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. While the performance of both operating units did not meet our expectations for the second quarter of 2025, we remain confident in the overall fundamentals, growth potential, and strategic direction of both businesses. However, it is important to remember that over 600 patients transferred into VITAS in the second quarter of 2024 as a result of our April 2024 acquisition of Covenant Health. Our average daily census, or ADC, expanded to 22,318, an increase of 6.1% when compared to the prior year quarter.
The detailed rate information related to the reimbursement increase in Florida for the 2026 cap year will become available during the third quarter. We intend to update our assumptions regarding rates and overall outlook for the 2026 Medicare cap year in Florida in the third quarter earnings release. Roto-Rooter revenue increased 0.6% in the second quarter of 2025 compared to the same period of 2024, falling short of our internal expectations. Branch revenue, in particular, was softer than anticipated, with less than 1% growth compared to the prior year.
We continue to execute on the strategies implemented in 2024 that resulted in improved fourth quarter of 2024 and the first quarter of 2025 revenue trends. June and July residential revenue has rebounded to a level that is much closer to our internal expectations. This will cause some disruption in VITAS' operating metrics but positions them to return to a consistent higher growth rate for the long term. We remain confident that the competitive advantages enjoyed by Roto-Rooter will return its financial performance to a steadier growth trajectory.
| Metric | Period | Current guidance |
|---|---|---|
| VITAS revenue prior to Medicare cap (full year) | FY2025 | +7.5% to +8.5% vs. 2024 (revised) |
| VITAS adjusted EBITDA margin prior to Medicare cap (full year) | FY2025 | 18.2%-18.7% (revised) |
| Total Medicare cap billing limitation (calendar 2025) | FY2025 | $28.2 million ($19M Florida, $9.2M other) (revised) |
| Roto-Rooter additional casualty/workers' comp expense (2H) | 2H 2025 | $4 million ($2M per quarter) (new) |
| VITAS adjusted EBITDA margin (indicative) | FY2026 | ~17.5%-18.5% (preliminary, vs. ~19% in 2024) (new) |
| Metric | YoY | Note |
|---|---|---|
| VITAS net revenue | +5.8% to $396.2M | 6.1% more days of care and ~4.2% Medicare rate increase, partly offset by Medicare cap and acuity mix |
| VITAS average daily census | +6.1% to 22,318 | census expansion despite mix shift |
| VITAS admissions (excl. Covenant transfers) | +4.9% | growth tempered by deliberate short-stay focus and Florida cap pressure |
| VITAS adjusted EBITDA margin (excl. cap) | -163 bps to 16.2% | impact of admitting more lower-revenue short-stay patients |
| Roto-Rooter revenue | +0.6% | soft branch revenue from weak April/May consumer demand |
| Roto-Rooter adjusted EBITDA | -18.7% | labor inefficiency, higher commissions, casualty/workers' comp costs, and costlier paid-search leads |
| Roto-Rooter adjusted EBITDA margin | -517 bps to 21.8% | same drivers, including an out-of-period insurance accrual |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Florida Medicare cap | on track to mitigate as of Q1 2025 | Weak April/May Florida admissions revised projection to a $19M limitation; expected near zero in 2026 | Deteriorated then expected to improve |
| VITAS short-stay patient mix shift | community access program emphasized longer-stay | Emphasizing hospital/short-stay admissions to manage cap, lowering revenue growth and margin near-term | Intensifying |
| Long-stay patient bubble attrition | bubble created in 2022-2024 | Getting smaller; post-COVID hardier patients moderating with passage of time | Easing |
| Roto-Rooter consumer demand | improved Q4 2024 and Q1 2025 trends | Weak April/May from tariff-driven confidence hit; June/July rebounded | Recovering |
| Private equity / search competition at Roto-Rooter | local management poaching discussed | PE pressure on drain/plumbing volumes persists; Google shifting leads to paid search | Ongoing |
| New Florida CON locations (Marion, Pinellas) | — | Ramping; provide extra time to right-size mix, but excluded from current cap projections | Improving |
| Capital deployment | Covenant hospice acquisition prior | No strategy change; pursuing right-priced acquisitions plus expected Q3 buybacks | Unchanged |