Q1 2024 Aveanna Healthcare Holdings Inc Earnings Call

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Good morning, and welcome to Aviano Healthcare Holdings' first quarter 2024 earnings Conference call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A at this time I'd like to turn the call over to Debbie Stewart have you honest Chief Accounting officer. Thank you you may begin.

Operator: Good morning, and welcome to Aveanna Health Care Holdings' first quarter 2024 earnings conference call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the call over to Debbie Stewart, Aveanna's Chief Accounting Officer. Thank you.

Debbie Stewart: Good morning, and welcome to Avi on his first quarter 2024 earnings call I am Debbie Stuart the Companys Chief Accounting Officer with me today is Jeff Shaner, Our Chief Executive Officer, and Matt Buckhalter, Our Chief Financial Officer. During this call we will make forward looking statements risk factors that in.

Debbie Stewart: Good morning, and welcome to Aveanna's first quarter 2024 earnings call. I am Debbie Stewart, the company's Chief Accounting Officer. With me today is Jeff Shaner, our Chief Executive Officer, and Matt Buckhalter, our Chief Financial Officer. During this call, we will make forward-looking statements. Risk factors that may impact those statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we file with the SEC. The company does not undertake any duty to update such forward-looking statements.

Debbie Stewart: May impact those statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we file with the SEC.

Debbie Stewart: The company does not undertake any duty to update such forward looking statements. Additionally.

Debbie Stewart: Additionally, during today's call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Jeffrey S. Shaner: A reconciliation of these measures can be found in this morning's press release, which is posted on our website Aviano dot com and in our most recent quarterly report on Form 10-Q, when filed with that I will turn the call over to I'll be honest, Chief Executive Officer, Jeff Shiner, Jeff.

Debbie Stewart: Additionally, during today's call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating our performance. However, the presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these measures can be found in this morning's press release, which is posted on our website, aveanna.com, and in our most recent quarterly report on Form 10-Q when filed. With that, I will turn the call over to Aveanna's Chief Executive Officer, Jeff Shaner. Jeff?

Jeffrey S. Shaner: Thank you, Debbie. Good morning, and thank you for joining us today. We appreciate each of you investing your time this morning to better understand our Q1 2024 results and how we are moving Aveanna forward in 2024 and beyond. My initial comments will briefly highlight our first quarter, along with the steps we are taking to address the labor markets and our ongoing efforts with government and preferred payers to create additional capacity. I will then provide insight on how we are thinking about year two of our strategic transformation and our enhanced outlook for 2024 prior to turning the call over to Matt to provide further details on the quarter and our refreshed outlook. In addition, I would like to take a moment and welcome Jerry Perchak, our new Chief Legal Officer, to Aveanna.

Jeffrey S. Shaner: Thank you Debbie good morning, and thank you for joining us today.

Jeffrey S. Shaner: We appreciate each of you investing your time this morning to better understand our Q1 2024 results and how we are moving forward. How we are moving forward in 2024 and beyond.

Jeffrey S. Shaner: My initial comments will briefly highlight our first quarter along with the steps we are taking to address the labor markets and our ongoing efforts with government and preferred payors to create additional capacity.

Jeffrey S. Shaner: I will then provide insight on how we are thinking about year two of our strategic transformation and.

Jeffrey S. Shaner: Our enhanced outlook for 2024 prior to turning the call over to Matt to provide further details in the quarter and our refreshed outlook.

Jeffrey S. Shaner: Jerry has spent the last two decades dedicated to high quality healthcare in the home setting. He brings a wealth of experience in regulatory and legal affairs, mergers and acquisitions, and general corporate law. We feel blessed to have Jerry join our Aveanna team. Now, moving on to highlights for the first quarter.

Jeffrey S. Shaner: In addition.

Jeffrey S. Shaner: I'd like to take a moment and welcome Jerry per check, our new Chief legal officer to Avianca.

Jeffrey S. Shaner: Jerry has spent the last two decades dedicated to high quality health care in the home setting.

Jeffrey S. Shaner: Jerry brings a wealth of experience and regulatory and legal affairs mergers and acquisitions and general corporate law.

Jeffrey S. Shaner: We feel blessed to have Jerry joined our Aviano team.

Jeffrey S. Shaner: Revenue for the first quarter was approximately $491 million, representing a 5.2% increase over the prior year period. First quarter adjusted EBITDA was $34.9 million, representing a 22.5% increase over the prior year period, primarily due to the improved payor rate environment, as well as cost reduction efforts. As we have previously discussed, the labor environment represented the primary challenge that we needed to address to see Aveanna resume the growth trajectory that we believed our company could achieve. It is important to note that our industry does not have a demand problem.

Jeffrey S. Shaner: Now moving to the highlights for the first quarter.

Jeffrey S. Shaner: Revenue for the first quarter was approximately $491 million, representing a five 2% increase over the prior year period.

Jeffrey S. Shaner: First quarter adjusted EBITDA was $34 9 million, representing a 22, 5% increase over the prior year period, primarily due to the improved payor rate environment as well as cost reduction efforts.

Jeffrey S. Shaner: As we have previously discussed the labor environment represented the primary challenge that we needed to address to see aviano resume the growth trajectory that we believed our company could achieve.

Jeffrey S. Shaner: It is important to note that our industry does not have a demand problem the demand for home and community based care continues to be strong with both state and federal governments and managed care organizations asking for solutions that can create more capacity.

Jeffrey S. Shaner: The demand for home and community-based care continues to be strong, with both state and federal governments and managed care organizations asking for solutions that can create more capacity. Our Q1 results highlight that we continue to align our objectives with those of our preferred payers and government partners. By focusing our clinical capacity on our preferred payers, we achieve year-over-year growth in revenue and adjusted EBITDA. We also experienced improvement in our caregiver hiring and retention trends by aligning our efforts to those payers willing to engage with us on enhanced reimbursement rates and value-based agreements.

Jeffrey S. Shaner: Our Q1 results highlight that we continue to align our objectives with those of our preferred payers and government partners.

Jeffrey S. Shaner: By focusing our clinical capacity on our preferred Payors, we achieved year over year growth in revenue and adjusted EBITDA.

Jeffrey S. Shaner: We also experienced improvement in our caregivers caregiver hiring and retention trends by aligning our efforts to those payers willing to engage with us on enhanced reimbursement rates and value based agreements.

Jeffrey S. Shaner: While we continue to operate in a challenging labor and inflationary environment, our preferred payer strategy allows us to return to a more normalized growth rate in our business segment. Since our fourth-quarter earnings call, I am pleased with the continued progress we have made on several of our rate improvement initiatives with both government and preferred payers, as well as the continued signs of improvement in the caregiver labor market, specifically. As it relates to our private duty services business, our goal for 2024 is to continue to execute on our legislative strategy to improve reimbursement rates in our various states, with particular emphasis on Georgia, Massachusetts, and California, which represent approximately 15% of our PDS revenue.

Jeffrey S. Shaner: While we continue to operate in a challenging labor inflationary environment, our preferred payer strategy allows us to return to a more normalized growth rate in our business segments.

Jeffrey S. Shaner: Since our fourth quarter earnings call I am pleased with the continued progress we have made on several of our rate improvement initiatives with both government and payers pay.

Jeffrey S. Shaner: Efird Payors as well as the continued signs of improvement and the caregiver labor market specifically.

Jeffrey S. Shaner: As it relates to our private duty services business. Our goal for 2020 for us to continue to execute on our legislative strategy to improve reimbursement rates in our various states with particular emphasis on Georgia, Massachusetts, and California, which represent approximately 15% of our <unk>.

Jeffrey S. Shaner: <unk> revenue.

Jeffrey S. Shaner: As a reminder, we achieved rate increases of 19 states in 2023.

Jeffrey S. Shaner: As a reminder, we achieved rate increases in 19 states in 2023. While we are pleased that our PDS legislative messaging has been well received by state legislatures, we still have much work to do. As an example of the work ahead, our PDN rate request was not included in the California governor's proposed budget.

Jeffrey S. Shaner: While we are pleased that our Pds legislative messaging has been well received by state legislatures.

Jeffrey S. Shaner: We still have much work to do.

Jeffrey S. Shaner: As an example of the work ahead, our PD and rate requests was not included in the California Governor's proposed budget.

Jeffrey S. Shaner: We believe that we made significant strides with the Governor, the Medi-Cal Department, and the California Legislature demonstrating the importance of PDN rate investments and how they support an overall lower healthcare cost, improved patient satisfaction, and quality outcomes. However... We need to further accelerate our preferred payer strategy and government affairs efforts to continue to advocate for children with complex medical conditions. We have a proven track record of expanding our preferred parent programs and will enhance our efforts in California, similar to our approach in other states.

Jeffrey S. Shaner: We believe that we've made significant strides with the Governor Medical Department, and the California legislature, demonstrating the importance of PDL right investments and how they support and overall lower health care costs improved patient satisfaction and quality outcomes.

Jeffrey S. Shaner: However.

Jeffrey S. Shaner: We need to further accelerate our preferred payer strategy and government affairs efforts to continue to advocate for children with complex medical conditions.

Jeffrey S. Shaner: We have a proven track record of expanding our preferred payer programs and will enhance our efforts in California similar to our approach in other states.

Jeffrey S. Shaner: As we look at a preferred payer initiatives in other states. Our goal for 2024 is to increase the number of Pds preferred payer agreements from 14 to 22.

Jeffrey S. Shaner: As we look at our preferred payer initiatives in other states, our goal for 2024 is to increase the number of PDS preferred payer agreements from 14 to 22. In the first quarter, we added four additional preferred payer agreements, increasing our total to 18.

Jeffrey S. Shaner: In the first quarter, we added four additional preferred payer agreements increasing our total to 18.

Jeffrey S. Shaner: I am very proud of our payer relations team as they continue to develop partnerships with managed care organizations to find solutions for children with complex medical conditions. Aveanna's preferred payer strategy is gaining momentum and allowing us to invest in caregiver wages and recruitment efforts to accelerate the hiring and staffing of nurses for our patients. Additionally... We are introducing a new PDS volume indicator that shows how we think about our momentum with our PDS preferred payers. Some of our PDS states, like Colorado, for example, are predominantly Medicaid reimbursed with little to no managed care penetration.

