Good morning and welcome to Aviana Healthcare Holdings' third quarter 2026 earnings conference call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the call over to Debbie Stewart, Aviana's chief accounting officer. Please go ahead.

Good morning and welcome to Aviana's third quarter 2026 earnings call. I am Debbie Stewart, the company's chief accounting officer. With me today is Jeff Shaner, our Chief Executive Officer, and Matt Buckhalter, our Chief Financial Officer. During this call, we will make forward-looking statements. Risk factors that may impact those statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we file with the SEC. The company does not undertake any duty to update such forward-looking statements. Additionally, During today's call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these measures can be found in this morning's press release, which is posted on our website, aviana.com, and in our most recent quarterly report on Form 10-Q when filed. With that, I will turn the call over to Aviana's Chief Executive Officer, Jeff Shaner. Jeff?

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 Q3 results and how we are finishing full year 2026 with solid momentum. My initial comments will briefly highlight our third 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 Family First integration, how we are progressing with our 2026 strategic initiatives, our enhanced guidance and reconfirm our long-term growth outlook before turning the call over to Matt. Let's move to highlights for the third quarter. Revenue for the third quarter was $695.5 million, representing an 11.8% increase over the prior year period. Third quarter adjusted EBITDA was $100.1 million, representing a 25% 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 Aviano resume the growth trajectory that we believed 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 burgeoning 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 Q3 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 three of our operating 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 three of our business segments. Since our second quarter earnings call, I am pleased with the continued progress we have made on several of our rate improvement initiatives, with both government and preferred payer partners, as well as continued signs of improvement in the caregiver labor markets. Specifically, as it relates to our private duty services business, our 2026 government affairs strategy was twofold. First, to enhance our advocacy presence with both federal and state legislatures. And second, to achieve mid single digit state rate enhancements. As of Q3, We have achieved eight state rate enhancements year-to-date and have shifted our focus to the 2027 legislative agenda. Our messaging of lowering the total cost of care and keeping our medically fragile patients in the comfort of their home continues to resonate well with our state government partners. As we communicated in Q2, after four years of dedicated advocacy and focus on the state of California, We are expecting a significant investment in PDN rates effective January 1, 2027. We have engaged extensively with the Department of Health and Community Services, known as DHCS, on the adjudication of this rate investment in California. DHCS has validated that the 2027 California budget includes a hard dollar investment for PDN rates of approximately $30 million, with the understanding that CMS will match it with their 50% FMAP matching or an additional $30 million for a total PDN rate investment of $60 million. DHCS believes this $60 million investment is a supplemental payment for the 2027 budget period of January 1, 2027 through June 30, 2027. The department has communicated that it will most likely apply this supplemental rate increase in addition to the PDM base rates for effectively all PDM patients covered by Medi-Cal. We are working with Governor Newsom and Governor-Elect Becerra to ensure the supplemental payment continues to be included in the California budget as a permanent rate increase to the PDM rate structure. We have every intention of passing material wage improvements onto our caregivers in concert with the permanent rate enhancement. We will continue to communicate and advocate with the Governor's Office, California Legislature, and the Department of Health and Community Services until a permanent rate and wage solution is in place. Now, moving on to our PDS Preferred Initiatives. As of Q3, we have achieved our goal of 38 PDS Preferred Payers. We signed one additional preferred payer agreement in the quarter and now expect to land closer to 40 agreements by the end of 2026. Aviana's preferred payer strategy continues to gain momentum and allows us to invest in caregiver wages and recruitment efforts to accelerate hiring and staffing of nurses for our payer partners. Additionally, our Q3 preferred payer agreements now account for 65% of our total PDS MCO volumes up from 57% at the end of 2025. This positive momentum in preferred payer volumes continues to highlight the shift in our caregiver capacity and recruitment efforts towards our preferred payer partners. Moving to our preferred payer progress in home health. Our goal for 2026 was to maintain our episodic mix above 75% while returning to a more normalized growth rate. I'm pleased to report in Q3 our episodic mix was 80% and our total episodic volume growth was 24% compared with the prior year period. Our growth was fueled by an impressive 19.6% episodic admission growth compared with the prior year period. Furthermore, we signed two additional episodic agreements in Q3 for a total of 52 agreements year-to-date. While we have exceeded our preferred payer and our organic growth goals in home health, we continue to lean into our payer partners. Our dedicated focus on aligning our home health care group capacity with those payers willing to reimburse us on an episodic basis has led to double-digit year-over-year growth in home health admissions and episodes, as well as improvement in our clinical and financial outcomes. Lastly, We're pleased with CMS's final home health rule published on November 4th, as well as the final hospice rule published on August 6th. The 2027 final home health rate shows positive movement by CMS aligned with a strong collaboration from the National Alliance for Care at Home. While there is still work to be done addressing the temporary adjustment and its impact on the annual home health rate, we have come a long way as an industry. We believe the stability of the home health and hospice rate structure are important as we continue to meet the increasing demand for America's aging population cared for in the comfort of their home. Finally, as we have achieved our desired preferred payer model in both private duty services and home health and hospice, we are executing a similar strategy in our medical solutions business. As of Q3, we have a total of 22 preferred payer agreements having added two in the quarter. 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 very pleased with our Q3 volume growth of approximately 98,000 unique patients served or positive 7.7% over the prior year period. As we think about medical solutions revenue growth, I expect us to remain in the high single digits consistent with our long-term growth projections. We are encouraged by our rate increases, preferred payer agreements, and subsequent growth in our business. 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 Aviana is a comprehensive platform with a diverse payer base providing a cost effective, high quality alternative to higher cost care settings. Now, turning to our acquisition of Family First Home Care, which we closed in June of this year. We are progressing nicely with the integration and have completed essentially all the back office functions in Q3. Our leadership teams continue to focus on exceptional clinical care and supporting our branches as we navigate the necessary in market and EMR integrations. I expect us to wrap up the majority of the Family First integration efforts by the end of Q4. I believe the Family First acquisition is a great example of how Aviana will continue to grow inorganically and deliver our balance sheet at the same time. I look forward to more Family First type acquisitions in 2027. Additionally, let me comment on our strategic plan and Enhanced Outlook for 2026. We will continue to focus our efforts on five primary strategic initiatives. First, strengthening our partnerships with government payers and preferred payers, government partners and preferred payers, excuse me, to create additional capacity and growth. Second, improving clinical outcomes and customer engagement scores while lowering the total cost of care. 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, continuing engagement with our leaders and employees in delivering our Aviana mission. Based on the strength of our third quarter results and the continued execution of our key strategic initiatives, We are increasing our full-year revenue and adjusted EBITDA guidance to revenue greater than $2.695 billion and adjusted EBITDA greater than $374 million. As I reflect on the continued strength of our 26 results and the improved visibility with state and federal reimbursement rates, we recently reconfirmed our long-term core organic growth rates in all three of our operating segments. As we communicated in Q2, we adjusted our long-term private duty services organic growth rate from 3% to 5% to 5% to 6%, primarily driven by the improved state government affairs and continued preferred payer execution. Also, we updated our long-term home health and hospice organic growth rates from 5% to 7% to 8% to 10%, primarily driven by the improved federal government affairs and preferred payer results. and we reconfirmed our medical solutions growth rate of eight to 10%. With the durability of our organic growth rates and thoughtful M&A, we continue to believe Aviana is well poised to achieve double digit revenue growth on an annual basis. Aviana has a strong value proposition to our federal and state government partners as well as our MCO preferred payers and these important relationships are underpinning our enhanced view on our future organic growth rates in our core business segments. We look forward to updating you on our continued execution of our business plans as we navigate the back half of 2026. With that said, let me turn the call over to Matt to provide further details on the quarter and our improved capital structure. Matt.

