Q2 2024 Chemed Corp Earnings Call

Thank you for standing by and welcome to the Chem-Ed Corporation's 2nd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.

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 this session, you'll need to press star-one-one on your telephone. If your question has been answered, and you'd like to remove yourself from the queue, simply press star-one-one again. As a reminder, today's program is being recorded, and now I'd like to introduce your host for today's program, Holley Schmidt. Please go ahead, ma'am.

To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again.

As a reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Holley Schmidt. Please go ahead, ma'am.

Holley Schmidt: Good morning. Our conference call this morning will review the financial results for the second quarter of 2024 and June 30th, 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 July 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 second quarter of 2024 and in June 30, 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.

Holley Schmidt: Your caution is 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 July 24th, which is available on the company's website at ChemEd.com.

In addition, management may also discuss non-GAAP operating performance results during today's call.

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. Thank you.

Kevin J. McNamara: I would now like to introduce our speakers for today, Kevin McNamara, President and Chief Executive Officer of Chemed Corporation.

Kevin J. McNamara: Thank you, Holley. Good morning.

Kevin J. McNamara: Welcome to ChemEd Corporation's second quarter 2024 conference call. I will begin with highlights for the quarter, then Mike and Nick will follow up with additional details. I will then open up the call for questions.

Kevin J. McNamara: We continue to be pleased with the excellent operating metrics at VITAS, coupled with a strong start for our Covenant Health acquisition. In the second quarter of 2024, admissions totaled 17,344, which equates to an 11% improvement from the same period of 2023. Additionally, our Average Daily Census, or ADC, expanded 2,644, an increase of 14.4% when compared with the prior year quarter.

Kevin J. McNamara: We continue to be pleased with the excellent operating metrics at VITAS, coupled with a strong start for our Covenant Health acquisition.

Kevin J. McNamara: These historically good metrics were positively impacted by the $85 million acquisition of Covenant Health, which was closed on April 17, 2024. Nick will provide further insight on the positive impact of the acquisition on these vets. These operating metric improvements and related financial impact would not be achievable without DTAS's continued strength in hiring and retaining clinical staff. We're also pleased that in the second quarter of 2024, VITAS was awarded the Certificate of Need to provide hospice services in Pasco County, Florida. This represents an opportunity for VITAS to begin service in a vibrant and growing community in Florida. Now, let's turn to Roto-Rooter.

Speaker Change: These historically good metrics were positively impacted by the $85 million acquisition of Covenant Health, which was closed on April 17, 2024.

Kevin J. McNamara: Roto-Rooter generated quarterly revenue of $221.3 million in the second quarter of 2024, a decrease. 5% when compared with the prior year quarter. Overall, our call volume was down 6.1% when compared with the prior year quarter. Closed rates at the call center at the time of dispatch and when our technician reaches the customer location remain consistently strong compared to historic levels. However, residential revenue at Roto-Rooter declined 1.6%, and commercial revenue declined 8.2%. Residential demand is significantly impacted by consumer sentiment and consumer spending, which continues to be depressed, particularly as it relates to home services and home improvement.

Speaker Change: Roto Rooter generated quarterly revenue of $241 $3 million in the second quarter of 2024.

Decrease of 5% when compared with the prior year quarter.

Speaker Change: Overall, our coal volume was down six 1% when compared with the prior year quarter.

Speaker Change: Close rates at the call center at the time of dispatch and when our technician reaches the customer location remained consistently strong compared to historical levels.

Residential revenue at Roto Rooter declined one 6% and commercial revenue declined eight 2%.

Residential demand is significantly impacted by consumer sentiment and consumer spending which continues to be depressed, particularly as it relates to home services and home improvements.

Kevin J. McNamara: With lower demand across the entire industry, competition for internet marketing positions and related job leads continues to be fierce. However, the commercial sector of RoadMirror provides significant opportunity for improvement, both sequentially through 2024 and in 2025. As we mentioned in the first quarter, the extraordinarily high demand we experienced during the pandemic led the commercial business to be deprioritized. Furthermore, the habits required in the field to make for a successful commercial business were not reestablished at the end of the pandemic in some locations.

With lower demand across the entire industry competition for Internet marketing position and related job leads continues to be fierce.

Speaker Change: However, the commercial sector, but it provides significant opportunity for improvement both sequentially through 2020 for inventory in 'twenty five as.

Speaker Change: As we mentioned in the first quarter the extraordinarily high demand we experienced during the pandemic led the commercial business to be deep private prioritized.

Speaker Change: The habits required to the field to make for a successful commercial business, we're not reestablished at the end of the pandemic.

Kevin J. McNamara: As Michael discussed further, the company has implemented several initiatives that I believe will have a significant positive impact on Roto-Rooter's commercial sector. To summarize, we are excited about the continued strong results of VITAS. VITAS management has consistently demonstrated the ability to accelerate hiring and retention of licensed healthcare professionals, which is translated into continued strong admissions and census growth.

Speaker Change: Some locations.

Speaker Change: As Mike will discuss further the company has implemented several initiatives, which I believe will have a significant positive impact on roto rooters commercial sector.

Mike: To summarize we are excited about the continued strong results at VITAS VITAS management has consistently demonstrated the ability to accelerate hiring and rich.

Mike: Tension of licensed health care professionals. This has translated into continued strong admission and census growth.

Kevin J. McNamara: We're very bullish on the prospects of VITAS for the year of 2024 and beyond. We believe Roto-Rooter is still well positioned, despite the difficult operating conditions that it faces. Roto-Rooter maintains its core competitive advantages in terms of excellent brand awareness, customer response time, 24-7 call centers, and aggressive internet presence. With that, I would like to turn this teleconference over to Mike.

Speaker Change: We're very bullish on the prospects of VITAS for the remainder of 2024 and beyond.

Speaker Change: We believe roto rooter is still well positioned despite the difficult operating conditions at this basis Roto Rooter maintains its core competitive advantages in terms of excellent brand awareness customer response time 24, seven call centers and aggressive internet presence.

Speaker Change: With that I would like to turn this teleconference over to Mike.

Mike: Thanks, Kevin.

Michael D. Witzeman: Before discussing VITAS results, it is important that we discuss the methodology used in determining the impact of Covenant Health's acquisition on VITAS overall results. As you may remember, we already had significant operations in two of the three Florida locations we acquired from Covenant Health. Those locations require that we estimate the Covenant Health impact as, once the operations are integrated, there are no separate results. For instance, there are not VITAS-specific referral sources versus covenant-specific referral sources in these locations.

Speaker Change: Before discussing VITAS results. It is important that we discussed the methodology used in determining the impact of Covenant House acquisition on VITAS overall results.

Mike: As you May remember, we already have significant operations in two of the three Florida locations, we acquired from Covenant health.

Mike: Those locations require that we estimate the covenant health impact as once the operations are integrated there are not separate results. For instance, there are not VITAS specific referral sources versus covenant specific referral referral sources in these locations.

Michael D. Witzeman: It is very likely that referral sources in the area have historically referred to both VITAS and Covenant. We have used historical operating trends in these locations to determine what is legacy VITAS activity. All activity above these historical operating trends has been attributed to the Covenant Health Acquisition. Of course, we have included the specifically determined impact as it relates to new operating territories acquired.

Mike: It is very likely that referral sources in the area have historically referred to both VITAS and covenant.

Mike: We have used historical operating trends and these locations to determine what is legacy VITAS activity.

Mike: All activity above these historical operating trends have been attributed to the Covenant health acquisition.

Mike: Of course, we have included the specific we determined impact as it relates to new operating territories acquired.

Michael D. Witzeman: Based on the above, the following discusses the range of impact that Covenant had on the overall VTOS operating metric. The Covenant Health acquisition contributed $8.2 million to $8.7 million of revenue in the second quarter of 2024. This revenue translated to net income of approximately $1.6 million to $1.8 million. Adjusted EBITDA for the quarter attributed to Covenant Health was between $2.2 million and $2.4 million. As we already had operations in two of the acquired programs, we did not need to add significant infrastructure to absorb the additional activity.

Mike: Based on the above the following discusses the range of impact that covenant had on the overall VITAS operating metrics.

Mike: The Covenant health acquisition contributed $8 2 million to $8 $7 million of revenue in the second quarter of 2024.

Mike: This revenue translated to net income of approximately $1 6 million to $1 8 million.

Mike: Adjusted EBITDA in the quarter attributed a covenant health is between $2 2 million and $2 $4 million.

Mike: As we already had operations in two of the acquired programs, we did not need to add significant infrastructure to absorb the additional activity.

