Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to Aveanna Healthcare Holdings Third Quarter 2022 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 would like to turn the call over to Shannon Drake, Aveanna’s Chief Legal Officer and Corporate Secretary. Thank you.

You may begin.

Shannon Drake

operator. you, Thank and everyone, for us joining Good thank today. morning, you

Aveanna’s call Speaking Officer Aveanna’s Afshar, and are Officer. Executive Chief today's Shaner, and Financial Aveanna’s Jeff Chairman; David Executive Windley, Chief Rod on Operating Officer; Aveanna’s Tony President; Chief Strange,

by We be website remind may and our call at use anyone SEC's well call today, on These press www.aveanna.com XX-Q as such who Investor expressions. of to and of may Relations website release as on until XX, statements November November listening contain want all available We the A forward-looking be call similar this are as will words made available of the earnings the replay at are words section could issued this and yesterday. identified plan, that our statements, Today's replay other XXXX. filed documents which XXXX. a of be of www.sec.gov. our may as XX, to

result federal on new Except All our business circumstances. are forward-looking today's cause results differ about operate. a environment expressed that update which those implied information, in or Aveanna to changing and and the as These securities uncertainties to based current required future or will revise we forward-looking beliefs of call. date statements actual risks as the made by statements any from laws, events or publicly could on are and assumptions not subject management's our made subsequent to statements materially today

most is GAAP both are non-GAAP call measures. earnings available website our non-GAAP and accordance otherwise Form on of or measure The separately website SEC's available in of our Also, measure with press any at our comparable on financial the we GAAP financial in release www.sec.gov is our website. which our reported at during the available to mentioned certain supplement reconciliation results with XX-Q,

initial as in your the question one call comments can callers will time. follow-up and limit allotted to we Following so questions. possible Please remarks, open the we many that to today's prepared one as accommodate

I that, to over call Chief Strange. Tony? Tony With the Executive will Officer, turn Aveanna's

Tony Strange

good factors well morning, affecting your understanding are investing you our better the as as our industry. and everyone. We Shannon, that results time you, Thank appreciate to

you the today, some markets quarter our third call On with our we'll payers insight update we'll capacity. to on additional ongoing the provide create results, efforts and labor into

And look finally, preliminary insight we'll our provide at well expectations some QX as for into XXXX. as a

and that net in release results our $XXX of you've million ongoing our of we're market, approximately it our disruptions fall to $XX two Despite our compared seeing discussed staffing of million. payer revenues to press night, We last adjusted relates showing QX expectations the our clearly relationships the As have seven EBITDA with seen last progress within preferred specifically in as call. PDS. below growth labor payer preferred signs in relationships, all on the now we

QX. medical Additionally, two is after left from consolidation market the the our business market late in benefiting solutions providers

of lower the growth our Finally, both posting QX, of their medical quarter duty produced is best solutions sequential year, typically our which the volume private and the services year. in results both

and As Hospice. Homecare in and we Earlier Health this issues release, by driven into in four Home consolidated referenced the Homebase. quarter our were the separate year, operating biggest unique systems

in significant the strategy we're we provide and Home the Aveanna while And to for QX. in value-based as In role Health right Both position to leader our data effect that Metalogix these a predictive a implemented see we addition, a short-term company, analytics. can long-term ability decisions within in will confident play Hospice are care.

with during volumes the we was volume XX the could all feel effect QX three factors, branches, a disruption by Our and in policies recertifications. as completed to results little the both admissions we associated decline Homebase, we we saw Homebase lower-than-expected new the the began were with in on to Homecare as rolled integration install disciplined Homecare following implement while primarily phase, driven out

platform, of Choice was acquisition. acute across Florida it in most legacy And the Doctor’s state our while this within was impact our

securely With the weeks October. the improvement in place, are first in and notwithstanding benefits across in we of going an board of volumes Hurricane into Ian QX, Homecare the in of Homebase experiencing particularly impact Florida two the

of Number issues about we quarter. for documentation adjustments system for during that reserves conversion took occurred additional since AR have uncollectible during adjustments additional the issues normal our two, above adjustments and in revenue These adjustments include $X.X increased legacy revenue that reserves, provisions higher-than-expected to and been the reserves million on configuration systems, rate for addressed.

quarter additional associated provide we discussed rate being lower will fourth elevated with with revenues. of costs normal to three, his continue levels reserve rest QX in of that will slightly the a details one-time returning XXXX, The number before in remarks. nature. adjustments the And higher to in have Dave more

took as late lower of efficiencies in through QX. the Homecare identified in As team being with the of million realized a revenue that benefit as the QX, costs well result we out Homebase, $X.X the has operating gained about full

provide on additional during commentary and some results all will his remarks. of Health Jeff Home the Hospice

home Monday for While final its home CMS payments last topic rule XXXX. we're week, of on on the health of for health issued

up of reduce market for recall, the for proposed XX increased X.X%. a CMS rule. adjustment, as rate increase update behavioral the a reduction the in approximately basket resulting CMS well XX you'll X.X%, As of net as

position in Clearly, paid at deliver. the In half to and game, what end better in outcome value industry themselves behavioral would for a the as full for some it implement that views are that the in would is indicated invest the adjustment the caregivers it continue while CMS of technology to they remaining XXXX, it this all disclosure, be companies on to where CMS future. providers allows point because better implementing the based XX%

about are Metalogix, with that well that positioned to system. proceed we behavioral summary, business. In we XX as and turning to Americans in not are we've trying believe shift feel to with of the said, CMS that future There Hospice the XX,XXX strongly made urge it With years in we winner every Homebase encourage. Home We be additional adjustment contradicts into the the a and good value-based behavior day. our in care future investments Health they're the Homecare that

