Q4 2019 Earnings Call
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[music].
Good evening My name is Debbie and I'll be your conference facilitator today.
This time I would like to welcome everyone to that Adidas fourth quarter 2019 earnings call. All lines 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 typically press star and the number one on your telephone keypad.
He would like to withdraw your question, but star then the numbers.
Thank you Mr. Good you started you may begin your conference.
Thank you and welcome everyone to our fourth quarter Conference call. We appreciate your continued interest in our company.
Jim Gustafson, Vice President of Investor Relations and with me today are Javier Rodriguez, our CEO Joel Ackerman, our CFO being somewhat group, Vice President and Jim Hilger, Our Chief Accounting Officer. Please note that during this call. We may make forward looking statements within the meetings in the federal security laws. All these statements are subject to known and unknown.
The risks and uncertainties that could cause actual results to differ materially from those described in the forward looking statement.
For further details concerning these risks and uncertainties. Please refer to our fourth quarter earnings press release, and our SEC filings, including our most recent annual report on form 10-K, and subsequent quarterly reports on form 10-Q are forward looking statements are based on information currently available to us and we do not intend and.
Undertakes no duty to update the state.
Additionally, we'd like to remind you that during this call we will discuss some non-GAAP financial measures reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release submitted to the FCC and available on our website.
I will now turn the call over to Javier Rodriguez.
Thank you Jim and good afternoon, everyone. We appreciate your interest in the Buda and look forward to your questions and comments.
I'll start with the clinical highlights as a reminder of life sustaining chair that we provide to more than 235000 people.
Well, we discussed clinical outcomes and lowering the total cost of care. Our goal is to improve our patients quality of life.
One specific example has been to focus on reducing infection in our patient I'll just patients onto infection, which can often lead to lengthy hospitalization stayed and increase in mortality.
I'm excited to report their efforts have paid off in 2009, James we reduced the rate of bloodstream infection by 13% and improve the rate of paired tonight at by 20% versus the prior year did a meaningful improvement they kept many of our patients out of the hospital.
Now, let me transition to our results and outlook for 2020.
I had a strong performance in 2019 amended earnings per share and free cash flow growth targets. We set for the year, we're committed to achieving our 2020 financial guidance and then back we're raising our earnings per share target range by 50 cents, Joe will provide the financial details on both the quarter and our 2020 guidance.
Now, let me pull up for a few minutes to share a high level view on clinical and on policy.
We are in an exciting time for kidney care, we're bridging the transition of care from the Nephrologist often to different types of care.
We're working with our payers to use predictive analytics to identify CKD patients with the highest Richard transition said yesterday. Once we support these patients will work on avoiding or delaying the onset of kidney failure.
We remain excited about nephrology Caroline the new physician Lennon to be with nearly 1100 nephrologist that will be the vehicle to connect Davita to then a follow this practice the goal a simple provide world class analytic and education to help position that's deploy their time to care for the right person at the right time.
For those patients who do transition yesterday, we bought a leading education platform to empower patients to choose to start on the right treatment modality for them.
For patients who choose home modality, we continue to invest in our leading home platform, where we serve the most home patient of any provider.
In 2019, we saw a high our highest growth however, NPD modality working to maintain our leadership in the home dialysis with a 2020 goal of achieving double digit growth in the PV modality.
Moving on to policy.
We continue our multiyear journey towards integrated care.
We're encouraged by the quality improvement that are evident in our demonstration such as the ESCO. We're hopeful that there will be additional models and opportunities the scale and extended care, where it started inpatient at national levels.
We remain optimistic about the administration's view for value based care model.
We believe that the capability that we built will support our collective goal.
[music] improved clinical outcome, while managing total cost.
It's been a lot of recent conversation about Medicare advantage and a 21st century Cures Act.
I would remind everyone that congress passed legislation with the intent at making additional insurance options available to Medicare eligible patient yeah, sorry patients.
With respect to expectations of adoption.
No one really no.
What choices will be made by the patient we continue to believe that this election into them and may well be more gradual and look forward to working with the plant partners to managed care and the cost of the patients.
In parallel our advocacy efforts are focused on ensuring adequate funding in both Medicare fee for service and then May and as we've said before we remain ready in New York <unk> advanced integrated care for Medicare fee for service population.
Shifting to stay policy, we will keep advocating for our patients in California, and other states, where some labor unions are pursuing policies that are not good for patients.
Or the care delivery system.
Now, let me transferred ought to Joe So he will provide additional details on the quarter and specifics on 2020 guidance.
