Good day, and thank you for standing by. Welcome to the ChemEdCorp first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, we'll open up for questions. To ask a question during the session, you will need to press star 11 on your telephone. You then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's call is being recorded. I would like to hand it over to our first speaker, Holly Schmidt, Assistant Control. Please go ahead.

Good morning. Our conference call this morning will review the financial results for the first quarter of 2026, ended March 31, 2026. Before we begin, let me remind you that the safe harbor provisions of the Private Security 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 April 23rd 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 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 April 23rd, 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 Wissman, Chief Financial Officer of ChemEd, and Joel Worley, President and Chief Executive Officer of ChemEd's VITAS Healthcare Corporation subsidiary. I will now turn the call over to Kevin McNamara.

Thank you, Holly. Good morning. Welcome to ChemEd Corporation's first 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 performance during the quarter exceeded even the high end of our expectations. We believed that the first quarter of 2026 would be a tough comparison as we continued to transition to balance our patient mix between short-stay and long-stay patients. VITAS Management was able to add ADC through accelerated admissions from non-hospital pre-admission locations while also maintaining a high level of hospital-based admissions. This was achieved while also keeping hospice labor costs lower than budgeted. These factors combined to allow VITAS to achieve higher-than-expected revenue growth and EBITDA margins while continuing to add cushion to the Medicare CAF position in our Florida combined position. Admissions at VITAS during the quarter totaled 19,394, which equates to a 6.9% improvement from the same period of 2025. Hospital admissions as a percent of total admissions for our Florida combined program was 43.8% during the first quarter of 2026. As we have discussed previously, an appropriate balance for the sustained long-term stability in the Florida patient base, given the current mix of referral sources, is that between 42% and 45% of total admissions that come from hospitals. As Joel will discuss in greater detail, admissions from all other pre-admission locations increased 8.4% compared to the first quarter of 2025 in our Florida combined program. Improved admissions led VITAS to outperform our expectations while also adding over $32.5 million to cap cushion in the Florida Combined Program in the first quarter of 2026. March 31st represents the halfway point in the government fiscal year. We are more confident than ever that VTAS has put the Florida cap issue of 2025 behind us and has returned to a normalized rate of growth. Now let's turn to Rotovert. Over the past two years, we have talked about the many headwinds that have persisted at Rotorier, which has made for a difficult operating environment. While we believe that Rotorier will continue to face some of those headwinds, the first quarter of 2026 also showed some signs of improvement across multiple fronts. For the first time since the fourth quarter of 2022, residential plumbing and residential sewer and drain revenue both increased during the quarter. We consider these Roto-Rooter's core services, which drive the add-on revenue from excavation and water restoration. We see this as a very positive development for the company. Driving the increase in core residential service revenue was an increase in total leads of 3.3%. Paid leads during the first quarter of 2026 increased 18.7% compared to the same quarter of 2025. Continuing the same trend as past quarters, 53.4% of those leads were the result of paid advertisements. In the first quarter of 2025, we paid for 46.5% of the leads. The change of approximately 7% required Rotorator to increase marketing spend by almost $3 million in the quarter, compared to the first quarter of 2025. The centralization of water restoration building collections continues, and has resulted in improved collections. These improvements resulted in a $1.5 million improvement in overall write-offs compared with the first quarter of 2025. Weather patterns in the first quarter of any given year are positive for Roto-Rooter. However, in the first quarter of 2026, unusual ice and snowstorms across large parts of the country led to significant service disruptions due to road conditions. Twenty-four Roto-Rooter branches experienced some level of service disruption for a period of time across five days of the quarter. We estimate that these service disruptions resulted in a net loss revenue of between $3 and $4 million during the quarter. On March 31, 2026, Loderbergh purchased the territory and assets of the franchises operating in San Francisco, California, and Fort Worth, Texas in two separate transactions. The aggregated combined purchase price of these transactions was approximately $20.6 billion. Collectively, these Rotorua locations serve a population of approximately 3.3 million people. This purchase is part of Rotorua's ongoing strategy of acquiring franchises to boost productivity, market share, and profitability. These two acquisitions are anticipated to add between $5 and $5.5 billion of revenue for the remainder of 2026. These acquisitions are immediately accretive to earnings. However, initially, gross margins, EBITDA margins, pricing and mix of service offerings tend to be below the average of our existing Rotary portfolio. We are happy with the performance of VTAS of the quarter and its prospects for the remainder of 2026 and beyond. In our February conference call, we described this as a year of transition for Rotary. The first quarter clearly demonstrated this transition. We feel very positive that the initiatives we have discussed over the last few quarters are beginning to take hold. With that, I would now like to turn the teleconference over to Mike.

