All right. I think we can go ahead and get started here. Hi everyone. Thanks for joining us for the Aveanna Healthcare session. For those I have not yet met, my name is Jared Haase. I cover healthcare delivery and healthcare IT stocks for William Blair. Two quick housekeeping items before we begin. Just required to inform you that a full list of disclosures is available at our website, williamblair.com. After we run through the presentation here, we'll have a full breakout session on the second floor in room Jenney B. With that, it's my great pleasure to introduce the team from Aveanna. At the far end of the table, we have CEO Jeff Shaner, and next to me we have CFO Matt Buckhalter. Really excited to have the team here.
First time for Aveanna presenting at our Growth Stock Conference. I think it's a great opportunity to hear from the company coming off of a really strong 2025. A lot of momentum that we've seen continue year to date. We also had an exciting announcement from the company this morning closing an acquisition of Family First. I'm sure we'll get into that in a little bit more detail, especially as it relates to the outlook and guidance. In a lot of ways, I think that's sort of symbolic of the evolution of the model over the last couple of years, and we've now seen the company complete two acquisitions within roughly the last year.
Sort of a reflection of the team kind of executing on a lot of strategic initiatives and operating priorities and getting the model in a place where they can sort of play offense a little bit and remain investing for strategic growth, which I'm sure is very exciting for the team internally. We'll get into that in a lot more detail here through the presentation. Without further ado, Jeff and Matt, we'll pass it over to you.
Thanks, Jared, thanks for introducing us, and we're glad to be here today. God, I thought that was a world-class introduction, by the way, so congrats and thanks. Just jumping in, we're excited to share our story with you today and look forward to taking questions in the breakout afterwards. As we think of who Aveanna is, think of Aveanna as the nation's leading provider of home care services to three specific groups, pediatric, adult, and geriatric patients in America. One of the only companies that focuses on all three specific patient groups. We've a diversified home care platform that delivers innovative, cost-effective, and patient-preferred care, all in the comfort of our patient's home. As Jared mentioned, we've had three years of strategic transformation. I'll go over that in a few minutes.
Within that, we have focused on providing high-quality clinical outcomes and enhanced value to our payer and government partners. We'll do a little bit deeper dive on our government and payer partners here in a few slides. Quickly touching on Matt, Debbie, and I, and also the management team that stepped in with us. We all stepped into our current roles effectively Q1 of 2023 is when we kicked off our strategic transformation as a company to rebuild the organization post-COVID. There's a large group behind us, teams of leaders and also hundreds of employees, now thousands of employees that have stayed committed on providing cost-effective care in the home while rebuilding the company through our preferred payer and government affairs strategy.
I will note, as a management team, we have hit, I believe it's 13 quarters in a row, including Q1, of beating and raising expectations.
Sorry, 14. I stand corrected. Expect that trend to continue as we think about the rest of 2026. As we go on to slide five here, just thinking about the overview of the company, I'll start at the top right. Probably one of the things that we're most proud of is really over the last six years, we've been able to drive almost a 10% revenue CAGR, and the majority of that being organic in nature. At the same time, if you took a reverse chart, you'd show a de-leveraging from the end of 2022 through Q1 of 2026 that started just above 11 times leverage and at the end of Q1 is now under 3.8. We didn't get there overnight. We've been systematically reducing leverage by growing the company and collecting cash in a cost-effective manner over the last three and a half years.
Very proud of the revenue growth, and Matt would remind me, de-leveraging the company at the exact same time. The bottom right, you see our national footprint. I'm proud of where we cover, but I'm also opportunistic on the states that we have yet to fill in. Many of our Medicaid MCO payers and Medicare Advantage MCO partners want us to fill in that upper Midwest, Michigan, Ohio, West Virginia, Kentucky, Tennessee, to really fill in some of the key Medicaid states that we don't currently serve. On the flip side, really proud of the density that we have developed in many states, like Pennsylvania, Texas, Florida, California, Massachusetts, New Jersey, and many others as we continue to grow the company. As Jared did mention, this morning we announced our closing of the Family First Homecare PDS, PDN, excuse me, transaction.