Home Hospice patient. most rising Health and provides by alternative preferred cost-effective healthcare and the costs to a it's importantly,

to to gross call, amount as our We and expect high of this we On high well about produce time last preferred the relationships value-based as spent XX%. year-after-year a business to the in talking single-digits grow in payer margins XX%s the continue fair pricing.

costs. to overall capacity our have value reducing care small in continued that a payers moving it home our can see While momentum revenue, still we overall represents of toward that in role portion play healthcare the

agreements, for a where The as these as path that Within all-in value-based gross signs of rates expansion. the see is clear we success a an to PDS payer early to pricing margin growth well with in potential possibility in the preferred indicators can single is Aveanna. digits high currently commitment forward mid demonstrate states strategy this for

get cash and we like QX flow to about a few comments make Before I'd liquidity. into XXXX, and

teams despite Home Health have the the First in adjustments Hospice, cycle we in took QX. and revenue and produced the to discussion extraordinary results that related foremost,

days. $XXX goal to or million against XXX% DSOs were the quarter plan. to million for of a collections $XXX XX Our dropped

or $XXX and we form being meantime, liquidity. our be to in will that government QX, within the enhance into give us than flow. systems, hedged able revenues the in confidence efforts Dave to relations the debt addition revenue million improved end to further the that collectible make This In business agreements and our pricing preferred have to substantially flexible his remarks related one enough access our in are nearly provide and and additional to represents results growth necessary to capital all some convert related covenants another. had continue our to cash will loan we to of more and value-based flow. These cash the in and liquidity of we payer to payer into clinical relationships. detail investments operate At

expectations XXXX. towards early turn our an into our for and focus Let's look QX

home during the revenues experienced hospice QX of rate increase October million We million X, volumes of $XX partially XXXX million. by reserve the in benefit include $XXX ongoing across offset pressure we the These $XXX quarter continued estimates EBITDA to Ian PDS adjusted the rate during million to the as that private effective improvements $XX a health in of expect Health and Hurricane duty improved segments. impact the of Home our as and well approximately and benefit

returning value-based the includes include targeting issue to billion has shortage in mid The of as finalized to margins been Looking duty gross well single-digit services approved that These earlier. ongoing relationship. and improvements discussed specific in Directors. base XXXX in of the $XXX XXXX, Home and by of rule than the received Board next CMS skilled EBITDA impact rate will pricing revenues budget mid our we forward disruption as normalized Hospice million range. XX% once estimates labor full to greater guidance improvements we XX% year the It market early to high and $X.X and and we that through Health private growth high adjusted with preferred ongoing from We're in caregivers.

weather-related other for events What states COVID-XX include or rate further were pandemics It within not provisions significant any material one do service or fires. those provisions from area. for estimates more or our include or catastrophic because improvements doesn't disruptions

Again, provides precise thinking broad the and budget believe we'll has begin a year full provide framework this XXXX guidance XXXX been we finalized, the once to that but about beyond.

Aveanna home care Jeff, turn on the over I my summarize I to the call industry. and wanted Before thoughts to

are with patients, be well and governments available nimble physician response. In and in higher breadth and not and – to as the innovative community-based hospital our be and that demand problem federal for home scale services service and size a care fewer solution, positioned our have we a levels eyes Companies resources, is partners, and and our of successful. payers, must as state

satisfied not with we our take We for in responsibility. that, QX are results full and

single be not We will a time. moment in by defined

than be than expect QX, we We to better and better expect XXXX. XXXX QX to be

Solutions progress We've growth in services. private-duty models skilled to innovation in and We caregiver have alternative produced related care. capacity. seen payer nursing seen drive seen preferred increased both We've models Medical

finalized by in of Home and Health choose. all a our environment, this Hospice we We bring times. Aveanna the end XXXX. do having today's wherever work our I’m they confident anticipate as our work through to these We that leader back business to can and position work employees will industry expectation. level of in recognize order can QX have to the of that In trying itself

your Aveanna continually tough. each thank I what resiliency of hard even are culture have employees for demonstrated a home. It's our employees our to our you when for times and the caregivers success. define same that do and Our willingness calling work will and

some Jeff with that, our segment will With results. provide you Jeff? insight additional into

Jeff Shaner

Tony. you, Thank

Aveanna highly their hand, task caregivers. and geriatric remain and patients focused pediatric, cases adult the fragile skilled leaders with Our on at bringing staffing medically home

strategy We develop are value-based that continue Aveanna as for shifting willing are our payers to those payer outcomes rates services. are enhanced to partner our in those and preferred and payers caregiver Aveanna to payers preferred preferred value reduced clinical return unplanned that identified actively at staffing, capacity with hospitalizations.

