Aveanna Healthcare Holdings Fourth Quarter 2025 Earnings Call - Preferred payer push and rate gains are normalizing volumes and margins

Operator: Good morning, and welcome to Aveanna Healthcare Holdings fourth quarter 2025 earnings call. Today’s call is being recorded, and we’ve allocated 1 hour for prepared remarks and Q&A. At this time, I’d like to turn the call over to Debbie Stewart, Aveanna’s Chief Accounting Officer. Thank you. You may begin.

Debbie Stewart, Chief Accounting Officer, Aveanna Healthcare Holdings: Thank you, and good morning, and welcome to Aveanna’s fourth quarter 2025 earnings call. I am Debbie Stewart, the company’s Chief Accounting Officer. With me today is Jeff Shaner, our Chief Executive Officer, and Matt Buckhalter, our Chief Financial Officer. During this call, we will make forward-looking statements. Risk factors that may impact those statements and could cause actual future results to differ materially from currently projected results are described in this morning’s press release and the reports we file with the SEC. The company does not undertake any duty to update such forward-looking statements. Additionally, during today’s call, we will discuss certain non-GAAP measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

A reconciliation of these measures can be found in this morning’s press release, which is posted on our website, aveanna.com, and in our most recent annual report on Form 10-K, when filed. With that, I will turn the call over to Aveanna’s Chief Executive Officer, Jeff Shaner. Jeff?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Thank you, Debbie. Good morning, and thank you for joining us today. We appreciate each of you investing your time this morning to better understand our Q4 and full year 2025 results and how we are moving Aveanna forward in 2026. My initial comments will briefly highlight our fourth quarter and full year 2025 results, along with the steps we are taking to address the labor markets and our ongoing efforts with government and preferred payers to create additional capacity. I will then provide updates on the recently announced Family First Homecare acquisition and how we are thinking about 2026 strategic initiatives and our full year 2026 guidance before turning the call over to Matt. Now moving to highlights for the fourth quarter and full year 2025.

Revenue for the fourth quarter was approximately $662 million, representing a 27.4% increase over the prior year period. Fourth quarter Adjusted EBITDA was $85 million, representing a 54% increase over the prior year period, primarily due to the improved rate and volume environment and continued cost savings initiatives. Revenue for the full year 2025 was approximately $2.433 billion, representing a 20.2% increase over the prior year period. Full year 2025 Adjusted EBITDA was $320.8 million, representing a 74.8% increase over the prior year period. As a reminder, our fourth quarter and full year 2025 results did benefit from the 53rd week due to our accounting calendar.

As we sunset 2025, I think it’s important to reflect on the three-year strategic transformation that we have successfully navigated. I am proud of the Aveanna team of leaders, employees, and caregivers that believe in our mission and helped execute the key strategies that returned Aveanna to our current performance. As we look forward, we remain deeply committed to our preferred payer and government affairs strategies that continue to drive our growth in all three operating divisions. As we have previously discussed, the labor environment represented the primary challenge that we needed to address to see Aveanna resume the growth trajectory that we believed our company could achieve. It is important to note that our industry does not have a demand problem.

The demand for home and community-based care continues to be strong, with both state and federal governments and managed care organizations asking for solutions that create more capacity while reducing the total cost of care. Our Q4 and full-year 2025 results highlight that we continue to align our objectives with those of our preferred payers and government partners. By focusing our clinical capacity on our preferred payers, we achieved solid year-over-year growth in revenue and Adjusted EBITDA. We also experienced improvement in our caregiver hiring and retention trends by aligning our efforts with those payers willing to engage with us on enhanced reimbursement rates and value-based agreements. While we continue to operate in a challenging environment, our preferred payer strategy supports our ability to achieve normalized growth rates in all three of our business segments.

Since our third quarter earnings call, I am pleased with the continued progress we have made on several of our rate improvement initiatives with both government and payer partners, as well as continued signs of improvement in our caregiver labor market. Specifically, as it relates to our private duty services business, our government affairs strategy for 2025 was twofold. First, we advanced our legislative agenda to improve reimbursement rates in at least 10 states. Second, we continued to advocate for Medicaid rate integrity on behalf of children with complex medical conditions. Our strong advocacy presence with both federal and state legislatures, as well as solid support from our governors across our national footprint, provided significant value in 2025. As it relates to private duty services rate updates, we achieved 10 rate enhancements in 2025, which was in line with our expectations.

As we reset our legislative goals for the new year, we expect to achieve high single-digit state rate enhancements for 2026. After 3 years of meaningful rate movement in our PDS states, we are generally in a good place as we navigate 2026 and focus on cost of living type rate and wage adjustments moving forward. Now, moving on to our preferred payer initiatives. Our goal for 2025 was to increase the number of private duty services preferred payer agreements from 22 to 30. We added 8 additional preferred payer agreements in 2025, achieving our goal of 30. Aveanna’s preferred payer strategy continues to gain momentum and allows us to invest in caregiver wages and recruitment efforts to accelerate hiring and staffing of nurses for our patients.

As we reset our preferred payer goals for 2026, we believe there is still ample room to grow in our current geography as well as new states that we enter through acquisitions. With that in mind, our goal for 2026 is to add 8 additional agreements with a target of 38 preferred payers by the end of 2026. Additionally, our Q4 preferred payer agreements accounted for approximately 57% of our total private duty services MCO volumes. This positive momentum in preferred payer volumes continues to highlight the shift in our caregiver capacity and recruitment efforts towards our preferred payer partners. We believe this important volume metric will grow to the low 60% in 2026 as we continue to align our capacity with our payer partners. Moving to our preferred payer progress in home health.

Our goal for 2025 was to maintain our episodic payer mix above 70% while returning to a more normalized growth rate. I am extremely pleased to report in Q4, our episodic mix was 78% and our total episodic volume growth was 25% compared with the prior year period. The continued investment in clinical outcomes, sales resources, and a focused approach to growth is paying dividends with Q4 total admissions of 10,400 or 22.4% growth over the prior year period. We ended 2025 with 45 preferred payer agreements in home health. Our dedicated focus on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis has led to double-digit year-over-year growth in home health total episodes and improvement in our clinical and financial outcomes.

