Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Kimmett Corporation third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question at this time, you will need to press star 11 on your telephone keypad. As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to your host, Ms. Holley Schmidt. Ma'am, please begin.

Good morning. Our conference call this morning will review the financial results for the third quarter of 2026, ended September 30th, 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 October 27 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 date at October 27th, 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 Witzeman, Chief Financial Officer of ChemEd, and Joel Wherley, President and Chief Executive Officer of ChemEd's VITAS Healthcare subsidiaries. I will now turn the call over to Kevin McNamara.

Thank you, Holley. Good morning. Welcome to ChemEd Corporation's third 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. VTAS continues to perform at a very high level. The combination of ADC growth and cost containment, particularly with respect to central support costs, drove significant revenue and income growth at VTAS during the third quarter of 2026. VTAS revenue increased 12.2% during the quarter, compared with the third quarter of 2025, and adjusted net income increased 44.7% over the same period. Admissions at VITAS during the quarter totaled 18,995, which equates to a 7.2% improvement from the same period of 2025. Hospital admissions, as a percent of total admissions for our Florida combined program, were 42.3% during the third quarter of 2026. As we've discussed previously, an appropriate balance for sustained long-term stability in the 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 11.1% compared to the third quarter of our 2025 in our Florida combined program. We ended the 2026 Medicare cap year with a cushion of more than $34 million in the Florida Combined Program. We do not anticipate any Medicare cap billing limitation for the Florida Combined Program in the 2027 Medicare cap year. Additionally, as a result of strong admissions, our Medicare cap billing limitation relating to all non-Florida programs ended the 2026 year approximately $3 million below our original projection. Now let's turn to Rotary. In the third quarter, were very pleased with the revenue growth generated by Roto-Rooter. Total revenue grew 7.5% during the quarter compared to the third quarter of 2025. Revenue grew across all major service lines in both our residential and commercial businesses. Mike will further provide information on the impact of our recent acquisitions. However, it is important to note that Our same store revenue increased 5.5% during the third quarter of 2026, which exceeded our internal expectations. Similar to the total revenue growth metrics, we saw strength in all service lines from same source sales. Our commercial business manager program continues to perform at a high level. There were 36 productive commercial business managers in place for the entire quarter, contributing to a commercial revenue increase of approximately 10.9% in their respective branches. This compares to a commercial revenue increase of 4.8% in branches without a commercial business manager. Centralization of the water restoration, billing, and collections function continues and has resulted in improved collections. Total write-offs improved by $2.9 million during the third quarter of 2026 compared to the third quarter of 2025. Equally as important, average price per job in the water restoration business increased 2.8% over the third quarter of 2025. This is a reversal of the multi-quarter downward trend in average water restoration price per job. Lead generation and the resulting cost of customer acquisition remained a challenge in the third quarter. Total leads during the third quarter of 2026 were essentially flat compared to the third quarter of 2025. Consistent with trends observed in prior quarters, free leads generated from Internet searches declined 11.8%, while paid leads increased 5%. Of all leads generated during the quarter, approximately 60% were paid compared to 56% in the third quarter of 2025. This change resulted in increased marketing spending of $4.3 million in the quarter compared to the third quarter of 2025. Rotorooter is building revenue growth momentum through improved operations supplemented by strategic acquisition activity. Rotorooter continues to explore every opportunity to contain and potentially moderate marketing costs. Rotorooter has demonstrated a long history of growing margins through cost containment so long as revenue growth is stable. We fully anticipate Roto-Rooter to return to that historic pattern through 2027 and beyond. We are very happy with the performance of VITAS in the quarter and its prospects for the remainder of 2026 and beyond. The combination of the two business units drove an increase in total ChemEd revenue of 10.6% and an increase in adjusted delivery earnings per share of 28.1% in the third quarter of 2026. as compared to the same period of 2025. Additionally, over the first nine months of 2026, the consolidated business generated cash flow from operations of more than $229 million, which along with minimal leverage allows us the flexibility to pursue strategic acquisitions and meaningful share repurchases as the opportunities arise. With that, I would like to turn this teleconference over to Mike.