Really excited to welcome the employees of Family First to our company as of yesterday. This morning we came out with updated guidance. We'll talk through that in just a minute. Family First really strengthens, just like Jared mentioned, Thrive Pediatrics, that we did last summer. Actually, I think we did it one day apart, June 2nd last year, Thrive. June 1st this year. We've got a theme going there for early June acquisitions. Just like Thrive strengthened our presence in the state of Texas, primarily. Family First was headquartered in Florida. About 70% of its revenues were generated out of the state of Florida. Really strengthens Florida for us, which is a mature pediatric PDS MCO state. A very important state for us to really be relevant in.
Also, Family First fills out states like Illinois, Iowa, North Carolina, Pennsylvania, South Dakota, and Texas. Although some of those are smaller, they're still important as we think of our total PDS story. Overarching, it strengthens our national footprint. Bottom left of the screen is our payer diversification. We're really proud of this. No single payer at Aveanna makes up more than 10% of our revenue, and that's Medicare through primarily our Home Health & Hospice division, a little bit of our Medical Solutions. As you think about our largest segment, Matt's going to talk about the business segments in a few minutes, PDS is our largest business segment. Think about the split being somewhere between 22%-60% Medicaid and MCO. A movement from Medicaid out to MCOs over the last seven years that we think continues, and that's a good thing for Aveanna.
Let's explain our preferred payer strategy. Top left is our guidance. Before this morning, we had guided up in the end of Q1 to $2.56 billion-$2.58 billion and adjusted EBITDA of $328 million-$332 million. As of this morning, specifically for the Family First revenue and EBITDA expected in 2026, we increased that range. We now believe fiscal year 2026 revenue range of $2.63 billion-$2.65 billion, or increase of $70 million at the midpoint and adjusted EBITDA range of $338 million-$342 million or an increase of $10 million at the midpoint. $70 million increase in revenue and a $10 million increase in EBITDA, exclusively driven just from the timing of the close of Family First. Again, we'll talk more about that in Matt's remarks and in Q&A. Impressive geographic mix, impressive payer mix.
Really it's underpinned by our preferred payer and our government affairs strategy, and we want to spend a little bit of time with you on that. Moving to slide six. Our growth strategy is underpinned by two key fundamental points. First, that demand for our services far outpaces the supply of caregivers, so that our demand far exceeds our supply. Second, on average, studies show that home care is a 10x cost savings when compared to higher acute care savings like the NICU, PICU, or ICU setting. As an example, our pediatric patient cost on average in a hospital is between $5,000 and $6,000 a day, in acute care setting and an average at home with PDN services, the average cost is between $500 and $600 a day. One tenth the cost of an acute care setting. Our MCO partners understand this very acutely.
For these reasons, we implemented our preferred payer and government affairs strategy back in late 2022. Our preferred payer strategy primarily aligns our clinical capacity with managed care organizations willing to invest in reimbursement rates. Our government affairs strategy similarly aligns our clinical capacity with federal and state partners willing to invest reimbursement rates. Both strategies rely on above-market reimbursement rates and above-market caregiver wages to align our caregiver capacity to that of our payers and our government partners. The overall focus of this strategy is to reduce the total cost of care and improve clinical outcomes while residing in the patient's preferred setting, their home. Lastly, our national scaled platform and investments in technology, data innovation, innovative tools, allows us to be the partner of choice for our MCO payers and government partners.
Now let's move into some key KPIs as we think about how we manage the preferred payer and government affairs strategy. We have a defined preferred payer strategy in all three of our business segments. Matt will review those, Private Duty Services, Home Health & Hospice, and Medical Solutions. Our largest business segment, as you'll hear, is our Private Duty Services segment, so let's focus there. As I mentioned, we implemented our preferred payer strategy back in mid 2022 with our first preferred payer. I'm proud to say they're still with us today. At the end of Q1 of 2026, we had 34 Private Duty Services preferred payers with approximately 60% of our total MCO volumes aligned with one of those MCO payers.
