CHE Q2 2026 earnings call transcript, October 28, 2026

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Kemet Corporation third quarter 2026 earnings conference call. At this time, all participants are...

Our conference call this morning will review the financial results for the third quarter of 2026 ended September 30, 2026. Before we begin...

...materially from those projected by these forward-looking statements as a result of a variety of factors, including those identified in the company's news release of October 27...

...before interest, taxes, depreciation, and amortization, or EBITDA, and adjusted EBITDA. A reconciliation of these non-GAAP results is provided in the company's press release data.

I will now turn the call over to Kevin McNamara.

Thank you, Holly. Good morning. Welcome to ChemEd Corporations, third quarter, 2026.

Drove significant revenue and income growth at VTAS during the third quarter of 2026. VTAS revenue increased 12.2% during the quarter.

Hostile emissions as a percent of total emissions for our Florida combined program were 42.3% during the third quarter of 2026.

Commissions from all other pre-admission locations increased 11.1% compared to the third quarter of our 2025.

...of strong admissions. Our Medicare cap billing limitation relating to all non-Florida programs ended the 2026 year approximately $3 million.

...in both our residential and commercial businesses. Mike will further provide information on the impact of our recent acquisitions. However, it is important to note that...

...to perform at a high level. There were 36 productive commercial business managers in place for the entire quarter, contributing to a commercial revenue increase of approximately 10%.

...by $2.9 million during the third quarter of 2026 compared to the third quarter of 2025. Equally as important, average price per job...

...to challenge in the third quarter. Total leads during the third quarter of 2026 were essentially flat compared to the third quarter of 2025. Consistent with trend...

This change resulted in increased marketing spending of $4.3 million in the quarter compared to the third quarter of 2025.

We anticipate Roto-Rooter to return to that historic pattern through 2027 and beyond. We are very happy with the performance of B.A.C.E.

in the same period of 2025. Additionally, over the first nine months of 2026, the consolidated business generated cash flow from operations.

VTAS net revenue was $457.4 million in the third quarter of 2026, which is an increase.

The economic shift negatively impacted revenue growth 25 basis points in the quarter when compared to the prior year revenue and level of care mix. The combination of Medicare cap and...

of $6.1 million. Average revenue per patient day in the third quarter of 2026 was $209.11.

$2.5 million in the quarter, an increase of 31.4% when compared to the prior year period. Adjusted EBITDA margin in the quarter.

Increasing revenues during the quarter. Rotorooter branch residential revenue in the quarter totaled $158.8 million.

When compared to the third quarter of 2025. Adjusted EBITDA margin in the quarter was 20.6%, which represents a 230.

Anticipate both cost headwinds to persist in the fourth quarter. During the third quarter of 2026, Roto-Rooter reacquired multiple.

Over half of the revenue associated with Acquired Territories will become part of our owned and operated branch locations. Two new branches will be established in Sacramento.

Between Texas and California. It is important to note that these acquisitions do not have the same high margin profile as our owned and operated Road Rooter branch.

Increasing revenue from the acquisitions coupled with lower EBITDA margins at these locations immediately post-acquisition will result in lower overall margins at...

...$6 million, which equates to a cost per share of $528.24. Over the trailing 12 months, the company has reported...

...company's plan. Finally, based on the company's financial results through September 30, 2026, we expect to finish the year at...

...given at the end of the second quarter. However, we are very comfortable with the overall adjusted EPS guidance given at that time. I will now turn...

...7 percent. Home-based patient admissions increased 6.3 percent. Assisted living facility patients...

...we expect this pattern to continue for the remainder of 2026 and all of 2027. High admissions in both...

However, to address continued ADC growth, we ramped up hiring in September of 2026. As a result, at the end of...

...for our caregivers. We have not experienced issues with our ability to hire and retain qualified caregivers over the past...

...decline of one day from the third quarter of 2025. Our adjusted EBITDA margin, excluding Medicare cap in the third quarter of...

...budgeted levels. This was achieved mainly through enhanced electronic staffing tools, which allowed our managers to more closely manage...

...particularly related to back office processes, which ensures every dollar spent is necessary to support our overall goal to...

...into high, sustainable growth while providing the best possible care to our patients and their families. With that, I'll turn the call...

If you have a question or comment, please press star 1-1 on your telephone keypad. Please stand by while we compile the Q&A roster.

