Aveanna Healthcare Holdings Inc.

Good morning and welcome to the Aviana Healthcare Holdings first quarter 2023 earnings conference call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the call over to Shannon Drake, Aviana's chief legal officer and corporate secretary. Thank you. You may begin.

Thank you, Maria. Good morning and welcome to Aviana's first quarter 2023 earnings call. I'm Shannon Drake, the company's chief legal officer and corporate secretary. With me today is Jeff Shainer, our chief executive officer, and Dave Afshar, 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 filed with the SEC. The company does not undertake any duty to update any 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. 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, Aviana.com, and in our most recent quarterly report on Form 10-Q filed with the SEC. With that, I will turn the call over to Aviana's Chief Executive Officer, Jeff Shainer.

Jeff? Thank you, Shannon. Good morning, and thank you for joining us today. We appreciate each of you investing your time this morning to better understand our first quarter results and how we are progressing against our near and longer-term objectives for 2023 and beyond. My initial comments will briefly highlight our first quarter results, along with the early progress we are making in addressing the labor markets and our ongoing efforts with government and managed care payers to create additional capacity. I will then provide some thoughts regarding our liquidity and refreshed outlook for 2023 prior to turning the call over to Dave to provide further details into the quarter and full year guidance. Starting with some highlights for the quarter. Revenue was approximately $466.4 million, representing a 3.5% increase over the prior year period. Gross margins was 144.5 million, or 31%, which is essentially flat when compared to the comparable prior year period. And finally, adjusted EBITDA was $28.5 million, representing a 25% decrease when compared to the prior year period, primarily due to the cost associated with the current labor environment. As we have previously discussed, the labor environment represents the primary challenge that we are aggressively addressing in 2023 to see Aviana resume the growth trajectory that we believe our company can achieve. As a reminder, we do not have a demand problem. The demand for home and community-based care has never been higher, with both state and federal governments and managed care organizations asking for solutions that can create more capacity. As communicated in our previous quarter, our ability to recruit and retain the best talent is a function of rate. Our business model offers a preferred work setting that is mission driven, providing a deep sense of purpose for our teammates. But our caregivers need to be able to provide for themselves and their families in this inflationary environment, and we must offer a competitive wage. Since our year-end earnings call, I am pleased with the progress we have made on several of our rate improvement initiatives with both government and managed care payers. Specifically, as it relates to our private duty services business, our goal for 2023 was to execute a legislative strategy that would increase rates by double-digit percentages in three important states, California, Texas, and Oklahoma, which represent approximately 25% of our total private duty services revenue. In the first quarter, we were able to demonstrate the value we create for medically fragile patients in Oklahoma and have successfully secured a double digit rate increase, which was retroactive to January 1st of this year. Since the Oklahoma rate increase, we have doubled the number of caregivers hired per week in Oklahoma, demonstrating the impact rate increases have on our ability to attract caregivers at the right wage profile. We have also made significant strides with the Texas legislature that gives us increased optimism that we will achieve our targeted double digit rate increase for our Texas private duty nursing business beginning September 1st. While this rate increase isn't guaranteed at this stage, early indicators reinforce our optimism that our efforts are gaining meaningful traction. Finally, We have spent considerable time with the California legislature and the governor's office demonstrating the importance of these rate increases and how they support an overall lower healthcare cost, improve patient satisfaction, and quality outcomes. Based on our actions to date, we believe that we are taking the appropriate steps needed to support our requested increase in this upcoming California budget cycle that is effective July 1st. While there is still much work to be done on the legislative front, we believe that we can accelerate our growth by increasing caregiver capacity and bringing more patients to the comfort of their home. By passing meaningful wages through to our caregivers, we become a solution for overcrowded children's hospitals and distraught parents who want their children to be cared for in the comfort of their home. We also discussed the need to double the number of preferred payers in 2023. We define preferred payers as those payers that support value-based care by offering an above-market reimbursement rate and value-based payments in exchange for proven savings. Our goal for 2023 was to double our volumes from private duty services preferred payers from approximately 10% of volumes to 20% by year-end 2023. In the first quarter, we've added two additional preferred payer agreements in key markets. Our preferred payer volumes increased to approximately 13% of PDS volumes. Also, we have a robust preferred payer pipeline and are very optimistic we will continue to execute on this strategic initiative throughout 2023. Finally, We discussed the need to shift our current labor capacity to those payers that value our services and appropriately reimburse us for the care provided. We have begun several initiatives to shift caregiver capacity to our preferred payers to optimize staffing rates while minimizing days in an acute care facility. In the first quarter, our preferred payer relationships benefited from accelerated nurse hires of two to three times more than our other payers, and we continue to experience staffing rates 15 to 20 percent greater with significantly higher patient admissions. The value proposition is straightforward. Preferred payers reimburse us a fair rate. We pay market-competitive nurse wage rates while also earning value-based payments for achieving positive clinical outcomes and improved staff dollars. While we are encouraged by our early 2023 rate increases and subsequent recruiting results, we believe our business can rebound quickly as we achieve our rate goals previously discussed. Home and community-based care will continue to grow, and Aviana is a comprehensive platform with a diverse payer base, providing a cost-effective, high-quality alternative to higher-cost care settings, and most importantly, We provide this care in the most desirable setting, the comfort of a patient's home. Before I turn the call over to Dave, let me briefly comment on our liquidity and refreshed outlook for 2023. On the liquidity front, we continue to make progress on improving our cash flow by focusing on attaining adequate reimbursement rates and growing our volumes. We are also implementing initiatives to right-size our corporate cost structure while optimizing our cash collections. As Dave will discuss further, we have ample liquidity to operate our business while we work with government and payers to improve the reimbursement rates to reflect the current inflationary environment. As it relates to our refreshed outlook for the year, while we exceeded our original revenue and EBITDA goals in the first quarter, We have several rate initiatives that still need to come to fruition over the next few months with particular emphasis on Texas and California. That being said, on the strength of our first quarter results, we are comfortable reiterating our full year revenue in adjusted EBITDA guidance of greater than $1.84 billion in revenue and at least $130 million in adjusted EBITDA respectively. We believe it is important to continue to set expectations that acknowledge our environment we are operating in and the time it will take to transform our company and return to sustainable growth. We believe our outlook provides a prudent view considering the challenges we face with the current inflationary labor environment, and hopefully it proves to be conservative as we execute throughout the year. Finally, I am proud of our Aviana team. as we execute on our 2023 strategic objectives. The power and efficiency of the home as a healthcare setting remains critical to our patients, families, payers, referral sources, and government partners. The value of our clinical workforce continues to be recognized through the various rate increases across the country and through our expanding preferred payer relationships. I look forward to updating you on our results at the end of Q2. With that, let me turn the call over to Dave to provide further details on the quarter and our 2023 outlook. Dave?