Thanks, Kevin. FITAS net revenue was $420 million in the first quarter of 2026, which is an increase of 3.1% when compared to the prior year period. This revenue increase is the result of a 2.2 percent increase in days of care and a geographically weighted average Medicare reimbursement rate increase of approximately 2.6 percent. The acuity mix shift negatively impacted revenue growth 120 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 negatively impacted revenue growth by approximately 47 basis points. In the first quarter of 2026, VITAS accrued $2.4 million in Medicare cap billing limitation. This is in line with our expectations. No Medicare cap billing limitation was recorded in the first quarter of 2026 for the Florida Combined Program, program, and none is anticipated for the 2026 fiscal period. Average revenue per day in the first quarter of 2026 was $210.62, which is a 146 basis point improvement from the prior year period. During the quarter, high acuity days of care were 2.3% of total days of care, a decline of 28 basis points when compared to the prior year quarter. Adjusted EBITDA, excluding Medicare cap, totaled $70.8 million in the quarter, an increase of 0.6 percent when compared to the prior year period. Adjusted EBITDA margin in the quarter, excluding Medicare cap, was 16.8 percent. Now let's turn to Rotator. Rotator. Rotator branch commercial revenue in the quarter totaled $56.5 million, a decrease of 1.9% from the prior year period. Commercial revenue was negatively impacted by the weather events discussed earlier by Kevin. However, for the 13 branches that had commercial business managers coming into 2026, commercial revenue was up approximately 10%. We added 18 new commercial business managers during the first quarter of 2026. We expect commercial business revenue to accelerate as these 18 new commercial business managers complete their training and begin to become productive sales leaders in their locations. Router Branch residential revenue in the quarter totaled 166.3 million dollars, a decrease of 1.5% over the prior year period all lines of service increased from the first quarter of 2025 with the exception of water restoration demand for water restoration services continues to be strong and our conversion rates remain high during the transition to a centralized billing and collection model we anticipated some disruption to the day-to-day billing processing function in the first quarter of 2026 the average revenue per water restoration job declined by roughly 13 percent. We anticipate that this issue will improve as the year progresses with the centralized staff gaining experience and proficiency. Revenue from our independent contractors declined 3.3 percent in the first quarter of 26 compared to the same period of 2025. Our independent contractors are generally smaller operations in middle market cities. Because they are independent contractors, they tend to operate more like a small mom-and-pop business than our owned and operated branch locations. We are actively working with the contractor group to help mitigate the issues in this segment of our business to get it back to a growth trajectory. Adjusted EBITDA in the first quarter of 2026 totaled $53.5 million, a decrease of 9.6% when compared to the first quarter of 25. The adjusted EBITDA margin in the quarter was 22.5%, which represents a 218 basis point decline from the first quarter of 25. Rotary's gross margin of 51% was in line with our expectations. As discussed by Kevin, the decline in adjusted EBITDA margin was mainly caused by increased internet marketing costs. Finally, let's discuss the revised guidance for fiscal 2026. Historically, we do not give quarterly updates to guidance. Due to the materially improved performance of VITAS, coupled with the level of Sherry purchases in the first quarter of 2026, we believe updating guidance is appropriate in this instance. As a result of the better than anticipated first quarter for VITAS, we have increased projections for the remainder of 2026. Full year ADC growth for 2026 is updated to a range of 4.5% to 5.5% compared to the original guidance of 3.5% to 4%. Anticipated revenue growth excluding the impact of the Medicare cap improves from the original guidance of 5.5% to 6.5% to a revised range of 6.5% to 7.5%. Finally, revised EBITDA margin excluding the impact of the Medicare cap is anticipated to be 18 to 18.5 percent compared to the original guidance of 17.5 to 18.5 percent. When factoring all the gives and takes within the expected road order performance for the remainder of fiscal 2026, anticipated revenue growth remains unchanged at 3 to 3.5 percent. Estimated adjusted EBITDA margin is lowered slightly to 21.5 to 22.5 percent, compared to the original guidance of 22.5 to 23 percent. This is primarily due to elevated marketing costs now expected to persist above our original guidance for the remainder of the year. Based on the above, full year 2026 earnings per diluted share, excluding non-cash expenses for stock options, tax benefits from stock option exercises, costs related to litigation and other discrete items, is estimated to be in the range of $24 to $24.75. The midpoint of the revised guidance represents a 13% increase from 2025 adjusted earnings per diluted share of $21.55. The revised 2026 guidance assumes an effective corporate tax rate on adjusted earnings of 24.5% and a diluted share count of 13.6 million shares. The original 2026 guidance was for adjusted earnings per diluted share to be between $23.25 and $24.25. Turn the call over to Joel.

