Chemed(CHE) - 2024 Q1 - Quarterly Results

Q1 2024 Financial Highlights Chemed Corporation reported strong first-quarter 2024 results with increased consolidated revenue and significant growth in both GAAP and Adjusted Diluted EPS Consolidated Operating Results Chemed Corporation reported a solid first quarter for 2024, with consolidated revenue increasing by 5.2% to $589.2 million. Both GAAP and Adjusted Diluted EPS showed strong growth, rising 18.4% and 21.5% respectively, indicating improved profitability Consolidated Operating Results Summary | Metric | Q1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | $589.2 million | +5.2% | | GAAP Diluted EPS | $4.24 | +18.4% | | Adjusted Diluted EPS | $5.20 | +21.5% | Changes to Non-GAAP Metrics Effective from the quarter ending September 30, 2023, Chemed no longer excludes the costs of its pandemic-related licensed healthcare professional retention bonus (Retention Program) from its non-GAAP metrics for current or prior periods. In Q1 2023, this program had a pre-tax expense of $10.9 million - The company has ceased excluding the Retention Program costs from non-GAAP metrics starting in Q3 2023[4] - The Retention Program expense in Q1 2023 was $10.9 million pre-tax and $8.3 million after-tax, which is now included in prior-period non-GAAP comparisons[4] Segment Performance VITAS Healthcare segment achieved strong revenue and profit growth, while Roto-Rooter segment experienced a decline in revenue and profitability VITAS Healthcare Segment The VITAS segment demonstrated strong growth in Q1 2024, with net patient revenue increasing 14.0% to $354.0 million. This was primarily driven by a 10.3% increase in Average Daily Census (ADC) and an 11.5% rise in days-of-care. Profitability improved significantly, with Adjusted EBITDA growing 67.2% and margins expanding by 544 basis points, aided by lapping prior-year retention program costs VITAS Healthcare Segment Performance | Metric | Q1 2024 | YoY Change | | :--- | :--- | :--- | | Net Patient Revenue | $354.0 million | +14.0% | | Average Daily Census (ADC) | 19,665 | +10.3% | | Admissions | 16,911 | +4.5% | | Adjusted EBITDA (excl. Medicare Cap) | $60.7 million | +67.2% | | Adjusted EBITDA Margin (excl. Medicare Cap) | 17.0% | +544 bps | - Revenue growth was driven by an 11.5% increase in days-of-care and a 2.6% increase in the geographically weighted average Medicare reimbursement rate[6] - The gross margin, excluding Medicare Cap, improved to 23.7% from 19.0% in Q1 2023. Approximately 370 basis points of this improvement is attributed to the absence of the prior-year's Retention Program expense[6] - On April 17, 2024, VITAS completed the acquisition of hospice assets from Covenant Health and Community Services, Inc. for $85 million in cash[7] Roto-Rooter Segment The Roto-Rooter segment faced a challenging quarter, with revenue declining 5.8% to $235.2 million. Both residential and commercial revenues decreased, by 3.5% and 10.5% respectively. This led to a 15.6% drop in Adjusted EBITDA to $60.7 million and a 299-basis point contraction in the Adjusted EBITDA margin to 25.8% Roto-Rooter Segment Performance | Metric | Q1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | $235.2 million | -5.8% | | Adjusted EBITDA | $60.7 million | -15.6% | | Adjusted EBITDA Margin | 25.8% | -299 bps | - Residential revenue decreased by 3.5%, with declines in drain cleaning (-5.6%) and water restoration (-8.5%) partially offset by growth in excavation (+1.5%)[9] - Commercial revenue saw a broader decline of 10.5%, with decreases across all service categories including drain cleaning (-9.9%), plumbing (-11.9%), and excavation (-13.0%)[15] Corporate Overview Chemed maintains a strong financial position with no debt and significant liquidity, reiterating its full-year adjusted EPS guidance Financial Position and Capital Allocation Chemed maintained a strong balance sheet as of March 31, 2024, with $313.4 million in cash and no debt. The company has significant liquidity with $404.8 million available under its revolving credit facility. During the quarter, Chemed repurchased 50,000 shares for $32.3 million, leaving $281.7 million in its buyback authorization - As of March 31, 2024, the company held $313.4 million in cash and cash equivalents with no current or long-term debt[10] - The company has approximately $404.8 million of undrawn borrowing capacity under its $550 million credit agreement[18] - In Q1 2024, Chemed repurchased 50,000 shares for $32.3 million at an average price of $646.87 per share[19] 2024 Full-Year Guidance Chemed's management has reiterated its full-year 2024 guidance for adjusted earnings per diluted share, expecting it to be in the range of $23.30 to $23.70. This guidance excludes certain items such as non-cash stock option expenses and litigation costs. An update is anticipated with the Q2 2024 earnings release - Management reiterates its full-year 2024 adjusted EPS guidance range of $23.30 to $23.70[21] - Updated 2024 guidance is expected to be provided with the second-quarter earnings release[21] Financial Statements & Reconciliations Detailed consolidated financial statements and segment-level reconciliations to non-GAAP metrics are presented for Q1 2024 Consolidated Statements of Income For Q1 2024, Chemed's service