AVAH - NASDAQ

Good morning and welcome to Aveanna Healthcare Holdings Second Quarter 2024 Earnings Conference Call. Today’s call is being recorded, and we have allocated 1 hour for prepared remarks and Q&A. At this time, I’d like to turn the call over to Debbie Stewart, Aveanna’s Chief Accounting Officer. Thank you. You may begin.

Good morning, and welcome to Aveanna’s second quarter 2024 earnings call. I am Debbie Stewart, the company’s Chief Accounting Officer. With me today is Jeff Shaner, our Chief Executive Officer and Matt Buckhalter, our Chief Financial Officer. During this call, we will make forward-looking statements. Risk factors that may impact those statements and could cause actual future results to differ materially from currently projected results are described in this morning’s press release and the reports we file with the SEC. The company does not undertake any duty to update such forward-looking statements. Additionally, during today’s call, we will discuss certain non-GAAP measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these measures can be found in this morning’s press release, which is posted on our website, aviana.com, and in our most recent quarterly report on Form 10-Q when filed. With that, I will turn the call over to Aveanna’s Chief Executive Officer, Jeff Shaner. Jeff?

Thank you, Debbie. Good morning and thank you for joining us today. We appreciate each of you investing your time this morning to better understand our Q2 2024 results and how we are moving Aveanna forward in 2024 and beyond. My initial comments will briefly highlight our second quarter along with steps we are taking to address the labor markets and our ongoing efforts with government and preferred payers to create additional capacity. I will then provide insight on how we are thinking about year 2 of our strategic transformation and our enhanced outlook for 2024 prior to turning the call over to Matt to provide further details into the quarter and our refreshed outlook. Moving to highlights for the second quarter. Revenue for the second quarter was approximately $505 million, representing a 7% increase over the prior year period. Second quarter adjusted EBITDA was $45.6 million, representing a 27.3% increase over the prior year period, primarily due to the improved payer rate environment as well as cost reduction efforts taking hold. As we have previously discussed, the labor environment represented the primary challenge that we needed to address to see Aveanna resume the growth trajectory that we believed our company could achieve. It is important to note that our industry does not have a demand problem. The demand for home and community-based care continues to be strong with both state and federal governments and managed care organizations asking for solutions that can create more capacity. Our Q2 results highlight that we continue to align our objectives with those of our preferred payers and government partners. By focusing our clinical capacity on our preferred payers, we achieved solid year-over-year growth in revenue and adjusted EBITDA. We also experienced improvement in our caregiver hiring and retention trends by aligning our efforts to those payers willing to engage with us on enhanced reimbursement rates and value-based agreements. While we continue to operate in a challenging labor and inflationary environment, our preferred payer strategy allows us to return to a more normalized growth rate in our business segments. Since our first quarter earnings call, I am pleased with the continued progress we have made on several of our rate improvement initiatives with both government and preferred payers as well as continued signs of improvement in the caregiver labor market. Specifically, as it relates to our private duty services business, our goal for 2024 was to execute on our legislative strategy to improve reimbursement rates in various states with particular emphasis on Georgia, Massachusetts and California, which represent approximately 15% of our PDS revenue. I am pleased to report that we have secured double-digit rate improvements in both Georgia and Massachusetts effective the second half of 2024. These states demonstrate our government affairs strategy to partner with state legislatures and governors to identify shortfalls in private duty nursing wages and to align reimbursement rates to improve access to care for patients with complex medical conditions. I applaud the leadership in Georgia and Massachusetts for their partnership and investing in high-quality nursing care in the home setting. Year-to-date, we have secured 12 state rate increases with a few states still finalizing their legislative process. While we are pleased that our PDS legislative messaging has been well received by state legislatures, there is still work to do. As an example of the work ahead, California continues to be a challenging landscape to secure funding for an appropriate PDN rate increase. We’ve made significant strides with the Governor, Medi-Cal Department and California legislature demonstrating the importance of PDN rate investment and how it supports an overall lower health care cost, improve patient satisfaction and quality outcomes. During the latest legislative