All right. First and foremost, thank you all for joining us here in person. And for those who are joining us via webcast, my name is Ben Rossi, and I'm a part of the Healthcare Services Research Team here at J.P. Morgan. We're excited to be hosting Aveanna Healthcare this morning. And with us today are CEO Jeff Shaner and CFO Matt Buckhalter. Thank you both for being here.
Thanks, Ben.
So I believe Jeff will be going through some slides, and then we'll dive into Q&A from there. Jeff?
Thanks, Ben. Good morning, everyone. As Ben said, my name is Jeff Shaner. I'm the Chief Executive Officer of Aveanna Healthcare, and I'm here with Matt Buckhalter, our CFO, today. We're very pleased to be updating you on the continued progress of our strategic transformation and our overall priorities and updating the company. We plan to keep our prepared remarks to about 15 minutes, and then we've got a pretty robust Q&A session that we're excited to do. Jumping in on slide three, really focusing on Aveanna's value proposition. At the heart of Aveanna, we are a scaled national provider of pediatric, adult, and geriatric home care. Aveanna is well positioned to benefit from the continued shift of healthcare to the patient's preferred setting, their home. By providing cost-effective, high-quality clinical outcomes, Aveanna is a much-needed solution for payers and government partners.
By focusing our clinical capacity on our preferred payers and our government partners, Aveanna lowers the total cost of care while achieving high levels of patient satisfaction and clinical outcomes. We call this strategy an underpinned business by our preferred payer and government affairs strategy. This strategy continues to produce solid year-over-year growth in core volumes, revenue, profitability, as well as improved clinical outcomes and patient satisfaction. Our preferred payer and government affairs strategy underpins everything we do at Aveanna. Moving to slide five for a general company update. While we are still closing our books for 2024, based on solid trends in our business through the end of the year, we have a high confidence in achieving our guidance of approximately $2 billion in revenue and greater than $168 million in adjusted EBITDA.
Q3 2024 represented our sixth consecutive quarter of beating and raising guidance, and we look forward to continuing these strong trends through Q4 and into 2025. We also expect fiscal year 2024 to generate positive operating and free cash flows based on strong cash collections and continued progress with our SG&A efficiency efforts. Aveanna is a diversified national home care platform with solid organic growth rates and continued opportunity for Adjusted EBITDA margin growth and expansion. Aveanna's preferred payer strategy positions us well for continued growth as we align our capacity with the needs of our payers and government partners. We look forward to announcing our updated, sorry, we look forward to announcing our full year 2025 guidance on our Q4 earnings call in early March. Moving to slide six, where we talk about our strategic transformation that we kicked off two years ago.
When Matt and I took over as CEO and CFO in early 2023, we embarked the company on a multi-year strategic transformation. It was underpinned by six principles you see here, and that we believed deeply in, and we committed ourselves as a management team to driving and delivering results for our partners. They are, first, providing a scaled national platform to bring standardization and efficiency in our care. Second, aligning our objectives with our preferred payer partners, allowing us to deliver powerful partnerships rooted in trusted value. Third, having a defined government affairs strategy, both state and federal, driving appropriate rates and wage reimbursements. Fourth, using technology and data to achieve efficiencies and outcome measurement. Fifth, improving clinical and patient outcomes, sorry, improving clinical and patient outcomes that bring meaningful change to patient lives.
and sixth, reducing the total cost of care for our patients and partners to redefine the value of care in the home. All six of those core principles underpin our strategy to be a great business partner to our preferred payers and our government partners as we shift our capacity to align to their patients' needs. How do we underpin those with key performance metrics? Slide seven shows an update for our 2023 and 2024 KPI performance, and I'll highlight a couple of those. First, our payer relations team achieved a total of 22 private duty services preferred payers with almost 50% of our now private duty services volumes aligned with a preferred payer and growing. We continue to execute on that strategy. Second, our dedicated government affairs team achieved 12 state rate increases, state Medicaid rate increases in 2024, highlighted by double-digit investments in both Georgia and Massachusetts.
