Full Press Release Details
AVEANNA HEALTHCARE HOLDINGS ANNOUNCES
SECOND-QUARTER 2021 FINANCIAL RESULTS
Revenue Increased 24.0% to $436.1 Million
Gross Margin Increased 37.5% to $146.6 Million
Net Income of $1.3 Million, or $0.01 per Diluted Share
Adjusted Net Income per Diluted Share of $0.10
Adjusted EBITDA Increased 30.6% to $48.8 Million
Atlanta, Georgia (August 11, 2021) Aveanna Healthcare Holdings, Inc. (NASDAQ: AVAH), a leading, diversified home care platform focused on providing care to medically complex, high-cost patient populations, today announced financial results for the three and six-month periods ended July 3, 2021.
Tony Strange, Chief Executive Officer, commented We are very pleased with the progress that we've made on all fronts during the second quarter, delivering robust top and bottom line growth and building on the solid results reported in the first quarter. The integration of Doctor's Choice is continuing to track ahead of expectations, giving us a clear line of sight on our synergies and opportunities ahead. In addition to our positive results, we continued to experience favorable rate outcomes across our diversified payer platform. Finally, we completed a successful refinancing of our remaining debt balances after the IPO, providing us enhanced operational and financial flexibility. I'm extremely proud of our team's focus during these uncertain times
Three-Month Periods Ended July 3, 2021 and June 27, 2020
Revenue was $436.1 million for the second quarter of 2021, as compared to $351.6 million for the second quarter of 2020, an increase of $84.5 million, or 24.0%. This increase was driven by growth across our key segments, including:
a $35.5 million, or 11.3%, increase in Private Duty Services ( PDS ) revenue to $349.7 million;
a $45.4 million, or 975.4%, increase in Home Health & Hospice ( HHH ) revenue to $50.1 million; and
a $3.6 million, or 11.1%, increase in Medical Solutions ( MS ) revenue to $36.4 million.
Gross margin was $146.6 million, or 33.6% of revenue, for the second quarter of 2021, as compared to $106.6 million, or 30.3% of revenue, for the second quarter of 2020, an increase of $40.0 million, or 37.5%.
Net income was $1.3 million for the second quarter of 2021, as compared to a net loss of $77.6 million for the second quarter of 2020, while net income per diluted share was $0.01 for the second quarter of 2021, as compared with net loss per diluted share of $0.55 for the second quarter of 2020. Adjusted net income per diluted share was $0.10 for the second quarter of 2021, as compared to $0.08 for the second quarter of 2020.
Adjusted EBITDA was $48.8 million, or 11.2% of revenue, for the second quarter of 2021 as compared to $37.4 million, or 10.6% of revenue, for the second quarter of 2020, an increase of $11.5 million, or 30.6%.
Six-Month Periods Ended July 3, 2021 and June 27, 2020
Revenue was $853.3 million for the first six months of 2021, as compared to $706.8 million for the first six months of 2020, an increase of $146.5 million, or 20.7%. This increase was driven by growth across our key segments, including:
a $65.8 million, or 10.4%, increase in PDS revenue to $700.5 million;
a $72.5 million, or 793.3%, increase in HHH revenue to $81.6 million; and
a $8.2 million, or 13.1%, increase in MS revenue to $71.2 million.
Gross margin was $278.3 million, or 32.6% of revenue, for the first six months of 2021, as compared to $214.2 million, or 30.3% of revenue, for the first six months of 2020, an increase of $64.1 million, or 29.9%.
Net income was $7.1 million for the first six months of 2021, as compared to a net loss of $39.9 million for the first six months of 2020, while net income per diluted share was $0.04 for the first six months of 2021, as compared with net loss per diluted share of $0.29 for the first six months of 2020. Adjusted net income per diluted share was $0.19 for the first six months of 2021 as compared to $0.10 for the first six months of 2020.
Adjusted EBITDA was $92.6 million, or 10.8% of revenue, for the first six months of 2021 as compared to $67.2 million, or 9.5% of revenue, for the first six months of 2020, an increase of $25.4 million, or 37.7%.
Aveanna's Initial Public Offering ( IPO ) and Subsequent Credit Facility Amendment
In May, 2021 we raised aggregate proceeds of $477.7 million from our IPO, after deducting underwriting discounts and commissions and inclusive of our underwriters' partial exercise of their overallotment option.
We used the majority of the net proceeds from our IPO to repay $100.0 million principal amount of our first lien indebtedness and $307.0 million of our second lien indebtedness. We then terminated our second lien credit facility.
Following our IPO, we increased the total capacity under our revolving credit facility from $75.0 million to $200.0 million
As of July 3, 2021, we had cash of $106.5 million and bank debt of $860.2 million, with $180.2 million of available borrowing capacity under our revolving credit facility.
On July 15, 2021, we amended our first lien credit facility to, among other things, simplify our first lien term loan structure and reduce the overall interest rates thereunder to LIBOR + 3.75%, with a LIBOR floor of 0.5%, and provide for a $200.0 million delayed draw term loan facility for future acquisitions. We also blended and extended our interest rate swaps to reduce our swap rates and extend the maturity through July, 2026.