As we reset expectations in home health and hospice for 2026, we believe our episodic payer mix will remain above 75% with organic growth rates approaching double digits. We also expect to sign additional preferred payer agreements in home health and are now targeting more than 50 agreements by the end of 2026. Finally, as we have achieved our desired preferred payer model in private duty services and home health and hospice, we are proceeding with a similar strategy in our Medical Solutions business. We’re in the late stages of implementing our preferred payer strategy in Medical Solutions and believe it will be fully realized in 2026. At year-end 2025, we had 18 preferred payers, and we expect that number to grow with a target of 25 total agreements in 2026 as we achieve our desired preferred payer model.

Our gross margins have stabilized in our desired range as we align our clinical capacity with those payers that value our services and pay us in a timely fashion. I am pleased with our Q4 volume growth of approximately 92,000 unique patients served or positive 3.4% over the prior year period. As we think about Medical Solutions revenue growth in 2026, I would expect us to remain in the mid-single digits growth for the next few quarters and then return to double-digit growth by the end of the year. We are encouraged by our rate increases, preferred payer agreements, and subsequent recruiting results. Our business has demonstrated solid signs of recovery as we achieve our rate goals previously discussed.

Home and community-based care will continue to grow, and Aveanna is a comprehensive platform with a diverse payer base, providing cost-effective, high-quality alternative to higher cost care settings. Now, turning to our recently announced transaction to acquire Family First Homecare, a Florida-based company with a great reputation for quality in-home pediatric care. I want to extend a warm welcome to our Family First teammates. I am thrilled to continue our acquisition growth story with great companies like Thrive Skilled Pediatric Care and Family First Homecare. Both companies continue to build upon the Aveanna brand of high quality, compassionate care in the most cost-effective setting, the comfort of our patient’s home. We expect the Family First transaction to close sometime in Q2 with normal regulatory approvals. I look forward to updating you on our progress in over the coming quarters.

Before I turn the call over to Matt, let me comment on our strategic plan and outlook for 2026. We will focus our efforts on five primary strategic initiatives. First, strengthening our partnerships with government partners and preferred payers to create additional capacity and growth. Second, improving clinical outcomes and customer engagement scores while lowering the total cost of care. Third, implementing high priority artificial intelligence and automation efforts to improve operational efficiency and productivity gains. Fourth, growing through acquisitions while improving net leverage and generating positive free cash flow. Finally, engaging our leaders and employees in delivering our Aveanna mission.

Based on the strength of our fourth quarter and full year 2025 results and the continued execution of our key strategic initiatives, we anticipate 2026 revenue range of $2.54-$2.56 billion and Adjusted EBITDA range of $318-$322 million. We believe this 2026 outlook provides a prudent view considering the challenges we still face with the evolving environment and does not include the impact of the Family First acquisition. In closing, I’m incredibly proud of our Aveanna team and their dedication to executing our strategic plan while holding our mission at the core of everything we do. We offer a cost-effective, patient-preferred, and clinically sophisticated solution for our patients and families. Furthermore, we are the right solution for our payers, referral sources, and government partners.

With that, let me turn the call over to Matt to provide further details on the quarter and our 2026 outlook. Matt?

Matt Buckhalter, Chief Financial Officer, Aveanna Healthcare Holdings: Thank you, Jeff, and good morning. I’ll first talk about our fourth quarter and full year 2025 financial results and liquidity before providing additional details on our outlook for 2026. Starting with the top line, we saw revenues rise 27.4% over the prior year period to $662.5 million. We achieved year-over-year revenue growth in all three of our operating divisions led by our private duty services, home health and hospice, and medical solutions divisions, which grew by 28.1%, 27.3%, and 21.3% compared to the prior year quarter. Consolidated gross margin was $213.3 million, or 32.2%. Consolidated adjusted EBITDA was $85 million, a 54% increase as compared to the prior year.

This growth reflects an improved rate environment, increased volumes, as well as enhanced operational efficiencies. As Jeff mentioned, this year’s fourth quarter included an additional 53rd week, which had a positive impact on both revenue and earnings. As a result, the current fiscal year reflects an extra week of business activity compared to a typical year. Now, taking a deeper look into each of our segments. Starting with Private Duty Services, revenue for the quarter was approximately $541 million, a 28.1% increase, and was driven by approximately 12.4 million hours of care, a volume increase of 17.9% over the prior year. Q4 revenue per hour of $43.74 was up 10.2% compared to the prior year quarter, primarily driven by preferred payer volume growth and the rate enhancements previously discussed.

We remain optimistic about our ability to attract caregivers and address market demands for our services when we obtain acceptable reimbursement rates. Turning to our cost of labor and gross margin metrics, we achieved $149.9 million of gross margin, or 27.7%. The cost of revenue rate of $31.62 in Q4 was up $3.15, or 13%, from the prior year period. Our Q4 spread per hour was $12.12, reflecting continued normalization as we make ongoing adjustments to caregiver wages to support higher volumes and improve clinical outcomes. Moving on to our home health and hospice segment. Revenue for the quarter was approximately $69.3 million, a 27.3% increase over the prior year.

Revenue was driven by 10,400 total admissions, with approximately 78% being episodic and 14,000 total episodes of care, up 25% from the prior year quarter. Medicare revenue per episode was $3,223, up 3% from the prior year quarter. We continue to focus on rightsizing our approach to growth in the near term by focusing on preferred payers that reimburse us on an episodic basis. This episodic focus has accelerated our margin expansion and improved our clinical outcomes. With episodic admissions well over 70%, we have achieved our goal of rightsizing our margin profile and enhancing our clinical offerings. We are pleased with our Q4 gross margin of 53.7%, representing our continued focus on cost initiatives to achieve our targeted operating model.

