Michael Murray

Michael Murray from RBC Capital Markets inquired whether eHealth's softer top-line outlook for 2026 was primarily due to a major Medicare Advantage (MA) payer limiting membership growth or the company's strategic reduction in investment in lower-margin third-party marketing channels. He also asked about the drivers behind the increase in MA LTV in Q4 and if any changes were made to persistency assumptions.

Answer

John Dolan, Chief Financial Officer, clarified that the reduced revenue outlook for 2026 is mainly attributed to eHealth's strategic decision to prioritize higher-margin, branded marketing channels, which demonstrate superior quality and retention, aligning with the challenging macro environment. Regarding MA LTV, Mr. Dolan confirmed no changes to constraints for the MA product in Q4 and anticipates slightly improved LTVs in 2026.

Michael Murray followed up on the reported increase in Medicare Advantage (MA) LTV in Q4, asking if there were any changes to eHealth's constraints or persistency assumptions and whether similar LTV rates should be expected in 2026.

Answer

John Dolan (CFO, eHealth) clarified that there were no changes to MA product constraints in Q4 2025, noting an earlier change only for the "sub product." He indicated that eHealth expects slightly improved LTVs in 2026.

Michael Murray questioned the company's capital allocation strategy, including the potential for share repurchases, and asked for its outlook on the upcoming Medicare AEP.

Answer

CFO Patrick Thompson stated that while the company has flexibility, the near-term focus is the $45M FTC payment, with future capital deployment aimed at maximizing long-term returns. Regarding AEP, CEO Steve Yi anticipates increased consumer shopping but muted carrier ad spend due to conservatism, which Mr. Thompson noted may be partially offset by stronger demand from brokers.

Michael Murray, on for Ben Hendrix, asked about the company's capital allocation strategy, including potential share repurchases, and inquired about expectations for the upcoming Medicare Annual Enrollment Period (AEP).

Answer

CFO Patrick Thompson stated that while no firm commitments have been made, the company has flexibility for investment, debt reduction, or capital returns after the $45M FTC payment. CEO Steve Yi anticipates increased consumer shopping during AEP but expects muted carrier spending due to conservatism, a sentiment echoed by Patrick Thompson who noted broker demand is holding up better than carrier demand.

Michael Murray of RBC Capital Markets, on for Ben Hendrix, asked about the M&A environment, including opportunity areas, valuations, and the company's comfort level with leverage for a potential acquisition. He also asked for the revenue outlook for the Diabetes segment in the second half of the year.

Answer

CEO Suzanne Foster described the M&A pipeline as active, with a focus on core sleep and respiratory assets that are geographically strategic. CFO Jason Clemens stated any deal would be self-funded with free cash flow to drive leverage down. Regarding the Diabetes segment, CEO Suzanne Foster reiterated that strong momentum in new patients and retention could lead to positive year-over-year revenue growth in the second half of 2025.

Michael Murray from RBC Capital Markets, on for Ben Hendrix, asked about potential indirect impacts from recent federal legislation on state Medicaid budgets and how Ensign is sizing that risk. He also questioned how acquisition valuations are trending, normalizing for real estate transactions and geography.

Answer

CEO Barry Port stated that skilled nursing was specifically carved out of the bill's provider tax reductions, which he views as a positive signal. He expressed confidence in working with states to protect funding. CIO Chad Keetch added that while valuations have risen moderately, Ensign's decisions are driven by local-level analysis of sustainable daily rent (DAR), not macro trends.

Michael Murray, on for Ben Hendrix, asked about the forward-looking outlook for Medicare Advantage LTVs following the recent shift in commission structures. He also inquired about the long-term growth and margin targets for the SelectRx business.

Answer

President Bob Grant confirmed the recent LTV decline was due to a shift from upfront to ratable commissions and expects LTV to be down year-over-year in Q4. For SelectRx, CEO Tim Danker stated the focus is now on prioritizing efficiency and margin consistency by targeting members with the best unit economics. CFO Ryan Clement added that they expect single-digit EBITDA margins for fiscal 2025 and see a path to margin expansion as they scale the new Kansas facility.

