Aveanna Healthcare Holdings Inc
For the period ended Dec 28, 2024. Filed Mar 13, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 13, 2025
AVAH$13.25-3.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-30; filed 2024-03-14.
0000950170-24-031321
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-28; filed 2025-03-13.
0000950170-25-038504
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 211 previous paragraphs and 199 current paragraphs.
123 unchanged; 59 reworded; 15 added; 27 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 12 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Current report
Home Health Episodic Mix
Current report
Home health episodic mix is calculated by dividing the total home health episodic admissions by the home health total admissions. Management monitors home health episodic mix as a simplified metric representing our home health admissions by reimbursement structure, which allows us to better understand the payer mix of our home health business.
Current report
Results of Operations
Current report
Represents the ratio of home health episodic admissions to home health total admissions.
Current report
Operating Income
Current report
a $115.8 million, or 7.6% increase in PDS revenue;
Current report
a $14.3 million, or 9.1%, increase in MS revenue.
Current report
a $95.1 million, or 8.7%, increase in PDS cost of revenue;
Current report
a $6.6 million, or 7.2%, increase in MS cost of revenue.
Current report
Depreciation and amortization was $10.8 million for the fiscal year ended December 28, 2024, compared to $13.8 million for the fiscal year ended December 30, 2023, a decrease of $3.0 million, or 21.8%. The $3.0 million decrease primarily resulted from improved capital asset management.
Current report
Other Operating Expense (Income)
Current report
Interest expense, net of interest income was $156.1 million for the fiscal year ended December 28, 2024, compared to $152.9 million for the fiscal year ended December 30, 2023, an increase of $3.2 million, or 2.1%. Interest expense increased primarily due to increased borrowing under our Securitization Facility and a higher U.S. federal funds rate during the fiscal year ended December 28, 2024. See further analysis under Liquidity and Capital Resources below.
Current report
On September 30, 2024, the we amended the terms of our revolving credit facility (the "Revolving Credit Facility") under the First Lien Credit Agreement (as defined in Note 6 -Long-Term Obligations to the Consolidated Financial Statements) to extend the Revolving Credit Facility’s maturity date from April 29, 2026 to the earlier of (i) April 15, 2028 and (ii) May 1, 2026 if by such date the Securitization Facility has not been renewed or replaced or paid-off, in each case, in full, with a maturity date that is April 15, 2028, or later. Additionally, such amendment immediately reduced the maximum borrowing availability under the Revolving Credit Facility from $200.0 million to $170.3 million through April 29, 2026, and then further reduces availability to $148.9 million from April 29, 2026 through the amended maturity date.
Current report
On May 31, 2024, we amended our Securitization Facility, which matures on July 31, 2026, to increase the borrowing capacity to $225.0 million, subject to certain borrowing base requirements. Further, this amendment revised the Securitization Facility's applicable margin on the borrowing rate to 3.15%, with all other terms remaining the same.
Removed paragraphs (27)
Previous report
Recent Developments
Previous report
HHS Proposed Rule:“Assuring Access to Medicaid Services”
Previous report
On April 27, 2023, HHS introduced a proposed rule titled “Assuring Access to Medicaid Services.” The proposed rule has a stated goal of improving access to services for Medicaid beneficiaries. HHS has proposed that state Medicaid agencies provide assurances that a minimum of 80% of Medicaid payments for personal care and similar services be spent on compensation to direct care workers. The proposed rule would allow states four years to implement changes required by a final rule, with extended time specified for managed care delivery systems. The proposed rule was subject to comment, and HHS specifically requested comments on the 80% threshold, related definitions and the implementation period. The public comment period concluded on July 3, 2023. The ultimate impact of any final rule, which could be adverse for periods after implementation, but could also benefit our business by improving access to services, depends on the requirements set forth in any final rule.
Previous report
Operating Income (Loss)
Previous report
a $103.7 million, or 7.3% increase in PDS revenue;
Previous report
a $17.8 million, or 12.7%, increase in MS revenue.
Previous report
a $72.5 million, or 7.1%, increase in PDS cost of revenue;
Previous report
a $9.9 million, or 12.2%, increase in MS cost of revenue.
Previous report
the 1.0% decrease in branch and regional administrative expenses as a percentage of revenue for the fiscal year ended December 30, 2023, as compared to the fiscal year ended December 31, 2022.
Previous report
lower professional services as a result of reductions in integration related expenses due to fewer acquired business integration activities during the year;
Previous report
lower compensation and benefits primarily as a result ofthe incremental compensation and severance benefits incurred in fiscal year 2022 related to the executive transition plan effective on December 31, 2022; and
Previous report
lower public company insurance costs.
Previous report
Depreciation and amortization was $13.8 million for the fiscal year ended December 30, 2023, compared to $21.3 million for the fiscal year ended December 31, 2022, a decrease of $7.5 million, or 35.4%. The $7.5 million decrease primarily resulted from certain intangible assets acquired in connection with the acquisitions of Comfort Care and Accredited being fully amortized in 2022 and early 2023. Additionally, fewer capitalized expenses were incurred in 2023, which has led to a decrease in depreciation and amortization expense as older assets become fully depreciated.
