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DAVITA INC. (DVA)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong financial performance: revenue $3.295B, operating income $565M, GAAP diluted EPS $3.09, and adjusted EPS $2.24; free cash flow was $281M .
  • Sequential revenue per treatment increased to $395.87 while patient care costs per treatment rose to $264.60; per‑day treatments fell 1.4% q/q due to severe weather and PD supply constraints .
  • 2025 guidance: adjusted operating income $2.01–$2.16B, adjusted EPS $10.20–$11.30, and free cash flow $1.0–$1.25B, with flat treatment volume assumptions and material RPT/PCC/T impacts from oral phosphate binders (OI contribution $0–$50M) .
  • Key stock narrative drivers: continued RPT lift from rate/mix and collections, share repurchases (2.3M in Q4; 0.8M post‑quarter), and clarity on 2025 cost/mix dynamics; headwinds include Brazil AR reserve ($19M) and lingering volume weakness from Q4 PD disruption .

What Went Well and What Went Wrong

What Went Well

  • Revenue per treatment growth and collections improvements sustained margin strength despite muted volume; RPT up sequentially and full‑year RPT growth 3.7% y/y .
  • Robust cash generation with Q4 operating cash flow $548M and free cash flow $281M; LTM leverage at 3.03x EBITDA, maintaining capital allocation flexibility .
  • International expansion progressed; three of four Latin America deals closed with Brazil expected mid‑2025; 2025 international adjusted OI growth expected at ~$50M .

Management quotes:

  • “Enhanced collection performance and contracting propelled higher revenue per treatment growth…” .
  • “We finished the year on a strong note… adjusted operating income and adjusted EPS in the top half of our guidance range” .

What Went Wrong

  • Volume came in below expectations; missed treatments from severe weather and lost ~350 PD admissions in Q4, creating ~15–20 bps headwind to 2025 volume growth at the midpoint (flat assumed) .
  • Patient care cost per treatment rose sequentially $7 largely on seasonality, health benefits, and higher center closure costs; general and administrative costs increased $15M q/q on typical Q4 seasonality .
  • International posted a $19M reserve against aged AR in Brazil flowing through Q4 OI, partially offset by a ~$10–$15M pull-forward of IKC revenue; quality-of-earnings mixed near-term .

Financial Results

Consolidated Performance vs prior periods

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$3.146 $3.187 $3.264 $3.295
Operating Income ($USD Millions)$389.9 $506.4 $534.9 $565.4
Operating Margin (%)—15.9% 16.4% 17.2%
GAAP Diluted EPS ($)$1.62 $2.50 $2.50 $3.09
Adjusted Diluted EPS ($)—$2.59 $2.59 $2.24
Operating Cash Flow ($USD Millions)$485 $799 $810 $548
Free Cash Flow ($USD Millions)$258 $654 $555 $281

Notes: Adjusted figures per company non‑GAAP reconciliations .

Segment breakdown (Operating revenues and segment OI)

SegmentQ3 2024 Revenue ($MM)Q4 2024 Revenue ($MM)Q3 2024 Segment OI ($MM)Q4 2024 Segment OI ($MM)
U.S. Dialysis$2,906 $2,888 $549 $496
Integrated Kidney Care (IKC)$112 $166 $(2) $26
International$258 $258 $18 $76
Corporate——$(29) $(29)
Consolidated$3,264 $3,295 $535 $565

KPIs (U.S. Dialysis)

KPIQ3 2024Q4 2024YTD 2024YTD 2023
Treatments (units)7,350,784 7,278,605 29,046,346 —
Avg Treatments/Day93,048 91,786 92,534 —
Rev per Treatment ($)$394.49 $395.87 $391.32 $377.44
Patient Care Cost/Treatment ($)$257.46 $264.60 $258.12 $255.78
G&A per Treatment ($)$41.01 $43.44 $40.42 —
D&A per Treatment ($)$23.21 $21.62 $22.77 —
DSO (days)54 52 ——
Normalized non‑acquired treatment growth (y/y)(0.2)% (0.3)% ——

