Chemed Corporation (CHE) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights mixed results: strong revenue growth projections for VITAS in 2025, but declining EBITDA margins in both VITAS and Roto-Rooter. Management's optimism about future margin improvements and revenue growth is offset by current financial declines and vague guidance for 2026. The Q&A session reveals concerns about elevated DSO and unclear responses on strategic improvements. Overall, these factors suggest a neutral sentiment, with no strong catalysts for significant stock price movement in the next two weeks.

Key Financial Performance

VITAS net revenue $407.7 million in Q3 2025, an increase of 4.2% YoY. This was driven by a 2.5% increase in days-of-care and a geographically weighted average Medicare reimbursement rate increase of approximately 4.1%. However, revenue growth was negatively impacted by an acuity mix shift (121 basis points) and Medicare Cap and other contra revenue changes (124 basis points).

Average revenue per patient day $205.08 in Q3 2025, 298 basis points above the prior year period. This increase reflects changes in Medicare reimbursement rates and patient care dynamics.

Adjusted EBITDA for VITAS (excluding Medicare Cap) $70.4 million in Q3 2025, a decline of 3.8% YoY. Adjusted EBITDA margin was 17.0%, 157 basis points below the prior year period, due to admitting more hospital-based short-stay patients.

Roto-Rooter revenue Increased by 1.1% in Q3 2025 compared to Q3 2024. Residential revenue grew by 3.4%, and commercial revenue grew by 2.8%. However, revenue from independent contractors declined by 4.7%.

Residential plumbing revenue Increased by 8.2% in Q3 2025 compared to Q3 2024. This growth was attributed to a targeted campaign focusing on high-revenue plumbing services.

Adjusted EBITDA for Roto-Rooter $49.4 million in Q3 2025, a decrease of 12.4% YoY. Adjusted EBITDA margin was 22.7%, representing a 351 basis point decline from Q3 2024. The decline was mainly due to a $3.6 million increase in SG&A costs driven by a shift from unpaid to paid leads.

Average daily census (VITAS) 22,327 patients in Q3 2025, an increase of 2.5% YoY. Hospital-directed admissions increased by 10.4%, while nursing home admissions declined by 8.9%.

You have reached the limit Upgrade to access full content

Get started

Operating Highlights

New Pinellas County location: Cleared all hurdles and is on track to open in early November 2025.

Marion County program: Opened in May 2025 and has grown to an ADC of 75 as of September 30, 2025, with projections to double to 150 by the end of 2026.

Florida Medicare Cap billing limitation: Came in slightly better than expected at $18.9 million for 2025, and management anticipates no Medicare Cap billing limitation for 2026.

Hospital-based admissions in Florida: Ratio reached 44.5% in Q3 2025, a high watermark post-pandemic, and has been above 42% for all of 2025.

Roto-Rooter revenue: Increased by 1.1% in Q3 2025 compared to Q3 2024, with residential plumbing revenue up by 8.2%.

Paid leads for Roto-Rooter: Increased by 8.6% in Q3 2025 compared to Q3 2024, offsetting a decline in natural leads.

VITAS net revenue: Increased by 4.2% in Q3 2025 compared to Q3 2024, driven by a 2.5% increase in days-of-care and a 4.1% Medicare reimbursement rate increase.

Focus on hospital-based admissions: Renewed focus on increasing hospital-based admissions to ensure long-term stability in Florida.

Targeted campaign for Roto-Rooter: Implemented a multipronged campaign to boost high-revenue plumbing services, yielding positive results.

You have reached the limit Upgrade to access full content

Get started

Risk or Challenges

Florida Medicare Cap billing limitation: The company faced a $18.9 million billing limitation for the Florida Medicare Cap in 2025, slightly better than the $19 million estimate. However, this remains a significant financial constraint and requires ongoing mitigation strategies to avoid future limitations.

Shift from natural to paid leads in Roto-Rooter: The decline in natural leads and increased reliance on paid leads has caused margin pressure, with SG&A costs rising by $3.6 million in the quarter. This trend, while potentially reducing competition, adds financial strain and operational challenges.

Independent contractor revenue decline in Roto-Rooter: Revenue from independent contractors declined by 4.7% in Q3 2025 compared to the same period in 2024. Smaller operations in middle-market cities face resource constraints, limiting their ability to capitalize on growth opportunities.

Roto-Rooter EBITDA margin pressure: Adjusted EBITDA margin for Roto-Rooter declined by 351 basis points compared to Q3 2024, driven by increased SG&A costs and operational inefficiencies. While some improvement was noted, margins remain below long-term expectations.

Acuity mix shift in VITAS: The shift in acuity mix negatively impacted revenue growth by 121 basis points in Q3 2025. This reflects challenges in managing patient care levels and optimizing revenue streams.

Medicare Cap impact on VITAS revenue: Medicare Cap and other contra revenue changes negatively impacted VITAS revenue growth by approximately 124 basis points in Q3 2025, highlighting ongoing financial challenges in managing regulatory constraints.

You have reached the limit Upgrade to access full content

Get started

Guidance & Outlook

VITAS Florida Medicare Cap: Management anticipates no Medicare Cap billing limitation for the Florida program in 2026, reflecting successful mitigation strategies.

