Chemed（CHE）2026年第3四半期決算説明会：VITASが成長を牽引

ケメド・コーポレーション（NYSE: CHE）が発表した2026年第3四半期決算は、VITASヘルスケアが牽引し強固な成長を記録しました。一方、ロト・ルーダー（Roto-Rooter）は増収を達成したものの、顧客獲得コスト、燃料費、および最近買収した利益率の低いフランチャイズ地域による圧迫に直面しました。

主要な要点

• ケメドの2026年第3四半期の売上高は前年同期比10.6%増加し、調整後希薄化後1株当たり利益（EPS）は28.1%増加しました。
• VITASの売上高は12.2%増の4億5,740万ドルとなりました。メディケア・キャップを除く調整後EBITDAは31.4%増の9,250万ドルとなり、利益率は20.2%でした。
• VITASの新規受入患者数は7.2%増の18,995人、1日平均在籍患者数は9.4%増の24,428人に増加しました。
• ロト・ルーダーの売上高は5.5%の既存店成長を含めて7.5%増加しました。しかし、調整後EBITDAは2.5%減少し、利益率は213ベースポイント低下して20.6%となりました。
• 経営陣は、2026年通期の調整後EPSが、2026年第2四半期決算時に公表した業績予想の上限と同等か、わずかに上回ると予想しています。
• 2026年最初の9か月間の営業キャッシュフローは2億2,900万ドルを超えました。また、ケメドは2026年中に主にテキサス州とカリフォルニア州において、9,600万ドルを投じてロト・ルーダーのフランチャイズを再買収しました。

主要財務データ

事業および業績ハイライト

VITASヘルスケア

VITASの売上高成長は、主にケア提供日数の9.4%増加と、地域加重平均メディケア償還率の約2.2%引き上げによって推進されました。メディケア・キャップおよびその他の売上控除項目の変動が成長率を約85ベースポイント押し上げた一方、重症度ミックスは成長率を25ベースポイント押し下げました。

患者1日当たりの平均売上高は前年同期比196ベースポイント増の209.11ドルでした。高重症度のケア提供日数は全ケア提供日数の2.2%を占め、5ベースポイント低下しました。

新規受入患者数は主要な紹介元すべてで増加しました。病院からの紹介による受け入れは5.7%増、在宅ベースの受け入れは6.3%増、高齢者向け住宅（アシステッド・リビング施設）からの受け入れは8.1%増、介護施設からの受け入れは9.8%増加しました。

フロリダの統合プログラムでは、新規受入患者の42.3%が病院からの紹介であり、経営陣が掲げる長期目標レンジである42%〜45%の範囲内となりました。フロリダにおけるその他の事前受け入れ場所からの新規受入患者数は11.1%増加しました。

VITASは、2026年メディケア・キャップ年度をフロリダの統合プログラムにおいて3,400万ドル以上の余剰枠を残して終了しました。経営陣は、同プログラムにおいて2027年メディケア・キャップ年度にメディケア・キャップ請求制限が発生することはないと見込んでいます。なお、VITASは前年同期の610万ドルに対し、2026年第3四半期に82万8,000ドルのメディケア・キャップ請求制限を計上しました。

コスト削減策も収益性を支えました。販売費および一般管理費（SG&A）は前年同期比で210万ドル減少したほか、電子人員管理ツールの導入により、VITASは2026年の大半において予算を下回る人員体制で運営されました。同社は在籍患者数の増加に対応するため9月に採用を強化し、当四半期末のフルタイム当量（FTE）目標を予算通り達成しました。

ロト・ルーダー

ロト・ルーダーの商業（法人向け）部門の売上高は9%増の5,990万ドル、住宅（個人向け）部門の売上高は5.2%増の1億5,880万ドルとなりました。売上高は、主要な商業および住宅向けサービスラインのすべてで増加しました。

商業ビジネスマネージャーを配置した拠点では、配置していない拠点の4.8%増に対し、商業部門の売上高が約10.9%増加しました。ロト・ルーダーでは、当四半期を通じて36名の生産的な商業ビジネスマネージャーが稼働していました。

水害修復事業の業績が改善しました。中央集権的な請求および回収プロセスにより未収金の貸倒損失が前年同期比で290万ドル減少したほか、1作業あたりの平均単価が2.8%上昇し、数四半期にわたる下落傾向から転換しました。

マーケティング費用が引き続き利益率の主な逆風となりました。総リード数はほぼ横ばいでしたが、無料のインターネット検索リードが11.8%減少した一方、有料リードは5%増加しました。有料リードが総リードに占める割合は、前年同期の56%から約60%に上昇しました。マーケティング支出は430万ドル増加し、燃料費は約140万ドル増加しました。

ロト・ルーダーは当四半期中、カリフォルニア州の複数のフランチャイズ地域を約6,250万ドルで再買収しました。これらの地域は1,200万人以上の人口をカバーしており、買収前には年間5,000万ドルから5,500万ドルの売上高を創出していました。経営陣によると、買収した事業のEBITDA利益率は通常一桁台であり、ロト・ルーダーの完全な運用モデルを導入するには12か月から18か月を要するとしています。

業績予想（ガイダンス）

ケメドは、2026年通期の調整後EPSが、2026年第2四半期決算時に公表したガイダンスの上限と同等か、それをわずかに上回ると予想しています。経営陣は、VITASの貢献度が以前の想定より大きく、ロト・ルーダーの貢献度が下回っているものの、連結EPSの見通しには引き続き安心感を持っていることを示しました。

