Chemed Corp

Ladies and gentlemen, thank you for standing by, and welcome to the ChemEd Corporation fourth quarter 2020 earnings conference call. At this time, all participant lines 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 will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Sherry Warner with Investor Relations. Thank you. Please go ahead, please.

Good morning. Our conference call this morning will review the financial results for the fourth quarter of 2020, ended December 31, 2020. 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 February 23rd and in various other filings with the SEC. You are cautioned 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, an adjusted EBITDA. A reconciliation of these non-GAAP results is provided in the company's press release dated February 23rd, which is available on the company's website at ChemEd.com. I would now like to introduce our speakers for today, Kevin McNamara, President and Chief Executive Officer of ChemEd Corporation, Dave Williams, Executive Vice President and Chief Financial Officer of ChemEd, and Nick Westphal, President and Chief Executive Officer of ChemEd's VITAS Healthcare Corporation subsidiary. I will now turn the call over to Kevin McNamara.

Thank you, Sherry. Good morning. Welcome to ChemEd Corporation's fourth quarter 2020 conference call. I will begin with highlights for the quarter, and Dave and Nick will follow up with additional operating detail. I will then open up the call for questions. Operating during a pandemic has been exceptionally challenging for both of our business segments. Fortunately, VITAS and Rotorooter have shown incredible speed, flexibility, and focus to remain completely open and operate safely for the benefit of our patients, customers, and employees. I believe ChemEd's operational and financial performance this past year is a testament to the success of these efforts. Our VITAS healthcare segment continues to be directly impacted by the pandemic. Fortunately, the federal government, specifically HHS and CMS, have been very supportive in terms of relaxing regulations, allowing the use of telehealth where appropriate, and providing pragmatic flexibility in caring for our entire patient census. The most complex issue facing VITAS over the past nine months has been the disruptive impact the pandemic has had on traditional hospice referral sources, which in turn has impacted our patient census patterns. Fortunately, certain portions of the healthcare continuum have normalized, and hospital referral and admissions have significantly improved from low admission rates experienced early in the pandemic. This is reflected in our second half of 2020 admission and census activity. Our third and fourth quarter 2020 admissions increased 4.7% and 2.8% respectively. Normally, two sequential quarters of solid admissions growth would result in an increase in average daily census. However, despite the admissions growth, our average daily census declined 2.8% in the fourth quarter. This decline in census is a direct result of disruption in senior housing, which includes nursing homes and assisted living facilities. Senior housing is an important referral network for the hospice industry, given the fact that over 90% of all hospice patients are over the age of 65. Senior housing has seen a severe reduction in occupancy levels and continues to struggle, even as hospitals and other key hospice referral sources have significantly recovered. Hospice-referred admissions typically account for 50% of VITAS's total admissions, and a significant portion of these referrals have very short lengths of stays. VITAS hospital referrals are returning to pre-pandemic levels. This is reflected in hospital-generated admissions increasing 6.2% and 7.4% in the third and fourth quarters, respectively. Nursing home hospice patients represented 14.7% of our fourth quarter 2020 census, a decline of 310 basis points when compared to the prior year. VITAS nursing home admissions decreased 22.6% in the third quarter of 2020 and declined 19.3% in the fourth quarter when compared to the equivalent prior year quarter. Nursing home-based patients are typically referred to hospice earlier into a Terminal prognosis and statistically have a much greater probability of being in hospice more than 90 days. This decline in nursing home admissions is a direct result of continued disruption in senior housing occupancy. According to data provided by the National Investment Center for Senior Housing and Care, COVID-19 continues to adversely affect senior housing occupancy, which reached another record low in October of 2020. Median length of stay in the fourth quarter of 2020 was 14 days, two days less than the prior year. This unusual decline in median length of stay is a result of a 7.4% increase in hospital referred admissions and a 19.3% decrease in nursing home admissions, the combination of which has had a material impact on our median length of stay. The guidance we will provide later in this call reflects this continued weakness in senior housing occupancy for the first half of 2021. We anticipate improvement in senior housing admissions in the second half of 2021 as senior housing patient mix and aggregate occupancy returns to pre-pandemic levels. Roto-Rooter operating results have been nothing short of exceptional during the pandemic. Strong residential plumbing and drain cleaning demand has been more than adequate to compensate for weakness from our commercial customers. quarter branch residential demand set all-time records. Unit-for-unit residential revenue totaled $123 million in the quarter, an increase of 20.8% when compared to the prior year quarter. Fourth quarter 2020 unit-for-unit branch commercial demand did decline 9.8% when compared with the fourth quarter of 2019. This is a significant improvement when compared to the second quarter of 2020 when which had commercial demand declining 29.1% in the third quarter of 2020, with a commercial revenue decline of 11.6% when compared to the prior year. Roto-Rooter generated fourth quarter 2020 revenue of $201 million, an increase of 10.2%. Consolidated revenue in addition to Roto-Rooter branch operations includes independent contractors franchise fees, and product sales, as well as the Oakland acquisition completed in July of 2019 and the HSW acquisition completed in September of 2019. With that, I would like to turn this teleconference over to David.