Thank you, Kevin. VCAS net revenue was $457.4 million in the third quarter of 2026, which is an increase of 12.2% when compared to the prior year period. This revenue increase was driven primarily by a 9.4% increase in days of care and a geographically weighted average Medicare reimbursement rate increase of approximately 2.2%. The acuity mix shift negatively impacted revenue growth 25 basis points in the quarter when compared to the prior year revenue and level of care mix. The combination of Medicare cap and other contra revenue changes positively impacted revenue growth by approximately 85 basis points. In the third quarter of 26, VITAS accrued $828,000 in Medicare cap billing limitation. This compares to a Medicare cap billing limitation recorded in the third quarter of 2025 of 6.1 million. Average revenue per patient day in the third quarter of 2026 was $209.11, which is 196 basis points above the prior year period. During the quarter, high-acuity days of care were 2.2% of total days of care, a decline of five basis points when compared to the prior year quarter. Adjusted EBITDA excluding Medicare cap totaled $92.5 million in the quarter, an increase of 31.4% when compared to the prior year period. Adjusted EBITDA margin in the quarter excluding Medicare cap was 20.2%. Now let's turn to Roto-Rooter. Roto-Rooter branch commercial revenue in the quarter totaled $59.9 million, an increase of 9% from the prior year period. all lines of business in the commercial sector had increasing revenues during the quarter. Roto-Rooter branch residential revenue in the quarter totaled $158.8 million, an increase of 5.2% over the prior year period. Again, all lines of business in the residential sector had an increasing revenue during the quarter. Adjusted EBITDA in the third quarter of 2026 totaled $48.2 million, a decline of 2.5% when compared to the third quarter of 2025. Adjusted EBITDA margin in the quarter was 20.6%, which represents a 213 basis point decline from the third quarter of 2025. As Kevin mentioned, cost of customer acquisition continues to put pressure on Roadrunner's margin. Additionally, during the third quarter of 2026, fuel costs increased approximately $1.4 million compared to the third quarter of 2025. We anticipate both cost headwinds to persist in the fourth quarter. During the third quarter of 2026, Roto-Rooter reacquired multiple franchise territories in California for approximately $62.5 million. These territories encompass a population of over 12 million people. Prior to the acquisition, this business had annual revenue of between 50 and 55 million dollars. Slightly over half of the revenue associated with acquired territories will become part of our owned and operated branch locations. Two new branches will be established in Sacramento and San Diego, while other territories will be absorbed by existing branches. The remaining locations will become will become part of our independent contractor operating model. In 2026, the company has spent $96 million to reacquire Road Roader franchises, primarily in Texas and California. It is important to note that these acquisitions do not have the same high margin profile as our owned and operated Road Roader branches. The franchisees acquired operate at a much lower EBITDA margin often in the single digits. While we see a rapid increase in revenue from acquisitions over the next several quarters, it is a 12 to 18 month process to implement the full Roto-Rooter operating model. Rapidly increasing revenue from the acquisitions coupled with lower EBITDA margins at these locations immediately post-acquisition will result in lower overall margins at Roto-Rooter in the short term. However, acquiring territories with significant and growing population characteristics is the right thing to do for the long term at Roto-Rooter. Turning now to ChemEd, during the quarter, the company repurchased 125,000 shares of stock for $66 million, which equates to a cost per share of $528.24. Over the trailing 12 months, the company has repurchased 1,235,000 shares of ChemEd stock and an average price of $427.62 per share. As of September 30th, there was approximately $73.7 million of remaining share repurchase authorization under the company's plan. Finally, based on the company's financial results through September 30th, 2026, We expect to finish the year at or slightly above the high end of our full year 2026 adjusted EPS guidance discussed in our second quarter 2026 earnings press release dated July 28, 2026. The contribution of each operating unit to that overall EPS level will likely differ slightly from the guidance given at the end of the second quarter. However, we are very comfortable with the overall adjusted EPS guidance given at that time. I will now turn the call over to Joel.

