DaVita reports Q1 net income down at US$162.1M from US$237.4M a year ago, with consolidated revenue at US$2.8B, flat from a year ago; results impacted by COVID-19 volume pressures from excess patient mortality, higher missed treatments

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DENVER, Colorado , May 6, 2022 (press release) –

DaVita Inc. (NYSE: DVA) announced financial and operating results for the quarter ended March 31, 2022.

For the quarter, diluted earnings per share was $1.61, a decrease of (10.1)% from the prior quarter. First quarter 2022 diluted earnings per share was impacted by continued volume pressures from COVID-19, including excess patient mortality and higher missed treatments as a result of the Omicron variant. Additionally, first quarter diluted earnings per share was impacted by higher than normal wage rate increases.

"It is an interesting time right now, as our country and world are facing a unique portfolio of one-time events all happening at the same time," said Javier Rodriguez, CEO of DaVita. "As our organization works through these challenges, I think it is important to keep in mind why DaVita exists — we are a patient focused organization that provides life-sustaining care to over 240,000 people in twelve countries."

Financial and operating highlights for the quarter ended March 31, 2022:

  • Consolidated revenues were $2.818 billion.
  • Operating income was $338 million.
  • Diluted earnings per share was $1.61.
  • Operating cash flow and free cash flow were $322 million and $147 million, respectively.
  • Repurchased 2.1 million shares of our common stock at an average cost of $110.90 per share.
   

Three months ended

   

March 31, 2022

 

December 31, 2021

 

March 31, 2021

Net income attributable to DaVita Inc.:

 

(dollars in millions, except per share data)

Net income

 

$                    162

 

$                    187

 

$                    237

     Diluted per share

 

$                   1.61

 

$                   1.79

 

$                   2.09

Adjusted net income(1)

 

$                    162

 

$                    212

 

$                    237

     Diluted per share adjusted(1)

 

$                   1.61

 

$                   2.02

 

$                   2.09

   

(1)

For definitions of non-GAAP financial measures, see the note titled "Note on Non-GAAP Financial Measures" and related reconciliations beginning on page 16.

 

   

Three months ended

   

March 31, 2022

 

December 31, 2021

 

March 31, 2021

   

Amount

 

Margin

 

Amount

 

Margin

 

Amount

 

Margin

   

(dollars in millions)

Operating income

 

$        338

 

12.0 %

 

$        389

 

13.2 %

 

$        443

 

15.7 %

 

U.S. dialysis metrics:

Volume: Total U.S. dialysis treatments for the first quarter of 2022 were 7,109,788, or an average of 92,335 treatments per day, representing a per day change of (2.2)% and (2.4)% compared to the fourth quarter of 2021 and first quarter of 2021, respectively. Normalized non-acquired treatment growth in the first quarter of 2022 compared to the first quarter of 2021 was (1.9)%.

 

Three months ended

 

Quarter

change

 

Three months ended

 

Year to date

change

 

March 31, 2022

 

December 31, 2021

   

March 31, 2022

 

March 31, 2021

 
 

(dollars in millions, except per treatment data)

Revenue per treatment

$          361.35

 

$           361.70

 

$            (0.35)

 

$        361.35

 

$        354.50

 

$             6.85

Patient care costs per treatment

$          252.61

 

$           248.12

 

$             4.49

 

$        252.61

 

$        238.69

 

$           13.92

General and administrative

$               217

 

$                243

 

$               (26)

 

$             217

 

$             221

 

$                 (4)

 

Primary drivers of the changes in the table above were as follows:

Revenue: The quarter change was driven by a seasonal decline from co-insurance and deductibles, partially offset by an increase in the Medicare base rate in 2022, increases in commercial rate and mix, favorable changes due to the continued shift to Medicare Advantage plans and a seasonal increase from hospital inpatient dialysis treatments. The year to date change was primarily driven by increases in the Medicare base rate in 2022 and commercial mix, as well as favorable changes due to the continued shift to Medicare Advantage plans.

Patient care costs: The quarter change was primarily due to an increase in compensation expenses driven by increased wage rates and seasonal increases in payroll taxes. In addition, our fixed other direct operating expenses in our dialysis centers negatively impacted patient care costs per treatment due to fewer number of treatments in the first quarter of 2022. These increases were partially offset by decreased health benefit expenses, pharmaceutical unit costs and medical supplies expense. The year to date change was primarily due to compensation expenses driven by increased wage rates, as well as increases in fixed other direct operating expenses associated with our dialysis centers, as described above. Other drivers of this change include increases in utilities expense resulting from lower expense in the first quarter of 2021 related to our virtual power purchase arrangements, medical supplies expense, costs related to management meetings and insurance expense. These increases were partially offset by decreased pharmaceutical unit costs and professional fees.

General and administrative: The quarter change was due to declines in compensation expense, professional fees, office supplies, other purchased services and health benefit expenses. The year to date change was due to a decline in professional fees, partially offset by increased costs related to management meetings.

Share repurchases: During the three months ended March 31, 2022, we repurchased 2.1 million shares of our common stock for $233 million, at an average cost of $110.90 per share.

Subsequent to March 31, 2022 through May 4, 2022, we repurchased 0.8 million shares of our common stock for $88 million, at an average cost of $110.28 per share.