We have a lot of the nursing environment today. What can you share with us in terms of the ability to recruit nurses and the demand has been strong.

Experiencing difficulty in hiring, there may be specific pockets or a specific program.

The wage pressure. Certainly, I think everyone is experiencing an impact of the inflationary...

across the organization. So the short answer is no issues in hiring.

Hire nurses away from hospitals on the basis of salary. I mean, if you want to make more money as a nurse, you can make it outside of hospice.

You know, always, you know, a couple percent and regardless of what inflation is doing, you know, in the short term and, you know, the market for.

There's a percent of, you know, total reimbursement and you live within that or you die. And so it's done.

Cost containment, particularly in the back office, it helps maintain, if not expand, the EBITDA margin a little bit, even though, you know,

and then maybe for Mike, just related to this, you touched on how we should be thinking about margins and the ability to grow revenues for these acquired franchisees.

A little bit, but that, you know, given what's going on in the market, I mean, that's what it's made possible to make these acquisitions on Rotor, but...

...emphasize the pipeline other than say it's, you know, I just signed a RCA for another one, another good-sized one today. I mean, that...

...90 million in acquisition costs, you know... For the full year, yeah. Yeah. But that was big. That was beyond our expectations. And...

All became available. We could have spent $200 to $250 million at the time. So by virtue of the fact that we spent $96 this year,

from the California acquisition we just did, our first year estimated revenue is somewhere in the $30 to $35 million range.

We're integrating it into the Roto-Rooter operation and getting it into that model, but that takes a little time, and that's how most of these acquisitions work.

Long-term acquisition for the company, just in the near term, it will mute overall margins a little bit.

And on your guidance change, you expect not to be at the higher end or slightly above your EPS, but you did not.

Okay, I'm going to turn it over to Mike. He handles this. But I'm going to start by saying, obviously, the last two quarters, we increased guidance.

Yeah, things are going well. We don't expect a slowdown, for instance. But we don't want to be too specific and get in the business of guiding it.

We beat the third quarter by about 30 cents. Even if we hit the fourth quarter, just meet the guidance that we've issued for the fourth quarter, we'll be at the top end.

We missed the fourth quarter by 30 cents to get to the middle of the range. We wanted to make sure to signal that we're on track in the fourth quarter for meeting the guidance that we've given.

If the top end or above the top end of the range are going to change a little bit, I think that's fairly obvious from the third quarter results. And so that's all we were trying to signal.

When it comes to EBITDA, like you said, maybe less than four for the annuals, maybe that's less than one million in Q4 is a good number to think about.

Excluding the impact on the recent acquisitions that's all-inclusive, help us understand, like, how are you guys thinking about 2027 growth in rural?

They're very good at cost containment and making sure our EBITDA margin is consistent, if not growing, you know, slightly.

at Roto-Rooter 27 and beyond. Let me also add a comment that really springs...

...as fuel costs. I mean, that was a million dollars or a million dollars in the quarter. But generally speaking, it's marketing expenses. And, you know, what we're seeing...

You know, came into existence. Everything was free. Every lead was free. So we've gone from zero to under 40% of the leads we get.

And all I can say is, you know, we have good thoughts on that. Over 50% of our Roto-Rooter customers are...

Let's say the percentage of natural leads that we get, we think. I will say that we've had recently this quarter, we've seen...

If that is, over the next 12 months, a flat or improving situation, yeah, I don't see marketing having a continued...

...to find just a solution to an issue at the house or apartment. So is that part of what...

Transparency might be also needed when those, you know, models look for information. So can you comment on that? Is that something that you've already been seeing?

Where there's sewage backing up in the basement. Somebody needs something to get out there immediately. We don't, you know, our bread and butter business is not, you know, changing out a toilet.

But that's not the bread and butter jobs that we do. And so it's a little bit speculative, but we don't see that as a huge hedge.

Half our revenue comes from excavation and water restoration. I mean, it's a different type of job than what you're getting involved in to do it yourself.

We're drinking strongly. But when you look at the effect of $1,500 on marketing, and

pernicious effects of Google strangleholds, and I'll tell you something right now, there's also litigation across all facets.

And if I may, last question on that segment. Like you said, you find these financial fees and you see, you know, margins are well below average. So can you help us understand that?

As it relates to Internet marketing, for instance. So they've spent a significant amount higher percentage of their revenue on Internet marketing.

