UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
October 29, 2024
CHEMED CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware | 1-8351 | 31-0791746 |
(State or other
jurisdiction of
incorporation) | (Commission File Number) | (I.R.S. Employer
Identification
Number) |
2600 First Financial Center, 255 East 5th Street, Cincinnati, OH 45202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(513) 762-6690
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
[_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240-14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under Exchange Act (17 CFR 240-14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4 (c) under Exchange Act (17 CFR 240-13e-4(c))
Securities registered pursuant to 12(b) of the Act:
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Title of each class | Trading symbol | Name of each exchange on which registered |
Capital stock $1 par value | CHE | NYSE |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. [_]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]
CONTACT: Michael D. Witzeman
(513) 762-6714
Chemed Reports Third-Quarter 2024 Results
CINCINNATI, October 29, 2024—Chemed Corporation (Chemed) (NYSE: CHE), which operates VITAS Healthcare Corporation (VITAS), one of the nation’s largest providers of end-of-life care, and Roto-Rooter, the nation’s largest commercial and residential plumbing and drain cleaning services provider, reported financial results for its third quarter ended September 30, 2024, versus the comparable prior-year period.
Changes to Non-GAAP Metrics
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 previously reported non-GAAP metrics during the four sequential quarters from September 30, 2022 through June 30, 2023 excluded the 12-month pandemic-related licensed healthcare professional retention bonus (Retention Program). Starting with the quarter-ended September 30, 2023, the Company no longer excludes the cost of the Retention Program when presenting non-GAAP operating metrics in current or prior periods.
For the nine-months ended September 30, 2023, the pretax and after-tax Retention Program expense was $23.7 million and $18.0 million, respectively. There was no material impact on financial results for the quarter or nine months-ended September 30, 2024 as a result of the Retention Program.
Results for Quarter Ended September 30, 2024
Consolidated operating results:
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Revenue increased 7.4% to $606.2 million |
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GAAP Diluted Earnings-per-Share (EPS) of $5.00, an increase of 1.4% |
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Adjusted Diluted EPS of $5.64, an increase of 6.0% |
VITAS segment operating results:
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Net Patient Revenue of $391.4 million, an increase of 17.3% |
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Average Daily Census (ADC) of 21,785, an increase of 15.5% |
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Admissions of 16,775, an increase of 6.3% |
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Net Income, excluding certain discrete items, of $53.8 million, an increase of 26.4% |
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Adjusted EBITDA, excluding Medicare Cap, of $73.1 million, an increase of 33.1% |
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Adjusted EBITDA margin, excluding Medicare Cap, of 18.6%, an increase of 212-basis points |
Roto-Rooter segment operating results:
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Revenue of $214.8 million, a decrease of 6.9% |
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Net Income, excluding certain discrete items, of $39.8 million, a decrease of 18.9% |
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Adjusted EBITDA of $56.4 million, a decline of 15.8% |
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Adjusted EBITDA margin of 26.3%, a decline of 275-basis points |
VITAS
As previously announced, VITAS completed its acquisition of the hospice assets and an assisted living facility of Covenant Health and Community Services, Inc. (Covenant Health) on April 17, 2024 for $85.0 million in cash. Before presenting VITAS’ overall results, it is important to disclose the methodology used in determining the impact of Covenant Health’s acquisition on VITAS’ overall results. VITAS 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 not separate results. For instance, there are no VITAS-specific referral sources versus Covenant Health-specific referral sources in these locations. It is very likely that referral sources in the area have historically referred to both VITAS and Covenant Health. We have used historical operating trends in these locations to determine what is “legacy” VITAS activity. All activity above those historical operating trends have been attributed as the Covenant Health impact. We have included the specifically determined impact as it relates to new operating territories acquired. Based on the above, we discuss the range of impact that Covenant had on the overall VITAS operating metrics.
Covenant Health contributed approximately $10 million to $11 million of revenue in the third quarter of 2024. This revenue translated to net income of approximately $1.8 million to $2.0 million. Adjusted EBITDA in the quarter attributed to Covenant Health is between $2.4 million and $2.6 million.
VITAS net revenue was $391.4 million in the third quarter of 2024, which is an increase of 17.3% when compared to the prior-year period. This revenue increase is comprised primarily of a 15.5% increase in days-of-care and a geographically weighted average Medicare reimbursement rate increase of approximately 2.6%. Acuity mix shift negatively impacted revenue growth 144-basis points in the quarter when compared to the prior-year period’s revenue and level-of-care mix. The combination of Medicare Cap and other contra revenue changes increased revenue growth by approximately 64-basis points.
In the third quarter of 2024, VITAS accrued $2.2 million in Medicare Cap billing limitations. This compares to a $125,000 Medicare Cap billing limitation in the third quarter of 2023.
Of VITAS’ 32 Medicare provider numbers, 24 provider numbers have a trailing 12-month Medicare Cap cushion of 10% or greater, five provider numbers have a cushion between 0% and 10%, and three provider numbers have a trailing 12-month Medicare Cap billing limitation totaling $9.4 million.
Average revenue per patient per day in the third quarter of 2024 was $199.16 which is 139-basis points above the prior-year period. Reimbursement for routine home care and high acuity care averaged $175.82 and $1,094.97, respectively. During the quarter, high acuity days-of-care were 2.5% of total days of care, a decline of 26-basis points when compared to the prior-year quarter.
