Chemed (CHE) reported $585.91 million in revenue for the quarter ended December 2023, representing a year-over-year increase of 7.2%. EPS of $6.60 for the same period compares to $5.39 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $587.45 million, representing a surprise of -0.26%. The company delivered an EPS surprise of +5.60%, with the consensus EPS estimate being $6.25.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Stre ...

Chemed (CHE) came out with quarterly earnings of $6.60 per share, beating the Zacks Consensus Estimate of $6.25 per share. This compares to earnings of $5.39 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 5.60%. A quarter ago, it was expected that this operator of the Roto-Rooter plumbing service and Vitas Healthcare hospices would post earnings of $4.92 per share when it actually produced earnings of $5.32, delivering a surp ...

Revenue Performance - Roto-Rooter segment revenue for Q4 2023 was $235.9 million, a decrease of 1.1% compared to the prior year[6]. - VITAS segment net patient revenue increased by 13.6% to $350.0 million in Q4 2023, driven by an 11.0% increase in average daily census[16]. - Total service revenues for the year ended December 31, 2023, were $2.26 billion, an increase from $2.13 billion in 2022[30]. - Revenue increased by 7.2% to $585.9 million[44]. - Total net revenue for Homecare segment was $1,136,437, an increase from $1,039,211 year-over-year[1]. - Total net revenue for Inpatient segment was $112,419, up from $102,361 year-over-year[1]. - Service revenues for VITAS reached $349,998 in 2023, compared to $235,914 in 2022, reflecting a significant increase of approximately 48.3%[63]. Profitability Metrics - Adjusted EBITDA for VITAS, excluding Medicare Cap, rose by 61.6% to $83.3 million, with an adjusted EBITDA margin of 23.7%, an increase of 705 basis points[18]. - Net income for Chemed in Q4 2023 was $90.1 million, up 45.0% from $62.1 million in Q4 2022[30]. - GAAP Diluted Earnings-per-Share (EPS) rose by 42.9% to $5.90[44]. - Adjusted Diluted EPS increased by 35.0% to $6.60[44]. - Adjusted EBITDA for Chemed Corporation in 2023 reached $139,644 thousand, up from $112,378 thousand in 2022, reflecting a growth of 24%[68]. - Adjusted net income for Q4 2023 was $100,813 thousand, a significant increase from $73,623 thousand in Q4 2022, marking a growth of 37%[69]. - The company’s EBITDA for the VITAS segment in 2023 was $224,867 thousand, compared to $196,680 thousand in 2022, showing an increase of 14%[68]. Cash and Debt Position - The company had total cash and cash equivalents of $264.0 million and no debt as of December 31, 2023[10]. - The cash and cash equivalents at the end of 2023 stood at $263,958, a significant increase from $74,126 at the end of 2022, representing a growth of approximately 256%[62]. - As of December 31, 2023, Chemed had approximately $314.1 million remaining under its share repurchase authorization[50]. Cost and Expense Management - Total costs and expenses for Chemed consolidated were $474,518 in 2023, up from $395,120 in 2022, marking an increase of about 20.1%[63]. - Interest expense for Chemed Corporation in 2023 totaled $3,108 thousand, a decrease from $4,584 thousand in 2022, reflecting a reduction of 32%[68]. - The Retention Program expenses for 2023 totaled $20.8 million, compared to $19.6 million in 2022[15]. - Capital expenditures for 2023 were $56,854, slightly down from $57,325 in 2022, indicating a decrease of about 0.8%[62]. Operational Metrics - Total admissions increased to 15,867 from 14,829 in the previous year[1]. - Average daily census for Homecare increased to 15,646 from 14,012 year-over-year[1]. - Total discharges increased to 15,705 from 14,862 in the previous year[1]. - The company has 26 Medicare provider numbers with a cap cushion of greater than 10%[45]. Future Outlook - For 2024, VITAS revenue is expected to increase by 9.0% to 9.8%, with adjusted EBITDA margin estimated between 17.8% and 18.3%[22]. - Roto-Rooter is projected to achieve full-year 2024 revenue growth of 3.5% to 4.0%[51]. - The adjusted EBITDA margin for 2024 is expected to be between 28.7% and 29.1%[51]. - Full-year 2024 earnings per diluted share are estimated to be in the range of $23.30 to $23.70[23]. Shareholder Returns - Chemed repurchased 79,512 shares of stock for $46.0 million at a cost per share of $579.09 during the quarter[50]. - The average number of shares outstanding for Chemed Corporation in Q4 2023 was 15,270 thousand, up from 15,052 thousand in Q4 2022[69].

CINCINNATI--(BUSINESS WIRE)--Chemed Corporation (NYSE:CHE) announced today that the Board of Directors has declared a quarterly cash dividend of 40-cents per share on the Company’s capital stock, payable on March 15, 2024, to shareholders of record as of February 26, 2024. This is equal to the dividend paid in December 2023. This represents the 211th consecutive quarterly dividend paid by Chemed in its 52 years as a public company. Listed on the New York Stock Exchange and headquartered in Cincinnati, Ohio ...

Chemed Corporation (CHE) is well-poised for growth in the coming quarters, backed by the strong prospects of the VITAS Healthcare and Roto-Rooter segments. The company delivered favorable solvency as of the end of the third quarter of 2023, generating investors’ optimism. However, macroeconomic headwinds and competitive disadvantages are discouraging for the company.In the past year, this Zacks Rank #3 (Hold) stock has increased 18% compared to the 6.4% rise of the industry and a 21.2% rise of the S&P 500 c ...

Financial Data and Key Metrics Changes - VITAS' net revenue was $334 million in Q3 2023, a 12.5% increase compared to the prior year [20] - Adjusted EBITDA for VITAS, excluding Medicare Cap, totaled $54.9 million, a 53.4% increase [22] - Roto-Rooter generated quarterly revenue of $231 million, a slight increase of 0.004% compared to the prior year [23] - Adjusted EBITDA for Roto-Rooter was $66.9 million, a decrease of 3.7% [24] - Full year 2023 earnings per diluted share is estimated to be in the range of $19.82 to $20.02 [27] Business Line Data and Key Metrics Changes - VITAS admissions increased by 7.5% year-over-year, with an Average Daily Census (ADC) of 19,047 patients in September 2023, up 9.4% from September 2022 [8][32] - Roto-Rooter experienced a 13.6% decline in call volume compared to the prior year, but improved conversion rates helped stabilize revenue [13][15] - Roto-Rooter branch commercial revenue increased by 1.5%, while residential revenue remained flat [23][24] Market Data and Key Metrics Changes - VITAS' average revenue per patient per day was $196.43, an increase of 2.96% compared to the prior year [21] - The Medicare reimbursement rate increased by approximately 2.7%, positively impacting revenue growth [20] - Roto-Rooter’s commercial business is slightly outperforming residential, indicating a shift in consumer behavior [93] Company Strategy and Development Direction - VITAS is focused on stabilizing and expanding patient capacity through a retention and hiring program, which has shown positive results [9][30] - Roto-Rooter aims to leverage its brand awareness and customer response time to expand market share despite economic headwinds [17] - The company anticipates continued sequential growth in ADC and revenue for VITAS, while Roto-Rooter is expected to achieve modest growth in Q4 [12][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in VITAS' ability to maintain growth in admissions and patient capacity, indicating a return to normalized operating conditions [16][35] - Roto-Rooter is navigating consumer spending headwinds but expects to see a recovery in demand as deferred maintenance needs arise [82][84] - The company is cautious about the economic environment but remains optimistic about future growth opportunities [84] Other Important Information - The total pre-tax cost of the retention program in 2023 is estimated at $23.8 million, impacting adjusted EBITDA margin guidance [26] - A realignment of the corporate tax structure is expected to reduce state taxes and result in a 24.3% effective tax rate starting in 2024 [29] Q&A Session Summary Question: Thoughts on VITAS revised guidance and hiring impact - Management indicated that the hiring from Q3 is factored into the fourth quarter guidance, with expectations for continued growth in staffing and admissions [40] Question: Water restoration trends and seasonality - Management noted that while there is some seasonality, the water restoration business is performing well due to quick response times [46][47] Question: Capital deployment priorities amid interest rate