Chemed Corp: Form 10-Q for the period ended Sep 30, 2025

Executive Summary

We operate through our two wholly-owned subsidiaries, VITAS Healthcare Corporation and Roto-Rooter Group, Inc. VITAS focuses on hospice care that helps make terminally ill patients’ final days as comfortable as possible. Through its teams of doctors, nurses, home health aides, social workers, clergy and volunteers, VITAS provides direct medical services to patients, as well as spiritual and emotional counseling to both patients and their families. Roto-Rooter’s services are focused on providing plumbing, drain cleaning, excavation, water restoration, and other related services to both residential and commercial customers. Through its network of company-owned branches, independent contractors and franchisees, Roto-Rooter offers plumbing and drain cleaning service to over 90% of the U.S. population.

The vast majority of the Company’s operations are located in the United States. As both operations are service companies, our employees are the most critical resource of the Company. We have very little exposure related to customers, vendors, or employees in other regions of the world. We continue to monitor macroeconomic trends and uncertainties such as inflation, the effects of recently implemented tariffs, and the potential imposition of modified or additional tariffs, which may have adverse effects on net sales and profitability. Based on preliminary analysis of the potential effects of the announced tariffs and these other factors, we do not expect a material negative effect on our net sales or profitability for the remainder of fiscal year 2025. However, we are continuing to evaluate these factors and their potential effects as well as our ability to potentially offset all or a portion of cost increases through pricing actions and cost savings efforts for fiscal year 2026 planning. Economic pressures including the challenges of high inflation and the effects of increased tariffs may negatively affect our net sales and profitability in the future.

The following is a summary of the key operating results (in thousands except per share amounts):

Adjusted net income, adjusted diluted EPS, earnings before interest, taxes and depreciation and amortization (“EBITDA”), Adjusted EBITDA and Adjusted EBITDA as a percent of revenue are not measures derived in accordance with US GAAP. We provide non-GAAP measures to help readers evaluate our operating results and to compare our operating performance with that of similar companies that have different capital structures. Our non-GAAP measures should not be considered in isolation or as a substitute for comparable measures presented in accordance with GAAP. A reconciliation of our non-GAAP measures is presented on pages 39-41.

For the three months ended September 30, 2025, the increase in consolidated service revenues and sales was driven by a 4.2% increase at VITAS and by a 1.1% increase at Roto-Rooter. The increase in service revenues at VITAS is comprised primarily of 2.5% increase in days-of-care and a geographically weighted average Medicare reimbursement rate increase of approximately 4.1%. Acuity mix shift negatively impacted revenue growth by 121-basis points in the quarter when compared to the prior year revenue and level-of-care mix. The combination of Medicare cap and other contra revenue changes decreased revenue growth by 124-basis points. The increase in service revenues at Roto-Rooter was driven by an increase in plumbing, excavation and water restoration offset by a decrease in drain cleaning.

For the nine months ended September 30, 2025, the increase in consolidated service revenues and sales was driven by an 8.2% increase at VITAS and by a 1.2% increase at Roto-Rooter. The increase in service revenues at VITAS is comprised primarily of 6.6% increase in days-of-care and a geographically weighted average Medicare reimbursement rate increase of approximately 3.8%. Acuity mix shift negatively impacted revenue growth by 100-basis points for the year when compared to the prior year revenue and level-of-care mix. The combination of Medicare cap and other contra revenue changes decreased revenue growth by 120-basis points. The increase in service revenues at Roto-Rooter was driven by an increase in excavation and water restoration offset by a decrease in plumbing and drain cleaning.

On April 17, 2024, VITAS completed the purchase of all hospice operations and an assisted living facility from Covenant Health and Community Services, Inc d/b/a/ Covenant Care (“Covenant”) for an aggregated purchase price of $85.0 million in cash.

The pro forma revenue and earnings for the Company for the three and nine months ended September 30, 2025 as if the Covenant acquisition made in 2024 was completed on January 1, 2024 are as follows (in thousands, except per share data):

Financial Condition

Liquidity and Capital Resources

Material changes in the balance sheet accounts from December 31, 2024 to September 30, 2025 include the following:

A $44.4 million increase in accounts receivable due to the timing of payments. Other significant changes in our accounts receivable balances are typically driven by the timing of payments received from the Federal government at our VITAS subsidiary. We typically receive a payment in excess of $60.0 million from the Federal government for hospice services every other Friday. The timing of a period end will have a significant impact on the accounts receivable at VITAS. These changes generally normalize over a two-year period, as cash flow variations in one year are offset in the following year.

