DaVita(DVA) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights This section provides a high-level overview of DaVita Inc.'s financial performance, key operational metrics, strategic events, and future outlook Q2 2025 Financial Highlights DaVita Inc. reported Q2 2025 consolidated revenues of $3.380 billion, with $538 million operating income and $2.95 adjusted diluted EPS Key Financial Metrics (Q2 2025 vs Q1 2025 & Q2 2024) | Metric | Q2 2025 | Q1 2025 | Q2 2025 (YTD) | Q2 2024 (YTD) | | :-------------------------------- | :------ | :------ | :------------ | :------------ | | Net income attributable to DaVita Inc. (millions) | $199 | $163 | $362 | $462 | | Diluted per share | $2.58 | $2.00 | $4.57 | $5.15 | | Adjusted net income (millions) | $228 | $163 | $391 | $434 | | Adjusted diluted per share | $2.95 | $2.00 | $4.93 | $4.84 | | Operating income (millions) | $538 | $439 | $977 | $990 | | Adjusted operating income (millions) | $551 | $439 | $990 | $955 | | Consolidated revenues (billions) | $3.380 | - | - | - | | Operating cash flow (millions) | $324 | - | - | - | | Free cash flow (millions) | $157 | - | - | - | U.S. Dialysis Operational Metrics U.S. dialysis treatments increased by 0.4% per day quarter-over-quarter, with revenue per treatment rising and patient care costs per treatment decreasing - Total U.S. dialysis treatments for Q2 2025 were 7,186,217, with an average of 92,131 treatments per day, representing a 0.4% per day increase compared to Q1 2025[7] - Normalized non-acquired treatment growth in Q2 2025 compared to Q2 2024 was (0.8)%[7] U.S. Dialysis Per Treatment Metrics (Q2 2025 vs Q1 2025 & YTD) | Metric | Q2 2025 | Q1 2025 | Quarter Change | YTD 2025 | YTD 2024 | YTD Change | | :-------------------------------- | :------ | :------ | :------------- | :------- | :------- | :--------- | | Revenue per treatment | $404.58 | $400.14 | $4.44 | $402.38 | $387.40 | $14.98 | | Patient care costs per treatment | $268.36 | $271.77 | $(3.41) | $270.05 | $255.19 | $14.86 | | General and administrative (millions) | $312 | $283 | $29 | $595 | $556 | $39 | - The quarter change in revenue was primarily due to normal seasonal improvements, including patients meeting co-insurance and deductibles, partially offset by decreased volume of phosphate binders[8] - The quarter change in patient care costs was primarily due to decreased compensation expense and pharmaceutical costs (principally related to phosphate binders volume), partially offset by increases in health benefit and insurance costs[9] - The quarter change in general and administrative expenses was primarily due to costs related to a cybersecurity incident, a gain recognized in Q1 2025, and increased compensation expenses[10] Key Events and Impacts DaVita incurred $13.5 million in cybersecurity remediation charges, issued $1 billion in senior notes, and repurchased 3.1 million shares for $446 million in Q2 2025 - A cybersecurity incident in Q2 2025 resulted in approximately $13.5 million in charges, increasing patient care costs by $1.0 million and general and administrative expenses by $12.5 million for remediation and system restoration[11] - In May 2025, DaVita issued $1 billion aggregate principal amount of 6.75% senior notes due 2033, using a portion of the proceeds to prepay its revolving line of credit[12] - During Q2 2025, the company repurchased 3.1 million shares of common stock for $446 million at an average price of $144.00 per share. Post-quarter, an additional 2.7 million shares were repurchased for $393 million[13] Integrated Kidney Care (IKC) Metrics As of June 30, 2025, DaVita managed 64,400 risk-based IKC patients, representing $5.3 billion in annualized medical spend, plus 9,300 other integrated care patients - As of June 30, 2025, DaVita had approximately 64,400 patients in risk-based integrated care arrangements[17] - These risk-based arrangements represent approximately $5.3 billion in annualized medical spend[17] - An additional 9,300 