Chemed Earnings Call: VITAS Shines, Roto-Rooter Strains

Chemed ((CHE)) has held its Q1 earnings call. Read on for the main highlights of the call.

Chemed’s latest earnings call struck an overall optimistic tone, with hospice unit VITAS powering stronger results and higher guidance while plumbing business Roto-Rooter continued to wrestle with cost and pricing pressures. Management framed the year as increasingly constructive, driven by VITAS’ momentum, but made clear that execution at Roto-Rooter remains a key swing factor for margins.

VITAS Admissions and Census Momentum

VITAS posted solid demand in Q1 2026, with admissions rising 6.9% year over year to 19,394 and average daily census increasing 2.2% to 22,723. On the back of this volume strength, management lifted full-year ADC growth guidance to 4.5%–5.5%, up from a prior 3.5%–4%, signaling confidence in continued hospice demand.

Revenue Growth and Margin Resilience at VITAS

Net revenue at VITAS reached $420.0 million, up 3.1% from the prior year as average revenue per day climbed to $210.62, a gain of 146 basis points. Adjusted EBITDA excluding Medicare Cap inched up 0.6% to $70.8 million, translating to a 16.8% margin and underscoring stable profitability despite mix and reimbursement headwinds.

Florida Cap Cushion Strengthens Balance Sheet Flexibility

The hospice unit also improved its regulatory positioning in Florida, adding more than $32.5 million to its Medicare Cap cushion in the state’s combined program during Q1. Management said the prior Florida cap issue is now behind the company and that it does not anticipate any combined program cap limitations for fiscal 2026.

Roto-Rooter Shows Early Signs of Residential Recovery

At Roto-Rooter, trends in core residential work finally ticked up, with the first revenue increases in residential plumbing and residential sewer and drain since late 2022. Total leads grew 3.3% year over year and paid leads surged 18.7%, lifting paid leads to 53.4% of the mix versus 46.5% a year ago as the company leaned harder into marketing.

Operational Gains and Franchise Buybacks Support Growth

Chemed reported operational progress in water restoration, where centralized billing and collections cut write-offs by $1.5 million versus Q1 2025. The company also repurchased the San Francisco and Fort Worth Roto-Rooter franchise territories for about $20.6 million, deals expected to add $5.0–$5.5 million of revenue in 2026 and be immediately accretive to earnings.

Roto-Rooter Revenue Softness and EBITDA Compression

Despite residential green shoots, Roto-Rooter’s financials remained under pressure as branch commercial revenue fell 1.9% to $56.5 million and branch residential revenue slipped 1.5% to $16.3 million. Adjusted EBITDA dropped 9.6% year over year to $53.5 million and margins contracted by 218 basis points to 22.5%, reflecting weaker volumes and higher costs.

Higher Marketing Spend Weighs on Margins

The heavier reliance on paid leads came at a cost, with marketing expenses rising by roughly $3.0 million in Q1 2026 compared with the prior year. Management expects these elevated marketing outlays to persist and trimmed Roto-Rooter’s full-year adjusted EBITDA margin outlook to 21.5%–22.5% from 22.5%–23% to reflect the margin drag.

Weather Disruptions Pressure Top Line

Unusual ice and snow storms across about 24 Roto-Rooter branches further dented performance, as operations were disrupted for portions of the quarter. Management estimated that these weather events resulted in net lost revenue of $3.0–$4.0 million in Q1, adding a temporary headwind on top of underlying demand and pricing issues.

Water Restoration Pricing and Mix Challenges

During the transition to centralized billing, Roto-Rooter’s water restoration business saw average revenue per job fall roughly 13% in Q1 2026, signaling significant pricing and mix pressure. Revenue from independent contractors in this segment declined 3.3% year over year, and management acknowledged that overall pricing and mix remain below expectations.

VITAS Revenue Mix and Medicare Cap Headwinds

Within VITAS, an acuity mix shift reduced revenue growth by about 120 basis points in the quarter, while Medicare Cap and contra revenue changes shaved another roughly 47 basis points. The hospice business accrued $2.4 million in Medicare Cap billing limitations in Q1, underscoring ongoing reimbursement complexity even as overall results improved.

Shorter Length of Stay Adds Revenue Pressure

VITAS also experienced a meaningful drop in patient duration, with average length of stay declining to 102.7 days from 118.7 days a year ago and median length of stay dipping to 15 days. This shift toward shorter-stay patients can weigh on revenue per admission and mix, partially offsetting the benefits of higher admissions and census growth.

Upgraded Outlook Driven by VITAS Strength

Chemed raised its 2026 outlook after VITAS’ better-than-expected Q1, now projecting ADC growth of 4.5%–5.5% and companywide revenue growth excluding Medicare Cap of 6.5%–7.5%. Consolidated adjusted EBITDA margin excluding the Cap is expected at 18.0%–18.5%, Roto-Rooter revenue growth is still pegged at 3.0%–3.5%, and adjusted EPS is guided to $20.00–$24.75 based on a 24.5% tax rate and 13.6 million diluted shares.

Chemed’s call painted a tale of two businesses, with VITAS delivering steady growth and margin stability while Roto-Rooter works through cyclical, cost and pricing issues. Investors will likely focus on whether VITAS can sustain its improved trajectory and whether Roto-Rooter’s marketing and operational investments can translate into a cleaner, higher-margin growth profile over the balance of 2026.