filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-looking statements
This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements that are forward-looking statements within the meaning of the federal securities laws and as such are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements could include, among other things, statements about our balance sheet and liquidity, our expenses, revenues, billings and collections, patient census, the impact of the recent cybersecurity incident experienced by the Company, including the ultimate duration and extent of the disruption to our network and operations, availability or cost of supplies, including without limitation the impact of evolving trade policies and tariffs and any reduction in clinical and other supplies due to any disruptions experienced by third party vendors, including with respect to our ability to provide home dialysis services, treatment volumes, mix expectation, such as the percentage or number of patients under commercial insurance, the effects on us and our operations of any interruptions in key functions performed by our third party service providers or suppliers, current macroeconomic, marketplace 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, capital allocation plans, expenses, cost saving initiatives, other strategic initiatives, use of contract labor, government and commercial payment rates, expectations related to value-based care (VBC), integrated kidney care (IKC), Medicare Advantage (MA) plan enrollment and our international operations, expectations regarding increased competition and marketplace changes, including those related to new or potential entrants in the dialysis and pre-dialysis marketplace and the potential impact of innovative technologies, drugs, or other treatments on the dialysis industry, and expectations regarding our share repurchase program. All statements in this report, 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" 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 report. 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:
*•*external conditions, including those related to general economic, marketplace and global health conditions, including without limitation, the impact of global events and political or governmental volatility; the impact of the domestic political environment and related developments on the current healthcare marketplace, our patients and on our business; the continuing impact of the COVID-19 pandemic on our financial condition and the chronic kidney disease (CKD) population and our patient population; supply chain challenges and disruptions, including without limitation with respect to certain key services, critical clinical supplies and equipment we obtain from third parties, and including any impacts on our supply chain and cost of supplies as a result of natural disasters or evolving trade policies, including tariffs; the potential impact of new or potential entrants in the dialysis and pre-dialysis marketplace and potential impact of innovative technologies, drugs, or other treatments on our patients and industry; elevated teammate turnover or labor costs; the impact of continued increased competition from dialysis providers and others; and our ability to respond to challenging U.S. and global economic and marketplace conditions, including, among other things, our ability to successfully identify cost saving opportunities;
*•*the concentration of profits generated by higher-paying commercial payor plans for which there is continued downward pressure on average realized payment rates; a reduction in the number or percentage of our patients under commercial plans, including, without limitation, as a result of continuing legislative efforts to restrict or prohibit the use and/or availability of charitable premium assistance, or as a result of payors implementing restrictive plan designs;
*•*risks arising from potential changes in or new laws, regulations or requirements applicable to us, including, without limitation, those related to trade policy, healthcare, privacy, antitrust matters, and acquisition, merger, joint venture or similar transactions and/or labor matters, and potential impacts of changes in interpretation or enforcement thereof or related litigation impacting, among other things, coverage or reimbursement rates for our services or the number of patients enrolled in or that select higher-paying commercial plans, and the risk that we make incorrect assumptions about how our patients will respond to any such developments;
*•*our ability to successfully implement our strategies with respect to IKC and VBC initiatives and home based dialysis in the desired time frame and in a complex, dynamic and highly regulated environment;
*•*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 MA benchmark structure;
*•*our reliance on significant suppliers, service providers and other third party vendors to provide key support to our business operations and enable our provision of services to patients, including, among others, suppliers of certain pharmaceuticals, administrative or other services or critical clinical products; and risks resulting from a closure, reduction or other disruption in the services or products provided to us by such suppliers, service providers and third party vendors;
*•*noncompliance by us or our business associates with any privacy or security laws or any security breach by us or a third party, such as the recent cybersecurity incident experienced by the Company, including, among other things, any such non-compliance or breach involving the misappropriation, loss or other unauthorized use or disclosure of confidential information;
*•*legal and compliance risks, such as compliance with complex, and at times, evolving government regulations and requirements, and with additional laws that may apply to our operations as we expand geographically or enter into new lines of business;
*•*our ability to attract, retain and motivate teammates, including key leadership personnel, and our ability to manage potential disruptions to our business and operations, including potential work stoppages, 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 and highly competitive labor market conditions, including due to the ongoing nationwide shortage of skilled clinical personnel, or other reasons;
*•*changes in pharmaceutical practice patterns, reimbursement and payment policies and processes, or pharmaceutical pricing, including with respect to oral phosphate binders, 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 that, among other things, may erode our patient base and impact reimbursement rates;
*•*our ability to complete and successfully integrate and operate acquisitions, mergers, dispositions, joint ventures or other strategic transactions on terms favorable to us or at all; and our ability to continue to successfully expand our operations and services in markets outside the United States, or to businesses or products outside of dialysis services;
*•*the variability of our cash flows, including, without limitation, any extended billing or collections cycles including, without limitation, due to defects or operational issues in our billing systems, the impact of the recent cybersecurity incident experienced by the Company or defects or operational issues in the billing systems or services of third parties on which we rely; 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;
*•*the effects on us or others of natural or other disasters, public health crises or severe adverse weather events such as hurricanes, earthquakes, fires or flooding;
*•*factors that may impact our ability to repurchase stock under our share repurchase program and the timing of any such stock repurchases, as well as any use by us of a considerable amount of available funds to repurchase stock;
*•*our goals and disclosures related to environmental, social and governance (ESG) matters, including, among other things, evolving regulatory requirements affecting ESG standards, measurements and reporting requirements; and
*•*the other risk factors, trends and uncertainties set forth in our Annual Report on Form 10-K for the year ended December 31, 2024 (2024 10-K), and the risks and uncertainties discussed in any subsequent reports that we file or furnish with the Securities and Exchange Commission (SEC) from time to time.
The following should be read in conjunction with our condensed consolidated financial statements.
Company Overview
Our principal business is to provide dialysis and related lab services to patients in the United States, which we refer to as our U.S. dialysis business. We also operate our U.S. integrated kidney care (IKC) business, our U.S. other ancillary services, and our international operations, which we collectively refer to as our ancillary services, as well as our corporate administrative support functions. Our U.S. dialysis business is a leading provider of kidney dialysis services in the U.S. for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD) or end stage kidney disease (ESKD).
External Conditions
Developments in external conditions, including those related to general economic, marketplace, environmental and global health conditions, have directly and indirectly impacted the Company and in the future could have a material adverse impact on our patients, teammates, physician partners, suppliers, business, operations, reputation, financial condition, results of operations, share price, cash flows and/or liquidity. Many of these external factors and conditions are interrelated, including, among other things, inflation, interest rate volatility and other economic conditions, labor market conditions, wage pressure, the increased mortality rates of our patients and other ESKD or CKD patients, supply chain challenges and the potential impact and application of innovative technologies, drugs or other treatments. Certain of these impacts could be further intensified by concurrent global events that have continued to drive sociopolitical, geopolitical and economic uncertainty; by severe weather events and other natural disasters; and by the impact of new policies implemented by the U.S. administration. For additional discussion of general economic, marketplace and global health conditions that could impact our business, see Part I Item 1. "Business" and Part I Item 1A. "Risk Factors" in our 2024 10-K.
