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DaVita (DVA)

Participants
Jim Gustafson Vice President, Investor Relations
Javier Rodriguez Chief Executive Officer
Joel Ackerman Chief Financial Officer
Pito Chickering Deutsche Bank
Kevin Fischbeck Bank of America
Justin Lake Wolfe Research
Call transcript
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Operator

Good evening. My name is Sheila and I will be your conference facilitator today. At this time, I would like to welcome everyone to the DaVita First Quarter 2021 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. you. Thank Instructions] [Operator Mr. begin may your you conference. Gustafson,

Jim Gustafson

the and and call. we make We you I’m CEO; Gustafson, Investor and within welcome Rodriguez, our forward-looking are in that everyone conference quarter Jim during Relations the of federal President Please first Joel our Vice me appreciate our may of securities meaning company. today Javier to laws. our Thank joining CFO. your note Ackerman, interest continued call, this statements

known described to could subject unknown forward-looking are risks to that statements these of uncertainties and cause differ and All statements. materially in results actual from those the

on further first XX-K report quarterly Form risks quarter For SEC SEC. and and XX-Q, our release on subsequent filings and press the refer report and with our to most these we Form concerning earnings our make filings, subsequent uncertainties, details including any please annual recent

duty we except us intend Our and currently available by required forward-looking to no update based information law. statements do not upon may be to and those are undertake as statements,

Javier like to to remind non-GAAP I financial call on will some is GAAP discuss reconciliation most the our we’d measures. in website. press release over the call the during Rodriguez. earnings to SEC that included and A to will these financial we of measures this comparable submitted our non-GAAP you measures Additionally, available now turn

Javier Rodriguez

and Jim, afternoon. you, good Thank

the that an ESG. to care our starting first optimism of the brought to its an education for help of and state as access the and Biden have a be that we QX rate patients would this that commitment overcome Over our in side vaccinated with today kidney patients. governments dialysis CDC, hard by of by third-party getting several Thanks outlook challenges ongoing the trusted of they administration, We the transportation And other our incredible vaccines pandemic, least of overview government caretaker. sites. a patients our could nationwide efforts teams provide on in a hesitancy our the from the work so that yesterday, closely of worked Providers updates our a dose. the then proud year, confidence had the hundreds lot would trusted smiles knew and partners, to administered thousands convenient community to followed finally improved performance, with all a have combat the XX% we and care. and last several update at received with I months, COVID-XX quarter progress patients vaccination, and to it’s when summary received decline as continued of one vaccine of say I’m made to

impact to in the Similar and dietitians, We the broader to were and population workers, us. approximately positively Asian directors causes results equity in not care for to white conversations Americans. our work with of did rollout, have address saw by of U.S. with sit also saw early health well to one-on-one an our the we teams medical in of including and below to clinics. vaccination Hispanics We common hesitancy. This patients mobilize XX% vaccine few first black and weeks COVID administering vaccine opportunity rates the the that got social

our Our XX%. patient black white at patients to the has rate vaccinated and Hispanic now as reduced have same the been nearly been patients for gap

are not done. We

we treatment the returned continues. quarter, last quarter in our to to operating presented we QX. for on health covered our challenges volumes continue the we continued margins our the QX pandemic. in financial solid pursuit On equity to results, call, in XX.X% performance Our delivered while by lead as And declined first through

storm. winter our we approximately growth of point census day surges, absent of our believe last including bit a could supports from continue, what infection per improved. XX,XXX further provided patient end more trends hit in mid-February, impact outlook. quarter. the trends ranges the have daily We’ve any then, sequential treatments detail mid we Since these If treatment steadily low Our guidance our volume is provided through incorporated the pre-COVID the that that we year in level, return which a to on our treatments

dialysis update continued have counts infections COVID our case with new First, QX, decline. population in and to within our

from As peak of XXXX. XX% from the XXXX. day January amongst rate ending our incidence January the X, the decreased approximately active of number cases patient Friday, In last prevalence decreased new the week last seven across country X, approximately on for cases XX%

associated that first in COVID versus in January, incremental quarter but with was January. of lives, both It early to dramatic approximately March. grateful is seeing results into shared Chip approximately an for XXXX, in previously incremental mortality We we’re estimate In Second, with March. decline in in that peaked associated In number a than mortality that occurring XXXX. the patient with in mortality to year April, mortality X,XXX the decreasing expect count and the improve associated rates approximately we’re COVID. unfortunate provide will the general count COVID with mortality our population full half was XXX X,XXX we too more outlook. the

from the operation unchanged guidance. core performance remains Our original view for our year of largely