session, we were successful in obtaining an increase to the Medi-Cal PDN rates despite the headwinds with the anticipated California budget deficit. This PDN rate investment would be effective January 1, 2026, and funded under the MCO tax provision similar to numerous other Medi-Cal rate investments. However, our PDN rate investment, along with other Medi-Cal right investments, is tied to a voter referendum on the upcoming November 5 election ballot designated as Proposition 35. Regardless of the outcome of Proposition 35, we will continue to advocate for California’s children with complex medical conditions. We have a proven track record of expanding our preferred payer programs and will continue to enhance our efforts in California, similar to our approach in other states. Now moving on to our preferred payer initiatives in other states. Our goal for 2024 was to increase the number of private duty services preferred payer agreements from 14 to 22. Year-to-date, we have added 5 additional preferred pay agreements, increasing our total to 19. I am proud of our payer relations team as they continue to develop partnerships with managed care organizations to find solutions for children with complex medical conditions. Aveanna’s preferred payer strategy is gaining momentum and allowing us to invest in caregiver wages and recruitment efforts to accelerate hiring and staffing of nurses for our patients. Additionally, we introduced a new PDS volume indicator in Q1 that demonstrates how we think about our momentum with our preferred payers. We now report our preferred payer volumes against the total MCO opportunity, which we believe is a better way to evaluate our preferred payer volume performance. Our Q2 preferred payer agreements account for approximately 45% of our total PDS MCO volumes, up from 40% in Q1. This positive momentum in preferred payer volumes continue to highlight the shift in our caregiver capacity and recruitment efforts towards our private duty services preferred payer partners. Moving to our preferred payer progress in Home Health. Our goal for 2024 was to maintain our episodic payer mix above 70%, while returning to a more normalized growth rate. In Q2, our episodic mix was 76%, and we achieved positive total episodic growth of 4.5% over the prior year period. We expect our episodic volume growth to be in the 3% to 5% range moving forward. We also signed 2 additional episodic agreements in the quarter for a total of 4 year-to-date. I am extremely proud of our home health and hospice leadership teams and their commitment to driving positive clinical outcomes, episodic growth and profitability. We will continue to remain focused on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis and focus on improved clinical and financial outcomes. We are encouraged by our 2024 rate increases preferred pay agreements and subsequent recruiting results. Our business is demonstrating solid signs of recovery as we achieve our rate goal as previously discussed. Home and community-based care will continue to grow and Aveanna is a comprehensive platform with a diverse payer base, providing a cost-effective, high-quality alternative to higher cost care settings. And most importantly, we provide this care in the most desirable setting the comfort of the patient’s home. Before I turn the call over to Matt, let me comment on our strategic plan and improved outlook for 2024. As we navigate year 2 of our strategic transformation, we remain highly focused on those initiatives that create a positive momentum in 2023 and continued execution in 2024. We will continue to focus our efforts on four primary strategic initiatives: first, enhancing partnerships with government and preferred payers to create additional caregiver capacity; second, identifying cost efficiencies and synergies that allow us to leverage our growth; third, managing our capital structure and collecting our cash while producing positive free cash flow; and fourth, engaging our leaders and employees in delivering our Aveanna mission. Based on the strength of our second quarter and year-to-date results and the continued execution of our key strategic initiatives, we now expect full year 2024 revenue to be greater than $1.985 billion and adjusted EBITDA to be greater than $158 million. We believe our enhanced outlook provides a prudent view considering the challenges we still face with the evolving labor market and hopefully, it proves to be conservative as we continue to execute throughout the year. In closing, I am so proud of our Aveanna team and their dedication to executing our strategic transformation while holding our mission at the core of everything we do. We offer a cost-effective patient-preferred and clinically sophisticated solution for our patients and families. Furthermore, we are the right solution for our payers, referral sources and government partners. By partnering with preferred payers, we can and will move rate and wage metrics in meaningful ways that support our growth. This strategy allows us to hire, retain and engage more caregivers and providing the mission of Aveanna every day. With that, let me turn the call over to Matt to provide further details on the quarter and our 2024 outlook. Matt?

