Chemed Corp

Good day and thank you for standing by. Welcome to the ChemEd Corporation first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star and zero. I would now like to hand the conference over to your speaker today, Holly Schmidt. Please go ahead.

Good morning. Our conference call this morning will review the financial results for the first quarter of 2022 and in March 31, 2022. 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 April 26 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, and adjusted EBITDA. A reconciliation of these non-GAAP results is provided in the company's press release dated April 26th which is available on the company's website at ChemEd.com. I would like now 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 Westfall, President and Chief Executive Officer of ChemEd's VITAS Healthcare Corporation subsidiary. I will now turn the call over to Kevin McNamara.

Thank you, Holly. Good morning. Welcome to ChemEd Corporation's first quarter 2022 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. Our first quarter 2022 operating results released last night reflect very solid performance for both VITAS and Ritter-Rigger. Both operating segments' financial results exceeded our internal estimates despite the continued disruption triggered by the pandemic. For VITAS, this disruption remains elevated with regard to the hiring and retention of licensed healthcare professionals. U.S. News and World Report has estimated as many as 20% of licensed healthcare workers exited the labor market during the pandemic. This has impacted turnover within VITAS' licensed staff, and our turnover rate continues to be above our pre-pandemic rate in several of our professional classifications. Fortunately, we are beginning to see indications of normalization as we continue to expand resources focused on hiring and retention initiatives in our markets. Beyond managing staffing levels, we are observing increased pressure on salaries and wages. To date, we have managed these pressures with increased paid time off, or PTO. We view it is inevitable that health care wages will permanently increase if we continue to have a nationwide systemic imbalance in supply and demand for licensed health care professionals. The guidance we issued earlier this year anticipates significant increases in overall compensation for licensed health care professionals when compared to pre-pandemic annual compensation rates. Fortunately for VITAS and the hospice industry, there is a natural hedge against inflationary pressures on costs, specifically labor. The annual increase in Medicare and Medicaid hospice reimbursement rates is based primarily on inflation in the hospital wage index basket, as measured by the federal government's Bureau of Labor Statistics. Typically, the annual inflation measured as of March 31 is used to determine the following October 1st reimbursement increase. This should give the hospice industry reasonable long-term stability in operating margins in an inflationary environment, albeit with a 6- to 18-month lag from inflation measurement to the actual reimbursement increase. The second pandemic trigger challenge for VITAS is the continued disruption to senior housing occupancy and related hospice referrals. Recent admission data suggests senior housing is in the process of recovery. Pre-pandemic, nursing home-based patients represented 18% of our total average daily sentence, or ADC. The nursing home ADC ratio hit a low of 14.3% during the pandemic. In the fourth quarter of 2021, our nursing home-based patients represented 15.6% of our total ADC. This increased an additional 30 basis points to 15.9% in the first quarter of 2022. Our 2022 guidance anticipated sequential improvement in senior housing-based patients in the first quarter of 2022, with an acceleration in senior housing admissions anticipated throughout 2022. For Roadrunner, Our most significant challenge has been to increase manpower. We increased technician headcount by 8% in 2021, and our technician manpower in April 2022 has expanded 6.8% when compared to the average Q1 2021 headcount. The April 2022 headcount has expanded 3.3% when compared to our average manpower in the fourth quarter of 2021. Based on current service demand levels, Roto-Rooter continues to remain understaffed in many of our markets. Technician compensation plays a crucial role in recruiting new employees as well as retention of our existing base. Our average 2021 technician and field sales force compensation is over $81,000 per year. Most of our technicians are paid on a commission-based manner on revenue generated. As a result, pricing for our services is a critical component in increasing technician wages. We successfully implemented an inflation-based price increase at the beginning of 2022 and will carefully monitor key inflation metrics for consideration of additional price increases in the second half of 2022. Roto-Rooter is well-positioned post-pandemic, and we anticipate continued expansion of market share by pressing our core competitive advantages in terms of brand awareness, customer response time, 24-7 call centers, and Internet presence. With that, I would like to turn this teleconference over to Dave.