would earnings guidance to our $X.XX has the major mentioned, growth over are is further decreased has social, new the or ESG topic areas commitment and and ongoing are X% and These trends of to I had governance matters, from income due more range that at final revised we a investment conversation topic These share, billion $X.XX of guidance some of ESG. $X share billion. our My DaVita. assume previously adjusted the significant for range. to last community no At to the of adjusted ranges virus not our environmental, approximately years. operating become focus of disruption increasing a couple year-over-year. scenarios revised range guidance us per now to per operating $X.XXX our likelihood represent However, midpoint downside this the income to adjusted

create incorporated each for caring Our throughout people our because who communities, vision top we DaVita vision, In beliefs the caring patient, diverse, our the us, every already patient the that providing core of the of in is for against care Directors belonging, belong. three world responsibility the quality clinical to and pipeline at to everyone our metrics stated In color. our connect around has XX% our and women of components, or diversity social we three diverse The deliberate female, company’s this achieved with other, to and and of practices currently first into four caring our including our environment. a organization. run feels continue are that both to clinics, for up she our have efforts are execute talent. XX% for do, of we team disclosing what made belong spoken at diverse results and in our where caring connect around how day. teammates, and cultivating vaccinate that the It are our length in and report in diversity our to including and and XX% of us. Board and which our core published people about of we been commitment to our nine operations and thoughtful on with our culture, of from of for a for we imperative few starts all our to feel believe like efforts whom to ongoing he other, diversity we how in of and world diversity of environment is patients, patients highlight caring have of each cultivate care rich I patients I’d achievements an leaders evident through a leaders many diverse XXXX, fostering color. is our with our These our organization that extends

lay goals goals reduce higher carbon population. of representing of or recently our XX%. achieve made also reports out the to engagement publish Responsibility our XX% report report. vendors first our Corporate and XXXX ESG Social have emission including in our scores change and ambitious ESG We XX% emissions we among by XXth climate XXXX for disclosed progress Annual to goals These and set teammates To

goal, pleased call With that, with to over ESG. the hope our to as we progress are see can more on to have lot diversity by I’ll turn Joe. and accomplish. we We And our date you a

Joel Ackerman

QX to the performance. start financial with strong a Javier. solid year was Thanks,

quarter, per share revenue earnings million we of $X.XX. of recorded income of the approximately and For $XXX $X.X billion operating

As Javier to our compared referenced, headwind and large X.X% negative volume was treatment negative was a non-acquired X.X% QX. in growth

responsible While to during the presented for about Winter particularly in challenge per quarter. decline, the points bottomed out were treatments Uri basis NAG XX the of QX. COVID first day storms, NAG main

So we quarter-over-quarter to in growth start QX. expect seeing

mortality see $X although pre-COVID in a as almost rates an this NAG of will Medicare be that a than improvement continued dialysis sequentially to per expenses for higher U.S. rate expect lower per and expect XXXX be XXXX grew years. as treatment to MA NAG continue result levels we dialysis of by in the a sequentially to acceleration increase, the We revenue enrollment may for few quarter, impact certain U.S. due level by declined services and protocol. as patient control we $X the the offset the year, although seasonal coinsurance treatment, to plan, clinical Partially mix higher experience elevated infection costs business. in PPE, from our higher slight costs continue and commercial volume by from such deductible. hospital of pandemic, care and negative approximately

purchase power in benefits nearly year. treatment per we agreement, expect included persist do costs care patient to that rest QX through from our $X not benefit of the the Our

effect headwind by a was approximately from higher PPE the compounding the that consisting quarter, associated partially suspension, offset primarily of the to costs, COVID other sequestration of For offset other. the net with number largely and patient mortality the of each COVID million, related with items $XX benefit

this from the is The other T&E approximately and the negative of COVID passed impact of through our relief estimate our to Medicare quarter. $XXX including impact the a result in guidance be offsets At COVID end half recently last from extension million lower than equate in middle the range, year, of negative XXXX, QX. back we net year. year the the fiscal This For impact COVID of lower guidance the to $XX of million now XXXX. the would in lower sequestration

have the DSO complete and due sure claim charge changes for holds related in reimbursement. we approximately days certain QX hold seven circumstances, primarily in increased information the make by Our winter to payments. versus accurate temporary an to to storms QX, In we calcimimetics billing

these next to This than of the and largest Uri, and of XXX a cause of increase more quarter, we flow DSO more pushing the which the effect in This significant amount right in corresponding until from middle centers interim. to this quarter the the winter related quarter. the of our driver storm single has last, cash holds, impacted the had was of

