Welcome to Oppenheimer's 36th Annual Healthcare Conference. I'm Mike Wiederhorn, the healthcare analyst. It's our pleasure to introduce Chemed today. We have Joel Wherley, President and CEO of VITAS; Mike Witzeman, Chief Financial Officer. Today will be our fireside. Thank you guys for, you know, for joining us this morning. Let's just go on. Thank you. I'll just, you know, start right away, you know, kind of kick in here. Can you discuss your guidance and your comfort level with each segment? I know it's a little open-ended, but, you know, we'll obviously go more into this, but just from a high-level perspective. Yeah. I'll start, and Joel can add some color, at least on the VITAS side. I would say, if you break it down, we're very comfortable with the VITAS guidance. We think that, there's probably some conservatism in it. We are working towards, as you know, balancing the patient mix, going back to a more balanced mix of short and long-stay patients, and that provides some upward potential, as we get through 2026. We're confident, fairly confident in the Roto-Rooter guidance. Obviously, the last couple of years have been a little rough there, and we've missed particularly the beginning of the year guidance by quite a bit by the time the end of the year comes. We feel like, you know, and I know we'll get into some details, but I feel like we're moving in the right direction on a number of fronts at Roto-Rooter. Honestly, our guidance is about half of what they have done from a budgeting standpoint on a growth rate internally. We've taken their budget and essentially taken the growth rate for revenue and EBITDA to about half of what they expect to do. We wanted to build in a bit of conservatism there as well. Perfect. Thank you. All right, so let's just move over here. We'll focus on VITAS here. You know, how should we be, you know, thinking about VITAS coming out of Q4 in terms of the underlying volume trends? If we set aside some of the mix shift, you know, as well, can you give us some color also on the Florida market versus the other markets? Yeah. Got you. You know, we were pretty upfront in our discussions in the fourth quarter that that really was gonna be an important barometer for us to look at how the rest of 2026 might go. We had to ensure that that first quarter of the Medicare cap year, which as you know is the fourth quarter of the calendar year, that we came out strong, that we came out far ahead of where we were at last year, and we delivered on that. We're in very good position from a volume perspective coming out of the quarter, which as we indicated in the fourth quarter, was what was going to really guide us as far as our overall growth potential and when that census could really reasonably begin adding back up. When you look at Florida as compared to the rest of the country, Florida, because of its unique nature, the CON environment, which is probably one of the best CON environments in the entire country, puts you in a circumstance where you can grow quickly. We'll talk, I'm sure, a little bit later on about how our new starts have gone, but our growth trajectory in Florida has gone very well. The rest of the country, and again, given the circumstances, depending on the geography, we know a lot of Mehmet Oz's focus has been on waste, fraud, and abuse and talking about California. We feel, you know, and welcome the focus on waste, fraud, and abuse. We feel we know we do things the right way, but it has put certainly an increased focus on the individual marketplaces in California. As we look at the rest of the markets, we are happy to see our Northeast business segment back in a growing mode, which we have struggled for some time in that environment. All in all, feel good. Growth rates outside of Florida don't compare, but that's the nature of the market in Florida as compared to other places in the country. We've grown ADC pretty much. We track it weekly, of course, and we've grown ADC pretty much every week of 2026 so far. I would say we are currently, it's only two months of, you know, two and a half months, so I don't wanna say it's a trend necessarily, but we're a little bit ahead of schedule on ADC growth here in the first couple months of the year. Perfect. You know, obviously we saw some of the mix impacting, you know, last year. Do you think that's easing in 2026? It looks like you have enough cap cushion to unwind maybe some of the restrictions that you made in the second half of last year and maybe start seeing increasing length of stay starting to move up again. Is that kind of how we should be thinking about it? Yeah. Actually, Mike, we've already done that. We implemented those strategies towards the end of December, feeling more comfortable about our Medicare cap position, especially in the Florida CCN. As Mike indicated, we have grown our Medicare ADC census every single week in 2026 in the Medicare in the Florida CCN. Which is a direct result of us beginning to ease that focus specific to just short length of stay, high acuity hospital-based