Thanks, Javier before I begin I'd like to point out that we've adjusted the first section of the press release. This quarter. We hope this format will give investors easier access to some of the most important results that have historically appeared later in the release.
I will start Q4 results and then move to 2020 guidance.
We generated $2.9 billion if revenue in the quarter, an increase of 2.75% over Q4 2018.
Our operating income was 463 million, which included approximately $67 million in profit related to Calcimimetic, resulting in an operating margin of 16%.
Earnings per share from continuing operations was $1.86.
Now, let me take through some of the underlying driver starting with the components of the U.S. dialysis and lab segment.
Non acquired growth for the quarter was 2.1% relatively flat with the prior two quarters.
Revenue per treatment was down sequentially by $1.10, which includes $1.68 per treatment decrease in revenue attributable to calcimimetic.
Excluding calcimimetic RPP was up by 58 cents.
To recap performance for the full year 2019 versus guidance.
Well the impact of Calcimimetic, we finished at the high end of our RPT guidance range of zero to 1%.
We fell outside of the net very narrow range that we provided I'm per commercial mix and ended 2019 with a year over year decreased approximately 20 basis points. Although this decline did not having meaningful impact on our revenue per tree.
Combined patient care cost and dialysis and lab segment GNS expense was down approximately $2 per treatment quarter over quarter, driven primarily by lower compensation and benefits costs.
Turning to Calcimimetic.
We generated operating income of approximately $67 million in the fourth quarter.
Revenue per treatment and cost for treatment of $12, an 86 cents.
$4 in 19 cents respectively.
For the full year, we generated approximately 200 mid 220 million in operating income as we negotiated significant cost decreases on oral calcimimetic.
For 2020, we now expect approximately $40 million to $70 million operating income from Calcimimetic.
With approximately half of this to be realized in the first quarter as we expect a S.P. reimbursement to decline in subsequent quarters with that said, there's still significant uncertainty around this outlook given the complexity in the ASV methodology.
Now turning to international for the quarter operating income was approximately $2 million, including an FX loss of $4 million for the full year, we generated positive adjusted operating income of $2 million, excluding goodwill impairment and including an effort.
Net loss of $2 million.
Our effective tax rate on adjusted income attributable to Davita from continuing operations for the quarter was 25.2%.
27, and a half per cent for the full year.
Our effective our effective tax rate for the fourth quarter in the full year benefited from a decrease in our estimated the tax rate.
Now onto cash flow.
Full year 2019, operating cash flow from continuing operations $2 billion and our free cash flow was $1.1 billion.
Operating cash flow and free cash flow.
Objectively impacted by significant improvements in our Dsos, an unusually low cash taxes in 29.
These two factors combined to improve cash flow during the year by approximately $300 million, we do not expect these to recur in 2020.
Capex for the year with $728 million slightly below the revised guidance range of 740 $780 million and well below our initial guidance from the year of 800 $840 million better results in Q4 was due to the time.
Certain projects.
Portion into 2020.
Since October Onest 2019.
We purchased almost 8.7 million shares at an average amount of $64.80 per share as a result of our recent repurchases we reduced fair share count by approximately 41.3 million shares were 24.8% since the close of the DMG.
Transaction June 2019.
This week, we expect to complete a rough repricing about 2.7 billion dollar term loan b that will reduce the interest rate on this tranche of debt by 50 basis points. We now expect ours, we now expect or debt expense to be approximately $90 million in Q1 2020 and.
Then approximately $85 million per quarter in the subsequent quarters.
I'll conclude with some comments on our guidance ranges for 2020.
We are updating our 2020 adjusted earnings per share guidance by 50 cents per share.
$5 in 75 cents.
Dollars in 25 cents.
As a reminder.
Includes the expected benefits from Calcimimetic.
Well as the expected costs of ballot initiative in California.
Due to the timing of Calcimimetic that I mentioned, I mean, you expected timing of ballot related costs in the second half of the year, we expect some fluctuations in earnings per share between quarters. This year.
Our revenue guidance for the year is 11.5 billion to $11.7 billion and our operating income margin guidance.
Consistent with the target range of 13% to 14% that we talked about at our capital markets day.
We expect to generate approximately 600 $800 million of free cash flow this year.
We'll point out that cash flow is inherently subject to greater swing and its operating income due to the time of working capital and other items such as the timing of payroll cycle.
Payments and intra period changes and the collections of they are just worked in our favor in 2019 and could swing the other way at some point in the future.
Operator, let's now open the line for quest.
Thanks.
If you would like to question. Please press star.
[noise] on your.
First question will come from Justin Lake.
Yes.
