Earnings call transcript: DaVita Q2 2025 beats estimates, stock dips

DaVita HealthCare Partners Inc. (DVA), a prominent healthcare provider with a market capitalization of $10.63 billion, reported better-than-expected earnings for the second quarter of 2025, with adjusted earnings per share (EPS) of $2.95, surpassing the forecasted $2.78. Revenue also exceeded expectations, reaching $3.38 billion against a forecast of $3.36 billion. According to InvestingPro analysis, the company currently appears undervalued based on its Fair Value estimate. Despite the positive earnings results, DaVita’s stock fell 0.73% in after-hours trading, closing at $138.50, potentially due to concerns over operational challenges and future guidance.

Key Takeaways

• DaVita’s Q2 2025 EPS of $2.95 exceeded forecasts by 6.12%.
• Revenue reached $3.38 billion, slightly above expectations.
• Stock dipped 0.73% in after-hours trading despite earnings beat.
• Operational challenges include a decline in US treatment volumes.
• Full-year guidance maintained, with EPS expected between $10.20 and $11.30.

Company Performance

DaVita’s performance in the second quarter of 2025 showed resilience, particularly in its financial metrics, despite facing operational hurdles. The company managed to exceed both EPS and revenue forecasts, continuing a trend of strong financial results. However, the slight decline in US treatment volumes and increased costs due to a cyber incident have posed challenges.

Financial Highlights

• Revenue: $3.38 billion, up from the forecasted $3.36 billion.
• Earnings per share: $2.95, surpassing the forecast of $2.78.
• Adjusted operating income: $551 million.
• Free cash flow: $157 million.

Earnings vs. Forecast

DaVita reported an EPS of $2.95, which was 6.12% above the forecast of $2.78. The revenue came in at $3.38 billion, slightly ahead of the $3.36 billion forecast. This marks a positive surprise in both earnings and revenue, continuing a pattern of exceeding expectations in recent quarters.

Market Reaction

Despite the earnings beat, DaVita’s stock fell by 0.73% in after-hours trading, closing at $138.50. This movement may reflect investor concerns over the company’s operational challenges and the impact of a cyber incident that incurred $13 million in direct costs. The stock trades near its 52-week low of $131.76, significantly below its high of $179.6. InvestingPro analysis indicates the stock generally trades with low price volatility, maintaining a beta of 1.09, while management has been actively buying back shares to support shareholder value.

Outlook & Guidance

DaVita maintained its full-year guidance, expecting adjusted operating income between $2.01 billion and $2.16 billion, and adjusted EPS between $10.20 and $11.30. With a P/E ratio of 13.57 and strong financial health metrics (rated GREAT by InvestingPro), the company shows promising value characteristics. Discover comprehensive analysis and 10 additional ProTips in the exclusive Pro Research Report, available to subscribers along with advanced screening tools and expert insights. The company anticipates a decline in treatment volumes by 75 to 100 basis points but expects revenue per treatment growth near the lower end of the 4.5% to 5.5% range.

Executive Commentary

CEO Javier Rodriguez emphasized the company’s commitment to patient care and technological innovation, stating, "We are first and foremost committed to providing exceptional care for our patients." CFO Joel Ackerman expressed confidence in meeting long-term guidance, saying, "We believe we can continue to deliver results consistent with our 2025 and long-term guidance."

Risks and Challenges

• Decline in US treatment volumes by 1.1%.
• Increased operational costs due to a recent cyber incident.
• Elevated mortality rates potentially related to COVID-19.
• Challenges in growing treatment volumes.
• Potential impact of proposed Medicare dialysis rate increase.

Q&A

During the earnings call, analysts inquired about the impact of the cyber incident, which resulted in $13 million in direct costs. Questions also focused on the lower-than-expected phosphate binder dispensing volumes and the elevated mortality rates, which may be linked to COVID-related care delays. Executives highlighted ongoing efforts to leverage new technologies to improve patient outcomes.

Full transcript - DaVita HealthCare Partners (DVA) Q2 2025:

Michelle, Conference Facilitator: Evening. My name is Michelle, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the DaVita Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer period.

Thank you, Mr. Lysen. You may begin your conference.

Nick Eisen, Group Vice President of Investor Relations, DaVita: Thank you, and welcome to our second quarter conference call. We appreciate your continued interest in our company. I’m Nick Eisen, Group Vice President of Investor Relations, and joining me today are Javier Rodriguez, our CEO and Joel Ackerman, our CFO. Please note that during this call, we may make forward looking statements within the meaning of the federal securities laws. All of these statements are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those described in the forward looking statements.

