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01/10 23:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: strong adjusted EPS guidance and revenue growth are offset by challenges like a decline in U.S. treatments and increased patient care costs. The Q&A reveals management's uncertainty about the cyber incident's impact and lack of clarity on phosphate binder revenue, raising concerns. Positive factors include increased share repurchases and international income growth. Without a clear market cap, the stock's reaction is uncertain, but likely neutral given the balanced positives and negatives.
Adjusted Operating Income $439,000,000 (up from previous guidance), driven by strong expense management, profitability from orals in the bundle, and strong performance in international, partially offset by lower than expected treatments.
Adjusted Earnings Per Share (EPS) $2 (slightly above expectations), attributed to the same factors as adjusted operating income.
Free Cash Flow Negative $45,000,000, reflecting challenges in treatment volume and costs associated with the cyber incident.
U.S. Treatments Per Day Declined 40 basis points year-over-year, approximately 50 basis points below forecast, primarily due to a higher missed treatment rate from a severe flu season and storms.
Revenue Per Treatment Increased by $4, with $10 attributable to new reimbursement for phosphate binders, offset by a $5 decline due to seasonality in patient responsibility for co-pays and deductibles.
Patient Care Cost Per Treatment Increased by $7 sequentially, driven by approximately $8 per treatment of new costs associated with phosphate binders.
General and Administrative (G&A) Costs Declined by $33,000,000 sequentially, due to a reduction from typical seasonally elevated spending.
International Adjusted Operating Income Increased by $29,000,000 versus the fourth quarter, benefiting from improved performance and a prior reserve against aged accounts receivable.
Debt Expense $135,000,000 in Q1, expected to increase to approximately $145,000,000 per quarter for the remainder of the year.
Share Repurchases Approximately $680,000,000 of stock repurchased since the last earnings call, indicating an accelerated pace.
Operating Loss from Integrated Kidney Care (IKC) $29,000,000, in line with expectations, with a realignment of operations moving $4,000,000 of operating loss to U.S. Other ancillary results.
Impact of Cyber Incident Expected to incur majority of costs related to the cyber incident as one-time items recognized in Q2.
Cumulative Operating Income Impact from Enhanced Premium Tax Credits Estimated at $75,000,000 to $120,000,000 over three years, trending towards the higher end due to strong open enrollment.
Phosphate Binders: Phosphate binders are now included in the dialysis benefit, with an expected full year operating income contribution at the upper end of the previous guidance range of $0 to $50 million.
International Business Performance: International adjusted operating income increased by $29 million versus the fourth quarter, with strong performance across several markets.
Latin America Acquisition: DaVita is committed to investing in high return growth opportunities, including a recent acquisition in Latin America.
Cybersecurity Incident: A cybersecurity incident occurred on April 12, disrupting operations, but patient care remained uninterrupted. Most systems have been restored, with some costs expected to be one-time items recognized in Q2.
Share Repurchases: Approximately $680 million of stock was repurchased, with expectations for share repurchases to be more front-loaded in 2025.
Capital Allocation Strategy: DaVita remains committed to investing in innovation and high return growth opportunities while returning capital to shareholders through share repurchases.
Policy Advocacy: DaVita continues to advocate for patients at state and federal levels, focusing on tariffs, Medicaid, and enhanced premium tax credits.
Cybersecurity Incident: A cybersecurity incident disrupted portions of operations, leading to potential regulatory and legal follow-ups. The company is addressing the incident and expects most costs to be one-time items recognized in the second quarter.
Treatment Volume Decline: A decline in treatment volume is expected due to a severe flu season and the impact of the cyber incident, leading to an anticipated 50 basis point decline in treatments for the year.
Regulatory and Legal Follow-ups: Post-cyber incident, there will be regulatory and legal follow-ups to identify the extent of data taken and necessary notifications.
Economic Factors: The company is monitoring potential impacts from tariffs and Medicaid reform, but currently does not believe they will represent any material financial impact.
Supply Chain Challenges: The company faced supply shortages due to a hurricane and a high flu season, which have contributed to operational challenges.
Financial Guidance: Despite headwinds from the cyber incident and treatment volume decline, the company maintains its full-year guidance for adjusted operating income and earnings per share.
Community Collaboration: Launched a community-based collaboration with the YMCA to support chronic kidney disease education and prevention, aiming to reach thousands of people.
Cybersecurity Incident Response: Addressed a cybersecurity incident that disrupted operations, ensuring uninterrupted dialysis care and restoring most functions.
Capital Allocation Strategy: Prioritizing investments in innovation and high-return growth opportunities, including a recent acquisition in Latin America.
Share Repurchases: Repurchased approximately $680 million of stock, with expectations for front-loaded repurchases in 2025.
Policy Advocacy: Continuing advocacy for patients at state and federal levels, focusing on tariffs, Medicaid, and enhanced premium tax credits.
2025 Adjusted Operating Income: Maintaining guidance range for adjusted operating income despite headwinds from the cyber incident.
2025 Adjusted EPS Guidance: Reiterating adjusted earnings per share guidance for 2025.
Treatment Volume Expectations: Expecting a 50 basis point decline in treatments for the year, with a return to 2% volume growth anticipated.
Phosphate Binders Contribution: Expecting full-year operating income contribution from phosphate binders at the upper end of the previous guidance range of $0 to $50 million.
Debt Expense: Anticipating an increase in debt expense to approximately $145 million per quarter for the remainder of the year.
Share Repurchase: Since the last earnings call, DaVita repurchased approximately $680,000,000 of stock, representing an accelerated pace. In 2025, share repurchases are expected to be more front-loaded than typical and should slow down over the remaining year.
Share Repurchase Details: In the first quarter, DaVita repurchased 3,700,000 shares and an additional 1,700,000 shares since the end of the quarter.
The earnings call reveals several negative indicators: a decline in treatment volume, increased patient care costs, and a significant operating income shortfall. The reaffirmed EPS guidance is overshadowed by weak guidance on treatment volumes and RPT growth. The Q&A session highlights concerns over mortality rates, unpredictable IKC revenue timing, and the impact of a cyber incident. Despite some positive aspects like technology investments and debt management, the overall sentiment is negative, particularly with the lack of clear guidance and the market's reaction to these uncertainties.
The earnings call reveals several negative factors: a cybersecurity incident impacting revenue, elevated mortality rates, and missed treatments persisting post-COVID. Additionally, revenue per treatment guidance has been reduced, and operating income for IKC is expected to be negative in the second half. Despite some positive initiatives, the overall sentiment is negative due to these challenges and uncertainties.
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