Thanks, Mike. In the first quarter of 2026, our average daily census was $22,723, an increase of 2.2%. In the quarter, hospital-directed admissions increased 13.6%, home-based patient admissions increased 0.2%, assisted living facility admissions increased 2.9%, and nursing home admissions declined 5.4% when compared to the prior year period. The continued high level of hospital admissions allows us to quickly transition in the quarter and start emphasizing admissions from other pre-admission locations that generate a longer length of stay patient. This resulted in ADC growth that was ahead of the original projections. We were able to achieve this level of ADC growth while maintaining full-time equivalents below low are budgeted targets for the quarter. Our average length of stay in the quarter was 102.7 days. This compares to 118.7 days in the first quarter of 2025. Our median length of stay was 15 days in the first quarter of 2026, a decline in one day from the first quarter of 2025. The new starts in Florida continue to grow at a very rapid pace. Marion, Pasco, and Pinellas counties combined had 526 admissions in the first quarter of 2026, exceeding our expectations. ADC for each new start continues to exceed our expectations, and we anticipate opening Manatee County in late second quarter or early third quarter. We intend to aggressively grow Manatee as we have in our other three new starts. I believe the opportunity for growth at VITAS has never been better. We have put the difficulties of the 2025 CAP circumstance behind us. We are looking forward to continue executing our strategies for the remainder of 2026 and beyond. That will translate into high, sustainable growth while providing the best possible care to our patients and families. And with that, I'll turn the call back to Kevin.

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

As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for a name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster.

One moment for our first question.

The first question will come from the lineup. Brian Tanquillit from Jeffries. Your line is open.

This is Megan Holtz on for Brian Tanquillit. Congrats on the quarter guys and the guidance for A's for the year. First, on the VITAS side, margins looked good in the quarter. How much of that was headcount reduction that contributed to it? And then since you're raising the ADC guidance, do you expect to expand labor capacity to support their growth for the remainder of the year? And then just lastly, on the VITAS side, speak to any fraud enforcement you're seeing in Southern California, given the CMS, Gurini.

I can start with the margin discussion, Megan, and then I'll let Joel talk about the fraud But we averaged roughly 100 FTEs below our budget in the quarter. We were able to, you know, efficiently serve the increased ADC at that level. But I think to your point, that's not something that we view as something sustainable for the rest of the year. We intend to, I think our original budget was adding 30 to 40 FTEs a month. We've increased that to closer to 60 per month for the remainder of the year. So we feel very good that if we add those 60, we can achieve the level of ADC growth we have currently budgeted and maybe a little better than that. Joel, fraud stuff?