In the first quarter of 2025, treatment per day volumes were approximately flat compared to the fourth quarter of 2024. We experienced a negative impact on revenue and treatment volume due to, among other things, a particularly severe flu season that drove continued elevated mortality rates in our patient population as well as missed treatments driven by severe weather events. New-to-dialysis admission rates were strong in the quarter, though these admission rates, treatment volumes, future revenues and non-acquired growth, among other things, could continue to be negatively impacted over time to the extent that the ESKD and CKD populations experience sustained elevated mortality levels. These mortality levels could be influenced by, among other things, the impact of infectious diseases on our patient population and the availability and use of vaccines, treatments and therapies as described in Part I Item 1A. "Risk Factors" of our 2024 10-K, and the magnitude of these cumulative impacts could have a material adverse impact on our results of operations, financial condition and cash flows.
Global economic conditions and political and regulatory developments, including, among other things, inflationary pressures and new U.S. administration policies have increased, and may continue to increase, our expenses, including, among others, staffing, labor, and supply costs. We expect certain of these increased staffing and labor costs to continue, due to, among other factors, the continuation of inflationary conditions and a challenging healthcare labor market. The cumulative impact of these increased staffing, labor, and supply costs and other expenses could be material. Our industry has also experienced increased union organizing activities. For example, union petitions have been filed in nine of our clinics in California and eight of these petitions are in different stages of the voting process and have been subject to legal challenges. For additional details on the risks related to rising labor costs and union organizing activities, see the discussion in Part I Item 1A. "Risk Factors" of our 2024 10-K under the headings, "Our business is labor intensive..." and "External conditions, including those related to general economic, marketplace and global health conditions..."
We believe that the aforementioned recent developments and general economic, marketplace and global health conditions will continue to impact the Company in the future. Their ultimate impact depends on future developments that are highly uncertain and difficult to predict.
Cybersecurity Incident
As previously disclosed in a Current Report on Form 8-K filed on April 14, 2025, on April 12, 2025, we became aware of a ransomware incident. Upon discovery, we activated our response protocols and implemented containment measures, including proactively disconnecting parts of our network. We are actively working to assess and remediate the incident with the assistance of third-party cybersecurity professionals and law enforcement. While the incident resulted in disruption to our operations, we have prioritized and focused our efforts on minimizing disruption to dialysis care, and these efforts have been successful to date. We have been able to restore most functions, but we cannot estimate the duration or extent of the disruption at this time.
We are aware of the exfiltration of certain data as part of the cybersecurity incident. We are in the process of validating the extent and nature of the files that were involved, including the identification of Personally Identifiable Information (PII) and/or Protected Health Information (PHI) involved. Based on our review, we will comply with applicable privacy notice
provisions and regulations. We have incurred, and expect to continue to incur, expenses in connection with the investigation and remediation activities related to this incident, including in connection with litigation that has been filed or may in the future be filed related to the incident, but at this time we are unable to predict the extent of other potential liabilities or consequences that may arise from this incident.
Based on information currently available and the investigation to date, we believe that this incident has not had, and is not expected to have, a material adverse impact on our ability to provide patient care or on our business, results of operations or financial condition. However, our investigation remains ongoing and as a result, we do not yet know the full impact of the cybersecurity incident, including how much of the financial impact will be covered by insurance.
For a discussion of the risks associated with privacy and security incidents and risks associated with our information systems or those of our third party service providers upon which we rely, see the discussions in Part I Item 1A. "Risk Factors" of our 2024 10-K under the headings, "Privacy and information security laws are complex…" and "Failing to effectively maintain, operate or upgrade our information systems or those of third-party service providers upon which we rely...". These risks include, among other things, business or other operational interruptions that may impact, among other things, our billing or clinical systems; the loss, compromise or corruption of data; systems outages; litigation or regulatory actions under privacy and security laws, all of which could have a material adverse effect on our business, results of operations, financial condition and cash flows, or materially harm our reputation.
Financial Results
The discussion below includes analysis of our financial condition and results of operations for the three months ended March 31, 2025 compared to the three months ended December 31, 2024, and the year-to-date periods for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.
Consolidated results of operations
The following tables summarize our revenues, operating income (loss) and adjusted operating income (loss) by line of business. See the discussion of our results for each line of business following the tables. When multiple drivers are identified in the following discussion of results, they are listed in order of magnitude:
| Three months ended | Q1 2025 vs. Q4 2024 | ||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| U.S. dialysis | $ | 2,823 | $ | 2,888 | $ | (65) | (2.3) | % | |||||||||||||||
| Other — Ancillary services | 415 | 430 | (15) | (3.5) | % | ||||||||||||||||||
| Elimination of intersegment revenues | (14) | (23) | 9 | 39.1 | % | ||||||||||||||||||
| Total consolidated revenues | $ | 3,224 | $ | 3,295 | $ | (71) | (2.2) | % | |||||||||||||||
| Operating income (loss): | |||||||||||||||||||||||
| U.S. dialysis | $ | 476 | $ | 496 | $ | (20) | (4.0) | % | |||||||||||||||
| Other — Ancillary services | (3) | 99 | (102) | (103.0) | % | ||||||||||||||||||
| Corporate administrative support | (34) | (29) | (5) | (17.2) | % | ||||||||||||||||||
| Operating income | $ | 439 | $ | 565 | $ | (126) | (22.3) | % | |||||||||||||||
| Adjusted operating income (loss)(1): | |||||||||||||||||||||||
| U.S. dialysis | $ | 476 | $ | 496 | $ | (20) | (4.0) | % | |||||||||||||||
| Other — Ancillary services | (3) | 25 | (28) | (112.0) | % | ||||||||||||||||||
| Corporate administrative support | (34) | (29) | (5) | (17.2) | % | ||||||||||||||||||
| Adjusted operating income | $ | 439 | $ | 491 | $ | (52) | (10.6) | % |
Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.
