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 - The fourth quarter of 2025 saw VITAS' net revenue at $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 [14] - Roto-Rooter revenue declined by 3.7% in the fourth quarter of 2025 compared to the same period in 2024, with branch residential revenue decreasing by 3.1% [9][16] - Adjusted EBITDA for VITAS was $91.6 million, a decline of 1.7% year-over-year, while Roto-Rooter's adjusted EBITDA totaled $47.5 million, a decrease of 21.1% compared to the prior year [15][21] Business Line Data and Key Metrics Changes - VITAS admissions totaled 17,419 in the fourth quarter, reflecting a 6% improvement from the same period in 2024, with hospital-based admissions making up 44.8% of total admissions [4][5] - Roto-Rooter branch commercial revenue increased by 1.6%, while residential revenue declined by 3.1%, with water restoration revenue declining by 10.3% [9][16][19] - The average revenue per patient day for VITAS was $288.01, an increase of 86 basis points from the prior year [15] Market Data and Key Metrics Changes - The average daily census for VITAS was 22,462 patients, an increase of 1.3%, with hospital-directed admissions increasing by 9.9% [26] - The company received a certificate of need to operate in Manatee County, Florida, which represents a significant growth opportunity [8][28] Company Strategy and Development Direction - VITAS is focusing on balancing its admission patterns to improve revenue growth and EBITDA margins, particularly by increasing long-stay patient admissions [8][27] - Roto-Rooter is expanding its commercial business by hiring commercial business managers, which has shown positive preliminary results [9][19] - The company plans to centralize billing and collections for water restoration to improve efficiency and reduce write-offs [18][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the Florida Medicare cap issue is behind them and anticipates a transition year for both VITAS and Roto-Rooter in 2026 [11][12] - The company expects VITAS revenue to grow by 5.5%-6.5% in 2026, while Roto-Rooter is forecasted to achieve revenue growth of 3%-3.5% [22][23] - Management acknowledged the challenges faced by Roto-Rooter due to increased marketing costs and write-offs but remains optimistic about future growth opportunities [12][41] 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 [21] - The estimated earnings per diluted share for 2026 is projected to be in the range of $23.25-$24.25, compared to $21.55 for 2025 [24] Q&A Session Summary Question: Confidence in Roto-Rooter revenue growth in 2026 - Management highlighted improvements in paid leads and a transition from free leads to paid leads as key factors for expected revenue growth [32][34] Question: VITAS revenue and EBITDA progression - Management indicated that the focus on short-stay admissions has impacted revenue growth, but a return to a normalized growth rate is expected as patient mix is adjusted [50][51] Question: Structural changes in Roto-Rooter and the plumbing industry - Management acknowledged challenges from private equity and changes in lead generation but expressed confidence in Roto-Rooter's ability to adapt and grow [53][56]

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 [14] - 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 previous year [15] - Roto-Rooter revenue declined by 3.7% in Q4 2025 compared to Q4 2024, with adjusted EBITDA at $47.5 million, a decrease of 21.1% year-over-year, and an adjusted EBITDA margin of 21.5%, down 477 basis points [9][21] Business Line Data and Key Metrics Changes - VITAS admissions totaled 17,419 in Q4 2025, a 6% improvement from Q4 2024, with hospital-based admissions making up 44.8% of total admissions, the highest post-pandemic [4][5] - Roto-Rooter branch residential revenue decreased by 3.1%, with plumbing revenue increasing by 6.3% while water restoration revenue declined by 10.3% [16] - Roto-Rooter branch commercial revenue increased by 1.6%, with excavation revenue up 10.9% and drain cleaning revenue up 2% [19] Market Data and Key Metrics Changes - The average daily census for VITAS was 22,462 patients, a 1.3% increase, with hospital-directed admissions up 9.9% and home-based admissions up 4.1% [26] - The average revenue per patient day for VITAS was $288.01, an increase of 86 basis points from the prior year [15] - Roto-Rooter experienced a significant increase in paid leads by 9.4% compared to Q4 