we Services seven In the up from of segment, payer have our end agreements, at two XXXX. Private preferred Duty

our partner commitment value with our as in, premium shortage our to forward We the effects and shift steadfast payers for pandemic continue a the update and of quarters those strategy. nursing outcomes. services in payers fee-for-service on I work subsequent we performance payment market have to long-term you to including settle payer preferred our rate value-based who rate, on from become pipeline with progress continuing robust to inflation payer look to a our to the in

our QX Duty to operating Services with Private on Now our segment. starting indicators,

Revenue by $XXX.X QX. care, produced We from the million quarter. revenue million hours which was was during approximately X.XX up of slightly of driven

to be rates primarily preferred turbulent single While growth experienced the high constrained improvement payer markets, labor reaching We volumes by nurses. in continue the select payers volumes year-to-date shortage did organic by digits. improve, the driven our we of with

services duty trends early, these path positive business. for our forward still us growth a Although private show

$XX.XX was from up QX per hour revenue $X.XX Our X.X%. QX or of sequentially

PDS improvements experience XXXX, rate rate back rates the to increases MCO-specific totaling rate in as of continue These the well Medicaid XX. rate as Aveanna PDS We increases. with state wins year-to-date half include

process All turned legislative rate have XXXX expansion opportunities. our their focus and the legislatures program our have we XXXX sessions, improvements of completed legislative to future and now for state

and MCO to We have a full legislative slate XXXX initiatives of execute payer preferred on.

on an model our We also efforts, licensed have Medicaid aid such family model. program as or expansion update caregiver a health the

that we families programs. being service program Washington New aid program families Jersey, Medicaid am to licensed to proud health As across this more states, expect which including over admitted LHA you similar system both dozen many have have may launched important recall, credentialed. Arizona numerous continue recently. to of its and Arizona's I expand recently our have to report I currently and endorsed a

to labor and or margin margin gross Turning of We our of gross million $XXX.X cost XX.X%. metrics. achieved

Our commitment passing wage the reflects we've rate of made $XX.XX our rate per wins through hour our caregivers. to to

in was our usage experienced with Our line with expectations. holidays. QX higher spread hour PTO QX $XX.XX per summer our

As margins gross to such, in expect bounce I QX. approximately to back XX%

Lastly, in we rationalized current align better our volume September, overhead of with trends. million approximately PDS annualized $X business to our

move necessary a and stabilization was as step in be efficient PDS into will This us more we our help forward XXXX.

gross caregiver our wages, Care the rule. Hospice margins. and for industry stand and and and our our QX moving impact Association to final for home united higher health pressure increased the inflation with of We applied the peers for where Home Now on has National mileage support Hospice Home and our segment XXXX on Health

the CMS issue the recognized times still adjustment for we're While of unprecedented industry. PDGM facing the looms large the behavioral

We the healthcare recognizing to home while advocate value brings the system. for behavioral a thoughtful to will solution adjustments continue for the health

experienced be impacted previewed, to operating significantly Health Homebase converted while we've the that Homecare Tony excited results. fully Home business Hospice and to we're disruptions system, QX's As some

low seasonality felt home admitting in our we Health trends both lowest in health our volume the XXX trends, were expected per in Hospice. we and system of admissions while integration some point for our we the QX our First, Home week. At mid-summer, and mission distraction

home comparable a day. basis, just admissions trend per health week this improved XXX On over post-Labor to

of expect emissions Hurricane Southwest the XXX exception Florida, us on per range in With Ian's impact approximately temporary I QX. remain to week in

X,XXX the organic look growth X% episodic health forward our to home admissions I health maintaining As range year-over-year. equates a per to low I week the QX, Approximately rates to admissions back in XX% week in to sustaining per home while X,XXX see mix path range. Aveanna X%

Health episodic leadership Home to sustained Hospice and Our is team driving dedicated growth.

revenue totaling million reserves Second, approximately in the and revenue adjustments $X.X higher-than-expected QX.

strategic Health Hospice During by our the Home driven process the system. teams Homebase to focus towards the XXX% and made direct and quarter, Homecare we improvements of decision the

our This necessary go-forward change teams protocols. was align processes with our made to systems, and

QX gives the last cutting materially, XX billing confidence in our results. Over clinical have days, performance us teams which operating improved our their

revenue back Home back bleed Hospice to expect with rebound million XX% our Although million into adjustments the the through and some improving normalize below gross QX, margin revenue I our to range XX% $XX to reserve in $XX to our Health Hospice Health X%, our getting and range. and QX down should should Home collections significantly revenue

overhead. $X.X Homecare line with in annualized with and locations we In Home Lastly, expectations. million of adjusted Homebase, we fully Health operational on our SG&A eliminated approximately all September, Hospice

the to standard This Homecare we important reentered outcome and was set us. since all years establishing made commitment of and Health Home Home one behind part Health division The the in company practices pleased large focus long-term two establishing achieved one I'm It's was mind. the of and a and to long-term system in we implementations business, to integrations now policies. with been two benefit and Hospice Hospice a in acquisitions Homebase and have

