Chemed(US:CHE)2026-02-26 16:00Financial 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]