Summary of Chemed (NYSE:CHE) FY Conference Call - March 19, 2026 Company Overview - **Company**: Chemed Corporation - **Segments**: VITAS (hospice care) and Roto-Rooter (plumbing and water restoration services) Key Points on VITAS - **Guidance Confidence**: The company is comfortable with VITAS guidance, indicating potential conservatism in projections. They aim to balance the patient mix between short and long-stay patients, which could enhance growth in 2026 [2][3] - **Volume Trends**: Strong volume performance was noted coming out of Q4 2025, which is expected to guide overall growth potential for 2026 [6] - **Florida Market**: Florida's unique Certificate of Need (CON) environment allows for rapid growth. The company is optimistic about its growth trajectory in Florida compared to other regions, where growth rates are slower [7][8] - **Medicare ADC Growth**: The company has seen consistent growth in Average Daily Census (ADC) in Medicare, particularly in Florida, indicating a positive trend in patient admissions [10][11] - **Hospital Admissions**: The ideal hospital admission rate is targeted between 42%-45%. The company has successfully managed to reduce this percentage while increasing overall volumes [11][12] - **Long-term Outlook**: The company feels confident about its long-term position in Florida, citing sufficient hospital patient base availability to maintain a balanced patient mix [16][17] - **New Market Expansion**: New locations in Florida (Pasco, Marion, Pinellas) are expected to reach profitability within 12 months, contributing significantly to organic growth [21][22][23] - **Margin Management**: The company anticipates returning to pre-pandemic margin levels, targeting margins of 18%-18.5% in the long term, with gradual improvements expected [27][26] Key Points on Roto-Rooter - **Growth Projections**: Roto-Rooter is projecting a top-line growth of 3%-3.5% for 2026, with improvements expected from reduced water restoration write-offs and a slight increase in lead volume [28][29] - **Marketing Costs**: Elevated marketing costs are anticipated to remain stable, impacting EBITDA. The company is focused on managing these costs effectively [30][34] - **Water Restoration Challenges**: The company is centralizing billing and collections for water restoration to improve efficiency and collection rates, which have historically varied across branches [36][37] - **Technology Integration**: Roto-Rooter is testing new technology to improve documentation for insurance claims, which is expected to enhance collection rates [40] - **Seasonality Impact**: The first quarter is expected to be challenging due to tough comparisons with the previous year, but the company remains on track with its overall metrics [44][46] - **Franchise Acquisition Strategy**: The company is actively pursuing franchise acquisitions, offering higher multiples than before, which may reduce ROI but is expected to yield strategic benefits [48][49] - **Strategic Alternatives**: If Roto-Rooter does not show recovery in 2026, the company is open to considering strategic alternatives, including potential divestitures [50] Additional Insights - **Market Conditions**: The company is navigating challenges related to weather impacts on operations and the competitive landscape for lead generation [45][46] - **Long-term Viability**: There is a strong belief in the long-term viability of both segments, with a focus on improving operational efficiencies and patient care [50]

Financial Data and Key Metrics Changes - VITAS net revenue was $407.7 million in Q3 2025, an increase of 4.2% compared to the prior year period [11] - Adjusted EBITDA for VITAS, excluding Medicare cap, totaled $70.4 million, a decline of 3.8% year-over-year [12] - Roto-Rooter revenue increased by 1.1% in Q3 2025 compared to the same period in 2024 [7] - Adjusted EBITDA at Roto-Rooter totaled $49.4 million, a decrease of 12.4% compared to the prior year quarter [15] Business Line Data and Key Metrics Changes - VITAS admissions totaled 17,714, a 5.6% improvement from the same period in 2024 [5] - Average revenue per patient day for VITAS was $205.08, up 2.98% from the prior year [12] - Roto-Rooter branch residential revenue increased by 3.4%, with residential plumbing revenue up 8.2% [13][8] - Revenue from independent contractors declined by 4.7% in Q3 2025 compared to the same period in 2024 [14] Market Data and Key Metrics Changes - The percentage of total admissions from hospitals in Florida was 44.5%, above the preferred range of 42% to 45% [6] - The average daily census for VITAS was 22,327 patients, an increase of 2.5% [17] - Hospital-directed admissions increased by 10.4%, while nursing home admissions declined by 8.9% [17] Company Strategy and Development Direction - The company aims to mitigate potential Florida Medicare cap billing limitations for fiscal 2026 [5] - VITAS is focusing on increasing hospital-based admissions to ensure long-term stability [6] - Roto-Rooter is implementing operational initiatives to stabilize and return to predictable growth [10] Management Comments on Operating Environment and Future Outlook - Management believes there will be no Medicare cap billing limitation related to the Florida program in 2026 [6] - The company is encouraged by the performance of both businesses in Q3 2025, with VITAS on track to resolve the Medicare cap issue [10] - Management anticipates a seasonal increase in demand and revenue in Q4 2025 [23] Other Important Information - The company has cleared hurdles to open a new location in Pinellas County, expected to open in early November [7] - The Medicare cap billing limitation for Q3 2025 was $6.1 million, slightly better than estimates [11] Q&A Session Summary Question: Insights on demand and cost trends for Q4 - Management noted that Q4 is typically stronger due to seasonal factors, with VITAS' margins expected to spike from the new rate increase [23][24] Question: Concerns about receivables and cash collections - Management indicated that elevated DSO is primarily a timing issue related to Medicaid payments, not a deterioration in collection efforts [31] Question: Growth rates and margins for 2026 - Management speculated on revenue growth in the 8% range and margins at 17.5%-18% for 2026, pending Q4 performance [37] Question: Sustainable margins in Roto-Rooter - Management indicated that while marketing costs are under pressure, they expect to absorb these costs through operational improvements [53] Question: Clarification on VITAS' Medicare cap liability - Management explained that the focus on hospital admissions and a favorable rate increase gives confidence in managing cap liability [65][69]