Chemed ((CHE)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for Chemed Corporation revealed a mixed sentiment, characterized by robust growth in its VITAS segment and notable challenges in the Roto-Rooter division. VITAS demonstrated strong performance, bolstered by strategic acquisitions and expansion in Florida, while Roto-Rooter faced revenue declines and operational hurdles.
Strong VITAS Performance
VITAS reported impressive net revenue of $411 million in Q4 2024, marking a 17.4% increase year-over-year. This growth was driven by a 3.5% rise in admissions and a significant 14.6% increase in the average daily census compared to the previous year.
Covenant Health Acquisition Success
The acquisition of Covenant Health for $85 million in April 2024 proved successful, contributing $11 million to $12 million in Q4 revenue and translating to a net income of approximately $2.1 million to $2.3 million.
New Growth Opportunities in Florida
VITAS capitalized on new growth opportunities in Florida, securing a certificate of need in Marion County and commencing operations in Pasco County, which underscores the significant growth potential in these areas.
Positive Adjusted EBITDA Growth
Excluding Medicare cap, VITAS achieved an 11.8% increase in adjusted EBITDA, reaching $93.2 million with a margin of 22.5%, highlighting the segment’s operational efficiency.
Roto-Rooter Revenue Decline
Roto-Rooter faced a 2.9% decline in revenue for Q4 2024 compared to the previous year, with residential revenue dropping by 2% and an 8% decrease in call volume, indicating operational challenges.
Challenges with Medicare Cap
Medicare cap limitations are anticipated to constrain VITAS’s growth in 2025, with an estimated cap billing limitation of $9.5 million, posing a challenge to the segment’s expansion.
VITAS Margin Pressure
VITAS’s adjusted EBITDA margin for 2025 is forecasted to decrease to a range of 18.4% to 18.9% from 19.1% in 2024, primarily due to strategies for managing the Medicare cap.
Forward-Looking Guidance
Chemed’s management provided guidance for 2025, projecting a 10.5% to 11.3% increase in VITAS Healthcare’s revenue, with the average daily census expected to grow by 8.5% to 9%. However, VITAS’s adjusted EBITDA margin is anticipated to decrease slightly. Roto-Rooter is expected to achieve revenue growth of 2.4% to 3%, with an EBITDA margin between 25.7% and 26.3%. Overall, the guidance suggests continued growth with moderated margins due to strategic Medicare cap management.
In summary, Chemed Corporation’s earnings call highlighted a dual narrative of strong growth in the VITAS segment and challenges in the Roto-Rooter division. While VITAS capitalizes on strategic acquisitions and expansion opportunities, Roto-Rooter faces revenue declines. The forward-looking guidance indicates continued growth with some margin moderation, reflecting the company’s strategic approach to navigating Medicare cap implications.