DaVita(DVA) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter adjusted operating income was $439 million, adjusted EPS was$2, and free cash flow was negative $45 million, with adjusted operating income above previous guidance due to strong expense management and international performance [18][25] - Revenue per treatment increased by$4, with approximately $10 attributed to new reimbursement for phosphate binders, partially offset by a$5 decline due to seasonal patient responsibility [21][39] - Patient care cost per treatment increased by $7 sequentially, driven by approximately$8 per treatment of new costs associated with phosphate binders [21] Business Line Data and Key Metrics Changes - Adjusted international operating income increased by $29 million compared to the fourth quarter, with strong performance across various markets [22] - Integrated Kidney Care (IKC) reported operating losses of$29 million, in line with expectations, with seasonally stronger performance anticipated in the second half of the year [22] Market Data and Key Metrics Changes - Treatments per day declined by 40 basis points compared to Q1 2024, primarily due to a higher missed treatment rate caused by a severe flu season [19] - The company expects an approximately 50 basis point decline in treatments for the year, influenced by flu-related impacts and a cyber incident [20] Company Strategy and Development Direction - The company remains committed to investing available capital in innovation and high-return growth opportunities, including a recent acquisition in Latin America [13] - The capital allocation strategy includes returning capital to shareholders through share repurchases, with approximately $680 million repurchased since the last earnings call [13] Management's Comments on Operating Environment and Future Outlook - Management highlighted the resilience of operations despite a cybersecurity incident that disrupted parts of the business, with uninterrupted patient care maintained [9][10] - The company reiterated its 2025 guidance range for adjusted operating income and adjusted EPS, despite headwinds from the cyber incident and a challenging flu season [16][25] Other Important Information - The company launched a community-based collaboration with the YMCA to support chronic kidney disease education and prevention, with early results showing 30% of participants screened had previously undiagnosed CKD [6][7] - The majority of costs related to the cyber incident are expected to be one-time items recognized in the second quarter [31] Q&A Session Summary Question: Impact of flu and cyber attack on treatment growth - Management indicated that the flu had a more significant impact on the full year guidance, with the census decline in Q1 affecting the full year [29] Question: Costs related to the cyber attack - Management clarified that some costs will be direct and non-GAAP, likely covered by insurance, while others will flow through the P&L and are included in guidance [31] Question: Phosphate binders uptake and drug mix - The mix leaned towards iron-based binders, leading to an adjustment in guidance to the upper end of the previous range [33] Question: Revenue per treatment and managed care increases - Management confirmed that revenue per treatment guidance remains unchanged, with increases expected from both core business and oral medications [42] Question: IKC patient treatment and competitive pricing - Management noted that the financials are playing out as expected, with a disciplined approach to patient care and financial modeling despite competitive pressures [51] Question: International performance outlook - International operations had a strong quarter, with positive contributions from various markets and a successful acquisition [57]