Thanks, Good afternoon, a wanted to go through a couple of moving parts here a first in terms of the a the higher EPS range year over year is it's fair to think about it as two thirds pulling from Calcimimetic supposed.
What was the numbers before maybe the rush coming from lower debt costs than maybe you could tell us any other moving parts other moving parts, including California haven't delaying implementation.
Or the legislation out there on the retail.
Sure. So just some you you've got the basics right.
Calcimimetic is the biggest component of this and a decrease in the in our expectation expected cost for 80 to 90 plays into this as well those are the two big things I'd call out there a lot of other moving pieces in here our share count moves around.
That's the stock price goes up.
And a whole bunch of other things related to core O y, but I would say calcimimetic some amy to nine year, the two big things to call out.
Great and maybe you can just give us an update on.
Is there any change in terms of the sustainability of Calcimimetic.
In your mind beyond 2020, or do you still expect Jack will migrate down the kind of neutral and then do you have a new ABT 90 number for US I think the old almost 25 to 40.
Sure. So on Calcimimetic, we still expect under the current.
To DAP Ah that it will migrate down to zero over the course of 2020, we haven't.
We've been.
We as you can see we've not been able to predict how A.S.P. would come down or the positive numbers for 2020 is the result of ASP not coming down the way we expected. It would three months ago I don't know that our visibility on how the rest of the industry has has behaved.
Eight combined with some of the black spot Black box natures of ASP have improved but we do think this this has to get down pretty close to zero by the end of the year.
In terms of 80 to 90, we don't have a new number clearly the number will be smaller that said there will be some legal costs associated with 80 to 90 and there certainly is the possibility that it gets implemented towards the end of the year or so.
The numbers are getting to a size, where I don't think it's a it's worth calling out a specific number but clearly below the 25 to 40.
Okay, and just one last follow up before I jump back in the queue. The Council Medix is is it fair to say here that you think costs have come down to.
On a normal range and its we just need to track the as a.
Yes, so does that up for dollar number going to yeah, yeah, I'm, not saying causal couldn't you'll continue to drift down a little bit, but but the real action for 2020 is on the trajectory of ASP.
That's helpful. Thanks, guys.
The next question will come from Kevin Fischbeck with Bank of America Your line.
Great wanted to ask a little bit about.
This year's guidance kind of in the context of your 2022 guidance because it looks like the kind of.
They're in a lot of all of your metrics I guess, a midpoint to midpoint always looking for 2%.
Revenue growth per year.
I guess, so I guess, just what I understand that jumping pulling off is that still the right point or are there things in here that now maybe there's a different way to think about the long term trajectory and I guess I think about this year's guidance versus a tight you number I guess the twice the number is going to have a headwind of cosmetics coming out and then I guess your guidance still assumes that.
Maybe 90 goes into place just wanted to make sure that that's one thing we have to figure out if we try to yeah. So you're spot on on on both those factors of Calcimimetic coming out of here in the 80 to 90 going into a place in terms of some of the other things I'd call out.
On the cash flow number.
2019 was surprisingly high and we called out in the script to with the factors, which are the dsos, having come down as well as cash taxes. I'd also note cash flow was helped by Calcimimetic as well and the impact that had on Oh why so.
That that happened faster than expected. We also benefited to some extent in the year by some of the.
Capex, we're expecting late in the year getting pushed into 2020. So the 2020 number might get impacted by that to the negative. There's certainly the possibility that at the end of 2020, we'll see some pushed into 2021 and that could slip by either way.
One other thing I'd call out is the margins, we spoke about margins of 13% to 14%, we're not changing that view of the world and so as you as you think about what the margins could be in 2022, I'd stick with that number.
Okay. That's helpful. And then appreciate the disciplinary comments on and they are.
Right I guess sounds like some of the managed care companies are starting towards this is going to be in issue for them into 2021, because once you could.
Talk about your conversations that you're having with and make companies or is there pushback on rates or or anything that you would kind of highlight there that could impact the or change the impact is going to have on you over the next few years.
Thanks, Kevin the top here, we've gotten a fair amount of questions on M&A and so I think it's useful to just pull up a little and and revisit the origin of it number. One. This is the only patient population yesterday population that was excluded from having the right.
Okay and May and so it was fixing a deficiency in the system.
A number two.
What is our role going forward and our role is to just make sure that our patients are well and form so they can make the best decision individually.
Point number three is everybody's trying to size it and when you try something like this theres two variables of course, one as rate and the other one as volume.
And so what we said is that our rate is above Medicare, but substantially below commercial we're not going to give anymore on that variable. The one that's most.
