Chemed Corp Q3 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by, and welcome to the Chemed Corporation Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to one of your speakers today, Ms. Sherri Warner with Investor Relations. Ma'am, please go ahead.

Good morning. Our conference call this morning will review the financial results for the third quarter of 2020 ended September 30, 2020. 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 29 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 dated October 29, 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; Dave Williams, Executive Vice President and Chief Financial Officer of Chemed; and Nick Westfall, President and Chief Executive Officer of Chemed's VITAS Healthcare Corporation subsidiary. I will now turn the call over to Kevin McNamara.

Thank you, Sherri. Good morning. Welcome to Chemed Corporation's third quarter 2020 conference call. I will begin with highlights for the quarter, and Dave and Nick will follow up with additional operating detail. I will then open up the call for questions. When we reported our second quarter 2020 operating results, I noted that the pandemic and related economic lockdown severely impacted our April 2020 operating results. Since April, both VITAS and Roto-Rooter have reengineered their operating procedures to safely care for our patients and customers during the pandemic. These operational changes have allowed Chemed to generate sequential operational improvement starting in May 2020, and this improvement has continued and has, in fact, accelerated throughout the third quarter and continued into October. David will provide updated earnings guidance later in the call. Our hospice segment operations continued to be impacted by the pandemic. Fortunately, the federal government, specifically HHS and CMS, have been exceptionally supportive in terms of relaxing regulations, allowing the use of telehealth where appropriate, and providing pragmatic flexibility in caring for our 19,000 patient census. The severe initial disruption within our patient referral and admission patterns we noted in the second quarter has noticeably dissipated throughout the third quarter. This improvement is reflected in our third quarter admissions. Our July 2020 admissions increased 4.3%, August increased 5.9%, and September admissions expanded 4%. Overall, our third quarter 2020 admissions increased 4.7%. Our average daily census did decline two-tenths of 1 percentage point in the quarter. The slight decline in census is a result of soft admissions from the second quarter as well as suppressed referrals from nursing homes and assisted-living facilities. We anticipate admissions to normalize when these types of facilities return to their pre-COVID occupancy levels. Nick will provide additional census and admissions detail later in this call. As I discussed last quarter, we made the strategic decision for Roto-Rooter to maintain full staffing and operating capacity early in the pandemic. This strategic decision to maintain full capacity was designed to capitalize on any snapback in commercial and residential demand, both to protect existing market share as well as to maximize opportunities to grow market share. I believe this has proven to be the correct strategic course. Roto-Rooter services demand began to show weekly improvement beginning in the later part of April and has strengthened unabated throughout the second and third quarters of 2020. This is reflected in our monthly performance. Roto-Rooter unit-for-unit commercial revenue declined 38.6% in April, improving to a 31.8% decline in May and a decline of 19.7% in June. Third quarter 2020 unit-for-unit commercial demand did decline 11.6% when compared to the prior year quarter. This third quarter commercial demand is a significant improvement when compared to the 29.1% decline in the second quarter 2020 commercial revenue. On a sequential basis, third quarter 2020 unit-for-unit commercial revenue totaled $39.5 million, an increase of 26.8% when compared to the second quarter of 2020. Our residential services have proven to be exceptionally resilient with our unit-for-unit residential revenue declining a modest 1.6% in April, increasing 11.7% in May, and 18.7% in June. The third quarter residential demand set all-time records with July 2020 unit-for-unit residential revenue expanding 22.8%, August revenue increased 24.1%, and September 2020 residential unit-for-unit revenue increased 26.6%. This translated into Roto-Rooter on a unit-for-unit basis having third quarter 2020 commercial revenue declining 11.6% and residential revenue increasing 24.6%. Total Roto-Rooter third quarter unit-for-unit revenue increased 12.9% when compared to the prior year. Including acquisitions, Roto-Rooter generated consolidated third quarter 2020 revenue growth of 20.4%. I anticipate continued strong operational and financial results for both VITAS and Roto-Rooter, as we operate during the pandemic. With that, I would like to turn this teleconference over to David.