To give you a relative point, that's up from seven preferred payers at the end of 2022, and about 15% of our MCO payers at the end of 2022 align with the volume. Even up from Q1, we ended 2025 with 30 preferred payers and 57% of our volume. Continued nice movement. Matt always says, and I'll echo his comment, "We don't have a single preferred payer who says you've met all my needs." Every single one of our preferred payers expects more from us and needs more of our services. We feel like we have a long tail on these relationships. In all 34 Private Duty Services preferred payers, we are receiving an above-market reimbursement rate and paying an above-market wage rate while aligning our clinical capacity with these payers.
We believe that as we think of the next three to five years, we can achieve somewhere between 80% and 85% of our total MCO volumes with a preferred payer in our PDS division. Currently sitting at about 60% and believe that can get to 80, 85. In addition, under the second set of graphs here, you'll see our value-based agreements and bonus opportunities. Think about those as upside bonuses only. Today, there's no risk on those value-based agreements, and those are really tied to our ability to reduce the total cost of care with our patient base. We ended 2025 with 12 value-based agreements and roughly $15 million worth of value-based performance bonuses. Again, these are upside only, and they're tied directly to our ability to manage our patient population and reduce the total cost of care.
As you think about Medical Solutions and our Home Health, I'll jump to Home Health & Hospice for a minute. Again, we have a defined preferred payer strategy in both of these business segments. Proud to report at the end of Q1, we had 49 preferred payers in our Home Health business. That was up from 45 at the end of 2025. Roughly 81% of our business and volume is with an episodic payer, and we define a preferred payer in Home Health as an episodic payer. You see there, growing from the mid-60s to the low 70s, and now we've been consistently in the high 70s and pushing 80%. Lastly, in Medical Solutions, we've just finished our modernization. Matt will talk about that and efficiency efforts, and we have a target to grow 18 preferred payers to 25 this year.
Before I hand it over to Matt, just talking about our long-term growth algorithm. Each of our three operating segments have unique organic growth rates, and Matt will discuss those. When you aggregate the three businesses, we underpin Aveanna Healthcare's core organic and value-based growth to a range of 6%-8% annually. Clearly, we've been outpacing this growth rate from some time now, as we've been in the mid-double-digit growth rate on a year-over-year basis. We still think it's prudent to guide the organic growth rate to the high single digits over the long term. We believe that our capital structure supports an additional 1%-2% in M&A growth for a total growth rate over the long term between 7% and 10% annually. You'll find we are a disciplined management team focused on delivering value to our payers, referral sources, government partners, and patients.
Even in this current environment, our preferred payer and government affairs strategies continues to give us the opportunity to grow both organically and through M&A. With that, let me turn it over to Matt, and we'll jump into the three business segments. Matt?
Thanks, Jeff. Aveanna operates across three core business segments. Our first one, Private Duty Services. That's dedicated to providing in-home care to the most medically fragile and complex children. Think about these children being high acuity, vent/trach dependent, cerebral palsy, and they probably spend their first six months to two years of their life being in a NICU or PICU setting before the very first time they come home with an Aveanna caregiver at their side. Our second division is your Home Health & Hospice. This is your traditional skilled geriatric care that is providing hospice therapy and skilled nursing services to adult and the geriatric population. Our last segment in here is our enteral nutrition, our Medical Solutions segment, which provides enteral nutrition to over 31,000 patients on a monthly basis. Kind of taking a deep dive here into Private Duty Services for a little bit.
