管理層發言
Good day, and thank you for standing by. Welcome to the Chemed Corp First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's call is being recorded. I would now like to hand it over to our first speaker, Holley Schmidt, Vice President, Investor Relations. Please go ahead.
Good morning. Our conference call this morning will review the financial results for the first quarter of 2026 ended March 31, 2026. Before we begin, let me remind you that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 applies to this conference call. During the course of this call, the company will make various remarks concerning management's expectations, predictions, plans and prospects that constitute forward-looking statements. Actual results may differ materially from those projected by these forward-looking statements as a result of a variety of factors, including those identified in the company's news release of April and in various other filings with the SEC. You are cautioned that any forward-looking statements reflect management's current view only and that the company undertakes no obligation to revise or update such statements in the future. In addition, management may also discuss non-GAAP operating performance results during today's call, including earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA. A reconciliation of these non-GAAP results is provided in the company's press release dated April 23, which is available on the company's website at chemed.com. I would now like to introduce our speakers for today, Kevin McNamara, President and Chief Executive Officer of Chemed Corporation; Mike Witzeman, Chief Financial Officer of Chemed; and Joel Wherley, President and Chief Executive Officer of Chemed's VITAS Healthcare Corporation subsidiary. I will now turn the call over to Kevin McNamara.
Thank you, Holley. Good morning. Welcome to Chemed Corporation's First Quarter 2026 Conference Call. I will begin with highlights for the quarter, then Mike and Joel will follow up with additional details. I will then open the call for questions. VITAS's performance during the quarter exceeded even the high end of our expectations. We believe that the first quarter of 2026 would be a tough comparison as we continue to transition to balance our patient mix between short-stay and long-stay patients. VITAS management was able to add ADC through accelerated admissions from non-hospital preadmission locations while also maintaining a high level of hospital-based admissions. This was achieved while also keeping hospice labor costs lower than budgeted. These factors combined to allow VITAS to achieve higher-than-expected revenue growth and EBITDA margins while continuing to add cushion to the Medicare Cap position in our Florida combined position program. Admissions at VITAS during the quarter totaled 19,394 which equates to a 6.9% improvement from the same period of 2025. Hospital admissions as a percent of total admissions for our Florida combined program was 43.8% during the first quarter of 2026. As we have discussed previously, an appropriate balance for sustained long-term stability in the Florida patient base, given the current mix of referral sources, is between 42% and 45% of total admissions coming from hospitals. Equally as important, as Joel will discuss in greater detail, admissions from all other preadmission locations increased 8.4% compared to the first quarter of 2025 in our Florida combined program. Improved admissions led VITAS to outperform our expectations while also adding over $32.5 million to cap cushion in the Florida combined program in the first quarter of 2026. March 31 represents the halfway point in the government fiscal year. We are more confident than ever that VITAS has put the Florida cap issue of 2025 behind us and has returned to a normalized rate of growth. Now let's turn to Roto-Rooter. Over the past two years, we have talked about the many headwinds that have persisted at Roto-Rooter, which has made for a difficult operating environment. While we believe Roto-Rooter will continue to face some of those headwinds, the first quarter of 2026 also showed some signs of improvement across multiple fronts. For the first time since the fourth quarter of 2022, residential plumbing and residential sewer and drain revenue both increased during the quarter. We consider these Roto-Rooter's core services which drive the add-on revenue from excavation and water restoration. We see this as a very positive development for the company. Driving the increase in core residential service revenue was an increase in total leads of 3.3%. Paid leads during the first quarter of 2026 increased 18.7% compared to the same quarter of 2025. Continuing the same trend as past quarters, 53.4% of those leads were the result of paid advertisements. In the first quarter of 2025, we paid for 46.5% of the leads. The change of approximately 7 percentage points required Roto-Rooter to increase marketing spend by almost $3 million in the quarter compared to the first quarter of 2025. The centralization of water