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i thank everyone for joining us today it's my pleasure to be sorry uh it's my pleasure to be uh hosting the meeting with davida uh we have uh joel ackerman who's the cfo of the company as well as nicholas and who's from president of capital markets and investor relations um so we're just gonna jump right in if you you're good with that all right excellent um so i know your favorite topic is volumes so maybe we should start with volumes sounds good um so So I guess Q1, you know, incremental treatment guidance was raised from flat to kind of up, you know, call it 25-50 basis points. What, you know, what drove the increase there, and how confident are you in the durability of that improvement? Sure. So first, good afternoon, everyone, and thanks for having us, Kevin. So we really divided the increase in the guide into two buckets. First is increased census for Xenius clinic closures. They have announced the closing of about 100 clinics, and we expect to get our fair share of the patients that they don't retain. So that would be about half the volume increase. The second is just what we observed during Q1. Our treatment volume came in about 20 basis points better than expected, largely as a result of census being ahead of plan. And we expect that to continue. you know, you can look across all the different inputs and tweak any one of them. The one I'd highlight that really came in above plan was mortality. As you know mortality has been elevated since COVID relative to pre-COVID levels and it's nice to see it starting to come back down and we would hope it will continue to come down given all the great clinical work our team is doing. How do you separate the improvement in mortality relative to like the light flu season, which I think would also kind of lift the mortality side of things? Yeah, so first, you're absolutely right. Relative to last year, flu was easier and less of a headwind on mortality. I would remind everyone, it was still relative to the last 15 years, it Was still quite a tough flu season, and we think we've gotten pretty good at modeling the impact flu has on mortality, so we can look through that, not just in Q1, but over the last few quarters, and believe we see some signal in what is a relatively noisy number. And then, I guess, like, Fresenius was closing sites through kind of the quarter. I think they're still maybe even doing it into this quarter. So is the benefit they're going to be more back-end loaded or ramp more? And then how do we think about next year as the starting point? Like is it the half that we should kind of think about as the starting point for next year? Or is it, you know, this ramp up? So we saw almost no benefit in Q1. They did start closing clinics in the quarter, but it was very much back- end loaded. So almost none of the volume performance in Q1 above plan was related to that. What they have announced is that they expect the clinics to be largely closed by the end of Q2. So our expectation, if you wanted to kind of decide from when to annualize this, it would probably be the end of April or the endof May. So we would expect to get most of the benefit this year, but there'd be a bit of a tailwind again next year. All right. And then when you think about the core growth, like is this the improvement of mortality? Is that something you expect to build as the year goes on as well? Or, you know, can you pinpoint anything that drove the improvement in mortality if it's not flu? Yeah, so I'd start with the history of the industry. And if you go back to a time frame call it 2000 to 2015, when the industry was growing 3%, 4%, 5% a year, I think there's a misperception that the growth then was because of increasing incidence of diabetes and obesity and all that. And that really is not the major driver of volume growth in those periods. The major driver growth, about two-thirds of the growth, was declining mortality in the industry. So the industry investing in better clinical outcomes to drive better mortality is really the history of volume growth. And our belief is we are at the beginning of seeing that reinvigorate. And it's about new medications. It's about higher flu vaccination rates. It's About time on therapy and other clinical interventions. middle molecule clearance is coming. And we think that's largely what's going to drive the mortality improvement. Timing is hard to predict. There is certainly a delay in some or all of these interventions between when you successfully drive the metric and when you start seeing it in mortality. But we called out, we would expect to get back to the two plus percent growth rate by 2029. What that curve looks like between now and then is hard to predict. And then I think that when people see weak volumes, they think GLP-1s and how that impacts things. I mean, can you talk a little bit about how you're seeing the impact there? I think in the quarter, you said something along the lines of that the mortality improved, but the admissions were down. Was there anything, is that just noise or was there anything to that side of the equation? we haven't called out any trends with admissions. It is a noisy number, and Q1 was noisy. In terms of GLP-1s and SGLT2 