environment - The company plans to continue share repurchases while also taking advantage of higher interest income from cash reserves [50][54] Question: VITAS margins and future guidance - Management discussed the potential for margins to settle around 19% to 19.5% in the future, with minimal opportunity for improvement [59][60] Question: Roto-Rooter growth outlook - Management expressed optimism for Roto-Rooter in 2024, contingent on consumer spending recovery, while acknowledging challenges in Q1 comparisons [82][85]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Chemed Corporation's unaudited consolidated financial statements for Q3 and nine months ended September 30, 2023 Consolidated Financial Highlights (Q3 2023 vs Q3 2022) | Financial Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change | | :--- | :--- | :--- | :--- | | **Service Revenues and Sales** | $564,532 | $526,472 | +7.2% | | **Income from Operations** | $86,850 | $80,857 | +7.4% | | **Net Income** | $74,958 | $56,873 | +31.8% | | **Diluted EPS** | $4.93 | $3.78 | +30.4% | Consolidated Financial Highlights (Nine Months Ended Sep 30, 2023 vs 2022) | Financial Metric | Nine Months 2023 (in thousands) | Nine Months 2022 (in thousands) | Change | | :--- | :--- | :--- | :--- | | **Service Revenues and Sales** | $1,678,505 | $1,588,309 | +5.7% | | **Net Income** | $182,456 | $187,498 | -2.7% | | **Diluted EPS** | $12.02 | $12.41 | -3.1% | Key Balance Sheet Data (as of Sep 30, 2023 vs Dec 31, 2022) | Balance Sheet Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $394,539 | $272,612 | | **Total Assets** | $1,562,079 | $1,442,012 | | **Total Current Liabilities** | $297,219 | $297,205 | | **Total Liabilities** | $542,836 | $643,297 | | **Total Stockholders' Equity** | $1,019,243 | $798,715 | Cash Flow Summary (Nine Months Ended Sep 30, 2023 vs 2022) | Cash Flow Activity | Nine Months 2023 (in thousands) | Nine Months 2022 (in thousands) | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $221,736 | $209,687 | | **Net Cash used by Investing Activities** | $(48,972) | $(39,914) | | **Net Cash used by Financing Activities** | $(73,740) | $(194,887) | | **Increase/(Decrease) in Cash** | $99,024 | $(25,114) | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed explanations for consolidated financial statement line items, including revenue recognition, debt, and legal matters [Note 2. Revenue Recognition](index=9&type=section&id=Note%202.%20Revenue%20Recognition) This note details the company's revenue recognition policies under ASC 606 for both VITAS and Roto-Rooter segments - VITAS revenue is recognized over time based on the level of care provided (Routine Home Care, Continuous Home Care, Inpatient Care), with adjustments for Medicare caps and implicit price concessions[95](index=95&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - Roto-Rooter recognizes revenue for its primary services (plumbing, drain cleaning, water restoration) at a point in time when the service is completed and accepted by the customer[22](index=22&type=chunk)[23](index=23&type=chunk) Disaggregated Revenue - Roto-Rooter (Nine Months Ended Sep 30) | Service Line | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Short term core | $509,044 | $504,688 | | Water restoration | $141,176 | $127,678 | | Independent contractors | $65,684 | $62,897 | | **Net Revenue** | **$713,439** | **$694,803** | Disaggregated Revenue - VITAS (Nine Months Ended Sep 30) | Level of Care | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Routine home care | $832,554 | $771,520 | | Continuous care | $63,054 | $57,717 | | Inpatient care | $84,312 | $75,714 | | **Net Revenue** | **$965,066** | **$893,506** | [Note 5. Long-Term Debt and Lines of Credit](index=15&type=section&id=Note%205.%20Long-Term%20Debt%20and%20Lines%20of%20Credit) This note details the company's 2022 Credit Facilities, including the full repayment of its term loan and compliance with debt covenants - In Q1 2023, the company made prepayments of **$75.0 million** on its term loan and paid the remaining **$21.3 million** balance on April 28, 2023, reducing total borrowing capacity to **$450.0 million**[41](index=41&type=chunk) - As of September 30, 2023, the company is in compliance with all debt covenants and has approximately **$404.8 million** of unused lines of credit available under its revolving credit facility[42](index=42&type=chunk) [Note 10. Legal and Regulatory Matters](index=18&type=section&id=Note%2010.%20Legal%20and%20Regulatory%20Matters) This note describes ongoing legal and regulatory matters, primarily concerning the VITAS segment, including an OIG audit and a repayment demand - On June 22, 2023, the OIG confirmed that VITAS satisfied its requirements under the five-year Corporate Integrity Agreement (CIA) that began in 2017, and the CIA was concluded[186](index=186&type=chunk) - VITAS received a demand letter from its MAC for **$50.3 million** following an OIG audit, and VITAS has deposited this amount to preserve its appeal rights and is actively appealing the claims[188](index=188&type=chunk) [Note 17. Acquisitions](index=21&type=section&id=Note%2017.%20Acquisitions) This note outlines the company's acquisition activities during 2023, with the Roto-Rooter segment completing two franchise acquisitions - In 2023, Roto-Rooter acquired one franchise in South Carolina for **$305,000** and one in Georgia for **$3.689 million** in cash[195](index=195&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management provides an overview of the company's performance, financial condition, and future outlook, including liquidity and segment analysis - The company updated its full-year 2023 adjusted earnings per diluted share guidance to be in the range of **$19.82** to **$20.02**[231](index=231&type=chunk) - VITAS implemented a hiring and retention bonus program for licensed healthcare workers starting July 1, 2022, with **$43.4 million** accrued since inception and **$28.6 million** paid in July 2023[229](index=229&type=chunk) Updated Full-Year 2023 Guidance | Segment/Metric | 2023 Forecast | | :--- | :--- | | **VITAS Revenue Growth (pre-Medicare Cap)** | 9.3% to 9.5% | | **VITAS Adjusted EBITDA Margin (pre-Medicare Cap)** | 15.4% to 15.7% | | **Roto-Rooter Revenue Growth** | 1.6% to 2.0% | | **Roto-Rooter Adjusted EBITDA Margin** | 28.4% to 28.6% | [Financial Condition, Liquidity and Capital Resources](index=23&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) The company's financial condition remains strong, marked by increased cash, full repayment of long-term debt, and improved operating cash flow - The company fully repaid its **$97.5 million** in long-term debt during the first nine months of 2023[209](index=209&type=chunk)[205](index=205&type=chunk) - Net cash provided by operating activities increased by **$12.0 million** to **$221.7 million** for the first nine months of 2023, largely due to a **$44.0 million** positive change in accounts receivable timing[210](index=210&type=chunk) - Management believes operating income and cash flows are sufficient to operate the business and meet commitments for the foreseeable future[206](index=206&type=chunk) [Results of Operations - Three Months Ended Sep 30, 2023 vs 2022](index=25&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20Sep%2030%2C%202023%20vs%202022) Consolidated revenue increased in Q3 2023, driven by VITAS's growth and improved gross margin, leading to a significant rise in net income Q3 2023 vs Q3 2022 Revenue by Segment | Segment | Q3 2023 Revenue (in thousands) | Q3 2022 Revenue (in thousands) | % Change | | :--- | :--- | :--- | :--- | | **VITAS** | $333,728 | $296,536 | +12.5% | | **Roto-Rooter** | $230,804 | $229,936 | +0.4% | | **Total** | **$564,532** | **$526,472** | **+7.2%** | - VITAS's revenue growth was driven by a **9.4%** increase in days-of-care and a **~2.7%** increase in the Medicare reimbursement rate[240](index=240&type=chunk) - The consolidated gross margin improved to **35.8%** from **34.1%** in Q3 2022, primarily due to margin expansion at VITAS as the licensed healthcare worker retention bonus program expired[270](index=270&type=chunk) - The company's effective tax rate for Q3 2023 was **19.6%**, down from **25.6%** in Q3 2022, due to a one-time **$4.2 million** benefit from realigning its state and local corporate tax structure[243](index=243&type=chunk)[272](index=272&type=chunk) [Results of Operations - Nine Months Ended Sep 30, 2023 vs 2022](index=28&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%20Ended%20Sep%2030%2C%202023%20vs%202022) Consolidated revenue grew for the first nine months of 2023, but net income