2024, although total leads remained flat due to a decline in natural leads [9][10] Company Strategy and Development Direction - VITAS aims to balance its admission patterns to improve revenue growth and EBITDA margins, with a focus on long-stay patients to enhance financial performance [8][29] - Roto-Rooter is expanding its commercial business by hiring commercial business managers, which has shown promising results in branches where they were implemented [19] - The company is pursuing strategic acquisitions and new CON opportunities in Florida to drive growth for VITAS [29] 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 a more sustainable growth pattern for VITAS [11][29] - Roto-Rooter is expected to face a transition year in 2026, with anticipated modest growth driven by improved lead generation and billing practices [12][42] - The company believes that the difficult operating environment is temporary and that long-term growth prospects remain intact for both VITAS and Roto-Rooter [11][60] 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 [21] - For 2026, VITAS revenue is projected to grow by 5.5%-6.5%, while Roto-Rooter is expected to achieve revenue growth of 3%-3.5% [22][23] 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 transition from free leads to paid leads, which is expected to stabilize and grow revenue [32][35] Question: Are long-term margin targets still achievable for Roto-Rooter? - Management indicated that achieving 24%-25% margins is still possible if revenue growth normalizes, but the path is less clear due to increased marketing costs [44][46] Question: What is the outlook for VITAS revenue and EBITDA progression in 2026? - Management noted that a shift back to long-stay patients is necessary for revenue growth, with expectations for gradual improvement throughout the year [50][51] Question: Is there a structural change in the plumbing industry affecting Roto-Rooter? - Management acknowledged challenges from private equity and changes in lead generation but expressed confidence that these issues are being addressed and that Roto-Rooter can return to stable growth [54][60]

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]

Core Insights - Chemed Corporation reported its fourth quarter financial results for 2025, highlighting mixed performance across its segments, VITAS and Roto-Rooter, with VITAS showing slight revenue growth while Roto-Rooter experienced a decline in revenue [1][2]. VITAS Segment Performance - VITAS net revenue reached $418.8 million in Q4 2025, marking a 1.9% increase from the previous year, driven by a 1.3% rise in days-of-care and a 2.2% increase in Medicare reimbursement rates [4]. - Total VITAS admissions rose by 6.0% in Q4 2025 compared to Q4 2024, indicating a positive trend in patient intake [5]. - The average revenue per patient per day was $208.01, an increase of 86 basis points year-over-year, with routine home care and high acuity care averaging $187.19 and $1,153.55, respectively [7]. - The gross margin for VITAS, excluding Medicare Cap, was 27.3%, down 150 basis points from the same period in 2024 [8]. Roto-Rooter Segment Performance - Roto-Rooter generated $220.6 million in revenue for Q4 2025, a decrease of 3.7% compared to the prior year, with commercial revenue slightly increasing by 1.6% while residential revenue fell by 3.1% [11][12]. - The gross margin for Roto-Rooter was 49.8%, down from 51.3% in the previous year, with selling, general, and administrative expenses rising by 10.5% [13]. - Adjusted EBITDA for Roto-Rooter was $47.5 million, reflecting a 21.1% decline year-over-year, with an adjusted EBITDA margin of 21.5%, down 477 basis points [14]. Consolidated Financials - Chemed's total revenue for Q4 2025 was $639.3 million, essentially flat compared to Q4 2024, with GAAP diluted EPS at $5.48, a decrease of 9.0% [8]. - The company reported a net income of $76.8 million for Q4 2025, down 0.6% from the previous year, while adjusted EBITDA, excluding Medicare Cap, was $91.6 million, a decline of 1.7% [9]. Guidance for 2026 - VITAS expects revenue growth of 5.5% to 6.5% in 2026, with an estimated average daily census increase of 3.5% to 4.0% [20]. - Roto-Rooter is projected to achieve revenue growth of 3.0% to 3.5% in 2026, with an adjusted EBITDA margin forecasted between 22.5% and 23.0% [21]. - The company anticipates full-year 2026 earnings per diluted share to be in the range of $23.25 to $24.25, compared to $21.55 in 2025 [21].

