Chemed Q1 Earnings Call Highlights

Key Points

• VITAS outperformed expectations: Admissions rose 6.9% and average daily census increased, driving 3.1% revenue growth to $420M, improved Medicare cap posture in Florida (+$32.5M cap cushion) and prompting the company to raise VITAS full‑year guidance (ADC 4.5–5.5%, revenue growth 6.5–7.5%, EBITDA margin 18–18.5%).
• Roto‑Rooter showed core residential recovery but margin pressure: Paid leads jumped 18.7% and collections improved, yet higher digital marketing costs (and weather disruptions) cut adjusted EBITDA by 9.6% and led management to trim Roto‑Rooter’s 2026 EBITDA margin guidance to 21.5–22.5%.
• Company raised 2026 outlook and EPS: Chemed lifted fiscal 2026 adjusted EPS to $24.00–$24.75 (about a 13% increase at the midpoint versus 2025), citing VITAS momentum and first‑quarter share repurchases.

Chemed NYSE: CHE executives highlighted stronger-than-expected first-quarter performance at its VITAS hospice business and early signs of improvement at Roto-Rooter, while also raising full-year guidance for 2026 based on VITAS momentum and first-quarter share repurchases.

VITAS exceeded expectations as admissions rose and Florida cap concerns eased

President and CEO Kevin McNamara said VITAS “exceeded even the high end of our expectations” during the quarter, despite what management viewed as a difficult comparison period as the business continues balancing its patient mix between short-stay and long-stay patients.

McNamara credited VITAS with increasing average daily census (ADC) by accelerating admissions from non-hospital pre-admission locations while maintaining a high level of hospital-based admissions, all while keeping hospice labor costs below budget. Those factors helped drive “higher than expected revenue growth and EBITDA margins,” he said, and also improved the Medicare cap position in VITAS’ Florida combined program.

VITAS admissions totaled 19,394, up 6.9% from the first quarter of 2025, according to McNamara. Hospital admissions as a percentage of total admissions for the Florida combined program were 43.8% in the quarter, which he said falls within a targeted 42% to 45% range “for the sustained long-term stability in the Florida patient base.” McNamara added that admissions from other pre-admission locations rose 8.4% year over year in the Florida combined program.

McNamara also pointed to cap improvement in Florida, saying VITAS “added over $32.5 million to cap cushion in the Florida combined program” in the first quarter and that management was “more confident than ever” that the company has moved past the Florida cap issue that impacted 2025.

Chief Financial Officer Mike Witzeman reported VITAS net revenue of $420 million, up 3.1% year over year, driven by a 2.2% increase in days of care and an approximately 2.6% geographically weighted average Medicare reimbursement rate increase. Witzeman said an acuity mix shift reduced revenue growth by 120 basis points compared with the prior-year revenue and level-of-care mix, while Medicare cap and other contra revenue changes reduced growth by about 47 basis points.

VITAS accrued $2.4 million in Medicare cap billing limitation during the quarter, which Witzeman said was in line with expectations. He also said no Medicare cap billing limitation was recorded for the Florida combined program in the first quarter and “none is anticipated for the 2026 fiscal period.”

• Average revenue per day: $210.62, a 146 basis point improvement year over year (Witzeman)
• High-acuity days of care: 2.3% of total, down 28 basis points year over year (Witzeman)
• Adjusted EBITDA (excluding Medicare cap): $70.8 million, up 0.6% year over year (Witzeman)
• Adjusted EBITDA margin (excluding Medicare cap): 16.8% (Witzeman)

VITAS President and CEO Joel Wherley said ADC averaged 22,723, up 2.2% from the prior year. Admissions by source shifted during the quarter, with hospital-directed admissions up 13.6%, home-based admissions up 0.2%, assisted living facility admissions up 2.9%, and nursing home admissions down 5.4% year over year.

Wherley said average length of stay was 102.7 days, compared with 118.7 days in the first quarter of 2025, while median length of stay declined by one day to 15 days. He also said new starts in Florida are growing “at a very rapid pace,” citing 526 admissions in Marion, Pasco, and Pinellas counties combined in the quarter. Wherley said VITAS anticipates opening Manatee County in late second quarter or early third quarter and intends to “aggressively grow” that market.

Labor and fraud scrutiny: what management addressed in Q&A

Asked about VITAS margins and staffing, Witzeman said the company averaged roughly 100 full-time equivalents (FTEs) below budget during the quarter and was able to “efficiently serve the increased ADC” at that level, but called it unsustainable. He said VITAS’ original budget contemplated adding 30 to 40 FTEs per month, which has been increased to “closer to 60 per month for the remainder of the year” to support higher ADC expectations.

On hospice fraud scrutiny—particularly in California—Wherley said VITAS is “very supportive” of efforts to eliminate fraud, waste, and abuse but emphasized the need to avoid limiting access for patients who need care and to ensure legitimate providers are not swept up in enforcement actions. McNamara distinguished the reported California issues as “real fraud,” describing it as involving “mailbox offices” and “no real patients, no real care,” and said the company is watching developments closely.

