• Q4 Revenue: $520 million, an 8.6% increase over the prior year period.
• Q4 Adjusted EBITDA: $55.2 million, a 42.6% increase over the prior year period.
• Full Year 2024 Revenue: $2.024 billion, a 6.8% increase over the prior year.
• Full Year 2024 Adjusted EBITDA: $183.5 million, a 31.8% increase over the prior year.
• Private Duty Services Revenue: $422.2 million for Q4, a 10.1% increase over the prior year.
• Home Health and Hospice Revenue: $54.4 million for Q4, a 0.6% increase over the prior year.
• Medical Solutions Revenue: $43.3 million for Q4, a 4.8% increase over the prior year.
• Consolidated Gross Margin: $171.7 million or 33% for Q4.
• Liquidity: Approximately $260 million at the end of Q4.
• Cash Flow from Operations: $32.6 million year-to-date.
• Free Cash Flow: Approximately $25.7 million year-to-date.
• 2025 Revenue Outlook: $2.1 billion to $2.12 billion.
• 2025 Adjusted EBITDA Outlook: $190 million to $194 million.

• Warning! GuruFocus has detected 7 Warning Signs with AVAH.

Release Date: March 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Aveanna Healthcare Holdings Inc (NASDAQ:AVAH) reported a significant revenue increase of 8.6% for Q4 2024, reaching approximately $520 million.
• The company achieved a 42.6% increase in adjusted EBITDA for Q4 2024, driven by improved payer rates and cost reduction efforts.
• Aveanna secured double-digit rate improvements in key states like Georgia and Massachusetts, enhancing reimbursement rates for private duty services.
• The company successfully expanded its preferred payer agreements from 14 to 22 in 2024, strengthening partnerships with managed care organizations.
• Aveanna's liquidity position is strong, with approximately $260 million available, providing flexibility for future growth and investments.

Negative Points

• The labor market continues to pose challenges, constraining Aveanna's topline growth due to a shortage of available caregivers.
• Despite revenue growth, the home health and hospice segment experienced only a modest 0.6% increase in revenue for Q4 2024.
• Aveanna's medical solutions segment saw a decrease in unique patients served, indicating potential challenges in maintaining patient volumes.
• The company faces ongoing reimbursement rate challenges, which remain a primary concern for sustaining growth.
• Aveanna anticipates muted volume growth in its medical solutions segment throughout 2025 as it implements its preferred payer strategy.

Q & A Highlights

Q: As I look at the topline growth, it's slightly above 4%, implying flat EBITDA margins year over year. Would you consider this conservative as you've spoken to EBITDA margin expansion in '25 previously? A: Jeff Shaner, CEO: We prefer to use the term "prudent" rather than conservative. We are confident about 2025 and expect it to be a significant year of transformation for Aveanna. Matt Buckhalter, CFO: We have solid momentum from 2024 with rate increases and preferred payer execution. We expect EBITDA to build in Q2 and the second half of 2025.

Q: Can you speak to the M&A pipeline? What areas are you focused on and any specific characteristics you require when looking at assets? A: Jeff Shaner, CEO: We are focused on home health and private duty services for tuck-in M&A. We plan to stay within our capital structure and expect to be back in the acquisition business in fiscal year 2025.

Q: How should we think about modeling the cadence of both rate growth and gross margin progression in 2025 for the PDS segment? A: Jeff Shaner, CEO: We have great clarity for 2025 with momentum from 2024. We expect Q1 to face headwinds due to high payroll taxes and holiday seasonality. Matthew Buckhalter, CFO: We expect spread per hour to normalize in the $10 to $10.50 range for 2025.

Q: As your cash flow increases, how are you thinking about capital allocation? What sort of leverage would you be comfortable going up to? A: Matthew Buckhalter, CFO: We aim to continue deleveraging and expect to be a free cash flow business in 2025. We will focus on accelerating growth in EBITDA both organically and inorganically without opening the capital structure.

Q: Regarding your medical solutions payer strategy, could you walk us through your approach to payer negotiations and potential rate changes? A: Jeff Shaner, CEO: We are aligning our clinical capacity with payers that value our services. We have identified 17 preferred payers and expect to see margin expansion and improved cash collections. Matthew Buckhalter, CFO: We expect muted volume growth initially but positive revenue growth as the strategy takes hold.

Q: How are you approaching policy discussions with regulatory counterparts regarding potential Medicaid program changes? A: Jeff Shaner, CEO: We are aligned with federal and state goals for cost efficiency and high-quality outcomes. Aveanna is a cost saver for governments, and we are well-positioned to benefit from any changes.

Q: Can you provide more detail on what's implied in the revenue guidance for PDS, particularly between rate and volume growth? A: Matthew Buckhalter, CFO: We expect 3% to 5% total revenue growth in PDS. We have good visibility from 2024's rate enhancements and preferred payer growth, with 50% of MCO volume from preferred payers.

Q: The guide calls for flat EBITDA margins at the midpoint. Is it fair to think that most of the margin expansion would come from PDS and HHH? A: Matthew Buckhalter, CFO: We expect margin expansion primarily from SG&A leverage. We aim to drive volume growth and leverage SG&A to achieve margin expansion.

Q: What caused the slower growth in home health and hospice in Q4, and how are you addressing it? A: Jeff Shaner, CEO: We had some sales position vacancies in key markets, but we are pleased with the current trends and expect organic growth of 1% to 3% in 2025. We plan to expand geographically through tuck-ins.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.