- Admissions: 17,344, an 11% improvement from the same period of 2023.
- Average Daily Census (ADC): 2,644, an increase of 14.4% compared to the prior year quarter.
- VITAS Net Revenue: $374.6 million, an increase of 16.7% compared to the prior year period.
- Revenue from Covenant Health Acquisition: $8.2 million to $8.7 million.
- Net Income from Covenant Health Acquisition: Approximately $1.6 million to $1.8 million.
- Adjusted EBITDA from Covenant Health Acquisition: Between $2.2 million and $2.4 million.
- Average Revenue per Patient Day: $200.3, 153 basis points above the prior year period.
- Adjusted EBITDA (excluding Medicare Cap): $67 million, an increase of 77%.
- Adjusted EBITDA Margin (excluding Medicare Cap): 17.8%, 613 basis points above the prior year period.
- Roto-Rooter Quarterly Revenue: $221.3 million, a decrease of 5% compared to the prior year quarter.
- Roto-Rooter Residential Revenue: $155 million, a decrease of 1.6% from the prior year period.
- Roto-Rooter Commercial Revenue: $50.9 million, a decrease of 8.2% from the prior year.
- Adjusted EBITDA at Roto-Rooter: $59.8 million, a decrease of 9.2% compared to the prior year quarter.
- Adjusted EBITDA Margin at Roto-Rooter: 27%, a 120 basis point sequential improvement from the first quarter of 2024.
- 2024 Earnings Per Diluted Share Guidance: $23.55 to $23.80.
- 2024 Revenue Guidance for VITAS: Estimated to increase 16.3% to 17.3% compared to 2023.
- 2024 Average Daily Census Guidance for VITAS: Estimated to increase 13.3% to 14.4%.
- 2024 Adjusted EBITDA Margin Guidance for VITAS: Estimated to be 19.3% to 19.7%.
- 2024 Revenue Decline Guidance for Roto-Rooter: Forecasted to have a 4% to 5% revenue decline compared to 2023.
- 2024 Adjusted EBITDA Margin Guidance for Roto-Rooter: Expected to be 26.5% to 27%.
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chemed Corp (CHE, Financial) reported a significant 11% increase in admissions for VITAS in Q2 2024 compared to the same period in 2023.
- The acquisition of Covenant Health positively impacted operating metrics, contributing $8.2 million to $8.7 million in revenue and $1.6 million to $1.8 million in net income.
- VITAS was awarded a Certificate of Need to provide hospice services in Pasco County, Florida, opening new growth opportunities.
- VITAS achieved an average daily census increase of 14.4% year-over-year, reflecting strong operational performance.
- Chemed Corp (CHE) raised its full-year 2024 guidance for VITAS, estimating a 16.3% to 17.3% revenue increase compared to 2023.
Negative Points
- Roto-Rooter experienced a 5% decline in quarterly revenue compared to the prior year, with residential revenue down 1.6% and commercial revenue down 8.2%.
- Overall call volume for Roto-Rooter decreased by 6.1% year-over-year, indicating lower demand.
- Roto-Rooter's adjusted EBITDA decreased by 9.2% in Q2 2024 compared to the prior year, reflecting operational challenges.
- Increased competition in the home services market, particularly in internet marketing, has impacted Roto-Rooter's performance.
- The commercial sector of Roto-Rooter continues to face demand issues, with small business owners behaving similarly to residential customers, leading to decreased revenue.
Q & A Highlights
Q: Can you provide more information on the long-term runway for census growth at VITAS and how you're thinking about capacity expansion given the hiring and retention activities?
A: Nicholas Westfall, Executive Vice President, highlighted that the revised full-year census guidance for 2024 is 13.3% to 14.3% compared to 2023. He emphasized that the demand for hospice services remains strong and that VITAS's ability to retain and attract staff is crucial for sustaining growth. Westfall expressed confidence in maintaining this growth trajectory in the coming years.
Q: Can you comment on the pipeline of opportunities for acquiring more companies like Covenant Health?
A: Nicholas Westfall mentioned that the pipeline is active and targeted, focusing on states and counties with restricted access. He noted that there are ongoing discussions with potential acquisition targets, including single-site and regional providers. Kevin McNamara, President and CEO, added that VITAS has shown rapid growth in new markets, whether through acquisitions or new startups, particularly in Florida.
Q: What is the longer-term growth trajectory for Roto-Rooter given the current headwinds on the commercial side?
A: Kevin McNamara stated that Roto-Rooter has been a consistent grower over the years, despite cyclical periods. Michael Witzeman, CFO, added that the long-term potential for Roto-Rooter is 5% to 6% top-line growth, driven by price increases and new home formations. He also mentioned potential acquisitions and new lines of business as additional growth drivers.
Q: Can you explain the sequential decline in Roto-Rooter's revenue and the factors contributing to it?
A: Michael Witzeman explained that the first and fourth quarters are typically the strongest for Roto-Rooter due to weather conditions. He noted that a sequential decline of 4% to 5% from Q1 to Q2 is normal. Kevin McNamara added that lower commercial sales and increased competition in residential services were key factors for the revenue decline.
Q: What are the trends in Roto-Rooter's business as we move into Q3 and Q4?
A: Michael Witzeman indicated that they are projecting sequential improvement in Q3 and Q4. He noted that commercial revenue comps improved each month during Q2, suggesting positive momentum for the second half of the year.
Q: How does the new Certificate of Need (CON) in Pasco County, Florida, impact VITAS's growth prospects?
A: Nicholas Westfall expressed optimism about the growth opportunities in Pasco County, noting that while the impact in 2024 may not be significant, it provides substantial growth potential for the future. Kevin McNamara added that new CONs offer Medicare Cap protection, which is beneficial in the early years.
Q: What are the assumptions for the Medicare rate update in Q4, and how does it impact your guidance?
A: Nicholas Westfall stated that the Medicare rate update is expected to have a net impact of about 3.5% across the company, which is slightly better than their original estimate. He highlighted that higher price increases in key markets and a focus on high-acuity services like continuous care contributed to this positive outlook.
Q: How sustainable is VITAS's current growth rate, and what are the competitive dynamics in the market?
A: Nicholas Westfall emphasized that VITAS has demonstrated sustainable growth over the past two years, driven by a strong culture and effective recruitment and retention strategies. He noted that while monetary compensation is important, the ability to fulfill their mission and provide comprehensive care is a significant attractor for clinicians.
Q: Can you explain the trends in VITAS's length of stay metrics and what they indicate about the business?
A: Nicholas Westfall explained that while the average length of stay has seen some fluctuations, the median length of stay has increased, indicating better education and earlier identification of hospice appropriateness. He expects the length of stay metrics to remain relatively consistent.
Q: What are the key factors driving the revised guidance for VITAS, and how does it compare to your original expectations?
A: Nicholas Westfall highlighted that the revised guidance is primarily driven by higher census growth and better-than-expected Medicare rate increases. He noted that the demand for hospice services remains strong, and VITAS's ability to attract and retain clinical staff is a key factor in sustaining this growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
