Slide 1: Capital Markets Day May 25, 2017
Capital Markets Day May 25, 2017 ©2017 DaVita Inc. All rights reserved. 1
Slide 2: ©2017 DaVita Inc. All rights reserved.
The company and its representatives may from time to time make written and oral forward‐looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), including statements in this presentation, filings with the Securities and Exchange Commission (“SEC”), rep
Slide 3: Agenda: Introduction, U.S. Kidney Care, DaVita Medical Group, International, Enterprise
DaVita Medical Introduction U.S. Kidney Care Group DaVita Enterprise International Summary ©2017 DaVita Inc. All rights reserved. 3
Slide 4: Introduction
Introduction ©2017 DaVita Inc. All rights reserved. 4
Slide 5: Agenda
DaVita Medical Introduction U.S. Kidney Care Group DaVita Enterprise International Summary ©2017 DaVita Inc. All rights reserved. 5
Slide 6: U.S. Kidney Care
U.S. Kidney Care • Industry overview • Company overview • Long‐term optionality • Outlook ©2017 DaVita Inc. All rights reserved. 6
Slide 7: Improved industry mortality rate
Improved industry mortality rate 20% 18 16 14 12 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Note: Mortality rate calculated as mortalities divided by beginning‐year prevalence plus incident patients. Source: USRDS. Most recently available data is as of 2014. ©2017 DaVita Inc. All rights reser
Slide 8: Stable historical industry growth
Stable historical industry growth US dialysis patients (000s) 2000‐2014 CAGR: 3.8% Source: USRDS 2016 Annual Data Report ©2017 DaVita Inc. All rights reserved. 8
Slide 9: Consolidated industry
Consolidated industry 100% 80 60 40 FMC 20 ROM DaVita 0 '05 Current 1 Source: ESRD Networks. 1. Represents latest available data as of 2015. ©2017 DaVita Inc. All rights reserved. 9
Slide 10: Private payors subsidize government
Private payors subsidize government Treatments Revenue Profit ©2017 DaVita Inc. All rights reserved. 10
Slide 11: Medicare reimbursement outlook
Medicare reimbursement outlook • Forecasted: – 2017: market basket minus 1.25% – 2018: market basket minus 1.00% – 2019+: normal market basket • Swing: Possible policy changes ©2017 DaVita Inc. All rights reserved. 11
Slide 12: Dynamic pharma landscape
Dynamic pharma landscape Anemia Management Calcimimetics •Diversifying •IV entry •Innovations •Likely bundled in ’18 •Potential oral generics ©2017 DaVita Inc. All rights reserved. 12
Slide 13: U.S. Kidney Care: Company overview
U.S. Kidney Care • Industry overview • Company overview • Long‐term optionality • Outlook ©2017 DaVita Inc. All rights reserved. 13
Slide 14: What remains consistent?
What remains consistent? • Clinical excellence • Commercial payor landscape • Stable growth • Capital‐efficient treatment growth ©2017 DaVita Inc. All rights reserved. 14
Slide 15: What is more dynamic?