decreased due to lower gross margin at VITAS, impacted by retention bonus expenses Nine Months 2023 vs 2022 Revenue by Segment | Segment | Nine Months 2023 Revenue (in thousands) | Nine Months 2022 Revenue (in thousands) | % Change | | :--- | :--- | :--- | :--- | | **VITAS** | $965,066 | $893,506 | +8.0% | | **Roto-Rooter** | $713,439 | $694,803 | +2.7% | | **Total** | **$1,678,505** | **$1,588,309** | **+5.7%** | - VITAS's revenue increase was driven by a **6.2%** increase in days-of-care and a **~2.8%** increase in the Medicare reimbursement rate[246](index=246&type=chunk) - The consolidated gross margin decreased to **34.0%** from **35.8%** in the prior-year period, mainly caused by the VITAS gross margin falling to **20.2%** from **22.3%** due to the retention bonus program expense[247](index=247&type=chunk) - The effective tax rate for the first nine months of 2023 was **22.3%**, compared to **24.2%** in the same period of 2022, reflecting the benefit from the state and local tax structure realignment[134](index=134&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate risk associated with its variable-rate debt - The company's primary market risk is interest rate risk from its variable interest line of credit[262](index=262&type=chunk) - As of September 30, 2023, the company had no variable rate debt outstanding, minimizing its current exposure to interest rate fluctuations[262](index=262&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes to internal controls - Based on an evaluation, the President and CEO, EVP and CFO, and VP and Controller concluded that the company's disclosure controls and procedures were effective as of the end of the period[294](index=294&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[294](index=294&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 10 of the financial statements for detailed information regarding the company's material legal matters - For information regarding the Company's legal proceedings, see Note 10, Legal and Regulatory Matters, under Part I, Item 1 of this report[301](index=301&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) The company states that there have been no material changes from the risk factors previously disclosed in its most recent Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the Company's most recent Annual Report on Form 10-K[295](index=295&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities, including Q3 2023 repurchases and the remaining authorization Share Repurchase Activity (Q3 2023) | Period | Total Shares Repurchased | Weighted Average Price Paid Per Share | | :--- | :--- | :--- | | **July 2023** | 0 | N/A | | **August 2023** | 11,206 | $508.01 | | **September 2023** | 17,251 | $501.52 | | **Q3 Total** | **28,457** | **$504.07** | - As of September 30, 2023, the company had **$60.1 million** remaining under its share repurchase authorization[181](index=181&type=chunk)[159](index=159&type=chunk) [Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by key executives and financial data in iXBRL format - The report includes certifications from Kevin J. McNamara (CEO), David P. Williams (CFO), and Michael D. Witzeman (Controller) pursuant to Rule 13a-14(a)/15d-14(a) and Section 906 of the Sarbanes-Oxley Act[297](index=297&type=chunk) - Financial statements and notes are provided in iXBRL (Inline eXtensible Business Reporting Language) format as Exhibit 101[266](index=266&type=chunk)

| --- | --- | --- | --- | --- | --- | --- | --- | --- | |-------------------------------------|-------|--------------------------|-------|---------------|-------|----------------------------------------------------------------------------------------------|-------|-------------------------------------| | | | \n(1) Shares Repurchased | | (2) Dividends | | For the Period January 1, 2007, through June 30, 2023 \n (3) Total Returned to Shareholders | \n$ | (4) Free Cash Flow Generated (1) | | Activity in 2007 A ...

Financial Data and Key Metrics - VITAS Healthcare's Q2 2023 revenue increased by 7.8% YoY to $321 million, driven by a 6.2% increase in days of care and a 2.7% increase in Medicare reimbursement rates [101] - Roto-Rooter's Q2 2023 revenue declined by 0.2% YoY to $233 million, with residential revenue down 1.1% and commercial revenue up 1.3% [99] - VITAS' adjusted EBITDA margin, excluding Medicare Cap, was 15.7% in Q2 2023, down 101 basis points YoY due to sequestration [102] - Roto-Rooter's adjusted EBITDA margin in Q2 2023 was 28.3%, down 128 basis points YoY [103] Business Line Performance - VITAS' average daily census (ADC) increased by 6.2% YoY to 18,392 patients in Q2 2023, with admissions up 5.9% YoY [82][68] - Roto-Rooter's call volume declined by approximately 13% YoY in Q2 2023, but close rates improved by 230 basis points for call centers and 160 basis points for technicians [85][86] Market Performance - VITAS' nursing home admissions increased by 13.7% YoY, while assisted facility admissions grew by 3.9%, hospital-directed admissions by 4.5%, and home-based patient admissions by 3.8% [68] - Roto-Rooter's residential revenue saw declines in drain cleaning (-8.6%) and plumbing (-2.8%), but growth in excavation (3.8%) and water restoration (2.5%) [99] Strategic Direction and Industry Competition - VITAS is focusing on expanding market share by leveraging scale, as smaller competitors struggle with inflation and reimbursement challenges [6] - Roto-Rooter is enhancing its internet marketing presence to capture more customer attention, despite a decline in overall search activity for plumbing services [65][40] Management Commentary on Operating Environment and Future Outlook - Management expects VITAS to achieve a 17.5% adjusted EBITDA margin by 2024, driven by improved staffing and census growth [5] - Roto-Rooter's guidance assumes continued consumer spending headwinds, with conservative estimates for Q3 and Q4 2023 [50] Other Important Information - VITAS' retention program has added 784 licensed healthcare professionals since July 2022, contributing to an annualized revenue increase of $84 million [94][84] - Roto-Rooter's workforce is at its strongest, with no plans for layoffs despite current call volume challenges [3][41] Q&A Session Summary Question: How does the decline in Roto-Rooter's call volume compare to past consumer cycles? - The decline is unusual, with call volume spikes never seen before, and demand weakness typically does not last beyond 12 months [19][20] Question: What is the outlook for VITAS' growth and margins? - VITAS expects 8.5% to 9.5% revenue growth in 2023, with margins returning to pre-pandemic levels by 2024 [7][5] Question: Are there plans for acquisitions in the hospice industry? - Acquisitions are not off the table, but the company prefers to expand through market competition due to high valuations for small providers [62][46] Question: How is Roto-Rooter addressing cost-cutting amid declining call volumes? - The company is focusing on reengineering costs rather than cutting expenses, with no layoffs planned [74][41]

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited consolidated financial statements, including balance sheets, income statements, cash flow statements, and stockholders' equity, along with detailed notes on key financial matters and accounting policies [Unaudited Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Key Data (USD thousands) | Indicator | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets:** | | | | Cash and Cash Equivalents | $159,924 | $74,126 | | Accounts Receivable | $120,314 | $139,408 | | Total Assets | $1,505,180 | $1,442,012 | | **Liabilities:** | | | | Total Current Liabilities | $302,487 | $297,205 | | Long-Term Debt | $0 | $92,500 | | Total Liabilities | $553,101 | $643,297 | | **Stockholders' Equity:** | | | | Total Stockholders' Equity | $952,079 | $798,715 | [Unaudited Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Income) Consolidated Income Statement Key Data (USD thousands, except per share data) | Indicator | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Service Revenue and Sales | $553,816 | $531,288 | $1,113,973 | $1,061,837 | | Cost of Sales | $374,193 | $336,821 | $744,898 | $673,373 | | Selling, General and Administrative Expenses | $94,987 | $87,853 | $195,082 | $177,807 | | Operating Income | $69,506 | $91,938 | $142,325 | $181,312 | | Net Income | $53,377 | $66,456 | $107,498 | $130,625 | | Diluted Earnings Per Share | $3.51 | $4.40 | $7.09 | $8.62 | [Unaudited Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Cash Flow Statement Key Data (USD thousands) | Indicator | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $192,809 | $157,670 | | Net Cash Used in Investing Activities | $(33,534) | $(25,635) | | Net Cash Used in Financing Activities | $(73,477) | $(155,290) | | Increase/(Decrease) in Cash and Cash Equivalents | $85,798 | $(23,255) | | Cash and Cash Equivalents, End of Period | $159,924 | $9,640 | [Unaudited Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Summary of Changes in Stockholders' Equity (USD thousands) | Indicator | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Common Stock | $36,996 | $36,651 | | Additional Paid-in Capital | $1,240,415 | $1,089,129 | | Retained Earnings | $2,294,004 | $2,090,214 | | Treasury Stock | $(2,621,657) | $(2,533,306) | | Deferred Compensation Payable to Company Stock | $2,321 | $2,272 | | **Total Stockholders' Equity** | **$952,079** | **$684,960** | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) [1. Basis of Presentation](index=8&type=section&id=1.