同社は、ロト・ルーダーの顧客獲得コストおよび燃料費の圧迫が2026年第4四半期も続くと予想しています。経営陣は2027年の予算編成を完了していませんが、安定した売上成長とコスト抑制により、2027年以降に向けて事業が過去の利益率パターンに回復すると見込んでいます。

VITASについて、経営陣は病院および非病院での堅調な新規受入患者のトレンドが2026年の残りの期間および2027年全体を通じて続くと予想しています。2027年に採用費用が大幅に増加することは見込んでいません。

リスクと注視すべき分野

• 無料の検索トラフィックが減少する中、ロト・ルーダーの有料リード比率とリードあたりのコストの上昇が続いており、マーケティング費用が増加しています。
• 燃料費の高騰は、短期的には引き続き利益率の逆風となると予想されます。
• フランチャイズの買収は即座に売上高を上乗せするものの、業務統合が完了するまではロト・ルーダーの連結利益率を希薄化させます。
• ホスピス請求への監視が強化される中、州および連邦の規制当局はVITASの追加売上高約1,200万〜1,400万ドルを精査しました。経営陣は、プロセスに時間はかかるものの、同社には異議を唱えられた請求を撤回させた強力な実績があると述べました。
• VITASの賃金上昇率は歴史的に償還率の伸びを上回っており、利益率を維持するためにはバックオフィスのコスト管理が重要となっています。

アナリスト質疑応答の要点

経営陣は、VITASが資格を持つ介護スタッフの採用や定着において重大な困難に直面していないと述べました。看護師の賃金上昇が全般的に償還額の引き上げを上回っているものの、賃金インフレが成長を制約することはありませんでした。

ロト・ルーダーの買収について、経営陣は残りのパイプラインには一握りの大規模フランチャイズ案件と、より小規模なボルトオン買収や独立請負業者の事業が含まれていると述べました。買収した拠点は、より効率的なマーケティング、水害修復サービス、バックオフィス費用の削減を通じて利益率を改善できます。

ロト・ルーダーのモバイルアプリは30万回以上ダウンロードされており、週当たり約1,000〜1,500件のリードを創出しています。また、経営陣は流入経路の特定（アトリビューション）は依然として難しいものの、AI検索からの無料リードが増加していると考えています。グーグル（Google）は引き続き短期的な検索トラフィックの支配的な情報源です。

経営陣は、ロト・ルーダーが基本的な修理ではなく主に複雑な緊急作業に焦点を当てているため、AIを活用したDIY（日曜大工）検索は現在大きな逆風とは見なされていないと述べました。同社は1作業あたりの平均単価が約1,500ドルであることを挙げました。

VITASの経営陣は、カリフォルニア州での成長の一因として、コンプライアンス能力がより高い大手で確立された事業者への紹介のシフトを挙げました。また、同社はフロリダ市場とフロリダ以外の市場の双方でバランスよく成長が達成されたと述べました。

ケメドは、フランチャイズの再買収や潜在的な小規模ホスピス買収を通じて、VITASとロト・ルーダーの拡大に引き続き注力しています。経営陣は、第3の事業プラットフォームの可能性を排除しないものの高い投資ハードルが存在すると述べました。まったく新しい事業に参入するよりも、特定市場でのHVAC（空調）事業など、ロト・ルーダーのサービスラインを追加する可能性の方が高いと説明しました。

決算説明会全文文字起こし

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Chemed Corporation Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to your host, Ms. Holly Schmidt.

Holley Schmidt

Good morning. Our conference call this morning will review the financial results for the third quarter of 2026 ended September 30, 2026. Before we begin, let me remind you that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call. During the course of this call, the company will make various remarks concerning management's expectations, predictions, plans and prospects that constitute forward-looking statements. Actual results may differ materially from those projected by the 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 and in various other filings with the SEC. You are cautioned that any forward-looking statements reflect management's current view only and that the company undertakes no obligation to revise or update such statements in the future. In addition, management may also discuss non-GAAP operating performance results during today's call. Including earnings before interest, tax, depreciation and amortization or EBITDA and adjusted EBITDA. A reconciliation of these non-GAAP results is provided in the company's press release dated October 27, which is available on the company's website at chemed.com.

I would now like to introduce our speakers for today, Kevin McNamara, President and Chief Executive Officer of Chemed Corporation; Mike Witzeman, Chief Financial Officer of Chemed and Joel Wherley, President and Chief Executive Officer of Chemed VITAS Healthcare subsidiaries. I will now turn the call over to Kevin McNamara.

Kevin McNamara

Thank you, Holly. Good morning. Welcome to Chemed Corporation's Third Quarter 2026 Conference Call. I will begin with highlights for the quarter, then Mike and Joel will follow up with additional details. I will then open the call for questions.

VITAS continues to perform at a very high level. The combination of ADC growth and cost containment, particularly with respect to central support costs. drove significant revenue and income growth at VITAS during the third quarter of 2026. VITAS revenue increased 12.2% during the quarter compared with the third quarter of 2025. And adjusted net income increased 44.7% over the same period. Admissions in VITAS during the quarter totaled 18,995 which equates to a 7.2% improvement from the same period of 2025.

