DaVita Inc. Q2 FY2025 earnings call

• Clinical: Reflected on post-COVID clinical innovation opportunities, including AI, new drugs like GLP-1s, and technologies for better middle molecule clearance. - Financial: Adjusted operating income and EPS ahead of expectations; highlighted ability to manage costs despite volume weakness; cyber incident had discrete costs (~$13M) and impact on volume/revenue. - Policy: Updates on legislation, CMS 2026 ESRD proposed rule, and ongoing fluidity of policy changes. - Innovation: Active with work streams on new dialysis technologies like HDF, monitoring clinical studies, and assessing operational implications.

U.S. dialysis: Treatment volume per day declined 1.1% vs Q2 2024, revenue per treatment (RPT) increased ~$4.50 sequentially but below expectations due to cyber incident and binder volumes, patient care costs per treatment (PCCs) declined ~$3.50 sequentially. International: Adjusted operating income increased $6 million vs Q1 due to a one-time benefit from Latin American acquisitions. Integrated Kidney Care (IKC): Adjusted operating income was $26 million in Q2, with $40 million of revenue recognized earlier as a pull forward from 2024 plan years.

Reaffirmed adjusted operating income range of $2.01 billion to $2.16 billion and adjusted EPS range of $10.20 to $11.30 despite cyber incident. Updated treatment volume expectation to a year-over-year decline of 75 to 100 basis points (previously down 50 basis points) due to higher missed treatment rates; revised RPT growth expectation to near lower end of original range (4.5% to 5.5%) due to cyber and binder volumes; patient care costs expected to continue outperforming with full year increase of 5% to 6%.

• Cyber incident impact on volume, revenue, and claims processing. - Persistent elevated mortality rates with no immediate resolution, requiring multi-pronged strategies. - Uncertainty around policy changes and their impact on financials.

Q: How does the cyber attack track with census and treatments, and how are volumes thought about in the back half?

A: Javier and Joel explained that cyber led to higher missed treatment rates, revised missed treatment rate assumptions for back half, and volume expectations adjusted due to flu and cyber impacts.

Q: Explain phosphate binder contribution to RPT and CPT and why dispensing volumes were lower?

A: Joel said volume was lower due to adherence issues, RPT contribution was low 8s, CPT was high 6s. Javier added pill burden and adherence issues.

Q: How maintain operating income guidance with worse treatment growth and RPT at lower end?

A: Joel stated cost per treatment improvement (labor dynamics) and positive international nonrecurring impact bridge the guidance.

Q: IKC $40M in Q2, is it a pull forward?

A: Joel explained it's revenue from 2024 plan years recognized early due to clarity gained earlier, a timing benefit.

Q: Cyber incident impact on RPT and back half?

A: Joel said cyber impacted Q2 RPT via delayed/manual processes affecting claims, not expected to impact back half.

Q: Mortality trends and mitigation?

A: Javier and Joel discussed COVID impact on delay of care and acutely sick patients, with multi-pronged strategies including better molecule clearance, pharma, and protocols taking time to impact.

Q: Free cash flow and IKC back half?

A: Joel said free cash flow to recover in back half due to cyber catch-up and cash taxes; IKC expected to be ~negative $20M over back half.

Q: New technologies like HDF usage and clinical data?

A: Javier discussed use of different technologies, watching studies like CONVINCE and mother study, and waiting for clinical evidence to guide adoption.

Q: MA penetration and fixed subsidies?

A: Joel said MA penetration is roughly with market; fixed subsidies expiring patients may enroll via American Kidney Fund.