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CHEMED CORP (CHE)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 consolidated revenue was $624.9M (+3.1% YoY) and adjusted diluted EPS was $5.27; GAAP diluted EPS was $4.46. Management reiterated FY25 adjusted EPS guidance of $22.00–$22.30 and expects no Florida Medicare cap billing limitation in FY26, assuming the rate differential does not recur . Versus S&P Global consensus, CHE was modestly below on revenue ($624.9M vs $626.0M*) and EPS ($5.27 vs $5.37*).
  • VITAS net patient revenue rose 4.2% YoY to $407.7M, with ADC up 2.5% to 22,327 and admissions up 5.6%; adjusted EBITDA (ex Medicare cap) was $70.4M with a 17.0% margin (−157 bps YoY) as higher hospital-based short-stay mix compressed margins .
  • Roto-Rooter revenue increased 1.1% to $217.2M; gross margin fell to 50.7% (from 52.9% YoY) and adjusted EBITDA margin to 22.7% (−351 bps YoY) amid a shift to paid leads (+$3.6M SG&A) and contractor weakness (−4.7%). Management sees sequential margin improvement into Q4 on seasonality and operational fixes .
  • Balance sheet remains strong: cash and equivalents $129.8M, no debt; share repurchases of 407,500 shares for $180.8M in Q3 ($443.62/share) leave ~$301.8M remaining authorization. Undrawn revolver capacity is ~$404.5M net of letters of credit .
  • Near-term catalysts: Florida cap risk engineered down (Q3 accrued $6.1M vs $16.4M in Q2), Pinellas County program opening in early November, and typical Q4 rate uplift and weather-driven demand at Roto-Rooter. Management’s tone targets the upper end of guidance for FY25 .

What Went Well and What Went Wrong

What Went Well

  • VITAS growth held: net patient revenue $407.7M (+4.2%), ADC 22,327 (+2.5%), admissions 17,714 (+5.6%). “Adjusted EBITDA, excluding Medicare Cap, totaled $70.4 million… Adjusted EBITDA margin… was 17.0%” .
  • Florida cap mitigation progressing: Medicare cap accrued $6.1M in Q3 (vs $16.4M in Q2); management “continues to believe there will be no Medicare cap billing limitation related to our Florida program in 2026” .
  • Roto-Rooter showed “strength in our residential plumbing revenue service line… increased 8.2%” aided by targeted campaigns and improving paid lead dynamics; sequential EBITDA margin improved ~90 bps vs Q2 .

What Went Wrong

  • Margin pressure at both segments: VITAS adjusted EBITDA margin down 157 bps YoY due to higher hospital-driven short-stay mix; Roto-Rooter adjusted EBITDA margin down 351 bps YoY on paid leads, SG&A increase, and contractor softness .
  • Roto-Rooter gross margin fell to 50.7% (from 52.9% YoY); total leads down and shift from unpaid to paid leads increased marketing costs and hurt margins .
  • Street modeled higher Q3; management acknowledged results “fell a little bit below what the street was modeling” but highlighted Q4 seasonality (VITAS rate increase Oct 1; Roto-Rooter weather demand) to bridge back to guidance .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$646.9 $618.8 $624.9
GAAP Diluted EPS ($)$4.86 $3.57 $4.46
Adjusted Diluted EPS ($)$5.63 $4.27 $5.27
Segment Revenue ($USD Millions)Q1 2025Q2 2025Q3 2025
VITAS$407.4 $396.2 $407.7
Roto-Rooter$239.5 $222.6 $217.2
Segment MarginsQ1 2025Q2 2025Q3 2025
VITAS Gross Margin (ex cap)23.7% 22.3% 22.5%
VITAS Adjusted EBITDA Margin (ex cap)17.2% 16.2% 17.0%
Roto-Rooter Gross Margin50.9% 49.0% 50.7%
Roto-Rooter Adjusted EBITDA Margin24.7% 21.8% 22.7%
VITAS KPIsQ1 2025Q2 2025Q3 2025
Average Daily Census (ADC)22,244 22,318 22,327
Admissions18,139 17,545 17,714
Avg Revenue per Patient per Day ($)$207.58 $207.03 $205.08
High Acuity Days of Care (% of total)2.6% 2.5% 2.3%
Avg Length of Stay (days)118.7 137.1 109.7
Median Length of Stay (days)16 20 18
Medicare Cap Accrual ($USD Millions)$2.3 $16.4 $6.1
Q3 2025 Actual vs S&P Global ConsensusActualConsensus*# of Estimates*
Revenue ($USD)$624.9M $626.0M*4*
Primary EPS ($)$5.27 $5.37*4*

