Aveanna Healthcare Holdings (Nasdaq: AVAH) is ramping up its merger and acquisition activity in the home health and hospice space heading into next year.

The Atlanta-headquartered company has set its strategic sights on both private duty nursing and hospice and home health, according to Aveanna CEO Jeff Shaner.

The company has been quiet on the M&A front in recent years, taking a cautious approach to growth, Shaner said during an earnings call on Thursday.

Aveanna is in the process of reviewing a few potential acquisitions, which could close in 2025, he indicated.

“We believe it’s time for us to re-enter the M&A market,” Shaner said in the earnings call. “As we go into 2025, both organic and inorganic growth becomes really priority number one for the company. We’ve already started ramping up the M&A engine, looking at transactions as we move back into the M&A market. We’ll stay focused on the [private duty service (PDS)], home health and hospice businesses for most of our M&A activity.”

Aveanna provides adult and pediatric health care across 33 states, offering private duty, medical solutions, as well as home health and hospice services. The company saw a 6.5% year-over-year increase in revenue, which reached $509 million during the third quarter.

Propelling its growth was a $24.8 million rise in private duty revenue and a $5.05 million bump in medical solutions dollars. Its home health and hospice segment revenue reached $54.14 million during Q3, a 2.2% year-over-year jump, faring better than the previous quarter’s decline. The growth was offset in part by a 4.3% dip in the segment’s total admissions compared to the same period last year.

Also impacting Aveanna’s growth trajectory were back-to-back hurricanes, which led to some disruption during the last month of Q3 in its Florida, Georgia and North and South Carolina markets, according to Shaner.

Complicating the company’s hospice trajectory are rising care delivery costs and lagging reimbursement rates that have not kept pace with inflation, Shaner said. Nimble payment strategies are an important part hospice’s strategies, he indicated

“With our model, we’re uniquely different than the industry, and that is, we’ve found a way to be successful under the current reimbursement rate, as disappointed as we are [by it],” Shaner said in the earnings call. “We can thrive under this reimbursement for home health. We expect the home health and hospice business to land in that 3%-plus growth rate. We think we’ve got the infrastructure. We’ve got the right clinical capacity.”

The company’s strategic focus is narrowed on acquiring smaller assets in areas adjacent to its existing geographic footprint, particularly building up its presence in the Midwest and Southwest.

Aveanna’s growth strategy in home health and hospice in part hinges on building operational efficiencies and improving quality, according to CFO Matt Buckhalter.

“We are committed to a disciplined approach to growth, while shifting our capacity to those payers who value our clinical resources,” Buckhalter said during the earnings call. “Our home health and hospice platform is dedicated to creating value through effective operational management and the delivery of exceptional patient care.”

Aveanna last year unveiled a four-pillar strategy, which continued into 2024. These include enhancing private and government payer partnerships, expanding caregiver capacity, identifying cost efficiencies and synergies, managing its capital structure to produce positive free cash flow and engaging its leadership and employees.

The company has seen some return on investment since the strategy’s launch, particularly with staffing gains and improved reimbursement and referrals – trends not anticipated to abate anytime soon, Shaner indicated.

“I am pleased with the continued progress we have made on several of our rate improvement initiatives with both government and preferred payers, as well as continued signs of improvement in the caregiver labor market, specifically as it relates to our private duty services business,” he said. “We are experiencing accelerated caregiver hiring trends, patient discharges from children’s hospitals and improved staffing levels in both Georgia and Massachusetts.”

Aveanna’s adjusted EBITDA reached $47.8 million in Q3, a 32.2% increment from the previous year.

All told, the company projected its annual revenue to reach roughly $2 billion in 2024, according to a Stephens report. Its home health and hospice segment dollars fell “slightly below” what was anticipated, analysts stated. 

“[Aveanna] reported +23.3% adjusted EBITDA upside on revenue,” Stephens analysts indicated in the report. “With [home health and hospice] coming in slightly below (-3% on revs and -60-bps on gross margin).”