back to where produced Now the period. in prior quarter $X.X million million the increase a revenue, year over $XX.X we

just revenue and in was being Florida impact above. of XX% by episodes early acquisition, XX,XXX by biggest by Ian total and Comfort driven admissions, XX,XXX approximately Care impacted care. QX Hurricane negatively our offset late into detailed was of We the The QX. September total adjustments revenue in business were the revenue episodic

event. as and and I pick for thank team has display momentum recovers up Aveanna business market one to this the from safety want commitment our the Florida during patient personally from event. to another your our the to storm continues rebounded resilience, devastating However, for compassion tragic

transitioned adjustment of detailed for were margin episode per above. was was by quarter, the episodic from revenue the From This demonstrates management to being $X,XXX by on QX. was and impact factors value increase primarily perspective, up This gross and fully revenue Now Homebase. XX.X%. a driven the QX driven cost which Homecare better margins to slightly

expect visits health trended expectations. XX% are As QX episode mentioned, margins I per down in visits just to XX% under and line cost overall with have to back the Home XX visit per range. settle into to gross our

segment, difficult Health for a Hospice and firmly believe was business QX Although quarter and proposition. we Home in our this long-term value its

care. operational We have Hospice value through delivering growth, an sound patient Home focused excellence management established in platform Health and delivering poised on for and

Now Solutions on Medical for to segment Aveanna QX. results our

$XXX.XX. emerged as by of X.X% our and Solutions During the the demonstrates medical trends. $XX.X served up commitment leading organic solutions year's per to interim national Medical revenue. from from were growth. complex for patients quarter, back see and XX,XXX on team's we provider unique Revenue achieve produced has our UPS Volumes supply business driven track of was single-digit this million Aveanna revenue clinically We patients. QX to growth of chain nutrition event high volume approximately

to cost improving, We dollars growth Turning stabilized medical achieved and gross our in solutions. Gross metrics. and goods rate to or million have leading $XX.X gross of margin margin our margins leverage additional is XX.X%. in

to as to more ways grow. in be our and our to back efficient we office continue continue We overhead leverage to effective evaluate

partnerships. our exit and this other see opportunity expand to the market, intro decided providers to national our While we to intra-presence payer further

difficult we keeping everything care Aveanna. value shifting caregiver is we at that those partnership the to to capacity path at clear that do. preferred the the payers us patients, In business sources. confident our payers of labor patients fight inflationary forward center our is our while and remain to referral Long-term, we continue proposition a summary, in medical and environment value for solutions generates through It

caregivers volumes. to other improvements through the and will better to pass ongoing We benefits and effort our continue to wage improve

million our improved QX deliver overhead in volumes necessary still to to flexibility total operational platform have will and expected $XX.X in on improve line more, line us current giving the our eliminated bottom While results trends. These while we be with our to more mission. changes need we we

And Hospice both fundamentals of Home to team's ability generate Health firmly results, and positive improved sustained to businesses leadership with Hospice finally, the moving on the the and and disappointed updating year. look Health growth, Hospice after results Health our our Home we QX forward. in believe collections first of although I profitability new improved you Home and our outcomes, cash clinical forward and

With that, on the Dave? for to over quarter. I'd like to turn Dave the color additional call

David Afshar

provided and collections, segment Tony as consolidated cash topics Jeff items around I'm color of Jeff. and Thanks, and and flow, holders top sure our and credit-related lenders. are results, such our liquidity equity with mind cash

these third our HHH So million $XXX reduced With with which about quarter, collected cash business. end our year. million we million of quarter, and items. $XXX cash to I'll we quarter end the $XXX of cash collections, the particularly right in receivables at of a second within respect great jump is had from collections at overall to began the where the the We

contributed operators in strong in the to of want a aged HHH collections did our on number and number collections also accounts. strong PDS we cash all I great in including collections, particularly while HHH In a thank our And saw cash team members businesses, that it quarter, addition a items collections field affected successes business. of was revenue revenue-related great to cycle we our the who to QX. have

four legacy businesses the systems we've from into system, acquisitions. our transitioned down Homebase different working HHH receivable and been accounts we've Homecare multiple As

systems. As during from HHH the legacy system our towards away and third fully team's the mentioned, we HCHB quarter, focus Jeff turned

system system incremental receivables are something in recur the allowances to As a legacy against during legacy future. took result, expect not additional The allowances quarter. I the we

operations our higher volumes, addition, challenges, HCHB encountered and we've In our implementation configuration which not in resulted HCHB system, integrated into but allowances against have the also impacted as revenues. only we've

to now, benefits leverage with of we're excited the to believe think, processes and we the all that past. offer HHH that all fullest to possible. behind we we in as has one And We now I fully configuration on disciplined align capture system challenges I issues HCHB our the focused can our be the know extent operations the put expect are system, further the to EMR implementation us.

flow say at for nine to QX of in of where we now million revenue the all interest which received this the to turning usages and is to rate you there basis. want months a mind, we in finance this purchase transition. though, QX cycle Free QX. I was year $X.X million CMS big year-to-date QX accounting cash we improved teams that in a from and thank cash $XX past of and one-time year-to-date our hanging And X, negative end flow, of $XX were to Bear million operations the included from our on of were during basis free to from over in cash $XX.X October cap on a to acquired improvement for an million a by advances where cash companies. certain ended repayments flow

the deficit the of by on The months cash facility from with million sheet. ended balance was free October cash securitization $XX funded for net our X and nine borrowings

