Q2 2023 Chemed Corporation Earnings Call
Into revised or updates 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 date of July 26th which is available on the company's website at <unk> Dot com.
I would now like to turn.
Now like to introduce our speakers for today, Kevin Mcnamara, President and Chief Executive Officer of 10 minute Corporation, Dave Williams, Executive Vice President and Chief Financial Officer of Chemed, and Nick Westfall, President and Chief Executive Officer of <unk> Healthcare Corporation subsidiaries I will now turn the call over to Kevin Mcnamara.
Thank you Holly good morning, welcome to commit corporations second quarter 2023 conference call.
Begin with highlights for the quarter and David MC will follow up with additional operating details.
Then open up the call for questions.
Our second quarter. According twenty-three operating results released last night reflect significant improvement in V passes operational metrics postpay endemic in.
In the quarter or admissions increased 5.9% over the prior period.
Strengthening admissions continued to drive higher patient census in the second quarter or average daily census, or ADC expanded 177, an increase of $6, 2% when compared to the prior year and 3.2% when compared with the first quarter of 2023.
Tennis is improving operating metrics are a direct result of our retention in hiring program launched July 1st of last year. This program was designed to Stabilise turnover in our tenured staff as well expand patient.
Patient capacity <unk>.
Since July 1st 2022 are stepping is methodically increased on a sequential basis over this 12 months period. This increase in staffing and related patient capacity has been converted into increased admissions and census.
The retention program is generated an aggregate increase of 784 licensed health care professionals. The majority of which are license. There's this.
Over the last four quarters VITAS has increased bedside professionals net sequential basis by 172.
103.
200, and 309, respectively. The.
The majority of the expanded capacity from the 309 net hires in the second quarter of 2023 is forecast to benefit admissions incentives growth in the second half of the year.
On June 30th 2023, our end of the month census was 18542 patients. This compares to our June 32022, ending census of 17360 for a net increase of 1182 patients. This.
This raw patient increase translates into $84 million of annualized billable revenue.
A revised guidance does assume sequential ADC growth to moderate in the second half of 2023, when compared to the first six months of the year.
Now, let's show the road by all indications as in.
Counting what I can only describe as headwinds.
Consumer spending is noted during our first quarter Tele conference call and the last few weeks of the first quarter, we observed an increase in weekly revenue volatility, indicating a potential softening.
Consumer demand since March we have observed increased weakness and weekly call volume and revenue. This weakness has continued throughout the second quarter.
Overall call volume is down approximately 13% when compared to the prior year quarter, although called call volume is a crude measurement.
It does indicate consumers are moderating their behavior in terms of discretionary plumbing and drained cleaning services.
Roeder has upset a portion of this software demand with material increase and clothes rates.
Our call centres conversion rate the rate at which a call is converted into a technician scheduled ticket has increased 230 basis points.
Our technician conversion rate the percentage of time at Tech arrives at the home or business and convert scheduled ticketed doable work has increased 160 basis points. These.
These improved conversion rates have materially reduced the impact of softening consumer demand.
We have seen some recent signs of improvement in overall demand over the last few weeks whoever our guidance assumes rotorua continues to be modestly impacted by consumer spending headwinds for the remainder of the year to.
To summarize I am pleased with the accelerated improvement and be task postpaid demick are increased growth and licensed healthcare professionals strong ambitions and corresponding growth inpatient census is positioned detached returned to normalize operating metrics in early 2024.
Roeder as well positioned in spite of economic headwinds on consumer spending we anticipate continued expansion of market share by pressing railroaders core competitive advantages in terms of excellent brand awareness customer.
Customer response time, 24, seven call centers and aggressive internet presence with that I would like to turn this teleconference over to David.
Thanks, Kevin.
<unk> net revenue was $321 million in the second quarter of 2023, an increase of seven 8% when compared to the prior year period.
Its revenue increase is comprised primarily of a 6.2% increase in our days of the year.
Geographically weighted average Medicare reimbursement rate increase of approximately 2.7%.
Partially offset by 100 basis points from sequestration.
The combination of Medicare cap and other content revenue.
Dangerous negatively impacted revenue growth by 10 basis points in the quarter.
Average revenue per patient per day in the second quarter of 2023 was $197.02.
