Slide 1: Investor Presentation September 2017
Investor Presentation September 2017 ©2017 DaVita Inc. All rights reserved. 1
Slide 2: Forward-looking statements
DaVita Inc. 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: U.S. Kidney Care, DaVita Medical Group, DaVita Enterprise, International, Summary
DaVita Medical U.S. Kidney Care Group DaVita Enterprise International Summary ©2017 DaVita Inc. All rights reserved. 3
Slide 4: Kidney Care at a glance
Kidney Care at a glance • US Facilities1 2,445 • US Patients1 195k • LTM Treatments (US)2 27.6M • Kidney Care LTM Net Revenue2 $10.8B 1. As of June 30, 2017 2. LTM as of June 30, 2017 ©2017 DaVita Inc. All rights reserved. 4
Slide 5: 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. 5
Slide 6: 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 7: Strong company clinical outcomes
Strong company 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
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: Payor landscape
Payor landscape • Seeking comprehensive solutions • Benefit and network designs, CPA • Policy: ACA, bundle ©2017 DaVita Inc. All rights reserved. 11
Slide 12: ACA plan update
ACA plan update • Remaining CPA risk within ACA plans: $45‐90M • Remaining patient characteristics: – Virtually all continuity of care – Virtually no Medicaid secondary ©2017 DaVita Inc. All rights reserved. 12
Slide 13: 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. 13
Slide 14: 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 15: 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. 15
Slide 16: What remains consistent?
What remains consistent? • Clinical excellence • Commercial payor landscape • Stable growth • Capital‐efficient treatment growth ©2017 DaVita Inc. All rights reserved. 16
Slide 17: What is more dynamic?
What is more dynamic? • Healthcare policy • Pharma landscape (anemia, calcimimetics) • Integrated care ©2017 DaVita Inc. All rights reserved. 17
Slide 18: Key takeaways
Key takeaways • Strong platform • Integrated care potential • Dynamic policy environment ©2017 DaVita Inc. All rights reserved. 18
Slide 19: U.S. Kidney Care, DaVita Medical Group, DaVita Enterprise, International, Summary
DaVita Medical U.S. Kidney Care Group DaVita Enterprise International Summary ©2017 DaVita Inc. All rights reserved. 19
Slide 20: DaVita Medical Group
DaVita Medical Group • Clinical leadership • Strong positions • Strong cash contribution ©2017 DaVita Inc. All rights reserved. 20
Slide 21: 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 22: National position
National position • 2K team clinicians • 12K affiliates • 726K value lives • 270+ clinics • $5.3B care dollars under management1 Data as of June 2017 1. LTM period 6/30/17; Care dollars under management is a non‐GAAP measure. ©2017 DaVita Inc. All rights reserved. 22
Slide 23: 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 24: Reminder: economic drivers
Reminder: economic drivers 1 2 3 Medical X Patients ‐ G&A margin • Members (legacy) • Value conversion (new) ©2017 DaVita Inc. All rights reserved. 24
Slide 25: Utilization
Utilization Legacy 1 Senior bed days per K ‐1% 992 980 2015 2016 ©2017 DaVita Inc. All rights reserved. 25
Slide 26: Value conversion on track
Value conversion on track New 2 • Active pipeline • 200+ new network clinicians • Senior wellness visits >95% • Expectations for value contracts in all 3 new states ©2017 DaVita Inc. All rights reserved. 26
Slide 27: '17-'19 incremental OI scenarios
‘17-’19 incremental OI scenarios 1• Medical margin: ($50M) ‐ $40M 2• Member growth: $30M ‐ $50M 2• Value conversion: $20M ‐ $40M 3• Net efficiencies: $40M ‐ $50M Midpoint $110M1 1. DMG outlook based on growth from midpoint of 2017 adjusted OI guidance excluding goodwill impairment charges and accrua
Slide 28: DaVita Medical Group
DaVita Medical Group • Clinical leadership • Strong positions • Strong cash contribution ©2017 DaVita Inc. All rights reserved. 28
Slide 29: U.S. Kidney Care, DaVita Medical Group, DaVita Enterprise, International, Summary
DaVita Medical U.S. Kidney Care Group DaVita Enterprise International Summary ©2017 DaVita Inc. All rights reserved. 29
Slide 30: Evolution of international
Evolution of international Achieve scale Grow + mature Place bets 2012 – 2016 2017 – 2020 2020 & beyond ©2017 DaVita Inc. All rights reserved. 30
Slide 31: Revenue
Revenue $M 208 140 109 67 15 2012 2013 2014 2015 2016 Note: Effective 8/1/2016 excludes APAC JV revenue due to deconsolidation ©2017 DaVita Inc. All rights reserved. 31
Slide 32: Path to profitability
Path to profitability Clinic‐level EBITDA margin (%) G&A per treatment ($) +39% ‐23% 2015 2016 2015 2016 ©2017 DaVita Inc. All rights reserved. 32
Slide 33: U.S. Kidney Care, DaVita Medical Group, DaVita Enterprise, International, Summary
DaVita Medical U.S. Kidney Care Group DaVita Enterprise International Summary ©2017 DaVita Inc. All rights reserved. 33
Slide 34: 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 35: Leverage ratio
Leverage ratio 3.5x1 3.4x 3.1x 3.2x 3.0x 3.0x 2.7x 2011 2012 2013 2014 2015 2016 Q2’17 Note: leverage ratio as defined in Credit Agreement 1. HCP acquisition – November 2012 ©2017 DaVita Inc. All rights reserved. 35
Slide 36: Debt maturities
Debt maturities Term Loan A Term Loan B 5.125% Sr. Notes 5.75% Sr. Notes 5% Sr. Notes $M 3,273 6/30/17 LTM EBITDA1 $2,506 1,750 1,500 1,250 710 35 135 675 68 18 35 35 50 100 2017 2018 2019 2020 2021 2022 2023 2024 2025 1. EBITDA as defined per the Credit Agreement. EBITDA per the Credit Agreement is
Slide 37: 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. 37
Slide 38: Business mix criteria and priorities
Business mix Criteria Priorities • Return on capital 1. DeNovos • OI growth 2. Tuck in acquisitions 3. Adjacencies 4. Strategic review of portfolio ©2017 DaVita Inc. All rights reserved. 38
Slide 39: $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 3.6 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 6/30/17 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. 39
Slide 40: Net share count reduction
Net share count reduction Shares outstanding (M) -9% 210 191 Jan. 1, 2016 Jun. 30, 2017 ©2017 DaVita Inc. All rights reserved. 40
Slide 41: Capital expectation
Capital expectation • Free cash flow • Leverage • Acquisitions and divestitures • Strategic review of portfolio • Stock buybacks ©2017 DaVita Inc. All rights reserved. 41
Slide 42: 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 adjusted guidance excluding VA settlement, impairment charges, accruals for legal matters, and gain on ownership changes. ©2017 DaVita
Slide 43: Investor Presentation September 2017
Investor Presentation September 2017 ©2017 DaVita Inc. All rights reserved. 43
Slide 44: Reconciliations for non-GAAP measures
Reconciliations for non-GAAP measures DMG: Schedule of rolling last twelve months 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 ins
Slide 45: 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 net settlement gain, estimated accruals for certain legal matters, goodwill
Slide 46: 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 47: Reconciliations for non-GAAP measures
Reconciliations for non-GAAP measures Calculation of the Leverage Ratio Under the senior secured credit facilities (Credit Agreement), the leverage ratio is defined as all funded debt plus the face amount of all letters of credit issued, minus cash and cash equivalents, including short‐term investme