Sort of a undecided at this juncture the pickup of the volume and all of you know the same as we do which is there's a lot of variables at play a one individual has a primary insurance a secondary ensures do they have medigap coverage et cetera. So.
We continue to think that it's reasonable to think that penetration will reflect the overall market. In addition, many people believe that our patients will have sort of a quick triggered to pick and insurance when there's so many complicated variables and they have many of.
I've been in Medicare for quite some time status quo might just keep going so we're literally.
Asking how well our patients interpret there their benefit and so we don't know and so many people are continuing aside then it's going to be some kind of an aggressive.
Movement, and we continue to think it'll be more gradual.
I guess, that's that's definitely helpful August two thoughts on that is there anything that you would think of as you think about that rate differential that you. Currently gets that makes you think that for whatever reason it wouldn't be sustainable I got to harvest kind of metric that we want to bring that delta down overtime, but is there any reason why you think that could be the case.
Sure.
Maybe you could.
Keep those economics that maybe changed the way that you actually contract with managed care, taking more risk things like that.
Yeah, I would think it as an opportunity for us to expand the way, we've talked to our contract and to our apparel.
Providers, it's an exciting time, where where all the line and trying to make sure that we have integrated care for our patients and so we're leaning in and trying to see how are we can best serve them and be a partner.
And if they think that the.
May volume is going to be higher.
Fair enough that it might also be an opportunity.
The contract and that way. So we're excited obviously, they want lower rates like higher rates and that dances never going to change and then the question is can we all get creative on coming up on a win win situation.
Okay, then I guess to your point about the.
Shift into M&A.
Point, well taken that inertia tends to be the way people tend to act when it comes to health insurance, because it's kind of daunting to shift for that but I would assume that the fact that you're able to meet with these people three times.
Blaine deal with a coverage options are would potentially change that dynamic and where we do our analysis and the 20 States, where you know that stuff isn't available for people under 65 and affordable way.
And if I would think that adoption will be quite large the question ends up being so about where in those states where it is available.
Is there a.
A rationale for those patients to switch from a med supp plan into and have a plan and then similarly in it in a for a dual eligible population which is.
40% of your Medicare book.
Is there is there an incentive for those patients to move and what why would you go those classes you don't see the benefit of another plant.
Yeah. The first premise that you discussed which is access to the patient. It is worth exploring because you might be more talented than us, but when you talk to people, but their insurance, it's not usually like Netflix or anything they don't want to keep watching the next episode.
Well, usually start the glaze over a bit and say you know when you talk about deductibles. When you talk about call insurance. When you talk about those kind of thing and is not normal binocular for most of these folks and they've been on Medicare for sometime and it works for that so then you got to start to explain that maybe it's.
More restrictive maybe they can't see their doctor, but it's got other benefits and you get into it and then you can see that some people just tune out and so the question is is that our obligation to go back out I'm in the answer I think there's no if you're satisfied with your insurance. We just have to make sure that you know that you have and new option and.
So on all these are on the duals, sometimes that could actually have a very little out of pocket and so you might not want to switch that situation. So it is very specific to each individual but again the net of it is that we think we're not going to look very different than the overall population.
But there is the range, but we're all playing with.
And then just last question does their time period when you.
I feel like you will know how that shift is going well you know during.
Open enrollment period in Q4 or do you actually have to wait till January for that for the patient claims extra coming in under the new Payors.
I think there we're gonna have to wait till January.
We will have some preliminary stuff, but but.
Unlikely that we're going to want to predict how that'll play out until we see it since it's the first time were experiencing it.
Great. Thank you.
Thank you Kevin.
The next question will come from Picozzi Gray line.
<unk>.
Hey, guys. Thanks for taking my questions I'm, a few ones here on the 2020 revenue guidance, what do you got to assuming in terms of organic growth in revenue per treatment has the exceptional reimbursement look for 2020.
Sure so.
Hey, Peto on on NAV, we were guiding to 1.5% to 2.5% in terms of revenue per treatment. We're not we're not going to guide to our peachy anymore in the level of specificity. We have in the past that said I think it's safe to say going forward that it will look.
Similar to what it looked like in the recent past the same dynamic in terms of commercial RPT Medicare RPT and mix should play out next year the way they have in the recent few years. The one big change obviously is on Medicare fee for service reimbursement, we got that a nine.
Teen we see that continuing forward. So again as as we think about the how we want to guide and this is consistent with what we raised capital markets day more of a focus on margin then on any of the individual inputs.
That said, if you think about the inputs of RTT the sub components, there as well as cost per treatment and the other things, we don't see anything, particularly different next year to call out than what we've seen in the recent past.