Yeah, so we certainly are very sensitive to the national campaign to root out fraud, waste, and abuse within the health care system. Certainly the hospice concerns in California have been very public. There were just congressional hearings on Tuesday speaking specific to it. We are very supportive of the efforts. However, we also want to avoid direct implications associated with the fraudsters and ensure that that does not limit access for patients in need in those counties, not only in California but across the United States, for legitimate providers to impact the quality of that patient and their loved one's final journey.

Got it. Thank you. And then on the Roto-Rooter side, it looked like you guys had some additional marketing expense in the quarter. Is that now the right run rate going forward? And you started seeing some pressure on the customers this time last year given the macro backdrop, and we're facing a similar headwind in terms of the economy right now and whatnot. So are you seeing that similar trends as we're a month into Q2 now?

Well, let me just start with marketing costs. Marketing costs are a proxy for Google costs. And as we indicated, our leads were up 3%. However, to get that 3%, we had to battle with the fact that due to changes in the Google algorithm, our leads from the natural or free side of the search spectrum were down almost 16%. So those were down 16%. Nothing Rotary could do. We expect that to basically continue. We have several efforts afoot to increase our visibility on the natural side, but in the short term, it's going to be something approaching that. We hope to improve our position, but through the models, I would say that's kind of what we expect to see, some tough sledding on the natural side of the search with Google. On the positive side, without increasing the amount we bid in the various domains, we've been getting a lot more clicks. I mean, our clicks on the paid side went up over 18%. So I guess what I'm saying is in order to keep our business where it is and basically our sales where we budgeted, we've got to pay for more of the leads. And that means more marketing costs and kind of inexorable in the short and midterm. And to answer your question, yes, we expect that to continue.

Yeah, Megan, from a specific number standpoint, I can walk you through it a little bit. But we were, from a year-over-year comparison, $3 million above last year in marketing costs. We had budgeted or guided, included in the guidance was an increase of a million. So we basically spent about $2 million in the quarter higher than what we had budgeted. Of that, we think that roughly $1 million of it was related to some of the weather things we talked about. When we couldn't get on the road, we were still getting calls, probably at a much higher volume than we would, as we've talked about. weather is good that that kind of weather is good for us but we couldn't serve it and so we were paying for calls that ultimately we couldn't serve we expect we thought that was probably about a million dollars additional expense that shouldn't be really considered in the run rate so all in all we spent about on a run rate basis we spent about a million dollars more in the quarter than we anticipated and the entire change in the EBITDA margin in the guidance is us adding a million dollars per quarter of marketing costs for the next three quarters.

Thanks. And then just any trends you can speak to so far in Q2?

It's real early in Q2. I think things continue to progress the way we expect them to.

Got it. Thank you, guys.

Thanks, Megan. Thank you.

One moment for our next question.

Next question will come from I know Joanna Dadrick from Bank of America your line is open oh hi good morning thanks so much for taking that question so maybe first of the voter voter business so we just talk about the marketing cut high and the weather disruption and I guess I want to tie the quarter to the to the full year outlook so now that the full year outlook includes plus 5 million from these two franchises that you acquired, so there's some EVF contribution in there, too. And I guess you still expect the same revenue growth. So, you know, was there some sort of bad guy, you know, that opted the good guy, so to speak, in the guidance that you can walk us through?

Yeah, so what, I mean, what we talked about, Joanna, was that there are, within the guidance and even in the first quarter, there are some positives, but there's also continued headwinds. The contractor operations still performs slightly below our expectations. The water restoration revenue, particularly on a cost price per job, is still a little bit below our expectations. So those gives and takes sort of offset the acquisition revenue we anticipated. but revenue stays in line with where we thought it would be at the beginning of the year just maybe the underlying components might be slightly different than what we anticipated but the ultimately the revenue continues to grow as we expected thanks for that and if I may so on the collection weight so that I hear right I guess maybe there was some improvement but I guess Q, but not expecting Q2.

So I guess I just want to make sure that you're still expecting to influence collection by $4 to $6 million for the year.

