8-K: Chemed Corporation Reports Strong First Quarter 2024 Results Driven by VITAS Growth

Chemed Corporation's first quarter 2024 results show significant growth in the VITAS segment, offsetting a decline in Roto-Rooter revenue.

Summary

• Chemed Corporation reported a 5.2% increase in revenue to $589.2 million for the first quarter of 2024.
• GAAP diluted earnings per share increased by 18.4% to $4.24, while adjusted diluted EPS rose by 21.5% to $5.20.
• The VITAS segment saw a 14.0% increase in net patient revenue to $354.0 million, with a 10.3% increase in average daily census to 19,665.
• VITAS's adjusted EBITDA, excluding Medicare Cap, increased by 67.2% to $60.7 million, with a margin of 17.0%, a 544-basis point increase.
• Roto-Rooter's revenue decreased by 5.8% to $235.2 million, and adjusted EBITDA declined by 15.6% to $60.7 million.
• Chemed repurchased 50,000 shares of its stock for $32.3 million during the quarter, at an average cost of $646.87 per share.
• The company has $313.4 million in cash and cash equivalents and no debt as of March 31, 2024.
• Chemed reiterates its full-year 2024 adjusted diluted EPS guidance range of $23.30 to $23.70.

Sentiment

Score: 7

Explanation: The document presents a mixed picture with strong growth in the VITAS segment but a decline in Roto-Rooter. The overall sentiment is positive due to the strong earnings and cash position, but the Roto-Rooter performance and potential risks temper the enthusiasm.

Positives

• VITAS experienced strong growth in revenue, average daily census, and adjusted EBITDA.
• The company's overall earnings per share showed significant growth.
• Chemed has a strong cash position with no debt.
• The VITAS segment's adjusted EBITDA margin improved significantly.
• The company completed a strategic acquisition of Covenant Health's hospice assets.
• Chemed has a substantial remaining share repurchase authorization of $281.7 million.

Negatives

• Roto-Rooter's revenue and adjusted EBITDA declined compared to the prior year.
• Roto-Rooter's gross margin and adjusted EBITDA margin decreased.
• Roto-Rooter's commercial and residential revenue both experienced declines.
• The company's consolidated results were negatively impacted by Roto-Rooter's performance.

Risks

• Changes in regulations governing the hospice care or plumbing and drain cleaning industries could impact the company.
• Periodic changes in reimbursement levels under Medicare and Medicaid programs could affect revenue.
• Difficulties in predicting patient length of stay and estimating Medicare reimbursement obligations pose a risk.
• The current shortage of qualified nurses, healthcare professionals, and licensed plumbing technicians could impact operations.
• The company is dependent on patient referral sources, which could be a risk.
• The company faces challenges inherent in its growth strategy.

Future Outlook

Management reiterates its full-year 2024 adjusted diluted EPS guidance range of $23.30 to $23.70 and anticipates providing updated guidance with the June 30, 2024 earnings release.

Management Comments

• Management uses EBITDA, Adjusted EBITDA and Adjusted Diluted EPS to evaluate the company's operating results and compare its performance with similar companies.
• Management anticipates providing updated 2024 earnings guidance and related subsidiary operating metrics as part of the June 30, 2024 earnings press release.

Industry Context

The results reflect the ongoing demand for end-of-life care services, as evidenced by the strong performance of the VITAS segment, while also highlighting the challenges faced by the plumbing and drain cleaning industry, as seen in Roto-Rooter's results. The acquisition of Covenant Health's hospice assets is a strategic move to further strengthen VITAS's position in the market.

Comparison to Industry Standards

• Chemed's VITAS segment's 14% revenue growth and 10.3% ADC growth are strong compared to industry averages for hospice care providers, which typically see single-digit growth.
• The 67.2% increase in VITAS's adjusted EBITDA is significantly higher than the average growth rate for hospice companies, indicating strong operational efficiency.
• Roto-Rooter's 5.8% revenue decline contrasts with some competitors in the plumbing and drain cleaning industry that have reported modest growth, suggesting potential market share loss or specific challenges in their operations.
• Companies like Amedisys and LHC Group, which also operate in the home health and hospice space, have reported varying results, with some experiencing similar growth in hospice but facing challenges in other segments.
• The acquisition of Covenant Health's hospice assets for $85 million is a typical transaction size for hospice acquisitions, aligning with industry trends of consolidation.

Stakeholder Impact

• Shareholders will likely react positively to the strong earnings and VITAS segment growth.
• Employees in the VITAS segment may benefit from the company's growth and expansion.
• Customers of VITAS will continue to receive end-of-life care services.
• Suppliers to VITAS may see increased demand for their products and services.
• Creditors are likely to view the company's strong cash position and lack of debt favorably.
• Roto-Rooter employees and franchisees may be concerned about the revenue decline.

Next Steps

• Chemed will host a conference call on April 25, 2024, to discuss the quarterly results.
• Management will provide updated 2024 earnings guidance with the June 30, 2024 earnings release.

Key Dates

Keywords

Chemed, VITAS, Roto-Rooter, Hospice, Plumbing, Drain Cleaning, Healthcare, EBITDA, Earnings Per Share, Revenue, Medicare, Acquisition