(1)For a reconciliation of adjusted operating income (loss) by reportable segment, see the "Reconciliations of Non-GAAP measures" section below.
| Three months ended | YTD Q1 2025 vs. YTD Q1 2024 | ||||||||||||||||||||||
| March 31, 2025 | March 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| U.S. dialysis | $ | 2,823 | $ | 2,756 | $ | 67 | 2.4 | % | |||||||||||||||
| Other — Ancillary services | 415 | 342 | 73 | 21.3 | % | ||||||||||||||||||
| Elimination of intersegment revenues | (14) | (27) | 13 | 48.1 | % | ||||||||||||||||||
| Total consolidated revenues | $ | 3,224 | $ | 3,071 | $ | 153 | 5.0 | % | |||||||||||||||
| Operating income (loss): | |||||||||||||||||||||||
| U.S. dialysis | $ | 476 | $ | 526 | $ | (50) | (9.5) | % | |||||||||||||||
| Other — Ancillary services | (3) | (12) | 9 | 75.0 | % | ||||||||||||||||||
| Corporate administrative support | (34) | (30) | (4) | (13.3) | % | ||||||||||||||||||
| Operating income | $ | 439 | $ | 484 | $ | (45) | (9.3) | % | |||||||||||||||
| Adjusted operating income (loss)(1): | |||||||||||||||||||||||
| U.S. dialysis | $ | 476 | $ | 491 | $ | (15) | (3.1) | % | |||||||||||||||
| Other — Ancillary services | (3) | (12) | 9 | 75.0 | % | ||||||||||||||||||
| Corporate administrative support | (34) | (30) | (4) | (13.3) | % | ||||||||||||||||||
| Adjusted operating income | $ | 439 | $ | 449 | $ | (10) | (2.2) | % |
Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.
(1)For a reconciliation of adjusted operating income (loss) by reportable segment, see the "Reconciliations of Non-GAAP measures" section below.
U.S. dialysis results of operations
Treatment volume:
| Three months ended | Q1 2025 vs. Q4 2024 | ||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | Amount | Percent | ||||||||||||||||||||
| Dialysis treatments | 7,040,519 | 7,278,605 | (238,086) | (3.3) | % | ||||||||||||||||||
| Average treatments per day | 91,793 | 91,786 | 7 | — | % | ||||||||||||||||||
| Treatment days | 76.7 | 79.3 | (2.6) | (3.3) | % | ||||||||||||||||||
| Normalized non-acquired treatment growth(1) | (0.6) | % | (0.3) | % |
Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.
(1)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.
| Three months ended | YTD Q1 2025 vs. YTD Q1 2024 | ||||||||||||||||||||||
| March 31, 2025 | March 31, 2024 | Amount | Percent | ||||||||||||||||||||
| Dialysis treatments | 7,040,519 | 7,151,512 | (110,993) | (1.6) | % | ||||||||||||||||||
| Average treatments per day | 91,793 | 92,159 | (366) | (0.4) | % | ||||||||||||||||||
| Treatment days | 76.7 | 77.6 | (0.9) | (1.2) | % | ||||||||||||||||||
Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.
Our U.S. dialysis operating revenues and expenses are directly driven by treatment volume. The decrease in our U.S. dialysis treatments for the first quarter of 2025 from the fourth quarter of 2024 was primarily driven by a decrease in treatment days. The decrease in our U.S. dialysis treatments for the three months ended March 31, 2025 from the three months ended March 31, 2024 was primarily driven by a decrease in treatment days, as well as decreased average treatments per day related to increased missed treatments impacted by storms and the seasonal flu as well as increased mortality related to a more severe flu season.
Revenues:
| Three months ended | Q1 2025 vs. Q4 2024 | ||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions, except per treatment data) | |||||||||||||||||||||||
| Total revenues | $ | 2,823 | $ | 2,888 | $ | (65) | (2.3) | % | |||||||||||||||
| Average patient service revenue per treatment | $ | 400.14 | $ | 395.87 | $ | 4.27 | 1.1 | % |
Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.
| Three months ended | YTD Q1 2025 vs. YTD Q1 2024 | ||||||||||||||||||||||
| March 31, 2025 | March 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions, except per treatment data) | |||||||||||||||||||||||
| Total revenues | $ | 2,823 | $ | 2,756 | $ | 67 | 2.4 | % | |||||||||||||||
| Average patient service revenue per treatment | $ | 400.14 | $ | 384.54 | $ | 15.60 | 4.1 | % |
Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.
U.S. dialysis average patient service revenue per treatment for the first quarter of 2025 compared to the fourth quarter of 2024 increased primarily due to the incorporation of phosphate binders into the ESRD Prospective Payment System (ESRD PPS) bundle, as further described below, Medicare base rate and other annual rate increases, favorable changes in mix, including seasonal increases in hospital inpatient dialysis treatments, partially offset by a seasonal decline from co-insurance and deductibles, and other normal fluctuations.
U.S. dialysis average patient service revenue per treatment for the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024 primarily driven by the incorporation of phosphate binders into the ESRD PPS bundle, as further described below, Medicare base rate and other annual rate increases, as well as an increase in hospital inpatient dialysis rates and favorable changes in mix, partially offset by other normal fluctuations.
On January 1, 2025, phosphate binders, a drug class taken orally by many ESKD patients to reduce absorption of dietary phosphate, were incorporated into the ESRD PPS bundled payment. Phosphate binders are not included in the ESRD PPS base rate at this time and are reimbursed through a Transitional Drug Add-on Payment Adjustment (TDAPA). During the TDAPA period, Medicare payment for phosphate binders are based on the average sales price increased by a fixed monthly amount of $36.41 for incremental operational costs. The TDAPA period is expected to continue for a period of at least two years.
Operating expenses and charges:
| Three months ended | Q1 2025 vs. Q4 2024 | ||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions, except per treatment data) | |||||||||||||||||||||||
| Patient care costs | $ | 1,913 | $ | 1,926 | $ | (13) | (0.7) | % | |||||||||||||||
| General and administrative | 283 | 316 | (33) | (10.4) | % | ||||||||||||||||||
| Depreciation and amortization | 157 | 157 | — | — | % | ||||||||||||||||||
| Equity investment income | (6) | (8) | 2 | 25.0 | % | ||||||||||||||||||
| Total operating expenses and charges | $ | 2,347 | $ | 2,392 | $ | (45) | (1.9) | % | |||||||||||||||
| Patient care costs per treatment | $ | 271.77 | $ | 264.60 | $ | 7.17 | 2.7 | % |
Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.
| Three months ended | YTD Q1 2025 vs. YTD Q1 2024 | ||||||||||||||||||||||
| March 31, 2025 | March 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions, except per treatment data) | |||||||||||||||||||||||
| Patient care costs | $ | 1,913 | $ | 1,825 | $ | 88 | 4.8 | % | |||||||||||||||
| General and administrative | 283 | 275 | 8 | 2.9 | % | ||||||||||||||||||
| Depreciation and amortization | 157 | 173 | (16) | (9.2) | % | ||||||||||||||||||
| Equity investment income | (6) | (6) | — | — | % | ||||||||||||||||||
| Gain on changes in ownership interests | — | (35) | 35 | 100.0 | % | ||||||||||||||||||
| Total operating expenses and charges | $ | 2,347 | $ | 2,230 | $ | 117 | 5.2 | % | |||||||||||||||
| Patient care costs per treatment | $ | 271.77 | $ | 255.13 | $ | 16.64 | 6.5 | % |
Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.