Which is 170 basis, some 178 basis points above the prior year period.
Reimbursement for reaching homecare in high acuity here average of $172.91.
In $1031.58 respectively.
During the quarter high acuity days of care, where 2.8% of total days of care essentially equal to the prior year quarter.
The gross margin and adjusted EBITDA for <unk>, we're both negatively impacted by CMS re implementing sequestration, which reduce these margins by 100 basis points when compared to the prior year quarter.
Gross margin in the second quarter of 2023, excluding Medicare cap and the retention bonus program was 22.7%.
143 basis point increase when compared to the second quarter of 2022.
Our adjusted EBITDA, excluding Medicare cap totaled $57 million in the quarter, an increase of 1.4%.
Adjusted EBITDA margin in the quarter, excluding Medicare cap was 15.7%, which is 101 basis points below the prior year period really all of which is a contributor to sequestration.
As Kevin noted earlier Vita has increased the license healthcare staff by 309 professionals in the quarter. This result in total license staff, increasing by 784 professionals since the inception of the retention program on July 1st of 22.
The increase of 309 net professionals higher during the quarter of 2023 think of it as basically underutilized later labour capacity.
Is estimated to have negatively impact margins in the second quarter by approximately 80 basis points.
Now, let's turn a roto rooter Redwood are generated revenue of $233 million in the second quarter of 2023, which is the decline of 0.2% when compared to the prior year quarter.
<unk> branch commercial revenue in the quarter totaled $55.5 million, which is an increase of 1.3% over the prior year.
The aggregate commercial revenue growth consisted of drain cleaning revenue declining 3% plenty, increasing five 4% <unk>.
<unk>, increasing 2.9% and water restoration, increasing 9.7%.
Rodriguez branch residential revenue in the quarter totaled $158 million, which is the decline of 1.1% over the prior year period the.
The aggregate residential revenue growth consisted of drank lini, decreasing 8.6% plumbing declining to 8% excavation expanding three 8% and water restoration increasing to 5%.
What are we are just gross margin in the quarter was 52.3%, which is an 89 basis point decline when compared to the second quarter of 2002 at.
Justin EBITDA in the second quarter of 2023 totaled $65 $9 million, a decrease of 4.5% and the adjusted EBITDA margin in the quarter was 28.3% a 128 basis points below the prior year period now.
Let's take a look at our guidance <unk>.
<unk> 2023 revenue prior to Medicare cap is estimated to increase eight 5% to 95% when compared to 2022.
The task is forecasted full year revenue growth is negatively impacted by 75 basis points as a result of the sequestration relief in the first half of 2022 compared to a full year sequestration in 2023.
ADC is estimated to increase six 5% to 705% in full year adjusted EBITDA margin prior to Medicare gap and accrued bonuses related to our retention program is estimated to between.
Between 16.5% and 17% and we're currently estimated $11 million of Medicare cat billing limit.
In calendar year 2000 2003.
Roto Rooter is forecasted to achieve full year 2023 revenue growth of 1% or 2% and rudder orders adjusted EBITDA margin for 2023 is expected to be between 28% in 2008, 5%.
So based on this discussion are full year 2000, 2003 earnings per diluted share excluding non-cash expense stock options tax benefits from stock option exercises cost related to certain litigation settlements in our retention bonus program is estimated to be in the range of $19 and 90.
To $20.10.
Current 2023 guidance as soon as an effective corporate tax rate and adjusted earnings of 24.7%.
In a diluted share count of 15.2 million shares for.
For comparison Railroaders 2022 reported adjusted earnings per diluted share was $19.75.
I'll now turn this call over to Nick Westfall, President and Chief Executive Officer of our beat Us healthcare business segments.
Thanks, David.
As Kevin discuss we implemented a targeted retention hiring bonus program at V task effective July 1st of 2022.
This program was focused on licence nurses, including admission nurses.
Managers home health aides and social workers. These.
These one time retention bonuses range from 2000 to $15000 per license health care professional.
The total 12 months forward looking cost of this program, including payroll taxes and governmental government mandated overtime calculations is estimated at $43 million.
All retention bonus payments are individually cliff vested and pay it out after the employee has successfully completed 12 months of continuous employment.
