Aveanna Healthcare Holdings, Inc.

Aveanna Healthcare Holdings Inc. (the "Company") operates as a diversified home care platform, providing services to medically complex, high-cost patient populations across 38 states, with concentrations in Texas, Pennsylvania, and California. The Company's business model focuses on delivering high-quality care in the home, which is a lower-cost setting preferred by patients, aiming to improve care quality and minimize the overutilization of high-cost settings like hospitals. Revenue generation is primarily through recurring services, with a diverse payer base including Medicaid managed care organizations (MCOs), state-based Medicaid programs, Medicare, Medicare Advantage plans, commercial insurance plans, and other governmental payers. The Company emphasizes its "one stop shop" approach, offering a range of services to meet patient needs and alleviate administrative burden for families and referral sources.

The Company's operations are structured into three segments: Private Duty Services (PDS), Home Health & Hospice (HHH), and Medical Solutions (MS). The PDS segment, which includes private duty nursing (PDN) and pediatric therapy services, is the largest, accounting for 82% of consolidated revenue in fiscal year 2025 ¹. PDN services cater to medically complex children and young adults, often for multiple years, with approximately 30% of patients being over 18 ². Pediatric therapy services, including physical, occupational, and speech therapy, are delivered at home or in clinics. The HHH segment provides home health, hospice, and specialty program services primarily to elderly populations, focusing on recovery from illness, chronic disease management, and end-of-life care. This segment contributed 10% of consolidated revenue in fiscal year 2025 ³. The MS segment, representing 8% of consolidated revenue in fiscal year 2025 ⁴, supplies enteral nutrition and respiratory care products, offering a wide selection of over 300 nutritional formulas ⁵ and 24/7 patient and caregiver education.

For the fiscal year ended January 3, 2026, the Company reported total revenue of $2,433,199 thousand ⁶, an increase of 20.2% from the prior fiscal year ⁷. Gross profit was $810,481 thousand ⁸, resulting in a gross margin of 33.3% ⁹. Operating income significantly increased to $256,463 thousand ¹⁰, representing an operating margin of 10.5% of revenue ¹¹. Net income for fiscal year 2025 was $225,034 thousand ¹², a substantial improvement from a net loss of $10,929 thousand in fiscal year 2024 ¹³. Basic net income per share was $1.11 ¹⁴, and diluted net income per share was $1.05 ¹⁵. Net cash provided by operating activities was $125,857 thousand ¹⁶. As of January 3, 2026, cash and cash equivalents stood at $193,260 thousand ¹⁷, and total long-term obligations (net of unamortized debt issuance costs) were $1,299,902 thousand ¹⁸. Goodwill and intangible assets, net, totaled $1,121,042 thousand and $92,559 thousand, respectively, representing approximately 60% of total assets ¹⁹.

Comparing fiscal year 2025 to fiscal year 2024, total revenue increased by $408,693 thousand ²⁰, or 20.2% ²¹. PDS revenue grew by $366,538 thousand ²², or 22.4% ²³, driven by an 11.0% increase in volume ²⁴ and an 11.4% increase in revenue rate ²⁵. HHH revenue increased by $30,752 thousand ²⁶, or 14.1% ²⁷, primarily due to an increase in total episodes and a 3.5% increase in home health revenue per completed episode ²⁸. MS revenue increased by $11,403 thousand ²⁹, or 6.6% ³⁰, attributable to a 7.7% increase in revenue rate ³¹, partially offset by a 1.1% decline in volume ³². Gross margin percentage improved by 1.9% to 33.3% ³³, and Field contribution margin increased by 3.9% to 17.9% ³⁴. Interest expense, net, decreased by $18,849 thousand ³⁵, or 12.1% ³⁶, due to decreased borrowing under the Securitization Facility and a lower U.S. federal funds rate, reducing the weighted average interest rate from 9.2% to 7.3% ³⁷.

During fiscal year 2025, the Company completed the acquisition of Thrive Skilled Pediatric Care, LLC on June 2, 2025 ³⁸, for approximately $75.7 million in consideration, including the issuance of 11.2 million shares of common stock valued at $59.8 million ³⁹. This acquisition added 23 locations in seven states and primarily expanded the Company's skilled Private Duty Nursing services ⁴⁰. The Company also restructured its credit facilities on September 17, 2025, entering into the Refinancing Amendment to its First Lien Credit Agreement, which included a $250.0 million 2025 Refinancing Revolving Credit Facility and $1,325.0 million in 2025 Term Loans ⁴¹. Proceeds from the 2025 Term Loans were used to refinance existing term loans and the Second Lien Term Loan of $415.0 million ⁴², resulting in a $5.9 million loss on debt extinguishment ⁴³. The Securitization Facility was also amended on June 25, 2025, increasing the maximum available amount from $225.0 million to $275.0 million ⁴⁴.

The Company anticipates continued growth in its existing local markets by leveraging its brand, service breadth, nurse recruiting, and go-to-market capabilities to increase case share, expand referral sources, and grow payer partnerships. A key aspect of this strategy involves educating referral sources about the benefits and high-quality outcomes of its services, aiming for higher fill rates and lower readmission rates compared to competitors. Further acceleration of growth is expected through new workforce recruiting and training initiatives to expand capacity, and de novo branch growth to increase geographic coverage within existing markets. Governmental affairs efforts are also intended to support competitive wages for nurses, which is expected to contribute to growth by enabling the Company to take on more cases and fill more hours and shifts.

The Company believes it is well-positioned to benefit from a shift towards value-based care due to its scale, which allows it to care for a significant portion of its payer partners' eligible populations. Substantial investments in clinical training programs, compliance protocols, and technology infrastructure enable the Company to provide consistently high-quality care with patient data and reporting directly from the home. This positions Aveanna as a "partner of choice" for payers as the industry transitions to value-based care arrangements. This transition is viewed as an opportunity to improve future revenue and profitability by providing value to partners and sharing in cost savings generated for the healthcare system, while also delivering improved patient outcomes.