A $47.6 million decrease in other assets primarily related to the refund of the OAS deposit.

A $12.4 million decline in accrued compensation due primarily to the payment of 2024 bonuses in the first quarter of 2025, as well as lower bonus expense in 2025.

A $12.2 million increase in other current liabilities due primarily to the increase in Medicare Cap liability.

A $16.3 million decrease in deferred income taxes due primarily to the refund of the OAS deposit.

Net cash provided by operating activities increased $2.2 million from September 30, 2024 to September 30, 2025. See the Unaudited Consolidated Statements of Cash Flow on page 5 for the detail components making up the change.

Management continually evaluates cash utilization alternatives, including share repurchase, debt repurchase, acquisitions and increased dividends to determine the most beneficial use of available capital resources.

We anticipate that our operating income and cash flows will be sufficient to operate our business and meet any commitments for the foreseeable future.

Commitments and Contingencies

On June 28, 2022, we replaced our existing credit facility with a fifth amended and restated Credit Agreement (“2022 Credit Facilities”). Terms of the 2022 Credit Facilities consist of a five-year $450.0 million revolver as well as a five-year $100.0 million term loan. The 2022 Credit Facilities have a floating interest rate that is generally SOFR plus an additional tiered rate which varies based on our current leverage ratio. As of September 30, 2025, the interest rate is SOFR plus 100 basis points. The 2022 Credit Facilities include an expansion feature that provides the Company the opportunity to increase its revolver and/or term loan by an additional $250.0 million.

We have issued $45.5 million in standby letters of credit as of September 30, 2025, mainly for insurance purposes. Issued letters of credit reduce our available credit under the 2022 Credit Facilities. As of September 30, 2025, we have approximately $404.5 million of unused lines of credit available and are eligible to be drawn down under our revolving credit facility. Management believes its liquidity and sources of capital are satisfactory for the Company’s needs in the foreseeable future.

Collectively, the terms of the 2022 Credit Facilities require us to meet various financial covenants, to be tested quarterly. We are in compliance with all financial and other debt covenants as of September 30, 2025 and anticipate remaining in compliance throughout the foreseeable future.

We are subject to various lawsuits and claims in the normal course of our business. In addition, we periodically receive communications from governmental and regulatory agencies concerning compliance with Medicare and Medicaid billing requirements at our VITAS subsidiary. We establish reserves for specific, uninsured liabilities in connection with regulatory and legal action that we deem to be probable and estimable. We disclose the existence of regulatory and legal actions when we believe it is reasonably possible that a loss could occur in connection with the specific action. In most instances, we are unable to make a reasonable estimate of any reasonably possible liability due to the uncertainty of the outcome and stage of litigation. We record legal fees associated with legal and regulatory actions as the costs are incurred.

See Note 10 in the Notes to the Unaudited Consolidated Financial Statements in Item 1 above for a description of current material legal matters.

Results of Operations

Three months ended September 30, 2025 versus 2024 - Consolidated Results

Our service revenues and sales for the third quarter of 2025 increased 3.1% versus services and sales revenues for the third quarter of 2024. Of this increase, a $16.3 million increase was attributable to VITAS, and a $2.4 million increase at Roto-Rooter. The following chart shows the components of revenue by operating segment (in thousands):

Days of care at VITAS during the quarters were as follows:

The increase in service revenues at VITAS is comprised primarily of 2.5% increase in days-of-care and a geographically weighted average Medicare reimbursement rate increase of approximately 4.1%. Acuity mix shift negatively impacted revenue growth by 121-basis points in the quarter when compared to the prior year revenue and level-of-care mix. The combination of Medicare cap and other contra revenue changes decreased revenue growth by 124-basis points.

The increase in plumbing revenues for the third quarter of 2025 versus 2024 is attributable to a 0.2% increase in price and service mix shift and a 5% increase in job count. The decrease in drain cleaning revenues for the third quarter of 2025 versus 2024 is attributable to a 3.5% increase in price and service mix offset by a 4.6% decrease in job count. Excavation and water restoration jobs are generally sold as a result of initial calls from customers regarding drain cleaning issues. As a result, excavation revenues increased 5.9% and water restoration revenues increased 6.6%. Contractors operations decreased 4.7%.

