Jeff Shaner: Yes. I’m going to start with kind of the sequential part of it. As we talked Taji, the last three or four quarters, this was an absolute focus of ours knowing that gross margin is very hard to move in this business, that being effective and efficient was key to us. I think the best part of the story is we talked — we really focused the last 15 months on Home Health & Hospice and corporate. We’ve pivoted this year to focusing on our largest business unit, which is Private Duty Services. We’re being thoughtful about it, right, because we have a very large PDS business. But I think as you think probably more importantly about ’25, million, we see the opportunity to continue to be efficient and effective in our business. Matt, do you want to touch just on the quarterly run rate?
Matt Buckhalter: Yes. And just on gross margin stuff, Q1 is a compressed gross margins as being that labor business, Taji, that we talked about, and state taxes are significant for us. We see a sequential jump up just immediately as those roll off into Q2. And then as well as we continue to focus on this and take meaningful cost out of OpEx, but also do the right thing on the gross margin line and making sure that we’re paying people the appropriate amount of money and being very diligent in there. I think you’ll see it expand throughout the year. Q1 historically, as I said, our lowest quarter out of the entire year on a GM basis. But Q2, Q3 and Q4, I think you’ll see minimal sequential step-up.
Taji Phillips: Great. That’s really helpful. And then just back to the commentary on California. I know you guys had expressed disappointment by not being included in the rate budget. But obviously, you’re still taking this enhanced effort towards driving rate increases, the two-pronged rate increases. But thinking about the state budget itself, right, and your continued efforts to try and get rate increases. Maybe can you just talk about your learnings from prior efforts and how you’re incorporating this into your continued efforts towards getting included in state budget? And I know there’s some moving pieces that are out of your control, right, like deficit, et cetera. But just curious to hear your learnings and how you’re going to take this revitalized approach to portraying your value prop and the need for rate increases within your business essentially.
Jeff Shaner: Yes. It’s a very thoughtful question, Taji, and thank you. We’re 2-plus years straight of working on California and needing — knowing that we needed to lift the rate and again, we represent the families of the complex medical children in the state. So it’s less about Aveanna. It’s more about how do we help the families. And I think we’ve learned in California that even a great story and a difficult budget time is difficult to get through, right? And so the governor has been very open to understanding our plight and the plight of our families. Dr. Vale, who runs HHS has been very open. But they’ve also been very open for the fact that they’re in a significant deficit situation, and it’s difficult to optically pass through a meaningful rate increase while you’re cutting many, many, many other programs.
And I think we just got caught up in that kind of prop wash. I know this for us, it’s not an if, it’s a win, meaning as the largest provider of PDN services in state of California, we have to just keep fighting the good fight. And to your point, learned from what worked and what maybe didn’t work and refine our efforts. We continue to partner with both the current governor’s team, Dr. [Ghaly] and many legislatures with our peers and the families we’re not expecting to be in this year’s budget. The May revised budget is due out any time now probably in the next two weeks. We’re not expecting PDN to be in that. I think it’s highly unlikely we’ll be in the final budget. There’s just not the appetite for rate improvements. We asked for a 40%. We were not asking for 2% or 3% rate increase, we’re asking for 40%.
And 40% is the right number to move the needle. I think the part of this that we have learned, though, over the last, call it, six, eight months is more families are voting in California with their need to get services. And so what we are seeing is one by one by one, families moving away from the Medi-Cal fee per service program and moving into either the whole child model programs, which there are a few in California or finding themselves to a payer like Kaiser or someone like Kaiser, who does have either commercial or an MCO carve-out in the state. And those MCOs and whole child models programs have partnered with companies like Aveanna at enhanced rates, which is great. So we can we can staff their cases, we can bring their children home.
So if we look at the MCO companies in California, they would tell us exactly what the rate is for PDN and the state and we’ve shared that with the current governor’s team in current legislature because it’s — there’s no magic behind it. It just takes the right rate to pay the right wage. But if you said to me, looking at a crystal ball, how long will it take in California. My gut is it’s a few more years, that it’s — we continue to help families transition out to the MCO plans but it’s a very slow movement, 1%, 2%, 3% movement at a time and that we continue to partner for another year or two with the California governor, maybe even the next governor and legislature to ultimately get it done. I think when we look back after five years, California will raise the PDN rate meaningfully because they have to, not because they want to, because they have to.
And so we’ll be proud that we were part of that process. But it will take two or three times as long as we thought and probably take two or three times as much money as we thought. So — but we’re committed to it. We work on behalf of the families we serve. And so we won’t rest until our work is done.
Taji Phillips: Great. Thank you.
Jeff Shaner: Thank you, Taji.
Operator: Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Jeff Shaner for closing remarks.
Jeff Shaner: Thank you, David, and thank you, everyone, for your interest in our Aveanna story. We look forward to updating you on our continued progress at the end of Q2. With that, have a great day.
Operator: This concludes today’s conference. Thank you for your participation. You may disconnect your lines at this time.