%20Basis%20of%20Presentation) - The company prepared its unaudited consolidated financial statements in accordance with SEC Regulation S-X Rule 10-01, omitting certain GAAP-required disclosures. The balance sheet data as of December 31, 2022, is derived from audited financial statements. Management believes these financial statements include all necessary adjustments for a fair presentation of the company's financial position, results of operations, and cash flows[187](index=187&type=chunk) [CLOUD COMPUTING](index=8&type=section&id=CLOUD%20COMPUTING) - Roto-Rooter currently has no significant capitalized implementation costs for cloud computing. VITAS uses a cloud-based human resources system, with approximately **$5.6 million** in capitalized implementation costs amortized over 5.7 years starting January 2020. Amortization was **$249 thousand** for the second quarters of 2023 and 2022, and **$497 thousand** for the first six months of each year[181](index=181&type=chunk)[182](index=182&type=chunk) [INCOME TAXES](index=8&type=section&id=INCOME%20TAXES) Effective Income Tax Rates | Period | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Effective Tax Rate | 24.1% | 22.8% | 24.0% | 23.5% | | Excess Tax Benefit from Stock Option Exercises | $1.5 million reduction | $2.5 million reduction | $3.2 million reduction | $3.9 million reduction | [NON-CASH TRANSACTIONS](index=8&type=section&id=NON-CASH%20TRANSACTIONS) - As of June 30, 2023, and December 31, 2022, the consolidated balance sheets included **$2.1 million** and **$1.9 million**, respectively, of capitalized property and equipment not yet paid for, excluded from capital expenditures in the consolidated cash flow statements. No significant non-cash amounts were included in interest expense during the reporting periods[202](index=202&type=chunk) [BUSINESS COMBINATIONS](index=8&type=section&id=BUSINESS%20COMBINATIONS) - The company accounts for acquired businesses using the acquisition method, recording all acquired assets and assumed liabilities at fair value on the acquisition date. Fair value determination involves estimates and valuation techniques, primarily the income approach. Goodwill is assessed annually for impairment[32](index=32&type=chunk) [2. Revenue Recognition](index=9&type=section&id=2.%20Revenue%20Recognition) [VITAS Revenue Recognition](index=9&type=section&id=VITAS%20Revenue%20Recognition) - VITAS service revenue is reported at the final consideration expected to be received, primarily from third-party payers (commercial health insurers and government programs like Medicare and Medicaid). Revenue recognition is based on service output, recognized daily or hourly. The company monitors the Medicare annual per-beneficiary cap and estimates potential repayments based on projected trends, adjusting revenue accordingly[18](index=18&type=chunk)[13](index=13&type=chunk)[209](index=209&type=chunk) VITAS Patient Care Service Revenue Composition (USD thousands) | Payer/Level of Care | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | **Medicare** | $304,072 | $280,667 | $599,017 | $563,407 | | **Medicaid** | $14,100 | $13,661 | $27,750 | $27,346 | | **Commercial Insurance** | $8,426 | $7,670 | $15,915 | $14,819 | | **Total** | **$326,598** | **$301,998** | **$642,682** | **$605,572** | | Other Revenue | $3,154 | $3,213 | $6,175 | $6,220 | | **Net Revenue** | **$320,861** | **$297,781** | **$631,339** | **$596,970** | - VITAS provides free care to patients meeting charity care standards, with related costs included in the cost of services. Charity care costs were **$2.2 million** in Q2 2023 and **$1.9 million** in Q2 2022; for the first six months, they were **$4.2 million** in 2023 and **$4.0 million** in 2022[198](index=198&type=chunk) [Roto-Rooter Revenue Recognition](index=12&type=section&id=Roto-Rooter%20Revenue%20Recognition) - Roto-Rooter provides plumbing, drain cleaning, excavation, water restoration, and other related services, primarily through company-owned branches, independent contractors, and a network of franchisees. Revenue for short-cycle core services (plumbing, drain cleaning, excavation) and water restoration services is recognized upon service completion, as customers acknowledge payment obligations and satisfaction immediately. Revenue from independent contractors and franchisees is recognized over time (weekly/monthly) as Roto-Rooter's brand usage rights and advertising support provide continuous value to them[211](index=211&type=chunk)[214](index=214&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) Roto-Rooter Segmented Revenue Composition (USD thousands) | Service Type | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Drain Cleaning | $60,362 | $64,532 | $126,851 | $131,219 | | Plumbing | $48,719 | $48,885 | $99,172 | $96,557 | | Excavation | $57,552 | $55,546 | $117,128 | $110,734 | | Water Restoration | $44,978 | $43,673 | $95,741 | $84,033 | | Independent Contractors | $21,875 | $21,005 | $45,175 | $42,423 | | Franchise Fees | $1,388 | $1,370 | $2,739 | $2,688 | | **Net Revenue** | **$232,955** | **$233,507** | **$482,634** | **$464,867** | [3. Segments](index=14&type=section&id=3.%20Segments) - The company operates through two wholly-owned subsidiaries, VITAS Healthcare Corporation and Roto-Rooter Group, Inc. VITAS focuses on hospice care services, while Roto-Rooter provides plumbing, drain cleaning, and water restoration services. Corporate administrative expenses and unallocated investment and financing income/expenses are reported as the "Corporate" segment[21](index=21&type=chunk)[226](index=226&type=chunk) After-Tax Income/(Loss) by Business Segment (USD thousands) | Segment | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | VITAS | $26,128 | $35,212 | $50,892 | $71,694 | | Roto-Rooter | $44,374 | $47,072 | $92,027 | $91,009 | | Corporate | $(17,125) | $(15,828) | $(35,421) | $(32,078) | | **Net Income** | **$53,377** | **$66,456** | **$107,498** | **$130,625** | [4. Earnings per Share](index=15&type=section&id=4.%20Earnings%20per%20Share) Earnings Per Share Calculation (USD thousands, except per share data) | Indicator | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $53,377 | $66,456 | $107,498 | $130,625 | | Weighted Average Common Shares Outstanding | 15,058 | 14,932 | 15,013 | 14,959 | | Earnings Per Share | $3.54 | $4.45 | $7.16 | $8.73 | | Diluted Weighted Average Common Shares Outstanding | 15,219 | 15,111 | 15,167 | 15,152 | | Diluted Earnings Per Share | $3.51 | $4.40 | $7.09 | $8.62 | - For the three and six months ended June 30, 2023, **311,335** and **596,000** stock options, respectively, were excluded from the diluted earnings per share calculation due to their anti-dilutive nature[230](index=230&type=chunk)[231](index=231&type=chunk) [5. Long-Term Debt and Lines of Credit](index=15&type=section&id=5.%20Long-Term%20Debt%20and%20Lines%20of%20Credit) - The company entered into a Fifth Amended and Restated Credit Agreement (the "2022 Credit Arrangement") on June 28, 2022, comprising a **$450 million** five-year revolving credit facility and a **$100 million** five-year term loan. Term loan principal payments of **$1.25 million** are due quarterly, with interest at SOFR plus 100 basis points. The company prepaid **$75 million** in Q1 2023 and paid the remaining **$21.3 million** on April 28, 2023, reducing borrowing capacity from **$550 million** to **$450 million**[232](index=232&type=chunk)[233](index=233&type=chunk) - As of June 30, 2023, the company was in compliance with all debt covenants and had **$45.3 million** in outstanding letters of credit, primarily for insurance purposes. Approximately **$404.7 million** of unused credit was available under the revolving credit facility[235](index=235&type=chunk) [6. Other Income/(Expense) – Net](index=16&type=section&id=6.