patients and expand that back to a more reliable and comfortable Medicare ADC growth. In terms of the, I think you came in, what, at 45% in terms of hospital admissions, I think, you know, last quarter. How should we be thinking about that? You know, should that be going back to, you know, lower 40s? What's the target? Where, you know, where, how is that trending? Yeah. We've been pretty open about the sweet spot seems to be 42%-45%, in that range. We finished the quarter, as you indicated around that upper 44%-45% range. We've been able to bring that down a little bit. The most important thing, as we monitor that on a very close basis, is the fact that we want to drop that percentage down while increasing overall volumes, which we've been able to demonstrate throughout the beginning of 2026, our ability to do. We feel like we're in a very good position right now with our Medicaid and have no concerns about a capped liability in the Florida CCN. Just sort of order of magnitude, Mike, you know, a couple percent change in that number can have a pretty significant impact. For instance, when we talked about, you know, for a couple of years, community access, that ratio went from, you know, the 42% only down to 38% or 39%. That's so a few percentage points within the 42%-45% range can have a pretty significant impact. Yeah. It sounds like you definitely seem, you know, comfortable with your cap position here in 2026. You know, longer term, how should we be thinking about Florida? You know, is this something that we need to, you know, is this something we should be, you know, worried about year to year, or is this something that you feel like you have longer, long-term control over? And then also, you know, any color on California. I mean, California's always had run, you know, I guess, you know, $87 million, $88 million or $89 million in cap. So that's, you know, and obviously there's the wage, you know, wage issue there, so. The thing that gives us the comfort, and I'll let Joel talk, but the thing that gives us the most comfort, I think, in Florida is the hospital base of patients is available. There is more than enough availability to be able to to balance our patient mix for the long term. We don't believe that we have a long-term issue in Florida. You know, Mike, that you've followed the hospice industry for so long. Some of our competitors back in the 2009, 2010 timeframe had cap issues that they couldn't get out of. If you really look into what happened there is they are in more rural locations that don't have the hospital patient base availability to be able to to make sure that that patient mix is appropriate. We feel pretty comfortable about Florida, but. Yeah, absolutely. I think, Mike, one of the most important things is monitoring where we deploy our resources and our focus. We can't control whether a patient is coming from a hospital setting, nursing home setting, ALF, or physician's office. But what we can control is where we deploy our resources to talk about the benefit or the value that VITAS brings to a potential patient and their loved one. Ensuring that we're constantly looking at where that mix is sitting, specific to where we then deploy our resources. I want to go back to, however, how we got in the issue last year, which actually was fourth quarter of 2024, first year of the 2025 cap year. Remember, we got over 5% rate increase in the state of Florida as an aggregate. Yep. That was unusual, and it certainly far exceeded what had been the norm specific to our rate increase. We also had that influence on top of a very successful campaign of growing our longer length of stay or community access patients. We're also continuing to monitor a newer KPI for us, which is an imputed length of stay, which really gives us a better view of our length of stay specific to our live patients and isn't influenced by discharged patients or death, which is typically ultimately what we know ends up with a hospice patient. We feel very good about the longer term outlook, and we'll continue to monitor and manage that appropriately. One more question on Florida. I guess, obviously, you referred to it earlier about you expanded to new markets there. I remember Manatee, Pinellas. Kinda, you can kinda give us some color on how is that contributing to organic growth. Besides the cap benefits of those new areas, you know, can you remind us what the timeline is to profitability for the, you know, one of those locations? Yeah. I'll start with the profitability side. We expect those locations. Again, I want to be clear, this is in a Florida environment, in that CON environment. It's different outside of that. We would expect profitability where it used to be 12-18 months. We are now at 12 months or a little bit below that. Specific to their overall influence on our organic growth, there's no question, again, given the circumstances, the environment in Florida, the aging population, the fact that, by 2031 one in five individuals be over the age 65, and in many areas of Florida, it's