Q1 2026 Aveanna Healthcare Holdings Inc Earnings Call

May 14, 2026

Operator: Good morning, welcome to Aveanna Healthcare Holdings, Inc., Q1 2026 Earnings Call. Today's call is being recorded, and we have allocated 1 hour for prepared remarks and Q&A. At this time, I'd like to turn the call over to Deborah Stewart, Aveanna's Chief Accounting Officer. Thank you. You may begin.

Speaker #2: At this time, I'd like to turn the call over to Debbie Stewart, Aveanna's Chief Accounting Officer. Thank you. You may begin. Good morning. And welcome to Aveanna's first quarter 2026 earnings call.

Deborah Stewart: Good morning, welcome to Aveanna's Q1 2026 Earnings Call. I am Debbie Stewart, the company's Chief Accounting Officer. With me today is Jeff Shaner, our Chief Executive Officer, and Matthew 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 at the SEC. The company does not undertake any duty to update such forward-looking statements. 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.

Speaker #2: 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.

Speaker #2: 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 in the reports we file with the SEC.

Speaker #2: The company does not undertake any duty to update such forward-looking statements. Additionally, during today's call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating our performance.

Speaker #2: The presentation of this additional information should not be considered an isolation or as a substitute for results prepared in accordance with GAAP. Our 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.

Deborah Stewart: 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?

Deborah Stewart: 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?

Speaker #2: With that, I will turn the call over to Aveanna's Chief Executive Officer, Jeff Shaner. Jeff?

Speaker #3: 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 results and how we are moving Aveanna forward in 2026.

Jeffrey Shaner: Thank you, Debbie. Good morning. Thank you for joining us today. We appreciate each of you investing your time this morning to better understand our Q1 results and how we are moving Aveanna forward in 2026. My initial comments will briefly highlight our Q1 results, 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 provide updates on the recently announced Family First Home Care acquisition and how we are thinking about our 2026 strategic initiatives and our enhanced guidance before turning the call over to Matt. Moving to highlights for Q1. Revenue for Q1 was approximately $648 million, representing a 15.9% increase over the prior year period.

Jeff Shaner: Thank you, Debbie. Good morning. Thank you for joining us today. We appreciate each of you investing your time this morning to better understand our Q1 results and how we are moving Aveanna forward in 2026. My initial comments will briefly highlight our Q1 results, 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 provide updates on the recently announced Family First Home Care acquisition and how we are thinking about our 2026 strategic initiatives and our enhanced guidance before turning the call over to Matt. Moving to highlights for Q1. Revenue for Q1 was approximately $648 million, representing a 15.9% increase over the prior year period.

Speaker #3: My initial comments will briefly highlight our first quarter results, 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.

Speaker #3: I will then provide updates on the recently announced family-first home care acquisition and how we are thinking about our 2026 strategic initiatives and our enhanced guidance before turning the call over to Matt.

Speaker #3: Moving to highlights for the first quarter. Revenue for the first quarter was approximately $648 million representing a 15.9% increase over the prior year period.

Speaker #3: First quarter adjusted EBITDA was $84.4 million, representing a 25.2% increase over the prior year period, primarily due to the improved rate and volume environment and continued operational efficiencies.

Jeffrey Shaner: Q1 Adjusted EBITDA was $84.4 million, representing a 25.2% increase over the prior year period, primarily due to the improved rate and volume environment and continued operational efficiencies. 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. 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 create more capacity while reducing the total cost of care. Our Q1 results highlight that we continue to align our objectives with those of our preferred payers and government partners.

Jeff Shaner: Q1 Adjusted EBITDA was $84.4 million, representing a 25.2% increase over the prior year period, primarily due to the improved rate and volume environment and continued operational efficiencies. 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. 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 create more capacity while reducing the total cost of care.

Speaker #3: 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 believe our company could achieve.

Speaker #3: 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 create more capacity while reducing the total cost of care.

Speaker #3: 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 solid year-over-year growth in all three of our business segments.

Jeff Shaner: 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 achieved solid year-over-year growth in all three of our business segments. We also experienced improvement in our caregiver hiring and retention trends by aligning our efforts with those payers willing to engage with us on enhanced reimbursement rates and value-based agreements. While we continue to operate in a challenging environment, our preferred payer strategy supports our ability to achieve accelerated growth rates in all three of our business segments.

Jeffrey Shaner: By focusing our clinical capacity on our preferred payers, we achieved solid year-over-year growth in all three of our business segments. We also experienced improvement in our caregiver hiring and retention trends by aligning our efforts with those payers willing to engage with us on enhanced reimbursement rates and value-based agreements. While we continue to operate in a challenging environment, our preferred payer strategy supports our ability to achieve accelerated growth rates in all three of our business segments. Since our Q4 earnings call, I am pleased with the continued progress we have made on several of our rate improvement initiatives with both government and payer partners, as well as continued signs of improvement in the caregiver labor market. Specifically, as it relates to our Private Duty Services business, our government affairs strategy for 2026 was twofold.

Speaker #3: We also experienced improvement in our caregiver hiring and retention trends by aligning our efforts with those payers willing to engage with us on enhanced reimbursement rates and value-based agreements.

Speaker #3: While we continue to operate in a challenging environment, our preferred payer strategy supports our ability to achieve accelerated growth rates in all three of our business segments.

Speaker #3: 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 payer partners.

Jeff Shaner: Since our Q4 earnings call, I am pleased with the continued progress we have made on several of our rate improvement initiatives with both government and payer partners, as well as continued signs of improvement in the caregiver labor market. Specifically, as it relates to our Private Duty Services business, our government affairs strategy for 2026 was twofold. First, we continue to advocate for Medicaid rate integrity on behalf of children with complex medical conditions. Our strong advocacy presence with both federal and state legislatures across our national footprint enhances our value proposition. Second, we expect to achieve mid-single digit state rate enhancements in 2026.

Speaker #3: As well as continued signs of improvement in the caregiver labor market. Specifically, as it relates to our private duty services business, our government affairs strategy for 2026 was twofold.

Speaker #3: First, we continue to advocate for Medicaid rate integrity on behalf of children with complex medical conditions. Our strong advocacy presence with both federal and state legislatures across our national footprint enhances our value proposition.

Jeffrey Shaner: First, we continue to advocate for Medicaid rate integrity on behalf of children with complex medical conditions. Our strong advocacy presence with both federal and state legislatures across our national footprint enhances our value proposition. Second, we expect to achieve mid-single digit state rate enhancements in 2026. As of Q1, we have received 3 Private Duty Services state rate wins and believe we will achieve our goals as states complete their annual budget processes. After 3 years of meaningful rate increases in a majority of our PDS states, we are in a very stable rate environment and are shifting our focus to cost of living and wage rate adjustments. Moving to our PDS preferred payer initiatives. Aveanna's preferred payer strategy continues to gain momentum and allows us to invest in caregiver wages and recruitment efforts to accelerate hiring and staffing of nurses.

Speaker #3: And second, we expect to achieve mid, single-digit state rate enhancements in 2026. As of Q1, we have received three private duty services state rate wins and believe we will achieve our goals as states complete their annual budget processes.

Jeff Shaner: As of Q1, we have received 3 Private Duty Services state rate wins and believe we will achieve our goals as states complete their annual budget processes. After 3 years of meaningful rate increases in a majority of our PDS states, we are in a very stable rate environment and are shifting our focus to cost of living and wage rate adjustments. Moving to our PDS preferred payer initiatives. Aveanna's preferred payer strategy continues to gain momentum and allows us to invest in caregiver wages and recruitment efforts to accelerate hiring and staffing of nurses.

Speaker #3: After three years of meaningful rate increases in a majority of our PDS states, we are in a very stable rate environment and are shifting our focus to cost of living and wage rate adjustments.

Speaker #3: Moving to our PDS preferred payer initiatives. Aveanna's preferred payer strategy continues to gain momentum and allows us to invest in caregiver wages and recruitment efforts to accelerate hiring and staffing of nurses.

Speaker #3: Our preferred payer goal for 2026 is to achieve 8 additional agreements for a total of 38 preferred payers. We signed four preferred payer agreements in Q1 and are well on our way to achieving our 2026 target.

Jeffrey Shaner: Our preferred payer goal for 2026 is to achieve eight additional agreements for a total of 38 preferred payers. We signed four preferred payer agreements in Q1 and are well on our way to achieving our 2026 target. Additionally, our Q1 PDS preferred payer agreements accounted for approximately 60% of our total private duty services MCO volumes, up from 57% at the end of 2025. This positive momentum in preferred payer volumes continues to highlight the shift in our caregiver capacity and recruitment efforts towards our preferred payer partners. Moving to our preferred payer progress in home health. Our goal for 2026 is to maintain our episodic payer mix above 75% while returning to a more normalized growth rate.

Jeff Shaner: Our preferred payer goal for 2026 is to achieve eight additional agreements for a total of 38 preferred payers. We signed four preferred payer agreements in Q1 and are well on our way to achieving our 2026 target. Additionally, our Q1 PDS preferred payer agreements accounted for approximately 60% of our total private duty services MCO volumes, up from 57% at the end of 2025. This positive momentum in preferred payer volumes continues to highlight the shift in our caregiver capacity and recruitment efforts towards our preferred payer partners. Moving to our preferred payer progress in home health. Our goal for 2026 is to maintain our episodic payer mix above 75% while returning to a more normalized growth rate.

Speaker #3: Additionally, our Q1 PDS preferred payer agreements accounted for approximately 60% of our total private duty services MCO volumes, up from 57% at the end of 2025.

Speaker #3: This positive momentum in preferred payer volumes continues to highlight the shift in our caregiver capacity and recruitment efforts towards our preferred payer partners. Moving to our preferred payer progress in home health.

Speaker #3: Our goal for 2026 is to maintain our episodic payer mix above 75% while returning to a more normalized growth rate. I am pleased to report in Q1, our episodic mix was approximately 80% and our total episodic volume growth was 23.1% compared with the prior year period.

Jeffrey Shaner: I am pleased to report in Q1 our episodic mix was approximately 80%, and our total episodic volume growth was 23.1% compared with the prior year period. The continued investment in clinical outcomes, sales resources, and a focused approach to growth is deriving results with Q1 total admissions of approximately 11,000 or 13.4% organic growth over the prior year period. Additionally, we exited 2025 with 45 preferred payer agreements in home health and expected to add 5 agreements in 2026 for a total of 50. As of Q1, I am pleased to report that we added 4 additional preferred payer agreements and are well on our way to exceeding our goal of 50 preferred payers in home health in 2026.

Jeff Shaner: I am pleased to report in Q1 our episodic mix was approximately 80%, and our total episodic volume growth was 23.1% compared with the prior year period. The continued investment in clinical outcomes, sales resources, and a focused approach to growth is deriving results with Q1 total admissions of approximately 11,000 or 13.4% organic growth over the prior year period. Additionally, we exited 2025 with 45 preferred payer agreements in home health and expected to add 5 agreements in 2026 for a total of 50. As of Q1, I am pleased to report that we added 4 additional preferred payer agreements and are well on our way to exceeding our goal of 50 preferred payers in home health in 2026.

Speaker #3: The continued investment in clinical outcomes, sales resources, and a focused approach to growth is driving results, with Q1 total admissions of approximately 11,000, or 13.4% organic growth over the prior-year period.

Speaker #3: Additionally, we exited 2025 with 45 preferred payer agreements in home health and expect to add five agreements in 2026 for a total of 50.

Speaker #3: As of Q1, I am pleased to report that we added four additional preferred payer agreements and are well on our way to exceeding our goal of 50 preferred payers in home health in 2026.

Speaker #3: Our dedicated focus on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis has led to double-digit year-over-year growth in home health total admissions and episodes as well as improvement in our clinical and financial outcomes.

Jeffrey Shaner: Our dedicated focus on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis has led to double-digit year-over-year growth in home health total admissions and episodes, as well as improvement in our clinical and financial outcomes. Finally, as we have achieved our desired preferred payer model in Private Duty Services and home health and hospice, we are continuing with a similar strategy in our medical solutions business. As we exited 2025, we had 18 preferred payer agreements in med solutions and expected that number to grow to 25 by the end of 2026. As of Q1, we signed 2 additional agreements for a total of 20 preferred payer agreements to date. Our gross margins have stabilized in our desired range as we align our clinical capacity with those payers that value our services and pay us in a timely fashion.

Jeff Shaner: Our dedicated focus on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis has led to double-digit year-over-year growth in home health total admissions and episodes, as well as improvement in our clinical and financial outcomes. Finally, as we have achieved our desired preferred payer model in Private Duty Services and home health and hospice, we are continuing with a similar strategy in our medical solutions business. As we exited 2025, we had 18 preferred payer agreements in med solutions and expected that number to grow to 25 by the end of 2026. As of Q1, we signed 2 additional agreements for a total of 20 preferred payer agreements to date.

Speaker #3: Finally, as we have achieved our desired preferred payer model in private duty services and home health and hospice, we are continuing with a similar strategy in our medical solutions business.

Speaker #3: As we exited 2025, we had 18 preferred payer agreements in med solutions and expected that number to grow to 25 by the end of 2026.

Speaker #3: As of Q1, we signed two additional agreements for a total of 20 preferred payer agreements to date. Our gross margins have stabilized in our desired range as we align our clinical capacity with those payers that value our services and pay us in a timely fashion, I am pleased with our Q1 volume growth in med solutions of approximately 93,000 UPS or positive 4.5% over the prior year period.

Jeff Shaner: Our gross margins have stabilized in our desired range as we align our clinical capacity with those payers that value our services and pay us in a timely fashion. I am pleased with our Q1 volume growth in Medical Solutions of approximately 93,000 UPS or +4.5% over the prior year period. As we think about Medical Solutions growth in 2026, I would expect us to remain in the mid-single digits for the next few quarters and then return to double-digit growth by the end of the year. We are encouraged by our rate increases, preferred payer agreements, and subsequent growth in our businesses. Our company has demonstrated a stable return to organic growth as we achieve our rate goals previously discussed.

Jeffrey Shaner: I am pleased with our Q1 volume growth in Medical Solutions of approximately 93,000 UPS or +4.5% over the prior year period. As we think about Medical Solutions growth in 2026, I would expect us to remain in the mid-single digits for the next few quarters and then return to double-digit growth by the end of the year. We are encouraged by our rate increases, preferred payer agreements, and subsequent growth in our businesses. Our company has demonstrated a stable return to organic growth as we achieve our rate goals previously discussed. Home and community-based care will continue to grow, Aveanna is a comprehensive platform with a diverse payer base providing cost-effective, high-quality alternative to higher cost care settings.

Speaker #3: As we think about medical solutions growth in 2026, I would expect us to remain in the mid, single-digits for the next few quarters and then return to double-digit growth by the end of the year.

Speaker #3: We are encouraged by our rate increases, preferred payer agreements, and subsequent growth in our businesses. Our company has demonstrated a stable return to organic growth as we achieve our rate goals previously discussed.

Jeff Shaner: Home and community-based care will continue to grow, Aveanna is a comprehensive platform with a diverse payer base providing cost-effective, high-quality alternative to higher cost care settings. Turning to our recently announced transaction to acquire Family First Home Care, a Florida-based company with a great reputation for high-quality in-home pediatric care. I would like to send my warm welcome to the Family First teammates. I am thrilled to continue our acquisition growth story with great companies like Thrive Skilled Pediatrics and Family First Home Care. Both companies continue to build upon the Aveanna brand of high-quality, compassionate care in the most cost-effective setting, the comfort of our patient's home.

Speaker #3: Home and community-based care will continue to grow and Aveanna is a comprehensive platform with a diverse payer base providing cost-effective high-quality alternative to higher-cost care settings.

Speaker #3: Now, turning to our recently announced transaction to acquire Family First Home Care, a Florida-based company with a great reputation for quality in-home pediatric care.

Jeffrey Shaner: Turning to our recently announced transaction to acquire Family First Home Care, a Florida-based company with a great reputation for high-quality in-home pediatric care. I would like to send my warm welcome to the Family First teammates. I am thrilled to continue our acquisition growth story with great companies like Thrive Skilled Pediatrics and Family First Home Care. Both companies continue to build upon the Aveanna brand of high-quality, compassionate care in the most cost-effective setting, the comfort of our patient's home. We continue to work through the regulatory approval process and expect the transaction will close sometime in late Q2. I look forward to updating you on our progress in the coming months. Let me comment on our strategic plan and enhanced outlook for 2026. We will focus our efforts on five primary strategic initiatives.

Speaker #3: Again, I would like to send my warm welcome to the Family First teammates. I am thrilled to continue our acquisition growth story with great companies like Thrive Skilled Pediatrics and Family First Home Care.

Speaker #3: Both companies continue to build upon the Aveanna brand of high-quality compassionate care in the most cost-effective setting the comfort of our patients' home. We continue to work through the regulatory approval process and expect the transaction will close sometime in late Q2.

Jeff Shaner: We continue to work through the regulatory approval process and expect the transaction will close sometime in late Q2. I look forward to updating you on our progress in the coming months. Let me comment on our strategic plan and enhanced outlook for 2026. We will focus our efforts on five primary strategic initiatives. First, strengthening our partnerships with government partners and preferred payers to create additional capacity and growth. Second, improving clinical outcomes and customer engagement scores while lowering the total cost of care. Third, implementing high-priority artificial intelligence and automation efforts to improve operational efficiency and productivity gains. Fourth, growing through acquisitions while improving net leverage and free cash flow.