From an economic perspective, approximately 37 million of this retention program was to maintain existing staffing levels. The additional $6 million as estimated retention bonuses represent bedside capacity expansion.
This additional 6 million and retention bonuses has helped to contribute to ADC, increasing 1182, when comparing the month of June two it's prior year.
On an annualized basis. This 1182 increase in patient senses will generate annual revenue of approximately $84 million.
During the second quarter, we expanded our licensed healthcare professional staff by 309 employees, bringing the total license healthcare staffing expansion attributed to this program to 784.
And the second quarter of 2023 are average daily census was 18392 patients an increase of 1077 or 6.2% when compared to the prior year and an increase of 562 or 3.2% sequentially.
The sequential monthly ADC growth in the fourth quarter of 2022, the first quarter of 2023 and now the second quarter of 2023 is very encouraging given the timing lag of increased staffing win.
Which then generates subsequent admission and census expansion.
And the second quarter of 2023 total be tough emissions were 15611. This the 5.9% increase when compared to the second quarter of 2022 and.
Five 3% improvement when compared to the fourth quarter of 2022.
In the quarter or nursing home admissions increased 13.7%.
Assistant facility admissions expand at 3.9% hospital directed emissions increased 4.5% in our Homebase patient emissions expanded 3.8% when compared to the prior period, all four segments increasing positively.
Our average length of stay in the quarter was 99.5 days. This compares to $103 seven days in the second quarter of 2022 and $99 nine days in the first quarter of 2023 are medium length of stay was 16 days in the quarter and compares to 17 days in the second quarter of 2022, and 15 days in the first quarter of 2002.
83.
To recap what our team is recently accomplished we know generated four quarters of sequential growth and licensed healthcare workers and three quarters of sequential growth in ADC.
We have developed what I believe is a very sustainable path to building back our capacity patient base and overall operating performance to pre pandemic levels and beyond with that either turn this call back over to Kevin.
Thank you Nick I will now open this teleconference to questions.
Q as a reminder to ask a question. Please press star one line on your telephone and wait for your name to be announced.
Try your question. Please press star one one again please.
All we compiled the Q&A roster.
One moment for our first question.
Okay.
And our first question comes from it.
<unk> F R B C capital markets.
[noise] Hi, this is Mike Murray on for Ben.
Starting with rotor ruder could you remind us of your mix of discretionary versus non discretionary jobs.
And do you believe this deferred maintenance could become a tailwind in 2024, where do you think more people are doing the job to themselves.
I might <unk> the definition of discretion areas in the minds of the consumer but with that said well under 10% of our volume, we consider discretionary well under but it's again, it's up to the consumer to decide what we have seen is an increase though and nondiscretionary John .
<unk> discretionary jobs on a relative basis. So what we're doing is the more severe phone calls are still coming in again, that's well over 90% of our volume.
But the customers are clearly self selecting on the annoying toilet that's constantly running the upper tank because of a bad sealer valve. Those are the things that you can defer attempt to do yourself. So the small annoying projects, but we actually have seen an increase in bigger jobs.
Over really the last six months, but very little is discretionary we're we're a grudge purchase in the first place no one guessed this.
Purchase satisfaction of getting your house back today, where it was two days ago. So.
The fact is people call us because of necessity and that's just down just a hair and I would say that the what you have is what we describe as.
Discretionary or putting something off it's pulling something off a couple of months.
Not permanently.
<unk>.
It's hard to say you are getting at a question, which is a tough one when you look at it a drop in call volume.
Like we had I mean.
Again, if you do.
Our best thinking on it is that we had a period of.
18 months, where.
Wages would not keeping pace with inflation.
There was a significant gap.
That had and I was I think it outside of effect on consumer decisions.
We take comfort in the fact that that's turning around at this point.
And.
We have a very.
Very basic business and Roto Rooter, there's no sense in any way that we are losing market.
Power.
Sure.
Closed rates are the <unk>.
Higher than they've been not surprisingly because people are more.
<unk> to push for every sale.
And something that we look at we look at the softness as being not confined to one region, which was suggest us that it's.
It's.
If the issue that's outside of our control.
The soft is not due to having turnover in a couple of big branches.
More pervasive than that but the same time.
When what day was really suggesting is to the extent when you have these really nondiscretionary problems.