And we called out both of those early in the year as states that needed significant rate improvements to hire nurses. And lastly, as an indicator, we're really proud of our home health and hospice team as they completed their shift to episodic payer mix by achieving greater than 70% of their business mix in an episodic payer mix, again, aligning our capacity to those payers who partner with us for full year 2024. These impressive results from 2023 through 2024, and as we continue to underpin this strategy moving 2025, will continue to underpin our continued success and give us a clear roadmap for growth in 2025. Slide eight, talking about our Aveanna growth model. We underpin our target growth model, our long-term target growth model at just approximately or just under 10% long-term revenue growth rates.
This growth rate is underpinned by 7% of core organic growth and about 3% of either risk-based or acquisition-related growth. Our five-year CAGR is just under 8% at 7.6%, and we expect this CAGR to continue to accelerate as we identify targeted M&A opportunities, specifically those targeted opportunities, and we'll talk more with Ben about those here in Q&A, but we remain focused on our M&A growth in our private duty services segment and our home health and hospice segments. Those are the two segments that we're primarily focused on M&A growth in the near future. We also continue to invest in key areas that drive value and growth, such as clinical innovation, data and analytics, recruitment and technology, all of which support efficient growth for Aveanna.
Touching just for a minute on our three business segments, I'll start with an overview of all three, and that is all three of our business segments are underpinned by our preferred payer and government affairs strategy, as well as a strong commitment to compliance and high-quality clinical outcomes. All of the services that we provide in each one of these three segments are provided in the patient's home, which represents the most cost-effective healthcare setting in America. And lastly, as you'll hear in all three of the businesses individually, our demand for patient care in all three segments far, far exceeds our caregiver supply. Moving to Private Duty Services, our largest segment, with almost 80% of our revenues in this Private Duty Services segment, just completed an in-depth modernization project to ensure optimal efficiency and superior outcomes.
We just finished this in December of 2024, so we spent almost 15 months modernizing our largest business to drive efficiencies, SG&A efficiencies, as well as standardization in our care. Today, we are the nation's largest provider of private duty services in America. Some themes that we like about the private duty services business: one, the patient base is made up with medically complex pediatric patients, and these patients now can live a long time at home. So we have a longer length of stay patient who can thrive in the home setting. And about 13,000 of our patients fit that type profile. The primary payers are Medicaid and Medicaid MCO, so a very robust payer base making up approximately 90% of the revenue in this business segment comes from either a Medicaid, state Medicaid, one of 27 state Medicaids, or a few hundred Medicaid MCO providers.
I mentioned our patient demand far exceeds our caregiver supply, which drives the need for a preferred payer and government affairs strategy. The primary service we provide in this segment is either shift nursing care or shift-like therapy care in the home. So think of us placing a nurse in the home and a patient's home anywhere from six to eight hours a day up to 24 hours a day. So we're probably doing shift care in the home. I think most importantly, our scaled national platform in private duty services supports our partnerships with large referral sources, large payers, and state agencies, state Medicaid agencies. So we are the ideal partner for most of our payers' referral sources in most of our states, and lastly, I'll underpin this with we're absolutely ready for M&A in this business. We've got a very efficient operation finishing our modernization project in 2024.
We're ready for continued organic growth and M&A growth. So this is an area that we're acutely focused on, is leveraging our size and scale to fill in open geographies in our Private Duty Services segment. I'll move on to our Home Health and Hospice segment. Home Health and Hospice accounts for about 11% of our company's revenue. We also completed a similar modernization project on our Home Health and Hospice business back in 2023, which is now producing industry-leading clinical outcomes and gross margins and bottom-line margins. So we're really pleased with our operating performance of this business. We are a regional provider of Home Health and Hospice, as you can see in our map. We are mainly Southeast and Midwest as the two areas we have unique density. A couple of things we like about this business.
