Earnings call transcript Q1 2023

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Operator

Good evening. My name is Michelle, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the DaVita First Quarter 2023 Earnings Call. Today's conference is being recorded.

If you have any objections you may disconnect at this time. placed to been noise. any have lines on prevent mute background All the be will remarks, question After there period. a speakers' and answer Instructions]. [Operator

you, may you Mr. conference. Thank begin your Eliason,

Nic Eliason

We to I'm and company. Eliason, Joel our me Group Investor CFO. quarter Thank today in of Nic our President Ackerman, and and continued interest our welcome conference you, CEO call. Relations appreciate Vice are your our Rodriguez, first joining Javier

of looking that federal during we statements this within securities the forward meaning note laws. Please may the call, make

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

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

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

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

the to Rodriguez. Javier turn over now call will I

Javier J. Rodriguez

market. our is today. of plan entered against you, treatment to all the Thank call balance ability a joining strong XXXX challenging with in cautious a about our uncertainty optimism to off you start Nic, and labor volume DaVita. year thank a and the about for execute We for

benefited and improving well key metrics from environment. we on In the our quarter, performed an first macro our results

path uncertainties external results deliver strong a the to put While current on continuation full-year. would remain, for of us trends some the

of care is about around I me That transitions step through leads like the clinical each continuum. Before the our patients to on strategy, our long-term which into CKD to I for area to our of across would elaborate quarter, get in the care education. connect details an kidney solutions highlight

updates is that program called through community have given community Periodically, Kidney critical, the we care education are our and Smart, in people awareness particularly chronic the aware. in X kidney American not the fact have provided of raising disease X kidney majority adults these education on

to by for we've barriers to program to go patients patients modality those Smart year likely different health team. XX,XXX history offered understand ever Smart Kidney a equity, patients as Kidney kidney program. Our their XXXX, To were help who recommended Moreover, and attended more classes best our to XXXX, and is classes patient in than health nephrologist XX class the these In in twice CKD for the remove consultation a with resource in a DaVita Smart the of designed attended and Kidney is help home XX manage nephrologist the education. as choose frequently over care languages.

share per of financial earnings our adjusted $X.XX. we of and delivered Transitioning in to quarter, million performance, operating first income $XXX the adjusted

some that XXXX quarter, operating initiatives to margin second costs. higher As normalize. volumes impacted metrics quarters, plans we now the XXXX the the number the with half These prior in a we're in discussed combined in and lower and associated of pressures positive of implemented a we with operating of translated respond to to strong into results seeing in rigor begin

costs quarter, combination good of with start in labor outperformance, on overall I'll biggest in the diligence a labor reflected the progress of QX operating which We the and labor. environment. driver made improvement

between wage labor effectively the successful interplay labor past, and training requires managing the in said have we contract costs. growth, As management

labor us on to continue to during costs which enabled our QX. within in has staffing contract levels improve clinic, reduction permanent the operators drive Our further

with teammates This tracking with above saw training the in efforts largely of expectation, and the year. peak The plan elevated the resulted summer. half relative our in our expense is although labor below of to last ahead permanent labor our has last in we improvement health the year historical historically year. with norms, in the which This increase teammate market. line successful we back in in tracked half anticipate will training on cut depend We're broader of quarter productivity cost full closely our combined to contract retention in the turnover in

to net This per Quarter-over-quarter range. middle were treatments gains treatment on of lower annualization excess still driven of better and to reduction year-over-year volume. higher volume mortality the admit from our treatment QX a X% the basis expect due anticipate mortality. proves would XXXX, we said, and Moving That the overall to and encouraged year by XXXX. on trend, quarter in year. census we a was X% excess expected Because than down we day a up both in approximately volume over to half balance mortality in we're saw be range continue of flat relative to volume to forecast we the our to the this of results. What assume of top finish by first our of