Patient care costs. U.S. dialysis patient care costs per treatment for the first quarter of 2025 increased from the fourth quarter of 2024 primarily due to increases in pharmaceutical costs, principally due to the administration of phosphate binders, as described above, compensation expenses, including increased wage rates and seasonal increases in payroll taxes, as well as increased medical supplies expense, a gain recognized in the fourth quarter of 2024, and increases in contributions to charitable organizations. These increases were partially offset by decreases in health benefit expense, center closure costs, insurance costs, hurricane-related expenses incurred in the fourth quarter of 2024, routine maintenance costs and other direct operating expenses associated with our dialysis centers.
U.S. dialysis patient care costs per treatment for the three months ended March 31, 2025 increased from the three months ended March 31, 2024 primarily due to increases in pharmaceutical costs, principally due to the administration of phosphate binders, as described above, and compensation expenses, including increased wage rate, as well as increases in medical supplies expense, other direct operating expenses associated with our dialysis centers and health benefit expense. Other drivers of this change include increases in contributions to charitable organizations, center closure costs and travel costs.
General and administrative expenses. U.S. dialysis general and administrative expenses in the first quarter of 2025 decreased from the fourth quarter of 2024 primarily due to a decrease in professional fees and a gain recognized in the first quarter of 2025. Other drivers of this change include decreases in contract salaries, center closure costs, travel costs, health benefit expenses and advocacy costs. These decreases were partially offset by increased compensation expenses, including increased wage rates and seasonal increases in payroll taxes.
U.S. dialysis general and administrative expenses for the three months ended March 31, 2025 increased from the three months ended March 31, 2024 due to increased IT-related expenses, compensation expenses, including increased wage rate and headcount, as well as increased long-term incentive compensation expense. These increases were partially offset by a gain recognized in the first quarter of 2025, and decreases in center closure costs and advocacy costs.
Depreciation and amortization. Depreciation and amortization expense is directly impacted by the number of our dialysis centers and the information technology that we develop and acquire as well as changes in useful lives of assets. U.S. dialysis depreciation and amortization expenses in the first quarter of 2025 were relatively flat compared to the fourth quarter of 2024.
U.S. dialysis depreciation and amortization expenses for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 decreased primarily due to decreases in depreciation related to corporate IT projects and accelerated depreciation related to center closures.
Equity investment income. U.S. dialysis equity investment income for the first quarter of 2025 compared to the fourth quarter of 2024 decreased due to decreased profitability at certain nonconsolidated dialysis partnerships. Equity investment income for the three months ended March 31, 2025 was flat compared to the three months ended March 31, 2024.
Gain on changes in ownership interests. During the first quarter of 2024, we acquired a controlling interest in a previously nonconsolidated dialysis partnership for which we recognized a non-cash gain of $35.1 million on our prior investment upon consolidation.
Operating income and adjusted operating income:
| Three months ended | Q1 2025 vs. Q4 2024 | ||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Operating income | $ | 476 | $ | 496 | $ | (20) | (4.0) | % | |||||||||||||||
| Three months ended | YTD Q1 2025 vs. YTD Q1 2024 | ||||||||||||||||||||||
| March 31, 2025 | March 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Operating income | $ | 476 | $ | 526 | $ | (50) | (9.5) | % | |||||||||||||||
| Adjusted operating income(1) | $ | 476 | $ | 491 | $ | (15) | (3.1) | % |
(1)For a reconciliation of adjusted operating income by reportable segment, see the "Reconciliations of Non-GAAP measures" section below.
U.S. dialysis operating income for the first quarter of 2025 compared to the fourth quarter of 2024 was negatively impacted by a decrease in dialysis treatments, as described above, increased pharmaceutical costs, compensation expense, medical supplies expense and contributions to charitable organizations. Operating income was positively impacted by decreased health benefit expenses, increased average patient service revenue per treatment, as described above, as well as decreases in other direct operating expenses associated with our dialysis centers, center closure costs and insurance costs. Operating income was also positively impacted by decreased routine maintenance costs, professional fees, hurricane-related expenses incurred in the fourth quarter of 2024, contract salaries and advocacy costs.
U.S. dialysis operating income for the three months ended March 31, 2024 was positively impacted by a gain on a change in business ownership interests as described above. U.S. dialysis operating income and adjusted operating income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was negatively impacted by a decrease in dialysis treatments, as described above, and increases in pharmaceutical costs, compensation expenses, IT-related costs, health benefit expense and medical supplies expense. Operating income was also negatively impacted by increased long-term incentive compensation expense and travel costs. Operating income was positively impacted by increased average patient service revenue per treatment, as described above, decreased depreciation related to corporate IT projects, a gain recognized in the first quarter of 2025 and decreased center closure costs.
Other—Ancillary services
Our other operations include ancillary services that are primarily aligned with our core business of providing dialysis services to our network of patients. As of March 31, 2025, these consisted principally of our U.S. IKC business, certain U.S. other ancillary businesses (including our clinical research programs, transplant software business, and venture investment group), and our international operations. In the first quarter of 2025, we reallocated the revenues and costs associated with an internal software product from the U.S. IKC business to the U.S. other ancillary business. Prior periods have been recast to reflect this change.
As of March 31, 2025, DaVita IKC provided integrated care and disease management services to approximately 62,100 patients in risk-based integrated care arrangements and to an additional 9,300 patients in other integrated care arrangements. We also expect to add additional service offerings to our business and pursue additional strategic initiatives in the future as circumstances warrant, which could include, among other things, healthcare services not related to kidney disease.
For a discussion of the risks related to IKC and our ancillary services, see the discussion in the risk factors in Part I Item 1A. "Risk Factors" of our 2024 10-K under the headings, "The U.S. integrated kidney care, U.S. other ancillary services and international operations that we operate or invest in now or in the future..." and "If we are not able to successfully implement our strategy with respect to our integrated kidney care and value-based care initiatives..."
As of March 31, 2025, our international dialysis operations provided dialysis and administrative services through a total of 512 outpatient dialysis centers located in 13 countries outside of the United States.