Hospital admissions as a percent of total admissions for our Florida combined program were 42.3% during the third quarter of 2026. As we've discussed previously, an appropriate balance for sustained long-term stability in the Florida patient base, given the current mix of referral sources is that between 42% and 45% of total admissions to come from hospitals. Equally as important, as Joel will discuss in greater detail, admissions from all other preadmission locations increased 11.1% compared to the third quarter of our 2025 in our Florida combined program.

We ended the 2026 Medicare Cap year with a cushion of more than $34 million in the Florida combined program. We do not anticipate any Medicare Cap billing limitation for the Florida combined program in the 2027 Medicare Cap year. Additionally, as a result of strong admissions, our Medicare cap billing limitation related relating to all non-Florida programs ended the 2026 year, approximately $3 million below our original projection.

Now let's turn to Roto-Rooter. In the third quarter, we're very pleased with the revenue growth generated by Roto-Rooter. Total revenue grew 7.5% during the quarter compared to the third quarter of 2025. Revenue grew across all major service lines 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 our same-store revenue increased 5.5% during the third quarter of 2026, which exceeded our internal expectations.

Similar to the total revenue growth metrics we saw strength in all service lines from same-store sales. Our Commercial business manager program continues 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 10.9% in their respective branches. This compares to a commercial revenue increase of 4.8% and in branches without a commercial business manager.

Centralization of the water restoration billing and collections function continues and has resulted in improved collections. Total write-offs improved by $2.9 million during the third quarter of 2026 compared to the third quarter of 2025. Equally as important average price per job in the water restoration business increased 2.8% over the third quarter of 2025. This is a reversal of the multi-quarter downward trend in average water restoration price per job.

Lead generation and the resulting cost of customer acquisition remained a 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 trends observed in prior quarters, free leads generated from Internet searches declined 11.8%, while paid leads increased 5%. Of all these generated during the quarter, approximately 60% were paid compared to 56% in the third quarter of 2025.

This change resulted in increased marketing spending of $4.3 million in the quarter compared to the third quarter of 2025. Roto-Rooter is building revenue growth momentum through improved operations, supplemented by strategic acquisition activity. Roto-Rooter continues to explore every opportunity to contain and potentially moderate marketing costs. Roto-Rooter has demonstrated a long history of growing margins through cost containment so long as revenue growth is stable. We fully anticipate Roto-Rooter to return to that historic pattern through 2027 and beyond.

We are very happy with the performance of VITAS in the quarter and its prospects for the remainder of 2026 and beyond. The combination of the two business units drove an increase in total Chemed revenue of 10.6% and an increase in adjusted diluted earnings per share of 28.1% in the third quarter of 2026 as compared to the same period of 2025. Additionally, over the first 9 months of 2026 the consolidated business generated cash flow from operations of more than $229 million, which, along with minimal leverage, allows us the flexibility to pursue strategic acquisitions and meaningful share repurchases as the opportunities arise.

With that, I would like to turn this teleconference over to Mike.

Michael Witzeman

Thank you, Kevin. VITAS net revenue was $457.4 million in the third quarter of 2026, which is an increase of 12.2% when compared to the prior year period. This revenue increase was driven primarily by a 9.4% increase in days of care in a geographically weighted average Medicare reimbursement rate increase of approximately 2.2%. The acuity mix 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 other contra revenue changes positively impacted revenue growth by approximately 85 basis points.

In the third quarter of '26 VITAS accrued $828,000 in Medicare Cap billing limitation. This compares to a Medicare capital limitation recorded in the third quarter of 2025 of $6.1 million. Average revenue per patient day in the third quarter of 2026 was $209.11 which is 196 basis points above the prior year period.

During the quarter, high acuity days of care were 2.2% of total days of care, a decline of 5 basis points when compared to the prior year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $92.5 million in the quarter, an increase of 31.4% when compared to the prior year period. Adjusted EBITDA margin in the quarter, excluding Medicare Cap, was 20.2%.

Now let's turn to Roto-Rooter. Roto-Rooter branch commercial revenue in the quarter totaled $59.9 million, an increase of 9% from the prior year period. All lines of business in the commercial sector had increasing revenues during the quarter. Roto-Rooter branch residential revenue in the quarter totaled $158.8 million, an increase of 5.2% over the prior year period.

Again, all lines of business in the residential sector had an increasing revenue during the quarter. Adjusted EBITDA in the third quarter of 2026 totaled $48.2 million, a decline of 2.5% when compared to the third quarter of 2025. Adjusted EBITDA margin in the quarter was 20.6% and which represents a 213 basis point decline from the third quarter of 2025. As Kevin mentioned, cost of customer acquisition continues to put pressure on Roto-Rooter's margin.

Additionally, during the third quarter of 2026, fuel costs increased approximately $1.4 million compared to the third quarter of 2025. We anticipate both cost headwinds to persist in the fourth quarter. During the third quarter of Roto-Rooter reacquired multiple franchise territories in California for approximately $62.5 million. Collectively, these territories encompass a population of over 12 million people. Prior to the acquisition, this business had annual revenue of between $50 million and $55 million. Slightly 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 and San Diego, while other territories will be absorbed by existing branches. The remaining locations will become part of our independent contractor operating model. In 2026, the company has spent $96 million to reacquire Roto-Rooter franchises, primarily in Texas and California. It is important to note that these acquisitions do not have the same high margin profile as our own operated Roto-Rooter branches. The franchisees acquired operate at a much lower EBITDA margin often in the single digits.

