Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aveanna Healthcare Holdings Inc (AVAH, Financial) reported a 7% increase in revenue for Q2 2024, reaching approximately $505 million.
- Adjusted EBITDA for the second quarter was $45.6 million, representing a 27.3% increase over the prior year period.
- The company secured double-digit rate improvements in Georgia and Massachusetts, effective the second half of 2024.
- Aveanna added five additional preferred payer agreements, increasing their total to 19, which supports their strategic growth initiatives.
- The company has ample liquidity with $269 million available, providing room to operate and invest in growth opportunities.
Negative Points
- Aveanna continues to face challenges in the labor market, impacting their ability to fully capitalize on demand.
- The company is experiencing ongoing wage pressures in the labor markets, which could affect profitability.
- California remains a challenging landscape for securing funding for appropriate PDN rate increases.
- Q3 is expected to experience softness in core volumes due to summer seasonality and holidays, impacting EBITDA.
- Aveanna's Home Health & Hospice segment saw a 1.4% decrease in revenue compared to the prior year.
Q & A Highlights
Q: The higher guidance bar appears consistent with the 2Q outperformance. Any reason we shouldn’t see the same level of outperformance through the balance of the year? Any unusual cost items ahead in 2Q other than the seasonality you mentioned?
A: Jeff Shaner, CEO: Q3 is typically soft due to seasonality, with schools being out and holidays like July 4 and Labor Day. This has been consistent over the last few years. However, we expect a ramp-up in Q4. Matt Buckhalter, CFO, added that the teams have started 2024 strong, continuing the growth from 2023.
Q: Any investments or efforts in advocacy of Prop 35 in California?
A: Matthew Buckhalter, CFO: We have been advocating for a PDN rate increase in California for three fiscal years. We continue to work with legislatures and the governor's team. While Prop 35 is significant, our commitment to California is long-term, and we will continue to push our preferred payer strategy and advocate for rate increases.
Q: On the 12 states where you’ve secured rate wins, what is the average rate increase? And what percent of business do Georgia and Massachusetts represent?
A: Jeff Shaner, CEO: We had 19 state rate wins last year and expect to be above 10% for 2024. Georgia and Massachusetts have provided significant rate wins, above expectations, allowing us to move wages to market levels. We are seeing fantastic recruiting and retention results in these states.
Q: For PDS, is the 27% to 28% gross margin range a good modeling spot for the updated guidance?
A: Matthew Buckhalter, CFO: Yes, the 26% to 28% margin profile is a great area for us, and we are right in the middle at around 27%. For Home Health & Hospice, we expect to stay in the 50% to 51% gross margin range, though 54% might be a bit strong.
Q: In states with above-average rate increases, how quickly can you ramp up hiring, and do you retain any of that to your operating income line?
A: Jeff Shaner, CEO: We get out in front of rate increases, as seen in Georgia, where we started passing through wage increases before the effective date. This approach helps in recruiting and retention, and we expect meaningful step-ups in volume and margin for 2024 and 2025.
Q: Regarding the PDS hourly wage increase in 2Q, was it all from state increases, or were there one-time payments?
A: Jeff Shaner, CEO: There were some value-based care payments, but they were not overly material. The increase was mainly due to state rate increases and business mix adjustments.
Q: How should Medical Solutions' unique patient served (UPS) trend in the back half of the year?
A: Jeff Shaner, CEO: We are aligning our Medical Solutions business with preferred payers. We expect to focus on the right payers, which may temper UPS growth in the second half as we hone our efforts.
Q: What caused the big step-up in share count sequentially?
A: Deborah Stewart, Chief Accounting Officer: The increase in share count was mainly driven by our employee stock purchase program and annual share-based compensation awards.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
