• Admissions: 16,427, a 3.5% increase from the same period in 2023.
• Average Daily Census (ADC): 2,827, a 14.6% increase compared to the prior year quarter.
• VITAS Net Revenue: $411 million, a 17.4% increase from the prior year period.
• Roto-Rooter Revenue: $229 million, a decrease of 2.9% from the prior year quarter.
• Residential Revenue at Roto-Rooter: Declined 2%.
• Commercial Revenue at Roto-Rooter: Increased 0.4%.
• Adjusted EBITDA (VITAS): $93.2 million, an 11.8% increase.
• Adjusted EBITDA Margin (VITAS): 22.5%, 112 basis points below the prior year period.
• Adjusted EBITDA (Roto-Rooter): $60.3 million, a 7.2% decrease from the prior year quarter.
• Adjusted EBITDA Margin (Roto-Rooter): 26.3%, a 120 basis point decline from the prior year.
• 2025 VITAS Revenue Guidance: Estimated to increase 10.5% to 11.3% compared to 2024.
• 2025 Roto-Rooter Revenue Growth Forecast: 2.4% to 3%.
• 2025 Earnings Per Diluted Share Guidance: Estimated to be $24.95 to $25.45.

• Warning! GuruFocus has detected 7 Warning Signs with AMBP.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Chemed Corp (NYSE:CHE) reported a 3.5% increase in admissions and a 14.6% increase in average daily census for VITAS compared to the prior year.
• The acquisition of Covenant Health is meeting financial projections and contributed positively to revenue and net income.
• VITAS' net revenue increased by 17.4% in the fourth quarter of 2024, driven by a 14.6% increase in days of care and a Medicare reimbursement rate increase.
• Roto-Rooter's commercial revenue increased by 0.4%, and initiatives in the commercial sector are gaining momentum.
• Chemed Corp (NYSE:CHE) is optimistic about growth opportunities in Florida with new programs in Pasco and Marion Counties, providing a strong growth path for VITAS.

Negative Points

• Roto-Rooter experienced a 2.9% decline in quarterly revenue compared to the prior year, with residential revenue declining by 2%.
• The acuity mix shift negatively impacted VITAS' revenue growth by 119 basis points in the quarter.
• Roto-Rooter's call volume was down 8% compared to the prior year quarter, indicating challenges in customer engagement.
• VITAS' adjusted EBITDA margin, excluding Medicare Cap, was 112 basis points below the prior year period.
• Chemed Corp (NYSE:CHE) anticipates a Medicare cap billing limitation of $9.5 million in 2025, which may moderate growth.

Q & A Highlights

Q: What gives you confidence in the Roto-Rooter turnaround, and how much of this improvement is attributed to switching to a new marketing agency? A: Kevin McNamara, President and CEO, stated that the guidance is based on strong early-year performance and improvements in core business areas beyond sewer and drain cleaning. The new marketing agency has contributed somewhat, but it's still early, and challenges with Google remain. Michael Witzeman, CFO, added that intra-quarter improvements were observed, and the commercial business is creating a strong foundation for 2025.

Q: Regarding VITAS, do you believe you're capturing market share, and does your guidance include any census in Marion County? A: Nicholas Westfall, Executive Vice President, confirmed that the guidance does not include Marion County census for 2025. He noted that VITAS is capturing market share by offering differentiated services and attracting high-quality clinicians. Kevin McNamara added that Florida is a key market for VITAS, contributing significantly to growth.

Q: How are you thinking about share repurchases moving forward, and are any built into your guidance? A: Kevin McNamara stated that no share repurchases are included in the guidance. The company plans to continue programmatic share repurchases and may take larger actions when opportunities arise, maintaining zero leverage while returning cash to shareholders.

Q: What is causing the margin pressure at VITAS despite double-digit top-line growth? A: Nicholas Westfall explained that the margin pressure is due to a shift towards hospital-based admissions, which have shorter lengths of stay, impacting both revenue and margin growth. Kevin McNamara added that the company is managing within existing legal constraints, aiming for sustainable growth.

Q: Should we assume the Medicare cap headwind will continue beyond 2025? A: Nicholas Westfall indicated that managing the Medicare cap is part of normal operations, and the 2025 guidance reflects a similar cap limitation as 2024. Kevin McNamara noted that the company has been managing this since acquiring VITAS in 2004, and the current growth rate is sustainable long-term.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.