Speaker #3: I look forward to updating you on our progress in the coming months. Additionally, let me comment on our strategic plan and enhanced outlook for 2026.

Speaker #3: We will focus our efforts on five primary strategic initiatives. First, strengthening our partnerships with government partners and preferred payers to create additional capacity and growth.

Jeffrey Shaner: First, strengthening our partnerships with government partners and preferred payers to create additional capacity and growth. Second, improving clinical outcomes and customer engagement scores while lowering the total cost of care. Third, implementing high-priority artificial intelligence and automation efforts to improve operational efficiency and productivity gains. Fourth, growing through acquisitions while improving net leverage and free cash flow. Finally, engaging our leaders and employees in delivering our Aveanna mission. Based on the strength of our first quarter results and the continued execution of our key strategic initiatives, we are increasing our full year revenue and Adjusted EBITDA guidance to a revenue range of $2.56 to $2.58 billion and an Adjusted EBITDA range of $328 to $332 million.

Speaker #3: Second, improving clinical outcomes and customer engagement scores while lowering the total cost of care. Third, implementing high-priority artificial intelligence and automation efforts to improve operational efficiency and productivity gains.

Speaker #3: Fourth, growing through acquisitions while improving net leverage and free cash flow. And finally, engaging our leaders and employees in delivering our Aveanna mission. Based on the strength of our first quarter results, and the continued execution of our key strategic initiatives, we are increasing our full-year revenue and adjusted EBITDA guidance to a revenue range of 2.56 to 2.58 billion dollars and an adjusted EBITDA range of 328 to 332 million dollars.

Jeff Shaner: Finally, engaging our leaders and employees in delivering our Aveanna mission. Based on the strength of our first quarter results and the continued execution of our key strategic initiatives, we are increasing our full year revenue and Adjusted EBITDA guidance to a revenue range of $2.56 to $2.58 billion and an Adjusted EBITDA range of $328 to $332 million. We believe this enhanced 2026 outlook provides a prudent view considering the challenges we still face with the evolving environment and does not include the impact of the Family First acquisition. As I reflect on the strong start to 2026, I want to take a moment and comment on our second annual Aveanna Cares Month of Community Service. We dedicate the month of April to not only focusing on our mission, but living that mission in our 379 communities.

Speaker #3: We believe this enhanced 2026 outlook provides a prudent view considering the challenges we still face with the evolving environment and does not include the impact of the Family First acquisition.

Jeffrey Shaner: We believe this enhanced 2026 outlook provides a prudent view considering the challenges we still face with the evolving environment and does not include the impact of the Family First acquisition. As I reflect on the strong start to 2026, I want to take a moment and comment on our second annual Aveanna Cares Month of Community Service. We dedicate the month of April to not only focusing on our mission, but living that mission in our 379 communities. Aveanna Cares is an extension of the care we provide families every day, and we are proud to give back, help others, and strengthen our communities and our teams through our volunteering efforts.

Speaker #3: As I reflect on the strong start to 2026, I want to take a moment and comment on our second annual Aveanna Cares Month of Community Service.

Speaker #3: We dedicate the month of April to not only focusing on our mission but living that mission in our 379 communities. Aveanna Cares is an extension of the care we provide families every day.

Jeff Shaner: Aveanna Cares is an extension of the care we provide families every day, and we are proud to give back, help others, and strengthen our communities and our teams through our volunteering efforts. We set an ambitious goal this year to serve 7,500 volunteer hours. I am extremely proud to announce that our Aveanna family completed over 9,000 total volunteer hours. Our teams held approximately 200 volunteer events nationwide and lived our core values while giving back to important local charities that support children, adults, and seniors in our communities. I look forward to raising the bar in 2027 with plans to further expand our Aveanna Cares impact across the country. With that, let me turn the call over to Matt to provide further details on the quarter and our 2026 outlooks. Matt?

Speaker #3: And we are proud to give back, help others, and strengthen our communities and our teams through our volunteering efforts. We set an ambitious goal this year to serve 7,500 volunteer hours and I am extremely proud to announce that our Aveanna family completed over 9,000 total volunteer hours; our teams held approximately 200 volunteer events nationwide and lived our core values while giving back to important local charities that support children, adults, and seniors in our communities.

Jeffrey Shaner: We set an ambitious goal this year to serve 7,500 volunteer hours. I am extremely proud to announce that our Aveanna family completed over 9,000 total volunteer hours. Our teams held approximately 200 volunteer events nationwide and lived our core values while giving back to important local charities that support children, adults, and seniors in our communities. I look forward to raising the bar in 2027 with plans to further expand our Aveanna Cares impact across the country. With that, let me turn the call over to Matt to provide further details on the quarter and our 2026 outlooks. Matt?

Speaker #3: I look forward to raising the bar in 2027 with plans to further expand our Aveanna Cares impact across the country. With that, let me turn the call over to Matt to provide further details on the quarter and our 2026 outlook.

Speaker #3: Matt?

Speaker #2: Thank you, Jeff. And good morning. I'll first talk about our first quarter financial results and liquidity, before providing additional details on our refreshed outlook for 2026.

Matthew Buckhalter: Thank you, Jeff. Good morning. I'll first talk about our first quarter financial results and liquidity before providing additional details on our refreshed outlook for 2026. Starting with the top line, we saw revenues rise 15.9% over the prior year period to $647.9 million. We achieved year-over-year revenue growth in all three of our operating divisions by our Home Health and Hospice, by the Duty Services and Medical Solutions divisions, which grew by 17.4%, 16.4%, and 7.4% compared to the prior year period. Consolidated gross margin was $205.4 million, or 31.7%. Consolidated Adjusted EBITDA was $84.4 million, a 25.2% increase as compared to the prior year period.

Matt Buckhalter: Thank you, Jeff. Good morning. I'll first talk about our first quarter financial results and liquidity before providing additional details on our refreshed outlook for 2026. Starting with the top line, we saw revenues rise 15.9% over the prior year period to $647.9 million. We achieved year-over-year revenue growth in all three of our operating divisions by our Home Health and Hospice, by the Duty Services and Medical Solutions divisions, which grew by 17.4%, 16.4%, and 7.4% compared to the prior year period. Consolidated gross margin was $205.4 million, or 31.7%. Consolidated Adjusted EBITDA was $84.4 million, a 25.2% increase as compared to the prior year period.

Speaker #2: Starting with the top line, we saw revenues rise 15.9% over the prior year period to $647.9 million. We achieved year-over-year revenue growth in all three of our operating divisions, by our home health and hospice, private duty services, and medical solutions divisions, which grew by 17.4%, 16.4%, and 7.4% compared to the prior year period.

Speaker #2: Consolidated gross margin was $205.4 million, or 31.7%. Consolidated adjusted EBITDA was $84.4 million, a 25.2% increase as compared to the prior year period.

Speaker #2: This growth reflects an improved rate environment, increased volumes, as well as enhanced operational efficiencies. Now, taking a deeper look into each of our segments, starting with private duty services, revenue for the quarter was approximately $536 million dollars, a 16.4% increase and was driven by approximately 12.1 million hours of care, a volume increase of 10.7% over the prior year.

Matthew Buckhalter: This growth reflects an improved rate environment, increased volumes, as well as enhanced operational efficiencies. Taking a deeper look into each of our segments. Starting with Private Duty Services, revenue for the quarter was approximately $536 million, a 16.4% increase, and was driven by approximately 12.1 million hours of care, a volume increase of 10.7% over the prior year. Q1 revenue per hour of $44.43 was up 5.7% compared to the prior year quarter, primarily driven by growth in preferred payer volume and updated reimbursement agreements. We remain optimistic about our ability to attract caregivers and address market demands for our services when we obtain acceptable reimbursement rates.

Matt Buckhalter: This growth reflects an improved rate environment, increased volumes, as well as enhanced operational efficiencies. Taking a deeper look into each of our segments. Starting with Private Duty Services, revenue for the quarter was approximately $536 million, a 16.4% increase, and was driven by approximately 12.1 million hours of care, a volume increase of 10.7% over the prior year. Q1 revenue per hour of $44.43 was up 5.7% compared to the prior year quarter, primarily driven by growth in preferred payer volume and updated reimbursement agreements. We remain optimistic about our ability to attract caregivers and address market demands for our services when we obtain acceptable reimbursement rates.

Speaker #2: Q1 revenue per hour of $44.43 was up 5.7% compared to the prior-year quarter, primarily driven by growth in preferred payer volume and updated reimbursement agreements.

Speaker #2: 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 149.2 million dollars of gross margin or 27.9%.

Matthew Buckhalter: Turning to our cost of labor and gross margin metrics, we achieved $149.2 million of gross margin or 27.9%. The cost of revenue rate of $32.05 in Q1 was up $2.17, or 8.1% from the prior year period. Our Q1 spread per hour was $12.38, reflecting continued normalization, driven in part by ongoing caregiver wage adjustments, supporting higher volumes and improving clinical outcomes. Moving on to our home health and hospice segment. Revenue for the quarter was approximately $66.6 million, a 17.4% increase over the prior year. Revenue was driven by 11,000 total admissions, with approximately 80% being episodic and 14,900 total episodes of care, up 23.1% from the prior year quarter.

Matt Buckhalter: Turning to our cost of labor and gross margin metrics, we achieved $149.2 million of gross margin or 27.9%. The cost of revenue rate of $32.05 in Q1 was up $2.17, or 8.1% from the prior year period. Our Q1 spread per hour was $12.38, reflecting continued normalization, driven in part by ongoing caregiver wage adjustments, supporting higher volumes and improving clinical outcomes. Moving on to our home health and hospice segment. Revenue for the quarter was approximately $66.6 million, a 17.4% increase over the prior year. Revenue was driven by 11,000 total admissions, with approximately 80% being episodic and 14,900 total episodes of care, up 23.1% from the prior year quarter.

Speaker #2: The cost of revenue rate of $32.05 in Q1 was up $2.17, or 8.1%, from the prior-year period. Our Q1 spread per hour was $12.38.

Speaker #2: Reflecting continued normalization, driven in part by ongoing caregiver wage adjustments supporting higher volumes and improving clinical outcomes. Moving on to our home health and hospice segment, revenue for the quarter was approximately $66.6 million dollars, a 17.4% increase over the prior year.

Speaker #2: Revenue was driven by 11,000 total admissions, with approximately 80% being episodic, and 14,900 total episodes of care, up 23.1% from the prior year quarter. Medicare revenue per episode was $3,167, up 0.5% from the prior year quarter.

Matthew Buckhalter: Medicare revenue per episode was $3,167, up 0.5% from the prior year Q1. Our episodic focus has accelerated our margin expansion and improved our clinical outcomes. With episodic admissions well over 75%, we have achieved our goal of right-sizing our margin profile and enhancing our clinical offerings. We are pleased with our Q1 gross margin of 53.7%, representing our continued focus on cost initiatives to achieve our targeted margin profile. Our home health and hospice platform is dedicated to creating value through effective operational management and the delivery of exceptional patient care. Now to our Medical Solutions segment results for Q1. During the quarter, we produced revenue of $45.7 million, up 7.4% over the prior year period.

Matt Buckhalter: Medicare revenue per episode was $3,167, up 0.5% from the prior year Q1. Our episodic focus has accelerated our margin expansion and improved our clinical outcomes. With episodic admissions well over 75%, we have achieved our goal of right-sizing our margin profile and enhancing our clinical offerings. We are pleased with our Q1 gross margin of 53.7%, representing our continued focus on cost initiatives to achieve our targeted margin profile. Our home health and hospice platform is dedicated to creating value through effective operational management and the delivery of exceptional patient care. Now to our Medical Solutions segment results for Q1. During the quarter, we produced revenue of $45.7 million, up 7.4% over the prior year period.

Speaker #2: Our episodic focus has accelerated our margin expansion and improved our clinical outcomes. With episodic admissions well over 75%, we have achieved our goal of right-sizing our margin profile and enhancing our clinical offerings.

Speaker #2: We are pleased with our Q1 gross margin of 53.7%, representing our continued focus on cost initiatives to achieve our targeted margin profile. Our home health and hospice platform is dedicated to creating value through effective operational management and the delivery of exceptional patient care.

Speaker #2: Now, to our medical solutions, segment results for Q1. During the quarter, we produced revenue of $45.7 million dollars, up 7.4% over the prior year period.

Speaker #2: Revenue was driven by approximately 93,000 unique patients served, and revenue per UPS of approximately $491, up 2.9% over the prior year period. Gross margin was approximately 20.4 million dollars, or 44.7% for the quarter.

Matthew Buckhalter: Revenue was driven by approximately 93,000 unique patients served and revenue per UPS of approximately $491, up 2.9% over the prior year period. Gross margin was approximately $20.4 million or 44.7% for the quarter. As Jeff mentioned, we are in the final stages of implementing our preferred payer strategy in medical solutions by aligning our capacity with those payers that value our resources and appropriately reimburse us for the services we provide. As a result, we expect margins to normalize and UPS to continue to accelerate its growth in the back half of 2026. In summary, we remain focused on keeping our patients' care at the center of everything we do.

Matt Buckhalter: Revenue was driven by approximately 93,000 unique patients served and revenue per UPS of approximately $491, up 2.9% over the prior year period. Gross margin was approximately $20.4 million or 44.7% for the quarter. As Jeff mentioned, we are in the final stages of implementing our preferred payer strategy in medical solutions by aligning our capacity with those payers that value our resources and appropriately reimburse us for the services we provide. As a result, we expect margins to normalize and UPS to continue to accelerate its growth in the back half of 2026. In summary, we remain focused on keeping our patients' care at the center of everything we do.

Speaker #2: As Jeff mentioned, we are in the final stages of implementing our preferred payer strategy in Medical Solutions, by aligning our capacity with those payers that value our resources and appropriately reimburse us for the services we provide.

Speaker #2: As a result, we expect margins to normalize and UPS to continue to accelerate its growth in the back half of 2026. In summary, we remain focused on keeping our patients' care at the center of everything we do.

Speaker #2: It is clear that aligning caregiver capacity with preferred payers who value our partnership is the right path forward at Aveanna. With the strong momentum through Q1, we are optimistic these trends will continue into 2026.

Matthew Buckhalter: It is clear that aligning caregiver capacity with preferred payers who value our partnership is the right path forward at Aveanna. With the strong momentum through Q1, we are optimistic these trends will continue into 2026. We will continue to pass through wage improvements and other benefits to our caregivers and the ongoing effort to better improve volumes. Now, moving to our balance sheet to liquidity. At the end of Q1, we have liquidity of approximately $525 million, representing cash on hand of approximately $189 million, $110 million of availability under our securitization facility, and approximately $226 million of availability on our revolver, which was undrawn as of the end of the quarter. We had $24.5 million in outstanding letters of credit at the end of Q1.

Matt Buckhalter: It is clear that aligning caregiver capacity with preferred payers who value our partnership is the right path forward at Aveanna. With the strong momentum through Q1, we are optimistic these trends will continue into 2026. We will continue to pass through wage improvements and other benefits to our caregivers and the ongoing effort to better improve volumes. Now, moving to our balance sheet to liquidity. At the end of Q1, we have liquidity of approximately $525 million, representing cash on hand of approximately $189 million, $110 million of availability under our securitization facility, and approximately $226 million of availability on our revolver, which was undrawn as of the end of the quarter. We had $24.5 million in outstanding letters of credit at the end of Q1.

Speaker #2: We will continue to 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.

Speaker #2: At the end of the first quarter, we had liquidity of approximately $525 million dollars, representing cash on hand of approximately $189 million, $110 million of availability under our securitization facility, and approximately $226 million of availability on our revolver, which was undrawn as of the end of the quarter.

Speaker #2: We had 24.5 million dollars 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.

Matthew Buckhalter: 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 our variable rate debt is hedged. Our interest rate swaps extend through June 2026, and our interest rate caps extend through February 2027. In anticipation of the swap expiration, we entered into an additional interest rate cap agreement effective July 2026. This agreement limits exposure on $520 million of variable rate debt to increases in SOFR above 4% through December 2029.

Matt Buckhalter: 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 our variable rate debt is hedged. Our interest rate swaps extend through June 2026, and our interest rate caps extend through February 2027. In anticipation of the swap expiration, we entered into an additional interest rate cap agreement effective July 2026. This agreement limits exposure on $520 million of variable rate debt to increases in SOFR above 4% through December 2029.

Speaker #2: 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 silver above 3%.

Speaker #2: Accordingly, substantially all our variable rate debt is hedged. Our interest rate swaps extend through June 2026, and our interest rate caps extend through February 2027.

Speaker #2: In anticipation of the swap expiration, we entered into an additional interest rate cap agreement effective July 2026. This agreement limits exposure on $520 million of variable rate debt to increases in SOFR above 4% through December 2029.

Speaker #2: Looking at year-to-date cash flow, cash generated by operating activities was $4.3 million and free cash flow was -$3.8 million. We are encouraged by our strong cash collections and cost efficiency efforts, which drove solid operating and free cash flow in 2025.

Matthew Buckhalter: Looking at year-to-date cash flow, cash generated by operating activities was $4.3 million, and free cash flow was -$3.8 million. We are encouraged by our strong cash collections and cost efficiency efforts, which drove solid operating and free cash flow in 2025, and we expect similar cash flow performance in 2026. As a reminder, Q1 is typically our seasonal low point for both operating and free cash flow, with improvement expected throughout the rest of the year. Before I hand the call over to the operator for Q&A, let me take a moment to address our raised outlook for 2026. As Jeffrey Shaner mentioned, we expect full year 2026 revenue range of $2.56 to $2.58 billion, an Adjusted EBITDA range of $328 to $332 million.