Michael D. Witzeman: This results in higher overall margins for these two programs and for the acquisition as a whole. VITAS net revenue was $374.6 million in the second quarter of 2024, which is an increase of 16.7% when compared to the prior year period. This revenue increase is comprised primarily of a 14.4% increase in days of care and a geographically weighted average Medicare reimbursement rate increase of approximately 2.5%. However, the acuity mix shift negatively impacted revenue growth by 112 basis points in the quarter when compared to the prior year revenue and level of care mix.

Mike: This results in higher overall margins for these two programs and for the acquisition as a whole.

Michael D. Witzeman: The combination of the Medicare cap and other contra revenue changes increased revenue growth by approximately 92 basis points. Average revenue per patient day in the second quarter of 2024 was $200.03, which is 153 basis points above the prior year period. Reimbursement for routine home care and high-acuity care averaged $176.73 and $1,071.65, respectively.

Mike: VITAS net revenue was $374 $6 million in the second quarter of 2024, which is an increase of 16, 7% when compared to the prior year period.

Mike: This revenue increase is comprised primarily of a 14, 4% increase in days of care.

Mike: In a geographically weighted average Medicare reimbursement rate increase of approximately two 5%.

Mike: The acuity mix shift negatively impacted revenue growth.

Mike: 112 basis points in the quarter when compared to the prior year revenue and level of care mix.

Mike: Combination of Medicare cap and other Contra revenue changes increased revenue growth by approximately 92 basis points.

Mike: Average revenue per patient day in the second quarter of 2024 was $200 in <unk>, which is 153 basis points above the prior year period.

Mike: Reimbursement for routine home care and high acuity care averaged $176 73.

Mike: And $1071 and 65, respectively.

Michael D. Witzeman: During the quarter, high acuity days of care were 2.6% of total days of care, a decline of 21 basis points when compared to the prior year quarter. Adjusted EBITDA excluding Medicare cap totaled $67 million in the quarter, an increase of 77%. Adjusted EBITDA margin in the quarter, excluding Medicare cap, was 17.8%, which is 613 basis points above the prior year period. The expense attributable to the retention bonus program in 2023 contributed 397 basis points to the year-over-year improvement in the 2024 margin. Now, let's turn to Roto-Rooter.

Mike: During the quarter high acuity days of care were two 6% of total days of care, a decline of 21 basis points when compared to the prior year quarter.

Mike: Yeah.

Mike: Adjusted EBITDA, excluding Medicare cap totaled $67 million in the quarter, an increase of 77%.

Mike: Adjusted EBITDA margin in the quarter, excluding Medicare cap was 17, 8%, which is 613 basis points above the prior year period.

Mike: We expect expense attributable to the retention bonus program in 2023 contributed 397 basis points to the year over year improvement in the 2020 for margin.

Michael D. Witzeman: Roto-Rooter branch residential revenue in the quarter totaled $155 million, a decrease of 1.6% from the prior year period. Voter Branch commercial revenue in the quarter totaled $50.9 million, a decrease of 8.2% from the prior year. As Kevin mentioned, this continues to lag our expectations for this segment of the business. The commercial business is experiencing some of the same overall demand issues we have seen with residential revenue in the second quarter.

Speaker Change: Now, let's turn to Roto rooter.

Speaker Change: Roto Rooter branch residential revenue in the quarter totaled $155 million a decrease of one 6% from the prior year period.

Speaker Change: Roto Rooter branch commercial revenue in the quarter totaled $50 $9 million, a decrease of eight 2% from the prior year.

Speaker Change: As Kevin mentioned this continues to lag our expectations for this segment of the business.

Kevin: The commercial business is experiencing some of the same overall demand issues, we've seen with residential revenue in the second quarter.

Michael D. Witzeman: In general, small business owners behave very similarly to our residential customer base, and therefore, consumer demand and increased competition are impacting this cohort of commercial customers. Roto-Rooter has continued its company-wide push to reemphasize the behaviors that are necessary to develop and retain commercial customers. Commercial sales have been added during the quarter and will continue to be added. Roto-Rooter Management has implemented enhanced customer relationship management capabilities to improve the efficiency of its expanded sales staff.

Kevin: General small business owners behave very similarly to our residential customer base and therefore consumer demand and increased competition are impacting this cohort of commercial customers.

Roto Rooter: Roto Rooter has continued its companywide pushed to reemphasize the behaviors that are necessary to develop and retain commercial customers.

Roto Rooter: Commercial sales have been added during the quarter and will continue to be added.

Speaker Change: Roto Rooter management has implemented enhanced customer relationship management capabilities to improve the efficiency of the expanded sales staff.

Michael D. Witzeman: Each branch general manager was required to directly contact or have their sales staff contact every key commercial customer as determined by certain customer demographic metrics. Additionally, Roto-Rooter management has noted that a handful of branches have contributed to a large majority of the decline in commercial revenue. Deep dive analysis has been performed on these branches, and specific targeted improvement programs have been implemented. As we noted in the first quarter, many of the general managers of these programs are new to their positions since the pandemic. Training general managers to recognize issues on a timely basis is part of the ongoing remediation program in the field.

Speaker Change: Each branch general manager was required to directly contact or have their sales staff contact every key commercial customer is determined by certain customer demographic metrics.

Speaker Change: Additionally, Roto Rooter management has noted that a handful of branches have contributed to a large majority of the decline in commercial revenue.

Speaker Change: Deep dive analysis has been performed on these branches in specific targeted improvement programs have been implemented as.

Speaker Change: As we noted in the first quarter many of the general managers of these programs are new to their positions since the pandemic.

Speaker Change: Training of general managers to recognize issues on a timely basis as part of the ongoing remediation program in the field.

Michael D. Witzeman: Roto-Rooter Management believes that the process of retraining managers and reemphasizing the commercial business will require multiple quarters to take full effect. Adjusted EBITDA at Roto-Rooter in the second quarter of 2024 totaled $59.8 million, a decrease of 9.2% compared to the prior year quarter. The adjusted EBITDA margin in the quarter was 27%. The second quarter adjusted EBITDA margin represents a 120 basis point sequential improvement from the first quarter of 2004, based mainly on lower internet marketing costs. Now let's talk about our revised 2024 guidance. VITAS 2024 revenue prior to the Medicare cap is estimated to increase 16.3% to 17.3% when compared to 2023. The average daily census is estimated to increase 13.3% to 14.4%.

Speaker Change: Roto Rooter management believes that the process of retraining managers and re emphasizing the commercial business.

Speaker Change: Will require multiple quarters to take full effect.

Speaker Change: Yeah.

Speaker Change: Adjusted EBITDA at Roto Rooter in the second quarter of 2024 totaled $59 $8 million, a decrease of nine 2% compared to the prior year quarter.

Speaker Change: Adjusted EBITDA margin in the quarter was 27%.

Speaker Change: The second quarter adjusted EBITDA margin represents a 120 basis point sequential improvement from the first quarter of 'twenty four based.

Speaker Change: Based mainly on lower Internet marketing costs.

Speaker Change: Now, let's talk about our revised 2020 for guidance.

Speaker Change: VITAS 'twenty 'twenty four revenue prior to Medicare cap is estimated to increased 16, 3% to 17, 3% when compared to 2023.

Speaker Change: Average daily census is estimated to increased 13, 3% to 14, 4%.

Michael D. Witzeman: Full year adjusted EBITDA margin prior to the Medicare cap is estimated to be 19.3% to 19.7%. We are currently estimating $8.5 million in Medicare cap billing limitations in calendar 2024. The cost of the retention program negatively impacted VITAS's 2023 full-year adjusted EBITDA by 159 basis points. The Covenant Health acquisition is estimated to contribute approximately $30 million to $32 million to VITAS's full-year revenue. There is no estimated Medicare cap billing limitation expected related to Covenant Health.

Speaker Change: Full year adjusted EBITDA margin prior to Medicare cap is estimated to be 19, 3% to 19, 7%.

Speaker Change: We are currently estimating $8 $5 million in Medicare cap billing limitations in calendar 2024.

Speaker Change: The cost of the retention program negatively impacted VITAS 2023 full year adjusted EBITDA by 159 basis points.

Speaker Change: The Covenant House acquisition is estimated to contribute approximately 30 million to $32 million to VITAS is full year revenue.

Speaker Change: There is no estimated Medicare cap billing limitation expected related to Covenant house.

Nicholas Michael Westfall: This translates into Adjusted Net Income attributable to Covenant Health of $5.5 million to $6 million and Adjusted EBITDA of $8 million to $8.5 million. Roto-Rooter is forecasted to have a 4-5% revenue decline in 2024 compared to 2023. Roto-Rooter's adjusted EBITDA margin for 2024 is expected to be 26.5 to 27%. Based on the above, full-year 2024 earnings per diluted share, including non-cash expenses for stock options, and tax benefits from stock option exercises.