We $XX on loan in cash term connection the Care to in also our QX with million replace Comfort used accredited draw acquisitions. XXXX delayed drew

fourth $XX balance Thinking progress quarter, and expect at remaining At quarter. that the the even of of towards cash balance we we sheet. of repay sheet we from And QX, perspective. the XXXX, with about on will $XX cash $XX free the forward end the taxes deferred payroll that we the breaking million to looking million have will IRS make cash fund at from million the to significant end the a compared of we the December, flow second end had of to

deferred volumes, rate XXXX costs possible our will XXXX. of for also negatively CMS in integration not of system which will In our be XXXX do should environment, payroll taxes purchase our continue transition focus flow, more $XX collections. including XXXX. than a or on reducing be where million the we significantly flow also limited the optimizing And M&A caps, our Advances improve We'll lower interest and costs of need things to be doing impacted cash by to all cash to and growing repayment the

Of we in the which On amount, LIBOR to rate $XXX million variable above with rate service million rate billion an interest increases of end hedged of the front, $X.XX subject further approximately swaps exposure fixed this is QX. X%. debt had is limits debt $XXX at cap, and to

of substantially was debt variable of the rate our hedged at all Accordingly, end QX.

Our have rate mention term rate loan through through our extend debt caps interest swaps no extend XXXX. we February and last to I'd XXXX. June material XXXX is One item that related interest our maturities until July

Turning to liquidity.

We At $XXX liquidity, have under liquidity end and total our cash fund quarter, third ample revolver. close to the and of securitization had facility the as of operations needed. we million availability our to considering balances

our would As which $XX revolving X.X the the reminder, leverage leverage been covenants end under more allowable has of of of than million carve-out for credit. leverage unless the credit QX. applicable are at turns, lien applicable, the were letters subject we utilized, become be facility under total a the covenant one-third first maximum a revolver well to not below availability Should

In summary, wrap up, our and on teams cash that our I'll with receivable accounts pleased quarter collections balances. as operations third reducing as executed say again revenue our once cycle we're I

optimizing our HHH we look including mentioned, believe value underway, that in its HCHB. we business all forward have Jeff and to long-term firmly HHH the proposition. performance within the initiatives As We

it I'd operator the with to And over that, for to like turn questions.

Operator

Thank you.

first Brian comes Jefferies. with Your question now from conducting ahead. session. [Operator Tanquilut go will We be question-and-answer Instructions] Please a

Taji Phillips

on Brian. you thank my Taji is and morning for question. taking This for good Hi,

Can first what on you of provide question to has insights like? with my labor So do the looks environment. nurse recruitment some kind

Jeff Shaner

year been Jeff. is for us. This question. has thanks XXXX And morning. It's good as Taji, as your for a difficult

related voice primarily over in hiring segment. Health a to segment year optimism hear PDS in last you'll our our difficult retention our What's really been nursing, the and very a – difficult and in think and XXXX. following few I our months our Hospice Home

of a choppy a very, very So six almost environment. quarters in row

trends, our Over we seen core Services Duty retention Private some the finally in our specifically last metrics nursing hiring segment. days, XX positive in have and both

both offer our think those pointed Tony are us employees. I to payers, reimbursement able that market see partnering wage out, to momentum rates and related we to rates as directly to and us positive the be with really I preferred our to payers ultimately, higher higher

PDS a PDS through I movement, point very because in think touch we truly shows at So small a and But talked percentage business. preferred I very it's our small partnerships it payer think our our with we're our albeit segment, the seeing preferred about retention. path nursing of hires seven some us finally relations this forward

Taji Phillips

Great. then And just...

Tony Strange

Go ahead, I’m sorry.

Taji Phillips

go Sorry, ahead.

Tony Strange

think such people. like when a our I talked rate feeling job. mission. think ball a like was perspective, say government payer whole that Jeff this what job we the what an really in We I idea hire just that we we're that like People field. preferred and can in relationships government we from to Jeff to relations down pay I team No, just volume. way these that wages our the to is I have of macro Jeff Mike the market That in about said. They relations what moving move and And can is, follow and relations. going plan have clinicians on our done And that outstanding payer adjust guys developed can related

the They want ourselves if to to And And work. nurses. a said. position to get just just that Jeff them that's come wages. think can we do pay I We've we competitive what can got in that, we way can

further on bit. I little think take team I'd a it brag our a really just and step

an the from see And job. just we and team done can have relations team relations here I government the think payer a where can runway nurses outstanding I engaged. get those

begin is leading is as going that is to a And number may of in volume the sharing a that XXXX to we're things go. caregivers for One hiring. of we us that indicator where

Taji Phillips

Tony Thank Great. Jeff. for and that,

one question. follow-up Just

quarter-over-quarter. admissions just to decline? other Just for lower Home contributed out what and versus was year-over-year, I'm curious, that of you that break And mentioned percentage that or you factors Hospice, you're HCHB thinking from any that about that can Health seeing demand had rollout they're lower

Jeff Shaner

at the demand But bit it I end think demand saw Yes. a I'll It's not Maybe with than we that. – differently not is. me. a little ask of start answer I'll the day, a it's you issue.

