DaVita Inc.

Good evening. My name is Sheila and I will be your conference facilitator today. At this time, I would like to welcome everyone to the DaVita first quarter 2021 earnings call. All lights have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star and then the number one on your telephone keypad. If you would like to withdraw your question, press star then the number two. Thank you. Mr. Gustafson, you may begin your conference.

Thank you, and welcome, everyone, to our first quarter conference call. We appreciate your continued interest in our company. I'm Jim Gustafson, Vice President of Investor Relations, and joining me today are Javier Rodriguez, our CEO, and Joel Ackerman, our CFO. Please note that during this call, we may make forward-looking statements within the meaning of federal securities laws. All of these statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to our first quarter earnings press release and our SEC filings, including our most recent annual report on Form 10-K and subsequent quarterly report on Form 10-Q and any subsequent filings we may make with the SEC. Our forward-looking statements are based upon information currently available to us and we do not intend and undertake no duty to update those statements except as may be required by law. Additionally, we'd like to remind you that during this call, we will discuss some non-GAAP financial measures. The reconciliation of these non-GAAP measures to those comparable GAAP financial measures is included in our earnings press release submitted to the SEC and available on our website. I will now turn the call over to Javier Rodriguez.

Javier Rodriguez Thank you, Jim, and good afternoon. Over the last several months, We have made incredible progress in our efforts to combat the COVID-19 pandemic. And it's with continued optimism that I provide several updates today, starting with vaccination, followed by a summary of the first quarter performance, then an update on our improved outlook for the year, and finally, an overview of our ongoing commitment to ESG. Q1 brought a lot of smiles as the kidney care community administered hundreds of thousands of vaccines to its patients. Providers worked closely with the Biden administration, the CDC, and state governments so that dialysis patients could be vaccinated in a trusted and convenient site of care. We knew that this would help our patients overcome transportation and other access challenges getting to third-party sites, and we had confidence that the hesitancy rate would decline when they received education from a trusted caretaker. Thanks to all the hard work by our teams and the government partners, I'm proud to say that as of yesterday, 72% of our patients nationwide have received at least one vaccine dose. We also saw an opportunity to positively impact health equity by administering COVID vaccines in our clinics. Similar to the early results in the broader U.S. population, in the first few weeks of the vaccine rollout, we saw the vaccination rate for Black and Hispanics were approximately 40% below that of White and Asian Americans. This did not sit well with us. We got to work and mobilize our care teams, including social workers, dieticians, and medical directors to have one-on-one conversations with patients to address common causes of hesitancy. Our Hispanic patients have now been vaccinated at nearly the same rate as white patients, and the gap for our black patients has been reduced to 10%. We are not done. Our pursuit for health equity continues. On to our first quarter financial results. We delivered solid performance in Q1 as our operating margins returned to 15.7% in the quarter while we continued to lead through the continued challenges presented by the pandemic. As we covered on our last call, treatment volumes declined in Q1. Our treatments per day hit a low point in mid-February, including the impact of approximately 25,000 mistreatments from the winter storm. Since then, our daily treatment trends have steadily improved. If these trends continue, absent any further infection surges, we believe that our sequential patient census growth through the end of the year could return to pre-COVID levels. which is what we incorporated in our guidance ranges we provided last quarter. Let me provide a bit more detail and volume that supports our outlook. First, with our update in Q1, COVID case counts and new infections within our dialysis populations have continued to decline. As of last Friday, the number of active cases amongst our patients across the country decreased approximately 85% from peak prevalence on January 6, 2021. And the last seven-day incidence rate for new cases decreased approximately 91% from the week ending January 9th, 2021. Second, we're grateful that we're seeing a dramatic decline in the mortality rates associated with COVID. We've previously shared that the unfortunate incremental mortality associated with COVID was approximately 7,000 in 2020. In 2021, both our patient mortality count and mortality count in the general population peaked in January. In the first quarter, incremental mortality associated with COVID was approximately 3,300 lives with more than half of that number occurring in January, decreasing to approximately 600 in March. It is too early to provide an estimate for April, but we expect the results will improve versus March. Shifting to full-year outlook, our view of core operation performance for the year remains largely unchanged from our original guidance. However, now that the likelihood of some downside scenarios has decreased due to the trends I previously mentioned, we are increasing our adjusted earnings per share guidance range to $820 to $9 per share, and our adjusted operating income guidance range to $1.75 billion to $1.875 billion. At the midpoint of our revised adjusted operating income guidance, this would represent approximately a 4% growth year over year. These revised ranges assume no further major disruption from the virus strain. My final topic is our ongoing commitment to environmental, social, and governance matters, or ESG. ESG has become a more significant topic of conversation in the investment community over the last couple of years, but these are not new areas of focus for us at DaVita. Our beliefs are incorporated into our stated vision of social responsibility that has three components, caring for our patients, caring for each other, and caring for the world around us, including both our communities and our environment. DaVita continues to execute against this vision. Providing top-quality clinical care for our patients is at the core of what we do, and because I've already spoken at length about our patients' care and our efforts to vaccinate our patients, I would like to highlight a few of our achievements in caring for our teammates and caring for the world around us. I believe that fostering an environment rich in diversity and where we all feel that we belong is imperative to our culture and how we connect with each other and how we connect with our patients every day. And our commitment to cultivating diversity is evident throughout the organization. It starts with the board of directors, currently made up of nine leaders, of whom 67% are diverse, including four women and three people of color. The diversity of our team extends to the leaders who run the core operations in our clinics, of whom 52% are female and 27% are people of color. These results have been achieved through thoughtful and deliberate practices to create a diverse pipeline of talent, In 2021, we published our first report on diversity and belonging, disclosing many of our company's diverse metrics and our ongoing efforts to cultivate a diverse organization in which everyone feels that he or she belongs. We also recently published our 14th Annual Corporate Social Responsibility Report and our first ESG report. These reports disclose the progress we made in 2020 and lay out our ambitious ESG goals for 2025, including goals to reduce carbon emissions by 50%, to have vendors representing 70% of emissions set climate change goals, and to achieve engagement scores of 84% or higher among our teammate population. We are pleased with our progress to date on diversity in ESG, and as you can see by our goals, we have a lot more we hope to accomplish. With that, I will turn the call over to Joel.