Aveanna (AVAH) Q1 2026 Earnings Transcript

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DATE

Thursday, May 14, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Jeffrey Shaner
• Chief Financial Officer — Matthew Buckhalter

TAKEAWAYS

• Revenue -- $647.9 million, a 15.9% increase year over year driven by all segments.
• Adjusted EBITDA -- $84.4 million, up 25.2% year over year, attributed to an improved rate and volume environment and operational efficiencies.
• Private Duty Services (PDS) Revenue -- $536 million, up 16.4% with 12.1 million hours delivered, a 10.7% volume increase and $44.43 revenue per hour (up 5.7%), mainly from preferred payer volume and new reimbursement agreements.
• PDS Gross Margin -- $149.2 million, equaling 27.9%, with a Q1 spread per hour of $12.38.
• Home Health & Hospice (HHH) Revenue -- $66.6 million, up 17.4% with 11,000 total admissions and 14,900 episodes of care, a 23.1% episode volume increase; gross margin reached 53.7%.
• Medical Solutions (MS) Revenue -- $45.7 million, representing 7.4% growth; 93,000 unique patients served, with revenue per unique patient serviced (UPS) at $491 (+2.9%).
• Liquidity -- $525 million, comprised of $189 million cash, $110 million under securitization, and $226 million on an undrawn revolver; $24.5 million in outstanding letters of credit.
• Debt Profile -- $1.48 billion of variable rate debt, with $520 million hedged by swaps (through June 2026) and $880 million capped; new cap effective July 2026 limiting $520 million of variable rate debt to SOFR above 4% through December 2029.
• Preferred Payer Agreements -- In Q1, 4 new preferred pay agreements signed in both PDS and HHH; PDS preferred payer MCO volume rose from 57% to 60% of total; episodic mix in HHH at 80% with 23.1% growth in total episodic volumes; MS now at 20 preferred pay agreements, up from 18.
• PDS State Rate Wins -- 3 state rate wins achieved in PDS; expectation for mid single digit state rate enhancements in 2026.
• Guidance Update -- 2026 full-year guidance raised to revenue of $2.56 billion–$2.58 billion and adjusted EBITDA of $328 million–$332 million, excluding Family First acquisition effects.
• Pending Acquisition -- The Family First Home Care acquisition is advancing through regulatory review, with a closing expected in late Q2.
• Cash Flow Performance -- Q1 cash from operations was $4.3 million and free cash flow was negative $3.8 million, characterized as a typical seasonal low with anticipated improvement in subsequent quarters.
• Artificial Intelligence Initiatives -- Noted improvement in cash collections and DSO reduction attributed to AI and automation within revenue cycle management (RCM), contributing ~$6 million AR recovery in Q1.

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RISKS

• CFO Matthew Buckhalter said, "In 2025, we did benefit from about $11 million of timing-related business or timing related items. If you exclude those, Brian, for 2025, we still expect to see really solid EBITDA growth in 2026," indicating that 2026 comparisons will not include a similar favorable timing item.
• Weather disruptions impacted Q1, leading to an estimated $5.5 million to $6 million of lost revenue and ~$1.5 million margin loss; acknowledged within results.

SUMMARY

Management reported revenue growth of 15.9% and adjusted EBITDA growth of 25.2% in Q1 2026, driven by aligned preferred payer strategies, payer mix shifts, and operational automation. Executives confirmed progress in executing strategic initiatives, including additional payer agreements, ongoing margin improvements across all segments, and advancing cross-business modernization. The company revised full-year 2026 guidance upward and emphasized the scale-up of its preferred payer model, as well as continued AI-driven collection gains. Management indicated strong progress on the Family First acquisition, which is expected to close in late Q2 but is excluded from current guidance.

• CEO Jeffrey Shaner stated, "absolutely zero impact on our 2026 guidance, our results, and our ability to grow the business successfully" in response to questions on the CMS 6-month Home Health and Hospice enrollment moratorium.
• Executives detailed that the company achieved 4 new preferred pay agreements in both PDS and HHH, with the majority of new HHH contracts representing Medicare Advantage on an episodic basis.
• The 80% episodic mix in HHH is supported both by traditional Medicare and Medicare Advantage, with new contract signings expected to keep this percentage stable.
• Management clarified that annual price increases in preferred contracts are not automatic; contract rates are reviewed annually (sometimes biennially), and most do not include built-in COLA adjustments.
• Free cash flow for Q1 was negative, but management reiterated confidence in improved cash flow as the year progresses, citing seasonality and operational gains.

INDUSTRY GLOSSARY

• Preferred Payer: A payer with whom the company has negotiated enhanced reimbursement rates and/or value-based payment agreements, typically resulting in prioritized service delivery.
• Episodic Mix: The proportion of home health admissions or services reimbursed on a per-episode rather than per-visit or fee-for-service basis, commonly denoting higher-margin business.
• UPS (Unique Patient Served): Count of distinct individuals receiving medical solutions services in a reporting period.
• RCM (Revenue Cycle Management): The administrative and clinical processes used to track patient care episodes from registration and appointment scheduling to the final payment of a balance.

Full Conference Call Transcript

Jeffrey Shaner: 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 Q1 results and how we are moving Aveanna forward in 2026. My initial comments will briefly highlight our first quarter 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 Home Care acquisition and how we are thinking about our 2026 strategic initiatives and our enhanced guidance before turning the call over to Matthew. Moving to highlights for the first quarter.

Revenue for the first quarter was approximately $648 million representing a 15.9% increase over the prior year period. First quarter adjusted EBITDA was $84.4 million representing a 25.2% increase over the prior year period primarily due to the improved rate and volume environment and continued operational efficiencies. 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 believe 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 Q1 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 all 3 of our business segments. 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 accelerated growth rates in all 3 of our business segments. Since our fourth 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 the caregiver labor market. Specifically, as it relates to our private duty services business, our government affairs strategy for 2026 was 2-fold. First, we continue to advocate for Medicaid rate integrity on behalf of children with complex medical conditions.

Our strong advocacy presence of both federal and state legislatures across our national footprint enhances our value proposition. And second, we expect to achieve mid single digit state rate enhancements in 2026. As of Q1, we have received 3 private duty services state rate wins and believe we will achieve our goals as states complete their annual budget processes. After 3 years of meaningful rate increases and a majority of our PDS states, we are in a very stable rate environment, and are shifting our focus to cost of living and wage rate adjustments. Moving to our PDS preferred payer initiatives.