Our home health and hospice platform is dedicated to creating value through effective operational management and the delivery of exceptional patient care. Now, to our Medical Solutions segment results for Q4. During the quarter, we produced revenue of $52.5 million, up 21.3% over the prior year period. Revenue was driven by approximately 92,000 unique patients served, and revenue per UPS of approximately $570, up 17.9% over the prior year period. Gross margin was approximately $26.2 million, or 50% for the quarter. Medical Solutions Q4 revenue, gross margin, and reimbursement rate benefited from a reserve release driven by stronger than expected cash collections on claims we had previously estimated as uncollectible. We expect results to normalize in Q1, with gross margins returning to the 43%-45% range.

As Jeff mentioned, we continue to implement initiatives to be more effective and efficient in our operations to achieve our targeted operating model. We are accelerating our preferred payer strategy in Medical Solutions by aligning our capacity with those payers that value our resources and appropriately reimburse us for the services we provide. We expect margins to normalize and UPS to accelerate its growth as we implement our targeted operating model. While I’m pleased with the integration efforts to date, we’re entering the final push to complete our efficiency efforts and return to a sustained year-over-year volume growth in Medical Solutions. In summary, we continue to fight through a difficult environment while keeping our patients’ care at the center of everything we do. It’s clear that aligning caregiver capacity with preferred payers who value our partnership is the right path forward at Aveanna.

With the strong momentum from Q4 and throughout 2025, we’re optimistic these trends will continue into 2026. We will continue to pass through wage improvements and other benefits to our caregivers in the ongoing effort to better improve volumes. Now, moving to our balance sheet and liquidity. At the end of the fourth quarter, we had liquidity of approximately $529 million, representing cash on hand of approximately $193 million, $110 million of availability under our securitization facility, and approximately $226 million of availability on our revolver, which was undrawn as of the end of the quarter. We had $24.5 million in outstanding letters of credit at the end of Q4. On the debt service front, we had approximately $1.49 billion available rate debt at the end of Q4.

Of this amount, $520 million is hedged with fixed rate swaps, and $880 million is subject to an interest rate cap, which limits further exposure to increases in SOFR above 3%. Accordingly, substantially all of our variable rate debt is hedged. Our interest rate swaps extend through June 2026, and our interest rate caps extend through February 2027. Looking at cash flow, cash generated by operating activities was $125.9 million, and free cash flow was $131 million. We are encouraged by our strong cash collections and cost efficiency efforts, which drove solid operating and free cash flow in 2025. We expect similar cash flow performance in 2026.

As a reminder, the first quarter is our, typically our seasonal low point for both operating and free cash flow, with improvement expected throughout the rest of the year. Before I hand the call over to the operator for Q&A, let me take a moment to address our outlook for 2026. As Jeff mentioned, we expect full year 2026 revenue range of $2.54-$2.56 billion, and Adjusted EBITDA range of $318-$322 million. This guidance does not include any impact from the Family First acquisition, which we expect to close in late Q2. As outlined in our recent 8-K, we are paying $175.5 million in consideration, or approximately 7.5 times post-synergy EBITDA.

We plan to fund the transaction and related fees with cash on hand and our securitization facility. As we reflect on our Q4 results, I’d like to take a moment to express my sincere gratitude to all of our Aveanna teammates. These strong results would not have been possible without your hard work and dedication. Looking ahead, I’m excited for the continued execution of our 2026 strategic plan and look forward to providing you with further updates at the end of Q1. With that, let me turn the call over to the operator.

Operator: Thank you. At this time, we’ll be conducting a question and answer session. If you’d like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you’d like to remove your question from the queue. As a reminder, we ask that you please limit to one question and one follow-up. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from A.J. Rice with UBS. Your line is now live.

A.J. Rice, Analyst, UBS: Hi, everybody. Thanks. Congratulations on the Family First acquisition. Obviously, that’s a decent sized deal for you guys. I think you’ve said you’re gonna fund that with cash and short-term borrowings. How should we think about the impact that’s likely to have on leverage? Can you give us any early read on whether there’s accretion there, or the trajectory on the margin contribution over time?

Matt Buckhalter, Chief Financial Officer, Aveanna Healthcare Holdings: Yeah. A.J., we’re really excited to welcome the Family First team into the Aveanna family. They have really strong clinical outcomes, really disciplined operation. It makes them a really nice cultural fit and operational fit into our family. We value this transaction, as I said in the script, about 7.5 times post synergy EBITDA. You could see that on a very short-term basis, having a very, very minimal impact on our leverage profile. With the generated free cash flow that we will produce in 2026, you should see us slightly or flat to slightly down as the year progresses on a pro forma basis with both of those pieces taken into consideration. We still plan on deleveraging in 2026, however, slightly not the large jumps that you’ve seen the past two years. Jeff, anything else?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Yeah. I think, A.J., as Matt’s well said, you know, we’ve gotten leverage down to just right at 4x. As Matt said, you know, we should end 2026 in that range with the Family First addition. And as he suggested, it’s just another nice transaction. You know, Thrive was a great transaction for us. It densified our services, allowed us to be better payer partners, Thrive mainly in Texas. This is a Florida focused deal for us. And it’s just a nice merger of two great companies. You know, we gotta clear some regulatory hurdles over the next month or two and excited to get through those and get on to doing business with the Family First team.

A really nice acquisition for us to start the year.

A.J. Rice, Analyst, UBS: Okay. Just maybe, as a follow-up on the preferred provider arrangements that you’re doing. At this point, do you have pretty good geographic coverage across your footprint, or there’s still major geographies where you do not yet have it? Is the idea that, you know, the incremental 8 that you did last year, the incremental 8 this year, is that more density, multiple managed care Medicaid programs that you’re contracting with in a given geography, or is it still just trying to get the broad coverage?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: That’s a great question. The 8 we won in 2025 and the additional 8 that we’re anticipating for 2026 are in the current geographies that we have. I’ll say current geographies post the Thrive acquisition because we added New Mexico and Kansas as our two additional Medicaid states. As we think about executing on the 38 goal for this year, it is still densifying our current geographies. I would tell you at this point, we’ve landed most of the major payers in the major markets, so we’re rounding out some of our payer partnerships. Then I think the next steps for us as you think about, like, what’s next for Aveanna from a Medicaid standpoint, we still wanna fill in the states like Ohio, West Virginia, Kentucky, Tennessee.