David Afshar, Chief Financial Officer, commented We continued our positive earnings momentum and capital structure improvement in the second quarter of 2021. We followed our IPO with the refinancing of our remaining outstanding first lien term loans and the restructuring of our interest rate swaps, which we expect will significantly reduce our overall debt service costs going forward.
On April 16, 2021, we completed the acquisition of Doctor's Choice Holdings, LLC ( Doctor's Choice ), a home health business with sixteen branches throughout the state of Florida, expanding our presence in the adult home health business and creating further density for us in the state of Florida.
Our pipeline continues to be active with numerous HHH and PDS opportunities.
Full Year 2021 Guidance
We are reaffirming our expectation that revenue is anticipated to be at least $1,745 million.
We are not providing guidance on net income at this time due to the volatility of certain required inputs that are not available without unreasonable efforts, including future fair value adjustments associated with our interest rate swaps.
We are reaffirming our expectation that Adjusted EBITDA is anticipated to be at least $185 million.
Non-GAAP Financial Measures
In addition to our results of operations prepared in accordance with U.S. generally accepted accounting principles ( GAAP ), we also evaluate our financial performance using EBITDA, Adjusted EBITDA, Field contribution, Field contribution margin, Adjusted corporate expense, Adjusted net income and Adjusted net income per diluted share. Given our determination of adjustments in arriving at our computations, these non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as substitutes or alternatives to net income or loss, revenue, operating income or loss, cash flows from operating activities, total indebtedness or any other financial measures calculated in accordance with GAAP.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are non-GAAP financial measures and are not intended to replace financial performance measures determined in accordance with GAAP, such as net income (loss). Rather, we present EBITDA and Adjusted EBITDA as supplemental measures of our performance. We define EBITDA as net income (loss) before interest expense, net; income tax (expense) benefit; and depreciation and amortization. We define Adjusted EBITDA as EBITDA, adjusted for the impact of certain other items that are either non-recurring, infrequent, non-cash, unusual, or items deemed by us to not be indicative of the performance of our core operations, including impairments of goodwill, intangible assets, and other long-lived assets; non-cash, share-based compensation; sponsor fees; loss on extinguishment of debt; fees related to debt modifications; the effect of interest rate derivatives; acquisition-related and integration costs; legal costs and settlements associated with acquisition matters; the discontinuation of our ABA Therapy services; non-acquisition related legal settlements; and other system transition costs, professional fees and other costs. As non-GAAP financial measures, our computations of EBITDA and Adjusted EBITDA may vary from similarly termed non-GAAP financial measures used by other companies, making comparisons with other companies on the basis of this measure impracticable.
We believe our computations of EBITDA and Adjusted EBITDA are helpful in highlighting trends in our core operating performance. In determining which adjustments are made to arrive at EBITDA and Adjusted EBITDA, we consider both (1) certain non-recurring, infrequent, non-cash or unusual items, which can vary significantly from year to year, as well as (2) certain other items that may be recurring, frequent, or settled in cash but which we do not believe are indicative of our core operating performance. We use EBITDA and Adjusted EBITDA to assess operating performance and make business decisions.
We incurred substantial acquisition-related costs and integration costs in fiscal years 2021 and 2020. The underlying acquisition activities took place over a defined timeframe, had distinct project timelines and were incremental to activities and costs that arose in the ordinary course of our business. Therefore, we believe it is important to exclude these costs from our Adjusted EBITDA because it provides us a normalized view of our core, ongoing operations after integrating our acquired companies, which we believe is an important measure in assessing our performance.
Field contribution and Field contribution margin
Field contribution and Field contribution margin are non-GAAP financial measures and are not intended to replace financial performance measures determined in accordance with GAAP, such as operating income (loss). Rather, we present Field contribution and Field contribution margin as supplemental measures of our performance. We define Field contribution as operating income (loss) prior to corporate expenses and other non-field related costs, including depreciation and amortization, acquisition-related costs, and other operating expenses. Field contribution margin is Field contribution as a percentage of revenue. As non-GAAP financial measures, our computations of Field contribution and Field contribution margin may vary from similarly termed non-GAAP financial measures used by other companies, making comparisons with other companies on the basis of these measures impracticable.
We believe Field contribution and Field contribution margin are helpful in highlighting trends in our core operating performance and evaluating trends in our branch and regional results, which can vary from year to year. We use Field contribution and Field contribution margin to make business decisions and assess the operating performance and results delivered by our core field operations, prior to corporate and other costs not directly related to our field operations. These metrics are also important because they guide us in determining whether our branch and regional administrative expenses are appropriately sized to support our caregivers and direct patient care operations. Additionally, Field contribution and Field contribution margin determine how effective we are in managing our field supervisory and administrative costs associated with supporting our provision of services and sale of products.