Previous report
Other Operating (Income) Expense
Previous report
Interest expense, net of interest income was $152.9 million for the fiscal year ended December 30, 2023, compared to $107.0 million for the fiscal year ended December 31, 2022, an increase of $45.9 million, or 42.9%. Interest expense increased primarily due to significant increases in interest rates, largely because the Federal Reserve Board increased the U.S. federal funds rate from the beginning of 2022 and through the third quarter of fiscal year 2023. Interest expense for fiscal year 2023 was also higher as a result of increased net borrowing on the Securitization Facility (as defined below). The Securitization Facility had an outstanding balance of $155.0 million as of December 30, 2023 compared to $140.0 million as of December 31, 2022.
Previous report
Represents costs incurred as a result of the COVID-19 environment in fiscal year 2022, primarily including, but not limited to, (i) relief, vaccine, and hero pay provided to our caregivers; staffing and retention related incentives to attract and retain caregivers in the midst of the Omicron surge; and other incremental compensation costs; (ii) sick leave for our caregivers required by OSHA's Emergency Temporary Standard, costs required to comply with federal, state and local vaccination mandates and testing requirements, and worker compensation costs for mandated quarantine time; (iii) incremental PPE costs; and (iv) salary, severance and lease termination costs associated with workforce reductions necessitated by COVID-19; net of temporary reimbursement rate increases provided by certain state Medicaid and Medicaid Managed Care programs. There were no such costs incurred during fiscal year 2023.
Previous report
In March 2023, in connection with a $19.8 million legal judgment rendered against us, we posted an $18.4 million appellate bond with the court. The $18.4 million appellate bond was collateralized with $15.0 million of letters of credit and $3.4 million of cash collateral. In July 2023, we reached a confidential settlement agreement with the plaintiffs to release all claims and extinguish the aforementioned judgment in exchange for a settlement payment covered by our insurance policy. During the quarter ended September 30, 2023, we secured the return of the $15.0 million of letters of credit and $3.4 million of cash collateral.
Previous report
In connection with a settlement agreement we entered into in March 2023 with the sellers of Epic/Freedom LLC and other defendants (collectively, the “Defendants”), we funded $6.8 million in April 2023 to an escrow account for the purposes of settling certain tax audits with the Internal Revenue Service (the “IRS”), which have been effectively settled with the IRS. As the audits have effectively concluded, these escrowed funds will be used to satisfy any additional charges and penalties to the IRS. To the extent that the amount of penalties and interest due to the IRS exceeds the escrowed funds, we as the taxpayer, will be required to fund such excess, but we have contractual rights to reimbursement from the Defendants.
Previous report
On February 21, 2024, Change Healthcare, a subsidiary of UnitedHealth Group that acts as an intermediary for processing certain payment claims we submit through certain third-party revenue cycle management solutions for payors (“third-party vendors”), notified our third-party vendors of a cybersecurity incident. In response to the incident, both our third-party vendors and Change Healthcare severed the service connections between their respective systems. The Change Healthcare incident has not affected our operations, except our ability to submit payment claims through these particular third-party vendors. In the event the Change Healthcare service is not restored in a timely fashion, we may experience payment collection delays as we turn to alternative channels to submit certain claims. As of the date hereof, the incident has affected approximately sixteen business days of billings for certain claims and could, depending on when Change Healthcare restores its service or our full implementation of alternative claims submission arrangements, result in an increase in our patient accounts receivable balances and a decrease in our Net cash provided by (used in) operating activities for the first quarter of 2024. We expect to fund any increase in working capital resulting from the billing and payment disruption through cash on hand and draws on our Securitization Facility and Revolving Credit Facility.
Previous report
$59.7 million in net proceeds drawn under the Delayed Draw Term Loan Facility;
Previous report
Interest associated with the 2021 Extended Term Loan includes interest expense and commitment fees of $7.3 million during the year ended December 31, 2022 related to the Delayed Draw Term Loan Facility (as defined below). The Company terminated the Delayed Draw Term Loan Facility commitment in November 2022. No interest expense or commitment fees were incurred in 2023 related to the Delayed Draw Term Loan Facility.
Previous report
On February 9, 2022 we entered into a five-year, $880.0 million notional interest rate cap agreement with a cap rate of 3.0% of LIBOR. During the second quarter of 2023, the Company amended its interest rate cap agreements to provide that the counterparty will pay the Company the amount by which SOFR exceeds 2.96%.
Previous report
On November 12, 2021, we entered into a three-year Securitization Facility (the “Securitization Facility”) which increases the Company’s borrowing capacity by collateralizing a portion of our patient accounts receivable at favorable interest rates relative to our 2021 Extended Term Loan. The maximum amount available under the Securitization Facility was initially $150.0 million, subject to maintenance of certain borrowing base requirements. Please see Note 7 –Securitization Facility, to the audited Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further discussion related to the Securitization Facility. On August 8, 2022, we amended our Securitization Facility to increase the maximum amount available to $175.0 million, subject to maintaining certain borrowing base requirements. On July 31, 2023, we amended our Securitization Facility to extend its maturity date from November 12, 2024 to July 31, 2026. The facility accrues interest at a rate equal to the SOFR rate, plus a CSA, plus an applicable margin.