While we see a rapid increase in revenue from acquisitions over the next several quarters, it is a 12- to 18-month process to implement the full Roto-Rooter operating model. rapidly increasing revenue from the acquisitions, coupled with lower EBITDA margins at these locations immediately post acquisition will result in lower overall margins at Roto-Rooter in the short term. However, acquiring territories with significant and growing population characteristics is the right thing to do for the long term at Roto-Rooter.

Turning now to Chemed. During the quarter, the company repurchased 125,000 shares of stock for $66 million, which equates to a cost per share of [$528.24]. Over the trailing 12 months, company has repurchased 1,235,000 shares of Chemed stock at an average price of $427.62 per share. As of September 30, there was approximately $73.7 million of remaining share repurchase authorization under the company's plan.

Finally, based on the company's financial results through September 30, 2026. We expect to finish the year at or slightly above the high end of our full year 2026 adjusted EPS guidance discussed in our second quarter 2026 earnings press release dated July 28, 2026. The contribution of each operating unit to that overall EPS level will likely differ slightly from the guidance 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 the call over to Joel.

Joel Wherley

Thank you, Mike. In the third quarter of 2026, our average daily census was 24,428 patients, an increase of 9.4%. In the quarter, hospital directed admissions increased 5.7%, home-based patient admissions increased 6.3% and assisted living facility patients increased 8.1% and nursing home admissions increased 9.8% when compared to the prior year period. The continued high level of hospital admissions allows us to also take a high number of admissions from other preadmission locations. We expect this pattern to continue for the remainder of 2026 and all of 2027. .

High admissions in both hospital and nonhospital settings allows us to responsibly grow revenue while also balancing the patient mix needed to manage Medicare capital. With respect to the workforce, full-time equivalents ran below our estimated totals for most of the quarter. However, to address continued ADC growth we ramped up hiring in September of 2026. As a result, at the end of the quarter, we are in line with our overall budgeted full-time equivalent metric. We monitor each location very carefully and ensure that staffing is adequate to provide high-quality care for our patients and their families as well as maintaining a healthy work-life balance for our caregivers.

We have not experienced issues with our ability to hire and retain qualified caregivers over the past few years. Our average length of stay in the quarter was 103.5 days. This compares to 109.7 days in the third quarter of 2025. Our median length of stay was 17 days in the third quarter of 2026, a decline of 1 day from the third quarter of 2025. Our adjusted EBITDA margin, excluding Medicare cap, in the third quarter in 2026 was 20.2%. We are able to achieve that high margin level through a continued focus on cost control at every level of the organization.

As mentioned above, we have been able to operate for most of 2026 at staffing levels below our budgeted levels. This was achieved mainly through enhanced electronic staffing tools which allowed our managers to more closely manage and flex daily staff levels. Equally important, selling, general and administrative costs declined $2.1 million in the third quarter of 2026 compared to the same period of 2025. We have worked hard to establish a culture, particularly related to back-office processes which ensures every dollar spent is necessary to support our overall goal to provide high-quality care to patients and their families.

We believe VITAS is exceptionally well positioned to capitalize on future growth opportunities. We look forward to executing our strategy for the remainder of 2026 and beyond that will translate into high sustainable growth while providing the best possible care to our patients and their families.

With that, I'll turn the call back to Kevin.

Kevin McNamara

Thank you, Joel. I will now open this teleconference to questions.

Operator

[Operator Instructions] Our first question or comment comes from the line of Brian Tanquilut from Jefferies.

質疑応答

Brian Tanquilut

Maybe, Joel -- I appreciate your comments on staffing. So maybe I'll start there. As we think about the nursing, environment today. What can you share with us in terms of the ability to recruit nurses and increase capacity as demand has been strong in the VITAS side? And also, what are you seeing in terms of wage inflation in light of we're seeing increases in orders for temp nurses on the hospital side just seems like just curious what you're seeing on your side of the business?

Joel Wherley

Yes, absolutely. So two things. One, we're not experiencing difficulty in hiring. There may be specific pockets or a specific program that has a greater need than another, but none of which have reached a level of concern associated with our ability to recruit and retain those key clinical positions. In regards to inflationary pressure or wage pressure, certainly, I think everyone is experiencing an impact of the inflationary situation that we're facing nationally within the United States. That's no different in health care.

However, it is not in any way impeded our ability to hire and certainly not restricted our ability to grow across the organization. So the Short answer is no issues in hiring and no significant wage pressures that we're concerned about at this time.

Kevin McNamara

And I'd just like to add that when you observe this over time, you noticed that the market for hiring nurses is highly segmented. And that is -- we do not compete generally with the higher 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. Hospice nurses have tended to be a special calling we compete largely with other hospices for nurses that are familiar with this segment and every hospice has to have strict discipline. We're -- the price increase is always a couple of percent.

And regardless of what inflation is doing in the short term. And the market for hospice nurses have lived with that reality for some time. And Joel has done a great job in bringing that -- it basically is iron law of hospice. If you look at VITAS over time, the field level expenses are in the mid-60s as a percent of total reimbursement, and you live within that or you die. And Joel done a great job doing that.

Michael Witzeman

Yes, Brian...

Kevin McNamara

Go ahead, Mike.

Michael Witzeman

I just think that we've lived with, I think, for 5-plus years, the fact that wage increases overall for nurses are higher than the reimbursement we get back. which is, I think, why Joel and his team have really stressed cost containment, particularly in the back office. It helps maintain, if not expand the EBITDA margin a little bit even though the reimbursement isn't necessarily keeping up with our wage inflation.