Financial and operating metrics:

 

Three months ended

March 31,

 

Twelve months ended

March 31,

 

2022

 

2021

 

2022

 

2021

Cash flow:

(dollars in millions)

Operating cash flow

$            322

 

$            154

 

$         2,099

 

$         1,773

Free cash flow(1)

$            147

 

$             (17)

 

$         1,297

 

$            986

   

(1)

For definitions of non-GAAP financial measures, see the note titled "Note on Non-GAAP Financial Measures" and related reconciliations beginning on page 16.

 
 
 

Three months ended

March 31, 2022

Effective income tax rate on:

 

Income

21.7 %

Income attributable to DaVita Inc.(1)

26.0 %

   

(1)

For definitions of non-GAAP financial measures, see the note titled "Note on Non-GAAP Financial Measures" and related reconciliations beginning on page 16.

 

Center activity: As of March 31, 2022, we provided dialysis services to a total of approximately 241,800 patients at 3,155 outpatient dialysis centers, of which 2,809 centers were located in the United States and 346 centers were located in 11 countries outside of the United States. During the first quarter of 2022, we opened a total of nine new dialysis centers and closed 15 dialysis centers in the United States. We also acquired three dialysis centers and opened four dialysis centers outside of the United States during the first quarter of 2022.

Integrated kidney care (IKC): As of March 31, 2022, we have approximately 40,000 patients in risk-based integrated care arrangements representing approximately $3.3 billion in annualized medical spend. We have an additional 8,000 patients in other integrated care arrangements; we do not include the medical spend for these patients in this annualized medical spend estimate. See additional description of these metrics at Note 2.

Outlook:

The following forward-looking measures and the underlying assumptions involve significant known and unknown risks and uncertainties, including those described below, and actual results may vary materially from these forward-looking measures. For example, the widespread impact of the COVID-19 pandemic continues to generate significant risk and uncertainty, and as a result, our future results could vary materially from the guidance provided below. We do not provide guidance for operating income or diluted net income per share attributable to DaVita Inc. on a basis consistent with United States generally accepted accounting principles (GAAP) nor a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures on a forward-looking basis because we are unable to predict certain items contained in the GAAP measures without unreasonable efforts. These non-GAAP financial measures do not include certain items, including foreign currency fluctuations, which may be significant. The guidance for our effective income tax rate on adjusted income attributable to DaVita Inc. also excludes the amount of third-party owners' income and related taxes attributable to non-tax paying entities.

 

2022 guidance

 

Low

 

High

 

(dollars in millions, except per share data)

Adjusted operating income

$                 1,525

 

$                 1,675

Adjusted diluted net income per share attributable

 to DaVita Inc.

$                   7.50

 

$                   8.50

Free cash flow

$                    850

 

$                 1,100

 

We will be holding a conference call to discuss our results for the first quarter ended March 31, 2022, on May 5, 2022, at 5:00 p.m. Eastern Time. To join the conference call, please dial (877) 918-6630 from the U.S. or (517) 308-9042 from outside the U.S., and provide the operator the password 'Earnings'. A replay of the conference call will be available on our website at investors.davita.com for the following 30 days.

Forward looking statements

DaVita Inc. and its representatives may from time to time make written and oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA), including statements in this release, filings with the Securities and Exchange Commission (SEC), reports to stockholders and in meetings with investors and analysts. All statements in this release, during the related presentation or other meetings, other than statements of historical fact, are forward-looking statements and as such are intended to be covered by the safe harbor for "forward-looking statements" provided by the PSLRA. These forward-looking statements could include, among other things, DaVita's response to and the expected future impacts of the novel coronavirus (COVID-19), including statements about our balance sheet and liquidity, our expenses and expense offsets, revenues, billings and collections, availability or cost of supplies, treatment volumes, mix expectation, such as the percentage or number of patients under commercial insurance, the availability, acceptance, impact, administration and efficacy of COVID-19 vaccines, treatments and therapies, the continuing impact on the U.S. and global economies, unemployment and labor market conditions, and overall impact on our patients and teammates, as well as other statements regarding our future operations, financial condition and prospects, expenses, strategic initiatives, government and commercial payment rates, expectations related to value-based care, integrated kidney care, and Medicare Advantage plan enrollment and our ongoing stock repurchase program, and statements related to our guidance and expectations for future periods and the assumptions underlying any such projections. All statements in this release, other than statements of historical fact, are forward-looking statements. Without limiting the foregoing, statements including the words "expect," "intend," "will," "could," "plan," "anticipate," "believe," "forecast," "guidance," "outlook," "goals," and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on DaVita's current expectations and are based solely on information available as of the date of this release. DaVita undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of changed circumstances, new information, future events or otherwise, except as may be required by law. Actual future events and results could differ materially from any forward-looking statements due to numerous factors that involve substantial known and unknown risks and uncertainties. These risks and uncertainties include, among other things:

  • the continuing impact of the dynamic and evolving COVID-19 pandemic, including, without limitation, on our patients, teammates, physician partners, suppliers, business, operations, reputation, financial condition and results of operations; the government's response to the COVID-19 pandemic, including, among other things, federal, state and local vaccine mandates or surveillance testing requirements and the extent to which they may ultimately be applicable to us; the pandemic's continuing impact on the U.S. and global economies, unemployment, labor market conditions, inflation and evolving monetary policies; the availability, acceptance, impact and efficacy of COVID-19 vaccines, treatments and therapies; further spread or resurgence of the virus, including as a result of the emergence of new strains of the virus, such as the Omicron variant or Omicron BA2 subvariant; the continuing impact of the pandemic on our revenue and non-acquired growth due to lower treatment volumes; COVID-19's impact on the chronic kidney disease (CKD) population and our patient population including on the mortality of these patients; any potential negative impact on our commercial mix or the number of our patients covered by commercial insurance plans; continued increased COVID-19-related costs; supply chain challenges and disruptions, including with respect to our clinical supplies; and higher salary and wage expense driven in part by labor market conditions and a high demand for our clinical personnel, any of which may also have the effect of heightening many of the other risks and uncertainties discussed below, and in many cases, the impact of the pandemic and the aforementioned global economic conditions on our business may persist after the pandemic subsides;
  • the extent to which the ongoing implementation of healthcare reform, or changes in or new legislation, regulations or guidance, enforcement thereof or related litigation result in a reduction in coverage or reimbursement rates for our services, a reduction in the number of patients enrolled in higher-paying commercial plans or that are enrolled in or select Medicare Advantage plans or other material impacts to our business or operations; or our making incorrect assumptions about how our patients will respond to any such developments;
  • risks arising from potential changes in laws, regulations or requirements applicable to us, such as potential and proposed federal and/or state legislation, regulation, ballot, executive action or other initiatives, including, without limitation, those related to healthcare and/or labor matters, such as AB 290 in California;
  • the concentration of profits generated by higher-paying commercial payor plans for which there is continued downward pressure on average realized payment rates, and a reduction in the number or percentage of our patients under such plans, including, without limitation, as a result of restrictive plan designs, restrictions or prohibitions on the use and/or availability of charitable premium assistance, which may result in the loss of revenues or patients, or our making incorrect assumptions about how our patients will respond to any change in financial assistance from charitable organizations;
  • our ability to successfully implement our strategies with respect to integrated kidney care and value-based care initiatives and home based dialysis in the desired time frame and in a complex, dynamic and highly regulated environment, including, among other things, maintaining our existing business; meeting growth expectations; recovering our investments; entering into agreements with payors, third party vendors and others on terms that are competitive and, as appropriate, prove actuarially sound; structuring operations, agreements and arrangements to comply with evolving rules and regulations; finding, training and retaining appropriate staff; and further developing our integrated care and other capabilities to provide competitive programs at scale;
  • a reduction in government payment rates under the Medicare End Stage Renal Disease program, state Medicaid or other government-based programs and the impact of the Medicare Advantage benchmark structure;
  • our ability to attract, retain and motivate teammates and our ability to manage operating cost increases or productivity decreases whether due to union organizing activities, legislative or other changes, demand for labor, volatility and uncertainty in the labor market, the current challenging labor market conditions, or other reasons;
  • U.S. and global economic and marketplace conditions, inflation, unemployment, labor market conditions, and evolving monetary policies, and our ability to respond to these changing conditions, including our ability to successfully implement cost savings innovations in response;
  • noncompliance by us or our business associates with any privacy or security laws or any security breach by us or a third party involving the misappropriation, loss or other unauthorized use or disclosure of confidential information;
  • legal and compliance risks, such as our continued compliance with complex, and at times, evolving government regulations and requirements;
  • the impact of the political environment and related developments on the current healthcare marketplace and on our business, including with respect to the Affordable Care Act, the exchanges and many other core aspects of the current healthcare marketplace, as well as the composition of the U.S. Supreme Court and the current presidential administration and congressional majority;
  • changes in pharmaceutical practice patterns, reimbursement and payment policies and processes, or pharmaceutical pricing, including with respect to hypoxia inducible factors, among other things;
  • our ability to develop and maintain relationships with physicians and hospitals, changing affiliation models for physicians, and the emergence of new models of care or other initiatives introduced by the government or private sector that, among other things, may erode our patient base and impact reimbursement rates;
  • our ability to complete acquisitions, mergers, dispositions, joint ventures or other strategic transactions that we might announce or be considering, on terms favorable to us or at all, or to successfully integrate any acquired businesses, or to successfully operate any acquired businesses, joint ventures or other strategic transactions, to successfully expand our operations and services in markets outside the United States, or to businesses or products outside of dialysis services;
  • continued increased competition from dialysis providers and others, and other potential marketplace changes, including without limitation increased investment in and availability of funding to new entrants in the dialysis and pre-dialysis marketplace;
  • the variability of our cash flows, including without limitation any extended billing or collections cycles; the risk that we may not be able to generate or access sufficient cash in the future to service our indebtedness or to fund our other liquidity needs; and the risk that we may not be able to refinance our indebtedness as it becomes due, on terms favorable to us or at all;
  • factors that may impact our ability to repurchase stock under our stock repurchase program and the timing of any such stock repurchases, as well as our use of a considerable amount of available funds to repurchase stock;
  • risks arising from the use of accounting estimates, judgments and interpretations in our financial statements;
  • impairment of our goodwill, investments or other assets;
  • our aspirations, goals and disclosures related to environmental, social and governance (ESG) matters, including evolving regulatory requirements affecting ESG standards, measurements and reporting requirements; the availability of suppliers that can meet our sustainability standards; and our ability to recruit, develop and retain diverse talent in our labor markets; and
  • the other risk factors, trends and uncertainties set forth in our Annual Report on Form 10-K for the year ended December 31, 2021 and the risks and uncertainties discussed in any subsequent reports that we file or furnish with the SEC from time to time.

