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    CHE
    Earnings call· Dec 2025(Q4 FY25)

    CHEMED Q4 FY25 earnings call CHE

    Feb 26, 2026 Source

    Executive summary

    Chemed Q4 FY25 — VITAS Medicare Cap mitigated, Roto-Rooter faces billing and lead generation challenges

    Chemed reported a challenging Q4 FY25, missing expectations due to specific operational headwinds at both VITAS and Roto-Rooter. VITAS successfully mitigated its Florida Medicare Cap risk by increasing short-stay admissions, which temporarily compressed revenue and EBITDA margins. Roto-Rooter faced revenue declines and margin pressure from increased water restoration write-offs and higher marketing costs for lead generation. Management views 2026 as a transition year, with financial results expected to build in the second half as strategic initiatives take hold.

    Highlights

    5

    • VITAS Florida Medicare Cap position improved by almost $25 million in Q4 FY25 compared to 2025, with no billing limitation accrued for Florida in Q4 FY25.

    • VITAS admissions increased 6% YoY to 17,419 in Q4 FY25.

    • VITAS received a Certificate of Need (CON) to operate in Manatee County, Florida, representing a significant growth opportunity.

    • Roto-Rooter's paid leads increased 9.4% in Q4 FY25 compared to Q4 FY24.

    • Roto-Rooter's branch commercial revenue increased 1.6% in Q4 FY25 compared to Q4 FY24.

    Concerns

    5

    • Q4 FY25 fell short of expectations for both subsidiaries, with a $0.70 per share miss.

    • VITAS's revenue growth and EBITDA margin were lower than anticipated due to an overwhelming success in garnering elevated short-stay patient admissions.

    • Roto-Rooter revenue declined 3.7% in Q4 FY25 compared to Q4 FY24.

    • Roto-Rooter's implicit price concessions and credit memos (write-offs) increased by $4 million or 57% in Q4 FY25 compared to Q4 FY24, impacting water restoration revenue.

    • Roto-Rooter's adjusted EBITDA declined 21.1% to $47.5 million in Q4 FY25, with margin decreasing 477 basis points to 21.5%.