Adjusted corporate expenses
Adjusted corporate expenses is a non-GAAP financial measure and is not intended to replace financial performance measures determined in accordance with GAAP, such as corporate expenses. Rather, we present adjusted corporate expenses as a supplemental measure of our performance. We define Adjusted corporate expenses as corporate expenses adjusted for the impact of certain other items that are either non-recurring, infrequent, non-cash, unusual, or items deemed by us to not be indicative of the performance of our core operations, including non-cash, share-based compensation; sponsor fees; acquisition-related and integration costs; legal costs and settlements associated with acquisition matters; COVID related costs, net of reimbursement; and other system transition costs, professional fees and
other costs. As non-GAAP financial measures, our computations of adjusted corporate expenses may vary from similarly termed non-GAAP financial measures used by other companies, making comparisons with other companies on the basis of this measure impracticable.
We believe Adjusted corporate expenses is helpful in highlighting trends in our corporate support function, which can vary from year to year. We use Adjusted corporate expenses to make business decisions in determining whether or not our corporate expenses is appropriately sized to support our caregivers and direct patient care operations. Excluding the aforementioned items from corporate expenses that are either non-recurring, infrequent, non-cash, unusual, or items deemed by us to not be indicative of the performance of our core operations allows us to evaluate adjusted corporate expenses in relation to the support necessary for our caregivers and direct patient care operations.
Adjusted net income and Adjusted net income per diluted share
Adjusted net income represents net income as adjusted for the impact of GAAP income tax, goodwill, intangible and other long-lived asset impairment charges, non-cash share-based compensation expense, sponsor fees, loss on extinguishment of debt, interest rate derivatives, acquisition-related costs, integration costs, legal costs, COVID-related costs net of reimbursement, ABA exited operations, other system transition costs, professional fees and certain other miscellaneous items on a pre-tax basis. Adjusted net income includes a provision for income taxes derived utilizing a combined statutory tax rate. The combined statutory tax rate is our estimate of our long-term tax rate. The most comparable GAAP measure is net income.
Adjusted net income per diluted share represents adjusted net income on a per diluted share basis using the weighted-average number of diluted shares outstanding for the period. The most comparable GAAP measure is net income per share, diluted.
Adjusted net income and Adjusted net income per diluted share are important to us because they allow us to assess financial results, exclusive of the items mentioned above that are not operational in nature or comparable to those of our competitors.
Aveanna will host a conference call on Thursday, August 12, 2021, at 10:00 a.m. Eastern Time to discuss our second quarter results. The conference call can be accessed live over the phone by dialing 1-877-407-0789, or for international callers, 1-201-689-8562. A telephonic replay of the conference call will be available until August 19, 2021, by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13721328. A live webcast of our conference call will also be available under the Investor Relations section of our website: https://ir.aveanna.com/. The online replay will also be available for one week following the call.
Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements (other than statements of historical facts) in this press release regarding our prospects, plans, financial position, business strategy and expected financial and operational results may constitute forward-looking statements. Forward-looking statements generally can be identified by the use of terminology such as believe, expect, anticipate, intend, plan, estimate, seek, will, may, should, predict, project, potential, continue or the negatives of these terms or variations of them or similar expressions. These statements are based on certain assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements, such as our ability to successfully execute our growth strategy, including through organic growth and the completion of acquisitions, effective integration of the companies we acquire, unexpected costs of acquisitions and dispositions, the possibility that expected cost synergies may not materialize as expected, the failure of Aveanna or the companies we acquire to perform as expected, estimation inaccuracies in revenue recognition, our ability to drive margin leverage through lower costs, unexpected increases in SG&A and other expenses, changes in reimbursement, changes in government regulations, changes in Aveanna Healthcare's relationships with referral sources, increased competition for Aveanna's services or wage inflation, changes in the interpretation of government regulations or discretionary determinations made by government officials, uncertainties regarding the outcome of rate discussions with managed care organizations and our ability to effectively collect our cash from these organizations, our ability to effectively bill and collect under new Electronic Visit Verification regulations, changes in tax rates, the impact of adverse weather, the impact to our business operations, reimbursements and patient population were the COVID-19 environment to worsen, and other risks set forth under the heading Risk Factors in Aveanna s Registration Statement on Form S-1, as amended, filed with the Securities and Exchange Commission and which was declared effective on April 28, 2021, which is available at www.sec.gov. In addition, these forward-looking statements necessarily depend upon assumptions, estimates and dates that may prove to be incorrect or imprecise. Accordingly, forward-looking statements included in this press release do not purport to be predictions of future events or circumstances, and actual results may differ materially from those expressed by forward-looking statements. All forward-looking statements speak only as of the date made, and Aveanna
undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
About Aveanna Healthcare
Aveanna Healthcare is headquartered in Atlanta, Georgia and has locations in 30 states providing a broad range of pediatric and adult healthcare services including nursing, rehabilitation services, occupational nursing in schools, therapy services, day treatment centers for medically fragile and chronically ill children and adults, home health and hospice services, as well as delivery of enteral nutrition and other products to patients. The Company also provides case management services in order to assist families and patients by coordinating the provision of services between insurers or other payers, physicians, hospitals, and other healthcare providers. In addition, the Company provides respite healthcare services, which are temporary care provider services provided in relief of the patient's normal caregiver. The Company's services are designed to provide a high quality, lower cost alternative to prolonged hospitalization. For more information, please visit www.aveanna.com.