You know, that’s still that an open area today where we don’t have any Medicaid services. So those four or five states and kind of the, call it the heartland, we really wanna fill in. That’s how we think about additional M&A, the back half of 2026 and going in 2027 on the Medicaid side of the business. Thanks, A.J.

A.J. Rice, Analyst, UBS: All right. Thanks.

Operator: Our next question is from Brian Tanquilut with Jefferies Group. Your line is now live.

Brian Tanquilut, Analyst, Jefferies Group: Hey, good morning, guys, and congrats on this acquisition. Maybe, Matt, as I think about to start, when I think of Family First, any other color you can share with us in terms of how we should be thinking about revenues? I guess we can back into the EBITDA contribution, but just any KPIs, any metrics that you can share with us. Kind of related to that, Jeff, I mean, is this one of those deals where you’re clearly densifying in Florida with a deal? Is this one that’s been kinda, like, supported or encouraged by the payers where they’ve asked you in the past to go into new markets?

Matt Buckhalter, Chief Financial Officer, Aveanna Healthcare Holdings: Awesome questions, Brian. Obviously on 2026 financials themselves, the impact will depend on the timing of closing of this obviously. That said, we really expect this to be a really smooth and efficient integration consistent with how the team successfully integrated the Thrive acquisition and brought that team onto the Aveanna platform. On a revenue side of it’s in the ballpark of $120 million of revenue, and then you can run the math for the 7.5x based upon purchase price. All that depending on a pro forma basis, 2026, we’ll see how that really lands just based upon closing timing. Jeff, do you wanna add on the-

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Yeah. Brian, I think you, Matt hit it. Thrive was right down the middle of the fairway, you know, helped us densify our payer needs in Texas. This one is primarily Florida-focused. Both companies have great reputations in the Florida market today. You know, well respected by the MCO payers. Florida is an MCO market, right? Our MCO payers are incredibly important to us. This acquisition helps us round out the areas in Florida that we were not in geographically. It does give us geographic expansion within Florida. It allows us to service effectively every county in the state of Florida. Again, our payer partners are very supportive of our growth. I think this one is right down the middle of the fairway, just like Thrive.

Again, excited to kind of get through the regulatory approvals here in Q1 and Q2, and get this thing closed up, you know, in the latter half of Q2.

Brian Tanquilut, Analyst, Jefferies Group: No, that makes sense. Matt, any chance you can help us bridge the 2026 EBITDA, given I think you have like almost roughly $20 million of one-timers in 2025. There’s an extra week, and then there’s Thrive in there. Just try to get that bridge and the guidance from 2025 actuals.

Matt Buckhalter, Chief Financial Officer, Aveanna Healthcare Holdings: Yeah. On the EBITDA, Brian, you know, take that, you know, roughly $320 million. You know, we came out earlier this year and talked about, hey, bridge that back down to the $300 based upon the retro rate increases, the cash collections, and that fifty-third week itself. Really kind of your jumping off point should, you know, be around that $300 million going up to that range, about $320 as we currently sit organically without any M&A inclusive in there. On the revenue side of things, the fifty-third week and Thrive kind of do a really nice offset to one another, you know, within 20 basis points themselves. We’re still gonna be in that 5%+ organic revenue growth as we currently sit today.

That’s back in line with our normal expectations, that 5%-7% range on revenue and that high single digits or medium to high single digits on EBITDA. Back into a normalized idea of Aveanna.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Brian, one thing I’ll add to that is what Will said, you know, the EBITDA growth implied about 7%, just under 7%. Again, we tried to, in my comments, lay out that we expect our PDS government rate wins to kind of be sub-10 this year. Last year, we landed right at 10, and that’s a net number from, positive and negative increases. We expect that number to kind of land between, somewhere between 6 and 8 state rate increases in this year. We expect them to be more cost of living oriented. You know, I’ll call it kind of the 1%-5% Medicaid rate win.

less number of total wins, less percentage per win, and that’s really what we’re factoring into our guidance as we start the year. You know, I think as we get to May, close Q1, close Family First, we’ll have a much better, you know, feel for how the year plays out, especially with our legislative efforts being in session, you know, right now in the first half of the year.

Brian Tanquilut, Analyst, Jefferies Group: Awesome. Thanks, guys.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Thanks, Brian.

Operator: Our next question comes from Raj Kumar with Stephens. Your line is now live.

Benjamin Rossi, Analyst, J.P. Morgan1: Hi, good morning. Maybe just kind of focusing on the preferred payer arrangements and kind of thinking about the home health and hospice book. I guess maybe kind of, you know, you see an episodic mix trending above 75%, and I think you’ve previously highlighted you wouldn’t be surprised if it got as high as 80%. Maybe just kind of thinking about what’s embedded into 2026 and then maybe just any framing around any membership impacts just given, you know, how volatile the membership was during AEP on the Medicare Advantage side. Just any color on that would be helpful.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Yeah, Raj, great question, and I’m gonna take that as a compliment to our, what we call our HHH business. Like you, we’re incredibly proud of their results. You know, I think we mentioned it, you know, pushing 25% organic year-over-year admission and episodic growth is, I would tell you, first-class, best-class results. And they’ve done it from just blocking and tackling. They’ve done it from just being really good at providing great clinical outcomes, and the right level of care to the right payers and the right patients. So we’re really robust. You know, now that we’ve got a more clear path from a federal home health rate standpoint, we continue to lean in.