Values with asterisks retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPS (diluted)FY 2025$24.95–$25.45 $22.00–$22.30 (reiterated in Q3) Lowered in Q2; Maintained in Q3
VITAS Revenue Growth (pre cap)FY 2025—7.5%–8.5% Introduced Q2; maintained
VITAS Adjusted EBITDA Margin (pre cap)FY 2025—18.2%–18.7% Introduced Q2; maintained
Calendar 2025 Medicare Cap (Total)FY 2025—~$28.2M (FL ~$19M; Other ~$9.2M) Introduced Q2; maintained
Roto-Rooter Revenue GrowthFY 2025—1.25%–1.75% Introduced Q2; maintained
Roto-Rooter Adjusted EBITDA MarginFY 2025—23.5%–24.5% Introduced Q2; maintained
Effective Tax RateFY 2025—25.3% Introduced Q2
Diluted Share CountFY 2025—14.7M Introduced Q2
Florida Medicare Cap ExpectationFY 2026—No cap assumed (rate differential not recurring) Affirmed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Florida Medicare CapQ1: Cap accrual $2.3M; hospital admissions 49% to mitigate; new CONs in Pasco/Marion . Q2: Cap accrual $16.4M incl. FL catch-up; projecting ~$19M FL cap; expect no cap in FY26 .Q3: Cap accrual $6.1M; FL program ended FY25 cap with $18.9M; management expects no FL cap in FY26 .Improving mitigation; confidence in FY26 no cap.
Hospital-based short-stay strategyQ1: Deliberate shift to hospital referrals (49%) to manage cap . Q2: Hospital admissions +9%; long-stay channels reduced .Q3: Hospital admissions ratio at 44.5% in FL; above 42% target; may moderate for profitability .Strategy effective; margin trade-off noted, aiming for balance.
VITAS margins/efficiencyQ1: Adj EBITDA margin 17.2% . Q2: 16.2% amid mix shift .Q3: 17.0% (ex cap); SG&A down YoY; rate increase from Oct 1 expected to lift Q4 margins .Sequential stabilization; Q4 uplift expected.
Roto-Rooter leads and marketingQ1: Leads −7.8%; focus on add-ons (water restoration/excavation) . Q2: Paid leads >50% of total; cost pressure; insurance accruals hit margins .Q3: Paid leads +8.6%; SG&A +$3.6M from paid leads; sequential EBITDA margin +90 bps; aiming for 25–26% LT EBITDA margin .Stabilizing revenue; gradual margin recovery expected.
SeasonalityQ2: Expect stronger Q4/Q1 for Roto-Rooter, VITAS rate uplift Q4 .Q3: Q4 framed as bridge to guidance midpoint/upper end .Seasonal tailwind reiterated.
Regional expansions (FL CON)Q1: Pasco launched; Marion to open mid-May . Q2: Pinellas approved; not in FY26 cap projections .Q3: Pinellas opening early Nov; Marion ADC ~75, potential to double by end of 2026 .Expansion supports cap cushion and growth.
Receivables/DSOQ1: AR timing driven by OAS $48M refund and PIP timing . Q2: —Q3: Elevated DSO mainly Medicaid timing; not a collection issue .Timing effects; operationally normal.