Michael Murray from RBC Capital Markets asked for clarity on the 2025 cadence for rate growth and gross margins in the PDS segment, and questioned capital allocation priorities and leverage comfort for M&A.

Answer

CFO Matt Buckhalter stated that the PDS spread per hour is expected to normalize in the $10.00 to $10.50 range, acknowledging that Q4 was elevated by one-time items. On capital allocation, Buckhalter reaffirmed the goal of deleveraging by a turn annually. CEO Jeff Shaner added that excess cash flow will be used to accelerate both organic growth and tuck-in M&A without altering the current capital structure.

Michael Murray, on behalf of RBC Capital Markets, asked about specific regions Concentra is targeting for future major acquisitions and questioned the potential impact of trade tariffs on its employer clients' volumes.

Answer

Executive William Newton stated that Concentra casts a 'far and wide' net for acquisition opportunities and is not targeting any specific region. Executive Matthew DiCanio added that growth plans include expanding both occupational health centers and the on-site clinic portfolio nationwide. Regarding tariffs, Newton commented that he does not foresee a significant headwind for Concentra's business at this time.

Michael Murray of RBC Capital Markets questioned the drivers behind the forecasted Roto-Rooter revenue turnaround, the impact of a new marketing agency, VITAS's competitive positioning and market share gains, and the company's capital allocation strategy regarding share repurchases.

Answer

CEO Kevin McNamara and CFO Michael Witzeman attributed their confidence in Roto-Rooter's growth to accelerating performance in late Q4 and early Q1, especially in the commercial sector, rather than the new marketing agency, whose impact is still early. On VITAS, CEO of VITAS Nicholas Westfall confirmed they are taking market share through differentiated service and clinician retention, and that the 2025 guidance does not yet include census from the new Marion County location. Regarding capital allocation, Kevin McNamara stated that share repurchases are not built into guidance but the company will continue its programmatic buyback strategy.

Michael Murray from RBC Capital Markets asked if the attractive Texas market could enable Addus to exceed its long-term Personal Care growth targets and questioned the drivers behind recent admission pressure in the hospice segment.

Answer

CEO R. Allison stated that while the Texas market is a positive for growth and should help Addus perform at the high end of its 3-5% target range, it is too early to commit to exceeding it. President and COO W. Bickham addressed the hospice question, expressing confidence that a revamped sales team and training, combined with strong January admissions, position the segment to reach the high end of its 5-7% growth target for 2025, dismissing Q4 softness as typical seasonality.

Michael Murray of RBC Capital Markets sought clarification on the financial impact of recent acquisitions, specifically the Q4 EBITDA benefit and the expected 2025 increases in EBITDA and interest expense. He also asked about the competitive dynamics and cost factors related to pressured third-party referral sources.

Answer

Dawn Kussow, EVP & CFO, confirmed the Q4 timing difference of an $8 million EBITDA benefit with a corresponding interest expense increase. She projected a $33 million annual EBITDA increase and a $15 million adjusted free cash flow improvement for 2025 from the acquisitions. Lucinda "Cindy" Baier, President & CEO, explained the referral softness was not cost-related but stemmed from lower volume from two key partners. She noted Brookdale has redeployed marketing spend and saw move-ins from these sources stabilize in October.

Michael Murray, on for Ben Hendrick, requested a ballpark estimate for the Q4 revenue impact from recent hurricanes and asked if any construction delays were expected for de novos in affected areas.

Answer

CFO Douglas Coltharp explained that while a specific revenue impact is difficult to quantify due to potential length-of-stay disruptions, the company's updated guidance fully incorporates all anticipated effects from the hurricanes. He confirmed that no construction delays are expected for the five hospitals scheduled to open in Florida next year, as the sites were secured and weathered the storms well.

Michael Murray, on for Ben Hendrix at RBC Capital Markets, inquired how the new Medicare Advantage case rates would initially compare to fee-for-service rates and if they were expected to converge over time.

Answer

President and CEO Chris Gerard responded that the new case rates would still be lower than fee-for-service but would close the gap significantly. He projected that revenue per visit could rise from the current ~$127 to a $175-$185 range, with margins expanding from the low 20s to the high 30s or low 40s, while also driving organic growth by unlocking clinical capacity.