Q2 2025 DaVita Inc Earnings Call
Good evening. My name is Michelle and I will be your conference facilitator. Today at this time I would like to welcome everyone to the DaVita second quarter, 2025 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, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star. Then the number 2.
Thank you, Mr. License, you may begin your conference
Thank you and Welcome to our second quarter conference call. We appreciate your continued interest in our company.
I'm Nicholas group, vice president of investor relations. And joining me today are Javier Rodriguez our CEO and Joel Akerman. Our CFO.
Please note that during this call, we may make forward-looking statements within the meaning of the federal securities laws. All of these statements are subject to known and unknown risks and uncertainties that could cause the 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 second quarter earnings press release and our SEC filings, including our most recent annual report on Form 10-K, all subsequent quarterly reports on Form 10-Q, and other subsequent filings that we may make with the SEC.
Measures to the most comparable. Gaap Financial measures is included in our earnings, press release furnished to the SEC, and available on our website. I will now turn the call over to Javier Rodriguez.
Thank you, Nick, and thank you for joining the call today.
We are pleased to report another solid quarter where our focus on providing exceptional care for our patients and fostering a positive experience for our caregivers, continue to drive results.
We delivered on our financial commitments supported by strong clinical performance and discipline and execution across our businesses.
Today I will share the highlights of our second quarter results offer insights on key policy development, discuss the evolving landscape of device Innovation and finish by sharing our outlook for the rest of the year.
But first, as always, let's begin with a clinical highlight.
While I usually focus on a specific clinical achievement today. I want to take a step back and reflect on the exciting opportunities ahead for DaVita in the Kidney Care community.
To offer some historical perspective in the 2. Decades. Leading up to co 19 pandemic. The Kidney Care Community made remarkable clinical strides.
advances in technology and pharmaceuticals combined, with the adoption of more standardized care led to improved outcomes in significant reductions in mortality rates
Then came Co A disruption that impacted not only operations, but also the health Acuity of our patients.
Yet from where we stand today, I am optimistic about what's ahead and I believe we're entering a new wave of clinical Innovation that holds exciting potential for the patients. We serve
breakthrough Technologies from advanced IT systems to the transformative power of artificial intelligence. Our position to help us personalize care in unprecedented ways.
Greater adoption of new drug classes, like glp1 and sglt2s along with the Next Generation devices, that improve the clearance of middle-sized, molecules offer the potential to extend life and ease recovery from dialysis.
Prior to these tools, the Kidney Care Community is positioned to once again improve clinical outcomes.
We have the opportunity to lower mortality, enhance the quality of life of our patients and deliver better care.
Of course, this Evolution will take time and investment.
But we're moving forward with conviction grounded in our vision of an unwavering pursuit of a healthier tomorrow.
Let me transition. Now to our second quarter performance,
adjusted operating income and adjusted earnings per share came in slightly ahead of our expectation.
These results are indicative of two important themes that we highlighted last quarter and which continued to resonate strongly today.
The First theme is our ability to deliver on our commitment of 3 to 7% adjusted oi growth despite not yet achieving our volume growth objectives.
This was evident during the second quarter where the strong performance in patient care costs more than offset cyber related weakness in revenue for treatment and volume.
That said improving volume remains a primary focus and we continue to believe we will return a 2% annual treatment growth over time.
While the rebound takes shape, we're executing against other opportunities to achieve our long-term operating income and EPS targets.
Our proven track record of managing costs across our operations, coupled with our significant investment in systems and IT in recent years, gives us confidence that we can achieve cost savings that offset current volume weakness.
The second theme, I want to highlight is the resilience of our business to navigate environmental and unexpected challenges.
We're now roughly 3 months out from our onset of the Cyber incident. We discussed last quarter.
So let me provide more detail on our recovery and Associated Financial impact.
Operationally. We continue to provide uninterrupted, patient care.
The financial impact incurred can be split into 2 high-level categories.
The first is discrete costs associated with the incident such as outside. Consultants, technology costs, legal costs, Etc.
In the second quarter, those costs were approximately 13 million in our excluded from second quarter adjusted operating income as non-gaap expenses.
Category is the impact on treatment volume and revenue per treatment, due to lower patient admissions, increased missed treatments, and lower expected. Yield on claims for treatment this quarter among other things.
Aside from the continued impact of the lower census from Lost admin opportunities.