Core Insights - Chemed Corporation (CHE) reported third-quarter 2025 adjusted earnings per share (EPS) of $5.27, a decline of 6.6% year over year, missing the Zacks Consensus Estimate by 2.2% [1] - The company's GAAP EPS was $4.46, down 10.8% from the previous year [1] Revenue Performance - Revenues for the quarter increased by 3.1% year over year to $624.9 million, but fell short of the Zacks Consensus Estimate by 0.5% [2] - The stock price dropped by 2.7% in after-hours trading, reflecting investor concerns regarding the declining EPS [2] Segment Analysis - Chemed operates through two subsidiaries: VITAS, a provider of end-of-life care, and Roto-Rooter, a plumbing and drain cleaning service provider [3] - VITAS reported net patient revenues of $407.7 million, up 4.2% year over year, driven by a 2.5% increase in days-of-care and a nearly 4.1% rise in the Medicare reimbursement rate [4] - Roto-Rooter generated sales of $217.2 million, a 1.1% increase year over year, with commercial revenues up 2.8% [5] - Residential revenues for Roto-Rooter increased by 3.4% year over year, with notable growth in plumbing (8.2%) and water restoration (6.8%) [6] Margin and Profitability - Gross profit decreased by 6.2% year over year to $196.9 million, with gross margin contracting by 313 basis points to 31.5% due to an 8% rise in service costs [7] - Selling, General and Administrative (SG&A) expenses rose by 3.7% year over year to $105.8 million, leading to a 15.6% decline in adjusted operating profit to $91.1 million [7] Liquidity and Capital Structure - At the end of Q3 2025, Chemed had cash and cash equivalents of $129.8 million, down from $249.9 million at the end of Q2 [10] - The company reported no current or long-term debt and cumulative net cash from operating activities of $254.7 million, slightly up from $252.6 million in the previous year [10] Share Repurchase and Dividends - Chemed repurchased 407,500 shares for $180.8 million, averaging $443.62 per share, with approximately $301.8 million remaining under its share repurchase authorization [11] - The company has a consistent dividend-paying history, with a five-year annualized dividend growth of 10.47% [11] Future Guidance - For 2025, Chemed expects VITAS revenues to increase by 10.5% to 11.3% and Roto-Rooter revenues to grow by 2.4% to 3.0% [12] - The total revenue estimate for 2025 is projected at $2.55 billion, indicating a 4.9% year-over-year improvement [12] - The adjusted EPS for the full year 2025 is expected to be in the range of $24.95-$25.45, with a Zacks Consensus Estimate of $22.03, reflecting a 4.8% decline from 2024 [13]

Core Insights - Chemed Corporation reported its third-quarter financial results for 2025, highlighting growth in its VITAS Healthcare and Roto-Rooter segments, despite some challenges in revenue growth and profitability metrics [1][2]. VITAS Segment Performance - VITAS net revenue reached $407.7 million, marking a 4.2% increase year-over-year, driven by a 2.5% rise in days-of-care and a 4.1% increase in Medicare reimbursement rates [4]. - Total VITAS admissions rose by 5.6% compared to the same quarter in 2024 [5]. - The average revenue per patient per day was $205.08, up 298 basis points from the previous year [7]. - The gross margin for VITAS, excluding Medicare Cap, was 22.5%, a decline of 261 basis points from the prior year [8]. Roto-Rooter Segment Performance - Roto-Rooter generated $217.2 million in revenue, a 1.1% increase from the previous year [11]. - Residential revenue increased by 3.4%, while commercial revenue rose by 2.8% [12]. - The gross margin for Roto-Rooter was 50.7%, down from 52.9% in the prior year [13]. - Adjusted EBITDA for Roto-Rooter was $49.4 million, reflecting a 12.4% decline year-over-year [14]. Consolidated Financials - Total consolidated revenue increased by 3.1% to $624.9 million [9]. - GAAP diluted EPS was $4.46, a decrease of 10.8%, while adjusted diluted EPS was $5.27, down 6.6% [9]. - Net income, excluding certain discrete items, was $48.9 million, a decrease of 9.0% [9]. - As of September 30, 2025, Chemed had total cash and cash equivalents of $129.8 million and no debt [16]. Share Repurchase and Guidance - The company repurchased 407,500 shares for $180.8 million, with approximately $301.8 million remaining under its share repurchase authorization [18]. - Management reiterated its guidance for 2025, projecting earnings per share between $22.00 and $22.30, excluding non-cash expenses and other discrete items [20].