Thanks, Kevin. VITAS' net revenue was $337 million in the third quarter of 2020, which is an increase of 4.8% when compared to the prior year period. This revenue increase is comprised primarily of a geographically weighted average Medicare reimbursement rate increase of approximately 5.7%, a 0.2% decline in days-of-care and acuity mix shift, which then reduced the blended average Medicare rate increase by 242 basis points. In addition, a favorable reduction in our Medicare Cap liability increased our third quarter 2020 revenue growth by 162 basis points. Our average revenue per patient per day in the third quarter of 2020 was $194.10, which, including acuity mix shift, is 3.2% above the prior year period. Reimbursement for routine home care and high acuity care averaged $166.51 and $971.71, respectively. During the quarter, high acuity days-of-care were 3.4% of our total days-of-care, which is 57 basis points less than the prior year quarter. This 57 basis points mix shift in high acuity days-of-care reduced the increase in average revenue per patient per day from 5.7% to 3.2% in the quarter. In the third quarter of 2020, VITAS reversed $4.1 million in Medicare Cap billing limitations recorded in earlier quarters. This compares to the prior year third quarter Medicare Cap billing limitation of $1.3 million. At September 30, 2020, VITAS had 30 Medicare provider numbers, 4 of which have an estimated fiscal 2020 Medicare Cap billing limitation liability that totaled $8.7 million. This compares favorably to the full year fiscal 2019 Medicare Cap billing limitation liability of approximately $11.4 million. VITAS' third quarter 2020 adjusted EBITDA, excluding Medicare Cap, totaled $68.2 million, which is an increase of 25.6%. Adjusted EBITDA margin, excluding Medicare Cap, was 20.5% in the quarter, which is a 367 basis point improvement when compared to the prior year period. Now let's take a look at Roto-Rooter. Roto-Rooter generated quarterly revenue of $191 million in the third quarter of 2020, which is an increase of $32.3 million or 20.4% over the prior year. On a unit-for-unit basis, which excludes the Oakland and HSW acquisitions completed in July of 2019 and September of 2019, respectively, Roto-Rooter generated quarterly revenue of $173 million, which is an increase of 11.4% over the prior year quarter. Total commercial revenue, excluding acquisitions, did decline 11.6% in the quarter. This aggregate unit-for-unit commercial revenue decline consisted of drain cleaning declining 13%, commercial plumbing and excavation declining 11.2%, and commercial water restoration declining 1.6%. This was more than offset by the residential activity. Total residential revenue, excluding acquisitions, increased 24.6%. This aggregate residential revenue growth consisted of residential drain cleaning increasing 22%, plumbing and excavation expanding 31.2%, and residential water restoration increasing 16.1%. Now let's talk about our 2020 guidance. Over the past seven months, our operating units have been able to successfully navigate within a rapidly changing environment and produce operating results that we believe provides us with the ability to issue guidance for the remainder of the calendar year. However, this guidance should be taken with the recognition that the pandemic will continue to materially disrupt all aspects of our healthcare system and general economy to such an extent that future rules, regulations, and government mandates could have an immediate and material impact upon our ability to achieve this guidance. Within this context, revenue growth for VITAS in 2020 prior to Medicare Cap is estimated to be 4%. Our average daily census in 2020 is estimated to expand approximately 1.3%. VITAS' full-year 2020 adjusted EBITDA margin prior to Medicare Cap is estimated to be 21%. We are currently estimating $8.6 million for Medicare Cap billing limitations for calendar year 2020. Roto-Rooter is forecasted to achieve full-year 2020 revenue growth of 12.5% to 13%. This full-year revenue growth assumes 2.7% of seasonal sequential revenue growth from the third quarter to the fourth quarter of 2020. Over the past five years, excluding water restoration and the impact from acquisitions, this Q3 to Q4 seasonal sequential revenue growth has averaged between 4% to 11%. Based upon the above, Chemed's full year 2020 adjusted earnings per diluted share, excluding non-cash expense for stock options, tax benefits for stock options, costs related to litigation, and other discrete items, is estimated to be in the range of $18 to $18.15. This compares to our previous guidance of $16.20 to $16.40. This 2020 guidance assumes an effective corporate tax rate of 25.8%. For comparison purposes, Chemed's 2019 reported adjusted earnings per diluted share was $13.95. I'll now turn this call over to Nick Westfall, our President and Chief Executive Officer of VITAS Healthcare.