One, it's geriatric, unlike the PDS business, which is a pediatric makeup. This is a geriatric makeup. We have about 13,000 patients, just over 13,000 patients. It's made up mostly of seniors. Medicare and Medicare Advantage are the primary payers. About 90%+ of the business is either Medicare or Medicare Advantage. Again, patient demand far exceeds caregiver supply, underpinning our need to be an episodic-driven business with over 70% of our business in episodic payers. Our organic growth rates will begin to be in that mid-single digits, and we think over time, over kind of three to five years, we can get that back up to higher single digits. They've been in the low single digits over the last two years.
Lastly, I mentioned it, we are prepared and think that we can know that we can execute on M&A in this business as well, primarily Home Health versus Hospice, but certainly we are open and looking for M&A opportunities within our capital structure here. Last but certainly not least is our Medical Solutions business. It's about 9% of our revenue. We just kicked off a modernization event for our Medical Solutions business that will carry throughout 2025, so we will be in a modernization effort throughout 2025. This will be our last modernization effort, refinement and refocus area for our company, and again, it's driven to ensure optimal operating efficiencies, superior clinical outcomes, and continued growth, but we're really excited to finish that in 2025. In this business, we serve both pediatrics, adults, and geriatric patients, about 30,000 patients a month.
Very diverse payer base here in Medical Solutions, everything from Medicaid, Medi-Cal to Medicare, to commercial, to even private pay. The primary service is enteral nutrition. So the primary service that we're providing is enteral nutrition, product supplies, equipment, and 24-hour-a-day nursing care. So we're the nation's largest provider of enteral nutrition to pediatric patients in need. Again, it's underpinned by our payer strategy. And with organic growth rates in the low double digits, this has been our fastest-growing business. Matt will talk in our Q&A with Ben about how we think about that in 2025 throughout the modernization product. So finishing up a couple of slides here, and then we'll open up for Q&A with Ben. I just want to touch on our capital structure. Matt and our banking partners have done a phenomenal job managing our leverage, our liquidity, and our cash flow.
With no maturities until July of 2028, we have ample time to deliver, to manage our liquidity, and to continue to produce positive cash flow, so we're really excited about that. Substantially, all of our variable-rate debt is hedged by interest rate swaps and caps until mid-2026 and early 2027, and with over $275 million in liquidity, we continue to invest in key areas that drive our business and support our mission, so we're really excited about that, and lastly, after generating positive cash flows in fiscal year 2023 and anticipated fiscal year 2024, this allows us to continue to accelerate our growth model, so really excited about our capital structure. I know we're going to talk a bit more about that with Ben, and in closing, Aveanna is a comprehensive platform with a diverse payer base, providing cost-effective, patient-preferred alternative to higher-cost care settings.
Our focus on care in the home aligns with the overwhelming trend in healthcare to provide high-quality care in lower-cost care settings. By aligning our capacity with the needs of our preferred payers and government partners, we are able to invest in caregiver wages and accelerate caregiver hiring trends and overall growth trends. Aveanna's demonstrated ability to leverage our scaled platform allows us to expand EBITDA margins as we achieve our growth targets. And our capital structure, as we just said, gives us ample liquidity driven by positive cash flow and a hedge strategy that allows us to invest and grow as a company as needed to achieve shareholder value. So with that, I will end my prepared remarks, and we'll flip over to some Q&A time with Ben.
Great. Thanks.
So to start, before we talk about your forward outlook, would you mind providing us with a retrospective on 2024 and walk us through some of the key drivers behind your financial performance over the course of the year?
Absolutely. I'll touch on 2024, and then Matt will add some comments. I think, as we mentioned, 2024 represented year two of our strategic transformation. And we had the six core principles driving us through 2023 and 2024, all of which were underpinned by the idea that we were going to align our capacity with our payer partners and help our government partners, primarily state Medicaid systems, by investing in reimbursement rates that ultimately would drive better wage rates and ultimately more hiring, more clinicians.