restoration billing and collections continues and has resulted in improved collections. These improvements resulted in a $1.5 million improvement in overall write-offs compared with the first quarter of 2025. Weather patterns in the first quarter of any given year are positive for Roto-Rooter. However, in the first quarter of 2026, unusual ice and snow storms across large parts of the country led to significant service disruptions due to road conditions. Twenty-four branches experienced some level of service disruption for a period of time across five days of the quarter. We estimate that these service disruptions resulted in net lost revenue of between $3 million and $4 million during the quarter. On March 31, 2026, we repurchased the territory and assets of the franchises operating in San Francisco, California, and Fort Worth, Texas in two separate transactions. The aggregated combined purchase price of these transactions was approximately $20.6 million. Collectively, these Roto-Rooter locations serve a population of approximately 3.3 million people. This purchase is part of Roto-Rooter's ongoing strategy of acquiring franchises to boost productivity, market share and profitability. These two acquisitions are anticipated to add between $5 million and $5.5 million of revenue for the remainder of 2026. These acquisitions are immediately accretive to earnings. However, initially, gross margins, EBITDA margins, pricing and mix of service offerings tend to be below the average of our existing Roto-Rooter portfolio. We are happy with the performance of VITAS in the quarter and its prospects for the remainder of 2026 and beyond. In our February conference call, we described this as a year of transition for Roto-Rooter. The first quarter clearly demonstrated this transition. We feel very positive that the initiatives we have discussed over the last few quarters are beginning to take hold. With that, I would now like to turn the teleconference over to Mike.
Thanks, Kevin. VITAS' net revenue was $420 million in the first quarter of 2026, which is an increase of 3.1% when compared to the prior year period. This revenue increase is the result of a 2.2% increase in days of care and a geographically weighted average Medicare reimbursement rate increase of approximately 2.6%. The acuity mix shift negatively impacted revenue growth by 120 basis points in the quarter when compared to the prior year revenue and level of care mix. The combination of Medicare Cap and other contra revenue changes negatively impacted revenue growth by approximately 47 basis points. In the first quarter of 2026, VITAS accrued $2.4 million in Medicare Cap billing limitation. This is in line with our expectations. No Medicare Cap billing limitation was recorded in the first quarter of 2026 for the Florida combined program and none is anticipated for the 2026 fiscal period. Average revenue per day in the first quarter of 2026 was $210.62, which is a 146 basis points improvement from the prior year period. During the quarter, high-acuity days of care were 2.3% of total days of care, a decline of 28 basis points when compared to the prior year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $70.8 million in the quarter, an increase of 0.6% when compared to the prior year period. Adjusted EBITDA margin in the quarter, excluding Medicare Cap, was 16.8%. Now let's turn to Roto-Rooter. Roto-Rooter branch commercial revenue in the quarter totaled $56.5 million, a decrease of 1.9% from the prior year period. Commercial revenue was negatively impacted by the weather events discussed earlier by Kevin. However, for the 13 branches that had commercial business managers coming into 2026, commercial revenue was up approximately 10%. We added 18 new commercial business managers during the first quarter of 2026. We expect commercial business revenue to accelerate as these 18 new commercial business managers complete their training and begin to become productive sales leaders in their locations. Roto-Rooter branch residential revenue in the quarter totaled $16.3 million, a decrease of 1.5% over the prior year period. All lines of service increased from the first quarter of 2025 with the exception of water restoration. Demand for water restoration services continues to be strong, and our conversion rates remain high. During the transition to a centralized billing and collections model, we anticipated some disruption to the day-to-day billing processing function. In the first quarter, the average revenue per water restoration job declined by roughly 13%. We anticipate that this issue will improve as the year progresses with the centralized staff gaining experience and proficiency. Revenue from our independent contractors declined 3.3% in the first quarter of 2026 compared to the same period of 2025. Our independent contractors are generally smaller operations in middle-market cities. Because they are independent contractors, they tend to operate more like a small mom-and-pop business than our owned and operated branch locations. We are actively