Thanks, Dave. In the third quarter, our average daily census was 19,045 patients, a slight decline of 0.2% over the prior year. This decline in average daily census is a direct result of the disruptions across the entire healthcare system, which started in March that impacted traditional admission patterns into hospice. While certain healthcare sectors have shown improvement in admission patterns in the third quarter, the long-term care market, specifically nursing homes and assisted-living facilities continue to be impacted as they work to safely navigate serving their residents during the pandemic. ADC growth is expected to normalize over the coming quarters as we return to pre-pandemic referral patterns across all sectors of the healthcare industry. In the third quarter of 2020, total admissions were 17,943. This is a 4.7% increase when compared to the third quarter of 2019. In the third quarter, our admissions increased 18.3% for our home-based pre-admit patients. Hospital directed admissions expanded a positive 6.2%, nursing home admits declined 22.6% and assisted-living facility admissions declined 13.5% when compared to the prior year quarter. Our average length of stay in the quarter was 97.1 days. This compares to 92.6 days in the third quarter of 2019 and 90.9 days in the second quarter of 2020. Our median length of stay was 14 days in the quarter, which is three days less than the 17-day median in the third quarter of 2019 and equal to the second quarter of 2020. Median length of stay continues to be a key indicator of our penetration into the high acuity sector of the market. Before I turn this call back over to Kevin, I wanted, again, to thank our VITAS team for their continued commitment and perseverance to provide high-quality care in every community we serve across the country. Additionally, I want to acknowledge the work our team has done to ensure, as an organization, we are well prepared to continue to navigate this pandemic, no matter how long it lasts. As we sit here today, we're confident in our ability to support all of our team members and their ability to deliver care by prioritizing their safety with sufficient PPE inventory, education, and clinical protocols. Additionally, we'll continue to utilize the resources and testing supplies we've acquired to comply with federal, state and local requirements to safely access the health facilities in our markets. Lastly, our entire team will continue to be out in the communities we serve, collaborating safely with our local healthcare partners to successfully identify and navigate patients and their families onto the hospice benefit during this unprecedented time. As we've internally discussed throughout the pandemic, we'll get through this by continuing to support one another and the patients and families we serve, all while focused on continuing to deliver the results we have thus far throughout the pandemic. With that, I'd like to turn this call back over to Kevin.

Thank you, Nick. I will now open this teleconference to questions.

Our first question comes from the line of Joanna Gajuk with Bank of America.

So first, I guess, on the VITAS segment. So you mentioned the last comment here about, obviously, the limitations that nursing homes and assisted-living facilities are having in terms of visitation, and I guess the census. So can you remind us how big is that business for you? And also you said that you expect ADC to normalize as you return to pre-pandemic referral patterns. But do you already expect this part of the healthcare system to kind of return next year? Or kind of what is your view on that part of business?

This is Dave Williams, Joanna. I'll just say, right, nursing homes are not a critical part of our census total. We're not overly dependent. I think about 14% of our census is in nursing homes, a 14% to 15%. It's also worth noting that of our patients in our nursing homes, over 80%, we only have 3, 2 or 1 patients in that facility. So we don't have a large concentration under any single row. So that's a starting point. Although by location of patient, nursing homes have the second longest length of stay statistically. But with that, I'll turn it over to Nick in terms of what he's seen on those types of facilities.

Yes. And Dave alluded to, when we think about overall nursing home volume as well as assisted-living, it's a definite component, and we've seen it decline on a year-over-year basis, like other providers have as it relates to total days-of-care. To your question related to do we really anticipate that coming back to pre-pandemic levels and when, it's a little bit of a nuanced answer in the fact that none of us can predict when patient flow into nursing homes is going to come back to pre-pandemic levels or if it will ever. However…

There could be some pent-up demand.

Correct. That's the direction I was going in. There is significant pent-up demand for access to nursing homes and the assisted living market, as well as hospice services. One insight we've gained during the pandemic is that nursing homes and assisted living facilities are now more focused than ever on their hospice partners in local communities. They genuinely want to provide access to those who can scale and deliver care safely, in line with all CMS regulations, which is what we have managed to achieve throughout the pandemic. We have ensured compliance with testing requirements and made certain our staff has adequate PPE and telehealth capabilities to effectively care for the residents.