And I think, as you've seen through our Q1, Q2, and our Q3 results through 2024, what is really driving that acceleration is just the amount of impact we're making in that story with our payers and the belief that they have investing in us. And also, as we pass through those wages to caregivers, the ability for us to really move the needle for our payers and our partners. Secondly, as Matt will talk about, we did a really nice job in getting after synergies and efficiencies in our business and methodically working from home health and hospice in 2023, private duty services in 2024, and then, as we talked about 2025, medical solutions. So not resting and getting after our SG&A synergies and making sure that we were doing the job to be efficient, effective on the back end.
So I think those two things working together really is what propelled us 2024.
Yeah, Jeff, I'd really agree with that as well. I mean, first, I'd probably say I'm really proud of our teams. I mean, we took quite a bit of cost out of corporate, took quite a bit of cost out of the field as well. And we didn't just give it or take it away, but we give it back. We invested back into the organization as well when we did so. So every $2 we save, we took $1 invested in technology advancement, standardization systems. And that's really going to propel us forward on a leverage aspect of it.
So when we continue our 7%-10%, I'll say 6%-7% core EBITDA growth, organic, or sorry, revenue growth, and then we add in some M&A to it, we're going to get that leverage profile and be able to expand upon our EBITDA margins as well. So really proud of the teams and the work that they've done. We'll talk more about Medical Solutions and the work they have to do or that we have to do with them going forward. But you can see it really playing through in HHH, and you'll see it play through in 2025 from the work that was done in 2024 for PDS.
All right. Great. Thank you for that summary. So looking ahead then, would you give us an update on what is going on at Aveanna and generally how you're approaching 2025?
And then what are some key milestones that we should be looking for this year?
That's a great question. And I think it's going to be more of the same. So the good part for us now is in year three is we don't have to go recreate the wheel. It's really lean deeper and deeper into our payer partners. I'll use Medicaid as an example in 2024. One of our it was the Governor of Georgia, Governor Kemp, talked about the single greatest investment ever made in home-based nursing reimbursement wages is what the governor said in his budget release in July of 2024. So those kind of wins where we have governors talking and state legislators talking about investing in home-based nursing wages is fantastic, right? Five years ago, we never would have envisioned that idea. Now we actually see the execution.
Congratulations and big thanks to Governor Kemp for investing in the right thing, the right care, the right place. Continuing that strategy, similar conversations with many of our MCO partners who just need more nurses, need more capacity in the home, and continuing to deliver on the commitments we made to our payer partners. That's at the key of it. I think we would also be remiss to say we just believe in being very efficient. Continuing to find areas to be efficient, whether it's through artificial intelligence on some of the back-end stuff we're doing, to continuing to leverage technology to make sure that we're being as efficient and effective at all times. That's just in our ethos.
I think as we've gone from not generating cash flow as a company to the last two years generating cash flow as a company, we've really just seen how powerful that is, that watching make sure that every single dollar, where we're investing and how we're investing it, making sure that it really gets right to the heart of how we deliver care is key for us. But I think more of the same is what you'll hear from us in 2025, is doing what we have been doing, just doing it better and faster and more efficiently.
Gotcha. No, thank you for that color. On the strategic transformation, you're now in year three across the organization. Could you just update us on how this transformation is tracking against your initial goals? And then how should we be thinking about impact here in 2025?
First of all, Matt's going to contain me here because I get excited, but 2025 is going to be a great year for us, and I think it'll play strongly through our growth trends. Matt said a minute ago, our growth trends have been at or above the areas that we normally guide to, and it's been driven by the pent-up demand and rate and wage and the amount of children that just need to be cared for in the home, so I think you'll see similar trends going into 2025, especially our PDS business, that our growth will be on the higher end. We normally say 3%-5%. 3%-5% organic, yeah. We've been running in the 5%-6.5%. So I think you'll see us in there for probably the majority of the year.