What is more dynamic? • Healthcare policy • Pharma landscape (anemia, calcimimetics) • Integrated care ©2017 DaVita Inc. All rights reserved. 15
Slide 16: Typical dialysis center
Typical dialysis center • 80 patients • 17 teammates – 5 nurses – 8 techs – 4 other • Medical Director • 18 machines & chairs • $4M revenue ©2017 DaVita Inc. All rights reserved. 16
Slide 17: Kidney Care at a glance
Kidney Care at a glance • US Facilities1 2,382 • US Patients1 189k • LTM Treatments (US)2 27.3M • Kidney Care LTM Net Revenue2 $10.7B • Kidney Care 2017 Adjusted OI Guidance3 $1.525‐$1.625B 1. As of March 31, 2017 2. LTM as of March 31, 2017 3. Adjusted OI Guidance; excludes VA settlement gain, impa
Slide 18: Patient-focused quality pyramid
Patient-focused quality pyramid ©2017 DaVita Inc. All rights reserved. 18
Slide 19: Strong clinical outcomes
Strong clinical outcomes QIP Penalty Facilities % of Four‐ and Five‐Star Centers 15% 14% 50% 46% 40 10 30 28% 5% 20 5 10 0 0 DVA Rest of Market DVA Rest of Market ~3x better ~2x better Note: Data are based on 2013‐2015 outcomes and CMS chain ownership, which are obtained via CROWNWeb and do not refl
Slide 20: Financial trilogy: treatments
Financial trilogy # of Treatments x Revenue / Tx - Expense / Tx • 4.0% ‐ 5.0% ©2017 DaVita Inc. All rights reserved. 20
Slide 21: Normalized non-acquired growth (NAG)
Normalized non-acquired growth (NAG) 5.0% 4.2% 3.9% 4.1% 3.5–4.5% 4.0 NAG range 3.0 2.0 1.0 0.0 2015 2016 LTM Note: Normalized for treatment day mix ©2017 DaVita Inc. All rights reserved. 21
Slide 22: Continuing DeNovo focus
Continuing DeNovo focus 105 98 100 90‐110 72 2013 2014 2015 2016 2017F ©2017 DaVita Inc. All rights reserved. 22
Slide 23: Financial trilogy: revenue per treatment
Financial trilogy # of Treatments x Revenue / Tx - Expense / Tx • 0.5% ‐ 2.0% Note: Excludes calcimimetics. ©2017 DaVita Inc. All rights reserved. 23
Slide 24: Commercial treatment mix
Commercial treatment mix 12% 11% 11% 10% 10% 10% 2012 2013 2014 2015 2016 Q1'17 ©2017 DaVita Inc. All rights reserved. 24
Slide 25: Payor landscape
Payor landscape • Seeking comprehensive solutions • Benefit and network designs, CPA • Policy: ACA, bundle ©2017 DaVita Inc. All rights reserved. 25
Slide 26: ACA plan update
ACA plan update • Remaining CPA risk: $45‐90M • Remaining patient characteristics: – Virtually all continuity of care – Virtually no Medicaid secondary ©2017 DaVita Inc. All rights reserved. 26
Slide 27: Financial trilogy: expense per treatment
Financial trilogy # of Treatments x Revenue / Tx - Expense / Tx • 0.0% ‐ 1.5% Note: Excludes calcimimetics. ©2017 DaVita Inc. All rights reserved. 27
Slide 28: Cost per treatment
Cost per treatment Component Outlook • Teammate costs • ~2‐3%/yr • Other costs • ~(1%)/yr • G&A and other corporate • ~in‐line with tx ©2017 DaVita Inc. All rights reserved. 28
Slide 29: U.S. Kidney Care: Long-term optionality
U.S. Kidney Care • Industry overview • Company overview • Long‐term optionality • Outlook ©2017 DaVita Inc. All rights reserved. 29
Slide 30: Need for care coordination
Need for care coordination Angelica 50%+ crash into dialysis ©2017 DaVita Inc. All rights reserved. 30
Slide 31: Need for care coordination
Need for care coordination Angelica 50%+ crash into dialysis 12 hrs/wk at dialysis ©2017 DaVita Inc. All rights reserved. 31
Slide 32: Need for care coordination
Need for care coordination Unnecessary Poorly Overwhelmed/ Uncoordinated Care Utilization Managed Confused Pts. Adapt to 12 hospital days/yr significant Angelica lifestyle 50%+ crash into changes dialysis Dietary restrictions specific kidney diet >3 co‐morbidities 12+ medications; (diabetes, 21+ p
Slide 33: DaVita Rx
