Q1 2024 Chemed Corp Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to the ChemEd Corporation First Quarter 2024 Earnings Conference Call.
Speaker Change: Good day, and thank you for standing by and welcome to the Chemed Corporation first quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.
Operator: 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 star one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Holley Schmidt. Please go ahead, Holley.
Speaker Change: 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 star one one on your telephone you will then hear an automated message advising your hand is right to withdraw your question. Please press star one one again.
Speaker Change: Please be advised that today's conference is being recorded I would now.
Speaker Change: Now like to hand, the conference over to your speaker for today Holly Schmidt. Please go ahead Holly.
Holley Schmidt: Good morning. Our conference call this morning will review the financial results for the first quarter of 2024, ended March 31st, 2024. Before we begin, let me remind you that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 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. 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 24th and in various other filings with the SEC.
Holley Schmidt: Good morning, Our conference call. This morning will review the financial results for the first quarter of 'twenty 'twenty four and at March 31, 2024, before we begin let me remind you that the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 apply to this conference call during.
Speaker Change: 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.
Speaker Change: 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 24th and in various other filings with the SEC.
Holley Schmidt: 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 24th, which is available on the company's website at ketmed.com.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: A reconciliation of these non-GAAP results is provided in the company's press release dated April 24th which is available on the company's website at Chemed Dot com.
Holley Schmidt: 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 Nick Westfall, Chairman and Chief Executive Officer of Chemed's VITAS Healthcare Corporation subsidiary. I will now turn the call over to Kevin McNamara.
Speaker Change: I would now like to introduce our speakers for today, Kevin Mcnamara, President and Chief Executive Officer of Chemed Corporation, Michael Whitman, Chief Financial Officer of Cabinet, and Nick Westfall, Chairman and Chief Executive Officer of came out to be taught to health Care Corporation subsidiary I will now I would now turn the call over to Kevin Mcnamara.
Kevin J. McNamara: Thank you, Holley. Good morning.
Kevin J. McNamara: Thank you Holly good.
Kevin J. McNamara: Welcome to Chemed Corporation's first quarter 2024 conference call. I will begin with highlights for the quarter, and Mike and Nick will follow up with additional operating details. I will then open up the call for questions.
Speaker Change: Morning.
Kevin J. McNamara: The Chemed Corporation's first quarter 2024 conference call I will begin with highlights for the quarter and Mike and Nick will follow up with additional operating detail.
Kevin J. McNamara: Open up the call for questions.
Kevin J. McNamara: We are very pleased with the strong operating metrics at VITAS in the first quarter of 2024. In the quarter, our admissions increased 4.5% over the prior year period. These strong emissions continue to drive higher patient costs. In the first quarter of 2024, our average daily census, or ADC, expanded by 1,835, an increase of 10.3 percent when compared to the prior year quarter and 1.6 percent when compared with the fourth quarter of 2023. VITAS's continued improvement in operating metrics is a result of our continued strength in hiring and retaining licensed staff.
Speaker Change: We are very pleased with the strong operating metrics would be pass in the first quarter 2024 in the quarter, our admissions increased four 5% over the prior year period.
Speaker Change: The strong ambitions continue to drive higher patient census in the first quarter of 2024 hour average daily census, or ADC expanded 1835, an increase of 10, 3% when compared to the prior year quarter, and one 6% when compared with the fourth quarter of 2023.
Speaker Change: VITAS is continued improvement in operating metrics as a result of our continued strength in hiring and retaining license staff in the quarter.
Kevin J. McNamara: In the quarter... Net bedside headcount increased by 173 licensed professionals. This exceeded our internal projections for the quarter, which more than offset the slight weakness we experienced in the fourth quarter of 2023. Now, let's turn to Red Uler.
Speaker Change: Net bedside head count increased 173 licensed professionals this exceeded our internal projections for the quarter, which more than offset the slight weakness we experienced in the fourth quarter of 2023.
Kevin J. McNamara: As we discussed during our fourth-quarter earnings call, we knew the first quarter was going to be a tough comparison for Rotary. The nationwide deep freeze at the beginning of 2023 resulted in six consecutive weeks of record revenue for Roto-Rooter. Not surprisingly, this phenomenon did not recur in 2024.
Speaker Change: Now, let's turn to Roto rooter.
Speaker Change: As we discussed during our first fourth quarter earnings call. We knew the first quarter was going to be a tough comparison for roto rooter the nationwide deep freeze at the beginning of 2023 resulted in six consecutive weeks of record revenue for Roto Rooter not surprisingly this phenomenon did not recur in 2024.
Kevin J. McNamara: Overall, our call volume was down 9.1% when compared to the prior year quarter. However, close rates at the call center at the time of dispatch and when our technician reaches the customer location remain consistently strong compared to historical levels. Residential revenue at Roto-Rooter declined 3.5 percent, but we're still seeing demand headwinds related to consumer sentiment and concerns about the macroeconomic environment. The residential revenue decline was within our range of expectations for the first quarter.
Speaker Change: Overall, our coal volume was down nine 1% when compared to the prior year quarter.
Speaker Change: Close rates at the call center at the time of dispatch when our technician reaches the customer location remained consistently strong compared to historical levels.
Speaker Change: <unk> revenue at Roto Rooter declined three 5%, while we're still seeing demand headwinds related to consumer consumer sentiment and concerns about macroeconomic environment. The residential revenue decline was within our range of expectations for the first quarter.
Kevin J. McNamara: As a result of changes made to various aspects of Google's search algorithms, Roto-Rooter temporarily increased spending on paid advertising in late 2023 and early 2024. This additional market expense was the major cause of Roto-Rooter's lower margins in the first quarter of 2024. Commercial revenue declined 10.5% during the quarter, which was a disappointment to us. Some of the same issues we discussed related to residential revenue, including difficult comparisons. Macroeconomic concerns and Internet Marketing Disruption have also impacted commercial revenue.
Speaker Change: As a result of changes made with various aspects of Google search algorithms Roto rooter temporarily increased spending on paid advertising ties in late 2023 in early 2024.
Speaker Change: This additional marketing expense is a major cause of roto rooter has lower margins in the first quarter of 2024.
Speaker Change: Commercial revenue declined 10, 5% during the quarter, which was a disappointment to us some of the same issues, we discussed related to residential revenue, including difficult comparisons macroeconomic concerns.
Speaker Change: And internet marketing disruption.
Speaker Change: So impacted commercial revenue.
Kevin J. McNamara: As Michael discussed in further detail, we also had more demand than we could service during the pandemic. As a result, our branch personnel did not spend as much time cultivating commercial relationships as we historically have dedicated to that part of the business.
Speaker Change: As Mike will discuss in further detail. We also had more demand than we could service during the pandemic.
Speaker Change: As a result, our branch personnel did not spend as much time cultivating commercial relationships as we historically have dedicated that part of the business. We have analyzed the causes of the decline are executing strategies to improve commercial revenue performance.
Kevin J. McNamara: We have analyzed the causes of decline and are executing strategies to improve commercial revenue performance. To summarize, we are pleased with the continued strong results of beta. Our growth in licensed healthcare professionals, strong admissions, and correspondent growth in patient census have returned VITAS to normalized operating conditions. As Nick will discuss further, we're also excited about the recently closed acquisition of Covenant Health and Community Services. We believe this will be a big win for us both from an operational and financial perspective for 2020-24 and beyond.
Speaker Change: <unk>, we are pleased with the continued strong results at VITAS our growth in licensed health care professionals strong admissions and a corresponding growth in patient census have returned VITAS to normalized operating conditions.
Speaker Change: Nick will discuss further were also excited about the recently closed acquisition of Covenant Health and community services. We believe this would be a big win for US both on an operational and financial perspective for 2024 and beyond.
Kevin J. McNamara: We believe Roto-Rooter is still well positioned, despite the difficult operating conditions that it faces. Rotary maintains its core competitive advantages in terms of excellent brand awareness, customer response time, 24-hour call centers, and aggressive internet presence. With that, I would like to turn this conference over to Mike.
Speaker Change: We believe roto rooter is still well positioned despite the difficult operating conditions that basis Roto Rooter maintains its core competitive advantages in terms of excellent brand awareness customer response time 27 call centers and aggressive internet presence.
Speaker Change: With that I would like to turn this conference over to Mike.
Michael D. Witzeman: PITAS's net revenue was $354 million in the first quarter of 2024, which is an increase of 14% when compared to the prior year period. This revenue increase is comprised primarily of an 11.5% 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 60 basis points in the quarter when compared to the prior year revenue and level of care mix.
Mike: Thanks, Kevin.