Cash Flow and Information about Indebtedness
The following table sets forth a summary of our cash flows from operating, investing, and financing activities for the six-month periods presented:
| For the Six-Month Periods Ended | |||||||
| (dollars in thousands) | July 3, 2021 | June 27, 2020 | |||||
| Net cash (used in) provided by operating activities | $ | (13,621 | ) | $ | 76,585 | ||
| Net cash used in investing activities | $ | (108,583 | ) | $ | (10,480 | ) | |
| Net cash provided by financing activities | $ | 91,408 | $ | 16,486 | |||
| Cash and cash equivalents at beginning of period | $ | 137,345 | $ | 3,327 | |||
| Cash and cash equivalents at end of period | $ | 106,549 | $ | 85,918 |
The following table presents our long-term indebtedness as of July 3, 2021:
| (dollars in thousands) | |||||
| Instrument | Interest Rate | July 3, 2021 | |||
| Initial First Lien Term Loan | L + 4.25% | $ | 560,137 | ||
| First Lien First Amendment Term Loan | L + 5.50% | 216,028 | |||
| First Lien Fourth Amendment Term Loan | L + 6.25% | 84,075 | |||
| Revolving Credit Facility | L + 4.25% | - | |||
| Total Credit Facility Debt | 860,240 | ||||
| Less: unamortized debt issuance costs | (18,618 | ) | |||
| Net Credit Facility Debt | $ | 841,622 |
The following table presents our term loan balances and related interest rates immediately prior to entering into the amendment to our credit facilities on July 15, 2021 and immediately after entering into such amendment. Holding all other factors the same, based upon the interest rates in effect immediately prior to and after the amendment, the Company currently expects to save approximately $13.0 million in annual cash interest on the $860.0 million 2021 Extended Term Loan, by reducing the average interest rate under its term loans by approximately 1.5% as a result of the amendment.
| Long-term | Annualized Interest | Annualized Interest | |||||||||||
| (dollars in thousands) | LIBOR | LIBOR | Obligations | Immediately Prior to | Immediately After | ||||||||
| Instrument | Margin | Floor | July 3, 2021 | July 15 Refinancing | July 15 Refinancing | ||||||||
| Initial First Lien Term Loan | L + 4.25% | 1.00 | % | $ | 560,137 | $ | 29,407 | $ | - | ||||
| First Lien First Amendment Term Loan | L + 5.50% | 1.00 | % | 216,028 | 14,042 | - | |||||||
| First Lien Fourth Amendment Term Loan | L + 6.25% | 1.00 | % | 84,075 | 6,095 | - | |||||||
| 2021 Extended Term Loan | L + 3.75% | 0.50 | % | 860,000 | - | 36,550 | |||||||
| Annual Cash Interest | 49,544 | 36,550 | |||||||||||
| Annual Cash Interest Savings | 12,994 | ||||||||||||
| Average Term Loan Interest Rate | 5.8 | % | 4.3 | % |
Results of Operations
Three and Six-Month Periods Ended July 3, 2021 Compared to the Three and Six-Month Periods Ended June 27, 2020
The following table summarizes our consolidated results of operations for the three and six-month periods indicated (amounts in thousands, except per share data):
| For the Three-Month Periods Ended | For the Six-Month Periods Ended | |||||||||||
| July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | |||||||||
| Revenue | $ | 436,112 | $ | 351,577 | $ | 853,272 | $ | 706,800 | ||||
| Cost of revenue, excluding depreciation and amortization | 289,523 | 244,948 | 575,000 | 492,630 | ||||||||
| Branch and regional administrative expenses | 77,720 | 55,120 | 147,092 | 114,814 | ||||||||
| Corporate expenses | 32,401 | 22,749 | 59,800 | 48,546 | ||||||||
| Goodwill impairment | - | 75,727 | - | 75,727 | ||||||||
| Depreciation and amortization | 5,170 | 4,234 | 10,018 | 8,417 | ||||||||
| Acquisition-related costs | 1,004 | 169 | 2,772 | 169 | ||||||||
| Other operating expenses | - | 587 | - | 587 | ||||||||
| Operating income (loss) | 30,294 | (51,957 | ) | 58,590 | (34,090 | ) | ||||||
| Interest income | 61 | 163 | 138 | 209 | ||||||||
| Interest expense | (19,262 | ) | (18,844 | ) | (41,687 | ) | (39,907 | ) | ||||
| Loss on debt extinguishment | (8,918 | ) | (200 | ) | (8,918 | ) | (73 | ) | ||||
| Other (expense) income | (736 | ) | (4,460 | ) | (577 | ) | 37,331 | |||||
| Income (loss) before income taxes | 1,439 | (75,298 | ) | 7,546 | (36,530 | ) | ||||||
| Income tax expense | (179 | ) | (2,255 | ) | (488 | ) | (3,386 | ) | ||||
| Net income (loss) | $ | 1,260 | $ | (77,553 | ) | $ | 7,058 | $ | (39,916 | ) | ||