Previous report
On July 15, 2021 we entered into an Extension Amendment (the “Extension Amendment”) to our First Lien Credit Agreement, originally dated as of March 16, 2017, with Barclays Bank, as administrative agent, the collateral agent, a letter of credit issuer, and swingline lender, and the lenders and other agents party thereto from time to time (as amended to date, the “First Lien Credit Agreement”). The Extension Amendment converted outstanding balances under all remaining first lien term loans into a single term loan in an aggregate principal amount of $860.0 million (the “2021 Extended Term Loan”), and extended the maturity date to July 2028. The Extension Amendment also provided for a delayed draw term loan facility (the “Delayed Draw Term Loan Facility”) in an aggregate principal amount of $200.0 million, which permitted us to incur senior secured first lien term loans (the “Delayed Draw Term Loans”) from time to time until July 15, 2023, in each case subject to certain terms and conditions. On August 9, 2022, we borrowed $60.0 million under the Delayed Draw Term Loan Facility to replace cash on our balance sheet previously used to complete acquisitions in the fourth quarter of fiscal year 2021, which $60.0 million borrowing under the Delayed Draw Term Loan Facility has similar terms as the 2021 Extended Term Loan so is presented on a combined basis with the 2021 Extended Term Loan in the table above. We terminated the remaining available amount of $140.0 million under the Delayed Draw Term Loan Facility on November 16, 2022.
Previous report
The 2021 Extended Term Loan and the Delayed Draw Term Loan bear interest, at the Company’s election, at a variable interest rate based on either SOFR (subject to a minimum of 0.50%), or prime or federal funds rate (“Annual Base Rate” or “ABR”) (subject to a minimum of 2.00%) for the interest period relevant to such borrowing, plus a CSA of 0.10% and an applicable margin of 3.75% for loans accruing interest based on SOFR and an applicable margin of 2.75% for loans accruing interest based on ABR. As of December 30, 2023, the principal amount of the 2021 Extended Term Loan accrued interest at a rate of 9.24%.
Previous report
On March 23, 2023 we amended our senior secured revolving credit facility under the First Lien Credit Agreement (the “Revolving Credit Facility”) to increase the sublimit for letters of credit to $40.0 million from $30.0 million. The other terms of the Revolving Credit Facility remained unchanged by such amendment. Revolving loans bear interest, at our election, at a variable interest rate based on either SOFR (subject to a minimum of 0.50%) for the interest period relevant to such borrowing or ABR (subject to a minimum of 2.00%), plus an applicable margin of 3.75% for loans accruing interest based on SOFR and an applicable margin of 2.75% for loans accruing interest based on ABR, subject to certain step downs based on our Consolidated First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement). As of December 30, 2023, borrowings under the Revolving Credit Facility accrued interest at a rate of 9.24%.
Previous report
On December 10, 2021, the Company entered into a Second Lien Credit Agreement (the “Second Lien Credit Agreement”) with a syndicate of lending institutions and Barclays Bank, as administrative agent and collateral agent. The Second Lien Term Loan has an aggregate principal amount of $415.0 million and a maturity date of December 10, 2029. The Second Lien Term Loan bears interest at a rate per annum equal to, at the Company’s option, either (1) an applicable margin (equal to 6.00%) plus a base rate determined by reference to the highest of (a) 0.50% per annum plus the Federal Funds Effective Rate, (b) the Prime Rate and (c) the SOFR rate for an interest period of one month plus a CSA depending on the interest period plus 1.00%; or (2) an applicable margin (equal to 7.00%) plus SOFR and a CSA depending on the interest period; provided that such rate is not lower than a floor of 0.50%. As of December 30, 2023, the principal amount of the Second Lien Term Loan accrued interest at a rate of 12.54%.
Reworded paragraphs (59)
Previous wording
Non-clinical care, including programs such as employer of record support services and personal care services.
Current wording
Non-clinical care, including programs such as support services and personal care services.
Previous wording
Our home health services involve the provision of in-home services to our patients by our clinicians, including nurses, therapists, social workers and home health aides. Our caregivers work with our patients’ physicians to deliver a personalized plan of care to our patients in their homes. Home healthcare can help our patients recover after hospitalization or surgery and assist patients in managing chronic illnesses. We also help our patients manage their medications. Through our care, we help our patients recover more fully in the comfort of their own homes, while remaining as independent as possible. Our home health services include: in-home skilled nursing services; physical, occupational and speech therapy; medical social services and aide services.
Current wording
Our home health services involve the provision of in-home services to our patients by our clinicians, who may include nurses, therapists, social workers and home health aides. Our caregivers work with our patients’ physicians to deliver a personalized plan of care to our patients in their homes. Home healthcare can help our patients recover after a hospitalization or surgery and assist patients in managing chronic illnesses. We also help our patients manage their medications. Through our care, we help our patients recover more fully in the comfort of their own homes, while remaining as independent as possible. Our home health services include: in-home skilled nursing services; physical, occupational and speech therapy; medical social services and aide services.
Previous wording
Through our Medical Solutions segment, we offer a comprehensive line of enteral nutrition supplies and other products to adults and children, delivered on a periodic or as-needed basis. We provide our patients with access to one of the largest selections of enteral formulas, supplies and pumps in our industry, with more than 300 nutritional formulas available. Our registered nurses, registered dietitians and customer service technicians support our patients 24 hours per day, 365 days per year, in-hospital, at-home, or remotely to help ensure that our patients have the best nutrition assessments, change order reviews and formula selection expertise.
Current wording
Through our Medical Solutions segment, we offer a comprehensive line of enteral nutrition supplies and other products to adults and children, delivered on a periodic or as-needed basis. We provide our patients with access to a large selection of enteral formulas, supplies and pumps in our industry, with more than 300 nutritional formulas available. Our registered nurses, registered dietitians and customer service technicians support our patients 24 hours per day, 365 days per year, in-hospital, at-home, or remotely to help ensure that our patients have the best nutrition assessments, change order reviews and formula selection expertise.