%20Other%20Income%2F%28Expense%29%20%E2%80%93%20Net) Other Income/(Expense) – Net (USD thousands) | Indicator | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Deferred Compensation Trust Asset Market Value Adjustment | $1,504 | $(5,086) | $1,184 | $(9,020) | | Interest Income | $113 | $154 | $263 | $226 | | Other - Net | $(8) | $2 | $59 | $2 | | **Total Other Income/(Expense) - Net** | **$1,609** | **$(4,930)** | **$1,506** | **$(8,792)** | [7. Leases](index=16&type=section&id=7.%20Leases) - The company primarily leases real estate, including office space and inpatient units for VITAS, and office space for Roto-Rooter. Lease terms range from less than one year to ten years, with some including renewal or termination options. The company currently has no finance leases, and all disclosures relate to operating leases[236](index=236&type=chunk)[241](index=241&type=chunk) Lease-Related Balance Sheet Information (USD thousands) | Indicator | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Operating Lease Assets | $127,215 | $135,662 | | Current Operating Lease Liabilities | $38,779 | $38,996 | | Non-Current Operating Lease Liabilities | $102,112 | $110,513 | | **Total Operating Lease Liabilities** | **$140,891** | **$149,509** | Lease Expense Composition (USD thousands) | Indicator | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Operating Lease Expense | $14,944 | $13,249 | $29,813 | $26,300 | | Sublease Income | $(23) | $(45) | $(46) | $(91) | | **Net Lease Expense** | **$14,921** | **$13,204** | **$29,767** | **$26,209** | [8. Stock-Based Compensation Plans](index=18&type=section&id=8.%20Stock-Based%20Compensation%20Plans) - On February 17, 2023, the Board's Compensation/Incentive Committee granted **6,078** Performance Stock Units (PSUs) vesting based on Total Shareholder Return (TSR) and Earnings Per Share (EPS) targets over a three-year period ending December 31, 2025. The cumulative compensation cost for TSR-based PSUs is estimated at **$5.1 million**, and for EPS-based PSUs at **$4.2 million**, both to be recognized over the three-year service period[246](index=246&type=chunk)[252](index=252&type=chunk) [9. Retirement Plans](index=18&type=section&id=9.%20Retirement%20Plans) Retirement Plan Net Benefit (USD thousands) | Period | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Benefit | $5,550 | $639 | $11,424 | $3,556 | - All company plans providing retirement and similar benefits are defined contribution plans. These expenses include the impact of asset market value gains and losses in the deferred compensation plan and are recorded in selling, general, and administrative expenses[253](index=253&type=chunk) [10. Legal and Regulatory Matters](index=18&type=section&id=10.%20Legal%20and%20Regulatory%20Matters) - VITAS's business is highly regulated and subject to government agency investigations and litigation. In 2017, a settlement was reached with the Department of Justice regarding the False Claims Act, including a five-year Corporate Integrity Agreement (CIA) which concluded on June 22, 2023. VITAS was also audited by the OIG, with a final report recommending repayment of approximately **$140 million**, but VITAS has appealed and deposited **$50.3 million** to preserve its appeal rights[2](index=2&type=chunk)[3](index=3&type=chunk)[253](index=253&type=chunk)[5](index=5&type=chunk) - In October 2020, VITAS received a civil investigative demand from the Department of Justice concerning the False Claims Act, involving 32 patients in its Florida operations. In November 2022, the DOJ declined to intervene, and the relator dismissed the case on April 6, 2023[247](index=247&type=chunk) - The company cannot estimate the timing or outcome of these matters, or whether any potential loss is probable or reasonably estimable. Addressing these matters could adversely affect the company through defense costs, potential damages, government funding withholdings, diversion of management time, and associated publicity[2](index=2&type=chunk)[6](index=6&type=chunk) [11. Concentration of Risk](index=19&type=section&id=11.%20Concentration%20of%20Risk) - As of June 30, 2023, and December 31, 2022, approximately **61%** and **64%**, respectively, of VITAS's total accounts receivable were from Medicare, and **30%** and **29%** from various state Medicaid or managed Medicaid programs. These government programs and managed Medicaid receivables collectively accounted for approximately **71%** of consolidated net accounts receivable[263](index=263&type=chunk) - VITAS relies on a single supplier for pharmaceutical services and most medical supplies. While these supplies are available from multiple vendors, a disruption from the primary supplier could adversely affect VITAS's operations, including temporary logistical challenges and increased costs[248](index=248&type=chunk) [12. Cash Overdrafts and Cash Equivalents](index=19&type=section&id=12.%20Cash%20Overdrafts%20and%20Cash%20Equivalents) - As of June 30, 2023, and December 31, 2022, cash overdrafts were not included in accounts payable. The company invests excess cash throughout the year in money market funds with major commercial banks and closely monitors the creditworthiness of these institutions[15](index=15&type=chunk)[249](index=249&type=chunk) [13. Other Assets](index=19&type=section&id=13.%20Other%20Assets) Other Assets Composition (USD thousands) | Indicator | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | OAS Deposits | $47,756 | $50,274 | | Life Insurance Cash Value | $3,643 | $3,636 | | Non-Current Prepayments and Deposits | $2,251 | $2,368 | | Other Long-Term Receivables | $1,747 | $1,826 | | Deferred Debt Costs | $1,311 | $1,703 | | **Total** | **$56,708** | **$59,807** | [14. Other Current Liabilities](index=20&type=section&id=14.%20Other%20Current%20Liabilities) Other Current Liabilities Composition (USD thousands) | Indicator | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Healthcare Worker Retention Bonuses | $43,384 | $19,634 | | Medicare Cap | $13,115 | $14,380 | | All Other | $28,210 | $26,990 | | **Total** | **$84,709** | **$61,004** | - No single amount in the "All Other" line item exceeded **5%** of total current liabilities during the reporting periods[9](index=9&type=chunk) [15. Financial Instruments](index=20&type=section&id=15.%20Financial%20Instruments) - FASB's authoritative guidance on fair value measurement defines a hierarchy for prioritizing fair value measurement inputs: Level 1 uses quoted prices in active markets, Level 2 uses other observable inputs, and Level 3 uses unobservable inputs. For cash and cash equivalents, accounts receivable, and accounts payable, their carrying values are reasonable estimates of fair value. The fair value of long-term debt approximates its carrying value due to its floating interest rate resetting in the short term and including additional amounts based on leverage ratios[10](index=10&type=chunk)[11](index=11&type=chunk) Financial Instrument Fair Value Hierarchy (USD thousands) | Indicator | Carrying Value (June 30, 2023) | Level 1 (June 30, 2023) | Level 2 (June 30, 2023) | Level 3 (June 30, 2023) | | :--- | :--- | :--- | :--- | :--- | | Deferred Compensation Plan Trust Investments | $99,522 | $99,522 | $0 | $0 | | | | | | | | Indicator | Carrying Value (December 31, 2022) | Level 1 (December 31, 2022) | Level 2 (December 31, 2022) | Level 3 (December 31, 2022) | | :--- | :--- | :--- | :--- | :--- | | Deferred Compensation Plan Trust Investments | $93,196 | $93,196 | $0 | $0 | | Long-Term Debt and Current Portion | $97,500 | $0 | $97,500 | $0 | [16. Capital Stock Repurchase Plan Transactions](index=21&type=section&id=16.%20Capital%20Stock%20Repurchase%20Plan%20Transactions) Capital Stock Repurchase Activity (USD thousands, except per share data) | Indicator | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Cost of Shares Repurchased | $13,425 | $49,861 | $13,425 | $77,214 | | Number of Shares Repurchased | 25,000 | 100,000 | 25,000 | 157,500 | | Weighted Average Price Per Share | $536.98 | $498.61 | $536.98 | $491.81 | | Remaining Authorized Amount | $74,443 | N/A | $74,443 | N/A | - The Board authorized an additional **$600 million** for the existing stock repurchase plan in May and November 2021. As of the end of the reporting period, the plan had an authorized balance of **$74.4 million** remaining[261](index=261&type=chunk) [17. Acquisitions](index=21&type=section&id=17.