What Management Said

Read the full Q1 2026 transcript ↗

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. These factors combined to allow VITAS to achieve higher than expected revenue growth and EBITDA margins while continuing to add cushion to the Medicare cap position in our Florida combined position program. We are more confident than ever that VITAS has put the Florida cap issue of 2025 behind us and has returned to a normalized rate of growth. For the first time since the fourth quarter of 2022, residential plumbing and residential sewer and drain revenue both increased during the quarter.

We consider these Roto-Rooter's core services, which drive the add-on revenue from excavation and water restoration. Driving the increase in core residential service revenue was an increase in total leads of 3.3%. The change of approximately 7% required Roto-Rooter to increase marketing spend by almost $3 million in the quarter, compared to the first quarter of 2025. We estimate that these service disruptions resulted in a net lost revenue of between $3 million and $4 million during the quarter.

These two acquisitions are anticipated to add between $5 million and $5.5 million of revenue for the remainder of 2026. However, initially, growth, gross margins, EBITDA margins, pricing, and mix of service offerings tend to be below the average of our existing Roto-Rooter portfolio. VITAS net revenue was $420 million in the first quarter of 2026, which is an increase of 3.1% when compared to the prior-year period. This revenue increase is the result of a 2.2% increase in days of care and a geographically weighted average Medicare reimbursement rate increase of approximately 2.6%.

What went well
  • VITAS performance exceeded even the high end of expectations in the first quarter, with admissions of 19,394 up 6.9% versus the prior year and average daily census up 2.2% to 22,723, achieved while keeping full-time equivalents below budgeted targets.
  • VITAS net revenue rose 3.1% to $420 million on a 2.2% increase in days of care and an approximately 2.6% Medicare reimbursement rate increase, while adding over $32.5 million to the Florida combined program cap cushion, leaving management more confident than ever that the 2025 cap issue is behind it.
  • Hospital-directed admissions grew 13.6%, and new Florida starts (Marion, Pasco, and Pinellas counties) delivered 526 combined admissions, exceeding expectations, with Manatee County opening planned for late Q2 or early Q3.
  • At Roto-Rooter, for the first time since the fourth quarter of 2022, both residential plumbing and residential sewer and drain revenue increased, driven by a 3.3% rise in total leads and an 18.7% increase in paid leads.
  • Centralized water restoration billing improved collections, producing a $1.5 million improvement in write-offs.
  • Strong results prompted Chemed to raise full-year guidance, with the revised midpoint representing a 13% increase over 2025 adjusted EPS of $21.55.
What went wrong
  • Roto-Rooter adjusted EBITDA fell 9.6% to $53.5 million, with adjusted EBITDA margin down 218 basis points to 22.5%, driven mainly by roughly $3 million higher internet marketing costs as natural/free Google leads fell almost 16% and the company had to pay for more of its leads.
  • Unusual ice and snowstorms disrupted service at 24 branches across five days, resulting in an estimated $3-$4 million of net lost revenue.
  • Roto-Rooter branch residential revenue declined 1.5% and commercial revenue fell 1.9%, while water restoration was the only residential line to decline as average revenue per water restoration job dropped roughly 13% amid the billing centralization transition.
  • Revenue from independent contractors fell 3.3%, as those smaller, mom-and-pop-style operations continued to perform below expectations.

Guidance Changes

MetricPeriodCurrent guidance
VITAS full-year ADC growthFY20264.5%-5.5% (raised)
VITAS revenue growth ex-Medicare capFY20266.5%-7.5% (raised)
VITAS EBITDA margin ex-Medicare capFY202618%-18.5% (raised)
Roto-Rooter revenue growthFY20263%-3.5% (unchanged)
Roto-Rooter adjusted EBITDA marginFY202621.5%-22.5% (lowered slightly on elevated marketing costs)
Adjusted EPSFY2026$24-$24.75 (raised (~13% increase at midpoint vs 2025))

Performance Breakdown

MetricYoYNote
VITAS net revenue +3.1% ($420M) 2.2% higher days of care and ~2.6% Medicare rate increase, partly offset by 120 bps acuity mix drag
VITAS admissions +6.9% (19,394) accelerated admissions from non-hospital pre-admission locations while maintaining high hospital-based admissions
VITAS adjusted EBITDA ex-cap +0.6% ($70.8M) higher census served efficiently with FTEs below budget; margin 16.8%
Roto-Rooter adjusted EBITDA -9.6% ($53.5M) increased internet marketing costs; margin down 218 bps to 22.5%
Roto-Rooter residential revenue -1.5% ($166.3M) weather disruption and ~13% lower water restoration revenue per job, despite gains in other lines
Roto-Rooter commercial revenue -1.9% ($56.5M) weather events, though branches with commercial business managers were up ~10%

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
VITAS Florida Medicare cap position2025 cap circumstance / billing limitationover $32.5M added to cap cushion in Q1; no cap limitation recorded or anticipated for the Florida combined program in 2026Resolved/improving
VITAS patient mix balancetransition to balance short-stay and long-stay; ALOS 118.7 days in Q1 2025Florida hospital admissions 43.8% (target 42-45%); ALOS 102.7 daysRebalanced toward target
Roto-Rooter core residential servicesdeclining since Q4 2022residential plumbing and sewer/drain both increased for the first time since Q4 2022Improving/inflecting
Google/SEO lead dynamics46.5% paid leads in Q1 2025; ~55% free leads less than three years ago53.4% of leads paid; free/natural leads down ~16% on algorithm changes; marketing spend up ~$3MStructurally costlier
Hospice fraud enforcement (California)—supportive of CMS efforts to root out fraud; cautious that legitimate providers and patient access are not collateral damageWatchful
Roto-Rooter franchise acquisitions—acquired San Francisco and Fort Worth franchises for ~$20.6M, adding $5-$5.5M revenue for remainder of 2026; good acquisition environmentExpanding

Q&A Summary

How much of VITAS margin came from headcount reduction, and will you add labor capacity?
VITAS averaged roughly 100 FTEs below budget in the quarter and served the increased ADC efficiently, but that is not sustainable; the company raised planned hiring to about 60 FTEs per month for the rest of the year to support budgeted ADC growth.
Is the higher Roto-Rooter marketing expense the right run rate going forward?
Yes; free/natural Google leads were down about 16% on algorithm changes, forcing the company to pay for more leads, so elevated marketing costs are expected to continue, with the guidance change reflecting about $1 million of added marketing per quarter for the next three quarters.
Why is Roto-Rooter full-year revenue growth unchanged despite the franchise acquisitions?
The roughly $5 million of acquisition revenue is offset by continued headwinds, including independent contractor underperformance and lower water restoration revenue per job, keeping revenue in line with the original outlook.
Will you do more Roto-Rooter franchise acquisitions this year?
Likely yes; the operating environment has multi-generational franchise holders considering selling, and while San Francisco and Fort Worth were unusual plums, more typically available are groups of smaller franchisees that fit the independent contractor portfolio.
How should we think about community-based admissions in the new Florida markets given the cap situation?
Management is balancing pre-admit sources daily and feels good about it; in new starts, all patients are effectively short-stay for at least the first six months because there is no existing base of long-stay patients.
What is the initial read on the proposed 2027 Florida Medicare rate increase versus the national average?
At a high level, management thinks the Florida rate increase might be slightly lower than the national average, but they are still crunching numbers and details (the final wage rule) typically are not set until late in the third quarter.

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Q1 2026 call
Reported 2026-04-24 · figures from the Chemed Corp Q1 2026 earnings call.

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