    Guidance & targets

    10
    CategoryTargetConfidence
    VITAS Revenue (prior to Medicare Cap)
    5.5% to 6.5% increase
    high materiality
    High
    VITAS Average Daily Census (ADC)
    3.5% to 4% increase
    medium materiality
    High
    VITAS EBITDA Margin (prior to Medicare Cap)
    17.5% to 18%
    high materiality
    High
    VITAS Medicare Cap Billing Limitations
    $9.5 million
    medium materiality
    High
    Roto-Rooter Revenue Growth
    3% to 3.5%
    high materiality
    High
    Roto-Rooter Adjusted EBITDA Margin
    22.5% to 23%
    high materiality
    High
    Adjusted EPS
    $23.25 to $24.25
    high materiality
    High
    Effective Corporate Tax Rate on Adjusted Earnings
    24.5%
    low materiality
    High
    Diluted Share Count
    13.9 million shares
    low materiality
    High
    Consolidated Adjusted Net Income and EBITDA Generation
    55% in H2 FY26
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    VITAS Healthcare
    Revenue growth was primarily driven by increased days of care and Medicare reimbursement rates, but negatively impacted by acuity mix shift and Medicare Cap accruals. Lower EBITDA margin reflects the impact of admitting more hospital-based short-stay patients for Medicare Cap mitigation. Admissions increased, but median length of stay decreased due to patient mix.
    Days of care: 1.3% increaseGeographically weighted average Medicare reimbursement rate increase: 2.2%Acuity mix shift impact on revenue growth: -143 basis pointsMedicare Cap and other contra revenue impact on revenue growth: -20 basis pointsMedicare Cap billing limitation accrued: $2.4 millionFlorida Medicare Cap billing limitation accrued: $0Average revenue per patient day: $208.01Average revenue per patient day YoY change: 86 basis points above prior yearHigh acuity days of care: 2.2% of total days of careHigh acuity days of care YoY change: -32 basis pointsAdjusted EBITDA margin (excluding Medicare Cap): 21.7%Adjusted EBITDA margin YoY change: -79 basis pointsAverage daily census: 22,462 patientsAverage daily census YoY change: 1.3%Hospital directed admissions YoY change: 9.9%Home-based patient admissions YoY change: 4.1%Assisted living facility admissions YoY change: 5.6%Nursing home admissions YoY change: -8.7%Average length of stay: 115.1 daysAverage length of stay YoY change: from 105.5 daysMedian length of stay: 17 daysMedian length of stay YoY change: 1 day less than prior yearFlorida Medicare Cap billing limitation (end of Q4 FY25): less than $2 millionFlorida Medicare Cap billing limitation (end of January '26): $0
    		$418.8 million1.9%—Adjusted EBITDA $91.6 million
    Roto-Rooter
    Revenue declined due to significant drops in residential and commercial water restoration and residential drain cleaning, partially offset by growth in plumbing and excavation. Profitability was heavily impacted by increased water restoration write-offs and higher marketing costs.
    Branch residential revenue: $155.6 millionBranch residential revenue YoY change: -3.1%Residential plumbing revenue YoY change: 6.3%Residential excavation revenue YoY change: essentially flatResidential water restoration revenue YoY change: -10.3%Residential drain cleaning revenue YoY change: -3.2%Implicit price concessions and credit memos (write-offs) increase: $4 millionImplicit price concessions and credit memos (write-offs) increase YoY: 57%Total write-offs as % of gross revenue (H1 FY25): mid-3%Total write-offs as % of gross revenue (H2 FY25): over 4.5%Total write-offs increase (FY25 vs FY24): $11 millionBranch commercial revenue: $55.2 millionBranch commercial revenue YoY change: 1.6%Commercial excavation revenue YoY change: 10.9%Commercial drain cleaning revenue YoY change: 2%Commercial plumbing revenue YoY change: essentially flatCommercial water restoration revenue YoY change: -20%Adjusted EBITDA margin: 21.5%Adjusted EBITDA margin YoY change: -477 basis pointsTotal leads YoY change: flatPaid leads YoY change: 9.4%Natural leads YoY change: decline (offsetting paid leads)
    		$210.8 million-3.7%—Adjusted EBITDA $47.5 million

    Operational metrics

    18
    Admissions
    17,4196% improvement from Q4 FY24
    Q4 FY25

    Total admissions for VITAS.

    Hospital admissions as % of total
    44.8%
    Q4 FY25

    Represents a high watermark during the post-pandemic period, indicating successful shift towards hospital-based admissions for Medicare Cap mitigation.

    Water restoration write-offs increase
    $11 millioncompared to 2024
    FY25

    Total increase in implicit price concessions and credit memos for fiscal 2025 compared to 2024.

    Water restoration write-offs as % of gross revenue
    mid-3%uptick from slightly below 3%
    H1 FY25

    Reflects an increase in write-offs during the first half of the year.

    Water restoration write-offs as % of gross revenue
    over 4.5%significant jump
    H2 FY25

    Reflects a significant jump in write-offs during the second half of the year due to increased insurance scrutiny.

    Water restoration billing & collections tailwinds
    $4 million to $6 million
    FY26

    Expected tailwind from improvements in water restoration billing and collections in 2026.

    Paid leads growth
    9.4%compared to Q4 FY24
    Q4 FY25

    Increase in paid leads, offsetting decline in natural leads.

    Natural leads growth
    decliningoffsetting paid leads
    Q4 FY25

    Decline in natural leads essentially offset the increase in paid leads, resulting in flat total leads.

    Google Maps visibility
    72%
    October 2024

    Percentage of time Roto-Rooter was showing up on the map section of Google.