Aveanna's preferred payer strategy continues to gain momentum and allows us to invest in caregiver wages and recruitment efforts to accelerate the hiring and staffing of nurses. Our preferred payer goal for 2026 is to achieve 8 additional agreements for a total of 38 preferred payers. We signed 4 preferred pay agreements in Q1, and are well on our way to achieving our 2026 target. Additionally, our Q1 PDS preferred pay agreements accounted for approximately 60% of our total private duty services MCO volumes. Up from 57% at the end of 2025. This positive momentum in preferred payer volume continues to highlight the shift our caregiver capacity and recruitment efforts towards our preferred payer partners.

Moving to our preferred payer progress in home health. Our goal for 2026 is to maintain our episodic payer mix above 75%. While returning to a more normalized growth rate. I am pleased to report in Q1 our episodic mix was approximately 80%. And our total episodic volume growth was 23.1% compared with the prior year period. The continued investment in clinical outcomes, sales resources, and a focused approach to growth is deriving results with Q1 total admissions of approximately 11 thousand or 13.4% organic growth over the prior year period. Additionally, we exited 2025 with 45 preferred pay agreements in home health.

I am pleased to report that we added 4 additional preferred pay agreements and expected to add 5 agreements in 2026 for a total of 50. As of Q1, we are well on our way to exceeding our goal of 50 preferred payers in home health in 2026. 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 admissions and episodes as well as improvement in our clinical and financial outcomes.

Finally, as we have achieved our desired preferred payer model in private duty services and home health and hospice, we are continuing with a similar strategy in our medical solutions business. As we exited 2025, we had 18 preferred payer agreements in Medical Solutions and expected that number to grow to 25 by 2026. As of Q1, we signed 2 additional agreements for a total of 20 preferred pay agreements to date. 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 Q1 volume growth in Medical Solutions of approximately 93 thousand UPS or +4.5% over the prior year period. As we think about medical solutions growth in 2026, I would expect us to remain in the mid single digits for the next few quarters and then returning to double digit growth by the end of the year. We are encouraged by our rate increases, preferred payer agreements, and subsequent growth in our businesses. Our company has demonstrated a stable return to organic growth 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 Home Care, a Florida based company with a great reputation for quality in home pediatric care. Again, I would like to send my warm welcome to the Family First teammates. I am thrilled to continue our acquisition growth story with great companies like Thrive Skilled Pediatrics, and Family First Home Care. 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 continue to work through the regulatory approval process and expect the transaction will close sometime in late Q2. I look forward to updating you on our progress in the coming months. Additionally, let me comment on our strategic plan and enhanced outlook for 2026. We will focus our efforts on 5 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 free cash flow And finally, engaging our leaders and employees in delivering on our Aveanna mission.

Based on the strength of our first quarter results, and the continued execution of our key strategic initiatives, we are increasing our full year revenue and adjusted EBITDA guidance to a revenue range of $2.56 billion to $2.58 billion and an adjusted EBITDA range of $328 million to $332 million We believe this enhanced 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. As I reflect on the strong start to 2026, I want to take a moment to comment on our 2nd annual Aveanna Cares month of community service.

We dedicate the month of April to not only focusing on our mission, but living that mission in our 379 communities. Aveanna Cares is an extension of the care we provide families every day. And we are proud to give back, help others, and strengthen our communities and our teams through our volunteering efforts. We set an ambitious goal this year to serve 7.5 thousand volunteer hours. And I am extremely proud to announce that our Aveanna family completed over 9 thousand total volunteer hours. Our teams held a approximately 200 volunteer events nationwide, and lived our core values while giving back to important local charities that support children, adults, and seniors in our communities.

I look forward to raising the bar in 2027 with plans to further expand our Aveanna Cares impact across the country. With that, let me turn the call over to Matthew to provide further details on the quarter. and our 2026 outlook. Matthew?

Matthew Buckhalter: Thank you, Jeffrey, and good morning. I will first talk about our first quarter financial results and liquidity before providing additional details on our enhanced outlook for 2026. Starting with the top line, we saw revenues rise 15.9% over the prior year period to $647.9 million. We achieved year over year revenue growth in all 3 of our operating divisions, led by our home health and hospice, private duty services, and medical solutions divisions, which grew by 17.4%, 16.4%, and 7.4% compared to the prior year period. Consolidated gross margin was $205.4 million or 31.7%, Consolidated adjusted EBITDA was $84.4 million a 25.2% increase as compared to the prior year period.

This growth reflects an improved rate environment increased volumes, as well as enhanced operational efficiencies. Now taking a deeper look into each of our segments. Starting with private duty services, revenue for the quarter was approximately $536 million, a 16.4% increase and was driven by approximately 12.1 million hours of care. A volume increase of 10.7% over the prior year. Q1 revenue per hour of $44.43 was up 5.7% compared to the prior year quarter, primarily driven by growth in preferred-payer volume and updated reimbursement agreements. 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 $149.2 million of gross margin or 27.9%. The cost of revenue rate of $32.5 in Q1 was up $2.17 or 8.1% from the prior year period. Our Q1 spread per hour was $12.38. Reflecting continued normalization driven in part by ongoing caregiver wage adjustments supporting higher volumes, and improving clinical outcomes. Moving on to our home health and hospice segment. Revenue for the quarter was approximately $66.6 million a 17.4% increase over the prior year. Revenue was driven by 11 thousand total admissions with approximately 80% being episodic, and 14.9 thousand total episodes of care up 23.1% from the prior year quarter. Medicare revenue per episode was $3.17 thousand up 0.5%. From the prior year quarter.

Our episodic focus has accelerated our margin expansion and improved our clinical outcomes. With episodic admissions well over 75%, we have achieved our goal of rightsizing our margin profile and enhancing clinical offerings. We are pleased with our Q1 gross margin of 53.7%, representing our continued focus on cost initiatives to achieve our targeted margin profile. 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 Q1. During the quarter, we produced revenue of $45.7 million, up 7.4% over the prior year period.