This is an area that we wanna grow through both organic and inorganic M&A-related activities in this year. You know, clinical outcomes are, you know, almost 4.5 stars on average for our home health locations. I think it’s 4.3 stars where we sit today. Gross margins in the 54, 53, 54%. Great cash collections. You know, as you said, episodic mix approaching 80%, and we’re growing in the north of 10% year-over-year. Right now, 20%. We’re off to a great start to the year in Q1. These guys are having a great start to the year. So I think everything we would say is we’re gonna continue to lean into both home health and hospice and continue to grow it. Am I concerned with the trends of managed Medicare? No.

I think we’re doing our playbook in this business, and our team’s just kicking butt and taking names right now. Really excited about where we are and as we end in 2025, and equally important as we sit here kind of halfway through Q1, really excited what these guys have done for the business model.

Benjamin Rossi, Analyst, J.P. Morgan1: Got it. Maybe just on the Medical Solutions business, you know, 2025 was a year of optimization and around preferred payer strategies. As we kind of think about 2026 and, you know, given where the reimbursement dynamics was, any kind of framing around what would be in a kind of appropriate run rate when we kind of x out the reserve dynamics variability in the quarter?

Matt Buckhalter, Chief Financial Officer, Aveanna Healthcare Holdings: Debbie, yeah, why don’t you take us through the reserve impact itself, and then we can lay the bigger picture out there.

Brian Tanquilut, Analyst, Jefferies Group: Yeah. Raj, you called it out that during the quarter, gross margin and the revenue reimbursement rate were elevated, and that was really from a reserve release.

Debbie Stewart, Chief Accounting Officer, Aveanna Healthcare Holdings: That we recorded, driven by improved cash collections on previously reserved claims. Now, without the inclusion of that reserve release, the Medical Solutions gross margin was slightly elevated compared to our guide, but we do expect it to normalize in Q1, getting back to that 43%-45% range.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Yeah. Well said, Debbie. I think, you know, to put the dollars in there themselves, the contribution of that was $2.5-$3 million that we’re talking about, Raj, so of additional revenue and EBITDA in the quarter, so not overly material to earnings, but it shows up in the Medical Solutions metrics and gross margin just due to its size. On the modernization efforts, though, Raj, we’re really excited about what the team has been able to do and what they’ve been able to accomplish so far. As we move into 2026, we expect to see preferred payer numbers really significantly increase. Currently, we’re sitting at 18. We expect that to continue to grow, as we become better aligned and put our capacity with those who support us.

There’s a little bit of work to do at the same time, so we plan on wrapping this up in the front half of 2026, and that’s when you’ll see us return back to a double-digit growth number organically in this business and gross margins, as Debbie pointed out, sustaining in that 43%-45% range. Thank you, Raj.

Benjamin Rossi, Analyst, J.P. Morgan1: Great. Thank you.

Operator: Our next question is from Ben Hendrix with RBC Capital Markets. Your line is now live.

Drew Steridon, Analyst, RBC Capital Markets: Hi, this is Drew Steridon for Ben Hendrix. You’ve previously mentioned continued wage pass-through into 2026. Can you quantify the magnitude and timing of these increases?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Yeah. Drew, I think the way to look at it is that spread rate that we talk about a lot. You know, Q4 was at $12.12, which is coming back down in line. But we’ve continued to push through wages. As we’ve talked about the entire year in 2025, that we had some initiatives in place to really drive our volumes, and you see it impacting and really growing our volumes. This really came down, and you can see it in our gross margins. We settled in that 28% range, which was on the higher end range that we give for that business and in line with our expectations. Looking ahead, though, we’ll continue to actively manage spread as we do every single day to meet the needs of our preferred payers and our payer partners.

Drew Steridon, Analyst, RBC Capital Markets: Got it. Thank you.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Thank you, Drew.

Operator: Our next question comes from Benjamin Rossi with J.P. Morgan. Your line is live.

Benjamin Rossi, Analyst, J.P. Morgan: Good morning. I appreciate you taking my questions and appreciate the earlier comments regarding your state contracting. I guess, just shifting focus to California, which still seems to be the outlier here on home-based nursing rates. What do you think is the realistic 2026, 2027 scenario for California here between, call it, like, no change, a cost of living type increase in that 1%-5% range, or maybe a structural reset? And then under each of those scenarios, do you have any kind of commentary on impact to your PDS spread rate per hour or maybe your broader market share strategy, given your stance to not exit California?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Yeah. Thanks, Ben. You know, we met with the governor of California as early as last week. We are not in the budget. There’s no PDN rate increase in the 2026, 2027 budget for California as it exists today. You know, we’re still lobbying and advocating to be in the May, what’s called the May revised budget. You know, if I’m scoring that as a handicap, I’d say it’s less than 10 or 15% that PDN makes it in any shape, way or form in the California budget. We’re certainly not expecting it. We’ve not modeled that.

Over time, I hate to say it, but over time, as our other markets have just grown at the 20, 22, 25% year-over-year growth rate in PDS, California has unfortunately just gotten smaller and smaller from a materiality for the company. We still care deeply about our California patients. We still care deeply about California operations. We advocate very hard. Like I said, we met with the governor last week, and we continue to meet with his staff and push forward. Today, as it sits today, I’m not expecting any material change. We’ll stop gap. You know, cost of living is potential, but I would say is unlikely. So it. There’s nothing baked in our guidance that California has a change in heart in 2026.

Benjamin Rossi, Analyst, J.P. Morgan: Understood. Thanks for the additional comments there. I guess, just as a follow-up, we’ve heard from some other healthcare facility names regarding the spillover impact from some of the delayed respiratory season and some of the additional weather-related pressures from some of the winter storms. Just when you think about your 2026 outlook, how are you factoring any of the respiratory or weather-related impacts during 1Q? Thanks.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: No, I mean, definitely. That’s well said. We didn’t put it in our prepared remarks, but we have had to fight through, like all of our peers, you know, mainly snow and significant snow throughout the entire country. I’d love to say the Northeast, but everything from Texas all the way up through Maine. You know, but our teams do a good job fighting that through. You know, we have a no excuse mentality here at Aveanna. We just fight through everything that comes our way. We certainly didn’t change our guidance based on weather. Like our peers, we’ve had to fight through, you know, two or three weeks of weather in the first 10 weeks of the year.