Thank you, Jeff, and good morning. I will first discuss our third quarter financial results and liquidity before providing additional details on our refreshed outlook for 2026. Starting with the top line, we saw revenues rise 11.8% over the prior year period to $695.5 million. We achieved year-over-year revenue growth in all three of our operating divisions, led by our home health and hospice, private duty services, and medical solutions divisions, which grew by 15.6%, 11.6% and 9.1% compared to the prior year period. Consolidated gross margin was $226.8 million or 32.6%. Consolidated adjusted EBITDA was $100.1 million, a 25% increase as compared to the prior year period. These results reflect strong execution across all three business segments and our continued focus on advancing our strategic initiatives that position us for long-term growth. Now, taking a deeper look into each of our segments. Starting with Private Duty Services, revenue for the quarter was approximately $574 million, an 11.6% increase and was driven by approximately 13 million hours of care, a volume increase of 10.2% over the prior year. Q3 revenue per hour of $44.09 was up 1.4% compared to the prior year quarter, driven by growth in our preferred payer volume. 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 $166 million of gross margin, or 28.9%. The cost of revenue rate of $31.34 in Q3 was up 45 cents, or 1.6% from the prior year period. Our Q3 spread per hour was $12.75, 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 $72.1 million, a 15.6% increase over the prior year. Revenue was driven by 11,600 total admissions, up 19.6%, with approximately 80% being episodic and 16,000 total episodes of care, up 24% from the prior year quarter. Medicare revenue per episode was $3,199 for the 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 right-sizing our margin profile and enhancing our clinical offerings. We're pleased with our Q3 gross margin of 53.3%, reflecting the team's continued focus on strong operational execution and delivering consistent results. 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 Q3. During the quarter, we produced revenue of $49.2 million, up 9.1% over the prior year period. Revenue was driven by approximately 98,000 unique patients served and revenue per UPS of approximately $502, up 1.4% over the prior year period. Gross margin was approximately $22.3 million, or 45.2% for the quarter. We're excited to see continued growth in both revenue and UPS as we begin to realize the full benefits of our modernization efforts. In summary, we remain focused on keeping our patients' 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 Aviano. With a strong momentum through Q3, we are optimistic these trends will continue throughout 2026. We will pass through wage improvements and other benefits to our caregivers and the ongoing effort and many more. Now, turning to our balance sheet and liquidity. At the end of the third quarter, we had liquidity of $492 million, representing cash on hand of $198 million, $69 million of availability under our securitization facility and $226 million of availability on a revolver, which was undrawn as of the end of the quarter. We had $24.4 million in outstanding letters of credit at the end of Q3. On the debt service front, we had approximately $1.52 billion of variable rate debt at the end of Q3. Of this amount, $1.4 billion is hedged with interest rate caps, which limits exposure to increases in SOFR. Accordingly, substantially all of our variable rate debt is hedged. Shortly after quarter end, we executed an additional interest rate cap agreement with a notional amount of $880 million that will become effective upon the expiration of our existing caps in February 2027. This new cap has a strike rate of 5.25% and extends through December 2029, aligning with our existing $520 million cap that expires at the same time. Effectively, all of our variable rate debt is hedged through December 2029. Looking at year-to-date cash flow, cash generated by operating activities was $157.5 million, and free cash flow was positive $141.2 million. We are encouraged by our strong cash collections and cost efficiency efforts, which has driven solid operating and free cash flow Thank you for joining us today. and adjusted EBITDA greater than 374 million. This improved guidance reflects continued strength in our underlying business, supported by strong organic growth and sustained demand for our services. As we reflect on Q3 results, I'd like to take a moment to express my sincere gratitude to our Aviana teammates. These strong results would not have been possible without your hard work and dedication. Looking ahead, I'm excited for the continued execution of our 2026 strategic plan and look forward to providing you with further updates at the end of Q4. With that, let me turn the call over to the operator.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Please limit yourself to one question and one follow-up. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question will come from Brian Tanquillut with Jefferies.