Matt Buckhalter: Looking at year-to-date cash flow, cash generated by operating activities was $4.3 million, and free cash flow was -$3.8 million. We are encouraged by our strong cash collections and cost efficiency efforts, which drove solid operating and free cash flow in 2025, and we expect similar cash flow performance in 2026. As a reminder, Q1 is typically our seasonal low point for both operating and free cash flow, with improvement expected throughout the rest of the year. Before I hand the call over to the operator for Q&A, let me take a moment to address our raised outlook for 2026. As Jeffrey Shaner mentioned, we expect full year 2026 revenue range of $2.56 to $2.58 billion, an Adjusted EBITDA range of $328 to $332 million.

Speaker #2: And we expect similar cash flow performance in 2026. As a reminder, the first quarter is typically our seasonal low point for both operating and free cash flow, with improvement expected throughout the rest of the year.

Speaker #2: Before I hand the call over to the operator, the Q&A, let me take a moment to address our raised outlook for 2026. As Jeff mentioned, we expect full-year 2026 revenue range of 2.56 to 2.58 billion, and adjusted EBITDA range of $328 to $332 million.

Speaker #2: Consistent with our standard practice, our full-year 2026 guidance excludes the pending Family First acquisition. Which we expect to close in late Q2. As we reflect on our Q1 results, I'd like to take a moment to express my sincere gratitude to our Aveanna teammates.

Matthew Buckhalter: Consistent with our standard practice, our full year 2026 guidance excludes the pending Family First acquisition, which we expect to close in late Q2. As we reflect on our Q1 results, I'd like to take a moment to express my sincere gratitude to our Aveanna teammates. These strong results would not have been possible without your hard work and dedication. Looking ahead, I'm excited for the continued execution of our 2026 strategic plan and look forward to providing you with further updates at the end of Q2. With that, let me turn the call over to the operator.

Matt Buckhalter: Consistent with our standard practice, our full year 2026 guidance excludes the pending Family First acquisition, which we expect to close in late Q2. As we reflect on our Q1 results, I'd like to take a moment to express my sincere gratitude to our Aveanna teammates. These strong results would not have been possible without your hard work and dedication. Looking ahead, I'm excited for the continued execution of our 2026 strategic plan and look forward to providing you with further updates at the end of Q2. With that, let me turn the call over to the operator.

Speaker #2: These strong results would not have been possible without your hard work and dedication. Looking ahead, I'm excited for the continued execution of our 2026 strategic plan and look forward to providing you with further updates at the end of Q2.

Speaker #2: With that, let me turn the call over to the operator.

Speaker #1: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Matthew Buckhalter: Thank you. We will now be conducting a question and answer session. To allow everyone in the Q&A queue to be able to ask a question, we ask that everyone limit themselves to only one question and one follow-up. One moment please while we pull for questions. Our first question comes from the line of Ben Hendricks with RBC Capital Markets. Please proceed with your question.

Operator: Thank you. We will now be conducting a question and answer session. To allow everyone in the Q&A queue to be able to ask a question, we ask that everyone limit themselves to only one question and one follow-up. One moment please while we pull for questions. Our first question comes from the line of Ben Hendricks with RBC Capital Markets. Please proceed with your question.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up their handset before pressing the star keys.

Speaker #1: To allow everyone in the Q&A queue to be able to ask a question, we ask that everyone limit themselves to only one question and one follow-up.

Speaker #1: One moment, please, while we pull for questions. Our first question comes from the line of Ben Hendricks with RBC Capital Markets. Please proceed with your question.

Speaker #3: Great. Thank you very much and congrats on the strong performance. Just wanted to get some comments on the regulatory backdrop, specifically with the home health moratorium on new Medicare licensure announced yesterday.

Ben Hendricks: Great. Thank you very much, and congrats on the strong performance. I just wanted to get some comments on the regulatory backdrop, specifically with the home health moratorium on new Medicare licensure announced yesterday. I just wanted to get some of your overall thoughts, any impact it's having on your acquisition strategy to the extent to which it might impact acquisitions like Family First or others. Any kind of comments you can give on the backdrop? Thanks.

Ben Hendrix: Great. Thank you very much, and congrats on the strong performance. I just wanted to get some comments on the regulatory backdrop, specifically with the home health moratorium on new Medicare licensure announced yesterday. I just wanted to get some of your overall thoughts, any impact it's having on your acquisition strategy to the extent to which it might impact acquisitions like Family First or others. Any kind of comments you can give on the backdrop? Thanks.

Speaker #3: Just wanted to get your overall thoughts on any impact it's having on your acquisition strategy to the extent to which it might impact acquisitions like Family First or others.

Speaker #3: Any kind of comments you can give on the backdrop? Thanks.

Speaker #4: Good morning, Ben, and well, Matt won the bet because we figured that would be the first question, the second question, third question. So I appreciate you just getting us right there.

Jeffrey Shaner: Morning, Ben, well, Matt won the bet 'cause we figured that would be the first question, the second question, third question. I appreciate you just getting us right there. All kidding aside, you know, Ben, if I think macro industry-wide, let's start with the industry, and then we'll come back to Aveanna. You know, Dr. Oz and CMS, the administration, have been pretty deliberate with their messaging around fraud, waste, and abuse now for at least a year, if not longer. You know, I view yesterday's CMS announcement regarding the home health and hospice six-month enrollment moratorium as consistent with Dr. Oz's messaging over the last, you know, six months to a year.

Jeff Shaner: Morning, Ben, well, Matt won the bet 'cause we figured that would be the first question, the second question, third question. I appreciate you just getting us right there. All kidding aside, you know, Ben, if I think macro industry-wide, let's start with the industry, and then we'll come back to Aveanna. You know, Dr. Oz and CMS, the administration, have been pretty deliberate with their messaging around fraud, waste, and abuse now for at least a year, if not longer. You know, I view yesterday's CMS announcement regarding the home health and hospice six-month enrollment moratorium as consistent with Dr. Oz's messaging over the last, you know, six months to a year.

Speaker #4: I'll kid you aside, Ben, I think if I think macro industry-wide, let's start with the industry and then we'll come back to Aveanna. Dr. Oz and CMS, the administration, have been pretty deliberate with their messaging around fraud, waste, and abuse now for at least a year, if not longer.

Speaker #4: And I view yesterday's CMS announcement regarding the home health and hospice six-month enrollment moratorium as consistent with Dr. Oz's messaging over the last six months to a year.

Speaker #4: I'd be remiss as an industry participant to say that we're disappointed that a nationwide moratorium is not the way to solve LA County's specific targeted fraud, waste, and abuse.

Matthew Buckhalter: I'd be remiss if, as an industry participant to say that we're disappointed that a nationwide moratorium is not the way to solve LA County's specific, you know, targeted fraud, waste, and abuse. I do think it's consistent with the messaging that CMS has been sharing the last 6 months. If I drill down to Aveanna and Family First, it has absolutely no impact, 0 impact on Aveanna. The way we have read it, we it has 0 impact on our 2026 business plan, our 2027 business plan.

Jeff Shaner: I'd be remiss if, as an industry participant to say that we're disappointed that a nationwide moratorium is not the way to solve LA County's specific, you know, targeted fraud, waste, and abuse. I do think it's consistent with the messaging that CMS has been sharing the last 6 months. If I drill down to Aveanna and Family First, it has absolutely no impact, 0 impact on Aveanna. The way we have read it, we it has 0 impact on our 2026 business plan, our 2027 business plan. Our home health and hospice business was built through M&A and then organic growth. I think for that part of it, we feel positive and pleased that the rule was thoughtful, the moratorium was thoughtful, to not penalize current Medicare beneficiaries and current providers.

Speaker #4: But I do think it's consistent with the messaging that CMS has been sharing the last six months. If I drill down to Aveanna and Family First, it has absolutely no impact—zero impact—on Aveanna.

Speaker #4: The way we have read it, it has zero impact on our 2026 business plan, our 2027 business plan. Our home health and hospice business was built through M&A and then organic growth.

Jeffrey Shaner: Our home health and hospice business was built through M&A and then organic growth. I think for that part of it, we feel positive and pleased that the rule was thoughtful, the moratorium was thoughtful, to not penalize current Medicare beneficiaries and current providers. We would like in this next six months with the National Alliance for Care at Home and all of our industry peers to work with Dr. Oz and CMS to really target the areas where fraud, waste, and abuse are occurring, specifically places like LA County, because this does punish rural type healthcare. Rural healthcare needs more providers. They need more robust home health and hospice providers.

Speaker #4: So I think for that part of it, we feel positive and pleased that the rule was thoughtful. The moratorium was thoughtful to not penalize current Medicare beneficiaries and current providers.

Speaker #4: But we would like in this next six months, with the Alliance, the National Alliance of Care at Home, and all of our industry peers, to work with Dr. Oz and CMS to really target the areas where fraud, waste, and abuse are occurring specifically places like LA County, because this does punish rural-type healthcare, right?

Jeff Shaner: We would like in this next six months with the National Alliance for Care at Home and all of our industry peers to work with Dr. Oz and CMS to really target the areas where fraud, waste, and abuse are occurring, specifically places like LA County, because this does punish rural type healthcare. Rural healthcare needs more providers. They need more robust home health and hospice providers. We wanna work with the administration, and we think the thoughtfulness of how Dr. Oz has approached things, that opportunity will avail itself. We expect to get this question a lot today, and I'll reiterate, absolutely zero impact on our 2026 guidance, our results, and our ability to grow the business successfully.

Speaker #4: Rural healthcare needs more providers. They need more robust home health and hospice providers. So we want to work with the administration, and we think the thoughtfulness of how Dr. Oz has approached things that that opportunity will avail itself.

Jeffrey Shaner: We wanna work with the administration, and we think the thoughtfulness of how Dr. Oz has approached things, that opportunity will avail itself. We expect to get this question a lot today, and I'll reiterate, absolutely zero impact on our 2026 guidance, our results, and our ability to grow the business successfully.

Speaker #4: But we expect to hear this question a lot today, and I'll reiterate, absolutely zero impact on our 2026 guidance, our results, and our ability to grow the business successfully.

Speaker #3: Great, thanks. And just to be clear, there is nothing involved in the transfer of a Medicare licensure that would require you guys to kind of reapply, that might be impacted by this moratorium.

Ben Hendricks: Great. Thanks. Just to be clear, there's nothing that involved in the transfer of a Medicare licensure that would require you guys to kind of reapply that might be impacted by this by this moratorium?

Ben Hendrix: Great. Thanks. Just to be clear, there's nothing that involved in the transfer of a Medicare licensure that would require you guys to kind of reapply that might be impacted by this by this moratorium?

Speaker #4: No. And I think that CMS did a nice job yesterday in releasing the Q&A, right? So you were able to kind of read the Q&A and the 36-month rule has been in place for at least a decade, maybe even two.

Jeffrey Shaner: No. I think, you know, the CMS did a nice job yesterday in releasing the Q&A, right? You were able to kind of read the Q&A, and, you know, the 36-month rule has been in place for at least a decade, maybe even 2. You still have to adhere to the 36-month rule in any kind of, you know, targeted acquisition on home health or hospice assets, and that, and that's been in place. Nothing new there. Nothing that limits our ability to, you know, to do normal things like move an address or, you know, the normal things that we do. I think in the Q&A, they did a good job of laying that out, and we don't see it having any impact on future M&A in that space as well.

Jeff Shaner: No. I think, you know, the CMS did a nice job yesterday in releasing the Q&A, right? You were able to kind of read the Q&A, and, you know, the 36-month rule has been in place for at least a decade, maybe even 2. You still have to adhere to the 36-month rule in any kind of, you know, targeted acquisition on home health or hospice assets, and that, and that's been in place. Nothing new there. Nothing that limits our ability to, you know, to do normal things like move an address or, you know, the normal things that we do. I think in the Q&A, they did a good job of laying that out, and we don't see it having any impact on future M&A in that space as well.

Speaker #4: So you still have to adhere to the 36-month rule in any kind of targeted acquisition on home health or hospice assets. And that's been in place.

Speaker #4: So nothing new there. But no, nothing that limits our ability to do normal things like move an address or the normal things that we do.

Speaker #4: And I think in the Q&A, they did a good job of laying that out, and we don't see it having any impact on future M&A in that space as well.

Speaker #4: And then again, I think they're targeting bad actors and I think they were thoughtful in this to release the fact that they were not intending to punish good actors and reputable providers like us.

Jeffrey Shaner: Then again, I think they're targeting bad actors, and I think they were thoughtful in this to release the fact that they were not intending to punish good actors and reputable providers like us. Thanks, Ben.

Jeff Shaner: Then again, I think they're targeting bad actors, and I think they were thoughtful in this to release the fact that they were not intending to punish good actors and reputable providers like us. Thanks, Ben.

Speaker #4: Thanks, Ben.

Speaker #3: Thank you.

Ben Hendricks: Thank you.

Ben Hendrix: Thank you.

Speaker #1: Thank you. Our next question comes from the line of Ryan Tanquilla with Jeffrey's. Please proceed with your question.

Ben Hendricks: Thank you. Our next question comes from the line of, Brian Tanquilut with Jefferies. Please proceed with your questions.

Operator: Thank you. Our next question comes from the line of, Brian Tanquilut with Jefferies. Please proceed with your questions.

Speaker #4: Hey, good morning, guys, and congrats. So maybe I'll add to Matt's pot here for a little bit. Jeff, question for you. I appreciate the answer to Ben's question.

Brian Tanquilut: Hey, good morning, guys, and congrats. Maybe I'll add to Matt's pot here for a little bit. Jeff, question for you. I appreciate the answer to Ben's question. Just wanna clarify, the moratorium is only on the Medicare home nursing side, right? I guess the second part of my regulatory question would be, when we think about the core PDN business in the context of all the scrutiny we're seeing in private duty or personal care services and their Medicaid, just wanna make sure that your business is not impacted and you're not seeing anything there.

Speaker #4: Just want to clarify the moratorium is only on the Medicare home nursing side, right? And then I guess the second part of my regulatory question would be when we think about the core PDN business in the context of all the scrutiny we're seeing in private duty or personal care services and their Medicaid, just want to make sure that your business is not impacted and you're not seeing anything there.

Speaker #5: No, it's a great question, Brian. And I'll answer it in two parts. One, again, kudos to CMS. I thought they were very thoughtful in how they put the information out there yesterday.

Jeffrey Shaner: No, great question, Brian. I'll answer it in two parts. One, again, kudos to CMS. I thought they were very thoughtful in how they put the information out there yesterday. They did talk about Medicaid and CHIP programs, right? They certainly are encouraging states to be thoughtful in how states audit the Medicaid and CHIP programs. They also were crystal clear that it did not impact Medicaid and Medicaid reimbursement. The second part is we do operate under, you know, a significant number of Medicare provider numbers to get our Medicaid license in certain states. We have many Medicare provider licenses in our PDN business. It's just to have the right to do business, to have a Medicaid license. Again, no impact to our Medicaid business to your point.

Jeff Shaner: No, great question, Brian. I'll answer it in two parts. One, again, kudos to CMS. I thought they were very thoughtful in how they put the information out there yesterday. They did talk about Medicaid and CHIP programs, right? They certainly are encouraging states to be thoughtful in how states audit the Medicaid and CHIP programs. They also were crystal clear that it did not impact Medicaid and Medicaid reimbursement. The second part is we do operate under, you know, a significant number of Medicare provider numbers to get our Medicaid license in certain states. We have many Medicare provider licenses in our PDN business. It's just to have the right to do business, to have a Medicaid license. Again, no impact to our Medicaid business to your point.

Speaker #5: They did talk about Medicaid and CHIP programs, right? And they certainly are encouraging states to be thoughtful in how states audit the Medicaid and CHIP programs.

Speaker #5: They also were crystal clear that it did not impact Medicaid and Medicaid reimbursement. The second part is we do operate under a significant number of Medicare provider numbers to get our Medicaid license in certain states.

Speaker #5: So we have many, many Medicare provider licenses in our PDM business. It's just to have the right to do business, to have a Medicaid license.

Speaker #5: So again, no impact to our Medicaid business, to your point. And again, I think more thoughtfully, as we think of growing our Medicare business, we put the business together through four acquisitions over the last five years.

Jeffrey Shaner: Again, I think more thoughtfully as we think of growing our Medicare business, you know, we put the business together through four acquisitions over the last five years. The rest of it's been organic growth the last three years. Nothing that we have reviewed in yesterday's announcements would say that we can't continue an M&A strategy, a thoughtful M&A strategy in our home health and hospice business.

Jeff Shaner: Again, I think more thoughtfully as we think of growing our Medicare business, you know, we put the business together through four acquisitions over the last five years. The rest of it's been organic growth the last three years. Nothing that we have reviewed in yesterday's announcements would say that we can't continue an M&A strategy, a thoughtful M&A strategy in our home health and hospice business.

Speaker #5: The rest of it's been organic growth the last three years. Nothing that we have reviewed in yesterday's announcements would say that we can't continue an M&A strategy.

Speaker #5: A thoughtful M&A strategy in our home health and hospice business.

Speaker #4: I appreciate that. And then, Matt, this one's for you. When I think of the guidance for the year, just curious if you can call out the cadence that we should be thinking about, especially from Q1 to Q2, given some of the one-timers that were in the quarter.