This is obviously our largest division, and it takes up about 82% of our total company revenue. In the long term, we think this will grow in the 3%-5% range. Think about that being roughly 3%, 3.5% on a volume and a 1%-1.5% rate, and that being a long-term projection. However, we obviously are experiencing much more accelerated volume and rate growth right now, and it's due to this pent-up demand that we're able to pull out all of these children out of the hospital and really staff the necessary cases to get the best clinical outcomes. We signed four additional preferred payers in Q1, bringing our total to 34, and of these 34, that makes up about 60% of our total MCO volume.
In that first kind of revenue mix, it makes up 60% of our total MCO volume is now being staffed through a preferred payer contract. We expect this to be in the low 60s by year-end. Overall, this division's really dedicated to providing quality care at a very cost-efficient area in a patient-preferred setting as well, the home. Our next division, Home Health & Hospice, makes up roughly about 10% of our total company revenue. Right now, we're very much a regional player in Home Health & Hospice. That's how we think of ourselves. The Midwest base as a hub for us, and also the Southeast. We believe long term that this division will grow in the 5%-7% range. That's industry. That's where that's growing. Jeff should be quick to remind me that in Q1, we grew 17.4% organically, so we are bucking the trend significantly.
We will continue to see accelerated growth, and it's really from our operating team, but also our clinical excellence that we're being able to pull through. Currently, we're at 4.5 stars out of five, where the industry is about three stars. That's helping our referral sources continue to push to us and our preferred payer agreements, where we have 49 signing four more additional episodic agreements in Q1. That is being able to push us forward and grow not only our Home Health, but also our Hospice division, which is the reason you're seeing this expedited growth at this time. The last one, our Medical Solutions segment, contributes roughly 8% of our total revenue. This is where we provide medical or enteral nutrition to roughly 31,000 patients on a monthly basis. Traditionally, much higher growth rate, 8%-10%.
You got to be careful in growing the right business and growing the right business appropriately. We are really seeing the return to growth in this division with 7.4% organic growth that we saw over Q1 of last year. That's really because we have put this division through our operating model. We call it our modernization efforts, where we put the car up on the lift and said, "Hey, let's go make ourselves effective and efficient." We did the same thing with Private Duty Services the year before and Triple H the year before that, and that's also a major point of why you're seeing that expedited growth in those two divisions. I would expect this division to follow on the back half of 2026 and into 2027 as well.
Overall, put all those together, we expect that revenue to grow in that 6%-8% organic growth range with some significant upside as we bring in tuck-in or appropriate M&A similar to the Family First acquisition that we announced earlier today. All three businesses, so continuing to deliver that strong year-over-year revenue growth. It was led by Home Health & Hospice, 17.4%, 16.4% in PDS, and that 7.4% in the Medical Solutions. This growth also has translated into pretty significant EBITDA growth as well, and so it's allowed us to generate some really meaningful free cash flow and to really strengthen our balance sheet at the same time. As Jeff mentioned, we're going to continue to remain really focused on our leverage profile. On Q1, we announced leverage of 3.8x , down significantly when we came into our positions back in 2022.
Going forward, we're going to continue to execute on our de-leveraging strategy while sustaining our growth, having really disciplined cost management, and really strong cash collections. Our ultimate goal is to get to be a sub-three times organization while also mixing in the inorganic growth with the organic growth at the same time. Lastly, what would be a finance person without talking about a capital structure? Obviously my favorite part. Q1 liquidity of $525 million is roughly about $189 million cash on hand, $110 million of availability on our securitization facility, and approximately $226 million on our revolver, which remains continuously undrawn. We just use it for some LCs to put for workman's comp claims. We do have approximately $1.48 billion of variable rate debt out there. We've done a very nice job over the last few years with hedges and swaps.
Currently, have replaced our expiring swaps at the end of June with new hedges that go into place. It really just takes the volatility out of potential interest rate fluctuations that could happen out there. On top of that, done some really nice free cash flow over the last few years. In 2025, we generated $131 million of free cash flow, and we expect to see similar increased results of that in 2026 as well. Lastly, in 2025, we refinanced our term loan. We combined our first and second into one Term Loan B, pushed out the maturity to 2032, and reduced the total cost of capital in there, saving about $14 million of interest expense with that one. Also last week, did a little repricing, and along with an upgrade from the rating agencies, we were able to reduce our term loans by 75 basis points.