And then as our home health business now is turned around and is gaining momentum, I think you'll start to see our home health growth rates start to pick up, probably mid-year to back half of the year, to be more in line with where we expect them to be long-term, kind of in that 3%-5% organic growth rate area. Medical Solutions is the one business for us that we'll probably think Medical Solutions on from a growth standpoint in 2025 is a little bit muted as we really attack kind of the efficiency side of that and then really push the growth rate in 2026. But I think with all that said, when we do come out in March with our guidance, I think we're going to be very proud of the continued growth in revenue and adjusted EBITDA.
I mentioned it now two or three times, but our EBITDA margin continues to grow. I think you'll see that through our fiscal year 2025 performance that our EBITDA margins will continue to expand.
Great. Digging into some of the top-line trends you talked about, patient utilization has been a consistent topic of discussion in the wake of COVID. Could you just speak to general patient demand over the past several quarters and how your volumes fared across your Medicare and Medicaid books of business?
Yeah, why don't I take this one, Jeff? Just kind of discussing patient demand, I mean, the great news is demand for our services have never been higher in all three of our divisions that we're talking about. There's always been this conundrum, which is strange to think, that there's more demand for your services than you can actually provide.
And that's always been true for our industry. It's just so much more heightened at this time because of availability of caregivers, because of reimbursement rate struggles that maybe that were out there with our initiatives that we were able to achieve through preferred payer and government affairs. We really drove that reimbursement rate. And we drove it in the idea to pass down wages to caregivers. And it's simple as that. We need to drive reimbursement rate, pass wages to our caregivers, provide better clinical care, get good outcomes. And that kind of generates the idea of value-based care payments on the back end as well from it. So that's been our step forward, and that's where we've been really, really successful at. You'll kind of can see that continue into 2025. I know it's a normal story now to us.
It's just secondhand, but boring is a good thing in this sense, so expectations for 2025 will be in line with what 2024 provided as well.
Got it. So flipping then to the rate side, I can appreciate that your rate development comes in on a state-by-state basis, but could you just walk us through how 2024 wrapped up and your general rate expectations for 2025? And then how have those conversations been coming along in some of your larger markets?
Yep. That's a great, great question, so if you go back to that key performance slide we showed, 12 state rate wins in 2024. That was down from 19 state rate wins in 2023, right? So 19 is the most we've ever had. We take that as kind of a that was a leftover from COVID and some of the COVID-related tailwinds.
I think 10 to 12, 10 to 13 is kind of where we believe 2024, 2025, 2026, and what will continue to be from a state performance standpoint. Again, we coach investors and people. Many of our states give us rate improvements every single year. They give us 1 or 2 or 3%, right? It doesn't move the needle, but every year they kind of, in Colorado, is a good example of that. Colorado invests in our businesses every single year. But it's kind of CPI. It's 2, 3, 4%. States like Georgia and Massachusetts, you could go 10 or 15 years before you get a 30, 40, 50, 60% rate increase. But they're not giving you 2, 3%. They're giving you 20, 30, 40% because that's how far the wages have fallen behind the market.
And so I think as we think of the PDS business, I think we continue to believe, even with the new administration, and we'll talk about that in a few minutes, we continue to believe that we'll be somewhere in the double-digit number of state wins per year for the foreseeable future. I'll say three to five years, barring another pandemic epidemic, something like that, that that's kind of our basis. Also believes that hospice continues to give appropriate annual rate updates. Like our peers, we're very disappointed in the home health rate update. We're slightly positive as an organization this year, and that was pretty consistent last year. We were about break-even last year in home health rate. Now, because we're shifting to episodic payer mix, our rate is improving, and that's part of our strategy.
