Chemed(US:CHE)2023-10-26 19:44Financial 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]