Aveanna Healthcare Holdings Inc.

Good morning, and welcome to Aviana Healthcare Holdings' third quarter 2021 earnings conference call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Shannon Drake, Aviana's chief legal officer and corporate secretary. Thank you. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining Aviana Healthcare's third quarter 2021 earnings call. Speaking on today's call are Rod Windley, Aviana's Executive Chairman, Tony Strange, Aviana's Chief Executive Officer and President, David Afshar, Aviana's Chief Financial Officer, and Jeff Shainer, Aviana's Chief Operating Officer. We issued our third quarter earnings press release and supplemental presentation, as well as filed our related Form 8K and Form 10Q yesterday with the SEC. These documents are available on the investor relations section of our website at www.aviana.com. We encourage you to read them. Also, a replay of this call will be available on our website until November 23rd, 2021. We want to remind anyone who may be listening to a replay of this call that all statements made are as of today, November 16th, 2021, and these statements have not been or nor will they be updated subsequent to today's call. Also, today's call may contain forward-looking statements. which may be identified by words such as may, could, will, expect, intend, plan and other similar words and expressions. All forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results, including those risks disclosed under the risk factor headings of our filings. Except as required by federal securities laws, Aviana does not undertake to publicly update or revise any forward-looking statements subsequent to the date made as a result of new information, future events, changing circumstances, or for any other reasons. In addition to our financial results reported in accordance with GAAP, we supplement our GAAP results with certain non-GAAP financial measures. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business and operating results, but they should not be relied upon to the exclusion of our financial results reported in accordance with GAAP. In addition, a reconciliation of any non-GAAP measure mentioned during our call to the most comparable GAAP measure is available in our earnings press release in 10Q, both of which are available on our website and on the SEC's website at www.sec.gov. Following today's prepared marks, we will open the call to questions. Please limit your initial comments to one question and one follow-up so that we can accommodate as many callers as possible in the allotted time. With that, I will turn the call over to Aviana's Chief Executive Officer and President, Tony Strange. Tony?

Thanks, Shannon, and good morning, everyone. Thank you for joining Aviana's third quarter earnings call. As you could see from our press release last night, we have a lot of information to cover on today's call. As a result, our prepared remarks may run a little bit long, but we'll extend our call to accommodate everyone's questions. The goal of the call today is to provide updates on the company's third quarter results, as well as some insights on our current reimbursement and COVID-19 environments. In addition, we'd like to bring you up to speed on our most recent M&A transactions, the deployment of capital to fund our M&A growth, as well as provide some insight into our full year 2021 guidance and beyond. To assist us in discussing all of the above, we will be referencing a supplemental investor deck that was published last night, along with the press release and the 10Q. Thank you. Before jumping into all the details, I'd like to first take a moment to thank all of our caregivers and administrative employees for what you are doing each and every day. Today's environment can make even the smallest tasks more complex. You make it your mission to bring to patients and families of the most frail and vulnerable population in America. So on behalf of the executive team, our board of directors, and all of our shareholders, thank you for what you do. I'd like to spend a moment talking about the overall industry trends and the impact on our current results, and perhaps more importantly, how they affect our long-term outlook for Aviana. The demand for home-based services is at an all-time high. Both our private duty services and our home health and hospice segments continue to experience demand that exceeds our supply, and we're not alone. Across our industry, we see patient discharges from higher acuity settings being delayed due to labor constraints and providers' inability to hire qualified caregivers at a rate that meets that demand. For these reasons, we believe that we are experiencing a shift in how home care is viewed. For the first time in many years and possibly ever, State and federal policymakers, legislators, and private payers are all recognizing the valuable role that home care can play in affecting clinical outcomes while reducing overall health care costs. During our second quarter call, we reported that 16 of our 31 states had either increased reimbursement and or expanded the benefits for home-based care. As of today, that number has grown to 24 of the 31 states that we operate in. That indicates that over 75% of the states where we operate made the decision to invest more dollars into providing more services in the home. Many of our managed care partners are following suit. We continue to have success in obtaining rate increases that target our ability to increase our capacity. And as you saw last week, the final rule for home health was published by CMS, and it, too, was better than originally expected. All of these indicators point to an increasing belief that home-based care can and will play a meaningful and growing role in the health care industry in America. In the meantime, we're living in an environment that has been disrupted by a pandemic, COVID-19, vaccinations and vaccination mandates have all played a role in disrupting business as we know it. The world in general and healthcare specifically is being affected by what we refer to as a COVID-19 hangover. Magnify that with the political and social issues surrounding vaccinations, which are further complicated by a wide variety of mandates. And you'll find yourself in a world where 3 million Americans have left the workforce. Hiring enough nurses and caregivers has always been hard, but it has become increasingly more difficult in this environment. So what are we doing? We, along with every other healthcare provider, are engaged in hand-to-hand combat over every single nurse and caregiver. We've implemented a return-to-work program that incentivizes nurses and caregivers to come back to work and to work more hours. We've created tools to make it easier for nurses and caregivers to apply, orient, and train. We've implemented programs to incentivize nurses and caregivers to get vaccinated, and we've rewarded nurses and caregivers who have demonstrated their loyalty to Aviana. Jeff will provide some additional details during his prepared remarks. And even with all these efforts, there is still not enough supply to meet the demand. We view this disruption as near term in nature. Eventually, vaccination rates will reach an equilibrium. And then and only then, the threat of COVID-19 will subside. The labor markets in the U.S. will reach a new normal. And when they do, there will be an increasing demand and appreciation for home-based care. We're extremely proud of our results this quarter. Despite these headwinds, we grew our revenues 12.4% over the previous year, and even more impressive, we've expanded our gross margins by 280 basis points to 34%. Some of this margin expansion is attributable to the business mix shift toward home health, but we also had margin expansion in private duty services. The team has done an outstanding job in managing labor expenses during this difficult environment. which has afforded us the flexibility to reinvest some of these dollars back into nurse and caregiver wages that should serve to accelerate growth. The increase in revenue related to pricing, accompanied by disciplined expense management, gives us the confidence that we will be able to meet our expectations related to profitability on lower than expected volumes. We will provide a detailed review of our results in a moment. But first, we'd like to touch on the M&A activity that we announced last night. As you're aware, on October the 1st, we filed an 8K with the SEC announcing that we had entered into an agreement to acquire comfort care. As of this call, we have received the necessary approvals from the FTC to proceed, and it is our intent to provide you with all of the details surrounding not only comfort care, but our latest agreement to acquire accredited as well. As you'll recall, our M&A strategy was to acquire between $150 and $200 million of new revenues per year that produced adjusted EBITDAs between $15 and $25 million a year. Our goal was to acquire both private duty and traditional home health assets and work diligently to integrate the acquired businesses in the Aviana, capturing the synergies in a timely manner. With the acquisition of Doctors' Choice in April and the two acquisitions that we announced last evening expected to close in Q4, our acquired revenues in 2021 will be approximately $290 million, far exceeding our goal. Originally, we contemplated using a combination of debt and equity to fund the M&A growth while maintaining net leverage around four and a half to five times. However, given the depressed values in home care stocks, we have decided to fund both of these transactions with debt, which will raise our net leverage profile to approximately six times. We'll work to bring leverage down over time with continued growth, future M&A, and the strategic use of our balance sheet. In the meantime, we're very proud of our continued growth without dilution to our existing shareholders at these depressed valuations. So with that as a lead-in, I'll turn the call over to Rod for a deeper dive into the two transactions, as well as some insights into our pipeline and for future M&A. Rod? Thanks, Tony.