Jeffrey S. Shaner: I am very proud of our payer relations team as they continue to develop partnerships with managed care organizations to find solutions for children with complex medical conditions.

Jeffrey S. Shaner: <unk> preferred payer strategy is gaining momentum and allowing us to invest in caregiver wages and recruitment efforts to accelerate hiring and staffing of nurses for our patients.

Jeffrey S. Shaner: Additionally.

Jeffrey S. Shaner: We are introducing a new pds volume indicator that demonstrates how we think about our momentum with our Pds preferred payors.

Jeffrey S. Shaner: Some of our Pds States like Colorado for example are predominantly Medicaid reimbursed with little to no managed care penetration.

Jeffrey S. Shaner: For this reason, we will report our PDS preferred payer volumes against the total MCO opportunity. Our 18 current PDS Preferred Pay Agreements account for just over 40% of the total PDS MCO volumes as defined above. This updated metric defines the opportunity for Aveanna to continue shifting our capacity and efforts towards our payer partners. Now, we are moving to our Preferred Payer Progress in Home Health. Our goal for 2024 is to maintain our episodic payer mix above 70% while returning to a more normalized growth rate.

Jeffrey S. Shaner: For this reason we will we will report our Pds preferred payer volumes against the total <unk> opportunity.

Jeffrey S. Shaner: Our current 80 or 18 current Pds preferred payer agreements account for just over 40% of the total Pds MTO volumes as defined above.

Jeffrey S. Shaner: This updated metric defines the opportunity for all of your honor to continue shifting our capacity and efforts towards our payer partners.

Jeffrey S. Shaner: Now moving to our preferred payer progress in home health.

Jeffrey S. Shaner: Our goal for 2024 is to maintain our episodic payer mix above 70%.

Jeffrey S. Shaner: While returning to a more normalized growth rate.

Jeffrey S. Shaner: In Q1, our episodic mix was 75%, and we achieved positive total episode growth of 1.7% over the prior year period. Q1 marked the first time we've had sequential and year-over-year episodic growth since we entered the home health market. We also signed two additional EPISOD agreements within the quarter.

Jeffrey S. Shaner: In Q1 are episodic mix was 75% and we achieved positive total episode growth of one 7% over the prior year period.

Jeffrey S. Shaner: Q1 marked the first time, we've had sequential and year over year episodic growth since we entered the home health market.

Jeffrey S. Shaner: We also signed two additional episode agreements within the quarter.

Jeffrey S. Shaner: I am so proud of our home health and hospice leadership team and their commitment to driving positive clinical outcomes, episodic growth, and profitability. We will continue to remain focused on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis and focus on improved clinical and financial outcomes. We are encouraged by our early 2024 rate increases, preferred payer agreements, and subsequent recruiting results. Our business is demonstrating signs of recovery as we achieve our rate goals previously discussed.

Jeffrey S. Shaner: I am so proud of our home health and hospice leadership team and their commitment to driving positive clinical outcomes episodic growth and profitability.

Jeffrey S. Shaner: We will continue to remain focused on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis and focus on improved clinical and financial outcomes.

Jeffrey S. Shaner: We are encouraged by our early 2024 rate increases preferred payer agreements and subsequent recruiting results.

Jeffrey S. Shaner: Our business is demonstrating signs of recovery as we achieve our rate goal as previously discussed.

Jeffrey S. Shaner: Home and community-based care will continue to grow, and Aveanna is a comprehensive platform with a diverse payer base, providing a cost-effective, high-quality alternative to higher-cost care settings. And, most importantly... We provide this care in the most desirable setting, the comfort of the patient's home.

Jeffrey S. Shaner: Home and community based care will continue to grow and Avianca is a comprehensive platform with a diverse payer base, providing a cost effective high quality alternative to higher cost care settings.

Jeffrey S. Shaner: And most importantly.

Jeffrey S. Shaner: We provide this care in the most desirable setting the comfort of the patients' home.

Jeffrey S. Shaner: Before I turn the call over to Matt, Let me comment on our strategic plan and refreshed outlook for 2024.

Jeffrey S. Shaner: Before I turn the call over to Matt, let me comment on our strategic plan and refreshed outlook for 2024. As we enter year two of our strategic transformation, we remain highly focused on those initiatives that created positive momentum in 2023. We will continue to focus our efforts on four primary strategic initiatives.

Jeffrey S. Shaner: As we enter year two of our strategic transformation, we remain highly focused on those initiatives that create a positive momentum in 2023.

Matt: We will continue to focus our efforts on four primary strategic initiatives number one enhancing partnerships with government and preferred payers to create additional caregiver capacity.

Jeffrey S. Shaner: Number one, enhancing partnerships with government and preferred payers to create additional caregiver capacity. Two, identifying cost efficiencies and synergies that allow us to leverage our growth. Three, managing our capital structure and collecting our cash while producing positive free cash flow. And fourth, engaging our leaders and employees and delivering our Aveanna mission. Based on the strength of our first quarter results and the continued execution of our key strategic initiatives, we now expect full year 2024 revenue to be greater than $1.97 billion and adjusted EBITDA to be greater than $150 million.

Jeffrey S. Shaner: To identify cost efficiencies and synergies that allow us to leverage our growth.

Jeffrey S. Shaner: Three managing our capital structure and collecting our cash while producing positive free cash flow and fourth engaging our leaders and employees and delivering our ASEAN emission.

Jeffrey S. Shaner: Yeah.

Jeffrey S. Shaner: Based on the strength of our first quarter results and the continued execution of our key strategic initiatives. We now expect full year 2020 for revenue to be greater than $1 97 billion.

Jeffrey S. Shaner: And adjusted EBITDA to be greater than $150 million.

Jeffrey S. Shaner: We believe our revised outlook provides a prudent view considering the challenges we still face with the evolving labor environment.

Jeffrey S. Shaner: And hopefully it proves to be conservative as we continued to execute throughout the year.

Speaker Change: In closing I.

Jeffrey S. Shaner: We believe our revised outlook provides a prudent view considering the challenges we still face in the evolving labor environment. And hopefully, it proves to be conservative as we continue to execute throughout the year. In closing, I am very proud of our Aveanna team.

Jeffrey S. Shaner: I am very proud of our Avianca team.

Jeffrey S. Shaner: We offer a cost-effective, patient-preferred, and clinically sophisticated solution for our patients and families. Furthermore, we are the right choice for our payers, referral sources, and government partners. By partnering with preferred payers, we can, and will, move reimbursement rates and wage metrics in meaningful ways that support our growth. This strategy allows us to hire, retain, and engage more caregivers in providing the mission of Aveanna every day. With that, I will turn the call over to Matt to provide further details on the quarter and our 2024 outlook. Thanks, Jeff, and good morning.

Jeffrey S. Shaner: We offer a cost effective patient preferred and clinically sophisticated solution for our patients and families. Furthermore, we are the right solution for our payers referral sources and government partners.

Matt: By partnering with preferred payers, we can and will move reimbursement rate and wage metrics in meaningful ways that support our growth.

Matt: This strategy allows us to hire retain and engage more caregivers and providing the mission of avianca everyday.

Jeffrey S. Shaner: With that let me turn the call over to Matt to provide further details on our quarter and our 2020 for outlook.

Jeffrey S. Shaner: Matt.

Matt: Thanks, Jeff and good morning.

Matt Buckhalter: I'll first talk about our first quarter financial results and liquidity before providing additional details on our refreshed outlook for 2024, starting with the top line. We saw revenues rise 5.2% over the prior year period to $491 million. We experienced revenue growth in two of our operating divisions, led by the private duty services and medical solutions segments, which grew by 5.9% and 9.9% compared to the prior quarter. Consolidated gross margin was $145.9 million, or approximately 30%, representing a 1% increase over the prior year period.

Matt: I'll first talk about our first quarter financial results and liquidity before providing additional details on our refreshed outlook for 2024.

Matt Buckhalter: Starting with the top line we.

Matt Buckhalter: We saw revenues rise five 2% over the prior year period to $491 million.

Matt Buckhalter: We experienced revenue growth in two of our operating divisions led by private duty surfaces and medical solutions segment, which grew by five 9% and nine 9% compared to the prior year quarter.

Matt Buckhalter: Consolidated gross margin was $145 9 million or approximately 30%, representing a 1% increase over the prior year period.

Matt Buckhalter: Consolidated Adjusted EBITDA was $34.9 million, a 22.5% increase as compared to the prior year, reflecting the improved payer rating environment, as well as cost reduction efforts taking hold. Now, taking a deeper look into each of our segments, starting with private duty services. Revenue for the quarter was approximately $395 million, a 5.9% increase, and was driven by approximately 10.3 million hours of care, a volume increase of 4.9% over the prior year.

Matt Buckhalter: Consolidated adjusted EBITDA was $34 9 million, a 22, 5% increase as compared to the prior year, reflecting the improved payor rate environment as well as cost reduction efforts taking hold.

Matt Buckhalter: Taking a deeper look to each of our segments.

Matt Buckhalter: Starting with private duty services.

Matt Buckhalter: Revenue for the quarter was approximately $395 million a.

Matt Buckhalter: A five 9% increase and was driven by approximately $10 3 million hours of care, a volume increase of four 9% over the prior year.

Matt Buckhalter: While volumes have improved over the prior year, we continue to be constrained in our topline growth due to the shortage of available caregivers.

Matt Buckhalter: While volumes have improved over the prior year, we continue to be constrained in our top-line growth due to the shortage of available caregivers. However, we are continuing to see signs of improvement in the labor market. Q1 revenue per hour of $38.48 was up 36 cents or 1% as compared to the prior year quarter.

Matt Buckhalter: Although we are continuing to see signs of improvement in the labor markets.

Matt Buckhalter: Q1 revenue per hour of $38 48.

Matt Buckhalter: It was up 36 or 1% as compared to the prior year quarter.