For further details concerning these risks and uncertainties, please refer to our second quarter earnings press release and our SEC filings, including our most recent annual report on Form 10 ks, all subsequent quarterly reports on Form 10 Q and other subsequent filings that we may make with the SEC. Our forward looking statements are based on information currently available to us, and we do not intend and undertake no duty to update these statements except as may be required by law. Additionally, we’d like to remind you that during this call, we will discuss some non GAAP financial measures. A reconciliation of these non GAAP measures to the most comparable GAAP financial measures is included in our earnings press release furnished to the SEC and available on our website. I will now turn the call over to Javier Rodriguez.

Javier Rodriguez, CEO, DaVita: Thank you, Nick, and thank you for joining the call today. We are pleased to report another solid quarter where our focus on providing exceptional care for our patients and fostering a positive experience for our caregivers continue to drive results. We delivered on our financial commitments, supported by strong clinical performance and disciplined execution across our businesses. Today, I will share the highlights of our second quarter results, offer insights on key policy developments, discuss the evolving landscape of device innovation, and finish by sharing our outlook for the rest of the year. But first, as always, let’s begin with a clinical highlight.

While I usually focus on a specific clinical achievement, today I want to take a step back and reflect on the exciting opportunities ahead for DaVita and the kidney care community. To offer some historical perspective, in the two decades leading up the COVID nineteen pandemic, the kidney care community made remarkable clinical strides. Advances in technology and pharmaceuticals, combined with the adoption of more standardized care, led to improved outcomes and significant reductions in mortality rates. Then came COVID, a disruption that impacted not only operations but also the health acuity of our patients. Yet, from where we stand today, I am optimistic about what’s ahead, and I believe we’re entering a new wave of clinical innovation that holds exciting potential for the patients we serve.

Breakthrough technologies from advanced IT systems to the transformative power of artificial intelligence are positioned to help us personalize care in unprecedented ways. Greater adoption of new drug classes like GLP ones and SGLT twos, along with the next generation devices that improve the clearance of middle sized molecules, offer the potential to extend life and ease recovery from dialysis. Prior with these tools, the kidney care community is positioned to once again improve clinical outcomes. We have the opportunity to lower mortality, enhance the quality of life of our patients, and deliver better care. Of course, this evolution will take time and investment, but we’re moving forward with conviction grounded in our vision of an unwavering pursuit of a healthier tomorrow.

Let me transition now to our second quarter performance. Adjusted operating income and adjusted earnings per share came in slightly ahead of our expectation. These results are indicative of two important themes that we highlighted last quarter and which continue to resonate strongly today. The first theme is our ability to deliver on our commitment of 3% to 7% adjusted OI growth despite not yet achieving our volume growth objectives. This was evident during the second quarter where the strong performance in patient care costs more than offset cyber related weakness in revenue per treatment and volume.

That said, improving volume remains a primary focus, and we continue to believe we will return to 2% annual treatment growth over time. While the rebound takes shape, we’re executing against other opportunities to achieve our long term operating income and EPS targets. Our proven track record of managing costs across our operations, coupled with our significant investment in systems and IT in recent years, give us the confidence that we can achieve cost savings that offset current volume weakness. The second theme I wanna highlight is the resilience of our business to navigate environmental and unexpected challenges. We’re now roughly three months out from the onset of the cyber incident we discussed last quarter, So let me provide more detail on our recovery and associated financial impact.

Operationally, we continue to provide uninterrupted patient care. The financial impact incurred can be split into two high level categories. The first, the discrete costs associated with the incident, such as outside consultants, technology costs, legal costs, etcetera. In the second quarter, those costs were approximately $13,000,000 and are excluded from second quarter adjusted operating income as non GAAP expenses. The second and more significant category is the impact on treatment volume and revenue per treatment due to lower patient admissions, increased mistreatments, and lower expected yield on claims for treatment this quarter, among other things.

Aside from the continued impact of the lower census from lost admit opportunities, we believe the impact of the cyber event is largely behind us, and there will be limited ongoing effect to adjusted results. Joe will provide more color on these dynamics. I’ll now transition to providing a few policy updates. Last quarter, we provided an update on various policy changes, including tariffs, Medicaid cuts, and qualified health plans. Although congress has passed further legislation and each of these topics remain fluid, our estimates of the impact of these items on DaVita remains unchanged from last quarter.

Additionally, in late June, CMS published the 2026 ESRD proposed rule. The approximate two percent increase from dialysis rate was in line with our expectations, yet, much like recent years, continues to fall short of actual inflation experienced by dialysis providers. As a reminder, the Medicare rate is subject to an incremental update in the final rule later this year. One final topic before I move on to guidance. There’s a lot of discussion and energy in the industry regarding new technology to The United States to improve clinical outcomes through better clearance of middle sized molecules during dialysis.