Speaker Change: This translates into adjusted net income attributed attributable to Covenant house of five $5 million to $6 million and adjusted EBITDA of 8 million to $8 5 million.

Speaker Change: Roto Rooter is forecasted to have a 4% to 5% revenue decline in 2024 compared to 2023.

Speaker Change: Roto Rooters adjusted EBITDA margin for 2024 is expected to be $26, 5% to 27%.

Speaker Change: Yes.

Speaker Change: Based upon the above full year 2024 earnings per diluted share.

Speaker Change: Fluting noncash expenses for stock options tax benefits from stock option exercises.

Nicholas Michael Westfall: Costs related to litigation and other discrete items are estimated to be in the range of $23.55 to $23.80. This guidance assumes an effective corporate tax rate on adjusted earnings of 24.3% and a diluted share count of 15.25 million shares. ChemEd's previously issued 2024 guidance was $23.30 to $23.70 per share, while ChemEDS 2023 reported adjusted earnings per diluted share was $20.30. We'll now turn this call over to Nick.

Speaker Change: Costs related to litigation and other discreet items is estimated to be in the range of $23 55 to $23 80.

Speaker Change: This guidance assumes an effective corporate tax rate on adjusted earnings of 24, 3% and a diluted share count of $15 two 5 million shares.

Kevin: Kevin. It's previously issued 2024 guidance was $23 30 to $23 70 per share.

Kevin: Came into 2023 reported adjusted earnings per diluted share was $20 30.

Kevin: I will now turn this call over to Nick.

Nick: Thanks, Mike.

Nicholas Michael Westfall: I'm very pleased with the continued sustainable expansion of our workforce and patient capacity through the second quarter of 2024. As Kevin mentioned, excluding the personnel who transitioned over as part of the Covenant Health Acquisition, we expanded our bedside headcount by 234 licensed professionals during the quarter. The second quarter of 2024 marked our eighth consecutive quarter of expanding our clinical workforce capacity in disciplines identified as part of the retention program. In the second quarter of 2024, our average daily census was 21,036 patients, an increase of 14.4%. VITAS has generated quarterly sequential ADC growth over the last seven quarters. For example, in the second quarter of 2024, total VITAS admissions were 17,334.

Nick: I'm very pleased with the continued sustainable expansion of our workforce and patient capacity during the second quarter of 2024.

Nick: As Kevin mentioned, excluding the personnel, who transitioned over as part of the Covenant Health acquisition, we expanded our bedside head count by 234 licensed professionals during the quarter.

Nick: The second quarter of 2024 marked our eighth consecutive quarter of expanding our clinical workforce capacity and disciplines identified as part of the retention program.

Nick: In the second quarter of 2024, our average daily census was 21036 patients an increase of 14, 4%.

Nick: VITAS generated quarterly sequential ADC growth over the last seven quarters.

Nick: In the second quarter of 2024 total VITAS admissions were 17334. This is an 11% increase when compared to the second quarter of 2023.

Nicholas Michael Westfall: This is an 11% increase when compared to the second quarter of 2023. As previously announced, approximately 680 of those admissions are the result of a one-time admission of Covenant Health patients at the time of the acquisition. In the quarter, admissions, excluding the one-time admissions related to the acquisition, increased in each of the top four pre-admit locations; our nursing home admissions increased 13.2%, assistant facility admissions expanded 15.7 percent, hospital-directed emissions increased 6.3%, and our home-based patient emissions expanded 8.3% when compared to the prior year period.

Speaker Change: As previously announced approximately 680 of those emissions.

Speaker Change: As a result of the one time and mission of Covenant help patients at the time of the acquisition.

Speaker Change: In the quarter admissions, excluding the onetime admissions related to the acquisition increased in each of the top four preeminent location types, our nursing home admissions increased 13, 2% assistant facility admissions expanded 15, 7%.

Speaker Change: Hospital, directed admissions increased six 3% and our home based patient admissions expanded eight 3% when compared to the prior year period.

Nicholas Michael Westfall: The average Lincoln stay in the corridor was 100.6 days. This compares to 99.5 days in the second quarter of 23 and 103.9 days in the first quarter of 24. Our median length of stay was 18 days in the quarter and compares to 16 days in the second quarter of 23 and 16 days in the first quarter of 24.

Speaker Change: Our average length of stay in the quarter was 106 days. This compares to $99 five days in the second quarter of 'twenty, three and 103 nine days in the first quarter of 'twenty four.

Speaker Change: Our median length of stay was 18 days in the quarter and compares to 16 days in the second quarter of 'twenty, three and 16 days in the first quarter of 'twenty four.

Nicholas Michael Westfall: Our teams remain hard at work integrating the operations of Covenant. To date, the integration has gone better than expected. The Covenant transaction could not have been accomplished without the unwavering commitment, dedication, and focus each VITAS team member shows towards fulfilling our mission in every community we serve. As I mentioned in the call last quarter, this transaction illustrates what's possible when two long-standing, mission-focused organizations collaborate, irrespective of tax status, to ensure we collectively serve the evolving needs of our communities.

Speaker Change: Our teams remain hard at work integrating the operations of Covenant.

Speaker Change: To date, the integration has gone better than expected.

Speaker Change: The covenant transaction could not have been accomplished without the unwavering commitment dedication and focus each VITAS team member shows towards fulfilling our mission in every community we serve.

Speaker Change: As I mentioned in the call last quarter. This transaction illustrates what's 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: I believe these types of opportunities should continue as the hospice and palliative care industry carries on its 45-plus-year mission in this country of focusing on patients and families in the communities we serve without allowing for items like tax status to impede progress. As Kevin mentioned, we are very excited about the opportunity to begin providing services in Pasco County, Florida. While we have not forecast a significant impact in 2024 as a result of the newly received CON, we believe this provides a significant growth opportunity for us in the future.

Speaker Change: I believe these types of opportunities should continue as the hospice and palliative care industry carries on its 45 plus year mission in this country are focusing on patients and families and the communities, we serve without allowing for items like tax status to impede progress.

Speaker Change: As Kevin mentioned, we're very excited about the opportunity to begin providing service in Pasco County, Florida, while we have not forecast a significant impact in 2024 as a result of the newly received C. O N. We believe this provides significant growth opportunity for us in the future.

Nicholas Michael Westfall: To recap what our team has accomplished, we've now generated eight quarters of sequential net growth in licensed healthcare workers and seven quarters of sequential growth in ADCs. With our targeted retention program having been completed over a year ago, we have demonstrated a sustainable and predictable approach to methodically building our clinical capacity and patient base that has taken us way past pre-pandemic levels. We've also demonstrated the ability and interest in partnering with other providers through acquisitions to ensure communities continue to receive the best possible care. We are extremely optimistic about the ability of VITAS to maintain above-average historical growth both organically and through potential acquisitions over the next few years. With that, I'd like to turn this call back over to Kevin.

Speaker Change: To recap what our team has accomplished we've now generated eight quarters of sequential net growth in licensed health care workers and seven quarters of sequential growth in ADC.

Speaker Change: With our targeted for pension program, having been completed over a year ago, we have demonstrated a sustainable and predictable approach to methodically building, our clinical capacity and patient base that has taken us way past pre pandemic levels. We've also demonstrated the ability and interest in partnering with other providers through.

Speaker Change: <unk> to ensure communities continue to receive the best possible care.

Speaker Change: We are extremely optimistic about the ability of VITAS to maintain above average historical growth both organically and through potential acquisitions over the next few years.

Speaker Change: With that I'd like to turn this call back over to Kevin.

Kevin J. McNamara: Thank you, Dick. I will now open this teleconference to questions.

Kevin: Thank you Nick.

Kevin: Now open this teleconference to questions.

Operator: Certainly. Ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. And our first question comes from the line of Ben Hendrix from RBC Capital Markets. Your question, please.

Speaker Change: Certainly ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone and our first question comes from the line of Ben Hendrix from RBC capital markets. Your question. Please.

Benjamin Hendrix: Great, thank you very much. Maybe I have a question for Nick here on VITAS.

Benjamin Hendrix: Great. Thank you very much maybe a question for next year.

Benjamin Hendrix: VITAS just curious if you could provide some more information on kind of that long term runway for census growth and how you're thinking about.

Nicholas Michael Westfall: Just curious if you could provide some more information on kind of that long-term runway for census growth and how you're thinking about, you know, the capacity that you could open up over the intermediate term, given the hiring activity, retention activity, and what we're seeing across what seemed to be a lot of your community referral sources in terms of occupancy improvements and skilled nursing and senior housing, to the degree to which that could continue to open up census opportunities, where you think Thanks.