inhibitors, and they're two sides of the same coin, what we called out when when this growth in the GLP-1 started was that absolutely these will delay progression for CKD4 patients who are taking these drugs. We think there's a lot of clinical evidence to demonstrate that. There's equally good clinical evidence to say CK4 patients will have lower mortality. So most CKD4 patients will unfortunately pass away before they're ever incident to ESRD because of their diabetes or their heart disease or some other issue. And so we see these two dynamics, slower progression offset by lower mortality as roughly evening each other out. We've re-looked at the data since we initially rolled out that hypothesis in late 2023, and our clinicians continue to believe that's the right way to think about it, with maybe a slight positive that our patients, ESRD patients who are taking GLP-1s, might benefit from lower mortality when they're on dialysis, so that would be a bit of a tailwind. It's probably too early to really be seeing that effect, though, yet. What percentage of your people are taking GLP-1s now? Roughly high single digits of our patients are on GLP ones, right. Is it something that everyone could be or should be taking, or is it? No, it is not something everyone should be taking. Again, I'm not a clinician, so I'm maybe getting a little out over my skis here. But generally, you'd think of patients who are who are diabetic as being the ones. Roughly 60% of our patients are diabetic, and about 40% are on ESRD because they're diabetic. So that might be a way to think about GLP-1s. GLP 1s, remember, though, have been available to these patients for a lot longer than they've been available just for weight loss. And then when you, I know you said you weren't quite ready to talk about the progression back to 2% by 2029, but let's see if I can pigeonhole you into something. I mean, but is there a reason, is there reason? You shouldn't warn me you're going to do that. No, no, no. But is there any reason why it wouldn't be more ratable? Like, or like, what would the, what would the reason why would happen sooner versus the reason Why it would happen later? You know, I'd start with the middle molecule clearance, which are either new machines or new dialyzers. They're not widely available yet, but that will grow over time. I think there's reasonable evidence, and if you look at the CONVINCE trial, you can see it there, that it takes about 18 months from when this clinical intervention starts, when the better clinical care starts until you really see the curve separate and the better mortality show up. So there is a delay between the implementation of better clinical care and when you will start seeing it in mortality. That delay is different depending on the intervention. It might be a lot quicker, for example, for higher vaccination rates, but it's that reason and some of the the questions around what that path will look like that we would expect we'll have to wait a bit till we get back to the two plus percent. Maybe talk about the middle molecule then. So Fresenius has a new device. They're very excited about it, but they're kind of doing it to themselves first. They are selling it externally. But how do you think about your potential adoption or the rate of your adoption of that? Start there. So I'd start with, we're very excited about this new modality. Everything I know says it's going to be great for patients and extend their lifetime, and they feel better. It's not just about living longer. The reports are that patients who've had middle molecule clearance, they're less tired and they just feel better, and that could have other benefits. It might mean patients miss fewer treatments, for example. There are two paths forward here. There's the new machine, high-volume HDF, and that's the machine you're referencing. There also dialyzers that could potentially deliver a similar benefit of middle molecule clearance. We are watching the data carefully to see what these different paths have to offer. Clinically, there are other considerations as well. There are supply chain considerations. There're operational considerations as well, so we're testing both out, and we're excited to see where this goes and the benefits it can deliver to our patients. Yeah, so I think, you know, they're talking about a 2030 kind of full penetration to themselves? If this other option of the dialyzers potentially delivering similar efficacy, is that something that could happen much sooner? When could you start to roll that out? Well, it depends on a whole bunch of things. It depends on the FDA. It depends on supply chain and the manufacturer's ability to create it as well. So I think it's a little early to speculate what sort of speed that could happen. And then can you talk a little bit about, it always seems like there's something new from the reimbursement side of things like phosphate binders or calcium emetics or what have you. So I guess maybe just start with phosphate bindings. How much is that going to be adding to your kind of OI this year and how should we think about it into next year? And then is there some next drug that you're kind of looking at and saying this has an opportunity to be meaningful? Yeah, so