Q3 2025 Earnings Call: Contradictions Emerge on Volume Growth, Mortality, and Commercial Mix

Date of Call: October 29, 2025

Financials Results

• EPS: $2.51 adjusted earnings per share, consistent with internal expectations

Guidance:

• Reaffirmed full-year adjusted operating income range of $2.035B–$2.135B and adjusted EPS $10.35–$11.15, with narrowed ranges.
• CFO also stated a full-year midpoint for adjusted operating income of $2.85B and adj EPS midpoint $10.75 (reaffirmation by management).
• Expect Q4 ~+$60M sequential operating income uplift driven by better day mix, higher RPT (vaccines and resolution of aged claims) and IKC timing; Q4 treatment volume growth ~+20–30 bps.
• No formal 2026 guidance; monitoring volume, payer mix (including premium tax credit impacts) and IKC timing; formal guidance expected in February.

Business Commentary:

* Financial Performance: - DaVita reported adjusted operating income of $517 million for Q3 2025, with adjusted earnings per share at $2.51. - The results were consistent with internal expectations despite a 1.5% year-over-year decline in U.S. treatments per day. - The decline in treatments was attributed to negative impacts from a severe flu season, lost admissions opportunities due to Hurricane Helene, and the cyber incident.

• Revenue per Treatment and Payer Mix:
• Revenue per treatment increased approximately $6 compared to the second quarter, driven primarily by rate increases and higher revenue from phosphate binders.

• However, this improvement was offset by a slight decline in payer mix, which contributed to the RPT growth being at the low end of the original 4.5% to 5.5% guidance.

• Capital Allocation:

• DaVita repurchased approximately 10 million shares worth around $1.5 billion year-to-date through the earnings call.

• The repurchase strategy is part of a disciplined capital allocation approach aimed at returning shareholder value while maintaining a strong balance sheet.

• Investment in Technology and Infrastructure:

• DaVita is investing in enhancing its clinical platform, replacing scheduling systems, and adopting AI solutions across its platform.
• These investments are expected to drive long-term cost efficiencies and improve patient care, despite causing higher G&A growth in the short term.

Sentiment Analysis:

Overall Tone: Neutral

• Management said Q3 results were "in line with our expectations" and reaffirmed full‑year guidance while noting 1.5% Y/Y treatment-volume decline and discrete 2025 headwinds (hurricane, severe flu, cyber). They emphasized continued investment in IT/AI and confidence in achieving full‑year goals but highlighted several 2026 swing factors (volume, payer mix, IKC timing).

Q&A:

• Question from Kevin Fischbeck (BofA Securities): You called out discrete items (hurricane, cyber, flu) — how would volumes have looked ex those items? Also, is there color on mortality improvement and how quickly that could affect volumes?
  Response: Management: The three discrete events cost ~75–100 bps to 2025 volume (census and missed treatments); mortality improvement is a multi‑year, steady process addressed via clinical protocol changes and will take time to affect volume.

• Question from Andrew Mok (Barclays): Is the 75–100 bps of one‑offs a reasonable starting point for 2026 growth, and will technology/infrastructure investments meaningfully impact treatment growth?
  Response: Management: Translating the one‑offs implies a ~50–75 bp structural improvement in 2026 versus 2025; tech investments (risk‑stratification to reduce hospitalizations and automation in revenue operations) could support volume and collections over time but the direct volume impact is uncertain.

• Question from Albert Rice (UBS): Q3 operating income was about $50M below consensus — is this a day‑count/timing issue? Also, what's the earnings/volume impact from the cyber incident and the Mozarc charge going forward?
  Response: Management: The variance versus Street reflects timing (Q4 needs ~+$60M OI from day‑mix, IKC timing and higher RPT/claims resolution); cyber effects were larger in prior quarter and are waning (now mainly a volume effect); the Mozarc charge is reflected outside adjusted OI and will largely eliminate that pretax drag next year.