The consolidated gross margin was 31.5% in the third quarter of 2025 as compared with 34.6% in the third quarter of 2024. On a segment basis, VITAS’ gross margin was 21.3% in the third quarter of 2025 as compared with 24.6% in the third quarter of 2024. The decline is related to an increase in Medicare Cap liability of $3.8 million in the third quarter of 2025 compared to the third quarter of 2024 and an increase in variable patient care expenses and wages. The Roto-Rooter segment’s gross margin was 50.7% for the third quarter of 2025 as compared with 52.9% in the third quarter of 2024. The decline is primarily due to an increase in variable expenses.

Selling, general and administrative expenses (“SG&A”) comprise (in thousands):

SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts for the third quarter of 2025 were up 6.5% when compared to the third quarter of 2024. $2.7 million of this increase was the result of a severance accrual related to one VITAS executive as well as a $2.3 million increase in legal expense mainly at VITAS in the third quarter of 2025 compared to the third quarter of 2024. The remaining increase is primarily related to variable selling expenses, mainly internet marketing costs at Roto-Rooter.

Other income – net comprise (in thousands):

We invest excess cash in money market funds with major commercial banks. We closely monitor the creditworthiness of the institutions with which we invest our overnight funds. Chemed invests excess cash in money market funds holding US Treasuries. Deposits and withdrawals are made daily, based on the Company’s excess cash balance. There are no penalties associated with withdrawals. The accounts bear interest at a normal market rate.

Our effective tax rate reconciliation is as follows (in thousands):

Net income for both periods included the following after-tax items/adjustments that (reduced) or increased after-tax earnings (in thousands):

Three months ended September 30, 2025 versus 2024 - Segment Results

Net income/(loss) for the third quarter of 2025 versus the third quarter of 2024 by segment (in thousands):

After-tax earnings as a percent of revenue at VITAS in the third quarter of 2025 was 11.5% as compared to 13.7% in the third quarter of 2024. VITAS’ after-tax earnings decreased due to an increase in Medicare Cap liability of $3.8 million in the third quarter of 2025 compared to the third quarter of 2024, as well as an increase of $2.1 million related to legal expense recorded in the third quarter of 2025 compared to the third quarter of 2024.

Roto-Rooter’s net income was negatively impacted in the third quarter of 2025 compared to the third quarter of 2024 due to an increase in variable expenses. Roto-Rooter’s after-tax earnings as a percent of revenue in the third quarter of 2025 was 14.8%, as compared to 17.7% in the third quarter of 2024.

After-tax Corporate expenses for the third quarter of 2025 decreased 6.8% when compared to the third quarter in 2024 due primarily to a $2.5 million decrease in stock-based compensation offset by $2.7 million in severance expense recorded for one VITAS executive and approximately $1.3 million decrease in other expenses.

Results of Operations

Nine months ended September 30, 2025 versus 2024 - Consolidated Results

Our service revenues and sales for the first nine months of 2025 increased 5.5% versus services and sales revenues for the first nine months of 2024. Of this increase, a $91.4 million increase was attributable to VITAS, and a $8.0 million increase at Roto-Rooter. The following chart shows the components of revenue by operating segment (in thousands):

Days of care at VITAS during the nine months ended September 30 were as follows:

The increase in service revenues at VITAS is comprised primarily of 6.6% increase in days-of-care and a geographically weighted average Medicare reimbursement rate increase of approximately 3.8%. Acuity mix shift negatively impacted revenue growth by 100-basis points for the year when compared to the prior year revenue and level-of-care mix. The combination of Medicare cap and other contra revenue changes decreased revenue growth by 120-basis points.

The decrease in drain cleaning revenues for the first nine months of 2025 versus 2024 is attributable to a 3.4% increase in price and service mix offset by a 6.2% decrease in job count. The decrease in plumbing revenues for the first nine months of 2025 versus 2024 is attributable to a 1.6% increase in job count and a 2.0% decrease in price and service mix shift. Excavation and water restoration jobs are generally sold as a result of initial calls from customers regarding drain cleaning issues. As a result, excavation revenues increased 5.7% and water restoration revenues increased 13.1%. Contractors operations decreased 5.2%.