Management Commentary

  • “VITAS continued to execute the strategies required to fully mitigate any potential Florida Medicare cap billing limitation for the government's fiscal 2026 year… Management continues to believe there will be no Medicare cap billing limitation related to our Florida program in 2026” .
  • “Residential plumbing revenue increased 8.2% in the third quarter of 2025… A multi-pronged campaign to target selected high-revenue dollar plumbing services yielded positive results” .
  • “The shift from unpaid leads to paid leads was the main driver of the $3.6 million increase in SG&A costs in the quarter. This led to EBITDA… slightly lower than our expectations” .
  • “Adjusted EBITDA… excluding Medicare cap, totaled $70.4 million… margin… 17.0%, which is 157 basis points below the prior year period. The lower EBITDA margin… reflects the impact of admitting more hospital-based short-stay patients” .
  • Tone into Q4: “We reiterated guidance… It is… not aspirational… we’re shooting at the upper end of guidance” .

Q&A Highlights

  • Bridging to Q4 guidance: Seasonality drives higher margins (VITAS rate reset Oct 1; Roto-Rooter colder/wetter demand). Differences between Q3 and Q4 are “only a couple million dollars” per segment in their internal bridge .
  • VITAS 2026 framework: Early budgeting suggests revenue growth ~8% and EBITDA margin ~17.5%–18% (prelim view), contingent on Q4 cap dynamics; optimism as hospital mix and LOS normalize .
  • Roto-Rooter margins: Medium-term target 25%–26% EBITDA margin; paid leads to persist but offset by operational improvements and pricing discipline as call volumes improve .
  • Receivables/DSO: Elevated DSO mainly timing in Medicaid; no deterioration in collections .
  • Florida rate differential: Expected 30–40 bps spread (FL ~3% vs national ~2.6%–2.7%) equating to a $3–$4M headwind vs ~$22–$25M last year; manageable with current strategy .

Estimates Context

  • CHE modestly missed consensus on revenue and EPS: $624.9M vs $626.0M* revenue; $5.27 vs $5.37* EPS. Four estimates in each category*. Given operational seasonality and rate uplift in Q4, Street models likely to shift toward upper-end guidance if Q4 margin uplift materializes . Values retrieved from S&P Global.

Key Takeaways for Investors

  • VITAS execution remains the stock’s core narrative: ADC and admissions growth persisted while margin pressure from hospital short-stay mix is deliberate to extinguish Florida cap risk; Q4 rate uplift should aid margins and could catalyze estimate upward revisions if delivered .
  • Florida cap risk materially reduced: Q3 accrued $6.1M (vs $16.4M in Q2), FL cap for cap year ended at ~$18.9M; management confidently guides to no FL cap in FY26—de-risking a key overhang .
  • Roto-Rooter is stabilizing: sequential margin improvement and targeted plumbing initiatives point to incremental recovery; watch Q4 seasonality and paid-lead cost discipline for proof points toward 25%+ EBITDA margin trajectory .
  • Shareholder returns supported by balance sheet: cash $129.8M, no debt, robust buybacks ($180.8M in Q3; ~$301.8M authorization remaining); financial flexibility to balance repurchases and selective acquisitions .
  • Near-term trading setup: Q4 could present a positive inflection with VITAS rate reset and Roto-Rooter seasonal demand—management targeting upper end of FY25 guidance; monitor Pinellas launch and hospital-admission ratio moderation toward 42% target for margin lift .
  • Estimate implications: Slight miss vs consensus in Q3; if Q4 seasonal uplift and margin recovery materialize, consensus may move upward within guidance range, particularly on EPS . Values retrieved from S&P Global.
  • Risk watch: Paid lead mix at Roto-Rooter (SG&A sensitivity), insurance accrual volatility, and Medicaid timing in receivables; counterbalanced by operational initiatives and improving competitive dynamics .