Thanks, Jeff, and good morning. I’ll first talk about our second quarter financial results and liquidity before providing additional details on our fresh outlook for 2024. Starting with the top line, we saw revenues rise 7% over the prior year period to $505 million. We experienced strong year-over-year revenue growth in two of our operating divisions, led by our Private Duty Services, Medi-Cal Solutions segments, which grew by 8% and 9.3%, respectively, compared to the prior year quarter. Consolidated gross margin was $158.3 million or 31.3%. Consolidated adjusted EBITDA was $45.6 million, a 27.3% increase as compared to the prior year, reflecting the improved payer rating environment as well as cost reduction efforts taking hold. Now taking a deeper look into each of our segments. Starting with private duty services. Revenue for the quarter was approximately $408 million, an 8% increase and was driven by approximately 10.3 million hours of care, a volume increase of 4.8% over the prior year. While core volumes have improved over the prior year, we continue to be constrained in our top line growth due to the shortage of available caregivers, although we are continuing to see signs of improvement in the labor markets. Q2 revenue per hour of $39.46 was up $1.18 or 3.2% as compared to the prior year quarter. This was partially impacted by the timing of revenue reimbursements related to select value-based care arrangements. We expect this to normalize in the second half of 2024. We remain optimistic about our ability to attract caregivers and address market demands for our services when we obtain acceptable reimbursement rates. Turning to our cost of labor and gross margin metrics. We achieved $110.9 million of gross margin or 27.2%. The cost of revenue rate of $28.73 in Q2 was essentially flat on a sequential basis. Despite ongoing wage pressures in the labor markets, our Q2 spread per hour improved to $10.73. We expect the spread per hour to normalize in the $10 to $10.50 range in the second half of 2024. Moving on to our Home Health & Hospice segment, revenue for the quarter was approximately $54.6 million, a 1.4% decrease over the prior year. Revenue was driven by 9,400 total admissions with approximately 76% being episodic and 11,600 total episodes of care, up 4.5% from the prior year quarter. Medicare revenue per episode for the quarter was $3,093, up 1.4% from the prior year quarter. We continue to focus on rightsizing our approach to growth in the near-term by focusing on preferred payers that reimburse us on an episodic basis. This episodic focus has accelerated our margin expansion and improved our clinical outcomes. With episodic emissions well over 70%, we have achieved our goal of rightsizing our margin profile and enhancing our clinical offerings. As we continue to navigate 2024, we believe our episodic volume will normalize in the 3% to 5% growth range. We are committed to a disciplined approach to growth while shifting our capacity to those payers who value our clinical resources. We are pleased with our Q2 gross margins of 53.8%, up 5.2% over the prior year period and representing our continued focus on cost initiatives to achieve our targeted margin profile. Our Home Health & Hospice platform is dedicated to creating value through effective operational management and the delivery of exceptional patient care. Now to our Medical Solutions segment results for Q2. During the quarter, we produced revenue of $42.5 million, a 9.3% increase over the prior year. Revenue was driven by approximately 94,000 unique patients served, a 10.6% increase over the prior year period and revenue per EPS of approximately $452. Gross margins were approximately $18 million or 42.4% for the quarter, up 6.8% over the prior year period and in line with our targeted margin profile for Medical Solutions. We continue to implement initiatives to be more effective and efficient in our operations to leverage our overhead as we continue to grow. We are accelerating our preferred payer strategy in Medical Solutions by aligning our capacity with those payers that value our services and appropriately reimburse us for the care we provide. In summary, we continue to fight through a difficult labor environment while keeping our patients care at the center of everything we do. It is clear to us that shifting caregiver capacity to those preferred payers who value our partnership is the path forward at Aveanna. As Jeff stated, our primary challenge continues to be reimbursement rates. The positive momentum we experienced in Q2, we remain optimistic that such trends will continue throughout 2024. As we continue to make progress with the rate environment, we’ll pass through wage improvements and other benefits to our caregivers and the ongoing effort to better improve volumes. Now moving to our balance sheet and liquidity. At the end of the second quarter, we had liquidity of $269 million, representing cash on hand of approximately $47.7 million, $53 million of availability under our securitization facility and approximately $168 million of availability on our revolver, which was undrawn as of the end of the quarter. We have $32 million in outstanding letters of credit at the end of Q2. The overall improvement in liquidity was driven by $50 million upsizing of our securitization facility in late May. Our ample liquidity provides room to operate the business and invest in the company to support our continued growth. On the debt service front, we had approximately $1.48 billion of variable rate debt at the end of Q2. Of this amount, $520 million is hedged with fixed rate swaps and $880 million is subject to an interest rate cap against further exposure to increases in SOFR above 3%. Accordingly, substantially all of our variable rate debt is hedged. Our interest rate swaps extend through June 2026 and our interest rate caps extend through February 2027. One last item I will mention related to our debt is that we have no material term loan maturities until July 2028. Looking at year-to-date cash flow. Cash provided by operating activities was negative $10.2 million and free cash flow was negative approximately $12.4 million. Q2 cash flow was in line with our expectations, and we continue to expect to be a positive operating cash flow company for full year 2024. We also expect to see continued cash flow benefits as our top line and cost management initiatives come to fruition. Before I hand the call over to the operator for Q&A, let me take a moment to address our revised outlook for 2024. As Jeff mentioned, we currently expect full year revenue to be greater than $1.985 billion and adjusted EBITDA greater than $158 million. As we have previously discussed, Q3 experiences softness in our core volumes due to summer seasonality, and therefore, we believe our adjusted EBITDA will reflect the seasonality before building in the fourth quarter. In closing, I’m proud of all of our Aveanna team members and their hard work in achieving our Q2 results. I look forward to the continued execution of our 2024 strategic plan and update you further at the end of Q3. With that, let me turn the call over to the operator.

