Aveanna Healthcare Holdings Inc
For the period ended Dec 28, 2024. Filed Mar 13, 2025.
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FY2024 · Filed Mar 13, 2025
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Item 8. Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Aveanna Healthcare Holdings Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Aveanna Healthcare Holdings Inc. and subsidiaries (the Company) as of December 28, 2024 and December 30, 2023, the related consolidated statements of operations, stockholders’ deficit and cash flows for each of the two years in the period ended December 28, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 28, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 13, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Estimated Contractual Adjustments and Implicit Price Concessions | |
|---|---|
| Description of the Matter | As of December 28, 2024, estimated contractual adjustments and implicit price concessions of $90.6 million was recorded as a reduction to patient accounts receivable balances to arrive at the estimated collectible revenue and patient accounts receivable. As discussed in Note 3 to the consolidated financial statements, the Company determines the transaction price based on established billing rates reduced by contractual adjustments provided to third-party payers and by implicit price concessions which are estimated based on historical collection experience. Auditing management’s estimates of estimated contractual adjustments and implicit price concessions was extensive due to the significant data inputs utilized in the analysis and the required judgments in the underlying assumptions used to estimate the related reserve amounts. The Company’s methodology utilizes analyses of historical cash collection experience as well as an assessment of various factors, including updated regulations and contract negotiations with payors, as applicable. |
| How We Addressed the Matter in Our Audit | To test the estimated contractual adjustments and implicit price concessions, we performed audit procedures that included, among others, performing data analytics to test the completeness and accuracy of the recorded revenue and to develop an independent range of patient accounts receivable, inclusive of contractual adjustments and implicit price concessions, for comparison to the Company’s recorded amounts, and tracing a sample of cash receipts to third-party evidence. Our testing also included assessing methodologies and evaluating the significant assumptions and testing the completeness and accuracy of the underlying data used by the Company in its estimates. We also assessed the historical accuracy of management’s estimates as a source of potential corroborative or contrary evidence. |
| Goodwill Impairment | |
|---|---|
| Description of the Matter | As discussed in Note 2 to the consolidated financial statements, the Company performs its annual goodwill impairment test on the first day of the fourth quarter of each fiscal year or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The impairment test compares the fair value of the reporting unit (calculated using a combination of both income and market approaches) to its carrying value Auditing management’s goodwill impairment tests for certain reporting units was complex and judgmental due to the significant estimation required to determine the fair value of each reporting unit. In particular, the fair value estimates were sensitive to significant assumptions used in the income approach, such as revenue growth rates, projected earnings before interest, taxes, depreciation, and amortization (EBITDA) margins and discount rates, among others, which are affected by expectations about economic conditions, changes to business models and changes in operating performance. |
| How We Addressed the Matter in Our Audit | To test the estimated fair value of the reporting units, we performed audit procedures that included, among others, assessing valuation methodologies and testing the significant assumptions discussed above and the completeness and accuracy of underlying data used by the Company in its analysis. We involved our valuation specialists to assist in reviewing the valuation methodologies, testing the discount rates, and assessing the reasonableness of the Company’s revenue growth rates and projected EBITDA margins by comparing those assumptions to results of select publicly traded companies. We further assessed the reasonableness of the Company’s revenue growth rates and projected EBITDA margins by comparing those assumptions to recent historical performance and current economic and industry trends. We recalculated each reporting unit’s fair value based on management’s significant assumptions and tested the Company’s reconciliation of all the reporting units’ fair values to the Company’s market capitalization. |
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2017.
Atlanta, GA
March 13, 2025
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