Chemed(US:CHE)2024-07-25 18:27Financial Data and Key Metrics Changes - Adjusted EBITDA excluding Medicare Cap totaled $67 million in Q2 2024, an increase of 77% compared to the prior year period, with an adjusted EBITDA margin of 17.8%, which is 613 basis points above the prior year [12] - VITAS net revenue was $374.6 million in Q2 2024, a 16.7% increase compared to the prior year, driven by a 14.4% increase in days-of-care and a 2.5% increase in Medicare reimbursement rates [53] - Adjusted EBITDA at Roto-Rooter in Q2 2024 totaled $59.8 million, a decrease of 9.2% compared to the prior year, with an adjusted EBITDA margin of 27% [58] Business Line Data and Key Metrics Changes - VITAS admissions totaled 17,334 in Q2 2024, an 11% increase from the same period in 2023, with average daily census (ADC) expanding to 21,036 patients, a 14.4% increase [62] - Roto-Rooter generated quarterly revenue of $221.3 million in Q2 2024, a decrease of 5% compared to the prior year, with residential revenue declining by 1.6% and commercial revenue declining by 8.2% [18][23] - The Covenant Health acquisition is estimated to contribute approximately $30 million to $32 million to VITAS' full-year revenue [60] Market Data and Key Metrics Changes - The acuity mix shift negatively impacted revenue growth by 112 basis points in Q2 2024 compared to the prior year [22] - Roto-Rooter is forecasted to have a 4% to 5% revenue decline in 2024 compared to 2023 [29] - VITAS is expected to see a revenue increase of 16.3% to 17.3% in 2024 compared to 2023 [27] Company Strategy and Development Direction - The company is focused on expanding its workforce and patient capacity, with VITAS expanding its bedside headcount by 234 licensed professionals in Q2 2024 [31] - Roto-Rooter management is implementing initiatives to improve the commercial sector, including adding commercial sales staff and enhancing customer relationship management capabilities [56] - The company is optimistic about VITAS maintaining above-average historical growth through organic growth and potential acquisitions [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in VITAS's ability to continue strong admission and census growth, citing no headwinds from demand for hospice services [40] - The company acknowledged challenges in the commercial sector of Roto-Rooter but believes that retraining efforts will take multiple quarters to yield results [26] - Management noted that the demand for hospice services remains strong, and they are optimistic about future growth opportunities in Florida [47][66] Other Important Information - The company has received a Certificate of Need to provide hospice services in Pasco County, Florida, representing a significant growth opportunity [47] - The retention bonus program in 2023 contributed 397 basis points to the year-over-year improvement in the adjusted EBITDA margin for 2024 [12] - The average length of stay for patients was 100.6 days in Q2 2024, compared to 99.5 days in the same quarter of 2023 [33] Q&A Session Summary Question: Long-term runway for census growth at VITAS - Management believes that as long as they continue to attract and retain staff, there are no limitations on growth, and they do not foresee any demand headwinds for hospice services [40] Question: M&A pipeline opportunities - The company is actively discussing potential acquisitions and is focused on markets where they can efficiently service community needs [97] Question: Roto-Rooter's longer-term growth trajectory - Management views the long-term potential for Roto-Rooter to be in the 5% to 6% range for top-line growth, with price increases and potential acquisitions contributing to this growth [45][101] Question: Trends exiting Q2 for Roto-Rooter - Management anticipates some sequential improvement in the second half of the year, with commercial revenue showing positive momentum [108] Question: Length of stay metrics - Management indicated that while the average length of stay has declined slightly, the median length of stay has increased, reflecting improved patient care [116]