Revenue was driven by approximately 93 thousand unique patients served and revenue per UPS of approximately $491 up 2.9% over the prior year period. Gross margin approximately $20.4 million or 44.7% for the quarter. As Jeff mentioned, are in the final stages of implementing 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. As a result, we expect margins to normalize and UPS to continue to accelerate its growth in 2026. In summary, we remain focused on keeping our patient's care at the center of everything we do.

It is clear that aligning caregiver capacity with preferred payers who value our partnership is the right path forward at Aveanna. With the strong momentum, through Q1, we are optimistic these trends will continue into 2026. We would continue to pass through wage improvements and other benefits to our caregivers in the ongoing effort to improve volumes. Now moving to our balance sheet and liquidity. At the end of the first quarter, we had liquidity of approximately $525 million, representing cash on hand of approximately $189 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 Q1. On the debt service front, we had approximately $1.48 billion of variable rate debt at the end of Q1. Of this amount, $520 million is hedged for fixed rate swaps, and $880 million is subject to an interest rate cap, which limits further exposure to increases in silver above 3%. Accordingly, substantially all our variable rate debt is hedged. Our interest rate swaps, extend through June 2026, and our interest rate caps extended February 2027. In anticipation of the swap expiration, we entered into an additional interest rate cap agreement effective July 2026.

This agreement limits exposure on $520 million of variable rate debt to increases in SOFR above 4%, through December 2029. Looking at year to date cash flow, cash generated by operating activities was $4.3 million and free cash flow was negative $3.8 million We are encouraged by our strong cash collections and cost efficiency efforts which drove solid operating and free cash flow in 2025. And we expect similar cash flow performance in 2020. As a reminder, the first quarter 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, the Q&A, let me take a moment to address our raised outlook for 2026. As Jeff mentioned, we expect full year 2026 revenue range of $2.56 billion to $2.58 billion and adjusted EBITDA range of $328 million to $332 million. Consistent with our standard practice, our full year 2026 guidance excludes the pending FamilyFirst acquisition. Which we expect to close in late Q2. As we reflect on our Q1 results, I would like to take a moment to express my sincere gratitude to our Aveanna teammates. These strong results would not have been possible without your hard work and dedication.

Looking ahead, I am excited for the continued execution of our 2026 strategic plan I look forward to providing you with further updates at the end of Q2. With that, let me turn the call over to the operator.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up their handset before pressing the star keys. To allow everyone in the Q&A queue to be able to ask a question, we ask that everyone limit themselves to only 1 question and 1 follow-up. 1 moment, please, while we poll for questions. Our first question comes from the line of Ben Hendrix with RBC Capital Markets.

Please proceed with your question.

Analyst (Ben Hendrix): Great. Thank you very much. Congrats on the strong performance Just wanted to get some comments on the regulatory backdrop, specifically with the home health moratorium on, new Medicare licensure. Announced yesterday. Just wanted to get some your overall thoughts any impact it is having on your acquisition strategy to the extent to which it might impact acquisitions, like Family First, or others? Any kind of comments you can give on the backdrop? Thanks.

Jeffrey Shaner: Morning, Ben. And, well, Matthew Matt won the bet because we figured that would be the first question, the second question, third question. So I appreciate you just getting us right there. I will kill you aside. You know, Ben, I if I think macro industry-wide, let's let's start with the industry, then we will come back to Aveanna. Doctor. Oz and CMS, the administration, have been pretty deliberate with their messaging around fraud, waste, and abuse now for at least a year, if not longer. And we you know, I view yesterday's CMS announcement regarding home health and hospice 6-month enrollment moratoria as consistent with doctor Oz's messaging over the last, you know, 6 months to a year.

I would be remiss if as an industry participant to say that we are disappointed. That a nationwide moratorium is not the way to solve LA County's specific, you know, targeted fraud, waste, and abuse. But I do think it is consistent with the messaging that CMS has been sharing the last 6 months. If I drill down to Aveanna and Family First, it has absolutely no impact zero impact on Aveanna. The way we have read it, we it has zero impact on our 2026 business plan, our 2027 business plan. Our home health and hospice business was built through M&A and then organic growth.

So, you know, I think I think for that part of it, feel positive that the rule was thoughtful. The moratoria was thoughtful, to not penalize current Medicare beneficiaries and current providers. But we would like in this next 6 months, you know, with the Alliance, National Alliance of Care at Home and all of our industry peers to work with Doctor. Oz and CMS to really target the areas where fraud waste and abuse are occurring. Specifically places like LA County. Because this does punish rural type health care. Rural health care needs more providers. They need more robust home health and hospice providers.

So we wanna work with the administration, and we think the thoughtfulness of how doctor Oz has approached things that opportunity will avail itself. But expect to get this question a lot today, and I will reiterate absolutely zero impact on our 2026 guidance, our results, and our ability to grow the business successfully.

Analyst (Ben Hendrix): Great. Thanks. And just to be clear, there is nothing that involved in the transfer of a Medicare licensure that would require you guys to, kind of reapply that might be impacted by this, by this moratorium?

Jeffrey Shaner: No. And I think, you know, that CMS did a nice job yesterday in releasing the Q&A. Right? So you were able to kinda read the Q&A and you know, the 36 month rule has been in place for at least a decade, maybe even 2. So you still have to adhere to the 36 month rule in any kind of, you know, targeted acquisition. On home health or hospice assets, and that and that is been in place. So nothing new there. But Nothing that limits our ability to, you know, to do normal things like move an address or, you know, the normal things that we do.

And I think in the q and a, they did a good job of laying that out and we do not see it having any impact on, future M&A that space as well. And then again, I think they are targeting bad actors and I think they were thoughtful in this. To release the bat that they were not intending to punish good actors and reputable providers like us. Thanks, Ben. Thank you.

Operator: Thank you. Our next question comes from the line of Brian Gil Tanquilut with Jefferies. Please proceed with your question.

Analyst (Brian Tanquilut): Hey. Good morning, guys, and congrats. So maybe I will I will add to Matthew's pot here for a little bit. Jeffrey, question for you. I appreciate the answer to Ben's question. Just wanna clarify. The moratorium is only on the Medicare home nurse side. Right? And then I guess the second part of my regulatory question would be, when we think about the core PDS business, in the context of all the scrutiny we are seeing in private duty or personal care services and their Medicaid, Just wanna make sure that your business is not impacted or you are not seeing anything there.