It's going to take.
It's going to take somebody to fix it eventually and there's no reason for us to believe that there are any less likely to Colorado room.
And I just had to call volume is up significantly from pre pandemic levels. I mean, obviously you had double digit but it does look like the consumer is a little exhausted.
And I think this this.
It's happened a couple of times in the last 20 years, I think I can point to kind of pulse the great recession in 2010, and there was some disruption.
Around 2001, but this doesn't happen very often and it does take kind of Ah it.
It takes up very very broad geographic kind of disruption and I think that's what we're seeing in all four of our regions throughout the country. The softness is everywhere.
And another thing I question, you haven't asked.
Is it seemed like it came on pretty quickly I mean.
Obviously from our previous call three months ago. We know we said we notice it in the last month of the first quarter.
It was many of the effects were probably already starting to land.
For <unk>, however was.
It was covered up by.
Unusual weather patterns, which were.
Basically we had business we're going through the roof. The first two months the first of the first quarter. So it's something some of these forces that we see at work.
More than they didn't just pop up in the.
And the second quarter, they were probably already.
Having some effect by the first quarter, but again, so unusual weather in the first quarter.
Everybody.
Working round the clock then.
So then when the weather moderated we thought we had.
A fairly severe difference so again we're.
One good thing about having the regular business it's.
They've they've indicated really great brand awareness.
Great marketing position.
One thing we haven't said.
Is that one of the one of the biggest limitations to rubber business workforce and.
Workforce has never been stronger.
We are prepared for an uptick.
We probably have.
Two larger workforce given the current call volume, but again, there have been a lot of effort and expense.
And developing that workforce. So we give ground grudgingly in that regard so we're not we're.
We're not alone.
Respect with the river business now and bend it to your question on a tailwind. The answer is probably these jobs will come to wise, but in light of what we've seen call. It.
In March and then in the second quarter, we have gotten conservative on the road over at her guidance, we're actually guide into typically we see seasonality, where Q3 tends to be.
All the quarters are relatively significant by Q3 tends to be down a couple of points from Q2 Q4 actually on average has been up as much as 7% for seasonality from Q3 Q for we were also very conservative and we guided that sequential growth from Q3 Q4 of this year to be only up a little under 3% because.
We don't know what's happening with the consumer spending we think we put forward conservative but realistic guidance for ruddevator.
We're encouraged by what we see in July relative to our guidance.
But with all that said.
We're.
We're waiting to see a sigh of relief and other consumer spending categories to say this is just an anomaly, but then we haven't seen that yet right now we're going under the assumption that consumers a little exhausted and they are going to avoid spending on ruddevator to the extent they can but like said 90 95 per cent of our vault.
<unk> is unavoidable.
Okay and just to.
Okay. Thank you and just a follow up to that how does the magnitude of the decline in call volumes compared to past consumer cycles and in those instances how quickly did it did it take for demand to return.
The call volumes unusually we have we've never seen call volume with the kind of spikes. We had so he actually this is actually unusual drop and we'd never seen weakness in demand go beyond 12 months.
Okay cool.
Outside throwing one out there.
It's always been a very short lived cycle and it doesn't happen often but it does happen.
Like I said, the great recession and <unk>.
911, and then kind of the dotcom blow up in 99 2000 as well those are the ones that come to mind, but it doesn't happen often.
Okay, alright, thanks for the call or just just real quick shifting to V times.
You just hit the one year Mark on your hiring retention program have you seen a pickup in turnover for the tenure employees. So far and then on the flip side of that has hiring slowed materially.
Since the retention program ended.
So Mike this is Nick.
The answer to both of those answers is no. So we have not seen material pick up to turn over what I will say, we're still in the first month related to it so.
Always like to say one month never makes a trend, but we feel good about it and for all prior commentary all the things that warrant relegated to just the financial payment, but cultural enhancement other items that tend to keep people with an organization is what was the driving force for some of those confident comments in the prior quarters.
About the exploration of the program and and in regards to hiring the hiring rate has we've been able to hire successfully where we need to on a market by market basis, and so we feel we feel confident in our ability to do that going forward.
