Aveanna Healthcare(AVAH) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Q4 2023 revenue was $479 million, a 6.1$38.7 million, a 30.4% increase YoY, driven by improved payor rates and cost reduction efforts [5] - Full-year 2023 revenue was $1.895 billion, a 6$139.2 million, a 7.6% increase YoY [6] - Full-year 2024 revenue is expected to be between $1.96 billion and$1.98 billion, with adjusted EBITDA between $146 million and$150 million [14][24] Business Line Performance Private Duty Services (PDS) - Q4 2023 PDS revenue was $383 million, a 6.1$38.04, up 1% YoY [17] - Gross margin for PDS was 27%, a 12.7% increase YoY, with a cost of revenue rate of $27.76, flat sequentially [18] - The company achieved double-digit PDS rate increases in eight key states, with 19 states representing 55$54 million, a 1.1% decrease YoY, with 9,200 total admissions and 11,300 episodes of care [18] - Medicare revenue per episode was $3,064, up 1.8$41.3 million, a 17.5% increase YoY, driven by 90,000 unique patients served, an 8.4% increase YoY [20] - Revenue per unique patient served (UPS) was $458.80 [20] - Gross margin for Medical Solutions was 42$232 million in liquidity, including $43.9 million in cash and$168 million available under its revolver [22] - Cash provided by operating activities was $22.7 million in Q4, with free cash flow of$12.5 million [24] - The company has no material term loan maturities until July 2028 [23] Q&A Session Summary Question 1: Margin Expectations for 2024 - The company expects gross margins to remain consistent with Q3 and Q4 2023 levels, with potential outperformance from preferred payor agreements and state rate increases [30][32] - The company is focused on reinvesting rate increases into caregiver wages to drive volume growth [30] Question 2: Labor Environment and Wage Inflation - The company plans to pass through rate increases to caregivers to improve hiring and retention [32] - Wage inflation is expected to be managed through rate improvements and cost efficiencies [32] Question 3: Preferred Payor Progress in California - The company is accelerating its preferred payor strategy in California, with a focus on both legislative efforts and commercial plans [35] - The company has two preferred payors in California, paying above the Medicaid PDN rate [35] Question 4: Upside Potential Across Business Lines - The Home Health & Hospice business has shown significant improvement, with a focus on episodic payors and improved clinical outcomes [38] - The company expects continued growth in PDS and Medical Solutions, driven by rate increases and volume growth [38] Question 5: Cash Flow and Working Capital Dynamics - The company expects moderate headwinds in Q1 2024 due to seasonality but anticipates positive operating cash flow for the year [40] - The company is considering small M&A opportunities in the back half of 2024 or 2025 [40] Question 6: Margin Expansion and Revenue Growth - Margin expansion in 2024 is expected to come primarily from SG&A efficiencies, with minimal improvement in gross margins [45] - Revenue growth in PDS is expected to be split evenly between rate and volume increases [48]