Jeffrey Shaner: that is a great question, Brian. And I will answer it 2 parts. 1, again, kudos to CMS. I thought they were very thoughtful in how they put the information out there yesterday. They did talk about and CHIP programs. Right? And they certainly are encouraging states to be thoughtful on how states audit Medicaid and CHIP programs They also were crystal clear that it did not impact Medicaid and Medicaid reimbursement. The second part is we do operate under, you know, a significant number of Medicare provider numbers to get our Medicaid license in certain states.

So we have many, many Medicare provider licenses in our PDS business. it is just to have the right to do business, to have a Medicaid license. So again, no impact to our Medicaid business to your to your point. And, again, I think more thoughtfully as we think of growing our Medicaid our Medicaid business, you know, we put the business together through 4 acquisitions over the last 5 years. Rest of it is been organic growth the last 3 years. Nothing that we have reviewed in yesterday's announcement would say that we cannot continue an M and A strategy thoughtful M&A strategy in our home health and hospice business. I appreciate that.

Analyst (Brian Tanquilut): And then, Matthew, this 1's for you. When I think of the guidance for the year, Given some of the 1 timers that were in the quarter? Just curious if you can call out the cadence that we should be thinking about, especially from Q1 to Q2. Thanks.

Matthew Buckhalter: Yeah. Great question there, Brian. And I will start off by saying how proud we are of all 3 of our divisions and all 3 teams. Significant organic growth in all 3 operating divisions. And they have really drove great financial performance and the financial results that you are seeing today. But they also drove phenomenal clinical performance in the background as well. All that being said, we continue to see very, very strong cash collections in Q1 on some previously reserved AR Really, that was to the tune of about $6 million. That impacted both our revenue and our EBITDA and the quarter itself. So a little bit heightened in the quarter.

I know we have said this for quite a few quarters now, but we are continuing to win. And it is really because of the artificial intelligence and the automation that the teams have put in on our RCM department. it is allowed us to really reduce our DSO, improve our cash collections, and shift some of our capacity to go grab some of that aged AR that we thought previously was uncollectible. So we are gonna continue to push that forward and remain focused on, artificial intelligence. it is especially in our RCM department because we are seeing such wonderful results from it.

On just 1 plug, I will put in there as a reminder for more of a Q2 item itself there. In 2025, we did benefit from about $11 million of timing-related business or timing related items. If you exclude those, Brian, for 2025, we still expect to see really solid EBITDA growth in 2026. So once again, proud of the teams, what we have been able to accomplish, not only on the cash collection side, clinical side, most importantly, the operational and the organic growth side too.

Jeffrey Shaner: And, Matthew, great answer. I think so as you think of the build this year, it would be a little bit different. Normally, Q1 is of our lowest EBITDA quarters. And I think from what Matthew just said, our build will be a little bit different this year where Q1 was I think as Matthew laid out, you know, it is $5 million to $6 million stronger than we had expected to be both on the revenue and EBITDA side. So our build to Q2 will be a little bit less than it normally is.

But still, I think as Matthew laid out, we expect to have a strong very strong Q2 and if you back up the $11 million in Q25, it will be a nice year-over-year continued growth. So as Matthew said, you know, the not only the AI and the automation, but also our preferred payer relationships just continue to generate great collections and efficient collections, which is a wonderful opportunity for us. Thanks, Brian.

Operator: Thank you. Our next question comes from the line of Raj Kumar with Stephens Inc. Please proceed with your question.

Analyst (Raj Kumar): Hi. Good morning. Maybe just kind of, I know you, you know, you talked about some of the preferred-payer kind of wins this year on the private duty services side. And maybe kind of thinking about I think you also talked about adding, you know, 4 to 5 value based care contracts within this year too. So, maybe just any update on the movement on that front.

Jeffrey Shaner: Yeah, Raj, I think let me step back for a second. We have had a nice balance the last 3 years of government state and federal rate wins, mainly Medicaid driven and preferred payer wins. We started messaging mid last year. We thought the government side of that would start to slow down. We use the word moderate a lot. Think we have seen that the 2025 in the early parts of 2026. We have also seen is the payer relations and preferred payer is picking up for us. So as we exited 2025, we had a nice momentum lead in 2026. So we see our preferred payer wins both in PDS, home health, and office.

And if you have if you have heard, we had our first 2 additional preferred payers in, medical solutions in Q1. So I think what you will hear from us this year is an uptick of preferred payer wins more than the government rate wins that we are receiving. And that is kind of what we expected. As you as you asked, following that will be our value based agreements. Both in PDS and in home health, as well. But you know, strong start to the year, Clearly, set a goal to sign 5 additional agreements in home health. We signed 4 in Q1. So, clearly, we will exceed that goal.

8 preferred payers in PDS, and we signed 4 in Q1. I think we feel confident we will break that goal. But think big picture, think of 2026, being more of a preferred payer win and a little bit more moderated government affairs wins?

Analyst (Raj Kumar): Got it. And then maybe just following up on the kind of the strategic initiatives within medical solutions and the preferred payer strategy there. As you kind of think about the opportunity, is there a way of framing, like, you know, the number of unique patients that are kind of under the, you know, preferred-payer arrangement? Relative to just the number of contracts as we kind of think about the opportunity ahead?

Matthew Buckhalter: Yeah. Raj, over time, we will continue to release this information as we are continuing to roll out. We are really proud of what the teams are doing and rolling out and finishing up these modernization efforts, which we expect to complete in Q2. Starting with zero preferred payers at the beginning of last year, working in about to 18 to end 2025, adding 2 in the first quarter itself, We are starting to see that pipeline continue to pull through preferred payers quicker and really put them to the front of the list and valuing those who value our resources and our time, effort, and energy as well.

We will continue to mature this as we sunset or complete our preferred our modernization efforts in medical solutions. And once we do that, then we will start releasing additional data on there.

Jeffrey Shaner: I think Matthew's well said. Raj, right now, we would anchor to 4.5% organic year over year growth and a 44.7% gross margin. Also 7.4% revenue growth, which has some preferred payer work in there. I think, Raj, that shows you we are back to growing this business. You know, it is the first quarter we have had 93 thousand unique patients served in a quarter. So and to Matthew's point, our margin profile is working. Our outcomes are successful. Our collections are working. So that business, to your question, is beginning to act like the other 2 business on our preferred payer. And, our team has been under the hood now for almost 18 months working really hard.

