Q3 2021 Chemed Corp Earnings Call
Yeah.
Good day, ladies and gentlemen, thank you for standing by and welcome to chemical operations third quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press. The Star then the one key on your Touchtone telephone please be advised that todays call.
May be recorded if you would go offer assistance. Please press Star then zero.
I would now like to turn the conference over to your Speaker host today, Sherri Warner with Investor Relations. Please go ahead.
Good morning, Our conference call. This morning will review the financial results for the third quarter of 2021 ended September 32000.
'twenty one before we begin let me remind you that the safe Harbor provisions of the private Securities Litigation Reform Act of $19 95 apply 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.
<unk> 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 October 28, and in various other filings with the SEC you are cautioned that any forward looking statements reflect management's current view.
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 October 28, which is available on the company's website at Chemed Dot Com I would now like to introduce our speakers for today, Kevin Mcnamara, President and Chief Executive Officer of Chemed Corporation, Dave Williams Executive.
<unk>, Vice President and Chief Financial Officer of Chemed and.
Nick Westfall, President and Chief Executive Officer of <unk>, VITAS Healthcare Corporation subsidiary I will now turn the call over to Kevin Mcnamara.
Thank you Sherry.
And thank you Sherry for your services over the years this is <unk>.
She is retiring at the end of the year and this is her last introduction to our quarterly conference call, but we do want to thank her for all of our efforts.
Good morning, welcome to Chemed Corporation's third quarter 2021 conference call I will begin with highlights for the quarter and David and Nick will follow up with additional operating detail I will then open the call up for questions.
Third quarter 2021 operating results released last night reflect very solid performance for both VITAS and Roto Rooter.
On a go forward basis, I would like to share with you some of the macro issues. We are dealing with as we approach the end of the second year of the pandemic.
For VITAS is the most important issue we are managing this labor staffing of licensed professionals has been exceptionally challenging to ensure an adequate mix of licensed health care workers on a market by market basis.
This is particularly challenging during the pandemic as we deal with dynamic fluctuations in patient census, and every market.
Turnover within our license staff remains above our pre pandemic rates, but we are seeing indications of normalization as we continued to expand our hiring and retention initiatives in many markets.
Beyond managing our staffing levels, we are observing increasing pressure on salaries and wages to date, we've manchus pressures with increased paid time off or PTO. We view. It is inevitable that health care wages will increase if we continue to have a nationwide systemic imbalance in supply and demand for life.
Since health care professionals.
Fortunately for VITAS hospice industry, there is a natural hedge against the inflationary pressures on cost specifically labor the annual increase in the Medicare and Medicaid hospice reimbursement rates is based primarily on inflation in the hospital wage index basket as measured by the federal government.
Bureau of Labor statistics, typically the annual inflation measured as of March 31 is used to determine the following October one reimbursement increase this should give the hospice industry, a reasonable stability in operating margins and in an inflationary environment inflationary environment, albeit with a <unk>.
Six month lag from the inflation measurement because the actual reimbursement increase.
The second critical challenge for VITAS is the continued disruption to senior housing occupancy and the latest phosphorus referrals. Our recent admission data suggests senior housing is in the process of recovery.
Pre pandemic nursing home based patients represented 18% of our total average daily census, or ADC, the nursing home ADC ratio hit a low of 14, 3% in the first quarter of 2021 in the second quarter of 2021 nursing home based patients increased 60 basis.
<unk> to 14, 9% in the third quarter of 2021, our nursing home patients represented 15, 6% of our total AUC.
Our updated 2021 guidance anticipate sequential improvement in senior housing based patients in the fourth quarter of 2021 with acceleration in senior housing admissions anticipated in 2022.
For Roto Rooter, our most significant challenge has been to increase manpower, we've expanded technician manpower by 8% in 2021, However, based on our current demand levels will continue to remain understaffed at many of our markets.
Technician compensation plays a role in recruiting new employees as well as retention of our existing employee base. Our average 2021 technician in field sales force compensation is over $81000 per year.