Previous wording
The following discussion of our results of operations should be read in conjunction with the foregoing tables summarizing our consolidated results of operations and key performance measures, as well as our audited consolidated financial statements contained elsewhere in this Annual Report on Form 10-K.
Current wording
The following discussion of our results of operations should be read in conjunction with the foregoing tables summarizing our consolidated results of operations and key performance measures, as well as the Consolidated Financial Statements.
Previous wording
Operating income was $8.1 million, or 0.4% of revenue, for the fiscal year ended December 30, 2023, as compared to an operating loss of $642.3 million, or 35.9% of revenue, for the fiscal year ended December 31, 2022.
Current wording
Operating income was $139.8 million, or 6.9% of revenue, for the fiscal year ended December 28, 2024, as compared to an operating income of $8.1 million, or 0.4% of revenue, for the fiscal year ended December 30, 2023, an increase of $131.7 million.
Previous wording
The change in operating income for fiscal year 2023 primarily resulted from a decrease in non-cash impairment charges of $570.2 million and a $38.5 million, or 19.6%, increase in Field contribution as compared to fiscal year 2022. The $38.5 million increase in Field contribution resulted from a $107.6 million, or 6.0%, increase in consolidated revenue and a 1.4% improvement in Field contribution margin to 12.4% for fiscal year 2023 from 11.0% for fiscal year 2022. The primary drivers of our higher Field contribution margin over the comparable fiscal year period were an increase in our gross margin percentage from 30.9% to 31.4% and a 1.0% decrease in branch and regional administrative expense as a percentage of revenue to 19.0% for fiscal year 2023 from 20.0% for fiscal year 2022.
Current wording
The change in operating income for fiscal year 2024 primarily resulted from the $105.1 million in non-cash impairment charges recorded during fiscal year 2023, and a $48.3 million, or 20.6%, increase in Field contribution as compared to fiscal year 2023. The $48.3 million increase in Field contribution resulted from a $129.3 million, or 6.8%, increase in consolidated revenue and a 1.6% improvement in Field contribution margin to 14.0% for fiscal year 2024 from 12.4% for fiscal year 2023. The primary drivers of our higher Field contribution margin over the comparable fiscal year period was a 1.6% decrease in branch and regional administrative expense as a percentage of revenue to 17.4% for fiscal year 2024 from 19.0% for fiscal year 2023.
Previous wording
The $527.5 million decrease in net loss over the comparable fiscal year periods, was primarily driven by the following:
Current wording
The $123.6 million decrease in net loss over the comparable fiscal year periods, was primarily driven by the following:
Previous wording
the previously discussed $650.3 million increase in operating income; and
Current wording
the previously discussed $131.7 million increase in operating income; and
Previous wording
an aggregate $79.7 million decrease in valuation gains on interest rate derivatives and increase in net settlements incurred with interest rate swap counterparties over the comparable periods.
Current wording
an aggregate $15.7 million decrease in valuation losses on interest rate derivatives and increase in net settlements received from interest rate derivative counterparties over the comparable periods; offset by
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a $2.7 million increase in income tax benefit; offset by
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a $20.5 million increase in income tax expense; and
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a $45.9 million increase in interest expense, net of interest income; and
Current wording
a $3.2 million increase in interest expense, net of interest income.
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Revenue was $1,895.2 million for the fiscal year ended December 30, 2023 as compared to $1,787.6 million for the fiscal year ended December 31, 2022, an increase of $107.6 million, or 6.0%. This increase resulted from the following segment activity:
Current wording
Revenue was $2,024.5 million for the fiscal year ended December 28, 2024 as compared to $1,895.2 million for the fiscal year ended December 30, 2023, an increase of $129.3 million, or 6.8%. This increase resulted from the following segment activity:
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a $14.0 million, or 6.0%, decrease in HHH revenue; and
Current wording
a $0.8 million, or 0.4%, decrease in HHH revenue; and
Previous wording
Our PDS segment revenue growth of $103.7 million, or 7.3%, for the fiscal year ended December 30, 2023 was attributable to an increase in revenue rate of 3.8% and an increase in volume of 3.5%. The increase in PDS volume on a year over year basis was attributable to growth in demand for non-clinical services. The 3.8% increase in PDS revenue rate for the fiscal year ended December 30, 2023, as compared to the fiscal year ended December 31, 2022, resulted from reimbursement rate increases issued by various state Medicaid programs and managed Medicaid payers.
Current wording
Our PDS segment revenue growth of $115.8 million, or 7.6%, for the fiscal year ended December 28, 2024 was attributable to an increase in volume of 4.4% and an increase in revenue rate of 3.2%. The increase in PDS volume on a year over year basis was attributable to growth in demand for non-clinical services.
Previous wording
Our HHH segment revenue decline of $14.0 million, or 6.0%, for the fiscal year ended December 30, 2023 resulted primarily from a decline in volumes over the comparable fiscal year period, partially offset by a shift in the composition of services provided toward episodic admissions.
Current wording
Our HHH segment revenue decline of $0.8 million, or 0.4%, for the fiscal year ended December 28, 2024 resulted primarily from a decline in non-episodic volumes over the comparable fiscal year period. While home health total admissions declined 8.0% over the comparable period, total segment revenue declined by a lower rate primarily due to the 4.6% improvement in home health episodic mix.
Previous wording
Our MS segment revenue growth of $17.8 million, or 12.7%, for the fiscal year ended December 30, 2023, as compared to the fiscal year ended December 31, 2022, was attributable to 8.8% volume growth combined with an increase in revenue rate of 3.9% over the comparable period.
