Chemed Corporation (CHE) Cash Flow Statement

The OCF/NI ratio has been consistently above 1.0 except in 2025Q1 (0.46), when working capital absorbed $52.6M. The 2025Q2 spike to 2.64 reflects a $57.6M working capital release, likely from collections. Overall, the gap between net income and operating cash flow appears driven by timing, not accrual manipulation, though the 2025Q1 dip warrants monitoring.

The 2025Q1 FCF margin of 3.0% was an outlier, driven by a $52.6M working capital outflow. Subsequent quarters show FCF margins in the 10-20% range, aligning with historical norms. The 2026Q2 FCF of $69.3M is roughly in line with net income, suggesting sustainable conversion, though the elevated buyback activity ($97.5M) may pressure cash balances if sustained.

CapEx has grown from $11.1M in 2024Q2 to $15.5M in 2026Q2, but remains modest relative to revenue, indicating a light-asset model. The increase may reflect investments in Roto-Rooter's water restoration equipment or VITAS facility upgrades, but the scale suggests maintenance-level spending rather than aggressive expansion. This aligns with the company's conservative capital allocation.

The large positive working capital in 2025Q2 and 2024Q4 ( $48.9M) likely reflects collections of receivables, possibly from Medicare or insurance claims. The negative swings in 2025Q1 and 2024Q2 suggest timing of payables or accruals. Given the complexity of VITAS's Medicare cap reserves and Roto-Rooter's insurance reimbursements, these fluctuations may persist, but they appear to be timing-related rather than indicative of deteriorating efficiency.

Buybacks have been consistently large, with notable spikes in 2024Q4 ($209.3M) and 2026Q1 ($190.0M), while dividends remain modest and stable. This suggests management views shares as undervalued and prioritizes flexibility over fixed distributions. The near-zero debt balance (0.16% D/E) indicates these repurchases are funded by operating cash flow, not leverage, which is a positive signal for balance sheet strength.