Thank you, Mike. In the third quarter of 2026, our average daily census was 24,428 patients, an increase of 9.4%. In the quarter, hospital-directed admissions increased 5.7%. Home-based patient admissions increased 6.3%. assisted living facility patients increased 8.1% and nursing home admissions increased 9.8% when compared to the prior year period. The continued high level of hospital admissions allows us to also take a high number of admissions from other pre-admission locations. We expect this pattern to continue for the remainder of 2026 and all of 2027. High admissions in both hospital and non-hospital settings allows us to responsibly grow revenue while also balancing the patient mix needed to manage Medicare cap. With respect to the workforce, full-time equivalents ran below our estimated totals for most of the quarter. However, to address continued ADC growth, we ramped up hiring in September of 2026. As a result, at the end of the quarter, we are in line with our overall budgeted full-time equivalent metric. We monitor each location very carefully and ensure that staffing is adequate to provide high-quality care for our patients and their families as well as maintaining a healthy work-life balance for our caregivers. We have not experienced issues with our ability to hire and retain qualified caregivers over the past few years. Our average length of stay in the quarter was 103.5 days. This compares to 109.7 days in the third quarter of 2025. Our median length of stay was 17 days in the third quarter of 2026, a decline of one day from the third quarter of 2025. Our adjusted EBITDA margin, excluding Medicare cap in the third quarter of 2026, was 20.2%. We are able to achieve that high margin level through a continued focus on cost control at every level of the organization. As mentioned above, we have been able to operate for most of 2026 at staffing levels below our budgeted levels. This was achieved mainly through enhanced electronic staffing tools, which allowed our managers to more closely manage and flex daily staffing levels. Equally important, selling general and administrative costs declined $2.1 million in the third quarter of 2026. compared to the same period of 2025. We have worked hard to establish a culture particularly related to back office processes, which ensures every dollar spent is necessary to support our overall goal to provide high quality care to patients and their families. We believe VITAS is exceptionally well positioned to capitalize on future growth opportunities Thank you, Joel. I will now open this teleconference to questions. Ladies and gentlemen.

If you have a question or comment at this time, please press star 1 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star 1 1 again. Again, if you have a question or comment, please press star 1 1 on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Brian Tranquillet from Jefferies. Your line is open.

Hey, good morning, guys, and congrats for the quarter. Maybe, Joel, I appreciate your comments on staffing, so maybe I'll start there. As we think about the nursing environment today, what can you share with us in terms of the ability to recruit nurses and increase capacity as Demand has been strong on the VTAC side. And also, what are you seeing in terms of wage inflation in light of, you know, we're seeing increases in orders for temp nurses on the hospital side. Just curious what you're seeing on your side of the business. Thanks.

Yeah, absolutely. So, two things. One, we're not experiencing difficulty in hiring. There may be specific pockets or a specific program that has a greater need than another, but none of which have reached a level of concern associated with our ability to recruit and retain those key clinical positions. In regards to inflationary pressure or wage pressure, certainly I think everyone is experiencing an impact of the inflationary situation that we're facing nationally within the United States. That's no different in healthcare. However, it has not in any way impeded our ability to hire and certainly not restricted our ability to grow across the organization. So the Short answer is no issues in hiring and no significant wage pressures that we're concerned about at this time.

And I'd just like to add that, you know, when you observe this over time, you notice that the market for hiring nurses is highly segmented. And that is, you know, we do not compete generally, you know, with hospitals. Thank you. Thank you. is always a couple percent, regardless of what inflation is doing in the short term. Hospice nurses have lived with that reality for some time, and Joel's done a great job in bringing that. It basically is the iron law of hospice. If you look at VITAS over time, The field-level expenses are in the mid-60s as a percent of total reimbursement, and you live within that or you die. And Joel's done a great job doing that.

Yeah, Brian, I think... Go ahead, Mike.

I just think that we've lived with, I think for five-plus years, the fact that wage increases overall for nurses are higher than the reimbursement we get back. which is, I think, why Joel and his team have really stressed cost containment, particularly in the back office. It helps maintain, if not expand, the EBITDA margin a little bit, even though the reimbursement isn't necessarily keeping up with our wage inflation.