Again, I won’t say it was nothing, but it’s just something we handle, we move on, and we’re glad weather, for the most part, is behind us at this point here and back to business. I don’t think you’ll have any material impact. Matt mentioned in his prepared comments, as a reminder, Q1 is our largest payroll tax quarter. You know, keep in mind as you think about guidance, Q1 is, you know, our seasonally low for our margin, mainly driven by the payroll tax on our labor costs. Thanks, Ben.

Operator: Our next question comes from Andrew Mok with Barclays Bank. Your line is now live.

Benjamin Rossi, Analyst, J.P. Morgan1: Hi, good morning. Given the recent increase in oil prices, can you remind us how travel is reimbursed for your caregivers and how much fuel represents as a % of total revenue and total cost? Thanks.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Hey, Andrew. Good morning. You know, great question. You know, 80% of our revenues are driven off of shift care in the home where we don’t reimburse any form of mileage or gas or fuel. And it’s primarily because our nurse goes from his or her home right to the home of the patient. They’re there for 8 or 10 or 12 hours, then they go home. The vast majority of the business at Aveanna has zero tie to gas prices and from a reimbursement standpoint. Our Med Solutions has some impact on a minimal amount from our drivers. Then the business that it does impact is our Home Health and Hospice business, and that’s about 12% of our total revenue.

It’s not a nothing impact for us, but thankfully, with the size and scale that we are and the diversity of our payer mix and our business mix, it’s not as meaningful as it would be to some of our large Home Health and Hospice peers.

Benjamin Rossi, Analyst, J.P. Morgan1: Got it. Maybe just as a follow-up, can you provide a little bit more color on just, you know, the pace of pass-through to caregivers on PDS and how you expect the spread to materialize throughout the year?

Matt Buckhalter, Chief Financial Officer, Aveanna Healthcare Holdings: Yeah, Andrew, I would go back to the gross margin line item here, 27.7% in Q4. A little bit of PTO utilization, holiday pay, et cetera, that occurs in Q4, so a little bit of extra compression in there. But our range should be in that 27%-28% gross margin for the private duty services segment. We’re close to it now, but as we continue to drive reimbursement rates, as Jeff mentioned, high single digits on the government affairs side, as we continue to add 8 more preferred payers, and as we continue to organically grow our preferred payers, we’ll take those rate wins and be able to continue to push them down to our caregivers, still aligning to that 27%-28% gross margin.

Benjamin Rossi, Analyst, J.P. Morgan1: Great question, Andrew Mok. We appreciate it.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Thank you.

Operator: Our next question comes from Pito Chickering with Deutsche Bank. Your line is now live.

Benjamin Rossi, Analyst, J.P. Morgan0: Hey, good morning, guys. If I think about the PDS business model, like, you know, the preferred payer strategy makes a ton of sense just due to the, you know, this pretty large savings for managed Medicaid, and it’s obviously sort of a more of a niche market. The thing about home health, it’s a huge market with a lot of nurses employed. Can you just walk us through why you can replicate the preferred payer strategy in the home health segment?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Yeah. Good morning, Pito Chickering. You know, I think one, our discipline around episodic payer mix, you know, I think a year or 2 ago, people questioned whether or not being above 70% was attainable long term. I would say at this point, we’ve now put that behind us and said being above 75% is our long-term strategy. And you know, over time, payers have come around. I mean, you know, at first, payers did not like the episodic conversation 3, 4, 5 years ago. When you don’t bend your backbone and you keep your clinical capacity focused on the right payer base, meaning episodic payers, eventually we have found that our payers do come back around. Now, clinical outcomes drive the story, right? Great clinical outcomes lead to good financial outcomes.

I think in our home health and hospice business, specifically home health, we’ve been able to stand behind great clinical outcomes. You know, I just think that when you look at, you know, I got eight quarters in a row here, we’ve been above 75% eight quarters in a row, and, you know, we’re approaching 80% now on an episodic basis. At this point, this is the business model. We’re not moving from it, and our payers have kind of caught up to us. By the way, I wanna give a shout to our payer team. We’ve got a world-class payer team, and our home health and hospice payer leader has done a fantastic job. She’s been amazing.

Kudos to our payer team for, you know, they’re out every day continuing to beat the drum, but they will not take fee for service, low dollar contracts because of how valuable, you know, caregivers and clinicians are in today’s world. Thank you for noticing, by the way.

Benjamin Rossi, Analyst, J.P. Morgan0: Yeah. Okay, fair enough. One more on Family First. You know, how much of the $120 million of revenues are in Florida versus the other six states? How fast can you roll out the preferred payer strategy in Florida, sort of in those new markets? The thing about the opportunity there, I assume it’s more of acceleration of the $120 million of revenues versus sort of around the 20% margin business that the business has today.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Yes. Think of the revenue base being kind of two-thirds Florida, one-third everywhere else. Certainly Florida is the state that we focused on. They do have meaningful business in other states outside of Florida, but Florida is where we focused on really and what made the most strategic rationale. We believe they have really good relationships in the state of Florida today from a payer standpoint. We have very good relationships as well. You know, I think the feedback we’ve gotten early from the payers is very supportive and congratulatory on the standpoint of providing more cost-effective, patient preferred, you know, win-win type scenarios. At the end of the day, you know, these are two great companies, both providing great care.

It’s not like, you know, Aveanna is superior in its service. Family First does a really, really nice job providing care in their seven states. Again, we think this is good for patients. We think this is good for employees, this is good for payers. And, you know, it’ll take us a little bit of time as we saw with Thrive. It takes us about a half a year or so to kind of get through the integration related efforts, systems, back office benefits to then really get to the expansion, back to the expansion of care, and we think Family First will be similarly close. Hopefully, close at some point in mid to late Q2, and by the end of the year, we’re wrapping up Family First.