Speaker Change: The capacity that you could open up over the intermediate term given the hiring activity retention activity and.

Speaker Change: What we're seeing across what seemed to be a lot of your community referral sources in terms of occupancy improvement in skilled nursing and senior housing.

Speaker Change: To the degree to which that can continue to up to open up.

Speaker Change: This opportunity how do you think where that growth could go over the next handful of years. Thanks.

Nicholas Michael Westfall: Yeah, absolutely. So just to reiterate, right, our revised full year census guidance for this year, which I realize is part of the question but not the full part of the question, is, you know, 13-3 to 14-3 on 24 as compared to 23. When we think about the algorithm into 25 and beyond, which of course we don't guide to, but just from a commentary standpoint, you know, we think the pace and cadence and all the factors that go into what we built, as demonstrated thus far throughout 24 and into the latter half of 23, are sustainable.

Kevin: Absolutely.

Speaker Change: So just to reiterate right our revised full year census guidance for this year, which I realize is a.

Speaker Change: Part of the question, but not full part of the question is 13, 3% to 14 three.

Speaker Change: On 24 as compared to 23, when we think about the algorithm and at 25 and beyond which of course, we don't guide to but just from a commentary standpoint, we think the pace and cadence and all the factors that go into what we build as demonstrated thus far throughout 'twenty four and into the law.

Speaker Change: Later half of 'twenty three.

Nicholas Michael Westfall: And so as we think about the markets in which we operate in, as well as the markets in which we are targeting to also operate in, we think, you know, this combination that's implied in our 24 guidance is something that, you know, could be achievable on a go-forward basis. And as we point out, the underlying pinpoint is that the demand in the market is not changing or waning. However, as long as we continue our successful track record of retaining and attracting staff in all the locations in which we operate, that would be the only, you know, limitation.

Speaker Change: Our sustainable.

Speaker Change: And so as we think about the markets in which we operate in as well as the markets in which we are targeting to also operate in we think.

Speaker Change: This combination that's.

Speaker Change: Inferred in our 2000 and for guidance is something that could be achievable on a go forward basis and as we point out the underlying pinpoint is the demand in the market is not changing our waning. However, as long as we continue our successful track record.

Speaker Change: We're retaining and attracting staff into all of the locations in which we operate that would be the only limitation, but as we tried to illustrate over a year plus now with a retention program.

Nicholas Michael Westfall: But as we've tried to illustrate over a year plus now with the retention program behind us, we think we have a really sustainable culture and approach towards methodically building that. And we don't see any headwinds from a demand standpoint for hospice services across the country and, in particular, in the markets in which we operate. Appreciate that. And just on the M&A front, can you offer any comments you can offer about your pipeline of opportunities to acquire more covenants out there? Maybe, you know, opportunities where you don't already have a presence and could attain a certificate in need?

Benjamin Hendrix: Thanks.

Speaker Change: Being behind US, we think we have a really sustainable culture and approach towards methodically building that and we don't see any.

Speaker Change: Any headwinds from a demand standpoint for hospice services across the country and in particular in the markets in which we operate.

Speaker Change: I appreciate that and just on the M&A front can you any comments you can offer about the about your pipeline of opportunities to acquire more covenants out there.

Speaker Change: Maybe opportunities where you don't already have a presence.

Speaker Change: Could attain a certificate of need.

Nicholas Michael Westfall: Yeah, so I guess the comment we'd make is it is an active pipeline and a very targeted and focused one, as we've commented on in the past in states as well as in counties, particularly those that are restricted because we think they operate very efficiently and help to serve the needs of all those communities. So, we have a lot in active discussion, but time will tell. And depending on the provider, obviously, there are a bunch of different catalysts of things that would lead to that strategic interest, whether it's, you know, single-site, regional focus providers with the ongoing headwinds from a reimbursement and reform standpoint.

Speaker Change: Yeah. So.

Speaker Change: The comment we would make as it is a active pipeline.

Speaker Change: A very targeted and focused one as we've commented on in the past in Ste.

Speaker Change: States as well as in counties, particularly those that are restricted.

Speaker Change: <unk>, we think they operate very efficiently and help to service the needs of all of those communities. So.

Speaker Change: A lot.

Nicholas Michael Westfall: And then there are other assets out on the market that are long in the tooth in their ownership cycle for some other, you know, private equity firms and others that may create interesting opportunities for us as well. So we're looking to put our balance sheet to work if it makes sense.

Speaker Change: In active discussion, but time will tell and depending on the provider, obviously theres a bunch of different catalysts or things that would lead towards that strategic interest.

Speaker Change: There is no single site regional focus providers with the ongoing headwinds from a reimbursement of reform standpoint, and then there's other assets out in the market that are long in the tooth and their ownership cycle for some other private equity firms and others that may create interesting opportunities for us as well so we're looking at.

Speaker Change: We're looking to put our balance sheet to work if it makes.

Speaker Change: Sense for our shareholders and as you guys can see on the covenant side of it also from a valuation standpoint and markets, which we want to operate so we think we're well positioned.

Speaker Change: And one thing I'd add is we've seen in Florida, a bit of a blurring in the lines between acquisition and.

Kevin J. McNamara: New Startup 2 CON, I'm speaking about in Florida, the pace of growth that VITAS has been able to achieve has It's sped up, but you know. Geometrically, in other words, it used to be, we used to say it took two years to get to about a hundred census on a new program, starting from scratch, and VITAS has blown that out of the water in the last several, C-O- So I'm just saying that you put your finger on one thing: yes, there's geography in Florida that we are precluded from being in, but VITAS has shown that once they have the legal right to be there, they grow very fast. So whether we get there by sue-in or acquisition, as I say, that differentiation is blurring a little bit in our minds, but I think there's opportunities in both those categories for expanding our footprint in

Speaker Change: New startup to C O N I mean speaking about in Florida.

Speaker Change: The pace of growth that VITAS has been able to achieve has.

Speaker Change: Sped up.

Speaker Change: Geometrically in other words that we.

Speaker Change: We used to say it took two years.

Speaker Change: Years to get to about 100 census Bureau on the new program.

Speaker Change: Starting from scratch and VITAS has blown out of the water to Alaska several.

Speaker Change: So I'm just saying.

Speaker Change: Put your finger on one thing is yes, there is geography in Florida.

Speaker Change: We are precluded from being in.

Speaker Change: VITAS has shown that once they have the legal right to be there. They are growing very fast so whether we get there by <unk> acquisition as I say that differentiation is blurring a little bit in our mind, but I think there are various opportunities.

Speaker Change: Both of those categories for expanding our footprint in Florida.

Nicholas Michael Westfall: No, that's a really excellent point by Kevin. Very happy and proud of the efforts our team has put into place to really accelerate impact in each of those markets that wouldn't have been the same, you know, years back. So we've taken a very intentional approach there so that everything is lined up, whether it's through acquisition or whether it's through, you know, New Start, DeNovo, to really penetrate, make an impact, and serve as many patients as quickly as we can in the markets in which we operate. So that impacts that growth algorithm as well.

Speaker Change: That's a really excellent point by Kevin very happy and proud of the efforts our team has put into place to really accelerate.

Speaker Change: The impact in each of those markets that wouldn't have been the same years back. So we've taken a very intentional approach. There. So that everything is lined up whether it's through acquisition or whether it's through new start de novo to really penetrate and make an impact in service as many patients as quickly as we can in the markets in which we operate.

Speaker Change: Impacts that growth algorithm as well.

Benjamin Hendrix: And just last thing for me, I was just getting a lot of questions about kind of the longer term, you know, kind of growth algorithm for Roto-Rooter, kind of given the headwinds that we've seen on the commercial side. I appreciate the commentary about the multi-quarter retraining, you know, opportunity to turn around those locations. But anyway, we should think about kind of the longer term, you know, growth trajectory for this business. Any thoughts at this point? Thanks.

Speaker Change: Thank you very much for that and just last thing for me I'm, just getting a lot of questions about kind of the longer term.

Speaker Change: Kind of growth algorithm for roto rooter kind of given the headwinds we've seen on the commercial side I appreciate the commentary about the multi quarter retraining.

Speaker Change: Opportunity to turnaround those locations, but any way, we should think about kind of the longer term.

Speaker Change: Our trajectory for this business.

Kevin J. McNamara: Well, let me start by saying that, you know, we've owned Roto-Rooter for 44 years, and during that period, of course, we always say it's recession-resistant. It's been a very consistent, you know, strong... but a consistent but, you know, grinded out type grower.