Ancillary services results of operations
| Three months ended | Q1 2025 vs. Q4 2024 | ||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| U.S. IKC | $ | 105 | $ | 165 | $ | (60) | (36.4) | % | |||||||||||||||
| U.S. other ancillary | 7 | 7 | — | — | % | ||||||||||||||||||
| International | 302 | 258 | 44 | 17.1 | % | ||||||||||||||||||
| Total ancillary services revenues | $ | 415 | $ | 430 | $ | (15) | (3.5) | % | |||||||||||||||
| Operating (loss) income: | |||||||||||||||||||||||
| U.S. IKC | $ | (29) | $ | 30 | $ | (59) | (196.7) | % | |||||||||||||||
| U.S. other ancillary | (4) | (7) | 3 | 42.9 | % | ||||||||||||||||||
| International(1) | 30 | 76 | (46) | (60.5) | % | ||||||||||||||||||
| Total ancillary services operating (loss) income | $ | (3) | $ | 99 | $ | (102) | (103.0) | % | |||||||||||||||
| Adjusted operating (loss) income(2): | |||||||||||||||||||||||
| U.S. IKC | $ | (29) | $ | 30 | $ | (59) | (196.7) | % | |||||||||||||||
| U.S. other ancillary | (4) | (7) | 3 | 42.9 | % | ||||||||||||||||||
| International(1) | 30 | 1 | 29 | 2,900.0 | % | ||||||||||||||||||
| Total ancillary services adjusted operating income (loss) | $ | (3) | $ | 25 | $ | (28) | (112.0) | % |
Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.
(1)The reported operating income and adjusted operating income for the three months ended December 31, 2024 includes foreign currency gains embedded in equity method income recognized from our Asia Pacific (APAC) joint venture, which was consolidated in the fourth quarter of 2024, of approximately $2.4 million.
(2)For a reconciliation of adjusted operating (loss) income by reportable segment, see the “Reconciliations of Non-GAAP measures” section below.
| Three months ended | YTD Q1 2025 vs. YTD Q1 2024 | ||||||||||||||||||||||
| March 31, 2025 | March 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| U.S. IKC | $ | 105 | $ | 115 | $ | (10) | (8.7) | % | |||||||||||||||
| U.S. other ancillary | 7 | 7 | — | — | % | ||||||||||||||||||
| International | 302 | 219 | 83 | 37.9 | % | ||||||||||||||||||
| Total ancillary services revenues | $ | 415 | $ | 342 | $ | 73 | 21.3 | % | |||||||||||||||
| Operating (loss) income: | |||||||||||||||||||||||
| U.S. IKC | $ | (29) | $ | (21) | $ | (8) | (38.1) | % | |||||||||||||||
| U.S. other ancillary | (4) | (6) | 2 | 33.3 | % | ||||||||||||||||||
| International(1) | 30 | 16 | 14 | 87.5 | % | ||||||||||||||||||
| Total ancillary services operating (loss) income | $ | (3) | $ | (12) | $ | 9 | 75.0 | % | |||||||||||||||
Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.
(1)The reported operating income and adjusted operating income for the three months ended March 31, 2024 includes foreign currency gains embedded in equity method income recognized from our APAC joint venture, which was consolidated in the fourth quarter of 2024, of approximately $1.5 million.
Revenues
IKC revenues for the first quarter of 2025 decreased compared to the fourth quarter of 2024 due to a net decrease in shared savings, partially offset by an increase in revenues from our special needs plans. U.S. other ancillary revenues for the first quarter of 2025 remained relatively flat compared to the fourth quarter of 2024. International revenues for the first quarter of 2025 increased compared to the fourth quarter of 2024 due to acquired treatment growth, charges in the fourth quarter of 2024 for balances deemed uncollectible and average reimbursement rate increases in certain countries.
IKC revenues for the three months ended March 31, 2025 decreased compared to the three months ended March 31, 2024 due to the divestiture of our physician services business in 2024 and a net decrease in shared savings. U.S. other ancillary services revenues for the three months ended March 31, 2025 remained relatively flat compared to the three months ended March 31, 2024. Our international revenues for the three months ended March 31, 2025 increased from the three months ended March 31, 2024 due to acquired and non-acquired treatment growth, partially offset by the negative impact of fluctuations in foreign currency exchange rates in certain countries.
Items impacting operating income
Gain on changes in ownership interests. During the fourth quarter of 2024, we acquired a controlling interest in the previously nonconsolidated partnership known as our APAC joint venture, for which we recognized a non-cash gain of $74.3 million on our prior investment upon consolidation.
Operating (loss) income and adjusted operating (loss) income
IKC operating loss for the first quarter of 2025 compared to IKC operating income for the fourth quarter of 2024 was driven by a net decrease in shared savings, partially offset by increased revenues and decreased medical costs related to our special needs plans, as well as decreased compensation expenses. U.S. other ancillary services operating loss for the first quarter of 2025 compared to the fourth quarter of 2024 decreased due to a reduction of the earn-out obligations related to our transplant software business. International operating income was impacted by a gain on a change in business ownership interests recognized in the fourth quarter of 2024, as described above. International operating income and adjusted operating income for the first quarter of 2025 compared to the fourth quarter of 2024 were impacted by increased revenues, as described above, partially offset by acquisition-related operating costs and decreased equity income resulting from fluctuations in foreign currency at our APAC joint venture, which was consolidated in the fourth quarter of 2024.
IKC operating loss for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 increased, primarily due to a net decrease in shared savings, partially offset by the divestiture of our physician services business in 2024. Other U.S. ancillary services operating loss for the three months ended March 31, 2025 decreased compared to the three months ended March 31, 2024 primarily due to a reduction of the earn-out obligations in our transplant software business.
International operating income for the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024 primarily driven by increases in revenue, as described above, and the positive impact of fluctuations in foreign currency exchange rates on operating costs in certain countries, partially offset by acquisition-related operating costs and decreased equity income resulting from fluctuations in foreign currency at our APAC joint venture, which was consolidated in the fourth quarter of 2024, as described above.
Corporate administrative support
| Three months ended | Q1 2025 vs. Q4 2024 | ||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Corporate administrative support | $ | (34) | $ | (29) | $ | (5) | (17.2) | % | |||||||||||||||
| Three months ended | YTD Q1 2025 vs. YTD Q1 2024 | ||||||||||||||||||||||
| March 31, 2025 | March 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Corporate administrative support | $ | (34) | $ | (30) | $ | (4) | (13.3) | % | |||||||||||||||
Corporate administrative support expenses for the first quarter of 2025 compared to the fourth quarter of 2024 and for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 increased primarily due to increased long-term incentive compensation expense and professional fees.
Corporate-level charges
| Three months ended | Q1 2025 vs. Q4 2024 | ||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Debt expense | $ | 135 | $ | 139 | $ | (4) | (2.9) | % | |||||||||||||||
| Weighted average effective interest rate(1) | 5.60 | % | 5.75 | % | (0.15) | % | |||||||||||||||||
| Other loss, net | $ | 18 | $ | 13 | $ | 5 | 38.5 | % | |||||||||||||||
| Effective income tax rate | 18.9 | % | 15.6 | % | 3.3 | % | |||||||||||||||||
| Effective income tax rate attributable to DaVita Inc.(2) | 24.9 | % | 19.9 | % | 5.0 | % | |||||||||||||||||
| Net income attributable to noncontrolling interests | $ | 69 | $ | 90 | $ | (21) | (23.3) | % |
(1)Represents our overall weighted average effective interest rate on all debt, including the effect of interest rate caps and amortization of debt discount, premium and deferred financing charges.