And as – I don't admissions the distraction on blame invitation down think a of just been the a this just by lack on QX. issue. And companies the Homebase to our of know, the for almost Homecare summer of way, you It's four end will really been it's a almost moving Homecare focus at heads year. one. Homebase. I a year be It was we've on

five have big of now September. now the it's sales teams, movement the operating for the months Hospice a teams, and is the distraction different Home is an of as And clinicians, as branch Metalogix division tools ultimately practices one just last, different Clearly, Homecare most in But really the I important four ending of Health SHP have was that as Aveanna. and President you Homebase and for we we companies I standards Rob use, tell would the importantly, the last think call I'll support and you, practices our think sunset company. both it, the

have operating division, We one one focus.

two points company first QX been barely since years XXXX. in it's And two of five years, just our we acquired

has strategy, on systems be to big now focus, one to us. one team deal that one of been getting one a set so – of And set

within day, of Florida That a blown into that And going us They have back would end weeks. big Ian three back so in were right pretty But trends Obviously, we've had to part that bounce, about than and team. the Taji at hit was I confident we Southwest event Florida. proud ever business. of thought. They think feel Florida we from really of Hurricane great faster our go QX.

patients employees really seeing and for All all that. accounted for accounted

we're looking not into a maintaining hearing from And about get QX to XX% us, big that as deal, at episodic to back of to I you're us, X,XXX week. really emissions is think mix a that north lowering question. staying that your gets our what thanks that focus to to really X,XXX and and week getting back missions us business, to But that's is. a and for committed back growing

Taji Phillips

you. Thank

Operator

America. Bank go with Gajuk Joanna question, Next Please of ahead.

Joanna Gajuk

follow-up the morning. a Hospice Home much first for so on question. just taking segment the Health Maybe Good disruption. and Thanks

about comment range. to QX. revenue correct? Is that XX%, rebounding That the a So comment XX% was around

Jeff Shaner

Joanna. $XX just normal see normalized That million, back getting to million is quarter, back correct, we that getting business. to That $XX to just our

pretty have QX is what in revenue into QX we that XX%, gross that of margins both rate as well will normalizing lot in heading. this XX% XX%, directionally be run sight back at see We as a where clear point

Joanna Gajuk

at Because that it I when segment, closer to QX looking I guess XX%. was revenue for was

before it so I doesn't into No, some guess. rate? lower, you run ramp-up, I that QX I more a the there guess, there's of that expect being else next it's Or something low So in QX, like I year? asset guess, is think mean

Jeff Shaner

No. Yes.

$XX million from QX I wasn't quarter. north think over Hospice fully I jumped we now, certainly Joanna, the to from a into see we mid- of of budget rate into run back in this additional is about that tailing be noise. Home talked see the little XXXX, in bit bleed Sequestration out, disappointed the QX And stabilizing into think, is no, But off process and July that still of we of forward. for out XXs. our our gate. the high some I if reserve baked I'd Health our working If

of we And so I growing back like be being I in some XXs high think feel think as we in and there. But off ourselves into bleeds QX, see to from the these can reserves we'll XXs. the

Tony Strange

well. Joanna comment. you the said it Jeff, so sequestration And

phase rather, in recall, in July or phased If in the overtime is back sequestration of was taken back put X. being you sequestration out last

then QX, So QX. full we in of there still in be we'll and impact the had sequestration

Joanna Gajuk

Exactly. the but to well. And question guess segment, done Thank PDN the clarification on relative you for which you a I there. the are here

time, that for in still saying you're around comment states. assume but and even the guess, still next updates the any year, I these you're some EBITDA for rate, the whatnot, rate, your shortages not rate same million about So labor at talking meaningful does $XXX

you of us can average assume PDN give $XXX you're for anything EBITDA, that next of Or getting year? with any the progress magnitude updates? of in been So what or us million also have can rate increases additional tracking? there And tell new rate for received bill flavor any in you terms specific Have QX? how pricing things, you you

Tony Strange

out. And thank Well, for that you that was pointing of lot. a first all, so

living our just year. of in doesn't include past many EBITDA this it does not What the like correct. updates in our we've did it look that So material material that of normalized In But that for states. any at preliminary rate cost of said include you saw we numbers the have the number include are state states. mid-XXXs is in any large XXXX, we of a large operating in change any Virginia the from maybe changes change like

have in through about to his we're to increases legislative As of from are a I it this done. and made your in all rate that see Jeff those all states in comments XXXX, our put mean, relates going whatever perspective, question XXXX, QX,

some to all a be Obviously, within lot Now what's large to about overall of duty states those their being process legislative go that's higher every private sitting process having come Colorado, California, waiting settings are states through of our in year. understand many other the cost paying to hospitals legislative patients Medicaid Florida, attention on during rates that budget we'll Texas, the home. talked well negative make year going and as sure we've every address on in as people because to states a Pennsylvania, impact and these