We believe the impact of the Cyber event is largely behind us, and there will be limited ongoing effect to adjusted results.
Joel will provide more color on these Dynamics.
I'll now transition to providing a few policy updates last quarter. We provided an update on various policy changes, including tariffs, Medicaid cuts, and qualified health plans.
Although Congress has passed further legislation and each of these topics remains fluid, our estimates of the impact of these items. On the Vita remains unchanged from last quarter.
Additionally, in late June, CMS, published the 2026 ESRD proposed rule.
The approximate 2%, increase from dialysis rate was in line with our expectations.
Yet much like recent years.
Continues to fall short of actual inflation experienced by diosys provider.
As a reminder.
The Medicare rate is subject to an incremental update in the final rule later this year.
1 final topic. Before I move on to guidance, there's a lot of discussion and energy in the industry. Regarding new technology to the United States, to improve clinical outcomes, through better, clearance of middle-sized, molecules during dialysis
High volume heo. Dial filtration or hdf is 1 example of this technology.
We actively Champion clinical Innovation that can improve patient outcomes in quality of life and these Technologies offer promising potential.
In terms of where we stand today, we are active with a number of work streams. This includes monitoring existing and future clinical studies to assess the efficacy of various solutions.
Including not only hcf machines but Advanced dialyzers, which may provide similar clinical outcomes.
As more clinical evidence comes to light, we will listen to Physicians preferences.
And finally, we're assessing the operational implications of each innovation.
With consideration of clinical outcomes and health economics.
So there's a lot to be excited about but still a lot to learn. We remain committed to staying at the Forefront of clinical Innovation and we're energized by the opportunity to deliver even better care. For the patients. We serve
Looking ahead to the remainder of the Year. We're reaffirming our guidance range for adjusted operating income of 2.01 billion to 2.16 billion and our adjusted earnings per share range of 10.20 to $11.30 despite the negative impact of the Cyber incident.
Furthermore, we continue to have confidence in our ability to deliver adjusted operating income and adjusted EPS growth consistent with our long-term guidance.
I will now turn it over to Joel to discuss our financial performance and Outlook in more detail.
Thank you, Javier.
Second quarter adjusted. Operating income was 551 million. Adjusted earnings per share was $2.95 and free. Cash flow was $157 Million.
I'll provide detail on the individual components of our results. Beginning with us, dialysis.
Starting with treatment volume.
Us treatments per day, declined 1.1% versus the second quarter of 2024, which was approximately 50 basis points, below our expectations for the quarter.
The weakness was largely the result of a higher than expected mistreatment rate. We believe that the Cyber outage was the primary driver, but it's difficult to differentiate between impacts from cyber and other underlying trends.
In light of the higher than expected mistreatment rate. In Q2, we've increased our expectations for mistreatment rate for the remainder of the Year. Thereby lowering, our expectations for full year treatment volume
We now anticipate a year-over-year decline of 75 to 100 basis points as compared to our previous guide of down 50 basis points.
And not treatments per day or non-acquired growth.
Moving on to revenue per treatment, rpt increased approximately $4.50 versus the first quarter.
This typical sequential step-up is due to higher patient responsibility for co-pays and deductibles in Q1.
The overall increase was below our expectations primarily related to the Cyber incident in April.
our PT for the quarter was also negatively impacted versus our expectations, by lower dispensing volumes of binders,
As a result of these 2 Dynamics. We now expect full year rpt, growth near the lower end of our original range, of 4, and a half, to 5, and a half percent.
Moving on to patient care costs.
Pcc's per treatment declined by approximately $3.50 sequentially.
this was primarily the result of 3 factors first is higher treatment, count compared to q1
second is improved labor productivity in our centers and third is binders. As I mentioned before, binder dispensing volume was below our expectations and down from q1.
We anticipate the outperformance in patient. Care costs to continue for the rest of the year. Resulting in a full year, increase of 5 to 6% versus 2024 better than our original expectations.
Back half of the year as a result, our full year adjusted Oh I expectation from the addition of binders to the bundled remains unchanged at approximately $50 million.
International adjusted operating income increased $6 million versus the first quarter, primarily due to a one time benefit.
We are excited that the fourth and final of the Latin American acquisitions related to clinics in Brazil closed last week.