Good morning, guys. This is Megan Holtan for Brian Tanquillut. Congrats on another good quarter. No, it's a little bit early and you guys reconfirmed your updated LRP, but any additional color you can provide on 2027? Maybe how you're thinking about preferred payer agreements, state rate increases, or a California benefit?

Megan, good morning. Thank you so much. Yeah, I think to our comments that we had in our prepared comments, we feel very confident in how we're ending 2026. You know, just another solid year, continue to beat and raise mentality, ending the year strong, really pleased with the Family First integration. That has been a great integration. It's helped continue to fuel our preferred payer strategy in some of the core states like Florida, just like Thrive did. So I think finishing off strong in our segments, we are very proud of how all three business segments met. Matt mentioned the revenue growth rates of all three segments. I'm going to give a shout out to our Med Solutions business. That business has just come out of its modernization and is just hitting the sweet spot right now in that kind of seven and a half, eight percent growth rate. So really doing a nice job, you know, all three businesses. So finishing strong. Obviously, we've kind of moved out of 26 into our 27 legislative agenda. I know we'll talk a lot about California here this morning, but really focused on just having another great year in our preferred payer execution business. Matt, you want to add comments?

Yeah, we're still working through the 2027 budget and strategic priorities, Megan. So it's a little early for us to necessarily get into the specifics. What I can tell you is we feel really great about the momentum we're carrying into next year. Obviously coming off a really strong quarter here in Q3 and we'll continue that momentum into Q4. But overall, our strategies that got us here, like our preferred payer strategy, our government fair strategies, and of course, just focusing on great clinical outcomes, those aren't going to change. and we really don't plan on slowing down. So we're excited about the opportunities ahead, excited about carrying this momentum into 2027, but we'll update you on 2027 after Q4 results come out.

Okay, thanks. And then a quick follow-up. I know you guys were going to start hiring for California ahead of getting the rate increase. I guess, can you give us any color on how that hiring process is going and then just how we should be thinking about margins in Q4 because of that?