Taking that SOFR 375 to SOFR 300, another $10 million of incremental savings. About $24 million in annual interest expense saved over the last year for interest. Really proud of what we've been able to accomplish, not only our free cash flow generation and our de-leveraging story, but really just securing our capital structure and being in a really nice position going forward. With that, Jeff, I'll turn it over to wrap everything up here for us.
I think well said, Matt, and I think Q1 is representative of now our fourth year in a row of continuing to transform our revenue growth, our clinical outcomes, and our cost-effective care through our financial results. I have no reason to expect 2026 not to be another banner year. It has certainly started out that way. I go back and think about we rebuilt Aveanna from the ground up from late 2022 when EBITDA was roughly $129 million, to the trailing four quarters. Now, EBITDA is approximately $340 million. We've built the company back from the ground up. Matt talked about it, each business, we built it one year at a time, rebuilt, modernized our businesses, took cost out of corporate support, at the same time, investing in key areas of clinical innovations and our oversight and onboarding.
We are blessed to have a deeply dedicated group of Aveanna leaders and employees who believe deeply in our missions. We want to thank them for all that they do. As we've outlined through this presentation, we continue to execute a focused, disciplined strategy built around scale, clinical excellence, and a strong partnership with both our payers and government partners. We are a growing national footprint with a balanced capital structure, with strong momentum, and Aveanna is well positioned to deliver long-term value for our patients, our families, and our shareholders. With that, we will open it up and see if Jared has any questions for us here with the few minutes we have left.
Awesome. Thank you so much, guys. Yeah, we've got a few minutes here, so I can open it up to the audience if anyone has any questions before we break out. Pause for a second. Yeah, please.
The preferred payer relationships that you have, does that take out the risk of reimbursement cuts and big changes or just how ?
The question was, if we can't hear it, is with our preferred payers, does it really de-risk the risk on reimbursement changes? I'll focus on our PDS division, this answer, but it's a similar answer across our three businesses. One, I went back and I said, the payer's need for our services is so far greater than we will ever be able to meet, both as a company and as an industry. The demand is what's driving the need for more supply. Because we are cutting contract agreements that are unique with each payer, so each one of the 34 agreements are unique with that payer, and as far as we know, it's just an agreement with Aveanna versus the peers in our market. Yes, it really creates a floor for us.
Our contracts are normally annual in nature, evergreen in nature, so they are reviewed each year. remember, each time the preferred payer signs a contract with us, they're committing to an additional spend. I mean, they're committing to additional dollars, and often it is meaningful in nature. our ability to move that through to wages and to engage and align more caregivers with them is what the premises is to ultimately save total cost of care. We try, and add value-based agreements to your question, our goal from day one with the new agreement is to start introducing the idea of value-based agreements because that's when the payer and us both can recognize the savings that we are generating through these pediatric PDN patients. again, think of the dollars in our value-based agreements.
For every dollar we're earning, the plan has probably saved between $9 and $10 per dollar. Because they're fronting us the reimbursement rate, which allows us to increase wage rates. It also then allows the payer to receive the robust amount of the savings and for us to share in those on a 10%-15% basis. It's kind of a win-win. It takes us about a year and a half to align to value-based agreements after we've signed a preferred arrangement. Short answer to the long answer is yes, it really underpins the de-risking. I would tell you, even in this environment where we have started to moderate our government affairs expectations, our state rate wins, we've seen the preferred payer wins pick up as referenced by second half of last year and Q1 of this year. Great question. Anybody else?