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Operating Income ($B)FY 2025N/A$2.01–$2.16 New
Adjusted Diluted EPS ($)FY 2025N/A$10.20–$11.30 New
Free Cash Flow ($B)FY 2025N/A$1.00–$1.25 New
Treatment Volume GrowthFY 2025N/AFlat vs 2024 midpoint New
Revenue per Treatment GrowthFY 2025N/A+4.5%–5.5% y/y New
Patient Care Cost per Treatment GrowthFY 2025N/A+6%–7% y/y New
U.S. Dialysis G&AFY 2025N/A+~4% y/y New
U.S. Dialysis D&AFY 2025N/ADown $25–$30M y/y New
Interest ExpenseFY 2025N/A$525–$555M New
Other Loss (below OI)FY 2025N/A~$75M New
Adjusted Effective Tax RateFY 2025N/A24%–26% New
IKC Adjusted OIFY 2025N/A~Flat y/y (2024: −$35M) New
International Adjusted OIFY 2025N/A+~$50M y/y New
Oral Phosphate Binders OI ImpactFY 2025N/A$0–$50M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2/Q3)Current Period (Q4)Trend
Supply chain disruptions (Baxter PD solutions)Hurricane Helene closures and impact disclosed in Q3; contingency efforts in flight ~$6M OI hit in Q4; ~15–20 bps 2025 volume headwind; admits normalized by year‑end Improving operationally, lingering 2025 volume headwind
Collections/RPTRPT rising on rate increases/mix and revenue cycle improvements (Q2/Q3) Continued RPT strength; ~40% of 2025 RPT growth from orals; remaining from rates, mix, collections Positive
Volume dynamicsQ2/Q3 normalized non‑acquired growth around flat to slight negative 2024 treatments +47 bps; 2025 midpoint assumes flat (days and PD disruption headwinds) Stabilizing at low growth
IKC/value‑based careIKC losses narrowing; timing variability highlighted (Q2/Q3) 2024 adj OI −$35M; flat expected in 2025; breakeven still targeted in 2026 On plan
International expansionDebt refinancings and active pipeline; acquisitions (Q2/Q3) Colombia closed; Brazil expected mid‑2025; $19M Brazil AR reserve in Q4 Mixed (strategic progress, near‑term reserve)
Change HealthcareTemporary funding assistance noted (Q2/Q3) Collections timing affected some quarterly MCI dynamics Normalizing

Management Commentary

  • “We finished the year on a strong note, producing full year adjusted operating income and adjusted EPS in the top half of our guidance range” — Javier Rodriguez, CEO .
  • “Enhanced collection performance and contracting propelled higher revenue per treatment growth, offsetting slower‑than‑expected rebound in treatment volume” — Javier Rodriguez .
  • “Our 2025 adjusted operating income guidance is $2.01 billion to $2.16 billion… assumes treatment volume growth is flat” — Joel Ackerman, CFO .
  • “We estimate the 2025 OI contribution [from oral phosphate binders] to be $0 to $50 million” — Javier Rodriguez .

Q&A Highlights

  • Volume assumptions: 2024 treatment growth +47 bps; 2025 midpoint flat driven by leap‑year reversal (~20 bps) and lost PD admits (~15–20 bps) .
  • Cost outlook: PCC/T midpoint +6.5% y/y (≈3.75% core inflation; ≈2.75% from orals), with labor and other costs both moving ~3.75% .
  • Mix/collections: Commercial mix at ~11% of treatments (expected small increase); exchanges ~3% vs 2% pre‑enhanced tax credits; annualization of collections improvements ($50M) .
  • Capital allocation: Maintain leverage 3–3.5x; repurchases continue after capital‑efficient growth/M&A; no specific buyback target .
  • International/IKC: $19M AR reserve in Brazil in Q4; IKC revenue timing pull‑forward ~$10–$15M from 2025 to 2024; IKC breakeven still targeted for 2026 .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at time of analysis due to SPGI request‑limit errors; therefore we cannot quantify beats/misses vs consensus at this time. We will update once S&P Global data access is restored.

Key Takeaways for Investors

  • Pricing/mix and revenue cycle improvements continue to offset tepid volume; RPT strength plus disciplined cost control support margin durability into 2025 .
  • 2025 guidance embeds conservative volume (flat) and explicit cost/mix impacts from orals; execution on cost containment (G&A ~+4%, D&A down $25–$30M) should aid EPS growth (midpoint +11%) .
  • Near‑term headwinds: lingering PD disruption impacts on 2025 volume, seasonal cost pressure, and Brazil AR reserve; these are manageable within the guidance ranges .
  • IKC progress remains on track for 2026 breakeven with 2024 better than plan due to timing; 2025 focus shifts to margin discipline over membership growth .
  • Capital deployment stays shareholder‑friendly: leverage ~3x and ongoing buybacks (2.3M in Q4; 0.8M post‑quarter), reinforcing EPS growth and support for valuation .
  • Watch catalysts: CMS oral bundling adoption patterns (mix/adherence), commercial/exchange mix drift, and international collections normalization; these drive RPT, PCC/T, and segment OI variability .