(2)For a reconciliation of our effective income tax rate attributable to DaVita Inc., see the "Reconciliations of Non-GAAP measures" section below.
| Three months ended | YTD Q1 2025 vs. YTD Q1 2024 | ||||||||||||||||||||||
| March 31, 2025 | March 31, 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Debt expense | $ | 135 | $ | 99 | $ | 36 | 36.4 | % | |||||||||||||||
| Weighted average effective interest rate(1) | 5.60 | % | 4.51 | % | 1.09 | % | |||||||||||||||||
| Other loss, net | $ | 18 | $ | 13 | $ | 5 | 38.5 | % | |||||||||||||||
| Effective income tax rate | 18.9 | % | 17.7 | % | 1.2 | % | |||||||||||||||||
| Effective income tax rate attributable to DaVita Inc.(2) | 24.9 | % | 21.5 | % | 3.4 | % | |||||||||||||||||
| Net income attributable to noncontrolling interests | $ | 69 | $ | 66 | $ | 3 | 4.5 | % |
(1)Represents our overall weighted average effective interest rate on all debt, including the effect of interest rate caps and amortization of debt discount, premium and deferred financing charges.
(2)For a reconciliation of our effective income tax rate attributable to DaVita Inc., see the "Reconciliations of Non-GAAP measures" section below.
Debt expense
Debt expense for the first quarter of 2025 compared to the fourth quarter of 2024 decreased primarily due to a decrease in our weighted average effective interest rate, partially offset by an increase in our weighted average outstanding credit facility balance. Debt expense for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 increased primarily due to an increase in our weighted average effective interest rate principally related to the expiration of our 2019 interest rate cap agreements on June 30, 2024, which had lower rates than our currently effective interest rate caps. This change was also driven by an increase in our long-term debt balance primarily related to the issuance in third quarter 2024 of 6.875% senior notes due 2032.
Other loss, net
Other loss for the first quarter of 2025 increased compared to the fourth quarter of 2024 primarily due to a decrease in interest income and increased net losses on investments, partially offset by decreased equity investment losses at Mozarc Medical Holding LLC (Mozarc). Other loss for the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024, primarily driven by increased net losses on investments, partially offset by decreased equity investment losses at Mozarc and increased interest income.
Effective income tax rate
The effective income tax rate and the effective income tax rate attributable to DaVita Inc. increased for the first quarter of 2025 compared to the fourth quarter of 2024 primarily due to a tax benefit recognized in the fourth quarter for non-taxable non-cash gains related to previously nonconsolidated businesses and benefits recognized in the fourth quarter in connection with the release of reserves that expired under the statute of limitations.
The effective income tax rate and the effective income tax rate attributable to DaVita Inc. for the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024 primarily due to a tax benefit recognized in the first quarter of 2024 related to a nontaxable non-cash gain on changes in ownership interests and a decrease in benefits recognized in the first quarter of 2025 related to stock-based compensation.
Net income attributable to noncontrolling interests
The decrease in net income attributable to noncontrolling interests for the first quarter of 2025 from the fourth quarter of 2024 was due to decreased profitability at certain U.S. dialysis partnerships. The increase in net income attributable to noncontrolling interests for the three months ended March 31, 2025 from the three months ended March 31, 2024 was due to increased profitability at certain U.S. dialysis partnerships.
U.S. dialysis accounts receivable
Our U.S. dialysis accounts receivable balances at March 31, 2025 and December 31, 2024 were $1.722 billion and $1.615 billion, respectively, representing approximately 55 days and 52 days of revenue outstanding (DSO), respectively. The increase in DSO is primarily due to timing of collections. Our DSO calculation is based on the current quarter’s average revenues per day. There were no significant changes from the fourth quarter of 2024 to the first quarter of 2025 in the carrying amount of accounts receivable outstanding over one year old.
Liquidity and capital resources
The following table summarizes our major sources and uses of cash, cash equivalents and restricted cash:
| Three months ended March 31, | YTD Q1 2025 vs. YTD Q1 2024 | ||||||||||||||||||||||
| 2025 | 2024 | Amount | Percent | ||||||||||||||||||||
| (dollars in millions and shares in thousands) | |||||||||||||||||||||||
| Net cash provided by operating activities: | |||||||||||||||||||||||
| Net income | $ | 232 | $ | 306 | $ | (74) | (24.2) | % | |||||||||||||||
| Non-cash items in net income | 238 | 199 | 39 | 19.6 | % | ||||||||||||||||||
| Other working capital changes | (293) | (634) | 341 | 53.8 | % | ||||||||||||||||||
| Other | 3 | (6) | 9 | 150.0 | % | ||||||||||||||||||
| $ | 180 | $ | (135) | $ | 315 | 233.3 | % | ||||||||||||||||
| Net cash used in investing activities: | |||||||||||||||||||||||
| Maintenance capital expenditures(1) | $ | (95) | $ | (85) | $ | (10) | (11.8) | % | |||||||||||||||
| Development capital expenditures(2) | (48) | (36) | (12) | (33.3) | % | ||||||||||||||||||
| Acquisition expenditures | (10) | (105) | 95 | 90.5 | % | ||||||||||||||||||
| Proceeds from sale of self-developed properties | 9 | 3 | 6 | 200.0 | % | ||||||||||||||||||
| Other | (18) | 8 | (26) | (325.0) | % | ||||||||||||||||||
| $ | (162) | $ | (215) | $ | 53 | 24.7 | % | ||||||||||||||||
| Net cash used in financing activities: | |||||||||||||||||||||||
| Debt issuances (payments), net | $ | 287 | $ | 736 | $ | (449) | (61.0) | % | |||||||||||||||
| Deferred and debt-related financing costs | (6) | — | (6) | (100.0) | % | ||||||||||||||||||
| Distributions to noncontrolling interests | (93) | (77) | (16) | (20.8) | % | ||||||||||||||||||
| Contributions from noncontrolling interests | 2 | 4 | (2) | (50.0) | % | ||||||||||||||||||
| Stock award exercises and other share issuances | (25) | (86) | 61 | 70.9 | % | ||||||||||||||||||
| Share repurchases | (542) | (251) | (291) | (115.9) | % | ||||||||||||||||||
| Other | (5) | (5) | — | — | % | ||||||||||||||||||
| $ | (383) | $ | 319 | $ | (702) | (220.1) | % | ||||||||||||||||
| Total number of shares repurchased | 3,660 | 2,119 | 1,541 | 72.7 | % | ||||||||||||||||||
| Free cash flow(3) | $ | (45) | $ | (327) | $ | 282 | 86.2 | % |
Certain columns or rows may not sum due to the presentation of rounded numbers.