innovation commitment a based experience acute healthcare and This overall in with access patient allow of reaffirms technology. its are health couple transformation home Medical, and independent and increase device leader from on the current our kidney to exclusively partnership ranging technologies. a access pipeline intended in care. focused technologies investment to kidney On advanced to care Transitioning R&D kidney realizing global Mozarc therapies and innovative products DaVita scale April Medtronic topics. a home and strategic Medtronic, dialysis improve announced launch to to company to fuel Xst, in Mozarc of the us new

kidney improving our consistent model of or integrated patients. business care our We continue on that note finally well-being plan progress care make health And our to and and is the of demonstrate IKC, with

of will highlight I two this. examples

care which optimal IKC in means cost our the difficult vascular hospitalizations Optimal in an patient to in and half of across and on place. reduction follow. costly and a than home the starts of reduce access at start, that treatment month achieve year First, initiates average the lead our program, dialysis or appropriate more continuing patients

data hospitalization recent versus patients encouraging show program population. overall our continues Second, differentiation patient rates from in our IKC in to an

As by of focus is our driving business, efficient of pursuing the total we to our which IKC on to care. continue spend saving measured while we rate dollars model continue scale in medical a cost our program, will net

at a across In $X.X range adjusted earnings we a $X.XX we're operating our and our per are of seeing in rate revising operating summary, $X.XX $X.XXX $X.X to looking $X.XX of initial billion range faster to forecast. income of range progress share billion our billion to to range $X.XX. important assumed than to our of billion adjusted most a $X.XXX revising metrics, Therefore, to

from Aside important our which cost other on saving elaborate COVID advocacy and will efforts. to against to in initiatives the labor disruption factors for of remaining course the progress protection effort continued our our benefit the Joe the patient continued of include market, year restore

it I Joe detail. and to financial will turn to performance our discuss outlook over now in more

Joel Ackerman

I'll add on Javier. of on for with detail first the year. I'll results and then quarter Thanks, commentary expectations remainder our the start additional some

the and things; With of the first, business; quarter, U.S. year. recur variability second, rest certain cost $X.XX million. and the the expectations in by adjusted high QX we the of the of that range dialysis me EPS roughly some operating was our three results detail. Overall, the end As in some a $XXX to cash are driven equally were was third, of operating in for Javier items strong free was flow at not provide normal income of in that, performance additional results, adjusted timing IKC million said, $XXX couple positive items our forecasting let

QX. QX X% were up First, to per U.S. dialysis compared treatments day almost in

down this normal MA higher compared increases due impact patient of $X.XX with in acute Medicare levels services Revenue that rates remained January, seasonal per patient offset fee treatment. expectations. in As of annual and was treatment were mentioned, to quarter-over-quarter, driven by Javier rates by increases high Mistreatment for our and begin growth in to seasonal responsibility pre-COVID consistent census. elevated was

decreased costs. in $X.XX health management contract spend per care and cost quarter-over-quarter largely the million sequentially. patient in compensation the two from a biggest and variability reductions costs treatment normal positive basis, On days and savings to cost pharmaceutical down fewer to were our were The non-GAAP insurance quarter. anemia in in a higher $XX These expenses due offset labor our by non-GAAP were benefits of drivers treatment On spend. transition Mircera, change variability basis, G&A by G&A

QX. we quarter approximately that and the and the expense hit items QX expected. same the The recognized was the expect forecasted OI from adjusted be revenue QX results IKC year as certain in and in that later benefited to for quarterly will better of was deferral IKC's than

line results IKC our items, these Excluding were in expectations. with

QX. QX, by International acquisition expenses operating relative foreign exchange $XX adjusted Brazil up equally million was to during roughly and income related driven in

A we EBITDA. target facility last term capital get to week with the leverage Looking times revolving to back billion despite our quarter to structure, of continues our at X.X on ended April, shares markets closed of we credit quarter focus range X our did loan to during ratio environment. $X.XX challenging any buy EBITDA. be a not our times the In and of X.X refinancing back We of approximately a a capital the as leverage successful