High volume hemodiafiltration, or HDF, is one example of this technology. We actively champion clinical innovation that can improve patient outcomes and quality of life, and these technologies offer promising potential. In terms of where we stand today, we are active with a number of work streams. This includes monitoring existing and future clinical studies to assess the efficacy of various solutions, including not only HCF machines but advanced dialyzers which may provide similar clinical outcomes. As more clinical evidence comes to light, we will listen to physicians’ preferences.

And finally, we’re assessing the operational implications of each innovation with consideration of clinical outcomes and health economics. So there’s a lot to be excited about, but still a lot to learn. We remain committed to staying at the forefront of clinical innovation, and we’re energized by the opportunity to deliver even better care for the patients we serve. Looking ahead to the remainder of

Javier Rodriguez, CEO, DaVita: the year, we’re reaffirming our guidance range for adjusted operating income of $2,010,000,000 to $2,160,000,000 and our adjusted earnings per share range of $10.20 to $11.30 despite the negative impact of the cyber incident. Furthermore, we continue to have confidence in our ability to deliver adjusted operating income and adjusted EPS growth consistent with our long term guidance. I will now turn it over to Joel to discuss our financial performance and outlook in more detail. Thank you, Javier. Second quarter adjusted operating income was $551,000,000 Adjusted earnings per share was $2.95 and free cash flow was $157,000,000 I’ll provide detail on the individual components of our results beginning with US dialysis.

Starting with treatment volume. US treatments per day declined 1.1% versus the 2024, which was approximately 50 basis points below our expectations for the quarter. The weakness was largely the result of a higher than expected mistreatment rate. We believe that the cyber outage was the primary driver, but it’s difficult to differentiate between impacts from cyber and other underlying trends. In light of the higher than expected mistreatment rate in Q2, we’ve increased our expectations for mistreatment rate for the remainder of the year, thereby lowering our expectations for full year treatment volume.

We now anticipate a year over year decline of 75 to 100 basis points as compared to our previous guide of down 50 basis points. I will remind you that this forecast is for the absolute number of treatments and not treatments per day or non acquired growth. Moving on to revenue per treatment. RPT increased approximately $4.5 versus the first quarter. This typical sequential step up is due to higher patient responsibility for co pays and deductibles in Q1.

The overall increase was below our expectations, primarily related to the cyber incident in April. RPT for the quarter was also negatively impacted versus our expectations by lower dispensing volumes of binders. As a result of these two dynamics, we now expect full year RPT growth near the lower end of our original range of 4.5% to 5.5%. Moving on to patient care costs. PCCs per treatment declined by approximately $3.5 sequentially.

This was primarily the result of three factors. First is higher treatment count compared to Q1. Second is improved labor productivity in our centers. And third is binders. As I mentioned before, binder dispensing volume was below our expectations and down from q one.

We anticipate the outperformance in patient care costs to continue for the rest of the year, resulting in a full year increase of 5% to 6% versus 2024, better than our original expectations. Focusing on binders for a moment. As I mentioned, both revenue and patient care costs associated with phosphate binders were lower in q two versus q one due to lower dispensing volumes. We expect no net impact from this and other small changes in our assumptions for the back half of the year. As a result, our full year adjusted OI expectation from the addition of binders to the bundle remains unchanged at approximately $50,000,000 International adjusted operating income increased $6,000,000 versus the first quarter, primarily due to a onetime benefit.

We are excited that the fourth and final of the Latin American acquisitions related to clinics in Brazil closed last week. Integrated Kidney Care or IKC, our value based care business, had adjusted operating income of $26,000,000 in the second quarter. IKC benefited from approximately $40,000,000 of revenue expected to recognize later this year. This reflects a timing benefit for the second quarter and has no impact on our full year expectations. Transitioning to capital structure.

During the second quarter, we repurchased 3,100,000.0 shares, and we repurchased an additional 2,700,000.0 shares since the end of the quarter. We finished the quarter with a leverage ratio of 3.34 times consolidated EBITDA, which is up from Q1 but still comfortably within our target range. In May, we raised $1,000,000,000 of senior unsecured debt. And in July, we repriced our term loan b, reducing the spread by 25 basis points and raised an additional $250,000,000, which we used to pay down a portion of our term loan a. These transactions represent our continuous efforts to optimize our interest rates, maturities and liquidity, all within our existing capital allocation philosophy.

Let me now turn to our expectations for full year 2025. As Javier noted, we are reiterating our full year adjusted operating income and adjusted earnings per share guidance ranges as reflected in our press release. We are confident that we can continue to deliver results consistent with our 2025 and long term guidance while caring intensely for our patients and teammates and investing in our future. That concludes my prepared remarks for today. Operator, please open the call for Q and A.