DaVita Rx • Mission • Outlook ©2017 DaVita Inc. All rights reserved. 33
Slide 34: Success with coordinated care
Success with coordinated care Hospitalizations Readmissions Catheters 2 0.8 20% 1 0.4 10% 0 0.0 0% National VillageHealth National VillageHealth National VillageHealth ESRD Avg. SNP ESRD Avg. SNP ESRD Avg. SNP 38% Better 59% Better 68% Better Sources: 2016 USRDS Annual Report, ESRD National Coordina
Slide 35: U.S. Kidney Care: Outlook
U.S. Kidney Care • Industry overview • Company overview • Long‐term optionality • Outlook ©2017 DaVita Inc. All rights reserved. 35
Slide 36: Outlook
Outlook # of Treatments x Revenue / Tx ‐ Expense / Tx • 4.0% ‐ 5.0% • 0.5% ‐ 2.0% • 0.0% ‐ 1.5% 2% – 7% OI Growth1 1. U.S. Kidney Care outlook based on growth from midpoint of 2017 adjusted OI guidance excluding VA settlement gain and impairment charges. ©2017 DaVita Inc. All rights reserved. 36
Slide 37: Key takeaways
Key takeaways • Strong platform • Integrated care potential • Dynamic policy environment ©2017 DaVita Inc. All rights reserved. 37
Slide 38: Agenda
DaVita Medical Introduction U.S. Kidney Care Group DaVita Enterprise International Summary ©2017 DaVita Inc. All rights reserved. 38
Slide 39: DaVita Medical Group
DaVita Medical Group • Clinical leadership • Strong positions • Strong cash contribution ©2017 DaVita Inc. All rights reserved. 39
Slide 40: Strong clinical quality
Strong clinical quality DMG avg DMG avg STAR Measure (2015 DOS) (2016 DOS)1 MA Nat’l Avg2 Body mass index (BMI) 5 5 4 Colorectal cancer 4 4 3 Diabetes: Blood sugar 5 5 4 Diabetes: Nephropathy 4 5 4 Diabetes: Eye exam 4 4 3 Osteoporosis 4 5 3 Rheumatoid arthritis 3 5 4 Breast cancer 5 5 4 Blood press
Slide 41: Improving affiliates
Improving affiliates California STAR Measure 2014 2015 2016 Body mass index (BMI) 2 4 4 Colorectal cancer 3 4 4 Diabetes: Blood sugar 4 4 4 Diabetes: Nephropathy 4 4 4 Diabetes: Eye exam 2 3 4 Osteoporosis 3 4 5 Rheumatoid arthritis 2 2 4 Breast cancer 5 5 5 Blood pressure 2 4 4 ©2017 DaVita Inc. Al
Slide 42: National position
National position • 2K team clinicians • 13K affiliates • 735K value lives • 270+ clinics • $5.3B care dollars under management1 Data as of March 2017 1. LTM period 3/31/17; Care dollars under management is a non‐GAAP measure. ©2017 DaVita Inc. All rights reserved. 42
Slide 43: Medical groups
Medical groups Legacy New California Florida Nevada Washington Colorado New Mexico Leading independent Yes Yes Yes Yes Yes Yes group Team Physicians & Extenders 710 200 220 580 210 150 IPA PCPs 1,430 120 200 WIP ‐ 140 As of March 2017. Team Physicians & Extenders includes employed PCPs, specialists,
Slide 44: 2016 adjusted EBITDA
2016 adjusted EBITDA Adjusted OI1 $135M D&A $211M $346M Pre‐tax step up benefit of $167M in equivalent OI related to DMG acquisition not in adjusted OI. 1. Non‐GAAP measure, excludes certain items, including goodwill impairment charges, accrual for legal matters and net gain on ownership changes. ©2
Slide 45: Reminder: economic drivers
Reminder: economic drivers 1 4 Medical X Patients ‐ G&A margin 2• Members (legacy) 3• Value conversion (new) ©2017 DaVita Inc. All rights reserved. 45
Slide 46: Utilization
Utilization Legacy 1 Senior bed days per K ‐1% 992 980 2015 2016 ©2017 DaVita Inc. All rights reserved. 46
Slide 47: Commercial member growth
Commercial member growth CA 2 • Co‐branded • Differentiated PX • Price competitive • April ’17 launch ©2017 DaVita Inc. All rights reserved. 47
Slide 48: Value conversion on track
Value conversion on track New 3 • Active pipeline • 200+ new network clinicians • Senior wellness visits >95% ©2017 DaVita Inc. All rights reserved. 48
Slide 49: Efficiency gains