I think as we think about home health, we continue to see another few years at home health probably being break-even to less than 2% rate on an annual basis. With that said, I think we have a ton of visibility through 2025 at this point. A meaningful amount of our rate increase in 2024, we're second half or a January 1, 2025 date that we started, effective date. We have a lot of visibility in 2025, and the things we do in 2025 are working in 2026. We're really excited. Probably the one state I'll call out just to remind us since we're sitting in the state is California. The governor's budget was released last Friday. There was no PDS, no as in zero PDN rate increase in his budget. As expected, disappointed, but as expected.
We will continue to intensify our efforts in California because it's very disappointing for the California families that the Medicaid system will not, unfortunately, support a rate increase for their much-needed nurses and much-needed kids.
Thank you for that. Turning over to the expense side with labor, how would you describe your current recruiting and retention efforts? And then are you still seeing a long tail on hiring trends for markets where you've been able to negotiate more favorable rates?
Yeah, I'll start, Matt. You jump in. Where we're winning, it's because we've been able to drive the rate, and so I'll use California as a great example. The majority of California is still Medi-Cal. So the majority of our PDN patients receive Medi-Cal, and that rate is the rate that is woefully behind. It's $44.12 an hour, to be specific.
It's incredibly difficult to hire a nurse in California for that reimbursement rate. So those families are lagging in their staffing rates, the ability for us, anyone to admit them at home. They're staying in hospitals at almost $6,000-$7,000 a day of cost compared to less than $1,000 in the home. So clearly, that's not working. The flip side is we have preferred payers in this state, in the state of California. Those preferred payers pay us somewhere between 120%-150% of the Medicaid rate, depending where in the state they are, depending north and south California. So clearly, the preferred payers that are MCO payers in the state understand the value proposition. But I think that's a great example of your hiring question.
In the state of California, where a patient is under an MCO, we're able to staff that case and staff it appropriately and get the family home, keep them home. With the Medi-Cal rate, we can't. And I think it just shows the difference between why you should invest in home-based nursing rates and why you shouldn't. It's just as simple as getting that child home. First of all, it's the right thing to do for the family, but it's so cost-effective. It's almost $6,000. Studies show $6,000 a day to less than $1,000 a day. So why we haven't been able to get done in three years with this governor, with this, I don't know. I would have told you two years ago we had done, last year had done. I know this.
We at Aveanna and our peers are committed to getting the rate improved in California, and we will stay here as long as it takes.
Anything else on hiring trends?
Yeah, no, I think, Ben, I think it's safe to say we're all feeling a little bit of softening in the labor market, and not a significant one. There's not a tailwind that's ripping through, and caregivers are beating down our doors for hiring. I mean, it's still a dogfight out there every single day to go and bring these caregivers and match them up with your patients and your families and create that opportunity. But it is softening a little bit.
To just reiterate Jeff's point, I mean, where we are winning and who is winning are our preferred payers and the people who are leaning into the relationships. The economic benefit is just so great.
I mean, you got a $5,000-$6,000 a day NICU, PICU cost setting as opposed to a $700-$800 a day in the home setting. When she's talking about that 5, 6, 7x on a daily basis, it's really quickly the economics work out in favor for the MCOs. By the way, it's also the preferred patient setting for the patient itself. It creates a family environment on top of it, and we have great clinical outcomes to back in and support this as well. So all the great things are happening. Those who get the story, get it quickly, and they're leaning in, and it's really helping us drive our caregiver hires. I can definitely see the economics clearly there.
Turning to a subject that you kind of mentioned earlier, the regulatory side, new administration, people or the new incoming administration, certainly a lot of buzz there. How do you anticipate change in healthcare regulations that impact Aveanna's performance for this year? And given your exposure within Medicaid, how are you thinking about potential program changes amid the broader discussion regarding government spending?
I'll start with we're excited for the new administration. So I don't think there's anything to be scared of. I do remember President Trump has been president before. So he ran the country for four years. We had good policies under him last time related to Medicaid, related to home-based Medicaid services.
