Chemed Q2 Earnings Call Highlights

Key Points

• Chemed delivered strong Q2 results: Consolidated revenue increased 8.8% year over year, adjusted diluted EPS rose 41.9%, and operating cash flow exceeded $173 million.
• VITAS outperformed expectations with revenue up 11.9%, patient census growth of 6.1%, and adjusted EBITDA excluding Medicare Cap up 20.6%. Chemed raised VITAS’ full-year growth and margin guidance while lowering its expected Medicare Cap limitation.
• Roto-Rooter grew revenue but faced marketing pressure: Higher paid-lead costs and weaker free-search leads kept adjusted EBITDA essentially flat and reduced margins. The company maintained its full-year Roto-Rooter outlook and forecast 2026 adjusted EPS of $25 to $25.75.

Chemed NYSE: CHE reported second-quarter 2026 results marked by stronger-than-expected performance at its VITAS hospice business, while Roto-Rooter delivered revenue growth but continued to face higher customer-acquisition costs.

President and Chief Executive Officer Kevin McNamara said consolidated revenue rose 8.8% from the prior-year quarter and adjusted diluted earnings per share increased 41.9%. The company generated more than $173 million in operating cash flow during the quarter, which McNamara said supports acquisitions and potential share repurchases.

VITAS Exceeds Expectations

VITAS Healthcare reported net revenue of $443.3 million, up 11.9% from the second quarter of 2025. The increase reflected 6.1% growth in days of care and an approximately 2.4% geographically weighted average Medicare reimbursement-rate increase, according to Chief Financial Officer Mike Witzeman.

Average daily census increased 6.1% to 23,687 patients, and total patient census surpassed 24,000 by the end of the quarter, a record for VITAS, said Joel Wherley, president and CEO of the subsidiary. Admissions totaled 19,125, up 9% year over year.

VITAS reported growth across several referral categories. Hospital-directed admissions and home-based admissions each rose 9%, while assisted-living-facility admissions increased 13.5%. Nursing-home admissions declined 8.6%.

The company continued to focus on maintaining a hospital-admission mix between 42% and 45% in its Florida Combined Program, which management views as appropriate for long-term stability of the patient base and Medicare Cap management. Hospital admissions represented 42.9% of total admissions in the Florida Combined Program during the quarter. Admissions from non-hospital pre-admission locations in the program increased 8.1%.

McNamara said the stronger admissions performance added $8.9 million of Medicare Cap cushion in Florida during the quarter. VITAS recorded no Medicare Cap billing limitation in the Florida Combined Program and does not expect one for the 2026 fiscal period, compared with a $16.4 million limitation in the second quarter of 2025.

VITAS accrued $500,000 in Medicare Cap billing limitation overall during the quarter, below management’s expectations, primarily due to improved admissions performance in California. Adjusted EBITDA excluding Medicare Cap was $80.6 million, up 20.6% year over year, and the corresponding margin was 18.2%.

Average revenue per patient day was $209.98, up 143 basis points from the prior-year period. VITAS’ average length of stay fell to 101.2 days from 137.1 days a year earlier, while median length of stay declined to 16 days from 20 days.

Wherley said VITAS maintained staffing below budgeted levels without impairing its ability to hire, retain caregivers or meet growth expectations. The company also cited progress in new Florida markets, with Marion, Pasco and Pinellas counties generating a combined 594 admissions during the quarter. Manatee County admitted its first patient during the period.

Higher VITAS Guidance

Chemed increased its full-year outlook for VITAS following the segment’s first-half performance. The company now expects average daily census growth of 5.75% to 6.25%, compared with its previous forecast of 4.5% to 5.5%.

• Revenue growth excluding Medicare Cap is now projected at 8.25% to 9.25%, versus prior guidance of 6.5% to 7.5%.
• Adjusted EBITDA margin excluding Medicare Cap is expected to be 19% to 19.5%, up from the previous 18% to 18.5% range.
• Expected full-year Medicare Cap billing limitation was reduced to $7 million from $9.5 million.

During the question-and-answer session, Wherley said management believes VITAS’ current growth level is sustainable into 2027, citing its operational metrics and ability to adjust resources to market conditions. McNamara said the business historically generated low-double-digit net-income growth over the 21 years Chemed has owned VITAS.

Management also said it sees no indication of material reimbursement restructuring at this time, though it expects increased program-integrity oversight and a greater focus on quality measures in hospice. Wherley said the proposed 2027 national average rate increase was 2.4%, while VITAS’ expected increase is 1.9%; Florida’s rate increase is projected to be slightly more than 1% below the national average based on the company’s current mix.

Roto-Rooter Revenue Growth Meets Marketing Pressure

Roto-Rooter’s commercial revenue increased 6.8% to $56.8 million, while residential revenue rose 1.7% to $159.1 million. Commercial business managers contributed to results: branches with a productive commercial business manager throughout the quarter posted approximately 13% commercial revenue growth, compared with a 1% decline in branches without one.

Water restoration revenue declined 6.7%, despite what management described as strong demand and high conversion rates. Witzeman said the average revenue per water-restoration job fell roughly 3.5% during the transition to centralized billing and collections, an improvement from an approximately 13% decline in the first quarter. Total write-offs improved by $1.3 million, while the centralization effort reduced staffing by about 20 employees from a year earlier.

Independent-contractor revenue declined 1.9%. Roto-Rooter’s adjusted EBITDA was $48.5 million, essentially flat year over year, while adjusted EBITDA margin declined 77 basis points to 21.1%.

The primary pressure came from lead generation. Total leads declined 1.6%, as free internet-search leads fell 13.1% and paid leads rose 7.3%. Paid leads accounted for about 59% of total leads, compared with 54% a year earlier, increasing marketing expense by approximately $3.1 million.

Management said it views the marketing environment as stable but does not expect a significant improvement. It is pursuing alternative lead sources, including commercial-business-manager referrals and its app, while emphasizing higher-value services such as excavation and water restoration.

Franchise Acquisitions and Earnings Outlook

In June, Roto-Rooter acquired the territory and assets of franchise operations in South Texas, including Corpus Christi, for about $12 million. The territory will operate as an independent contractor and is not expected to contribute materially to revenue or income in the second half of 2026, but McNamara described it as a growth opportunity for 2027 and beyond.

Through the first six months of the year, Chemed spent $33.5 million repurchasing four franchises in strategically advantageous locations. Management said it expects additional franchise acquisition opportunities may arise.

Chemed maintained its full-year Roto-Rooter outlook, calling for revenue growth of 3% to 3.5% and adjusted EBITDA margin of 21.5% to 22.5%.

For 2026, Chemed forecast adjusted diluted earnings per share of $25 to $25.75, excluding non-cash stock-option expenses, tax benefits from stock-option exercises, litigation costs and other discrete items. The midpoint represents a 17.8% increase from 2025 adjusted EPS of $21.55, the company said.

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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