Awesome. Good morning, and thank you again for joining us for the 2026 Jefferies Healthcare Service Conference. I'm Brian Tanquilut, Healthcare Services Analyst here at Jefferies. The next company we have is Chemed. They're the largest operator of hospice services in the U.S., and also they own Roto-Rooter. With us this morning are Kevin McNamara, company CEO, and Joel Wherley, CEO of VITAS, the hospice business. Kevin, Joel, thank you so much for joining us. I'll start, Kevin, maybe if you can start with the state of the union, how the second quarter played out, and how you're thinking about the back half of the year. 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. That is awesome. Maybe Joel, since Kevin highlighted VITAS and the strength there, if you can walk us through how you are thinking about the sustainability of the margin gains that you have delivered there. I think you had an EHR rollout and a few other initiatives that are helping drive margin and growth. Walk us through some of that. 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— [crosstalk] —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. Joel, maybe if I can double-click on that, the raised expectations. Is that just a matter of just execution, or is this seeing benefits from the Florida expansions you had in Pinellas? 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. Sure. To the extent that you have other entities, these new starts that are doing better than expected and creating a lot more cap cushion, he can run at the lower end of that, 42%. That is, in a sense, monetizing that cap cushion that is being prepared, or created by those new starts, which goes with your question, which is there is no question, the three that we have gotten over the last three cycles have done way above expectation. I will pull it up a little higher level here. When we think of demand for hospice services, right? It sounds like to your point, like in Florida, you can grow as much as you want, like when you have the CON. What is the demand outlook like if you think of this business for the next three to five years? I will let Joel jump in and say it, other than to say, obviously, it is fed by rate increase, which is inscribed in law, okay, and demographics. There is no question. The fact that we are in Florida and dominant in Florida, it is the best state for hospice. All those factors seem to be even more significantly positively impacting our business. Joel, yeah. Yeah. I think as you look at what they have deemed the silver tsunami, by 2030, one in five Americans is going to be over the age of 65. In Florida, that number is one in four. The outlook, the opportunity, and improving access and education to the value of the hospice benefit, is a significant part of that. We continue to look market by market at where there is additional opportunity to improve that. Statistics show the longer a patient is on hospice care, the more money is actually saved to the Medicare Trust Fund. It is a win-win for everyone. Joel, maybe just to that last point you made. There are folks out there that are questioning some of the mix numbers that you have specifically in Florida for dementia. I think I saw a number that was like, what, 58% of your Florida hospice patients had a dementia code on them. If you can just walk us through how you're thinking through coding, compliance, and the mix of patients. Yeah. Happy to. First of all, as one of the largest providers of end-of-life care in the nation, we are surveyed and audited more than anyone else, and there is not any question or concern specific to the eligibility of our patients. Capitol Forum is the article you're referencing. It is a subscription-based service. They have a paywall that you've got to pay for to read an article. There would seem to be a high degree of sensationalism and certainly inaccuracies regarding the statistics that they put out there. You referenced 58% having a primary diagnosis, they said, of dementia. Coding within hospice is driven by ICD-10. You have to have a primary diagnosis, which may change over the course of a patient's life cycle on hospice. There's oftentimes many comorbid diagnoses also associated with a patient. To say that dementia in and of itself, which has many components of it, is a specific comparison, we would have to much better understand the claims data they were reviewing. Now, I'll speak specific to the numbers, our own numbers, regardless of what their article says. When you look at days of care, you're going to see an outsized number of a neuromuscular type and/or cerebrovascular type patient because they tend to have a longer length of stay on hospice, so they end up making up a greater percentage of those total days of care. When you combine those two and you compare it to the last national data from our National Alliance Association, our numbers are split in this way. If you combine those two diagnosis groupings, VITAS's number is around 59%, compared to the national recognized number at about 56%. Not a significant delta whatsoever, which was very misrepresented in the article that was then tweeted out for people to look at. Just to amplify one of the points that Joel's making. First of all, virtually all our patients that come to VITAS, another doctor has determined that they were terminal, and they come to us. We verify that. We do not accept 100% of those designations, but we verify it. As patients enter, about 7% of our patients are neurological. Now, you might say, how do we get to a higher percentage of our patient days, if it starts at 7%? That is compared to cancer. Cancer is 26% of our, okay. Cancer, it is a much more reliable diagnosis. The cancer patient, about high 80% to 90% of the patients die within six months or get out of hospice. So you could see if neurological is less predictable. Over time, you have the legacy patients that accumulate. But again, it starts from a number of 7%. As Joel says, it could be, we are talking about the super elderly who are with you for an extended period of time. It could be that they had an undiagnosed dementia that is an added comorbidity during the period. So again, as Joel says, that is how it happens, but it happens to every hospice in the country. The