| Income (loss) per share: | ||||||||||||
| Net income (loss) per share, basic | $ | 0.01 | $ | (0.55 | ) | $ | 0.05 | $ | (0.29 | ) | ||
| Weighted average shares of common stock outstanding, basic | 171,149 | 142,084 | 156,636 | 139,777 | ||||||||
| Net income (loss) per share, diluted | $ | 0.01 | $ | (0.55 | ) | $ | 0.04 | $ | (0.29 | ) | ||
| Weighted average shares of common stock outstanding, diluted | 177,683 | 142,084 | 161,975 | 139,777 |
The following tables summarize our consolidated key performance measures, including Field contribution and Field contribution margin, which are non-GAAP measures, for the three and six-month periods indicated:
| For the Three-Month Periods Ended | ||||||||||||
| (dollars in thousands) | July 3, 2021 | June 27, 2020 | Change | % Change | ||||||||
| Revenue | $ | 436,112 | $ | 351,577 | $ | 84,535 | 24.0 | % | ||||
| Cost of revenue, excluding depreciation and amortization | 289,523 | 244,948 | 44,575 | 18.2 | % | |||||||
| Gross margin | $ | 146,589 | $ | 106,629 | $ | 39,960 | 37.5 | % | ||||
| Gross margin percentage | 33.6 | % | 30.3 | % | ||||||||
| Branch and regional administrative expenses | 77,720 | 55,120 | 22,600 | 41.0 | % | |||||||
| Field contribution | $ | 68,869 | $ | 51,509 | $ | 17,360 | 33.7 | % | ||||
| Field contribution margin | 15.8 | % | 14.7 | % | ||||||||
| Corporate expenses | $ | 32,401 | $ | 22,749 | $ | 9,652 | 42.4 | % | ||||
| As a percentage of revenue | 7.4 | % | 6.5 | % | ||||||||
| Operating income (loss) | $ | 30,294 | $ | (51,957 | ) | $ | 82,251 | -158.3 | % | |||
| As a percentage of revenue | 6.9 | % | -14.8 | % |
| For the Six-Month Periods Ended | ||||||||||||
| (dollars in thousands) | July 3, 2021 | June 27, 2020 | Change | % Change | ||||||||
| Revenue | $ | 853,272 | $ | 706,800 | $ | 146,472 | 20.7 | % | ||||
| Cost of revenue, excluding depreciation and amortization | 575,000 | 492,630 | 82,370 | 16.7 | % | |||||||
| Gross margin | $ | 278,272 | $ | 214,170 | $ | 64,102 | 29.9 | % | ||||
| Gross margin percentage | 32.6 | % | 30.3 | % | ||||||||
| Branch and regional administrative expenses | 147,092 | 114,814 | 32,278 | 28.1 | % | |||||||
| Field contribution | $ | 131,180 | $ | 99,356 | $ | 31,824 | 32.0 | % | ||||
| Field contribution margin | 15.4 | % | 14.1 | % | ||||||||
| Corporate expenses | $ | 59,800 | $ | 48,546 | $ | 11,254 | 23.2 | % | ||||
| As a percentage of revenue | 7.0 | % | 6.9 | % | ||||||||
| Operating income (loss) | $ | 58,590 | $ | (34,090 | ) | $ | 92,680 | -271.9 | % | |||
| As a percentage of revenue | 6.9 | % | -4.8 | % |
The following tables summarize our key performance measures by segment for the three-month periods indicated:
| PDS | |||||||||||||
| For the Three-Month Periods Ended | |||||||||||||
| (dollars and hours in thousands) | July 3, 2021 | June 27, 2020 | Change | % Change | |||||||||
| Revenue | $ | 349,680 | $ | 314,196 | $ | 35,484 | 11.3 | % | |||||
| Cost of revenue, excluding depreciation and amortization | 243,898 | 224,075 | 19,823 | 8.8 | % | ||||||||
| Gross margin | $ | 105,782 | $ | 90,121 | $ | 15,661 | 17.4 | % | |||||
| Gross margin percentage | 30.3 | % | 28.7 | % | 1.6 | % | (4) | ||||||
| Hours | 9,920 | 9,013 | 907 | 10.1 | % | ||||||||
| Revenue rate | $ | 35.25 | $ | 34.86 | $ | 0.39 | 1.2 | % | (1) | ||||
| Cost of revenue rate | $ | 24.59 | $ | 24.86 | $ | (0.27 | ) | -1.3 | % | (2) | |||
| Spread rate | $ | 10.66 | $ | 10.00 | $ | 0.66 | 7.3 | % | (3) | ||||
| HHH | |||||||||||||
| For the Three-Month Periods Ended | |||||||||||||
| (dollars and admissions/episodes in thousands) | July 3, 2021 | June 27, 2020 | Change | % Change | |||||||||
| Revenue | $ | 50,071 | $ | 4,656 | $ | 45,415 | 975.4 | % | |||||
| Cost of revenue, excluding depreciation and amortization | 25,765 | 2,696 | 23,069 | 855.7 | % | ||||||||
| Gross margin | $ | 24,306 | $ | 1,960 | $ | 22,346 | 1140.1 | % | |||||
| Gross margin percentage | 48.5 | % | 42.1 | % | 6.4 | % | (4) | ||||||
| Home health total admissions (5) ** | 11.7 | ** | ** | ** | |||||||||
| Home health episodic admissions (6) ** | 7.1 | ** | ** | ** | |||||||||
| Home health total episodes (7) ** | 10.3 | ** | ** | ** | |||||||||
| Home health revenue per completed episode (8) ** | $ | 2,894 | ** | ** | ** | ||||||||
| MS | |||||||||||||
