CHEMED CORP Q4 FY2024 earnings call

• VITAS Highlights: Continued strong operating performance with admissions and ADC up. Covenant Health acquisition meeting projections. New programs in Pasco County and upcoming Marion County, Florida. Mitigating Medicare cap limitations by increasing emphasis on hospital-based admissions.
• Roto-Rooter Highlights: Revenue decline but exceeded internal estimates. Residential conversion rates improving, especially for water restoration. Commercial business gaining momentum. 2025 guidance based on commercial momentum and residential stabilization.

VITAS Healthcare

• Fourth quarter 2024 net revenue was $411 million, a 17.4% increase compared to the prior year period. Admissions totaled 16,427, a 3.5% improvement from Q4 2023. Average daily census (ADC) expanded to 2,827, a 14.6% increase y-o-y. The Covenant Health acquisition closed in April 2024 contributed $11-12 million to Q4 2024 revenue, translating to net income of approximately $2.1-2.3 million. Adjusted EBITDA excluding Medicare cap was $93.2 million, up 11.8%.
• 2025 guidance: VITAS revenue prior to Medicare cap estimated to increase 10.5%-11.3% compared to 2024. ADC estimated to increase 8.5%-9%. Full year adjusted EBITDA margin prior to Medicare cap estimated at 18.4%-18.9%. Medicare cap billing limitation estimated at $9.5 million in 2025.

Roto-Rooter

• Fourth quarter 2024 revenue was $229 million, a 2.9% decrease y-o-y. Residential revenue declined 2%, while commercial revenue increased 0.4%. Adjusted EBITDA was $60.3 million, a 7.2% decrease y-o-y.
• 2025 guidance: Roto-Rooter forecasted to achieve revenue growth of 2.4%-3%. EBITDA margin expected to be in the range of 25.7%-26.3%. Full year 2025 earnings per diluted share excluding certain items estimated to be in the range of $24.95-$25.45.

• VITAS 2025: Revenue prior to Medicare cap estimated 10.5%-11.3% growth, ADC 8.5%-9% growth, adjusted EBITDA margin 18.4%-18.9%. Medicare cap billing limitation $9.5 million.
• Roto-Rooter 2025: Revenue growth 2.4%-3%, EBITDA margin 25.7%-26.3%. Full year earnings per diluted share $24.95-$25.45. The 2025 earnings trajectory is weighted towards the second half of the year.

• Medicare cap limitations in certain VITAS programs affecting growth. Competitive landscape and Google issues impacting Roto-Rooter's marketing and revenue.

Q: While 4Q Roto-Rooter revenue came in better than expectations but still declined y-o-y, what gives confidence in the Roto-Rooter turnaround and how much is attributed to a new marketing agency?

A: Kevin and Mike discussed that Roto-Rooter showed strong growth in the second part of the fourth quarter, with sequential improvements intra-quarter. Regarding the marketing agency, it's early, and while Google issues persist, commercial business is creating a strong foundation.

Q: About VITAS margins being solid but below model and 2025 guidance calling for margin decline despite double-digit top-line growth, what's causing the margin pressure?

A: Nick and Kevin explained that moderating growth due to managing Medicare cap by increasing hospital-based admissions, which leads to shorter lengths of stay, negatively impacting margin in the short term but enabling growth.

Q: About Roto-Rooter 2025 revenue growth guidance and seasonality, what gives confidence and seasonality assumptions?

A: Kevin and Mike noted that the second part of Q4 2024 showed positive trends, and seasonality is factored in with normal patterns, expecting easier comparatives as the year progresses.