So shout out to our medical solutions team. They have really done a lot of work over the last year and a half to get this model in place. Thanks, Raj. Thank you.

Operator: Thank you. Our next question comes from the line of Benjamin Michael Rossi with JPMorgan. Please proceed with your question.

Analyst (Benjamin Rossi): Hi. Good morning. Regarding 1Q margin dynamics, I imagine you got some margin lift quarter over quarter with 53rd week dynamic in 4Q. You mentioned the AI contribution here too in RCM. I guess as you have been assessing the cost structure and context of your long term margin profile, can you walk us through how expenses trended during Q1 compared to your expectations? And you are thinking about expense trends within your revised 2026 outlook?

Matthew Buckhalter: I would tell you great question, very thoughtful too, Ben, at the same time, thinking about that 53rd week transition you over and grabbing a few payroll tax dollars and 2025 opposed to 2026. Really, the most impactful 1 was that $6 million I referenced earlier that hit our EBITDA or that hit our revenue and EBITDA line item. If you still normalize that, we are in a very great position, on our for private duty services, really sitting around that 28% gross margin right in line with our expectations of where we should be On the SG and A side, really impressed what the teams have been able to accomplish.

We continue to grow our business organically continuing to add preferred payer contracts, add additional volumes in all 3 operating divisions, while adding very, very little overhead at the same time. it is really driven by these automation efforts that we put in place, and it is small items at a time. Scheduling, RCM, areas that we think we can get some real good leverage out of, and we have not had been we have not had to add that incremental overhead as we have continued to grow. I would expect to see what you saw in Q1 pretty consistent with the rest of this year.

While getting small basis point wins in Q2, Q3, Q4, and continue to ramp that up over time.

Jeffrey Shaner: And then we did not mention weather, and we have a no-excuse policy here at Aveanna. So weather is in fact alive. But we did get hit with 2 major weather events in January. So I think, you know, to your point, the 53rd week pulled the holiday week into last year, which was nice. It did that offset probably $1 million with the payroll taxes and pushed it into last year. But we lost about $5.5 million, $6 million of revenue through the 2 weeks of weather, or not, you know, that equates to about $1.5 million of margin EBITDA. So we hit these results with playing through that.

And I think I think if you had said to us without the 1 without the timing-related collections and, positive pet, we would have ended up in the high seventies, which is probably where we thought this was gonna land. So, you know, ramping off a high-seventies number, I think, to Matthew's point makes the rest of the year, you know, make a ton of sense.

Analyst (Benjamin Rossi): Great. Appreciate the added details there. Just to follow up on the preferred payer contract wins in PDS, And thinking about those preferred payer economics, as penetration of preferred payer mix increases in that segment, do you expect your revenue rate to also reaccelerate? Do you expect growth to continue to be more primarily volume driven with wages absorbing most of this upside and pricing? I guess just curious on your efforts in wage pass throughs here.

Jeffrey Shaner: I would say the latter. I would say at this point, our for the most part, our PDS rate and wage is basically settled in, I think to the range where we think it will be it will move by a percentage point or 2, but I do not think it is gonna move by 50¢ or a dollar per hour. Really, really proud of how the team started the year. I mean, 4 rate, 4 wins, Q1. I am not gonna get ahead of myself talking about Q2 yet. Matthew will pull me back. But, you know, additional wins that we will be talking about in Q2. The team started this year.

We knew we needed more out of preferred payers this year. We knew that was gonna have to pick up the slack from more moderated state rate wins. And we are and as I mentioned before, we are seeing that. So I think the majority of this will continue to drive volume. And you will see a pretty consistent spread, you know, in that in that low-$12 range moving forward. But again, really, really proud of our preferred payer teams. They are doing an amazing job. Thanks. Appreciate you taking my questions. Thanks, Ben.

Operator: Thank you. Our next question comes from the line of Shane Dodge with BMO Capital Markets. Your line is now live.

Analyst: Yeah. Thanks. Good morning. Maybe just staying on PDS for another moment. You talked about before that segment returning to a 5% to 7% organic growth for this year. Just any updated thoughts on that? If we look at what you all did in Q1 in terms of hours and kind of revenue per hour, and just annualize that. That alone gets me a bit above the high end of that range. And I know Thrive contributes some there, but it also is not adjusting for, you know, the extra week, Matthew, that you mentioned, the weather, or factoring in any additional rate increases or any new preferred payers you are talking about.

So just trying to square that and make sure I am not missing any 1 timers or anything else impacting kind of Q1 and how we think about that annualized over the No, I do not think you are, Shane.

Matthew Buckhalter: And we are continuing to see really impressive growth across our PDS segment and from our PDS teams itself. When you start normalizing up the Thrive acquisition, we still had growth in the high single digits on revenue, which was really, really impressive. We will pass that in Q2 because we closed that acquisition on 06/02/2025. And so then you will see that start to drop back down. But we are seeing moderation starting to occur to there. 16.4% phenomenal, close to double-digit growth. Phenomenal, but that will eventually mature over time. We just wanna be open and honest with people and understand that, hey.

We under plan to under plan this division to a much lower growth rate, though we are accelerating at the time. Okay. Great. And then on the tech or the AI initiatives, Matthew, you referenced your work in revenue cycle. You have also talked before about now tackling more front office type functions with that I was wondering if you just kind of help frame for us, like, proportion of your OpEx I guess this would be, like, the things within the branch and regional admin and your corporate expense line. Like, what percent of those do you think is ultimately, like, impactful with technology over time?

And, like, what inning do you think we are in when it comes to kind of leveraging tech to drive more efficiency and savings? Yeah. John, top of the first inning. Yeah. But we are we are still mid you know, we are still changing sides right here early in the game. There we are seeing benefits from it, but we are just being very thoughtful. We are not diving headfirst into the shallow end without, you know, wading into it first and making sure it to see how deep it actually is. We have seen benefits in that RCM.

I am really proud of the team's for leaning in and really being able to drive better results reduce our DSO, collect cash a lot faster, but also on the operational side of it. Between scheduling, between the automation work that a lot of our teams are doing in the medical solutions with Tenor, what our accounting teams are doing as well. Are areas that we are just chipping away at it, and we are getting better, and we are getting smarter, and we are getting faster every single day. Would tell you it is still very, very early to crown any champions out here. We are gonna continue to lean in get the results that we can from it.