Great and then on on that one for time margin guidance, let me ask a different way if we exclude calcimimetic to 20 maintain the operating income margin is about 12.5%. If you exclude 40 70 million of Calcimimetic for 2020, it looks as though you're guiding to about 50 basis point, improving in 2020 versus 2018 first.
Cordoning team has a very easy comp. So if you exclude calcimimetic for 2018 to 2020 and easy comp of first quarter 19, how should we think about core operating income margin in 2020 versus 2018.
Okay. Peter you lost me there on your math, but I'll I'll tell you the way I think about my math and I apologize if this doesn't tick and tie to what you asked but but you can follow up with Jim afterwards so.
For.
For adjusted normalized numbers. So this excludes calcimimetic.
We came in just north of 14% in 2019.
We expect that eight it and again.
Where we were not guiding to alike. So we again, we said that accounts some of the capital markets day, we're sticking with that that said either through a top down analysis using revenue and our margin guidance or bottoms up through as she can all do the math and come up with a range. So.
I'm going to give some high level thoughts relative to whats the probably the middle of the range of what you should be thinking about which would should show you a little bit of margin compression in 2020 versus 2019, although still very much in that 13% to 14% range.
Talked about a capital markets day, and if I have to point out what is driving that you've got a little bit of baby to 90 in there.
You've got the continued pressure on labor costs associated with with the strong environment. We're in and we are also looking at making some investments in the form of operating costs investing in our future around things like Oh.
And things like integrated kidney care things like data and analytics. So if you put those all those things together you'd come up with a little bit of margin pressure in 2020 over 29 team, but still very much in the range of what we talked about a capital markets is that helpful.
Yes, very much so which it would actually sort of the last question that you know at the analyst day, you talked about capital.
Capital growth with Capex coming down to 615 20.2, any sort of you just mentioned so can you start homebodies programs can you can't quantify how many of your centers have separate home treatments options today and how many you how many are freestanding home centers as well.
I don't know the answer to that.
Well follow up on what we can follow up with you on that Peter I.
Thanks, So much guys I appreciate it.
The next question will come from Andrew.
Your line.
Hi, Good afternoon, and just wanted to follow up on the 2020 guidance components given all the moving parts you raised EPS guidance by 50 cents. It sounds like that increases largely accounted for by the benefit from calcimimetic than the reversal maybe to 90. So is it fair to say, but the underlying assumptions on share repurchase remain the same given the 2.4.
Early enough share repurchases did in 2019 combined with a nice run in the stock price. The last few months, how should we think about the size and cadence of share repurchase in 2020.
Sure. So the fundamentals of our share repurchase philosophy haven't changed in terms of.
Focusing on intrinsic value and ensuring we're not buying at what we believe above what we believe intrinsic value is also with with the general.
Expectation to stay most of the time, although not all at the time within our leverage guidance of three to three and a half times I will take a second here to note that you'll see the leverage number in the press release is around 3.1, which would bring it in at the low end about range.
If you think about that excluding Calcimimetic switch I think is a better way to think about it it would put it at the higher end of our range.
But oh with all that said our philosophy on buybacks has not changed I think what has changed since we spoke to you in November is the stock is up from the high Fiftys low sixtys to now in the eighties and that does impact our share buyback thinking really into fundamental ways.
One is that deep the dollars, we would apply to share buybacks will just by DAC, many fewer shares because the stock prices up and second as as we think about intrinsic value.
And comparing that to where the stock is this the where the stock is will fundamentally impact how we think about buybacks. So we're not we're not going to give you any any fore sight in what we plan to do we've always shied away from that but I wanted to give you a kind of a bit of an update.
They are on how we're thinking about things.
Great appreciate the color and then second question on the home dialysis from the mandatory model from the executive order was supposed to go into effect last month and now that's delayed are you hearing anything out of DCM why that model got delayed and does a temporary or even permanent delay of the model impact your strategy to increase home penetration.
No in general I think the executive order or had a lot in it and they asked for comments in the community was very United on its views and so we are glad that the administration taken its time, because we want a good.
Outcome, rather than meaning a deadline and no to the other question, which is well policy of course impact at the end of the day, the patient and physician pick them modality, and that's what's driving the movement to home people picking it or not picking it as opposed to any policy changes.
At this juncture.
Okay, great. Thanks, Thank you.
The next question will come from Steve.
With Goldman Sachs. Your line is.
Good afternoon, guys. Thanks for the question.
