Chemed Corp

And thank you for standing by. Welcome to the ChemEd Corporation third 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 a question during your 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Holly Schmidt, Assistant Controller. Please go ahead.

Good morning. Our conference call this morning will review the financial results for the third quarter of 2025 and its September 30th, 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 October 28th 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 October 28th, 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, Mike Witzman, Chief Financial Officer of ChemEd, and Joel Worley, 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 third quarter 2025 conference call. I will begin with highlights for the quarter, then Mike and Joel will follow up with additional details. I will then open the call for questions. Both operating units fell primarily in line with our expectations in the third quarter of 2025. VITAS continued to execute the strategies required to fully mitigate any potential Florida Medicare cap billing limitation for the government's fiscal 2026 year. Admissions at VITAS during the quarter totaled 17,714, which equates to a 5.6% improvement from the same period of 2024. An important metric that we have been tracking related to Florida admissions is the percentage of total admissions that come from hospitals. Our analysis indicates that an appropriate balance for sustained long-term stability in the Florida patient base, given the current mix of referral sources, is between 42 and 45% of the total emissions should come from hospitals. During our Community Access Program, this ratio dipped below the preferred range for a sustained period of time. In the third quarter of 2025, this ratio was 44.5%, which represents a high watermark during the post-pandemic period. The ratio has been above 42% for all of 2025. We previously estimated that the consolidated Florida program would end 2025 Medicare cap year with a $19 million billing limitation. We came in slightly better than that with a billing limitation of $18.9 million. Management continues to believe there will be no Medicare cap billing limitation related to our Florida program in 2026. As discussed above, the initiative to admit a higher percentage of hospital-based admissions has gained traction, and we anticipate that to continue. We have cleared all hurdles to opening our new Pinellas County location, which is now on track to open in early November. Our new program in Marion County, Florida, which opened in May of 2025, has grown to an ADC of 75 as of September 30, 2025. We projected it could double in size to an ADC of 150 by the end of 2026. Now let's turn to Rotor Room. Revenue increased 1.1% in the third quarter of 2025 compared to the same period of 2024. Branch residential and commercial revenue were both encouraging, with increases of 3.4% and 2.8% respectively. Revenue from independent contractors continues to be disappointing, declining 4.7% in the third quarter of 2025. For the first time in several quarters, we saw strength in our residential plumbing revenue service line. Residential plumbing revenue increased 8.2% in the third quarter of 2025 compared to the same period of 2024. A multi-pronged campaign to target selected high revenue dollar plumbing services yielded positive results in the quarter. The campaign included more targeted internet focus on specific services enhanced sales materials for the technicians in the field, and more frequent close rate reporting to branch management related to the specific services. We are encouraged by the results of this campaign in the quarter. Total leads were down 1.3 percent in the third quarter of 2025 compared to the same period of 2024. This is a nice improvement compared to the trajectory we saw in 2024 and earlier in 2025. As discussed in the past two quarters, the trend of increasing paid leads offset by declining natural leads continues. During the third quarter, paid leads increased 8.6% compared to the same quarter of 2024. The entire decline in leads is in the natural lead category. In my opinion, this trend is both a positive and a negative. While we are paying for more leads causing some margin pressure, We also believe this trend indicates a potential moderation of competition for leads from our most significant private equity competitors. We are monitoring these trends closely. As Mike will discuss further, rotator margins continue to be below our long-term expectations. However, gross margin during the quarter was exactly in line with our guidance. The many operational initiatives discussed in past calls are having positive impacts. The shift from unpaid leads to paid leads was the main driver of the $3.6 million increase in SG&A costs in the quarter. This led to EBITDA and EBITDA margins to be slightly lower than our expectations for the quarter. We were very encouraged with the performance of both businesses in the third quarter. BTAS is on track to ensure that the Florida Medicare cap issue is behind us. While still below our long-term expectations, there are signs that the Rotary business has stabilized and is on the way to returning to a predictable, sustainable growth trajectory. With that, I would like to turn this conference over to Mike.