The Company plans to expand its Private Duty Services, Home Health, and Hospice presence through acquisitions, acting as a consolidator in highly fragmented markets. Since 2017, the Company has completed and integrated eighteen acquisitions. The acquisition strategy targets both tuck-in acquisitions, which are smaller, highly synergistic, and aim to increase density in existing markets with integration times measured in weeks, and larger expansion targets that diversify geographic footprint and provide immediate scale in new markets, with integration times of one to two months. The Company maintains discipline in valuation and has consistently achieved deal-related growth and operational objectives.

A significant growth opportunity lies in cross-selling enteral services to its existing PDN and home care patient base. The Company's ability to bundle PDN and enteral nutrition services is a differentiator, offering a convenient "one stop shop" and a more responsive, tailored service experience due to nurses managing enteral shipments from the home. Currently, while a majority of PDN patients receive enteral therapy, most are served by third-party providers, indicating substantial future cross-selling potential for the enteral business to penetrate the PDN patient base.

Ongoing investment in the Company's platform is expected to drive greater efficiency and a virtuous cycle of growth. Plans include continuous investment in people, technology, and processes to further drive volumes, leverage corporate infrastructure, and achieve higher margins over time. Investments in reporting capabilities and tracking advances will support growth initiatives based on value-based payment models. Technology platform developments are aimed at aligning data with payers' and government partners' clinical quality metrics, which is expected to deliver value and improve outcomes.

The Company's debt facilities will mature in forthcoming years, and an inability to extend these maturity dates on a long-term basis could result in outstanding balances becoming due and payable in full, which would materially adversely affect its business, financial condition, results of operations, and cash flows. The Company's variable rate indebtedness, primarily indexed to SOFR with a 50 basis point floor, exposes it to interest rate risk. While interest caps and swap agreements are in place to protect against SOFR increases above 2.96% ⁴⁵, future variable rate debt in excess of these notional amounts or the expiration of these instruments without similar coverage could lead to increased borrowing costs. Although the Federal Reserve Board cut interest rates in September 2025, October 2025, and December 2025, and may further adjust rates, the timing and amount of future changes are uncertain, and a failure of rates to continue decreasing could negatively impact borrowing costs and cash flows.

The Company faces intense competition across its home health, hospice, and durable medical equipment segments from a variety of providers, including community-based, national, regional, local, facility-based, and hospital-based agencies, some of which may have greater financial resources. The inability to maintain relationships with existing patient referral sources, which are not contractually obligated to refer patients, could materially adversely affect the business. Substantial reliance on government and private insurance programs for funding exposes the Company to significant risk from potential reductions or limitations in reimbursement rates, including changes to Medicare and Medicaid rates or payment methodologies, and the proliferation of Medicare Advantage plans. The "One Big Beautiful Bill Act" (OBBBA), enacted in 2025, is projected to reduce federal Medicaid spending by an estimated $1.15 trillion over the next ten years ⁴⁶, potentially impacting future rate expansion for Medicaid-funded services. Delays in collection or non-collection of patient accounts receivable, particularly during business integration or system transitions, or due to non-compliance with electronic visit verification (EVV) data collection requirements, could adversely affect liquidity. Failure to maintain the security and functionality of information systems or to prevent cybersecurity attacks could lead to significant fines, litigation, reputational damage, and operational disruptions. The use of artificial intelligence also presents risks related to confidentiality, inaccurate outputs, and emerging regulatory challenges. Changes in healthcare reform, such as the ACA, or other regulations, including CON laws, could increase costs or limit market expansion. The industry's historical shortage of qualified employees and management, coupled with competition for personnel, may increase labor costs and reduce profitability. Economic downturns or federal and state budget pressures could result in reduced payments and covered services, while the Company's substantial indebtedness of $1,487 million ⁴⁷ increases its vulnerability to adverse economic conditions and limits its financial flexibility. The Company is also exposed to various legal proceedings, claims, and governmental inquiries, including potential professional liability claims that may exceed insurance coverage, and the risk of goodwill impairment, which accounted for $1,121,042 thousand of assets as of January 3, 2026 ⁴⁸.

Management's message to shareholders emphasizes the Company's position as a leading, diversified home care platform focused on medically complex, high-cost patient populations, highlighting its role in addressing U.S. healthcare challenges by providing safe, high-quality, lower-cost care in the home. They underscore the significant investments made in their platform, including talent, training, clinical programs, infrastructure, and technology-enabled systems, which are viewed as essential for driving rapid organic and acquisition-based growth and establishing the Company as a partner of choice. Management explicitly states that the "One Big Beautiful Bill Act" (OBBBA), enacted in 2025, is projected to reduce federal Medicaid spending by an estimated $1.15 trillion over the next ten years ⁴⁹, with most provisions effective December 31, 2026, or later, and while no direct impact on reimbursement rates for their services is anticipated, the resulting reductions to state Medicaid budgets may indirectly affect future rate expansion. For fiscal year 2026, CMS's final rule is expected to reduce Medicare reimbursement rates by 1.3% ⁵⁰, reflecting a 3.2% market basket update offset by a 0.8% productivity cut. The three strategic priorities emphasized for the period ahead include increasing volumes within the existing footprint by leveraging brand, service breadth, and nurse recruiting; driving value-based care arrangements in partnership with Managed Care Organizations by utilizing scale, technology, and data reporting capabilities; and expanding Private Duty Services, Home Health, and Hospice presence through strategic acquisitions, acting as a consolidator in fragmented markets.