New Locations in Florida: The new Pinellas County location is on track to open in early November 2025, and the Marion County program, which opened in May 2025, is projected to double its ADC to 150 by the end of 2026.

Roto-Rooter Revenue and Margins: Management expects stabilization and a return to a predictable, sustainable growth trajectory for Roto-Rooter, despite current margins being below long-term expectations.

Guidance on Earnings Per Share: Management reiterates its guidance of $22 to $22.30 per share for 2025, excluding specific noncash and discrete items.

You have reached the limit Upgrade to access full content

Get started

Shareholder Return Plan

The selected topic was not discussed during the call.

You have reached the limit Upgrade to access full content

Get started

Key Q&A

Q:Can you explain the elements that bridge back to guidance in the fourth quarter for each segment?

A:Management explained that the fourth quarter is expected to show more seasonality. VITAS' fourth quarter is typically its best due to a rate increase on October 1, which boosts margins. Roto-Rooter also performs better in colder, wetter weather, which increases job volume. The difference between quarters is only a few million dollars, and management expects sequential margin improvement for Roto-Rooter and steady performance for VITAS.

Q:What are your thoughts on the elevated DSO and cash collections?

A:Management stated that the elevated DSO is a timing issue, mainly at VITAS, due to slower Medicaid payments. They emphasized that this is not indicative of any deterioration in collection efforts or ability to collect.

Q:How are you thinking about margins and growth rates for 2026, particularly with the Medicare rate changes?

A:Management is in the early stages of budgeting for 2026. They expect the fourth quarter to inform their strategy, particularly in Florida, where cap liability is generated. They anticipate revenue growth in the 8% range and margins between 17.5% and 18%. They are optimistic about improving long-stay patient categories responsibly to avoid cap issues.

Q:What is the outlook for Roto-Rooter’s competitive dynamics and G&A improvements?

A:Management noted that paid search leads are up, and competitive pressures for paid leads have decreased. They are encouraged by operational metrics like close rates. They aim to improve gross margins, which are currently in line with expectations but below long-term goals. They are also focusing on pricing discipline and minimizing costs while maximizing opportunities.

Q:How should we think about sustainable margins for Roto-Rooter given marketing cost pressures?

A:Management believes the long-term EBITDA margin for Roto-Rooter should be 25%-26%. They expect to absorb higher marketing costs through increased leads and revenue. They are implementing tighter controls on discounting and expect margin improvement over the next few quarters.

Q:What is the expected growth rate for Roto-Rooter’s top line?

A:Management expects better growth in 2026 compared to 2025, potentially in the 3%-5% range. They are optimistic due to green shoots in certain revenue categories and are working on a realistic and achievable budget.

Q:What gives you confidence in VITAS’ ability to manage Medicare Cap liabilities in Florida?

A:Management highlighted their strategy of focusing on hospital preadmit environments, which drives shorter length-of-stay patients. They are monitoring hospital admission ratios and length of stay closely. The rate increase in Florida is now more manageable, with a smaller headwind of $3-$4 million compared to $22-$25 million last year.

Q:How do you plan to improve VITAS’ margins in the fourth quarter?

A:Management expects a bump from the rate increase, better efficiencies, and targeted cost-cutting measures. They are managing costs program-by-program and have already seen SG&A reductions year-over-year.

Q:What is the outlook for VITAS’ patient mix and length of stay?

A:Management is focusing on balancing hospital admissions and long-stay patients. They aim to responsibly grow census and maintain a reasonable average length of stay, which should help mitigate Medicare Cap issues and improve profitability.

Q:Review of Unclear Management Responses

A:Management avoided providing specific guidance for 2026, citing the early stages of the budgeting process. They also used vague language when discussing the speed of returning to active census growth in Florida and the exact impact of marketing costs on Roto-Rooter’s margins.

You have reached the limit Upgrade to access full content

Get started

Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

CHE Transcript

Chemed Corporation (CHE) Presents at UBS Global Healthcare Conference 2025 Transcript

Neutral11-11

Chemed Corporation (CHE) Q3 2025 Earnings Call Transcript

Unknown10-29

Chemed Corporation (CHE) Q2 2025 Earnings Call Transcript

Unknown7-30

The earnings call presents a mixed picture. Positive elements include VITAS's revenue growth and strategic acquisitions, while negative aspects involve declining Roto-Rooter EBITDA and margin concerns. The Q&A session revealed management's efforts to address issues but also highlighted uncertainties, particularly with Roto-Rooter and VITAS admissions. The lack of detailed guidance and unclear responses create uncertainty, balancing the positive impact of share buybacks and strategic focus. Overall, the sentiment is neutral as the positive and negative factors counterbalance each other, leading to an expected stock price movement within the -2% to 2% range.

Chemed at BofA Securities Conference: Strategic Insights on VITAS and Roto-Rooter

Neutral5-14

CHE Report

Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the Quarterly Period EndedSeptember 30, 2025o

Frequently Asked Questions

Where does this earnings call transcript come from?

All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.

How soon is the transcript available after the earnings call ends?

Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.

Is the transcript edited or altered in any way?

No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.

Why do some answers appear as “Unclear” or “Inaudible”?

When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.

Who creates the AI Summary and Key Q&A highlights shown above the transcript?

They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.