And like nothing stops Nip, where it's appropriate to have a small retention program in a market for certain disciplines, it's just not going to be necessary to carve it out or even call. It out at this point, we believe we can do it where necessary on a very small basis that you guys won't even see.
Okay, Alright, that's helpful. Thank you and just just one final one.
Given the repayment of your debt during the quarter. How are you thinking about share repurchases in the back half of the year.
We still think share repurchase is what appears to be the best way to return capital.
Two shareholders at the same time with what the fed did yesterday, we are now getting about 5.5% pretax center overnight money.
And so from that standpoint, it's no longer than 10 basis points of nothing we used to get two years ago. So we actually aren't penalized by city non-cash because of the overnight return that's basically right now all kept with J P. Morgan Chase.
But share repurchases continued part of our capital deployment, maybe we will do some <unk>.
Every quarter, we anticipated.
Okay.
Right. That's all I had thank you.
Thank you as a reminder to ask a question. Please press star one line and your telephone and wait for your name to be announced to withdraw. Your question. Please press star one line again.
And one moment for our next question.
Okay.
And our next question comes from the Joanna <unk>.
Bank of America. Please proceed.
Yes. Good morning. Thank you so much for taking the questions here. So it gets first on the seat gas.
Things are going there pretty nicely and you raise your God is and expect a 9% <unk> color D over a year. So how should they thing about this.
Talk about going for it instead of sustainable correct.
And also with you know this phone at that rate when it comes to 70% said <unk>.
<unk> turns to 2019, which seems like.
You already are very very close to that.
Anything about margins Uhm, if that was to happen.
Regarding margins very very encouraged.
Where we are now if the actually think about the headwinds we created by excess capacity and utilized labor because that will be utilized in Q3 of this year. The 309 people. We hired accurately does look like we are going to get to our target fairly comfortably to that call at that 17.5% adjusted EBITDA margin.
We enjoyed in the fourth quarter of 2019 seems very achievable within 24, I don't want to get too optimistic beyond that but it's encouraging.
And regarding our guidance for the second half of the year, we actually assumed census growth moderates.
The second half of the year compared to the first where we will add about 75% of the centers. We added in the first half we're assuming in a guidance we add pro rata throughout the second half of this year. So we expect that momentum to continue but we conservatively estimated to slow a little bit from the first half.
Nick anything else, we should add on it no I don't.
I don't think so just as a reminder, if you start comparing pre pandemic too exiting pandemic dynamics, there's a lot of different variables inside of it right just to not to recap it but it's about a three year window and one of the other aspects and you can see it through the distribution of pre admit institutions, while we continue to serve as.
The entire community of where we were at the community access initiative will continue and as effectively baked into our approach on a go forward basis and every market. We will see what that translates into you know for 2024 and beyond but it puts us at a good.
Should put us at a good jump off point at the end of the year.
Also say as we've talked about this in past quarters. When we look at census, we actually follow it in buckets and we look at it as tenured buckets. So how many patients that bandwidth best $0 30 days 31, 60, 6100, 90, and we do that all the way out and obviously during the pandemic when we had weakened missions.
13% of our patients who live past six months that actually got laid off during the past three years. It really two years and really over the past three quarters Nicks and his team have really started material growth and all of those aged out buckets. So the path that were read.
Turning on and and.
We lose money on half of our patients, 13% or so I'll make it past six months, we are doing a great job of re fill lane the statistical outlier buckets of beyond 180 days. So that's another indirect way of saying that the <unk>.
Momentum we've picked up in the recovery is on a really really solid foundation of census.
And last comment just a relay why that's important not only for V toss, but the overall industry and also for the Medicare Trust Fund is.
Recent independent literature were out on the hill today, continuing to educate and what it helps to further illustrate is for the entire hospice industry, but there is a need for earlier access and the more there is earlier access there's more total cost of care savings to the Medicare Trust fund, including past 12 months.
An 11% cost savings, so bringing up because hopefully that trend continues consistently for the overall industry because it's significantly beneficial for the Medicare Trust fund.
Alright, and then I guess, if I may just to follow up on that point <unk> the Medicare.
Proposed alright, I came out that's you know.
Back from the in the sickly are getting this should be.
Instead of you know one time adjustments for the for the market basket as I've seen below consultation prior.
<unk> two years.
So it gets to think that you know any traction.