Brian Tanquilut

That makes sense. And then maybe, Kevin, as I think through Roto-Rooter, obviously, seeing some inflection here, nice growth, nice same-store -- and also, you've had some acquisitions there. When I think of the pipeline for franchise acquisitions, what does that look like? 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. If you can just walk us through that dynamic.

Kevin McNamara

Yes. Let me just start with the pipeline. We always try and deemphasize that because most of the major metopolitan areas Roto-Rooter has already repurchased. And there's a few out there. It has surprised us a little bit, but that given what's going on in the market, I mean that's what it's made it possible to make these acquisitions on Roto-Rooter. But generally speaking, we're where the action is in the smaller markets, participants in our contractor -- independent contractor program, smaller locales that are added to an existing branch for Roto-Rooter.

We don't like to emphasize the pipeline other than say, it's I just signed of RCA for another one, another good size one today. I mean that -- again, when I say a good size at an independent contractor operation. So not that significant. I don't think that as a significant acquisition.

But they're still out there, but it's the type of thing that as you saw, we were pretty active and made a big one, and it was what might in acquisition costs, et -- for the full year, Yes. But that was big. That was beyond our expectations and not -- you shouldn't extrapolate that and expand that in the future at that level.

Michael Witzeman

A few years ago, Brian, we had done a study -- and we estimated at the time we could have spent -- if all of the acquisition -- franchise acquisition candidates we would be interested in all became available we could have spent $200 million to $250 million at the time. So by virtue of the fact that we spent $96 million this year, we've eaten into that sum, but there's still a handful of, as Kevin said, bigger acquisitions we'd be interested in. And then the rest of them are smaller, either tuck-ins or contractor operations.

Your question about revenue and margin, I'll just I'll just give you from the California acquisition we just did. Our first year estimated revenue is somewhere in the $30 million to $35 million range. but their EBITDA margin was sub-10% when we purchased them. So we'll add $30 million to $35 million to the top line, say, in '27 million but it will add less than $4 million in EBITDA. It will start growing and we'll start 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.

Top line growth is immediate and then the EBITDA margin comes. But we're very excited to have franchisee that had 12 million of population and population density as well, which is important in locations like San Diego and Sacramento. So I think it's definitely a good long-term acquisition for the company, just in the near term, it will mute overall margins a little bit.

Operator

Our next question or comment comes from the line of Joanna Gajuk from Bank of America.

Joanna Gajuk

So maybe just to first clarify things on your guidance change. So you expect now to be at the high end or slightly above your EPS, but you did not specifically commented on the segment -- so maybe you can kind of give us color. Is it fair to assume that this guidance raise is largely the FDA our performance and there's also the rotor franchisee acquisitions. So how much it's adding to the guidance, can I help us bridge to that EPS guidance based on the segment outlook now? .

Kevin McNamara

Okay. I'm going to turn it over to Mike. He handles this. But I'm going to start by saying, obviously, we -- the last 2 quarters, we increased guidance. I mean we're trying to get out of the business of increasing and changing the guidance every quarter. But Obviously, we're trying to send the signal Yes, we had -- we outperformed in the third quarter compared to when we came up with that, the number for the last two quarters. We're obviously running ahead, but we tried to make -- try to give the indication that, yes, things are going well.

We don't expect a slowdown, for instance, but we're not -- we don't want to be too specific and get in the business of guiding every quarter. But Mike, why don't you go ahead answer -- we do have some questions, some specifics -- but with that proviso, Joanna, just remember we're trying to get out of that business.

Michael Witzeman

Joanna, as -- certainly from just purely a math standpoint, right, we gave guidance at the end of the second quarter. We beat the third quarter by about [$0.30]. Even if we hit the fourth quarter, just meet the guidance that we've issued for the fourth quarter, will be at the top end or near the top end of the range already, right? So saying that we're going to be at the top end doesn't necessarily need to signal any huge outperformance in the fourth quarter.

What we're signaling is, as Kevin said, that given that we beat the third quarter by $0.30, we didn't want to signal that we might miss the fourth quarter by $0.30 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. And so that was the whole point. And I think as you can see from the third quarter results, Roto-Rooter, from an income -- purely from an income standpoint came in a little lower than what our guidance was and VITAS came up higher.

And so when we say that the components of how we might get to 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 is, and as Kevin said, we didn't feel the need to necessarily regurgitate all of the components and all of the metrics around each one of the operating units.

Joanna Gajuk

Now I understand this, but I guess this latest purchase acquisition in mid-September, is going to add, I guess, a little bit in fourth quarter. When it comes to EBITDA but you said maybe less than $4 million for the like annual, maybe that's less than $1 million in Q4 is a great number to think about. Okay.

So now I guess on the [Protos] segment, Actually, so just a follow-up on the comment in prepared remarks that being used something along the lines of you expect to return to historic growth in '27. So are you talking about, I guess, what kind of growth are you talking about -- and is it excluding the impact of the recent acquisitions that's all inclusive, Help us understand like how are you guys thinking about 2027 growth in the Roto-Rooter? .

Kevin Fischbeck

Don't have a budget yet for 2027. They're still working on that. So that is more of a high-level comment, so I can't give you specifics on 2027. The comment relates to the fact that over a long period of time that we've owned Roto-Rooter, if they can consistently grow top line they're very good at cost containment and making sure our EBITDA margins is consistent, if not growing slightly quarter-to-quarter, year-to-year. So that's what we were talking about there. We weren't giving any specifics. I think it's important to note that given the marketing headwinds that we're seeing, the fact that we can find other places to get leverage and margin with consistently growing revenue at Roto-Rooter. We'll be able to overcome some of those marketing costs in '27 and beyond. .