Brian Tanquilut: I appreciate that. Matt, this one's for you. When I think of the guidance for the year, just curious if you can call out the cadence that we should be thinking about, especially from Q1 to Q2, given some of the one-timers that were in the quarter. Thanks.

Speaker #4: Thanks.

Speaker #5: Yeah, great question there, Brian. And I'll first start off by saying how proud we are of all three of our divisions and all three teams.

Matthew Buckhalter: Yeah, great question there, Brian. I'll first start off by saying how proud we are of all three of our divisions and all three teams. Significant organic growth in all three operating divisions. They really drove great financial performance and the financial results that you're seeing today, but they also drove phenomenal clinical performance in the background as well. All that being said, we continue to see very, very strong cash collections in Q1 on some previously reserved AR. Really that was to the tune of about $6 million. That impacted both our revenue and our EBITDA in the quarter itself. A little bit heightened in the quarter. I know we've said this for quite a few quarters now, but we're continuing to win.

Matt Buckhalter: Yeah, great question there, Brian. I'll first start off by saying how proud we are of all three of our divisions and all three teams. Significant organic growth in all three operating divisions. They really drove great financial performance and the financial results that you're seeing today, but they also drove phenomenal clinical performance in the background as well. All that being said, we continue to see very, very strong cash collections in Q1 on some previously reserved AR. Really that was to the tune of about $6 million. That impacted both our revenue and our EBITDA in the quarter itself. A little bit heightened in the quarter. I know we've said this for quite a few quarters now, but we're continuing to win.

Speaker #5: Significant organic growth in all three operating divisions. And they really drove great financial performance and the financial results that you're seeing today. But they also drove phenomenal clinical performance in the background as well.

Speaker #5: All that being said, we continue to see very, very strong cash collections in Q1 on some previously reserved AR. Really, that was to the tune of about $6 million that impacted both our revenue and our EBITDA in the quarter itself.

Speaker #5: So a little bit heightened in the quarter. I know we've said this for quite a few quarters now, but we're continuing to win. And it's really because of the artificial intelligence and the automation that the teams have put in on our RCM department.

Matthew Buckhalter: It's really because of the artificial intelligence and the automation that the teams have put in on our RCM department. It's allowed us to really reduce our DSO, improve our cash collections, and shift some of our capacity to go grab some of that aged AR that we thought previously was uncollectible. We're gonna continue to push that forward and remain focused on artificial intelligence, especially in our RCM department, because we're seeing such wonderful results from it. Just one plug I'll put in there as a reminder for more of a Q2 item itself there. In 2025, we did benefit from about $11 million of that timing-related business or timing-related items. If you exclude those, Brian Tanquilut, for 2025, we still expect to see really solid EBITDA growth in Q2 of 2026.

Matt Buckhalter: It's really because of the artificial intelligence and the automation that the teams have put in on our RCM department. It's allowed us to really reduce our DSO, improve our cash collections, and shift some of our capacity to go grab some of that aged AR that we thought previously was uncollectible. We're gonna continue to push that forward and remain focused on artificial intelligence, especially in our RCM department, because we're seeing such wonderful results from it. Just one plug I'll put in there as a reminder for more of a Q2 item itself there. In 2025, we did benefit from about $11 million of that timing-related business or timing-related items. If you exclude those, Brian Tanquilut, for 2025, we still expect to see really solid EBITDA growth in Q2 of 2026.

Speaker #5: It's allowed us to really reduce our DSO, improve our cash collections, and shift some of our capacity to go grab some of that aged AR that we thought previously was uncollectible.

Speaker #5: So we're going to continue to push that forward and remain focused on artificial intelligence, especially in our RCM department because we're seeing such wonderful results from it.

Speaker #5: On just one plug I'll put in there as a reminder for more of a Q2 item itself there. In 2025, we did benefit from about $11 million of that timing-related business or timing-related items.

Speaker #5: If you exclude those, Brian, for 2025, we still expect to see really solid EBITDA growth in Q2 of 2026. So once again, proud of the teams.

Matthew Buckhalter: Once again, proud of the teams, what we've been able to accomplish, not only on the cash collection side, clinical side, but most importantly, the operational and the organic growth side too.

Matt Buckhalter: Once again, proud of the teams, what we've been able to accomplish, not only on the cash collection side, clinical side, but most importantly, the operational and the organic growth side too.

Speaker #5: What we've been able to accomplish, not only on the cash collection side, clinical side, but most importantly, the operational and the organic growth side too.

Speaker #4: And Matt, great answer. I think so as you think of the build this year, it'd be a little bit different. Normally, Q1 is one of our lowest EBITDA quarters.

Jeffrey Shaner: Matt, great answer. I think, as you think of the build this year, it'll be a little bit different. Normally, Q1 is one of our lowest EBITDA quarters. I think from what Matt just said. You know, our build will be a little bit different this year, where Q1 was, I think as Matt laid out, you know, $5 to 6 million stronger than we had expected to be both on the revenue and EBITDA side. You know, our build to Q2 will be a little bit less than it normally is. Still, I think as Matt laid out, we expect to have a very strong Q2. If you back out the $11 million in Q2 of 2025, it'll be a nice year-over-year continued growth.

Jeff Shaner: Matt, great answer. I think, as you think of the build this year, it'll be a little bit different. Normally, Q1 is one of our lowest EBITDA quarters. I think from what Matt just said. You know, our build will be a little bit different this year, where Q1 was, I think as Matt laid out, you know, $5 to 6 million stronger than we had expected to be both on the revenue and EBITDA side. You know, our build to Q2 will be a little bit less than it normally is. Still, I think as Matt laid out, we expect to have a very strong Q2. If you back out the $11 million in Q2 of 2025, it'll be a nice year-over-year continued growth.

Speaker #4: And I think from what Matt just said, our build will be a little bit different this year. We're Q1 was, I think, as Matt laid out, 5 to 6 million dollars stronger than we had expected it to be both on the revenue and EBITDA side.

Speaker #4: So our build to Q2 will be a little bit less than it normally is. But still, I think, as Matt laid out, we expect to have a very strong Q2.

Speaker #4: And if you back out the $11 million of Q2 of '25, it'll be a nice year-over-year continued growth. So as Matt said, not only the AI and the automation, but also our preferred payer relationships just continue to generate great collections and efficient collections, which is a wonderful opportunity for us.

Jeffrey Shaner: As Matt said, you know, the not only the AI and the automation, but also our preferred payer relationships just continue to generate great collections and efficient collections, which is a wonderful opportunity for us. Thanks, Brian.

Jeff Shaner: As Matt said, you know, the not only the AI and the automation, but also our preferred payer relationships just continue to generate great collections and efficient collections, which is a wonderful opportunity for us. Thanks, Brian.

Speaker #4: Thanks, Brian.

Speaker #3: Awesome. Thank ank you.

Matthew Buckhalter: Awesome. Thank you.

Brian Tanquilut: Awesome. Thank you.

Speaker #1: Thank you. Our next question comes from the line of Raj Kumar with Stevens, Inc. Please proceed with your question.

Matthew Buckhalter: Thank you. Our next question comes from the line of Raj Kumar with Stephens Inc.. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Raj Kumar with Stephens Inc.. Please proceed with your question.

Speaker #3: Hi. Good morning. Maybe just kind of I know you talked about some of the preferred payer kind of wins this year on the private duty services side.

Operator: Hi, good morning. Maybe just kind of, I know you know, you've talked about some of the preferred payer kind of wins this year on the Private Duty Services side. Maybe kind of thinking about, I think you also talked about adding, you know, four to five value-based care contracts within this year too. Maybe just any update on the movement on that front.

Raj Kumar: Hi, good morning. Maybe just kind of, I know you know, you've talked about some of the preferred payer kind of wins this year on the Private Duty Services side. Maybe kind of thinking about, I think you also talked about adding, you know, four to five value-based care contracts within this year too. Maybe just any update on the movement on that front.

Speaker #3: And maybe kind of thinking about I think you also talked about adding four to five value-based care contracts within this year too. So maybe just any update on the movement on that front.

Speaker #5: Yeah. Raj, I think let me step back for a second. We've had a nice balance the last three years of government, state, and federal rate wins.

Jeffrey Shaner: Yeah, Raj, I think let me step back for a second. You know, we've had a nice balance the last 3 years of government, state, and federal rate wins, mainly Medicaid driven and preferred payer wins. We started messaging mid last year. We thought the government side of that would start to slow down, or we use the word moderate a lot. I think we've seen that in the H2 of 2025 and the early parts of 2026. What we've also seen is the payer relations and preferred payer is picking up for us. As we exited 2025, we had a nice momentum lead in 2026. We see our preferred payer wins both in PDS, home health, and hospice.

Jeff Shaner: Yeah, Raj, I think let me step back for a second. You know, we've had a nice balance the last 3 years of government, state, and federal rate wins, mainly Medicaid driven and preferred payer wins. We started messaging mid last year. We thought the government side of that would start to slow down, or we use the word moderate a lot. I think we've seen that in the H2 of 2025 and the early parts of 2026. What we've also seen is the payer relations and preferred payer is picking up for us. As we exited 2025, we had a nice momentum lead in 2026. We see our preferred payer wins both in PDS, home health, and hospice.

Speaker #5: Mainly Medicaid-driven, and preferred payer wins. We started messaging mid-last year. We thought the government side of that would start to slow down. We use the word 'moderate' a lot.

Speaker #5: I think we've seen that the second half of 2025 and the early parts of '26. What we've also seen is the payer relations and preferred payer is picking up for us.

Speaker #5: So as we exited 2025, we had a nice momentum lead in 2026. So we see our preferred payer wins both in PDS, home health, and hospice.

Speaker #5: And if you've heard, we had our first two additional preferred payers in medical solutions in Q1. So I think what you'll hear from us this year is an uptick of preferred payer wins, more so than the government rate wins that we're receiving.

Jeffrey Shaner: If you heard, we had our first two additional preferred payers in medical solutions in Q1. I think what you'll hear from us this year is an uptick of preferred payer wins, more so than the government rate wins that we're receiving. That's kind of what we expected. As you asked, following that will be our value-based agreements, both in PDS and in home health as well. You know, strong start to the year. Clearly, we set a goal to sign five additional agreements in home health. We signed four in Q1, clearly we will exceed that goal. Eight preferred payers in PDN, we signed four in Q1. I think we feel confident we'll break that goal.

Jeff Shaner: If you heard, we had our first two additional preferred payers in medical solutions in Q1. I think what you'll hear from us this year is an uptick of preferred payer wins, more so than the government rate wins that we're receiving. That's kind of what we expected. As you asked, following that will be our value-based agreements, both in PDS and in home health as well. You know, strong start to the year. Clearly, we set a goal to sign five additional agreements in home health. We signed four in Q1, clearly we will exceed that goal. Eight preferred payers in PDN, we signed four in Q1. I think we feel confident we'll break that goal. I think big picture, think of 2026 being more of a preferred payer win and a little bit more moderated government affairs wins.

Speaker #5: And that's kind of what we expected. As you asked following that, will be our value-based agreements, both in PDS and in home health as well.

Speaker #5: But strong start to the year, clearly. We set a goal to sign five additional agreements in home health. We signed four in Q1. So clearly, we will exceed that goal.

Speaker #5: Eight preferred payers in PDN, and we signed four in Q1. I think we feel confident we'll break that goal. But I think big picture, think of 2026 being more of a preferred payer win and a little bit more moderated government affairs wins.

Jeffrey Shaner: I think big picture, think of 2026 being more of a preferred payer win and a little bit more moderated government affairs wins.

Speaker #3: Got it. And then maybe just following up on the kind of the strategic initiatives within medical solutions and the preferred payer strategy there. As you kind of think about the opportunity, is there a way of framing the number of unique patients that are kind of under the preferred payer arrangement relative to just the number of contracts as we kind of think about the opportunity ahead?

Operator: Got it. Then maybe just following up on the kind of the strategic initiatives within, you know, medical solutions and the preferred payer strategy there. As you kind of think about the opportunity, is there a way of framing like, you know, the number of unique patients that are under the, you know, preferred payer arrangement, relative to just the number of contracts as we kind of think about the opportunity ahead?

Raj Kumar: Got it. Then maybe just following up on the kind of the strategic initiatives within, you know, medical solutions and the preferred payer strategy there. As you kind of think about the opportunity, is there a way of framing like, you know, the number of unique patients that are under the, you know, preferred payer arrangement, relative to just the number of contracts as we kind of think about the opportunity ahead?

Speaker #5: Yeah. Raj, over time, we'll continue to release this information as we're continuing to roll out for really proud of what the teams are doing and rolling out and finishing up these modernization efforts, which we expect them to complete in Q2.

Matthew Buckhalter: Yeah, Raj, over time, we'll continue to release this information as we're continuing to roll out. We're really proud of what the teams are doing and rolling out and finishing up these modernization efforts, which we expect them to complete in Q2. Starting with zero preferred payers at the beginning of last year, working it up to 18 to end 2025, adding 2 in the Q4 itself. We are starting to see that pipeline continue to pull through preferred payers quicker and really put them to the front of the list and valuing those who value our resources and our time, effort, and energy as well. We'll continue to mature this as we sunset or complete our modernization efforts in medical solutions. Once we do that, then we'll start releasing additional data on there.

Matt Buckhalter: Yeah, Raj, over time, we'll continue to release this information as we're continuing to roll out. We're really proud of what the teams are doing and rolling out and finishing up these modernization efforts, which we expect them to complete in Q2. Starting with zero preferred payers at the beginning of last year, working it up to 18 to end 2025, adding 2 in the Q4 itself. We are starting to see that pipeline continue to pull through preferred payers quicker and really put them to the front of the list and valuing those who value our resources and our time, effort, and energy as well. We'll continue to mature this as we sunset or complete our modernization efforts in medical solutions. Once we do that, then we'll start releasing additional data on there.

Speaker #5: Starting with zero preferred payers at the beginning of last year, working it up to 18 to end 2025, adding two in the fourth quarter itself.

Speaker #5: We are starting to see that pipeline continue to pull through preferred payers quicker and really put them to the front of the list and valuing those who value our resources and our time, effort, and energy as well.

Speaker #5: We'll continue to mature this as we sunset or complete our modernization efforts in medical solutions. And once we do that, then we'll start releasing additional data on there.

Speaker #4: And I think, Matt, it's well said. Raj, right now, we would anchor to four and a half percent organic year-over-year growth and a 44.7% gross margin.

Jeffrey Shaner: I think Matt's well said. Raj, right now, we would anchor to 4.5% organic year-over-year growth and a 44.7% gross margin.

Jeff Shaner: I think Matt's well said. Raj, right now, we would anchor to 4.5% organic year-over-year growth and a 44.7% gross margin.

Speaker #5: Also 7.4% revenue growth, which has some preferred payer work in there.

Matthew Buckhalter: Also 7.4% revenue growth, which has some preferred payer work in there.

Matt Buckhalter: Also 7.4% revenue growth, which has some preferred payer work in there.

Speaker #4: And I think, Raj, that shows you we're back to growing this business. It's the first quarter we've hit 93,000 unique patients served in a quarter.

Jeffrey Shaner: I think, Raj, that shows you we're back to growing this business. You know, it's the Q1 we've hit 93,000 unique patients served in a quarter. To Matt's point, our margin profile is working, our outcomes are successful, our collections are working. That business, to your question, is beginning to act like the other two businesses on our preferred payer. You know, you guys have been under the hood now for almost 18 months working really hard. Shout out to our medical solutions team. They have really done a lot of work over the last year and a half to get this model in place. Thanks, Raj.

Jeff Shaner: I think, Raj, that shows you we're back to growing this business. You know, it's the Q1 we've hit 93,000 unique patients served in a quarter. To Matt's point, our margin profile is working, our outcomes are successful, our collections are working. That business, to your question, is beginning to act like the other two businesses on our preferred payer. You know, you guys have been under the hood now for almost 18 months working really hard. Shout out to our medical solutions team. They have really done a lot of work over the last year and a half to get this model in place. Thanks, Raj.

Speaker #4: So and to Matt's point, our margin profile is working. Our outcomes are successful. Our collections are working. So that business, to your question, is beginning to act like the other two businesses on our preferred payer.

Speaker #4: And you guys have been under the hood now for almost 18 months. Working really hard. So shout out to our medical solutions team. They have really done a lot of work over the last year and a half to get this model in place.

Speaker #4: Thanks, Raj.

Speaker #3: Thank you.

Operator: Thank you.

Raj Kumar: Thank you.

Speaker #1: Thank you. Our next question comes from the line of Benjamin Rossi with JPMorgan. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Benjamin Rossi with JP Morgan. Please proceed with your question.

Benjamin Rossi: Hi, good morning. Regarding Q1 margin dynamics, I imagine you got some margin lift quarter over quarter with the 53rd week dynamic in Q4. You mentioned the AI contribution here too in RCM. I guess, as you've been assessing the cost structure in context of your long-term margin profile, can you walk us through how expenses trended during Q1 compared to your expectations and how you're thinking about expense trends within your revised 2026 outlook?

Speaker #6: Hi. Good morning. Regarding 1Q margin dynamics, I imagine you've got some margin live quarter over quarter with the 53rd week dynamic in 4Q. You mentioned the AI contribution here too.

Speaker #6: And RCM, I guess, as you've been assessing the cost structure in context of your long-term margin profile, can you walk us through how expenses trended during 1Q compared to your expectations?

Speaker #6: And how you're seeing it about expense trends within your revised 2026 outlook?

