Chemed ((CHE)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Chemed’s Recent Earnings Call: A Mixed Bag of Growth and Challenges
Chemed’s recent earnings call presented a balanced sentiment, highlighting growth in key areas such as VITAS admissions and Roto-Rooter’s residential plumbing revenues. However, these positive developments were countered by margin pressures and a decline in independent contractor revenues for Roto-Rooter, alongside challenges with VITAS Medicare Cap limitations. While the company’s strategic initiatives show promise, they are tempered by operational challenges.
VITAS Admissions Improvement
VITAS achieved a notable 5.6% increase in admissions during the quarter, with a particular focus on hospital-based admissions, which reached a high of 44.5%. This marks a significant post-pandemic period high, showcasing the company’s efforts to enhance its hospital partnerships and patient care services.
Roto-Rooter Residential Plumbing Growth
Roto-Rooter’s residential plumbing revenue saw an impressive 8.2% increase in the third quarter compared to the same period in 2024. This growth was driven by targeted campaigns, indicating a successful strategy in capturing the residential market’s demand for plumbing services.
VITAS Revenue Growth
VITAS reported a 4.2% increase in net revenue compared to the prior year, supported by a 2.5% increase in days-of-care and a 4.1% increase in Medicare reimbursement rates. This growth reflects the company’s ability to effectively manage its operations and leverage Medicare reimbursements.
Roto-Rooter Branch Revenue Growth
Roto-Rooter experienced a 3.4% increase in branch residential revenue and a 2.8% rise in commercial revenue for the quarter compared to the prior year. These gains highlight the company’s robust performance in both residential and commercial sectors.
Roto-Rooter Independent Contractor Decline
Despite overall growth, Roto-Rooter faced a 4.7% decline in revenue from independent contractors in the third quarter of 2025 compared to the same period in 2024. This decline was attributed to resourcing constraints, posing a challenge to the company’s contractor-based operations.
Roto-Rooter Margin Pressure
Roto-Rooter’s adjusted EBITDA decreased by 12.4% year-over-year, with a 351 basis point decline in adjusted EBITDA margin. This was primarily due to increased SG&A costs from paid leads, highlighting the financial pressures faced by the company.
VITAS Adjusted EBITDA Decline
VITAS experienced a 3.8% decline in adjusted EBITDA, excluding Medicare Cap, from the prior year. The adjusted EBITDA margin decreased by 157 basis points, reflecting ongoing financial challenges within the division.
VITAS Medicare Cap Limitations
The company accrued a $6.1 million Medicare Cap billing limitation in the third quarter, with $4.6 million for Florida and $1.5 million for other programs. This indicates ongoing challenges in managing Medicare Cap limitations, affecting the company’s financial performance.
Forward-Looking Guidance
In the third quarter of 2025, Chemed Corporation provided guidance indicating a mixed performance across its divisions. VITAS Healthcare showed a 4.2% increase in net revenue to $407.7 million, driven by a 2.5% increase in days-of-care and a 4.1% rise in Medicare reimbursement rates, despite a 3.8% decline in adjusted EBITDA. The company successfully navigated the Florida Medicare Cap issue, reducing the expected billing limitation to $18.9 million and projecting no cap limitation for 2026. Roto-Rooter reported a 1.1% revenue increase, with residential and commercial revenues rising by 3.4% and 2.8%, respectively, though independent contractor revenue fell by 4.7%. The transition from unpaid to paid leads led to a $3.6 million increase in SG&A costs, impacting EBITDA margins. Despite these challenges, Chemed reaffirmed its annual guidance of $22 to $22.30 per share, excluding specific noncash expenses and discrete items, citing seasonal factors and operational improvements expected in the fourth quarter as key contributors to achieving its financial targets.
In summary, Chemed’s recent earnings call highlighted both growth and challenges. While the company demonstrated significant improvements in VITAS admissions and Roto-Rooter’s residential plumbing revenues, it faced margin pressures and declines in independent contractor revenues. The forward-looking guidance remains optimistic, with expectations of operational improvements and financial target achievements in the upcoming quarters.