Yeah, we were slightly better than that, than our expectations in the first quarter. Having said that, part of that obviously comes from the idea that we're billing less per job. So we anticipate both of those things improving as we finalize the centralization and those centralized employees get more experience and we can bring up the revenue per job while still maintaining a higher collection rate.

That makes sense. And with these acquisitions, like you mentioned, they usually just come with somewhat lower margins. Obviously, accretive is still making money, right? And the goal is still to improve over time. Do you anticipate doing more of these this year? And are there some maybe other assets that you would consider acquiring for that business?

Well, I would just say, Joanna, that it's hard to say, but yes, I would, given the operating environment out there, we've noted that there are a number of franchise holders that have held the franchise for a couple of generations, and they're saying, boy, this is tough, maybe I will consider selling to you, and we're considering a number of possibilities. I would say that the two that we mentioned this quarter, San Francisco and Fort Worth, are kind of, you know, unusual. They're real plums. I mean, the ones that are generally available tend to be groups of smaller franchisees that are very likely going to be participants in our independent contractor portfolio. But, yeah, there's no question. We anticipate continuing to add additional locations for Roto-Rooter. It's a good acquisition environment for us at this time.

And I guess any progress? You mentioned you're making some traction with Google, August, and stuff, and I guess you had this new SEO partner. So can you give us an update there?

Well, I hate to get too far in the weeds, But let me just say this. We immediately saw an improvement in what we call visibility. And by visibility, the best way to do that is you look at how often you appear in the maps section. That's where you get the natural, the biggest driver of the natural leads or free leads. And as we indicated previously, at the end of 2024, we were appearing nationwide 72% of the time. And halfway through the first quarter of last year, we dropped like a rock to the mid to low 20% of the time showing up on those maps. What we saw in the first quarter of this year was, you know, working with our outside contractor, an improvement. You know, basically a 10 percentage point improvement in our visibility. And then in March, we saw a change in the algorithm again, which knocked us back a bit as far as visibility. And again, working, doing their magic, we've been able to improve that almost back to the previous run rate of earlier this year. So it's a constant battle, Joanna, but yes, we're looking for certainly to stabilize the percentage of leads we get that are free. I mean, as I indicated, we are winning the battle in a major way on the paid search. I mean, we are getting substantially more leads without increasing the amount we're offering per lead. You know, so the private equity firms that have come and kind of upended the Google market for leads, I don't know if they're pulling back. I don't know if they're not quite as scientific as we have become as far as, you know, our bidding process. But that's a real success story. The only problem is if you're comparing it to a prior period where you were paying nothing for the lead, you know, it's a tough comparison. But in any event, it's a constant battle. Do we anticipate improving on our position? No question about it. Now, if you said, will Google change their algorithm again? They tend to do it in a significant way, once a year. So, I mean, maybe we're past that at this point, but we'll see.

Okay, thank you for that. And switching to VDAS then, I just want to make sure, because we hear from other companies calling out, you know, the weather disruption, you know, in health care services. So it sounds like it wasn't material because you guys didn't call it out in the hospice business.

We get paid on a per-day basis, Joanna. So, you know, we don't do fee-for-service. So there could be a disruption in a location where we can't get to patients for a day, but that doesn't really impact our revenue.

It might affect admissions, but not if the disruption is just a day or two.

On a specific day. That is correct. So, no, Joanna, to answer your question, we did not have any weather disruption in our business model.

Okay, perfect. I just don't confirm. But, yeah, that segment, you know, I performed, so things are going pretty good there. And thanks for the update on the Florida, I guess, cushion. So that increased. So now we've got the proposal for a 27-year rate and the rate up is going to increase and the cut is going to increase, call it 2.4%. And I know you don't have all the details yet, but any indication on your kind of initial estimate in terms of the proposed increase in Florida versus the cut for 27?

At a very high level, very high level, we think that the revenue, the rate increase might be slightly lower in Florida than the national average, but we're still, you know, we're still crunching the numbers and we don't have the details. They don't come out until sometime in the summer.

Yeah, keeping in mind that is the proposed wage rule. We're still in the comment period and a final wage rule typically is not put into place until the late part of the third quarter.