The financial information presented in this release is unaudited and is subject to change as a result of subsequent events or adjustments, if any, arising prior to the filing of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

 

DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars and shares in thousands, except per share data)

 

 

Three months ended March 31,

 

2022

 

2021

Dialysis patient service revenues

$        2,716,281

 

$        2,714,587

Other revenues

101,274

 

105,414

          Total revenues

2,817,555

 

2,820,001

Operating expenses:

     

     Patient care costs

2,018,529

 

1,938,330

     General and administrative

294,820

 

281,426

     Depreciation and amortization

172,944

 

165,701

     Equity investment income, net

(7,046)

 

(8,058)

          Total operating expenses

2,479,247

 

2,377,399

Operating income

338,308

 

442,602

     Debt expense

(73,791)

 

(67,014)

     Other (loss) income, net

(1,786)

 

1,168

Income before income taxes

262,731

 

376,756

     Income tax expense

57,013

 

85,211

Net income

205,718

 

291,545

     Less: Net income attributable to noncontrolling interests

(43,596)

 

(54,142)

Net income attributable to DaVita Inc.

$           162,122

 

$           237,403

       

Earnings per share attributable to DaVita Inc.:

     

     Basic net income

$                 1.68

 

$                 2.18

     Diluted net income

$                 1.61

 

$                 2.09

       

Weighted average shares for earnings per share:

     

     Basic shares

96,342

 

109,014

     Diluted shares

100,503

 

113,852

 

DAVITA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

 (dollars in thousands)

 

 

Three months ended March 31,

 

2022

 

2021

Net income

$           205,718

 

$           291,545

Other comprehensive income (loss), net of tax:

     

     Unrealized gains on interest rate cap agreements:

     

     Unrealized gains

41,132

 

4,882

     Reclassifications of net realized losses into net income

1,033

 

1,033

     Unrealized gains (losses) on foreign currency translation:

62,212

 

(62,544)

          Other comprehensive income (loss)

104,377

 

(56,629)

Total comprehensive income

310,095

 

234,916

     Less: Comprehensive income attributable to noncontrolling interests

(43,596)

 

(54,142)

Comprehensive income attributable to DaVita Inc.

$           266,499

 

$           180,774

 

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(unaudited)

(dollars in thousands)

 

 

Three months ended March 31,

 

2022

 

2021

Cash flows from operating activities:

     

Net income

$         205,718

 

$         291,545

Adjustments to reconcile net income to net cash provided by operating activities:

     

     Depreciation and amortization

172,944

 

165,701

     Stock-based compensation expense

24,904

 

23,595

     Deferred income taxes

(41)

 

18,688

     Equity investment loss (income), net

664

 

(2,924)

     Other non-cash charges, net

4,714

 

3,979

Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:

     

     Accounts receivable

(66,270)

 

(224,274)

     Inventories

849

 

(5,303)

     Other receivables and prepaid and other current assets

(17,966)

 

13,756

     Other long-term assets

3,520

 

(6,521)

     Accounts payable

21,402

 

(75,504)

     Accrued compensation and benefits

(95,927)

 

(126,330)

     Other current liabilities

26,912

 

26,970

     Income taxes

52,473

 

62,719

     Other long-term liabilities

(11,701)

 

(11,793)

          Net cash provided by operating activities

322,195

 

154,304

Cash flows from investing activities:

     

     Additions of property and equipment

(123,108)

 

(144,913)

     Acquisitions

(5,166)

 

(3,668)

     Proceeds from asset and business sales

11,353

 

16,337

     Purchase of debt investments held-to-maturity

(5,070)

 

(5,349)

     Purchase of other debt and equity investments

(2,726)

 

(1,779)

     Proceeds from debt investments held-to-maturity

5,070

 

5,349

     Proceeds from sale of other debt and equity investments

3,773

 

11,879

     Purchase of equity method investments

(2,962)

 

(3,200)

     Distributions from equity method investments

470

 

978

          Net cash used in investing activities

(118,366)

 

(124,366)

Cash flows from financing activities:

     

     Borrowings

354,285

 

1,606,969

     Payments on long-term debt

(398,990)

 

(698,298)

     Deferred financing and debt redemption costs

 

(8,346)

     Purchase of treasury stock

(236,232)

 

(316,250)

     Distributions to noncontrolling interests

(65,452)

 

(53,867)

     Net payments related to stock purchases and awards

(501)

 

(2,524)

     Contributions from noncontrolling interests

4,929

 

10,689

     Proceeds from sales of additional noncontrolling interests

3,673

 

     Purchases of noncontrolling interests

(3,283)

 

(1,095)

          Net cash (used in) provided by financing activities

(341,571)

 

537,278

Effect of exchange rate changes on cash, cash equivalents and restricted cash

3,363

 

(7,966)

Net (decrease) increase in cash, cash equivalents and restricted cash

(134,379)

 

559,250

Cash, cash equivalents and restricted cash at beginning of the year

554,960

 

501,790

Cash, cash equivalents and restricted cash at end of the period

$         420,581

 

