Aveanna Healthcare Holdings Inc. (NASDAQ:AVAH) Q3 2023 Earnings Call Transcript

Jeffrey Shaner: Hey Benjamin, good morning. Yes, so I think in Matt’s prepared remarks, he talked about we had some onetime benefits that did help us in Q3. Q3 would have been cash flow positive even without the onetime benefits. But some things like just how our biweekly payroll closes, it fell into an October date versus the September day, which was unusual. So, there’ll be a little bit of a swing from quarter-to-quarter. I think the most important part you’re hearing from us, and we’ve been talking about it for a couple of quarters now is we’ve been very close to breaking through and becoming a positive operating and ultimately a positive free cash flow company. And although Q4 will be a little bit of a headwind in that, I think we feel confident that you’ll see that from us for the year.

And more importantly or equity important, transitioning in 2024, Aveanna is now a positive generating cash flow company, which was an important milestone for us as a company. So we’re certainly, Matt talked about it. It’s a total team effort it takes growing the volume, the growing rates, it takes managing margin, also takes taking costs out of the company. And lastly, and really important collecting our cash. And I think it’s a total team effort of Aveanna to get where we are and to continue to drive through. So, I think you’ll find us to be pretty excited less about how Q4 impacts but more about how we think of the full year.

Matt Buckhalter: Yes, Jeff. I think that’s really, really what was said there. I mean the team’s success in driving our top line growth as well as being very disciplined on any type of spend as it really allowed some of those dollars to drop down to the bottom line for us on operating cash flow and free cash flow basis. Onetime items in Q3 that are a very moderate headwind in Q4 as well. But just wanted to be upfront about that to provide realistic expectations. But more importantly, we’re on the run rate for consistency of this and creating an organization that will be a positive operating cash flow company. I will lay shells on the beach. There’s a little bit of headwinds in Q1 with some of our TPL seasons that evolved and just some of our payroll taxes and normal spend. So, we don’t expect it during Q1, but therefore, our goal is to continue to be a positive operating cash flow business.

Unidentified Analyst: That’s super helpful. And then one more quick one. We really like to see the leverage tick down a little bit this quarter. Can you give any color on maybe targets you have or where you see it going over the next few quarters? Thank you.

Jeffrey Shaner: Yes, Ben, I mean, we’re really pleased. I mean dropping off Q3 last year was a really tough quarter for us and the industry was going through a mighty shift during that time period. So being able to drop off that one and then add a strong $36.2 million, a 46.2% increase year-over-year really helps that leverage profile. We — we’re very cognizant of it around here every single day. I think you can hear that in our tone and our voice about cost and spend and getting back to where we know this organization can be. And by doing so, we’ll provide a whole lot more patient care as well. So we’re going to continue to work that down through some good old-fashioned organic growth, cost reduction efforts to decrease our leverage profile. Don’t want to get ahead of our skis as well and throw out a number that might take us a little bit of time to get to, but that’s something we’ll work down over time.