Investment Strategy Overview - LRT Global Opportunities strategy returned -8.00% in September and -0.17% year-to-date as of October 1, 2025 [4][5] - The strategy focuses on long positions in high-quality companies and short positions in broad market indexes, viewing September's performance as a temporary setback [6] - Current market valuations are at extreme levels, with a trailing P/E ratio over 30x, P/B ratio over 5.6x, and cyclical P/E over 40x, indicating potential future return challenges [7] Company Highlights StoneX Group Inc. (SNEX) - StoneX operates as a diversified financial services network, providing execution, clearing, payment, and advisory services across various asset classes [12][13] - The company focuses on underserved client segments, leveraging deep institutional knowledge and a robust global infrastructure [13][14] - StoneX's growth strategy combines organic expansion with strategic acquisitions, enhancing capabilities and geographic reach [14][15] Simpson Manufacturing Co., Inc. (SSD) - Simpson is a leader in engineered structural connectors, with products specified in building codes, creating high switching costs for customers [16][17] - The company benefits from a strong distribution network and technical support, reinforcing its market position [18][19] - Demand for Simpson's products is driven by housing construction and stricter building codes due to extreme weather events [19][20] Asbury Automotive Group, Inc. (ABG) - Asbury operates a diverse portfolio of dealerships, focusing on high-margin parts and service operations for revenue stability [21][22] - The company has a proven track record in strategic acquisitions, enhancing its operational footprint and earnings power [23][24] - Asbury's digital retailing platform, Clicklane, integrates online and in-store experiences, providing a competitive advantage [24][25] Chemed Corp. (CHE) - Chemed operates VITAS Healthcare and Roto-Rooter, benefiting from strong demand in hospice care and plumbing services [26][27] - VITAS is positioned to capitalize on the aging U.S. population, while Roto-Rooter offers recession-resistant services [28][29] - The company has a disciplined capital allocation strategy, returning significant capital to shareholders [29] The Toronto-Dominion Bank (TD) - TD is a major player in North America's banking sector, with a focus on retail and commercial banking [30][31] - The bank's U.S. retail segment has been a primary growth engine, supported by strategic acquisitions [32] - TD's conservative risk culture and strong capital management contribute to its competitive advantage [34] RLI Corp. (RLI) - RLI is a specialty insurance company known for its underwriting discipline and focus on niche markets [35][36] - The company prioritizes profitability over growth, maintaining a strong alignment of interests through employee ownership [37][38] - RLI has a history of returning excess capital to shareholders, demonstrating a commitment to shareholder value [38] The Toro Company (TTC) - Toro is a leader in turf and landscape solutions, known for its quality and innovation [39][40] - The company has a strong distribution network and a disciplined growth strategy, including strategic acquisitions [41][42] - Toro consistently generates strong free cash flow, which is reinvested in product development and shareholder returns [42] Crown Castle International Corp. (CCI) - Crown Castle owns the largest portfolio of shared communications infrastructure in the U.S., primarily macro cell towers [43][44] - The company benefits from long-term lease agreements, providing predictable revenue streams [44][45] - Crown Castle is divesting non-core businesses to focus on its tower portfolio, enhancing shareholder value [46] Corporación América Airports S.A. (CAAP) - CAAP operates 53 airports across six countries, generating revenue from aeronautical and commercial activities [48][49] - The company invests in airport infrastructure to enhance operational efficiency and passenger experience [51] - CAAP is well-positioned to benefit from the recovery in global air travel [52] Colliers International Group Inc. (CIGI) - Colliers is a global leader in commercial real estate services, distinguished by its decentralized structure and entrepreneurial culture [53][54] - The company pursues a balanced growth strategy, focusing on high-margin business lines [56] - Colliers' ownership culture aligns interests with long-term shareholders, enhancing its competitive advantage [54] The Travelers Companies, Inc. (TRV) - Travelers is a leading provider of property and casualty insurance, organized into three primary segments [57][58] - The company benefits from a vast distribution network and strong relationships with independent agents [58][62] - Travelers leverages its scale and data advantages to maintain profitability and manage risks effectively [62] Petróleo Brasileiro S.A. - Petrobras (PBR-A) - Petrobras is a major integrated energy producer, controlling significant pre-salt oil reserves [63][64] - The company focuses on maximizing value from its most