Right. That makes sense. And then because, I guess, the other piece of the more important piece, right, is the hospitals, also your referral source. So I guess there's improvement there. So I guess that's what you were referring, saying that you expect the volumes to kind of come back to normal. So that's probably the one area where we're seeing that. And I guess thinking about those comments, because the guidance for revenue for VITAS, you lowered it, so now it implies revenues for Q4 down from Q3. Is there some sort of seasonality? Or are you just kind of saying that ADCs will be sort of still flattish? Or any kind of comments there on kind of the sequential revenue for VITAS implied by the guidance?

Yes, Joanna, we are expecting revenue growth from Q3 to Q4. However, if we compare it to the previous year's Q4, we could see a decrease of up to 1%. So, while we anticipate sequential growth, the comparison to last year reflects a higher acuity mix, which may result in a slight decline. The shift in acuity mix is the main factor influencing this.

Joanna, I want to highlight that one way to track this is by looking at Florida, which is particularly important to us. Nursing homes and hospitals in Florida have faced disruptions, leading to a decrease in admissions due to concerns about coronavirus. Hospitals, which are our primary referral source, have also been affected. As a result, we are seeing more patients with shorter stays; for instance, our median length of stay decreased from 17 last year to 14 this year. This indicates an increase in short-stay patients, which impacts our average daily census and revenue. Therefore, as we move towards normalcy, we anticipate our median length of stay will increase, followed by our average daily census returning to typical levels. This is a broader perspective on the situation.

And one last piece, Joanna, just to highlight. You noticed a 6-plus percent increase on a year-over-year basis from hospital admissions. That's both up year-over-year as well as sequentially Q2 to Q3. However, also pay attention to the home-based component, which are primarily a lot of the physician office pieces. And when we think about referral patterns inside a healthcare system, we've seen more patients accessing, whether it's primary care or other specialty physician offices and avoiding other settings throughout the pandemic, which is not a surprise. And that being up 18% in the quarter on a year-over-year basis as well as up sequentially gives me great confidence in the strength of our education and awareness out in the communities to really have a diverse referral mix that allows us to identify and be a good partner for all hospice-appropriate patients in the community, regardless of where they're choosing to access the healthcare system, whether that's physician offices, hospitals or assisted-living. And that's why we prioritize the diverse referral stream.

No, that definitely makes sense. To conclude on the VITAS segment, the margins were quite high. How should we view this, especially since you raised guidance and seem to expect it to reflect in Q4 as well? What are your thoughts on next year's margins? Are these margins sustainable? There are clearly Medicare Cap issues due to sequestration, and the future is uncertain. Assuming those issues resolve, how should we consider the return of other drivers of ADCs? Will that lead to reduced costs or increased labor needs? Can you provide insights into how we should approach margins for next year, given the current strength?

We are currently in our budgeting process, so we prefer not to discuss next year just yet. However, we acknowledge that the relaxation of sequestration will end on December 31st, which represents a 2% impact that will be challenging to compare. On a more positive note, the effective use of telehealth and its growing acceptance among patients are here to stay. This has become the new normal for us. With labor costs comparatively low, this situation is likely to persist. Therefore, while we won’t delve deeply into our budgeted or projected margins for the upcoming year, we plan to account for the return of sequestration to its previous level.

Just to build on Kevin's comments, Joanna, we have really focused on what we've learned throughout the pandemic at VITAS. The pandemic has accelerated the integration of telehealth into our operations, and we are examining how it combines with traditional care plans and what patients and families prefer in terms of care delivery. Our aim is to enhance overall quality, which we will incorporate into our 2020 budget. We will also continue to learn from our experiences over the past seven months and use that knowledge to improve our care delivery model moving forward.

But Joanna, what we definitely expect in 2021 is what I'd call a slow and hopefully, methodical return to pre-pandemic admissions, the type of admission. So hospitals return to normal nursing homes, assisted-living facilities, we normalize. So hopefully, by December 31 of 2021, we'd be probably gotten back to where we need to. And we do expect to return to providing more high acuity care as appropriate based upon our patient mix. So yes, that certainly could reflect somewhat on margins. But only because we're going to have more revenue for care with a higher cost, we expect the overall profitability of VITAS to continue. So we don't view the absolute profitability of VITAS as just pandemic-related by getting the extra 2% for relaxing sequestration. What we think is margins have been a little more volatile to the positive in this case. But the fact of the matter is, the growth in VITAS is going to continue. Census growth is going to normalize again to about a 4% level is what we anticipate, high acuity care will return, so revenue will go up, but at a lower margin, but still the same dollar of profitability for day-of-care. But 2021 is going to be kind of hopefully a mirror image of the disruption we saw in 2020. And by 2022, we're running as normal as possible post-pandemic.