Michelle, Conference Facilitator: Thank you, sir. Our first caller is Andrew Mock with Barclays. You may go ahead, sir.

Andrew Mock, Analyst, Barclays: Hi. Good afternoon. Appreciate all the color on guidance. Can you give us a sense for how census and treatments tracked following the cyber attack and how you’re thinking about volumes in the back half? Because on the one hand, you signaled there wouldn’t be an ongoing impact, but then you assumed, I think, elevated mistreatments persist for the back half of the year and revise the treatment growth outlook.

So maybe just help us understand how you’re thinking about that. Thanks.

Javier Rodriguez, CEO, DaVita: Thanks, Andrew. This is Javier. Before Joel gets into explaining, that’s very important because there’s a lot of dynamics going on in treatment volume. I think on the simpler side, so we can stand you know, start at 10,000 feet, the year is going as expected with the exception of two significant items, which is a severe flu season and the cyber incident. And that, of course, puts all those dynamics that you highlighted in play.

But sometimes it’s just easier to start with a high level before you get into the detail. So now, Joel, if you can bridge all those questions in there. So,

Joel Ackerman, CFO, DaVita: Andrew, let me try and unpack this for you. So during the call last quarter, we anticipated challenges on the admit side associated with the cyber attack of of a few 100, 500, 600 admits, and that has played out largely as we expect it. We saw the the challenges for a few weeks, but everything has normalized since then. What we did not anticipate was a spike in mistreatment rates, which, is a number that tends to follow a regular seasonal pattern, high in q one, down in q two and q three, and then back up in q four. Q one was higher than normal associated with the flu, and we expected it to come down, along a typical curve in q two, and that’s not what we saw.

It was elevated in April and actually even worse in May and then came back down in June, although not as far as we would normally expect. So we saw a big jump in mistreatment rates in q two year over year, which we attribute to the cyber incident. And as a result of that dynamic, we decided to change our view on mistreatment rate for the back half of the year, where previously, we had thought it would come down a bit relative to 2024 given the challenges we’ve seen in the first half of the year due to both flu and cyber, we updated our assumptions and assume this treatment rate is roughly flat relative to last year for the back half of the year. So that’s the math. I I’ll remind you, we’re we’re talking about point 1% delta roughly.

So we’re really focusing in on numbers, and and the tighter you get, the harder it is to really call out the precision. But that’s the dynamic. So if you think about the change in guide on volume growth from negative 50 bps to negative 75 to negative a 100, it’s pretty much all about a higher mistreatment rate, partially in q two, partially in the back half of the year.

Andrew Mock, Analyst, Barclays: Great. And maybe just a few follow ups on phosphate binders. First, can you give us the phosphate binder contribution to RPT and CPT in the quarter? And why was the dispensing volumes lower in the quarter? Is that due to the lower treatments?

Or did the mix of patients on binders go down?

Joel Ackerman, CFO, DaVita: Yeah. So on the on the volume side, it’s about a reduction in the number of scripts. It’s not a mix issue. What what we believe is happening is, adherence is not what we expected. Some patients are getting their binders through other means outside of DaVita, and some are just relying on, over the counter solutions.

So volume is lower than expected. In terms of contribution to RPT and CPT, The RPT number was someone in somewhere in the low eights, and CPT was in the high sixes.

: Great. Thank you.

Javier Rodriguez, CEO, DaVita: Andrea, one of the things that you might not be familiar with or other people on the call is for these binders, the pill burden is pretty heavy. And so, there’s also some adherence issue around that because you have to take the pills with a meal. I think that there’s, there’s some leakage in that dynamic.

Andrew Mock, Analyst, Barclays: Great. Thanks for all the color.

Javier Rodriguez, CEO, DaVita: Thank you.

Michelle, Conference Facilitator: Thank you. Our next caller is Pito Chickering with Deutsche Bank.

Pito Chickering, Analyst, Deutsche Bank: Hey, good afternoon, guys. I guess, starting on operating income guidance, can you sort of bridge us how you’re maintaining the guidance from last quarter with treatment growth getting worse due to mistreatments and revenue per treatment at the lower end of the guidance. Can you sort of walk us through how you’re sort of getting there? Is it from cost on core kidney? Is it from Better International or IQC?

Just how bridge to me sort of those two negative moving parts and how we’re maintaining operating

Joel Ackerman, CFO, DaVita: Yeah. Generally, it’s two components. By far, the biggest one is cost per treatment, and that’s largely a labor dynamic in US dialysis. And the other is on international, which was roughly $10,000,000 ahead of plan for the quarter, largely nonrecurring. So I wouldn’t annualize that in the back half of the year.