Most of our technicians are paid down the commission basis on revenue generated as a result pricing for our services is a critical component increasing technician wages, we anticipated passing through inflationary price increases in all of our markets in the fourth quarter of this year.
Demand for plumbing and drain cleaning excavation and water restoration services remain at record levels I wanted to give additional color on the depth and breadth of this increase in demand.
Let's compare Q3 2021 revenue to Q3 2019, excluding the <unk> acquisition, which was completed in September 2019 under this unit for unit comparison residential services have experienced incredible growth in aggregate residential branch revenue.
Leased 46, 2% over this two year period.
In our service segment basis residential plumbing revenue revenue increased 37, 1% drain cleaning expanded 36% excavation increased 65, 6% and water restoration increased 48, 1%.
Commercial demand has been more challenging however, commercial revenue has experienced a significant recovery since the 40% decline in commercial demand noted in April 2020.
Overall commercial revenue declined three 1% over this two year period.
On an individual service segment.
Basis commercial plumbing commercial plumbing service declined four 9%.
Drain cleaning expanded one 8% excavation declined 10, 2% and water and water restoration increased 7%, we anticipate continued strengthening and commercial demand in the fourth quarter of 2021 as well as throughout 2022.
Over the past 20 years, the country has faced 911, the great recession, and now a global pandemic and each of these crises really remained operating and materially increased market share revenue and operating margin just as important post crisis revenue algorithm to these increases in revenue.
Market share and margins.
<unk> is well positioned post pandemic and we anticipate continued expansion of market share by pressing our core competitive advantages in terms of brand awareness customer response time 24, seven call centers and Internet presence with that I would like to turn the teleconference over to David.
Thank you Kevin.
<unk> net revenue was $317 million in the third quarter of 2021, which is a decline of five 8% when compared to the prior year period. This.
This revenue decline is comprised primarily of a five 3% decline in days of care, partially offset by a geographically weighted average Medicare reimbursement rate increase including the suspension of sequestration of approximately one 2%.
Our acuity mix shift had a net impact of reducing revenue approximately $3 million or nine tenths of 1% in the quarter when compared to the prior year revenue and level of care mix.
The combination of Medicare cap and other contract revenue changes negatively.
Impacted revenue grow an additional 80 basis points.
VITAS accrued $100000 in Medicare cap billing limitations in the quarter. This compares to $4 $1 million reversal of Medicare cap billing limitations in the third quarter of 2020.
Of our 30 Medicare provider numbers 27 of these provider numbers currently have a Medicare cap cushion of 10% or greater one provider number has cap cushion between zero and 5% and two of our provider numbers have a fiscal 2021, Medicare cap billing limitation liability.
Roto Rooter generated quarterly revenue of $221 million in the third quarter of 2021, which is an increase of $30 1 million or 15, 7% when compared to the prior year quarter.
Roto Rooter branch residential revenue in the quarter totaled $151 million, which is an increase of $22 2 million or 17, 2% over our prior year period.
Aggregate residential revenue growth consisted of drain cleaning increased 11, 7% plumbing, expanding 17, 4% excavation, increasing 14, 1% and water restoration increasing 28%.
Roto Rooter branch commercial revenue in the quarter totaled $52 3 million, which is an increase of $4 7 million or 10% over the prior year.
The aggregate commercial revenue growth consisted of drain cleaning, increasing 17, 6% plumbing, increasing nine 3% and commercial excavation declining one 3%.
Water restoration also increased nine 4%.
Now, let's turn to <unk> on a consolidated basis.
During the quarter, we repurchased 350000 shares of chemed stock for $164 million, which equates to a cost per share of $467 80.
As of September 32021, there was approximately $148 million of remaining share repurchase authorization under this plan.
Kevin had restarted our share repurchase program in 2007 since that time <unk> has repurchased approximately $15 2 million shares aggregating approximately $1 7 billion.