(1)Maintenance capital expenditures represent capital expenditures to maintain the productive capacity of the business and include those made for investments in information technology, dialysis center renovations, capital asset replacements, and any other capital expenditures that are not development or acquisition expenditures.
(2)Development capital expenditures principally represent capital expenditures (other than acquisition expenditures) made to expand the productive capacity of the business and include those for new U.S. and international dialysis center developments, dialysis center expansions and relocations, and new or expanded contracted hospital operations.
(3)For a reconciliation of our free cash flow, see the "Reconciliations of Non-GAAP measures" section below.
Consolidated cash flows
Consolidated cash flows from operating activities during the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024. The increase was principally due to increased collections as compared to the first quarter of 2024 which were adversely impacted by the cybersecurity breach at Change Healthcare (CHC), a subsidiary of UnitedHealth Group, that temporarily suspended claims processing activity at CHC. The increase was partially offset by a decrease in operating results and increases in cash interest paid for the three months ended March 31, 2025.
Free cash flow during the three months ended March 31, 2025 increased as compared to the three months ended March 31, 2024 primarily due to an increase in net cash provided by operating activities, as described above, partially offset by increased distributions to noncontrolling interests and increases in capital expenditures.
Significant sources of cash during the period included net draws on our revolving line of credit of $425 million. Significant uses of cash during the three months ended March 31, 2025 included the repayment of $93 million in interest-free funding made available by UnitedHealth Group and its affiliates following the cybersecurity breach that affected CHC during the first quarter of 2024, regularly scheduled principal payments under our senior secured credit facilities totaling approximately $30 million on our Term Loan A-1 and $4 million on Term Loan B-1, and additional required payments under other debt arrangements. In addition, during the three months ended March 31, 2025 we used cash to repurchase 3.7 million shares of our common stock.
By comparison, the same period in 2024 included net draws on our revolving line of credit of $765 million. Significant uses of cash in that period included regularly scheduled principal payments under our senior secured credit facilities totaling approximately $8 million on Term Loan A-1 and $7 million on Term Loan B-1, as well as additional required payments under other debt arrangements.
Dialysis center footprint
The table below shows the footprint of our dialysis operations by number of dialysis centers owned or operated:
| U.S. | International | ||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended March 31, | Three months ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Number of centers operated at beginning of period | 2,657 | 2,675 | 509 | 367 | |||||||||||||||||||||||||||||||||||||||||||
| Acquired centers | 1 | 9 | 1 | 67 | |||||||||||||||||||||||||||||||||||||||||||
| Developed centers | 6 | 2 | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Net change in non-owned managed or administered centers(1) | 1 | (8) | 4 | (3) | |||||||||||||||||||||||||||||||||||||||||||
| Sold and closed centers(2) | (3) | (8) | (2) | — | |||||||||||||||||||||||||||||||||||||||||||
| Closed centers(3) | (1) | (5) | — | (4) | |||||||||||||||||||||||||||||||||||||||||||
| Number of centers operated at end of period | 2,661 | 2,665 | 512 | 427 |
(1)Represents the change in the number of dialysis centers which we manage or provide administrative services to but in which we own a noncontrolling equity interest or which are wholly-owned by third parties, including our APAC joint venture centers which were consolidated in the fourth quarter of 2024.
(2)Represents dialysis centers that were sold and/or closed for which the majority of patients were not retained.
(3)Represents dialysis centers that were closed for which the majority of patients were retained and transferred to one of our other existing outpatient dialysis centers.
Share repurchases
The following table summarizes our common stock repurchases during the three months ended March 31, 2025 and March 31, 2024:
| Three months ended March 31, 2025 | Three months ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased (in thousands) | Amount paid (in millions)****(1) | Average price paid per share**(2)** | Shares repurchased (in thousands) | Amount paid (in millions)****(1) | Average price paid per share**(2)** | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total repurchases(3): | 3,660 | $ | 550 | $ | 148.94 | 2,119 | $ | 240 | $ | 112.76 |
(1)Includes commissions and the 1% excise tax imposed on certain share repurchases by the Inflation Reduction Act of 2022. The excise tax is recorded as part of the cost basis of treasury shares repurchased and, as such, is included in stockholders’ equity.
(2)Excludes commissions and the excise tax described above.
(3)Includes share repurchases from Berkshire Hathaway Inc. pursuant to our previously disclosed share repurchase agreement. See further information regarding these share repurchases in Note 8 to the condensed consolidated financial statements.
Available liquidity
As of March 31, 2025, we had $1,075 million available and $425 million drawn on our $1.5 billion revolving line of credit under our senior secured credit facilities. Credit available under this revolving line of credit is reduced by the amount of any letters of credit outstanding thereunder, of which there were none as of March 31, 2025. We separately had approximately $173 million in letters of credit outstanding under a separate bilateral secured letter of credit facility.
See Note 6 to the condensed consolidated financial statements for components of our long-term debt and their interest rates.
We believe that our cash flow from operations and other sources of liquidity, including from amounts available under our senior secured credit facilities and our access to the capital markets, will be sufficient to fund our scheduled debt service under the terms of our debt agreements and other obligations for the foreseeable future, including the next 12 months. From time to time, depending on market conditions, our capital requirements and the availability of financing, among other things, we may seek to refinance our existing debt and may incur additional indebtedness. Our primary recurrent sources of liquidity are cash from operations and cash from borrowings, which are subject to general, economic, financial, competitive, regulatory and other factors that are beyond our control, as described in Part I Item 1A. "Risk Factors" of our 2024 10-K*.*
Reconciliations of Non-GAAP measures
The following tables provide reconciliations of adjusted operating income (loss) to operating income (loss) as presented on a U.S. generally accepted accounting principles (GAAP) basis for our U.S. dialysis reportable segment as well as for our U.S. IKC business, our U.S. other ancillary services, our international business, and for our total ancillary services which combines them and is disclosed as our other segments category, in addition to our corporate administrative support.
In connection with a comment letter from the Securities and Exchange Commission Staff, beginning in the second quarter of 2024, we have updated the presentation of our non-GAAP measures to no longer exclude center closure costs for all periods presented. To facilitate comparisons, the non-GAAP measures presented for prior periods also have been conformed to the presentation of the non-GAAP measures for the current period.
These non-GAAP or "adjusted" measures are presented because management believes these measures are useful adjuncts to, but not alternatives for, our GAAP results. Specifically, management uses adjusted operating income (loss) 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 this non-GAAP measure is also 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. We also believe this presentation enhances a user's understanding of our normal operating income by excluding certain items which we do not believe are indicative of our ordinary results of operations.