Analyst: Okay. Great. Thanks again, and congratulations on the great start to the year. Thanks, Shane.

Operator: Thank you. Our next question comes from the line of John Ransom with Raymond James. Please proceed with your question.

Analyst (John Ransom): Hey. Good morning. Just to hit on the obvious, you have excuse me, you beat by 13. You raised by 10. Is there anything going on here other than just conservatism?

Jeffrey Shaner: No. I think well, yes. Let's start with the $6 million of timing related, John. And again, I know we sound like a broken record, right, because it is, you know, 3 out of 4 quarters and already talked about positive benefits to revenue and earnings. So we recognize that at some point, folks are just gonna bake that into our baseline. But think of we think of the quarter in the and as in the high seventies number, know, sub 80 number of you know EBITDA. EBITDA generated out of the quarter based on the results in the quarter.

And the other 6, 5 to 6 being more of a legged AR that was then collected that we are able to take. So we think of basing off of the high seventies and really a normal step up to Q2 would be kind of where we were in Q1, kind of the mid eighties. So you know, I think I think certainly, it is still early in the year. You know, we are still seeing things shake out, but you know, $10 million for us in EBITDA, John, was aggressive. So thank you. You know, we felt like we were being aggressive, but appreciate the conservatism. Question.

Analyst (John Ransom): And the other thing, I know you do not guide for Family First, but assuming we put that in our model, how should we think about 3Q, 4Q EBITDA contribution? From that deal?

Matthew Buckhalter: Great question. Yeah, John. And we are really excited for this FamilyFirst acquisition. I am really a Family First team and bringing them into the Aveanna family. They have got a great focus on for the Balcoms. They have really, really good operational discipline as well, which brings them in culturally and strategically. A nice fit for us. That transaction, we talked about valuing it about 7.5x post synergy EBITDA itself. So you can back into the math on that 1 based upon closing date. And then revenue has been sitting around the $120 million mark itself. So depending on closing time, of it, we will come and update our guidance accordingly.

But right now, we just left it out without knowing exactly when that date's gonna occur.

Analyst (John Ransom): But I think I think that my point being, like, is the post synergy EBITDA I assume that is not gonna be realized right off the bat. So just kind of a make our own journey on how long it makes you get to that post synergy EBITDA number.

Matthew Buckhalter: Yeah. We are pretty quick on it itself to get on a full run rate basis. Takes us about it takes about 6 months, John, to get to our kinda hard itself, but we start bringing it in day 1. But then we will go recognize it, tuck them onto our systems, bring them onto our platforms, put them on our payroll process, put them in our operating model as well. When all that happens, that takes a grand total of 6 months, and then there is that lag of AR that runs down But that full synergy recognition is in with that 180-day period.

Jeffrey Shaner: And, John, if we use Thrive from last year, closed Thrive on June 1, June 2. We were effectively done by Thanksgiving Yeah. You know, December 1, and then AR is still running off today. We expect to close this by the June, July 1, and to match point, we would we would be done by December. By Christmas, we are holidays, we would be done. And then, again, AR would run off through you know, the majority of 2027. But low hanging fruit, this is a great company. Matthew's point, great culture, fits right in our wheelhouse. This kind of stuff we should be doing.

Analyst (John Ransom): And I am sorry to drag this out, but is the first the rate that you have versus the rates they might have, is that captured immediately, or do you have to go through a contracting cycle?

Jeffrey Shaner: Here's the beauty, John. We do not know. We stay out of that you know, for all the right reasons, for the for the right regulatory review process. We are we do not operate around rate knowledge. We just and none of our assumptions are built on kind of right arbitrage. We just focus on, you know, filling in the GI that we did not have, that they do, the density that they had in certain Florida that we did not even service. So really filling out needed geography for us and key markets like Florida was the most important reason. So we are excited. Alright. Thank you.

Operator: Our next question comes from the line of Andrew Malk with Barclays. Please proceed with your question.

Analyst: Hi, good morning. Your home health episodic mix was north of 80% in the quarter and well above 75% target. Can you help us understand the trends underneath that? How much of this positive trend is driven by Medicare Advantage versus traditional Medicare? And to the extent this is driven by Medicare Advantage, why would not this number sustain at these levels or tick higher as you target more preferred payer agreements? Thanks.

Jeffrey Shaner: Hey, morning. Thanks for noticing that. You know, again, we have been in the high seventies now for, I will call it, 4 quarters in a row. We have been flirting with 80% towards the end of last year. And we had said that 80, we felt like, was kind of the peak. At this point, you know, Andrew, more managed more Medicare Advantage. Payers are getting comfortable with the episodic nature. And it is some, you know, it is some form of Medicare minus 5%, 10%, you know, So it is not it is not they are not all set at Medicare. Episodic rates.

But, you know, as they get more comfortable with this, you know, the growth is just working for us. We are able to add, you know, we mentioned in Q1, we added 4. New contracts. The majority of those were Medicare Advantage contracts. And they were all episodic. Right? So at the end of the day, I think we see this number staying in the high seventies. We have not adjusted our target to 80 or above at this point.

Do not know that we will, but we have been pretty consistent now for 2 or 3 quarters in that you know, high seventies, low eighties, and I do not think it is gonna change as we continue to sign more Medicare Advantage contracts. They are getting more and more comfortable with this as a as a form of contracting.

Analyst: Great. And maybe just a follow-up. Your capital expenditures increased to $4.5 million in the quarter, which is more than double your typical spend. Can you provide more color on the nature of that and how that is supposed to track for the balance of the year? Thanks.

Matthew Buckhalter: So, Andrew, that Q1 purchase was really related to a refresh that, you know, we had kinda baked in and we are but it is not gonna continue. That trend will not continue through the rest of the year. So it was really a 1-time kind of purchase on our laptops.

Analyst: Great. Great.

Jeffrey Shaner: It was it was our employee's feedback. It was their 1 of their 1 of their highest feedback points for us was they wanted new laptops. So good catch, Andrew. Very good catch. Sounds good. Care. Have a good 1. Thank you. Thanks, Andrew.