Thank you. [Operator Instructions] Our first question comes from the line of Ben Hendrix with RBC. Please proceed with your question.

Thank you very much. Congratulation on the quarter. The higher guidance bar appears consistent with the 2Q outperformance, and it sounds like you guys are seeing really good rate momentum continue through the second half. Any reason we shouldn’t see the same level of outperformance through the balance of the year. Any unusual cost items ahead in 2Q other than the seasonality you mentioned?

Hi, Ben, good morning. I heard a compliment in there. So thank you. I think as Matt laid out in his prepared remarks, Q3 for us is a soft seasonality in our skilled business, primarily just driven by the school – season of schools being out as well as the two holidays, both July 4 and Labor Day falling in Q3. So that’s the one thing we point out. It’s consistent with the last few years, is that Q3s are a little bit soft on our core volumes from our skilled business. With that said, Matt, anything that you’d point out just from...

No, Jeff, I would probably say the teams really just started 2024, right, where they left off in 2023 as well. With the accelerated growth that we’re seeing in PDS as well as in AMS on top of the great clinical care that the teams are providing. We’re really proud of all they’ve achieved. To your point, they will be experiencing a little bit of softness in seasonality in Q3, which we’ll see a step back in our EBITDA. But then I would expect in Q4 to see a ramp from there as well.

Great. Just as a quick follow-up. Any investments, capital outlays or other efforts you guys are taking in advocacy of the Prop 35 in California? Thanks.

