DAVITA INC. Q1 FY2025 earnings call

• Clinical highlight: Community-based collaboration with YMCA for CKD education, where 30% of pilot participants had previously undiagnosed CKD.
• Cybersecurity incident: Identified on April 12th, systems mostly restored, majority of costs related to incident expected to be one-time items in Q2.
• First-quarter results: Adjusted operating income and EPS ahead of expectations, driven by patient-care costs, phosphate binders, and international business, offset by treatment volume underperformance due to flu season.
• Phosphate binders: CMS transition from Part D to dialysis benefit, higher iron-based binder prescriptions, full-year contribution at upper end of range.
• Capital allocation: Repurchased ~$680 million of stock since last earnings call, 2025 repurchases front-loaded.
• Policy topics: Tariffs and Medicaid not material, enhanced premium tax credits impact $75M-$120M cumulative over 3 years.

First-quarter adjusted operating income was $439 million, adjusted EPS was $2, and free cash flow was negative $45 million. Adjusted operating income was above prior guidance due to strong expense management, profitability from orals in the bundle, and strong international performance, offset by lower-than-expected treatments. Phosphate binders contributed positively, with the full-year operating income contribution from phosphate binders expected at the upper end of the previous range of zero to positive $50 million. International business saw adjusted international OI increase by $29 million versus the fourth quarter. Integrated Kidney Care (IKC) had operating losses of $29 million in the quarter, with a realignment of an IP product moving approximately $4 million of operating loss from IKC to US other ancillary results.

• Maintaining 2025 adjusted operating income and EPS guidance.
• Flu season and cyber incident headwinds, but first-quarter performance and phosphate binder profitability support guidance.
• Expect debt expense to increase to approximately $145 million per quarter from Q2.

• Cybersecurity incident disrupted operations, with ongoing regulatory and legal follow-ups to address data taken and make required notices.

Q: Can you help understand how much of the 50 basis point revision for full-year was attributable to flu, cyberattack, etc.?

A: Biggest impact on full-year was flu (more than half of 50 basis points), then mistreatment rate in Q1 and ~500 admissions lost in couple weeks due to cyber, each roughly equal. Q1 miss largely mistreatment rate, census impact not big.

Q: Majority of costs related to cyberattack will be one-time items in Q2. Can you explain?

A: Some direct costs may be covered by insurance, others are indirect costs that will flow through P&L and be included in guidance.

Q: Can you speak to expectations for RPT in the year?

A: No change to RPT guide, still within 4.5% to 5.5% range.

Q: Quantify new patients started this quarter and mortality post-flu?

A: Q1 was strong admit quarter, supports normal variability hypothesis. Mortality in Q1 was elevated due to flu, early to tell post-flu mortality.