$      1,061,040

 

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars and shares in thousands, except per share data)

 

 

March 31, 2022

 

December 31, 2021

ASSETS

     

Cash and cash equivalents

$             327,502

 

$             461,900

Restricted cash and equivalents

93,079

 

93,060

Short-term investments

19,407

 

22,310

Accounts receivable

2,044,346

 

1,957,583

Inventories

107,722

 

107,428

Other receivables

441,363

 

427,321

Prepaid and other current assets

79,261

 

72,517

Income tax receivable

16,034

 

25,604

          Total current assets

3,128,714

 

3,167,723

Property and equipment, net of accumulated depreciation of $4,866,988 and $4,763,135, respectively

3,439,337

 

3,479,972

Operating lease right-of-use assets

2,784,140

 

2,824,787

Intangible assets, net of accumulated amortization of $64,525 and $60,730, respectively

191,096

 

177,693

Equity method and other investments

237,788

 

238,881

Long-term investments

47,866

 

49,514

Other long-term assets

185,166

 

136,677

Goodwill

7,072,903

 

7,046,241

 

$        17,087,010

 

$        17,121,488

LIABILITIES AND EQUITY

     

Accounts payable

$             433,137

 

$             402,049

Other liabilities

737,160

 

709,345

Accrued compensation and benefits

565,458

 

659,960

Current portion of operating lease liabilities

399,101

 

394,357

Current portion of long-term debt

185,728

 

179,030

Income tax payable

99,863

 

53,792

          Total current liabilities

2,420,447

 

2,398,533

Long-term operating lease liabilities

2,622,039

 

2,672,713

Long-term debt

8,687,487

 

8,729,150

Other long-term liabilities

108,954

 

119,158

Deferred income taxes

839,003

 

830,954

          Total liabilities

14,677,930

 

14,750,508

Commitments and contingencies

     

Noncontrolling interests subject to put provisions

1,390,757

 

1,434,832

Equity:

     

          Preferred stock ($0.001 par value, 5,000 shares authorized; none issued)

 

          Common stock ($0.001 par value, 450,000 shares authorized; 97,342 and 95,238

          shares issued and outstanding at March 31, 2022, respectively, and 97,289 shares

          issued and outstanding at December 31, 2021)

97

 

97

          Additional paid-in capital

595,403

 

540,321

          Retained earnings

516,459

 

354,337

          Treasury stock (2,104 and zero shares, respectively)

(233,318)

 

          Accumulated other comprehensive loss

(34,870)

 

(139,247)

               Total DaVita Inc. shareholders' equity

843,771

 

755,508

          Noncontrolling interests not subject to put provisions

174,552

 

180,640

          Total equity

1,018,323

 

936,148

 

$        17,087,010

 

$        17,121,488

 

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited)
(dollars in millions and shares in thousands, except per treatment data)

 

 

Three months ended

 

March 31,
2022

 

December 31,
2021

 

March 31,
2021

1. Consolidated business metrics:

         

     Operating margin

12.0 %

 

13.2 %

 

15.7 %

     General and administrative expenses as a percent of consolidated revenues(1)

10.5 %

 

11.0  %

 

10.0 %

     Effective income tax rate on income

21.7 %

 

20.8 %

 

22.6 %

     Effective income tax rate on income attributable to DaVita Inc.(2)

26.0 %

 

25.8 %

 

26.4 %

     Effective income tax rate on adjusted income attributable to DaVita Inc.(2)

26.0 %

 

16.0 %

 

26.4 %

           

2. Summary of financial results:

         

     Revenues:

         

          U.S. dialysis patient services and other

$     2,575

 

$     2,703

 

$     2,590

          Other—Ancillary services

         

               Integrated kidney care

87

 

86

 

93

               Other U.S. ancillary

5

 

6

 

6

               International dialysis patient service and other

173

 

170

 

162

 

265

 

262

 

261

          Eliminations

(22)

 

(20)

 

(31)

               Total consolidated revenues

$     2,818

 

$     2,944

 

$     2,820

     Operating income (loss):

         

          U.S. dialysis

$        406

 

$        451

 

$        480

          Other—Ancillary services

         

               Integrated kidney care

(37)

 

(39)

 

(27)

               Other U.S. ancillary

(3)

 

4

 

1

               International(3)

8

 

6

 

13

 

(32)

 

(29)

 

(12)

          Corporate administrative support expenses

(36)

 

(33)

 

(25)

               Total consolidated operating income

$        338

 

$        389

 

$        443

 

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA - continued

(unaudited)

(dollars in millions and shares in thousands, except per treatment data)

 

 

Three months ended

 

March 31,
2022

 

December 31,
2021

 

March 31,
2021

3. Summary of reportable segment financial results and metrics:

         

     U.S. dialysis

         

          Financial results

         

          Revenue:

         

               Dialysis patient service revenues

$     2,569

 

$     2,697

 

$     2,583

               Other revenues

6

 

6

 

7

                    Total operating revenues

2,575

 

2,703

 

2,590

          Operating expenses:

         

               Patient care costs

1,796

 

1,850

 

1,739

               General and administrative

217

 

243

 

221

               Depreciation and amortization

162

 

166

 

156

               Equity investment income

(6)

 

(7)

 

(6)