    Google Maps visibility
    24%fell from 72%
    within a few months of Oct 2024

    Low point in visibility, leading to falling leads and sales.

    Google Maps visibility
    35%up from 24%
    current

    Improvement due to internal changes and new AI-centric natural search provider.

    Paid lead cost
    $90
    current

    Cost per lead for paid search, stable over recent quarters.

    Customer acquisition cost (paid leads)
    $150 to $180
    current

    Cost to acquire a paying customer through paid leads.

    Paid leads as % of total
    roughly 60% to 65%
    current

    Represents the current mix of lead sources.

    Share repurchases
    400,000 shares
    Q4 FY25

    Purchases funded by free cash flow from both subsidiaries.

    Total share repurchases (program-to-date)
    over $2.9 billion
    program-to-date

    Total capital returned to shareholders through repurchases.

    First-time Medicare patients admitted
    40 to 50
    current

    Performance of previously awarded CONs, meeting or exceeding expectations.

    First-time Medicare patients admitted
    28
    second full month of operation

    Performance of a recently awarded CON.

    Industry KPIs

    1
    MetricValueDetails
    Adjusted EPS EBITDA leverage guidance$23.25 to $24.25USD per share

    Risks & headwinds

    7
    Lower revenue growth and EBITDA margin at VITAS due to elevated short-stay patient admissionsQ4 FY25

    revenue growth and EBITDA margin were lower than anticipated

    Mitigation: Refocusing admissions to a more balanced approach between hospital admissions and other pre-admission locations, expected to improve results in H2 2026.

    Roto-Rooter revenue declineQ4 FY25

    declined 3.7% in the fourth quarter of 2025

    Mitigation: New SEO provider, expanding commercial business managers, improving water restoration billing and collections.

    Increased water restoration write-offs at Roto-RooterQ4 FY25

    implicit price concessions and credit memos increased at Roto-Rooter by $4 million or 57% compared to the fourth quarter of 2024

    Mitigation: Modifications to billing and collection support functions, centralizing water restoration billing and collections, improving documentation through technology.

    Higher marketing costs at Roto-RooterQ4 FY25

    The decline in EBITDA margin was caused by higher marketing costs

    Mitigation: Focus on driving top-line growth to leverage marketing spend and improve overall profitability.

    Negative impact of Google algorithm changes on Roto-Rooter's natural search leadsQ4 FY25

    The decline in natural leads essentially offset the increase in paid leads

    Mitigation: Contracted with a new third-party search engine optimization provider to positively impact natural search results in 2026.

    Duplication of costs and investment in technology during Roto-Rooter's billing centralizationH1 FY26

    some duplication of costs and investment in technology which will cause some marginal headwinds

    Mitigation: Expected to be temporary, with financial impact mostly seen in H2 FY26.

    Marginal drag from training new commercial business managers at Roto-RooterH1 FY26

    roughly 45-day process to get these positions trained and productive, which also may cause some marginal drag

    Mitigation: Temporary drag, expected to lead to improved organic growth in the long term.

    What to watch in Q1 FY26

    5

    VITAS patient mix rebalancing

    Q1 FY26 / H1 FY26
    CurrentElevated short-stay hospital admissions
    TargetMore balanced mix of hospital and other pre-admission locations

    Why it matters

    This rebalancing is crucial for VITAS to accelerate revenue growth and improve EBITDA margins as the year progresses.

    In mid-January 2026, VITAS management responded to the improved Florida Medicare Cap position by instructing operating personnel to begin the process of refocusing admissions to a more balanced approach between hospital admissions and preadmission -- other preadmission locations. That process is underway.

    Q&A highlights

    6

    What gives management confidence in 3-3.5% revenue growth for Roto-Rooter in 2026, given recent performance?