Speaker Change: Thank you.

Speaker Change: Well, let me start by saying that we.

Speaker Change: <unk> owned Roto Rooter for 44 years and during that period of course, we always say it's recession resistant.

Speaker Change: It's been a very consistent strong.

Speaker Change: But a consistent but grinded out type grower.

Kevin J. McNamara: We have had, you know... Cyclical periods where you know it's been up a little more or down a little bit more clearly. And we're we're in what I think is, you know, one of those cyclical periods. We're out a little bit on the You know calls are down six percent of the quarter. I mean, it's. It's down. And when you're on, you know, that slope of the line, you kind of look at it and say, does this slope continue to go down forever? How quickly does it turn?

Speaker Change: We have had.

Speaker Change: Cyclical periods, where it's been up a little more down a little bit more clearly we're in what I.

Speaker Change: I think is one of those cyclical periods, where a little bit on the.

Speaker Change: Calls are down 6% in the quarter I mean.

Kevin J. McNamara: Historically, it's turned, you know, pretty quickly. I would say that, you know, the way we look at it is that there's nothing substantially changed in the business. I mean, other you know, that when I look at what we call the macroeconomic trends, you know, those could turn on, you know, two Fed rate cuts. I mean, that's not something we worry about in anything but the short term, to the extent that the home services sector went through a period during the pandemic of just explosive growth.

Speaker Change: It's down and when Youre on that slope of the line.

Speaker Change: You kind of look at it and say does this slope continue to go down forever. How quickly does it turn historically its turn pretty quickly.

Speaker Change: I would say that the way we look at it is theres nothing substantially changed in the business I mean.

Speaker Change: When I look at the what we call the macroeconomic trends.

Speaker Change: Yes.

Speaker Change: Those could turn on two fed rate cuts I mean, that's that's that's not something we worry about on anything but the short term to.

Speaker Change: To the extent that the home services sector.

Speaker Change: Yeah.

Speaker Change: Went through a period during the pandemic of just explosive growth and attracted a lot of private equity money.

Kevin J. McNamara: It attracted a lot of private equity money, you know, into the field, and I think that disrupted the market a little bit. What we always say is those competitors are, you know, they're running a sprint. We're running a marathon. Their number one priority is, you know, growing the top line and building a brand. We have a brand, and you know, we're out to build net income first and foremost, and then top line, but so it's a bit of a mismatch, but I guess to answer your question. We view it as just kind of the normal yin and yang, the cyclical period that we're on the negative side of that question. But Mike, anything to add there?

Speaker Change: The field I think that's that's.

Speaker Change: Disrupted the market a little bit what we always say is those those competitors are.

Speaker Change: They are running a sprint we're running a marathon.

Speaker Change: Their number one priority is growing topline and building a brand we have a brand and.

Speaker Change: We're off to build net income first and foremost and then topline.

Speaker Change: Topline, but.

Speaker Change: So it was a bit of a mismatch, but I guess to answer your question.

Speaker Change: We view it as just kind of.

Speaker Change: The normal Ying and Yang.

Speaker Change: Yes.

Speaker Change: Cyclical period that we're on the.

Speaker Change: Quick question.

Mike: The negative side of that question, but Mike anything to add there sure.

Michael D. Witzeman: Sure. Ben, on a longer-term basis, I think your question, you know, we view the long-term potential for Roto-Rooter to be in the 5% to 6% range for top-line growth. And the way you would build that up is we're always going to pass along a price increase at the beginning of the year, based on inflation and hopefully a little bit higher than inflation. That's not only good for our top line, but because all of our technicians are generally commission-based, we need to at least pass along price increases so that their commission stays up with the price of inflation and real rates. So, we'll always have a price increase at the beginning of the year.

Speaker Change: On a longer term basis I think your question.

Speaker Change: We view, probably the long term potential for roto rooter to be in the 5% to 6% range topline growth and the way you would build that up is we're always going to pass along a price increase.

Speaker Change: At the beginning of the year based on inflation, and hopefully a little a little bit higher than inflation.

Speaker Change: It's not only good for our top line, but because of all of our technicians are generally commission based we need to at least pass along price and price increases so that there.

Speaker Change: Commission stays up with the price of inflation in real rates. So we will always have a <unk>.

Speaker Change: Rice increase at the beginning of the year, we always talk about and it's a very crude measure, but new home formation is sort of how the demand.

Michael D. Witzeman: We always talk about, and it's a very crude measure, but new home formation is sort of how demand will increase over the years, just in the whole sector itself, so call that a couple percent. So, if we pass through a three, you know, three percent price increase, a couple percent demand increase, that's where you get to five, six percent. On top of that, if we were to start thinking about growing on a long-term, consistent basis higher than that, we would be adding acquisitions, which we think are a very, very good possibility over the next 18 to 24 months.

Speaker Change: Will increase over the years just in the whole sector itself. So call that a couple percent. So if we pass through a three 3% price increase a couple of percent demand increase that's where you get to five 6%.

Speaker Change: On top of that if we were to start thinking about growing on a long term consistent basis higher than that we would be adding acquisitions, which we think are very very good.

Speaker Change: Possibility over the next 18 to 24 months and then we would start developing and looking at new lines of businesses.

Michael D. Witzeman: And then we would start developing and looking at new lines of businesses that are within the plumbing sort of sector, and we're constantly looking and exploring those kinds of different services. So, five to six percent with add-on from acquisition and new potential lines of business.

Speaker Change: Better within the plumbing sort of sector and we're constantly looking and exploring those those kind of different services.

Speaker Change: 5% to 6% with some add on from acquisition and new potential lines of business.

Benjamin Hendrix: I really appreciate you guys. Thank you.

Speaker Change: Really appreciate it guys. Thank you.

Speaker Change: Thank you.

Joanna Sylvia Gajuk: And our next question comes from the line of Joanna Kojak from Bank of America. Your question, please.

Speaker Change: And our next question.

Joanna Sylvia Gajuk: Comes from the line of Joanna <unk>.

Speaker Change: From Bank of America. Your question. Please.

Joanna Sylvia Gajuk: Good morning. Thank you for taking the time to answer the question. So maybe since we finished on water, I'll continue that topic first. So the business, I guess, you know, sounds like it did worse than your internal expectations. I mean, clearly worse than our model, and you made it sound like things were kind of, you know, when it comes to these headwinds, similar to Q1. But, you know, the revenues did decline sequentially, but I assume there's some seasonality because Q1 tends to be a busy quarter there.

Joanna: Hi, good morning. Thanks.

Speaker Change: For taking the question, so maybe asking suite.

Speaker Change: I'm glad I asked I'll continue that topic first.

Speaker Change: So the business I guess.

Louis Danny: Looks like it did from Louis Danny or Intel or extra commissions I mean, clearly it wasn't in our model.

Louis Danny: And.

Speaker Change: You made it sound like things are kind of you know.

Joanna Sylvia Gajuk: And when it comes to these headwinds similar to Q1.

Speaker Change: But the revenues did decline sequentially, but I assume there is some seasonality because Q1 tends to be busy quarter there.

Joanna Sylvia Gajuk: But then when I look at the last few years, obviously, things are skewed by the pandemic. So is there any historical data you can share, kind of on an organic basis, like typical seasonality here from Q1? And can you flag, you know, was there any new issue or kind of how would you describe the reasons for why it was a little bit worse than what you were initially expecting?

Speaker Change: But then when I look at the last few years, obviously, it thinks I forget about the pandemic. So is there any.

Speaker Change: Historical data you can share kind of organic basis like the typical seasonality.

Speaker Change: Q2 from Q1, and <unk> was there any real issue or kind of how how would you describe the reasons for why it was to let it better or worse than what you were initially expecting.

Michael D. Witzeman: Sure, on a sequential basis, the first quarter and the fourth quarter every year are Road Rotor's best top line. There's freezing, there's more precipitation, those things help our demand. Generally, overall, I would tell you that from the first quarter to the second quarter, sequentially, the decline is roughly four to five percent of revenue. That's normal.

Joanna Sylvia Gajuk: Sure.

Joanna Sylvia Gajuk: On a sequential basis.

Speaker Change: First quarter in the fourth quarter every year or rotors best topline.

Joanna Sylvia Gajuk:

Joanna Sylvia Gajuk: Quarters Theres.

Joanna Sylvia Gajuk: Theres freezing theres more precipitation knows those things help help part demand.

Speaker Change: Generally overall I would tell you that first quarter to second quarter sequentially. The decline is roughly 4% to 5% of revenue. That's normal we're going from a really cold period into a more mild period and so that just that happens every year normally.