Pito Chickering, Analyst, Deutsche Bank: Okay. And then with the updated treatment growth of down 75 basis points, 100 basis points, the first half of year was down 70. So to get to the midpoint of the range, we’re now down 1% to 1.1% in the back half of the year. Can you just talk to us about incidence, mortality and transplants? And then on the mistreatment side, why would they be structural?

Because I get this I get the flu in the first quarter, and I get cybersecurity in the second quarter. But, generally, these patients need treatments. Otherwise, they die. So how can mistreatments become a structural headwind?

Joel Ackerman, CFO, DaVita: Yeah. So let me start with the mistreatment rate. Mistreatment rate is a number that varies. It has been elevated since COVID. Roughly, it peaked at about a one percent worse than the pre COVID levels in 2022, and we had expected it to come down since then, and it did.

It was down in ’23 and ’24. It’s back up again this year, and I think your your your point is a very reasonable one. But, again, we’re talking about one tenth maybe of 1%, maybe 15 bps. So I think, we’re comfortable with just keeping it flat relative to 2014. I wouldn’t say it’s a structural issue, but just our anticipation for the next couple of quarters, we brought it down, a bit.

In terms of let me fill out some of the other dynamics, which is really about admits and mortality. So admits in q two was negatively impacted by cyber roughly in line with what we expected. Excluding that, it would have been a normal admit month showing year over year growth similar to what we’ve seen most quarters over the last few years. Mortality, again, mortality remains elevated, but consistent what with what we saw in q two of last year. So the the excess excess mortality we saw in q one from flu has come back down, but the overall mortality level, remains higher than pre COVID, but consistent with last year.

Pito Chickering, Analyst, Deutsche Bank: Okay. Great. Thanks. I’ll jump back in queue.

Javier Rodriguez, CEO, DaVita: Hey, Peter. One of the things that’s really important because sometimes in the interest of being simple, people talk about the CKD population and GLP ones and the impact upstream. We are not seeing it in the admits. And so it’s really important what you ask because it’s this mortality and mistreatment dynamic that really needs to be rectified. As you mentioned, mistreatment are a little trickier, but mortality, we have a three pronged plan to work on it.

It will take some time to get there, but at the end of the day, you’ve heard it in the opening remarks, we need better clearance of minimal molecules is the first step. Number two, on pharma, we need more patients on GLP one. There’s barely any patients on them. And then number three is, we’re working on a whole bunch of protocols in IT to make sure that we can predict hospitalization and other things like that. But at the end of the day, we need to lower mortality.

: Great. Thanks so much. Thank you.

Michelle, Conference Facilitator: Thank you. Our next caller is AJ Rice with UBS.

AJ Rice, Analyst, UBS: Hi, everybody. Just maybe ask about the, comment on IKC, 40,000,000 more in the, q two. And it sounds like you obviously believe that’s a pull forward. I wonder, can you maybe give us a little more of what happened and why do you think that’s a pull forward versus potentially a better trend in the underlying business that might carry over in the back half of the year?

Joel Ackerman, CFO, DaVita: Yeah. So the reason we feel comfortable that it’s a pull forward, it is it is all revenue associated with twenty twenty four plan years. And the dynamic is as the data comes in and our actuarial and accounting teams gain confidence that we have actually earned shared savings, then we will recognize revenue. And our expectation was that we would get that level of clarity in q three and q four, but, we were able to get some of the clarity earlier in the year. And as a result, we recognized the revenue early, but we didn’t recognize more revenue than we had expected during the year, which is why it’s a timing thing rather than a net positive for the year.

AJ Rice, Analyst, UBS: Okay. Thanks. Maybe I’ll also just ask. I I think in the prepared remarks, you said the cyber attack also had an impact on revenue per treatment. I really wasn’t maybe I’m missing something that’s obvious, but it wasn’t clear to me why that would occur.

What what’s the dynamic there? Is that something that you think is gonna impact the back half as well?

Joel Ackerman, CFO, DaVita: Yeah. So, you heard it right, AJ. We we do think, the cyber incident had an impact on RPT. We don’t think it’ll impact the second half of the year. There are really two components to this.

The larger one is impact on revenue for treatments done in q two. So think about as we’re working our way through the cyber incident, some processes have gone manual. Some things are other processes are either delayed or not being done. If if I have to give you a couple of examples here, it would be something like prior authorizations or data gathering of certain elements that that you’d want on a claim. And as we’re working either manually or in a delayed fashion, we expect some of the claims that would normally get approved will not get approved for q two.

So that’s the bigger chunk. The smaller chunk relates to older claims that were in the queue that had been previously denied, and we’re now working to get them reapproved, either gathering information that that wasn’t on the claim or updating coverage that that had changed. And just as time moves on, it gets harder and harder to collect on those claims. And so we think the the impact of the cyber incident on on systems and other processes will lower our ultimate yield and basically increase bad debt on some of those older claims.

