DaVita Inc. Q3 FY2025 earnings call

Clinical Highlights

• DaVita Clinical Research (DCR) has more than 250 research sites in the US, conducted over 500 clinical trials, helped obtain FDA approval for dozens of ESKD drugs, and fueled over 700 clinical publications. Currently evaluating outcomes of middle molecule clearance using middle cut - off dialyzers.

Financial Performance

• Third quarter adjusted operating income was $517 million, adjusted earnings per share was $2.51. US treatment volume was down approximately 1.5% year - over - year. Revenue per treatment increased approximately $6 versus the second quarter. Patient care costs per treatment increased by approximately $5 sequentially.

Strategic Priorities

• Completed rollout of next - generation clinical platform last year and continues to enhance it. Making long - term investments to replace scheduling system and upgrade revenue operations technology. Adopting AI solutions across the platform, including internal use cases, commercial opportunities, and working with external providers. These investments result in higher G&A growth but are seen as critical for advancing clinical care, improving patient and teammate experience, and driving long - term cost efficiencies.

In terms of segment performance, in the third quarter, DaVita's U.S. dialysis segment had adjusted operating income of $517 million. U.S. treatments per day declined 1.5% year-over-year. International adjusted operating income was $27 million, down $9 million from the second quarter. The IKC (Integrated Kidney Care) segment had a third - quarter adjusted operating loss of $21 million.

Full - Year Outlook

• Reaffirming the midpoint of guidance ranges for adjusted operating income ($2.035 billion - $2.135 billion) and adjusted earnings per share ($10.35 - $11.15), while narrowing each range.

2026 Outlook

• Volume: 2025 headwinds like Hurricane Helene, severe flu season, and cyber incident are not expected to recur in 2026, expecting a structural improvement in volume growth.
• Payer Mix: Monitoring impact of enhanced premium tax credits on commercial mix and ongoing recalibration of Medicare Advantage landscape.
• Integrated Kidney Care (IKC): Awaiting release of final 2024 performance year results from CKCC program, timing of operating income recognition between 2025 and 2026 is uncertain.

• Government shutdown for 29 days with key healthcare policy decisions in flux, having real implications for the business.
• Uncertainty in payer mix policies such as impact of enhanced premium tax credits and Medicare Advantage landscape changes.
• Technology investment projects resulting in higher G&A growth with uncertainty regarding their long - term effectiveness.

Q: Kevin Fischbeck asked about the volume number for next year, specifically how volumes would have played out in 2025 ex those one - time items like hurricane, cyber, and flu.

A: Joel Ackerman responded that the number is probably about a 75 to 100 basis point headwind on '25 volume from those 3 things combined, a combination of census and missed treatment rate.

Q: Andrew Mok inquired about volume for 2026 and whether technology investments would impact treatment growth.

A: Joel Ackerman said that translating the 75 to 100 bps from '24 to '25, '26 over '25 is likely a 50 to 75 basis point structural improvement in growth relative to '25. Javier Rodriguez added that they are investing in many things, like risk stratifying hospitalization and administrative improvements in call centers and revenue operations which could impact volume.

Q: Albert Rice asked about the headline number of operating income being about $50 million below consensus.

A: Joel Ackerman explained that they don't give quarterly guidance. To hit the midpoint of the guide for Q4 over Q3, they need about a $60 million uplift in OI. There's a typical headwind from seasonal costs, offset by volume day mix tailwind, IKC pickup, and revenue per treatment pickup.

Q: Pito Chickering asked about the timing of IKC funds and fourth quarter guidance.

A: Joel Ackerman said the big change on IKC timing for the year was moving some revenue from plan year '24 from back half of the year to Q2. Regarding the fourth quarter guidance range, he talked about drivers like RPT and IKC, and that Q4 volume growth is expected to be positive due to day mix tailwind.

Q: Justin Lake asked about fourth quarter growth and volume assumption.

A: Joel Ackerman said it's more like $8 sequentially. The biggest component of RPT improvement is a significant part of the growth.

Q: Ryan Langston asked about payer mix driving RPT down and revenue cycle improvements.

A: Joel Ackerman said payer mix was down 15 bps from Q2 to Q3, right around 11%. Revenue cycle is a continuous process with real value in improvements like 1% improvement in ROPS collections equal to about $120 million of OI, and they're continuing to invest in it with AI and automation opportunities.