That makes sense. And then maybe, Kevin, as I think through Roto-Rooter, obviously seeing some inflection here, nice growth, nice name store. and also you've had some acquisitions there. When I think of the pipeline for franchise acquisitions, what does that look like? And then maybe for Mike, just related to this, you touched on how we should be thinking about margins and the ability to grow revenues for these acquired franchisees. If you can just walk us through that dynamic. Thank you.

Let me just start with the pipeline. We always try and de-emphasize that because most of the major metropolitan areas Red River has already repurchased. And there's a few out there. It has surprised us a little bit, but given what's going on in the market, I mean, that's what it's made it possible to make these acquisitions on Red River. But generally speaking, where the action is, is in the smaller markets. Participants in our independent contractor program Smaller locales that are added to an existing branch for Roto-Rooter. We don't like to emphasize the pipeline other than say, I just signed an RCA for another good-sized one today. Again, when I say a good-sized one, an independent contractor operation. So not that significant. Don't take that as a significant acquisition. But they're still out there But, you know, it's the type of thing that, as you saw, we were pretty active and made a big one, and it was, what, like $90 million in acquisition costs. For the full year, yeah. Yeah. But that was big. That was beyond our expectations. And, you know, you shouldn't extrapolate that and expand that in the future at that level.

A few years ago, Brian, we had done a study – We estimated at the time we could have spent, if all of the franchise acquisition candidates we would be interested in all became available, we could have spent $200 to $250 million at the time. By virtue of the fact that we spent $96 million this year, we've eaten into that sum, but there's still a handful of, as Kevin said, Bigger acquisitions we'd be interested in, and then the rest of them are smaller, either tuck-ins or contractor operations. Your question about revenue and margin, I'll just give you from the California acquisition we just did. Our first year estimated revenue is somewhere in the $30 to $35 million range, but their EBITDA margin was sub-10% when we purchased them. So will add $30 to $35 million to the top line, say, in 27, but it will add less than $4 million in EBITDA. It'll start growing, and we'll start integrating it into the Roto-Rooter operation and getting it into that model, but that takes a little time, and that's how most of these acquisitions work. Top line growth is immediate, and then the EBITDA margin comes, but... were very excited to have a franchisee that had 12 million of population and population density as well, which is important in locations like San Diego and Sacramento. So I think it's definitely a good long-term acquisition for the company. Just in the near term, it will mute overall margins a little bit.

Awesome. Thank you, guys.

Thanks, Brian.

Thank you. Our next question or comment comes from the line of Joanna Gajuk from Bank of America. Your line is now open.

Hi, good morning. Thank you so much for taking the question. So maybe just to first clarify things around your guidance change. So you expect not to be at the higher end or slightly above your EPS, but you did not specifically comment that on the segment. So maybe you can kind of give us color, you know, to assume that this guidance raises largely the VDAS outperformance. I mean, there's also the Roto-Franchisee acquisitions. So how much it's adding to the guidance is going to help us bridge to that EPS guidance based on the segment outlook now.

Okay, I'm going to turn it over to Mike. He handles this, but I'm going to start by saying, obviously, the last two quarters, we increased guidance. We're trying to get out of the business of increasing and changing the guidance every quarter, but obviously, we're trying to send the signal, yes, we outperformed in the third quarter compared to when we came up with that, the number for the last two quarters. We're obviously running ahead, but we've tried to make... trying to give the indication that, yeah, things are going well. We don't expect a slowdown, for instance. But we don't want to be too specific and get in the business of guiding every quarter. But, Mike, why don't you go ahead and answer Joanne's. We do have some questions, some specifics. But with that proviso, Joanne, just remember that we're trying to get out of that business.

