DaVita(DVA) - 2024 Q2 - Quarterly Report

Financial Performance - Total consolidated revenues for Q2 2024 reached $3,187 million, an increase of$ 116 million or 3.8% compared to Q1 2024[113]. - U.S. dialysis revenues for Q2 2024 were $2,841 million, up$ 85 million or 3.1% from $2,756 million in Q1 2024[113]. - For the six months ended June 30, 2024, total consolidated revenues were$ 6,257 million, an increase of $384 million or 6.5% compared to the same period in 2023[115]. - Total revenues for the six months ended June 30, 2024, were$ 5,597 million, an increase of 4.8% compared to $5,343 million for the same period in 2023[121]. - Operating income for the six months ended June 30, 2024, was$ 1,076 million, representing a 30.9% increase from $822 million in the same period of 2023[136]. - U.S. dialysis operating income for Q2 2024 was$ 550 million, an increase of $24 million or 4.6% from Q1 2024[113]. Treatment and Patient Care - In Q2 2024, treatment per day volumes increased compared to Q1 2024, driven by census gains, but revenue and treatment volume were negatively impacted by elevated mortality rates among patients[107]. - The average treatments per day for Q2 2024 were 93,147, an increase of 988 treatments or 1.1% from Q1 2024[116]. - U.S. dialysis treatment volume for Q2 2024 was 7,265,444, reflecting an increase of 113,932 treatments or 1.6% from Q1 2024[116]. - The ongoing impact of COVID-19 has contributed to higher mortality rates among patients, adversely affecting patient census and treatment volumes[107]. - Future revenues and treatment volumes may be negatively impacted by sustained elevated mortality levels in the ESKD and CKD populations[107]. Operational Challenges - The company is facing challenges related to supply chain disruptions and elevated labor costs, which may impact operational efficiency[106]. - The company is currently focused on mitigating the impact of the CHC outage through alternative claim processing methods and has secured interest-free funding from United and its affiliates[102]. - The CHC cybersecurity breach led to a significant reduction in cash flow, with claims processing suspended since February 2024, resulting in increased days sales outstanding (DSOs)[102][103]. - The company is actively monitoring its information technology infrastructure following the CHC outage to prevent potential data breaches[105]. - General economic conditions, including inflation and labor market pressures, are expected to have a material adverse impact on the company's operations and financial condition[106]. Revenue and Cost Management - Average patient service revenue per treatment increased to$ 390.22 in Q2 2024, a rise of 1.5% from $384.54 in Q1 2024[120]. - The company expects continued elevated staffing and labor costs due to a challenging healthcare labor market, which could materially impact operations[109]. - The company is implementing cost savings initiatives to mitigate inflationary pressures, including optimizing clinic operations and improving procurement[109]. - U.S. dialysis patient care costs per treatment for the six months ended June 30, 2024, increased to$ 255.19, a slight increase of 0.1% from $254.94 in the prior year[125]. Cash Flow and Debt Management - Net cash provided by operating activities for the six months ended June 30, 2024, was$ 664 million, a decrease of 27.3% compared to $913 million for the same period in 2023[161]. - Free cash flow for the six months ended June 30, 2024, decreased to$ 327 million, down 37.7% from $525 million in the same period in 2023[163]. - Significant sources of cash included a$ 1,640 million extension of the maturity date for a portion of Term Loan B-1 and $393 million in temporary funding assistance from Change Healthcare[164]. - As of June 30, 2024, DaVita had$ 1,240 million available and $260 million drawn on its$ 1.5 billion revolving line of credit[167]. - The company believes its cash flow from operations and other liquidity sources will be sufficient to fund scheduled debt service and other obligations for the next 12 months[168]. Shareholder Returns and Investments - DaVita repurchased 4,774,415 shares of common stock for $616 million during the six months ended June 30, 2024, with an average price of$ 127.98 per share[167]. - DaVita Inc. has entered into purchase agreements to acquire dialysis service operations in Chile, Ecuador, Colombia, and Brazil, with expected cash payments of approximately $180 million for the remaining transactions[182]. Tax and Income - The effective income tax rate for Q2 2024 was 19.3%, up from 17.7% in Q1 2024[151]. - The effective income tax rate attributable to DaVita Inc. for the six months ended June 30, 2024, decreased compared to the same period in 2023, primarily due to increased benefits recognized for forecasted tax credits and a nontaxable noncash gain on change in ownership[156]. - Net income attributable to noncontrolling interests for Q2 2024 was$ 77 million, an increase of 16.7% from $66 million in Q1 2024[151]. - Income before income taxes attributable to DaVita Inc. was$ 294 million for the three months ended June 30, 2024[177]. Debt Structure - As of June 30, 2024, total fixed and economically fixed debt amounted to $8,454 million, with an average interest rate of 4.13%[186]. - Total variable rate debt not subject to caps was$ 594 million, with an average interest rate of 7.51%[186]. - The average fixed interest rate for the company's long-term debt is 4.07%[184]. - The average variable interest rate for the company's long-term debt is 4.64%[184]. - The company has principal amounts of $950 million for Term Loan B-1,$ 1,640 million for Extended Term Loan B-1, and $910 million for Term Loan A-1, which are effectively hedged by interest rate cap agreements[186].