• Question from Pito Chickering (Deutsche Bank): Can you quantify new patient starts, mortality trends in Q3 versus H1, any IOTA impact, timing of IKC funds, and what would drive low vs high end of Q4 guidance (what treatment growth to model)?
  Response: Management: No IOTA impact; Q3 volume largely as expected but missed treatments ran a bit higher; admissions within normal post‑COVID band and mortality movement tied to flu with no durable trend; IKC timing is lumpy (some PY‑24 revenue moved into Q2); Q4 should show modest positive Y/Y treatment growth (~+20–30 bps) with RPT and IKC timing driving range.

• Question from Justin Lake (Wolfe Research): Is the sequential EPS improvement roughly $10 or $8, and how much is non‑recurring collections versus recurring?
  Response: Management: Expected sequential EPS improvement is about $8; a majority (>50%) of that is driven by RPT improvements (they called out ~$50M of RPT benefit, roughly ~$7 of RPT impact), implying a meaningful portion is collection/timing‑related.

• Question from Ryan Langston (TD Cowen): What was commercial treatment mix in the quarter and any Q4 assumption for mix improvement? Also, status of revenue‑cycle initiatives?
  Response: Management: Commercial mix ~11%, down ~15 bps Q2→Q3 and not expected to be a material Q4 driver; revenue‑cycle work is ongoing (AI/automation/collections) with steady multi‑year opportunity — incremental improvements (even 10–20 bps) translate to meaningful operating income.

Contradiction Point 1

Volume Growth Impact

It involves differing explanations of the impact of certain factors such as flu and cyber incidents on volume growth, which are crucial for understanding the company's performance and growth trajectory.

How would volumes have been this year excluding the three factors (hurricane, cyber, flu) you mentioned? Are there any updates on improving mortality or the impact on MA enrollment in 2026? - Kevin Fischbeck (BofA Securities, Research Division)

2025Q3: Joel Ackerman mentioned a 75 to 100 basis point headwind on '25 volume from those 3 factors. - Joel Ackerman(CFO)

How much of the 50-basis-point full-year revision was due to Q1 flu and the cyberattack? And what was the flu's impact on the quarter? - Andrew Mok (Barclays)

2025Q1: More than half of the 50 basis points is due to flu-related census decline. - Javier Rodriguez(CEO)

Contradiction Point 2

Mortality Trends

It involves differing explanations of mortality trends, which are critical for understanding the company's operational efficiency and patient outcomes.

What were new patient starts in Q3 and IOTA's impact on treatment growth? How are mortality trends in Q3? - Pito Chickering (Deutsche Bank AG, Research Division)

2025Q3: Mortality was consistent with typical ranges, with no significant trends noted. - Joel Ackerman(CFO)

Can you discuss the changes in drug uptake and mix during the quarter, and any additional details? - Andrew Mok (Barclays)

2025Q1: Q1 was a strong admit quarter, supporting normal variability rather than a trend. Mortality was elevated due to flu. - Javier Rodriguez(CEO)

Contradiction Point 3

Commercial Treatment Mix

It involves differing explanations of the commercial treatment mix, which is a key indicator of the company's market position and revenue streams.

Can you provide the commercial treatment mix for the quarter and expected changes in payer mix for Q4? - Ryan Langston (TD Cowen, Research Division)

2025Q3: Commercial treatment mix was around 11%, down 15 bps from Q2 to Q3. - Joel Ackerman(CFO)

Can you provide details on the commercial mix for the quarter and the exchange growth in Q1? - Andrew Mok (Barclays)

2025Q1: Commercial mix remained flat in the low 11%. - Joel Ackerman(CFO)

Contradiction Point 4

Volume Growth Outlook

It involves differing expectations for volume growth, which significantly impacts revenue projections and investor expectations.

How would volumes have developed this year excluding hurricane, cyber, and flu impacts? Any updates on mortality improvements or MA enrollment impact in 2026? - Kevin Fischbeck(BofA Securities, Research Division)

2025Q3: Joel Ackerman mentioned a 75 to 100 basis point headwind on '25 volume from those 3 factors. - Joel Ackerman(CFO)

For '25 volume outlook, is there a range tied to your OI range? - Joanna Gajuk(Bank of America)

2024Q4: The midpoint for '25 is flat. - Joel Ackerman(CFO)