Chemed Corporation 2026 Jefferies Healthcare Services and Technology Conference

Sure. Let me start by saying that the second quarter, we increased guidance. It was pretty much things happened as we expected, only a little bit better. The trends again, were solid. I would characterize it as, let's start with the tougher one, Roto-Rooter. Roto-Rooter, the goal this year was a little more stabilization. It's difficult. I won't bore everybody with the market issue. The only problem Roto-Rooter has is the fact that we face some negative comparisons on marketing expenses because our percent of free leads has gone from basically close to 60% to now just under 40% in the course of about two years. It's just efforts by Google to say, "If we have companies that are advertising, we should bury them in the free sections, and they should pay for their leads." It's their business. That's what they've determined to do, and we're just dealing with that.

It's a new normal. We have a lot of plumbing companies scrambling, paying a lot more. We've gone from about $50 a lead to $120, $125 a lead on the paid side, and there's more companies vying for those. Roto-Rooter's done a pretty good job of paying a little bit more money, but we're getting the leads. They're not falling. They're getting. Our top line is growing. That's the first stage, stabilization of the business. That is the top line and looking for growth of the top line. Dealing with margin as we fight the battles with Google, and again, it's a battle where our visibility on the free side falls a little bit, and we make some effort, and then we increase it.

Net effect is a stable Roto-Rooter business, and I characterize it as, from an investment standpoint, what we want is Roto-Rooter to be stable and to get out of VITAS's way because VITAS is doing great and exceeding our expectations. Bouncing back from an unusual situation in Florida last year where we had Medicare cap exposure of a relatively small amount, $19 million. The day we announced that, the stock fell 100 points, about well over $1 billion in value. VITAS has dealt with that issue, and as I said, exceeding expectations this year. The good news about hospice is such that it's a very predictable business. In other words, Roto-Rooter, we don't know what our sales are going to be tomorrow. We'll just wait to see how the phone rings.

Joel knows within a couple hundred thousand dollars what your sales are going to be tomorrow. It is a very predictable business. It is one that during periods when you are struggling, it is like an aircraft carrier, a little tough to turn around. On the other side, when things are going well, it is steady as she goes. Our outlook is just stabilization of Roto-Rooter, get out of VITAS's way because they are doing great.

Yeah. We have realized some improvement because of the EHR. In reality, when we look at our margin expansion, which we planned for, and have exceeded expectations, it is really because the overall management of the business. Personnel management, although while we have had marginal expansion with labor management, we have no concerns about our current labor force being able to expand it to meet the expectations of growth, both in Florida and throughout the country. The other component to that is, as we looked at the year, we knew the strategy that we put into place, and employed going back to last year to mitigate the cap liability that had been generated was going to cause marginal compression. We planned for that and then laid out the strategy of which we would expand that marginal improvement throughout the course of the year.

Our two recognitions of expansion of that margin contributed then to restating guidance twice, unprecedented for the organization.

Positively in a very positive way.

We planned for it. We're ahead of expectations, but also recognize where we will most likely finish the year and then plan for next year.

Yeah. Yeah. The most recent expansions in CON awards within the state of Florida have exceeded expectations.

Their growth has had a very strong, positive contribution to that marginal expansion. But it is through delivering on a strategy and ensuring that from an operational perspective, we are appropriately managing the business on a day-to-day basis.

One of the reasons, I say, to the extent that those new starts do so well, they create cap cushion. A lot of it. Florida's all one program for us. What it really demonstrates is there's plenty of business in Florida. There's limitations on it. It's Medicare cap liability. If Joel is able to, let's say, run. We talk about a range where we want our hospital admissions, which are low or zero profit margin associated with. If those run at 44%, okay, it hits your margin, your profitability a little bit, but you create cap cushion.