Mike: <unk> net revenue was $354 million in the first quarter of 2024, which is an increase of 14% when compared to the prior year period.
Mike: This revenue increase is comprised primarily of an 11, 5% increase in days of care in a geographically weighted average Medicare reimbursement rate increase of approximately two 6%.
Mike: The acuity mix shift negatively impacted revenue growth 60 basis points in the quarter when compared to the prior year revenue and level of care mix.
Michael D. Witzeman: The combination of the Medicare cap and other contra revenue changes increased revenue growth by approximately 50 basis points. Average revenue per patient day in the first quarter of 2024 was $203.08, which is 212 basis points above the prior year period. Reimbursement for routine home care and high-acuity care averaged $177.67 and $1,074.78, respectively.
Speaker Change: The combination of Medicare cap and other contra revenue changes increased revenue growth by approximately 50 basis points.
Speaker Change: Average revenue per patient day in the first quarter of 2024 was $203 and <unk>, which is 212 basis points above the prior year period.
Speaker Change: Reimbursement for routine home care and high acuity care averaged $177 67.
Speaker Change: <unk> $1074 78, respectively.
Michael D. Witzeman: During the quarter, high acuity days of care were 2.8% of total days of care, a decline of 10 basis points when compared to the prior year quarter. Adjusted EBITDA excluding Medicare cap totaled $60.7 million in the quarter, an increase of 67.2%. The adjusted EBITDA margin in the quarter, excluding the Medicare cap, was 17.0%, which is a 544 basis point above the prior year period. The expense attributable to the retention bonus program in 2023 resulted in a 370 basis point improvement in the 2024 margin. Now, let's turn to Roto-Rooter.
Speaker Change: During the quarter high acuity days of care were two 8% of total days of care, a decline of 10 basis points when compared to the prior year quarter.
Speaker Change: Adjusted EBITDA, excluding Medicare cap totaled $67 million in the quarter, an increase of 67, 2%.
Speaker Change: Adjusted EBITDA margin in the quarter, excluding Medicare cap was 17.0%, which is a 544 basis points above the prior year period.
Speaker Change: The expense attributable to the retention bonus program in 2023 resulted in a 370 basis point improvement in the 2020 for margin.
Speaker Change: Now, let's turn to Roto rooter.
Michael D. Witzeman: Roto-Rooter generated quarterly revenue of $235.2 million in the first quarter of 2024, a decrease of 5.8% when compared to the prior year quarter. Roto-Rooter branch residential revenue in the quarter totaled $162.9 million, a decrease of 3.5% from the prior year period. Roto-Rooter branch commercial revenue in the quarter totaled $53.7 million, a decrease of 10.5% from the prior year. As Kevin mentioned, this was below our expectations for the first quarter. The commercial business is experiencing some of the same issues we have seen with residential revenue in the first quarter, including a difficult comparison with the prior year and continued Internet marketing challenges. We also continue to face some issues related to certain of our retail customers. In addition to those factors, during the pandemic, we had more demand than we could service.
Speaker Change: Literature generated quarterly revenue of 230.
Speaker Change: $2 million in the first quarter of 2024.
Speaker Change: A decrease of five 8% when compared to the prior year quarter.
Speaker Change: Roto Rooter branch residential revenue in the quarter totaled $162 9 million.
Speaker Change: A decrease of three 5% from the prior year period.
Speaker Change: Roto Rooter branch commercial revenue in the quarter totaled $53 $7 million, a decrease of 10, 5% from the prior year.
Speaker Change: As Kevin mentioned this was below our expectations for the first quarter.
Speaker Change: The commercial business is experiencing some of the same issues, we have seen with residential revenue in the first quarter, including a difficult comparison with prior year and continued internet marketing challenges.
Speaker Change: We also continued to face some of the issues related to certain of our retail customers.
Speaker Change: In addition to those factors during the pandemic, we had more demand than we could service.
Michael D. Witzeman: As a result, our branch personnel did not maintain as much focus on cultivating commercial accounts as we historically have maintained. Accordingly, Roto-Rooter has embarked upon a company-wide push to reemphasize the behaviors that are necessary to develop and retain commercial customers. We are increasing the number of touchpoints with key accounts both through our national call centers and locally in each branch. We have also implemented strategies to maximize revenue for the leads we do currently receive by training our commercial technicians to be acutely aware of upselling opportunities at every job they perform.
Speaker Change: As a result, our branch personnel did not maintain as much focus on cultivating commercial accounts as we historically have maintained occur.
Speaker Change: Accordingly, Roto Rooter has embarked upon a companywide push to reemphasize the behaviors that are necessary to develop and retain commercial customers.
Speaker Change: We are increasing the number of touch points with key accounts, both through our national call centers and locally in each branch.
Speaker Change: We have also implemented strategies to maximize revenue for the leads we do currently receive by training our commercial technicians to be acutely aware of upselling opportunities at every job they perform.
Nicholas Michael Westfall: We believe that some of these strategies should provide short-term help, while other efforts will take longer to show results. Adjusted EBITDA at Roto-Rooter in the fourth quarter of and the first quarter of 2024 totaled $60.7 million, a decrease of 15.6% compared to the prior year quarter. The adjusted EBITDA margin in the quarter was 25.8%, which is 299 basis points below the prior year period. As Kevin mentioned, the decrease in margins was driven mainly by higher internet marketing costs.
Speaker Change: We believe that some of these strategies should provide short term help while other efforts will take longer to show results.
Speaker Change: Adjusted EBITDA, a rotary during the fourth quarter.
Speaker Change: The fourth first quarter of 2024 totaled $67 million a.
Speaker Change: <unk>, a 15, 6% compared to the prior year quarter.
Speaker Change: The adjusted EBITDA margin in the quarter was 25, 8%, which is 299 basis points below the prior year period.
Speaker Change: As Kevin mentioned the decrease in margins was driven mainly by higher Internet marketing costs.
Nicholas Michael Westfall: Before the end of the first quarter, we reduced our overall marketing spend back to more historical levels, and as a result, we anticipate an improvement in operating margins starting in the second quarter. I will now turn this call over to Nick.
Speaker Change: Before the end of the first quarter, we reduced our overall marketing spend back to more historical levels and as a result, we anticipate an improvement in operating margins starting in the second quarter.
Speaker Change: I will now turn this call over to Nick.
Nicholas Michael Westfall: I'm very pleased with our continued sustainable expansion of our workforce and patient capacity through the first quarter of 2024. As Kevin mentioned, we expanded our bedside headcount by 173 licensed professionals during the quarter. The first quarter of 24 marked our seventh consecutive quarter of expanding our clinical workforce capacity. In the first quarter of 24, our average daily census was 19,665 patients, an increase of 10.3% when compared to the prior year and an increase of 313 or 1.6% sequentially.
Nicholas Michael Westfall: Thanks, Mike.
Nicholas Michael Westfall: I am very pleased with our continued sustainable expansion of our workforce and patient capacity through the first quarter of 2024 as.
Nicholas Michael Westfall: As Kevin mentioned, we expanded our bedside head count by 173 licensed professionals during the quarter.
Nicholas Michael Westfall: The first quarter of 'twenty four marked our seventh consecutive quarter of expanding our clinical workforce capacity.
Nicholas Michael Westfall: In the first quarter of 24, our average daily census was 19665 patients an increase of 10, 3% when compared to the prior year and an increase of 313 or one 6% sequentially.
Nicholas Michael Westfall: VITAS generated quarterly sequential ADC growth over the last six quarters on.
Nicholas Michael Westfall: On the last day of the quarter March 31st we had over 20000 live patients on service, which was an exciting milestone for VITAS.
Nicholas Michael Westfall: VITAS has generated quarterly sequential ADC growth over the last six quarters. On the last day of the quarter, March 31st, we had over 20,000 live patients on service, which was an exciting milestone for VT. In the first quarter of 24, total VITAS admissions were 16,911.
Nicholas Michael Westfall: In the first quarter of 'twenty four total VITAS admissions were 16911. This represents a four 5% increase when compared to the first quarter of 'twenty three.
Nicholas Michael Westfall: And represents an increase across all four of our reported pre admit segments.
Nicholas Michael Westfall: In the quarter, our nursing home admissions increased 4% assisted facility admissions expanded to one hospital directed admissions increased three 2% and our home based patient in mis admissions expanded 12% when compared to the prior year period.