patients were in other integrated care arrangements, whose medical spend is not included in the annualized estimate[17] 2025 Financial Outlook DaVita projects 2025 adjusted operating income between $2,010 million and $2,160 million, with adjusted diluted EPS from $10.20 to $11.30 and free cash flow from $1,000 million to $1,250 million 2025 Guidance | Metric | Low (millions) | High (millions) | | :------------------------------------------ | :------------- | :-------------- | | Adjusted operating income | $2,010 | $2,160 | | Adjusted diluted net income per share attributable to DaVita Inc. | $10.20 | $11.30 | | Free cash flow | $1,000 | $1,250 | - The company does not provide GAAP guidance for operating income or diluted net income per share due to the inability to predict certain items without unreasonable efforts[18] Forward-Looking Statements & Risk Factors This section outlines the nature of forward-looking statements and identifies key risk factors that could impact future financial results Nature of Forward-Looking Statements All non-historical statements in the release are forward-looking, covered by PSLRA safe harbor, and subject to risks, with no obligation for public updates except as legally required - All statements in the release, other than statements of historical fact, are forward-looking statements intended to be covered by the safe harbor provisions of the PSLRA[20] - Forward-looking statements are based on current expectations and information available as of the release date, and DaVita undertakes no obligation to update or revise them, except as legally required[20] Key Risk Factors The company identifies various factors that could cause actual results to differ materially from forward-looking statements, including external conditions, regulatory changes, strategic implementation challenges, and cybersecurity risks - External conditions: General economic, marketplace, and global health conditions; impact of domestic political environment; COVID-19 pandemic; supply chain challenges and disruptions; new market entrants and innovative technologies; elevated teammate turnover or labor costs; increased competition[20][21][22] - Concentration of profits from higher-paying commercial payor plans: Downward pressure on payment rates; reduction in commercially insured patients due to legislative efforts or restrictive plan designs[20][21][22] - Regulatory changes: Potential changes in or new laws/regulations (e.g., OBBBA) related to healthcare, privacy, antitrust, and labor matters, impacting coverage, reimbursement rates, or patient enrollment in commercial plans[20][21][22] - Strategic implementation challenges: Ability to successfully implement IKC, VBC, and home-based dialysis initiatives in a complex and regulated environment[20][21][22] - Government payment rates: Reductions under Medicare ESRD, state Medicaid, or other government programs, and impact of MA benchmark structure[20][21][22] - Reliance on suppliers: Dependence on significant suppliers, service providers, and third-party vendors for key support and clinical products[20][21][22] - Cybersecurity and compliance risks: Noncompliance with privacy/security laws, security breaches (like the recent incident), and evolving government regulations[20][21][22] - Labor market: Ability to attract, retain, and motivate teammates, including key leadership, and manage disruptions from labor market volatility or skilled personnel shortages[20][21][22] - Pharmaceutical changes: Changes in practice patterns, reimbursement, payment policies, or pricing, particularly for oral phosphate binders[20][21][22] - Physician and hospital relationships: Ability to develop and maintain relationships, changing affiliation models, and emergence of new care models[20][21][22] - Strategic transactions: Ability to complete and integrate acquisitions, mergers, dispositions, joint ventures, or expand international operations[20][21][22] - Cash flow variability: Extended