down to one in four. Their growth is certainly an influential impact on our organic growth and represent a high percentage of that number. We've been extremely successful in lifting up the new starts, which are Pasco, Marion, and Pinellas. You know, Pasco being the longest, September of 2024 opened within a hurricane, but we were able to quickly turn that around and get it lifted up. Came Marion, April of 2025, and Pinellas, mid-November of 2025. All three are exceeding expectations, specific to on their track to profitability, but also caring for more and more patients every single day and exceeding our expectations from an admission and a census growth projection. In the guidance and in the embedded in everything we've done, we estimated roughly 500 admissions from those new start programs during 2026, and I think we're ahead of that pace at the moment. Perfect. I'll ask one more question here on VITAS, then we'll switch over to Roto-Rooter since, yeah, you know, due to time. Margin perspective on VITAS, you know, kind of what, you know, obviously it's been moving around. We've seen it go, you know, higher. We've seen it obviously getting compressed with the short length of stay and the cap issues. Where do you think is a comfortable level what you should be targeting or we should be thinking about from an investor perspective long term? Great question. There is no doubt, and we've openly talked about the fact that a higher length of stay, shorter length of stay, higher acuity patient, creates margin compression. We're touching the patient more often. The patient is on our service for a shorter length of time, so you don't have an opportunity, over a period of time to, balance out that cost. I think we will return to pre-pandemic percentages, and as we have indicated, we are more backloaded, from our overall contribution back to the organization, primarily because of what it takes to begin moving that focus from a longer length of stay or a shorter length of stay to a more balanced length of stay patient. However, I will tell you, we are ahead of expectations. So far in 2026, we have been able to impact and have good expense management, good labor management, while continuing to focus on expanding that margin. I think, you know, we're in a good position. We're ahead of where we expected we would be this time of the year and anticipate continued improvement marginally throughout the rest of the year. I would say, Mike, if you're modeling out years, I would think 18%-18.5% margins is probably around where I would project it. We can get leverage. If we're growing top line like we expect, which is high single digits, we can get leverage from that, mainly off of back-office costs. So we can grow margins from, you know, the 18%-18.5%, but it's gonna be a slow build over time, based on leveraging back-office costs. I don't foresee any, you know, big bang that's gonna take our margins up to 19.5% or 20%. We could maybe eventually get there over time by leveraging the back office, but 18%-18.5% is probably a comfortable range at the moment. Perfect. Okay, let's shift over to everyone's favorite subject matter, Roto-Rooter. Can you know, you talked about your confidence on the guidance for Roto-Rooter for 2026. You know, what are some of the puts and takes that get you to the, you know, to, you know, the bottom end to the top end of the ranges in your opinion? Yeah. If you sort of model out how we got to top-line growth of 3%-3.5%, we're anticipating. We talked a lot about the issues we had with water restoration write-offs, which has both top line and bottom line impacts. It was $11 million headwind last year. We're projecting it to be better by half this year, or said another way, a tailwind of $5.5 million. That's probably 60-70 basis points of improvement. You know, the lead volume in the first couple of months has been pretty good, so we would expect at least a little bit of volume growth, call it 1%-1.5%. We passed through a roughly 1.5% price increase at the beginning of the year. If you add those things up, that gets you to the 3%-3.5% range. Obviously, the biggest issue on top line will be leads, making sure that we continue to be successful on the paid lead front and then, to the extent possible, get you know more natural leads than we have gotten in 2025. I think we're on track for that. As far as then if you get to the EBITDA line, by far the biggest issue there is the marketing costs, as I think we've been pretty clearly talking about for a while. I don't see that moderating from the 2025 level. We're making sure, too, that it doesn't continue to grow and doesn't grow out of control to the best we can. We need to generate leads. As you well know, as I know you've heard the story many, many times, we're being forced to pay for more leads. It's not that they're picking on Roto-Rooter or anything. They're doing it to anyone in the industry that's willing to pay for a lead. It makes sense to, you know, force us to pay for leads instead of giving them to us for free. We