revenues and sales grew to $589.2 million from $560.2 million in the prior-year period. Despite higher costs, income from operations was relatively stable at $72.3 million. A significant increase in 'Other income--net' to $12.6 million, primarily from market value adjustments, boosted income before taxes to $84.5 million, resulting in a net income of $65.0 million, up from $54.1 million in Q1 2023 Consolidated Statements of Income (in thousands) | (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Service revenues and sales | $589,233 | $560,157 | | Income from operations | $72,333 | $72,819 | | Income before income taxes | $84,485 | $71,165 | | Net income | $65,017 | $54,121 | | Diluted EPS | $4.24 | $3.58 | Consolidated Balance Sheets As of March 31, 2024, Chemed's balance sheet shows a substantial increase in cash and cash equivalents to $313.4 million, compared to $58.1 million a year prior. Total assets grew to $1.73 billion. The company eliminated all long-term debt. Total stockholders' equity increased significantly to $1.18 billion from $880.1 million, reflecting strong earnings retention and share repurchases Consolidated Balance Sheets (in thousands) | (in thousands) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $313,350 | $58,054 | | Total current assets | $539,617 | $262,221 | | Total Assets | $1,727,633 | $1,431,485 | | Long-term debt | $0 | $16,250 | | Total Liabilities | $544,138 | $551,132 | | Total Stockholders' Equity | $1,183,495 | $880,053 | Consolidated Statements of Cash Flows In Q1 2024, Chemed generated $84.5 million in net cash from operating activities, a significant increase from $60.5 million in the prior year. Investing activities used $19.4 million, mainly for capital expenditures and business combinations. Financing activities used $15.8 million, driven by share repurchases ($38.5 million) and dividends, partially offset by proceeds from stock option exercises ($37.2 million). The company's cash position increased by $49.4 million during the quarter Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $84,549 | $60,492 | | Net cash used by investing activities | ($19,385) | ($17,013) | | Net cash used by financing activities | ($15,772) | ($59,551) | | Increase/(decrease) in Cash | $49,392 | ($16,072) | Segment Financials and Reconciliations The consolidating statements show that in Q1 2024, VITAS contributed $44.0 million in net income, while Roto-Rooter contributed $40.9 million. Reconciliations from GAAP to non-GAAP metrics detail adjustments for items like stock option expenses and severance costs, resulting in a consolidated Adjusted EBITDA of $114.6 million and Adjusted Net Income of $79.8 million for the quarter Consolidating Statements of Income In Q1 2024, the VITAS segment generated $53.1 million in operating income on $354.0 million of revenue. The Roto-Rooter segment produced $50.0 million in operating income on $235.2 million of revenue. After taxes and other items, VITAS's net income was $44.0 million, and Roto-Rooter's was $40.9 million Consolidating Statements of Income (in thousands) | Q1 2024 (in thousands) | VITAS | Roto-Rooter | Corporate | Consolidated | | :--- | :--- | :--- | :--- | :--- | | Service revenues and sales | $354,007 | $235,226 | - | $589,233 | | Income/(loss) from operations | $53,120 | $50,047 | ($30,834) | $72,333 | | Net income/(loss) | $43,970 | $40,853 | ($19,806) | $65,017 | Reconciliation of EBITDA and Adjusted EBITDA For Q1 2024, consolidated EBITDA was $100.7 million. After adjustments for items including stock option expense ($9.0 million) and a severance arrangement ($5.3 million), Adjusted EBITDA reached $114.6 million. This compares to a consolidated Adjusted EBITDA of $100.1 million in Q1 2023 Reconciliation of EBITDA and Adjusted EBITDA (in thousands) | Q1 2024 (in thousands) | VITAS | Roto-Rooter | Consolidated | | :--- | :--- | :--- | :--- | | EBITDA | $63,535 | $64,114 | $100,718 | | Adjusted EBITDA | $58,312 | $60,650 | $114,622 | Reconciliation of Adjusted Net Income Chemed's Q1 2024 reported GAAP net income of $65.0 million, or $4.24 per diluted share, was adjusted for several pre-tax costs, including stock option expense and amortization. These adjustments led to an Adjusted Net Income of $79.8 million, or $5.20 per diluted share, representing a 21.5% increase from the $4.28 adjusted EPS in Q1 2023 Reconciliation of Adjusted Net Income (in thousands, except per share) | (in thousands, except per share) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income as reported | $65,017 | $54,121 | | Adjusted net income | $79,831 | $64,723 | | Diluted EPS as reported | $4.24 | $3.58 | | Adjusted Diluted EPS | $5.20 | $4.28 | VITAS Operating Statistics VITAS's operational metrics for Q1 2024 show an 11.5% increase in total days of care to 1,789,504. The Average Daily Census (ADC) grew to 19,665 from 17,830 in the prior year, with routine homecare ADC showing the largest increase. The average length of stay increased slightly to 103.9 days, and total admissions rose by 4.5% to 16,911 VITAS Operating Statistics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Days of care | 1,789,504 | 1,604,681 | | Total Average Daily Census (ADC) | 19,665 | 17,830 | | Total Admissions | 16,911 | 16,179 | | Average length of stay (days) | 103.9 | 99.9 |