In addition, management may also discuss non-GAAP operating performance results during today's call, including earnings before interest, taxes, depreciation, and amortization, or EBITDA and adjusted EBITDA. The second impact is that due to the overwhelming success of garnering elevated short-stay patient admissions, our revenue growth and EBITDA margin were lower than anticipated. Ultimately, the percentage of total admissions that come from hospitals was higher than we originally budgeted in both the third and fourth quarters of 2025, resulting in this muted revenue growth and EBITDA margin. In the guidance that Mike will discuss further, we have anticipated that the more balanced approach will start being reflected in financial results, mainly in the second half of the year.

As a result, refocusing the admission patterns will result in revenue growth and EBITDA margins building over the course of 2026. Roto-Rooter revenue declined 3.7% in the fourth quarter of 2025 compared to the same period of 2024. Branch commercial revenue increased 1.6% compared to the fourth quarter of 2024. Branches with commercial business managers had percentage revenue increases, 10% more than those without them.

The decline in natural leads essentially offset the increase in paid leads. A similar increase in write-offs was seen in the third quarter of 2025. Our guidance reflects management's belief that 2026 is expected to be a transition year for both VITAS and Roto-Rooter. We are very confident the Florida Medicare capital limitation in 2025 is fully behind us.

What went well
  • VITAS admissions in Q4 totaled 17,419, up 6% versus the prior-year period, and average daily census rose 1.3% to 22,462 patients, with VITAS net revenue up 1.9% to $418.8 million.
  • The aggressive shift toward hospital-based, short-stay admissions drove the Florida hospital-admissions ratio to 44.8% (a post-pandemic high within the preferred 42%-45% range) and improved the Florida Medicare cap position by almost $25 million year-over-year, with management confident the 2025 Florida Medicare cap problem is now behind them.
  • VITAS received a new certificate of need for Manatee County, Florida (its fourth CON in two years), representing significant future growth, while prior CON awards in Pinellas, Marion, and Pasco met or exceeded expectations.
  • At Roto-Rooter, branch commercial revenue rose 1.6% and branches with commercial business managers posted revenue increases 10% higher than those without.
  • Chemed repurchased 400,000 shares at an average price of $436.39 and has returned over $2.9 billion to shareholders since the program's inception.
What went wrong
  • The fourth quarter fell short of expectations for both subsidiaries, with management describing a $0.70 per share miss.
  • Roto-Rooter revenue declined 3.7% year-over-year, with branch residential revenue down 3.1% and water restoration declining 10.3% (residential) and 20% (commercial).
  • Roto-Rooter implicit price concessions and credit memos rose $4 million, or 57%, in the quarter, with total write-offs jumping to over 4.5% of gross revenue in the second half (versus a historical level slightly below 3%) and increasing $11 million for full-year 2025 as insurers used AI to scrutinize bills.
  • Roto-Rooter adjusted EBITDA fell 21.1% to $47.5 million, with margin down 477 basis points to 21.5% on higher marketing costs and write-offs.
  • VITAS adjusted EBITDA excluding Medicare cap declined 1.7% to $91.6 million, with margin down 79 basis points to 21.7% from admitting more short-stay patients, and natural search leads continued to decline (Roto-Rooter Google map visibility fell from 72% to a low of 24%).

Guidance Changes

MetricPeriodCurrent guidance
VITAS revenue prior to Medicare capFY2026Increase 5.5%-6.5% vs 2025
VITAS average daily censusFY2026Increase 3.5%-4%
VITAS full year EBITDA margin prior to Medicare capFY202617.5%-18%
VITAS Medicare cap billing limitationsFY2026$9.5 million (Improved (down from 2025))
Roto-Rooter revenue growthFY20263%-3.5%

Performance Breakdown

MetricYoYNote
VITAS net revenue +1.9% (to $418.8 million) 1.3% increase in days of care and ~2.2% Medicare reimbursement rate increase, muted by acuity mix shift (-143 bps)
VITAS adjusted EBITDA excluding Medicare cap -1.7% (to $91.6 million) Higher mix of hospital-based short-stay patients pressuring margin
Roto-Rooter revenue -3.7% Residential decline of 3.1% led by a 10.3% drop in water restoration amid insurer billing scrutiny and reduced branch-level billing
Roto-Rooter adjusted EBITDA -21.1% (to $47.5 million) Higher marketing costs and higher water restoration write-offs; margin down 477 bps to 21.5%
Roto-Rooter branch commercial revenue +1.6% Excavation up 10.9% and drain cleaning up 2%, offset by a 20% water restoration decline

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Florida Medicare capHeading toward a cap liability in Florida in 2025Position improved almost $25 million year-over-year; no billing limitation in Florida combined program as of January 2026Resolved/improving
VITAS admission mix rebalancingEmphasized short-stay hospital admissions to fix capRefocusing to a more balanced hospital/community mix starting mid-January 2026, building revenue and margin over the yearNormalizing
Roto-Rooter water restoration write-offsHistorically slightly below 3% of gross revenueJumped above 4.5% in H2 2025; centralizing billing/collections, expecting a $4M-$6M tailwind in 2026Improving (recovery expected)
Roto-Rooter lead generation / searchMajority free natural leads; map visibility 72% in Oct 2024Shift to ~60%-65% paid leads at ~$90/lead; visibility recovered to ~35% from 24% low with new SEO providerStabilizing
Private equity competitionDisrupted paid search and offered services below costThreat largely diminished; competitors stopped buying franchises and paid lead costs stable for three quartersDiminishing
VITAS geographic expansion—Fourth CON in two years (Manatee County); Pinellas, Marion, Pasco meeting or exceeding expectationsExpanding

Q&A Summary

What gives confidence Roto-Rooter can grow revenue ~3% in 2026 after flat 2025?
Management pointed to three components: modest organic growth from improved lead trajectory (paid leads up ~10% per quarter for three quarters, visibility recovering to ~35%), additional growth from more commercial business managers, and recovering roughly half of the $11 million write-off increase for a ~$5.5 million tailwind.
Are the longer-term Roto-Rooter margin targets of 24%-26% still on the table?
Management said the 24%-25% target is achievable if Roto-Rooter returns to roughly 5%+ top-line growth to leverage off elevated marketing costs, though the path is less clear than before; current margins are close to pre-pandemic levels.
Is there a structural impairment at Roto-Rooter or the plumbing industry?
No; management attributed seven quarters of speed bumps to private equity disruption (now diminishing) and Google's shift from predominantly free natural leads to predominantly paid leads, but said the service, market, and cash flow remain strong with no long-term concern.
How should we think about VITAS revenue and EBITDA progression in 2026?
Revenue is guided a bit below the normalized 7%-9% target because rebalancing the admission mix means elevated short-stay (initially negative-margin) patients; Q1 will be muted and revenue/EBITDA will build through Q2-Q4 as patients convert to longer-stay and ADC grows.
Is VITAS at Medicare cap risk in markets outside Florida?
Management expects $9.5 million in 2026 cap limitations (mainly California, which has improved using Florida strategies); small programs occasionally dip into cap in Q4 of the cap year, but there are no concerns about major programs or new significant liabilities.
What is the conversion-adjusted economics of paid versus natural leads?
Paid leads cost roughly $90 each and have been stable for several quarters; it takes about 1.5 to 2 leads to convert to a paying job, implying a $150-$180 customer acquisition cost, with roughly 60%-65% of leads now paid.

More on Chemed Corp

Reported 2026-02-26 · figures from the Chemed Corp Q4 2025 earnings call.

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