expect that trend to continue. I think that the elevated cost we saw in 2025, we've put into the guidance again in 2026. We don't anticipate it getting worse from here, but we don't expect it to necessarily get much better, at least in the short term. Okay. On the leads, if I remember correctly, I think in Q4 it increased by what? By $3 million, I think, $12 million annualized, I guess, for 2026. Yeah. You're saying you feel comfortable with those levels going forward. You know, is there a plus or minus? You know, is there in the guide expectations for another increase from there? Kinda just from a, you know, investor standpoint, how should we be, you know, just to more granularize that? Yeah. We expect it to level at this, you know, $3 million a quarter extra cost. That's what's in the guide. Ultimately, we feel good about where the paid leads are. As we talked about at the end of, you know, with our fourth quarter press release, we hired a new search engine optimization company. They have very preliminarily seen pretty decent results. We're showing up more on the natural search sections than we were before they started their work, and they're only two months into their work. I think we're optimistic that they can move the needle some. I don't expect it to go back to, you know, 23, 24 levels necessarily. We feel pretty comfortable that the marketing spend is under control. It's gonna be elevated, but it's not gonna balloon, you know, out of control either. Okay. Let's move over to water restoration you spoke about earlier. Can you talk about some of the challenges on the collection side of that side of the business and how that should impact the business going forward? We can, you know, then we'll drill down more into that. Yeah. I mean, we started water restoration in 2013. At the time, we made the decision that each branch, we have 51 branches, each branch was gonna do billing and collections in the branch itself. It wasn't gonna be a central function. As you might imagine, we have 51 groups of people doing it 51 different ways. Some are better than others. It has grown now to a size that you can't have that level of variability with 51 groups of people doing it 51 different ways. That's why we've talked about centralization. It'll ultimately reduce head count, but it also. It's a very specialized business, right? We're billing insurance companies, and it's the only business that Roto-Rooter does, billing insurance companies. It's a specialized skill to know how to bill, how to collect, negotiating with insurance adjusters. We think that it now is the time, it's the right time to centralize. There'll be a little bit of overlap of costs, but we're well on our way to getting that done. We anticipate the collection rates to get better as the year goes on. You talked about duplicate costs. How much should we be expecting in the first half? It's not huge. It's maybe $1 million at most. Okay. I think you guys spoke about the use of technology also to mitigate, you know, some of the issues. You know, is there any, you know, can you talk a little bit about that and the related costs on that as well? Yeah. I'll give you a very specific example of something that we are testing right now. When we get to a customer's location from 2013 till about three months ago, our technicians did hand measurements, you know, with tape measures and things like that of, you know, measuring the area, sort of judgmentally deciding where to put fans and dehumidifiers. There is technology they would call it AI. I don't really know that it's AI, but everyone wants to call it AI these days. It's essentially a camera that you put in the middle of the room that has had the flood, and it takes a 360-degree scan of the room. It takes all the measurements automatically. It tells you where the fans and the dehumidifiers things need to be placed. As you might imagine, that is significantly better documentation for insurance companies than is our handwritten notes. We're testing that technology now. It doesn't cost anything to buy the camera. The company that does, you know, provides the service and the technology, they give you the camera, but then it's $40 for every job that it essentially performs. Water restoration jobs are $5,000+ jobs, and so $40 is a pretty minimal cost to get documentation significantly improved. 