| For the Three-Month Periods Ended | |||||||||||||
| (dollars and UPS in thousands) | July 3, 2021 | June 27, 2020 | Change | % Change | |||||||||
| Revenue | $ | 36,361 | $ | 32,725 | $ | 3,636 | 11.1 | % | |||||
| Cost of revenue, excluding depreciation and amortization | 19,860 | 18,177 | 1,683 | 9.3 | % | ||||||||
| Gross margin | $ | 16,501 | $ | 14,548 | $ | 1,953 | 13.4 | % | |||||
| Gross margin percentage | 45.4 | % | 44.5 | % | 0.9 | % | (4) | ||||||
| Unique patients served ( UPS ) | 78 | 74 | 4 | 5.4 | % | ||||||||
| Revenue rate | $ | 466.17 | $ | 442.23 | $ | 23.94 | 5.7 | % | (1) | ||||
| Cost of revenue rate | $ | 254.62 | $ | 245.64 | $ | 8.98 | 3.9 | % | (2) | ||||
| Spread rate | $ | 211.55 | $ | 196.59 | $ | 14.96 | 8.0 | % | (3) |
The following tables summarize our key performance measures by segment for the six-month periods indicated:
| PDS | |||||||||||||
| For the Six-Month Periods Ended | |||||||||||||
| (dollars and hours in thousands) | July 3, 2021 | June 27, 2020 | Change | % Change | |||||||||
| Revenue | $ | 700,507 | $ | 634,709 | $ | 65,798 | 10.4 | % | |||||
| Cost of revenue, excluding depreciation and amortization | 492,895 | 452,038 | 40,857 | 9.0 | % | ||||||||
| Gross margin | $ | 207,612 | $ | 182,671 | $ | 24,941 | 13.7 | % | |||||
| Gross margin percentage | 29.6 | % | 28.8 | % | 0.8 | % | (4) | ||||||
| Hours | 19,830 | 17,929 | 1,901 | 10.6 | % | ||||||||
| Revenue rate | $ | 35.33 | $ | 35.37 | $ | (0.04 | ) | -0.2 | % | (1) | |||
| Cost of revenue rate | $ | 24.86 | $ | 25.19 | $ | (0.33 | ) | -1.6 | % | (2) | |||
| Spread rate | $ | 10.47 | $ | 10.18 | $ | 0.29 | 3.1 | % | (3) | ||||
| HHH | |||||||||||||
| For the Six-Month Periods Ended | |||||||||||||
| (dollars and admissions/episodes in thousands) | July 3, 2021 | June 27, 2020 | Change | % Change | |||||||||
| Revenue | $ | 81,589 | $ | 9,133 | $ | 72,456 | 793.3 | % | |||||
| Cost of revenue, excluding depreciation and amortization | 43,094 | 5,499 | 37,595 | 683.7 | % | ||||||||
| Gross margin | $ | 38,495 | $ | 3,634 | $ | 34,861 | 959.3 | % | |||||
| Gross margin percentage | 47.2 | % | 39.8 | % | 7.4 | % | (4) | ||||||
| Home health total admissions (5) ** | 17.5 | ** | ** | ** | |||||||||
| Home health episodic admissions (6) ** | 10.9 | ** | ** | ** | |||||||||
| Home health total episodes (7) ** | 16.0 | ** | ** | ** | |||||||||
| Home health revenue per completed episode (8) ** | $ | 2,928 | ** | ** | ** | ||||||||
| MS | |||||||||||||
| For the Six-Month Periods Ended | |||||||||||||
| (dollars and UPS in thousands) | July 3, 2021 | June 27, 2020 | Change | % Change | |||||||||
| Revenue | $ | 71,176 | $ | 62,958 | $ | 8,218 | 13.1 | % | |||||
| Cost of revenue, excluding depreciation and amortization | 39,011 | 35,093 | 3,918 | 11.2 | % | ||||||||
| Gross margin | $ | 32,165 | $ | 27,865 | $ | 4,300 | 15.4 | % | |||||
| Gross margin percentage | 45.2 | % | 44.3 | % | 0.9 | % | (4) | ||||||
| Unique patients served ( UPS ) | 151 | 140 | 11 | 7.9 | % | ||||||||
| Revenue rate | $ | 471.36 | $ | 449.70 | $ | 21.66 | 5.2 | % | (1) | ||||
| Cost of revenue rate | $ | 258.35 | $ | 250.66 | $ | 7.69 | 3.3 | % | (2) | ||||
| Spread rate | $ | 213.01 | $ | 199.04 | $ | 13.97 | 7.5 | % | (3) |
The following table summarizes our key performance measures for our HHH segment on a sequential basis for the current fiscal year:
| HHH | |||||||||||||
| For the Three-Month Periods Ended | |||||||||||||
| (dollars and admissions/episodes in thousands) | July 3, 2021 | April 3, 2021 | Change | % Change | |||||||||
| Revenue | $ | 50,071 | $ | 31,518 | $ | 18,553 | 58.9 | % | |||||
| Cost of revenue, excluding depreciation and amortization | 25,765 | 17,329 | 8,436 | 48.7 | % | ||||||||
| Gross margin | $ | 24,306 | $ | 14,189 | $ | 10,117 | 71.3 | % | |||||
| Gross margin percentage | 48.5 | % | 45.0 | % | 3.5 | % | (4) | ||||||
| Home health total admissions (5) | 11.7 | 5.8 | 5.9 | 101.7 | % | ||||||||
| Home health episodic admissions (6) | 7.1 | 3.8 | 3.3 | 86.8 | % | ||||||||
| Home health total episodes (7) | 10.3 | 5.7 | 4.6 | 80.7 | % | ||||||||
| Home health revenue per completed episode (8) | $ | 2,894 | $ | 2,962 | $ | (68 | ) | -2.3 | % |
1)Represents the period over period change in revenue rate, plus the change in revenue rate attributable to the change in volume.