At an average share cost of $113 enforced include.
Including dividends over the same period Chemed has returned approximately $1 9 billion to shareholders.
We have updated our full year 2021 guidance as follows VITAS.
VITAS is 2021 revenue prior to Medicare cap is estimated to decline approximately 5% when compared to the prior year period average daily census in 2021 is estimated to decline five 5%.
And our full year adjusted EBITDA margin prior to Medicare cap is estimated to be 18, 8%.
We're currently estimating $6 $6 million for Medicare cap billing limitations in calendar year 2021.
Roto Rooter is forecasted to achieve full year 2021 revenue growth of 17, 3%.
<unk> adjusted EBITDA margin for 2021 is estimated to be between 28, 5% and 29%.
Based on the above full year 2021, adjusted earnings per diluted share excluding noncash expense for stock options tax benefits from stock option exercises cost related to litigation and other discreet items is estimated to be in the range of $19 to $19 and 20.
This compares to our initial 2021 adjusted earnings guidance per diluted share of <unk> $17 $17 50.
This revised 2021 guidance assumes an effective corporate tax rate on adjusted earnings of 25, 1%.
This compares to <unk> 2020 reported adjusted earnings per diluted share of $18 in <unk>.
I'll now turn this call over to Nick Westfall, President and Chief Executive Officer of our VITAS subsidiary.
Steve in the third quarter, our average daily census was 18034 patients a decline of five 3% over the prior year and a 2% increase when compared to the second quarter of 2021.
This year over year decline in average daily census is a direct result of pandemic related disruptions across the entire health care system since March of 2020.
Our hospital generated admissions have largely normalized pre pandemic levels.
Referrals from senior housing, specifically nursing homes and assisted living facilities continue to be disrupted during.
During the third quarter, we've seen emission stabilization and pockets of improvement in senior housing admissions. However.
However, it remains too early to accurately project the pace and timeline for senior housing admissions to fully return to pre pandemic levels.
In the third quarter of 2021 total VITAS admissions were 17598.
This is a one 9% decline when compared to the third quarter of 2020 admissions and a four 5% sequential increase when compared to the second quarter of 2021.
In the third quarter on a year over year basis, Our hospital directed admissions declined <unk>, 8%.
Total homebase pre admit admissions decreased eight 3% nursing home admissions declined 0.2% and assisted living facility admissions declined eight 6%.
When you compare our third quarter third quarter 2021 emissions to the second quarter of 2021, we generated solid sequential improvement with hospital directed admissions improving 2%.
Total homebase pre admin admissions, increasing 16, 3% nursing home admissions, expanding eight 9% and assisted living facility admissions, increasing 5% sequentially.
Our average length of stay in the quarter was 96 days. This compares to 97, one days in the third quarter of 2020 and 94 five days in the second quarter of 2021.
Our median length of stay was 13 days in the quarter and compares to 14 days in the third quarter of 2020 and is equal to the second quarter of 2021.
Before I turn this call back over to Kevin I wanted to thank our VITAS team members for their ongoing commitment and all hands on deck approach throughout the third quarter and all of 2021 as we continued to successfully navigate the daily challenges Kevin spoke about earlier on the call with that I would like to turn this call back over to Kevin. Thank you Nick.
I will now open this teleconference to questions.
Yes.
Ladies and gentlemen to ask a question you will need to press the start under one key on your Touchtone telephone to withdraw your question. Please.
Okay.
Please standby, while we compile the Q&A roster.
Our first question coming from the line of Joanna <unk> with Bank of America. Your line is now open.
Hey, good morning, Thank you for taking the question here.
First I guess on that.
On behalf of Simona.
In terms of the better margin this quarter.
And the guidance implies that margins are actually expected to maybe improve in the fourth quarter. So can you talk about what's driving that especially in the context of.
At that broad base of labor shortage and high blood pressure.
Yes.