Michael D. Witzeman: We're going from a really cold period into a more mild period, and so that happens every year normally. The second and third quarters, then, are generally comparable to each other. The fourth quarter, then, generally goes up five to seven percent based on weather, as well as the idea that during the holidays, people are home more and they're doing more things around the house. They're getting their houses ready for holiday festivities and things, so that helps pump up our demand. But there's a bit of a dip historically in the second and third quarter as it relates to revenue.

Speaker Change: From third second and third quarter, then are generally comparable to each other fourth quarter, then generally goes up 5% to 7% based on weather as well as the idea that during the holidays people are home more theyre doing more things around the house theyre getting their house ready for holiday.

Speaker Change: Devotees and things so that that helps pump up our demand. So there is.

Speaker Change: A bit of a dip historically in the second and third quarter as it relates to revenue.

Joanna Sylvia Gajuk: Okay, and when I look at the front, oh, sorry.

Joanna Sylvia Gajuk: Okay.

Speaker Change: When I look at the front.

Joanna Sylvia Gajuk: Sorry.

Speaker Change: Okay understood.

Michael D. Witzeman: Just to answer one question about the issue of why it was kind of an overarching question, why were sales. I'm reiterating the many things we've said in our, [inaudible] A couple of percentage point improvements in that just through blocking and tackling. The other aspect of the question really relates more to the residential side, and that is, go on Google and open up plumbing services. You'll see there is a cacophony of services. [inaudible] top locations, but all our contractor operations and our franchise, our hundreds of franchise operations.

Speaker Change: Just to answer one question about issue why it was kind of an overarching question why were sales.

Joanna Sylvia Gajuk: Lower than we expected in the quarter and again.

Joanna Sylvia Gajuk: I'm reiterating that.

Joanna Sylvia Gajuk: Things, we've said in our.

Joanna Sylvia Gajuk: In our press release and then.

Joanna Sylvia Gajuk: Our earlier presentations, but generally I would say.

Speaker Change: It could be two things.

Speaker Change: Commercial sales were lower than they really should have been lower than they were lower than we expected.

Speaker Change: There is no reason for our view that for them to be quite that low I mean, do we expect those.

Speaker Change: A couple of percentage point improvement, so that just through blocking and tackling.

Speaker Change: The other aspects of the question is.

Speaker Change: Is really relates more to the residential and that is yes.

Speaker Change: Go on Google and open up plumbing services, you'll see there is a cacophony of.

Speaker Change: Of our service offerings and.

Speaker Change: Much more so than <unk>.

Speaker Change: Past years.

Speaker Change: It's a very complex issue.

Joanna Sylvia Gajuk: All firms are fighting that.

Joanna Sylvia Gajuk: Fighting that through not only our.

Joanna Sylvia Gajuk: Top locations, but all our contract our operations and our franchise.

Joanna Sylvia Gajuk: Hundreds of franchise operations.

Michael D. Witzeman: I mean, I have a feeling that of all the companies in that sector, to figure it out, historically, it's always been the road order to get on top of changes on the marketing side. So we're not there yet, but to answer your question as far as why it's lower, it's those two issues. It's getting the calls on the residential side and doing a better job dealing with the commercial market.

Joanna Sylvia Gajuk: I have a feeling that of all the companies in that sector to figure it out.

Joanna Sylvia Gajuk: Historically, it's always been roto rooter to get on top of changes on the marketing side. So we're not there yet but to answer your question as far as why is it lower.

Joanna Sylvia Gajuk: It's those two issues, it's getting the calls on the residential side.

Joanna Sylvia Gajuk: <unk>.

Joanna Sylvia Gajuk: Doing a better job.

Joanna Sylvia Gajuk: Dealing with the commercial market.

Joanna Sylvia Gajuk: Thank you. And, and I guess related question, because I was trying to say, the breakdown you gave in terms of the different elements, you know, inside a residential and commercial building, and water restoration was down, you know, year over year, I guess more than, you know, more in commercial, but still residential, it was down, like, you know, almost 5% year over year. Because I thought this would be sort of the most need-based business, right? So because it obviously talked about residential being more like macro driven, you know, consumer confidence, and, and, and, and, I guess, just the economy, broadly speaking. So I thought, you know, but that would be the best.

Speaker Change: Thank you Anne and I guess related question because the <unk> has tried to say the breakdown you gave in terms of the different elements inside the residential commercial and the water restoration was down year over year, I guess more than I don't know more in commercial but residential it was down like 5% year over year.

Speaker Change: Because I thought this would be sort of that most need base business by itself because it all this talk about residential being more like a macro driven consumer confidence in and and I guess just economy broadly speaking so I thought that would be that the settlement will know whether there was anything year over year, how would you describe kind of the.

Joanna Sylvia Gajuk: I don't know whether there was anything year over year, or how would you describe kind of the need-based sort of core business versus the sort of the more discretionary elements. How those are

Speaker Change: Then you need Bachelor of core business specialist out sort of the more discretionary elements.

Speaker Change: How those are tracking.

Michael D. Witzeman: So the water restoration business is, you know, it's dependent on the severity of the issues that we find when we get to the job site. So it's difficult to say why or how it varies from quarter to quarter, sequentially, or year over year.

Speaker Change: So so the water restoration business as you know is dependent on the severity of the issues that we find when we get to the job site. So it's it's difficult to say why or how it is.

Speaker Change: Varies on a quarter to quarter sequentially or year over year, what I can say with some definition. Some definitive is that our conversion rate on calls that we received that we think had the water restoration possibility alright.

Michael D. Witzeman: What I can say with some definition or some certainty is that our conversion rate on calls that we receive that we think have the water restoration possibility is at close to all-time highs. So we are converting the calls that we get that we think have water restoration possibilities at a higher rate than we have in the past. How those calls come in and why they may or may not come in is a hard question to answer, really. It generally goes with our plumbing and sewer drain revenue, though, as you point out. We're converting the jobs we're getting; I can say that with certainty.

Speaker Change: Close to all time highs. So we're converting the calls that we get that we think have water restoration possibilities at a higher rate than we have in the past.

Speaker Change: But how those calls come in and why they may or may not come in as a hard. It's a hard question to answer really it generally goes with our plumbing and sewer drain revenue, though as you point out so.

Speaker Change: We're converting the jobs, we're getting I can say that with certainty.

Joanna Sylvia Gajuk: All right, and I guess, you know, the last question around, so your guidance assumes revenue declines four to five, but I guess it was a bigger decline in the first half, so it kind of implies the second half is still down, but maybe less than the first half. So can you talk about maybe the trends, you know, exiting the quarter and into, you know, early Q3, like how are things tracking in that business?

Speaker Change: Alright, and I guess.

The last question.

So your guidance assumes no revenue or the class four to five I guess it was that'd be great decline in first half kind of implies second half still down by maybe lessen second half the first half so.

Joanna Sylvia Gajuk: Can you talk about maybe the trends exiting the quarter and into early Q3, or how are things tracking in that business.

Michael D. Witzeman: We are projecting some sequential improvement, third quarter and fourth quarter, on a year-over-year comparison basis. So obviously, if we're down, you know, roughly five and a half percent year to date, and we're only guiding the 4% to 5% down.

Speaker Change: We are.

Speaker Change: Projecting some sequential improvement third quarter and fourth quarter as on a year over year comparison basis.

Speaker Change: So obviously, if we're down roughly five 5% year to date.

Michael D. Witzeman: We're only.

Speaker Change: Guiding to 4% to 5% down theres going to be some improvement in the second half of the year.

Michael D. Witzeman: There's going to be some improvement in the second half of the year. The other thing I can say is, and I don't want to make too big of a deal out of this, but sequential improvement intra-quarter in the second quarter, particularly on commercial revenue, on a monthly basis, our commercial revenue comps improved each month during the second quarter. I don't want to make too big of a deal out of that. That's just, you know, a couple months of activity. But we think that there's some positive momentum for the second half of the year, and things are going in the right direction.

Speaker Change: The other thing I can say is and I don't want to make too big of a deal out of this but sequential improvement intra quarter in the second quarter, particularly on commercial revenue on a monthly basis, our commercial revenue comps improved each month during the second quarter.

Michael D. Witzeman: I don't want to make too big of a deal out of that that's just a couple of months of activity, but we think that theres a positive some positive momentum for the second half of the year going in the right direction.

Joanna Sylvia Gajuk: Okay, that's helpful. And if I may, so to that end, you kind of said in your remarks around the management team of Rotoworks kind of anticipates several quarters for the actions to represent themselves. In results, I guess. So is it fair to assume, you know, headed into 25, revenue may still be declining, but, but, you know, I guess, status quo, or, you know, assuming the economy doesn't change much in either direction, you would think that, you know, 25 could be a growth year. It sounds like it's probably not growing, especially maybe your long term, the five to six you described, but is it somewhere, you know, kind of approaching that into next year?

