What Chemed (CHE) Said on Its Q3 Earnings Call

Chemed NYSE: CHE reported higher third-quarter revenue and adjusted earnings as growth at its VITAS hospice business offset margin pressure at Roto-Rooter from customer-acquisition and fuel costs.

President and Chief Executive Officer Kevin McNamara said consolidated revenue increased 10.6% from the prior-year quarter, while adjusted diluted earnings per share rose 28.1%. Through the first nine months of 2026, the company generated more than $229 million in operating cash flow, providing flexibility for acquisitions and share repurchases, he said.

VITAS revenue and earnings growth accelerate

VITAS Healthcare reported third-quarter net revenue of $457.4 million, up 12.2% year over year. Chief Financial Officer Mike Witzeman said the increase was driven primarily by a 9.4% rise in days of care and an approximately 2.2% geographically weighted average Medicare reimbursement increase.

Average daily census increased 9.4% to 24,428 patients, while admissions totaled 18,995, up 7.2% from a year earlier. Joel Wherley, president and CEO of VITAS, said admissions rose across hospital, home-based, assisted-living and nursing-home settings. Hospital-directed admissions increased 5.7%, home-based admissions rose 6.3%, assisted-living admissions grew 8.1%, and nursing-home admissions increased 9.8%.

VITAS adjusted EBITDA excluding Medicare Cap totaled $92.5 million, up 31.4% from the year-earlier period, with a 20.2% margin. Wherley attributed the margin performance to cost control, staffing-management tools and lower selling, general and administrative costs. SG&A costs declined to $2.1 million in the quarter, he said.

The business accrued $828,000 in Medicare Cap billing limitations during the quarter, compared with $6.1 million a year earlier. McNamara said the Florida combined program ended the 2026 Medicare Cap year with a cushion of more than $34 million and that management does not anticipate a Cap billing limitation there in the 2027 Medicare Cap year.

Management also discussed increased state and federal review activity involving patient files. Witzeman said regulators reviewed an additional $12 million to $14 million of revenue, contributing to a higher contractual allowance. He said VITAS has historically had a strong record in sustaining challenges to revenue, though the review process takes time.

On staffing, Wherley said VITAS has not experienced significant difficulty recruiting or retaining qualified caregivers and does not anticipate a material increase in recruiting costs in 2027. The company ramped up hiring in September to support continued average daily census growth and finished the quarter in line with its budgeted full-time-equivalent staffing level.

Roto-Rooter grows revenue as margins face headwinds

Roto-Rooter revenue increased 7.5% from the third quarter of 2025, including 5.5% same-store revenue growth. McNamara said revenue increased across major residential and commercial service lines.

Commercial branch revenue rose 9% to $59.9 million, while residential branch revenue increased 5.2% to $158.8 million. The company’s commercial business manager program continued to contribute to growth: branches with a commercial business manager in place for the full quarter recorded commercial revenue growth of about 10.9%, compared with 4.8% at branches without one.

Roto-Rooter adjusted EBITDA declined 2.5% to $48.2 million, and adjusted EBITDA margin fell 213 basis points to 20.6%. Witzeman said higher customer-acquisition costs and an approximately $1.4 million year-over-year increase in fuel costs weighed on profitability. Management expects both pressures to continue in the fourth quarter.

Total leads were essentially flat year over year. Free leads from internet searches declined 11.8%, while paid leads increased 5%. Paid leads represented about 60% of total leads, compared with 56% a year earlier, resulting in a $4.3 million increase in marketing spending.

McNamara said more than half of Roto-Rooter customers are repeat customers and that the company is working to grow lead sources outside of paid search. The company’s mobile app has more than 300,000 downloads and generates roughly 1,000 to 1,500 leads per week, according to Witzeman.

Water-restoration billing and collections centralization improved results, with total write-offs improving by $2.9 million from the year-earlier quarter. Average water-restoration price per job increased 2.8%, reversing a multi-quarter decline, McNamara said.

Franchise acquisitions to boost revenue, initially dilute margins

During the quarter, Roto-Rooter reacquired multiple California franchise territories for approximately $62.5 million. The acquired territories cover a population of more than 12 million people and had annual revenue of roughly $50 million to $55 million before the acquisition.

Witzeman said slightly more than half of the acquired revenue will move into company-owned branches, including new Sacramento and San Diego branches, while remaining locations will operate through Roto-Rooter’s independent-contractor model. Chemed has spent $96 million in 2026 to reacquire franchises, primarily in Texas and California.

Management said the acquired operations have lower margins than Roto-Rooter’s established company-owned branch network, often operating at single-digit EBITDA margins. Witzeman estimated the California acquisition could add $30 million to $35 million in revenue in 2027 but less than $4 million in EBITDA initially. He said implementing the full Roto-Rooter operating model generally takes 12 to 18 months.

Chemed repurchased 125,000 shares for $66 million during the quarter, or $528.24 per share. As of Sept. 30, approximately $73.7 million remained authorized under its repurchase plan.

Looking ahead, Witzeman said Chemed expects to finish 2026 at or slightly above the high end of its adjusted EPS guidance issued after the second quarter. Management said VITAS outperformed its prior expectations in the third quarter, while Roto-Rooter’s income contribution was somewhat below prior guidance amid marketing and fuel-cost headwinds.

About Chemed (NYSE:CHE)

Chemed Corporation NYSE: CHE is a Cincinnati, Ohio-based company that provides healthcare and residential and commercial services through two operating businesses: VITAS Healthcare and Roto-Rooter. Its operations serve customers primarily in the United States, with Roto-Rooter also providing services in Canada.

VITAS Healthcare is a provider of hospice and palliative care for individuals with advanced illnesses. The business delivers care in patients' homes, hospice inpatient units, hospitals, nursing facilities and other care settings.

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