In addition, management may also discuss non-GAAP operating performance results during today's call, including earnings before interest, taxes, depreciation, and amortization, or EBITDA and adjusted EBITDA. These factors combined to allow VITAS to achieve higher than expected revenue growth and EBITDA margins while continuing to add cushion to the Medicare Cap position in our Florida Combined Program. This strong performance makes us more confident than ever that VITAS has put the Florida cap issue of 2025 behind us and has returned to a normalized rate of growth. Total commercial revenue in the second quarter of 2026 increased 6.8% compared to the second quarter of 2025.
There were 30 productive commercial business managers in place for the entire quarter, resulting in a commercial revenue increase of approximately 13% in their respective branches. This compares to a commercial revenue in branches without a commercial business manager, which saw a decline of 1%. We continue to evaluate the ability of the remaining branches to add a commercial business manager, which will drive additional growth. Lead generation and the resulting cost of customer acquisition remained a challenge in the second quarter.
It is not expected to add a material amount of revenue or income in the last half of the year, but represents a nice growth opportunity for 2027 and beyond. Roto-Rooter is building positive operating momentum while being in a great position to take advantage of franchise acquisition opportunities as they arise. VITAS net revenue was $443.3 million in the second quarter of 2026, which is an increase of 11.9% when compared to the prior year period. This revenue increase is the result of a 6.1% increase in days of care and a geographically weighted average Medicare reimbursement rate increase of approximately 2.4%.
| Metric | Period | Current guidance |
|---|---|---|
| Total-company adjusted diluted EPS | FY2026 | $25.00-$25.75 (midpoint +17.8% vs 2025's $21.55) |
| VITAS ADC growth | FY2026 | 5.75%-6.25% |
| VITAS revenue growth (ex-Medicare Cap) | FY2026 | 8.25%-9.25% |
| VITAS EBITDA margin (ex-Medicare Cap) | FY2026 | 19%-19.5% |
| VITAS full-year Medicare Cap billing limitation | FY2026 | $7 million |
| Roto-Rooter revenue growth / EBITDA margin | FY2026 | 3%-3.5% / 21.5%-22.5% (unchanged) |
| Tax rate / share count | FY2026 | 24.5% effective adjusted tax rate; ~13.5 million diluted shares |
| Metric | YoY | Note |
|---|---|---|
| Consolidated revenue | +8.8% to $673.3M | VITAS revenue growth of 11.9% plus Roto-Rooter growth of 3.3%. |
| Income from operations | $89.2M (13.3% margin) | Up from $68.1 million a year ago on strong VITAS performance and disciplined costs. |
| GAAP diluted EPS | $5.13 (+43.7%) | GAAP net income of $67.7 million; also aided by a lower share count from buybacks; adjusted diluted EPS $6.06 (+41.9%). |
| VITAS net patient revenue | +11.9% to $443.3M | 6.1% higher days of care, a ~2.4% weighted Medicare rate increase, and a ~455 bps positive from Medicare Cap/contra-revenue changes, partly offset by acuity mix. |
| VITAS adjusted EBITDA (ex-cap) | +20.6% to $80.6M (18.2% margin) | Accelerated admissions and labor costs below budget; ADC up 6.1% to 23,687. |
| Roto-Rooter revenue | +3.3% to $229.9M | Commercial up 6.8% and residential up 1.7%, partly offset by a 6.7% water-restoration decline during the billing centralization. |
| Roto-Rooter adjusted EBITDA | $48.5M (flat; 21.1% margin, -77 bps) | Higher internet marketing costs offset gross-margin gains (gross margin +135 bps to 50.4%). |
| Operating cash flow | >$173M | Strong consolidated cash generation with minimal leverage, funding acquisitions and buybacks. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| VITAS growth normalization | 2025 Florida Medicare Cap disruption | Management declared the Florida cap issue behind it, with VITAS back to low-double-digit 'normalized' growth; hospital admissions held at a sustainable 42.9% of Florida admissions (target 42%-45%) to balance length of stay and build cap cushion. | — |
| De novo Florida programs | New market launches | New starts in Marion, Pasco, and Pinellas counties combined 594 admissions; Manatee County admitted its first patient; two new inpatient units and two new facility relationships are slated for 2027, all supporting cap mitigation and growth. | — |
| Roto-Rooter lead generation | Rising paid-lead reliance | Free internet leads keep declining (down 13.1%) as Google deprioritizes free traffic and AI encroaches; management sees a stabilized 'new normal' with paid leads at 59% and is pursuing strategies (commercial business managers, its app) to reduce Google reliance. | — |
| Roto-Rooter ancillary services | Cross-sell advantage | Excavation and water-restoration sales, sold to existing customers at near-zero acquisition cost, now roughly match all other revenue sources and are the key margin advantage over competitors running plumbing/drain at thin margins; higher conversion helps offset marketing cost pressure. | — |
| Capital allocation / acquisitions | Franchise buy-ins and buybacks | $33.5 million of franchise repurchases year to date (four franchises), a ~$12 million South Texas territory, and appetite for a larger Roto-Rooter acquisition before year-end, plus selective VITAS acquisitions in CON/barrier-to-entry states. | — |
| Hospice regulation | Program integrity focus | Management expects no unbundling of the hospice benefit and no material reimbursement change; an MA carve-in is shelved for 2027; the CON moratorium ends in November (possibly extended), and the 2027 final rule (national +2.4%, VITAS +1.9%) is due within weeks, with elevated program-integrity oversight expected. | — |