Aveanna Healthcare (AVAH) Healthcare Services Conference summary

Strategic transformation and operational momentum

• Entering year two of a strategic transformation focused on accelerating preferred payer and government affairs strategies, with strong momentum and positive business outlook for 2024.

• Stabilized revenue and earnings in 2023, now shifting to growth and capacity alignment with payers offering enhanced rates and value-based models.

• Q1 2024 saw a $35 million EBITDA, overcoming payroll tax headwinds, and Q2 is expected to be strong due to favorable labor conditions and volume trends.

• Preferred payer and government affairs strategies are driving top-line growth, with SG&A efficiencies contributing to EBITDA improvements.

• Sustained beat-and-raise performance is anticipated for Q2, continuing recent positive trends.

State rate increases and impact on staffing

• Targeting 6-10 of 33 Medicaid states annually for material rate increases, with recent wins in Georgia (34% increase) and expectations for Massachusetts later in the year.

• Rate increases enable improved staffing, especially in states like Georgia, where hiring has accelerated from 2-3 to 15-20 nurses per week.

• Fill rates in preferred payer states are reaching 85-90%, up from pre-increase levels below 70%, reflecting improved capacity to meet demand.

• Volume growth in the PDS segment has increased to 3-4% annually, with expectations to normalize at 3-5% after pent-up demand is met.

• Rate increases are passed through to caregivers, boosting recruitment and retention, with rapid market response to wage adjustments.

Preferred payer and value-based strategies

• Preferred payer agreements are easier to negotiate when demonstrating wage pass-through and increased capacity, especially on the Medicaid side.

• Majority of incremental rate is passed to caregivers, with value-based agreements enabling additional bonuses for meeting performance metrics.

• Transparency in wage postings supports negotiations and recruitment, with rapid hiring following rate increases.