I might just add one, kind of building off of that. I guess, when I think about your response to that question, and then I go back to, I think, one of the comments you made on the Q1 earnings call was just the idea that the labor environment is stable right now. Is it fair to say then that you're just less dependent on rate increases today than you were a few years ago to achieve your growth targets?
Yeah, I'll start and then Matt jump in. I think we've said consistently, especially if you start four years ago, we had to fix 31 of 31 states four years ago, and you go back to our state rate wins, which was, I can't remember, 12, 15, 11, 10 over four years, each year, material in nature. We sit here today where the only market we have not yet fixed is the California Medi-Cal market. We're hopeful the Senate and the Assembly are both building a 2027 legislative process in California today. I'm going to remind on record, we are disappointed in California for the fact that they have not put forth a rate increase. It is one of the only investments in California that has a net savings to them on an annual basis.
For them to invest about $75 million, they'd save about $330 million on an annual basis. It is a no-brainer for California to step up and invest in PDN rate increases. I will get off my soapbox, sorry.
Yeah. Thank you.
Yes, over the last four years, Jared, our team and our industry has done a really good job of fixing the state rate wins, and Matt maybe will talk about kind of how we think about state rates over the next few years.
Yeah, it's more of a COLA adjustment now, Jared, is the expectation, and a lot of this was prior to us driving the Government Affairs or the Payer Relations strategy, but specifically the Government Affairs strategy. Nobody was doing it. We do have size, we do have scale, we have density, we have sophistication, but our Payer Relations and Government Affairs team used to be a part-time employee, a contractor that we had in there. Now you turn around and there's 25, 30 deep. It's a robust piece of our business, and it's a big piece of our story. We don't want to go for the 10-year hiatus like we're experiencing in California of a 50% rate increase and then waiting 10 years until the next one comes. We'd rather go back to the table every couple of years, every two years. "Hey, we need to put 3% in.
Hey, 4% will help into this one. Let us show you what we saved you with this one. Really just beating the drum and staying on top of it, so there's not wild swings or any feast or famine that would potentially occur. We're in a really good spot right now. We've played the catch up, post the hyper wage inflation that occurred, post-COVID, and now we're just operating the business at a really high level and getting some nice leverage out our SG&A too.
Awesome. Yes, sir.
I saw you said this, but I may have missed it earlier.
Yeah.
It seems like your growth has been accelerating recently. What's the key to that?
If you take PDS, let's take out the Thrive acquisition last year, 16.4% comes down to closer to 10%. Why 10% when we guide to 3%-5%? I think we would tell you it is those three and four years of the pent-up demand that was ultimately there for the need for children to get out of the hospital and be serviced at home. As we continued to build upon these rate wins, both state and preferred payers and the MCOs, you just started to get a compounding impact of both rate and volume. Ultimately, in our 10% PDS, we tell you it's still 6%-6.5% volume and 3%-3.5%, maybe 4% rate. Rate is still high. You heard Matt talk about we guide to 1%-1.5% rate long term. We think that's prudent.
Rate is still accelerated, but really it's the growth, and I would tell you it's the pent-up growth. Matt talks about often, when we sign a preferred payer agreement, immediately we go from having not admitted a single case for that payer for months to the next week, we're admitting three, four, or five patients. Think of our patients on average getting between 60 and maybe 100 hours of service a week. These are high intense children coming out of the hospital. There is just such pent-up demand when these payers sign agreements with us, and we use a data point like on average, nationally, medically fragile children spend 54 extra days in the hospital waiting for home-based nursing services to be established in a home. That's 54 days at somewhere between $5,000 and $7,000 a day.
If you're an MCO payer, you understand what $250,000 means of just waste in a hospital, plus the family's yelling at you that they want to go home. Those kind of pent-up demand type decisions, I think, has been driving our accelerated growth. Great.
Hit the shot clock.
I mean, right on the dot. Right on the dot. When in Chicago, hit the shot clock.
Thanks, everyone.
Thank you so much.
Thanks, guys.
Appreciate it.