Joanne, certainly from just purely a math standpoint, right, We gave guidance at the end of the second quarter. We beat the third quarter by about 30 cents. Even if we hit the fourth quarter, just meet the guidance that we've issued for the fourth quarter, we'll be at the top end or near the top end of the range already. So saying that we're going to be at the top end doesn't necessarily need to signal any huge outperformance in the fourth quarter. What we're signaling is, as Kevin said, that given that we beat the third quarter by 30 cents, we didn't want to signal that we might miss the fourth quarter by 30 cents to get to the middle of the range. We wanted to make sure to signal that we're on track in the fourth quarter for meeting the guidance that we've given. And so that was the whole point. And I think, as you can see from the third quarter results, Rotorooter, purely from an income standpoint, came in a little lower than what our guidance was, and VTOTS came up higher. When we say that the components of how we might get to the top end or above the top end of the range are going to change a little bit, I think that's fairly obvious from the third quarter results. That's all we were trying to signal. As Kevin said, we didn't feel the need to necessarily regurgitate all of the components and all of the metrics around each one of the operating units.

and I understand this but I guess this latest franchise acquisition in mid-September that's going to add I guess a little bit in fourth quarter when it comes to EBITDA but you said maybe less than four for the like annuals maybe that's less than one million in Q4 is a good number to think about okay um so now I guess on the on the photo segment actually so um just to follow up on the comment in favor of Mark, I think you said something along the lines of you expect to return to historic growth in 27. So are you talking about, I guess, what kind of growth are you talking about? And is it excluding that impact on the recent acquisitions or that's all-inclusive? Help us understand how you guys are thinking about 2027 growth in rural.

We don't have a budget yet for 2027. They're still working on that. So that's... is more of a high-level comment, so I can't give you specifics on 2027. The comment relates to the fact that over a long period of time that we've owned Roto-Rooter, if they can consistently grow top line, they're very good at cost containment and making sure our EBITDA margin is consistent, if not growing slightly quarter to quarter, year to year. So that's what we were talking about there. We weren't giving any specifics I think it's important to note that given the marketing headwinds that we're seeing, the fact that we can find other places to get leverage and margin with consistently growing revenue at Roto-Rooter and be able to overcome some of those marketing costs in 27 and beyond.

Let me also add a comment that really springs from some of the questions we've had recently. Just, you know, since yesterday afternoon when we released earnings, I mean, when you look at the rotator numbers and the margin, you know, we're saying, oh, yeah, margin. I mean, the margin has been affected. Yes, every company that has people on the road has fuel costs. I mean, that was a million dollars, a million dollars in the quarter. But generally speaking, it's marketing expenses. And, you know, what we're seeing is that...

Thank you for joining us.

under 40% of the leads we get are free. I mean, that's a big transformation. That begs the question of where do you go from here? What do you expect as far as erosion in that percentage of free leads? I mean, that's a big question, and I think it came through a number of questions by people who commented on our earnings release. And all I can say is we have good thoughts on that. Over 50% of our Roto-Rooter customers are repeat customers. In other words, they come to the Internet looking for Roto-Rooter. They're coming looking for the telephone number, half of them maybe. And it really comes down to the strength of the Roto-Rooter service market. So that's a natural floor to the Internet. Let's say the percentage of natural leads that we get, we think. I will say that we've had recently this quarter, we've seen a, when I say a flattening, we've actually had weeks where we had an improvement in natural leads compared to the prior year's period. So we have a pretty good thought on that question and some good hopes. But I guess that's really the answer to your question, Joanna. If that is... If that is, over the next 12 months, a flat or improving situation, yeah, I don't see marketing having a continued negative effect on our comparative margin. Mike, do you agree with that?

Yes, I agree with that completely.

Okay, and to that end, I guess we hear from some national brands in the residential services sectors. They're simply calling out some negative impacts as the consumer is using their AI tools like chat GPT and such to find just a solution to an issue at the house or apartment. So is that part of what you're seeing already? And I guess is there a risk to, you know, about a brand because of that? Because I guess there's a couple of things, you know, that happens when people use those newer tools because first of all, you know, they can get a first like a do-it-yourself type of a solution. and I guess price transparency might be also needed when those models look for information. So can you comment on that? Is this something that you've already been seeing in your search in the lead process, I guess, generation?