Kevin McNamara

Joanna, let me also add a comment that really springs from some of the -- some of the questions we've had just since yesterday afternoon when we released earnings. I mean when you look at the Roto-Rooter numbers and the margin, we're saying, "Oh, yes, margin -- I mean the margin has been affected yes, every company that has people on the road has fuel costs. I mean, that was $1 million -- over $1 million in the quarter. .

But generally speaking, it's marketing expenses. And what we're seeing is that the kind of double barrels. So compared to previous periods, we're paying Google more per lead the bidding is going up for the lease. So it's just the price per lead is going up. But also there's a shift that when Google first came into existence, everything was free. Every lead was free. So we've gone from 0 to under 40% of the leads we get are free. I mean that's a big transformation. -- that begs the question of where do you go from here? What do you expect as far as erosion in that percentage of release. I mean that's a big question. And I think it came through with a number of questions by people who commented on our earnings release. And all I can say is we have good thoughts on that.

Over 50% of our Roto-Rooter customers are repeat customers. In other words, they come to the Internet looking for Roto-Rooter largely. They're coming looking for the telephone number, half of them maybe. And -- it's because -- and it really comes down to the strength of the Roto-Rooter service market. So that's a natural floor to the let's say, the percentage of natural leads that we get, we think. I will say that we had recently this quarter, we've seen a when I say a flattening, we've actually had -- we had an improvement in natural leads compared to the prior year's period.

So we have a pretty good thought on that question. But and some good hopes. But I guess that really the answer to your question, Joanna, if that is over the next 12 months, a flat or improving situation, yes, I don't see marketing having a continued negative effect on our comparative margins. Mike, do you agree with that?

Michael Witzeman

Yes, I agree with that completely.

Joanna Gajuk

Okay. And I guess, we're hearing from some national brands in the residential services sectors. They just simply calling out some negative impact as the consumer is using the tools like GPT and such to find just a solution to an issue of the house partner. So is that part of what you're seeing already -- and I guess, is there a risk to vote a brand because of that? Because I guess there's a couple of things that happens when people use those newer tools because, first of all, they can get a first labor or sell type solution, right? And I guess price transparent. It might be also needed when those models look for information. So can you comment on that? Is that something that you've already been seeing in your search in the lead process I guess generation?

Michael Witzeman

I would say, Joanna, that's a little bit speculative, but I would say that from a Roto-Rooter specific standpoint, given that we focus on emergency level work, when we get called, it's the much more complicated issues where there's sewage backing up in the basement, somebody needs something to be out there immediately. We don't our bread and butter business is not changing out a toilet or fixing a leaky faucet, -- those are the things I think people try and do DIY chassis PC kind of searches. That's not our bread and butter. So if that's a trend that really continues or really expands could it hurt us on the margins. It could certainly hurt us on the margins, but that's not the bread-and-butter job that we do. And so it's a little bit speculative, but we don't see that as a huge headwind going forward.

Kevin McNamara

And Joanna, the question also touches on the subject at First of all, it pet subject to the fact that our average job is something very different than what you're describing. Average job is $1,500. I mean we're talking about some job that involves plumbing -- 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 bed -- do it yourself. But let me also say, but when I say it touches an important point because I think our way out of the conundrum and problems associated with marketing is not so much Google going out of business.

We think that Google strangle hold on the market will abate with AI emerging and is moving strongly. But the -- when you look at the effect of $1,500 on marketing and if you look at our average price per job, as that price goes up significantly, marketing becomes less of a factor. I mean to the extent that it wasn't too many years ago, our average price per job was -- and so I think we can outgrow a lot of the pernicious effects of Google stranglehold.

And I'll tell you right now, there's also litigation across all facets of the service industry with Google with regard to some of their predatory activities. But I think the real answer is we're growing our average price per job, that will be how we handle the marketing issue.

Joanna Gajuk

That makes sense. And if I may, last question on that segment. Like you said, you find the franchise fees, and you see margins are well below average. So can you help us understand specifically these other owners fail to do? Or kind of how do you plan to bring these margins to the average in terms of vague examples.

Michael Witzeman

Yes. I would -- I mean it's across the entire organization that we acquired. The they were not as sophisticated as we are as it relates to Internet marketing, for instance. So they spent a significant amount higher percentage of their revenue on Internet marketing to get the business that they got. They did not do any water restoration. And so that obviously comes at a good margin for us. And so there's just a number of things that had pretty significant back-office staff that we really don't need to replicate. And so there's just... .

Kevin McNamara

Many of them don't have on reparation.

Michael Witzeman

Right. So that's top to bottom, I think there's ways that we will improve the EBITDA margin. And there's no reason to believe that these locations are any different than any other Roto-Rooter branch location that all combined average 20.8% margin in the third quarter.

Kevin McNamara

[indiscernible] sure with overtreatment being.

Joanna Gajuk

All right. If I may, on the VITAS question I have. So clearly, outperformance very strong results there. So this is a great -- one question about the contractual allowance. It's a small number, but I guess going up in this quarter in Portugal and went up again like $3 million sequentially. So can you help us understand what's driving that? And also do you assume this line item stays at $8 million per quarter going forward? .

