Aveanna Healthcare(AVAH) - 2023 Q3 - Quarterly Report

Revenue Performance - Consolidated revenue for the three-month period ended September 30, 2023, was $478.01 million, an increase from$443.01 million for the same period in 2022, representing a growth of 7.9%[105] - For the nine-month period ended September 30, 2023, consolidated revenue reached $1.416 billion, compared to$1.336 billion for the same period in 2022, reflecting a year-over-year increase of 6.0%[107] - The Private Duty Services (PDS) segment generated $384.75 million in revenue for the third quarter of 2023, accounting for 81$355.62 million in the same quarter of 2022[105] - Home Health & Hospice (HHH) segment revenue was $52.99 million for the third quarter of 2023, maintaining an 11$49.85 million in the prior year[105] - Medical Solutions (MS) segment revenue was $40.27 million for the third quarter of 2023, representing 8$37.54 million in the same quarter of 2022[105] - PDS segment revenue increased by $29.1 million, or 8.2$3.1 million, or 6.3%, while MS revenue increased by $2.7 million, or 7.3$1,416.4 million, an increase of $79.9 million, or 6.0$1,336.5 million for the same period in 2022[169] Financial Performance - Operating loss for the third quarter of 2023 was $76.4 million, a decrease of$81.1 million from an operating income of $4.8 million in the same quarter of 2022, primarily due to a$105.1 million goodwill impairment charge[139] - Net loss for the three-month period ended September 30, 2023, was $102.4 million, compared to a net income of$24.3 million for the same period in 2022, reflecting a decrease of $126.7 million[140] - Net loss for the nine-month period ended September 30, 2023, was$108.8 million, a decrease of $315.5 million, or 74.4$21.2 million for the nine-month period ended September 30, 2023, from a loss of $437.8 million in the prior year, representing a reduction of$416.6 million, or 95.2%[167] - Interest expense increased by $11.3 million, net of interest income, impacting net loss[140] - Interest expense, net of interest income, rose by$39.9 million, or 54.4%, to $113.3 million for the nine-month period ended September 30, 2023, compared to$73.4 million for the same period in 2022[182] - Other income decreased by $59.4 million to$27.1 million for the nine-month period ended September 30, 2023, down from $86.5 million for the same period in 2022[183] Cost and Margin Analysis - Gross margin increased to$147.3 million, representing 30.8% of revenue, up from 30.4% in the prior year, with a $12.7 million increase year-over-year[139] - Cost of revenue, excluding depreciation and amortization, was$330.7 million, an increase of $22.3 million, or 7.2$447.0 million, or 31.6% of revenue, for the nine-month period ended September 30, 2023, compared to $424.5 million, or 31.8$11.2 million, or 24.9%, with a Field contribution margin of 11.8%, up from 10.2% in the previous year[139] - Field contribution increased by $15.8 million, or 10.1$173.0 million, or 12.2% of revenue, for the nine-month period ended September 30, 2023, compared to $157.2 million, or 11.8$105.1 million for the three-month period ended September 30, 2023, with no impairment in the comparable period last year[151] - Goodwill impairment was recorded at $105.1 million for the nine-month period ended September 30, 2023, significantly lower than the$470.2 million impairment in the comparable period in 2022[179] - The company recorded a goodwill impairment charge of $105.1 million during the three-month period ended September 30, 2023, due to challenges in the labor market affecting anticipated volume[222] Cash Flow and Liquidity - Net cash provided by operating activities for the nine-month period ended September 30, 2023 was$25.7 million, compared to a cash used of $8.2 million for the same period in 2022, reflecting an increase of$33.8 million[207][208] - Net cash used in investing activities decreased to $7.2 million for the nine-month period ended September 30, 2023, down from$22.1 million in the same period of 2022, primarily due to a $14.9 million reduction in cash used[211] - Net cash provided by financing activities decreased by$52.8 million, from $63.4 million for the nine-month period ended October 1, 2022 to$10.6 million for the same period in 2023[212] - As of September 30, 2023, the company had $48.3 million in cash,$20.0 million available under the Securitization Facility, and approximately $168.0 million borrowing capacity under the Revolving Credit Facility[205] Compliance and Internal Controls - The company is addressing a material weakness in internal control over financial reporting, specifically related to IT general controls (ITGCs) for user access and program change management[226] - Remediation efforts include implementing a new revenue system and enhancing ITGCs to ensure effective internal controls[227] - No changes in internal control over financial reporting occurred during the three-month period ended September 30, 2023, that materially impacted internal controls[228] - Management acknowledges inherent limitations in the effectiveness of controls, stating that no system can provide absolute assurance against errors or fraud[229] Future Outlook and Strategic Initiatives - The company aims to enhance its patient-centered care delivery platform to improve care quality and reduce high-cost care settings, positioning itself for sustainable growth through both organic means and acquisitions[103] - The proposed HHS rule aims to ensure that at least 80% of Medicaid payments for personal care services are allocated to direct care worker compensation, which could impact the company's operations positively or negatively depending on the final requirements[118] - Future capital requirements will depend on various unpredictable factors, including potential acquisitions and capital investments[205]