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Analysis

DaVita Releases Q2 Earnings as 'Dutch Auction' Commences

By Jack O'Brien  
   July 22, 2019

The dialysis treatment company issued a modified tender offer of up to $1.2 billion in common stock.

Denver-based DaVita Inc. released its preliminary Q2 earnings report Monday morning as the company commenced with its modified 'Dutch Auction' which will run through August 16.

The dialysis treatment company is offering up $1.2 billion worth of common stock at a price range between $53.50 and $61.50 per share. This action allows shareholders to determine the quantity of stocks they seek to tender and at what price in DaVita's range they will pay for them.

DaVita's Q2 earnings were released in coordination with the company's ongoing bank financing process, the proceeds of which will be used to repay outstanding credit amounts, fund the tender offer, and "add cash to the balance sheet." 

The results also mark the first financial metrics released since DaVita announced the promotion of DaVita Kidney Care CEO Javier J. Rodriguez as the company's new CEO effective June 1.

Related: New DaVita CEO Announced as Thiry Transitions to Executive Chairman  

According to the earnings release, the company expects to post an operating income between $460 million and $465 million for Q2, including $40 million attributable to calcimimetics, a treatment for end stage renal disease.

DaVita anticipates reporting non-acquired treatment growth of 2.1%, revenue per treatment of $350, and a decrease in the cost per treatment by $9. 

In May, a study by the University of California, Los Angeles found private health plans paid four times more for dialysis treatments, $1041 per session, than government programs, $248 per session.

DaVita is planning to update its year-end financial guidance, with an adjusted operating income between $1.64 billion and $1.70 billion, above the previous range of $1.54 billion to $1.64 billion.

Related: Net Income Falls $30M for DaVita During Difficult Q1  

Other than the executive leadership change, DaVita's Q2 also featured favorable news coming out of Washington, D.C.

On June 20, UnitedHealth received approval from the Federal Trade Commission for the long-delayed $4.3 billion merger of DaVita Medical Group with its Optum subsidiary. 

Three weeks later, President Donald Trump signed an executive order to launch a new kidney care initiative aimed at lowering the cost of dialysis treatment, which raised the company's stock.

Similarly, news of the 'Dutch auction' boosted DaVita stock more than 5% in early morning trading.  

ADDITIONAL Davita Q2 EARNINGS REPORT HIGHLIGHTS:  

  • DaVita repurchased nearly $350 million in shares between its last earnings call on May 7 and July 17.
  • Subsequently, the company terminated its previous repurchase agreement and implemented a $2 billion repurchase agreement with no expiration date.
  • DaVita will host its Q2 investor call on August 1 after markets close.

For complete financial information, review DaVita's filing with the Securities and Exchange Commission.

Related: HHS Names KidneyX Redesign Phase 1 Winners  

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: Photo credit: Photo credit: St. Joseph, Missouri / United States of America - March 26 2019: Davita Kidney Care in downtown St. Joseph. - Image / Editorial credit: APN Photography / Shutterstock.com


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