%20Acquisitions) - On June 1, 2023, Roto-Rooter acquired a franchise in South Carolina for **$305 thousand** in cash. In 2022, VITAS acquired assets of a hospice service provider in Florida for **$1.24 million** in cash, and Roto-Rooter acquired three franchises and related assets in New Jersey for **$2.29 million** in cash[19](index=19&type=chunk) Goodwill Changes (USD thousands) | Indicator | VITAS | Roto-Rooter | Total | | :--- | :--- | :--- | :--- | | Balance as of December 31, 2022 | $334,063 | $247,232 | $581,295 | | Business Combinations | - | $207 | $207 | | Foreign Currency Adjustments | - | $40 | $40 | | **Balance as of June 30, 2023** | **$334,063** | **$247,479** | **$581,542** | - Goodwill is assessed for impairment annually on October 1, and all recognized goodwill is tax-deductible. Quarterly amortization of intangible assets primarily stems from two Roto-Rooter franchise acquisitions completed in 2019, where approximately **$59.2 million** was identified as the value of reacquired franchise rights and is amortized over the remaining franchise agreement terms[19](index=19&type=chunk)[50](index=50&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition and operating results for the three and six months ended June 30, 2023, focusing on its VITAS (hospice) and Roto-Rooter (plumbing services) segments, noting revenue growth but declines in net income and adjusted EBITDA due to specific operational factors [Executive Summary](index=22&type=section&id=Executive%20Summary) - The majority of the company's operations are in the United States, with employees being its most critical resource. The company has minimal risk exposure to customers, suppliers, or employees in other regions[36](index=36&type=chunk) [Key Operating Results](index=22&type=section&id=Key%20Operating%20Results) Summary of Key Operating Results (USD thousands, except per share data) | Indicator | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Service Revenue and Sales | $553,816 | $531,288 | $1,113,973 | $1,061,837 | | Net Income | $53,377 | $66,456 | $107,498 | $130,625 | | Diluted Earnings Per Share | $3.51 | $4.40 | $7.09 | $8.62 | | Adjusted Net Income | $71,686 | $73,090 | $144,553 | $145,870 | | Adjusted Diluted Earnings Per Share | $4.71 | $4.84 | $9.53 | $9.63 | | Adjusted EBITDA | $109,133 | $110,907 | $220,167 | $221,114 | | Adjusted EBITDA as % of Revenue | 19.7% | 20.9% | 19.8% | 20.8% | - Adjusted Net Income, Adjusted Diluted Earnings Per Share, EBITDA, Adjusted EBITDA, and Adjusted EBITDA as a percentage of revenue are non-GAAP measures used to help readers evaluate operating results and compare with similar companies[22](index=22&type=chunk) [VITAS Segment Performance](index=22&type=section&id=VITAS%20Segment%20Performance) - In Q2 2023, VITAS service revenue grew by **7.8%**, driven by a **6.2%** increase in average daily census and an approximate **2.7%** increase in Medicare reimbursement rates, partially offset by 100 basis points from the re-implementation of CMS sequestration. For the first six months, VITAS service revenue grew by **5.8%**, driven by a **4.6%** increase in average daily census and an approximate **2.8%** increase in Medicare reimbursement rates, partially offset by 150 basis points from sequestration[37](index=37&type=chunk)[71](index=71&type=chunk)[23](index=23&type=chunk)[81](index=81&type=chunk) - To address industry-wide shortages of licensed healthcare professionals, VITAS implemented a recruitment and retention bonus program on July 1, 2022. As of Q2 2023, **$12.8 million** has been accrued, **$23.8 million** for the first six months, and a cumulative **$43.4 million** since the program's inception[38](index=38&type=chunk) - For the full year 2023, VITAS revenue (pre-Medicare Cap) is projected to grow by **8.5% to 9.5%**, with average daily census expected to increase by **6.5% to 7.5%**. Adjusted EBITDA margin (pre-Medicare Cap and retention bonuses) is anticipated to be **16.5% to 17.0%**[25](index=25&type=chunk) [Roto-Rooter Segment Performance](index=22&type=section&id=Roto-Rooter%20Segment%20Performance) - In Q2 2023, Roto-Rooter service revenue decreased by **0.2%**, primarily due to a decline in drain cleaning services, partially offset by growth in excavation and water restoration services. For the first six months, Roto-Rooter service revenue grew by **3.8%**, driven by increases in plumbing, excavation, and water restoration services, partially offset by a decline in drain cleaning services[37](index=37&type=chunk)[23](index=23&type=chunk) - The decline in drain cleaning and plumbing volumes was primarily influenced by macroeconomic consumer caution. Growth in excavation and water restoration revenue depends on the volume and scale of drain cleaning issues. Independent contractor revenue growth was mainly due to the expansion of water restoration business[72](index=72&type=chunk)[82](index=82&type=chunk) - For the full year 2023, Roto-Rooter revenue is projected to grow by **1.0% to 2.0%**, with an Adjusted EBITDA margin expected to be **28.0% to 28.5%**[40](index=40&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) - Key balance sheet changes as of June 30, 2023, include a **$13 million** decrease in accrued compensation (due to 2022 bonus payments), a **$19.2 million** decrease in accounts receivable (due to collection timing), a **$23.7 million** increase in other current liabilities (primarily from the healthcare worker retention bonus program), and a **$97.5 million** decrease in long-term debt (due to early repayment)[43](index=43&type=chunk)[67](index=67&type=chunk) - Net cash provided by operating activities increased by **$35.1 million** from **$157.7 million** as of June 30, 2022, to **$192.8 million** as of June 30, 2023, primarily driven by a **$32.6 million** increase in accounts payable and other current liabilities (due to retention bonus accruals) and a **$19.2 million** decrease in accounts receivable, partially offset by a **$23.1 million** decrease in net income[44](index=44&type=chunk)[175](index=175&type=chunk) - The company anticipates its operating income and cash flows will be sufficient to meet business operations and commitments for the foreseeable future. Management continuously evaluates cash utilization options, including stock repurchases, debt repurchases, acquisitions, and increased dividends[66](index=66&type=chunk)[68](index=68&type=chunk) - The company prepaid **$75 million** of its term loan in Q1 2023 and paid the remaining **$21.3 million** on April 28, 2023, reducing the 2022 Credit Arrangement's borrowing capacity from **$550 million** to **$450 million**. As of June 30, 2023, the company had approximately **$404.7 million** of unused revolving credit capacity[27](index=27&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) [Commitments and Contingencies](index=24&type=section&id=Commitments%20and%20Contingencies) - The company faces various lawsuits and claims in the normal course of business and regularly receives communications from government and regulatory agencies regarding Medicare and Medicaid billing compliance. The company accrues liabilities for specific, uninsured regulatory and legal actions that are probable and estimable, and discloses actions when a loss is reasonably possible. In most cases, the company cannot reasonably estimate any potential liability due to the uncertainty of outcomes and litigation stages[69](index=69&type=chunk) [Results of Operations - Three months ended June 30, 2023 versus 2022](index=25&type=section&id=Results%20of%20Operations%20-%20Three%20months%20ended%20June%2030%2C%202023%20versus%202022) [Consolidated Results](index=25&type=section&id=Consolidated%20Results) - Service revenue and sales increased by **4.2%** in Q2 2023 compared to the prior year, with VITAS contributing **$23.1 million** in growth and Roto-Rooter decreasing by **$552 thousand**[47](index=47&type=chunk) Revenue Composition by Operating Segment (USD thousands) | Segment | Q2 2023 | Q2 2022 | Growth/(Decline) Percentage | | :--- | :--- | :--- | :--- | | **VITAS Net Revenue** | **$320,861** | **$297,781** | **7.8%** | | Routine Home Care | $278,116 | $257,631 | 8.0% | | Continuous Care | $21,081 | $19,538 | 7.9% | | Inpatient Care | $27,401 | $24,619 | 11.3% | | Medicare Cap Adjustment | $(2,750) | $(2,000) | (37.5)% | | **Roto-Rooter Net Revenue** | **$232,955** | **$233,507** | **(0.2)%** | | Drain Cleaning | $60,362 | $64,532 | (6.5)% | | Plumbing | $48,719 | $48,885 | (0.3)% | | Excavation | $57,552 | $55,546 | 3.6% | | Water Restoration | $44,978 | $43,673 | 3.0% | | **Total Revenue** | **$553,816** | **$531,288** | **4.2%** | [Segment Results](index=27&type=section&id=Segment%20Results) - VITAS's after-tax earnings decreased primarily due to **$9.6 million** in