Right. And if I may, on Roto-Rooter, one question here. Because these margins there all-time high. I mean, 26% for this year? I mean, how sustainable is that, I guess? Because I mean, you talked about in the past because of the condemning and the shift in the business mix, right, towards residential risk, commercial. How should we think about a similar question in terms of next year, as you expect potentially commercial growing, how would that impact margins? Or have you done something differently on the cost structure that's kind of sustainable into next year?

I would say that Roto-Rooter is operating under normal conditions, with very strong demand from residential clients and improving commercial activity. When examining what is influencing margins and how the business is evolving, we find that excavation and water restoration services are particularly strong. It's an ongoing inquiry to determine whether this is due to pent-up demand for those services, gaining market share, or changes in how we deliver our services, with more decision-makers being available at home during service calls. We are still working to understand these dynamics. However, I can confidently say that the impact of the pandemic on Roto-Rooter has been minimal, and we are still exploring factors like pent-up demand versus market share gains. We have been actively engaged in marketing, particularly online, at a time when some others may be pulling back, which could be influenced by the pandemic. Overall, Roto-Rooter is in a strong position, bolstered by its marketing advantages and availability of personnel for the work. As Dave noted, this strength contributes significantly to our raised guidance for the fourth quarter.

Yes. Our expectation, Joanna, I mean, VITAS is more exposed to government intervention, changes in reimbursement. There's a lot of pressure points that impact VITAS. Roto-Rooter, we've taken share. We've increased our penetration on existing customers. We're definitely getting great utility of our three, 24/7/365 call centers. So we really just see this as momentum that Roto-Rooter is going to hang on to. I can't say that we clearly don't anticipate we're going to do the same growth rate in residential in 2021 as 2020, it might even soften quite a bit by continued growth. But then commercial, which has been hobbled, we fully expect to have above-average activity in 2021. It's just a long way of saying is the Roto-Rooter business is the gift that keeps on giving. As long as water and raw sewage is going someplace, it shouldn't be going, have an army of technicians and trucks waiting to respond immediately, that is not going away. So our positioning has been enhanced by the pandemic, very similar to how it was enhanced with a great recession. And we've picked up share. We've expanded the awareness of our brand. Because of the way we respond to jobs, we're in a very, very good position on a go-forward basis for maintaining the momentum we've captured this year.

And our next question comes from the line of Frank Morgan with RBC Capital Markets.

You just answered my Roto-Rooter question. But I guess just to jump back over to VITAS, I know you commented about the reduction in the cap accrual. I'm just curious, is that more likely to happen in the future given this whole dynamic about the patient mix shift and the lower length of stay and you're seeing in median and average length of stays? I guess, first question, any color there, any thoughts about that?

I'll hand it over to Nick now. Frank, I want to mention that due to the reimbursement levels in California, we are still expecting good profitability but not in significant capital. Essentially, we have discussed in the past that the reimbursement differentials are $130 versus $260, maintaining the same capital. So until that changes, our budgeting for next year will likely remain conservative and similar to this year, even though Nick has effectively reduced that figure. This situation is an ongoing challenge that won't disappear, and we will continue to adjust our projections accordingly. Nick, do you have anything to add?

Well, I mean, Frank, I think it really goes back to the experience we've seen with a shorter length of stay patient or said differently, a patient accessing the hospice benefit, a day or two later than they typically would have as a result of the disruption of the pandemic. How long that continues is beneficial as it relates to Medicare cap management, but not beneficial as it relates to growth of ADC in total days of care over time. And that's really the ongoing balancing act with it. So we'll just continue to be fiscally responsible continuing to drive some of the strategic initiatives we had to help us navigate California cap market, just given the dynamics Kevin referenced to. And we're making headway even in spite of the pandemic with where we believe will put us on even a more positive short, mid and long-term trajectory just to navigate the realities of that calculation basically.

Understand. Yes, I just was trying to find a silver lining to it. But just to be clear, I...

We want our median to increase, and we want ADC to rise. Then we will provide what capital is necessary along with other measures.