Speaker #5: I would tell you great question. Very thoughtful too, Ben, at the same time, thinking about that 53rd week transitioning over and grabbing a few payroll tax dollars and Q4 of 2025 opposed to Q1 of 2026.

Matthew Buckhalter: I would tell you, great question. Very thoughtful too, Ben. At the same time, thinking about that 53rd week, transitioning over and grabbing a few payroll tax dollars in Q4 of 2025 as opposed to Q1 of 2026. Really the most impactful one was that $6 million I referenced earlier that hit our EBITDA, or that hit our revenue and EBITDA line item. If you still normalize that out, we're in a very great position for Private Duty Services, really sitting around that 28% gross margin, right in line with our expectations of where we should be. On the SG&A side, really impressed with what the teams have been able to accomplish.

Matt Buckhalter: I would tell you, great question. Very thoughtful too, Ben. At the same time, thinking about that 53rd week, transitioning over and grabbing a few payroll tax dollars in Q4 of 2025 as opposed to Q1 of 2026. Really the most impactful one was that $6 million I referenced earlier that hit our EBITDA, or that hit our revenue and EBITDA line item. If you still normalize that out, we're in a very great position for Private Duty Services, really sitting around that 28% gross margin, right in line with our expectations of where we should be. On the SG&A side, really impressed with what the teams have been able to accomplish.

Speaker #5: Really, the most impactful one was that $6 million I referenced earlier. That hit our EBITDA or that hit our revenue and EBITDA line item.

Speaker #5: If you still normalize that outwards in a very great position on our for private duty services, really sitting around that 28% gross margin right in line with our expectations of where we should be.

Speaker #5: On the SG&A side, really impressed with what the teams have been able to accomplish. We're continuing to grow our business organically, continuing to add preferred payer contracts, add additional volumes in all three operating divisions.

Matthew Buckhalter: We're continuing to grow our business organically, continuing to add preferred payer contracts, add additional volumes in all 3 operating divisions while adding very, very little overhead at the same time. It's really driven by these automation efforts that we've put in place. Small items at a time, scheduling, RCM, areas that we think we can get some real good leverage out of, and we haven't had to add that incremental overhead as we've continued to grow. I would expect to see what you saw in Q1 pretty consistent with the rest of this year while getting small basis point wins in Q2, Q3, Q4, and continue to ramp that up over time.

Matt Buckhalter: We're continuing to grow our business organically, continuing to add preferred payer contracts, add additional volumes in all 3 operating divisions while adding very, very little overhead at the same time. It's really driven by these automation efforts that we've put in place. Small items at a time, scheduling, RCM, areas that we think we can get some real good leverage out of, and we haven't had to add that incremental overhead as we've continued to grow. I would expect to see what you saw in Q1 pretty consistent with the rest of this year while getting small basis point wins in Q2, Q3, Q4, and continue to ramp that up over time.

Speaker #5: While adding very, very little overhead at the same time. It's really driven by these automation efforts that we've put in place, and it's small items at a time.

Speaker #5: Scheduling, RCM, areas that we think we can get some real good leverage out of. And we haven't been had to add that incremental overhead as we've continued to grow.

Speaker #5: I would expect to see what you saw in Q1 pretty consistent with the rest of this year. While getting small basis point wins in Q2, Q3, Q4, and continuing to ramp that up over time.

Speaker #4: And Ben, we didn't mention whether and we have a no-excuse policy here at Aveanna. So whether is just the fact of the life. But we did get hit with two major weather events in January.

Jeffrey Shaner: The, we didn't mention weather and we have a no excuse policy here at Aveanna, weather is just a fact of life. We did get hit with 2 major weather events in January. I think, you know, to your point, the 53rd week pulled a holiday week into last year, which was nice. That offset probably $1 million worth of payroll taxes and pushed it into last year. We lost about $5.5 million to $6 million of revenue through the 2 weeks of, you know, weather, and that, you know, that equates to about $1 million to $1.5 million of, you know, margin in EBITDA. We hit these results with playing through that.

Jeff Shaner: The, we didn't mention weather and we have a no excuse policy here at Aveanna, weather is just a fact of life. We did get hit with 2 major weather events in January. I think, you know, to your point, the 53rd week pulled a holiday week into last year, which was nice. That offset probably $1 million worth of payroll taxes and pushed it into last year. We lost about $5.5 million to $6 million of revenue through the 2 weeks of, you know, weather, and that, you know, that equates to about $1 million to $1.5 million of, you know, margin in EBITDA. We hit these results with playing through that.

Speaker #4: So, I think to your point, the 53rd week pulled a holiday week into last year, which was nice. That offset probably a million dollars' worth of payroll taxes.

Speaker #4: And pushed it into last year. But we lost about five and a half, six million dollars of revenue through the two weeks of weather and that equates to about a million, a million and a half dollars of margin in EBITDA.

Speaker #4: So we hit these results with playing through that. And I think if you had just said to us without the timing-related collections and positive impact, we would have ended up in the high 70s, which is probably where we thought this was going to land.

Jeffrey Shaner: I think, I think if it had just said to us without the weather timing related collections and positive impact, we would have ended up in the high 70s, which is probably where we thought this was gonna land. You know, ramping off a high 70s number, I think, to Matt's point, makes the rest of the year, you know, make a ton of sense.

Jeff Shaner: I think, I think if it had just said to us without the weather timing related collections and positive impact, we would have ended up in the high 70s, which is probably where we thought this was gonna land. You know, ramping off a high 70s number, I think, to Matt's point, makes the rest of the year, you know, make a ton of sense.

Speaker #4: So ramping off a high 70s number, I think, to Matt's point, makes the rest of the year make a ton of sense.

Speaker #3: Great. Appreciate the added details there. As just a follow-up on the preferred payer contract wins in PDS, and thinking about those preferred payer economics as penetration of preferred payer mix increases in that segment, do you expect your revenue rate to also re-accelerate?

Benjamin Rossi: Great. Appreciate the added details there. As just to follow up on the preferred payer contract wins in PDS, in thinking about those preferred payer economics, as penetration of preferred payer mix increases in that segment, do you expect your revenue rate to also re-accelerate, or do you expect growth to continue to be more primarily volume driven with wages absorbing most of this upside on pricing?

Speaker #3: Or do you expect growth to continue to be more primarily volume-driven with wages absorbing most of this upside in pricing? I guess just curious on your approach in wage pass-throughs here.

Matthew Buckhalter: Yeah.

Jeff Shaner: Yeah.

Benjamin Rossi: The approach in wage pass-throughs here.

Speaker #5: I'd say the latter. I'd say at this point, for the most part, our PDS rate and wage has basically settled in, I think, to the range where we think it will be it'll move by a percentage point or two.

Jeffrey Shaner: I'd say the latter. I'd say at this point, for the most part, our PDS rate and wages basically settled in, I think, to the range where we think it will be. It'll move by a percentage point or 2, but I don't think it's gonna move by $0.50 or $1 per hour. Really, really proud of how the team started the year. I mean, 4 wins in Q1. I'm not gonna get ahead of myself talking about Q2 yet. Matt will pull me back. You know, additional wins that we'll be talking about in Q2. The team started this year. We knew we needed more out of preferred payers this year. We knew that was gonna have to pick up the slack from more moderated state rate wins.

Jeff Shaner: I'd say the latter. I'd say at this point, for the most part, our PDS rate and wages basically settled in, I think, to the range where we think it will be. It'll move by a percentage point or 2, but I don't think it's gonna move by $0.50 or $1 per hour. Really, really proud of how the team started the year. I mean, 4 wins in Q1. I'm not gonna get ahead of myself talking about Q2 yet. Matt will pull me back. You know, additional wins that we'll be talking about in Q2. The team started this year. We knew we needed more out of preferred payers this year. We knew that was gonna have to pick up the slack from more moderated state rate wins.

Speaker #5: But I don't think it's going to move by 50 cents or a dollar per hour. Really proud of how the team started the year.

Speaker #5: I mean, four wins, in Q1. I'm not going to get ahead of myself. Talking about Q2 yet. Matt will pull me back. But additional wins that we'll be talking about in Q2.

Speaker #5: The team started this year. We knew we needed more out of preferred payers this year. We knew that was going to have to pick up the slack from more moderated state rate wins.

Speaker #5: And as I mentioned before, we're seeing that. So I think the majority of this will continue to drive volume and you'll see a pretty consistent spread.

Jeffrey Shaner: As I mentioned before, we're seeing that. I think the majority of this will continue to drive volume, and you'll see a pretty consistent spread, you know, in that low $12 range moving forward. Again, really proud of our preferred payer teams. They are doing an amazing job.

Jeff Shaner: As I mentioned before, we're seeing that. I think the majority of this will continue to drive volume, and you'll see a pretty consistent spread, you know, in that low $12 range moving forward. Again, really proud of our preferred payer teams. They are doing an amazing job.

Speaker #5: And that low $12 range moving forward. But again, really, really proud of our preferred payer teams. They are doing an amazing job.

Speaker #3: Thanks. Appreciate you taking the questions.

Benjamin Rossi: Thanks. Appreciate you taking my questions.

Speaker #5: Thanks, Ben.

Jeffrey Shaner: Thanks, Ben.

Jeff Shaner: Thanks, Ben.

Speaker #1: Thank you. Our next question comes from the line of Sean Dodge with BMO Capital Markets. Your line is now live.

Jeffrey Shaner: Thank you. Our next question comes from the line of Sean Dodge with BMO Capital Markets. Your line is now live.

Operator: Thank you. Our next question comes from the line of Sean Dodge with BMO Capital Markets. Your line is now live.

Speaker #6: Yeah, thanks, Sean. Good morning. Maybe just staying on PDS for another moment—you talked about before that segment returning to a 5% to 7% organic growth for this year.

Sean Dodge: Thanks, morning. Maybe just staying on PDS for another moment. You talked about before that segment returning to a 5% to 7% organic growth for this year. Just any updated thoughts on that? If we look at what you all did in Q1 in terms of hours and kind of revenue per hour and just annualize that. That alone gets me a bit above the high end of that range. I know Thrive contributes some there, but it also is not adjusting for, you know, the extra week, Matt, that you mentioned, the weather, or factoring in any additional rate increases or any new preferred payers you are talking about.

Speaker #6: Just any updated thoughts on that? If we look at what you all did in Q1 in terms of hours and kind of revenue per hour, and just annualize that, that alone gets me a bit above the high end of that range.

Speaker #6: And I know Thrive contributes some there. But it also is not adjusting for the extra week, Matt, that you mentioned, the weather, or factoring in any additional rate increases or any new preferred payers you're talking about.

Speaker #6: So just trying to square that and make sure I'm not missing any one-timers or anything else impacting Q1 and how we think about that annualized over the year.

Sean Dodge: Just trying to square that and make sure I am not missing any one-timers or anything else impacting kind of Q1 and how we think about that annualizing over the year.

Speaker #5: No, I don't think you are, Sean. And we're continuing to see really impressive growth across our PDS segment and from our PDS teams itself.

Matthew Buckhalter: No, I don't think you are, Sean. You know, we're continuing to see really impressive growth across our PDS segment and from our PDS teams itself. When you start normalizing out the Thrive acquisition, we still had growth in the high single digits on revenue, which was really, really impressive. We will pass that in Q2 'cause we closed that acquisition on 02 June 2025, then you'll see that start to drop to back down. We are seeing moderation starting to occur through there. 16.4%, phenomenal. Close to double digits growth, phenomenal. That will eventually mature over time. We just wanna be open and honest with people and understand that, hey, we underpinned this division to a much lower growth rate, though we are accelerating at the time.

Matt Buckhalter: No, I don't think you are, Sean. You know, we're continuing to see really impressive growth across our PDS segment and from our PDS teams itself. When you start normalizing out the Thrive acquisition, we still had growth in the high single digits on revenue, which was really, really impressive. We will pass that in Q2 'cause we closed that acquisition on 02 June 2025, then you'll see that start to drop to back down. We are seeing moderation starting to occur through there. 16.4%, phenomenal. Close to double digits growth, phenomenal. That will eventually mature over time. We just wanna be open and honest with people and understand that, hey, we underpinned this division to a much lower growth rate, though we are accelerating at the time.

Speaker #5: When you start normalizing out the Thrive acquisition, we still had growth in the high single digits on revenue, which was really, really impressive. We will pass that in Q2 because we closed that acquisition on 6/2 of 2025.

Speaker #5: And so then you'll see that start to drop back down. But we are seeing moderation starting to occur to there. 16.4% phenomenal, close to double digits growth, phenomenal.

Speaker #5: But that will eventually mature over time. We just want to be open and honest with people and understand that, hey, we underpanned to underpin this division to a much lower growth rate, though we are accelerating at this time.

Speaker #3: Okay. Great. And then on the tech or the AI initiatives, Matt, you referenced your work in revenue cycle. You've also talked before about now tackling more front office-type functions with that.

Sean Dodge: Okay, great. On the tech or the AI initiatives, Matt, you referenced your work in revenue cycle. You've also talked before about now tackling more front office type functions with that. I was wondering if you just kind of help frame for us, like what proportion of your OpEx, so I guess this would be like the things within the branch and regional admin and your corporate expense line. Like what percent of those do you think is ultimately like impactable with technology over time? Like what inning do you think we are in when it comes to kind of leveraging tech to drive more efficiency and savings?

Speaker #3: I was wondering if you could just kind of help frame for us what proportion of your OPEX? So I guess this would be things within the branch and regional admin and your corporate expense line.

Speaker #3: What percent of those do you think is ultimately impactable with technology over time? And what ending do you think we are in when it comes to kind of leveraging tech to drive more efficiency and savings?

Speaker #5: Yeah. Sean, top of the first inning, bottom of the first inning. Yeah. But we're still mid. We're still changing sides right here. Early in the game.

Matthew Buckhalter: Yeah, Sean, top of the first inning, bottom of the first inning. Yeah, but we're still, you know, changing sides right here early in the game. There, we are seeing benefits from it, but we're just being very thoughtful. We're not diving headfirst into the shallow end without, you know, wading into it first and making sure to see how deep it actually is. We have seen benefits in that RCM, and really proud of the teams for leaning in and really being able to drive better results, reduce our DSO, collect cash a lot faster. Also on the operational side of it, between scheduling, between the automation work that a lot of our teams are doing in the medical solutions with Tenor, what our accounting teams are doing as well.

Matt Buckhalter: Yeah, Sean, top of the first inning, bottom of the first inning. Yeah, but we're still, you know, changing sides right here early in the game. There, we are seeing benefits from it, but we're just being very thoughtful. We're not diving headfirst into the shallow end without, you know, wading into it first and making sure to see how deep it actually is. We have seen benefits in that RCM, and really proud of the teams for leaning in and really being able to drive better results, reduce our DSO, collect cash a lot faster. Also on the operational side of it, between scheduling, between the automation work that a lot of our teams are doing in the medical solutions with Tenor, what our accounting teams are doing as well.

Speaker #5: We are seeing benefits from it. But we're just being very thoughtful. We're not diving headfirst into the shallow end without wading into it first and making sure to see how deep it actually is.

Speaker #5: We have seen benefits in that RCM and really proud of the teams for leaning in and really being able to drive better results, reduce our DSO, collect cash a lot faster.

Speaker #5: But also on the operational side of it, between scheduling, between the automation work that a lot of our teams are doing in the medical solutions with Tenor, what our accounting teams are doing as well.

Speaker #5: These are areas that we're just chipping away at it. And we're getting better. And we're getting smarter. And we're getting faster every single day.

Matthew Buckhalter: These are areas that we're just chipping away at it, and we're getting better, and we're getting smarter, and we're getting faster every single day. I would tell you it's still very, very early to crown any champions out here, but we're going to continue to lean in and get the results that we can from it.

Matt Buckhalter: These are areas that we're just chipping away at it, and we're getting better, and we're getting smarter, and we're getting faster every single day. I would tell you it's still very, very early to crown any champions out here, but we're going to continue to lean in and get the results that we can from it.

Speaker #5: I would tell you it's still very, very early to crown any champions out here. But we're going to continue to lean in and get the results that we can from it.

Speaker #3: Okay, great. Thanks again, and congratulations on the great start to the year.

Sean Dodge: Okay. Great. Thanks again, and congratulations on the great start to the year.

Speaker #5: Thanks, Sean.

Jeffrey Shaner: Thanks, Sean.

Jeff Shaner: Thanks, Sean.

Speaker #1: Thank you. Our next question comes from the line of John Ransom with Raymond James. Please proceed with your question.

Jeffrey Shaner: Thank you. Our next question comes from the line of John Ransom with Raymond James. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of John Ransom with Raymond James. Please proceed with your question.

Speaker #6: Hey, good morning. Just to hit on the obvious, you excuse me. You beat by 13. You raised by 10. Is there anything going on here other than just conservatism?

John Ransom: Hey, good morning. Just to hit on the obvious, excuse me, you beat by 13, you raised by 10. Is there anything going on here other than just conservatism?

Speaker #5: No, I think—well, yes. Let's start with the $6 million of timing-related, John. And again, I know we sound like a broken record, right? Because it's three out of four quarters in a row we've talked about positive benefits to revenue and earnings.

Jeffrey Shaner: No, I think. Well, yes. Let's start with the $6 million of timing related, John. Again, I know we sound like a broken record, right? It's, you know, 3 out of 4 quarters in a row we've talked about positive benefits to revenue and earnings. We recognize that at some point folks are just gonna bake that into our baseline. We think of the quarter as in the high 70s number, you know, sub-80 number of, you know.