Nicholas Michael Westfall: This represents a 4.5% increase when compared to the first quarter of 23, and represents an increase across all four of our reported pre-admit segments. In the quarter, our nursing home admissions increased 4 percent, assisted facility admissions expanded 2.1, hospital-directed admissions increased 3.2 percent, and our home-based patient admissions expanded 12 percent when compared to the prior year period. Our average length of stay in the quarter was 103.9 days. This compares to 99.9 days in the first quarter of 23 and 105.9 days in the fourth quarter of 20. Our median length of stay was 16 days in the quarter, which compares to 15 days in the first quarter of 23 and 17 days in the fourth quarter of 20.
Nicholas Michael Westfall: Our average length of stay in the quarter was $103 nine days. This compares to 99.9 days in the first quarter of 'twenty, three and 105 nine days in the fourth quarter of 'twenty three.
Nicholas Michael Westfall: Our median length of stay was 16 days in the quarter and compares to 15 days in the first quarter of 2003, and 17 days in the fourth quarter of 'twenty three.
Nicholas Michael Westfall: As previously announced we completed our $85 million acquisition of certain assets from Covenant health and community services on April 17th.
Nicholas Michael Westfall: Our teams are currently hard at work in integrating the operations of Covenant.
Nicholas Michael Westfall: I'm pleased to say that approximately 680 patients were reevaluated for eligibility and chose to transfer on the VITAS service as a result of this transaction.
Nicholas Michael Westfall: We have also successfully retained practically all of our covenants license workforce, who are identified during diligence as part of that transition.
Nicholas Michael Westfall: As previously announced, we completed our $85 million acquisition of certain assets from Covenant Health and Community Services on April 17. Our teams are currently hard at work integrating the operations of Covenant. I am pleased to say that approximately 680 patients were re-evaluated for eligibility and chose to transfer to the VITAS service as a result of this transaction. We have also successfully retained practically all of Covenant's licensed workforce who were identified during diligence as part of this transition.
Nicholas Michael Westfall: The covenant transaction could not have been accomplished without the unwavering commitment dedication and focus of each of our existing and new VITAS team members.
Nicholas Michael Westfall: They showed during fulfilling our mission in every community we serve.
Nicholas Michael Westfall: This transaction illustrates what is possible when two long standing mission focused organizations collaborate irrespective of tax status to ensure we collectively serve the evolving needs of our communities.
Nicholas Michael Westfall: The covenant transaction could not have been accomplished without the unwavering commitment, dedication, and focus of each of our existing and new VITAS team members, as they showed during fulfilling our mission in every community we serve. This transaction illustrates what is possible when two long-standing, mission-focused organizations collaborate irrespective of tax status to ensure we collectively serve the evolving needs of our communities. This opportunity was born out of the relationships and mutual respect amongst our organization.
Nicholas Michael Westfall: This opportunity was born out of the relationships and mutual respect amongst our organizations I would like to thank the board of directors and executive team of Covenant for ensuring our continued focus and cultural alignment.
Nicholas Michael Westfall: Loud pretty integration to proceed seamlessly.
Nicholas Michael Westfall: I believe these types of opportunities should continue as the hospice and palliative care industry carries on its 45 plus year mission across the country are focusing on the patients and families and the communities, we serve without allowing for items like tax status to impede progress.
Nicholas Michael Westfall: To recap what our team has accomplished we've now generated seven quarters of sequential net growth in licensed health care workers and six quarters of sequential growth in ADC.
Nicholas Michael Westfall: I would like to thank the Board of Directors and the Executive Team of Covenant for ensuring a continued focus and cultural alignment that allowed for the integration to proceed seamlessly. I believe these types of opportunities should continue as the hospice and palliative care industry carries on its 45-plus-year mission across the country, focusing on the patients and families in the communities we serve, without allowing for items like tax status to impede progress.
Nicholas Michael Westfall: We now have a sustainable and predictable approach to continue methodically building, our clinical capacity and patient base that has taken us past, our pre pandemic levels and forward into 'twenty four and beyond.
Nicholas Michael Westfall: We have also demonstrated the ability and interest in partnering with other providers through acquisitions to ensure communities continue to receive the best possible care.
Nicholas Michael Westfall: To recap what our team has accomplished, we've now generated seven quarters of sequential net growth in licensed healthcare workers and six quarters of sequential growth in ADC. We now have a sustainable and predictable approach to continue methodically building our clinical capacity and patient base that has taken us past our pre-pandemic levels and forward into 24 and beyond. We have also demonstrated the ability and interest in partnering with other providers through acquisitions to ensure communities continue to receive the best possible care. With that, I'd like to turn the call back over to Kevin. Thank you, Nick. I will now open this teleconference.
Nicholas Michael Westfall: With that I'd like to turn the call back over to Kevin. Thank you Nick I will now open this teleconference to questions.
Kevin J. McNamara: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be called.
Kevin J. McNamara: So let's draw your questions. Please press star one again.
Speaker Change: These standby, while we compile the Q&A roster.
Nicholas Michael Westfall: Your first call comes from the line of Ben <unk> of RBC capital markets. Please go ahead.
Nicholas Michael Westfall: Hi, This is Michael <unk> on for Dan.
Michael Andrew Murray: Roto Rooter call volume has declined in the high single digit low double digit range for the past four.
Kevin J. McNamara: Thank you, Nick. I will now open this teleconference to questions.
Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be called. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A. Your first call comes from the line of Ben Hendrix of RBC Capital Markets. Ben, please go ahead. Hi.
Michael Andrew Murray: Quarters, obviously, you grew a lot during the pandemic and youre going up again.
Ben: Up against tougher comps, but how much of the weaker call volume is attributable to the weakening consumer and how should we think about this for the rest of 2024.
Speaker Change: Well, let me just jump.
Speaker Change: I jumped in there.
Speaker Change: And let me misery loves company, let me say that.
Speaker Change: What we're seeing through.
Michael Andrew Murray: Hi, this is Michael Murray on behalf of Ben. Roto-Rooter call volume has declined in the high single-digit, low double-digit range for the past four quarters. Obviously, you grew a lot during the pandemic, and you're going up again, up against tougher comps. But how much of the lower call volume is attributable to the weakening consumer? And how should we think about this for the rest of 20
Speaker Change: Basically everyone, who we talked to in the sector, we see softness in the sector, which is as you say it could be pandemic comparisons could be.
Speaker Change: People did a lot of work.
Speaker Change: Out of work during the pandemic, which.
Speaker Change: Drained the swamp as it were I don't know I mean, but I'll, just say that the sector has weakness generally speaking.
Kevin J. McNamara: And let me, you know, misery loves company. Let me say that, you know, what we're seeing through Basically, everyone who we talked to in the sector, we see softness in the sector, which could be, as you say, could be, you know, pandemic comparisons could be, you know, People did a lot of work during the pandemic, which drained the swamp, as it were. I don't know. I mean, but I'll just say that the sector has weaknesses, generally speaking.
Speaker Change: We don't want to go into it too much but because of this weakness.
Speaker Change: Key marketer Google made some changes.
Speaker Change: To their service offering that is when you call up let's say plumbing Cincinnati they made.
Speaker Change: Some significant changes, which I won't bore you with and what shows up on the phone had the effect of.
Speaker Change: Spreading the.
Speaker Change: Relatively meager number of calls across a much broader base, we had an impact almost immediately.
Kevin J. McNamara: You know, I don't we don't want to go into it too much, but because of this week. You know, a key marketer, Google, made some changes to their service offering, that is, when you call up, let's say, plumbing Cincinnati, some significant changes. Joe Borre's approach to what shows up on the phone had the effect of spreading the meager number of calls across a much broader base that had an impact almost immediately late last year in our room.
Speaker Change: Late last year in our in our.
Speaker Change: Okay.
Speaker Change: Our call volume and we're dealing with that.
Speaker Change: In this quarter, we had a desperate times demand desperate measures.
Speaker Change: We did a lot of paid search which is now relegated to the.
Speaker Change: Third level, which is first there is.
Speaker Change: There is a section that.
Speaker Change: We call.
Kevin J. McNamara: We're dealing with that. In this quarter, desperate times meant desperate measures. We did a lot of paid search, which is now relegated to the third level, which is, you know, first there's the, there's a section that gets the benefits of that. And we weren't there.
Speaker Change: Those LSA then we have a map that we have paid search which dramatically.
Speaker Change: Increased aggressive bidding in the paid search, which we said temporarily we wanted to test the limits of the.
Speaker Change: <unk>.
Speaker Change: The benefits of that and we werent there and so we pulled back that extra advertising as it were which had.
Kevin J. McNamara: And so we pulled back that extra advertising, as it were, which had that, which we refer to as a temporary impact on the road or margins. But we're, you know, we're fighting a new battle. It's a little bit like when they changed when people basically went to the Internet.