Roto-Rooter showed core residential improvement but faced marketing and weather pressures

McNamara said Roto-Rooter continues to face headwinds, but the first quarter showed improvement across “multiple fronts.” He noted that, for the first time since the fourth quarter of 2022, both residential plumbing and residential sewer and drain revenue increased during the quarter, calling those services the business’ “core” drivers of add-on work such as excavation and water restoration.

Management tied the improvement in core residential revenue to lead growth. McNamara said total leads increased 3.3%, while paid leads increased 18.7% year over year. He also said 53.4% of leads in the quarter came from paid advertisements, up from 46.5% a year earlier—an increase that required almost $3 million in additional marketing spend versus the first quarter of 2025.

Roto-Rooter also continued centralizing water restoration billing and collections, which McNamara said improved collections and reduced write-offs by $1.5 million compared with the first quarter of 2025. However, Witzeman said that during the transition, average revenue per water restoration job declined roughly 13% and management expects improvement as centralized staff gain experience.

Weather disrupted performance during the quarter. McNamara said unusual ice and snowstorms led to road-condition disruptions across 24 branches over five days, with an estimated net lost revenue impact of $3 million to $4 million.

Financially, Witzeman reported:

• Commercial branch revenue: $56.5 million, down 1.9% year over year; Witzeman said for 13 branches that had commercial business managers entering 2026, commercial revenue rose about 10%.
• Residential branch revenue: $166.3 million, down 1.5% year over year; Witzeman said all lines increased except water restoration.
• Independent contractor revenue: down 3.3% year over year; Witzeman said the company is working with contractors to address performance.
• Adjusted EBITDA: $53.5 million, down 9.6% year over year; adjusted EBITDA margin was 22.5%, down 218 basis points.
• Gross margin: 51%, in line with expectations; Witzeman attributed the EBITDA margin decline mainly to higher internet marketing costs.

McNamara also detailed franchise acquisitions completed March 31, with Roto-Rooter purchasing the territories and assets of franchise operations in San Francisco and Fort Worth for a combined purchase price of about $20.6 million. He said the acquired locations cover a combined population of roughly 3.3 million people and are expected to add $5 million to $5.5 million of revenue for the remainder of 2026. McNamara said the acquisitions are “immediately accretive to earnings,” though he noted that initially the acquired locations’ growth and margins tend to run below the company’s existing Roto-Rooter portfolio averages.

Digital marketing shift and lead mix remain a key focus

In response to questions about marketing spending, McNamara described higher marketing costs as largely a “proxy for Google costs,” saying changes to Google’s algorithm reduced “natural or free” leads by almost 16% in the quarter. To keep lead volume stable, he said the company has had to pay for more leads, which management expects to continue in the short to medium term while it works to improve organic visibility.

Witzeman said marketing costs were $3 million higher year over year; the company had budgeted for a $1 million increase, implying about $2 million in incremental spend versus its plan. He estimated roughly $1 million of the quarter’s marketing expense increase was tied to weather-related service disruptions that prevented branches from servicing calls they were paying to generate. For guidance purposes, Witzeman said the company is effectively budgeting an additional $1 million per quarter in marketing costs for the next three quarters.

Chemed raised 2026 guidance on VITAS strength; Roto-Rooter margin outlook trimmed

Witzeman said Chemed typically does not provide quarterly guidance updates, but the company raised its fiscal 2026 outlook due to “materially improved performance of VITAS” and the level of share repurchases in the first quarter.

Updated 2026 guidance included:

• VITAS full-year ADC growth: 4.5% to 5.5% (previously 3.5% to 4%)
• VITAS revenue growth (excluding Medicare cap impact): 6.5% to 7.5% (previously 5.5% to 6.5%)
• VITAS EBITDA margin (excluding Medicare cap impact): 18% to 18.5% (previously 17.5% to 18.5%)
• Roto-Rooter revenue growth: unchanged at 3% to 3.5%
• Roto-Rooter adjusted EBITDA margin: 21.5% to 22.5% (previously 22.5% to 23%), reflecting elevated marketing costs expected to persist
• Adjusted earnings per diluted share: $24 to $24.75 (previously $23.25 to $24.25), excluding certain non-cash and discrete items

Witzeman said the revised EPS midpoint implies a 13% increase from 2025 adjusted earnings per diluted share of $21.55 and assumes a 24.5% effective corporate tax rate and a diluted share count of 13.6 million.

In closing remarks, McNamara said management was pleased with an “excellent quarter” at VITAS and “good trends” across both businesses, and said the company looks forward to updating investors when it reports second-quarter results.

About Chemed NYSE: CHE

Chemed Corporation is a diversified provider of essential home services and healthcare solutions in the United States. Headquartered in Cincinnati, Ohio, the company operates through two principal business segments—Roto-Rooter and Vitas Healthcare. Since its founding in 1974, Chemed has built a reputation for reliability and expertise, serving both residential and commercial customers across a broad range of markets.

The Roto-Rooter segment offers a comprehensive suite of plumbing, drain cleaning and water restoration services.

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