April quarter losses than expense $XXX of up to of is rest timing of for less we below partnership per the to of pre-tax million The OI QX. line due Mozarc $XX Medtronic Looking still shift in first approximately launch interest result in of shared expect will forward, costs. $XXX our Medical, million certain previously the stand with This year. the million

year, half years. on Mozarc's the approximately per we $XX impact quarter breakeven in previously, anticipate to income towards In trend shared expect next of as we million and still back we the OI three the other negative of

year-over-year the by prior past, realize $XXX in within to facility to talked Regarding million and with consolidation. ongoing the consistent initiatives This of is we've a driven cost million reduction primarily our we're savings $XXX savings expectations. about on-track pharmaceutical the in range

to out will the continue to we initiated the QX, our Mircera, During which over of remainder roll conversion year.

another XX currently the consolidating anticipate consolidated centers of remainder we QX, in year. Additionally, XX the and over to XX centers

We the facilities. have at to consolidated patient retention DaVita transitioned rates nearby and these continue to achieve related to centers as teammate of majority high shifts patients

my please today. concludes open the Q&A. for remarks call That prepared for Operator,

Operator

Instructions]. [Operator sir. you, Thank

Lake Justin Wolfe Research. with

sir. You ahead, may go

Justin Lake

you you're maybe what a color. could Appreciate the Joel, little Thanks. seeing. about bit talk all

target talked What's expecting are kind higher had for the temp maybe And year? for of You headwind us? rest there? do turnover hit leverage you ratio costs. you cost labor rest laid in are if shares? the turnover the when going QX? your get projecting are you buyback how quarter, you given the to the out labor with And you on of versus Thanks. then upside therefore about these for the the of think and and tracking And the what kind relative that What numbers, potential you to back year lower of of do

Javier J. Rodriguez

lot a there's in Well, Okay. there.

second me just answer your let then follow-up pull up for a and some Joel of So questions. can

is Javier. this Justin,

when some but of we're on in good little now First, started had the give it's right ask, of I on underlying labor, is a volatility up number, think time you more the we a metrics. we as bigger clear to just all to but so more pull which color a metrics,

on talk labor. account double wages, you training there's click into can about obviously SWBs, wages, and you When Within productivity, take you benefits, contract that.

shift got other and with time things. those But five. You've let's stay over differential

out contract to quarter our fast with we numbers. then that of called outliers to the worry five. XXXX, calculate labor as spike between In training interplay the and fast had math that they enough the to we we today, historical third a in But the aren't forward because we people were

I to you let So if your not, a follow-up get and see can me if question. number

in talking had to from we variables X% number growth. In incorporates course expect a X% that went to that had which in XXXX all And of in to XXXX, just that X% XXXX, So the over about, more to that those we XXXX, XXXX CAGR be outlier roughly we SWBs. growth. X% roughly that were number

follow-up you do want answer on does ask on a the that to question or that? So labor

Justin Lake

Yeah.

out X% that versus if Just trying mostly what at continue to X%, pace, where on do figure you think this you is up? you labor, I'm to end

Joel Ackerman

we're cost. thinking of ahead we're thought we would labor I'd million be on total Justin, where $XX we the say, about

And increase say middle that that of that's I'd million So half if of volume. range at to think guide million. of is the I the and get $XX half $XX labor of of our how is you

Justin Lake

better? trying that is first about if kind And XXX just And for that quarter, the Joel? I'm this to of you're think mean continues, like does

Joel Ackerman

think don't you labor items that were things. the itself, in line in some as workers' recur. that They like strip guys we out comp think about will good I'd lines Well, in annualizing there were benefits

full-year million number. be $XX a would the So

We're of driven progress building we In a continued the year in half last year the see in pre-COVID seen in we're we to peak expecting on still in of year, much. well of need middle that seeing. that the levels. in contract haven't labor, There the off the we're largely by terms on. here, what little faster above that just above pre-COVID some improvement pressure we is that's but turnover And side, year, we're levels. saw of back go the the labor to And but presses most really improvement bit ending the we're seen but as we've where currently And still we thought. wage it from contract happened of because will be than we're likely the productivity

Justin Lake

That's the Thanks. my questions helpful. rest of take Joel. offline, I'll

Operator

you. Thank

is next Bank America. caller with of Our Fischbeck Kevin

You may go ahead, sir.