AJ Rice, Analyst, UBS: Okay. Alright. Thanks a lot.

Michelle, Conference Facilitator: Thank you. Our next caller is Justin Lake with Wolfe Research. You may go ahead, sir.

Nick Eisen, Group Vice President of Investor Relations, DaVita0: Thanks. Appreciate it. Just a few numbers questions for me. Joel, I think you said last quarter, you expected revenue per treatment ex binders at about 3% for the year. Just curious if you’ve got an updated assumption on that number?

Joel Ackerman, CFO, DaVita: Yes. We would peg the number now at around two and a quarter percent for the year. And the the big difference really is the RPT impact of the cyber incident.

Nick Eisen, Group Vice President of Investor Relations, DaVita0: Even though that was you’re saying you think contained to the quarter, how much was that of an impact to the revenue per treatment in the quarter? Do you have a number there?

Joel Ackerman, CFO, DaVita: I’d call it 40 to 50,000,000.

Nick Eisen, Group Vice President of Investor Relations, DaVita0: Great. Then you talked about the mistreatments in the first half of the year. And then I think you talked about the second half as being flat year over year, where before you would expect it to be down. Is that right?

Joel Ackerman, CFO, DaVita: That’s right.

Nick Eisen, Group Vice President of Investor Relations, DaVita0: And what was the growth year over year on mistreatments in the first half? Trying to get a comparison.

Javier Rodriguez, CEO, DaVita: It was a little it was

Joel Ackerman, CFO, DaVita: a little worse in q one than in q two, but it averaged about 50 bps for the first half of the year.

Nick Eisen, Group Vice President of Investor Relations, DaVita0: Okay. Got it. Then last one for me is just you you gave it you’re giving a treatment growth number of down 75 to a 100 bps, and that’s total treatment growth. Do you think that equates to online?

Joel Ackerman, CFO, DaVita: Like, you’re looking at same store non

Nick Eisen, Group Vice President of Investor Relations, DaVita0: right. That’s total US treatment growth. Or right? Right. But I think most people, including myself, focus on same store non acquired.

What do you think that equates to there?

Joel Ackerman, CFO, DaVita: I would say the same stored, acquired number would be roughly down 50 bps.

Nick Eisen, Group Vice President of Investor Relations, DaVita0: Okay. So on a non acquired basis, you’re expecting things to get a little bit better than the second quarter, look more like the first quarter, and that’s because you think the second quarter cyber attack kind of filters through and is done? Why do you expect it to get better than the first half?

Joel Ackerman, CFO, DaVita: Yeah. I I I don’t think MAG is a great number for modeling, so I’m I’m a little reluctant to answer your question. Remember, year over year growth also depends on the shape of the the census trend from the prior year, so you can’t just rely on quarter over quarter numbers. But I would say volume growth in the back half of the year, you’d you’d expect it to be worse in q three and then better in q four.

Nick Eisen, Group Vice President of Investor Relations, DaVita0: Got it. Thanks.

Michelle, Conference Facilitator: Thank you. Our next caller is Kevin Fischbeck with Bank of America. You may go ahead, sir.

: Great. Thanks. Wanted to ask another question about the the volumes, I guess, particular, the increased mortality. I appreciate the comments about, some of the things that you guys are planning to do to address it, but it’s still not clear to me why we have a higher mortality issue to begin with because, I I guess, higher mortality implies something that is above where it was pre COVID. So the issue that you you you singled out kinda sound like newer options to potentially address the issue rather than something went backwards and we’re gonna get it back to where it was.

It’s more that it’s elevated and and now you have new tools to potentially bring it down. So just trying to figure out why mortality in your view is persistently, you know, elevated versus where it was historically?

Javier Rodriguez, CEO, DaVita: Yeah, thanks for the question, Kevin. Actually, the actuarial teams are asking that across the country because not just elevated in kidney, but it’s elevated in all disease states. The hypothesis is that COVID had an impact,

Joel Ackerman, CFO, DaVita: number one, on just the delay of care. And secondly, that comorbid conditions, and in particular, more acutely sick people are dying faster. And so those are the two but their hypothesis, there’s no, real study that can prove that to now. I don’t know, Joel, if you’ve seen anything else you wanna add. Well, first, welcome back, Kevin.

Look. Javier said it right. This is, we believe, a holdover from COVID, and and you see it nationally. The mortality rate for all cause mortality in The US is up roughly similar to what DaVita sees our mortality is up. So it’s a national issue.

It’s not a kidney issue. I think the point we were trying to emphasize here is we’re not passively waiting for the environment to improve, although, obviously, that would help. But there are things that we and the rest of the industry can do to improve mortality, and this is not a new dynamic. This is really the underpinning of volume growth for the better part of twenty years pre COVID was mortality improvements in the dialysis community as a result of things that dialysis providers were able to accomplish.