working with the contractor group to help mitigate the issues in this segment of our business to get it back to a growth trajectory. Adjusted EBITDA in the first quarter of 2026 totaled $53.5 million, a decrease of 9.6% when compared to the first quarter of 2025. The adjusted EBITDA margin in the quarter was 22.5%, which represents a 218 basis point decline from the first quarter of 2025. Roto-Rooter gross margin of 51% was in line with our expectations. As discussed by Kevin, the decline in adjusted EBITDA margin was mainly caused by increased internet marketing costs. Finally, let's discuss the revised guidance for fiscal 2026. Historically, we do not give quarterly updates to guidance. Due to the materially improved performance of VITAS, coupled with the level of share repurchases in the first quarter of 2026, we believe updating guidance is appropriate in this instance. As a result of the better-than-anticipated first quarter for VITAS, we have increased projections for the remainder of 2026. Full year ADC growth for 2026 is updated to a range of 4.5% to 5.5% compared to the original guidance of 3.5% to 4%. Anticipated revenue growth, excluding the impact of the Medicare Cap, improves from the original guidance of 5.5% to 6.5% to a revised range of 6.5% to 7.5%. Finally, revised EBITDA margin, excluding the impact of the Medicare Cap, is anticipated to be 18% to 18.5% compared to original guidance of 17.5% to 18.5%. We're factoring all the gives and takes within expected Roto-Rooter performance for the remainder of fiscal 2026; anticipated revenue growth remains unchanged at 3% to 3.5%. Estimated adjusted EBITDA margin is lowered slightly to 21.5% to 22.5% compared to the original guidance of 22.5% to 23%. This is primarily due to elevated marketing costs now expected to persist above our original guidance for the remainder of the year. Based on the above, full year 2026 earnings per diluted share, excluding noncash expenses for stock options, tax benefits from stock option exercises, costs related to litigation and other discrete items, is estimated to be in the range of $20 to $24.75. The midpoint of the revised guidance represents a 13% increase from 2025 adjusted earnings per diluted share of $21.55. The revised 2026 guidance assumes an effective corporate tax rate on adjusted earnings of 24.5% and a diluted share count of 13.6 million shares. The original 2026 guidance was for adjusted earnings per share to be between $23.25 and $24.25. I will now turn the call over to Joel.
Thanks, Mike. In the first quarter of 2026, our average daily census was 22,723, an increase of 2.2%. In the quarter, hospital-directed admissions increased 13.6%, home-based patient admissions increased 2%, assisted living facility admissions increased 2.9% and nursing home admissions declined 5.4% when compared to the prior year period. The continued high level of hospital admissions allowed us to quickly transition in the quarter and start emphasizing admissions from other preadmission locations that generate longer length-of-stay patients. This resulted in ADC growth that was ahead of the original projections. We were able to achieve this level of ADC growth while maintaining full-time equivalents below our budgeted targets for the quarter. Our average length of stay in the quarter was 102.7 days. This compares to 118.7 days in the first quarter of 2025. Our median length of stay was 15 days in the first quarter of 2026, a decline of one day from the first quarter of 2025. The new starts in Florida continued to grow at a very rapid pace. Marion, Pasco and Pinellas Counties combined had 526 admissions in the first quarter of 2026, exceeding our expectations. ADC for each new start continues to exceed our expectations, and we anticipate opening Manatee County in late second quarter or early third quarter. We intend to aggressively grow Manatee as we have in our other three new starts. I believe the opportunity for growth at VITAS has never been better. We have the difficulties of the 2025 cap circumstance behind us. We are looking forward to continuing to execute our strategies for the remainder of 2026 and beyond. That will translate into high sustainable growth while providing the best possible care to our patients and families. And with that, I'll turn the call back to Kevin.
Thank you, Joel. I will now open this teleconference to questions.
分析師問答
To ask a question, please press the star key followed by the number one on your telephone keypad. Our first question will come from the line of Brian Tanquilut from Jefferies.
This is Megan Holt on for Brian Tanquilut. Congrats on the quarter guys, and the guidance raises for the year. First, on the VITAS side, margins looked good in the quarter. How much of that was headcount reduction that contributed to it? And then since you're raising the ADC guidance, do you expand labor capacity to support their growth for the remainder of the year? And then just lastly on the VITAS side, speak to any fraud enforcement you're seeing in Southern California, given the CMS cure.