Unidentified Analyst

on is [Nimea question. have taking Gutierrez] Hi. just on question quick Kevin. This I the actually for (ph) Thanks labor. another for

You this levels? And year? Thanks. said in how year? does are year wage the expect What pressure and to compare wage you you last for pre-COVID assuming inflation it continued

Javier J. Rodriguez

Yes.

think was Justin. really it bit a answered little I with

make me sure thing. the So let we're same asking

So we X% think that that account Does said over your take if all answer question? into of that be that the just will we to SWBs XXXX you higher, X% XXXX. variables basically

Unidentified Analyst

And you. Yes. that's Thank you. Thank all.

Operator

Thank you.

Andrew Mok next Our caller UBS. is with

Hi. sir. ahead, go may You

Unidentified Analyst

you for on walk as is quarter rates tracking update sequentially? for provide beat the through well taking Could question. [Andrew] the This an (ph). drivers mistreatment treatment Thanks growth us underlying Thomas the the of in on as Thanks. are how

Javier J. Rodriguez

Thanks. Sure. Thanks question. for the

increases census to and treatment number way XX result like offset than use that by but the day the that's number excess of bps increases by prior largely to see driven down is So it and QX about remains higher pre-COVID. you'll relative mortality, in That admissions per quarter-over-quarter. is that is years, continued was I which up

above are It of rates, roughly of one other it, still the we well pre-COVID impacts saw can mistreatment terms the In it a pre-COVID. There's but to next. trend running than quarter basis seeing lot XXX from what seasonality we in to continues move and points around higher number. it

Unidentified Analyst

track switch and any can you wanted to specifically, to it. ask follow-up. update on the Got cadence any the quick That's are rollout? transition helpful. do have of about the And there a I Mircera, KPIs ESA Thanks. you share to the

Javier J. Rodriguez

as that We do not have rollout as any disclosures on it. All seeing I wanted. that can perspective, is tell the well we you that results clinical from expected are the and is we a going we

So it's going planned. as

Unidentified Analyst

again. Great. Thanks

Javier J. Rodriguez

Thank you.

Operator

Thank you. Instructions]. [Operator

caller from next Bank. Deutsche Chickering Pito Our is

ahead. go may You

Pito Chickering

afternoon Good guys.

of the $XX follow-up the said here a question, half raise, So million operating on of half on income you labor and better Justin's volumes.

through XX% that of else almost walk operating million flow? your income us $XX in free any what capital tracking how or is added IKC. you the into guidance guess versus of You there? transitioning raise, cash new is that $XXX I previous Is just lives And working changes in anything on then guidance can on million

Javier J. Rodriguez

second Let the take me Joel first that. clearly and take the can growing of is IKC, is of business. while investment part and it the it really can we're progress, part as making phase that good of in you a On imagine, the business

there. see we is the no had timing full And a change what so we bit of there in year,

looks will So annualized on we're a what quarter-to-date to the than said. number a target it we've still on an basis, on little better

Joel Ackerman

in pointed cash out, flow on as an that. Yes, increase OI helps the obviously, free you Pito,

better second expected. are the And one is taxes The are capital. things we other than working trending cash two

the DSOs see were considerably. You down

a for year. bit that of the a tailwind well to get as we'll think we So,

Pito Chickering

then people Okay. just tracking realizing as think XX%, your XX% you was first color spikes just sort XXXX drag for But be year. into add tracking class mean, healthcare, other trends going are when online. IKC that second, that's how seen the sort to lives, of trust a And how curious on in of that on you during the sort kind a those we've areas of of coming about utilization you almost of quarter? new medical any had and come for I guys of that the of

Joel Ackerman

you so COVID. noise It's we to little as say we because and Yes, said, agree. because hard have a volatility of much

efficient report manual. are these We lot And things care not we're to scale build a bunch the are more whole need the a so that of a where is savings to to to than what standardize want. line we in there's less seeing right expect little of is now we need that and coming we model

that We're to we're So we're still a expecting XXXX. in breakeven going work progress. things in and still to want be be of lot we