Operator: Thank you. Our next question comes from the line of Pito Chickering with Deutsche Bank. Please proceed with your question.

Analyst (Pito Chickering): Hey. Good morning, guys, and thanks for taking my questions. On PDS, just wanna make sure I understand sort of the economics of what you have laid out. You won 4 preferred contracts in first quarter, expect to win another 4 during the year. And you are guiding to, I think, the rate being fairly consistent throughout the year. I mean, would not we see some increase as more preferred come up come online And then going back in 2024 on the spread side, it looks like the spread is growing at the same level as the rates. Is that the right way to think about spread going forward?

Is if rates grow at x percent, the spread should grow at the same level?

Jeffrey Shaner: Yes, Pipi. Great question. Thank you. Yes, I think, 1, we are expecting to receive less state government rate weighing. So the preferred contracts we are winning are offsetting some of the more moderated government state government rate wins that we had received over the last 3 years which is why we do not see the rate changing materially. You know, 43 may go to 64, but we do not see it going to 44 or 45. Within the course of the year. Then, yes, I think I think your thoughts on spread and Matthew would say, translate that to gross margin.

We think we think that gross margin will stay in that 28 it touch 28 and a half percent? Sure. Could it be 27.6 or 7? Sure. But we think of that being in the 28% range. As well as that spread per hour being somewhere north of $12. And, again, it will move generally, but, yes, we are passing continue to pass wage through the 4 agreements we signed. We have passed wage are in the process of passing wage through to those nurses and caregivers as we speak.

Analyst (Pito Chickering): Great. And then with 60% of the PDS revenues coming from preferred know you are not giving 2027 guidance at this point, but can you talk about the mechanics of how the annual price increases are set on those preferred contracts? As you think about sort the out years, you know, kind of how much how much clarity do you have on what this price increases should be by nature of this preferred contracts you have already written?

Jeffrey Shaner: I would like to re record reflect that at 10:53 on May 14, you asked 2027 guidance. So that is that is that is impressive. You know, Peter, I think as we laid out earlier this year, fifth we thought 57% of the MCO volumes would go to low to mid-60 percentage points. Think based on what we see today, we would say that is accurate this year. It would be you know, be right in the mid sixties. We have said before publicly, we thought this could get to the low- to mid-80% at some point in the future.

Know, people have asked us what inning are you in? it is not the first inning, but it is probably the fifth or sixth inning. You know, probably about halfway through this process as it relates to PDS specifically. I would say in home health, we are we are still in the early stages of this story, and certainly MedSolutions, we are in the very early stages. But I think you will see that somewhere between 3-5% volume shift per year continuing the next 3 to 5 years. there is not a lot of large, large volume payers for us to sign in our current market. So we are down to the very fine minute you know, you know, payers.

But it is also why when we talk with and Christy is sitting, our chief operator officer there next to me. We have talked about filling in Ohio and Michigan and, you know, West Virginia and Tennessee and Kentucky. Filling in some of those additional markets where we have no Medicaid revenue today, no preferred payers, all of that is new greenfield to us. So as we do think about the next 3 to 5 years, we wanna fill in those geographies, which would create new opportunity for us to, you know, add brand new brand new preferred annually. Just new op new greenfield for us in the Medicaid space.

And we said before, our payers are national MCO payers have asked us and are asking us to move into these markets for them.

Analyst (Pito Chickering): Sofia? So yeah, I guess, the fault there is just, you know, what price increases, sir, are baked into these preferred contracts? You know, you know, 1 of the questions that I keep getting is you know, each quarter you guys are beating by huge amounts and guys is not chain you know, is not changing. So the buy side tries to figure out what is sort of the true you know, out year numbers. You know? Is what percent of your contracts you know, have inflate in inflation already built in and kinda any color on sort of what inflation built into these contracts?

Jeffrey Shaner: Thank you. I have the perfect answer the way you it other than thank you. Shane you for that comment or the compliment. I think there was a compliment in Other than Pito, all of our contracts are annual and evergreen. So we have not and we have said before, our first preferred payer is still part of the 34 preferred payers today. So we have not lost a preferred payer to date. That may change in future, but not today. Every contract we have is reviewed every year. Matthew would even say every quarter, even though they are not quarterly contracts, but our teams are meeting with the payers quarterly.

So the opportunity for rate enhancement and for additional value based agreements are there in every 1 of the contracts every year. We have also said before that the value based agreements take normally between 9 and about 18 months. Post the point at which we sign the preferred pay agreement. Not because we are not ready, but it just takes the payer time to get comfortable with the fact that they would add on an additional upside bonus to us. So, again, the tail on this plays out years in front of us. The value based side, but very few of our agreements have COLA or cost of living type rate increases built into them.

Those are annual conversations that we are and by way, we are not having those every year with them. We are having every other year of every 3rd year, because the upfront rate they are paying us is pretty material compared to the Medicaid fee for service schedule. that is probably the best way I can answer the question. Yep. Perfect. that is right. And great job in the quarter. Thanks, guys. Thanks, Peter.

Operator: Thank you. Our next question comes from the line of AJ Rice with UBS. Please proceed with your question.

Analyst (Albert Rice): Hi, everybody. First, just maybe on your comment in the prepared remarks. I think you said that caregiver hiring and retention is strong or is solid. Is that would you say that is pretty much a function of the rate of environment that you are seeing? Or is there any underlying trend with potential clinician candidates that suggest things are stabilizing or even improving somewhat?

Jeffrey Shaner: I think you hit it right, AJ. it is being driven by rate and wage. Right? The 2 are moving in unison. Kind of to Peter's point, like, you know, the $12, how that is moving in unison. As our rate goes up consistently, our wage is going up. So, you it is really a function of continuing to get rate wins, turning that into wage improvements, and ultimately hiring and employing more caregivers. I would not say it is getting easier. I would also say it is not getting harder. Over the last 6 months. We have not had other than the weather type stuff.

We have not had a position where we felt like nurse hiring or family caregiver hiring has gotten harder. it is been pretty consistent. But the wins, the growth, Matthew talked about high single digit PDS growth. Organic growth. that is tied to the rate and wage pass through So think about accelerated wages tied to accelerated rate. Okay.