last year we called out 50 million of contribution from OI. We expect this year to be something similar to that. In terms of 2027, it is too early to tell. There are a lot of dynamics yet to play out, largely from CMS, about how they're going to think about binders next year and when they fully bring them into the bundle and how they fully bring them in to the bundle I would expect we'll get a lot more clarity on that when the preliminary rule comes out typically at the end of June or early July so TBD on that one in terms of other drugs coming down the pipeline what I would observe is DaVita has I believe a core competency in terms of how we manage drugs to deliver great care to our patients, deliver great savings to the systems, but also deliver OI to our shareholders. And I think you saw that with calcium emetics. You're seeing it with binders now. You can see it with how we're able to manage down the cost of EPO over time. And I think this will continue to deliver. There's no specific drug I would call out, but I do think as we think about how we continue to maintain our margins and deliver cost savings for our payers in the system, I think there will be more pharma opportunities going forward. And then like the RPT number in the quarter was pretty strong, 4%. I guess it's a way to break that out. Why it would only be 1% or 2% kind of for the year? Sure. So RPT is a source of a lot variability from quarter to quarter and we've called that out we called it out in q4 called it out and q3 about q4 and it came out as we expected q1 benefited from positive variability this year it also suffered from negative variability in q1 of 2025 so those two things combine to partially explain the high growth in q 1. there are two other dynamics that you have to to think about in terms of progression for the year. One is enhanced premium tax credits. And as we've called out about a $40 million headwind from lower commercial mix as patients leave the exchanges, that's a number that will grow over the course of the year, so that's one reason you would expect lower RPT growth later in the year The second would be binders. We think RPT contribution from binders will come down over the course of the year. No impact to OI because we think costs will come Down as well. But that would be the other thing. Also, I said about variability Q4 at very positive variability in 2025. And we called that out. So you would expect Q4 of 26 to have a very tough comp as well. And is the binder impact, is that just a natural result of the way that the rates are based off of ASP on a lag? Or is it because, I guess, there's like a new generic that's coming out this year? Like, is That influencing that or is that separate? Yeah, so you're right about both. It's more the former than the latter. There is a new generic generic Erixia, which has been approved, but there isn't much supply of it. So it's really not having an impact on ASP. And then just to talk about the rate updates that you're getting, because I guess the Medicare rate is, you know, 2%. So, you Know, why is it only one to two overall? Yeah, so you're, you're right, 2% is, is probably a more typical average rate increase we would get, the big headwind is on the binders, that the decline in ASP in the bindERS is about a 40 basis point headwind for us in the year, which is why we're at 1 to 2 rather than 1.5 to 2.5. And I would remind you, as I said before, that has no impact on OI because cost per treatment is coming down uh with that yeah so then the commercial side is in that two percent range as well why why aren't you able to get something more than that i ask our payer partnerships team that every day um look it is it is um full contact sport as our former ceo used to say we would love to get better rates uh i think we're comfortable forecasting two percent and that's kind of where we are. And although, you know, the market has been very much focused on volumes, you guys have been pretty confident in your ability to do your three to seven percent OI growth, even if volumes are a little bit lighter. Like, can you talk a little about the cost side of the equation? What gives you confidence in being able to manage costs down to deliver that? Yeah. So, look, it's been a strength of DaVita's for a very long time. We are a provider with a national footprint at scale. And there's no doubt that gives some advantages on the cost side. And I would say we benefit from just staying ahead of the curve. We have been investing in IT for many, many years now, even through some of the more challenging years in 22 and 23. We did not take our eye off the ball in investing in the future. And the best example is CWOW, which is our electronic medical records system. And what you see in our P&L is true this year and has been true in the past and I think will be true inthe future. We continue to invest in IT in our future, and you see the benefits of that in other parts of the P&O. You see it in cost per treatment. You see in revenue per treatment through better revenue operations. And we think that will continue. So I guess if you think about, say, 50 basis points of volume growth, how do we get from 50 basis points of line growth plus 1% or 2% pricing to 3% to 