Speaker Change: That.
Speaker Change: The preferred was a temporary impact on the roto rooter margins.
Speaker Change: But we're.
Speaker Change: We're fighting a new battle, it's a little bit like when they when.
Speaker Change: When they changed the <unk>.
Speaker Change: People basically went to the internet instead of going to the yellow pages, we have a dominant position in the yellow pages.
Kevin J. McNamara: We had a dominant position in the Yellow Pages, um... And that was gone because people no longer went to the Yellow Pages. And internet marketing, it took us a while, but we developed a dominant position on the internet. You know, again, with changes in various algorithms, it's a new battle, which I have confidence Roto-Rooter will be the winner again.
Speaker Change: And that was gone because people no longer went through a yellow pages and.
Speaker Change: On the Internet marketing it took us a while but we've developed a dominant position.
Speaker Change: The internet.
Speaker Change: And.
Speaker Change: Again.
Speaker Change: Changes in various algorithms.
Speaker Change: Battle, which I have confidence roto rooter will be.
Kevin J. McNamara: But, you know, If you see from any of our verbiage, I mean, it's a little bit outside of our hands, our operational...................................................................................................... We've got our price increase; our manpower is good. You know, our close rates are good. We're just, you know, we've got to get the phone to ring now.
Speaker Change: The winter again, but.
Speaker Change: <unk>.
Speaker Change: If you see from any of our verbiage I mean, it's a little bit outside of our hands are operational.
Speaker Change: Metrics at Roto Rooter has never been better.
Speaker Change: We've got a price increase our manpower is good.
Speaker Change: Our close rates are good.
Speaker Change: We're just.
Speaker Change: Got to get the foundering now thats all on that.
Kevin J. McNamara: That's all on the downside. The good side is that the fact that there's difficulty, you know, generally, we've never had a better environment for buying in. The kind of the, The Relatively Small Rotary Franchises that are always, you know, kind of on our list to buy, they're suddenly becoming available because of the softness. So we'll try to take advantage of it and then, you know, do the blocking and tackling that will float us up to the top of the Internet appearance network.
Speaker Change: On the downside the good side is that the.
Speaker Change: The fact that there is difficulty.
Speaker Change: Generally we've never had a better.
Speaker Change: Environment for buying in.
Speaker Change: Kind of the.
Speaker Change: The relatively small roto rooter franchises that are always kind of on our list of bi they are suddenly become available because of the softness so we'll try and take advantage of it and then do the blocking and tackling that will flow to us up to the.
Speaker Change: Top of the Internet appearance.
Kevin J. McNamara: But it's a slog, you know. I think that when you look at... you know, what we're doing, some of the negatives in road order for the quarter are temporary. And, you know, we're taking actions that are much more likely to bear fruit. Mike, any doubt about that? Yeah, I think it's hard.
Speaker Change: Network, but.
Speaker Change: It's a slog.
Speaker Change: I think that when you look at.
Speaker Change: What we're doing I mean, some of the negatives in roto rooter for the quarter I think were temporary and.
Speaker Change: We're taking actions that I think are much more likely to bear fruit, Mike anything to add on that.
Michael D. Witzeman: Yeah, I think it's hard for us to put a number, a specific number, on what we think the consumer sentiment, consumer demand, and macroeconomic environment is causing, but as Kevin said, we have a lot of indications that we are certainly not the only Home Residential Service Provider that's struggling, not only from, you know, people outside of the Road Router Network, but also, we know our franchises are struggling, as Kevin mentioned We know that our contractors are struggling.
Mike: I think it's hard for us to put a number or a specific number on what we think the consumer sentiment consumer demand macroeconomic environment is causing but as Kevin said we.
Mike: A lot of indications that we are certainly not the only.
Mike: Home residential service provider, that's struggling not only from people outside of the Roto Rooter network, but also we know our franchises are struggling as Kevin mentioned we.
Mike: No that our contractors are struggling.
Michael D. Witzeman: The other thing I would tell you is that we see this struggle across all five of our regions. It's not, you know, sort of in one region or centered around one location in the country. All of which is to say we do definitely think that there are still consumer headwinds that we're facing that are underlying some of the softness in demand.
Mike: The other thing I would tell you is we see this struggle across all five of our regions it's not.
Mike: Sort of at one region are centered around one location in the country.
Mike: All of which is to say, we do definitely think that there are still consumer headwinds that we're facing that our underlying some of the softness in demand.
unknown: Okay, that's really helpful. Just one more on Roto-Rooter, a multi-part question. So last quarter, you said that commercial customers were coming to you asking for significant price decreases, which caused you to walk away from some jobs. Obviously, if those were non-discretionary, those were going to someone else.
Michael D. Witzeman: Hi.
Speaker Change: Okay, that's really helpful.
Speaker Change: Just one more on router.
Mike: Multipart question, So last last quarter, you said that.
Mike: Commercial customers were coming to you asking for significant price decreases which caused you to walk away from some jobs, obviously, if those were non discretionary.
unknown: Are you still seeing this? And then just the next part, at the same time, Roto-Rooter, you guys saw significant margin expansion for the past few years. Do you think the markets need to go back down to where we saw them in pre-pandemic 2019, 2020 levels in order to drive revenue growth? And then how should we think about the balance between revenue growth and margins for Roto-Rooter?
Mike: We're going to someone else.
Mike: Are you still seeing that and then just.
Mike: Next part at the same time reiterate or you guys saw significant margin expansion for the.
Mike: Past few years.
Mike: Do you see do you think margins need to go back down to where we saw them in pre pandemic 2019, 2020 levels in order to drive revenue growth.
unknown: And then how should we think about the balance between revenue growth and margins for <unk>.
unknown: Sure, on the retail thing that we mentioned in our February call, retail is definitely still part of the problem; it's still down. Commercial retail, yeah, the commercial retail business is still down. It's still part of the problem, but as we, you know, kept asking questions and digging into it, we discovered it was a little bit of a bigger issue than just the retail sector. That's the first part. In other words, that was the first group.
Mike: Sure.
unknown: Sure on the.
Mike: The retail thing that we mentioned that in our February call retail is definitely still part of the problem, it's still down.
Mike: Commercial commercial retail business is still down it's still part of the problem.
Mike: But as we kept asking questions and delving into it we describe it as a little bit of a bigger issue than just the retail sector Thats. The first part in other words that was the first group.
Mike: That was struggling.
Mike: That one.
unknown: Unknown Executive, Benjamin Hendrix, Nicholas Westfall, Michael Witzeman, Chemed Corp., Chemed, plumber, or maybe I'll try a discount plumber, you know, and what we've seen with those situations over time is that people try those, and there are a lot of reasons why a company like Roto-Rooter is a better option for them, but you're going through that period where people are continuing to When we first saw that with our large commercial customers, they were the first, but it was more pervasive than we saw in the early stages.
unknown: Which we seem like stuck out like a sore thumb is that continuing.
Speaker Change: Yes, and I think that what you have to give you. An example, an element.
Speaker Change: A big property manager.
Mike: Get struggling sees bills like this it says maybe I'll try hiring my own.
Mike: Yeah.
unknown: Plumber or maybe I'll try a discount plumber on what we've seen with those situations over time is.
Mike: People try those and Theres a lot there are a lot of reasons why a company like <unk> is a better option for them, but that you're going through that period, where people are trying and are continuing to try other things and we first saw that with a large.
Mike: Our large commercial customers.
Mike: But.
Mike: They reversed.
unknown: But.
unknown: It was more pervasive than we saw in the early stages, but.
unknown: It's a battle, you know; we've owned Roto-Rooter for 44 years, and they've always kind of risen to the fight, and there's no reason we wouldn't have a lot of confidence in that. With regard to margin, first, you know, you would have to adjust for the excess marketing costs that we had in the quarter. You know, again, I think that, If you ask us, we guide into a margin for road routers, you know, there's no reason we don't, we think that at this point, there's any reason to change that guidance with regard to that margin.
Mike: We are.
Speaker Change: It's a battle road, we've owned Roto Rooter for 44 years.
unknown: And.
Mike: They are always kind of risen to the pipe and.
Mike: No reason, we wouldn't have a lot of confidence in that with regard to margin.
Mike: First we would have to you'd have to adjust for the excess marketing costs that we had in the quarter.
Mike: Again, I think that.
Mike: If you ask us.
Mike: We guided to a margin for roto rooter.
Mike: We don't we think that at this point there is any reason to change that guidance with regard to that margin.
unknown: The first quarter.