Right, no, exactly. So that's when we will find out. But as of now, there's no indication there's some outside dynamic that you experienced, you know, I guess last year with that increase being high in Florida than overall. It sounds like maybe that's the opposite, so that should be manageable there. And there was a couple of other items in this proposal, including this new scarring system, the index SSVI. So when we look at some of the data that was posted by CMS, VDAS was actually screening above average, but it seems like there was one of these measures that was penalizing the large providers because it was essentially capturing just the total number, not per patient. So any thoughts about any of these efforts or anything that was discussed by CMS in that proposal? How could that impact your operation?

Yeah, thanks, Joanna. And as I said previously, we are very supportive of the efforts to eliminate any waste, fraud, and abuse from the hospice environment. But you have to keep in mind, over 50% of patients needing hospice don't have access or receive that end-of-life care today. So we want to ensure any efforts to weed out fraudsters, which again, we are very supportive of, don't in any way impact legitimate providers to be able to provide care to those in need. Now, specific to your question about the proposed potential additional scrutiny that is listed in the wage rule, we're continuing to evaluate what the potential impact that might be on VITAS, but again, I'll go back to this is in the comment period, and we will be providing comments to ensure that we have communicated our guidance to ensure that that scoring and that oversight is aligned with what legitimate providers want to be evaluated on on a day-to-day basis across the country. And so weed out the fraud, focus on improved quality and access for those in need.

And, Joanna, just very generally speaking, when we hear about fraud in the hospice and whatnot, especially with a focus on California, you have to remember they're in two buildings in Los Angeles County. There are more hospices located in those two buildings than there are in the whole state of Florida. I mean, the fraud that we're talking about is real fraud. That is, almost fake business, mailbox offices for hospices, no real patients, no real care, totally different situation from what historically has been, quote, fraud in the hospice field, which tends to be highly specialized arguments between doctors whether a six-month terminal prognosis is indicated or not. I mean, it's a different magnitude. But, again, we'll continue to watch it. We don't want to be swept. We don't want to be, you know, a dolphin swept into a tuna net, you know, accidentally. But as Joel says, we're watching it very carefully.

So should I read this out? You don't think, like, this new scoring system that they propose is going to be finalized? You know, there were some other things that CMS proposed, but they never really enforced it. because, yeah, they couldn't really figure out how they're going to measure things. So is it a similar situation with this particular one?

We want to make sure that the criteria and the algorithms used to evaluate the scoring with SSVI makes sense and is accurate and does not include data that has been infiltrated by fraudulent claims processing from these providers. They've got to be able to filter all of that out and focus on legitimate providers and the measurement of the care and services provided from those.

And to that end, when you mentioned, you know, making sure that these are legitimate providers, the other effort right out there, so Dr. Oswego, one of these meetings talk about these efforts they want to put in place where states would have to revalidate all providers within 30 days. Have you seen any of this starting? And I don't know if that, you know, I assume that meant things like, you know, hospitals in California. But, yeah, have you seen anything in your operations where the states are starting to do that?

We have not. seeing it to that level. There is in place a higher degree of evaluation on new locations and the review of their claims on a regular basis to ensure that these new providers are legitimate in providing actual care. I mean, again, if you think about where the focus has been in L.A. County, the expansion from 400-plus providers to nearly 1,500 providers in L.A. County alone. Those individuals, those companies receive licenses, and we are very supportive of an improved surveying environment to ensure that they're legitimate and that their patients are legitimate.

Joanne, let me just hear one reason.

Sure, go ahead.

One reason Joel's a little perturbed on this is we attempted to get a license in San Francisco. It took us about six years dealing with a number of surveys where people didn't understand what hospice was. But we got it through. We got it after six years. Joel's sitting here saying, how could 1,100 fake hospices get a license in 18 months? whereas it took us six years with legitimate. I mean that's the kind of stuff that's hard to explain. Now it's different. A state issues a license not the federal government so you're talking about different silos but still they've got to coordinate their activities. But I guess what I'm saying is if you put any type of scrutiny on, the type of scrutiny we're used to on licensing, if they put anywhere a percentage of that, a small percentage of that it would knock out about 95% of these fake hospices.