The third quarter 2024 gross margin, excluding Medicare Cap, was 25.1%. This compares to the prior year quarter’s gross margin of 24.0%, excluding Medicare Cap. Selling, general and administrative expenses were $25.9 million in the third quarter of 2024 compared to $25.3 million in the prior-year quarter.
Adjusted EBITDA, excluding Medicare Cap, totaled $73.1 million in the quarter, an increase of 33.1% when compared to the prior year period. Adjusted EBITDA margin in the quarter, excluding Medicare Cap, was 18.6%, which is 212-basis points above the prior-year period.
Hurricane Helene, which impacted the panhandle of Florida and other parts of the southeastern United States in late September, did not result in any significant property loss or damage to VITAS. However, as with other similar events, we did experience a slowdown in admission activity while health systems prepared for the hurricane and then dealt with the aftermath. We estimate that admissions were negatively impacted during the quarter by approximately 60-100 patients. We also believe that the Florida admission impact will be more significant in the fourth quarter with the combination of Hurricanes Helene and Milton.
Roto-Rooter
Roto-Rooter generated quarterly revenue of $214.8 million in the third quarter of 2024, a decrease of 6.9%, when compared to the prior-year quarter.
Roto-Rooter branch commercial revenue in the quarter totaled $53.5 million, a decrease of 5.9% from the prior-year period. This aggregate commercial revenue change consisted of drain cleaning revenue declining 4.4%, plumbing declining 12.1%, excavation declining 2.3%, and water restoration declining 3.3%.
Roto-Rooter branch residential revenue in the quarter totaled $146.0 million, a decrease of 6.3%, over the prior-year period. This aggregate residential revenue change consisted of drain cleaning declining 5.9%, plumbing declining 11.2%, excavation declining 6.1%, and water restoration declining 6.9%.
Roto-Rooter’s gross margin in the quarter was 52.9%, essentially flat when compared to the third quarter of 2023. Roto-Rooter’s selling, general and administrative expenses were $57.1 million in the quarter, which is an increase of 3.5% compared to the third quarter of 2023. This increase was caused by continued enhanced marketing efforts designed to drive additional demand.
Adjusted EBITDA in the third quarter of 2024 totaled $56.4 million, a decrease of 15.8% when compared to the third quarter of 2023. The Adjusted EBITDA margin in the quarter was 26.3% which represents a 275-basis point decline from the third quarter of 2023.
Chemed Consolidated
As of September 30, 2024, Chemed had total cash and cash equivalents of $238.5 million and no current or long-term debt.
In June 2022, Chemed entered into a five-year $550 million Amended and Restated Credit Agreement (Credit Agreement). This Credit Agreement consisted of a $100 million amortizable term loan and a $450 million revolving credit facility. The interest rate on this Credit Agreement has a floating rate that is currently SOFR plus 100-basis points. There is approximately $404.8 million of undrawn borrowing capacity under the Credit Agreement after excluding $45.2 million for Letters of Credit.
During the quarter, the Company repurchased 100,000 shares of Chemed stock for $57.8 million which equates to a cost per share of $578.21. As of September 30, 2024, there was approximately $168.1 million of remaining share repurchase authorization under its plan.
Revision to Guidance for 2024
VITAS continues to perform as anticipated, and we reiterate the metrics for VITAS as presented in our second quarter 2024 press release. Roto-Rooter’s revenue and resulting adjusted EBITDA and adjusted net income was softer than anticipated during the third quarter of 2024. As a result of these factors, full-year consolidated 2024 earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, costs related to litigation and other discrete items, is estimated to be in the range of $23.00 to $23.15. This range represents a 13.3% to 14.0% increase from Chemed’s 2023 reported adjusted earnings per diluted share of $20.30. This guidance assumes an effective corporate tax rate on adjusted earnings of 24.3% and a diluted share count of 15.22 million shares.
Conference Call
As previously disclosed, Chemed will host a conference call and webcast at 10 a.m., ET, on Wednesday October 30, 2024, to discuss the company's quarterly results and to provide an update on its business. Participants may access a live webcast of the conference call through the
investor relations section of Chemed’s website, Investor Relations Home | Chemed Corporation or the hosting website https://edge.media-server.com/mmc/p/c93ntfig/.
Participants may also register via teleconference at:
https://register.vevent.com/register/BI0022c41ceecf4b83a582584604bc732b.
Once registration is completed, participants will be provided with a dial-in number containing a personalized conference code to access the call. All participants are instructed to dial-in 15 minutes prior to the start time.
A taped replay of the conference call will be available beginning approximately two hours after the call's conclusion. You may access the replay via webcast through the investor relations section of Chemed’s website.
Chemed Corporation operates in the healthcare field through its VITAS Healthcare Corporation subsidiary. VITAS provides daily hospice services to patients with severe, life-limiting illnesses. This type of care is focused on making the terminally ill patient's final days as comfortable and pain-free as possible.
Chemed operates in the residential and commercial plumbing and drain cleaning industry under the brand name Roto-Rooter. Roto-Rooter provides plumbing, drain cleaning, and water cleanup services through company-owned branches, independent contractors and franchisees in the United States and Canada. Roto-Rooter also has licensed master franchisees in the republics of Indonesia and Singapore, and the Philippines.