In addition, our effective income tax rate on income attributable to DaVita Inc. excludes noncontrolling owners' income, which primarily relates to non-tax paying entities. We believe this adjusted effective income tax rate is 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, our free cash flow represents net cash provided by operating activities less distributions to noncontrolling interests, development capital expenditures, and maintenance capital expenditures; 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 under GAAP and should not be considered in isolation from, nor as substitutes for, their most comparable GAAP measures.
| Three months ended March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||
| U.S. dialysis | Ancillary services | Corporate administration | Consolidated | ||||||||||||||||||||||||||||||||||||||
| U.S. IKC | U.S. Other | International | Total | ||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | 476 | $ | (29) | $ | (4) | $ | 30 | $ | (3) | $ | (34) | $ | 439 | |||||||||||||||||||||||||||
| Adjusted operating income (loss) | $ | 476 | $ | (29) | $ | (4) | $ | 30 | $ | (3) | $ | (34) | $ | 439 |
| Three months ended December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
| U.S. dialysis | Ancillary services | Corporate administration | Consolidated | ||||||||||||||||||||||||||||||||||||||
| U.S. IKC | U.S. Other | International | Total | ||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | 496 | $ | 30 | $ | (7) | $ | 76 | $ | 99 | $ | (29) | $ | 565 | |||||||||||||||||||||||||||
| Gain on changes in ownership interest(1) | — | — | — | (74) | (74) | — | (74) | ||||||||||||||||||||||||||||||||||
| Adjusted operating income (loss) | $ | 496 | $ | 30 | $ | (7) | $ | 1 | $ | 25 | $ | (29) | $ | 491 |
| Three months ended March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
| U.S. dialysis | Ancillary services | Corporate administration | Consolidated | ||||||||||||||||||||||||||||||||||||||
| U.S. IKC | U.S. Other | International | Total | ||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | 526 | $ | (21) | $ | (6) | $ | 16 | $ | (12) | $ | (30) | $ | 484 | |||||||||||||||||||||||||||
| Gain on changes in ownership interest(1) | (35) | — | — | — | — | — | (35) | ||||||||||||||||||||||||||||||||||
| Adjusted operating income (loss)(2) | $ | 491 | $ | (21) | $ | (6) | $ | 16 | $ | (12) | $ | (30) | $ | 449 |
Certain columns or rows in the above tables may not sum due to the presentation of rounded numbers.
(1)Represents non-cash gains recognized on the acquisitions of controlling financial interests in previously nonconsolidated partnerships in 2024. See additional discussion above under the heading "Gain on changes in ownership interests" within "U.S. dialysis results of operations" and "Ancillary services results of operations" for the $35 million and $74 million, respectively. These gains were to mark our prior investments in these businesses to fair value before consolidation and to recognize related foreign currency gains from translation adjustments previously deferred in accumulated other comprehensive loss. Gains on changes in business ownership interests do not represent a normal and recurring requirement of operating our business or generating revenues and may obscure analysis of underlying trends and financial performance.
(2)In connection with the conclusion of a comment letter from the Securities and Exchange Commission Staff in July 2024, beginning in the second quarter 2024, we have updated the presentation of our non-GAAP measures to no longer exclude center closure costs for all periods presented. To facilitate comparisons, the non-GAAP measures presented for prior periods also have been conformed to the presentation of the non-GAAP measures for the current period.
| Three months ended | ||||||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||||||||||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||||||||
| Income before income taxes | $ | 286 | $ | 414 | $ | 372 | ||||||||||||||||||||
| Less: Noncontrolling owners' income primarily attributable to non-tax paying entities | (69) | (90) | (66) | |||||||||||||||||||||||
| Income before income taxes attributable to DaVita Inc. | $ | 217 | $ | 324 | $ | 305 | ||||||||||||||||||||
| Income tax expense | $ | 54 | $ | 64 | $ | 66 | ||||||||||||||||||||
| Less: Income tax attributable to noncontrolling interests | — | — | — | |||||||||||||||||||||||
| Income tax expense attributable to DaVita Inc. | $ | 54 | $ | 64 | $ | 66 | ||||||||||||||||||||
| Effective income tax rate on income attributable to DaVita Inc. | 24.9 | % | 19.9 | % | 21.5 | % |
Certain columns or rows may not sum or recalculate due to the presentation of rounded numbers.
| Three months ended | |||||||||||
| March 31, 2025 | March 31, 2024 | ||||||||||
| (dollars in millions) | |||||||||||
| Net cash provided by operating activities | $ | 180 | $ | (135) | |||||||
| Adjustments to reconcile net cash provided by operating activities to free cash flow: | |||||||||||
| Distributions to noncontrolling interests | (93) | (77) | |||||||||
| Contributions from noncontrolling interests | 2 | 4 | |||||||||
| Maintenance capital expenditures | (95) | (85) | |||||||||
| Development capital expenditures | (48) | (36) | |||||||||
| Proceeds from sale of self-developed properties | 9 | 3 | |||||||||
| Free cash flow | $ | (45) | $ | (327) |
Certain columns or rows may not sum due to the presentation of rounded numbers.
Off-balance sheet arrangements and aggregate contractual obligations
In addition to the debt obligations and operating lease liabilities reflected on our balance sheet, we have commitments associated with letters of credit, as well as certain working capital funding obligations associated with our equity investments in nonconsolidated dialysis ventures that we manage and some that we manage which are wholly-owned by third parties. For additional information see Note 7 to the condensed consolidated financial statements.
We also have potential obligations to purchase the noncontrolling interests held by third parties in many of our majority-owned dialysis partnerships and other nonconsolidated entities. These obligations are in the form of put provisions that are exercisable at the third-party owners’ discretion within specified periods as outlined in each specific put provision. For additional information on these obligations and how we measure and report them, see Note 11 to the condensed consolidated financial statements included in this report and Notes 16 and 23 to the consolidated financial statements included in our 2024 10-K.
For information on the maturities and other terms of our long-term debt, see Note 6 to the condensed consolidated financial statements.
As of March 31, 2025, we have outstanding letters of credit in the aggregate amount of approximately $173 million under a bilateral secured letter of credit facility separate from our senior secured credit facilities.
As of March 31, 2025, we have outstanding purchase agreements with various suppliers to purchase set amounts of dialysis equipment, parts, pharmaceuticals and supplies. If we fail to meet the minimum purchase commitments under these contracts during any year, we are required to pay the difference to the supplier, as described further in Note 16 to the Company's consolidated financial statements included in our 2024 10-K.
On March 5, 2024, we entered into four separate purchase agreements with Fresenius Medical Care AG and its affiliates to acquire their dialysis service operations in Chile, Ecuador, Colombia and Brazil. The Chile, Ecuador and Colombia transactions closed during 2024. The Brazil transaction is expected to close mid-year 2025 and remains subject to customary closing conditions and regulatory approval. The expected cash payment for this remaining transaction is approximately $100 million, subject to certain customary adjustments.
New Accounting Standards
See discussion of new accounting standards in Note 13 to the condensed consolidated financial statements.
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