Just wanted to go back to the 2021 rule change I guess, some more I'm struggling with the idea that penetration of the us or de patients should reach the overall market is just this notion that today and they penetration of yesterday patients is there any 25% for the market at large despite the fact that they can't freely enroll in the plan so wouldn't that tell us that.
Spaceship panel, probably prefers that may and that penetration could exceed 35% overtime and I guess I know, we're still anchoring to that but looks like CMS last week with the changes in the advance notice for M&A rights to their forecast up too.
33, and 21, and then going to 42.
41 by 22, 2024 that 42 thereafter, so obviously a much much more optimistic outlook than you guys have any thoughts on those those pieces there.
Yeah, Steve I think of that all of the opinions are quite reasonable and we don't per claim to be right. We're all staring at the same data as to.
Economics deductibles out of pocket Mac.
Sort of coordination of care networks, a narrow networks or broader network.
And so.
When we put all the variables in place. We just think that in general we think that it'll take a little bit longer for people to settle in to the choice than others and think that it'll be what I'd call. It very efficient and effective market and we of course couldn't be wrong.
And so there is that range that is let's call. It the low base case in the high case and and we don't have any additional insights that you or CMS.
Does it.
There's no there's no detailed information that we're relying on.
Helpful. Okay, and then just heard correctly in terms of making sure you're patients or where there are options I imagine that applies to all states regardless of whether you know there's guaranteed issue for med supp or not is that correct.
Yes.
Okay, and then I guess I wanted to also ask about and other part of that proposed rule to the extent you guys have time to go through all this but the the network adequacy proposals.
There's a few things in there I won't go through all of them here, but.
Some could be presumably read as maybe mitigating some of the market power in dialysis.
How do you guys think about that dynamic in general.
Yeah, I guess I I leave it open ended there I don't want to discuss it this way any or share maybe I guess.
[laughter].
I appreciate Steve obviously.
Network adequacy is critical in any disease state when when you are signing up for product do you want to make sure that it's got coverage so that.
You end up signing up and then you have.
Yes, our D. you don't end up having some kind of restricted networks and and of course it matters, whether it's in there or not the plans had been quite vocal and from our perspective, what we want to do is going back to our conversation earlier is we want to change the dynamics with our payer partners so that they see what.
We're doing and how we're adding value so that they do you want to contract with us in a way that it's a win win.
Perfect helpful. Maybe one more on this and then I'll yield just.
Going back to the treatment deltas.
Her see for service I guess I appreciate that you guys don't want to give a certain difference but.
Maybe you can comment or how much variability there isn't that spread and what factors dictate his willingness to contract for lower versus higher spreads is different I may plants.
Well I appreciate the question, Steve, but I think you probably know it had low odds of being answered.
[laughter] every plan is staring right now as to how they want to contract.
With us and actually even if I try to answer it it'd be helpful.
The the contract is very specific to each plan and their ability to take risk and our ability to take risk and and so it's very specific.
Unfortunately, I can't give you more more detail that.
That's fine thanks, a lot I appreciate it thank you.
Your next question will come from Whitney.
Your line is now.
Hey, Thanks. Good afternoon, just a couple of here on on Calcimimetic, you're guiding to 40 to 70 million of O Y. This year, 50% of that is falling in the first quarter, which implies about 25% of today's run rate of $220 million in the first quarter. So average.
I guess, what you're basing that on is that because that based off of.
ASP for the quarter today.
How much visibility do you have into the first quarter contribution at this point I guess is what I'm asking.
We've got pretty good visibility with the S.P. number came out I think in December.
I'm not perfect visibility, but so on Q1, we've got we've got that the trajectory of what that looks like going forward, though we is where we don't have person perfect visibility and we won't know ASP for Q2 for a little bit awhile now.
So it looks like that's about a 60% sequential decline all the fourth quarter free SP is that right.
Well done what we're we're.
You know.
Even though there are other with their other factors that go into that in terms of the cost declined the changing mix between sensipar on parse the bid and parsabiv cost cost differential so I'm not sure you can get as clean a number as you'd like from that but.
Is it coming up presumably the ASP numbers available. So can you disclose what it is for the quarter, it's down a a little bit more than 40%.
Okay.
Okay. So some other factor would be.
Driving your your cost opt to lower the a wide by 60%.
They are well there's there's there are other factors besides cost because there's a mix issue between the oral in the IB is well Yep Yep Yep Yep got it got it got it okay.
That's that's and thinking about that the the remaining.
$50 million or or about 50 million, but the remaining earnings how do you I mean, how are we how should we think about the progression of that earnings is it.
Fall.
Ratably throughout the year on an interest in any any help on that I know you you have is about as much visibility into this is as we do yeah. If you think about it getting cut in half to each quarter going forward, that's a reasonable.