Current wording
Our MS segment revenue growth of $14.3 million, or 9.1%, for the fiscal year ended December 28, 2024, as compared to the fiscal year ended December 30, 2023, was attributable to 5.5% volume growth combined with an increase in revenue rate of 3.6% over the comparable period.
Previous wording
Cost of revenue, excluding depreciation and amortization, was $1,299.8 million for the fiscal year ended December 30, 2023, as compared to $1,234.4 million for the fiscal year ended December 31, 2022, an increase of $65.4 million, or 5.3%. This increase resulted from the following segment activity:
Current wording
Cost of revenue, excluding depreciation and amortization, was $1,389.0 million for the fiscal year ended December 28, 2024, as compared to $1,299.8 million for the fiscal year ended December 30, 2023, an increase of $89.2 million, or 6.9%. This increase resulted from the following segment activity:
Previous wording
a $17.0 million, or 13.0%, decrease in HHH cost of revenue; and
Current wording
a $12.5 million, or 10.9%, decrease in HHH cost of revenue; and
Previous wording
The 7.1% increase in PDS cost of revenue for the fiscal year ended December 30, 2023 resulted from thepreviously described 3.5% increase in PDS volume for the fiscal year ended December 30, 2023 and a 3.6% increase in PDS cost of revenue rate. The 3.6% increase in cost of revenue rate primarily resulted from higher caregiver labor costs, including pass-through of reimbursement rate increases received by the Company during the fiscal year ended December 30, 2023, net of $5.0 million lower general and professional liability expense associated with certain accrued legal settlements.
Current wording
The 8.7% increase in PDS cost of revenue for the fiscal year ended December 28, 2024 resulted from thepreviously described 4.4% increase in PDS volume for the fiscal year ended December 28, 2024 and a 4.3% increase in PDS cost of revenue rate. The 4.3% increase in cost of revenue rate primarily resulted from higher caregiver labor costs, including pass-through of reimbursement rate increases.
Previous wording
The 13.0% decrease in HHH cost of revenue for the fiscal year ended December 30, 2023 was driven by decreased volumes.
Current wording
The 10.9% decrease in HHH cost of revenue for the fiscal year ended December 28, 2024 was driven by a decline in HHH non-episodic volumes and improvements in HHH caregiver utilization.
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The 12.2% increase in MS cost of revenue for the fiscal year ended December 30, 2023 was driven by the previously described 8.8% growth in MS volumes during fiscal year 2023 and a 3.4% increase in cost of revenue rate.
Current wording
The 7.2% increase in MS cost of revenue for the fiscal year ended December 28, 2024 was driven by the previously described 5.5% growth in MS volumes during fiscal year 2024 and a 1.7% increase in cost of revenue rate.
Previous wording
Gross margin was $595.4 million, or 31.4% of revenue, for the fiscal year ended December 30, 2023, as compared to $553.2 million, or 30.9% of revenue, for the fiscal year ended December 31, 2022. Gross margin increased $42.2 million, or 7.6%, year over year. The 0.5% increase in gross margin percentage for the fiscal year ended December 30, 2023 resulted from the combined changes in our revenue rates and cost of revenue rates in our PDS and MS segments, which we refer to as the change in our spread rate, and the change in gross margin percentage in our HHH segment, as follows:
Current wording
Gross margin was $635.5 million, or 31.4% of revenue, for the fiscal year ended December 28, 2024, as compared to $595.4 million, or 31.4% of revenue, for the fiscal year ended December 30, 2023. Gross margin increased $40.1 million, or 6.7%, year over year. Gross margin percentage was unchanged for the fiscal year ended December 28, 2024 compared to the fiscal year ended December 30, 2023. The increase in gross margin resulted from the combined changes in our revenue rates and cost of revenue rates in our PDS and MS segments, which we refer to as the change in our spread rate, and the change in gross margin percentage in our HHH segment, as follows:
Previous wording
a 4.5% increase in PDS spread rate from $10.20 to $10.64, driven by the 3.8% increase in PDS revenue rate, net of the 3.6% increase in PDS cost of revenue rate;
Current wording
a 0.5% increase in PDS spread rate from $10.64 to $10.69, driven by the 3.2% increase in PDS revenue rate, net of the 4.3% increase in PDS cost of revenue rate;
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a 4.7% increase in MS spread rate from $184.06 to $192.09, driven by the 3.9% increase in MS revenue rate, net of the 3.4% increase in MS cost of revenue rate; and
Current wording
a 6.1% increase in MS spread rate from $192.08 to $203.24, driven by the 3.6% increase in MS revenue rate, net of the 1.7% increase in MS cost of revenue rate; and
Previous wording
our HHH segment, in which gross margin percentage increased by 4.2%.
Current wording
our HHH segment, in which gross margin percentage increased by 5.5%.
Previous wording
Branch and regional administrative expenses were $361.0 million, or 19.0% of revenue, for the fiscal year ended December 30, 2023, as compared to $357.2 million, or 20.0% of revenue, for the fiscal year ended December 31, 2022, an increase of $3.7 million, or 1.0%.
Current wording
Branch and regional administrative expenses were $352.8 million, or 17.4% of revenue, for the fiscal year ended December 28, 2024, as compared to $361.0 million, or 19.0% of revenue, for the fiscal year ended December 30, 2023, a decrease of $8.2 million, or 2.3%.
