CHE — Chemed Corporation

Chemed Corp (CHE) Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• VITAS Healthcare:

  • Net revenue: $420 million, up 3.1% year-over-year.
  • Days of care increased by 2.2%.
  • Average revenue per day: $210.62, a 1.5% improvement.
  • Adjusted EBITDA (excluding Medicare Cap): $70.8 million, up 0.6%.
  • Adjusted EBITDA margin (excluding Medicare Cap): 16.8%.

• Roto-Rooter:

  • Residential revenue: $16.3 million, down 1.5% year-over-year.
  • Commercial revenue: $56.5 million, down 1.9%.
  • Adjusted EBITDA: $53.5 million, down 9.6%.
  • Adjusted EBITDA margin: 22.5%, a decline of 218 basis points.

2. Strategic Updates and Business Highlights

• VITAS Performance:

  • Achieved 19,394 admissions, a 6.9% increase from Q1 2025.
  • Successfully transitioned to a balanced patient mix, with hospital admissions at 43.8%.
  • Added over $32.5 million to the Medicare Cap cushion in Florida.
  • Management expressed confidence in returning to normalized growth after previous challenges.

• Roto-Rooter Developments:

  • For the first time since Q4 2022, residential plumbing and sewer revenue increased.
  • Paid leads rose by 18.7%, necessitating an increase in marketing spend by nearly $3 million.
  • Acquired franchises in San Francisco and Fort Worth for $20.6 million, expected to add $5-$5.5 million in revenue for the remainder of 2026.

3. Forward Guidance and Outlook

• VITAS:

  • Full-year average daily census (ADC) growth revised to 4.5%-5.5%, up from 3.5%-4%.
  • Revenue growth (excluding Medicare Cap) revised to 6.5%-7.5%, from 5.5%-6.5%.
  • Adjusted EBITDA margin (excluding Medicare Cap) projected at 18%-18.5%, up from 17.5%-18.5%.

• Roto-Rooter:

  • Revenue growth guidance remains at 3%-3.5%.
  • Adjusted EBITDA margin slightly lowered to 21.5%-22.5% due to persistent elevated marketing costs.

4. Bad News, Challenges, or Points of Concern

• Roto-Rooter:

  • Weather disruptions from ice and snow storms caused an estimated revenue loss of $3-$4 million.
  • Increased marketing costs due to changes in Google’s algorithm resulted in a reliance on paid leads, which could pressure margins.
  • Decline in revenue from independent contractors and water restoration services.

• VITAS:

  • Acuity mix negatively impacted revenue growth by 120 basis points.
  • Ongoing scrutiny regarding fraud in hospice care, particularly in California, poses regulatory risks.

5. Notable Q&A Insights

• Management acknowledged that headcount reductions contributed to improved margins but indicated plans to increase staffing to support growth.
• Concerns about the impact of fraud enforcement in California were discussed, emphasizing the need to ensure legitimate providers are not adversely affected.
• Roto-Rooter’s marketing strategy is under constant evaluation due to fluctuating lead generation dynamics, with expectations of continued high marketing costs.
• The company is open to further acquisitions in the Roto-Rooter segment, citing favorable market conditions for franchise purchases.

Overall, Chemed Corp reported a solid quarter driven by VITAS's performance, while Roto-Rooter showed signs of improvement despite facing challenges. The company remains optimistic about growth prospects and is adjusting its guidance accordingly.