I can start with the margin discussion, Megan, and then I'll let Joel talk about the fraud piece. We averaged roughly 100 FTEs below our budget in the quarter. We were able to efficiently serve the increased ADC at that level. But to your point, that's not something that we view as sustainable for the rest of the year. Our original plan was adding 30 to 40 FTEs a month. We've increased that to closer to 60 per month for the remainder of the year. So we feel very good that if we add those 60, we can achieve the level of ADC growth we have currently budgeted and maybe a little better than that. Joel, fraud.
Yes. So we certainly are very sensitive to the national campaign to root out fraud, waste and abuse within the health care system. Certainly, the hospice concerns in California have been very public—there were congressional hearings on Tuesday speaking specifically to it. We are very supportive of the efforts. However, we also want to avoid direct implications associated with fraudsters and ensure that that does not limit access for patients in need in those counties not only in California, but across the United States for legitimate providers to deliver quality end-of-life care for patients and their families.
Got it. And then on the Roto-Rooter side, it looked like you guys had some additional marketing expense in the quarter. Is that now the right run rate going forward? And you started seeing some pressure on the customers this time last year given the macro backdrop and facing a similar headwind in terms of the economy right now. So are you seeing similar trends as we're a month into Q2 now?
Well, let me just start with the marketing costs. Marketing costs largely proxy for Google costs. As we indicated, our leads were up 3%. However, to get that 3% we had the battle with the fact that due to changes in the Google algorithm, our leads from the natural or free side of the search spectrum were down almost 16%. Those were down 16%—nothing Roto-Rooter could do. We expect that to basically continue. We have several efforts afoot to increase our visibility on the natural side, but in the short term it's going to be challenging. We hope to improve our position, but through the models, I would say that's kind of what we expect to see on the natural side of search with Google. On the positive side, without increasing the amount we bid in the various domains, we've been getting a lot more clicks. Our clicks on the paid side went up over 18%. So to keep our business where it is and basically keep sales where we budgeted, we've got to pay for more of the leads, and that means more marketing costs in the short and midterm. So, yes, we expect that to continue.
Yes. Megan, from a specific number, I can walk you through it a little bit. We were, year-over-year, about $3 million above last year in marketing costs. We had budgeted or guided for an increase of about $1 million, so we basically spent about $2 million in the quarter higher than what we had budgeted. Of that, we think that roughly $1 million of it was related to some of the weather issues we talked about. When we couldn't get on the road, we were still getting calls—probably a much higher volume than we would in normal weather—but we couldn't serve it. So we were paying for calls that ultimately we couldn't serve. We expect that is probably about $1 million of additional expense that shouldn't be considered part of the ongoing run rate. All in all, on a run-rate basis, we spent about $1 million more in the quarter than we anticipated. The entire change in the EBITDA margin in the guidance is us adding $1 million per quarter of marketing costs for the next three quarters.
And then just any trends you can speak to so far in Q2?
It's really early in Q2. I think things continue to progress the way we expect them to.
Next question will come from the line of Joanna Gajuk from Bank of America.
So maybe first on the Roto-Rooter business. Can you just talk about the marketing and the weather disruption—and I guess I want to tie the quarter to the full year outlook. The full year outlook includes, call it, $5 million from these two franchises that you acquired. So there's some contribution in there too. And I guess you still expect the same revenue growth. So was there some sort of offset after the positives in the guidance? If you can walk us through that.
Yes. What we talked about, Joanna, was that within the guidance and what's even in the first quarter, there are some positives, but there's also continued headwinds. Contract operations still performed slightly below our expectations. The water restoration revenue, particularly on a price or cost per job basis, is still a little bit below our expectations. So those gives and takes sort of offset the acquisition revenue we anticipated. But revenue stays in line with where we thought it would be at the beginning of the year—just maybe the underlying components might be slightly different than what we had anticipated. Ultimately, the revenue continues to grow as we expected.