Yeah, I think it's important, Megan, you know, as we've spent the last two months working with California legislature, Governor Newsom's office, and the department, in our prepared remarks we talked about, the department is viewing this rate investment as a supplemental payment. And by supplemental payment, they think of it as an add-on to the base fee-for-service reimbursement rates. They agree that it belongs in the second half of 2027, the fiscal year 2027 for California, which is January 1st through June 30th. But at the moment, they're viewing it as a supplemental payment. We disagree with this philosophy. We feel like the legislative intent and Governor Newsom's intent through SB Bill 111, which is what funded this in the 27 budget, was and our minds was crystal clear that these rates intended to address long-standing and long-term workforce shortages. But we're working with the legislature as we speak, both Governor Newsom, we're also working now with Governor-elect Becerra, just to ensure that the department puts this through in the appropriate way that includes it in the 2028 budget and ongoing as a permanent rate. Matt, with that in mind, you want to talk about how we're thinking about the wage pasture?

Yeah, Megan, no impact to 2026 and Q3 or Q4. You know, overall with the nurse wages in California, we've communicated clearly with DHCS, Governor Newsom, and a legislator that we're just unable to invest meaningful dollars in base wage rates until we have certainty around the PDN rate investment. We still expect that full impact of the supplemental payment to be recognized in the first half of 2026, and we're working on retention and engagement payments for our California nurses. This is temporarily, however, and this will temporarily help the current workforce, but it's not addressing the longstanding workforce shortages. In the meantime, obviously, we're just going to continue to advocate and fight for our patients and our caregivers until we have more certainty around that reimbursement, which gives us more certainty around the wage rate as well. Thank you, Megan.

Thank you. And our next question will come from Ben Hendricks with RBC Capital Markets.

Great. Thank you very much. Just wanted to get a little color on the updated long-range plan for private duty. When we think about the state budgets and the government affairs processes, would you consider this mid-single-digit rate and eight-state enhancements that we've seen year-to-date as kind of Outperformance to your typical, what's baked into your LRP. What do we really need on a state-by-state or on a year-by-year basis from the states overall to achieve that range?

Thanks. I think it's 2026 in our mind, both on the government affairs side and on the preferred payer side, is right down the middle of the fairway for us. So not overly aggressive and not certainly conservative, kind of right where we need to be. That high mid-single digits for us is the perfect place to be in our 38 states. It's the perfect place to be. We felt like 10 was probably a little bit of a stretch this year, and it played out to be 8, so I think right in our wheelhouse. If it was 6 to 8 next year, Ben, I think we would be pleased, and it would tie to our LRPs. and if I flip over to the preferred payer execution you know we talked on this call we achieved 38 preferred payers at the end of Q3 that was our goal for the year we're going to sign a few more here in Q4 already in progress so we think we think that number kind of easily gets to 40 so it'll be a great year for PDS preferred payers the payers continue to want more from us both on the Medicaid side of the business but also on the Medicare side of the business so I think 2026 set up incredibly well. We think 2027 will be very similar as we focus both on the GA execution as well as the preferred payer execution.

Great, thanks. And then just to follow up on an earlier point, is there kind of a deadline date we need to be on lookout for for interpretation of the SB-111 in California?

No, I think as it sits today, the department is still working... We expected to have a fee-for-service schedule at that apartment about a month ago. They have struggled to work through this. It's taken longer than normal. They've held, I guess now, probably four or five different phone calls with the provider community and the California Home Care Association. We've been on all of those. We understand their stance today, Ben. And their stance really is, instead of changing the fee-for-service schedule by the approximate 40% increase, They're intending to add a supplemental hourly payment on top of the current rate. We understand how they get there. We just vehemently disagree with their position as a department. We actually just had our legislative partners, our California legislative partners, write a letter to them. It was dated November 3rd. I believe it's public at this point. Certainly we can post and share it. But it really goes into the intent of SB Bill 111 and what the intent of those legislators who drove it and passed it as well as Governor Newsom was. And the letter reads very well that it was meant to address the long-standing workforce shortages and it was intended to address wage rate over a long period of time. Matt said it and we've been crystal clear with the department and not just us but our peers as well. We cannot pass through base wage rate improvements to nurses in California until we know the wage rate is permanent In theory, forever. In the 28 budget, the department understands that. We met with Governor Newsom again. He understands that. Our legislative partners understand that. So we're all in an understanding that we're going to receive this supplemental payment in the first half of 2027, which is great. That is wonderful. As Matt said in his remarks, it just doesn't address the real issue, which is meaningful wage pass-through. So we're set to meet with Governor-elect Becerra here in a few weeks. He and his team are in charge of the 28 budget, so it really moves from Governor Newsom to Governor Becerra at this point. I'm very optimistic that Governor Becerra, one of his leading theses for California is workforce enhancement and enhancing the worker in California. This is a perfect landing place. We just need both the governor and the legislature to help direct the department that this was not a supplemental six-month investment. This is an ongoing basis to the California Medi-Cal budget from 27 forward. So the rate is going to come through on January 1. There's no drama about that. But we've been clear we cannot pass through meaningful wage base rate wage changes until such point that it is permanent not only on 27 but 28 as well. Thank you, Ben.