after-tax expenses from the healthcare worker retention bonus program. Roto-Rooter's after-tax earnings decreased mainly due to reduced revenue. Corporate after-tax expenses increased by **8.2%**, primarily due to a **$1.2 million** increase in stock-based compensation[78](index=78&type=chunk)[53](index=53&type=chunk)[79](index=79&type=chunk) Net Income/(Loss) by Segment (USD thousands) | Segment | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | VITAS | $26,128 | $35,212 | | Roto-Rooter | $44,374 | $47,072 | | Corporate | $(17,125) | $(15,828) | | **Total** | **$53,377** | **$66,456** | [Gross Margin](index=26&type=section&id=Gross%20Margin) Gross Margin | Segment | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Consolidated Gross Margin | 32.4% | 36.6% | | VITAS Gross Margin | 18.0% | 23.6% | | Roto-Rooter Gross Margin | 52.3% | 53.2% | - VITAS's gross margin decreased primarily due to **$12.8 million** in expenses from the healthcare worker retention bonus program. Roto-Rooter's gross margin decreased mainly due to reduced revenue[49](index=49&type=chunk) [Selling, General and Administrative Expenses (SG&A)](index=26&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses%20%28SG%26A%29) SG&A Expense Composition (USD thousands) | Indicator | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | SG&A Expenses (excluding long-term incentive and deferred compensation trust market value adjustments) | $91,733 | $91,422 | | Long-Term Incentive Compensation | $1,750 | $1,517 | | Impact of Deferred Compensation Trust Asset Market Value Adjustment | $1,504 | $(5,086) | | **Total SG&A Expenses** | **$94,987** | **$87,853** | - SG&A expenses, excluding long-term incentive compensation and the impact of deferred compensation trust market value adjustments, were relatively flat in Q2 2023 compared to Q2 2022[73](index=73&type=chunk) [Other Income/(Expense) – Net](index=26&type=section&id=Other%20Income%2F%28Expense%29%20%E2%80%93%20Net) Other Income/(Expense) – Net (USD thousands) | Indicator | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Deferred Compensation Trust Asset Market Value Adjustment | $1,504 | $(5,086) | | Interest Income | $113 | $154 | | Other | $(8) | $2 | | **Total Other Income/(Expense) - Net** | **$1,609** | **$(4,930)** | [Income Taxes](index=26&type=section&id=Income%20Taxes) Effective Tax Rate Reconciliation (USD thousands) | Indicator | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Income Tax at Statutory Federal Rate | $14,772 | $18,082 | | Stock-Based Compensation Tax Benefit | $(1,501) | $(2,499) | | State and Local Income Taxes | $2,286 | $1,965 | | Other - Net | $1,410 | $2,102 | | **Income Tax Expense** | **$16,967** | **$19,650** | | **Effective Tax Rate** | **24.1%** | **22.8%** | [Results of Operations - Six months ended June 30, 2023 versus 2022](index=28&type=section&id=Results%20of%20Operations%20-%20Six%20months%20ended%20June%2030%2C%202023%20versus%202022) [Consolidated Results](index=28&type=section&id=Consolidated%20Results) - Service revenue and sales increased by **4.9%** for the first six months of 2023 compared to the prior year, with VITAS contributing **$34.4 million** in growth and Roto-Rooter contributing **$17.8 million** in growth[55](index=55&type=chunk) Revenue Composition by Operating Segment (USD thousands) | Segment | First Six Months 2023 | First Six Months 2022 | Growth/(Decline) Percentage | | :--- | :--- | :--- | :--- | | **VITAS Net Revenue** | **$631,339** | **$596,970** | **5.8%** | | Routine Home Care | $545,166 | $515,267 | 5.8% | | Continuous Care | $41,022 | $39,116 | 4.9% | | Inpatient Care | $56,494 | $51,189 | 10.4% | | Medicare Cap Adjustment | $(5,500) | $(4,500) | (22.2)% | | **Roto-Rooter Net Revenue** | **$482,634** | **$464,867** | **3.8%** | | Drain Cleaning | $126,851 | $131,219 | (3.3)% | | Plumbing | $99,172 | $96,557 | 2.7% | | Excavation | $117,128 | $110,734 | 5.8% | | Water Restoration | $95,741 | $84,033 | 13.9% | | **Total Revenue** | **$1,113,973** | **$1,061,837** | **4.9%** | [Segment Results](index=30&type=section&id=Segment%20Results) - VITAS's after-tax earnings decreased primarily due to **$17.7 million** in after-tax expenses from the healthcare worker retention bonus program and the re-implementation of the **2.0%** sequestration policy. Roto-Rooter's after-tax earnings as a percentage of revenue slightly decreased. Corporate after-tax expenses increased by **10.4%**, primarily due to a **$3.1 million** increase in stock-based compensation[62](index=62&type=chunk)[110](index=110&type=chunk)[86](index=86&type=chunk) Net Income/(Loss) by Segment (USD thousands) | Segment | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | | VITAS | $50,892 | $71,694 | | Roto-Rooter | $92,027 | $91,009 | | Corporate | $(35,421) | $(32,078) | | **Total** | **$107,498** | **$130,625** | [Gross Margin](index=29&type=section&id=Gross%20Margin) Gross Margin | Segment | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | | Consolidated Gross Margin | 33.1% | 36.6% | | VITAS Gross Margin | 18.2% | 23.8% | | Roto-Rooter Gross Margin | 52.7% | 53.0% | - VITAS's gross margin decreased primarily due to **$23.8 million** in expenses from the healthcare worker retention bonus program[57](index=57&type=chunk) [Selling, General and Administrative Expenses (SG&A)](index=29&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses%20%28SG%26A%29) SG&A Expense Composition (USD thousands) | Indicator | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | | SG&A Expenses (excluding long-term incentive and deferred compensation trust market value adjustments) | $189,634 | $184,000 | | Long-Term Incentive Compensation | $4,264 | $2,827 | | Impact of Deferred Compensation Trust Asset Market Value Adjustment | $1,184 | $(9,020) | | **Total SG&A Expenses** | **$195,082** | **$177,807** | - SG&A expenses, excluding long-term incentive compensation and the impact of deferred compensation trust market value adjustments, increased by **3.1%** for the first six months of 2023 compared to the prior year, primarily due to increased variable selling expenses and normal wage growth[58](index=58&type=chunk) [Other Income/(Expense) – Net](index=29&type=section&id=Other%20Income%2F%28Expense%29%20%E2%80%93%20Net) Other Income/(Expense) – Net (USD thousands) | Indicator | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | | Deferred Compensation Trust Asset Market Value Adjustment | $1,184 | $(9,020) | | Interest Income | $263 | $226 | | Other | $59 | $2 | | **Total Other Income/(Expense) - Net** | **$1,506** | **$(8,792)** | [Income Taxes](index=29&type=section&id=Income%20Taxes) Effective Tax Rate Reconciliation (USD thousands) | Indicator | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | | Income Tax at Statutory Federal Rate | $29,717 | $35,870 | | Stock-Based Compensation Tax Benefit | $(3,150) | $(3,940) | | State and Local Income Taxes | $5,226 | $5,418 | | Other - Net | $2,218 | $2,835 | | **Income Tax Expense** | **$34,011** | **$40,183** | | **Effective Tax Rate** | **24.0%** | **23.5%** | [Unaudited Consolidating Statements of Income](index=31&type=section&id=Unaudited%20Consolidating%20Statements%20of%20Income) Q2 2023 Consolidating Statements of Income (USD thousands) | Indicator | VITAS | Roto-Rooter | Corporate | Chemed Consolidated | | :--- | :--- | :--- | :--- | :--- | | Service Revenue and Sales | $320,861 | $232,955 | $0 | $553,816 | | Operating Income | $30,128 | $55,710 | $(16,332) | $69,506 | | Net Income/(Loss) | $26,128 | $44,374 | $(17,125) | $53,377 | Q2 2022 Consolidating Statements of Income (USD thousands) | Indicator | VITAS | Roto-Rooter | Corporate | Chemed Consolidated | | :--- | :--- | :--- | :--- | :--- | | Service Revenue and Sales | $297,781 | $233,507 | $0 | $531,288 | | Operating Income | $41,819 | $59,860 | $(9,741) | $91,938 | | Net Income/(Loss) | $35,212 | $47,072 | $(15,828) | $66,456 | First Six Months 2023 Consolidating Statements of Income (USD thousands) | Indicator | VITAS | Roto-Rooter | Corporate | Chemed Consolidated | | :--- | :--- | :--- | :--- | :--- | | Service Revenue and Sales | $631,339 | $482,634 | $0 | $1,113,973 | | Operating Income | $58,620 | $115,998 | $(32,293) | $142,325 | | Net Income/(Loss) | $50,892 | $92,027 | $(35,421) | $107,498 | First Six Months 2022 Consolidating Statements of Income (USD thousands) | Indicator | VITAS | Roto-Rooter | Corporate | Chemed Consolidated | | :--- | :--- | :--- | :--- | :--- | | Service Revenue and Sales | $596,970 | $464,867 | $0 | $1,061,837 | | Operating Income | $85,890 | $115,728 | $(20,306) | $181,312 | | Net Income/(Loss) | $71,694 | $91,009 | $(32,078) | $130,625 | [Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA](index=35&type=section&id=Unaudited%20Consolidating%20Summary%20and%20Reconciliation%20of%20Adjusted%20EBITDA) Q2 2023 Adjusted EBITDA Reconciliation (USD thousands) | Indicator | VITAS | Roto-Rooter | Corporate | Chemed Consolidated | | :--- | :--- | :--- | :--- | :--- | | Net Income/(Loss) | $26,128 | $44,374 | $(17,125) | $53,377 | | EBITDA | $39,974 | $68,783 | $(22,494) | $86,263 | | Healthcare Worker Retention Bonuses | $12,833 | - | - | $12,833 | | Stock-Based Compensation Expense | - | - | $8,400 | $8,400 | | **Adjusted EBITDA** | **$47,918** | **$65,880** | **$(4,665)** | **$109,133** | Q2 2022 Adjusted EBITDA Reconciliation (USD thousands) | Indicator | VITAS | Roto-Rooter | Corporate | Chemed Consolidated | | :--- | :--- | :--- | :--- | :--- | | Net Income/(Loss) | $35,212 | $47,072 | $(15,828) | $66,456 | | EBITDA | $52,709 | $71,230 | $(21,697) | $102,242 | | Stock-Based Compensation Expense | - | - | $7,216 | $7,216 | | **Adjusted EBITDA** | **$47,966** | **$69,016** | **$(6,075)** | **$110,907** | First Six Months 2023 Adjusted EBITDA Reconciliation (USD thousands) | Indicator | VITAS | Roto-Rooter | Corporate | Chemed Consolidated | | :--- | :--- | :--- | :--- | :--- | | Net Income/(Loss) | $50,892 | $92,027 | $(35,421) | $107,498 | | EBITDA | $78,287 | $141,643 | $(46,152) | $173,778 | | Healthcare Worker Retention Bonuses | $23,750 | - | - | $23,750 | | Stock-Based Compensation Expense | - | - | $16,882 | $16,882 | | **Adjusted EBITDA** | **$92,380** | **$137,723** | **$(9,936)** | **$220,167** | First Six Months 2022 Adjusted EBITDA Reconciliation (USD thousands) | Indicator | VITAS | Roto-Rooter | Corporate | Chemed Consolidated | | :--- | :--- | :--- | :--- | :--- | | Net Income/(Loss) | $71,694 | $91,009 | $(32,078) | $130,625 | | EBITDA | $107,047 | $138,373 | $(43,010) | $202,410 | | Stock-Based Compensation Expense | - | - | $14,667 | $14,667 | | **Adjusted EBITDA** | **$98,001** | **$134,909** | **$(11,796)** | **$221,114** | [Reconciliation of Adjusted Net Income](index=37&type=section&id=Reconciliation%20of%20Adjusted%20Net%20Income) Adjusted Net Income Reconciliation (USD thousands, except per share data) | Indicator | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Reported Net Income | $53,377 | $66,456 | $107,498 | $130,625 | | Healthcare Worker Retention Bonuses (pre-tax) | $12,833 | - | $23,750 | - | | Stock-Based Compensation Expense (pre-tax) | $8,400 | $7,216 | $16,882 | $14,667 | | Total Pre-Tax Adjustments | $25,335 | $11,171 | $51,356 | $23,634 | | Total After-Tax Adjustments | $(18,309) | $(6,634) | $(37,055) | $(15,245) | | Adjusted Net Income | $71,686 | $73,090 | $144,553 | $145,870 | | Diluted Earnings Per Share (reported) | $3.51 | $4.40 | $7.09 | $8.62 | | Adjusted Diluted Earnings Per Share | $4.71 | $4.84 | $9.53 | $9.63 | [Operating Statistics](index=38&type=section&id=Operating%20Statistics) VITAS Operating Statistics | Indicator | Q2 2023 | Q2 2022 | First Six Months 2023 | First Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Patient Days | 1,673,710 | 1,575,702 | 3,278,391 | 3,133,879 | | Average Daily Census (ADC) | 18,392 | 17,315 | 18,114 | 17,314 | | Total Admissions | 15,611 | 14,735 | 31,790 | 31,265 | | Total Discharges | 15,104 | 14,603 | 30,509 | 31,465 | | Average Length of Stay | 99.5 | 103.7 | 99.7 | 104.3 | | Median Length of Stay | 16.0 | 17.0 | 15.0 | 16.0 | | Days Sales Outstanding (excluding unapplied Medicare payments) | 35.2 | 33.7 | N/A | N/A | | Days Sales Outstanding (including unapplied Medicare payments) | 22.6 | 28.2 | N/A | N/A | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company primarily faces interest rate risk through its floating-rate credit facilities, continuously evaluating this exposure and the costs versus benefits of hedging techniques - As of June 30, 2023, the company had no outstanding floating-rate debt. For every **$10 million** borrowed under the credit facility, a 100 basis points (**1%**) increase or decrease in interest rates would increase or decrease the company's annual interest expense by **$100 thousand**[102](index=102&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management has assessed the effectiveness of disclosure controls and procedures as of the end of the reporting period, concluding they are effective, with no significant internal control changes this quarter - Under the supervision of the President and Chief Executive Officer, and with the participation of the Executive Vice President and Chief Financial Officer and the Vice President and Controller, the company evaluated the effectiveness of its disclosure controls and procedures as of the end of the reporting period. Based on this evaluation, management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period. No significant changes in internal control occurred during the reporting period[126](index=126&type=chunk) [Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Regarding Forward-Looking Information](index=39&type=section&id=Safe%20Harbor%20Statement%20under%20the%20Private%20Securities%20Litigation%20Reform%20Act%20of%201995%20Regarding%20Forward-Looking%20Information) This report contains forward-looking statements based on current expectations and assumptions, involving known and unknown risks, uncertainties, contingencies, and other factors that may cause actual results to differ materially - Forward-looking statements are identified by words such as "believe," "expect," "hope," "anticipate," "plan," and similar expressions, based on current expectations and assumptions, involving risks, uncertainties, contingencies, and other factors that could cause actual results to differ materially from those expressed. Investors should be aware that such forward-looking statements carry inherent risks, and there is no assurance that the matters contained therein will be achieved. The company undertakes no obligation to publicly update or revise any forward-looking statements[101](index=101&type=chunk) [PART II. OTHER INFORMATION](index=39&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) - For information regarding legal proceedings involving the company, please refer to Note 10, "Legal and Regulatory Matters," in Part I, Item 1 of this Form 10-Q quarterly report[103](index=103&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) - There have been no other material changes to the risk factors disclosed in the company's most recent Annual Report on Form 10-K[104](index=104&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) [Purchases of Equity Securities by Issuer and Affiliated Purchasers](index=40&type=section&id=Purchases%20of%20Equity%20Securities%20by%20Issuer%20and%20Affiliated%20Purchasers) Stock Repurchase Plan Activity for the First Six Months of 2023 | Period | Total Shares Repurchased | Weighted Average Price Per Share | Total Shares Repurchased Under Plan | Remaining Authorized Amount Under Plan | | :--- | :--- | :--- | :--- | :--- | | January 1 to January 31, 2023 | - | $0 | 10,458,154 | $87,867,735 | | February 1 to February 28, 2023 | - | $0 | 10,458,154 | $87,867,735 | | March 1 to March 31, 2023 | - | $0 | 10,458,154 | $87,867,735 | | Total for Q2 2023 | 25,000 | $536.98 | N/A | N/A | | April 1 to April 30, 2023 | - | $0 | 10,458,154 | $87,867,735 | | May 1 to May 31, 2023 | 16,620 | $537.12 | 10,474,774 | $78,940,805 | | June 1 to June 30, 2023 | 8,380 | $536.71 | 10,483,154 | $74,443,156 | [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) - None[143](index=143&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) - None[131](index=131&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) - None[132](index=132&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) - Exhibits include iXBRL-formatted materials for Chemed Corporation's Form 10-Q quarterly report as of June 30, 2023, and various certifications filed under Exchange Act Rule 13a-14(a)/15d-14(a) and Section 906 of the Sarbanes-Oxley Act[107](index=107&type=chunk)[133](index=133&type=chunk) [SIGNATURES](index=42&type=section&id=SIGNATURES) This report has been signed by authorized representatives of Chemed Corporation in accordance with the Securities Exchange Act of 1934 - This report was signed by Kevin J. McNamara, President and Chief Executive Officer, David P. Williams, Executive Vice President and Chief Financial Officer, and Michael D. Witzeman, Vice President and Controller, on behalf of Chemed Corporation, as required by the Securities Exchange Act of 1934, on July 28, 2023[146](index=146&type=chunk)[135](index=135&type=chunk)[147](index=147&type=chunk)