Chemed(US:CHE)2024-04-25 16:42Financial Data and Key Metrics Changes - In Q1 2024, VITAS reported an average daily census (ADC) of 19,665 patients, a 10.3% increase year-over-year and a 1.6% increase sequentially [26][37] - Roto-Rooter generated quarterly revenue of $235.2 million, a decrease of 5.8% compared to the prior year [43] - Adjusted EBITDA at Roto-Rooter for Q1 2024 totaled $60.7 million, a decrease of 15.6% year-over-year, with an adjusted EBITDA margin of 25.8%, down 299 basis points from the prior year [57][78] Business Line Data and Key Metrics Changes - VITAS experienced a 4.5% increase in admissions, totaling 16,911 in Q1 2024, with growth across all segments [82] - Roto-Rooter branch residential revenue declined by 3.5% to $162.9 million, while commercial revenue decreased by 10.5% to $53.7 million [43][55] - Average revenue per patient day for VITAS was $203.8, up 212 basis points from the prior year [42] Market Data and Key Metrics Changes - Roto-Rooter faced a 9.1% decline in overall call volume compared to the prior year quarter, attributed to macroeconomic concerns and increased competition [73][89] - The residential revenue decline was within expectations, reflecting ongoing consumer sentiment challenges [50][63] Company Strategy and Development Direction - The company is focusing on integrating the recently acquired Covenant Health and Community Services, which is expected to enhance operational and financial performance [40][83] - Roto-Rooter is implementing strategies to improve commercial revenue performance, including increasing touchpoints with key accounts and upselling opportunities [21][79] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that macroeconomic issues have impacted both residential and commercial segments, but expressed confidence in the long-term growth potential of Roto-Rooter [12][14] - The company remains optimistic about VITAS's growth trajectory, citing strong hiring and retention metrics [48][92] Other Important Information - The company reported a significant increase in marketing expenses due to changes in Google search algorithms, which negatively impacted Roto-Rooter's margins [39][80] - The acquisition of Covenant is seen as a strategic move to expand service capabilities and patient access [83][96] Q&A Session Summary Question: How does the continued weakness in Roto-Rooter affect long-term growth potential? - Management stated that the long-term outlook for Roto-Rooter remains strong despite current challenges, emphasizing the brand's competitive advantages [14][75] Question: What are the expectations for margins moving forward? - Management indicated that while margins were impacted by increased marketing costs, they expect improvements as marketing spend normalizes [80][100] Question: How is the integration of the Covenant acquisition progressing? - The integration is proceeding smoothly, with expectations for operational synergies and improved patient service delivery [119][124] Question: What is the outlook for future acquisitions in the hospice sector? - The company is actively looking for additional acquisition opportunities, particularly in restricted markets, and remains optimistic about the M&A environment [95][121]