Jeff Shaner: No, I think. Well, yes. Let's start with the $6 million of timing related, John. Again, I know we sound like a broken record, right? It's, you know, 3 out of 4 quarters in a row we've talked about positive benefits to revenue and earnings. We recognize that at some point folks are just gonna bake that into our baseline. We think of the quarter as in the high 70s number, you know, sub-80 number of, you know.

Speaker #5: So we recognize that at some point, folks are just going to bake that into our baseline. But think of we think of the quarter as in the high 70s number, sub-80 number of EBITDA-generated out of the quarter based on the results in the quarter.

John Ransom: EBITDA

Jeffrey Shaner: EBITDA generated out of the quarter based on the results in the quarter. you know, and the other 6, 5 to 6 being more of lagged AR that was then collected that we were able to take. so we think of basing off of the high 70s.

Jeff Shaner: EBITDA generated out of the quarter based on the results in the quarter. you know, and the other 6, 5 to 6 being more of lagged AR that was then collected that we were able to take. so we think of basing off of the high 70s.

Speaker #5: And the other 6, 5 to 6 being more of lagged AR that was then collected that we were able to take. So we think of basing off of the high 70s and really the normal step up to Q2 would be kind of where we were in Q1, kind of a mid-80s.

John Ransom: Okay

Jeffrey Shaner: Really the normal step up to Q2 would be kind of where we were in Q1, kind of a mid-80s. You know, I think certainly it's still early in the year. You know, we're still seeing things shake out. You know, $10 million for us in EBITDA, John, was aggressive, so thank you. You know, we felt like we were being aggressive, but appreciate the conservatism question.

Jeff Shaner: Really the normal step up to Q2 would be kind of where we were in Q1, kind of a mid-80s. You know, I think certainly it's still early in the year. You know, we're still seeing things shake out. You know, $10 million for us in EBITDA, John, was aggressive, so thank you. You know, we felt like we were being aggressive, but appreciate the conservatism question.

Speaker #5: So I think certainly, it's still early in the year. We're still seeing things shake out. But 10 million for us in EBITDA, John, was aggressive.

Speaker #5: So thank you. We felt like we were being aggressive. But appreciate the conservatism question.

John Ransom: Yeah. The other thing, I know you don't guide for Family First, but assuming we put that in our model, how should we think about Q3, Q4 EBITDA contribution.

Speaker #6: And the other thing, I know you don't guide for family first. But assuming we put that in our model, how should we think about 3Q, 4Q EBITDA contribution?

Jeffrey Shaner: Yep

Jeff Shaner: Yep

Speaker #6: From that deal?

John Ransom: from that deal?

Speaker #5: Great question.

Jeffrey Shaner: Great question.

Jeff Shaner: Great question.

Speaker #4: Yeah, John. And we're really excited for this family first acquisition and really a family first team and bringing them into the Aviana family. They've got a great focus on clinical outcomes.

Matthew Buckhalter: Yeah, John, we're really excited for this Family First acquisition and really the Family First team and bringing them into the Aveanna family. They've got a great focus on clinical outcomes. They have really good operational discipline as well, which brings them in culturally and strategically a nice fit for us. That transaction, we talked about valuing it about 7.5x post synergy EBITDA itself, so you can back into the math on that one based upon closing date. Revenue's been sitting around the $120 million dollar mark itself. Depending on closing time of it, we'll come and update our guidance accordingly. Right now, we've just left it out without knowing exactly when that date's going to occur.

Matt Buckhalter: Yeah, John, we're really excited for this Family First acquisition and really the Family First team and bringing them into the Aveanna family. They've got a great focus on clinical outcomes. They have really good operational discipline as well, which brings them in culturally and strategically a nice fit for us. That transaction, we talked about valuing it about 7.5x post synergy EBITDA itself, so you can back into the math on that one based upon closing date. Revenue's been sitting around the $120 million dollar mark itself. Depending on closing time of it, we'll come and update our guidance accordingly. Right now, we've just left it out without knowing exactly when that date's going to occur.

Speaker #4: They have really, really good operational discipline as well, which brings them in culturally and strategically—a nice fit for us. That transaction, we've talked about valuing it at about 7.5 times post-synergy EBITDA itself.

Speaker #4: So you can back into the math on that one based upon closing date. And then revenue has been sitting around the $120 million mark itself.

Speaker #4: So depending on closing time, we'll come and update our guidance accordingly. But right now, we've just left it out without knowing exactly when that date's going to occur.

Speaker #6: But I think my point being is the post-synergy EBITDA I assume that's not going to be realized right off the bat. So just kind of make our own journey on how long it takes you to get to that post-synergy EBITDA number.

Jeffrey Shaner: I think, Matt.

Jeff Shaner: I think, Matt.

John Ransom: My point being like.

Jeffrey Shaner: Go ahead.

Jeff Shaner: Go ahead.

John Ransom: is the post synergy EBITDA, I assume that's not gonna be realized right off the bat. just kind of make our own journey on how long it takes you to get to that post synergy EBITDA number.

Speaker #4: Yeah, we're pretty quick on it itself. To get on a full run rate basis, it takes us about six months, John, to get to our kind of hard number itself.

Matthew Buckhalter: Yeah, we're pretty quick on it itself. To get on a full run rate basis, it takes about 6 months, John Ransom, to get to our kind of hard number itself. We start bringing it in day 1. We'll go recognize it, tuck them onto our systems, bring them onto our platforms, put them on our payroll process, put them in our operating model as well. When all that happens, that takes a grand total of 6 months, and then there's that lag of AR that runs down. That full synergy recognition is in with that 180-day period.

Matt Buckhalter: Yeah, we're pretty quick on it itself. To get on a full run rate basis, it takes about 6 months, John Ransom, to get to our kind of hard number itself. We start bringing it in day 1. We'll go recognize it, tuck them onto our systems, bring them onto our platforms, put them on our payroll process, put them in our operating model as well. When all that happens, that takes a grand total of 6 months, and then there's that lag of AR that runs down. That full synergy recognition is in with that 180-day period.

Speaker #4: But we start bringing it in day one. But then we'll go recognize it, tuck them onto our systems, bring them onto our platforms, put them on our payroll process, put them in our operating model as well.

Speaker #4: When all that happens, that takes a grand total of six months. And then there's that lag of AR that runs down. But that full synergy recognition isn't with that 180-day period.

Speaker #5: And John, if we use Thrive from last year, we closed Thrive on June 1st, June 2nd. We were effectively done by Thanksgiving. December 1st.

Jeffrey Shaner: John, if we use Thrive from last year, we closed Thrive on 1 June, 2 June. We were effectively done by Thanksgiving.

Jeff Shaner: John, if we use Thrive from last year, we closed Thrive on 1 June, 2 June. We were effectively done by Thanksgiving.

Matthew Buckhalter: Yeah.

Matt Buckhalter: Yeah.

Jeffrey Shaner: You know, 1 December. AR is still running off today. We expect to close this by the end of June, 1 July. To Matt's point, we would be done by December. By Christmas or holidays, we would be done. Again, AR would run off through, you know, the majority of 2027. Low-hanging fruit. This is a great company. Matt's point, great culture, fits right in our wheelhouse. This kind of stuff we should be doing.

Jeff Shaner: You know, 1 December. AR is still running off today. We expect to close this by the end of June, 1 July. To Matt's point, we would be done by December. By Christmas or holidays, we would be done. Again, AR would run off through, you know, the majority of 2027. Low-hanging fruit. This is a great company. Matt's point, great culture, fits right in our wheelhouse. This kind of stuff we should be doing.

Speaker #5: And then AR is still running off today. We expect to close this by the end of June, first of July. And to Matt's point, we would be done by December, by Christmas.

Speaker #5: We're holidays. We would be done. And then again, AR would run off through the majority of 27th. But low-hanging fruit, this is a great company.

Speaker #5: Matt's point—great culture, fits right in our wheelhouse. This kind of stuff we should be doing.

Speaker #6: And I'm sorry to drag this out. But is the first the rates that you have versus the rates they might have, is that captured immediately?

John Ransom: I'm sorry to drag this out, is the first, the rate that you have versus the rates they might have, is that captured immediately, or do you have to go through a contracting cycle?

Speaker #6: Or do you have to go through a contracting cycle?

Speaker #5: Here's the beauty, John. We don't know. We stay out of that. For all the right reasons. For the right regulatory review process. We are we do not operate around rate knowledge.

Jeffrey Shaner: Here's the beauty, John. We don't know. We stay out of that, you know, for all the right reasons, for the right regulatory review process. You know, we are, we do not operate around rate knowledge. None of our assumptions are built on any kind of rate arbitrage. We just focus on, you know, filling in the geography that we didn't have, that they do, the density that they had in certain Florida markets that we didn't even service. Really filling out needed geography for us in key markets like Florida was the most important reason. We're excited.

Jeff Shaner: Here's the beauty, John. We don't know. We stay out of that, you know, for all the right reasons, for the right regulatory review process. You know, we are, we do not operate around rate knowledge. None of our assumptions are built on any kind of rate arbitrage. We just focus on, you know, filling in the geography that we didn't have, that they do, the density that they had in certain Florida markets that we didn't even service. Really filling out needed geography for us in key markets like Florida was the most important reason. We're excited.

Speaker #5: We just and none of our assumptions are built on any kind of rate arbitrage. We just focus on filling in the geography that we didn't have that they do.

Speaker #5: The density that they had in certain Florida markets that we didn't even service. So really filling out needed geography for us and key markets like Florida was the most important reason.

Speaker #5: So we're excited.

Speaker #6: All right. Thank you.

John Ransom: All right. Thank you.

Speaker #1: Thank you. Our next question comes from the line of Andrew Mark with Barclays. Please proceed with your question.

John Ransom: Thank you. Our next question comes from the line of Andrew Mok with Barclays. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Andrew Mok with Barclays. Please proceed with your question.

Speaker #7: Hi. Good morning. Your home health episodic mix was north of 80% in the quarter and well above the 75% target. Can you help us understand the trends underneath that?

Andrew Mok: Hi, good morning. Your home health episodic mix was north of 80% in the quarter and well above the 75% target. Can you help us understand the trends underneath that? How much of this positive trend is driven by Medicare Advantage versus traditional Medicare? To the extent this is driven by Medicare Advantage, why wouldn't this number sustain at these levels or tick higher as you target more preferred payer agreements? Thanks.

Speaker #7: How much of this positive trend is driven by Medicare Advantage versus traditional Medicare? And to the extent this is driven by Medicare Advantage, why wouldn't this number sustain at these levels or tick higher as you target more preferred payer agreements?

Speaker #7: Thanks.

Speaker #5: Hey, good morning. Thanks for noticing that. Again, we've been in the high 70s now for, I'll call it, four quarters in a row. We've been flirting with 80% towards the end of last year.

Jeffrey Shaner: Hey, Andrew, good morning. Thanks for noticing that. You know, again, we've been in the high 70s now for, I'll call it 4 quarters in a row. We've been flirting with 80%, you know, towards the end of last year. We had said that 80 we felt like was kind of the peak. At this point, you know, Andrew, more Medicare Advantage payers are getting comfortable with the episodic nature. It's some, you know, it's some form of Medicare minus 5%, 10%, you know. It's not they're not all set at Medicare episodic rates. You know, as they get more comfortable with this, you know, the growth is just working for us. We're able to add.

Jeff Shaner: Hey, Andrew, good morning. Thanks for noticing that. You know, again, we've been in the high 70s now for, I'll call it 4 quarters in a row. We've been flirting with 80%, you know, towards the end of last year. We had said that 80 we felt like was kind of the peak. At this point, you know, Andrew, more Medicare Advantage payers are getting comfortable with the episodic nature. It's some, you know, it's some form of Medicare minus 5%, 10%, you know. It's not they're not all set at Medicare episodic rates. You know, as they get more comfortable with this, you know, the growth is just working for us. We're able to add.

Speaker #5: And we had said that 80, we felt like, was kind of the peak. At this point, Andrew, more Medicare Advantage payers are getting comfortable with the episodic nature, and it's some form of Medicare minus 5%, 10%.

Speaker #5: So, it's not—they're not all set at Medicare episodic rates. But as they get more comfortable with this, the growth is just working for us.

Speaker #5: As we mentioned in Q1, we added four new contracts. The majority of those were Medicare Advantage contracts, and they were all episodic, right?

Jeffrey Shaner: You know, we mentioned in Q1, we added 4 new contracts. The majority of those were Medicare Advantage contracts. And they were all episodic, right? At the end of the day, I think we see this number staying in the high seventies. We've not adjusted our target to 80 or above at this point. Don't know that we will, but we've been pretty consistent now for 2 or 3 quarters in that, you know, high seventies, low 80s. I don't think it's gonna change as we continue to sign more Medicare Advantage contracts. They are getting more and more comfortable with this as a form of contracting.

Jeff Shaner: You know, we mentioned in Q1, we added 4 new contracts. The majority of those were Medicare Advantage contracts. And they were all episodic, right? At the end of the day, I think we see this number staying in the high seventies. We've not adjusted our target to 80 or above at this point. Don't know that we will, but we've been pretty consistent now for 2 or 3 quarters in that, you know, high seventies, low 80s. I don't think it's gonna change as we continue to sign more Medicare Advantage contracts. They are getting more and more comfortable with this as a form of contracting.

Speaker #5: So at the end of the day, I think we see this number staying in the high 70s. We've not adjusted our target to 80 or above at this point.

Speaker #5: Don't know that we will. But we've been pretty consistent now for two or three quarters in that high, high 70s, low 80s. And I don't think it's going to change as we continue to sign more Medicare Advantage contracts.

Speaker #5: They are getting more and more comfortable with this as a form of contracting.

Speaker #7: Great. And maybe just a follow-up. Your capital expenditures increased to 4 and a half million in the quarter, which is more than double your typical spend.

Andrew Mok: Maybe just a follow-up. Your capital expenditures increased to $four and a half million in the quarter, which is more than double your typical spend. Can you provide more color on the nature of that and how that's supposed to track for the balance of the year? Thanks.

Speaker #7: Can you provide more color on the nature of that and how that's supposed to track for the balance of the year? Thanks.

Speaker #8: So Andrew, that Q1 purchase was really, really due to a laptop refresh that we had kind of baked in and were expecting. But it's not going to continue.

Matthew Buckhalter: Andrew, it's that Q1 purchase was really related to a laptop refresh that, you know, we had kind of baked in and were expecting. It's not gonna continue. That trend won't continue through the rest of the year. It was really a one-time kind of purchase on our laptops.

Deborah Stewart: Andrew, it's that Q1 purchase was really related to a laptop refresh that, you know, we had kind of baked in and were expecting. It's not gonna continue. That trend won't continue through the rest of the year. It was really a one-time kind of purchase on our laptops.

Speaker #8: That trend won't continue through the rest of the year. So it was really a one-time kind of purchase on our laptops.

Speaker #5: Great. Great. Great. It was our employee's feedback. It was one of their highest feedback points for us was they wanted new laptops. So good catch, Andrew.

Jeffrey Shaner: Great, great. It was our employees' feedback. It was one of their highest feedback points for us was they wanted new laptops. Good catch, Andrew. Very good catch.

Jeff Shaner: Great, great. It was our employees' feedback. It was one of their highest feedback points for us was they wanted new laptops. Good catch, Andrew. Very good catch.

Speaker #5: Very good catch.

Speaker #7: Sounds good. Take care. Have a good one.

Andrew Mok: Sounds good. Take care. Have a good one.

Speaker #5: Thank you. Thanks, Andrew.

Jeffrey Shaner: Thank you. Thanks, Andrew.

Jeff Shaner: Thank you. Thanks, Andrew.

Speaker #1: Thank you. Our next question comes from the line of Peter Jickering with Deutsche Bank. Please proceed with your questions.

Jeffrey Shaner: Thank you. Our next question comes from the line of Peter Chickering with Deutsche Bank. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Peter Chickering with Deutsche Bank. Please proceed with your question.

Peter Chickering: Hey, good morning, guys, and thanks for taking my questions. On PDS, just want to make sure I understand sort of the economics the way you've laid out. You won four preferred contracts in Q1, expect to win another four during the year. Yet you're guiding to, I think, the rate being fairly consistent throughout the year. I mean, wouldn't we see some increase as more preferred come online? Then going back into 2024 on the spread side, it looks like the spread is growing at the same level as the rates. Is that the right way to think about spread going forward, is if rates grow at X%, the spread should grow at the same level?

Pito Chickering: Hey, good morning, guys, and thanks for taking my questions. On PDS, just want to make sure I understand sort of the economics the way you've laid out. You won four preferred contracts in Q1, expect to win another four during the year. Yet you're guiding to, I think, the rate being fairly consistent throughout the year. I mean, wouldn't we see some increase as more preferred come online? Then going back into 2024 on the spread side, it looks like the spread is growing at the same level as the rates. Is that the right way to think about spread going forward, is if rates grow at X%, the spread should grow at the same level?

Speaker #9: Hey. Good morning, guys. And thanks for taking my questions. On PDS, I just want to make sure I understand sort of the economics of what you've laid out.

Speaker #9: You won four preferred contracts in the first quarter. Expect to win another four during the year. And yet you're guiding to, I think, the rate being fairly consistent throughout the year.

Speaker #9: I mean, wouldn’t we see some increase as more preferred come online? And then going back into 2024, on the spread side, it looks like the spread is growing at the same level as the rates.