'Cause as you know, through the healthcare industry, if you don't get the documentation up right up front, you are not gonna get paid. Yeah. That's a lesson well learned. Exactly. How should we be thinking about the reduced pricing on the water restoration side? Do you expect that to firm up as soon as the collections improve and the centralized, you know, being centralized? Or do you think there was maybe historically it was too aggressive? I think we were a little aggressive, but we, you know, our collection rate historically has been roughly 90%. We've had a roughly 10% write-off rate on all water restoration billing. You know, you wanna be, you know, you don't wanna be overly aggressive, you wanna be slightly aggressive, because if you don't bill it, you definitely won't get paid for it. I think what happened, you know, in the fourth quarter, for instance, is when, especially when you have 51 different locations and you have managers, regional managers and things, you know, calling every day and sort of stressing collection rates. One way to improve collection rates is to bill less. That's what we saw. We're working to improve that. I think the first quarter should be better. You know, the revenue per job should be back to closer to normal. The centralization helps that because now you only have a small group of people doing it. With all these factors, you know, on Roto-Rooter, can you discuss how should we be thinking about the seasonality on the Roto-Rooter business throughout 2020-2026? Specific to Q1, can you review your expectations for seasonality specific to that quarter? 'Cause obviously all the moving parts and also the you know, the strength of the last year. Yeah. Last year, the first quarter was by far, I think, at least $10 million, if not $15 million higher than any other quarter from a revenue standpoint. It's a pretty tough comparison. We expect the fourth quarter and the first quarter to be our best quarters because of the weather and the seasonality. It was a tough comparison. I think our guidance has us flat to just slightly down in the first quarter from a top-line perspective, and then down a little more because of, you know, on an EBITDA perspective from marketing costs mainly. Ultimately, the one thing I would say is the first quarter, I think we are on track for where we thought we were, you know, gonna be through the first two months. The one slight caveat to that is we love cold and wet weather, but when it gets to the point where it's shutting down cities, we can't get on the road just like anyone else. We've had two weather events that have shut down. You know, the first one that went from basically Texas all the way to the northeast, that shut down 24 branches for some period of time across the country over a 3-day period. There's a second wave of snow that came, as you well know, through the northeast, that shut down some of our northeast branches for a period of time over a couple of days. We've had some downtime over the course of the first quarter that is unusual. That's had an impact, negative impact on our results a little bit. When I say a little bit, we're working on estimates. I would say somewhere $3-$4 million maybe. We're working to get through that and, you know, we're fairly well on track with that exception on the first quarter on all the other metrics and revenue and those things. Perfect. That's really good color. You know, moving over, you know, one of the, you know, areas of potential growth historically in Roto-Rooter at one point that you guys were more aggressive about buying, you know, acquiring franchisees, bringing them back in. You know, what's the thoughts around that strategy again? We are being very aggressive. We have historically offered in the range of 1-2x their revenue. The franchisees were happy about that. That seemed like a good price to them. For us, it provided a return on investment in almost every instance above 50%. It was a good, you know, a good deal for us. They thought it was a good deal for them. We've now made some offers, particularly in locations that we really like, that are closer to 2.5-3x the revenue. That takes the return on investment down to, you know, quote-unquote, "only 30%-35%." I would expect we should have at least a couple deals to announce before the end of the quarter, or certainly by the time we release our first quarter earnings. Perfect. One last question here, and, you know, it's definitely something that investors keep asking. Obviously, Roto-Rooter's been, you know, somewhat of a problem child over the last, you know, 12-18 months. You know, if this performance of this business doesn't recover, could you look at strategic alternatives and possibly breaking the company up? We absolutely have no hesitation to do that if we think it will provide long-term shareholder value. As we sit today, obviously, we feel very good about the VITAS story and the VITAS trajectory over the next five years. We don't believe that there has been an existential impairment of Roto-Rooter's value or its ability to get back to its normal, predictable growth path. We recognize that, you know, we think it's a temporary dislocation. We recognize that a temporary dislocation can't go on for four or five years at a time. I think 2026 is gonna be a very important year for us to show that Roto-Rooter is recovering, it's on the right track. If it doesn't show that, I think we will have some strategic alternative decisions to make. Well, we're out of time. This was a great discussion. I really appreciate, you know, your time today, Mike and Joel. This is really great. I, you know, like I said, always appreciate your time sitting down here and taking these questions. Thanks, Mike. Thanks, Mike.