Michael D. Witzeman: Right, in the first quarter, by far, the primary issue with the EBITDA margin was certainly marketing costs, as Kevin mentioned. Obviously, with revenue lagging a little bit, we might not be quite to the high level of the margin range that we had given, but we're certainly going to be within the range, we believe, particularly given that, as we've mentioned many times in the past, most of our technicians are commission-based, so we're quite a variable cost-based company. And so we're not quite as sensitive to a marginal percentage decrease in revenue.
Mike: By far the primary issue with the EBITDA margin was certainly the marketing costs as Kevin mentioned, obviously with.
Mike: No.
Mike: Revenue lagging a little bit we might not be quite to the high level of the margin range that we've given but were certainly going to be within the range. We believe.
Mike: Particularly given that as we've mentioned many times in the past our.
Mike: Most of our technicians are commission based so we're quite variable cost based company and so we're not quite as sensitive on a margin on a marginal percentage to decreases in revenue.
unknown: Okay, that's really helpful. Just shifting to VITAS, so really strong ADC growth. How did that compare to your internal expectations? Obviously, this is partly a byproduct of last year's retention program and better referral partnerships, but is there anything else to highlight here, any changes in the competitive landscape? Yeah, sure.
Speaker Change: Okay, that's really helpful.
Speaker Change: Just shifting to VITAS.
unknown: Really strong ADC growth.
Mike: How did that compare to your internal expectations.
unknown: Obviously this is partly a byproduct of last year's retention program and better referral partnerships, but is there anything else to highlight here any changes in the competitive landscape.
Nicholas Michael Westfall: Yeah, sure. The first quarter slightly outperformed our internal expectations regarding overall census growth. The one thing I just want to highlight and reinforce, you know, while we referenced the retention program that goes all the way back now, you know, we're nine months since the expiration of that. So while that formed a catalyst associated with it, all the activity that built the cultural enhancements, the things we've talked about over the last quarter, has allowed it to continue to perform absent that program being in place for what is 10 months right now with great performance.
Speaker Change: Yes sure.
Speaker Change: Okay.
Nicholas Michael Westfall: The first quarter slightly outperformed our internal expectations regarding overall census growth.
Speaker Change: The one thing I, just want to highlight and reinforce.
Nicholas Michael Westfall: While we referenced the retention program that goes all the way back now.
Nicholas Michael Westfall: Our nine months since the expiration of that so while that formed a catalyst associated with it all of the activity that built the cultural enhancements that things we've talked about over the last quarter is what's allowed us to continue to perform absent that program being in place.
Nicholas Michael Westfall: For what is 10 months right now with that with great performance. So from an outlook standpoint feel very good about it.
Nicholas Michael Westfall: So from an Outlook standpoint, you know, feel very good about it and feel very good about the Census Outlook, not only with same store operations but the successful integration of, you know, Covenant that's been occurring over the last week or so. So feel very good about the remaining forecast for 24 and beyond. Regarding other competitive factors, I don't think there's anything necessarily new and unique about the first quarter, other than sometimes success tends to compound upon itself, and we're seeing that and experiencing that.
Nicholas Michael Westfall: And feel very good about the census outlook not only with.
Speaker Change: Same store operations, but the successful integration.
Nicholas Michael Westfall: Covenant that it's been occurring over the last week or so so feel very good about.
Speaker Change: The remaining forecast for 24 and beyond regarding other competitive factors I don't think theres anything necessarily new and unique in the first quarter other than sometimes success tends.
Nicholas Michael Westfall: <unk> tends to compound upon itself and we're seeing that and experiencing that and so when you start thinking about the ability to continue to very strongly attract new team members to come into the organization, they're looking at it and.
Nicholas Michael Westfall: And so when you start thinking about the ability to continue to very strongly attract new team members to come to the organization, they're looking at it and, you know, really seeing a place in which it's hitting on all cylinders, but, just as importantly, has a very strong cultural tie that's led to continued improvement in retention. And so it's sort of compounding upon itself, which is a great situation and what gives me the confidence I was talking about earlier.
Nicholas Michael Westfall: And really seeing a place in which.
Speaker Change: It's hitting on all cylinders, but just as importantly has a very strong cultural tie. That's led to continue continued improvement in retention and so it's sort of compounding upon itself, which is which is a great situation and.
Nicholas Michael Westfall: What's what gives me the confidence I was referencing about before.
unknown: Awesome, thank you. Just one last one on VTAS. You made your first sizable VTAS acquisition in quite some time. Congratulations.
Speaker Change: Awesome. Thank you.
Speaker Change: Just just one one last one on <unk>.
unknown: You made your first sizable VITAS acquisition in quite some time can congratulations.
Nicholas Michael Westfall: What was the census that you added from the acquisition? I think you mentioned 600. Was that the census we should think about adding moving forward?
Speaker Change: What was the incentive that you added from the acquisition I think you mentioned 600 was that.
Speaker Change: The census, we should think about adding moving forward.
Nicholas Michael Westfall: Yeah, so what it referenced in the transcript was 680 patients transferred, which is not the exact same thing as census or days of care translation with it. You know, we'll provide, we'll include some of that with anticipation from an updated guidance at the end of the second quarter, but I wouldn't just think of it as a one-time step up that you add into your model because, you know, we have other opportunities as we think about the existing markets that we overlap with Covenant, as well as new markets for us to deploy our approach that allows us to not only increase admissions but also look for opportunities to So I feel very encouraged about the outlook for those markets, the outlook for the outlook or the acquisition, it being immediately accretive, and what it will mean for the remainder of 24 and into 25. 680 is
Speaker Change: Yes, so what I had referenced in the transcript was 680 patients transferred which is not the exact same thing as census, or days of care translation with it.
Nicholas Michael Westfall: We will provide will include some of that with an anticipation from an updated guidance at the end of the second quarter, but.
Nicholas Michael Westfall: I wouldn't just think of it as a one time step up that you're adding to your model because we have other opportunities as we think about the existing markets that.
Nicholas Michael Westfall: We overlap with covenant as well as the new markets for us to deploy our approach that allows us to not only increase admissions, but also look for opportunities to educate those communities of referring patients earlier in their disease trajectory to us that would allow for overall days of care expansion as well so feel.
Nicholas Michael Westfall: Very encouraged about the outlook for those markets the outlook of the acquisition at being immediately accretive and what it will mean for the remainder of 'twenty four and into 'twenty five and beyond the 680 <unk>.
Nicholas Michael Westfall: The 680 is basically the starting point to be able to start calculating it.
Nicholas Michael Westfall: Basically the starting point to be able to start calculating life patients.
Nicholas Michael Westfall: Okay, and just a quick follow-up. Could you talk a little bit about the hospice M&A environment? How are valuations, and are you continuing to look at opportunities?
Nicholas Michael Westfall: Okay.
Nicholas Michael Westfall: Okay.
Nicholas Michael Westfall: And just a quick follow up could you talk a little bit about the hospice M&A environment. How are valuations and are you continuing to look at opportunities.
Nicholas Michael Westfall: I'll start at the end of that question, which is yes, continue to absolutely look at opportunities. Valuation ranges, obviously, there is a larger range, and a lot of it has to do with the circumstances of those existing providers, the markets in which they operate, as well as whether it is a platform or whether it is just a desirable location that maybe has restrictions around accessing the market that really influence those multiples.
Speaker Change: I'll start at the end of that question, which is yes continue to absolutely looked at opportunities valuation ranges. Obviously, there is a larger range and a lot of it has to do with the circumstances of.
Nicholas Michael Westfall: Of those existing providers the markets in which they operate.
Nicholas Michael Westfall: As well as whether it is a platform or whether it is a just a desirable location that maybe has restrictions around accessing the market that that really influenced those multiples with all that being said not just multiples from an attraction standpoint, but really the environment in which we're in is.
Nicholas Michael Westfall: With all that being said, not just multiples from an attraction standpoint, but really, you know, the environment in which we're in, a lot of providers are looking at their outlook today, and for many providers, particularly those that have been in the business or in the industry for very long, and that's why I go back to longstanding mission-focused providers. I think it's one in which we're looking amongst one another around that mission and cultural alignment to find the right partnerships, and so it's less about multiple components as it is what's the right partner to look for to continue to fulfill that mission and serve the community.
Nicholas Michael Westfall: A lot of providers looking at their outlook and where and how they are operating.
Nicholas Michael Westfall: Today and for many providers, particularly those that have been in.
Nicholas Michael Westfall: In the business or in the industry for very long and that's why I go back to long standing mission focused providers I think its one in which we're looking amongst one another around that mission and cultural alignment to find the right partnerships and so it's less about multiple components as it is what's the right partner.