    Management cited improved paid lead generation (10% increase in last 3 quarters), new SEO provider to improve natural leads, expansion of commercial business managers, and an expected $4M-$6M tailwind from improved water restoration billing/collections. They also noted the Q4 miss was due to specific issues (water restoration, short-stay VITAS admissions) that are being addressed.

    “I would characterize our confidence in the 3% to 3.5% revenue growth in '26 based on 3 specific things. As Kevin mentioned, some things we've done to change the lead trajectory, hopefully, to provide some organic growth, but modest organic growth is built in. The increase in commercial sales force will also lead to some more modest organic growth. And then as we've talked about, the water restoration write-offs, we've estimated that of the $11 million that the increase of write-offs of $11 million, we're going to recover maybe half of that this year. So that's a $5.5 million tailwind.”

    asked by Joanna Gajuk · answered by Michael Witzeman

    3 min read8 chapters

    Detailed Narrative

    01

    VITAS Florida Medicare Cap Mitigation

    VITAS successfully executed strategies to mitigate potential Florida Medicare Cap billing limitations for government fiscal 2026. The Florida Medicare Cap position improved by almost $25 million in Q4 FY25 compared to 2025, with no billing limitation accrued for Florida in Q4 FY25. As of January 2026, there was no billing limitation in the Florida combined program. This was achieved by increasing hospital-based short-stay admissions, which temporarily impacted revenue and EBITDA margins.

    02

    VITAS Admission Rebalancing

    In mid-January 2026, VITAS began refocusing admissions to a more balanced approach between hospital admissions and other pre-admission locations. This rebalancing is expected to result in revenue growth and EBITDA margin building over the course of 2026, with financial results mainly reflecting this change in the second half of the year. The goal is to return to a more normal, sustainable organic growth pattern.

    03

    VITAS New Market Expansion

    VITAS was granted a Certificate of Need (CON) to begin operating in Manatee County, Florida, in December 2025. This county had approximately 3,000 Medicare hospice patients in fiscal 2024, representing a significant growth opportunity. This is the fourth CON awarded to VITAS in the past two years, with previous awards in Pinellas, Marion, and Pasco Counties meeting or exceeding expectations.

    04

    Roto-Rooter Revenue Challenges

    Roto-Rooter experienced a 3.7% revenue decline in Q4 FY25. Residential revenue decreased 3.1%, primarily due to a 10.3% decline in water restoration and a 3.2% decline in drain cleaning, partially offset by a 6.3% increase in plumbing. Commercial revenue increased 1.6%, but commercial water restoration declined 20%.

    05

    Roto-Rooter Water Restoration Write-offs

    Implicit price concessions and credit memos (write-offs) for water restoration increased by $4 million or 57% in Q4 FY25 compared to Q4 FY24, and by $11 million in FY25 compared to FY24. This was attributed to increased scrutiny from insurance companies, often using AI, and a reluctance at the branch level to bill for certain services to ensure higher collection rates.

    06

    Roto-Rooter Billing and Collection Improvements

    In response to the water restoration issues, Roto-Rooter is improving documentation through technology and centralizing billing and collections, which were historically performed at each branch. This centralization is expected to create more expertise and improve results, with financial impact mostly in the second half of 2026, though some cost duplication is expected in H1.

    07

    Roto-Rooter Lead Generation and Commercial Growth

    Total leads were flat in Q4 FY25, with a 9.4% increase in paid leads offset by a decline in natural leads. Roto-Rooter contracted with a new SEO provider in late December 2025 to improve natural search results. The company is also expanding its commercial business manager program, which has shown encouraging preliminary results, to drive modest organic growth in 2026.

    08

    2026 as a Transition Year

    Management emphasized that 2026 is expected to be a transition year for both VITAS and Roto-Rooter. Financial results are projected to build over the course of the year, with 55% of consolidated adjusted net income and EBITDA expected to be generated in the second half, reflecting the time needed for strategic initiatives to fully impact performance.

    AI-generated summary of the company’s earnings call. Not investment advice.