Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DaVita Inc (DVA, Financial) reported a strong first quarter with adjusted operating income of $463 million and adjusted earnings per share from continuing operations at $2.38.
- The company has raised the bottom of its adjusted operating income guidance for the full year, now expecting between $1.875 billion to $1.975 billion.
- DaVita Inc (DVA) achieved significant clinical milestones, including a record number of kidney transplants facilitated for patients in 2023.
- The international business expansion continues with strategic investments in Latin America, expecting to enhance scale and clinical outcomes.
- Operational resilience demonstrated as the company effectively managed the Change Healthcare outage, minimizing its impact on financial operations.
Negative Points
- Free cash flow was negative $327 million in Q1, influenced by delayed claim submissions and payments due to the Change Healthcare outage.
- U.S. dialysis treatments per day were slightly lower in Q1 compared to Q4, with mortality rates still elevated relative to pre-COVID levels.
- Revenue per treatment saw a decrease of approximately $2 quarter-over-quarter due to typical seasonality.
- The company temporarily suspended share repurchases in March due to the Change Healthcare disruption, reflecting a cautious approach to capital management.
- International acquisitions are pending regulatory approvals, introducing uncertainty and potential delays in the expected benefits from these investments.
Q & A Highlights
Q: Treatments per day were down sequentially but up year-over-year. Was there any impact from weather or other seasonal factors?
A: Joel Ackerman, CFO & Treasurer, explained that the difference in treatments per day year-over-year was due to day mix, including an extra Tuesday and a shift in treatment volume due to New Year's Day falling on a Monday. He emphasized that Q1 was in line with expectations, attributing the year-over-year growth to strong new-to-dialysis admits, offset by continued elevated mortality rates.
Q: Revenue per treatment was strong this quarter. Was this due to Health Insurance Exchange (HIX) enrollment or other one-time factors?
A: Joel Ackerman clarified that the quarter's revenue per treatment was typical of Q1 seasonality, with no unusual factors affecting it. He suggested that the Q1 results provide a clean basis for modeling the rest of the year.
Q: Can you provide an update on patient care costs, which were down year-over-year and sequentially?
A: Joel Ackerman noted that the sequential decrease in patient care costs was largely due to high seasonality in Q4, while the year-over-year decrease was driven by lower contract costs and increased productivity.
Q: How is the international business performing, especially with the new acquisitions in Latin America?
A: Javier Rodriguez, CEO, highlighted the strategic acquisitions in Brazil, Colombia, Chile, and Ecuador, aiming to leverage existing operations for better scale and efficiency. He emphasized the importance of clinical differentiation and attractive risk-adjusted returns in these markets.
Q: What are the assumptions for wage inflation and mistreatment rates for the year?
A: Joel Ackerman mentioned that wage inflation is tracking at around 5%, consistent with expectations. Mistreatment rates are improving gradually post-COVID, aligning with historical trends.
Q: What are the expectations for center consolidations for the remainder of the year?
A: Javier Rodriguez indicated that approximately 30 net closures are expected for the full year, focusing on optimizing treatment capacity and efficiency.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