Matt Buckhalter: We remain optimistic about our ability to attract caregivers and address market demands for our services when we obtain acceptable reimbursement rates. Turning to our cost of labor and gross margin metrics, we achieved $100.1 million of gross margin, or 25.4%, a 3.9% decrease from the prior year quarter, primarily driven by some timing-related items and overall strengthening of our PDS reserve. The cost of revenue rate of $28.73 in Q1 was influenced by payroll taxes.

Matt Buckhalter: We remain optimistic about our ability to attract caregivers and address market demands for our services when we obtain acceptable reimbursement rates.

Matt Buckhalter: Turning to our cost of labor and gross margin metrics, we achieved $100 1 million of gross margin or 25, 4% a three 9% decrease from the prior year quarter.

Matt Buckhalter: Primarily driven by some timing related items and overall strengthening of our Pds reserve.

Matt Buckhalter: The cost of revenue rate of $28 73 in Q1 was influenced by payroll taxes.

Matt Buckhalter: Despite the ongoing wage pressures in the labor markets are Q1 spread per hour was $9 75.

Matt Buckhalter: Despite the ongoing wage pressures in the labor markets, our Q1 spread per hour was $9.75. We expect the spread per hour to normalize to the $10 to $10.50 range beginning in Q2 and continue to improve in the second half of 2024. Moving on to our home health and hospice segment, revenue for the quarter was approximately $54.6 million, a 2.7% decrease over the prior year. Revenue was driven by 10,100 total admissions, with approximately 75% being episodic, and 12,100 total episodes of care, up 7% sequentially from Q4. Medicare revenue per episode for the quarter was $3,070, up 3.4% from the prior year quarter.

Matt Buckhalter: We expect spread per hour to normalize to the $10 to $10 50 range beginning in Q2 and continue to improve in the second half of 2024.

Matt Buckhalter: Moving on to our home health and Hospice segment.

Matt Buckhalter: Revenue for the quarter was approximately $54 6 million a two 7% decrease over the prior year revenue was.

Matt Buckhalter: Driven by 10100 total emissions with approximately 75% being episodic and 12100 total episodes of care up 7% sequentially from Q4.

Matt Buckhalter: Medicare revenue per episode for the quarter was $3 $70 up three 4% from the prior year quarter.

Matt Buckhalter: We continue to focus on right sizing our approach to growth in the near term by focusing on preferred payors that reimburse us on an episodic basis.

Matt Buckhalter: We continue to focus on right-sizing our approach to growth in the near term by focusing on preferred payers that reimburse us on an episodic basis. This episodic focus has accelerated our margin expansion and improved our clinical outcomes. With episodic emissions well over 70%, we have achieved our goal of right-sizing our margin profile and enhancing our clinical offering. As we approach 2024, we believe our emission growth will normalize in the 3 to 5% range.

Matt Buckhalter: Episodic focus has accelerated our margin expansion and improved clinical outcomes.

Matt Buckhalter: With episodic admissions well over 70%.

Matt Buckhalter: We have achieved our goal of right sizing our margin profile and enhancing our clinical offerings.

Matt Buckhalter: As we navigate 2024, we believe our admission growth will normalize in the 3% to 5% range.

Matt Buckhalter: We are committed to a disciplined approach to growth, while shifting our capacity to those payors, who value our clinical resources.

Matt Buckhalter: We're committed to a disciplined approach to growth while shifting our capacity to those payers who value our clinical resources. We're pleased with our Q1 gross margin of 53.1%, up 15.8% over the prior year period and representing a continued focus on cost initiatives to achieve our targeted margin profile. Q1 gross margins benefited from some timing-related entries and should normalize in the 49-51% range moving forward. Our home health and hospice platform is dedicated to creating value through effective operational management and the delivery of exceptional patient care.

Matt Buckhalter: We're pleased with our Q1 gross margin of 53, 1% up 15, 8% over the prior year period, and representing a continued focus on cost initiatives to achieve our targeted margin profile.

Matt Buckhalter: Q1, gross margins benefited from some timing related entries and should normalize in the <unk>, 49% to 51% range moving forward.

Matt Buckhalter: Our home health and hospice platform is dedicated to creating value through effective operational management and the delivery of exceptional patient care.

Matt Buckhalter: Now to our medical solutions segment results for Q1.

Matt Buckhalter: Now, to our medical solution segment results for Q1. During the quarter, we produced revenue of $41 million, a 9.9% increase over the prior year. Revenue was driven by approximately 92,000 unique patients served, an 8.2% increase over the prior year period, and revenue per UPS of approximately $446. Gross margins were $17 million, or 40.8% for the quarter, up 9.8% over the prior year period, and in line with our targeted margin profile for medical solutions.

Matt Buckhalter: During the quarter, we produced revenue of $41 million a.

Matt Buckhalter: A nine 9% increase over the prior year.

Matt Buckhalter: Revenue was driven by approximately 92000 unique patients served with an eight 2% increase over the prior year period and revenue.

Matt Buckhalter: <unk> of approximately $446.

Matt Buckhalter: Gross margins were $70 million or 48% for the quarter up nine 8% over the prior year period and in line with our targeted margin profile for medical solutions.

Matt Buckhalter: We continue to implement initiatives to be more effective and efficient in our operations to leverage our overhead as we continue to grow.

Matt Buckhalter: We continue to implement initiatives to be more effective and efficient in our operations to leverage our overhead as we continue to grow. We are accelerating our preferred payer strategy in medical solutions by aligning our capacity with those payers that value our services and appropriately reimburse us for the care we provide. As we expand our national enteral presence and solidify our position as the leading provider of enteral nutrition in the country, we plan to refine our partnerships with payers to better support our growth. In summary, we continue to fight through a difficult labor environment while keeping our patients' care at the center of everything we do.

Matt Buckhalter: We are accelerating our preferred payer strategy and medical solutions by aligning our capacity with those payers that value our services and appropriately reimburse us for the care we provide.

Matt Buckhalter: As we expand our national presence and solidify our position as the leading provider of enteral nutrition in the country, we plan to refine our partnerships with payers to better support our growth.

Matt Buckhalter: In summary, we continue to fight through a difficult labor environment, while keeping our patients care at the center of everything we do.

Matt Buckhalter: It is clear to us that shifting caregiver capacity to those preferred payers, we value our partnerships, is the path forward at Aveanna. As Jeff stated, our primary challenge continues to be reimbursement rates. With the positive momentum we experienced in Q1, we remain optimistic that such trends will continue throughout 2024. As we continue to make progress with the rate environment, we will pass through wage improvements and other benefits to our caregivers, and the ongoing effort to better improve volumes. Now moving to our balance sheet and liquidity. At the end of the first quarter, we had liquidity in excess of $220 million, representing cash on hand of approximately $42.6 million.

Matt Buckhalter: It is clear to us that shifting caregiver capacity to those preferred payors, who value our partnerships is the path forward at Aviano.

Matt Buckhalter: As Jeff stated our primary challenge continues to be reimbursement rates with the positive momentum we experienced in Q1, we remain optimistic that such trends will continue throughout 2024.

Matt Buckhalter: As we continue to make progress with the rate environment, we will pass through wage improvements and other benefits to our caregivers and the ongoing effort to better improve volumes.

Matt Buckhalter: Now moving to our balance sheet and liquidity.

Matt Buckhalter: $10 million of availability under our securitization facility and approximately $168 million of availability on our revolver, which was undrawn as of the end of the quarter. Additionally, we had $32 million in outstanding letters of credit at the end of Q1. On the debt service front, we had approximately $1.48 billion of variable rate debt at the end of Q1. Of this amount, $520 million is hedged with fixed rate swaps, and $880 million is subject to an interest rate cap, which limits further exposure to increases in SOFR above 3%. Accordingly, substantially all of our variable rate debt is hedged.

Matt Buckhalter: Our interest rate swaths extend through June 2026, and our interest rate caps extend to February 2027. One last item I will mention related to our debt is that we have no material term loan maturities until July of 2028. Looking at cash flow, cash provided by operating activities was negative $12 million for the quarter, and free cash flow was negative approximately $12.7 million.

Matt Buckhalter: At the end of the first quarter, we have liquidity in excess of $220 million, representing cash on hand of approximately $42 6 million.

Matt Buckhalter: $10 million of availability under our securitization facility.

Matt Buckhalter: And approximately $168 million of availability on our revolver, which was undrawn as of the end of the quarter.

Matt Buckhalter: Lastly, we have $32 million and outstanding letters of credit at the end of Q1.

Matt Buckhalter: On the debt service front, we had approximately $1 four 8 billion of variable rate debt at the end of Q1.

Matt Buckhalter: Of this amount $520 million is hedged with fixed rate swaps and $888 million is subject to an interest rate cap, which limits further exposure to increases in sofa above 3%.

Matt Buckhalter: Accordingly substantially all of our variable rate debt is hedged.

Matt Buckhalter: Our interest rate swaps extend through June 2026, and our interest rate caps extend through February 2027.

Matt Buckhalter: One last item I will mention related to our debt is that we have no material term loan maturities until July 2028.

Matt Buckhalter: Looking at cash flow.

Matt Buckhalter: Cash provided by operating activities was negative $12 million for the quarter and.

Matt Buckhalter: And free cash flow was negative approximately $12 7 million.

Matt Buckhalter: Q1 is traditionally our highest cash outflow for the year and we continue to expect to be a positive operating cash flow company and 2024.

Matt Buckhalter: Q1 is traditionally our highest cash outflow for the year, and we continue to expect to be a positive operating cash flow company in 2024. We also expect to see continued cash flow benefits as our top line and cost management initiatives come to fruition. Before I hand the call over to the operator for Q&A, let me take a moment to address our revised outlook for 2024. As Jeff mentioned, we currently expect full-year revenue to be greater than $1.97 billion and adjusted EBITDA to be greater than $150 million.

Matt Buckhalter: We also expect to see continued cash flow benefits as our top line and cost management initiatives come to fruition.

Matt Buckhalter: Before I hand, the call over to the operator for Q&A, Let me take a moment to address our revised outlook for 2024.