Great question, Ben. I wouldn’t say capital type expenses. But if you step back, I think we – we’re – we’ve been in California now since 2018, right? So we’ve been in California for 6 years. We’re the largest provider of PDN in the state. So we’re meaningful in nature. We’ve been advocating for a PDN rate increase now for 3 fiscal – this is our third fiscal year. I think the thing that we would point out is there’s a lot of time between now and January 1, ‘26. So we keep our heads down. We just continue to work advocate, legislate, meet with legislatures. We’ve met with the governors and the governor’s team numerous times. We met with the head of the Medi-Cal department, will continue to do so. So although Prop 35 is a significant day for us on November 5, it doesn’t stop the way we think about California. We are in California for the long-term. We’re committed to California for the long-term. And we will continue to both push our preferred payer strategy with MCOs, of which we have numerous preferred payers in California as well as continue to advocate for meaningful rate lift on the Medi-Cal side. So I wouldn’t say there’s any specific spend around the November 5. I would just tell you, we’ve been spending a significant amount of money in the last few years. We’ll continue to spend a significant amount of money for the next few years, because there’s still a lot of time between now and 2026. Thanks, Ben.

Thank you. Our next question comes from the line of Scott Fidel with Stephens Inc. Please proceed with your question.

Hi, thanks and good morning. First question, just on some of the updates that you gave us on the rate wins. First, on the 12 states where you’ve now secured rate wins, do you have what the average rate increase is that you’ve gotten to churn in those 12 states. And then I know that you mentioned two states that were key that you secured double-digit rate improvements in with Georgia, in Massachusetts. You mentioned that those two with California represent 15% of PDS business. Do you have what percent of business just for Georgia and Massachusetts are, so we can sort of isolate out California?

Yes, I would just like to add on to that, Jeff, as well. I mean, obviously we have seen great revenue growth in our PDS segment, 8% in Q2, 7% year-to-date. We mentioned that Q2 did benefit from a little bit of value-based care payments that came thin, though they were not overly material to our results. This is really because of the efforts of our preferred payer initiatives and because of our government affairs. Those two areas have really been able to push us forward, allowed us to bring kids home from the hospital, allowed us to hire caregivers and make that care happen in between them. So, hats off to that team and everybody at Aveanna for making that. I will kind of temper expectations a little bit, 8% is a little strong in PDS. And eventually, this will start working its way back down closer to that 5% kind of range that we have guided to historically for those out years. But as you can see, with the rate, we are able to drive our volume and drive care in the home, and we are seeing that in full right now.

Sorry, Scott, that was a long answer to that, but we thought it was an important point.

No, great color, I appreciate that. And then just a follow-up question, just a modeling question just around gross margins. For PDS, it looks like you are sort of in that, that 27% range exiting out of 2Q, which I think is sort of a pretty good spot for you guys, right? So, is that – would you say sort of that 27% to 28% range is a good sort of modeling spot for what’s implied in the updated guidance? And then similarly on HHH, where Matt had talked about having sort of achieved your margin objectives through the preferred contracting, would we – and you had that sort of nice been running in that 53% to 54% gross margin. Is that a good run rate as well? Do you see sort of holding the line on those types of margins in the back half of the year, or do you see any movement up or down on those? Thanks.

Good question, Scott. I would tell you that on PDS segment, I think the 26% to 28% kind of margin profile is a great area for us to be, and we are right in the middle of it at right around 27%. And I think that’s where we will stand at. Obviously, we saw significant expansion in our spread per hour from, I know it was $9.76 in Q1 up to $10.73 here in Q2, which gets us to a $10.24 year-to-date, which is right dead center of our $10 to $10.50 range. So, I think that’s all kind of worked itself out. That will continue in the back half of this year even with these rate improvements that Jeff has mentioned. And that’s because we are taking these dollars, and we are investing them into our caregivers, investing to our teams. And that’s what’s really driving our growth perspective in PDS. To your point, HHH, 53.8%, hats off to the team. They have done a phenomenal job driving that business, rightsizing it and getting back to good core episodic growth that will drive that business and produce great clinical outcomes. We think that will continue to stay in that 50%, 51%, just north of 50% gross margin range. 54% might be a little strong at this time and we are aware of that. But it’s because of how well they have executed that these results are reflecting that as well.

Thanks Scott.