The primary difference between the third quarter and the fourth quarter is October one the Medicare price increase takes effect and so thats a primary driver related to the marginal increase that has always occurred going back forever from the third quarter to the fourth quarter. All the other dynamics, we spoke about regarding labor pressure managing through it.
All of those will continue through and are identified not only in our fourth quarter, but will be forecast when we release, our 2022 projections.
So in terms of managing that.
The labor pressure.
Can you flesh that what's that.
It did.
Did you think or are you taking that allowed you to.
Okay.
Favorable retention rate given we're hearing a lot about turnover and I guess in that context also things back.
We do not rely on contract labor. So can you talk about.
Any change there.
Yes, sure so from a retention and a turnover perspective as Kevin alluded to in his remarks, we're still running at turnover rate thats higher than our pre pandemic levels. So it's something that we are absolutely continuing to focus on and improve upon so.
Obviously pay attention to the numbers everybody else references with it but we're dialed in and focused on continuing to try to improve that and where our level is today is not where we want to be we want to continue to improve it.
As it relates to continuing to manage through inflationary wage pressure as well as all sorts of other inflationary pressure related to it. The team has done a fantastic job and would expect us to continue to do a fantastic job, but with that being said, we're being very intentional and focused on a market by market community by.
Community basis to respond appropriately for specific staff and specific staffing levels.
And when needed and when necessary. We are also looking for opportunities for offsets to that inflationary cost, whether it's becoming more efficient or thinking through how we want to structure the way in which we're servicing that market. So the team's done a fantastic job in the third quarter and for the last 19 months with that and.
It is the number one thing we are doing on a day to day basis, and it's what I referred to in terms of the all hands on deck, everybody rolls up their sleeves, and let's continue to navigate through this.
And if I can follow up when you talk about wage pressure in some markets that you have to respond on properties, but can you can you give us sense of.
The magnitude of what.
What wage inflation do you expect next year in terms of.
For the year.
Although increases that you would expect that you would have to.
Implement.
We're still assessing the impact of all of those pressures. So we're really not prepared to project that out for next year at this time.
Okay, that's what I was getting.
With that is that margins are very strong.
This quarter into next quarter, then I guess sequestration is coming back next year, but just thinking higher level. The funding you still walk you through the numbers and projections, but.
Can you I guess maybe for Keith.
Comments about normal normalized margin.
Post banding of seven.
17, five to 18.
So given all of these things.
Variability.
<unk> expectations.
Do you expect to be.
Or below that range for next year.
So when we said so if you go back to the last full year, we had before the pandemic started just wrapping things that was the range of adjusted EBITDA margin, we were generating and our expectation as post pandemic in a normalized environment and can debate when that happens is 2022 start of 2023.
But whenever that normalization of senior housing occupancy of hospital occupancy referrals and all the mix is normalized that's that $17 five an 18%, which also was predicated on us running about a four to four 5% of our days of care are high acuity, but when that happens that's still.
Uncertain to us we thought up until the the variance started nagging. This country are really globally, we really thought labor day 2021 would have been the beginning of true accelerated pace of normalization and obviously that's been pushed off into next year.
I'm not going to be a base of by any means but we don't know that gas.
<unk> when we will normalization occur it's clear 2022 is going to be impacted by the pandemic still so at this point to forecast out margins and impacts on wages. It's too early how much of the wage pressure right now safer outside contracted services as <unk>.
<unk> versus permanent that's all unknown, what will be the level of our licensed health care professionals in terms of that supply for the needs of the country. If people return to the workforce. We have exited we're in those positions pre pandemic things will return to normal quickly. If we see a shortage of staffing that thats going to put wage pressure.
Yes.
It really starts with just summarize what they've said.
<unk> laid bare one.
Very clear Faq, all assets are not equal.
And to the extent that.
The.
Most important.
That source that is.
Senior housing was slow disrupted and directly disrupted by <unk>.
That Mike.
Just totally up ended the hospitalist market.
And you can't dig yourself out just by getting a hospital admissions and the thing that.