Pito Chickering

Okay. here of color several you definitely a you today? sort on And say I lot won't this give of quarters, tracking which on we've we're And any last patients pre-COVID? trending then guys about that growth similar is color of flat looking can track base you specs patient can in many so one guess How current better, us added more of give at did you last then sort utilization. how the us normalization versus mortality where on of sort XXXX versus shock sort year-over-year question any quarter? of than talking sort net the seen

Joel Ackerman

Yes.

here. So let walk me you Pito, some through numbers,

the in census about net So was growth X,XXX QX patients.

that was compare it you QX patients. was of almost If negative what XXXX XXX in that to

is quarter of mortality is admit last some saw So patients excess explained year. this although of better X,XXX an of the quarter almost by it we result also change than a swing, that in most the

the So we progress. and side, the both mortality side saw on admit

Pito Chickering

on sort XXXX can was, that XXXX comparison color pre-COVID? guess, say new XQ ads a give just I of side, of us So how the XQ on you admin and some the a

Joel Ackerman

I start it out. what before excluding a That quarter-to-quarter mortality, have This we variable and one front tell of would was wait extrapolating at a this were declare been XXXX. to the I more to it in QX I'd excess you see ready here. definitely metric of said, trend really but data, me, quarter this happens has this before I can this is than to If we're higher numbers don't to few was months historically you of quarter want for cautious be look

Pito Chickering

last question So just a that one. on

for, U.S. stage the back looking fairly incidence So of there, go been sort data, has signs decade. that to disease renal this going nearly many end a and but consistent just to soon sorry to I normalization point? rate keep mean, are years, of we at Are you're the RDS it's for returning seeing rates to all it you're of at we call too incidents lead

Javier J. Rodriguez

with It's studying But little to different a to CKD in We've not the been too particular all lot early there's evaluating any movement and population draw and a ready on sources COVID. call conclusions. we're it. data upstream of

so will slower. know progression because there's And making look we you are that some as things

other On the there's that expectancy. life things hand, are expanding

so at point. is our this conclusion And any not to math leading

Pito Chickering

here, color year? here half any And of I should is of we there. the piece sort on least think I in promise those excess stop guess, both I on mortality, about mortality the stop I'll sort then and now at continuing of And last was normal back mortality for will the of where in how

Javier J. Rodriguez

Yes.

mortality excess patients about was the XXX So in quarter.

patients. we're a at year somewhere X,XXX for of down and the our but the mortality balance brought still of expectations number slightly have looking excess XXXX We between

middle into guidance the range. what's our of terms of In built

Pito Chickering

I'll there. Great. stop

Javier J. Rodriguez

Thank you.

Operator

you. Thank

Our with next Cowen. Taylor caller is Gary

ahead, You may sir. go

Gary Taylor

Hi, good evening.

some refund. or quick had G&A, least items the for advocacy in mentioned favorable in release, including two Joel, at just once think me, you I numbers,

there to you $X had I'm IKC, revenue moving better for down but foot Just on of XQ, -- trying said sequentially or a then some parts the was but of there's some that And delayed I sort could know from just million how there, revenue wondering if early size expense. you than us? ton you and

still sort including some So revenue early just recognition? down, trying foot but to of

Joel Ackerman

Sure.

ballot million the you're is number looking $X So, for.

year. were roughly terms were that IKC, the $XX in later expecting, we it just expecting the in we half in revenue In half expense million the about of we line, saw line

of view of IKC year terms generally of timing revenue In revenue, half the we be back the loaded. the to

year That's a As on that claims still recognize then you maturing why the the you ultimately about of usually call decline back savings the shared think filling from done, shared and savings with calculations see the half happens we'll and timing that's the lags positive the surprise. it in QX being when up dollars. or

Gary Taylor

it. Thank Got you. Perfect.

Javier J. Rodriguez

Thank you, Gary.