billing/collections cycles, impact of cybersecurity incident on billing systems, and ability to service debt or fund liquidity needs[20][21][22] - Other factors: Natural disasters, public health crises, stock repurchase program impacts, and ESG matters[20][21][22] Consolidated Financial Statements This section presents DaVita Inc.'s consolidated statements of income, comprehensive income, cash flows, and balance sheets for the reported periods Consolidated Statements of Income For Q2 2025, DaVita reported total revenues of $3,379,526 thousand, operating income of $537,841 thousand, and diluted net income per share of $2.58 Consolidated Statements of Income (Three Months Ended June 30) | Metric (thousands) | 2025 | 2024 | | :----------------------------------- | :--------- | :--------- | | Dialysis patient service revenues | $3,206,871 | $3,061,102 | | Other revenues | $172,655 | $125,620 | | Total revenues | $3,379,526 | $3,186,722 | | Patient care costs | $2,261,540 | $2,142,299 | | General and administrative | $412,805 | $367,845 | | Depreciation and amortization | $174,704 | $175,661 | | Equity investment income, net | $(7,364) | $(5,481) | | Total operating expenses | $2,841,685 | $2,680,324 | | Operating income | $537,841 | $506,398 | | Debt expense | $(146,062) | $(97,747) | | Income before income taxes | $368,928 | $371,440 | | Income tax expense | $93,708 | $71,688 | | Net income | $275,220 | $299,752 | | Net income attributable to DaVita Inc. | $199,337 | $222,676 | | Diluted net income per share | $2.58 | $2.50 | Consolidated Statements of Comprehensive Income For Q2 2025, total comprehensive income was $364,350 thousand, significantly higher than the prior year, driven by unrealized gains on foreign currency translation Consolidated Statements of Comprehensive Income (Three Months Ended June 30) | Metric (thousands) | 2025 | 2024 | | :------------------------------------------------ | :--------- | :--------- | | Net income | $275,220 | $299,752 | | Unrealized (losses) gains on interest rate cap agreements | $(6,405) | $5,919 | | Reclassifications of net realized losses (gains) into net income | $1,534 | $(22,041) | | Unrealized gains (losses) on foreign currency translation | $94,001 | $(78,853) | | Other comprehensive income (loss) | $89,130 | $(94,975) | | Total comprehensive income | $364,350 | $204,777 | | Comprehensive income attributable to DaVita Inc. | $288,467 | $127,701 | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $504,245 thousand, while net cash used in financing activities increased to $378,094 thousand due to debt payments and share repurchases Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric (thousands) | 2025 | 2024 | | :------------------------------------------ | :--------- | :--------- | | Net cash provided by operating activities | $504,245 | $664,010 | | Net cash used in investing activities | $(229,303) | $(376,964) | | Net cash used in financing activities | $(378,094) | $(243,976) | | Effect of exchange rate changes on cash | $20,286 | $(4,458) | | Net (decrease) increase in cash | $(82,866) | $38,612 | | Cash, cash equivalents and restricted cash at end of period | $796,959 | $503,246 | - Operating cash flow decreased primarily due to changes in operating assets and liabilities, notably a significant increase in accounts receivable[29] - Financing activities saw increased borrowings but also higher payments on long-term debt and other purchases of treasury stock[29] Consolidated Balance Sheets As of June 30, 2025, total assets increased to $17,492,958 thousand, total liabilities rose to $15,939,935 thousand, and shareholders' equity shifted to a $(369,633) thousand deficit Consolidated Balance Sheets (As of June 30, 2025 vs December 31, 2024) | Metric (thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :-------------- | :---------------- | | Total current assets | $4,087,828 | $3,746,072 | | Property and equipment, net | $2,854,468 | $2,940,916 | | Goodwill | $7,465,769 | $7,375,216 | | Total Assets | $17,492,958 | $17,285,268 | | Total current liabilities | $2,933,540 | $2,973,410 | | Long-term debt | $10,078,805 | $9,175,903 | | Total Liabilities | $15,939,935 | $15,193,917 | | Treasury stock | $(2,485,654) | $(1,389,072) | | Total DaVita Inc. shareholders' equity (deficit) | $(369,633) | $121,122 | | Total Equity (deficit) | $(107,967) | $395,868 | - Accounts receivable increased significantly from $2,146,975 thousand to $2,441,259 thousand[31] - Long-term debt increased by approximately $900 million, reflecting the recent senior notes issuance[31] Supplemental Financial Data This section provides detailed consolidated business metrics, segment-specific financials, IKC metrics, cash flow details, and debt structure information Consolidated Business Metrics Consolidated operating margin improved to 15.9% in Q2 2025, with adjusted operating margin at 16.3% and effective income tax rate on adjusted income at 25.5% Consolidated Business Metrics (Q2 2025 vs Q1 2025 & YTD) | Metric | Q2 2025 | Q1 2025 | YTD 2025 | | :------------------------------------------------ | :------ | :------ | :------- | | Operating margin | 15.9 % | 13.6 % | 14.8 % | | Adjusted operating margin excluding certain items | 16.3 % | 13.6 % | 15.0 % | | General and administrative expenses as a percent of consolidated revenues | 12.2 % | 11.6 % | 11.9 % | | Effective income tax rate on income | 25.4 % | 18.9 % | 22.6 % | | Effective income tax rate on adjusted income attributable to DaVita Inc. | 25.5 % | 24.9 % | 25.2 % | Summary of Financial Results by Segment U.S. dialysis revenues were $2,913 million with $523 million operating income, while IKC revenues reached $152 million with $26 million operating income in Q2 2025 Revenues by Segment (Q2 2025 vs Q1 2025 & YTD) | Segment | Q2 2025 (millions) | Q1 2025 (millions) | YTD 2025 (millions) | | :-------------------------------- | :----------------- | :----------------- | :------------------ | | U.S. dialysis patient services and other | $2,913 | $2,823 | $5,737 | | Integrated kidney care | $152 | $105 | $258 | | Other U.S. ancillary | $8 | $7 | $16 | | International dialysis patient service and other | $325 | $302 | $627 | | Total consolidated revenues | $3,380 | $3,224 | $6,603 | Operating Income (Loss) by Segment (Q2 2025 vs Q1 2025 & YTD) | Segment | Q2 2025 (millions) | Q1 2025 (millions) | YTD 2025 (millions) | | :-------------------------------- | :----------------- | :----------------- | :------------------ | | U.S. dialysis | $523 | $476 | $999 | | Integrated kidney care | $26 | $(29) | $(3) | | Other U.S. ancillary | $(5) | $(4) | $(10) | | International | $36 | $30 | $67 | | Corporate administrative support expenses | $(42) | $(34) | $(76) | | Total consolidated operating income | $538 | $439 | $977 | U.S. Dialysis Segment Financials and Metrics The U.S. dialysis segment reported $2,913 million in revenues and $523 million in operating income for Q2 2025, with 7,186,217 treatments and $404.58 average revenue per treatment U.S. Dialysis Segment Financials (Q2 2025 vs Q1 2025 & YTD) | Metric (millions) | Q2 2025 | Q1 2025 | YTD 2025 | | :-------------------------------- | :------ | :------ | :------- | | Total operating revenues | $2,913 | $2,823 | $5,737 | | Patient care costs | $1,928 | $1,913 | $3,842 | | General and administrative | $312 | $283 | $595 | | Segment operating income | $523 | $476 | $999 | | Adjusted segment operating income | $536 | $476 | $1,012 | U.S. Dialysis Segment Metrics (Q2 2025 vs Q1 2025 & YTD) | Metric | Q2 2025 | Q1 2025 | YTD 2025 | | :------------------------------------------ | :---------- | :---------- | :----------- | | Treatments | 7,186,217 | 7,040,519 | 14,226,736 | | Average treatments per day | 92,131 | 91,793 | 91,963 | | Per day year-over-year change | (1.1)% | (0.4)% | (0.7)% | | Normalized year-over-year non-acquired treatment growth | (0.8)% | (0.6)% | - | | Average patient service revenue per treatment | $404.58 | $400.14 | $402.38 | | Patient care costs per treatment | $268.36 | $271.77 | $270.05 | | General and administrative expenses per treatment | $43.43 | $40.15 | $41.81 | | Accounts receivable (millions) | $1,838 | $1,722 | - | | DSO | 58 | 55 | - | Integrated Kidney Care (IKC) Metrics_detailed IKC metrics show 64,400 risk-based patients as of June 30, 2025, with $5,300 million in annualized aggregate risk-based spend, alongside 9,300 other integrated care patients IKC Metrics (As of June 30, 2025 vs March 31, 2025) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Risk-based patients | 64,400 | 62,100 | | Other patients | 9,300 | 9,300 | | Annualized aggregate risk-based spend (millions) | $5,300 | $5,200 | Cash Flow Details Q2 2025 operating cash flow was $324 million, resulting in $157 million free cash flow, with $90 million in maintenance and $32 million in development capital expenditures Cash Flow (Q2 2025 vs Q1 2025 & YTD) | Metric (millions) | Q2 2025 | Q1 2025 | YTD 2025 | | :------------------------ | :------ | :------ | :------- | | Operating cash flow | $324 | $180 | $504 | | Free cash flow | $157 | $(45) | $112 | | Maintenance capital expenditures | $90 | $95 | $185 | | Development capital expenditures | $32 | $48 | $80 | | Acquisition expenditures | $0 | $10 | $11 | | Proceeds from sale of self-developed properties | $12 | $9 | $21 | - Operating cash flow for the last twelve months was $1,862 million, and free cash flow for the last twelve months was $947 million[14] Debt and Capital Structure As of June 30, 2025, total debt was $10,330 million, net debt $9,622 million, and a leverage ratio of 3.34x, with 97% of debt at fixed or capped rates Debt and Capital Structure (As of June 30, 2025 vs March 31, 2025) | Metric | June 30, 2025 | March 31, 2025 | | :------------------------------------------------ | :------------ | :------------- | | Total debt (millions) | $10,330 | $9,799 | | Net debt, net of cash and cash equivalents (millions) | $9,622 | $9,361 | | Leverage ratio | 3.34x | 3.27x | | Weighted average effective interest rate (during quarter) | 5.71 % | 5.60 % | | Debt with fixed and capped rates as a percentage of total debt | 97 % | 92 % | | Amount spent on share repurchases (millions) | $446 | $550 | | Number of shares repurchased (thousands) | 3,067 | 3,660 | Non-GAAP Financial Measures & Reconciliations This section defines and reconciles non-GAAP financial measures used by management to evaluate performance and provide additional insights to investors Note on Non-GAAP Financial Measures This section defines non-GAAP financial measures like adjusted income and free cash flow, which management uses for performance evaluation and investor insights, though they are not GAAP substitutes - Adjusted measures exclude certain items like cybersecurity costs, impairment charges, gain/loss on ownership changes, restructuring charges, legal accruals, and debt extinguishment/modification costs[45] - Management uses adjusted operating income, adjusted net income, and adjusted diluted EPS to compare performance, analyze trends, establish budgets, and for incentive compensation[47] - Free cash flow is defined as net cash provided by operating activities less distributions to noncontrolling interests, development and maintenance capital expenditures, plus contributions from noncontrolling interests and proceeds from property sales[49] Calculation of Leverage Ratio The leverage ratio, calculated as funded debt minus unrestricted cash divided by 'Consolidated EBITDA', was 3.34x as of June 30, 2025, well below the 5.00x maximum permitted - The leverage ratio is defined as (a) all funded debt, minus unrestricted cash and cash equivalents (not to exceed $750 million) divided by (b) 'Consolidated EBITDA' for the last 12 months[40] Leverage Ratio Calculation (Twelve Months Ended) | Metric (millions) | June 30, 2025 | March 31, 2025 | | :------------------------------------------------ | :------------ | :------------- | | "Consolidated EBITDA" | $2,871 | $2,840 | | Total debt, excluding debt discount and other deferred financing costs | $10,330 | $9,799 | | Less: Cash and cash equivalents including short-term investments | $(737) | $(508) | | Consolidated net debt | $9,594 | $9,292 | | Leverage ratio | 3.34x | 3.27x | | Maximum leverage ratio permitted under the Credit Agreement | 5.00x | 5.00x | Adjusted Net Income and EPS Reconciliation Q2 2025 net income of $199 million was adjusted to $228 million (or $2.95 adjusted diluted EPS) by accounting for $13 million in cybersecurity charges and $19 million in tax impact from a prior legal matter Adjusted Net Income and Diluted EPS Reconciliation (Three Months Ended June 30) | Metric | Q2 2025 (Dollars in millions) | Q2 2025 (Per share) | Q1 2025 (Dollars in millions) | Q1 2025 (Per share) | | :------------------------------------------ | :---------------------------- | :------------------ | :---------------------------- | :------------------ | | Net income attributable to DaVita Inc. | $199 | $2.58 | $163 | $2.00 | | Cybersecurity incident-related charges | $13 | $0.17 | — | — | | Income tax impact related to prior legal matter | $19 | $0.24 | — | — | | Related income tax | $(3) | $(0.04) | — | — | | Adjusted net income attributable to DaVita Inc. | $228 | $2.95 | $163 | $2.00 | Adjusted Operating Income Reconciliation Q2 2025 consolidated operating income of $538 million was adjusted to $551 million after adding back $13 million in cybersecurity incident-related charges, primarily impacting the U.S. dialysis segment Adjusted Operating Income Reconciliation (Three Months Ended June 30, 2025) | Segment | Operating income (loss) (millions) | Cybersecurity incident-related charges (millions) | Adjusted operating income (loss) (millions) | | :-------------------------- | :--------------------------------- | :---------------------------------------------- | :------------------------------------------ | | U.S. dialysis | $523 | $13 | $536 | | U.S. IKC | $26 | — | $26 | | U.S. Other | $(5) | — | $(5) | | International | $36 | — | $36 | | Ancillary services Total | $57 | — | $57 | | Corporate administration | $(42) | — | $(42) | | Consolidated Total | $538 | $13 | $551 | Effective Income Tax Rates Reconciliation The effective income tax rate on income attributable to DaVita Inc. was 31.9% for Q2 2025, adjusting to 25.5% on adjusted income after accounting for cybersecurity and prior legal matter impacts Effective Income Tax Rates Reconciliation (Three Months Ended June 30) | Metric | Q2 2025 | Q1 2025 | YTD 2025 | | :------------------------------------------------ | :------ | :------ | :------- | | Effective income tax rate on income attributable to DaVita Inc. | 31.9 % | 24.9 % | 28.9 % | | Effective income tax rate on adjusted income attributable to DaVita Inc. | 25.5 % | 24.9 % | 25.2 % | - Adjustments to income before income taxes attributable to DaVita Inc. include adding back cybersecurity incident-related charges and subtracting noncontrolling owners' income[57] Free Cash Flow Reconciliation Q2 2025 net cash from operating activities was $324 million, resulting in $157 million free cash flow after adjustments, a significant recovery from Q1 2025's $(45) million Free Cash Flow Reconciliation (Three Months Ended) | Metric (millions) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------- | :------------ | | Net cash provided by operating activities | $324 | $180 | $799 | | Distributions to noncontrolling interests | $(58) | $(93) | $(30) | | Contributions from noncontrolling interests | — | $2 | $4 | | Maintenance capital expenditures | $(90) | $(95) | $(86) | | Development capital expenditures | $(32) | $(48) | $(39) | | Proceeds from sale of self-developed properties | $12 | $9 | $6 | | Free cash flow | $157 | $(45) | $654 | - For the twelve months ended June 30, 2025, free cash flow was $947 million, compared to $1,038 million for the twelve months ended June 30, 2024[61]