I think, you know, I just want to hit on again, we are committed to growing our home health and hospice business through, you know, accretive M&A. I think you’ll see us get back to the home health focused, both de novo and tuck-in M&A.

Jared Haase, Analyst, William Blair: Thanks, Pito.

Matt Buckhalter, Chief Financial Officer, Aveanna Healthcare Holdings: Thanks so much, guys.

Operator: Our next question comes from Sean Dodge with BMO Capital Markets. Your line is now live.

Chris Bohnert, Analyst, BMO Capital Markets: Great. Thanks for taking our questions here. It’s Chris Bohnert on for Sean. You’ve mentioned greater adoption of value-based add-ons from some of your earlier preferred partners, particularly in private duty. Can you walk us through what a typical timeline looks like from when a preferred payer is initially signed to when value-based arrangements might start contributing to revenue? And then how much visibility do you have into the incremental growth on the value-based side in 2026?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: No, great question, Chris. I think as we ended the year with 30 preferred payers and just over 10 value-based agreements, right? About a third of our preferred payers in PDS had a value-based agreement attached to it. Think of that being over the course of 3 years, right? We’re now starting year 4. There’s definitely a lag, and we think of the lag anywhere between half a year to about 18 months. About 6 months from the time we sign a preferred payer, which just means enhanced rates and enhanced wages for the caregiver, it’s between a half a year and up about 18 months later that we expect to then add a value-based agreement.

We certainly want the value-based agreement from day one, but it takes time to work through that with the payer. As you think of 30 going to 38 this year, we don’t guide to the value-based agreements, but I would think of somewhere from 10 going to 14 or 15 this year. Again, our payer team does a great job of continuing to remind the payer the more we’re aligned on outcomes and cost savings, the better we can do as a payer partner. I’ll also point out, remember Q2 is the quarter where we do our annual true ups from the previous year. We’ve called that out in prior years as well.

I think of that nature of we ended the year just over 10, and we’ll probably end this year somewhere in the, you know, 14-15 range.

Chris Bohnert, Analyst, BMO Capital Markets: Okay, that’s helpful. Maybe going back to talking about entering new states in private duty as well. You’ve been successful in driving rate increases across nearly all your PDS states. How have the rates been progressing in other states where you’re not currently operating, and how does this maybe impact your approach when you’re considering entering new markets over the coming years and in 2026?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: It’s not always rate, right? We look at a market and look at size and scale of the Medicaid population, number of PDN patients, pediatric population that state. When I say Ohio, there’s a difference between Ohio and Wyoming, right? Wyoming, I’m just picking this randomly, may have a higher PDN rate, but may only have 75 PDN patients in the entire state where Ohio has 2,000. There’s other factors where we’re looking at than just rate. We feel confident that as we enter a state or grow in a state, we can work through both our government affairs team, working directly with the governor and the state legislatures, as well as our preferred payers and our MCO partners to appropriately address wage and rate.

Again, it’s not just rate for the sake of rate, it’s rate for the sake of the right wage rate for the caregivers to attract caregivers into the home. Again, we think over time in any state, including, again, I think it was Ben who brought up California. Eventually, we’re gonna get California flipped. I mean, you know, that’s the one state today we’ve not been able to get flipped to appropriate wage rate and appropriate reimbursement rate, but eventually we’ll get California. We think every state, if you look at it over a macro period of five or 10 years, every state, any and every payer over time, we think we can get to move to appropriate reimbursement rate, which means an appropriate wage rate. Thanks, Chris.

Operator: Our next question comes from Jared Haase with William Blair. Your line is now live.

Jared Haase, Analyst, William Blair: Hey, good morning. Thanks for taking the questions. Maybe I want to drill back into the 2026 outlook and specifically thinking about the volume growth opportunity for private duty. I think we saw you benefit a little bit from sort of the elevated growth on an organic basis throughout 2025, just given all the rate and preferred payer activity that you were able to achieve last year. You know, now as we think about you getting more and more caught up on wages, I’m wondering, you know, I guess if there’s any way to sort of contextualize how you’re thinking about the runway for volume growth and opportunities to potentially sustain elevated levels of growth over the next handful of quarters.

Matt Buckhalter, Chief Financial Officer, Aveanna Healthcare Holdings: Yeah, Jared, we’re really excited about the momentum heading into 2026, and we really expect a more normalized growth rate as we enter 2026 as well. To your point, we’ve had those elevated rates that have been able to drive our volume forward, but we anticipate kind of that organic in that 5%-7% range as we’ve guided to with additional M&A add-ons like Family First Homecare or adding on top of that as well. EBITDA growing in that high single digits% after you adjust out that, you know, $20 million in normalization that we backed everybody into in January. Overall, great momentum in 2025 and continue that momentum into 2026, though more on a more normalized basis.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: I think, Jared, as we called out, you know, we just don’t expect to get the 30, 40, 50% PDS Medicaid rate increases. We’re really thinking these are more in the 2%-4% or the 3%-5% range. You know, I think we’ve talked before. We’ve been in the teens, you know, state rate wins. We think this year is probably 6, 7, 8, maybe 9. If we hit 10 this year, we’d be very pleased on a net basis. With all that baked in, I think Matt’s point of PDS getting back to mid-single digit volume and rate, you know, year-over-year is probably where we think, you know, the back half of this year lands.

That’s what we guide to long term in our investment thesis.