Previous wording
The 1.0% increase in branch and regional administrative expenses was lower than our revenue growth of 6.0% for the fiscal year ended December 30, 2023, as compared to the fiscal year ended December 31, 2022. The 1.0% decrease in branch and regional administrative expenses as a percentage of revenue was primarily due to operational efficiencies realized as a result ofrestructuring portions of our branch and regional operating structure. In the third quarter of fiscal year 2022, we began restructuring our branch and regional administrative footprint to appropriately size our resources to current volumes, and we continued to focus on these initiatives in 2023.
Current wording
The 2.3% decrease in branch and regional administrative expenses was for the fiscal year ended December 28, 2024, as compared to the fiscal year ended December 30, 2023, was primarily due to the positive effects of restructuring portions of our branch and regional operating structure, which resulted in the overall 1.6% decrease in branch and regional administrative expenses as a percentage of revenue over the comparable period.
Previous wording
Field contribution was $234.5 million, or 12.4% of revenue, for the fiscal year ended December 30, 2023 as compared to $196.0 million, or 11.0% of revenue, for the fiscal year ended December 31, 2022, an increase of $38.5 million, or 19.6%. The 1.4% increase in Field contribution margin for the fiscal year ended December 30, 2023 resulted from the following:
Current wording
Field contribution was $282.7 million, or 14.0% of revenue, for the fiscal year ended December 28, 2024 as compared to $234.5 million, or 12.4% of revenue, for the fiscal year ended December 30, 2023, an increase of $48.3 million, or 20.6%. The 1.6% increase in Field contribution margin for the fiscal year ended December 28, 2024 is primarily driven by the 1.6% decrease in branch and regional administrative expenses as a percentage of revenue for the fiscal year ended December 28, 2024, as compared to the fiscal year ended December 30, 2023.
Previous wording
Corporate expenses were $113.0 million, or 6.0% of revenue, for the fiscal year ended December 30, 2023, as compared to $137.9 million, or 7.7% of revenue, for the fiscal year ended December 31, 2022. The $24.8 million or 18.0% decrease in year over year corporate expenses resulted primarily from:
Current wording
Corporate expenses were $125.4 million, or 6.2% of revenue, for the fiscal year ended December 28, 2024, as compared to $113.0 million, or 6.0% of revenue, for the fiscal year ended December 30, 2023. The $12.4 million or 10.9% increase in year over year corporate expenses resulted primarily from higher compensation and benefits and higher non-cash share-based compensation costs.
Previous wording
Goodwill impairment was $105.1 million for the fiscal year ended December 30, 2023, as compared to $675.3 million for the fiscal year ended December 31, 2022, a decrease of $570.2 million. During the fiscal year ended December 30, 2023, we recorded an impairment charge as a result of continued challenges in the labor markets which resulted in anticipated volume not being actualized to forecasted levels in the reporting unit within our HHH segment. We performed an interim impairment test during the third quarter of fiscal year 2023 due to the noted labor market factors. We performed an interim impairment assessment as of September 30, 2023 and determined that the carrying value of thereporting unit within our HHH segment exceeded its respective fair value, and we accordingly recorded an aggregate goodwill impairment charge of $105.1 million for the three-month period ended September 30, 2023. During fiscal year 2022, we recorded two impairment charges as a result of continuing inflationary and overall cost pressures, which had the effect of constraining patient volume growth in relation to costs across most of our businesses. We performed an interim impairment assessment as of July 2, 2022 and based on that assessment, we determined that the carrying value of five of our six reporting units across our three segments exceeded their respective fair values and accordingly recorded an aggregate goodwill impairment charge of $470.2 million for the three-month period ended July 2, 2022. During our annual goodwill impairment test during the fourth quarter of fiscal year 2022, we determined that the carrying value of five of our six reporting units across our three segments exceeded their respective fair values and accordingly recorded an aggregate goodwill impairment charge of $205.1 million during the three-month period ended December 31, 2022.
Current wording
During the fiscal year ended December 30, 2023, we recorded an impairment charge of $105.1 million as a result of challenges in the labor markets which resulted in anticipated volume not being actualized to forecasted levels in the reporting unit within our HHH segment. Due to such labor market factors, we performed an interim impairment assessment as of September 30, 2023 and determined that the carrying value of thereporting unit within our HHH segment exceeded its fair value. There was no goodwill impairment recorded for the fiscal year ended December 28, 2024.
Previous wording
Other operating income was $6.0 million for the fiscal year ended December 30, 2023, compared to other operating expense of $3.7 million. The $9.7 million increase primarily related to a $5.1 million non-cash gain on the acquisition of a business recorded during the fiscal year ended December 30, 2023 and a release of reserve of $3.6 million related to the settlement of a legal matter resulting from a 2020 acquisition.
Current wording
Other operating expense was $5.3 million for the fiscal year ended December 28, 2024, compared to other operating income of $6.0 million. The $11.3 million decrease in other operating income primarily resulted from impairment of a certain facility lease asset recorded in the 2024 fiscal year, and both a favorable $5.1 million non-cash gain on the acquisition of a business license and other net assets and a $3.6 million acquisition related legal settlement, recorded in the fiscal year ended December 30, 2023.