Thank you.

We'll go next to Raj Kumar with Stevens.

Hey, good morning. Maybe kind of speaking more broadly on the kind of government affairs and kind of the outcomes of the midterm election. I guess kind of any kind of level setting there in terms of any particular states that you think you guys stand to benefit or the provider community stands to benefit from a seat change. and kind of just speaking maybe towards broadly, what are kind of some of the early conversations that you're seeing around that for 2027?

Thanks, Raj. Good morning. Generally, we would say over a period of decades that the Democrats have been maybe deeper investors in the Medicaid system. I think that is generally widely known throughout America. I will say many of our PDN rate wins in the states have been with Republican states, Republican governors, and Republican legislators. So we've had great success on both sides of the aisle. We often point out Georgia and we often point out Massachusetts and Oklahoma and Pennsylvania. So the blue states, red states, we've been very successful in. But generally, the shift to Democrats is normally known as a good thing for Medicaid globally. I think we were clear the last couple of quarters, the one big beautiful bill, the OB-BBA bill, really did not directly impact PDN, patient population, positively or negatively. So we don't see a change from that. We don't see this new legislative agenda to unravel the OB-BBA bill. And we can be wrong on that, but we just don't see a material change from What the OBBA bill was intended to do in 27-28. So without Raj, we generally think that it's going to be a steady state, continue to lean in. A couple of our states and big states did flip. Obviously, Georgia was a big change. We'll point out Texas. Texas has maxed their rainy day fund for the last, I think, eight years, so the last four legislative cycles, and hasn't had meaningful investment in the Medicaid program over the last three or four legislative cycles. Now, we're paid by the MCOs in Texas, but getting investment, getting further investment in Texas would be good for the MCOs and would ultimately be good for us as Texas goes into its 2027 legislative cycle. So generally positive, but I don't think anything that we would point out that says drastic change positively or negatively on last Tuesday's outcome.

Got it. And then as my follow-up, just kind of on the medical solutions business and the preferred payer arrangements there, are you guys kind of seeing any explicit cost selling opportunities as part of those arrangements, given that you have a plethora of them across home health and private duty. So I guess kind of curious on that, or is that something that's just kind of beyond the contract and where you kind of do that separate from any kind of pay or preferences on also being the provider of choice for the same patient or home health patient?

Yeah, Raj, what I would tell you with the preferred payer contract in medical solutions, similar to our other two divisions, the demand for services still outweighs the supply that we're able to provide them. And in this case, it's the internal nutrition and the demand for the services in there. At any given time, we have thousands of referrals that are needing to be used and to be pulled through the pipeline. and so what we're focused on are providing care to those who at the end of the day value us and value our services the most and that can be through reimbursement rate, that can be through our collection cycle, that could be through our authorization process as well and so working with the specific payers to make sure that there aren't hiccups in the process of providing these services is what makes somebody a preferred payer. So we're able to add to within the quarter, get ourselves up to 22. You know, it's a big step up from where we started two years ago at zero. And so we've done a really, really nice job of pulling those preferred payers through. We expect to expand upon that over the next couple quarters as well. And as you can see with 9.1% revenue growth this quarter, I think it was 9.4% revenue growth last quarter, they are now through their modernization efforts and those relationships are also working very well for that division.

Thank you, Raj. Thank you.

Moving on to Sean Dodge with BMO Capital Markets.

Yeah, thanks. Good morning. Maybe in home health, you called out your growth in admissions, both episodic and total, accelerated a lot in the quarter. Just any more detail you can share on how you're driving that? I don't think there was anything in there from Family First that I'm aware of. So was that all, I guess, organic?

It was, Sean. This is not new. The intensity of this team has been building over the last, I'll call it, six quarters. They've honed their model, and they just continue to excel at a high level. If you walk around the halls in our corporate office here, we're high-fiving this team daily, if you will. A lot of energy, a lot of passion, and they're just executing the business plan that Their leader, Shane, sent forth a couple years ago in doing sort of high level. When sales, ops, and clinical all work together, a beautiful thing happens. And I think what you're seeing in our home health and our hospice businesses, great clinical outcomes, great cash collections, I'll add that as well, solid margins, solid margin profile, and unbelievable growth. Do I think we can keep 20% to 25% organic growth going forever? No, I don't think that's sustainable forever, but every quarter these guys and gals continue to defy logic and how fast they're growing. And the fact now, Sean, we've kind of settled in around that 80% episodic. We're now in kind of quarter five, six, and seven of episodic mix being in the high 70s, low 80s, and the team has just done a really good job of executing that business plan.