Our next presentation.
That is most helpful is the fact that that.
<unk> seems to be coming back fairly strongly and that is a rising.
But that lifts all metrics, let's put it that way.
And as far as the timing and pace of that as Dave said.
We'll do a little bit.
Deeper dive on it as we go through the budget process.
A half.
And when we give guidance in February we released annual earnings.
We will have guidance, that's based on that budget and at least at that point it will be a guest but it'll be an educated guess at this point, we haven't gone through the process, that's right and it's a bottoms up approach Joanna So the ranges you were referencing R. R.
<unk> unique on a market by market basis, and on a disciplined by disciplined basis as well based upon all the factors going on in states and communities.
Okay. Thank you and I'll just I'll go back to the queue.
And our next question coming from the line of Frank Morgan with RBC Capital. Your line is open.
Good morning, Yeah, just thinking about your different buckets of referral sources.
Given the uncertainty around the recovery the timing of the recovery and normalization is there any thought about just kind of strategically rethinking the balance of your referral sources does it make sense to you.
Allocate resources to some of these other areas or is it just still too attractive to stick with.
The senior housing the long term care in the assisted living segment.
So Frank this is Nick.
You've hit on a key piece that we have.
Moderated on throughout the course of 2021, very intentionally and as Kevin alluded to and it's something we talk about internally.
Our mission all lives are created equal, but where we're deploying our time.
And really trying to extend relationships has has really intentionally shifted as as Kevin alluded to so we are we are often executing you can see some of that inside of the third quarter.
And some of the third quarter compared to the second quarter inside of my comments that I mentioned as well and would anticipate that continuing.
For the rest of the year and into 'twenty two.
And frankly as you can imagine.
Cap year starts October one.
We are the VITAS is going.
For election for that.
Admits every market to build cap cushion.
And.
So it's almost all when we talk about reallocating.
Resources, its always hard to take resources away from let's say the hospital market because those are fertile source of abbott's, which you'll never know how many you need but.
It's <unk>.
To the.
That picture becomes clearer during the course of the year.
It's clear more resources are put.
<unk>.
The areas that are more likely to lead to.
Expanded stay Frank.
The only other comment that drives towards that and it's been consistent throughout the pandemic. When you think about an environment, where we continue to have staffing pressure not only from our admissions teams responding but from our care teams, we're being weak.
Need to be much more selective and intentional around where we're allocating our time, because we use the metaphor of the phone ringing equate to our sister friends at Roto Rooter, but the phones ringing off the hook in terms of demand for hospice appropriate referrals on a market by market basis, and so we're really just ensuring we are.
<unk>, our time and responding in building relationships on a market by market basis.
Got you and I guess, the margins held up remarkably well considering the wage pressure.
It is.
Is productivity.
I mean, how much of that is productivity is there any change in.
Visits per visitor per case per week or is there anything else in there that's driving that and.
And then maybe some color about specifics on the use of contract labor and how does that affect productivity.
Yes so.
Absolutely productivity has increased.
And would anticipate us looking for all opportunities not only from a productivity.
<unk> perspective, but also from an efficiency perspective, and when I reference efficiency. What I mean is ensuring we are either eliminating or streamlining all activity that would have.
<unk> taken our team members administrative function not in our patient facing function and trying to make those as efficient as possible and so we measure productivity based upon the time. They are at the bedside and Thats continued to increase and so it was already part of our strategic.
Initiative right for the last few years, but we have just continued to accelerate and push that and thats.
That's helped us but in the same regard we need to continue to retain our team members and we've been successful in our ability to recruit but you.
You need to be able to recruit and hire and retain and that will continue to stabilize our staffing levels on a go forward basis for.
For contract Labor, we use it selectively the biggest impact on contract labor inside of certain states is.
Our continuous care deployment for a select disciplines and it is.
Very competitive, particularly with some.
Extreme pricing and wage inflation and we've been very selective so that we're not out just paying contracted rates that is.