Matt Buckhalter: As Jeff mentioned, we currently expect full year revenue to be greater than $1 97 billion and adjusted EBITDA to be greater than $150 million.

Matt Buckhalter: As we think about seasonality, we expect our revenue to grow as rate increases are implemented throughout the year and as our volumes grow. Accordingly, we expect approximately 47 to 48% of our full-year guided adjusted EBITDA to be recognized in the first half of 2024. As most of our annual rate increases typically become effective in the second half of the year, we expect our adjusted EBITDA to increase as we use these increases to attract and retain more caregivers and drive volume.

Matt Buckhalter: As we think about seasonality, we expect our revenues revenue to grow as rate increases are implemented throughout the year and as our volumes grow.

Matt Buckhalter: Accordingly, we expect approximately 47% to 48% of our full year guided adjusted EBITDA to be recognized in the first half of 2024.

Matt Buckhalter: As most of our annual rate increases typically become effective in the second half of the year, we expect our adjusted EBITDA to ramp as we use these increases to attract and retain more caregivers and drive volumes.

Matt Buckhalter: Our EBIT will also accelerate as we realize the benefits of our continued cost saving initiatives.

Matt Buckhalter: Our EBITDA will also accelerate as we realize the benefits of our continued cost-saving initiatives. In closing, I'm proud of all of our Aveanna team members and our hard work in achieving our Q1 results. I look forward to our continued execution of our 2024 strategic plan and further updating at the end of Q2. With that, let me turn the call over to the operator. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Matt Buckhalter: In closing I am proud of all of our <unk> team members and our hard work in achieving our Q1 results I look forward to our continued execution of our 2024 strategic plan and updating you further at the end of Q2.

Matt Buckhalter: With that let me turn the call over to the operator.

Speaker Change: Thank you at this time, we will be conducting a question and answer session.

Operator: If at any time you wish to remove your question from the queue, please press star 2. We ask that you limit your questions to one with one follow-up so that others may have an opportunity to ask. You may re-enter the queue by pressing star 1.

Matt Buckhalter: If you would like to ask a question. Please press star one on your telephone keypad.

Operator: Confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue. Please press star two.

Operator: We ask that you limit your questions to one with one follow ups and others may have an opportunity to ask questions. You may reenter the queue by pressing star one.

Operator: Perfect.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we poll for questions. Our first question is from Ben Hendrix with RBC Capital. Hey, thank you guys, and congratulations on the quarter. We appreciate the new stats on your pair, overall managed care. I just wanted to get your thoughts on how you expect that to, (inaudible). Hey, Ben. Good morning.

Operator: Oh excuse me for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Operator: Our first question is from Ben Hendrix, with RBC capital markets.

Benjamin Hendrix: Hey, Thank you guys and congratulations on the quarter.

Benjamin Hendrix: I appreciate the new stats on your payer arrangements as a percentage of the overall managed care opportunity.

Benjamin Hendrix: To get your thoughts on how you expect that to pace from the current 40% range and and then geographically how thats progressing and where the next opportunities are I know you've made good progress in Texas, California is a little bit of a different environment, but kind of where's the low hanging fruit now how should we think about that pacing.

Speaker Change: Hey, Ben Good morning. Thanks for the question Yeah, I think first of all this indicator makes a lot more sense on the on the potential opportunity that we have out there with the states that have.

Jeffrey S. Shaner: Thanks for the question. Yeah, you know, I think, first of all, this indicator makes a lot more sense in terms of the potential opportunity that we have out there with the states that have migrated away from pure Medicaid to Medicaid MCO states. And having 40 percent of our total volume, I think, you know, tells the reader that we're pretty far along in this process, right? We're a couple of years into this preferred payer strategy. Some of the largest payers in the largest states are in that first group, what we call the first 14 preferred payers at the end of last year.

Jeffrey S. Shaner: Migrated away from pure Medicaid to mitigate MTO stay.

Jeffrey S. Shaner: States.

Jeffrey S. Shaner: And having 40% of our total volume I think the hotel. It tells the reader that that we're pretty far along in this process right. A couple of years into this preferred payer strategy. Some of the largest payers in our largest states are in that in the first what we call. It. The first 14 preferred payers at the end of last year I think we've mentioned that before on calls.

Jeffrey S. Shaner: I think we've mentioned that before on calls. And I think the low 40s percentage points will probably move quarter by quarter in very small increments from this point forward. It'll take us landing numerous preferred pay agreements to kind of get the basis to move materially. If I looked out a year or two, Ben, do I think that this number could be over 50%? And I think the answer is yes, that we believe we'll get over 50% of our total volumes and continue to progress. But I wouldn't expect this to move by 5% or 10% per quarter. I would expect it to move in small increments of 1% or 2%.

Jeffrey S. Shaner: And I think 40 low <unk> <unk>.

Jeffrey S. Shaner: Percentage points will probably move.

Jeffrey S. Shaner: Quarter by quarter, and very small increments from this point forward it'll it'll take us.

Jeffrey S. Shaner: Ending numerous preferred payer agreements to kind of get the basis to move materially.

Jeffrey S. Shaner: If I looked out a year or two Ben do I think that this number could be over over 50%.

Jeffrey S. Shaner: I think the answer is yes that we believe we will get over 50% of our total volumes.

Jeffrey S. Shaner: And continued progress, but I wouldn't expect this to move by five or 10% per quarter I would expect it to move in small increments of one or 2%, but I.

Jeffrey S. Shaner: But I think if we use Q1 as an example, our team executed four additional preferred payer contracts in the first quarter. We're off to a nice start. Some of these are pretty small in volume but are very important in the states that they're in. And I think we should use California, to your point, as an example. The majority of California PDM patients are still on the traditional Medi-Cal fee-for-service, but we're able to partner with some of the whole child models and some of the MCOs that are in the state.

Jeffrey S. Shaner: I think if we use Q1 as an example, our team executed for additional preferred payer contracts in the first quarter, we're off to a nice start some of these are pretty small in volume, but a very important in the states that they're in.

Jeffrey S. Shaner: And I think we use California to your point as an example.

Jeffrey S. Shaner: The majority of California, PD patients are still on the traditional Medicare fee for service, but we're able to partner with some of the whole child models and some of the <unk> that are in the state and as families move into those programs. We have we have preferred payer agreements with them. So that will help accelerate our volume in states like California that are.

Jeffrey S. Shaner: And as families move into those programs, we have preferred payer agreements with them, so that will help accelerate our volume in states like California that are still primarily a Medicaid product. But I guess I'll close with this: at the end of the day, you read it right, Ben.

Jeffrey S. Shaner: Is still primarily a.

Jeffrey S. Shaner: Medicaid product.

Jeffrey S. Shaner: But I guess I'll close with at the end of the day you read it right then really nice continued momentum on the preferred payer strategy inside the Pds Division really proud of how both the government affairs team and the preferred payer teams are working to execute our strategy.

Jeffrey S. Shaner: Really nice continued momentum on the Preferred Payer Strategy inside the PDS division. Really proud of how both the Government Affairs Team and the Preferred Payer Teams are working to execute our strategy, and I think our momentum will continue on that as we think about 24 and 25. Great, thank you very much.

Operator: Thanks, Ben. Our next question is from Scott Fidel with Stephen. All right, thanks. Good morning. First question, just a two-parter, just on the PDS in terms of some of the modeling.

Scott J. Fidel: Our momentum will continue that as we think about 'twenty four and 'twenty five.

Operator: Okay.

Scott J. Fidel: Great. Thank you very much.

Scott J. Fidel: Thanks Pam.

Operator: Our next question is from Scott Fidel with Stephens.

Scott J. Fidel: Hi, Thanks, good morning.

Jeffrey S. Shaner: First, on the revenue rate, so it looks like that's been up around 1% year-over-year in each of the last two quarters. Just wondering whether that's a good run rate now, you know, for the balance of the year on the revenue rate or whether you do expect that to move higher at all. And then just the second part would be on the gross margin in PDS. Matt did talk about some timing items, I guess, affecting the first quarter, as well as adding to the reserve. If you could maybe elaborate on that and then just talk about how you see gross margins for PDS tracking over the balance of the year. Absolutely, Scott. Thank you.

Speaker Change: First question just a two parter just on the pdx in terms of some of the modeling.

Jeffrey S. Shaner: First on the revenue rate so it looks like thats been up around 1% year.

Speaker Change: Year over year in each of the last.

Jeffrey S. Shaner: Two quarters, just wondering whether that's a good run rate now for the balance of the year on the revenue rate or whether you do expect that to move higher at all and then just the second part would be on the on.

Speaker Change: On the gross margin and in Pds.

Jeffrey S. Shaner: Matt can talk about some timing items I guess affecting in the first quarter as well as adding to the reserve.

Speaker Change: If you could maybe elaborate on that and then just talk about how you see gross margins for Pds tracking over the balance of the year.

Jeffrey S. Shaner: Yeah, I think as you think about the PDS rate, you know, we do over 10 million hours per quarter at this point. So it takes a lot of new rates to lift the basis. You know, I think Matt's used the growth rate of PDS kind of in that three to 5% range both between volume and rate the last few quarters. Obviously, we're in the high end of that, you know, the last two, three quarters, which we're really proud of. I mean, you know, to talk about a 5% volume and rate lift for $10 million a quarter is a huge accomplishment for our team.

Speaker Change: Absolutely Scott. Thank you, yes, I think as you think about Pds rate.

Jeffrey S. Shaner: We did over 10 million hours per quarter at this point. So it takes a lot of new rate to lift the basis.

Jeffrey S. Shaner: I think thats used.

Jeffrey S. Shaner: The growth rate of Pds kind of in that 3% to 5% both between volume and rate. The last few quarters. Obviously, we're in the high end of that the last several of them that to last two or three quarters.

Jeffrey S. Shaner: Which we're really proud of I mean, just to talk about 5%.

Jeffrey S. Shaner: Volume and rate lift for our for $10 million a quarter is a huge accomplishment for our team, but yes. I think you can think of it generally correct that that will be in the higher end of that 3% to 5% range volume is 3% to 4% of it right is one to one 5% of it is we as we move forward in <unk>.