Matt, you want to add? Yeah, couldn't be more proud. Echo Jeff's statements here of what that team's been able to accomplish. 19.6% emission growth, 24% episodic emission growth, 24% total episode growth. Q3 historically has been a little bit of a softer quarter for us because of our geographical density and where we are at in the southeast, specifically Florida and some of the snowbirds kind of going back up north. The team has actually turned that into a positive and turned that into a growth quarter for us as well. And so we're Thank you for joining us.

The revised guidance, if we take, I guess, the low ends for both revenue and EBITDA, the $2,695 billion and the $374 million, that would imply Q4 would be down sequentially. Just any context, Matt, you can kind of share. Is there anything seasonality-wise, one time in Q3, that would point to why that would be the case?

We had a really great quarter in Q3, Sean, so I just want to highlight that one. Yeah, there's a little bit of collection dollars that come in in there, but we've been really successful collecting some of the AR over the past, I'll say, year and a half as well. We are excited about the continued EBITDA growth across the organization. $100 million in Q3, that was monumental for us and a real big milestone. That's all due to the dedication between the teams of all three of our operating divisions. If you look at our growth rates across all three, very impressive what they've been able to achieve I do want to remind one little quick thing in there, Sean, about Q4 of last year. In Q4 2025, we did have an additional week due to the timing of that fiscal calendar and how it landed. So just take that in consideration where that would have gone a little bit flat or even a slight step down sequentially. That's probably what we're expecting in Q4 this one. Yeah, there's a couple dollars here and there, but nothing monumental to point out in Q3. Okay.

Thanks again, and congrats on the quarter. Thanks, Sean. Thanks, Sean.

Our next question will come from Pito Chikorin with Deutsche Bank.

Good morning, guys. I just want to actually follow up on that one. The 3Q revenue to 4Q revenue sequential decline, you talked about AR days maybe being in 3Q. So I get the year-over-year impact in 4Q with lower days, but just sequentially, I guess, what revenues in 3Q are one-timers we should not consider going into the fourth quarter?

Morning, Peter. Thank you for your note this morning. It was great to hear from you. And, you know, I think, Peter, the holidays, every Q4, we deal with the same thing, which is three big, big holiday weeks, Thanksgiving, Christmas, and New Year's. Matt talked about last year, we had the 14th week in Q4. Obviously, we don't have that this year. But I think as you think of kind of the... Thank you for joining us. EBITDA, and could it be high 90s? Approaching 100, sure, but mid-90s is where we really have anchored to as a team, and we think it's prudent to guide in that manner.

Okay, great. And then the follow-up here is on the home health. What percent of your contracts today are under episodic reimbursement? And as you look at those that are under episodic, what percent of the patients that those payers are doing are episodic versus fever service. I'm trying to understand sort of the penetration overall of episodic and sort of how much longer we can go there. Thank you.

Yeah, I mean, so we're at 52 episodic agreements in total. 51 of them are Medicare Advantage. One of them is Medicare, right? So at the end of the day, 51 of our 52 contracts are with Medicare Advantage payers. But, you know, in Bali, we are feeling a similar thing that our Our industry's feeling, which is the general movement from Medicare to Medicare Advantage. So we feel that within our patient population. But I think I would just say, I don't want to use the word easier because nothing's easy in this business, but more payers are more comfortable with episodic agreements in 2026 than they were in 25 and 24 and 23. I'm not suggesting we are the ones who have changed that, but More of the industry is now advocating for episodic agreements, and it just has gotten smoother for us to operate with that group. It's every payer that you know. It's every national payer in America, right? So these are all the known payers that we all deal with from the Medicare Advantage standpoint. We've just gotten more comfortable with them and finding the niches where they need us in specific states operating under episodic agreements. So again, if If our episodic mix, if the mix of our business went from 80% to 78%, we would be fine with that as long as the growth rates stayed in high single digits, low double digits. But we've been doing this now six, seven, eight quarters. It has settled in. It's not going back to 65% or 60% episodic. We've kind of settled in that high, high 70s, low 80s. I just think that at this point, that's most likely where that business mix is going to stay. and our payers honestly have gotten more comfortable with it. They're not fighting us the way they were maybe two years ago on using episodic reimbursement.