The consolidated gross margin was 31.6% in the first nine months of 2025 as compared with 34.6% in the first nine months of 2024. On a segment basis, VITAS’ gross margin was 21.2% in the first nine months of 2025 as compared with 23.9% in the first nine months of 2024. The decline was primarily due to an increase in Medicare Cap liability of $18.8 million and an increase in variable patient care expenses and wages. The Roto-Rooter segment’s gross margin was 50.2% for the first nine months of 2025 as compared with 52.5% in the first nine months of 2024. The decline was primarily due to an increase in variable expenses.

Selling, general and administrative expenses (“SG&A”) comprise (in thousands):

SG&A expenses before long-term incentive compensation and the impact of market value adjustments related to deferred compensation trusts for the first nine months of 2025 were up 4.8% when compared to the first nine months of 2024. $2.7 million of this increase was the result of a severance accrual related to one VITAS executive as well as a $3.6 million increase in legal expense mainly at VITAS in the first nine months of 2025 compared to the first nine months of 2024. The remaining increase is related to normal salary increases and an increase in variable selling expenses, mainly internet marketing costs at Roto-Rooter.

Other income – net comprise (in thousands):

Our effective tax rate reconciliation is as follows (in thousands):

Net income for both periods included the following after-tax items/adjustments that (reduced) or increased after-tax earnings (in thousands):

Nine months ended September 30, 2025 versus 2024 - Segment Results

Net income/(loss) for the first nine months of 2025 versus the first nine months of 2024 by segment (in thousands):

After-tax earnings as a percent of revenue at VITAS in the first nine months of 2025 was 11.1% as compared to 13.1% in the first nine months of 2024. VITAS’ after-tax earnings decreased primarily due to an increase in Medicare Cap liability of $18.8 million and an increase in legal expense of $3.4 million.

Roto-Rooter’s net income was negatively impacted in the first nine months of 2025 compared to the first nine months of 2024 due primarily to an increase in casualty insurance expense of $5.8 million and an increase in variable expenses. Roto-Rooter’s after-tax earnings as a percent of revenue in the first nine months of 2025 was 15.3%, as compared to 17.8% in the first nine months of 2024.

After-tax Corporate expenses for the first nine months of 2025 decreased 7.2% when compared to the first nine months in 2024 due primarily to an $11.4 million decrease in stock-based compensation offset by $2.7 million in severance expense recorded for one VITAS executive and a $4.2 million decrease in interest income.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATING STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2025

(in thousands)(unaudited)

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATING STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024

(in thousands)(unaudited)

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATING STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025

(in thousands)(unaudited)

CONSOLIDATING STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024

(in thousands)(unaudited)

Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

(in thousands)

Unaudited Consolidating Summary and Reconciliation of Adjusted EBITDA

(in thousands)

RECONCILIATION OF ADJUSTED NET INCOME

(in thousands, except per share data)(unaudited)

CHEMED CORPORATION AND SUBSIDIARY COMPANIES

OPERATING STATISTICS FOR VITAS SEGMENT

(unaudited)

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Regarding Forward-Looking Information

Certain statements contained in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe”, “expect”, “hope”, “anticipate”, “plan” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. These forward-looking statements are based on current expectations and assumptions and involve various known and unknown risks, uncertainties, contingencies and other factors, which could cause Chemed’s actual results to differ from those expressed in such forward-looking statements. Variances in any or all of the risks, uncertainties, contingencies, and other factors from our assumptions could cause actual results to differ materially from these forward-looking statements and trends. In addition, our ability to deal with the unknown outcomes of these events, many of which are beyond our control, may affect the reliability of projections and other financial matters. Investors are cautioned that such forward-looking statements are subject to inherent risk and there are no assurances that the matters contained in such statements will be achieved. Chemed does not undertake and specifically disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The Company’s primary market risk exposure relates to interest rate risk exposure through its variable interest line of credit. At September 30, 2025, the Company had no variable rate debt outstanding. For each $10 million borrowed under the credit facility, an increase or decrease of 100 basis points (1%), increases or decreases the Company’s annual interest expense by $100,000.

The Company continually evaluates this interest rate exposure and periodically weighs the cost versus the benefit of fixing the variable interest rates through a variety of hedging techniques.

We carried out an evaluation, under the supervision of the Company’s President and Chief Executive Officer and with the participation of the Vice President, Chief Financial Officer and Controller, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the President and Chief Executive Officer and Vice President, Chief Financial Officer and Controller have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. There has been no change in our internal control over financial reporting that occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There have been no other material changes from the risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K and Quarterly Report on form 10-Q.