Nicholas Michael Westfall: To look to continue to fulfill that mission and service that community and we think we're very well positioned and obviously my opinion is biased but.
Nicholas Michael Westfall: We think we're very well positioned, and obviously, my opinion is biased, but we do things the right way. We have, since our founders founded not only the hospice benefit but VITAS as part of itself, and so we believe we're really well positioned, which leads us to continue to look at those opportunities. We would be interested in
Nicholas Michael Westfall: We do.
Nicholas Michael Westfall: We do things the right way, we have since our founders founded not only the hospice benefit, but VITAS as part of itself and so we believe we're really well positioned which lead us to continuing to look at those opportunities.
Kevin J. McNamara: We would be interested in any opportunities, but as Nick mentioned, particularly in restricted states, particularly Florida, we would be even more interested.
Nicholas Michael Westfall: We would be interested in any opportunities, but as Nick mentioned, particularly in <unk>.
Kevin J. McNamara: Restricted states, particularly Florida, we would be even more interested.
Operator: Okay. Thank you so much. I appreciate it. One moment for your next question.
Kevin J. McNamara: Okay.
Operator: Thank you so much I appreciate it.
Operator: One moment for your next question.
Operator: Yeah.
Joanna Sylvia Gajuk: The next question comes from the line of Joanna Gajuk of Bank of America. Joanna, please go ahead.
Operator: The next question comes from the line of Joanna could you.
Joanna Sylvia Gajuk: <unk> of America Joana. Please go ahead.
Joanna Sylvia Gajuk: Hi, good morning. So, I guess I have a couple of follow-ups here. So, maybe first, we didn't talk about guidance. So, maybe you can frame this.
Joanna Sylvia Gajuk: Hi, good morning I.
Joanna Sylvia Gajuk: I guess I have a couple of follow ups here. So maybe first we didn't talk about guidance. So maybe you can.
Joanna Sylvia Gajuk: It sounds like VDAS was better, and ROTA was lower than your internal expectations, but how would you characterize, overall, at the consolidated level, I guess, the results versus your internal expectations? Because in the press release, you said, you know, you reiterated guidance. So, should we read into this as saying that, you know, Q1 was roughly in line, or maybe it was inside the range? Maybe we should start there.
Joanna Sylvia Gajuk: Fantastic sounds like VITAS.
Joanna Sylvia Gajuk: <unk> better.
Joanna Sylvia Gajuk: Lower than your internal but how would you characterize overall at the consolidated level the results versus your internal expectations because in the press release you said.
Speaker Change: Your <unk>.
Joanna Sylvia Gajuk: Guidance, so should we read into this as saying that.
Joanna Sylvia Gajuk: Q1 was roughly in line or maybe it was inside the range.
Joanna Sylvia Gajuk: Maybe.
Kevin J. McNamara: There's another element, and that is we don't give quarterly guidance; we give yearly guidance. Compared to, let's say, endless estimates, you know, that they tend to be more, you know, not necessarily exactly aligned with our seasonal expectations. But also, if you just wanted to, starting at the end, Mike, and feel free to jump in, we think we were about 12 cents a share below what we would have expected Again, we didn't change our guidance, which we don't give quarterly guidance, but again, that's not that much of a hill to overcome.
Joanna Sylvia Gajuk: Thus far there.
Joanna Sylvia Gajuk: Okay.
Kevin J. McNamara: Again al there's another element that is we give we don't give quarterly guidance, we give yearly guidance and sometimes the.
Kevin J. McNamara: Compared to let's say.
Kevin J. McNamara: Most estimates.
Kevin J. McNamara: They tend to more.
Kevin J. McNamara: Sure.
Kevin J. McNamara: Not necessarily.
Kevin J. McNamara: Exactly align with our seasonal expectations, but I will say if you just wanted to starting at the end Mike feel free to jump in.
Kevin J. McNamara: We think we were about 12 cents a share.
Kevin J. McNamara: Below what we would have.
Kevin J. McNamara: We would expected.
Kevin J. McNamara: <unk>.
Kevin J. McNamara: Again, we didn't change our guidance, which we don't we don't give quarterly guidance, but again thats not that much of a hill to overcome.
Kevin J. McNamara: We'll change our guidance, but it was certainly a blip that's very unusual for us. We don't have many quarters where we're below analyst estimates. But more importantly, we were, say, about $0.12, $0.13 below our own expectations. Mikey, do you have anything to add?
Kevin J. McNamara: And.
Mike: We will change our guidance, but it's just it was.
Mike: Certainly a blip.
Mike: That's very unusual for us we don't have many quarters, where we're below analysts' estimates but.
Mike: More importantly, we were saying about 12 13 below our own expectations. So.
Kevin J. McNamara: Mike the other thing to add yes, Julian I think that at the moment with the VITAS outperforming with Roto Rooter, maybe a little a little disappointing, but certainly plans in place we didn't feel like.
Michael D. Witzeman: Yeah, Joanna, I think that at the moment with the VTOS outperforming Roto-Rooter, maybe a little disappointing, but certainly plans in place, we didn't feel like changing our range that we gave back in February made a lot of sense. Having said that, there's no doubt that, as Kevin alluded to, in the second quarter, we're going to change certainly the components of how we get to that range, and certainly the range might change, but at the moment, given the differing ways that VITAS and Ruderer are going, we didn't have any reason to say we didn't think that that original range was still within the realm of reason.
Michael D. Witzeman: Changing R R.
Michael D. Witzeman: Range that we gave back in February and made a lot of sense, having said that there is no doubt that as Kevin alluded to that in the second quarter, we're going to change certainly the components of how we get to that range and certainly the range might change, but at the moment given.
Michael D. Witzeman: The deferring.
Michael D. Witzeman: Ways that VITAS and Roto rooter, when we didn't have any reason to say, we don't think that that original range was still within the realm of reason.
Joanna Sylvia Gajuk: Okay, that makes sense. And I guess the other piece of this, I assume is the deal that you closed right in mid April. So I assume you're going to include it in your updated guidance. So thank you for giving some color on the top line when it comes to the number of patients and potential offset over time. But how should we think about margins there? Because, obviously, this asset was a nonprofit.
Joanna: Okay that makes sense and I guess the other piece of.
Joanna Sylvia Gajuk: I assume is.
Joanna Sylvia Gajuk: The deal that you closed in mid April so I assume you're going to included in your updated guidance Joe. Thank you for.
Joanna Sylvia Gajuk: Giving some color on the on the top line when it comes to to have our patients and for Vishal said over time, but how should we think about margins there because obviously this this asset with that nonprofit.
Joanna Sylvia Gajuk: So I would assume that, you know, maybe a different margin profile there. And so how do you think about how quickly those margins were achieved? We'll kind of, you know, get to the Vita segment level, essentially.
Joanna Sylvia Gajuk: So I would assume that maybe different margin profile, there and so how do you think about how quickly those margins were.
Joanna Sylvia Gajuk: Got till the VTS segment level essentially.
Nicholas Michael Westfall: Yeah, Joanna, as you alluded to, we will include it in our second quarter update. When you think about, you know, outlook from a marginal expectation standpoint, realize that of the markets, two of them we already operate in, and so there's, there's a lot of operational opportunities that are included inside of there. And then similarly, you know, the ways in which we approach the market may be slightly different than how, in this instance, Covenant did.
Speaker Change: Yes, John.
Nicholas Michael Westfall: As you alluded to we will include it in our second quarter update when you think about outlook from a marginal expectation standpoint realize.
Nicholas Michael Westfall: Of the markets two of them, we already operate in and so there is there's a lot of operational.
Nicholas Michael Westfall: Opportunities that are included inside of there and then similarly, the ways in which we approach the market may be slightly different than how in this instance, covenant did so we were prepared and making investments and we have all of that modeled inside of our own turn our internal guidance and feel very good about it so from to answer your question.
Nicholas Michael Westfall: So, you know, we were prepared to make investments, and we have all that, you know, modeled inside of our own, our internal guidance, and feel very good about it. So to answer your question on overall marginal profiles, you know, it's going to look relatively simple, similar once it's all integrated in, and given the size of what we're talking about compared to the overall enterprise, it's not like there's some material impact on overall company marginal outlooks because of the deal on a go-forward basis. It's one that is very opportunistic for us, and we're just excited about servicing the existing communities as well as the new communities we entered into last Wednesday.
Nicholas Michael Westfall: Overall marginal profile.
Nicholas Michael Westfall: Look relatively simple similar once it's all once it's all integrated in.