– we're going additional so team, relations – talked those were tell our into I investments in relations out And we go the making about and of to government government to actually some stories. XXXX

to through different mind We'll the provide as will in year. updates information what have go process. we as they updates public cycles. that the become that legislative Keep Now as for we states different provide

fiscal that end June, ended September. have cycles of the are that have years others Some ended years fiscal

some on for over changes of happened. period any for and any phased time-based XXXX So would rate rate – state when material the in changes it be

to standpoint, comment part last we So duty, remarks. his give question he go. private no information your from think when have the prepared Jeff that of new update made and in I about you, as the we was you we'll To and

number about about to additional those aggressive where We on optimism we've seen And rates. caregivers. we've been as changes, that's paid through received improvement disciplined of rate some we've very were caregivers of think that I from have been Jeff's pushing that the comes those in based is to rate wages some increases

gotten and made states rates, caregivers when care. people we where earlier, then we home see – But money. been in to comment we increased state as discussions I some we've having. or of when And And that can the add invest that's and you that, to payer these want grow grow I Jeff, result, when the good we've anything pricing why the a and reception rates from traction payers we that? do such good value-based save think

Jeff Shaner

Thanks, right. That's Joanna.

Operator

go Bank. next Instructions] [Operator question ahead. Your comes with Please Chickering from Pito Deutsche

Pito Chickering

for Hey, taking good guys. Thanks questions. morning, my

of at high compare back And PDS rate? third sort of, you? the business. versus parts XQ? are quarter as XQ And new turn versus as that was What rates labor How of I you're note guess, work are then for that they hiring Just what people on the versus changed has hires? wages the legacy nurses, other new looking they

Jeff Shaner

same-store That's feeling are and living see nurse state, rate the side Because news. of we the through passed increases states have the over markets The both and last two We MCO so preferred in – same hires years. by theme that Yes, is we have really retention market not the improvement nurse last, we're kept up slowdown the by employment. months. call that through the that last change of over the the flip where Pito. and I'm passed market, cost with around not market – have passed with preferred states that's of in through, nurse we overall payers tying increases turnover greatest have have still we payers. hires, of nurses state momentum that good nurse also the going to stick look material XX it, I'll the of seven payers, our when new

Those talked states XXXX. on that that dialed were Tony the are about in just

fill rates, problem what the state the They that to a us. or way I I them, hearing of feel starting low understand at business side. have-nots of and haves up partner now and the is our to with understand process issue They are understand one understand backed you're the being in issue and that, that's they're talking playing for months, better the payers And it's XX legislative pressure. and children hospital. better So well. in we've been play PDS another, and the for think absolutely think on optimism better conversation wanting the this. the MCO us as And They it's through the makes

We're on on in XXXX – today year. again, or we competitive can't hire be states basis. to in able And see be being didn't and still expecting better – confidence what markets that where move XXXX gives important, a new wages more a move can those wages we're ones. And legislative So a that and be material markets year very nurses in to XXXX. us we a retain raise those probably those good in in specific nurse to in consider the had XXXX we expecting to XXXX even

Tony Strange

this openly about talked the we've Pito, And in past.

ago, a paying about If an the that today's hospital at to we question hour. $XX $XX high market, be have a now were average look an different they to XXs competitive you LPNs look states, you've if back in we're to can that LPN upwards ago, how LPN nurses, back paying year even ago. a got going to back job to on your year for probably be you year across In gotten because go get that couldn't to a to hour $XX a

the recognize an we from. the the And rates that those those wages in team XXs, move So Jeff got high LPNs that with pay come in the that's for that that's magnitude in we're provide, people have high great we order growth have and seeing been to able value negotiated where to $XX to XXs into move and hour. where that, to competitive and that markets we've rates be

in to point, going not that metric. are that changes or those states Jeff's rate we're be To move until to able that payers lagging behind,

an $X nurses $X be. hour, I Jeff's that or number hour, we wanted think Jeff hurry, $XX I take we will in can right you where to the he move is he of could and out to and in the down $XX.XX an referenced comments, in at spread expect Now If made, spread, wheelhouse point business. them could we volume grow hire which to a

away margin, give it get it once the However, all we'll we in way just give in margin. it And never we back.

sequentially, So drive with wage. follow to that then got we've and rate

Pito Chickering

really annualize that? of should guys good we think any Like the color enough. all just for did, there? to give that these Fair curious rate you us how can just take XXXX? we third caps costs Should interest – quarter Okay. Because you about

David Afshar

bump see you'd essentially a think I it Pito, now that X% increase, capped. but QX continue they're up Yes, were to as little rates in LIBOR over bit

XXXX see that and run compared interest the But in that payments our to swaps receive as mind rate. we bear – in the will our costs QX incremental we'll caps also increase. So under

in the about you as expense, the X% and we first you – think call if then margin forecast think think you it, So second pay at net, interest our interest and wanted about about expense to being the on could capped lien LIBOR that component XXXX.

Pito Chickering

when this together, the all XXX is said the is one that more this So the range? Is level? right XXX,

David Afshar

a probably fair That's estimate.