Analyst (Albert Rice): I wanted to just ask you a minute about medical solutions. You are saying, I think, guiding to mid single digit growth near term, but double digit by year end. What specifically is gonna drive that acceleration? And is that are you able to cross sell on these new these 2 acquisitions? Is that part of the dynamic? It will drive more volume into MedSolutions. And I think you said also gross margins have stabilized there. Is that stable, and that is sort of where we are gonna be a while, or is there improvement potential in MedSolutions as well?

Matthew Buckhalter: Yeah. AJ, on the gross margin side of this, I would tell you that the 44% range is kind of right down the middle where we expect it to be. And really what you are already seeing in a medical solution division and Q4 and Q1 of this year is the benefits from the modernization efforts. Already taking hold. So as we move through 2026, you have seen us jump up from mid single digit to the higher end of that at 7.4%. You will see as that continue to grow to that high single digits, low double digits, in the back half of this year, but it is really just the completion of our modernization efforts.

Your point, there is a great cross sell opportunity in between, our businesses themselves and bringing in the Family First, acquisition gives another cross sell opportunity for that division at the same time, but organic growth is something that this team is ready to start driving. I would tell you they have been felt left out the past couple of quarters, and it they proved it in Q4 and Q1 so far.

Jeffrey Shaner: And then, AJ, I met so well. Automation AI is a big part of this. Yep. I mean, you know, get 5 thousand or 6 thousand efaxes a week for this business. So the more we can use automation and AI to pull through the referral process, and the follow-up physician orders and things that come with it, the more we can pull through growth. And so I you know, 4 point we are very pleased with 4.5% This is all organic. Right? This is this is truly organic. And I think we will see that continue to tick up You know, Is 10% a little bit aggressive by Q4?

Probably, but we think high single digits by Q4 and probably low double digits by the time we get into first half of next year. Okay. Alright. Interesting. Thanks a lot. Thanks, AJ.

Operator: Thank you. Our next question comes from the line of Jared Hess with William Blair. Please proceed with your question.

Analyst: And, Jared, are you on mute? Your line is now live. Jerry about that. Hopefully, I am coming through here. Yeah. Hey, Jared. Morning. Hey. Hey. Good morning. Morning. I will just stick to 1 here as I realize we are getting to the end of the call, but I just wanted to double click on the home health side. Again, nice to see the growth there. You know, you pointed to clinical offerings and success on that front, and I think that is been kind of consistent with your commentary the last few quarters.

I was just wondering if there is any more I guess, color or data points you could share to sort of illustrate what you mean by the that you have made in terms of clinical outcomes since that really seems to be underpinning the operational performance here? And I guess to be clear, when you talk about clinical investment, is that more kind of in areas around star ratings performance? Or is that maybe developing you know, I guess, specific programs based on the needs of patients and referral partners? Thanks.

Jeffrey Shaner: Yeah. And then, about great question, Jared. Thank you. Yes, I will start with TPS scores. So we are now into the second full year of scoring on TPS scores. I think we mentioned last year we were a net winner, net benefit so we received value based payments from Medicare because of our of our 5 star rankings. We are also on pace to be a net winner this year in TPS ranking. So your 5 star scoring tells you based on your value based payments, what whether you are not win or not loser. So effectively, we have mitigated some of the rate decrease in the last 18 months in home health through our TPS scores.

We also have no 3-star agencies, both in home health or hospice. I think, on average, were 4.5-stars on home health. And our 21 out of 22 hospice locations are 5-star branches. So we have we have phenomenal performance. The team has rolled out a cardio program that was CHAP approved. So they have they have invested in actually, you know, excuse me, clinical programs and protocols that we are outselling and out outsourcing. So I think net takeaway is the team has done a really, really good job of providing great outcomes. Great patient satisfaction in both businesses. And we have learned over time, you cannot have a great financial outcome without a great clinical outcome.

Also should not have a great clinical outcome without a good financial outcome. And so I think the yin and yang in our HHH business are working right now. Great growth and great clinical outcomes. Okay. Thank you. Sure. Thanks, Jared.

Operator: Thank you. And our next question comes from the line of Grayson McAlisterAllister with Truist Securities. Please proceed with your question.

Analyst (Grayson McAlister): Hey, guys. This is Grayson on for David. Just 1 for me as well. Wanted to follow-up on capital allocation. Obviously, some work left around Family First. But past that, how are you thinking about the potential for tuck ins? And home health just given the regulatory backdrop versus something like adding density and 1 of those PES states that you have called out like in Ohio or Tennessee? And just following on, still right to think about leverage somewhere in that 4x-level ending the year. That will be it for me.

Matthew Buckhalter: Perfect, Gracie. Yeah. I think I will I will start off on cash flow and invest on leverage here for you. So really, really pleased for the team's start to 2026. Our team continues to position Aveanna as a strong free cash flow generator. 2025, obviously, monumental year for us. We had about a $131 million of free cash flow. Reflecting not only commitment to clinical quality, but also cash collections in there as well. We expect this pause momentum to continue into Q1 and the rest of 2026 and the cash flow generation to be pretty consistent with what you saw in 2025?

On the leverage side of it, could not be more proud of what we have been able to accomplish the last few years on our leverage. We have done a lot. We have taken this down from Double digits down to 3.8x net leverage here on a LTM basis in Q1. Certainly, not done either. Still some more work to do. But we will continue to be grow this company not only organically, but also inorganically while continuing to keep leverage at top of mind. We wanna be highly sensitive to that and highly aware of it. So there is still some free cash flow that we could do for small tuck in acquisitions.

But beyond Family First this year, probably nothing monumental.

Jeffrey Shaner: I mean, I think that is well said. The you know, part of the goal, Grayson, is to do both, is to grow the company through tuck ins, but also to continue to delever know Matthew and team are very proud. Matthew and Debbie, know, leverage, you know, a quarter a point in the quarter, close to 3.8 times was a continued great movement. We are not done in that in that avenue. And as Matthew said, our goal is to get down to at or below 3x leverage and continue to grow the company and we think we can do both. Thanks, Grayson.

Operator: Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back to Jeffrey Shaner for closing remarks.

Jeffrey Shaner: Awesome. Thank you, operator, and thank you so much for your interest in our company and our Aveanna story. And we look forward to catching up with you after the end of Q2 in August. Thank you. Have a great day.

Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. Shane you for your participation.

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