It is a losing proposition from a hospice perspective, because those rates are heavily influenced by hospital systems and other organizations and if it goes up 300%, we're not going to be renewing those contracts obviously so.
It's not a huge influence we don't use a ton of contracted labor, but it really just impacts our continuous care service line for.
The most part.
Got you and last one maybe a Dave question everybody question. When you think about sort of the return to the sequester next year could you kind of remind us what the gross impact there is and then maybe the net net of your expected market basket update and then all of the market basket update.
Can you talk a little bit about how long you think it takes for that to catch up and reflect all of the labor pressures that youre seeing.
Sequestration I, just round numbers call it $6 million a quarter of $24 million as the benefit maybe slightly less than that.
So that would be a significant headwind if they put sequestration back in place January one, which we haven't given up on by the way, but that is it is scheduled to that this is scheduled to sunset, but there is some talk about it being extended the benefit.
So that's probably the biggest headwind we have for next year.
And for the pricing market basket impact is two 2% frankly, we're anticipating.
But your question. So the bureau of Labor statistics measures the inflation by CBS, a core base statistical area, but basically they use the information from April 1st through March 31, as the measurement and then the following October one is when that rate increase actually gets put in place so really from the fall.
Measurement period, which ends March 31, and then six months later that goes into your reimbursement increase and that's the lag Kevin referred to in his prepared remarks earlier, so about a six month lag where you could see margin squeeze next year. If this inflation in wages isn't transitory, but it's permanent.
That's the issue. We're currently address freshly now but in the end these things tend to work its way out, but it's right now hospice is the industry is in a pretty good position, where the government acknowledges how labor intensive we are and the increase we get is based upon the hospital wages for these licensed professionals. So there really should be.
Hedge, but with a six month lag.
For next year for the October one and long term Dave.
Obviously things are changes by the minute but.
Longer term basis.
The.
Budget blueprint. There is there is a lot of money being suggested for.
Nurses and hospital services.
Talk of as much as $20 billion going towards tray.
Training for hospice licensed personnel.
Now this is the framework analysis, which seems.
A little fluid at the time, but without a doubt we see strong indications that the government continues to invest in the hospice industry realizes the pricing pressures yes.
Any additional follow up Frank.
Okay, I think that that.
Okay.
The last question in the queue.
As a reminder, ladies and gentlemen to ask a question. Please press star one we do have a follow up from Joanna <unk> of Bank of America. Your line is open.
Yes. Thank you.
So just wanted to.
Move to the segments, because I guess.
The strength there continues to.
The impressive both on the topline and bottom line. So can you talk about kind of the margin situation. There I mean I guess.
The opposite of what we just discussed in terms of Medicare rate increase and how you have to wait for this to play out here I guess.
Can you talk about your ability to put the pressure.
In the market I guess, you mentioned inflationary price increases planned for Q4. So can you give us a sense of the magnitude of that.
Most interesting Vik you might consider.
So yes, we do have pricing power within the roto rooter business within that industry. If you define the industry is same day next day predominantly emergency plumbing and drain cleaning services.
We have the pricing power and we price based on market by market procedure by procedure. So what we pass through a price increase for our plumbing is different and drain cleaning in different lines within those segments.
We can't give you anything more granular Joanna because we're still developing it but we absolutely will pass through inflation increases if not inflation plus a little bit more because frankly, that's the way our technicians get increases in their wages and our employees are feeling the pressures of inflation in terms of fuel.
Sure.
Housing all of those costs that are going up significantly at five 6% theyre paying those fees to feed their family put fuel in their trucks are they predominantly one so that's what that is there more receptive our price increases and our employees are very comfortable selling the price increases to our customers.
Because thats how they earn their money that's other wages go up but the exact amount of the increase will do a weighted average analysis at the end of the year and we'll give you more color in early 2022 on those increases.
The one comment I'd like to make before leaving margins at Roto Rooter.