Michael Witzeman

Because of all of the press and things around fraud and abuse, we saw a very significant increase in activity around viewing files on a state and federal level across all of our locations across the country. So order of magnitude, we saw roughly $12 million to $14 million additional revenue being reviewed by the state and federal regulators. 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 historically, there is a slightly higher write-off percentage when files get pulled, then our normal write-off percentage on a day-to-day basis. And that's all you're seeing is a bit of an increase in activity around regulators. Whether that continues going forward or not, I think is anyone's guess. I would say, if I were guessing that it probably will be distinct for some period of time. But as you said, it's not particularly material to the total.

Kevin McNamara

It's -- we probably have a competitive advantage given that our department that we have that fights those audits and whatnot are far beyond what our average competitor that is a single site not-for-profit could deal with.

Joel Wherley

Yes. And to Mike's point though, we have a really, really strong track record of reversal on these claims, but we have to go through the due process which takes some time. And so from an accounting perspective, we record it. And then we go through the necessary steps in reviewing of the claims. And again, we have an outstanding track record and have no concerns associated with that recent increase because of -- to Mike's point, the focus from the government and program integrity has certainly increased the number of audits, both pre and post payment audits that we're faced with. .

Operator

Our next question or comment comes from the line of Ben Hendrix from RBC Capital Markets.

Benjamin Hendrix

Just a couple of quick follow-ups. Kevin, I think you mentioned on the Roto-Rooter side that you had increased actually your number of organically generated leads. I wonder if you can kind of give us a recap of some of the platforms or programs you have in place to kind of generate the leads internally. Are we working with applications or apps for iPhone apps or AI tools to help generate that and diversify away from Google? Any comments you can get -- you can offer on that and where that could go?

Kevin McNamara

Yes. I could start, Mike, also, but we have an app. And Mike, what is our total downloads at this point? .

Michael Witzeman

It's over 300,000. We received roughly 1,000 to 1,500 leads a week generated directly from the app. .

Kevin McNamara

We have apps. We have -- when I say our natural we'll get them from, for instance, commercial customers that have the commercial business managers, direct line. We get them from largely the maps section of Google. And generally speaking, it could be from a sticker on a water heater that we replaced with our telephone number that does not go a Google click.

So it's -- they're multifaceted, but basically, they're everything other than somebody going to Google and clicking on 1 of the paid ads. I mean -- and in the Google makes it tough is they make it. So it's hard for our customers to find our free listing on Google. I mean it's -- there's three sections of paid advertising before you get to that type of information. I mean, if you search roto rooter plumbing, you probably be viewing 7 or 8 competitors before you had the telephone number for Roto-Rooter. And there would probably be a map section with a paid Roto-Rooter.

We wouldn't have a paid ad generally on that. But to the extent that Roto-Rooter -- that Google now has rotating paid ads in the map section, we don't have any control over that where those appear. So that very likely again, our customers have to do a dance and go through a maze in order to find it on a basis, but we find that they still do, and they're still looking for just Roto-Rooter.

Michael Witzeman

Yes. And even if -- so they would click down the page in the first 2 or 3 places they would see Roto-Rooter, are still paid some level of paid search. And so even if they're looking for outer, they don't distinguish certainly between paid and unpaid. They just click the first one available. So I think that's part of the part of what Google is forcing with the way they've organized their search page. But the other thing that we -- I definitely think we see, it's a little harder for us to track.

But we certainly believe that 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 great information from anywhere in the internet. So we're not exactly sure where the phone number was obtained from, but we know that those are free leads as well. So yes. It's a slow slog, but I do think that we'll continue to expand free leads. Unfortunately, Google is still the elephant in the room for the -- at least for the near term.

Kevin McNamara

Yes. And I don't want to -- I want to emphasize that certainly, our goal is to have the lion's share, never 100%, but the lion's share of commercial business come other than from Google. Okay? And that's, of course, the fastest growing part of the Roto-Rooter business. And that gives us a lot of hope for stability with regard to this subject. .

Benjamin Hendrix

One more on VITAS side and just to follow up on the line of questioning around the recruiting costs. Just -- I know you guys are still working on your plan for 2027, but we're getting the question. So any way to think directionally about kind of recruiting costs this year versus next? And should we expect some kind of acceleration in recruiting expenses next year? .

Joel Wherley

Ben no, we do not anticipate any material increase in recruiting costs as we look forward to 2027. Our teams do a great job of proactively managing where we have staffing needs and responding accordingly.

Operator

[Operator Instructions] Our next question comment comes from the line of A.J. Rice from UBS.

Albert Rice

Maybe just first on the VITAS side. Obviously, strong growth there. I wonder you drill down, is that your sense of you're consistent 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 fraud and abuse, is there any movement of referral sources towards you because we feel more comfortable with your compliance programs versus the mom and pop. I wonder if you could just comment on what you're seeing in your growth numbers relative to what you think the underlying trends are.

Joel Wherley

Yes. Thanks for the questions. First, we had a very balanced quarter as you look at growth both Florida and non-Florida across the company. Although I will speak to your latter question, which is have we seen an increase specific to any concerns associated with waste, fraud and abuse potentially with other providers. We continue to see strong growth in Florida -- or I mean in California, specifically Southern California.

