Chemed Corp

Good day and thank you for standing by. Welcome to the ChemEdCorp first quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, we'll open up for questions. To ask a 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. Please be advised that today's call is being recorded. I would now like to hand it over to our first speaker, Holly Schmidt, Assistant Control. Please go ahead.

Good morning. Our conference call this morning will review the financial results for the first quarter of 2026, ended March 31, 2026. 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 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, and adjusted EBITDA. A reconciliation of these non-GAAP results is provided in the company's press release dated April 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, Mike Wissman, 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 first quarter 2026 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. VITAS performance during the quarter exceeded even the high end of our expectations. We believed that the first quarter of 2026 would be a tough comparison as we continued to transition to balance our patient mix between short-stay and long-stay patients. VITAS management was able to add ADC through accelerated admissions from non-hospital pre-admission locations while also maintaining a high level of hospital-based admissions. This was achieved while also keeping hospice labor costs lower than budgeted. These factors combined to allow VITAS to achieve higher than expected revenue growth and EBITDA margins while continuing to add cushion to the Medicare cap position in our Florida combined position program. Admissions at VITAS during the quarter totaled 19,394, which equates to a 6.9% improvement from the same period of 2025. Hospital admissions as a percent of total admissions for our Florida combined program was 43.8% during the first quarter of 2026. As we have discussed previously, an appropriate balance for the sustained long-term stability in the Florida patient base, given the current mix of referral sources, is that between 42% and 45% of total admissions that come from hospitals. Equally as important, as Joel will discuss in greater detail, admissions from all other pre-admission locations increased 8.4% compared to the first quarter of 2025 in our Florida combined program. Improved admissions led VITAS to outperform our expectations while also adding over $32.5 million to cap cushion in the Florida combined program in the first quarter of 2026. March 31st represents the halfway point in the government fiscal year. We are more confident than ever that PTAS has put the Florida cap issue of 2025 behind us and has returned to a normalized rate of growth. Now let's turn to Rotorua. Over the past two years, we have talked about the many headwinds that have persisted at Rotorua, which has made for a difficult operating environment. While we believe that Rotorua will continue to face some of those headwinds, the first quarter of 2026 also showed some signs of improvement across multiple fronts. For the first time since the fourth quarter of 2022, residential plumbing and residential sewer and drain revenue both increased during the quarter. We consider these rotors core services, which drive the add-on revenue from excavation and water restoration. We see this as a very positive development for the company. Driving the increase in core residential service revenue was an increase in total leads of 3.3%. Paid leads during the first quarter of 2026 increased 18.7% compared to the same quarter of 2025. Continuing the same trend as past quarters, 53.4% of those leads were the result of paid advertisements. In the first quarter of 2025, we paid for 46.5% of the leads. The change of approximately 7% required Rotorooter to increase marketing spend by almost $3 million in the quarter compared to the first quarter of 2025. The centralization of water restoration building and collections continues and has resulted in improved collections. These improvements resulted in a $1.5 million improvement in overall write-offs compared with the first quarter of 2025. Weather patterns in the first quarter of any given year are positive for Roto-Rooter. However, in the first quarter of 2026, unusual ice and snowstorms across large parts of the country led to significant service disruptions due to road conditions. 24 Roto-Rooter branches experienced some level of service disruption for a period of time across five days of the quarter. We estimate that these service disruptions resulted in a net loss revenue of between $3 and $4 million during the quarter. On March 31, 2026, Loewerer purchased the territory and assets of the franchises operating in San Francisco, California and Fort Worth, Texas in two separate transactions. The aggregated combined purchase price of these transactions was approximately $20.6 million. These Rotorua locations serve a population of approximately 3.3 million people. This purchase is part of Rotorua's ongoing strategy of acquiring franchises to boost productivity, market share, and profitability. These two acquisitions are anticipated to add between $5 and $5.5 billion of revenue for the remainder of 2026. These acquisitions are immediately accretive to earnings. However, initially, gross margins, EBITDA margins, Pricing and mix of service offerings tend to be below the average of our existing Rotary portfolio. We are happy with the performance of VITAS of the quarter and its prospects for the remainder of 2026 and beyond. In our February conference call, we described this as a year of transition for Rotary. The first quarter clearly demonstrated this transition. We feel very positive that the initiatives we have discussed over the last few quarters are beginning to take hold. With that, I would now like to turn the teleconference over to Mike.