Jeffrey S. Shaner: But yeah, I think you're generally correct that we'll be in the higher end of that 3% to 5% range, volume is 3% to 4% of it, and rate is 1% to 1.5% of it as we move forward. And ultimately, we think that'll moderate back to more like 3% volume, 2% rate, or 3.5% volume. But in the environment we're in today, we're kind of in that 4% volume, 1% rate, and that's probably the right way to think of it. Now on the cost side, Matt, we'll give you some thoughts about our spread and how we think of Q2 and the rest of the year. Yeah, Scott.

Jeffrey S. Shaner: Ultimately, we think that will moderate back to more like.

Speaker Change: More like 3% volume, 2% rate or three 5% behind it but but in the environment. We're in today, where you know we're kind of in that 4% volume, 1% rate and that's probably the right way to think of it.

Speaker Change: On the cost side, Matt and I will give you a kind of thoughts about our spread and how we think of Q2 and the rest of the year, Yes Scott.

Matt Buckhalter: You know, Q1 is always a temporary headwind, always with just the higher payroll taxes that significantly impact us being a labor company. So that right off the bat, had a little bit of a temporary headwind in nature with some of our reserves. And, you know, we did the right thing of increasing reserves to make sure that we're in a solid position kind of moving forward as well. You know, expect us to be in that $10 to $10.50 spread range in Q2 and Q3 and Q4.

Matt Buckhalter: Q1 is a temporary headwind always which is the higher payroll taxes that significantly impact us being a labor company. So that right off the bat had a little bit of headwind temporarily in nature with.

Matt Buckhalter: Some of our reserves and we did the right thing of increasing reserves to make sure that we're in a solid position kind of moving forward as well.

Matt Buckhalter: Expect us to be in that $10 to $10 50 spread range in Q2, and Q3 and Q4.

Matt Buckhalter: You know, we're pretty confident and comfortable with where that's currently sitting and probably will land there for the entire year as well. I think it's fair to say, Scott, to Matt's comment, you know, our Q1 gross margin will probably be, will probably be the lowest for the quarter. I'm sorry, for the year, not the quarter, but for the year. And I think it's fair to expect us to be above 26% moving forward. I think Matt said it well.

Speaker Change: We're pretty confident and comfortable with where that is currently sitting in an and probably will land there for the entire year as well and I think it's fair to say Scott so to Matt's comment.

Matt Buckhalter: Our Q1 gross margin will be probably will most likely be the low for the quarter I'm sorry for the year North Dakota, but for the year and I think it's fair to expect us to be above 26% moving forward that and Matt said it well, we'll be in that 10 to $10 50 range. Even in Q2, as we move forward, 26% to 8% range.

Jeffrey S. Shaner: We'll be in that $10 to $10.50 range, you know, even in Q2 as we move forward. The 26%, 28% range, you know, is our go-forward range for PDS. Good business, able to drive volume growth with that spread – or with that gross margin as well. And so, as we continue to win the preferred payer contracts, and have, you know, government affairs wins that come in, we'll continue to pass through those wage improvements to our caregivers. So you won't necessarily see expansion there from those rate increases, but more solidifying in a solid spot. Okay.

Jeffrey S. Shaner: Historically is our go forward rate range for Pds gift business, we're able to drive volume growth with that spread or without gross margin as well and so as we continue to win the preferred payer contracts have.

Jeffrey S. Shaner: Government affairs wins that come in we will continue to pass through those wage improvements to our caregivers. So you won't see expansion there from those rate increases necessarily but more solidifying and solid spot.

Speaker Change: Okay got it.

Jeffrey S. Shaner: Then just on my follow-up question, I just want to ask about operating cash flow and what was negative in the first quarter, but you had guided for that. Maybe if you could help us walk through your thoughts on operating cash flow for the second quarter. And then I know you expect to be positive for the full year. Could you put a number around that in terms of range? And then the last part on the operating cash flow would be, I'm not sure about necessarily this year, but if you continue to sort of normalize margins, how you guys are thinking about, let's call it over the next year or two maybe, sort of settling out on what you think your EBITDA to cash flow conversion can look like. All right, Scott. I'm going to unpack this one. So, let me stumble through, and you will come back and catch me up.

Speaker Change: My follow up question I, just wanted to ask around operating cash flow and was negative in the first quarter, but you had guided for that maybe if you could help us walk through your thoughts on operating cash flow for the second quarter and then I know you expect to be positive for the full year could you put a number around that in terms of range and then.

Scott: Last part on the operating cash flow would be.

Speaker Change: Im not sure that necessarily this year, but if you continue to sort of normalize margins. How you guys are thinking about let's call. It over the next year or two maybe sort of settling out on what you think your EBITDA to cash flow conversion can look like.

Jeffrey S. Shaner: Alright, Scott him unpack. This one so let me stumble through and you come back and catch me off all right got it.

Scott: Any of the pieces of that I'm happy to help.

Matt Buckhalter: All right, I'll help you with that. If you need any of the pieces of that, I'm happy to help. Appreciate it. So, yeah, first off, great 2023 cash flow year. You know, first year of a $12 million free cash flow for Aveanna. Really proud of our teams and then being able to achieve that.

Speaker Change: I appreciate it so first off great 2023 cash flow year first year, you know for $12 million free cash flow for Avianca really proud of our teams and being able to achieve it we did have a little benefit of some timing items in 2023 that were a little bit of a headwind in 2024, specifically in Q1.

Matt Buckhalter: We did have a little benefit of some timing items in 2023 that were a little bit of a headwind in 2024, specifically in Q1. Q1 was actually a pretty darn good quarter for us. You know, we were expecting a more significant headwind there, but through some cash management, great operations, and, you know, our adjustments are getting so much cleaner as well, we've been able to drop some of that cash flow.

Matt Buckhalter: Q1 was actually a pretty darn good quarter for us and we're expecting a more significant headwind there, but there is some cash management through great operations and through our adjustments are getting so much cleaner as well we've been able to drop some of that cash flow through Q2 will probably be similar concept Q1 as well just as we have some of our timing.

Matt Buckhalter: You know, Q2 will probably be a similar concept to Q1 as well, just as we have some of our timing items come through, specifically related to when revenue is or when cash comes in from revenue. TPL season is always a headwind for us at the very beginning of the year that, you know, starts to subside in the back half of Q2 and really jumps up into Q3.

Matt Buckhalter: Items come through specifically related to.

Matt Buckhalter: When revenue is or when cash comes in from revenue GPL season is always a headwind for us at the very beginning of the year that starts to subside in the back half of Q2 and really jumps up into Q3. So I would think about it sequentially roughly the same in Q2 and this is all ballpark that we're talking about are really starting to compound and get there in Q3.

Matt Buckhalter: So, I would think about it sequentially roughly the same in Q2 and, you know, this is all ballpark that we're talking about, but really starting to compound and get there in Q3, getting us back to being a positive, you know, free cash flow operating cash flow company in 2024. As you think about the past years, our team has done such a great job, one with cash collections, two with operations, but even just our EBITDA is such a healthier, cleaner EBITDA as well.

Matt Buckhalter: <unk> getting us back to being a positive free cash flow operating cash flow company and 2024 as you think about the out years. Our team has done such a great job with cash collections to it operations, but even just our EBITDA is such a healthier cleaner EBITDA as well I think a lot of that is starting to drop through and you're seeing that play out there.

Matt Buckhalter: I think a lot of that is starting to drop through, and you're seeing that, you know, play out through our cash flow, and we'll continue to see that. We do have some costs coming out this year, but we are doing some things to remove costs.

Matt Buckhalter: Our cash flow and we'll continue to see that we do have some costs coming out. This year. We are doing some some items to remove cost out so I'm not saying those are going to be zero going forward, but we're doing the things right now to be benefit in the long run for organization and will benefit us in 2024, and 2025 and Scott I think it's a great springboard of Mats <unk>.

Matt Buckhalter: So, I'm not saying those are going to, you know, be zero going forward, but we're doing the things right now that will benefit us in the long run for our organization and will benefit us in 2024 and 2025. And Scott, I think that's a great springboard to Matt's point about operating cash flow to really your last point of question on, you know, really profitability. And, you know, Matt laid it out over the last, you know, four or five quarters that we were committed to taking thoughtful costs out of the company as we scaled the company. And I think you see that, and you saw it at the end of 23, you see it in our Q1 results. You'll see it again in Q2 and moving forward.

Matt Buckhalter: <unk> from operating cash flow to really Youre last Powerpoint your question on <unk>.

Matt Buckhalter: Really profitability in yeah, I think Matt laid out of last four five quarters that we were committed to taking.

Matt Buckhalter: Full cost out of the company as we scale the company and I think you see that and you saw at the end of 'twenty three you'll see it in our Q1 results you will see it again in Q2 and moving forward.

Jeffrey S. Shaner: I may have gotten ahead of myself on the last earnings call when I said 10% by the end of the year, that was probably a bit aggressive. But I think you should think of us on a march back to $200 million a year in EBITDA, and our goals are set on doing the right things to get there. And I think we've been in the 7% EBITDA range, our adjusted EBITDA margins, you know, we're approaching 8% as we speak.

Speaker Change: May have gotten ahead of myself last earnings call. When I said, 10% by the end of the year that was probably a bit aggressive.

Jeffrey S. Shaner: But I think you would think of us on a march back to $200 million a year in EBITDA and our goals are set on doing the right things to get there and I think we've been in the 7% EBITA adjusted EBITDA margins were approaching 8% as we speak but the most of them I think the exciting part for us is.

Jeffrey S. Shaner: But the most exciting part for us is we see that clear path over 24, 25, and 26, and really marching the company back to being a double-digit EBITDA company. And, you know, none of it's easy.

Jeffrey S. Shaner: We see that clear path over 'twenty, four 'twenty, five and 26 and marching the company back to being a double digit EBITDA company and none of it's easy it's all hard work and it's thoughtful work, but I think Matt said it well our teams have embraced this idea of being efficient and effective as we grow the company in.

