Aveanna Healthcare Holdings Inc. Common Stock Healthcare Services and Technology Conference

Yeah. Thanks, Brian. By the way, we're going to crush this Tuesday afternoon session here, so we're bringing it home before the day ends. No, glad to be here, and like you said, coming off a strong first half of the year, definitely strong Q2. Not only the core business and how we think about the core growth rates in the businesses, but also, and I know we'll get into our long-term growth algorithm we updated, and really felt like we were at a place where we saw enough of the OBBA impact to our PDN business, as well as understood how states were thinking about their budgets.

Company with, we'll talk about the home health final rule for 2025, the 2026 proposed rule, and then last but not least, I know we'll talk about California quite a good bit, but really getting the California rate increase effective 1/1/2027 was for us, the 32nd meaningful Medicaid state rate increase in 32 states. You take all of that just to say it was a good time to not only update guidance for the rest of the year, but also to really think about the long-term growth algorithm as we go into 2027 and beyond. Second half of the year, I know Matt will get into it in a little bit, but continue the same.

Continue to execute on the preferred payer strategy, continue to execute on our state government affairs, be efficient, effective, generate free cash flow, and continue to deleverage is going to be our story for the rest of the year.

Yeah, that's a real good question, Brian, and I think a lot of it really came down to how we felt about the OBBA once that came through. This time last year when things started hitting, we were cautious. We were just saying, "Is there going to be friendly fire that happens in this one? Are we going to get clipped by something accidentally that comes through a state? Is there going to be pressure in these state Medicaid budgets and these programs that are put into place?" Even at the beginning of the year, we downplayed what we thought our state rate wins would end up being.

We said, "Hey, guys, mid-single digits, historically be on the high single digits to double-digit state rate wins." We thought, "Hey, let's just be extra cautious and see how things end up progressing." Through the first half of the year, we had 7 state rate wins. We've got a line of sight to a few more here in the back half of this year. We've signed 7 additional preferred payers this year, and we've got some more lined up for H2 as well. It's really just business as usual. It's the multi-year strategy of our preferred payer model, our government affairs model. There's no difference to it, and we obviously support the idea of eliminating fraud, waste, and abuse. That's going to be great. That's a phenomenal thing. Keep going and get as much as you can, because those good providers who provide great clinical outcomes and have good care, they're going to end up winning at the end of the day here.

We're feeling that, and that's the reason it gave us confidence to just move our long-range projections up. It's what we're experiencing right now. It's what we've also been producing the past few years. Let's stick with it and continue just the business as usual.

I want to point out home health and hospice. It is one of our smaller segments, and it is about 12% of our total revenue and approaching $300 million in annualized revenue. Our home health and hospice, Matt always talks about how proud he is of our team. They have been outpacing the market in growth. We are in the 15%-16% organic revenue growth in that business, really driven by double-digit volume. It is all organic. The team has done a great job, and we just felt like, as you know, Brian, we have been waiting for stability with CMS related to home health. We thought we saw it in the final 2025 rule.

We wanted to see the proposed rule play through, and I think many people in the home health industry are taking a deep breath of like, "Okay, things are going to be okay, and the future is going to be better." That tied together with just the growth rate that we are experiencing felt like, to us, the right time to update both PDS and home health and hospice.

We updated the idea of our PDS segment from 3%-5%, to 5%-6%. Obviously, we have been doing that for the past couple of years as well. We have done a great job of rebalancing where our reimbursement structure is. California was, I imagine we will talk about that here in a second, Tank was the 32nd out of 32nd state in the Medicaid side of it, that now we can compete. Now we can actually go to work every day. It is never going to be easy. To say that it is going to be easy, it is not. But now we can compete in every market and every state that we provide services in. That was a nice step for us. But going forward, it is not going to be the chunky 20% increase, 30% increase, but it is going to be a COLA type adjustment.

It's going to be 7, 10 states a year that are 4%, 7%, 8%, 10%, and every once in a while, you have one that comes out of left field like we did with Wisconsin this year, a 38% increase that came out of nowhere. Those are great, but now we've gotten to a place where we can just compete consistently. So what that's going to equate to is a 1.5%, maybe up to 2% rate on the PDS side of it, with the majority of it going to be volume. So it's going to be a volume play for it. Demand for services, as Jeff always likes to say, will continue to outweigh the supply of caregivers. But these COLA type adjustment rates will allow us to continue to grow our volume pretty consistently.

I would tell you that on the home health and hospice side as well, just with the proposed rule coming out, not having parentheses around it for the first time in a while is very refreshing. That 5% to 7%, taking it to 8% to 10%, we'll continue to most likely outperform that, but we felt very confident with 2% plus of that being rate or 1% to 2% of that being rate, and the majority of that continuing to be volume.