Thank you. Our next question comes from the line of A.J. Rice with UBS. Please proceed with your question.

Hi everybody. Just to follow-up on these states where you are getting these above-average rate increases. I know the dynamic has been historically, it takes you a quarter or two quarters to be able to get that translated into increased rates for your – to pass through to your underlying nurses. Should we think about that as being something that therefore suggests some boost to the back half of the year? And then as you think about these updates as well, how quick can you ramp up the hiring and take advantage of that and start to – and see growth, and do you retain any of that to your own operating income line, or does it all pretty much get passed through to the underlying employees?

A.J., good morning. Thanks for the question. I will use Georgia as a great example. Our rate increase in – we haven’t had – a meaningful rate increase in Georgia in a long, long time. I mean pushing a decade, the rates, the home nursing rates in Georgia had fallen way, way, way behind nursing rates in the State of Georgia. So, the industry was pretty desperate. I will go as far as saying most of our competitors left the State of Georgia because it was that bad of an environment. And I understand why. We are headquartered in Atlanta, we are seeing Atlanta right now. We were not going to leave Georgia. With that said, we have actually gotten ahead of the date. So, the effective date of the rate increase in Georgia was July 1st of ‘24. We started passing the wage through our nurses in May to get ahead of it, because it was such a big deal. It was such a meaningful wage rate increase for the industry. So, I do think that’s a little bit more of the new norm, A.J., is with these meaningful rate increases. You have got to get out in front of it or be right at the date of the effective increase. Most of the nurses hear the noise in the market, they hear of the date and they hear a swell of there is a rate increase coming. So, we have found in, I will call it, post-COVID timeframe, ‘23, ‘24, it’s better to get out in front of this immediately and meaningfully move the wages. Now, with that said, our spread per hour in Georgia will significantly change to the better moving forward, meaning our spread per hour in Georgia, I don’t know the exact number, but it was way, way below $10 an hour. And now we will see it more in that $10 to $11 range, which is great because that’s as we can grow the business. We do pass the wage increases through to both our entire current nursing pool and the future nurses. And again, I am using Georgia as an example. We could have used Oklahoma last year and Minnesota last year. We will use California in 2026. But you see a meaningful step-up in employment. And I think we would tell you from our last 3 years or 4 years post-COVID, it lasts for about 18 months to 24 months before it really starts to subside and you probably need another step increase. So, I think we will see in the Georgia and Massachusetts that these are meaningful step-ups in volume number of cases, number of nurses, revenue and ultimately margin for all of ‘24 and most of ‘25.

Okay. Thanks so much. Take care.

Thanks A.J.

Thank you. Our next question comes from the line of Pito Chickering with Deutsche Bank. Please proceed with your question.

Hey. Just actually following up on A. J.’s question here, so just confirming the PDS hourly wage you saw in 2Q step-up sequentially from 1Q. That’s all from state increases and no one-time payments in there, right?

Pito, we did have a little bit of value-based care payments in there, but we are talking very low single millions on that one, which is very – not overly material to impact the rate itself. So, beyond that, that was just normal state rate increases as well as the mix in the business of skilled versus unskilled kind of adjusting a little bit. But that’s just kind of our run rate going forward and where we expect us – expect our business to be.

And A.J., I am sorry, Pito, we pointed towards Q3. And remember, our skilled mix does go down in Q3. Some of our unskilled stays pretty stable. So, I think Matt, in his prepared remarks was pointing towards the fact that we don’t expect to see as strong as a rate/maybe growth rate in Q3, specifically in our PDS. So, that’s probably the one thing that we are pointing out. Even though these rates are coming to fruition, second half of the year, our seasonality will still overplay that. So, I would just be careful in Q3, we will see a little bit of a step back in Q3 as then we move forward in Q4 and into ‘25.