Speaker #9: Is that the right way to think about spread going forward? Is if rates grow at X percent, the spread should grow at the same level?

Speaker #5: Yeah. Great question. Thank you. I think, one, we're expecting to receive less state government rate wins. So the preferred payer contracts we are winning are offsetting some of the more moderated government state government rate wins that we had received over the last three years, which is why we don't see the rate changing materially.

Jeffrey Shaner: Peter, great question. Thank you. Well, one, we're expecting to receive less state government rate wins. The preferred payer contracts we are winning are offsetting some of the more moderated, you know, government, state government rate wins that we had received over the last, you know, 3 years, which is why we don't see the rate changing materially. You know, 44, 43 may go to 44.60, we don't see it going to 44 or 45 within the course of the year. Yes, I think your thoughts on spread, Matt would say translate that to gross margin. We think that gross margin will stay in that 28. Could it touch 28.5%? Sure. Could it be 27.6% or 27.7%? Sure.

Jeff Shaner: Peter, great question. Thank you. Well, one, we're expecting to receive less state government rate wins. The preferred payer contracts we are winning are offsetting some of the more moderated, you know, government, state government rate wins that we had received over the last, you know, 3 years, which is why we don't see the rate changing materially. You know, 44, 43 may go to 44.60, we don't see it going to 44 or 45 within the course of the year. Yes, I think your thoughts on spread, Matt would say translate that to gross margin. We think that gross margin will stay in that 28. Could it touch 28.5%? Sure. Could it be 27.6% or 27.7%? Sure.

Speaker #5: 44, 43 may go to 44, 60. But we don't see it going to 44 or 45 within the course of the year. And then, yes, I think your thoughts on spread and Matt would say translate that to gross margin.

Speaker #5: We think that gross margin will stay in that 28. Could it touch 28 and a half percent? Sure. Could it be 27.6 or 27.7?

Speaker #5: Sure. But we think of that being in the 28% range. As well as that spread per hour being somewhere just north of $12. And again, it'll move generally.

Jeffrey Shaner: We think of that being in the 28% range as well as that spread per hour being somewhere just north of $12. Again, it'll move generally, but yes, we are passing, continuing to pass wage through the 4 agreements we signed. We have passed wage. We are in the process of passing wage through to those nurses and caregivers as we speak.

Jeff Shaner: We think of that being in the 28% range as well as that spread per hour being somewhere just north of $12. Again, it'll move generally, but yes, we are passing, continuing to pass wage through the 4 agreements we signed. We have passed wage. We are in the process of passing wage through to those nurses and caregivers as we speak.

Speaker #5: But yes, we are passing continue to pass wage through the four agreements we signed. We have passed wage. We are in the process of passing wage through to those nurses and caregivers as we speak.

Speaker #9: Agreed. And revenues coming from preferred, I know you're not giving 2027 guidance at this point. But can you talk about the mechanics of how the annual price increases are set on those preferred contracts as you think about the out years?

Peter Chickering: Great. Then with 60% of the PDS revenues coming from preferred, I know you're not giving 2027 guidance at this point, can you talk about the mechanics of how the annual price increases are set on those preferred contracts as you think about sort of the out years? You know, kind of how much clarity do you have on what this price increases should be by nature of those preferred contracts because they've already written?

Pito Chickering: Great. Then with 60% of the PDS revenues coming from preferred, I know you're not giving 2027 guidance at this point, can you talk about the mechanics of how the annual price increases are set on those preferred contracts as you think about sort of the out years? You know, kind of how much clarity do you have on what this price increases should be by nature of those preferred contracts because they've already written?

Speaker #9: Kind of, how much clarity do you have on what this price increase should be by nature of those preferred contracts, because they've already written?

Speaker #5: I'd like to rapidly reflect that at 10:53 on May 14th, you asked for 2027 guidance. So that's impressive. Peter, I think as we laid out earlier this year, we thought 57% of the MCO volumes would go to low to mid-60% percentage points.

Jeffrey Shaner: I'd like the re-record reflect that at 10:53 on 14 May, you asked for 2027 guidance. That's impressive. You know, Peter Chickering, I think as we laid out earlier this year, we thought 57% of the MCO volumes would go to low to mid 60 percentage points. I think based on what we see today, we would say that that's accurate this year. It'd be, you know, right in the mid-60s. We've said before publicly we thought this could get to the low to mid 80% at some point in the future. You know, people have asked us, What inning are you in? It's not the 1st inning, but it's probably the 5th or 6th inning, and we're probably about halfway through this process.

Jeff Shaner: I'd like the re-record reflect that at 10:53 on 14 May, you asked for 2027 guidance. That's impressive. You know, Peter Chickering, I think as we laid out earlier this year, we thought 57% of the MCO volumes would go to low to mid 60 percentage points. I think based on what we see today, we would say that that's accurate this year. It'd be, you know, right in the mid-60s. We've said before publicly we thought this could get to the low to mid 80% at some point in the future. You know, people have asked us, What inning are you in? It's not the 1st inning, but it's probably the 5th or 6th inning, and we're probably about halfway through this process.

Speaker #5: I think based on what we see today, we would say that that's accurate this year. I mean, it'd be right in the mid-60s. We've said before publicly we thought this could get to the low to mid-80% at some point in the future.

Speaker #5: People have asked us what ending are you in. It's not the first ending, but it's probably the fifth or sixth ending. And we're probably about halfway through this process.

Speaker #5: As it relates to PDS, specifically, I'd say in home health, we're still in the early stages of this story and certainly med solutions were in the very early stages.

Jeffrey Shaner: As it relates to PDS specifically, I'd say in home health, we're still in the early stages of this story, and certainly Med Solutions, we're in the very early stages. I think you'll see that somewhere between 3% to 5% volume shift per year, continuing the next 3 to 5 years. There's not a lot of large volume payers for us to sign in our current market. We're down to the very fine minute, you know, payers. It's also why when we talk, and Christy's sitting, our Chief Operating Officer sitting right next to me. We've talked about filling in Ohio and Michigan and, you know, West Virginia and Tennessee and Kentucky, filling in some of those additional markets where we have no Medicaid revenue today, no preferred payers.

Jeff Shaner: As it relates to PDS specifically, I'd say in home health, we're still in the early stages of this story, and certainly Med Solutions, we're in the very early stages. I think you'll see that somewhere between 3% to 5% volume shift per year, continuing the next 3 to 5 years. There's not a lot of large volume payers for us to sign in our current market. We're down to the very fine minute, you know, payers. It's also why when we talk, and Christy's sitting, our Chief Operating Officer sitting right next to me. We've talked about filling in Ohio and Michigan and, you know, West Virginia and Tennessee and Kentucky, filling in some of those additional markets where we have no Medicaid revenue today, no preferred payers.

Speaker #5: But I think you'll see that somewhere between 3 to 5 percent volume shift per year continuing over the next three to five years. There's not a lot of large volume payers for us to sign in our current market.

Speaker #5: So we're down to the very fine minute payers, but it's also why, when we talk—and Chris, he's sitting in our chief operating office, sitting right next to me.

Speaker #5: We've talked about filling in Ohio and Michigan and West Virginia and Tennessee and Kentucky. Filling in some of those additional markets where we have no Medicaid revenue today, no preferred payers, all of that's new greenfield to us.

Jeffrey Shaner: All of that's new greenfield to us. As we do think about the next 3 to 5 years, we want to fill in those geographies, which would create new opportunity for us to, you know, add brand-new and really just new greenfield for us in the Medicaid space. We said before, our payers, our national MCO payers have asked us and are asking us to move into these markets for them. Thanks, Peter.

Jeff Shaner: All of that's new greenfield to us. As we do think about the next 3 to 5 years, we want to fill in those geographies, which would create new opportunity for us to, you know, add brand-new and really just new greenfield for us in the Medicaid space. We said before, our payers, our national MCO payers have asked us and are asking us to move into these markets for them. Thanks, Peter.

Speaker #5: So as we do think about the next three to five years, we want to fill in those geographies, which would create new opportunity for us to add brand new preferred payer and really just new greenfield for us in the Medicaid space.

Speaker #5: And we've said before, our payers—our national MCO payers—have asked us and are asking us to move into these markets for them. Thanks, Peter.

Speaker #9: Yeah. So I guess the fault there is just what price increases are sort of baked into these preferred contracts? I mean, one of the questions that I keep getting is, each quarter you guys are beating by huge amounts.

Peter Chickering: When, I guess the follow-up here is just, you know, what price increases sort of are baked into these preferred contracts? You know, one of the questions that I keep getting is, you know, each quarter you guys are beating by huge amounts and guidance isn't, you know, isn't changing. The buy side tries to figure out what's sort of the true, you know, out year numbers. You know, what percent of your contracts, you know, have inflation already built in and kind of any color into what inflation is built into those contracts? Thank you.

Pito Chickering: When, I guess the follow-up here is just, you know, what price increases sort of are baked into these preferred contracts? You know, one of the questions that I keep getting is, you know, each quarter you guys are beating by huge amounts and guidance isn't, you know, isn't changing. The buy side tries to figure out what's sort of the true, you know, out year numbers. You know, what percent of your contracts, you know, have inflation already built in and kind of any color into what inflation is built into those contracts? Thank you.

Speaker #9: And guidance isn't changing. So is it buy-side tries to figure out what's sort of the true out-year numbers? I guess what percent of your contracts have inflation already built in and kind of any colorants or what inflation is built into those contracts?

Speaker #9: Thank you.

Speaker #5: I don't have the perfect answer the way you asked it other than thank you. Thank you for that comment or the compliment. I think there was a compliment in there.

Jeffrey Shaner: I don't have the perfect answer the way you asked it other than thank you. Thank you for that comment or the compliment. I think there was a compliment in there. Other than, Peter, all of our contracts are annual and evergreen. As we've said before, our first preferred payer is still part of the 34 preferred payers today. We've not lost a preferred payer to date. That may change in the future, but not today. Every contract we have is reviewed every year. Matt would even say every quarter, even though they're not quarterly contracts, but our teams are meeting with the payers quarterly.

Jeff Shaner: I don't have the perfect answer the way you asked it other than thank you. Thank you for that comment or the compliment. I think there was a compliment in there. Other than, Peter, all of our contracts are annual and evergreen. As we've said before, our first preferred payer is still part of the 34 preferred payers today. We've not lost a preferred payer to date. That may change in the future, but not today. Every contract we have is reviewed every year. Matt would even say every quarter, even though they're not quarterly contracts, but our teams are meeting with the payers quarterly.

Speaker #5: Other than, Peter, all of our contracts are annual and evergreen. So we've said before, our first preferred payer is still part of the 34 preferred payers today.

Speaker #5: So we've not lost a preferred payer to date. That may change in the future but not today. Every contract we have is reviewed every year.

Speaker #5: Matt would even say every quarter, even though they're not quarterly contracts. But our teams are meeting with the payers quarterly. So the opportunity for rate enhancement and for additional value-based agreements are there in every one of the contracts every year.

Jeffrey Shaner: The opportunity for rate enhancement and for additional value-based agreements are there in every one of the contracts every year. We've also said before that the value-based agreements take normally between 9 and about 18 months post the point at which we sign the preferred payer agreement, not because we're not ready, but it just takes the payer time to get comfortable with the fact that they would add on an additional upside bonus to us. Again, the tail on this plays out years in front of us on the value-based side. Very few of our agreements have COLA or cost of living type rate increases built into them. Those are annual conversations that, and by the way, we're not having those every year with them.

Jeff Shaner: The opportunity for rate enhancement and for additional value-based agreements are there in every one of the contracts every year. We've also said before that the value-based agreements take normally between 9 and about 18 months post the point at which we sign the preferred payer agreement, not because we're not ready, but it just takes the payer time to get comfortable with the fact that they would add on an additional upside bonus to us. Again, the tail on this plays out years in front of us on the value-based side. Very few of our agreements have COLA or cost of living type rate increases built into them. Those are annual conversations that, and by the way, we're not having those every year with them.

Speaker #5: We've also said before that the value-based agreements take normally between 9 and about 18 months post the point at which we sign the preferred payer agreement.

Speaker #5: Not because we're not ready, but it just takes the payer time to get comfortable with the fact that they would add on an additional upside bonus to us.

Speaker #5: So again, the tail on this plays out years in front of us on the value-based side. But very few of our agreements have COLA or cost of living-type rate increases built into them.

Speaker #5: Those are annual conversations that we're and by the way, we're not having those every year with them. We're having every other year, every third year.

Jeffrey Shaner: We're having every other year, every third year, because the upfront rate they're paying us is pretty material compared to the Medicaid fee for service schedule. That's probably the best way I can answer the question.

Jeff Shaner: We're having every other year, every third year, because the upfront rate they're paying us is pretty material compared to the Medicaid fee for service schedule. That's probably the best way I can answer the question.

Speaker #5: Because of the upfront rate they're paying us is pretty material compared to the Medicaid fee-for-service schedule. That's probably the best way I can answer the question.

Speaker #9: Yeah, perfect. That's fair enough. And great job in the quarter. Thanks, guys.

Peter Chickering: Yeah, perfect.

Pito Chickering: Yeah, perfect.

Jeffrey Shaner: Thank you.

Jeff Shaner: Thank you.

Peter Chickering: Fair enough. Great job in the quarter. Thanks, guys.

Pito Chickering: Fair enough. Great job in the quarter. Thanks, guys.

Speaker #5: Thanks, Peter.

Jeffrey Shaner: Thanks, Peter.

Jeff Shaner: Thanks, Peter.

Speaker #10: Thank you. Our next question comes from the line of AJ Rice with UBS. Please proceed with your question.

Jeffrey Shaner: Thank you. Our next question comes from the line of A.J. Rice with UBS. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of A.J. Rice with UBS. Please proceed with your question.

Speaker #11: Hi, everybody. First, just maybe on your comment in the prepared remarks, I think you said that caregiver hiring and retention is strong or is solid.

A.J. Rice: Hi, everybody. First, just maybe on your comment in the prepared remarks, I think you said that caregiver hire and your retention is strong or is solid. Is that? Would you say that's pretty much a function of the rate of environment that you're seeing? Is there any underlying trend with potential clinician candidates that suggest things are stabilizing or even improving somewhat?

Speaker #11: Is that would you say that's pretty much a function of the rate environment that you're seeing? Or is there any underlying trend with potential clinician candidates that suggests things are stabilizing or even improving somewhat?

Speaker #5: I think you hit it right, AJ. It's being driven by rate and wage, right? The two are moving in unison. Kind of to Peter's point, the $12, how that's moving in unison.

Jeffrey Shaner: I think you hit it right, A.J. Rice. It's being driven by rate and wage, right? The two are moving in unison. kind of to Peter's point, like, you know, the $12, how that's moving in unison. As our rate goes up, consistently our wage is going up. It's really a function of continuing to get rate wins, turning that into wage improvements and ultimately hiring and employing more caregivers. I wouldn't say it's getting easier. I'd also say it's not getting harder over the last 6 months. We haven't had, other than the weather type stuff, we've not had a position where we felt like nurse hiring or family caregiver hiring has gotten harder. It's been pretty consistent.

Jeff Shaner: I think you hit it right, A.J. Rice. It's being driven by rate and wage, right? The two are moving in unison. kind of to Peter's point, like, you know, the $12, how that's moving in unison. As our rate goes up, consistently our wage is going up. It's really a function of continuing to get rate wins, turning that into wage improvements and ultimately hiring and employing more caregivers. I wouldn't say it's getting easier. I'd also say it's not getting harder over the last 6 months. We haven't had, other than the weather type stuff, we've not had a position where we felt like nurse hiring or family caregiver hiring has gotten harder. It's been pretty consistent.

Speaker #5: As our rate goes up consistently, our wage is going up. So it's really a function of continuing to get rate wins, turning that into wage improvements, and ultimately hiring and employing more caregivers.

Speaker #5: I wouldn't say it's getting easier. I'd also say it's not getting harder. Over the last six months, we haven't had, other than the weather-type stuff, we've not had a position where we felt like nurse hiring or family caregiver hiring has gotten harder.

Speaker #5: It's been pretty consistent. But the wins, the growth Matt talked about—high single-digit PDS growth, organic growth—that's tied to the rate and wage pass-through.

Jeffrey Shaner: The wins, the growth, Matt talked about high single digit PDS growth, organic growth, that's tied to the rate and wage pass-through. Think about accelerated wages tied to accelerated rate.

Jeff Shaner: The wins, the growth, Matt talked about high single digit PDS growth, organic growth, that's tied to the rate and wage pass-through. Think about accelerated wages tied to accelerated rate.

Speaker #5: So think about accelerated wages tied to accelerated rate.

Speaker #11: Okay. I wanted to just ask you a minute about Medical Solutions. You're saying, I think, guiding to mid-single-digit growth near-term, but double-digit by year-end.

A.J. Rice: Okay. I wanted to just ask you a minute about medical solutions. You're saying, I think, guiding to mid-single-digit growth near term, but double-digit by year-end. What specifically is gonna drive that acceleration? Is that, are you able to cross-sell on these new, these two acquisitions? Is that part of the dynamic? It'll drive more volume into med solutions. I think you said also gross margins have stabilized there. Is that stable and that's sort of where we're gonna be for a while, or is there improvement potential in med solutions as well?

Speaker #11: What specifically is going to drive that acceleration? And is that are you able to cross-sell on these new two acquisitions? Is that part of the dynamic?