Previous wording
Other income was $5.9 million forthe fiscal year ended December 30, 2023, compared to other income of $85.5 million forthe fiscal year ended December 31, 2022, a decrease of $79.7 million. We realized a $113.6 million decrease in non-cash valuation gains associated with interest rate derivatives in fiscal year 2023 resulting from changes in market expectations of future interest rates in the comparable periods. The decrease in other income was offset by an increase in net settlements with interest rate derivative counterparties of $34.0 million as interest rates increased compared to be the prior year, resulting in net cash received from interest rate derivative counterparties. Details of other income (expense) included the following:
Current wording
Other income was $21.4 million forthe fiscal year ended December 28, 2024, compared to other income of $5.9 million forthe fiscal year ended December 30, 2023, an increase of $15.5 million. We realized a $13.1 million decrease in non-cash valuation losses associated with interest rate derivatives in fiscal year 2024 resulting from changes in market expectations of future interest rates in the comparable periods, as well as a $2.7 million improvement in net settlements with interest rate derivative counterparties as interest rates increased compared to the prior year period due to higher market interest rates. Details of other income included the following:
Previous wording
We incurred income tax benefit of $4.5 million for the fiscal year ended December 30, 2023, as compared to income tax benefit of $1.8 million for the fiscal year ended December 31, 2022, a net 151.2% increase. This increase in tax benefit was primarily driven by the release of uncertain tax positions, as well as changes in federal and state valuation allowances, changes in uncertain tax positions, and federal and state current tax expense.
Current wording
We incurred income tax expense of $16.0 million for the fiscal year ended December 28, 2024, as compared to income tax benefit of $4.5 million for the fiscal year ended December 30, 2023, a net 457.8% increase in income tax expense. This increase in tax expense was primarily driven by the increases to uncertain tax positions, as well as changes in federal and state valuation allowances, and federal and state current tax expense.
Previous wording
EBITDA and Adjusted EBITDA are non-GAAP financial measures and are not intended to replace financial performance measures determined in accordance with U.S. GAAP, such as net loss. Rather, we present EBITDA and Adjusted EBITDA as supplemental measures of our performance. We define EBITDA as net loss before interest expense, net; income tax benefit; and depreciation and amortization. We define Adjusted EBITDA as EBITDA, adjusted for the impact of certain other items that are either non-recurring, infrequent, non-cash, unusual, or items deemed by management to not be indicative of the performance of our core operations, including impairments of goodwill, intangible assets, and other long-lived assets; non-cash, share-based compensation; loss on extinguishment of debt; fees related to debt modifications; the effect of interest rate derivatives; acquisition-related and integration costs; legal costs and settlements associated with acquisition matters; COVID-19 related costs; restructuring costs; other legal matters; other system transition costs, professional fees; and other costs including gains and losses on acquisitions and dispositions of certain businesses. As non-GAAP financial measures, our computations of EBITDA and Adjusted EBITDA may vary from similarly termed non-GAAP financial measures used by other companies, making comparisons with other companies on the basis of this measure impracticable.
Current wording
EBITDA and Adjusted EBITDA are non-GAAP financial measures and are not intended to replace financial performance measures determined in accordance with U.S. GAAP, such as net loss. Rather, we present EBITDA and Adjusted EBITDA as supplemental measures of our performance. We define EBITDA as net loss before interest expense, net; income tax expense or benefit; and depreciation and amortization. We define Adjusted EBITDA as EBITDA, adjusted for the impact of certain other items that are either non-recurring, infrequent, non-cash, unusual, or items deemed by management to not be indicative of the performance of our core operations, including impairments of goodwill, intangible assets, and other long-lived assets; non-cash, share-based compensation; loss on extinguishment of debt; fees related to debt modifications; the effect of interest rate derivatives; acquisition-related and integration costs; legal costs and settlements associated with acquisition matters; restructuring costs; other legal matters; other system transition costs, professional fees; and other costs including gains and losses on acquisitions and dispositions of certain businesses. As non-GAAP financial measures, our computations of EBITDA and Adjusted EBITDA may vary from similarly termed non-GAAP financial measures used by other companies, making comparisons with other companies on the basis of this measure impracticable.
Previous wording
Represents (i) costs associated with our Integration Management Office, which focuses on our integration efforts and transformational projects such as systems conversions and implementations, material cost reduction and restructuring projects, among other things, of $1.5 million and $2.8 million for the fiscal years ended December 30, 2023 and December 31, 2022, respectively; and (ii) transitionary costs incurred to integrate acquired companies into our field and corporate operations of $0.8 million and $15.0 million for the fiscal years ended December 30, 2023 and December 31, 2022, respectively. Transitionary costs incurred to integrate acquired companies include IT consulting costs and related integration support costs; salary, severance and retention costs associated with duplicative acquired company personnel until such personnel are exited from the Company; accounting, legal and consulting costs; expenses and impairments related to the closure and consolidation of overlapping markets of acquired companies, including lease termination and relocation costs; costs associated with terminating legacy acquired company contracts and systems; and one-time costs associated with rebranding our acquired companies and locations to the Aveanna brand.
Current wording
Represents (i) costs associated with our Integration Management Office, which focuses on our integration efforts and transformational projects such as systems conversions and implementations, material cost reduction and restructuring projects, among other things, of $1.0 million and $1.5 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively; and (ii) transitionary costs incurred to integrate acquired companies into our field and corporate operations of $0.2 million and $0.8 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively. Transitionary costs incurred to integrate acquired companies include IT consulting costs and related integration support costs; salary, severance and retention costs associated with duplicative acquired company personnel until such personnel are exited from the Company; accounting, legal and consulting costs; expenses and impairments related to the closure and consolidation of overlapping markets of acquired companies, including lease termination and relocation costs; costs associated with terminating legacy acquired company contracts and systems; and one-time costs associated with rebranding our acquired companies and locations to the Aveanna brand.