2)Represents the period over period change in cost of revenue rate, plus the change in cost of revenue rate attributable to the change in volume.
3)Represents the period over period change in spread rate, plus the change in spread rate attributable to the change in volume.
4)Represents the change in margin percentage year over year (or quarter over quarter).
5)Represents home health episodic and fee-for-service admissions.
6)Represents home health episodic admissions.
7)Represents episodic admissions and recertifications.
8)Represents Medicare revenue per completed episode.
** We entered the home health business in the fourth fiscal quarter of 2020. The metrics presented for the three and six-month periods ended July 3, 2021 pertain to the home health component of the Home Health and Hospice segment. These metrics do not pertain to the hospice portion of this segment or certain other Medicare services provided in this segment, both of which are not material in the aggregate.
The following table reconciles operating income to Field contribution and Field contribution margin:
| For the Three-Month Periods Ended | For the Six-Month Periods Ended | |||||||||||
| (dollars in thousands) | July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | ||||||||
| Operating income (loss) | $ | 30,294 | $ | (51,957 | ) | $ | 58,590 | $ | (34,090 | ) | ||
| Other operating expenses | - | 587 | - | 587 | ||||||||
| Acquisition-related costs | 1,004 | 169 | 2,772 | 169 | ||||||||
| Depreciation and amortization | 5,170 | 4,234 | 10,018 | 8,417 | ||||||||
| Goodwill impairment | - | 75,727 | - | 75,727 | ||||||||
| Corporate expenses | 32,401 | 22,749 | 59,800 | 48,546 | ||||||||
| Field contribution | $ | 68,869 | $ | 51,509 | $ | 131,180 | $ | 99,356 | ||||
| Revenue | $ | 436,112 | $ | 351,577 | $ | 853,272 | $ | 706,800 | ||||
| Field contribution margin | 15.8 | % | 14.7 | % | 15.4 | % | 14.1 | % |
The following table reconciles net income to EBITDA and Adjusted EBITDA:
| For the Three-Month Periods Ended | For the Six-Month Periods Ended | |||||||||||
| (dollars in thousands) | July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | ||||||||
| Net income (loss) | $ | 1,260 | $ | (77,553 | ) | $ | 7,058 | $ | (39,916 | ) | ||
| Interest expense, net | 19,201 | 18,681 | 41,549 | 39,698 | ||||||||
| Income tax expense | 179 | 2,255 | 488 | 3,386 | ||||||||
| Depreciation and amortization | 5,170 | 4,234 | 10,018 | 8,417 | ||||||||
| EBITDA | 25,810 | (52,383 | ) | 59,113 | 11,585 | |||||||
| Goodwill, intangible and other long-lived asset impairment | 98 | 76,423 | 94 | 76,471 | ||||||||
| Non-cash stock-based compensation | 5,168 | 1,422 | 5,880 | 1,740 | ||||||||
| Sponsor fees (1) | - | 807 | 808 | 1,615 | ||||||||
| Loss on extinguishment of debt | 8,918 | 200 | 8,918 | 73 | ||||||||
| Interest rate derivatives (2) | 737 | 4,470 | 686 | 12,762 | ||||||||
| Acquisition-related costs and other costs (3) | 1,004 | 169 | 2,772 | 2,689 | ||||||||
| Integration costs (4) | 4,649 | 802 | 8,118 | 1,845 | ||||||||
| Legal costs and settlements associated with acquisition matters (5) | 475 | 1,065 | 1,050 | (48,023 | ) | |||||||
| COVID-related costs, net of reimbursement (6) | 560 | 3,362 | 2,320 | 3,823 | ||||||||
| ABA exited operations (7) | - | 1,477 | - | 2,337 | ||||||||
| Other system transition costs, professional fees and other (8) | 1,424 | (428 | ) | 2,820 | 291 | |||||||
| Total adjustments (9) | $ | 23,033 | $ | 89,769 | $ | 33,466 | $ | 55,623 | ||||
| Adjusted EBITDA | $ | 48,843 | $ | 37,386 | $ | 92,579 | $ | 67,208 |
The following table reconciles Corporate expenses to Adjusted corporate expenses:
| For the Three-Month Periods Ended | For the Six-Month Periods Ended | |||||||||||