Michael D. Witzeman: Okay. That's helpful and if I may fill a cluster that Andy you kind of set up.

Speaker Change: Our prepared remarks around the.

Speaker Change: The management team of otherwise kind of anticipated.

Speaker Change: Several quarters for for kind of the actions too.

At present themselves.

Joanna Sylvia Gajuk: And I know results I guess, so is it fair to assume like headed into.

Joanna Sylvia Gajuk: 25, there may be still actuaries declining, but everybody you know I guess status quo or assuming the economy doesn't change much either direction, you would think that you know.

Joanna Sylvia Gajuk: 25 could be a growth year and it sounds like it's probably not growing as fast as maybe a longtime to five to six you describe what.

Speaker Change: Is it somewhere you know kind of approaching that.

Speaker Change: Into next year.

Michael D. Witzeman: We haven't done any real analysis for 25 yet, Joanna, so I would hesitate to say that we're going to be at a five to six percent growth rate in 25, but I think we think we're moving in that direction.

Speaker Change: We haven't done any real analysis in 'twenty four 'twenty five yet Joanna.

I would hesitate to say that we're going to be at a five or six 5% to 6% growth rate in 'twenty five.

Michael D. Witzeman: But I think we think we're moving in that direction.

Joanna: Okay, Thanks for that and maybe switching gears.

Speaker Change: Davita.

Speaker Change: So you raised guidance, there, but quite a bit obviously that the audit, but small fraction and I guess, the the Medicare cap is lower.

Joanna Sylvia Gajuk: Obviously, that the audit, but just a small fraction, and I guess the Medicare cap is lower. But it sounds like your census is much higher. So that's where it is. But the last piece I want to ask and clarify comments around the Medicare rate average. So we've seen the proposal. So what do you assume for Q4 for the Medicare rate out there? And how much I guess it helped your guidance versus, say, your original expectation?

Joanna Sylvia Gajuk: But sounds like urea census is much higher so that's where it is but the last piece I wanted to ask a clarifying comments around Medicare rate. So we've seen the proposal. So what do you. What are you. So far for Q4 for the Medicare rate update and how much I guess, what it helped you.

Speaker Change: Guidance versus say your original expectations.

Nicholas Michael Westfall: Yeah, sounds good. So, let me provide what we have baked in, and of course, while I believe it's an OMB getting finalized as we speak, the construct of it is, you know, locked and loaded. So we believe, you know, the impact in the fourth quarter that's embedded in our estimate that should come to fruition when it's finalized is about 3.5% net across the entire company, which is better, you know, we then do better, of course, than the national stated blended rate of 2.6. So that's great.

Speaker Change: Yeah. It sounds good so let me provide what we haven't baked in and of course it well.

Nicholas Michael Westfall: I believe it's at OMB getting finalized as we speak the construct of it is.

Nicholas Michael Westfall: Locked and loaded so we believe.

Nicholas Michael Westfall: The.

Nicholas Michael Westfall: The impact in the fourth quarter, that's embedded in our estimate that should come to fruition. When it's finalized is about three 5% net across the entire <unk>.

Company, which is better.

Speaker Change: We then do better of course, then national stated blended rate of two six so that's great and tide of our original estimate I think I can't recall totally off the top of my head, but this was slightly better than our original estimate related to it and it really.

Nicholas Michael Westfall: In tide of our original estimate, I think I can't recall totally off the top of my head, but this is slightly better than our original estimate related to it. And it really comes down to, as you point out, some of the key markets in which we operate and saw higher price increases than we anticipated, which is great, which is good. And then the other real underlying driving factor is that the government continues to recognize in that wage rule that high-acuity services, particularly continuous care, are an area of focus.

Nicholas Michael Westfall: It comes down to as you point out some of the key markets in which we operate and saw higher price increases than we anticipated which is.

Which is good and then the other real underlying driving factor is the government continues to recognize in that wage rule that high acuity services, particularly continuous care.

Nicholas Michael Westfall: And so continuous care happens to have the largest price increase of all four levels, with GIP being the lowest, but it's really reflective of a continued decrease in providers in the hospice space providing continuous care. And we continue to provide all four levels. And we think that's a differentiating offering, not only for our partners but, more importantly, for patients and families as we're able to provide services, keep them at home, and help them through a period of crisis. So that's how it all weighs in.

Nicholas Michael Westfall: Our area of focus and so continuous care happen to have the largest price increase of all four levels.

With <unk> being the lowest but it's really reflective of a continued decrease of providers in the hospice space, providing continuous care and we continue to provide all four levels and we think that's a differentiating offering not only for our partners, but more importantly for patients and families as we're able to provide.

Nicholas Michael Westfall: <unk> provides services keep them at home and help them through a period of crisis. So that's how it all up that's how it always in.

Joanna Sylvia Gajuk: Right, and the bigger piece seems to be the census growth rate, and you mentioned that, you know, you continue to hire, which has capacity, which is going to address census, but you know, so it sounds like you just essentially hire these nurses or workers from out of, so I guess, you know, I think I know the answer, but I just, you know, would like to hear you talk about the competitive environment and just, you know, how long, for how long, I guess, you can grow it at rate and kind of, I guess, continue to take market, sure.

Alright, and the bigger piece seems to be the fastest growing right and you mentioned that.

You continue to go higher, which that's capacity which to address this but.

So it sounds like you just essentially.

Speaker Change: Ladies nurses all workers from auto so I guess.

I think I know the answer, but I guess, we'd like to hear you talk about the competitive environment.

How long for how long I guess, you can you can grow at rate and kind of I guess.

Continue to take market share.

Nicholas Michael Westfall: Yeah, I mean, we believe there is, and we feel really confident in what we've proven over the last effective two years, right? You have seven quarters of ADC growth, two years of clinical capacity, and we've been referencing just the five disciplines associated with the retention program, and that trend is consistent with all the other clinical disciplines we need to provide full comprehensive care. As it relates to talent in the marketplace, predictability, culture, and the ability to really provide comprehensive care to patients and families continue to resonate with clinicians.

Speaker Change: Yeah, I mean, we believe there is we feel real confident in what we've proven over the last effect of two years right you have seven quarters of ADC growth two years of.

Clinical capacity and we've been referencing just five disciplines associated with the retention program and those that trend is consistent with all the other clinical disciplines, we need to provide.

A full comprehensive care as it relates to talent in the marketplace.

That predictability and culture and ability to really provide comprehensive care to patients and families continues to resonate with clinicians we believe that as a differentiating proposition for them to come to us and come to us with a fantastic cultural and local family that there.

Nicholas Michael Westfall: We believe that as a differentiating proposition for them to come to us and come to us with a fantastic cultural and local family that they're joining. So, you know, whether those individuals are coming from other healthcare settings, whether it, we're also seeing a combination of strength of people either coming back into the workforce or a much more reliable and predictable pattern of resources available out there. That's really encouraging. That's what we're experiencing, and that's what gives us further confidence not only in, you know, this year's remaining growth rate at 13.3 to 14.3, but as you point out, all of our Revised Guidance is volume-driven, and we anticipate that to continue going forward, and we'll provide those details once we get into the 25 planning process.

That they are joining so.

Whether those individuals are coming from other health care settings, whether it. We're also seeing a combination of strength of people either coming back into the workforce or a much more reliable and predictable pattern of resources available out there. That's really that's really encouraging that's what we're experiencing and that's what.

Gives us further confidence not only in.

This year's remaining growth rate at 13, 3% to 14, three but as you point out all of our.

The revised guidance is volume driven and we anticipate that to.

To continue going forward and we'll provide those details once we get into 'twenty.

25 planning process.

So I guess it sounded like you offer contra and better work environment I guess it might.

Speaker Change: I see some monetary.

Speaker Change: I guess the advantage that you guys have versus your competitors right.

Nicholas Michael Westfall: Yeah, we're going to continue to pay a prevailing market rate, rich benefits, all the things that attract people, but as we've spoken about over the last two years, it's not just money that drives people to make a choice to come into hospice; it is also the ability and confidence they have to fulfill that mission and calling that typically brings people into our industry. And we think we're, you know, obviously, I have a slighted view, but we think we're the best place in the market to do so.

Yeah, we're going to continue to play.

Correct.

Alien market range rich benefits, all the things that attract but.

As we've spoken about over the last two years, it's not just money that drives people to make a choice one to come in either into hospice. It is also the ability and confidence they have to fulfill that mission and calling that typically bring people into our industry and we think we're obviously I have a slide.