                    Total operating expenses

2,169

 

2,251

 

2,110

                         Segment operating income

$        406

 

$        451

 

$        480

     Metrics

         

     Volume:

         

          Treatments

7,109,788

 

7,455,560

 

7,286,934

          Number of treatment days

77.0

 

79.0

 

77.0

          Average treatments per day

92,335

 

94,374

 

94,636

          Per day year-over-year decrease

(2.4) %

 

(1.6) %

 

(2.3) %

          Normalized year-over-year non-acquired treatment growth(4)

(1.9) %

 

(1.8) %

 

(2.2) %

     Operating net revenues:

         

          Average patient service revenue per treatment

$  361.35

 

$  361.70

 

$  354.50

     Expenses:

         

          Patient care costs per treatment

$  252.61

 

$  248.12

 

$  238.69

          General and administrative expenses per treatment

$     30.50

 

$     32.53

 

$     30.33

          Depreciation and amortization expense per treatment

$     22.79

 

$     22.22

 

$     21.40

     Accounts receivable:

         

          Receivables

$     1,837

 

$     1,781

 

$     1,892

          DSO

65

 

61

 

67

 

DAVITA INC.

SUPPLEMENTAL FINANCIAL DATA - continued

(unaudited)

(dollars in millions and shares in thousands, except per treatment data)

 

   

Three months ended

   

March 31,
2022

 

December 31,
2021

 

March 31,
2021

4. Cash flow:

           

     Operating cash flow

 

$        322

 

$        530

 

$        154

     Operating cash flow, last twelve months

 

$     2,099

 

$     1,931

 

$     1,773

     Free cash flow(2)

 

$        147

 

$        290

 

$         (17)

     Free cash flow, last twelve months(2)

 

$     1,297

 

$     1,133

 

$        986

     Capital expenditures:

           

          Routine maintenance/IT/other

 

$          84

 

$        132

 

$          90

          Development and relocations

 

$          39

 

$          58

 

$          55

     Acquisition expenditures

 

$            5

 

$        142

 

$            4

     Proceeds from sale of self-developed properties

 

$            8

 

$          13

 

$          16

             

5. Debt and capital structure:

           

     Total debt(5)

 

$     8,927

 

$     8,965

 

$     9,063

     Net debt, net of cash and cash equivalents(5)

 

$     8,599

 

$     8,503

 

$     8,179

     Leverage ratio (see calculation on page 14)

 

3.50x

 

3.32x

 

3.39x

     Weighted average effective interest rate:

           

          During the quarter

 

3.35 %

 

3.34 %

 

3.08 %

          At end of the quarter

 

3.52 %

 

3.35 %

 

3.18 %

          On the senior secured credit facilities at end of the quarter

 

2.54 %

 

2.18 %

 

1.97 %

     Debt with fixed and capped rates as a percentage of total debt:

           

          Debt with rates fixed by its terms

 

52 %

 

52 %

 

51 %

          Debt with rates fixed by its terms or capped by

           cap agreements

 

91 %

 

91 %

 

90 %

     Amount spent on share repurchases

 

$        233

 

$        647

 

$        322

     Number of shares repurchased

 

2,104

 

6,128

 

2,949

 

Certain columns, rows or percentages may not sum or recalculate due to the presentation of rounded numbers.

             

(1)

General and administrative expenses include certain corporate support and long-term incentive compensation.

(2)

These are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, and for a definition of adjusted amounts, see attached reconciliation schedules.

(3)

The reported operating income for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021 includes foreign currency gains (losses) embedded in equity method income recognized from our Asia Pacific joint venture of approximately $0.3, $(1.0) and $2.7, respectively.

(4)

Normalized non-acquired treatment growth reflects year-over-year growth in treatment volume, adjusted to exclude acquisitions and other similar transactions, and further adjusted to normalize for the number and mix of treatment days in a given quarter versus the prior year quarter.

(5)

The debt amounts as of March 31, 2022, December 31, 2021 and March 31, 2021 presented exclude approximately $53.6, $56.7 and $65.2, respectively, of debt discount, premium and other deferred financing costs related to our senior secured credit facilities and senior notes in effect or outstanding at that time.

 

DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA-continued
(unaudited)
(dollars in millions)

Note 1: Calculation of the Leverage Ratio

Under our senior secured credit facilities (the Credit Agreement) dated August 12, 2019, the leverage ratio is defined as (a) all funded debt plus the face amount of all letters of credit issued, minus unrestricted cash and cash equivalents (including short-term investments) not to exceed $750 divided by (b) "Consolidated EBITDA." The leverage ratio determines the interest rate margin payable by the Company for its Term Loan A and revolving line of credit under the Credit Agreement by establishing the margin over the base interest rate (LIBOR) that is applicable. The calculation below is based on the last twelve months of "Consolidated EBITDA," as of the end of the reported period and pro forma for acquisitions or divestitures that occurred during the period, and "Consolidated net debt" at the end of the reported period, each as defined in the Credit Agreement. The Company's management believes the presentation of "Consolidated EBITDA" is useful to investors to enhance their understanding of the Company's leverage ratio under its Credit Agreement. The leverage ratio calculated by the Company is a non-GAAP measure and should not be considered a substitute for the ratio of total debt to operating income, determined in accordance with GAAP. The Company's calculation of its leverage ratio might not be calculated in the same manner as, and thus might not be comparable to, similarly titled measures of other companies.