quarters. collect. We’ve cash increase negative shift seen impact cash positive points. hold $XX million April, claim and the over what While a million April the a flow ultimately and our and one they to X.X final significant shares. quarter, two already expense in to-date first approximately repurchase repurchase quarters, no A collections was the DSOs expect have In both we common flow of expect cash next Debt and additional in on shares million we in corresponding stock impact couple of for quarter. between we

million to expect $X next in $XX We approximately February. issued of quarterly late the result as of increase quarter billion a debt expense notes to beginning

up some the me let open we line Q&A, reflections. Before for share

year, challenges volatility teams unusual and to past business the and our the experienced our pandemic. Over due

platform care. people, weathered dedication patient and holistic of difficult our of our innovation, very this have period in to approach our because scale, our We

As stronger. I forward, our look organization is

Our deepened, for is payer and deliver more well hospitals even kidney relationships and positioned partners. our best-in-class have platform comprehensive patients, a care patients to proposition that our have physicians value resolved with that

Now, let’s open for Q&A. it up

Operator

you. Thank

question-and-answer first Deutsche begin come now Our the [Operator question Instructions] from Chickering will Pito We session. with will Bank.

Your open. is line

Pito Chickering

for questions. afternoon, and Good thanks taking guys, my

drivers the First COVID Can you $XX help guidance year. some sort X.X% raised operating of the talked gives of about on costs by half of takes in about were one at the the you midpoint. And quantify or back income those? and sequestration of lower impact us of the and/or is which it that you million in and sort

Joel Ackerman

it’s Pito, here. Sure. Joel Hello,

And this the that expecting obviously from with million. so biggest the the down So some and really. towards T&E. driver taken offsets back I full the then year, three of would was We about $XX quarter, the were that of beat looking G&A and think here COVID we’ve we things that’s year. half helps Sequestration about

offset As better, in things little as and not get much QX. were bit we a expecting QX

that’s you’ll that you So up. wind put all together where and

Pito Chickering

to acute the you year-over-year. relations business the and the of quarter by during X.X% recovery from and just can that end of And Okay. monthly then storms. are growth from host us treatment a us mortality the you there of declined census missed understand back and chance sequentially plan the to issue. give treatments I help offset X.X% said, obviously They’re through your With lot understand and is how treatments the being Or by levels year. to patient any April? there pace get pre-COVID the

Joel Ackerman

appreciate I the Pito, Yes. question.

not the about also by give monthly, bottom. issue me driven as out We’re the little storm was the April the XX,XXX well. got as as a treatments. mortality and better We Uri recovery the both from saw and but missed February going storm, issue, there was in try in bit. mortality largely little March after to let but And better that resulting well recovery trended as then the a help

number draw it try early around bit. a trend to little a and bounce a to can numbers use a think I quantify it’s These line. and

we that’s are. So where

Pito Chickering

treatment And items with laid strong, you revenue the pretty all the out. last question, per was the

So two questions. quick

is The years, next couple did how quarter? a of revenue for And revenue assumption a per what treatment there growth be you pressure per in right is the see the the XQ? to first wouldn’t co-pay X% as much you a assumption why did reason make? forward for look first So be treatment would in good

Joel Ackerman

Yes.

about of couple RPT. a I’d QX So highlight things

deductible, In of the treatment to in and terms $X of range. somewhere the that’s quantifying co-insurance $X

expect QX. So you’d to see to add what that in you’d

the in will We to pickup seasonal over I’ll calcimimetics a QX be but in be remind XXXX pattern calcimimetics. you, will very similar result also had QX XXXX, different. a OI as of

up we $X QX QX from about that. – in over So picked RPT $X of

In guiding will we’ve what RPT about remember. away of on terms moved forward looking look like, as from RPT you’ll

number, year. reasonable unreasonable, but I X% wouldn’t say a about, what’s little on that high range obviously of to later it end RPT the might more be say is it’s I think of we’ll the terms on reasonable? probably In XXXX have the a but in

Pito Chickering

much. so Thanks Great.

Operator

Thank you.

question… next Our

Joel Ackerman

XXXX in jump I’m a my number. Pito, obviously, go operator. between comment, which just sequestration, XXXX that sorry, and and you’d would adjust be big that have to to on would presumably that, for away

Pito Chickering

was the just Yes, sequestration of to so course. gives more takes reasonable. and MA, a market the shift to overall demand, excluding It’s X% within

Joel Ackerman

Exactly.

Operator

Thank you.

from Kevin of Our next question come Fischbeck Bank with will America.

is line Your open.