I don't think there's any boogeyman that we need to be worried about as an industry because all the reasons we just said, it's the right care in the right setting at the right price, the right time, right? Those things make sense. Structurally, differences between the current administration and the new administration, how they think about the states receiving Medicaid dollars. I think that's where a lot of the conjecture is right now and the focus is how is the new administration going to think about getting the Medicaid dollars to each state? I think there's still a lot to be worked out there, Ben, from a macro standpoint. At the end of the day, the current administration, the new administration, and the state governments all want to get these children home and keep them home. That's where everybody wants them.
So, I don't think we fear anything draconian just from a structural shift in wanting to get high-cost patients home and keep them home in a setting. I think it's just how we will think about some of the dollars getting to the states and how they think about receiving them and spending them. And I think we can be an answer to that. I think we feel strongly that Aveanna can be a solution both at the state level as well as we partner with CMS on more macro-type issues and opportunities to improve care and lower costs. So I think we see it as it's a great opportunity. Again, we did well under Trump's first administration, right? Four years, his first four years. I think we feel confident we'll do well under the second four years.
And there may be some broader shifts in CMS related to home health and hospice over time, and we'll certainly deal with that as that comes up. But we feel really, really good about our spot in Medicaid and how we help save the system money.
Yeah, you can certainly see where the value proposition comes into play with the potential cost savings appetite growing. So shifting gears to your capital structure and leverage, what is your go-forward plan for deleveraging? And how much of this do you expect to achieve from pure EBITDA growth versus simply paying down debt? And then how are you balancing all that with your M&A pipeline across segments?
Yeah, great question there, Ben. So we obviously were aware of our leverage profile. We know who we are. We know who we're not.
We've done a very nice job the past couple of years of deleveraging through good old-fashioned organic EBITDA growth. We're deleveraging a turn to a turn and a quarter annually at this time, and we see that happening in the foreseeable future as well. With our capital structure set out to mid-2028 and caps and swaps in place, we've had pretty good cash flow in 2024. We have pretty good cash flow in 2023 as well. We'll continue that in 2025. The deployment of that capital will be used for a little bit of tuck-in opportunities that arise. We don't have any thoughts to open up our capital structure or do anything of that nature.
If we're able to bring in good, solid businesses with good clinical leadership and tuck them into the Aveanna operating model, we think that'll be very accretive to our story and to our growth rates moving forward. So more of the story, I would expect one-plus turns deleveraging through organic EBITDA growth. And if we're able to take in a little bit of capital and do some tuck-ins, might expedite that just a little bit as well. Gotcha. So as a follow-up then on the cash flow cadence, just regarding your cash flow for the year, payroll taxes typically come in during the first quarter, but is there anything else you'd want to call out as we go through 2025? Normal seasonality for our business itself. I mean, we'll be a negative cash flow in Q1. We always are in Q1. It's prepaid seasons that happen. It's renewals.
We have a third-party liability billing session. It just extends DSO for the first quarter a little bit as people go through the authorization process. That's just normal course. You see that turnover in Q2, and then you see it starting to add free cash flow in Q3. That's our normal process that occurs every single year. We're proud of where we've been and how we've been able to get there. We've got a tight model, and every dollar is important to us, and where we invest those dollars are important to us too. So you'll see us, once again, be that free cash flow company moving forward indefinitely, and we're really proud of that too.
Thanks for that. So taking a step back just on competitive dynamics, Aveanna's footprint covers some 33 states. Could you just walk us through some of the competitive dynamics by market?
Are you seeing any common players across your markets with matching service offerings at this stage?
I think we're unique. Globally, we're unique because, to my knowledge, we're the only company who does all three patient bases: pediatric, adult, and geriatrics in the home. So I think that does make Aveanna unique. In some ways, it makes it harder, right? Because each one of these patient bases is a very, very focused patient base from a clinical standpoint. But I think we're unique in that way. As you get into each of our businesses, it's highly competitive within home health and hospice, is very highly competitive within America. So depending on what market you're in, we have a lot of competition, anywhere from a dozen to 50 competitors in any given market in the home health and hospice space. So very competitive.