Algorithm to use and then it goes to zero by the end of the year.
Okay.
It does that that's not a prediction that's just to help you all of your modeling. Yeah is is there a scenario where by the time.
The industry sort of sees the benefit of Calcimimetic zero out that you are still carrying some level of earnings from Calcimimetic given that you know you presumably than buying below the market for some time.
Unlikely.
Just because the numbers get so small in terms of the cost.
I think that the more interesting question about calcimimetic.
Ultimately how it gets bundled handle the two dapper stuff will play out relatively quickly.
Okay, just a a couple other quick ones are just back to the the knack guidance from one and a half the two and a half that does imply some level of T. Celleration just Joe maybe in any factors influencing your decision to to bring the the range down.
Let me grab that this is how they're we continued to to look at the macro ranges and we just think that that is the right place. The land, we're continuing to invest in our missions in or I.D. and all are operation to simplify please.
<unk>.
Placement, but at the end of the day, what we're focusing is ensuring that we have.
You know the disciplined and Capitol, so that we have profitable growth and so we're not going to change volume. It's just not the right thing for us and so we're we're a comfortable with that range of one to have two and a half.
Okay. Thanks.
And and just as an F.Y.I. my memory has any right that is not a change from capital markets. We had at one half the two and a half, but but I could be wrong, so let's check that.
The next question <unk>.
Cheap airline.
Hi, Good evening, just a couple questions or less for me I'm. The first is going back to.
Yeah. The question about the E.T.C. the mandatory demonstration that's.
Been delayed <unk> do you have any visibility on when that would start are you incurring any costs to prepare for it and I presume.
Model had some dallas's center reimbursement cuts, which you could potentially you know or in back. Since this is delayed you know any potential financial impact is is not contemplated in in the 2020 guides.
The short answer is we do not have any more information than any of you. We were giving an opportunity just like all providers to give our opinions and inside and we did and they're processing that we have not heard back we are not encourage any costs right now associated with it and it.
Not in bed in our guys. So right now you're even.
Even if you will there's no change it right. Thanks.
The last one to Joel I, just wondered if you would perhaps just review and clarify for us on.
Either an E.P.S. basis for a dollar basis, what actually is in 2020 for advocacy cost because I know in the third quarter you bump that up you know 50 cents or call it 87 million.
Tax, but that I think was on top of what you view as your recurring sorta normal advocacy, but then with the 80 to 90.
<unk>, maybe some of that costs came back in your direction. So maybe just some help on when we think about the 2020 guide how much above sort of your what you'd call. Your normal advocacy spend as is built into 2022.
Sure show Nothing's really changed in that carried there there hasn't been any interplay between 2020 ballot initiatives spending 80 to 90, they're pretty independent. So the 50 cents per share is the right number a match over and above the 30 million baseline that we plan just.
Band year, and you're out the one correction I would make to your numbers is dish ballot initiative costs is not tax deductible. So you're 87 million pretax is is overstated because I. My guess is you got to that calculation, assuming this with tax.
Deductible, Yeah, <unk> I recall, he told us that now some more like 60 65 million range, probably so we're we're sticking with 50 cents a share so.
Alright.
Thank you.
The next question is from Justin Lake.
Windfall for instance airline is now.
Thanks.
Just the road run through what's left on my question list your thoughts or do you guys. So first on the cash available for deployment urine.
I think if recollection is correct you guys typically want to run around $500 million with the parent the quarter on T.V.
Think about you guys, having another 500 million give or take.
I think it boiled cash from at your end is that right. Yeah. That's about right 500 million is is typically what we want to have in the system. So yeah, the 600 million.
The number above that.
Okay.
<unk> Yeah go you spend time talking about the intrinsic value kind of coming in so <unk> and giving you. The you know a tremendous amount a brief rode a really attractive place for the benefit of shareholders now that the stocks in the eighties. It looks like you bought a little bit less bucks at those levels is there anything was read into your.
View of the intrinsic value.
Here at the current price and how you expect to buy back stock could you give us a kind of.
And update yeah. We're we we've never really been willing to talk about what our views of intrinsic value are at any moment in time and I don't expect to deviate from that here.
I think the one thing I would point out is intrinsic value is a moving target, it's not something that stays static and it's impacted by our results and it can be impacted by our buybacks and everything else. So I think what are what our views of intrinsic value worst six months ago.
<unk> the same as their views them intrinsic value today.
One dynamic just <unk> rarely talked about publicly also is that we have big blackout period.