number, I think, in comparison, that article was something like 13% nationally and [inaudible]. That is just the wrong number. Yeah. Under any circumstance. I am happy to say Joel's level of concern about the whole thing approaches zero, which is not to say, let us put it this way. If the federal government just said, "Oh, I am getting a lot of letters on this, let us look into it." Yeah, that is not a good thing, but to the extent that Joel lives a life, one of our largest departments in VITAS is the department dealing with audits and surveys and what have you. It is an everyday occurrence for VITAS. No, thank you for sharing all that information with us. Maybe, Joel, one of the things that we have always been fascinated with is just your ability to recruit. Because obviously the growth and demand has to be supported by clinical labor supply. So how are you driving this, and what does the labor market look like today for hospice nurses and caregivers? Yeah. I will go back to the pandemic. When we were in a circumstance in the country where clinical resources had a significant limitation given what was occurring specific to the pandemic. We, at that point, said, "This is not sustainable." We are losing every bit as much as we are gaining from a labor perspective. We did not have a hiring problem. We had a retention problem during that particular environment with the pandemic. We rolled out a retention program that was overwhelmingly successful. We invested in our labor force a significant dollar amount, far above any rate increase we ever received, but it was the right thing to do. We came out of the pandemic with very strong clinical resources, no concerns whatsoever being able to meet capacity, that we had then expanded because of our ability to retain our clinical team. As we fast-forward to present day, I think we have done a number of considerable benefits for our field staff through clinical ladders, through being recognized as a top healthcare workplace, in 2025 and 2026. We continue to look at what that value add is to our clinical teams and ensuring that there is an appropriate balance of work life and personal life. One of the things that hit us boldly in the face during the pandemic is the personal side of the concerns of those team members certainly took precedent over the professional side. We recognized that, and even though we have four key core values that were established almost 50 years ago now with the organization, and that number one key core value being that we put patients and families first. Our second key core value is we take care of each other, and we recognize that we can't do one without number two. Our teams are reminded of that on a daily basis, that we have got to do everything we can to maintain an appropriate work-life and personal life balance for our team members to ensure that when they are in that patient's home, they have walked through that door. Whatever frustration, whatever difficulty they may have going on personally, it pales in comparison to that patient laying in a bed and having a physician look them squarely in the eye and let them know that if their life expectancy continues on its normal course, it is going to be less than six months. That is a significant responsibility, and we celebrate our team members to be able to impact the quality of that patient and their loved one's final journey every single day. I think it is creating the culture and that overall environment that talks about hospice in a way that it is not whispered in the corner, that it is not about death, that it is about life, and it is infusing as much life as possible into whatever journey that patient and their loved one have left. That is what we focus on every single day. Also, just to put some numbers on what Joel said is, during the pandemic, we didn't apply for it, but we received $82 million from the federal government as pandemic relief. We used 100% of it. We took none of it in adjusted net income. We used every dollar to give initial vacation pay during the heart of the pandemic for the workers. Then what was left, we put into the hiring and retention fund. That was about $43 million additional. As Joel said, we jump-started the business on the back end of the pandemic and have been going great since then. Awesome. Kevin, maybe we'll shift gears a little bit. Let's go to Roto-Rooter this time. I'd prefer just talking about VITAS. I think your guidance assumes 21.5%-22.5% margin for Roto-Rooter for the year. What gives you that confidence that Roto has stabilized and that you can hit these margin targets? Well, let me be specific and say that obviously it depends. The only real delta, the only real variant here on the negative side is marketing costs. Again, it's a negative comparison. That is, it's just a question of we have to fill the bucket, okay? To the extent that we lose more free leads than we're projecting, we just go out and get them, and that costs money. But we're pretty confident on the top line, the sales, as far as our business activity, it's going to be at a very prescribed level. So a bit of an unknown as far as how much marketing expense will result. But on the positive side, you might say, what are the kind of things that we look for that'll help our margin? Well, as we said, this is something we've laid out in our earlier discussions for when we came up with our guidance. We were looking to improve water restoration collections, okay? We had some problems early 2025 that were self-induced. We had some rogue billers. But billing was decentralized, and we said, okay, those kind of problems come from decentralization. We made an effort. We said, "Let's centralize the billing." Because it's an inexact science, billing for water restoration. We wanted high quality, we wanted consistency. In our guidance, we put that, and that's a good contributor to our expectations on margin. I'll tell you, given now that we're eight and a half months through the year, I would say that it's a triple whammy on that. In other words, by centralization, we have 33 fewer employees doing billing, okay? Our average job size is up more than $300 per job. Our collection rate has improved a percentage point. So when I say internal metrics of Roto-Rooter on both