Previous wording
Represents legal and forensic costs, as well as settlements associated with resolving legal matters arising during or as a result of our acquisition-related activities. This primarily includes (i) costs of $0.3 million and $3.8 million for the fiscal years ended December 30, 2023 and December 31, 2022, respectively, to comply with the U.S. Department of Justice, Antitrust Division’s grand jury subpoena related to nurse wages and hiring activities in certain of our markets, in connection with a terminated transaction and (ii) release of reserve of ($3.6) million during the fiscal year ended December 30, 2023, related to the settlement of a legal matter resulting from a 2020 acquisition.
Current wording
Represents legal and forensic costs, as well as settlements associated with resolving legal matters arising during or as a result of our acquisition-related activities. This primarily includes (i) costs of $1.1 million and $0.3 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively, to comply with the U.S. Department of Justice, Antitrust Division’s grand jury subpoena related to nurse wages and hiring activities in certain of our markets, in connection with a terminated transaction and (ii) release of reserve of ($3.6) million during the fiscal year ended December 30, 2023, related to the settlement of a legal matter resulting from a 2020 acquisition.
Previous wording
Represents costs associated with restructuring our branch and regional administrative footprint as well as our corporate overhead infrastructure costs in order to appropriately size our resources to current volumes, including (i) branch and regional salary and severance costs; (ii) corporate salary and severance costs; (iii) rent and lease termination costs associated with the closure of certain office locations; and (iv) certain consulting costs related to the restructuring of our branch and regional administrative footprint. Restructuring costs also include compensation, severance and related benefits costs associated with the executive transition plan effective on December 31, 2022.
Current wording
Represents costs associated with restructuring our branch and regional administrative footprint as well as our corporate overhead infrastructure costs in order to appropriately size our resources to current volumes, including (i) branch and regional salary and severance costs; (ii) corporate salary and severance costs; (iii) rent and lease termination costs associated with the closure of certain office locations. Restructuring costs also include compensation, severance and related benefits costs associated with an executive transition plan initiated in the first quarter of 2024.
Previous wording
Represents activity related to accrued legal settlements, related costs, and expenses associated with certain judgments and arbitration awards rendered against the Company related to a civil litigation matter in Texas, where certain insurance coverage is in dispute.
Current wording
Represents activity related to accrued legal settlements, related costs, and expenses associated with certain judgments and arbitration awards rendered against the Company where certain insurance coverage is in dispute.
Previous wording
Represents (i) costs associated with the implementation of, and transition to, new electronic medical record systems and billing and collection systems, duplicative system costs while such transformational projects are in-process, and other system transition costs of $1.3 million and $6.0 million for the fiscal years ended December 30, 2023 and December 31, 2022, respectively; and (ii) professional fees associated with Sarbanes-Oxley compliance of $3.2 million for the fiscal year ended December 31, 2022, no such costs were incurred for the fiscal year ended December 30, 2023; and (iii) a ($5.1) million non-cash gain on the acquisition of a business in the fiscal year ended December 30, 2023 and ($0.2) million of net gains on disposal of businesses during the fiscal year ended December 31, 2022; and (iv) certain other costs or (income) that are either non-cash or non-core to the Company’s ongoing operations of ($1.4) million and $0.1 million for the fiscal years ended December 30, 2023 and December 31, 2022, respectively.
Current wording
Represents (i) costs associated with the implementation of, and transition to, new electronic medical record systems and billing and collection systems, duplicative system costs while such transformational projects are in-process, and other system transition costs of $1.3 million for the fiscal year ended December 30, 2023; (ii) a ($5.1) million non-cash gain on the acquisition of a business in the fiscal year ended December 30, 2023; and (iii) certain other costs or (income) that are either non-cash or non-core to the Company’s ongoing operations of ($0.8) million and ($1.4) million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively.
Previous wording
Field contribution margin to make business decisions and assess the operating performance and results delivered by our core field operations, prior to corporate and other costs not directly related to our field operations. These metrics are also important because they guide us in determining whether or not our branch and regional administrative expenses are appropriately sized to support our caregivers and direct patient care operations. Additionally, Field contribution and Field contribution margin determine how effective we are in managing our field supervisory and administrative costs associated with supporting our provision of services and sale of products.
Current wording
Management believes Field contribution and Field contribution margin are helpful in highlighting trends in our core operating performance and evaluating trends in our branch and regional results, which can vary from year to year. We use Field contribution and Field contribution margin to make business decisions and assess the operating performance and results delivered by our core field operations, prior to corporate and other costs not directly related to our field operations. These metrics are also important because they guide us in determining whether or not our branch and regional administrative expenses are appropriately sized to support our caregivers and direct patient care operations. Additionally, Field contribution and Field contribution margin determine how effective we are in managing our field supervisory and administrative costs associated with supporting our provision of services and sale of products.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The 3.2% increase in PDS revenue rate for the fiscal year ended December 28, 2024, as compared to the fiscal year ended December 30, 2023, resulted primarily from reimbursement rate increases issued by various state Medicaid programs and managed Medicaid payers and increases in value-based payments, offset by increases in implicit price concessions.
Current report — wording carried from elsewhere
$15.5 million in net proceeds from settlements with interest rate swap counterparties;
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
the 0.5% increase in gross margin percentage in the fiscal year ended December 30, 2023, as compared to the fiscal year ended December 31, 2022; and
Previous report — wording carried elsewhere
Management believes Field contribution and Field contribution margin are helpful in highlighting trends in our core operating performance and evaluating trends in our branch and regional results, which can vary from year to year. We use Field contribution and