And if I may, on the collection rate, did I hear right? I guess maybe there was some improvement, but I want to make sure—are you still expecting to improve collection by $4 million to $6 million for the year?
Yes, we were slightly better than our expectations in the first quarter. Having said that, part of that improvement obviously comes from the fact that we're billing fewer jobs in some segments. We anticipate both of those things improving as we finalize the centralization and those centralized employees get more experienced and we can bring up the revenue per job while still maintaining a higher collection rate.
Right. That makes sense. And with these acquisitions that you mentioned, they usually come with somewhat lower margins initially. Obviously, accretive to cash flow, right—the goal is to improve over time. Do you anticipate doing more of these this year? Are there other assets you would consider acquiring for that business?
It's hard to say definitively, but yes, given the operating environment out there, we've noted that there are a number of franchise holders that have held the franchise for a couple of generations and they're saying this is tough and may consider selling to us. We're considering a number of possibilities. The two we mentioned this quarter, San Francisco and Fort Worth, are somewhat unusual. They're real plugs. Many of the ones generally available are groups of smaller franchisees that are more likely to be participants in our independent contractor portfolio. But yes, we anticipate continuing to add additional locations for Roto-Rooter. It's a favorable acquisition environment for us at this time.
Can you give us an update on the SEO partner? I think you mentioned working with a new SEO partner—any progress there?
We immediately saw an improvement in what we call visibility. By visibility, the best measure is how often you appear in the map section—that's a big driver of natural leads or free leads. At the end of 2024 we were appearing nationwide about 72% of the time. Halfway through the first quarter of last year we dropped to the mid- to low-20% of the time showing up on those maps. What we saw in the first quarter of this year, working with our outside contractor, was a roughly 10 percentage point improvement in our visibility. Then in March there was another algorithm change which knocked us back a bit, and again working with our partner we've been able to improve that almost back to the earlier run rate. It's a constant battle, Joanna. We are looking to stabilize the percentage of free leads. We are winning the battle on paid search—we're getting substantially more leads without increasing the amount we're bidding per lead. The private equity entrants have changed the market for leads; we don't know if they're pulling back or not. But the fact we saw an 18% plus increase in paid leads without increasing bids is a success. We expect to continue improving our position, but algorithm changes can create volatility.
And switching to hospice, I just want to confirm because we hear other companies calling out weather disruption in healthcare services. It sounds like it wasn't material because you didn't call it out in the hospice business?
We get paid on a per-day basis, Joanna. So we don't do fee-for-service. There could be a disruption in a location where we can't get to patients for a day, but that doesn't materially impact our revenue on those short disruptions.
It might affect admissions if the disruption lasts longer than a day or two, but we did not have any material weather disruption in our hospice business during the quarter.
That segment outperformed—so things are going pretty well there. Thanks for the update on the cap cushion—so now there's a proposal for 2027 where the rate update is expected to increase and the cost is going to increase about 2.4%. I know you don't have all the details yet, but any initial estimate on the proposed increase in Florida versus the national average for 2027?
At a very high level, we think that the rate increase might be slightly lower in Florida than the national average, but we're still crunching the numbers and we don't have the details yet. The details don't come out until later in the summer.
Keep in mind that is the proposed wage rule. We're still in the comment period, and a final wage rule typically is not put into place until the late part of the third quarter.
There were a couple of other items in that proposal, including this new scoring system, the social vulnerability index (SVI). When we look at some of the data, VITAS was actually scoring above average on some measures, but it seems like one of these measures could be penalizing providers because it captures total numbers rather than per-patient metrics. Any thoughts on how these efforts or anything in the CMS proposal could impact your operations?
Thanks, Joanna. As I said previously, we are very supportive of efforts to eliminate fraud, waste and abuse from the hospice environment. But you have to remember over 50% of patients needing hospice don't have access or receive that end-of-life care today, so we want to ensure efforts to weed out fraudsters don't in any way limit legitimate providers' ability to provide care to those in need. Specific to the proposed additional scrutiny listed in the wage rule, we're continuing to evaluate the potential impact that might have on VITAS. This is in the comment period and we will be providing comments to ensure scoring and oversight are aligned with how legitimate providers should be evaluated. We want the focus to be on weeding out fraud and improving quality and access for those in need.
