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.
| Metric | Period | Current guidance |
|---|---|---|
| VITAS revenue prior to Medicare cap | FY2026 | Increase 5.5%-6.5% vs 2025 |
| VITAS average daily census | FY2026 | Increase 3.5%-4% |
| VITAS full year EBITDA margin prior to Medicare cap | FY2026 | 17.5%-18% |
| VITAS Medicare cap billing limitations | FY2026 | $9.5 million (Improved (down from 2025)) |
| Roto-Rooter revenue growth | FY2026 | 3%-3.5% |
| Metric | YoY | Note |
|---|---|---|
| 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 |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Florida Medicare cap | Heading toward a cap liability in Florida in 2025 | Position improved almost $25 million year-over-year; no billing limitation in Florida combined program as of January 2026 | Resolved/improving |
| VITAS admission mix rebalancing | Emphasized short-stay hospital admissions to fix cap | Refocusing to a more balanced hospital/community mix starting mid-January 2026, building revenue and margin over the year | Normalizing |
| Roto-Rooter water restoration write-offs | Historically slightly below 3% of gross revenue | Jumped above 4.5% in H2 2025; centralizing billing/collections, expecting a $4M-$6M tailwind in 2026 | Improving (recovery expected) |
| Roto-Rooter lead generation / search | Majority free natural leads; map visibility 72% in Oct 2024 | Shift to ~60%-65% paid leads at ~$90/lead; visibility recovered to ~35% from 24% low with new SEO provider | Stabilizing |
| Private equity competition | Disrupted paid search and offered services below cost | Threat largely diminished; competitors stopped buying franchises and paid lead costs stable for three quarters | Diminishing |
| VITAS geographic expansion | — | Fourth CON in two years (Manatee County); Pinellas, Marion, Pasco meeting or exceeding expectations | Expanding |