Nicholas Michael Westfall: And given the size of what we're talking about compared to the overall enterprise. It's not like there is some material impact to overall company marginal outlooks because of the deal on a go forward basis. It's one that is very opportunistic for us and we're just excited about servicing the existing communities as well as the new communities, we entered into last Wednesday.
Michael D. Witzeman: And our models at the moment, I would tell you that because of some of the uncertainty just with the integration, the short-term integration costs, I would tell you that 24. We've been a little conservative from a margin perspective, but going forward past 24, certainly, we expect margins to come in line too, and the rest of the VITAS company.
Nicholas Michael Westfall: And our models at the moment I would tell you that.
Michael D. Witzeman: Because of some of the uncertainty just with the integration in the short term integration cost.
Michael D. Witzeman: <unk> I would tell you that 24, we've been a little conservative from a margin perspective, but going forward past 'twenty four certainly we expect margins to come in line too.
Michael D. Witzeman: The rest of the VITAS company as well when you're thinking about SG&A, whether Andy get into call centers back office et cetera.
Nicholas Michael Westfall: When you think about SG&A, whether you get into call centers, back office, etc., all those operations are able to be folded in immediately without any incremental investment. So, as with any acquisition, that's the opportunity.
Michael D. Witzeman: All of those operations are able to be folded in immediately without any incremental investment so.
Nicholas Michael Westfall: As with any acquisition that's the that's the opportunity they have a shorter.
Nicholas Michael Westfall: <unk> average length of stay so the margin would be a little bit lower yet.
Nicholas Michael Westfall: Yet as I had alluded to with the previous question for Michael I think we have an opportunity.
Nicholas Michael Westfall: They have a shorter average length of stay, so their margin would be a little bit lower. As I alluded to with the previous question from Michael, I think we have an opportunity for day-of-care expansion as we look at implementing our strategy to help the community and the referral sources better identify patient eligibility earlier in their disease trajectory. So we're very encouraged about the outlook of that acquisition and, just as importantly, just as excited about bringing on those team members who are now part of our VITAS family going forward.
Nicholas Michael Westfall: Four day of care expansion as we look at.
Nicholas Michael Westfall: Execution of our strategy to help the community and the referral sources better identify patient eligibility earlier in their disease trajectory. So we're we're very encouraged about the outlook of that acquisition and just as importantly.
Nicholas Michael Westfall: Just as excited about bringing on those team members that are now part of our VITAS family going forward.
Speaker Change: Okay. So I guess it sounds like the margins.
Nicholas Michael Westfall: Well.
Nicholas Michael Westfall: Look.
Nicholas Michael Westfall: Close to that stable margin.
Nicholas Michael Westfall: In 25, so I guess would you say that.
Nicholas Michael Westfall: Is it is it going to be kind of exiting 'twenty four kind of already close to that margin and I'll call. It I guess Q4 is also at the <unk>.
Joanna Sylvia Gajuk: Okay, so I guess it sounds like the margins will look. (inaudible)
Joanna Sylvia Gajuk: Quarter of the year.
Nicholas Michael Westfall: Correct. It'll be integrated very quickly. You know, our team's doing a fantastic job with that. And as we've alluded to, we won't manage it. We'll manage the business around how we've approached every other aspect of it and feel good about the predictability of marginalization.
Speaker Change: But I guess it sounds like you're going to.
Nicholas Michael Westfall: Get there fairly quickly.
Nicholas Michael Westfall: Correct. It will be integrated very quickly our team is doing a fantastic job with that and as we've alluded to we want manage well manage the business around how we've approached every other aspect with it and feel good about the predictability of marginal outlook.
Nicholas Michael Westfall: And obviously, with your balance sheet and cash flow, it sounds like you have a lot of room to do more of these. Is it fair to expect a couple of more this year?
Nicholas Michael Westfall: And obviously with your balance sheet and cash flow it sounds like you have.
Nicholas Michael Westfall: A lot of them to do more of these it sounds like.
Nicholas Michael Westfall: Is it fair to expect.
Nicholas Michael Westfall: Couple of modest here.
Nicholas Michael Westfall: I don't think we, you know, as we never have, we wouldn't set any expectations, but as you allude to, balance sheet is pristine and, you know, opportunities absolutely are out there and hopefully they come to fruition that have the same alignment like we're talking about now and is why I also referenced, you know, it's not just the traditional transactional component, it is also, you know, long-standing providers that are no longer looking at tax status as an irrelevant impediment and looking to just align organizations so that they can evolve their needs and mission to continue to serve the communities we've all signed up for, for 40 plus years.
Speaker Change: I don't think.
Nicholas Michael Westfall: We never have we wouldn't set any expectations, but as you allude to balance sheet is pristine and opportunities absolutely are out there and hopefully they come to fruition that have the same alignment like we're talking about now and is why I also referenced.
Nicholas Michael Westfall: It's not just the traditional transactional component is also long standing providers that are now.
Nicholas Michael Westfall: No longer looking at tax status as an as an irrelevant impediment and looking to just align organizations. So that they can evolve their needs and mission to continue to serve the communities. We've all signed up for for 40 plus years, we're very bullish on the.
Nicholas Michael Westfall: We're very bullish on the pipeline, the potential for these kinds of deals over maybe not just 24, but the next 18 to 24 months. We're very bullish on the potential to be able to do these kinds of deals over the next couple of years.
Nicholas Michael Westfall: Pipeline the potential for these kinds of deals over maybe not just 24, but the next the next 18 to 24 months.
Nicholas Michael Westfall: But we're very bullish on the potential to be able to do these kind of deals over the next couple of years.
Joanna Sylvia Gajuk: Right, and guys, to your point earlier about, you know, I guess the market is, I guess, open, so to speak, their assets for sale. And I guess it ties to my other question; our last question was around hiring. So very impressed there that, you know, the bonus program is long over, but it's still, you know, doing pretty well there. So I guess what's happening, are you hiring away these nurses and other clinicians from your competitors, from other hospice agencies where maybe they, you know, are still kind of in this ray, or are you seeing these workers maybe coming from other settings?
Speaker Change: Alright, and then the guys to get to your point.
Joanna Sylvia Gajuk: Earlier around.
Joanna Sylvia Gajuk:
Joanna Sylvia Gajuk: The market is I guess open so to speak their assets for sale.
Joanna Sylvia Gajuk: And I guess it ties to my other question and our last question of you guys around the.
Joanna Sylvia Gajuk: The hiring so very impressive there.
Joanna Sylvia Gajuk: The bonus program is slung over but still.
Joanna Sylvia Gajuk: Doing pretty well there so I guess what's happening.
Joanna Sylvia Gajuk: And ladies snare these nurses and other clinicians trauma from your competitors from some other hospice agencies, where maybe they are.
Joanna Sylvia Gajuk: I still kind of in this way our USD A&D workers may be coming from auto settings.
Nicholas Michael Westfall: Yeah, it's a little bit of everything, to be quite honest, and is somewhat market-by-market specific, but what I will say is, you know, the strength of our candidate pool has never been stronger, and our continued focus on retention of our existing staff is exactly the same. So we feel really good about the outlook and our ability to continue to methodically add team members when and where we need them to support our growth forecast. And as you can see in the first quarter, we outperformed just our internal quarterly growth forecast, and hiring and retention will not be an impediment to growth on a go-forward basis, and demand from a referral standpoint is still extremely strong.
Nicholas Michael Westfall: Yes.
Nicholas Michael Westfall: It's a little bit of everything to be quite honest.
Nicholas Michael Westfall: Is somewhat market by market specific but what I will say is the strength of our candidate pool has never been stronger and our continued focus on retention of our existing staff is exactly the same way. So we feel really good about the outlook and our ability to continue to methodically.
Nicholas Michael Westfall: <unk> AD team members, when and where we need them to support our growth forecast as you can see in the first quarter.
Nicholas Michael Westfall: We outperformed our internal quarterly growth forecast.
Nicholas Michael Westfall: And hiring and retention, we will not be an impediment towards towards growth on a go forward basis and demand from a referral standpoint is still extremely strong.
Joanna Sylvia Gajuk: Thank you. If I may, on the voter side, a couple of follow-ups on the commercial. So that revenue much worse is that you have some plans in place already to remediate some of these issues, and so some are maybe faster to kind of take effect versus others. So anyway, to help us think about when we would expect to see the benefits of these remediation actions.
Speaker Change: Thank you if I may on the on the water side, a couple of follow ups on the <unk>.
Joanna Sylvia Gajuk: Marshall.
Joanna Sylvia Gajuk: So that revenue much was you said you have some plans in place already to remediate some of these issues and it sounds like somewhere maybe faster to kind of take effect versus others. So.