I would say, Joanna, that's a little bit speculative, but I would say that from a Roto-Rooter specific standpoint, given that we focus on emergency-level work, When we get calls, it's the much more complicated issues where there's sewage backing up in the basement, somebody needs something to get out there immediately. Our bread and butter business is not changing out a toilet or fixing a leaky faucet. Those are the things I think people try and do, DIY, chat GPT kind of searches. That's not our bread and butter. So if that's a trend that... really continues or really expands, could it hurt us on the margins? It could certainly hurt us on the margins, but that's not the bread and butter jobs that we do. And so it's a little bit speculative, but we don't see that as a huge headwind going forward.

Your question also touches on a subject that, first of all, it touches on a subject for the fact that our average job is something very different than what you're describing. Our average job is $1,500. I mean, we're talking about some job that involves plumbing. Half our revenue comes from excavation and water restoration. I mean, it's a different type of job than what you're getting involved in doing it yourself. But let me also say, when I say it touches on an important point, because I think our way out of the conundrum and problems associated with marketing Thank you very much. Thank you very much. with Google with regard to some of their predatory activities. But I think the real answer is in growing our average price per job, that will be how we handle the marketing issue.

That makes sense. And if I may, the last question on that segment, like you said, you're buying these franchisees and the margins are well below average. So can you help us understand what specifically, you know, these other owners fail to do or kind of how do you plan to bring these margins to the average in terms of like specific examples?

Yeah, I would, I mean, it's across the entire organization that we acquired. They were not as sophisticated as we are as it relates to internet marketing, for instance. So they spent a significant amount higher margins Many of them don't have water restoration. Top to bottom, I think there's ways that we will improve the EBITDA margin, and there's no reason to believe that these locations are any different than any other road, route, or branch location that all combined average 20.8% margin in the third quarter. And that's almost a sure thing, that they'll retreat from the beans.

All right, and thank you so much for that. And if I may, on the VCAS one question, I have security outperformance, very strong results there. So this is great. One question about the contractual allowance. It's a small number, but I guess it is going up, and this quarter in particular went up again, like $3 million sequentially. So can you help us understand what's driving that? And also, do you assume this line item stays at a run called at $8 million per quarter going forward? Thank you.

Because of all of the Press and things around fraud and abuse, we saw a very significant increase in activity around reviewing files on a state and federal level across all of our locations across the country. So order of magnitude, we saw roughly 12 to 14 million additional revenue being reviewed by the state and federal regulators. We have a great track record in sustaining any challenges to the revenue. We have great record keeping. We have entire departments devoted to compliance. But historically, there is a slightly higher write-off percentage when files get pulled than our normal write-off percentage on a day-to-day basis. And that's all you're seeing is a bit of an increase in activity around regulators. Whether that continues going forward or not, I think is anyone's guess. I would say, if I were guessing, that it probably will be sustained for some period of time. But as you said, it's not particularly material to the total.

We probably have a competitive advantage, given that our department that we have that fights those audits and whatnot are competitive. far beyond what our average competitor, that is a single site not-for-profit, could deal with.

And to Mike's point, though, we have a really, really strong track record of reversal on these claims, but we have to go through the due process, which takes some time, and so from an accounting perspective, we record it, and then we go through the necessary steps in reviewing of the claims. And again, we have an outstanding track record and have no concerns associated with that recent increase because of, to Mike's point, the focus from the government on program integrity has certainly increased the number of audits, both pre- and post-payment audits that we're faced with.

Thank you. Our next question or comment comes from the line of Ben Hendricks from RBC Capital Markets. Mr. Hendricks, your line is now open.

Thank you very much. Just a couple of quick follow-ups. Kevin, I think you mentioned on the Roto-Rooter side that you had increased actually your number of organically generated leads. I wonder if you kind of give us a recap of some of the platforms or programs you have in place to kind of generate those leads internally. Are we working with applications or apps for iPhone apps or AI tools to help generate that and diversify away from Google? Any comments you can get, you can offer on that and where that could go?

Yeah, I could start, Mike, also, but we have an app, and Mike, what is our total downloads at this point?

It's over 300,000. We receive roughly a We have apps.