: And then as that’s helpful, I guess as we think about the the three things that you outlined as ways to try to mitigate this, I mean, how should we think about the timing of these and and when they might expect to impact results?

Javier Rodriguez, CEO, DaVita: Yeah. The timing will be gradual. If if you look at the better clearance of middle molecule, the HDF or the cutoff dialyzer, that will take some time to play out. If you look at pharma and GLP ones, again, here we are x years into it, and the numbers are in the low teens of patients on the drug, so it’s also low. And then on the protocols and systems, again, they are they’re gradual and they’re incremental, but it’s the cumulative portfolio of things that over time has an impact.

But you should you should think about it in in years and not just a couple quarters.

: Okay. And then I guess maybe the last question. It sounds like, you know, the the story for the quarter is you obviously had some headwinds from volume, headwinds from pricing, but you were able to offset it on the cost side of things. Are these cost initiatives things that you can still pull even when volumes come back? I mean, it’s it’s been impressive to see the cost control the last few years.

Does that mean when volumes do start to come back that you should be growing even faster than the three to seven OI? Or, like, it it seems that if can maintain this cost control, then there’s a lot of opportunity once volumes normalize.

Javier Rodriguez, CEO, DaVita: Well, we take a lot of pride in our operational excellence and discipline, and we’re always looking for variables that can move the needle. So the short answer is, of course, who knows because it depends on what volume pickups, etcetera. But our hope and our strategy right now is that we will continue this efficiency. And, of course, as technology advances, we think we can make it happen.

: But there’s no inherent, you know, roadblock to controlling costs if volumes are growing? There’s nothing like an okay. Obvious All right. Perfect. Thanks.

Thank you.

Michelle, Conference Facilitator: Thank you. Our next caller is Ryan Langston with TD Cowen. You may go ahead, sir.

Nick Eisen, Group Vice President of Investor Relations, DaVita1: Thanks. Good evening. Maybe just to Kevin’s question a little bit more, I guess, on the patient care cost. Any specifics on what’s sort of driving that performance? And I guess, you know, I think it sounds like you’re expecting this to continue through the rest of the year.

If that’s true, is there really any reason why we shouldn’t expect this to carry into next year?

Javier Rodriguez, CEO, DaVita: The the main driver, as Joel said, is productivity. And if you were gonna double click, because as you know, productivity has a lot of variables in there, you would say that our teammates are staying longer, so our retention is a bit better. And our training costs have come down a bit, as we are more effective at putting, people in their jobs effectively quicker.

Nick Eisen, Group Vice President of Investor Relations, DaVita1: Got it. And then just lastly, I guess on the cyber incident, does this have any sort of impact on longer term spending sort of expectations in terms of hardware, software, anything you might, need to invest in just to mitigate the chances of this happening again? Thanks.

Javier Rodriguez, CEO, DaVita: It’s a it’s a marginal cost. Look. At the end of the day, these cyber criminals are quite sophisticated, they keep reinventing themselves. And so the corporations and industry has to continue to innovate ourselves. So we’ve made some investments that we believe to be appropriate and prudent, but I don’t think I would call out anything material.

Michelle, Conference Facilitator: Would you like to go to the next question?

Javier Rodriguez, CEO, DaVita: Yes, please. Ryan, are you done?

: Yeah. I’m good. Thank you. Alright. Thank you.

Michelle, Conference Facilitator: Our next caller is Lisa Clive with Bernstein. You may go ahead.

Nick Eisen, Group Vice President of Investor Relations, DaVita2: Hi. Just a question on the new technologies available in the market, you know, in this focus on removing larger molecules. Baxter’s Theranova dialyzer has been in the market in The US for several years, and obviously, FMC is ramping up their their HDF rollout for next year. For Theranova, and I guess also for HDF because you run clinics in Europe too, how much have you used these technologies in your clinics thus far? And I suppose, how are you gonna go about really collecting the clinical data, you know, running sort of effectively, I assume, trials?

And, and how long do you think it’ll really take to get an idea of how much of an impact these new technologies, can make?

Javier Rodriguez, CEO, DaVita: Yeah. So let me unpack it and see if I get to all your questions. Number one, we are experienced on both the HDF and the middle molecule dialyzers. We are using different brands, so I won’t get into what what brand of dialyzer we are using. Different countries have different beliefs.

And so in countries where HCF is there, sometimes you have almost the entire country there, and sometimes you have literally only 20%. So it’s got dynamics of clinical practices. It’s got dynamics of reimbursement and other things. So as you know, the CONVINCE study had some very encouraging results on mortality. And now there is a study in Spain called the mother study, and that is literally putting both technologies head to head.

