8-K: Chemed Corporation Reports Strong Q4 2023 Results Driven by VITAS Healthcare Growth

Chemed Corporation's Q4 2023 results show significant growth in the VITAS segment, offsetting a slight revenue decrease in Roto-Rooter.

Summary

• Chemed Corporation announced its financial results for the fourth quarter of 2023, showing a 7.2% increase in consolidated revenue to $585.9 million.
• GAAP diluted earnings per share increased by 42.9% to $5.90, while adjusted diluted EPS rose by 35.0% to $6.60.
• The VITAS segment saw a 13.6% increase in net patient revenue to $350.0 million, with a 11.0% increase in average daily census (ADC) to 19,352.
• VITAS' adjusted EBITDA, excluding Medicare Cap, increased by 61.6% to $83.3 million, with a margin of 23.7%, a 705-basis point increase.
• Roto-Rooter's revenue decreased by 1.1% to $235.9 million, with adjusted EBITDA declining by 6.4% to $64.9 million.
• Roto-Rooter's adjusted EBITDA margin was 27.5%, a decrease of 154-basis points.
• Chemed repurchased 79,512 shares of its stock for $46.0 million during the quarter, at an average cost of $579.09 per share.
• As of December 31, 2023, Chemed had $264.0 million in cash and cash equivalents and no debt.
• For 2024, VITAS revenue is projected to increase by 9.0% to 9.8%, with ADC growth of 6.5% to 7.0%, and an adjusted EBITDA margin of 17.8% to 18.3%.
• Roto-Rooter's 2024 revenue is forecasted to grow by 3.5% to 4.0%, with an adjusted EBITDA margin of 28.7% to 29.1%.
• Full-year 2024 earnings per diluted share are estimated to be in the range of $23.30 to $23.70.

Sentiment

Score: 8

Explanation: The document presents a generally positive outlook with strong growth in the VITAS segment and positive guidance for 2024. While Roto-Rooter experienced a slight decline, the overall tone is optimistic and indicates a healthy financial position.

Positives

• Chemed's consolidated revenue grew by 7.2% year-over-year.
• The company's GAAP diluted EPS saw a significant increase of 42.9%.
• Adjusted diluted EPS also showed strong growth, increasing by 35.0%.
• VITAS Healthcare experienced substantial growth, with a 13.6% increase in net patient revenue.
• VITAS' average daily census increased by 11.0%, indicating higher patient volumes.
• VITAS' adjusted EBITDA, excluding Medicare Cap, saw a substantial increase of 61.6%.
• VITAS' adjusted EBITDA margin, excluding Medicare Cap, improved significantly by 705-basis points.
• Chemed has a strong cash position with $264.0 million and no debt.
• The company has a remaining share repurchase authorization of $314.1 million.
• 2024 guidance for VITAS and Roto-Rooter indicates continued growth.

Negatives

• Roto-Rooter's revenue decreased by 1.1% compared to the prior-year quarter.
• Roto-Rooter's adjusted EBITDA declined by 6.4%.
• Roto-Rooter's adjusted EBITDA margin decreased by 154-basis points.
• Roto-Rooter's commercial revenue declined by 7.9%, with decreases across drain cleaning, plumbing, excavation, and water restoration.
• Roto-Rooter's residential drain cleaning revenue decreased by 5.6%.

Risks

• Changes in regulations governing the hospice care or plumbing and drain cleaning industries could impact operations.
• Periodic changes in reimbursement levels and procedures under Medicare and Medicaid programs may affect revenue.
• Difficulties in predicting patient length of stay and estimating potential Medicare reimbursement obligations could pose challenges.
• The current shortage of qualified nurses, other healthcare professionals, and licensed plumbing and drain cleaning technicians could impact service delivery.
• Chemed's dependence on patient referral sources could create vulnerabilities.
• The company faces risks related to its growth strategy.

Future Outlook

Chemed anticipates continued growth in both VITAS and Roto-Rooter segments for 2024, with specific revenue and EBITDA margin targets provided. Full-year 2024 earnings per diluted share are estimated to be in the range of $23.30 to $23.70.

Management Comments

• Chemed uses certain non-GAAP metrics such as EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted earnings per share, to provide additional context and perspective to reported operational results.
• Chemed's management similarly uses EBITDA, Adjusted EBITDA and Adjusted Diluted EPS to assist it in evaluating the performance of the Company across fiscal periods and in assessing how its performance compares to its peer companies.

Industry Context

The results reflect the ongoing demand for end-of-life care services, as evidenced by the strong performance of the VITAS segment. The plumbing and drain cleaning industry, represented by Roto-Rooter, is experiencing a slight downturn in revenue, which may be indicative of broader economic trends or competitive pressures.

Comparison to Industry Standards

• VITAS's 13.6% revenue growth and 11% ADC growth are strong compared to industry averages for hospice care providers, which typically see single-digit growth.
• The 705-basis point increase in VITAS's adjusted EBITDA margin is a significant improvement, suggesting efficient cost management and operational improvements compared to peers.
• Roto-Rooter's 1.1% revenue decline contrasts with some competitors in the home services sector that have seen growth, indicating potential challenges in market share or service demand.
• Companies like Amedisys (AMED) and LHC Group (LHCG) are comparable in the home health and hospice space, and their financial results can be used as a benchmark for VITAS's performance.
• For Roto-Rooter, comparisons can be made with companies like ServiceMaster (SERV) or smaller regional plumbing and drain cleaning businesses to assess its relative performance.

Stakeholder Impact

• Shareholders will likely react positively to the strong financial results and positive outlook.
• Employees may benefit from the company's growth and financial stability.
• Customers of VITAS will continue to receive end-of-life care services.
• Customers of Roto-Rooter will continue to receive plumbing and drain cleaning services.
• Suppliers and creditors will likely view Chemed as a stable and reliable partner.

Next Steps

• Chemed will host a conference call and webcast on February 28, 2024, to discuss the quarterly results and provide a business update.
• The company will continue to execute its growth strategy in both the VITAS and Roto-Rooter segments.
• Chemed will monitor and manage Medicare Cap billing limitations.
• The company will continue to evaluate share repurchase opportunities.

Key Dates

Keywords

Chemed, VITAS Healthcare, Roto-Rooter, Hospice Care, Plumbing Services, Drain Cleaning, Financial Results, EBITDA, Earnings Per Share, Medicare, Revenue, Adjusted EBITDA, Average Daily Census