When I say our natural, we'll get them from, for instance, commercial customers that have the commercial business managers direct line. We get them from largely the maps section of Google. Generally speaking, it could be from a a sticker on a water heater that we replaced with our telephone number that does not go through a Google click. So they're multifaceted, but basically they're everything other than somebody going to Google and clicking on one of the paid ads. The type of thing that Google makes it tough is they make it so it's hard for our customers It's hard for our customers to find our free listing on Google. There's three sections of paid advertising before you get to that type of information. If you search Roto-Rooter plumbing, you'll probably be viewing seven or eight competitors before you had the telephone number for Roto-Rooter. And there would probably be... a map section with a paid Roto-Rooter. We wouldn't have a paid ad generally on that, but to the extent that Google now has rotating paid ads in the map section, we don't have any control over that, where those appear. Very likely, again, our customers have to do a dance in a Go through a maze in order to find it on a basis, but we find that they still do, and they're still looking for just Roto-Rooter.

Yeah, and even if they're, so, you know, they would click down a page, and the first two or three places they would see Roto-Rooter are still paid, some level of paid search. And so even if they're looking for Roto-Rooter, they don't distinguish, certainly, between paid and unpaid. They just click the first one available. So I think that's part of what Google's forcing with the way they've organized their search page. But the other thing that I definitely think we see, it's a little harder for us to track, but we certainly believe that the number of leads we get from AI searches is increasing. It's hard for us to track because All the AI search engines do at the moment is scrape information from anywhere in the Internet. So we're not exactly sure where the phone number was obtained from, but we know that those are free leads as well. So it's a slow slog, but I do think that we'll continue to expand free leads. Unfortunately, Google is still the elephant in the room, at least for the near term.

And I want to emphasize that certainly our goal is to have the lion's share, never 100%, but the lion's share of commercial business come other than from Google. And that's, of course, the fastest growing part of the Rotary business. And that gives us a lot of hope for stability with regard to this subject.

Thank you very much. One more on VITAS side and just to follow up on the line of questioning around the recruiting costs. I know you guys are still working on your plan for 2027, but we're getting the questions. So any way to think directionally about kind of recruiting costs this year versus next? And should we expect some kind of acceleration in recruiting expenses next year? Thanks.

Hey, Ben. No, we do not anticipate any material increase in recruiting costs as we look forward to 2027. Our teams do a great job of proactively managing where we have staffing needs and responding accordingly.

Thanks, guys. Thank you. Again, ladies and gentlemen, if you have a question or comment, please press star 11 on your telephone keypad. Our next question or comment comes from the line of A.J. Rice from UBS. Mr. Rice, your line is open.

Thanks. Hi, everybody. Maybe just first on the VTAS side, obviously strong growth there. I wonder, when you drill down, is that your sense of you're consistent with overall market? Are you picking up share? I know you've got a couple of new markets in Florida that you've opened that may be contributing. I know the discussion around fraud and abuse, is there any movement of referral sources toward you because people feel more comfortable with your compliance programs versus a mom and pop? I wonder if you could just comment on what you're seeing in your growth numbers relative to what you think the underlying trends are.

Thanks for the questions. First, we had a very balanced quarter as you look at growth both Florida and non-Florida across the company. Although I will speak to your latter question which is have we seen an increase specific to any concerns associated with waste, fraud, and abuse potentially with other providers? We continue to see Thank you for joining us. Oversight with Program Integrity and their desire to weed out fraudsters within the industry. One thing I want to comment on in that we're working very closely with CMS on this is that we want to change that narrative. from discussing waste, fraud, and abuse to access for those in need, recognizing only a little over half of the Medicare deaths in the United States actually get the benefit from the Medicare Hospice Benefit. There is a lot of education still to be done and a lot of access that needs to be created. So we feel good about our balance growth. It's not just been in our new starts in Florida. It's been across the company. And as regards to California, we feel really good as the largest provider across the state of where we're positioned and the growth that has occurred out there.

Okay, maybe also on the Roto-Rooters side, I know a lot of the discussion has been about the headwind on the margin side that the paid leads and all the dynamic of how the referral sources have changed over the last few years. I wonder when you step back, do you think because you maybe are in a better position to fund that, is it helping you grab share? I don't know whether the 5.5% same-store growth revenues that you're reporting in Roto-Rooter. Is that, do you think, market, or do you think you're picking up share because of some of the changing dynamics in the business?