profitable exploration and production activities [65][66] - Petrobras' performance is closely tied to its operational execution in the pre-salt basins [66] Fabrinet (FN) - Fabrinet specializes in advanced optical packaging and precision manufacturing, serving leading OEMs [67][68] - The company's engineering expertise and focus on complex manufacturing create high switching costs [68][69] - Fabrinet benefits from secular tailwinds in the optical communications market, driven by data traffic growth [69][70] UnitedHealth Group Incorporated (UNH) - UnitedHealth is a leading healthcare enterprise, combining health benefits with diversified health services [71][72] - The company's scale provides cost advantages and superior negotiating power in the healthcare market [73][74] - UnitedHealth's integrated model enhances efficiency and patient outcomes, positioning it for continued growth [74] Charter Communications, Inc. (CHTR) - Charter is a major connectivity provider in the U.S., focusing on high-speed broadband services [76][77] - The company is upgrading its network to meet increasing bandwidth demands and expanding into underserved areas [79] - Charter's convergence of services, including mobile offerings, enhances customer loyalty and reduces churn [78][79] Group 1 Automotive, Inc. (GPI) - Group 1 operates a diversified automotive retail business, focusing on luxury and import brands [80][81] - The company's disciplined acquisition strategy enhances performance and profitability [82] - Group 1's digital retailing platform improves customer experience and operational efficiency [82][83] Exxon Mobil Corp (XOM) - Exxon Mobil is a leading integrated energy and chemical manufacturer with a vertically integrated business model [85]

Financial Data and Key Metrics Changes - VITAS net revenue was $396.2 million in 2025, an increase of 5.8% compared to the prior year period, driven by a 6.1% increase in days of care and a 4.2% increase in Medicare reimbursement rates [12] - Adjusted EBITDA excluding Medicare Cap totaled $66.8 million in the quarter, essentially flat with 2024, with an adjusted EBITDA margin of 16.2%, down 163 basis points from the prior year [15][16] - Roto Rooter revenue increased by 6% in 2025 compared to the same period in 2024, falling short of internal expectations [8] Business Line Data and Key Metrics Changes - Admissions at DITAS totaled 17,545, a 1.2% improvement from the same period in 2024, with a 4.9% increase when excluding patient transfers from VITAS [5] - Roto Rooter branch residential revenue totaled $156.4 million, a 9% increase from the prior year, driven by a 16.9% increase in water restoration [17] - Roto Rooter branch commercial revenue totaled $53.2 million, a 4.4% increase from the prior year, with a 24.4% increase in excavation revenue [17] Market Data and Key Metrics Changes - Hospital-directed admissions increased by 9.1%, while home-based patient admissions declined by 6.2%, nursing home admissions declined by 2.9%, and assisted living facilities admissions declined by 1.4% compared to the prior year [6] - The consolidated Florida program is estimated to end the 2025 Medicare cap year with a $19 million billing limitation, with management expecting no significant Medicare cap billing limitation for the 2026 cap year [6][7] Company Strategy and Development Direction - The company remains confident in the growth potential and strategic direction of both businesses despite underperformance in 2025 [5] - VITAS is adjusting its patient mix in Florida to mitigate Medicare cap issues, which may cause some disruption in operating metrics but is expected to lead to higher growth rates in the long term [10] - Roto Rooter is focusing on improving its competitive advantages to return to a steadier growth trajectory [11] Management's Comments on Operating Environment and Future Outlook - Management commented on the impact of the Liberation Day tariff announcement on consumer confidence and spending, which affected Roto Rooter's performance in April and May [9] - The company is optimistic about the overall prospects for both businesses, with VITAS working on initiatives to improve admissions and Roto Rooter focusing on enhancing its service offerings [10][11] Other Important Information - The company estimates $28.2 million in Medicare cap billing limitations for calendar 2025, with $19 million related to the Florida combined program [23] - Roto Rooter's adjusted EBITDA totaled $48.6 million, a decrease of 18.7% compared to the prior year quarter, with a margin of 21.8% [18] Q&A Session Summary Question: Impact of Medicare cap and future margins - Management discussed the levers being pulled to ensure no carryover impact from the Medicare cap after Q3, emphasizing hospital admissions and the moderation of the patient mix bubble created by the Community Access Program [28][29] Question: Factors driving underperformance in admissions - Management noted that the increase in admissions was intentionally moderated to avoid providing services without reimbursement, focusing on hospital admissions