Aveanna Healthcare Holdings Inc.

Good morning and welcome to the Aviana Healthcare Holdings fourth 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 Debbie Stewart, Aviana's Chief Accounting Officer. Thank you. You may begin.

Good morning and welcome to Aviana's fourth quarter 2023 earnings call. I am Debbie Stewart, the company's Chief Accounting Officer. With me today is Jeff Shainer, our Chief Executive Officer, and Matt Buchhalter, our Chief Financial Officer. During this call, we will make forward-looking statements. Risk factors that may impact those statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we file with the SEC. The company does not undertake any duty to update such forward-looking statements. 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 annual report on Form 10-K, which will be filed with the SEC this afternoon. With that, I will turn the call over to Aviana's Chief Executive Officer, Jeff Shainer. Jeff?

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 Q4 and full year 2023 results and how we are moving Aviana forward in 2024 and beyond. My initial comments will briefly highlight our fourth quarter and full year 2023 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 then provide insight on how we are thinking about year two of our strategic transformation and overall outlook for 2024 prior to turning the call over to Matt to provide further details into the quarter and our 2024 outlook, starting with some highlights for the fourth quarter and full year 2023. Revenue for the fourth quarter was approximately $479 million, representing a 6.1% increase over the prior year period. Fourth quarter adjusted EBITDA was $38.7 million, representing a 30.4% increase over the prior year period, primarily due to the improved payer rate environment as well as cost reduction efforts taking hold. Finally, full year 2023 revenue and adjusted EBITDA was approximately $1.895 billion and $139.2 million, representing a 6% and 7.6% respective increase over the prior year. As we have previously discussed, the labor environment represented the primary challenge that we needed to address in 2023 to see Aviana 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 can create more capacity. I am proud of our focus and execution in 2023 as we aligned our objectives with those of our preferred payers and government partners. By focusing our clinical capacity on our preferred payers, we achieved year-over-year growth in revenue and adjusted EBITDA. We also experienced improvement in our caregiver hiring and retention trends by aligning our efforts to those payers willing to engage with us on enhanced reimbursement rates and value-based agreements. While we continue to operate in a challenging labor and inflationary environment, our preferred payer strategy allows us to return to a more normalized growth rate in our business segments. Since our third quarter earnings call, I am pleased with the continued progress we have made on several of our rate improvement initiatives with both government and preferred payers, as well as the continued signs of improvement in the caregiver labor market. Specifically, as it relates to our private duty services business, our goal for 2023 was to execute a legislative strategy that would increase rates by double digit percentages across our various states with particular emphasis on California, Texas, and Oklahoma, which represented approximately 25 percent of our total PDS revenue. At year-end 2023, we had successfully obtained double-digit PDS rate increases in eight key states, including Oklahoma. We have also achieved rate wins in an additional 11 states that were either in line or slightly better than our expectations. These combined 19 states represent approximately 55% of our PDS footprint, and we expect to see positive progress into 2024 as we focus on the remaining states. As a point of reference, the majority of the rate increases were effective in the second half of 2023, which will result in a full-year benefit in 2024. While we are pleased that our PDS legislative messaging has been well received by state legislatures, we still have much work to do. As an example of the work ahead, our PDN rate request was not included in the California governor's proposed budget. We believe that we made significant strides with the governor, Medi-Cal department leadership, and California legislature demonstrating the importance of PDN rate increases and how they support an overall lower healthcare cost, improve patient satisfaction, and quality outcomes. However, it is clear that we need to further accelerate our preferred payer strategy and government affairs efforts to continue to advocate for children with complex medical conditions. This strategy allows us to 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 have a proven track record of expanding our preferred payer programs and will enhance our efforts in California similar to our approach in other states. As we look at our preferred payer initiatives in other states, our goal for 2023 was to double our PDS preferred payers from 7 to 14. In the fourth quarter, we added two additional preferred payer agreements, achieving our goal of 14. Our PDS preferred payer volumes remain consistent at 17 percent of total PDS volumes, We are optimistic that we will continue to execute this strategic initiative into 2024. While we are taking a national approach to our PDS preferred payer strategy, we are placing particular focus in 2024 on the state of California and continuing our positive traction in the state of Texas. Using Texas as a point of reference as of year end, We are approaching 60% of our Texas PDN volumes with a preferred payer and still believe we have an opportunity to further improve this trend to approximately 70% in 2024. We plan to execute a similar playbook in California over the next 18 to 24 months and are optimistic we can achieve positive results. Moving to our preferred payer progress in home health. Our goal for 2023 was to improve our episodic payer mix by 10% from approximately 60% to above 70% by year-end 2023. We signed a total of eight episodic agreements in 2023 and improved our episodic mix from approximately 60% at the end of 2022 to 74% in Q4. We continue to remain focused on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis and focus on improved clinical and financial outcomes. We are encouraged by our 2023 rate increases, preferred payer agreements, and subsequent recruiting results. Our business is demonstrating signs of recovery 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 the patient's home. Before I turn the call over to Matt, let me comment on our strategic plan and our initial outlook for 2024. As we enter year two of our strategic transformation, we remain highly focused on those initiatives that created positive momentum in 2023. We will continue to focus our efforts on four primary strategies. First, enhancing partnerships with government and preferred payers to create additional caregiver capacity. Second, identifying cost efficiencies and synergies that allow us to leverage our growth Third, managing our capital structure and collecting our cash while producing positive free cash flow. And fourth, engaging our leaders and employees in delivering our Aviana mission. While executing the above key strategies, we still believe it is important to set expectations that acknowledge the environment that we are operating in and the time it will take to fully transform our company to sustain growth. Accordingly, We currently expect full-year 2024 revenue to be in a range of $1.96 to $1.98 billion and adjusted EBITDA to be in a range of $146 to $150 million. We believe our outlook provides a prudent view considering the challenges we face with the evolving labor market and hopefully it proves to be conservative as we execute throughout the year. In closing, I am very proud of our Aviana team. We offer a cost-effective patient-preferred and clinically sophisticated solution for our patients and families. Furthermore, we are the right solution for our payers, referral sources, and government partners. By partnering with preferred payers, we can and will move rate and wage metrics in meaningful ways that support our growth. This strategy allows us to hire, retain, and engage more caregivers in providing the mission of Aviana every day. With that, let me turn the call over to Matt to provide further details on the quarter and our 2024 outlook. Matt?