Thank you so much for taking the questions.

Thanks, Joanna. Thank you. Star 11 for questions. Our next question comes from Michael Murray from RBC Capital Markets. The line is open. Hey, thanks for taking my question.

For VTOS, I think you're probably seeing a higher mix of admissions from hospitals in your new Florida market. Just given your current cap situation in the state, how are you thinking about community-based admissions in these So, thanks for the question.

And as we have talked previously, we're managing the balance in those pre-admitted environments, and we look at that on a daily basis, specific to where we're focusing or where our resources are deployed, and we feel that our community-based initiatives are responsibly growing back from where we needed to be in the last half of 2025. So we feel really good about the balance between hospitals as a preadmit and all of our other or community-based type admissions.

And, Michael, keep in mind that you specifically mentioned the new starts. When we have a new start, there is not, by definition, an existing base of long-stay patients. So regardless of where in the new starts only, regardless of where the pre-admission location is, for some period of time they're all short-stay patients because we don't have a base of existing long-stay patients.

You have legacy pacers from past government plan years.

So when you're talking specifically about the new starts, think of them all as short-stay patients for at least a period of time.

Okay. And then, you know, these new markets are pretty sizable. How should we think about the volume opportunities longer term? You know, what's your typical market share in Florida, and how should we think about the range of markets?

Well, I mean, again, if you look at, you know, our historical market in some of these markets where we're the original hospice, I mean, the numbers are staggering. Joel, jump in here, but I mean, we're a dominant provider in almost, you know, any county that we have the license to operate in.

And we don't see a significant change in our outlook specific to our ability to grow into a market. and our last three new starts that we talked specifically about have demonstrated that. So we feel really good about the long-term outlook on our ability to continue effectively grow those markets as we have in the past.

All right, and then just one more on Roto-Rooter. So I just wanted to get a sense of what your current mix of paid leads versus organic leads is, and what are your expectations embedded in your guidance?

Paid leads are roughly 53% to 54% of our total leads at the moment. We anticipate that mix to continue. We have not anticipated a deterioration or a significant improvement, and that's why, again, we took our guidance and added $3 million of additional marketing costs for the rest of the year. But we haven't projected a significant deterioration in that from the first quarter.

I mean, it's hard. As I indicated, it's a constant battle. In the first quarter, we had two months of improving visibility on maps and then a change in March where we had a deterioration and then we go to April to fight the battle and improve our visibility. So Mike is just saying as far as a prognosticator, there's going to be some ins, there's going to be some outs. Our hope, of course, is that we have improvement there, but that remains to be seen. I mean, we've been through a period where, you know, you go back just less than three years, you know, our percentage of leads from free sources were 55 percent, not 47 percent. I mean, that's an expensive, significant shift. Now, having said that, Roto-Rooter has been through something similar, and that is when we went through the change from the importance of yellow pages, where yellow pages was all, and Roto-Rooter had a dominant position in virtually every directory to the Internet, that was tough. I mean, Roto-Rooter had a tough marketing situation, where we went from a dominant, the first two pages in almost every major metropolitan directory to just one of 50 listings on the natural side. It was tough, but Roto-Rooter developed into the dominant position nationwide on the Internet side. Now, the Internet's changing. I have confidence that Rotorua would be able to transition to the new normal better than our competitors. And if you look at the growth we've had on the paid search side, that is as far as our 18% plus increase in leads on the paid search, I think that's a demonstration of that. But, again, there's a cost to the transition, and we're prepared to, you know, we're prepared, I think, prepared to deal with it. Rotary has done it in the past.

All right. Thank you.

Thank you. I'm not showing any further questions in the queue. I'd like to turn it back over to Kevin for any closer remarks.

Thank you, everyone. We're happy. We had what we thought was a good quarter, excellent quarter at VTAS and some good trends at both companies. and we look forward to reporting on results for the current quarter in due course. Thank you very much.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Have a great rest of your day.