Chemed (NYSE:CHE) Q4 2025 Earnings call February 26, 2026 10:00 AM ET Company ParticipantsHolley Schmidt - Vice President and Assistant ControllerJoanna Gajuk - Director of US Equity ResearchJoel Wherley - COOKevin McNamara - President and CEOMichael Witzeman - CFOConference Call ParticipantsBen Hendrix - AnalystBrian Tanquilut - Senior Equity Analyst and Healthcare Services Equity ResearchOperatorGood day, and thank you for standing by. Welcome to the Chemed Corporation fourth quarter 2025 earnings confere ...

Financial Data and Key Metrics Changes - VITAS' net revenue for Q4 2025 was $418.8 million, a 1.9% increase compared to the prior year, driven by a 1.3% increase in days of care and a 2.2% increase in Medicare reimbursement rates [12] - Adjusted EBITDA for VITAS, excluding Medicare cap, was $91.6 million, a decline of 1.7% year-over-year, with an adjusted EBITDA margin of 21.7%, down 79 basis points from the prior year [13] - Roto-Rooter revenue declined by 3.7% in Q4 2025 compared to the same period in 2024, with adjusted EBITDA at $47.5 million, a decrease of 21.1% [8][18] Business Line Data and Key Metrics Changes - VITAS admissions totaled 17,419 in Q4 2025, a 6% improvement from Q4 2024, with hospital-directed admissions increasing by 9.9% [4][23] - Roto-Rooter branch residential revenue decreased by 3.1%, while branch commercial revenue increased by 1.6% [8][14] - Water restoration revenue declined by 10.3%, attributed to increased scrutiny from insurance companies leading to higher write-offs [15][17] Market Data and Key Metrics Changes - The percentage of total admissions from hospitals in Florida was 44.8%, indicating a recovery in the patient mix post-pandemic [5] - Average revenue per patient day for VITAS was $288.01, an increase of 86 basis points from the prior year [13] - The average daily census for VITAS was 22,462 patients, a 1.3% increase, with a median length of stay of 17 days [23] Company Strategy and Development Direction - VITAS is focusing on balancing admissions between hospital-based and other pre-admission locations to improve revenue growth and EBITDA margins [6][24] - Roto-Rooter is expanding its commercial business by hiring commercial business managers, which has shown positive preliminary results [8][17] - The company plans to pursue strategic acquisitions and new start opportunities in Florida and other CON states to drive growth [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the Florida Medicare cap issue is resolved, allowing for a return to normal growth patterns for VITAS [10][26] - Roto-Rooter is expected to face a challenging operating environment but anticipates modest growth driven by improved lead generation and billing practices [10][11] - The company expects 2026 to be a transition year for both subsidiaries, with VITAS revenue growth projected at 5.5%-6.5% and Roto-Rooter at 3%-3.5% [19][20] Other Important Information - The company repurchased 400,000 shares of Chemed stock at an average price of $436.39, funded by free cash flow from both subsidiaries [18] - The estimated Medicare cap billing limitations for 2026 are $9.5 million, significantly lower than $27.2 million in 2025 [19] Q&A Session Summary Question: What gives confidence in Roto-Rooter revenue growth in 2026 after flat revenues in 2025? - Management highlighted improvements in paid leads and a recovery in natural leads visibility, which are expected to drive revenue growth [30][34] Question: Are the long-term margin targets still achievable for Roto-Rooter? - Management indicated that achieving 24%-25% margins is still possible if Roto-Rooter can return to normalized revenue growth [42][44] Question: What is the outlook for VITAS revenue and EBITDA progression in 2026? - Management expects a return to normalized growth rates of 7%-9% as the patient mix is adjusted, with revenue growth building throughout the year [49][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, driven by a 2.5% increase in days of care and a 4.1% increase in Medicare reimbursement rates [11][12] - Adjusted EBITDA for VITAS, excluding Medicare cap, totaled $70.4 million, a decline of 3.8% year-over-year, with an adjusted EBITDA margin of 17.0%, down 157 basis points from the prior year [12][13] - Roto-Rooter revenue increased by 1.1% in Q3 2025 compared to the same period in 2024, with residential plumbing revenue up 8.2% [7][13] Business Line Data and Key Metrics Changes - VITAS admissions totaled 17,714 in Q3 2025, a 5.6% improvement from the same period in 2024, with hospital-directed admissions increasing by 10.4% [5][17] - Roto-Rooter branch residential revenue was $150.9 million, an increase of 3.4%, while commercial revenue totaled $55 million, up 2.8% [13][14] - 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% in Q3 2025, indicating a recovery in the mix of referral sources [6] - The average daily census for VITAS was 22,327 patients, an increase of 2.5% [17] Company Strategy and Development Direction - The company is focused on increasing hospital-based admissions to mitigate Medicare cap billing limitations, with a target ratio of 42% to 45% for hospital admissions [6][29] - VITAS is set to open a new location in Pinellas County in early November 2025, which is expected to enhance its service capacity [7][18] - Roto-Rooter is implementing operational initiatives to improve margins and stabilize growth, with a focus on managing lead generation costs [9][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the Florida Medicare cap issue will be resolved, with no expected billing limitations for 2026 [6][16] - The company anticipates a strong fourth quarter for both VITAS and Roto-Rooter, driven by seasonal demand and operational improvements [24][27] - Management indicated that the fourth quarter will be a significant indicator for 2026 growth strategies, with expectations for revenue growth in the 8% range and margins around 27.5% to 28% [36][37] Other Important Information - The company is actively working to address challenges faced by independent contractors to return this segment to a growth trajectory [14][15] - SG&A costs increased by $3.6 million in Q3 2025, primarily due to the shift from unpaid to paid leads [9][15] Q&A Session Summary Question: Can you run through demand and cost trends for each segment? - Management noted that seasonality impacts the fourth quarter, with VITAS typically performing better due to rate increases and Roto-Rooter benefiting from weather conditions [23][24] Question: What are the expectations for receivables and cash collections? - Management clarified that elevated DSO is primarily a timing issue related to Medicaid payments, not a deterioration in collection efforts [31] Question: How are margins expected to improve in Roto-Rooter? - Management indicated that while marketing costs are under pressure, they expect to absorb these costs through operational improvements and increased lead generation [52][53] Question: What is the outlook for VITAS in 2026? - Management stated that the fourth quarter will inform 2026 strategies, with expectations for improved revenue growth and margins based on operational adjustments [36][40] Question: How does the company view competitive dynamics in Roto-Rooter? - Management expressed optimism about improved competitive dynamics, noting that increased paid leads are yielding better results without significant competitive pressure [43][44]