Chemed’s Earnings Call: Mixed Sentiment with Growth and Challenges

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

Chemed’s recent earnings call painted a picture of mixed sentiment, with notable growth in VITAS admissions and revenue, bolstered by strategic acquisitions like Covington Health. However, Roto Rooter faced challenges, including a decline in EBITDA and contractor revenue, alongside the need to manage Medicare cap constraints carefully. While positive growth indicators are evident, particularly for VITAS, Roto Rooter’s performance and cap management issues present significant hurdles.

Strong Growth in VITAS Admissions

VITAS, a key segment of Chemed, reported a robust increase in admissions, totaling 18,139 in the first quarter of 2025. This marks a 7.3% improvement compared to the same period in 2024. The average daily census also expanded significantly by 13.1% to 22,244, indicating strong demand and operational efficiency in this segment.

VITAS Revenue and EBITDA Increase

VITAS’s financial performance was impressive, with net revenue reaching $407.4 million in Q1 2025, a 15.1% increase from the prior year. Adjusted EBITDA, excluding Medicare cap, grew by 15.9% to $70.3 million, showcasing the segment’s profitability and effective cost management.

Acquisition of Covington Health Boosts Performance

The strategic acquisition of Covington Health, completed in April 2024, has positively impacted Chemed’s financials. It contributed to a 3-4% increase in revenue, adjusted net income, and EBITDA, highlighting the acquisition’s role in enhancing the company’s overall performance.

Roto Rooter Commercial Revenue Growth

Roto Rooter, another significant segment of Chemed, saw its branch commercial revenue increase by 7.3% in Q1 2025. This growth was driven by a substantial 38% rise in excavation and a 14% increase in water restoration services, indicating strong demand in these areas.

Decline in Roto Rooter’s Overall EBITDA

Despite the growth in commercial revenue, Roto Rooter faced a decline in its overall EBITDA, which decreased by 2.4% compared to the prior year quarter. The EBITDA margin also fell by 108 basis points, reflecting challenges in maintaining profitability.

Reduction in Revenue from Independent Contractors

Roto Rooter experienced a 6.4% decline in revenue from independent contractors in Q1 2025 compared to the same period in 2024. This reduction highlights the challenges in managing contractor relationships and maintaining revenue streams from this segment.

Challenges with Medicare Cap Management

Chemed is focusing on hospital-based admissions, which come later in the disease trajectory, to provide a needed Medicare cap cushion. However, this strategy limits revenue and EBITDA margin growth, presenting a challenge in balancing cap management with financial performance.

Forward-Looking Guidance

During the earnings call, Chemed provided a comprehensive overview of its financial performance and strategic initiatives. The company maintained its earnings guidance, expressing optimism about sustaining growth through organic expansion and acquisitions. Key metrics included a 7.3% increase in VITAS admissions and a 15.1% rise in net revenue. Chemed is also expanding operations in Florida, with new programs in Pasco and Marion counties, indicating a strategic focus on growth and market penetration.

In conclusion, Chemed’s earnings call revealed a mixed outlook, with strong growth in VITAS and strategic acquisitions driving positive sentiment. However, challenges in Roto Rooter’s performance and Medicare cap management present hurdles that the company must navigate. Overall, Chemed remains optimistic about sustaining growth through strategic initiatives and market expansion.