And just very generally, when we hear about fraud in hospice, especially focused on California, you have to remember there are clusters—there are many more license holders packing into a small set of buildings in Los Angeles County than the number of legitimate hospices in other states. The fraud we're talking about is real fraud—often mailboxes or offices with no real patients or real care. It's a different magnitude from historical hospice disputes about clinical determinations. We continue to watch it carefully and we don't want legitimate providers to be swept up in enforcement actions. Joel and I are closely monitoring and participating in the dialogue.
One of the proposals would require states to revalidate providers within 30 days. Have you seen any states start to implement anything like that? I assume some of that activity is focused on places like California, but are you seeing any operational impact?
We have not seen revalidation to that extent. There is a higher degree of evaluation on new locations and ongoing review of claims to ensure new providers are legitimate and providing actual care. The focus has been on areas like L.A. County where providers expanded rapidly—from about 400 providers to nearly 1,500 in a short period. Licensing processes vary by state, and we support improved surveying to ensure legitimacy and patient protection.
To add an example, we attempted to get a license in San Francisco and it took about six years, going through multiple surveys. It raises the question of how hundreds of questionable providers can get licenses quickly in other jurisdictions. More coordination across licensing authorities and stronger scrutiny would knock out many of these bad actors. But again, it's a state-by-state issue and we're engaging with regulators.
Next question will come from Michael Murray from RBC Capital Markets.
For VITAS, I think you're probably seeing a higher mix of admissions from hospitals in your new Florida markets. Given your current cap situation in the state, how are you thinking about community-based admissions in these markets?
Thanks for the question. As we have talked previously, we're managing the balance in those preadmit environments and we look at that on a daily basis specific to where we're focusing and where our resources are deployed. We feel that our community-based initiatives are responsibly growing back from where we needed to be in the last half of 2025, and we feel really good about the balance between hospitals as a preadmit source and our other community-based admissions.
When you're talking specifically about the new starts, think of them as all short-stay patients initially for a period of time because there isn't an existing base of long-stay patients. Over time, as the new start builds a base, the patient mix will lengthen. So in new start markets, the initial admissions will skew toward shorter stays until we build a longer-stay population.
So when you're talking specifically about the new starts, think of them all as short-stay patients for at least a period of time.
These new markets are sizable. How should we think about the volume opportunity longer term? What's your typical market share in Florida and how should we think about these markets?
If you look at our historical performance in markets where we've been established, our market penetration is strong. We're a leading provider in most counties where we operate. Joel can speak to specifics, but we don't see a significant change in our outlook regarding our ability to grow into a market.
We don't see a significant change in our outlook specific to our ability to grow into a market. Our last three new starts we've discussed have demonstrated that success, so we feel really good about the long-term outlook for continued, effective growth in those markets.
And then just one more on Roto-Rooter. I wanted to get a sense for your current mix of paid leads versus organic leads and what your expectations embedded in guidance are.
Paid leads are roughly 53% to 54% of our total leads at the moment. We anticipate that mix to continue. We have not anticipated a significant deterioration or a significant improvement. That's why, again, we adjusted our guidance and added additional marketing costs for the rest of the year. We haven't projected a significant deterioration in that mix from the first quarter.
It's hard to predict. As I indicated, it's a constant battle. In the first quarter we had two months of improving visibility on maps and then a change in March where we saw a deterioration, and then we worked to improve visibility in April. We hope to improve our position, and our paid search performance demonstrates strong execution. Historically, Roto-Rooter successfully navigated similar transitions—think of the shift from Yellow Pages to Internet search. We expect to similarly transition and ultimately compete effectively in the evolving search environment.
I'm not showing any further questions in the queue. I'd like to turn it back over to Kevin for any closing remarks.
Thank you, everyone. We had what we thought was a good quarter—an excellent quarter at VITAS—and good trends at both companies. We look forward to reporting on our results for the current quarter in due course. Thank you very much.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Have a great rest of your day.