Great. Thanks so much.

Thank you.

We'll go next to Benjamin Rossi with J.P. Morgan.

Good morning. So by the sound of it, you remain eager to deploy capital on home health and you've mentioned that multiples have started to pick up a bit. I know that the better home health rates give you a one-year reprieve, but what gives you confidence that you've passed the trough in home health operational sentiment? And then for your long-term guidance of 9% growth at the midpoint in home health, can you remind us of the relative contributions to growth from volumes and rates?

So Ben, first off, Let's go back to the home health itself and how the team has been able to perform. The last five years, six years, it's been a downward cycle in the reimbursement environment. At the same time, we've been able to grow this business very significantly, 24% this quarter, 15% last quarter. I think we're just shy of 16% year-to-date when you look at the numbers itself. And that's with a little bit of a headwind, with there being parentheses around the final rule. Really excited that the final rule came out positive. There's no drama around it. Positive net 2.4%. This will be great for the industry, but also our teams itself. We want to continue to grow this business. We want to become more relevant and more dense to our payers as well. Right now, we're a regional provider in the Midwest and in the Southeast, but being able to connect those businesses itself and give our team that's operating at a very high level more responsibility and take it from a $300 million business higher is what our plans and our intention are. We have a really robust M&A pipeline right now. We're going to remain focused on finding that right acquisition that obviously fits our organization culturally. It creates a lot of value for Aviana and, of course, our shareholders in that process. But overall, we're just long-term believers in home health industry. Five-year down cycle, five-year up cycle, it doesn't matter to us. We're going to operate in the lowest cost care setting, the patient's home, providing great care, saving the healthcare system dollars, and also growing it pretty significantly, too.

Great. And then thinking about PDS, M&A, you've mentioned that some markets can have, call it stale rates when there are long delays between Medicaid rate updates. Are there any states that you'd call out where a rate update could open up some markets that might otherwise not be on your radar in PDS? Thanks.

Yeah, I think I may answer a little differently than you asked it, Ben. Certainly putting California to bed long term continues to be our number one goal. We have high-level confidence on that. I think I go back to the six states that we're not materially in that we want to be in. We talked about Michigan, Ohio, West Virginia, Kentucky, Tennessee. Those are the states we would like to invest in. They have different reimbursement rates for different states. They've had different investments, but they're all good Medicaid states with large or significant population of pediatric and adult. If you look back at our book, 32 of 32 states we've moved the rate materially or had annual rate movements that can keep us competitive. So in our 32 PDS states today, it's not perfect, but we're where we need to be. I'd say it's those six states we want to fill in over the next three years. And again, they're going to be smaller acquisitions. You said it well. We are shifting our capital towards home health and some hospice. and PDS will be more tuck-in related as we just start to pick off those six states that we want to be in. We've been pretty clear in the last three or four quarters we're just going to kind of one or two of those states per year and find ways to get into those states and then our PDS growth will continue to expand as we open up those additional states. And then that's around 40 PDS states is kind of our goal. Our goal was to kind of be in about 40 of the 50 states on the PDN, PDS side. Thanks, Ben.

We'll hear next from Jared Hawes with William Blair.

Hey, good morning, guys. Thanks for taking the questions here. Maybe on the PDN preferred payers, just wanted to ask one sort of in terms of the model mechanics, I guess. Can you talk through what the sort of typical growth curve looks like when you sign a new preferred payer agreement? So in other words, when we think about The volume opportunity in 2027, you know, how much of that growth would come from the new preferred pairs that you signed in 2026 ramping towards, you know, call it your target fill rate opportunity versus maybe some of the new agreements that you hope to sign next year?

Great question, Jared. And anytime we sign a brand new preferred payer agreement, we do see kind of like a whiplash effect that happens there because there's the damn releasing of patients that are stuck in the children's hospital or stuck in a high-acute care setting itself. And so whenever we do that, we're able to pull a lot of those referrals and get a lot of starter cares and hire a lot of caregivers to be able to provide that care at the same time. After that, it comes into a more normalization factor itself. And our LRPs for this division are 5% to 6%. We're obviously overachieving that very significantly right now. and that's because we've been able to sign quite a few preferred pay agreements and a lot of the government fair contracts that we've been able to be successful at as well. They operate in the same manner. The moment you have a significant reimbursement rate increase, you see that whiplash effect, you pull a lot of those through there but we're seeing that heightened growth continue post because we're able to hire, retain and pay our caregivers an appropriate wage because that's reducing our turnover and allowing us to provide more care at the same time. So that's given us confidence to take it from that 3% to 5%. to that 5% to 6% long-term. And we expect to see that in the future right now. We just happen to be outperforming it pretty significantly at this time.