Having CMS actually act on it or do you need Congress to two could do something along these lines and what do you expect in the final uhm regulation that should come out any day.
So I think the commentary with it we'll see.
It is fully within CMS authority to to do so there's all indications the final rule itself will be issued.
In the very near future and so as opposed to speculating, we will sit back and see.
You know the ongoing calculation as we've alluded to significantly lags reality.
Against the hospital market Basket index of the impacts more than just the hospice industry right. It impacts the hospitals by definition as well.
And and time will tell I think the important piece going back to the value of the study is you know the fact that hospice is one of arguably the only industry that is returns money to the Medicare Trust fund inside of healthcare is one that we hope CMS, here's an congressional leadership here.
So that they.
They continue to support ongoing.
Reimbursement because of the value of the benefit for the overall country and to the Medicare Trust Fund Joanna your points are good one our association estimates with the proposed rule that CMS up put out a couple of months ago, they've held back in a little over 5% of increase based on an inflation measurement on the market basket.
Obviously that impacts the entire industry, but it's existential for the small players who lack scale, which is over 50% of the provider numbers out there. So frankly, one of the reasons we are picking up.
License healthcare staff and expanding our Sanchez is because our small mom and pop competition, which exists in every market.
They are truly struggling because they lack scale and that 500 basis points of inflation is kicking their butts.
So right now CMS by holding back on reimbursement is creating opportunities for the players who have scale.
To expand market share and that's what we're gonna do but we really wish CMS with corrupt inflation will take the share by just a tough way to get it.
No and I guess it begs the question would you be interested in buying out some of these providers. So I guess at this point you should say that it's.
Cost effective and more cost effective to just hire way to workers.
Massively more cost effective as Kevin said in our prepared remarks.
It cost US 6 million incremental in this retention bonus to expand our workforce and that creates based on just on the expanded sense as we've enjoyed through today, that's $84 million of revenue that across a $6 million to acquire if.
Under pre pandemic, we would've paid anywhere from $100 million to $120 million for $84 million revenue, which obviously, we didn't do because we thought those were crazy valuations.
Right now, we're getting it through competition and the problem with buying buying the hospices are almost always too small.
To be profitable based on what we think is we think it's tied to quality, but to the extent that were big public company.
We have to have safeguards and.
Provide.
All levels of service and whatnot and the.
The two lowest census base, that's just not economically feasible, but acquisitions aren't off the table Joanna we could see doing a footprint that gives us in an area where not in and it would even pay a multiple for that but then we have to average down that multiple by basically increasing the size of whenever we acquire.
Through a market competition, so add any county in Florida.
Exit, California, and Florida typically are very successful in that regard, but we're not opposed to it but at the same time you know, we're very serious about protecting shareholders' capital if we put it at risk there better be a commensurate return.
Alright, I appreciate it that makes sense I see <unk>.
Oh this is sitting on the <unk> not a bad idea I guess as of now just switching to uhm.
<unk>.
So I appreciate the commentary that you.
Soon this you know.
We can assert gets continuous <unk> sounds.
Sounds like July maybe indicating some.
Some changes there.
Yeah, what would have to happen I guess in your mind for kind of hinder the call volume I guess to return or what kind of a first <unk> I'm kind of like you're looking out there in the market to kind of being able to to say like Elizabeth This is happening or it will happen soon.
Well this is a tough that's a tough one.
It comes down to.
Why does the.
Why does the phone not ringing, sometimes we know why the phone does ring is because it's.
Raining in some part of the country and whatnot and and.
And causing all sorts of havoc, which.
Is good for the business, but tough on the.
People.
And why but generally thinking why does it ring web dot ring. The only thing we can point to is let's say internet marketing that drives the.
That drives the.
The sales that we have.
To the extent that we have various measures I mean of course, I don't want to get too far the weeds, but.
There's the natural search which is free which.
The hope Roederer Pops up and that's tied to their algorithm and there's all sorts of things that you do you have bricks and mortar more bricks and mortar stores.
To get better better coverage.
You do well in that there's paid search.
There's one measure of paid search which is.
You want to make sure that you show up on the first page.
More frequently and.
The vaccine thing is that we are doing better than that.
Than we ever have another word for showing up on the first page of paid search.
More often.