Platform costs 4 Efficiency gains ©2017 DaVita Inc. All rights reserved. 49
Slide 50: '17-'19 incremental OI scenarios
‘17-’19 incremental OI scenarios 1• Medical margin: 2• Member growth: 3• Value conversion: 4• Net efficiencies: ©2017 DaVita Inc. All rights reserved. 50
Slide 51: '17-'19 incremental OI scenarios
‘17-’19 incremental OI scenarios 1• Medical margin: ($50M) ‐ $40M 2• Member growth: $30M ‐ $50M 3• Value conversion: $20M ‐ $40M 4• Net efficiencies: $40M ‐ $50M Midpoint $110M ©2017 DaVita Inc. All rights reserved. 51
Slide 52: DaVita Medical Group summary
DaVita Medical Group • Clinical leadership • Strong positions • Strong cash contribution ©2017 DaVita Inc. All rights reserved. 52
Slide 53: Agenda
DaVita Medical Introduction U.S. Kidney Care Group DaVita Enterprise International Summary ©2017 DaVita Inc. All rights reserved. 53
Slide 54: Executive summary
Executive summary • On track, solid trajectory • Growth platform ©2017 DaVita Inc. All rights reserved. 54
Slide 55: Contents
Contents 1• Our journey thus far 2• Where we are headed ©2017 DaVita Inc. All rights reserved. 55
Slide 56: Evolution of international
Evolution of international Achieve scale Grow + mature Place bets 2012 – 2016 2017 – 2020 2020 & beyond ©2017 DaVita Inc. All rights reserved. 56
Slide 57: Growth trajectory
Growth trajectory Patients (in 000s) Clinics 19 214 15 154 10 118 91 7 73 5 36 2 2012 2013 2014 2015 2016 Apr’17 2012 2013 2014 2015 2016 Apr’17 ©2017 DaVita Inc. All rights reserved. 57
Slide 58: Revenue
Revenue $M >300 208 140 109 67 15 2012 2013 2014 2015 2016 2017F Note: Effective 8/1/2016 excludes APAC JV revenue due to deconsolidation ©2017 DaVita Inc. All rights reserved. 58
Slide 59: Path to profitability
Path to profitability Clinic‐level EBITDA margin (%) G&A per treatment ($) +39% ‐23% 2015 2016 2015 2016 ©2017 DaVita Inc. All rights reserved. 59
Slide 60: Clinical impact
Clinical impact Germany Saudi Arabia India 26% 100% 24% of patients referred reduction in CVC improvement in for transplant rates adequacy1 evaluation 1. Change in proportion of patients with KT/V <1.45 ©2017 DaVita Inc. All rights reserved. 60
Slide 61: Contents
Contents 1• Our journey thus far 2• Where we are headed ©2017 DaVita Inc. All rights reserved. 61
Slide 62: Adjusted OI trajectory
Adjusted OI trajectory $M 0 ‐20 ‐27 20161 2017F2 2018F 1. Non‐GAAP measure, excludes certain items including an impairment charge and APAC JV gain. 2016 adjusted operating loss includes a foreign exchange gain of $7M. 2. Guidance excludes certain items including a true‐up of the APAC JV gain and for
Slide 63: Portfolio mix
Portfolio mix Large Brazil Germany APAC JV Saudi Arabia Growth potential Poland Colombia Small Portugal Emerging Micro‐economics Proven ©2017 DaVita Inc. All rights reserved. 63
Slide 64: Conclusions
Conclusions • Thesis remains intact • Differentiation: Clinical, Brand, Culture • Platform • Exciting upside ©2017 DaVita Inc. All rights reserved. 64
Slide 65: Agenda
DaVita Medical Introduction U.S. Kidney Care Group DaVita Enterprise International Summary ©2017 DaVita Inc. All rights reserved. 65
Slide 66: Enterprise Summary
Enterprise Summary • Capital availability • Capital allocation • Summary ©2017 DaVita Inc. All rights reserved. 66
Slide 67: Strong cash flows
Strong cash flows Operating Cash Flow $M Free Cash Flow3 1,963 1,773 1,459 1,557 1,180 1,101 1,366 1,412 855 1,045 1,055 715 2011 2012 2013 20141 20152 2016 Diluted share count (M) 193 196 215 217 216 205 1. Includes the ~$269M after‐tax impact of 2010 and 2011 US Attorney Physician Relationship Inv
Slide 68: Leverage ratio
Leverage ratio 3.5x1 3.1x 3.2x 3.0x 3.0x 3.0x 2.7x 2011 2012 2013 2014 2015 2016 Q1’17 Note: leverage ratio as defined in Credit Agreement 1. HCP acquisition – November 2012 ©2017 DaVita Inc. All rights reserved. 68