Jeffrey S. Shaner: It's all hard work, and it's thoughtful work. I think Matt said it well. Our teams have embraced this idea of being efficient and effective as we grow the company. And, you know, and we moved last year to home health and hospice. This year, we're focused on our PDS division and continuing to focus on corporate, you know, both last year and this year. But, you know, we've taken meaningful costs out of the company in 23.

Jeffrey S. Shaner: And we've moved but last year was home health and hospice. This year, we're focused on our Pds Division.

Jeffrey S. Shaner: We continue to focus on corporate both last year and this year, but.

Jeffrey S. Shaner: We've taken a meaningful cost out of the company in 'twenty three we're taking additional meaningful cost of the company in 'twenty four and already thinking about 25. So we're real excited about how that relates to both improved.

Jeffrey S. Shaner: We're taking additional meaningful costs of the company in 24 and already thinking about 25. So, we're really excited about how that relates to both improved, you know, adjusted EBITDA margin, but also, to your point, being a cash-generating company moving forward. And kudos to our teams for all the work that they've done to get us there. Thanks, Scott. Thanks, and it's helpful to get those intermediate term bogeymen you just added in, so I appreciate that. Thank you. Our next question is from Peter Chickering with Deutsche Bank. Hey, uh, good morning, guys, and thanks for taking my questions.

Philip Chickering: Adjusted EBITDA margin, but also to your point being it being a cash generating company moving forward and kudos to our teams for all the work that they've done to get us there.

Philip Chickering: Thanks Scott.

Philip Chickering: Thanks and helpful to get those intermediate term Bogies you just added in so I appreciate that thank you.

Jeffrey S. Shaner: Thanks.

Jeffrey S. Shaner: Our next question is from Peter Chickering with Deutsche Bank.

Philip Chickering: Hey, good morning, guys. Thanks for taking my questions.

Matt Buckhalter: Um, on the preferred payer strategy, I guess what percent of all PDS volume today is handled by managed Medicaid versus Medicaid? You know, we don't necessarily give that metric much weight from the volume standpoint. We do obviously give a breakout on the revenues, so you can kind of back into it a little bit from a math standpoint. You know, going back to that 40 percent, we're really proud of our teams for achieving that.

Philip Chickering: Third payer strategy I guess what percent of all Pds volume today is handled by managed Medicaid versus Medicare fee for service.

Matt Buckhalter: We don't necessarily give that metric on the volume standpoint, we do obviously give a breakout on the revenue. So you can kind of back into it a little bit on some math, Matt standpoint from it.

Matt Buckhalter: Going back to that 40%, we're really proud of our teams for achieving that and I'll say, our operations teams for providing that care and reaching out our clinical teams for leaning into those patients, but obviously, our payer relations teams on top of it as well you'll see that continue to grow as Jeff stated earlier organically just as patients are coming out of hospital and bring.

Matt Buckhalter: And I'll say our operations teams for providing that care and reaching out to our clinical teams for leaning into those patients. But obviously, our payer relations teams are on top of it as well. You'll see that continue to grow, as Jeff stated earlier, organically, you know, just as patients are coming out of the hospital and bringing their families into it, but also as we continue to sign new preferred payer agreements. You know, we've got to go out there 22 times this year.

Matt Buckhalter: Intuit, but also as we continue to sign new preferred payer agreements. We've got to go out there 22. This year, we saw a nice jump up in Q1, and we'll continue to see that throughout the year, so that will add to it.

Matt Buckhalter: We saw a nice jump in Q1, and we'll continue to see that throughout the year. So that will add to it. I guess the only negative headwind to it wouldn't be from a volume standpoint.

Matt Buckhalter: I guess, the only negative headwind to it wouldn't be on a volume standpoint, it actually be a positive because it would give us more opportunity. It's as states continue to migrate from a Medicaid system over to an mcl, we'll work our best to see if we can get out in front of some of those conversations some of those year NCO payers, but I guess that could actually bring it down temporarily in nature, but open.

Matt Buckhalter: It'd actually be a positive because it would give us more opportunity. It's as states continue to migrate from a Medicaid system over to an MCO. We'll work our best to see if we can get out in front of some of those conversations, some of those MCO payers. But I guess that could actually bring it down temporarily in nature, but open up the population for us to even drive that and have meaningful conversations as well. And Peter, I guess, thinks of the 40, so separate the two.

Matt Buckhalter: The population for us to even drive that and have meaningful conversations as well.

Matt Buckhalter: Yes think of the 40, so think separate the two government affairs, primarily still focused on moving Medicaid fee for service rates take Oklahoma last year, obviously, we shifted our focus this year to specifically, Georgia, Massachusetts, and California, I think of those three primarily still government affairs.

Jeffrey S. Shaner: Government affairs primarily still focused on moving Medicaid fee-for-service rates. Take Oklahoma last year. Obviously, we shifted our focus this year to specifically Georgia, Massachusetts, and California. Think of those three as primarily government affairs oriented. And then go back to that 40% indicator.

Jeffrey S. Shaner: Oriented and then go back to that 40% indicator, that's our preferred payer strategy team right that is 40% of the total opportunity for us to execute on on MTO payer partners and National commercial partners on the Medicaid space. So think of us almost halfway there from a total.

Jeffrey S. Shaner: That's our preferred payer strategy team, right? That is 40% of the total opportunity for us to execute on MCO payer partners and national commercial partners in the Medicaid space. So think of us almost halfway there, you know, from a total opportunity standpoint on a preferred payer strategy. But I don't want to take away from Georgia; we still have a government affairs strategy. You know, in Massachusetts, we still have a government affairs strategy.

Jeffrey S. Shaner: <unk> standpoint on a preferred payer strategy, but I don't want them et cetera, I don't want to take away from in Georgia, We still have a government affair strategy in Massachusetts, We still have a government fare strategy, we talked about last year, Oklahoma and other states like that so we're doing both.

Jeffrey S. Shaner: You know, we talked about last year, Oklahoma and other states like that. So we're doing both. And I'm proud to say we're winning more than we're losing on both sides of that equation. But our work is never done.

Jeffrey S. Shaner: Proud to say we're.

Jeffrey S. Shaner: We're winning more than we're losing and on both sides of that equation. Our work is never done, California is a perfect example to remind us all of our work is never done.

Jeffrey S. Shaner: California is a perfect example to remind us all the time that our work is never done. You know, we need to raise the PDN rate in California long-term just to help the families, you know, be able to get their children home and keep their children's homes. Okay, so, you know, I just said for halfway there again, you know, if you take a five-year plus view here, if you move a hundred percent of your managed Medicaid into a preferred, that would be about 80% of our volumes are handled by Managed Medicaid, and 20% are handled by Medicare Fee-for-Services. Is that a ballpark number? That's probably a bit strong. There are still some large states that are still in, and I'll use two examples.

Jeffrey S. Shaner: We need to move the PD and rate in California long term just to help the families you would be able to get their children home and keep their children's home.

Speaker Change: Okay. So so.

Jeffrey S. Shaner: Just are halfway there, giving you even take a five year plus you hear if you move 100% of your managed Medicaid.

Jeffrey S. Shaner: Into a preferred that would be about 80% of our volumes are handled by managed Medicaid and 20% are handled by Medicare fee for services is that a ballpark number.

Jeffrey S. Shaner: So it's probably a bit strong theres still some large states that are still I'll use two examples, California, and Colorado are still primarily.

Jeffrey S. Shaner: California and Colorado are still primarily fee-for-service states, and both are very different. But I think Matt said it well. Over time, Peter, most states are, as you already know, most states are moving to an MCO strategy. So I think in our lifetime here, the last seven years and the next five years, the majority of the states... through the PDM product will move to a Medicaid managed care organization. Now, as we've learned with states like Texas, it takes three or four years. I mean, it's a very thoughtful process, so it's not a fast flip.

Jeffrey S. Shaner: Fee for service States and.

Jeffrey S. Shaner: And both of both are very different but I think that set of well overtime <unk>. Most states are as you would as you already know most states are moving to an MTO strategy. So I think in our lifetime here. The last seven years in the next five years the majority of the states.

Jeffrey S. Shaner: The PD product will move to a to a to a Medicaid MCR now as we've learned with states like Texas. It takes three or four years I mean, it's a very thoughtful process. So it's not a it's not a fast flip it's a very thoughtful process because of the fragility of our patient population.

Jeffrey S. Shaner: It's a very thoughtful process because of the fragility of our patient population. But think of us having great opportunities on both sides, different customers that we're selling to and talking to. But both the government affairs and the preferred payer strategy can work depending on what the state is. Okay, fair enough.

Jeffrey S. Shaner: But think of us.

Jeffrey S. Shaner: Think of us having great opportunity on both sides different customers that we're selling to in talking to but both the government affairs and the preferred payer strategy. Both can work depending on what the state is.

Jeffrey S. Shaner: And then, you know, looking at that 40% number, I mean, that's extraordinary. What an accomplishment for you guys. I guess, as you look at your hourly growth, you know, it's pretty strong in a quarter, and obviously even on the previous comps of the year, it was still a pretty strong hourly growth rate. Any color on how much you're growing organically in the provider network versus everyone else, is there a structurally different hourly growth rate between those two? It really is, Peter, and I'll relate it back to like hiring, you know, hiring the actual nurse. It is still the haves and have-nots, right?

Speaker Change: Okay Fair enough and then just.

Jeffrey S. Shaner: Looking at that 40% number I mean, that's.

Jeffrey S. Shaner: Extraordinary.

Jeffrey S. Shaner: Accomplishments you guys I guess as you look at your early growth.

Jeffrey S. Shaner: Pretty strong in a quarter and obviously he is you.

Jeffrey S. Shaner: You've just comps a year it was still pretty strong early growth rate any color on actually how much you're growing organically in the provider preferred provider networks versus everyone else is there is there are structurally different early growth rate between those two.

Speaker Change: It really is.

Jeffrey S. Shaner: I'll relate it back to like hiring hiring the actual nurse.

Jeffrey S. Shaner: It is still the haves and have nots right. So so so.