Many of us don't have water restoration. Right. So that, you know, top to bottom, I think there's ways that we will improve the EBITDA margin.

All right. Thank you so much for that. And if I may, on the EBITDA one question, I have security outperformance, very strong results there. So this is all great. One question.

Press and things around fraud and abuse, we saw a very significant increase in activity.

We have a great track record in sustaining any challenges to the revenue. We have great record keeping. We have entire departments devoted to compliance, but...

Going forward or not, I think, is anyone's guess. I would say, if I were guessing, that it probably will be sustained for some period of time. But as you said, it's not particularly...

To Mike's point, though, we have a really, really strong track record of reversal on these claims.

That recent increase because of, to Mike's point, the focus from the government and program integrity.

Thank you very much. Just a couple of quick follow-ups. Kevin, I think you mentioned on the Roto-Rooter side that you had increased, actually, your...

...integrate that and diversify away from Google. Any comments you can offer on that and where that could go? Yeah, I could start, Mike, also.

...customers that have the commercial business managers, you know, direct line. We get them from largely the maps section.

...everything other than a, you know, somebody going to Google and clicking on one of the paid ads. I mean, it's the type of thing that makes...

Roto-Rooter plumbing. You'll probably be viewing seven or eight competitors before you had the telephone.

It's in the map section. We don't have any control over that, where those appear. So, you know, that would be very likely, again, our customers have to do a...

are still paid, some level of paid search. And so, even if they're looking for road order, they don't distinguish, certainly, between paid and unpaid. They just click...

The number of leads we get from AI searches is increasing. It's hard for us to track because all the AI search engines do at the moment is...

Unfortunately, Google is still the elephant in the room, at least for the near term. Yeah, and I don't want to... And I want to...

And that gives us a lot of hope for stability with regard to this subject.

Thank you very much.

recruiting expenses next year. Thanks. Hey, Ben. No, we do not anticipate any material increase.

Thank you. Again, ladies and gentlemen, if you have a question or comment, please press star 11 on your telephone keypad. Our next question or comment comes from the line of A.J.

with overall market. Are you picking up share? I know you've got a couple of new markets in Florida that you've opened that may be contributing. I know the discussion around.

It's about a very balanced quarter as you look at growth. Both Florida and

strong growth in California, specifically Southern California. And so yes, we do believe there has been a

fraudsters within the industry. One thing I want to comment on in that we're working very closely with CMS on this.

education still to be done and a lot of access that needs to be created. So we feel good about our balanced growth.

Maybe also on the Roto-Rooter side, I know a lot of the discussion has been about the headwind on the margin side.

Same-store growth revenues that you're reporting in Roto-Rooter, is that, do you think, market, or do you think you're picking up share because of some of the changing dynamics?

To the extent that things get tougher, they have a company that has very little name recognition in their market.

But Google is discriminating against any company that advertises because they say, well, as long as you're big enough to advertise, we're going to have a company that makes it better.

The margin pressure associated with marketing. And I think stage one is they're fighting off that margin.

Again, so it's a little bit like VTAS in Florida. It's hard to talk about them get improving market share when some of the counties...

Price per job is much higher. It makes our marketing cost per job lower, obviously, just arithmetic.

Competition, and Google's doing everything we can to make it tougher, but we have good thoughts for Roto-Rooter, but we don't want to ever send the message.

Saying, look, if we can grow the top line, it's like a rising creek covers a lot of stumps, and the creek is rising.

And overall, you know, size of the industry and our part in that. What I would say is five and a half.

Contractors, as well as, you know, the very motivated seller we just bought their business from California. We know that smaller, less sophisticated.

See, I wish we had better statistics on how that all worked. No, no problem. I might ask one last question on the prepared remarks.

Talking about when you're saying you have the capital strength to consider strategic deals, or is there something broader than that that you're referencing? I think I think.

It's the brand that we own. Kevin and I, and some of the other executives talk all the time about, you know, the potential for third legs of the stool at the company.

You talked about in terms of, I agree 100% with what Mike said, that nothing, certainly nothing's imminent. I would say much, if you talk about probability, you know, the type of thing we look at,

we think there are struggling HVAC companies in some of the geography that we would like to be in. The first time we were in it, and this was in the...

business. Okay. All right. That's great. Thanks so much. Thanks, AJ. Thank you. I'm showing no additional questions.

As this concludes the program, you may now disconnect. Everyone have a wonderful day.