the top line and some of those internal operating metrics have been positive with the one wild card, marketing. We have a trained sales force. We don't want business activity to fall below a level that we can't support that sales force. Even if we do, we're talking about a service provision at a margin that exceeds 20 percentage, for even that margin, 20%. It's a comparative issue. It's a new normal. But again, there are enough positive things to go and answer your question really is, okay, are you going to get 21%+? The answer is, there's some things going on that are positive. We've made acquisitions, okay? Which day one are accretive. But every one by definition is a fixer-upper. In Roto-Rooter, when we make an acquisition, and this is true since our first acquisition in 1980, it's a fixer-upper, okay? But they're accretive day one for using the cash that we just buy back a fewer shares. I think we're also getting benefit from that as well. Maybe, Kevin, just to your point on the Google searches, Roto-Rooter used to run at a mid-20s on margin. Yeah. You're saying this is the new normal. Is it right to think that there's just a margin reset/step-down that has occurred, and this is the right run rate to be thinking about from a margin perspective? As long as Google adopts these attitudes. In other words, we've fallen from 60% free leads to 39%. That's been tough to deal with. Now you might say, is this permanent? What if as long as Google is in charge. With AI, Roto-Rooter does fantastic because it's the largest, puts out a lot of content, easy to scrape the information. That's free. At the current time, that's free. Is that going back, would that, as AI becomes adopted as the search du jour, that's what we're expecting. But in the meantime, we're kind of at the I hate to say this in a public company, but we're kind of at the mercy of Google. We just try and stay on top of them. I think our efforts in that regard, you might say, well, how far is down? We have seen that it really comes down on the free search to something we call visibility. How often do we appear in the, call it the map section? Someplace where we can get a call from somebody who hasn't looked at an ad, but they're looking at the, call it the free section. Our visibility historically, because it used to be done based on number of positive reviews and propinquity to the customer and years having provided the service. Obviously we did very well in that. Our visibility was in the 70-plus percentage rates. They changed the rules of the game. We fell to low 20s. We put other efforts using some outside contractors. We got it up to the mid-30s. They made some other changes. We fell to the low 20s. We've gotten those back to the low 30s. That has yielded results which I've said have been a return to a kind of a consistency and a new normal, a stable base to grow from. Thank you for that. Maybe shifting gears here. We've got three minutes. You have an activist investor involved in the stock. They've asked for some strategic moves and strategic reviews. You've been very active with a share buyback. How would you want investors to think of your approach to these requests and your perspective on share repurchases for the remainder of the year? Well, the company's called Barington. It's a small firm, a very small firm. They took a position when we were selling in under $400, a little under half of 1% of our shares. We met with them several times. Very good relationship. At the time, they specifically said, "Oh, boy," that they would not recommend separating the two companies, for instance. They think everything's going great, but they wanted, they mentioned at the time, adding There's a person who they associate with who they have proposed for many boards. We said, "We'll have him beat our nominating committee." What happened, now everything else after that point is speculation. At that point, for a variety of reasons, I thought the stock was too low to start with. The stock recovered to well over $500. I think that they weren't getting any credit. Nobody was added to the board. It was getting away from them. Their obvious goal is to get other activist investors to kind of piggyback with them, to give them a little more say. The entry point had changed so dramatically that I think they did not see that happening. Actually, we haven't heard a word from them since. I saw recently they announced a situation with Bed Bath & Beyond. Maybe they've gone to greener pastures. No, we've never had any discussion that involved anything other than, would we like to add a certain gentleman to the board of directors. Got it. Kevin, last question for you. As we think of what you think is underappreciated by investors in terms of the Chemed story, both in VITAS and Roto-Rooter, what would be the message? Well, let me say this. It's your guys' job to come up with what something's worth. I would just say that you go back to the beginning of last year. Let's say our stock was selling at over $600. I think we're in a lot better position than we were then. VITAS has showed a lot of growth, and the expectation for the future has never been higher. The risk associated with cap in Florida. As we come to the end of the government plan year, Joel's looking at excess of $35 million of cap cushion. That's what's being generated under our current mix of business. It hasn't been that high in a long time, put it that way. That's better than recent events. First thing I'd say is there's a lot to be said that Roto-Rooter has stabilized, and a year ago, when we were $600, it was still in a downward slide. I would just say, the first thing is, I don't know about valuation, but it seems like we are better. I don't know why it's as low as it is, other than still a hangover from the fact that we did have a big miss. You get punished for that. I think that to the extent that the market will reward getting back to our growth of kind of a very consistent, low risk, high single-digit operating number, coupled with taking shares out of the market with stock repurchases. I think to the extent that that gets back to being rewarded, I think then that's the outlook for the Chemed stock price. Amazing. Thank you guys. Appreciate your time today. Thank you so much.