Jared Haase, Analyst, William Blair: Then, Jeff, I think you mentioned in the prepared remarks, you know, some of the or one of the core initiatives you’re focusing on here is just, you know, some of the high priority AI and automation efforts. Would love to hear a little bit more about just where you’re seeing some of the biggest opportunities leveraging those tools. And then I guess maybe the fine point I’d put on it is how quickly might we, you know, start to see those initiatives ramping in terms of impacting either the cost structure or margin profile?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Yeah, I think, you know, we certainly started in the back office. You know, we’re a couple of years into RCM automation with our RCM partners and wanna continue to accelerate that. I think part of the cash collections and the one-time and timing related revenue enhancements last year were related to just great collections, and part of that was tied to some of our AI partnerships that helped us collect our cash more effectively and efficiently. So I think of that being the long pole in the tent, meaning what we’ve started with and are continuing to drive. Matt and Debbie and James, who leads our RCM, just does a fantastic job with that.

We’re also pivoting now to the front office, so we’re in the piloting stages of thinking of caregiver engagement, also on shift fulfillment and really how we schedule and think of engaging with our caregiver and using automation and AI related opportunities there. There’s more on the AMS business. There’s nuances we use for fax automation and some of the back office stuff that just makes the back office more efficient. I’d think of us being back office focused for the last, I’ll call it two plus years. That will continue. Then at the end of 2025, going 2026, we kind of pivoted to more of field facing, front office facing, tied to our how we think of scheduling engagement of our caregivers.

Jared Haase, Analyst, William Blair: Thank you so much, Jeff.

Operator: Our next question is from John Ransom with Raymond James. Your line is now live.

Benjamin Rossi, Analyst, J.P. Morgan2: Hey there. So we think about the core EBIT growth this year being just below 7% on a consolidated basis, you know, $301-$320-ish. How does that look by segment? What are the highest growth segments versus the lowest growth segments for Q3 as we think about modeling 2026?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Historically, Medical Solutions and home health and hospice has been our highest organic growth sections over there, John. We’ve got Medical Solutions going through its modernization efforts at this time. We talked about still hanging in that low single digits growth in the front half of 2026, but returning to that high single digits to double digits growth in the back half of 2026. There’s a little bit of mutedness in that happening in H1 compared to H2. I’ll tell you, home health and hospice hitting out of the gate strong just as they finish the year strong. That will continue to be a high single digits to double digits growth.

We think, you know, PDS return back into the normal or more normalization, you know, 3.5, 4% volume growth, add in a point to a point and a half of rate growth in there, getting back to your 5%-7% kind of range itself, or 3%-5% on the upper end of that one. That’s how we kinda have it modeled out and how we’re thinking about into 2026 and beyond. John, just being cost effective efficient in the back office, corporate office, I mean, we’re down to, I think we’re down to four, 4.5%, you know, corporate cost as a percentage of revenue. We think we can make that, you know, get a little, even a little better there.

Then you were about to bring this up, so I wanna highlight, you know, we’re generating a meaningful amount of cash flow. I appreciate you highlighting that great point, that $131 million of, you know, free cash flow last year was well beyond our expectations. Really kudos to Matt and Debbie and the team for executing on that. Generating that kind of cash moving forward just gives us optionality to continue to do deals like Family First and to use cash. We’re excited about the opportunity to do that. Thanks for asking.

Benjamin Rossi, Analyst, J.P. Morgan2: Yeah. You’re welcome. The other question is just the PDS rate outlook. I mean, you’re adding 8 preferred payers, but you’re only calling for 1.5, 1-2% rate. Is that conservative, or are we missing something?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: No, I just think it shows how far along the spectrum we are in this strategy. Meaning, you know, when we first started, we were getting 10% of volume or 15% of volume. Some of these now we’re tucking in are smaller in nature. They’re still niche oriented. They’re really important. Even a 1% volume mover, if we can move them into a preferred payer, matters. But think of us being just further along the maturity spectrum in the preferred payers, which is why we love the idea of additional states ’cause it opens up new markets for us. As we think of Thrive, the New Mexico and the Kansas was so important ’cause it opened up two brand new MCO markets for us.

No, I think just as we think about the preferred payers going from 30 to 38, you know, we’re just continuing to round out some of those final tweaks in our current markets and really focused on new expansion.

Benjamin Rossi, Analyst, J.P. Morgan2: Yeah. Last one for me. I know we’re a little over time.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Yep.

Benjamin Rossi, Analyst, J.P. Morgan2: Clearly there’s synergy between the nutrition segment and the pediatric segment. If I think about home care, hospice, and personal care, you know, I think the market is kinda mixed so that there’s really that much synergy between the three businesses. Does it help you with payer? Does it help you with nurse recruiting? What is the synergy? And I guess where I’m going, and with hospice multiples, M&A multiples being in the teens, if somebody came to you with a 15x multiple, offer for your hospices, is that something you would consider or do you really think you wanna knit all these pieces together indefinitely?

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Yeah, First of all, it’s a very thoughtful question. I’ll say this, yes, obviously the enteral nutrition business is incredibly synergistic to the PDS business. They operate as a referral entity incredibly well together. We have a lot of crossover in the referral source, the payer conversations between those two businesses. The opposite is true between our PDS and our HHH business. There’s very little synergies from a referral source standpoint. Even a payer standpoint, they’re very different conversation, as you know. I think why we love being in both businesses, one, the diversification. As we see right now, you know, the last three years, Medicaid has been the darling. Right now, it’s swinging back to Medicare being more of a darling.

We like the idea of being larger in both of these businesses, and we’d like to be larger in the HHH business over time. But no, we think of it as growth rates, you know, that these businesses, like Home Health and Hospice, can grow in double-digit year-over-year organic growth. We like that from a growth algorithm. We’re committed to all three segments, excited about all three segments. Again, just wanna get back to, you know, blocking and tackling this year and being really good at executing our business plan. Thanks, John.

Operator: We have reached the end of the question and answer session. I’d now like to turn the call back over to Jeff Shaner for closing comments.

Jeff Shaner, Chief Executive Officer, Aveanna Healthcare Holdings: Thank you, operator. Just thank you for your attention and look forward to catching up in mid-May on our Q1 and 2026 results. Thank you and have a wonderful day.

Operator: This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.