That's right. But Frank, the one thing I want to ensure, particularly for my team members that are on the call listening to this is the team did an excellent job over the last 12 months in the Medicare Cap year, really managing and navigating that in the California markets. It turned out better than we anticipated.

Much better.

It turned out better than we anticipated. While I can't quantify exactly how much of that is due to the pandemic compared to our focused efforts, we're very pleased with the leadership in those markets and the performance of our local operators.

Got you. Just to clarify the ADC growth, if the mix shift caused by the declines in the referral sources from skilled nursing facilities in Illinois and Alabama has stabilized and the admission trends remain steady, then we can expect to see a return to ADC growth. Do you believe you're at that point with the mix shift?

If we look at it and if you go back and take a look at even on the sequential Q2 versus Q3 growth component, admissions from nursing homes and assisted-living facilities have really stabilized and flat-lined, which we see as a positive. The hospital-based admissions, the physician office admissions have grown. And as we see access and bed capacity being opened back up across the markets in which we operate in the long-term care community, more patients will come on service, reside in those facilities. And as Dave alluded to, for the entire industry, those patients tend to have a longer length of stay based upon their primary disease and some of the trajectory components that come along with it. So we feel good and optimistic that we've captured share across the board. And as the long-term care market comes back, we'll be able to keep a preferred or have an elevated preferred status to care for those patients while continuing our success with the physician offices and the hospital systems.

Got you. Is there a particular state where SNF based referrals and IL/AL referrals are higher? Or is it generally the same across all your states of operation?

There is variability on a market-by-market basis, largely influenced by the competition from other hospice providers in that area, whether they are independent or part of a larger hospital system. The dynamics of each market often dictate where we are getting our patient flow. Overall, however, the mix remains fairly consistent.

Got you. One final and I'll hop off. Obviously, there's a lot of talk about just the recovery of the same-store business here. But I'm just curious to get your thoughts about growth initiatives, whether it's de novo agencies. Kind of how do you think about growing the business externally beyond just the same-store story?

So as Kevin alluded to, we're going into our budgeting process for next year. Part of that goes towards us discussing not only our internal metrics, but other markets that we may be very interested in entering, and it gets down to what's the best entrant strategy, whether that's de novo or whether that is through an acquisition, but as other providers have alluded to, valuations on those acquisitions in the hospice market given the appetite or continue to be at all-time highs. And so we really have to be fiscally responsible around whether those things make sense.

We focus on Florida and other locations. Anything we achieve in Florida has been extremely successful because the VITAS brand is well-regarded by state regulators. We have specific areas in Florida where we aim to expand, aggressively pursuing every Certificate of Need (CON). We are eager to acquire or develop more in Florida. In other regions, I evaluate potential acquisitions by looking at the size of various institutions. For instance, are we dealing with a network of 50 hospices across 10 locations, or just 2 hospices with a larger capacity? This is the first hurdle I consider when assessing acquisitions. New starts outside of Florida typically require a long-term strategy, which has been confirmed through our experience. We continue to pursue these opportunities, and they will remain part of our planning when setting priorities during our budgeting process, but our main focus remains on Florida and other areas.

Got you. And meanwhile, cash flow continues to be very good. And kind of gets us back to the issue around stock repurchases. So maybe color and thoughts about longer-term outlooks and remaining authorizations and likelihood for future stock buys in the absence of acquisitions?

Yes, I believe that as long as the Federal Reserve maintains its current policy and interest rates remain very low, even negative in real terms, we will largely stay away from making acquisitions, except for a few unique opportunities. In terms of our free cash flow, we have utilized just over $150 million in share repurchases in the first nine months of this year and are aiming for around $200 million. I see no reason we won't reach that target. Alongside our annual dividend of $20 million to $24 million, which we find very sustainable moving forward, we plan to primarily use our free cash flow for share repurchases, while also considering acquisitions if they are of good value.

If it continues with our earnings growing like they have, it continues to be very accretive.

Right now, I think we're going to be pushing $1.5 billion now on share repurchases and dividends since we started the share repurchasing program in mass.

I'm showing no further questions at this time. I would like to turn the conference back over to Kevin McNamara for any further remarks.

Thank you. Thanks for everybody's questions. I hope we've answered them. It was a great quarter for us. Thanks for your attention. And we will be back in February with a report on how this all turned out and what we expect for next year. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.