 

Twelve months ended

 

March 31,
2022

 

December 31,
2021

 

March 31,
2021

Net income attributable to DaVita Inc.(1)

$                903

 

$                978

 

$                791

Income taxes

279

 

307

 

308

Interest expense

268

 

261

 

255

Depreciation and amortization

688

 

681

 

641

Noncontrolling interests and equity investment income, net

223

 

233

 

247

Stock-settled stock-based compensation

102

 

101

 

94

Debt prepayment, refinancing and redemption charges

 

 

86

Loss on changes in ownership interest, net

 

 

16

Other

20

 

13

 

29

"Consolidated EBITDA"

$            2,481

 

$            2,574

 

$            2,468

           
 

March 31,
2022

 

December 31,
2021

 

March 31,
2021

Total debt, excluding debt discount and other deferred financing costs(2)

$            8,927

 

$            8,965

 

$            9,063

Letters of credit issued

108

 

69

 

65

 

9,035

 

9,034

 

9,128

Less: Cash and cash equivalents including short-term investments(3)

(344)

 

(481)

 

(750)

Consolidated net debt

$            8,691

 

$            8,554

 

$            8,378

Last twelve months "Consolidated EBITDA"

$            2,481

 

$            2,574

 

$            2,468

Leverage ratio

3.50x

 

3.32x

 

3.39x

Maximum leverage ratio permitted under the Credit Agreement

5.00x

 

5.00x

 

5.00x

 
 

Certain columns or rows may not sum or recalculate due to the presentation of rounded numbers.

 

(1)

The net income measure presented is our net income attributable to DaVita Inc., since the Credit Agreement requires divestitures to be reflected on a pro forma basis for our leverage ratio calculation, and this measure of net income already excludes our discontinued operations divested.

(2)

The debt amounts as of March 31, 2022, December 31, 2021 and March 31, 2021 presented exclude approximately $53.6, $56.7 and $65.2, respectively, of debt discount, premium and other deferred financing costs related to our senior secured credit facilities and senior notes in effect at that time.

(3)

This excludes amounts not readily convertible to cash related to the Company's non-qualified deferred compensation plans for all periods presented. The Credit Agreement limits the amount deducted for cash and cash equivalents, including short-term investments, to the lesser of all unrestricted cash and cash equivalents, including short-term investments of the Company or $750.

 

 

DAVITA INC.
INTEGRATED CARE METRICS
(unaudited)

Note 2:  Integrated Care Metrics

Our integrated kidney care (IKC) business is party to a variety of risk-based integrated care and disease management arrangements, including value-based care (VBC) contracts under which we assume full or shared financial risk for the total medical cost of care for patients below or above a benchmark.

The aggregate amount of medical spend associated with risk-based integrated care arrangements that we disclose includes both medical costs included in our reported expenses for certain risk-based arrangements (such as its special needs plans), as well as the aggregate estimated benchmark amount above or below which we will incur profit or loss on for VBC arrangements under which third-party medical costs are not included in our reported results. This metric is an annualization of our estimate of this amount for the most recent quarter.

A number of our VBC contracts are subject to complex or novel patient attribution mechanics and benchmark adjustments, some of which are based on information not reported to us until periods after we report our quarterly results. As a result, our estimates of our patients under, and the dollar amount of, our value-based contracts remain subject to estimation uncertainty.

 

DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)

Note on Non-GAAP Financial Measures

As used in this press release, the term "adjusted" refers to non-GAAP measures as follows, each as reconciled to its most comparable GAAP measure as presented in the non-GAAP reconciliations in the notes to this press release: (i) for income measures, the term "adjusted" refers to operating performance measures that exclude certain items such as impairment charges, (gain) loss on ownership changes, restructuring charges, accruals for legal matters and debt prepayment and refinancing charges; and (ii) the term "effective income tax rate on adjusted income attributable to DaVita Inc." represents the Company's effective tax rate excluding applicable non-GAAP items and the tax associated with them as well as noncontrolling owners' income, which primarily relates to non-tax paying entities.

These non-GAAP or "adjusted" measures are presented because management believes these measures are useful adjuncts to GAAP results. However, these non-GAAP measures should not be considered alternatives to the corresponding measures determined under GAAP. 

Specifically, management uses adjusted operating income, adjusted net income attributable to DaVita Inc. and adjusted diluted net income per share attributable to DaVita Inc. to compare and evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe these non-GAAP measures also are useful to investors and analysts in evaluating our performance over time and relative to competitors, as well as in analyzing the underlying trends in our business. Furthermore, we believe these presentations enhance a user's understanding of our normal consolidated results by excluding certain items which we do not believe are indicative of our ordinary results of operations. As a result, adjusting for these amounts allows for comparison to our normalized prior period results.

In addition, the effective income tax rate on income attributable to DaVita Inc. excludes noncontrolling owners' income, which primarily relates to non-tax paying entities.

The effective income tax rate on adjusted income attributable to DaVita Inc. excludes noncontrolling owners' income and certain non-deductible and other charges which we do not believe are indicative of our ordinary results. Accordingly, we believe these adjusted effective income tax rates are useful to management, investors and analysts in evaluating our performance and establishing expectations for income taxes incurred on our ordinary results attributable to DaVita Inc.

