Chemed (NYSE:CHE) FY Conference Transcript

Summary of Chemed (NYSE:CHE) FY Conference Call - March 19, 2026 Company Overview - Company: Chemed Corporation - Segments: VITAS (hospice care) and Roto-Rooter (plumbing and water restoration services) Key Points on VITAS - Guidance Confidence: The company is comfortable with VITAS guidance, indicating potential conservatism in projections. They aim to balance the patient mix between short and long-stay patients, which could enhance growth in 2026 [2][3] - Volume Trends: Strong volume performance was noted coming out of Q4 2025, which is expected to guide overall growth potential for 2026 [6] - Florida Market: Florida's unique Certificate of Need (CON) environment allows for rapid growth. The company is optimistic about its growth trajectory in Florida compared to other regions, where growth rates are slower [7][8] - Medicare ADC Growth: The company has seen consistent growth in Average Daily Census (ADC) in Medicare, particularly in Florida, indicating a positive trend in patient admissions [10][11] - Hospital Admissions: The ideal hospital admission rate is targeted between 42%-45%. The company has successfully managed to reduce this percentage while increasing overall volumes [11][12] - Long-term Outlook: The company feels confident about its long-term position in Florida, citing sufficient hospital patient base availability to maintain a balanced patient mix [16][17] - New Market Expansion: New locations in Florida (Pasco, Marion, Pinellas) are expected to reach profitability within 12 months, contributing significantly to organic growth [21][22][23] - Margin Management: The company anticipates returning to pre-pandemic margin levels, targeting margins of 18%-18.5% in the long term, with gradual improvements expected [27][26] Key Points on Roto-Rooter - Growth Projections: Roto-Rooter is projecting a top-line growth of 3%-3.5% for 2026, with improvements expected from reduced water restoration write-offs and a slight increase in lead volume [28][29] - Marketing Costs: Elevated marketing costs are anticipated to remain stable, impacting EBITDA. The company is focused on managing these costs effectively [30][34] - Water Restoration Challenges: The company is centralizing billing and collections for water restoration to improve efficiency and collection rates, which have historically varied across branches [36][37] - Technology Integration: Roto-Rooter is testing new technology to improve documentation for insurance claims, which is expected to enhance collection rates [40] - Seasonality Impact: The first quarter is expected to be challenging due to tough comparisons with the previous year, but the company remains on track with its overall metrics [44][46] - Franchise Acquisition Strategy: The company is actively pursuing franchise acquisitions, offering higher multiples than before, which may reduce ROI but is expected to yield strategic benefits [48][49] - Strategic Alternatives: If Roto-Rooter does not show recovery in 2026, the company is open to considering strategic alternatives, including potential divestitures [50] Additional Insights - Market Conditions: The company is navigating challenges related to weather impacts on operations and the competitive landscape for lead generation [45][46] - Long-term Viability: There is a strong belief in the long-term viability of both segments, with a focus on improving operational efficiencies and patient care [50]