7% OI? Yeah. So I'd start with a point of OI growth from international and a point OI of growth from IKC or value-based care business. They won't be exactly a point every year. But as you think of the theoretical model, I think you can count on, call it 20 million or so of OI from each of those. And then, you know, you're dependent on, you know, 1 to 5% from the U.S. dialysis business. To get to 3%, you need, call it two points of RPT growth and a point of volume growth and constant margins. There are other equations you can get there. We got there with zero volume growth by tweaking some of the other components of our trilogy but there's no doubt it gets easier as volume growth comes back so how durable is the one percent from each like i mean i guess internationally you can keep investing potentially theoretically the value-based care site probably has a upper limit to where that can be how many more years do we have of that Yeah, so international is just inherently a higher, we're in higher growth markets than in the US. And we've got more room to run on margin improvement. So I think the model there is relatively easy to see. On IKC, we've had a lot of strength in delivering shared savings. And that continues to improve. What I think you will see over time is growth in lives under management and dollars under management and some fixed cost leverage, which doesn't lead me to worry that somehow this 20 million a year model is going to fall apart in IKC anytime soon. I think we've got a few years of visibility to continue to deliver that. And then why is international so interesting? It seems like Fresenius, obviously some of the clinics you bought was from them, that they were getting out of some markets, you were getting into those markets. So what makes it interesting to you and why were you able to make that work for you? I'm reluctant to speculate about why Fresenus chose to sell those markets, I think, based on what they've said publicly, they were solving for lower leverage and higher margins. neither of those were issues that we were solving for we were solving for return on capital and OI growth and so we're quite happy with the markets we bought from them it's been enough time right now where I feel like those were good investments for us we expect higher returns internationally because of the risk and we are getting those so I like the international markets We're cautious. We're hesitant when we get into new markets to make sure they meet our criteria. And the thing that I would emphasize that I think I and Robert Lang, the head of international, are all very proud of is in every single market that we enter, we demonstrably improve the quality of the clinical care. Great. And then maybe just pivoting back to the ACA for a minute. um you guys talked about that benefit or the impact of that growing you know it's bigger to 27. um I guess it's more about the new incidents into direct uh into dialysis not having coverage so is there is there a way to think about how that will progress for the rest of the year is that kind of like a growing number each quarter and what are you seeing now I don't know we're now in May so it seems like with the effectuation rates maybe you'd start to have some color on how that's Yeah, it's still early to tell on exactly how it's trending, but what you called out is exactly right. The way we expect this to really play out would be our newly incident patients, you said won't have coverage, just to be clear. We would expect they'll have Medicare coverage, but they won'thave commercial coverage, and we get a lower rate on Medicare, as you know. So that's the impact and we would expect that to continue to build over the rest of the year and into 2027 and the big question is what has happened to CKD4 patients and how many of them have retained coverage on the exchanges despite the higher premiums because that ultimately will dictate what the incident commercial mix rate is for us and to be clear you're basically assuming that exchanges go back to 2019 as a percentage total or is it different yes well yeah we're we're using our numbers we are expecting that roughly one percent of our patients were on the exchanges as a result of enhanced premium tax credits and we would expect that number to to go away Over multiple years. Over the three-year period. Correct. Okay. And then one of the things that everyone seems to be really excited about is AI. Can you talk a little bit about what you guys see AI as, what the opportunity is for you, and is there anything that maybe the market gets too excited about, gets over their skis on? I'm not going to touch the second part of that question. Look, AI is something that we are absolutely leaning in on. We're investing a lot in it, both in the infrastructure that is ultimately needed to deliver AI, and that's both having clean data and having good systems, because I'd say in general, our AI benefits will come through our core systems. For example, the AI benefits I would expect to see in accounting would largely come through Our Oracle system rather than some standalone AI system. And I would expect similar things for a lot of our technology. So we're excited about it. We, you know, we are moving, I think, at a judicious