| (dollars in thousands) | July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | ||||||||
| Corporate expenses | $ | 32,401 | $ | 22,749 | $ | 59,800 | $ | 48,546 | ||||
| Non-cash stock-based compensation | (4,276 | ) | (1,306 | ) | (4,825 | ) | (1,624 | ) | ||||
| Sponsor fees (1) | - | (807 | ) | (808 | ) | (1,615 | ) | |||||
| Acquisition-related costs and other costs (3) | - | - | - | (2,239 | ) | |||||||
| Integration costs (4) | (3,889 | ) | (805 | ) | (7,649 | ) | (1,858 | ) | ||||
| Legal costs and settlements associated with acquisition matters (5) | (559 | ) | (1,065 | ) | (1,134 | ) | (1,977 | ) | ||||
| COVID-related costs, net of reimbursement (6) | (71 | ) | (548 | ) | (221 | ) | (566 | ) | ||||
| Other system transition costs, professional fees and other (8) | (1,822 | ) | 5 | (3,726 | ) | (418 | ) | |||||
| Total adjustments | (10,617 | ) | (4,526 | ) | (18,363 | ) | (10,297 | ) | ||||
| Adjusted corporate expenses | $ | 21,784 | $ | 18,223 | $ | 41,437 | $ | 38,249 | ||||
| Adjusted corporate expenses as a percentage of revenue | 5.0 | % | 5.2 | % | 4.9 | % | 5.4 | % |
The following table reconciles net income to Adjusted net income and presents Adjusted net income per diluted share:
| For the Three-Month Periods Ended | For the Six-Month Periods Ended | |||||||||||
| (dollars in thousands, except share and per share data) | July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | ||||||||
| Net income (loss) | $ | 1,260 | $ | (77,553 | ) | $ | 7,058 | $ | (39,916 | ) | ||
| Income tax expense | 179 | 2,255 | 488 | 3,386 | ||||||||
| Goodwill, intangible and other long-lived asset impairment | 98 | 76,423 | 94 | 76,471 | ||||||||
| Non-cash stock-based compensation | 5,168 | 1,422 | 5,880 | 1,740 | ||||||||
| Sponsor fees (1) | - | 807 | 808 | 1,615 | ||||||||
| Loss on extinguishment of debt | 8,918 | 200 | 8,918 | 73 | ||||||||
| Interest rate derivatives (2) | 737 | 4,470 | 686 | 12,762 | ||||||||
| Acquisition-related costs and other costs (3) | 1,004 | 169 | 2,772 | 2,689 | ||||||||
| Integration costs (4) | 4,649 | 802 | 8,118 | 1,845 | ||||||||
| Legal costs and settlements associated with acquisition matters (5) | 475 | 1,065 | 1,050 | (48,023 | ) | |||||||
| COVID-related costs, net of reimbursement (6) | 560 | 3,362 | 2,320 | 3,823 | ||||||||
| ABA exited operations (7) | - | 1,477 | - | 2,337 | ||||||||
| Other system transition costs, professional fees and other (8) | 1,424 | (428 | ) | 2,820 | 291 | |||||||
| Total adjustments | 23,212 | 92,024 | 33,954 | 59,009 | ||||||||
| Adjusted pre-tax net income | 24,472 | 14,471 | 41,012 | 19,093 | ||||||||
| Income tax provision on adjusted pre-tax income (10) | (6,118 | ) | (3,762 | ) | (10,253 | ) | (4,964 | ) | ||||
| Adjusted net income | $ | 18,354 | $ | 10,709 | $ | 30,759 | $ | 14,129 | ||||
| Weighted average shares outstanding, diluted | 177,683 | 142,084 | 161,975 | 139,777 | ||||||||
| Adjusted net income per diluted share (11) | $ | 0.10 | $ | 0.08 | $ | 0.19 | $ | 0.10 |
The following footnotes are applicable to tables above that reconcile (i) Net income to EBITDA and Adjusted EBITDA, (ii) Corporate expenses to Adjusted corporate expenses and (iii) Net income to Adjusted net income. The adjustments to reconcile Corporate expenses to Adjusted corporate expenses only represent the amounts that were recorded within Corporate expenses.
1)Represents annual management fees payable to our sponsors under our Management Agreement as defined in Note 12 Related Party Transactions within the notes accompanying our consolidated financial statements included in our Quarterly Report on Form 10-Q. The Management Agreement terminated in accordance with its terms upon completion of our initial public offering.