Again, clinical outcomes are really what drives the day. How do you grow? You got to grow through good outcomes. On the pediatric side, there's a nice robust amount of pediatric competitors. Most of our competitors do just peds, so they're just focused on pediatric. There's been a decent amount of private equity investment in pediatrics over the last, I'll call it, five to seven years. So we're seeing some of our pediatric peers and competitors get rolled up and get bigger and larger and more sophisticated in nature, which is good. I think it's good for the industry. It brings good competition, brings good innovation to the market. But today, we still are the largest, and we continue to want to expand and fill in some of those geographies today that are open in our PDS business. In enteral nutrition, there's not a lot of competitors.
Most of the competitors have left that space. It's a tough business. It's a business that if you're going to do it, you want to do a lot of it. So it's one of those businesses that scale does really matter because the overhead structure is pretty significant to get it up and running. So we've seen over the last, I guess, three years with some of the COVID and some of the enteral nutrition shortages that happened two years ago, we've seen some of our competitors leave that space and not many come back in. So that's a business where Aveanna really is the answer. The reason we're going through the modernization now is because we know we can scale that business. We're 30,000 patients today. We know we can scale it significantly.
We just need to get the infrastructure appropriate so that we're ready to grow and be efficient in how we grow. So each market has a robust number of competitors and peers, and we take that as a positive. We think having competitors and peers in this market is a good thing. It drives clinical innovation and overall efficiencies in the business. And just add on that, with size and scales comes the opportunity for us to invest, invest into clinical innovation, invest into technology and the work that we're doing on the clinical innovation side. And we continue to invest even though we've cut and done a really good job and been very methodical on any additional adds. That's an area that we've pushed a lot of dollars, efforts, and energy into. And it's really to get better clinical outcomes. And those clinical outcomes are preventing hospitalizations, preventing infections.
I mean, at the end of the day, our partners are recognizing that and rewarding us with value-based care payments on top of it too. So that's all working, and it's an area of focus that we'll continue to have indefinitely.
That makes sense. Thanks for the commentary there. So we're starting to slowly approach time here. So I'd like to always wrap these up with kind of like a one-year forward outlook. But what will investors appreciate about Aveanna one year from now that they don't today?
I think I'll give you two things. One, the EBITDA margin expansion, if you look back over the last two years and look forward to the next two years, I think you'll see a very similar trend, maybe a little bit more, a little bit less.
I mean that on a percentage basis, that we are still improving EBITDA percentages closer to 10%. We're not quite there yet, but close to 10%. The ability for margins to continue to expand. We're a Medicare and Medicaid company, so I don't mean they're going to get to 20%, right? We think they can get to low teens over the next few years, excuse me. That's already pulling me back. I just think don't underestimate how powerful these payer relationships can be. I mean that in the right sense, which is our payers want us to provide them as much as possible care as they can, and we can't meet their needs today. There's so much more demand than we can even supply with our partners. When we think out a few years, we think about the preferred payer relationship.
We think about value-based outcomes. And one day down the road, there'll be this thing called risk, and it's not there today. But when you put those things together, it really opens up the door for meaningful more amounts of patients, revenue, scope. And I think that's something that I wouldn't have said this two years ago, but as we sit here today, over the next two years, I think could really expand our top line and change the game for Aveanna in a great way. My statement would be continued execution. And if you look at the past two and a half, three years for Aveanna, execution has been at a high for this organization. And I'm proud of the teams and what they've been able to accomplish. And I think that's something that you'll see in 2025 as well.
Great. Well, that wraps up our Q&A session here.
Thank you to Jeff and Matt for the very informative answers, and appreciate you all for listening in here. Thank you so much.
Thanks.
Thanks, Ben. Appreciate you.