But we think we're the best place in the market to do so and we're trying and have evolved our.

Nicholas Michael Westfall: And we're trying and have evolved our targeted marketing and evaluation strategies; the pandemic forced us to elevate our game appropriately, and we've done that. So that's what the last two years, I think, have helped illustrate. And, you know, we're well past the year's worth anniversary of the retention program being behind us. We've completed the last payment. I mean, we have a proven track record of a year plus of being able to do this in the environment we're operating in.

Targeted marketing evaluation strategies the pandemic.

Forced us to elevate our game appropriately and we've done that so that's what the last two years I think have helped to illustrate and.

We're well past the years' worth anniversary of the retention program being behind US we've completed the last payment I mean, we have a.

Our proven track record right now or a year plus being able to do this in the environment, which we're operating right now.

Joanna Sylvia Gajuk: Thanks for that, and I guess, if I may, on the new CON, so it sounds like this is pretty close to Tampa, so can you remind us when the last time you added a new CON? It sounds like those CONs that you've added in Florida went much better than you had expected. So any way to kind of size up opportunity in this new territory, maybe not this year, but as we think about, say, next year?

Okay. Thanks for that and I guess, if I may on the on the New C. O N S. It sounds like this is.

Critical to Tampa.

So can you remind us what was the last time you added two and it sounds like.

Those con's auditing and Florida went much better than you had expected so any way to kind of size up opportunity in this new territory. So maybe not maybe not this year, but I'd like ask you think about say next year.

Nicholas Michael Westfall: Yeah, we'll provide some of the sizing embedded in our guidance for 25 and beyond. You know, it's one of the things I want to hesitate doing right now. I'd have to go back because I don't want to do it off the top of my head as to when the timing of a few of the last CONs went into place. But what Kevin was alluding to, whether it's CON entry or whether it's acquisition entry, our teams, you know, we've refined our approach and have really found great performance and deploying resources immediately pre-day one and on day one of being successful at penetrating the markets.

Yes, we'll provide some of the sizing embedded in our guidance and 25 and beyond it's one of the things I want to hesitate doing right now.

I'd have to go back to I don't want do it off the top of my head as to when the timing of a few of the last Con's went into place, but what Kevin was alluding to whether it's C O N entry or whether it's acquisition entry our teams.

We've refined our approach and have really found.

Great performance and deploying resources immediately pre day, one in on day, one of being successful at penetrating the markets and for the C. O N pieces. It just helps to further reinforce the underserved population, which drove to the identification of need and we found that demand to be.

Nicholas Michael Westfall: And for the CON pieces, it just helps to further reinforce the underserved population, which drove to the identification of need, and we found that demand to be substantial. And so we basically threw away all of our other historical growth algorithms because they were grossly under-, you know, we were outperforming all of that.

<unk> and <unk>.

So we.

We basically throw away all of our other historical growth algorithms because they werent they were grossly under.

Nicholas Michael Westfall: And we anticipate that here in PASCO once we enter.

We're outperforming all of that and we anticipate that here in Pasco once we enter.

Kevin J. McNamara: Joanna, another big benefit of a new CON like that, a fast-growing CON like that, is the Medicare cap protection that it provides, you know, in the early years, almost more important, and the contribution to the It's good to get them, I guess. But we don't take them lightly.

Joanne another big benefit of the new sand like that fast growing like that is the Medicare cap protection that it provides us.

Yes.

The early years, almost more important and then the contribution to the.

Yes, Todd.

Bottom line, but.

It's good it's good it's good to get them I guess, we don't we don't take them lightly.

Nicholas Michael Westfall: And our latest one, the performance of it, is so substantially off the charts compared to anything else historically, that's why I'm hesitating to reference it right now. I don't think that's what we would attribute to the PASCO entry, but it was... You know, substantially.

And our latest one the performance of it is so substantially off the charts compared to anything else historically thats why im hesitating to reference it right now I don't think Thats, what we would attribute in pasco entry to be but it was.

Substantial.

Joanna Sylvia Gajuk: Okay, that's good to hear. I guess that it did so well.

Okay. That's good to hear I guess at Salobo.

But at the very last one and thank you for that on the length of stay metrics of the median is higher 18 versus 16 last year and I guess 16 last quarter, but then the average length of stay I guess, it's been declining so I guess it kind of peaked almost like six days, but now it's like a lot of it.

Joanna Sylvia Gajuk: On the length of stay metrics, the median is higher, 18 versus 16 last year, and I guess 16 last quarter. But then the average length of stay, I guess, has been declining, so I guess it kind of peaked at almost 106 days, but now it's like a little bit above 100 days. So should we expect this average length of stay to continue to decline? Because I guess you had pretty good growth in your hospital admission, so I assume that's where it's being reflected, but then the median is higher, so I'm trying to work on that, so thank you.

So should we expect this.

This average length of stay to continue to decline because I guess.

Yeah.

Pretty good.

Hospital admission so I assume that's where it's being reflected but then the median is higher so I'm trying to reconcile that Joe. Thank you.

Nicholas Michael Westfall: Yeah. You know, I wouldn't put too much credence in the quarter-over-quarter movement of any of the average length-of-stay components. I think what you can anticipate is it will remain relatively consistent with where, you know, the first half of the year has been. The median length-of-stay at 18 days is very encouraging, you know, whether it was 16, whether it's 18. It may not sound substantial, but to me, it really becomes an accurate representation of how well we're doing out in the communities with our healthcare partners in educating them around earlier identification of hospice appropriateness.

Yeah.

I wouldn't put too much credence in quarter over quarter movement of any of the average length of stay components. I think what you could anticipate is and will remain relatively consistent with where the first half of the year has been the median length of stay at 18 days.

Find very encouraging.

Whether it was 16, whether it's 18 it may not sound.

Substantial but to me it really becomes the accurate representation of how well we're doing out in the communities with our health care partners educating them around earlier identification of hospice appropriateness and it begins to translate through that way and so while one day of movement doesn't meaningfully.

Nicholas Michael Westfall: And so while one day of movement doesn't meaningfully drive a whole lot, it is something we look at because it becomes a good barometer of how good of a job we're doing with that education cycle and how every day matters in the patient and family's experience here. And that's what we always remind all of our team members, and the quarter represents a, you know, positive trajectory.

Really drive a whole lot. It is something we look at because it becomes a good barometer of how good of a job we're doing.

With that education cycle, and how everyday matters in a patient and family's experience here and that's what we always remind all of our team members.

And in that quarter represents.

Nicholas Michael Westfall: But, you know, whether it's 16, 17, 18, or 19, that's probably the range we'll operate in. We referenced it in the pandemic when we hit an all-time low of 11, but that was more of the healthcare system being completely disrupted, patients coming to us at, you know, the real. Transcripts provided by Transcription Outsourcing, LLC.

Positive positive trajectory, but whether it's 16 17 18 or 19, that's probably the range will operate and we referenced it in the pandemic when we hit an all time low of 11, but that was more of the health care system being completely disrupted patients coming to us.

Unknown Executive: We referenced it in the pandemic when we hit an all-time low of 11, but that was more of the healthcare system being completely disrupted. Patients coming to us at, you know, the real extreme end of life, and we were trying to forecast at that time what it was going to mean over time for census, and so we're encouraged by 16 to 18 range.

Ed you know the real.

The extreme end of life and we were trying to forecast at that time, what was going to mean over time for sensus and so we're encouraged by 16 to 18 range.

Unknown Executive: Thank you so much.

Great. Thank you so much thanks for taking the question.

Joanna Sylvia Gajuk: Great. Thank you so much. Thanks for taking the time to answer the question.

Unknown Executive: Absolutely. Thank you.

Absolutely.

Kevin J. McNamara: Thank you. This does conclude the question and answer session for today's program. I'd like to hand the program back to Kevin McNamara, CEO, for any further remarks.

Unknown Executive: So this does conclude the question-and-answer session of today's program.

Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Kevin Mcnamara CEO for any further remarks.

Kevin Mcnamara: I'd like to hand the program back to Kevin McNamara, CEO, for any further remarks. Thank you everyone for your questions and your kind attention, and we'll reconvene about three months from today. Thank you.

Kevin J. McNamara: Thank you, everyone, for your questions and your kind attention. We'll reconvene about three months from today. Thank you.

Thank you everyone for your questions and your kind attention and we'll.

We will reconvene in about three months from today. Thank you.

Unknown Executive: Thank you, ladies and gentlemen, for your participation at today's conference.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Unknown Executive: This does conclude the program.

Unknown Executive: You may now disconnect.

Yeah.

Okay.