Kevin Fischbeck

you Great. update were listed order Thanks. RPT was listed one? on second. that staying Is that things fair for that throw just that the importance the the it a in the RPT the Maybe of say rate quarter, biggest they to when the in

Joel Ackerman

calcimimetics, they’re I’d and – are MA. roughly that’s magnitude, rate say same there and all four things change of commercial update, in magnitude. order the and They’re roughly about mix changes the same Medicare mix order the the of then

Kevin Fischbeck

profits? about should that margins Okay, then And to a guess, goes improvement have expect improvement? implications you commercial see that’s in for that that the any about when And think we how does improvement, the or on, disproportionately think helpful. I we year Is perspective? that as volumes mix from volume

Joel Ackerman

Yes.

is of that expect, commercial. was likelihood we’ve population older older disproportionately mortality mix population COVID you seen and result Remember, the in Medicare as say as than the more the So a our the Medicare. would I’d disproportionate will be is

unwind you mix next as So of years, a the that lead from to trending number happen over a think X COVID see commercial bit. of lower would we our kind down the

to How of on will patients of and its to seen underlying to these tendency forces implications forth, dependent those the for and up. of number a play lot some it’s the those the terms margins a tough there’s offset to assumptions. – two have countervailing new a remains be recognizing be predict that that, would that capacity unused margin, an In filling drive

Kevin Fischbeck

you to far me, as bridge what your helpful. Okay, saying were guidance. wasn’t it If the to as XXX%, clear that’s

worse, down that don’t the that? You’ve need feel some said COVID are – you that as cost prepared get for that and things he you much took the offsets, and you lined all push were better you of cuts in saying that up things had to does are now coming as basically to

Joel Ackerman

teammates year. end been the and T&E through in levels. beginning the is and since we of could had T&E for that the And continuing example, QX of pre-COVID to QX our we down. think, modeled it’s closer travel COVID, that No, now down And less, return as

So less we got the is lower benefit probably to anticipated. offset, the we going T&E be from than

Kevin Fischbeck

an Okay, And going things that’s how your large rates can far based more I give as on value outlook business Advantage. helpful. models? year? question, up going And as you on Medicare to for any next are there for update guess renewal last contracting books conversations around of and are Are that

Javier Rodriguez

How Javier. is you? question. Thanks for are this Kevin, Yes, the

no by add The spike that and in continuum. aligned we anything highly saying in volume off there change its the make renewals that highly, of start it’s to be just or conversations or cycle. patients sure is to the value like me more normal that and to Let in trying continue help care

that of fact the complicated contracts, and takes So, a that means doing it longer. fee-for-service, we’re instead more

because So nothing relates there there’s to of sort kind talk it’s the about, is and that guidance. our it in unchanged, of incorporated outlook to as

Kevin Fischbeck

right, All thanks.

Javier Rodriguez

Thank you.

Operator

Instructions] from with question you. Justin Lake Research. will next [Operator come Our Thank Wolfe

Your is line open.

Justin Lake

Thanks. Few to you. Good afternoon. questions

first terms took guy than on by? views? kind of the Or better your quarter consensus? an does imply line better So from materially my the perspective? actually that with the was So than was quarter kind does I mean better and a it that the I and talked change, model that OI bit quarter it you looked that first think in think like of up all about knit guidance things said looks when $XX the or you getting COVID that’s you in million First, better little what basically front, we took you together, of the

Joel Ackerman

what positive little on say side, year with Justin, tinkering start Yes, in our early the our were we the guidance within forecast. it’s QX but bit expecting, the, was and the year the full it’s I’d I’d year range full of say to a

characterize strong keep to chose as So despite things we in quarter, I line. what would a

Justin Lake

Okay. And then was said the net the Joel, $XXX million, headwinds? COVID I think you

Joel Ackerman

Correct, for the year.

Justin Lake

full the year. For

Okay.

looks sequestration, different COVID it, there’s a impact put sounds the the there. cost negative on benefit it part If of there’s components, treatments, costs then there’s So, it, in there’s that like about of some but you bunch it as right? has think I then like a And right, which offsets. of

understand So, I’m those is help us buckets? any trying to there just four think to about, way

Joel Ackerman

Yes.

right. it got calculation. a ultimately, you’ve So think simple And pretty I it it’s

costs offsets with and is take You million sequestration. PPE everything and impact that excess then resulted range. which what you And wash the with mortality, is roughly associated that negative of else $XXX is in a the basically, in

moving there but So and lot mostly pieces, net-net, the out you mortality. cancel of with are of they a impact leave

Justin Lake

year. Okay. the bottom saw about in your through get probably And to mortality, the point, quarter, we expected to the obviously better you think first things as then a are and on impact