Jeffrey S. Shaner: So, the good news is, over the last 2 years, we've eliminated the number of—we've reduced the number of states and payers that we work with who don't have acceptable rates to hire nurses, right? So, we've either stopped working with those payers and shifted our capacity and time of attention to the payers who are willing to engage with us, or we've taken the states who had very low rates, and we've eliminated that by increasing the rates significantly.

Jeffrey S. Shaner: The good news is the last two years, we've eliminated a number we've we've reduced the number of states and payers that we work with who don't have acceptable rates to hire nurses right. So we've been either stopped working with those payers and shifted our capacity in time attention to the payers who are willing to engage with us or we take in the states who had very.

Jeffrey S. Shaner: Low rates and we've eliminated that by by increasing the rates significantly again primary focus this year, Georgia, Massachusetts, and California, because we need to move those rates those are still Medicaid rates that really are not attractive from a reimbursement to help it to be able to higher rins or Lps, but yes. If you if you saw within.

Jeffrey S. Shaner: Again, our primary focus this year is Georgia, Massachusetts, and California because we need to move those rates. Those are still Medicaid rates that are really not attractive from a reimbursement standpoint to be able to hire RNs or LPNs. But yes, if you looked within the business, or if you said to one of our operators, "you know, non-preferred payers," how much volume are you generating? In most cases, the answer would be negative, that in a non-preferred payer, we're not even flat. We're moving backwards, and it's not an accident.

Jeffrey S. Shaner: The business or if you said to one of our operators.

Jeffrey S. Shaner: <unk>.

Jeffrey S. Shaner: Non preferred payers how much volume are you generating in most cases, the answer would be negative that in a non preferred payer we're not even flat we're moving backwards and it is not an accident. It is we are shifting our caregiver capacity, we're putting all of our recruitment efforts and said market like Texas to our payer partners and honestly Pete it's what they're paying.

Jeffrey S. Shaner: It is because we are shifting our caregiver capacity. We're putting all of our recruitment efforts in said market, like Texas, to our payer partners. And honestly, Peter, that's what they're paying us to do. I mean, you know, they're giving us accelerated rates and value-based agreements with the intent that we're going to live through that and give them our nurses and give them our capacity. So, it's your opportunity. Peter, I can't believe you didn't touch on home health and care across margins and how proud you are of our team. Well, there's so much to unpack here.

Jeffrey S. Shaner: So do I mean.

Jeffrey S. Shaner: They're giving us accelerated rates and value based agreements with the intent that we're going to live through that and give them our nurses and give them our capacity. So it's it's your opportunity Peter I can't I can't believe I can't believe you didn't touch on home health and home health gross margins. How proud you are of our team.

Jeffrey S. Shaner: Just extraordinary well theres so much on pack areas I guess going forward just because.

Jeffrey S. Shaner: I guess going forward, just, you know, because it's such a huge strategy for you guys. Can you actually begin disclosing what the organic growth rate is on preferred? Just as we look at our Excel models, we can actually help sort of, you know, model this as, you know, changes going forward. And then, you know, to the point on home health, obviously, we saw, you know, strong episodic growth, obviously, weak emissions as you're sort of shifting away.

Jeffrey S. Shaner: Cigna is one second because it's such a key driver for you guys can you actually begin disclosing what's the organic growth rate is on preferred just so as we look at our excel models, we actually help sort of model. This is just.

Jeffrey S. Shaner: Changes going forward and then good.

Speaker Change: Good point on.

Jeffrey S. Shaner: On home Health, obviously you saw.

Jeffrey S. Shaner: Strong you'll give us a lot of growth, obviously weak emissions as youre sort of shifting away I guess is this the right gross margin level, we should think about going forward or.

Jeffrey S. Shaner: I guess, is this the right gross margin level that you should be thinking about going forward? Or, you know, and as you roll into the back half of the year, as we move past payroll taxes, are we actually expanding gross margins from these levels, let's say, 50% to 50%? I think, as Matt laid it out, 53% was a little hot for us and was helped by some one-time items. We think of it more in the 49% to 51%.

Jeffrey S. Shaner: And as you roll into the back half of year as we as we move past payroll taxes, but we actually expanding gross margins from these levels. If you do 50%.

Jeffrey S. Shaner: So I think I think as Matt laid out 53% was a little hot for US and was helped by some some one time items, we think of it more in the 49% to 51%.

Jeffrey S. Shaner: I think based on where we are and the strength, we have with our episodic percentage being well north of 70%, we're probably a 50, 50% plus gross margin business in home and home health and hospice for the majority of this year.

Jeffrey S. Shaner: I think based on where we are and the strength we've had with our episodic percentage being well north of 70%, we're probably a 50% plus gross margin business in home health and hospice for the majority of this year. As you know, that's 18 months of work by our home health and hospice leadership team to get there. I think the thing that we're most proud of in that is now that we have finally overlapped our comps to where we're actually generating positive year-over-year sequential growth. Now, Q1 is our season.

Jeffrey S. Shaner: And as you note that's 18 months of work by our home health and Hospice leadership team to get there I think the thing that we're most proud of and that is now we have finally overlapped our comps to where we're actually generating positive start generating a positive year over year and sequential growth. Now Q1 is our season, we have a decent Florida business. So Q1 is up.

Jeffrey S. Shaner: We have a decent Florida business, so Q1 is a better season for us in our Florida business. But being at that 1.7% positive growth, it's the first time we've had positive episodic year-over-year comps in almost three years. I think our team is really set on the fact that they can generate somewhere between 1% and 3% organic growth moving forward at a roughly 50% gross margin. You know the industry well. It's tough days in home health right now.

Jeffrey S. Shaner: As a better season for us in our Florida business, but.

Jeffrey S. Shaner: Be it that one 7% positive growth. It's the first time, we've had positive episodic year over year comps in almost three years and I think our team is really set on the fact that they can generate somewhere between 1% and 3% organic growth moving forward at a roughly 50% gross margin you know the industry well it's tough.

Jeffrey S. Shaner: Days in home health right now the fact that we're able to do this.

Jeffrey S. Shaner: The fact that we're able to do this is just an incredible amount of diligence by our team. We're excited about that. Honestly, as we look forward, we think the AMS business will start to show similar trends as the home health and hospice division has as we continue to implement our preferred payer strategy throughout Medical Solutions. But yeah, we'll be in that 49% to 51% gross margin, and I believe we'll have positive year-over-year growth of total episodes from this point forward for the rest of the year.

Jeffrey S. Shaner: It's just.

Jeffrey S. Shaner: Credible amount of diligence by our team. So so we're excited about that and honestly as we look forward. We think the Ams business will start to show similar trends as the home health and Hospice Division has been as we as we continue to implement our preferred payer strategy throughout medical solutions, but yet will be in that 49.

Jeffrey S. Shaner: 51% gross margin and I believe will be a positive year over year growth of total episodes from this point forward for rest of the year.

Speaker Change: And then one last Super quick question just hop on Scott's question on cash flow from ops.

Jeffrey S. Shaner: Also, and then one last super quick question, just to follow up on Scott's question on cash flow for mops. You know, you said to Q be negative, you know, back up, you'll be positive, get you positive cash flow for mops. If we'd be modeling 24 cash flow for mops in the same range as last year, is that a good ballpark range, or is there any color of house you'd be modeling that? Thanks so much.

Jeffrey S. Shaner: Are you starting to see if <unk> be negative.

Jeffrey S. Shaner: Back half you'll be positive a positive cash from ops.

Jeffrey S. Shaner: <unk> modeling 24 casual from ops in the same range as last year is that a good ballpark range or just any color of how would you would be modeling that thanks. So much.

Matt Buckhalter: I think, you know, I would hinder that a little bit. I would say, you know, take it back a little bit. You know, we had a really good year last year, but as I mentioned, we benefited from some timing-related items that came through. So I would just say, hey, positive is a good year for us on top of this one. If we're a little bit north of that, awesome.

Jeffrey S. Shaner: I think I would I would.

Matt Buckhalter: I would hinder that a little bit I would say take it back a little bit we had a really good year last year, but as I mentioned, we benefited from some timing related items that came through.

Matt Buckhalter: So I would just say hey positive as a good year for us on top of this one for a little bit north of that awesome, but really in 2025 is when you see the big jump up and it's really to the diligence of our teams are just good clean operations and growing our business organically.

Matt Buckhalter: But really, 2025 is when you see the big jump. And it's really due to the diligence of our teams and just good, clean operations and growing our business organically. Thanks Peter. Our next question is from Brian Tanquilut with Jeffrey. Good morning. You've got Taji on for Brian. Question.

Taji: Thanks, guys. Thanks Peter.

Taji: Our next question is from Brian <unk> with <unk>.

Matt Buckhalter: Jeffrey.

Kashi: Good morning, you've got Kashi on for Brian. Thanks for taking my question. So looking at the margins I know that you guys had provided some really great detail on the gross margin but.

Operator: So looking at the margins, I mean, I know that you guys are in the margin, but I'm thinking about the, Even with gross margins stepping down sequentially, you are able to get a good amount of cost out of the P&L. Just curious, is that the right jumping point that we should be thinking about for this year? You know, how much more juice is there to squeeze within that?

Operator: Thinking about the Opex in the business, obviously, even with gross margin stepping down sequentially, you weren't able to extract a good amount of cost out of the P&L. Just curious is that the right jumping point that we should be thinking about for this year.

Operator: How much more juice is there to squeeze within that line item.

Speaker Change: Yes, I'm going to start with kind of the sequential part of it is we've talked to RG. The last three or four quarters. This was an absolute focus of ours, knowing that gross margin is very hard to move in this business.

Jeffrey S. Shaner: Yeah, I'm going to start with kind of the sequential part of it. You know, as we talked, Taji, the last three or four quarters, this was an absolute focus of ours. Knowing that gross margin is very hard to move in this business, that being effective and efficient was key to us. I think the best part of the story, as we talked, is that we really focused the last 15 months on home health and hospice and corporate. We've pivoted this year to focus on our largest business unit, which is private duty services.

Jeffrey S. Shaner: That being effective efficient was key to us.

Jeffrey S. Shaner: I think the best part of the story as we talked we really focused the last 15 months on home health and hospice incorporate we've pivoted this year to focusing on our largest business unit, which is private duty services.