At the end of the day, what we want is what’s best for the patients and what our physicians and patients want. But, of course, we’re watching the science because it’s a lot easier to change a dialyzer than it is to change your fleet of machines and prescriptions and all the other things. But at the end of the day, if that’s what the doctors want or that’s where the science points us, of course, we will do it. So we are watching like you are, and we’re conducting a couple of studies ourselves, and we will be doing as appropriate.

Nick Eisen, Group Vice President of Investor Relations, DaVita2: Right. And just to follow-up on the phosphate binders. There’s a lot of generics in the market, and then there’s, I guess, two newer alternatives. Are are the pill loads on that better? Because I know one of them should be going generic soon.

Or is do you see this as more of an adherence problem rather than a cost problem?

Joel Ackerman, CFO, DaVita: I would say, probably more adherence. The mix, that we saw hasn’t changed much between q one and q two. That said, look, we’re we’re only about six months into this, so we’re still learning. That said, I think from an OI standpoint point, we feel pretty good about where we are for the year and and the number of, moving pieces are going down every quarter. So the 50,000,000 of o I feels like a pretty reasonable estimate for the rest of the year.

Nick Eisen, Group Vice President of Investor Relations, DaVita2: Great. Thanks for that.

: Thank you, Lisa. Thank you.

Michelle, Conference Facilitator: Our next caller is Pito Chickering with Deutsche Bank. You may go ahead, sir.

Pito Chickering, Analyst, Deutsche Bank: Hey, guys. Thanks for letting me back in the queue. Just free cash flow, I guess, tracking about $112,000,000 for the first half of the year, but guidance is reiterated at $1,000,000,000 to $1,250,000,000 I guess, can you bridge us how you get back to that level of free cash flow in the back half of year?

Joel Ackerman, CFO, DaVita: Yeah. Free cash flow is generally lighter in the first half of the year, and the cyber incident slowed us down a lot in q two. So catching up on cyber will be the biggest component. I think cash taxes is probably the other thing I point to in the back half of the year that will be significantly better than the first half.

Pito Chickering, Analyst, Deutsche Bank: Okay. Great. And then on IKC, this big reversal of operating income in 2Q, patients began growing again. I guess, what are you seeing there? And what do you see in the back half of the year, from Just because you guys unloaded a bunch of patients in the first quarter or just what kinda what you know, what should we expect for IKC in the back half of the year?

Joel Ackerman, CFO, DaVita: So, look, IKC was roughly breakeven for the first half of the year. We haven’t changed our guide for the year of, call it, negative 20,000,000 ish. So that’s what we you should expect negative 20 over the back half of the year. Typically, q four should be a better quarter than q three, although the phasing of, OI and IKC is is very variable and tough to predict as you can see based on what happened in q two.

Pito Chickering, Analyst, Deutsche Bank: K. Then a few quickies here. What is your MA penetration at this point? Are you still getting positive pricing pressure pricing tailwinds from growth in MA?

Joel Ackerman, CFO, DaVita: There’s there’s really not much to call out anymore on MA. We’re we’re roughly moving with the market. There’s really very little to of note there.

Pito Chickering, Analyst, Deutsche Bank: Okay. And then, on HICS subsidies expiring for 2026, can those patients get enrolled via the American Kidney Fund, before the drop into government reimbursement?

Joel Ackerman, CFO, DaVita: Certainly a possibility. Yes.

Pito Chickering, Analyst, Deutsche Bank: Okay. And then last, second last one here. Was the commercial mix this quarter? Any changes to home dialysis?

Joel Ackerman, CFO, DaVita: Immaterial. Minor minor variability on both, so nothing to call out.

Pito Chickering, Analyst, Deutsche Bank: K. And then my last one here, I promise here. Berkshire, sale that came out today, was that just part of the normal, in to get to that 45% range, and that’s what that’s what it is?

Joel Ackerman, CFO, DaVita: That that’s exactly right, Peter. It was it was in a normal course. It was pursuing for the standstill agreement that we have with them.

Pito Chickering, Analyst, Deutsche Bank: Great. Thanks so much.

Joel Ackerman, CFO, DaVita: Thank you.

Michelle, Conference Facilitator: Thank you. At this time, we are showing no further questions. I’ll turn the call back over to you.

Javier Rodriguez, CEO, DaVita: Okay. Thank you, Michelle, and thank you all for your time this afternoon. As we highlighted today, we’re first and foremost committed to providing exceptional care for our patients. As we achieve our clinical objectives, our financial performance will follow. Thank you all for joining the call and be well.

Michelle, Conference Facilitator: Thank you. This concludes today’s conference call. You may go ahead and disconnect at this time.

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