Speaker #11: It'll drive more volume into med solutions? And I think you said also gross margins have stabilized there. Is that stable? And that's sort of where we're going to be for a while?

Speaker #11: Or is there improvement potential in Med Solutions as well?

Speaker #5: Yeah. AJ, on the gross margin side of this, I would tell you that the 44% range is kind of right down the middle where we expect it to be.

Matthew Buckhalter: Yeah, A.J., on the gross margin side of this, I would tell you that the 44% range is kind of right down the middle where we expect it to be. Really what you're already seeing in a medical solution division in Q4 and Q1 of this year is the benefits from the modernization efforts already taking hold. As we move through 2026, you've seen us jump up from mid-single digits to the higher end of that at 7.4%. You'll see that continuing to grow to that high single digits, low double digits in H2 of this year. It's really just the completion of our modernization efforts.

Matt Buckhalter: Yeah, A.J., on the gross margin side of this, I would tell you that the 44% range is kind of right down the middle where we expect it to be. Really what you're already seeing in a medical solution division in Q4 and Q1 of this year is the benefits from the modernization efforts already taking hold. As we move through 2026, you've seen us jump up from mid-single digits to the higher end of that at 7.4%. You'll see that continuing to grow to that high single digits, low double digits in H2 of this year. It's really just the completion of our modernization efforts.

Speaker #5: And really, what you're already seeing in the Medical Solutions division in Q4 and Q1 of this year is the benefits from the modernization efforts already taking hold.

Speaker #5: So as we move through 2026, you've seen us jump up from mid-single-digits to the higher end of that at 7.4%. You'll see that continue to grow to that high single-digit slow double-digits in the back half of this year.

Speaker #5: But it's really just the completion of our modernization efforts. To your point, there's a great cross-sale opportunity. And between our businesses themselves and bringing in the family-first acquisition gives another cross-sale opportunity for that division at the same time.

Matthew Buckhalter: To your point, there's a great cross-sell opportunity in between, our businesses themselves and bringing in the Family First acquisition gives another cross-sell opportunity for that division at the same time. Organic growth is something that this team is ready to start driving. I would tell you they've been felt left out the past couple of quarters, and they've proved it in Q4 and Q1 so far.

Matt Buckhalter: To your point, there's a great cross-sell opportunity in between, our businesses themselves and bringing in the Family First acquisition gives another cross-sell opportunity for that division at the same time. Organic growth is something that this team is ready to start driving. I would tell you they've been felt left out the past couple of quarters, and they've proved it in Q4 and Q1 so far.

Speaker #5: But organic growth is something that this team is ready to start driving. And I would tell you they've been felt left out the past couple of quarters.

Speaker #5: And they've proved it in Q4 and Q1 so far.

Speaker #12: And then, AJ, Matt said well, automation, AI is a big part of this. We get five or six thousand effects a week for this business.

Jeffrey Shaner: A.J., Matt said, well, automation, AI is a big part of this. You know, we get 5,000 or 6,000 e-faxes a week for this business. The more we can use automation and AI to pull through the referral process and the follow-up physician orders and things that come with it, the more we can pull through growth. I, you know, We are very pleased with 4.5%. This is all organic, right? This is truly organic. I think we'll see that continue to tick up. You know, is 10% a little bit aggressive by Q4? Probably, but we think high single digits by Q4 and probably low double digits by the time we get into H1 of next year.

Jeff Shaner: A.J., Matt said, well, automation, AI is a big part of this. You know, we get 5,000 or 6,000 e-faxes a week for this business. The more we can use automation and AI to pull through the referral process and the follow-up physician orders and things that come with it, the more we can pull through growth. I, you know, We are very pleased with 4.5%. This is all organic, right? This is truly organic. I think we'll see that continue to tick up. You know, is 10% a little bit aggressive by Q4? Probably, but we think high single digits by Q4 and probably low double digits by the time we get into H1 of next year.

Speaker #12: So the more we can use automation and AI to pull through the referral process and the follow-up physician orders and things that come with it, the more we can pull through growth.

Speaker #12: And so we are very pleased with 4.5%. This is all organic, right? This is truly organic. And I think we'll see that continue to tick up.

Speaker #12: Is 10% a little bit aggressive by Q4? Probably. But we think high single digits by Q4, and probably low double digits by the time we get into the first half of next year.

Speaker #11: Okay. All right. Interesting. Thanks a lot.

A.J. Rice: Okay. All right. Interesting. Thanks a lot.

Speaker #12: Thanks, AJ.

Jeffrey Shaner: Thanks, AJ.

Jeff Shaner: Thanks, AJ.

Speaker #10: Thank you. Our next question comes from the line of Jared Hess with William Blair. Please proceed with your question. And Jared, are you on mute?

Jeffrey Shaner: Thank you. Our next question comes from the line of Jared Haase with William Blair. Please proceed with your question. Jared, are you on mute? Your line is now live.

Operator: Thank you. Our next question comes from the line of Jared Haase with William Blair. Please proceed with your question. Jared, are you on mute? Your line is now live.

Speaker #10: Your line is now live.

Speaker #5: Sorry about that. Hopefully, I'm coming through here.

Jared Haase: Sorry about that. Hopefully, I'm coming through here.

Speaker #12: Yeah. Hey, Jared. Morning.

Jeffrey Shaner: Yeah. Hey, Jared. Morning.

Jeff Shaner: Yeah. Hey, Jared. Morning.

Speaker #5: Hey. Hey. Good morning. Morning. I'll just stick to one here as I realize we're getting to the end of the call. But I just wanted to double-click on the home health side.

Jared Haase: Hey. Good morning. Morning. I'll just stick to one here as I realize we're getting to the end of the call, I just wanted to double-click on the home health side. Again, nice to see the growth there. You know, you pointed to clinical offerings and success on that front, I think that's been, you know, kinda consistent with your commentary the last few quarters. I was just wondering if there's any more, I guess, color or data points you could share to sort of illustrate, you know, what you mean by the investment that you've made in terms of clinical outcomes, since that really seems to be, you know, underpinning the operational performance here.

Speaker #5: Again, nice to see the growth there. You pointed to clinical offerings and success on that front, and I think that's been kind of consistent with your commentary the last few quarters.

Speaker #5: I was just wondering if there's any more color or data points you could share to sort of illustrate what you mean by the investment that you've made in terms of clinical outcomes, since that really seems to be underpinning the operational performance here.

Speaker #5: And I guess to be clear, when you talk about clinical investment, is that more kind of in areas around star ratings performance? Or is that maybe developing specific programs based on the needs of patients and referral partners?

Jared Haase: I guess to be clear, when you talk about clinical investment, is that more, you know, kind of in areas around star ratings performance, or is that maybe developing, you know, I guess, specific programs based on the needs of patients and referral partners? Thanks.

Speaker #5: Thanks.

Speaker #12: Yeah. And by the way, great question, Jared. Thank you. Yes. I'll start with TPS scores, right? So we're now into the second full year of scoring on TPS scores.

Jeffrey Shaner: Yeah. By the way, great question, Jared. Thank you. Yes. I'll start with TOPS scores, right? We're now into the second full year of scoring on TOPS scores. I think we mentioned last year we were a net winner, net benefit, so we received value-based payments from Medicare because of our five-star rankings. We are also on pace to be a net winner this year in TOPS ranking. Your five-star scoring tells you based on your value-based payments whether you're net winner or net loser. Effectively, we have mitigated some of the rate decrease in the last 18 months in home health through our TOPS scores. We also have no three-star agencies, both in home health or hospice. I think on average we're 4.5 stars on home health.

Jeff Shaner: Yeah. By the way, great question, Jared. Thank you. Yes. I'll start with TOPS scores, right? We're now into the second full year of scoring on TOPS scores. I think we mentioned last year we were a net winner, net benefit, so we received value-based payments from Medicare because of our five-star rankings. We are also on pace to be a net winner this year in TOPS ranking. Your five-star scoring tells you based on your value-based payments whether you're net winner or net loser. Effectively, we have mitigated some of the rate decrease in the last 18 months in home health through our TOPS scores. We also have no three-star agencies, both in home health or hospice. I think on average we're 4.5 stars on home health.

Speaker #12: I think we mentioned last year, we were a net winner, net benefit. So we received value-based payments from Medicare because of our five-star rankings.

Speaker #12: We are also on pace to be a net winner this year in TPS rankings. So your five-star scoring tells you based on your value-based payments whether you're net winner, net loser.

Speaker #12: So effectively, we have mitigated some of the rate decrease in the last 18 months in home health through our TPS scores. We also have no three-star agencies, both in home health or hospice.

Speaker #12: I think on average, we're 4.5 stars on home health. And our 21 out of 22 hospice locations are five-star branches. So we have phenomenal performance.

Jeffrey Shaner: Um, and, uh, our-

Jeff Shaner: Um, and, uh, our-

Matthew Buckhalter: 21 out of 22.

Matt Buckhalter: 21 out of 22.

Jeffrey Shaner: 21 out of 22 hospice locations are 5-star branches. We have phenomenal performance. The team has rolled out a cardio program that was CHAP approved, they've invested in and actually, you know, excuse me, clinical programs and protocols that we're outselling and outsourcing. I think net takeaway is the team has done a really good job of providing great outcomes, great patient satisfaction in both businesses. We've learned over time, you can't have a great financial outcome without a great clinical outcome. You also shouldn't have a great clinical outcome without a good financial outcome. I think the yin and yang in our HHH business are working right now, great growth and great clinical outcomes.

Jeff Shaner: 21 out of 22 hospice locations are 5-star branches. We have phenomenal performance. The team has rolled out a cardio program that was CHAP approved, they've invested in and actually, you know, excuse me, clinical programs and protocols that we're outselling and outsourcing. I think net takeaway is the team has done a really good job of providing great outcomes, great patient satisfaction in both businesses. We've learned over time, you can't have a great financial outcome without a great clinical outcome. You also shouldn't have a great clinical outcome without a good financial outcome. I think the yin and yang in our HHH business are working right now, great growth and great clinical outcomes.

Speaker #12: The team has rolled out a cardio program that was CHAP-approved. So they've invested in and actually - excuse me - clinical programs and protocols that were outselling and outsourcing.

Speaker #12: So I think net takeaway is the team has done a really, really good job of providing great outcomes, great patient satisfaction in both businesses.

Speaker #12: And we've learned over time, you can't have a great financial outcome without a great clinical outcome. You also shouldn't have a great clinical outcome without a good financial outcome.

Speaker #12: And so I think the yin and yang in our HH&H business are working right now. Great growth and great clinical outcomes.

Speaker #5: Okay. Thank you.

Matthew Buckhalter: Okay. Thank you.

Jared Haase: Okay. Thank you.

Speaker #12: Thanks, Jared. Thanks, Jared.

Jeffrey Shaner: Sure. Thanks, Jared.

Jeff Shaner: Sure. Thanks, Jared.

Speaker #10: Thank you. And our next question comes from the line of Grayson McAllister with Truist Securities. Please proceed with your question.

Jeffrey Shaner: Thank you. Our next question comes from the line of Grayson McAlister with Truist Securities. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Grayson McAlister with Truist Securities. Please proceed with your question.

Speaker #13: Hey, guys. This is Grayson on for days. Just one for me as well. One, to follow up on capital allocation. Obviously, some work left around family-first.

Grayson McAlister: Hey, guys. This is Grayson on for Dave. Just one for me as well. Wanted to follow up on capital allocation. Obviously, you know, some work left around Family First, but past that, how are you thinking about the potential for tuck-ins in home health, just given the regulatory backdrop versus something like adding density in, you know, one of those PDS states that you've called out, like an Ohio or Tennessee? Just following on, still right to think about leverage somewhere in that 4 times level ending the year? That'll be it for me.

Speaker #13: But past that, how are you thinking about the potential for tuck-ins in home health, just given the regulatory backdrop versus something like adding density in one of those PES states that you've called out, like in Ohio or Tennessee?

Speaker #13: And just following on, still right to think about leverage somewhere in that four times level ending the year that'll be it for me.

Speaker #5: Perfect, Grayson. Yeah. I think I'll start off on cash flow and end this on leverage here for you. So really, really pleased for the team to start to 2026.

Matthew Buckhalter: Perfect, Grayson. I think I'll start off on cash flow and end this on leverage here for you. Really pleased for the team start to 2026. Our team continues to position Aveanna as a strong free cash flow generator. 2025 obviously monumental year for us. We had about $130 to 131 million of free cash flow, reflecting not only a commitment to clinical quality, but also cash collections in there as well. We expect this pos momentum to continue into Q1 and the rest of 2026, and the cash flow generation to be pretty consistent with what you saw in 2025. On the leverage side of it, couldn't be more proud of what we've been able to accomplish the last few years on our leverage. We've done a lot.

Matt Buckhalter: Perfect, Grayson. I think I'll start off on cash flow and end this on leverage here for you. Really pleased for the team start to 2026. Our team continues to position Aveanna as a strong free cash flow generator. 2025 obviously monumental year for us. We had about $130 to 131 million of free cash flow, reflecting not only a commitment to clinical quality, but also cash collections in there as well. We expect this pos momentum to continue into Q1 and the rest of 2026, and the cash flow generation to be pretty consistent with what you saw in 2025. On the leverage side of it, couldn't be more proud of what we've been able to accomplish the last few years on our leverage. We've done a lot.

Speaker #5: Our team continues to position Avianna as a strong free cash flow generator. 2025, obviously, monumental year for us. We had about 130, 131 million dollars of free cash flow.

Speaker #5: Reflecting not only a commitment to clinical quality, but also cash collections in there as well. We expect this positive momentum to continue into Q1 and the rest of 2026.

Speaker #5: And the cash flow generation to be pretty consistent with what you saw in 2025. On the leverage side of it, couldn't be more proud of what we've been able to accomplish the last few years on our leverage.

Speaker #5: We've done a lot. We've taken this down from double digits down to 3.8 times net leverage here on an LTM basis in Q1. Certainly, not done either.

Matthew Buckhalter: We've taken this down from double digits down to 3.8 times net leverage here on an LTM basis in Q1. Certainly not done either. Still some more work to do. We'll continue to grow this company, not only organically, but also inorganically, while continuing to keep leverage at top of mind. We wanna be highly sensitive to that and highly aware of it. There's still some free cash flow that we could do for small tuck-in acquisitions, but beyond Family First this year, probably nothing monumental.

Matt Buckhalter: We've taken this down from double digits down to 3.8 times net leverage here on an LTM basis in Q1. Certainly not done either. Still some more work to do. We'll continue to grow this company, not only organically, but also inorganically, while continuing to keep leverage at top of mind. We wanna be highly sensitive to that and highly aware of it. There's still some free cash flow that we could do for small tuck-in acquisitions, but beyond Family First this year, probably nothing monumental.

Speaker #5: Still some more work to do. But we'll continue to be grow this company not only organically but also inorganically while continuing to keep leverage at top of mind.

Speaker #5: We want to be highly sensitive to that and highly aware of it. So there's still some free cash flow that we could do for small tuck-in acquisitions.

Speaker #5: But beyond family-first this year, probably nothing monumental.

Speaker #12: I mean, that's well said. Part of the goal, Grayson, is to do both, is to grow the company through tuck-ins but also to continue to de-lever.

Jeffrey Shaner: I mean, I think that's well said. The, you know, part of the goal, Grayson, is to do both, is to grow the company through tuck-ins, but also to continue to delever. I know Matt and the team are very proud. Matt and Debbie, you know, lowering leverage, you know, almost a quarter point in the quarter, you know, close to 3.8x was a continued great movement. We're not done in that avenue, as Matt said, our goal is to get down to at or below 3x leverage and to continue to grow the company, and we think we can do both. Thanks, Grayson.

Jeff Shaner: I mean, I think that's well said. The, you know, part of the goal, Grayson, is to do both, is to grow the company through tuck-ins, but also to continue to delever. I know Matt and the team are very proud. Matt and Debbie, you know, lowering leverage, you know, almost a quarter point in the quarter, you know, close to 3.8x was a continued great movement. We're not done in that avenue, as Matt said, our goal is to get down to at or below 3x leverage and to continue to grow the company, and we think we can do both. Thanks, Grayson.

Speaker #12: I know Matt and the team are very proud. Matt and Debbie, lowering leverage, almost a quarter point in the quarter, close to 3.8 times.

Speaker #12: It was a continued great movement. We're not done in that avenue. And as Matt said, our goal is to get down to at or below three times leverage and to continue to grow the company.

Speaker #12: And we think we can do both. Thanks, Grayson.

Speaker #10: Thank you. And we have reached the end of the question-and-answer session. I would like to turn the floor back to Jeff Shaner for closing remarks.

Jeffrey Shaner: Thank you. We have reached the end of the question and answer session. I would like to turn the floor back to Jeffrey Shaner for closing remarks.

Operator: Thank you. We have reached the end of the question and answer session. I would like to turn the floor back to Jeffrey Shaner for closing remarks.

Speaker #12: Awesome. Thank you, operator. And thank you so much for your interest in our company and our Avianna story. And we look forward to catching up with you after the end of Q2 in August.

Jeffrey Shaner: Awesome. Thank you, operator. Thank you so much for your interest in our company and our Aveanna story. We look forward to catching up with you after the end of Q2 in August. Thank you. Have a great day.

Jeff Shaner: Awesome. Thank you, operator. Thank you so much for your interest in our company and our Aveanna story. We look forward to catching up with you after the end of Q2 in August. Thank you. Have a great day.

Speaker #12: Thank you. Have a great day.

Jeffrey Shaner: Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

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