instead [38][40] Question: Roto Rooter management issues and recovery - Management indicated that local management issues have been resolved, and the recovery seen in June and July is attributed to improved operational performance rather than management changes [49][50] Question: Tax rate favorability in Q2 - The decline in the effective tax rate was attributed to accounting factors related to stock option exercises, with fewer exercises in the quarter leading to a larger tax deduction [65][66] Question: Confidence in short stay patient mix - Management expressed confidence in achieving a higher mix of short stay patients through improved operational emphasis and reputation [70][71] Question: Capital deployment and acquisition strategy - The company remains open to acquisitions at the right valuation and location, with no change in strategy despite current business challenges [98]

Financial Data and Key Metrics Changes - VITAS net revenue was $396.2 million in Q2 2025, representing a 5.8% increase compared to the prior year period, driven by a 6.1% increase in days of care and a 4.2% increase in Medicare reimbursement rates [13][14] - Adjusted EBITDA excluding Medicare Cap totaled $66.8 million in the quarter, essentially flat with 2024, with an adjusted EBITDA margin of 16.2%, down 163 basis points from the prior year [16][17] - Roto Rooter revenue increased 6% in 2025 compared to the same period in 2024, falling short of internal expectations [8][9] Business Line Data and Key Metrics Changes - DITAS admissions totaled 17,545, a 1.2% improvement from the same period in 2024, with a 4.9% increase when excluding patient transfers to VITAS [5][6] - Roto Rooter branch residential revenue was $156.4 million, a 9% increase from the prior year, driven by a 16.9% increase in water restoration [20] - Roto Rooter adjusted EBITDA decreased by 18.7% to $48.6 million, with an adjusted EBITDA margin of 21.8%, reflecting inefficiencies in the labor force due to lower residential revenues [21][22] Market Data and Key Metrics Changes - Hospital-directed admissions increased by 9.1%, while home-based patient admissions declined by 6.2%, nursing home admissions declined by 2.9%, and assisted living facilities admissions declined by 1.4% compared to the prior year [6][10] - The consolidated Florida program is projected to end the 2025 Medicare cap year with a $19 million billing limitation, with management expecting no significant Medicare cap billing limitation for the 2026 cap year [6][7] Company Strategy and Development Direction - The company remains confident in the growth potential and strategic direction of both businesses despite underperformance in Q2 2025 [5][11] - VITAS is adjusting its patient mix in Florida to mitigate Medicare cap issues, which may cause some disruption in operating metrics but positions the company for long-term growth [11][12] - Roto Rooter is focusing on improving its competitive advantages and is optimistic about returning to a steadier growth trajectory [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted that the weak admissions in April and May were influenced by external factors affecting consumer confidence and spending [10][11] - The company is optimistic about the overall prospects for both businesses, with VITAS management actively reviewing expenses to offset lower EBITDA margins [17][21] - Management expects to update assumptions regarding rates and the overall outlook for the 2026 Medicare cap year in the third quarter earnings release [7][26] Other Important Information - The company estimates $28.2 million in Medicare cap billing limitations for calendar 2025, with no limitations expected in the fourth quarter related to the Florida combined program [26] - Roto Rooter is forecasted to have a revenue increase of 1.25% to 1.75% in 2025 compared to 2024, with an adjusted EBITDA margin expected to be 23.5% to 24.5% [27] Q&A Session Summary Question: What measures are being taken to avoid Medicare cap issues in 2026? - Management emphasized hospital admissions and the moderation of the patient mix bubble created by the Community Access Program as key levers to avoid cap issues [31][32] Question: What is the outlook for admissions and revenue growth? - Management indicated that while admissions were slightly below expectations, they are confident in achieving a higher mix of short-stay patients moving forward [70][72] Question: How are local management issues affecting Roto Rooter's recovery? - Management stated that past local management issues have been resolved, and the focus is now on improving conversion rates and addressing market challenges [51][56] Question: What is the impact of the recent tax rate changes? - The effective tax rate decline was attributed to accounting factors related to stock option exercises, which are not expected to persist [67][68] Question: Is there a change in the company's acquisition strategy? - The company remains open to acquisitions at the right valuation and location, with no change in overall strategy despite current challenges [100][102]