Finally, free cash flow represents net cash provided by operating activities less distributions to noncontrolling interests and all capital expenditures (including development capital expenditures, routine maintenance and information technology); plus contributions from noncontrolling interests and proceeds from the sale of self-developed properties. Management uses this measure to assess our ability to fund acquisitions and meet our debt service obligations and we believe this measure is equally useful to investors and analysts as an adjunct to cash flows from operating activities and other measures under GAAP.

It is important to bear in mind that these non-GAAP "adjusted" measures are not measures of financial performance or liquidity under GAAP and should not be considered in isolation from, nor as substitutes for, their most comparable GAAP measures.

The following Notes 3 through 5 provide reconciliations of the non-GAAP financial measures presented in this press release to their most comparable GAAP measures.

DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES - continued

(unaudited)

(dollars in millions, except per share data)

 

Note 3:  Adjusted net income and adjusted diluted net income per share attributable to DaVita Inc.

 
   

Three months ended

   

March 31, 2022

 

December 31, 2021

 

March 31, 2021

   

Dollars

 

Per share

 

Dollars

 

Per share

 

Dollars

 

Per share

Net income attributable to DaVita Inc.

 

$     162

 

$    1.61

 

$     187

 

$    1.79

 

$     237

 

$    2.09

     Operating charges:

                       

     Income tax impact related to prior legal settlement

 

 

 

25

 

0.24

 

 

Adjusted net income attributable to DaVita Inc.

 

$     162

 

$    1.61

 

$     212

 

$    2.02

 

$     237

 

$    2.09

 

Certain columns or rows may not sum or recalculate due to the presentation of rounded numbers.

 

Note 4:  Effective income tax rates on income attributable to DaVita Inc.

 
   

Three months ended

   

March 31,
2022

 

December 31,
2021

 

March 31,
2021

Income before income taxes

 

$        263

 

$        315

 

$        377

Noncontrolling owners' income primarily attributable to non-tax paying entities

 

(44)

 

(62)

 

(54)

Income before income taxes attributable to DaVita Inc.

 

$        219

 

$        253

 

$        323

             

Income tax expense

 

$           57

 

$           66

 

$           85

     Income tax attributable to noncontrolling interests

 

 

 

Income tax expense attributable to DaVita Inc.

 

$           57

 

$           65

 

$           85

             

Effective income tax rate on income attributable to DaVita Inc.

 

26.0 %

 

25.8 %

 

26.4 %

 

The effective income tax rate on adjusted income attributable to DaVita Inc. is computed as follows:

 
   

Three months ended

March 31,
2022

 

December 31,
2021

 

March 31,
2021

Income before income taxes

 

$        263

 

$        315

 

$        377

Noncontrolling owners' income primarily attributable to non-tax paying entities

 

(44)

 

(62)

 

(54)

Income before income taxes attributable to DaVita Inc.

 

$        219

 

$        253

 

$        323

Income tax expense

 

$          57

 

$          66

 

$          85

Less income tax related to:

           

     Prior legal settlement

 

 

(25)

 

     Noncontrolling interests

 

 

 

Income tax on adjusted income attributable to DaVita Inc.

 

$          57

 

$          41

 

$          85

Effective income tax rate on adjusted income attributable to DaVita Inc.

 

26.0 %

 

16.0 %

 

26.4 %

 

Certain columns, rows or percentages may not sum or recalculate due to the presentation of rounded numbers.

 

DAVITA INC.

RECONCILIATIONS FOR NON-GAAP MEASURES - continued

(unaudited)

(dollars in millions)

 

Note 5:  Free cash flow

   

Three months ended

   

March 31,
2022

 

December 31,
2021

 

March 31,
2021

Net cash provided by operating activities

 

$               322

 

$               530

 

$               154

Adjustments to reconcile net cash provided by operating activities

 to free cash flow:

           

     Distributions to noncontrolling interests

 

(65)

 

(67)

 

(54)

     Contributions from noncontrolling interests

 

5

 

3

 

11

     Expenditures for routine maintenance and information technology

 

(84)

 

(132)

 

(90)

     Expenditures for development

 

(39)

 

(58)

 

(55)

     Proceeds from sale of self-developed properties

 

8

 

13

 

16

Free cash flow

 

$               147

 

$               290

 

$               (17)

 

   

Twelve months ended

   

March 31,
2022

 

December 31,
2021

 

March 31,
2021

Net cash provided by operating activities

 

$           2,099

 

$           1,931

 

$           1,773

Adjustments to reconcile net cash provided by operating activities

 to free cash flow:

           

     Distributions to noncontrolling interests

 

(256)

 

(244)

 

(249)

     Contributions from noncontrolling interests

 

26

 

32

 

44

     Expenditures for routine maintenance and information technology

 

(416)

 

(421)

 

(408)

     Expenditures for development

 

(204)

 

(220)

 

(257)

     Proceeds from sale of self-developed properties

 

48

 

56

 

83

Free cash flow

 

$           1,297

 

$           1,133

 

$               986

 

Certain columns or rows may not sum or recalculate due to the presentation of rounded numbers.

 

Contact:       
Investor Relations    
DaVita Inc.
ir@davita.com

SOURCE DaVita Inc.

 

 

 

 

 

 

 

 

 

 

 

 

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