DaVita Inc. (DVA) Earnings

Management highlights

Clinical Highlights - The multi-year transition of phosphate binders into the Medicare dialysis bundle was completed successfully, expanding patient access to clinically effective therapies. Over 50% fewer patients now rely on less effective over-the-counter options, improving phosphate level management and reducing long-term cardiovascular and bone health risks. - DaVita completed a $200 million minority investment in Alara Caring in July 2026, which will enable the development of tailored home health services for dialysis patients, expected to contribute a small mid single-digit million benefit to other income in 2026. Policy Updates - CMS released the 2027 ESRD Prospective Payment System proposed rule, which includes a base rate increase that trails industry cost trends. DaVita is submitting feedback during the rulemaking process and supports moving phosphate binders into the bundled payment and concluding the Tdapa period after two years. Innovation and Clinical Strategy - The MOTHER clinical trial confirmed that Expanded Hemodialysis (Expanded HD) using medium cutoff dialyzers is non-inferior to Hemodial Filtration (HDF) for reducing all-cause mortality and major cardiovascular events. - Expanded HD can be delivered on DaVita's existing dialysis machines with no significant capital expenditure required, and the company has secured sufficient supply of newly FDA-approved Nipro expanded HD dialyzers. Broad deployment of Expanded HD across DaVita's U.S. network will begin in coming quarters to expand patient access to advanced middle molecule clearance therapy. Financial and Operational Updates - Year-over-year treatment volume growth accelerated slightly faster than expected, driven by continued improvements in patient mortality, partially offset by lower-than-expected new patient admits from closed Fresenius clinics and higher-than-expected mistreatments. DaVita's leverage ratio was 3.37x consolidated EBITDA at quarter-end, within the target 3x to 3.5x range. The company repurchased 2.2 million shares in Q2 2026, primarily to maintain Berkshire Hathaway's ownership near 45%.

Guidance

DaVita is maintaining its full year 2026 guidance, with the following key updates: - Full year 2026 adjusted operating income midpoint is held at $2.2 billion, and adjusted earnings per share midpoint is maintained at $14.65. - Total treatment growth for 2026 is now expected to land near the top end of the prior 25 to 50 basis points guidance range, which translates to approximately 50 to 75 basis points of growth after normalizing for calendar impacts. - Full year 2026 revenue per treatment growth is projected to stay between 1% and 2%, with slightly negative year-over-year growth expected in the second half of 2026. - Full year 2026 total cost per treatment growth guidance is maintained at 1.25% to 2.25%, with cost growth expected to decelerate in the back half of the year. - Sequential adjusted operating income growth of $50 to $100 million is expected from Q3 2026 to Q4 2026, driven primarily by IKC revenue timing.

Segment performance

1. U.S. Dialysis: Total treatments increased 56 basis points year-over-year in Q2 2026, with 56 basis points growth in treatments per normalized day. Revenue per treatment decreased $2 sequentially, but year-to-date revenue per treatment is 3.6% higher than the first half of 2025. Patient care cost per treatment declined $3 sequentially, with year-to-date patient care costs growing more than 3% year-over-year. U.S. dialysis G&A increased $11 million quarter-over-quarter, while depreciation and amortization decreased $9 million quarter-over-quarter. This segment forms the core of DaVita's revenue, with no specific revenue contribution % provided for other segments. 2. International: Q2 2026 adjusted operating income was $25 million, in line with management expectations. 3. IKC: Delivered $40 million in positive adjusted operating income in Q2 2026.

Risks & headwinds

• Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from projections, including policy changes from CMS and regulatory outcomes for the 2027 ESRD proposed rule. • Commercial insurance mix continues to decline due to expired ACA subsidies, creating a headwind to revenue per treatment that is expected to persist into 2027. • Treatment volume and margin growth depend on the realization of long-term mortality benefits from new dialysis therapies, which will not materialize until at least 2028. • Uncertainty around new patient admission trends and mistreatment rates can create small but meaningful deviations from projected volume growth.

Analyst Q&A

• Q: U.S. dialysis operating income was flat year-over-year even after lapping a $45 million prior year cyber incident headwind, and cost per treatment was elevated. What explains this dynamic, and is DaVita outperforming broader industry volume trends? /

  A: Higher first-half cost per treatment growth offset operating leverage from higher-than-expected volume, and G&A grew 10% in the quarter, dampening overall income growth. DaVita cannot speak to broader industry performance, but its own volume growth is driven entirely by improved clinical outcomes that extend patient life, leading to higher treatment volume. Current trends confirm the improvement in mortality is sustained, with the Q2 2026 beat against expectations coming entirely from better mortality outcomes.

• Q: What near-term economic impact will the broad deployment of Expanded HD have on DaVita, and can you add color on recent minor deviations from volume expectations around Fresenius clinic closures? /

  A: The capital cost of deployment is minimal because Expanded HD uses existing machines, and all near-term costs are already incorporated into 2026 guidance. No material financial impact is expected until the mortality benefit of the therapy drives higher volume, which is not projected to occur until 2028. Deviations in new patient admits from closed Fresenius clinics and elevated mistreatment rates are very small, reflect minor quarterly fluctuations, and do not represent a material shift in underlying business trends. Fresenius has completed its planned 100 clinic closures, so no additional pickup from this process is expected for 2026.

• Q: What is the current center capacity utilization, and has DaVita changed its target leverage range or share repurchase priorities after recent stock price moves? /

  A: Current capacity utilization is in the high 50% range, down from a pre-COVID peak of ~65%. The target leverage range remains 3x to 3.5x EBITDA, and the current 3.37x leverage is within this range. The lower repurchase volume since quarter-end is only a function of front-loaded repurchase activity early in 2026 and the planned $200 million Alara Caring investment, with no change to the long-standing capital allocation or share repurchase strategy. Year-to-date 2026 repurchases total $785 million, in line with prior plans.

• Q: How much room for sustained margin improvement does the IKC business have, and what is driving recent improvements? /

  A: IKC is a still-maturing business that relies on coordination between nephrologists, clinics and internal DaVita teams. Management expects incremental margin improvement to be sustained over multiple years as the care model evolves. Near-term improvement this year is primarily driven by revenue recognition timing, but management is growing more confident in long-term ability to manage total care costs, and plans to continue growing the business via additional contracts with Medicare Advantage plans.