That's what we've observed is generally speaking.
Historically, we've developed.
Our fixed costs.
To support the plumbing and drain cleaning business, which was the <unk>.
First business and we've seen over time.
As we've added substantially to the ancillary services that is.
Excavation.
Water restoration.
That has significantly leveraged.
<unk>.
Our margins.
<unk> to up to the point, where it's been.
I used to think 20% was good now we're pushing 30%.
It's that strength.
The reason we're seeing.
Well the reason, we're seeing that the improved margin is of course, the additional of those services, but.
You've got to remember that.
When there is strength in the underlying core business.
That comes from those fixed costs.
The rest are add ons with very very little acquisition costs for the for the business and.
To the extent that the underlying core business is strong we know that the service line for the other businesses will continue to be strong and then support that margin. So.
It Hasnt been the margin has increased I guess by saying not by just taking price increases, but focus has been more on the leverage of the of the not just the cost of the fixed business, but the underlying core business.
Ended up itself, so Kevin brings up.
Key point on that Joanna it's not that the margins for water restoration and excavation or so high quite frankly, they are not that much materially different than our core business, but as Kevin pointed out after those costs, we don't increase the cost to operate a branch at all or.
Certainly not materially so more of that incremental revenue.
And what I would call raw contribution margin just drop straight to the EBITDA line. So the growth in revenue is really resulting in the accelerated EBITDA margin increase.
Thank you Sir two follow ups on that on this last point.
In terms of adding some salary surfaces that.
Allows us to leverage some.
Some of the expansion of our costs that are there.
Additional ancillary services that might make sense to Idaho, you've kind of already.
Oh the basis there.
We keep trying and we have at least.
One.
Additional service that we're testing out and seeing if we can't find them.
Winning formula but over the years.
We've tried just about every service of the <unk>.
Involves having a person for a technician in a truck going out.
Emergency service on.
Our consumer and we've.
We've had successes we've had failures, but we're we continue to look at that in fact, a water restoration really came about following up.
A new look at it we said look we're going to forget all of the former failures and look at everything.
With fresh eyes and that's.
Roto Rooter came up with the water restoration really from that process.
That process is ongoing where we're saying look we've tried pretty much everything but.
We continue to look for.
Something we could throw into this.
A powerful I mean again, when I talk about Roto rooter.
It's big and a very.
Sure.
Scattered industry.
So it has a lot of advantages on the internet.
Got a great service, Mark and again, we keep turning the pancake over but again I wouldn't from an analytical standpoint, or an analyst standpoint, I would say again the way we would get involved in that would be.
Slow methodical so I wouldn't think that any of those projects that were bid.
Vaguely referring too.
We're likely to reflect earn in earnings or sales over the next year.
Year or two.
No I understand but I was just curious whether there.
So it's good to hear there are some.
As a follow up.
In terms of.
Does that or I guess staff level. So we are clearly increments manpower at 19, 8% this year, but I think you are in it.
Is that something that demand level.
So mark gets soft tissue.
Some understaffing.
So can you talk about bad weather days.
More difficult to find.
Manpower to provide services in house.
I think I expect this to play out into next year.
Without a doubt.
Band power right now if we could grow and manpower, we could expand our revenue base even more significantly.
And the type of people, we're looking for our self starters as well because typically our technicians own their own work truck.
And that which is issued we can't give advance them.
Ed has an issue is issue as well.
But without a doubt the the pandemic has made hiring more difficult retention is fine, but hiring is more difficult and it is a market by market issue again, we suspect as we get the pandemic behind us and we see increased more full employment on that key age category.
Of people between 30, and 50, which is our sweet spot, we expect to see manpower expanding as the pandemic waned in 2022, let's put this way at the phone is ringing.
The service technicians are making more money.
$81000 of that is a high watermark and Thats an average among all of our technicians in the field. If you actually look at the folks with three or more years of seniority with us the numbers even higher so we offer an incredibly viable career path for tradespeople, who don't feel this obligation to go to go to <unk>.