So, coming think trying rates of to exit Because impact I’m that, to be the right? about think just on out pace about the next it’s fourth $XXX of quarter, to going year. the million, important

you is impact kind in you where think in the this of of quarter? that think terms that So, impact where about can that, think be in us help quarter? you will fourth And

Joel Ackerman

Yes.

pretty help let this quickly. gets pretty you stuff try me So out. and technical, But

that. out would could quickly, a pre-COVID in the its And impacted But excess COVID going see I that’s number, think you’ll to down grab way things what pick different. you that mortality. declining plays something it but you low any to continued by I But we we in probably as be simplify QX, on again, our and typical the see go NAG way about back expect really assuming way you is. X%s, obviously some again, out. like with rapidly, want X.X%, the something think if And it start think

don’t incorporate add if look be we NAG, terms if then up start don’t right could any We But at And have in So one what see there’s to mortality you of died as that’s away a adjust with but next impact then patients agonists, see we who have impact. pipeline, data two want have challenge result a to or that. we would passed you’d from assume CKDs see to that new of COVID. the a we on for any for tailwind otherwise excess to And in what coming that. measure. we impact as hard don’t there quarter the any see now, a that

how that’s it. model So I’d

kind to of I and lot you of throwing at realize get If simplistic complicated numbers story I’m a and you. want a

I think…

Justin Lake

you I’m to begging get the Joel. perfect

Joel Ackerman

tailwind the like associated start And post-COVID. what with You how add mortality modeling lower going looks NAG you forward. back that’s

Justin Lake

talk not it smart right, offline. out. enough figure All But that to about we’ll I’ll

the last were question. kind us give – Just the kind into looking here? of, you in the you commercial change quarter fourth The can what mix at quarter from first

Joel Ackerman

up not a went It amount, it bit. little up small a but much, was

Justin Lake

Thanks, guys. right. All

Operator

Thank you.

from Our Chickering Deutsche next Pito Bank. question will come with

line Your open. is

Pito Chickering

Hey, here. about we from deploy this that taking point at to questions. share business curious, of point, just it kind we X.X, for a think should years two thanks leverage around versus how feeling my couple for where ratios a share a leverage at just follow-up about into fun is is share repo want get the rest this we repo? should it A so the the of It’s been what ones right for I’m pretty quick perspective, think repurchase ratio

Joel Ackerman

Yes.

Cash been So for deal strong. rest on look, be we changed; think that Right And flow consistent to to we’re X.X three want we likely the be year times where a pretty during is this. did the we’ve to the of in now, relatively at has quarter. billion X.XX. I nothing bond really $X

ratio leverage flow up of philosophy the buybacks saw we’ll we think to over future. the over going make You weak. QX in to the reason change And cash and course no our and near is that was approach year, to but think

Pito Chickering

this Medicare year quicker the your what was Second versus Advantage one is year? last one, of percentage penetration,

Joel Ackerman

in XX% last was we is time our as mid-to-high We what said expectation disclosed XX%. and markets line, around roughly

the in of below mid-to-high XXs. slightly still we’re rest market the So, the

Pito Chickering

Okay.

if were post-COVID you patients in that sort quarter, see this of this So treated the environment? in accelerating, home percent of what your

Joel Ackerman

because and the with increase our of much but part X%. but changed NAG PD, that’s grow. a so segment is hasn’t particular the our did continues that lot feel have We technology and hemodialysis, community the decreasing, appetite HH that think the and being more of site. there net-net patients innovating segment Home to more freedom. from in of we business that connected that of And PD the grew to percentage are care more patients around the The creating physician businesses more decreased, and confident, convenient, to flexibility it comfortable

So, we do expect that the modalities will continue to grow.

Pito Chickering

Okay, great. Thanks so much guys.

Joel Ackerman

you. Thank

Operator

Thank you.

no time. showing at further are We questions this

Javier Rodriguez

Okay, was well, clear. hopefully that short means pretty that it

Let a dramatic closing my say being QX, will and vaccinating XXXX, for or and overstating come of my many many lot mind, remembered with some literally heart of not me and literally in sustaining. be XXXXs patients, of fulfillment our just instances it in in comments. XXs life of in always caregivers

of continued and quarter and unwavering in your towards the our pretty are then to commitment We in safe. teams the to talking the we normalization. patients. Second, begin Stay look caring lastly, historical a financials shift toward our And thank interest And pending innovating lives straightforward to a DaVita. our for forward soon. virus. We path you you improve

Operator

does participating. conference. Thank today’s for you you. Thank That conclude

at disconnect time. may this You