Aveanna Healthcare Holdings Inc.

Good morning and welcome to Aviana Healthcare Holdings first quarter 2025 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 first quarter 2025 earnings call. I am Debbie Stewart, the company's chief accounting officer. With me today is Jeff Shainer, our Chief Executive Officer, and Matt Buchalter, 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 quarterly report on Form 10-Q when filed. 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 Q1 2025 results and how we are moving Aviana forward in 2025. 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. I will then provide insight on how we are thinking about year three of our strategic plan and our improved outlook for 2025. Lastly, I will provide some insight into the recently announced ThriveSkill pediatrics acquisition and how we're thinking about the combined company prior to turning the call over to Matt to provide further details into the quarter. Moving to our highlights for the first quarter. Revenue for the first quarter was approximately $559 million, representing a 14% increase over the prior year period. First quarter adjusted EBITDA was $67.4 million, representing a 93.1% increase over the prior year period, primarily due to the improved pay rate environment and continued cost savings initiatives. We continue to execute our strategic transformation strategy, focusing on obtaining adequate rates from our payer and government partners for the services we provide, which is clearly evidenced in our first quarter results. Our first quarter performance benefited from some timing-related revenue items that favorably impacted our PDS division. Matt will provide further details on this in his prepared remarks. As we have previously discussed, the labor environment represented the primary challenge that we needed to address to see Aviano resume the growth trajectory that we believed our company could achieve. 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. By focusing our clinical capacity on our preferred payers, we achieved significant year-over-year growth in revenue and adjusted EBITDA. 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 normalized growth rates in all three of our business segments. 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 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 2025 is twofold. First, we plan to execute on our legislative strategy to improve reimbursement rates in at least 10 states. And second, we're advocating for Medicaid rate integrity on behalf of children with complex medical conditions. We have a strong advocacy presence with both federal and state legislatures, as well as solid support from our governors across our national footprint. Legislatures have recognized how meaningful private duty nursing is to the overall cost savings and improved outcomes of our nation's most vulnerable children. We achieved five rate enhancements for our PDS segment in Q1 and are well on our way to reach our legislative goals for 2025. I am proud of our government affairs and our advocacy teams for their commitment to protecting children with complex medical conditions. Now, moving on to our preferred payer initiatives. Our goal for 2025 is to increase the number of PDS preferred payer agreements from 22 to 30. We added two additional preferred payer agreements in Q1 and are currently positioned at 24 agreements in total. Managed care organizations continue to ask us for solutions for their members to receive nursing care in the home. Aviana's preferred payer strategy is gaining momentum and allowing us to invest in caregiver wages and recruitment efforts to accelerate hiring and staffing of nurses for our patients. Additionally, our Q1 preferred payer agreements now account for approximately 54% of our total PDS MCO volumes up from 50% in Q4. This continued positive momentum in preferred payer volumes highlights the shift in our caregiver capacity and recruitment efforts towards our PDS preferred payer partners. Moving to our preferred payer progress in home health. Our goal for 2025 is to maintain our episodic mix above 70% while returning to a more normalized growth rate. In Q1, our episodic mix was 77% and our total episodic volume growth was essentially flat with the prior year period. We added three episodic agreements in the quarter and currently sit at 45 preferred payer agreements in total. Our focus on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis has led to solid 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 have embarked on a similar strategy in our medical solutions business. We're still in the early stages of implementing our preferred payer strategy in medical solutions, but believe it will be fully realized by the end of the year. To date, we have 17 preferred payers in medical solutions, and we expect that number to grow as we achieve our desired preferred payer model. Our gross margins are stabilizing in the 42 to 44 percent range as we are aligning our clinical capacity with those payers that value our services and pay us in a timely fashion. While our volume growth will be muted this year, We expect our clinical outcomes, customer satisfaction, and financial outcomes to improve as we achieve our target operating model. I look forward to updating you on our medical solutions progress over the coming quarters. We are encouraged by our rate increases, preferred pay agreements, and subsequent recruiting results. Our business has demonstrated solid 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 enhanced outlook for 2025. We will continue to focus our efforts on five primary strategic initiatives. First, enhancing partnerships with government partners and preferred payers to create additional capacity and growth. Second, identifying cost efficiencies and synergies that allow us to leverage our growth. Third, modernizing our medical solutions business to achieve our target operating model. Fourth, managing our capital structure and collecting our cash while producing positive free cash flow, and lastly, engaging our leaders and our employees in delivering our Aviana mission. Based on the strength of our first quarter results and the continued execution of our key strategic initiatives, we now anticipate 2025 revenue to be greater than $2.15 billion and adjusted EBITDA to be greater than $207 million. We believe this enhanced 2025 outlook provides a prudent view considering the challenges we still face with the evolving macro environment. As it relates to our recently announced transaction to acquire ThriveSkill Pediatrics, I am pleased to report that we are on target to close this transaction in the coming weeks. Our combined leadership teams are collaborating on integration plans, communications, and post-close strategies to optimize the care delivery for our patients and families. Thrive SPC will be a fantastic addition to our Aviana family and further enhance our preferred payer and government affairs strategies. I look forward to updating you on our progress in the coming quarters. In closing, I am incredibly proud of our Aviana team and their dedication to executing our strategic transformation while holding our mission at the core of everything we do. 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. With that, let me turn the call over to Matt to provide further details on the quarter and our 2025 outlook. Matt?