I think there's a little bit of that, but the countervailing force is I think we're seeing a little bit of panic by some of our competitors. And when I say panic, I see them increasing their bids. Thank you for having me. because there are advertisers. It's kind of counterintuitive, but Google is discriminating against any company that advertises because they say, well, as long as you're big enough to advertise, we're going to turn the screws on you and you're going to be forced to have your only outlet for getting leads. And I see them possibly panicking a bit. We saw during the quarter that the bids per lead were going in. That was part of what we call the margin pressure associated with marketing. I think stage one is they're fighting off that market erosion. I think a little bit of that is coming to us. We expect to be even more successful with regard to market share. It's also another comment that there are very few markets that we aren't significantly larger than our competitors. There's some. Again, so it's a little bit like VITAS in Florida. It's hard to talk about them improving market share when some of the counties, VITAS might have 75% of the Medicare deaths associated with entered hospice. But I think you're making the right point. I mean, Roto-Rooter has, I think, some advantages in adversity. I mean, to the extent, again, our average price per job is much higher. It makes our marketing cost per job lower, obviously, just arithmetic. Our resiliency of our service mark is so strong. The period of time that we've been in the Thank you very much. Google isn't going away. We're trying to get better in dealing with them. And job one really for us is saying, look, if we can grow the top line, it's like a rising creek covers a lot of stumps. And the creek is rising. And now it's our job just to navigate the stumps.

I would just add, AJ, that much to our... Disappointment internally as well is there are not great statistics in the overall plumbing industry market share and overall size of the industry and our part in that. What I would say is 5.5% growth is higher than what we would historically see in the overall industry on a year-to-year basis. So I think we would conclude that at least to some degree, as Kevin would say. We are taking market share in our branches. We know with certainty, as evidenced particularly by some of the things we've talked about, our own contractors, as well as the very motivated seller. We just bought their business from California. We know that smaller, less sophisticated plumbing companies are really struggling in this environment. It's a difficult environment, and as Kevin has talked about, It's a pretty sophisticated marketing problem to navigate our way through. So I do think we're taking market share from some of the smaller players. And we'll see. I wish we had better statistics on how that all worked. No, no problem.

I might ask one last question. On the prepared remarks, you made the comment about obviously the capital structure is strong. You can You're positioned, if strategic deals come along, to take a look at it. It sounds like in some of the earlier discussion, the main focus is on potentially buying out some franchisees, but I didn't want to leave it without making sure. Is that what you're talking about when you're saying you have the capital strength to consider strategic deals, or is there something broader than that that you're referencing?

I think at the moment we're more focused on the type of deals we have made this year so far, reacquiring franchises maybe. Joel will find a single location or smaller multi-location hospice in a place we like, but I think we're focused on building the two brands that we own. Kevin and I and some of the other Executives talk all the time about the potential for third legs of the stool at the company, but ultimately that's a pretty high bar for us from an investment standpoint to make. But it's not that we ever rule it out. It's just we have pretty high standards when it comes to thinking about potentially expanding to a new product or service line altogether.

I agree 100%. Mike said that certainly nothing's imminent. I would say if you talk about probability, the type of thing we look at almost just regularly is another service line at Roto-Rooter. I mean, we've certainly been in many other service lines. A lot of questions like would we ever consider getting back into the HVAC? And we think in certain geographies we would. We think there are struggling... and HVAC companies in some of the geography that we would like to be in. The first time we were in it, and this was in most of the 1990s, we just didn't see it helping our plumbing business very much or vice versa. But maybe things change. But I'd say that's a lot more likely to an additional service line at Rotorooter than it is a completely new business.

Okay. All right. That's great. Thanks so much. Thanks, AJ.

Thank you. I'm showing no additional questions in the queue at this time. I would like to turn the conference back over to management for any closing remarks.

No, closing remarks are just thanks everyone for their attention and appreciate all the operating units for excellent results. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.