And so yes, we do believe there has been a migration towards a more stable, trusted partner as it comes to end of life care in those markets, and we have benefited from that. We continue to support the government's oversight with program integrity and their desire to weed out fraudsters with in the industry. One thing I want to comment on in that we're working very closely with CMS on this is that we want to change that narrative from discussing waste, fraud and abuse to access for those in need, recognizing only a little over half of the Medicare deaths in the United States actually get the benefit from the Medicare hospice benefit.

There is a lot of education still to be done. And a lot of access that needs to be created. So we feel good about our balanced growth. It's not just been in our new starts in Florida. It's been across the company. And as regards to California, we feel really good as the largest provider across the state of where we're positioned and the growth that has occurred out there.

Albert Rice

Okay. Maybe also on the Roto-Rooter side. I know a lot of the discussion has been about the headwind on the margin side, the paid leads and all the dynamic of how the referral sources have changed over the last few years. I wonder when you step back, do you think -- because you maybe are in a better position to fund that? Is it helping you grab share? I don't know whether the 5.5% 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 in the business?

Kevin McNamara

I think there's a little bit of that, but the countervailing force is -- I think we're seeing a little bit of panic by some of our competitors. And when I say panic, I see them increasing their bids for placement on the paid search. To the extent that things get tougher, they don't -- they have a company that has very little name recognition in their markets relatively -- compared to Roto-Rooter and we see them as they are -- because they're largely big competitors, they're facing the same discrimination by Google that we're seeing.

And because they are advertisers, it's kind of counterintuitive, but Google is discriminating any company that advertises because they say, well, as long as you're big enough to advertise, we're going to turn the screws on you and you're going to be forced to have that be your only outlet for getting leads. And I see them possibly panicking a bit that we saw during the quarter that our -- the bids per lead were going in. That was part of the what we call the margin pressure associated with marketing.

And I think Stage 1 is they're fighting off that market erosion and I think a little bit of that is coming to us. We expect to be even more successful with regard to market share. I mean there's also another comment that there are very few markets that we aren't significantly larger than our competitors. There's some. But again, so it's a little bit like VITAS in Florida. It's hard to talk about them get improving market share when they -- when some of the counties, VITAS might have 75% of the Medicare death associated that entered hospice.

So -- but I think you're making the right point. I mean, Roto-Rooter has some, I think, some advantages in adversity. I mean to the extent as get our average price per job is much higher. It makes our marketing cost per job lower, obviously, just arithmetic. It -- our resiliency of our service mark is so strong. The period -- the time that we've been in the -- in each one of these markets has been since the 1940s. So I mean as we have a lot of advantages, we're still facing some tough competition and Google is 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 during this period that there aren't headwinds. We've talked about the headwinds of gas prices aren't going to improve anytime in the next couple of weeks. Google isn't going away. We're trying to get better in dealing with them. And job one really for us is saying, look, if we can grow the top line that, it's like a rising Creek covers a lot of stuff. And the creek is rising. And now it's our job just to navigate the stubs.

Michael Witzeman

I would just add, A.J., that much to our disappointment internally as well is there are not great statistics in the overall plumbing industry market share and overall size of the industry and our part in that. What I would say is 5.5% growth is higher than what we would historically see in the overall industry on a year-to-year basis. So I think we would conclude that at least to some degree, as Kevin would say, we are taking market share in our branches. We know with certainty as evidenced particularly by some of the things we've talked about, our own contractors as well as the very motivated seller we just bought their business from California. We know that smaller, less sophisticated plumbing companies are really struggling in this environment. It's a difficult environment.

And as Kevin has talked about, it's a pretty sophisticated marketing problem to navigate our way through. So I do think we're taking market share from some of the smaller players. And we'll see. I wish we had better statistics on how that all worked.

Albert Rice

No, no problem. I might ask one last question. On the prepared remarks, you made the comment about, obviously, the capital structure is strong. You can -- you're positioned if strategic deals come along to take a look at it. it sounds like in some of the earlier discussion, the main focus is on potentially buying out some franchisees, but I want -- I didn't want to leave it without making sure is that what you're 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?

Michael Witzeman

I think at this moment, we're more focused on the deals, the type of deals we have made this year so far, reacquiring franchises, maybe Joel will find a single location or smaller multi-location hospice in a place we like. But I think we're focused on building the two brands that we own. Kevin and I and some of the other executives talk all the time about the potential for third legs of the stool at the company. But ultimately, that's a pretty high bar for us from an investment standpoint to make, but it's not that we ever rule it out. It's just we have pretty high standards when it comes to thinking about potentially expanding to a new product or service line altogether.

Kevin McNamara

Yes. I would say if you talk about in terms of -- I agree 100%, what Mike said that nothing -- certainly nothing is imminent. I would say a much -- if you talk about probability, the type of thing we look at almost just regularly to another service line of Roto-Rooter. I mean we've certainly been in many other service lines, a lot of questions like, would you ever -- would we ever consider getting back into the HVAC? And we think in certain geographies we would.

We think that are struggling HVAC companies and some of the geography that we would like to be in. The first time we were in it -- and this was in the most of the 1990s, we just didn't see it helping our plumbing business very much or vice versa. And -- but maybe things change. But I mean, I'd say that's a lot more likely to an additional service line at Roto-Rooter that is a completely new business.

Operator

I'm showing no additional questions in the queue at this time. I would like to turn the conference back over to management for any closing remarks.

Kevin McNamara

No closing remarks are -- just thanks, everyone, for their attention and appreciate all the operating units for excellent results. Thank you. .

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.