Great. So, I guess on that, I mean looking at the correlation, I mean – so I guess two questions on that one. The first one is looking at the seasonality in the last 2 years, of not seeing a step back. So, I guess why is ‘24 different? And looking at the correlation between wage in hours, it’s a pretty quick correlation here, and you are not with the change in the guidance for the year, except for the beat this quarter, I guess is there anything that we should be thinking about why the 2Q step-up and then the 3Q step-up from Georgia shouldn’t lead to sort of increased hours in the back half of the year versus expectations last quarter, or is that just pure conservatism?

Well, we use the word prudent conservatism, so – versus pure conservatism. But I think – I don’t think you are missing anything, except for remember, in the last 2 years, our unskilled business in the summer stays pretty consistent. I mean it doesn’t drop, our skilled nursing business in the summer does drop in our Medicaid summer business, so that was the one point to your – really your PDS revenue by rate by hour. It’s a little bit lower revenue per hour business that flows through Q3. I think at the end of the day, though, as you think about – all we are trying to just moderate Q3 will be – we believe Q3 will be a slight step back in EBITDA before we propel forward. And I think we are hopeful that in November, we are talking about another beat and raise and kind of pointing towards 2025. I will say, Pito, you can read into Georgia, Massachusetts as well as the other 10 state rate increases, the other – the five year-to-date preferred payer wins, we have a nice robust book of preferred payers that we are working for Q3 and Q4. We expect to be in around 22, 23 preferred payers by the end of the year as well as Home Health & Hospice continuing to execute on their plan of episodic contract. I think it’s too early for us to talk about ‘25. We have strong momentum going in the second half of the year. We have strong momentum going into 2025. We have a lot of confidence building. And then lastly, we haven’t talked about SG&A, but I think you see – you saw in Q1, you see in Q2, you will see it against the second half of the year, we continue to have nice SG&A leverage. We still have work we are doing. We talked about it in Q1. We still are focusing on our PDS and our AMS businesses just make sure that we are really efficient models moving forward. And Matt’s pointed out in his last two prepared remarks, quarters were really honed on our medical solutions business and making sure that, that model is highly efficient because we want to scale that business to 100-plus thousand UPS a quarter. And to do it, we got to be a little bit more efficient. So, anyways, all that to be said, we have been six quarters in a row now, I think it’s fair to say we expect to be beaten rates in the next two quarters. That is our goal and our strong momentum going into 2025.

Okay. Two quick follow-up questions. Looking at MS at the rate [ph] in the UPS, like how should that be trending on the back half of the year? And the second question is just on share count, big step-up of share count sequentially. I guess how should we – I guess why was that and how should we be thinking about that in the back half of the year? Thank you.

Yes, I am glad you asked about medical solutions. Matt had prepared – in his prepared remarks, talks about realigning our medical solutions business around our preferred payers. And I would tell you that our – we have been in medical solutions business now for over 8 years. We are just now, I think getting the medical solutions business honed into our preferred payer strategy. And as we think about 2025, I think we will be as excited about medical solutions in ‘25 as we have been about Home Health & Hospice and PDS in ‘24. And by that, I mean we are going to start to call our payers in medical solutions business that if you aren’t a preferred payer with us, our capacity is going to be focused on those preferred payers. And so I think you will see us be a little bit more focused on the payers that we are accepting. We have got tons of demand in that business. So, it’s really getting the right payers through that business model. And we are thinking of that as a 2025 really honing that in – meaning doing the work in ‘24 to really execute on that in ‘25. So, I tempered a little bit in medical solutions UPS, the second half of this year as we really hone those efforts and kind of call some of those payers. I don’t recall anything in the share count, but…

I mean the share counts increased, mainly driven by our employee stock purchase program and then our annual share-based comp award.

Okay. Thanks so much guys and great quarter.

Thanks Pito.

Thank you. We have reached the end of our question-and-answer session. I would like to turn the call back over to Mr. Shaner for any closing remarks.

So, thank you, operator. I just want to thank everyone for joining us on our Q2 call for 2024, and we look forward to catching up in early November on our Q3 results. Thank you for your time.