Jeffrey S. Shaner: We're being thoughtful about it, right, because we have a very large, you know, PDS business. But I think, as you think, probably more importantly, about 25, we see the opportunity to continue to be efficient and effective in our business. Matt, you want to touch on the quality run, right?

Jeffrey S. Shaner: We're being thoughtful about it right because we have we have a very large pds business, but but I think as you think it probably more important about 25, we see the opportunity to continue to be efficient effective and our business touches on a quarterly run rate, yes, and just on gross margin itself Q1 <unk>.

Matt Buckhalter: Yeah, and just on gross margin itself, you know, Q1 is a compressed gross margin, just being that labor business, Taji, that we talked about. And, you know, state taxes are significant for us. We see, you know, a sequential jump up just immediately as those roll off into Q2. And then, as well, as we continue to focus on this and take meaningful costs out of OPEX, but also do the right thing on the gross margin line and make sure that we're paying people the appropriate amount of money and being very diligent in there.

Matt Buckhalter: Compress gross margins as being a labor business <unk> that we talked about and state taxes are significant for us we see a sequential jump up just immediately as those roll off into Q2, and then as well as we continue to focus on this and take meaningful cost out of Opex, but also do the right thing on the gross margin line and making sure that we are.

Matt Buckhalter: We're paying people the appropriate amount of money and being very diligent in there I think youll see it expand throughout the year Q1, historically as I said, our lowest quarter out of the entire year on a GM basis, but Q2, Q3, Q4, I think youll see minimal.

Matt Buckhalter: I think you'll see it expand, you know, throughout the year. Q1 is historically, as I said, our lowest quarter out of the entire year on a GM basis. But Q2, Q3, Q4, I think you'll see minimal sequential steps, great, that's really helpful.

Matt Buckhalter: Sequential step up.

Speaker Change: Great. That's really helpful. And then just back to the commentary on California, I know you guys.

Matt Buckhalter: And then just back to California, you know, I know you guys express disappointment by not being on the rate budget, but, you know, obviously you're enhanced effort towards driving rate increases, the two pronged approach. But thinking about the state budget itself, right, and your continued efforts to try and get ratings. Maybe can you just talk about your learning from prior experiences, how you're incorporating this into your continued efforts towards getting, Moving pieces that are out of your control, right? Like deficit, et cetera. But just curious to hear, you know, your learnings and how you're getting on.

Matt Buckhalter: Express disappointment by not being included in the budget, but.

Matt Buckhalter: Obviously, you're still taking this enhanced effort towards driving rate increases the two pronged grading creatures creases, but thinking about the state budget itself right and your continued efforts to try and get them.

Matt Buckhalter: Rate increases maybe can you just talk about your learnings from prior efforts.

Matt Buckhalter: How you are incorporating this into your continued efforts towards getting <unk>.

Matt Buckhalter: Including the state's budget, you know and I know, there's some <unk>.

Matt Buckhalter: Moving pieces that are out of your control right like deficit et cetera, but just curious to hear your learnings and how youre going to take this revitalized approach too.

Jeffrey S. Shaner: Revitalize, portraying your, you know, value prop and the, you know, your best. It's a very thoughtful question, Taji, and thank you. You know, we've worked for two-plus years straight on California and knew that we needed to lift the rate. And again, we represent the families of the complex medical children in the state, so it's less about Aveanna, it's more about how do we help the families. And I think we've learned in California that, you know, even a great story in a difficult budget time is difficult to get through, right?

Jeffrey S. Shaner: Portraying your value prop and the need for rate increases within.

Jeffrey S. Shaner: You know your business essentially.

Jeffrey S. Shaner: Yes.

Jeffrey S. Shaner: It's a very thoughtful question and thank you.

Jeffrey S. Shaner: We're two plus years straight of working on California, and needing knowing that we needed to lift the rate.

Jeffrey S. Shaner: And again, we represent the families of the complex medical children in the state. So it's less about avia and it's more about how to how do we help the families.

Jeffrey S. Shaner: And I think I think we've learned.

Jeffrey S. Shaner: In California that.

Jeffrey S. Shaner: <unk> been a great story and a difficult budget time is difficult to get through right and so the governor has been very open to understanding our applied and the plate of our families. Dr.

Jeffrey S. Shaner: And so, you know, the governor's been very open to understanding our plight and the plight of our families. Dr. Ghaly, who runs HHS, has been very open, too. But they've also been very open about the fact that they're in a significant deficit situation and it's difficult to optically pass through a meaningful rate increase while you're cutting many, many, many other programs. And I think we just got caught up in that kind of prop wash. I know this too.

Jeffrey S. Shaner: Dr <unk>, who runs.

Jeffrey S. Shaner: <unk> has been very open but they've also been very open to the fact that they are in a significant deficit situation and it's difficult to optically pass through a meaningful rate increase while youre cutting many many many other programs.

Jeffrey S. Shaner: And I think we just got caught up in that kind of prop wash.

Jeffrey S. Shaner: I know this for us it's not a it's not an if it's a win meaning as the largest provider of <unk> services data of state of California, We have to just keep fighting the good fight and to your point learned from what worked and what maybe didn't work and refine our our efforts we continue to partner with both the current govern.

Jeffrey S. Shaner: For us, it's not an if; it's a when. Meaning, as the largest provider of PDN services in the state of California, we have to just keep fighting the good fight and, to your point, learn from what worked and what maybe didn't work and refine our efforts. We continue to partner with both the current governor's team, Dr. Ghaly, and many lawmakers with our peers and families. We're not expecting to be in this year's budget, you know; the May revised budget is due out any time now, probably in the next two weeks. We're not expecting PDN to be in that. I think it's highly unlikely we'll be in the final budget.

Jeffrey S. Shaner: Or his team.

Jeffrey S. Shaner: Golly and many legislature's.

Jeffrey S. Shaner: With our peers and the families we're not expecting to be in this year's budget may revise budgets due out anytime now probably the next two weeks were not expecting <unk> to be in that.

Jeffrey S. Shaner: I think it's highly unlikely we will be in the final budget. There's just not the appetite for for rate improvements. We asked for a 40% we were not as compared to a 3% rate because we're asking for 40% and 40% is the right number to move the needle.

Jeffrey S. Shaner: There's just not the appetite, you know, for rate improvements. We asked for 40%. We were not asking for a 2% or 3% rate because we're asking for 40%, and 40% is the right number to move the needle. I think the part of this that we have learned, though, over the last, I'll call it six, eight months, is that more families are voting in California with their need to get services. And so what we are seeing is, one by one by one, families moving away from the Medi-Cal Attrition Fever Service Program and moving into either the Whole Child Model Programs, of which there are a few in California, or finding themselves with a payer like Kaiser or someone like Kaiser who does have either commercial or an MCO carve-out in the state.

Jeffrey S. Shaner: I think the part of this that we have learned over the last I'll call. It six to eight months is.

Jeffrey S. Shaner: More families are voting in California with their with their need to get services and so what we are seeing is one by one by one families moving away from the Medicare fee for service program and moving into either the whole child model programs, which there were a few in California or finding themselves to a payer like Kaiser.

Jeffrey S. Shaner: Or or someone like Kaiser who does have either commercial or mcl carve out in the state and those those <unk> and <unk> models programs had partner with companies like Avianca at enhanced rates, which is great. So we can we can staff their cases, we can bring their children home. So.

Jeffrey S. Shaner: And those MCOs and Whole Child Models programs have partnered with companies like Aveanna at enhanced rates, which is great because we can staff their cases. We can bring their children home. So, if we look at the MCO companies in California, they would tell us exactly what the rate is for PDN in the state. And we've shared that with the current governor's team and the current legislature because there's no magic behind it. It just takes the right rate to pay the right wage.

Jeffrey S. Shaner: If we look at the MTO companies in California, They would tell us exactly what the rate is for <unk> in the state and we've shared that with the current current governor's team in turn legislature, because there's no. There's no. There's no there's no magic behind it. It just takes the right rate to pay the right wage, but if you said to me.

Jeffrey S. Shaner: But if you said to me, looking at a crystal ball, how long will it take in California? My gut feeling is that it's a few more years. We continue to help families transition out of the MCO plans, but it's a very slow movement, you know, 1%, 2%, 3% movement at a time, and we continue to partner for another year or two with the California governor, maybe even the next governor and legislature to ultimately get it done. I think when we look back after five years, California will raise the PDN rate meaningfully because they have to, not because they want to, but because they have to.

Jeffrey S. Shaner: Looking at the Crystal ball, how long will it take in California. My gut is it's a few more years that it's we continue to help families transition out to the mcl plans, but it's very slow movement, one 2% to 3% movement at a time and that we continue to partner for another year or two with the California Governor maybe even the next governor and led.

Jeffrey S. Shaner: <unk> to ultimately get it done.

Jeffrey S. Shaner: When we look back after five years, California will raise the PGN rate meaningfully because they have to now because they want to but because they have to and so we'll be proud that we were part of that process, but it will take two to three times as long as we thought and probably take two or three times as much money as we thought so but we're committed Joey we work on behalf of the families. We serve and so we won't rest until.

Jeffrey S. Shaner: And so we'll be proud that we were part of that process, but it'll take two or three times as long as we thought and probably take two or three times as much money as we thought. But we're committed to it. We work on behalf of the families we serve, and so we won't rest until our work is done. Great, thank you.

Jeffrey S. Shaner: While our work is done.

Speaker Change: Great. Thank you.

Speaker Change: Thank you Todd.

Operator: Thank you, Taji. Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the call back to Jeff Shaner for closing remarks. Thank you, David. And thank you, everyone, for your interest in our Aveanna story. We look forward to updating you on our continued progress at the end of Q2. With that, have a great day. This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.

Jeffrey S. Shaner: Ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call back to Jeff Shiner for closing remarks.

Jeffrey S. Shaner: Thank you David and thank you everyone for your interest in our Avi on a story, we look forward to updating you on our continued progress at the end of Q2 with that have a great day.

Operator: This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.

Operator: [music].