pace, recognizing there's a lot of infrastructure that needs to be put in so we can really take advantage of AI. But we would expect benefits in lower software development costs, better revenue operations, labor productivity is an area where we're excited about, call centers. So in line with what I think most people are looking at initially, then ultimately opportunities in clinical care. And you give little sense of timing of when we should start to see some of these things? The fact that ultimately clinical care makes it seem like it's a farther out thing, but is there a way to think about timing? Well, I think each of these things has many, many sub-projects, and there are areas of clinical care that are, you know, dosing being one of them that you could attribute benefits to AI already today. I would say, using a CFO's lens, I would expect AI to be a net cost to us at least for 26 and probably much of 27 before the benefits start outweighing the expense. And I guess when you think about the best ROI, what's the best ROI of the things that you kind of mentioned? The best, I mean, a lot of them are quite inexpensive to implement. And so I'm not sure ROI is the right lens. The question would be more about what's the total dollar savings you could you could benefit from? And I would say right now, the largest ones would be software development, productivity and revenue operations. And those aren't necessarily about the percentage savings. Just two of those things, revenue operations and labor productivity in particular are just very big items on our P&L. And then when we look at the P&R, you know, probably the cost number that jumps out the most is that G&A has been up a couple hundred basis points over the last several years. On the call, Javier was kind of saying you didn't really care where the cost per treatment came from, as long as you keep in that two, two and a half percent range. I mean, is there, is the outside that looks high, but is that not the case, or is there an opportunity to bring that G&A number down? I think the point Javier was making is that if we can invest $20 million in G&E to drive $40 million of better revenue collections or $40 billion of lower labor costs, we don't care if G&H goes up for that reason. We're investing in gna and the returns are excellent and we will continue to do that and i think most of our ai and technology costs wind up in g a and they generally result in savings that are in another line or benefits that are another line in the p l so we're comfortable with with gna going up as long as we're getting the right return for those investments. DaVita for many many years that certainly preceded my time as CFO has been praised for its cost management. I think it's well deserved. We bring the same lens to G&A but we are comfortable with G&a growing as long as we're getting the value for it. And then when we think about capital deployment I think was one of the of the things that probably wasn't well understood by the market when you guys came out with Q4 results and just kind of showed how much cash you have and how much share repo you can be doing. You guys have invested in some things along the way, whether it was, you know, device JV and then home health investment. Like, how should we think about share repo versus some of these ancillary things? And is there a view that there should be another leg to the stool or how should we think about that? Yeah. So, yeah. Share repurchases are the last thing on the list. When we don't have other appropriate good uses of capital where we're investing in our future at good risk-adjusted returns, we'll buy back stock. I love finding other uses like, you know, the Mozart, the joint venture you mentioned, or Alara, the home health investment. So we will continue to do those. I don't think of either of these as another leg to the stool. These are supportive of our dialysis and kidney care strategy. In terms of are we out looking to put billions of dollars of work to diversify, the answer is no, we are not. Maybe just the last question on that. How do you think about leverage? You know, obviously you have, you're growing an OI now. So do we think about leverages, something that you could plan to use for a share repo or use it for share repo? Yeah. So we don't, we think about it differently. We think about our comfort is with our leverage in the three to three and a half turns range. And if EBITDA is growing and it has been growing, to stay in three to three and a half times, we have to take on more debt. And we don't do it because we want to buy back more shares. We do it Because of a fundamental view on how we're going to fund the business between debt and equity. And to keep in that three to three and half times we borrow more money. We don't generally like to have a lot of cash sitting around on the balance sheet. So if we can't find other uses for it, we buy back stock. So it's not that we're taking on debt to buy backstock, we're taken on debt, to keep our leverage levels where we want them to be. And as as we think about what are we going to do with that cash, buying back stock happens to be the the option we we end up needing. That's all we have time for. Thank you very much. Thank You, Kevin.