Chemed Corp

Hello, and welcome to ChemMed Corporation's second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the conference over to Holly Schmidt. You may begin.

Good morning. Our conference call this morning will review the financial results for the second quarter of 2025, ended June 30, 2025. 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 July 29th and in various other filings with the SEC. Your caution 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 July 29th, 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. and Mike Witzman, Chief Financial Officer of ChemEd. I will now turn the call over to Kevin McNamara.

Thank you, Holly. Good morning. Welcome to ChemEd Corporation's second quarter 2025 conference call. I will begin with highlights for the quarter, then Mike will follow up with additional details. I will then open the call for questions. While the performance of both operating units did not meet our expectations of the second quarter of 2025, we remained confident in the overall fundamentals, growth potential, and strategic direction of both businesses. Admissions at VITAS during the quarter totaled 17,545, which equates to a 1.2% improvement from the same period of 2024. However, it is important to remember that over 600 patients transferred into VITAS in the second quarter of 2024 as a result of our April 2024 acquisition of Covenant Health. Excluding those transfers, admissions increased 4.9% in the second quarter of 2025. Our average daily census, or ADC, expanded to 22,318, an increase of 6.1% when compared to the prior year quarter. In the quarter, Hospital-directed admissions increased 9.1%. Home-based patient admissions declined 6.2%. Nursing home admissions declined 2.9%. And assisted living facilities admissions declined 1.4% when compared to the prior year period. We currently estimate that the consolidated Florida program will end the 2025 Medicare cap year with a $19 million billing limitation. As was discussed in our June 27 Press release. We were on track to mitigate the Florida Medicare billing limitation risk as of the end of the first quarter of 2025. Admissions in Florida were weaker than anticipated in April and May. Accordingly, our Medicare cap projection was revised. June and July admissions in Florida are within our expected range but will not be enough to offset the overall billing limitation for the 2025 cap year. Management does not expect a significant level of Medicare cap billing limitation in our Florida program for the 2026 cap year. There are a number of initiatives underway that contribute to that expectation, including continued efforts on admitting short-stay patients, mainly through higher hospital admissions, quick ramp-up of the CON startup locations in Marion and Pinellas counties, and other cap management strategies. The current projection for the 2026 cap year assumes that the rate differential between that occurred for the 2025 cap year does not recur. The detailed rate information related to the reimbursement increase in Florida for the 2026 cap year will become available during the third quarter. We intend to update our assumptions regarding rates and overall outlook for the 2026 Medicare cap year in Florida in the third quarter earnings release. Now let's turn to Rotary Rooms. Rotary revenue increased six-tenths of 1% in the second quarter of 2025 compared to the same period of 2024, falling short of our internal expectations. Branch revenue in particular was softer than anticipated, with less than a 1% growth compared to the prior year. We continued to execute on the strategies implemented in 2024 that resulted in improved fourth quarter of 2024 and the first quarter of 2025 revenue trends. Despite these efforts, April and May were particularly weak. Other large consumer-facing companies have discussed the chilling effect that the Liberation Day tariff announcement had on consumer confidence and consumer spending in April and May. We believe that Rotary suffered from that issue as well. June and July residential revenue has rebounded to a level that is much closer to our internal expectations. Total leads were down 7.2% in the second quarter of 2025, compared with the same period of 2024. This is a slight improvement compared to the trend we saw in the first quarter of 2025. While the second quarter of 2025 resulted in disappointing operating results, we remain optimistic about the overall prospects for both businesses. VITAS is in the process of adjusting their patient mix in Florida to ensure Medicare cap issues do not persist past 2025. This will cause some disruption in VITAS's operating metrics, but positions them to return to a consistent higher growth rate for the long term. Rotoroo remains the most recognized brand in the plumbing and drain cleaning industry. We remain confident that the competitive advantages enjoyed by Rotoroo will return its financial performance to a steadier growth trajectory. With that, I would like to turn the teleconference over to Mike.