And and then you have plans and you have restrictions and whatnot and so what you Wanna.
Do is not look at one quarter or two quarters, but overall what is our track record I think you see our track record over time.
Fluid Ah consistent with what Joseph.
A dog absolutely Nissans banks and then just quickly on your commercial mix.
It was down 20 basis points your every year, but not really immature real impact on revenue per tree, but.
Can you just give us some more color are not getting I'll keep that metric of.
Yeah look not every commercial pay or is is created equal and if the mix comes from payers with lower rates. It has much less impact on our our P.T. then.
Then a pay or who's at an average rate.
And so would you say this is you know.
Instead of it being just kind of normal aging in a population type of thing did you proactively kind of walk away for some time trials, but will lower lower price or was that just kind of you know the way things fell.
I would say that what Joe started off with on on on earlier question.
Holes with the there's no new dynamic and sort of the ecosystem slash negotiation is is a relatively stable.
No Big you know decision one way or another in the world played out the way that.
Okay. Just a few couple others here one up so just to make sure. We understand you you're not giving away guide and what you back to People's question on margins core margins X. kind of moving parts are down a little bit. Your every year revenues up a little bit some kind of course.
Oh why.
Oh it acts calcium may exchange and things like that are is effectively flat. Your every year and your would then you're gone is that a reasonable way to think about.
[noise], you know I'm reluctant to get drawn into the O.Y. guidance question, because we're not guiding I know why that shed.
<unk>.
Again, you can look into range is top down or bottoms up I would say, it's fair to say that at the middle of the range is you should expect some oh I grows year over year.
Core like X., we're getting rich with margin compression, which would say, it's not going to grow it's a rate of revenue.
Okay.
Just <unk> core excluding calcimimetic and other stuff their noise.
Yeah, and then maybe quit commentary I think <unk> the industry was going to run its own ballot initiative in California, and then decided to back off that there was some reason Ah.
Why you decided to back off or do I have that wrong.
Oh, no you have it right and I think the right way to think about adjusting it very early on you have to explore all your options and so there's some filing restrictions et cetera. So we we're exploring or option may making sure that we had everything at our disposal after evaluating it.
We did not think that that was something that we should pursue it it's not in the best interests of our strategy and it's cleaner to go right. After it literally straight at it as opposed to doing and countermeasure.
Okay. Thanks for all the time guess.
Thank you just.
The next question will come from Maggie Chang with bank of China.
Okay.
Thank you for taking my call. My question is what is <unk> I see that the about 240 points enters into intonation now and so 2018 I'm not sure <unk> goes out.
In 2000 routine.
Sure so our our priorities for international or similar to our priorities in the U.S. switches capital efficient growth. We we continue to see it as a growth business. We've continued to deployed capital there in the markets that we see is having the best opportunities and those are opportunity.
These where we can either acquire things that attractive rage or build didn't know blows it attractive rates and where we have an opportunity to add value. So gross in 19 was.
Relatively in line with our expectations, we see 2020, continuing along that path.
Okay.
The <unk> the international business do you expect to be just because.
<unk> would have different type of green personal assistant affordability and customized.
Town <unk>, what do you expect the international positive better team faces Joe Cole.
Yes.
I think that'll very very much country by country. As you noted some some countries have better reimbursement others last show. So I think it'll be a bit of a mix and where it winds up relative to the U.S. will depend a lot on the different mixing the different.
Trees, and and where we choose to prioritize our investments.
It's hard to predict now what the ultimate margin will be relative to the U.S. margin.
Okay, and you know it seems that the the revenue coming from the international it's actually about Ah, 4.5%, Hi Tech acrylics purely look at two for 2018 places to for 2019.
Sunday intonation imagine, even 6.4 or 5% so that seems to be brightest <unk> you know aggregate that'd be good around 227%.
So do you think they will continue to approach.
Dishing out, particularly in China, <unk>, we do see you know.
<unk>.
So yes, I do think we're going to continue to invest in international whether it it grows faster than the U.S.. We're we're not giving specific guidance on that although I think looking at the past is a reasonable guide to the future there so yes.
I see and then in terms of your ensure so print in Asia, I see Oh, I see punches and senior centers in Taiwan, and China and you also working with like he had to change me <unk>, which are this nor do and how do you approach.
Oh, great to China.
So we we generally don't get into too much detail on on any individual country. So I'm going to pass on that one.
Thank you.
Thank you imagine.
Because there are no question.
Well I want to think you're all for investing that time, we look forward to talk me again, and we're going to do our hardest to deliver on all that we committed.
Q and talk again soon.
Thank you for your participation you may not.