Joanna Sylvia Gajuk: Any way to help us.
Joanna Sylvia Gajuk: How to think about when.
Joanna Sylvia Gajuk: I guess, you would expect to see the benefits of these remediate.
Kevin J. McNamara: Well, Joanna, let me start by saying that, you know, we've pinned a lot of our problems on macroeconomic issues over the last... 2012-2016, on the residential side. But we think that those issues are beginning to abate. It seems to be lingering on the commercial side for a variety of reasons, which we implied. But the things that we said were going to change, they're largely – I mean, let me just – I'll simplify it.
Joanna Sylvia Gajuk: The Asian actions.
Kevin J. McNamara: Let me start by saying that.
Kevin J. McNamara: We spend a lot of our problems on macro economic issues over the last.
Kevin J. McNamara: No.
Kevin J. McNamara: 12 to 16 months.
Kevin J. McNamara: On the residential side.
Kevin J. McNamara: We think that those issues are beginning to abate the macro economic issues.
Kevin J. McNamara: The.
Kevin J. McNamara: No.
Kevin J. McNamara: It seems to be lingering on the commercial side for a variety of reasons, which we implied but.
Kevin J. McNamara: The things that we said we're going to change there are largely put US let me just.
Kevin J. McNamara: Supervised commercial accounts tend to take.
Kevin J. McNamara: Commercial accounts tend to take a lot more hand-holding, and more communication. They expect to be moved to the top of the queue when their problems are more important, more demand than we can deal with. That type of customer was, you know, difficult to deal with, given, you know, given the shortages and, you know, resources. I would say that If I were to summarize most of our plans, it would go back to what we did, the more of the hand-holding, the more of the..., you know, emphasis on the importance of commercial work. Those, those. Projects have begun, or have already begun, you know, and again, we expect them to bear fruit. They historically did,
Kevin J. McNamara: A lot more handholding.
Kevin J. McNamara: <unk>.
Kevin J. McNamara: More communication.
Kevin J. McNamara: They expect to be moved to the top of the queue.
Kevin J. McNamara: When.
Kevin J. McNamara: Their problems are more important than anybody else's.
Kevin J. McNamara: During the pandemic when we had.
Kevin J. McNamara: More demand than we can deal with that type of customer was.
Kevin J. McNamara: Difficult to deal with.
Kevin J. McNamara: Given.
Kevin J. McNamara: Given the shortages.
Kevin J. McNamara: Resources.
Kevin J. McNamara: I would say that.
Kevin J. McNamara: So if I summarize both of our plans.
Kevin J. McNamara: Going back to what we did do the more of the hand holding more of the.
Kevin J. McNamara: Emphasis on the importance of commercial work.
Kevin J. McNamara: Those those.
Kevin J. McNamara: Projects have begun have already begun and again, we expect to bear fruit.
Michael D. Witzeman: And when you combine that with what we see generally is, you know, improving, not improving, not back to normal, but improving macroeconomic operating levels, you know, we're looking at the relatively short term for improvements on the commercial side. Mike, anything else? Yeah, as Kevin said,
Kevin J. McNamara: Historically did.
Kevin J. McNamara: And when you combine that with what we see generally.
Mike: Improving <unk>.
Mike: Improving not back to normal, but improving macroeconomic operating level.
Mike: We're looking at the relative short term for improvements on the commercial.
Michael D. Witzeman: Yeah, as Kevin said, the hand-holding and the touch points at a local level with commercial, potential commercial customers, that's going to take a little bit of time. But to illustrate the point of some things that we're doing that we're hoping will help in the short term, we're now sending, for instance, cameras along with every jetting opportunity we have to clean a sewer and drain, and we've never done that before. We're hoping that helps almost immediately start driving add-on sales, and more. You know, we're starting to implement that program, and we're going to see how that goes.
Mike: Like anything else, yes, as Kevin said, the handholding in the touch points at a local level with commercial potential commercial customers thats going to take that's going to take a little bit of time.
Michael D. Witzeman: But to illustrate the point of some things that we're doing that we're hoping that will help in the short term. We're now sending for instance cameras along with <unk>.
Michael D. Witzeman: Every jetting opportunity, we have to clean a sewer drain and we've never done that before we're hoping that helps.
Michael D. Witzeman: Immediately start driving add on sales.
Michael D. Witzeman: We're starting to.
Michael D. Witzeman: Implement that program and we're going to see how that goes so as we mentioned in the script. There is there are some short term things, we're hoping that we can almost immediately start driving at least some improvement and then the handholding in the macro economic things that kevin's talking about or a little bit longer term.
Michael D. Witzeman: So, as we mentioned in the script, there are some short-term things. We're hoping that we can almost immediately start driving at least some improvement, and then, you know, the handholding and the macroeconomic things that Kevin's talking about are a little bit longer term.
Joanna Sylvia Gajuk: Thank you. And I guess the other piece in that segment you talk about on the margin side, right? So I guess some of the revenue is not there, which I guess it should be. Reflective of the, you know, because of the, you know, commissions and, you know, how I guess these employer employees are reimbursed, but I guess the margins for that sound like advertising costs, but then you kind of lower them down at the end of the quarter, when it was more normalized. So should we expect a segment margin to essentially bounce back to close to 28 or so in Q2? Is that what you're trying to tell us?
Speaker Change: Thank you and I guess.
Joanna Sylvia Gajuk: The other piece in that segment can you talk about on the margin side right.
Joanna Sylvia Gajuk: Some of them I think is not there, which I guess there.
Joanna Sylvia Gajuk: It should be.
Joanna Sylvia Gajuk: Reflective in the <unk>.
Joanna Sylvia Gajuk: Because of.
Joanna Sylvia Gajuk: The.
Joanna Sylvia Gajuk: Commissions.
Joanna Sylvia Gajuk:
Speaker Change: Hi, guys.
Joanna Sylvia Gajuk: Employers employees are reimbursed, but I guess, the margins where does sounds like advertising.
Joanna Sylvia Gajuk: Costs, but then you kind of lowered that at the end of the quarter by the end of the quarter. It was more normalized so should we expect.
Joanna Sylvia Gajuk: With Morgan to essentially boss back close to 28 or so in Q2 is that what youre trying to Dallas.
unknown: Yes, definitely.
Speaker Change: Yes definitely.
Joanna Sylvia Gajuk: And I guess, um, kind of a longer-term question, uh, in terms of just, yeah, this road over the weakness, it sounds like, you know, there's some, um, macroeconomic things that are normalizing there or maybe improving there. And then, um, the other, I guess, situation you identified, you're trying to remediate, well, how, how does this, um, you know, continued weakness, I guess, in this segment, change your view of the long-term growth potential for this business?
unknown: Okay.
unknown: And I guess.
Joanna Sylvia Gajuk: On a longer term question in terms of just the threat of real weakness it sounds like.
Joanna Sylvia Gajuk: There is some.
Joanna Sylvia Gajuk: Macroeconomic things are normalizing, there, where maybe improving there and then.
Joanna Sylvia Gajuk: Are there other situations you had identified youre trying to remediate about how how does this.
Joanna Sylvia Gajuk: Continued weakness I guess in the segment change your view of the long term growth potential for this business.
unknown: It doesn't change our long-term growth potential outlook at all. Roto-Rooter is a great business, very strongly positioned as the best brand name in the industry. We don't have any long-term concerns about the outlook for Roto-Rooter.
Joanna Sylvia Gajuk: It doesn't change our long term growth potential.
unknown: Outlook at all Roto Rooter is a great business.
unknown: Very strongly positioned the best brand name in the industry. We don't have any long term concerns about the outlook for roto rooter.
Joanna Sylvia Gajuk: Great, thank you so much for taking the questions.
Operator: This now concludes the question and answer session. I would like to turn it back over to Kevin McNamara. Thank you. I just wanted to thank everybody.
Speaker Change: Great. Thank you so much for taking the questions.
Speaker Change: Our pleasure.
Operator: This now concludes the question and answer session.
Kevin J. McNamara: Like to turn it back over to Kevin Mcnamara.
Kevin J. McNamara: Thank you I just wanted to thank everybody.
Kevin J. McNamara: Thank you for your kind attention. We've got some things to work on, but as we've indicated, I think matters are well in hand.
Kevin J. McNamara: For your kind attention and.
Kevin J. McNamara: We've got some things to work on but as we've indicated.
Kevin J. McNamara: I think matters are well in hand.
Kevin J. McNamara: <unk>.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Operator: Okay.
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Operator: Okay.
Operator: Okay.
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Operator: Okay.
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