Okay. That's very helpful. And then, you know, you obviously talk about sort of the connection between, you know, the focus that you guys have on getting better rates, being able to invest in the workforce and that driving, you know, what is still a tough environment but incrementally better. hiring and retention. I guess, are there any operating KPIs around hiring, retention, onboarding, anything like that that you would sort of point us to that you think would be relevant to support that? I mean, I get that ultimately, you know, volume growth is kind of the output of that. So perhaps that's the most important thing you want us to focus on. But just curious if there's any incremental operating metrics you'd sort of point to to help frame, you know, how you're performing in this environment.

You got the right answer. At the end of the day, the only way we grow volume is ultimately through additional caregivers, additional nurses working. We get seasonally a little bit of growth out of more hours per week around the holidays, but that's like four or five weeks a year where nurses want to work a little bit more right before the holiday to earn more money. We do pay per week, and we have daily pay, so people can get paid quickly. But ultimately, underpinning our volume growth which is kind of in that 3.5 to 4% LRP, 3.5 to 4.5% is more, just more workforce. It's also why California is so important, right? Because what we're trying to do here is materially change the wage rate in that state in the home-based nursing. And that was the intent of the legislature and the governor is to really move these wages. The only way to fix the Thank you. And our next question will come from Andrew Cooper with Raymond James.

Hey, everybody. Thanks for the question. A lot covered already. So maybe just one thinking about the fourth quarter in California a little bit. I mean, I know this time last quarter, you talked about flowing some wage increase through ahead of time. It sounds like that's not necessarily happening now. So just curious, you know, how much does not doing that impact the way you look at 4Q and how we think about the guidance increase?

Yeah, Andrew, like we said, we're just not going to get ahead of it right now until we have clarity to the long-term expectations of that temporary adjustment or that supplemental add-on becoming permanent for us. So we're just not going to get ahead of it. We will be prepared on 1-1 to put something in place about retention and engagement payments to our caregivers, whether it be an onboarding, whether it be a new hire or a volume piece. We're still working through the details itself to actually get those dollars into the caregivers' hands because that's our ultimate goal at the end of the day here We just can't move that base wage rate if we don't have clarity to it starting on 7-1 of 2027. With California itself, we have mentioned that it has become a lot less relevant to Aviana over the last five years as our other 38 states have grown pretty significantly and they continue to grow. So it is very important to our patients and families to move this and get this permanent, but this is more just a temporary delay is what we're viewing it as and it doesn't affect pretty much our 2027 or our LRPs and RIs.

Okay, helpful. And then maybe just quickly a little bit more on the M&A landscape and sort of the activity levels you're seeing out there. And has there been any change in some of the valuations that you're seeing? We hear from some others that maybe home health and hospice have normalized a little bit at the same time. We hear from some others that they're also increasingly focused in those areas. So just would love kind of your current lay of the land and how it's evolved.

Great question, Andrew. And I don't think we're trying to gain low multiples versus medium multiples or the high multiples. Matt said earlier to one of the questions like Ben asked about confidence in home health and hospice. We just have a tremendous confidence in both our team and the industry itself, partly because we've been doing it for 25 plus years and we've seen the cycles up and the cycles down. We do believe the cycle has turned after six years of downward rate in home health. We believe that cycle has now turned and will be positive for a few years in the future. But Even if it wasn't, we're still long-term believers in that business because we can grow it in double digits. So the multiples will be what they'll be. Is private equity coming back into home health? Sure, absolutely. But we have synergies. We have both back office synergies. We've proven that with Family First and with Thrive. We have operating synergies of how we operate the business. So For us, it's thoughtful geographic expansion. It's not jumping to Hawaii. It's not jumping to Alaska. It's being very thoughtful. We're in 16 states today. We want to densify the states we're in, and we want to build out the Southeast, Southwest, and ultimately Mid-America. Those are the areas that we want to densify, and we will do that. There are assets coming to market in 26 and 27 that we think are meaningful for Aviana. I will say... Caveat to that is we've done an amazing job of deleveraging the company and driving free cash flow. We will continue to be thoughtful on how we do M&A like Family First and continue to deleverage. We've made it crystal clear our goal is to be sub three times leverage and 27, and we still want to obtain that goal as we do M&A. Thank you, Andrew.

Great. Thank you so much.

This now concludes our question and answer session. I would like to turn the floor back over to Jeff Shaner for closing comments.

Thank you so much for your time and attention today and your interest in Aviano. We look forward to catching up with you after the end of the year and as we report our Q4 results in 2027 guidance. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.