We're just continuing to refine that and hope that even improve that but to the extent that.
Search to the entire category.
As we believe down substantially.
It's.
It's the.
The reverse of the converse of the raising of the rising Creek covers a lot of stomach the creek as in the whole category is.
Is down for people look starting the search but.
Answer your question one thing we can do is we can have our fingers crossed and hope the economic conditions improve so that more people searching for plumbing and drink, claiming number one but then number two is something that we continue to do and I think we've had some success with based on sound recorded metrics.
Being better placed on.
On the Internet.
Capture more of the.
As to consider Rover so.
Your question is a tough one with vaccine Corona ruder.
And I say with some trepidation trepidation that if it comes down to.
Running a business that involves keeping your fingers crossed and hoping demand comes back that's a tough way to that Sir.
Tough way to run the business and we're putting that aside right now and doing okay on the marketing side.
You certainly can ignore significant increase in call center close rates and technician close range at the residence has.
Like I said materially offset that we call demand, but not completely.
Shows the reset and and <unk>.
<unk> has been around for a long time, they have good management and good management that goes right to the field.
<unk> said.
Six months ago that you did.
What are the issues that we said we had an unprecedented 18 month period, where we.
We had some of our top branch managers hired away by private equity now that's largely stopped for a variety of reasons.
And we said at the time.
<unk> really.
The fact that we had.
New managers and the number of locations in an unusually high number of new locations, where we had the managers and again time is to help settle that but the softness we see is more for invasive more tied to overall economic conditions and we think we think based on.
Kind of our research that some of the some of the factors that caused that are ameliorating. So.
We don't kill ourselves.
Talk to you about the big economic conditions it's.
It's hard to draw too many.
Too many conclusions based on what almost by definition is insufficient data.
And the last question here to that and so would you expect cost cutting are you doing anything differently given to call volume being down and I can see what.
What are you getting me because I don't remember.
One thing about rotors, we do not quoted price over the phone we don't advertise the price I mean the way.
Somebody calls us they have no idea what road got charged for the issue.
We send somebody out.
They give a written estimate.
For what what would cause that's the first time the customer receives the price.
And actually as they've said.
Close right once once first of all when somebody calls the clothes right.
Conversion rate by the.
The person on the phone is higher.
We send a technician out who mentioned the price for the first time those growth rates are going higher so milk the cost cutting side we.
We think an important aspect of <unk> make sure that we protect margins and especially in the inflationary periods. We make sure we get price increases that reflect the installation.
Again, that's another success area.
We think we have gotten that price increase.
Price cutting doesn't really work for road, we don't advertise you know some people are plumbers.
We'll fix any drain for $99 now that's not the case I mean.
Find out that there is a.
A 50 dollar.
Charged for this and the $50 charge for that and they say well and that new entering your brains that exception.
But we don't do that so cost cutting out of the rotary side is would only come from something I referred to earlier and that is we built our workforce.
Through a lot of training and expense.
And we're probably a little too high given our current call volume and to the extent that we're not we're not going to lay anybody off or cut anybody but to accept that there's turnover would would be a little less aggressive and.
And.
And filling those those spaces caused by the termination probably.
You said, if our workforce was up 4% year to date.
A trip down to bring up one or 2%.
I think that would be very reasonable and that would be the call cost cutting and of course some.
Company like rode over labor is everything so that would.
That would have the effective cost cutting but it would be.
Passive rather than active and generally it's semantics, but I mean.
Our approach on cost cutting is we don't cut costs, we re engineered cost side of the system. What can we do for less money or hopefully less money into a better job doing various things, but reengineering is the sustainable way to drive down your expenses not just.
Through stress you start whacking expenses that usually.
Helps in the short term and hurts in the long term. So we're much fans of 369 months engineering various costs downward, but not just wacky.
I appreciate it. Thank you so much for taking the question.
Thank you at this time I'd like to turn the conference back to Kevin Mcnamara for closing remarks.
Okay, My remarks or limited banking everyone for.
Your kind attention and.
Will continue to work in again.
Again make a recovery from an unusual unusually tough.
Quarter for us, but again, we think we're.
Still on a winning wicket and thank you everyone.
This concludes today's conference call. Thank you for participating and you may now disconnect.
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