DaVita (DVA) TD Cowen 46th Annual Health Care Conference summary

Financial performance and guidance

• Projected 2026 operating income (OI) growth slightly above the low end of long-term targets, driven by 1.5% growth from U.S. dialysis and 1% each from international and IKC segments.

• Revenue growth is expected to come from revenue per treatment, with flat volume and steady margins; cost control remains a focus.

• Free cash flow is guided to be flat year-over-year, with variability attributed to working capital swings rather than fundamental business changes.

• Enhanced premium tax credit (APTC) expiration is expected to create $40 million pressure in 2024, $70 million in 2025, and $10 million in 2028, mainly impacting new patient commercial mix.

• OI growth is expected to remain in the 3%-7% range, with double-digit EPS growth and disciplined capital deployment.

Operational initiatives and cost management

• Margin maintenance is prioritized even without volume growth, leveraging cost controls, revenue operations, and evolving opportunities in labor, pharma, and G&A.

• New IT systems for labor scheduling and ongoing investments in IT are expected to help flatten G&A growth and potentially turn it into a margin tailwind.

• Clinical programs targeting mortality and volume growth include flu vaccination, GLP-1 utilization, and middle molecule management, with major impacts expected by 2029.

• Most clinical program investments are IT-focused rather than capital-intensive, and require collaboration with physicians and patients.

• Capacity utilization is expected to improve through volume growth rather than clinic closures, with margin leverage greatest when filling existing shifts.

Market dynamics and risk factors

• Commercial mix remains stable, with exchange growth as the main driver; no significant changes expected outside of APTC impacts.

• GLP-1s are expected to have a neutral impact on admissions and a modest headwind to commercial mix, estimated at 3 basis points per year.

• Supply chain risks are being addressed through enhanced business continuity planning following recent disruptions.

• International operations are diverse, with clinical improvements in every country and capital spending focused on organic growth and select acquisitions.

• Legal and regulatory issues such as AB 290 and Marietta SCOTUS remain unresolved but have not caused recent disruptions.