Slide 69: Debt maturities
Debt maturities Term Loan A Term Loan B 5.125% Sr. Notes 5.75% Sr. Notes 5% Sr. Notes $M 3,273 3/31/17 LTM EBITDA1 $2,501 1,750 1,500 1,250 710 35 135 675 95 26 35 35 69 100 2017 2018 2019 2020 2021 2022 2023 2024 2025 1. EBITDA as defined per the Credit Agreement 2. $1,000 revolver expires in 2019
Slide 70: Cash scenario 2017-2020
Cash scenario 2017-2020 $M 7,200 600 1,600 5,000 4,550 1,650 1,2002 3,350 OCF1 NCI Maintenance FCF Development Cash Available CapEx CapEx 1. Includes VA settlement 2. Cash and ST investments balance as of 12/31/16 ©2017 DaVita Inc. All rights reserved. 70
Slide 71: Enterprise Summary
Enterprise Summary • Capital availability • Capital allocation • Summary ©2017 DaVita Inc. All rights reserved. 71
Slide 72: Capital allocation
Capital allocation Business mix Capital return ©2017 DaVita Inc. All rights reserved. 72
Slide 73: Business mix
Business mix Criteria Priorities • Return on capital 1. DeNovos • OI growth 2. Tuck in acquisitions 3. Adjacencies 4. Pruning ©2017 DaVita Inc. All rights reserved. 73
Slide 74: $3 billion of share repurchases
$3 billion of share repurchases Shares repurchased (M) 17.8 16.6 9.6 7.6 7.8 5.8 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: The Company performed a stock split in 2013 and all prior periods have been adjusted for the stock split. ©2017 DaVita Inc. All rights reserved. 74
Slide 75: Net share count reduction
Net share count reduction Shares outstanding (M) -7% 210 195 Jan. 1, 2016 Mar. 31, 2017 ©2017 DaVita Inc. All rights reserved. 75
Slide 76: Enterprise Summary
Enterprise Summary • Capital availability • Capital allocation • Summary ©2017 DaVita Inc. All rights reserved. 76
Slide 77: Capital expectation
Capital expectation • Free cash flow • Leverage • Acquisitions and divestitures • Stock buybacks ©2017 DaVita Inc. All rights reserved. 77
Slide 78: EPS scenario
EPS scenario Consolidated OI Growth 3% ‐ 8% 1 + Financial Leverage Net Income Growth 4% ‐ 9% 1 + Share Repurchase EPS Growth 1 5% ‐ 12% 1. Growth on midpoint of 2017 guidance excluding VA settlement gain, impairment charges and true‐up of APAC JV gain. ©2017 DaVita Inc. All rights reserved. 78
Slide 79: Capital Markets Day May 25, 2017
Capital Markets Day May 25, 2017 ©2017 DaVita Inc. All rights reserved. 79
Slide 80: Reconciliations for non-GAAP measures
Reconciliations for non-GAAP measures Free Cash Flow (in millions) Free cash flow represents net cash provided by operating activities less distributions to noncontrolling interests and capital expenditures for routine maintenance and information technology. We believe free cash flow is a useful adj
Slide 81: Reconciliations for non-GAAP measures
Reconciliations for non-GAAP measures Adjusted operating income (in millions) Adjusted operating income is defined as operating income before certain items we do not believe are indicative of ordinary results, including a gain on the APAC JV ownership changes, a gain on sale of Tandigm ownership int
Slide 82: Reconciliations for non-GAAP measures
Reconciliations for non-GAAP measures DMG: Schedule of total care dollars under management (in millions) In California, as a result of our managed care administrative services agreements with hospitals and health plans, DMG does not assume the direct financial risk for institutional (hospital) servi
Slide 83: Reconciliations for non-GAAP measures
Reconciliations for non-GAAP measures EBITDA and adjusted EBITDA EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, including a gain on the APAC JV ownership changes, a gain on sale of Tandigm ownership i