Operator

you. Thank

Our Pito Chickering next caller is with Bank. Deutsche

sir. ahead, You may go

Pito Chickering

sorry, guys. on. I couple a back of to wanted Alright, just come you to had things I

So sequentially ready for copays. of sort sort primarily flattish to due of treatment seasonal

about questions, should going the managed how -- from what updates? treatment rest curious you of we on per I the two guess, care Just sort then revenue cost seeing think limiting of are And year? for

Javier J. Rodriguez

of not things. talked We're anything in you, Thanks, multi-year anything given from Yes. our portfolio any to about on about refresh so care seeing Pito. couple of year, roughly managed and year. the our different seeing this to and A we've or just negotiated negotiations report in XX% we're contractor not we

year last said from increase X.X%, QX in revenue about treatment talked per we've would XXXX. XXXX we a get to over is that year-over-year What X% we

Pito Chickering

great. then, from so centers. efficiencies Okay, closing And on

sort You of quarter. XX had closed this

consolidating consolidations XXXX do just how from solely you're through of should another guess to in XX then much for realize sort line? those trend about that much of And talked savings going XXXX? center on you XX centers. how think to I that You

Javier J. Rodriguez

Yes.

the we it get The that'll biggest part We've said haven't that XXXX. some will still be be number. quantified to So is $XXX rollover amount piece. Mircera. -- will not of million always that the it in but We'll There'll of biggest get $XXX in we'll into of XXXX, but XXXX. million be most piece the so

Pito Chickering

was for for then missed you are was rest quarter? here you're seeing what labor the on And this net quarter? year? dollars but What was one what contract the the last color – of I in the hiring me. it, have may hiring first of sort then any And and Okay. What

Javier J. Rodriguez

Yes.

for remember was we of contract year moving said are million half was this around year, labor now and at hundred last think that that better the we we'd the said be in a running pace. year, that we I -- and move today what year, -- So we better

So important the that where variability conversation those more all part metrics of the like because, million. point labor interplay beginning number. would benefits you intertwined, number is But we $XX the are of said course, the training I and of to all productivity all the but that's be again, will between wages, contract the most

Pito Chickering

And I net how after number guess can comes you lower trading is that quantify the online about should as in part you how was us mentioned the of - just had Because second hires you’re trend the of for first. the thinking And just the year? this sort quarter and hires you throughout costs what quantify batch turnover?

Javier J. Rodriguez

Yes.

So as really things, with year for way to about training of last a net result here's I'd combined need a training turnover combined us the the They high cost. staff two to the level. and think peaked higher those add

with But turnover on others. remains remains class gotten elevated. the It's some still better sit today, here birth of elevated. it we As late than

So but we're expecting much comes staffed. or continued the half the year modeling We're down. high closer training until we that are at of fully back levels

So QX that will mitigate relative training now with the done levels peak costs staffing getting up saw year. is last of the back some in to of the and we training the some associated

Pito Chickering

should a of that about that within guidance about embedded talk X% of that one from I the training -- how you when costs So, increase the it are roll comes off guess, is in of the X% more XXXX? SMB, much to as think you sort sort of

Javier J. Rodriguez

XXXX back the year. partly The productivity Not improve a beginning training the training a It's the not is to productivity partly low. in in in also And relative to going of tailwind see because of labor we're lot. the still change training -- much productivity. the it's because till was contract half bigger that's XXXX,

we was the saw that in one spike only QX, but So quarter.

Pito Chickering

so Thanks it. great. appreciate I much, Okay, guys.

Javier J. Rodriguez

Thank Pito. you,

Operator

no And questions. am at this showing further time, I

Javier J. Rodriguez

Michelle, you, thank all the for Thank questions. and you

to As all financial results We're Thank year you've proved implications XXXX performance and well. the for heard about that the positive hope our momentum the QX the be for to some beyond. have today, in and trend. start you joining be teammates, sustainable patients, call our and our of I excited we

Operator

Thank conference you. concludes today's This call.

You disconnect may go time. at ahead this and

DaVita (DVA) 8 May 232023 Q1 Earnings call transcript