Pito Chickering

flow breakeven next what get standpoint, which that do to achieve order -think from And cash a the enough. question flow then EBITDA free to free breakeven? to to in you Fair have leads Okay. you cash

David Afshar

I think XXXX. a of towards we'll make progress lot in that

without security deferred EBITDA, costs. lower lower in this year, $XX in that are in social as I moving because to be you including lot would expect But parts. cash can million mentioned, is what have social what The one-time XXXX. a and our going on payments. M&A can't environment, of in we're usages systems-related we where We EBITDA integration specific say from there's a that grow to of estimate a I I the give growth

make in XXXX So towards progress breakeven. significant we'll

Pito Chickering

go And ahead. sorry,

David Afshar

you. Thank

Pito Chickering

for question me last here. then And

choice within Just you Doctor’s and of Metalogix. because rollout the Homebase of talked about volatility Homecare a lot

so choice. you Thanks if you curious more details Just Doctor’s on specifically can give much. what in saw

Jeff Shaner

of was the it end day, I the at just X. think

is companies up different recover of systems. different So three I'm different had on They all Florida They Alabama. market just systems had acquired versions three They going different different say standards. step different all were four Iowa markets. and or practices. to The very second a operating were and Minnesota, we four than

bit own Homebase. of come a of at slower inside through think business had path We turnover the choppier in each reason, family. And company to had for be I maybe a Aveanna and and Homecare of the the just Aveanna more bit a whatever the little little bit the was process. to part Florida was its around end little day, a

And a amount so turnover we leadership of decent had there.

how And only the great how I I fast you think would – us they team forwarding, Hurricane at tell handle the the part end Ian day, of not showed of is Florida as Aveanna Aveanna I treated family how the part they're think, back their they to treating patients, now. showed – got each hurricane but event, really got other, they us business, back of the to

be of M&A. us And beast so the us the here of in each of integration Medicare its markets. We are I that state. excited all doctor Not of long That's that we're are great on you in tell table. And business great nature today, These Florida. sitting wouldn't about own. term, being in takes would markets, should have still on And life the done very storage one in different a the integration.

Tony Strange

a and will benefit to the system. this the of – things great say Homebase echo I'll I'm said echo an will of acquisition Homebase Ian, Jeff And about job the in did implementation recovering down employees from And said is as acquisition well, way, Choice what be one Jeff. Those a positive guys our for you said, there. from what and Hurricane Homecare us. well and I'll That's that unbelievable going responding is a Homecare in rigid Doctor’s we

a right first the an the in build the them, this little it's think painful Homecare QX, make I'll giving do business time. admission have And requirement move system you And to time notification go think over got for a Homebase you And us been you there to order do better in forward. I over do a use long around. while with term, company, disciplined face-to-face process example, a – that forces infrastructure us the will of in don't says, hard bit patient to I don't right a and things every it is to the if you've stop or

it So forward. going I'm about pretty excited

Jeff Shaner

Thanks Pito.

Operator

question, with Please RBC. Next Hendrix go Ben ahead.

Ben Hendrix

just I the term? around about kind guys. with these secondly, have rule and impact to trying receptivity want follow over argument. of able your And with how discussion wanted in your home more final cuts just some we're better-than-proposed Thanks. the negate comments relations stay the to rule – up behavioral the momentum comments I CMS of health gauge intermediate and Thanks folks know how government assumptions efforts to behavioral broadly. year-end had to the on your value-based the the conversations around then if this

Tony Strange

questions first and think I then the yes no. were

CMS NOC teams So Rod engaged. think same – engaged to warranted. board process. that believe is the are the think don't that our thing NOC folks, well. yes, on is going in position pressure while in well as share the we that we the did are very adjustment with appreciative and And we that we're our extremely I right term, this the the sits forward we short behavioral NOC has going share continue of

incentive CMS thing adjustments, they're right to about matter of get behavioral cut at same and value-based rehabilitated, for to behavior hospital, patient do – taking better, when living time, incentivizing the basically actually the stay a my the data incentivize to those fact, is comment, out behavior they trying patient create. companies of pricing, through to away the trying the to return of question they're the activities to As the they're help your get of

in more people the to piece do come industry the And necessary. takes CMS in is then is And patients, they've believe trying if the behavioral the want them want those think they don't these pricing that's there to the And that to doing. got the care we don't adjustment value-based get to to move encourage arrangement to that right outcome we'll that dollars pressures keeping rewarding behavioral account out years companies to for that we the thing to provide more sure reasons, to we their so be really of for a continue and need. we enough leave right into things we the for really that why and that's make the outcomes. think is doing hospital adjustment to And incentivize

Ben Hendrix

Thank you.

Tony Strange

Ben. Thanks

Operator

floor turn Strange Tony would like come the Q&A end for to We've to I over closing of to session. remarks. the the

Tony Strange

just Well, your look We on and progress updating I forward joining in you at forward for to with the catching end our call. want year, interest the say business of to our I soon. you thank look and to Thank again up our you. everybody

Operator

Thank you. teleconference. This concludes today's

time You thank your may disconnect and lines for your at participation. you this

Aveanna Healthcare (AVAH) 10 Nov 222022 Q3 Earnings call transcript