College, but want to work with their hands, we have a very very viable training program and we can give them a career with great retirement benefit so theres a lot selling but it's hard to find people are willing to get their hands dirty in this day and age we've been very successful in the past.
A little bit of a limitation during the pandemic, but we're still pleased with the 8% growth in manpower and we certainly look at 2022 as an opportunity to further expand our manpower but.
We don't Kid ourselves right now in this environment is exceptionally difficult.
So.
Definitely good to hear about.
Yes.
Sure.
Got to get people.
Like I said, you're welcome thank you Jeff.
And last question on Guadalajara.
H as W.
I guess.
We haven't really talked about how things are going there because that's interesting.
Okay.
Nick.
Any updates in terms of.
That that transaction in your plan.
As to market to make some changes.
Okay I can respond.
Topline.
Sure.
We're happy with it.
When we make a purchase for submitted to our board we've maker.
Our request for capital authorization, we make various projections.
Justifying the expenditure of funds and let me say that we're running ahead of those projections. So it has been.
From a financial standpoint.
It's been it's been a good one for us.
That is despite the fact as we've talked about it had a had.
A significant commercial.
<unk>.
Aspect to its business as opposed to.
Our typical roto Rooter branch.
Residential right.
Shortly after the acquisition the pandemic closed a lot of type of commercial establishments that they would call on.
With that even with that as the transition to a normal normalized roto Rooter branch.
Done well Theres still an upside a big upside associated with them. They are in some gray.
Great very popular markets and.
That's going to be a.
Significant part of the growth of Roku or over the next several years undoubtedly so they're going well anything you'd want to stay on that question, but each SW.
No I'd say, if you had told US the pandemic was going to hit I would have said there is no chance of hitting those RCA projections, but the roto Rooter management team did a phenomenal job of quite frankly accelerating some of the changes.
At the <unk> locations or many of them during the pandemic. So they took advantage of that disruption to accelerate improvement and I would say all of the locations with the exception of two we're exceptionally pleased with the other two are works in progress, but in aggregate, they're now exceeding our expectations.
Definitely good to hear that and then my very last question Kenneth level in terms of capital deployment priorities, including you.
Thanks.
A good chunk of your cash flow.
This quarter.
And your cash I guess on share repo, so kind of how do you think about it.
Thank you.
I'd say, we're staying with the same thesis we have on capital deployment, we love to do acquisitions, both acquisitions compete with share repurchase on a risk adjusted return basis, and we still look at share repurchasing as a as a macro item, having a better return for lower risk for shareholders, but we are always looking at.
<unk>, we just don't pull the trigger because share repurchasing as more attractive, but we look at that on a regular basis.
I wouldn't even say, it's more often than quarterly is a constant conversation with the board as well, but we anticipate continuing with the dividend of course, and a methodical increasingly that dividend and share repurchasing, we're not opposed to putting cash on the balance sheet, but at the current share price, we consider our free cash flow yield.
Separately attractive in an environment, where LIBOR is at nine basis points well anomaly that.
Implicit with what they are saying is one of the big advantages of both where we were VITAS is there.
Very good cash generating operations.
<unk>.
So the real question comes out like any company if thats, how you take that.
<unk>.
Best use of that advantage and it's been pretty clear as Dave mentioned we've.
Since we purchased VITAS, we've taken a billion seven and returned it to the shareholders and.
Is that tied up in goodwill of questionable acquisitions, and there's a lot of low very.
But accepted theories of value and that is.
The value of an asset is determined.
Sure.
What it returns to the owner and we've had very substantial returns. So we can demonstrate.
Thank you for that color and thanks for taking it.
One other question.
Thanks Joanna.
And I'm showing no further questions at this time I would now like to turn the call back over to Mr. Kevin Mcnamara for any closing remarks.
Thank you.
We were pleased with the quarter results.
And thank you for.
Thank you for your kind attention.
Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.