Integrated kidney care or eye case see our value based care business had adjusted operating income of $26 million in the second quarter.
K C benefited from approximately $40 million of revenue that we expected to recognize later this year.
This reflects a timing benefit for the second quarter and has no impact on our full year expectations.
Transitioning to capital structure.
During the second quarter, we repurchased 3.1 million shares and we repurchased an additional 2.7 million shares since the end of the quarter.
We finished the quarter with a leverage ratio of 3.34 times consolidated EBITDA, which is up from Q1, but still comfortably within our target range.
In May we raised $1 billion of senior unsecured debt and in July we repriced, our term loan b, reducing the spread by 25 basis points and raised an additional $250 million, which we used to pay down a portion of our term loan a.
These transactions represent our continuous efforts to optimize our interest rates maturities and liquidity all within our existing capital allocation philosophy.
Let me now turn to our expectations for full year 'twenty twenty-five as Javier noted we are reiterating our full year adjusted operating income and adjusted earnings per share guidance ranges as reflected in our press release, we are confident that we can continue to deliver results.
System with our 2025 and long term guidance, while caring intensely for our patients and teammates and investing in our future.
That concludes my prepared remarks for today operator, please open the call for Q&A.
Thank you Sir 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 our first caller is Andrew Mok with Barclays. You May go ahead Sir.
Hi, Good afternoon I appreciate all the color on guidance.
Can you give us a sense for how census, and treatments track following the cyber attack and attack and how youre thinking about volumes in the back half because on the one hand, you signaled there wouldn't be an ongoing impact, but then you assumed I think elevated miss treatments persist for the back half of the year and revise the treatment growth outlook. So maybe just help us understand how you're thinking about that.
Thanks.
Thanks, Andrew This is Javier before Joe gets into explaining that very important because there's a lot of dynamics going on in treatment volume I think on the simple side. So we can start at 10000 feet.
The year is going as expected with the exception of two significant.
Items, which is a severe flu season.
In the cyber incident.
And that of course.
It puts all those dynamics that you highlighted in play.
Sometimes it's just easier to start with a high level before you get into the detail. So now Joe if you can bridge all those questions sure.
So Andrew.
Andrew Let me try and unpack this for you so.
During the call last quarter, we anticipated.
Challenges on the admin side associated with the cyber attack of of a few hundred 500, 600 admits and that has played out largely as we expected we saw that the challenges for a few weeks, but everything has normalized.
Since then.
What we did not anticipate was a spike in Ms treatment rates, which.
Is a number that tends to follow.
<unk> seasonal pattern high in Q1 down in Q2, and Q3, and then back up in Q4.
Q1 was higher than normal associated with the flu and we expected it to come down.
Along a typical curve in Q2, and that's not what we saw it was elevated in April and actually even worse in May and then came back down in June although not as far as we would normally expect so we saw a big jump in this treatment rates.
In Q2 year over year, which we attribute to the cyber incident.
And as a result of that dynamic.
We decided to change our view on mistreatment right for the back half of the year, where previously we had thought it would come down a bit relative to 2024, given the challenges we've seen in the first half of the year due to both flu and cyber we updated Ara.
Assumptions and assume this treatment rate is roughly flat relative to last year for.
For the back half of the year. So that's the math I'll remind you were talking about <unk>.
0.1% Delta roughly so we're really focusing in on numbers in the tighter you get the harder it is.
To really call out depreciation, but that's the dynamic. So if you think about the change in guide on volume growth from negative 50 bps to negative 75 to negative 100, its pretty much all about a higher missed treatment rate partially in <unk>.
Q2, partially in the back half of the year.
Great and maybe just a few follow ups on phosphate binders first can you give us the phosphate binder contribution to RPT and CPT in the quarter and why was the dispensing volumes lower in the quarter is that due to the lower treatments or did the mix of patients on binders go down. Thanks.
Yeah. So on the on the volume side, it's about a.
The reduction in the number of scripts, it's not a mix issue.
What what we believe is happening is.
Adherence is not what we expected some patients are getting their binders through other means outside of Davita and some are just relying on.
Over the counter solutions, so volume is lower than expected in terms of contribution to RPT and C. P T.
RPT number with someone in somewhere in the low eights.
C. P T was in the high sixes.
Okay.
Great. Thank you every one of the things that you might not be familiar with or are there people on the call.
For these binders the pill burden pretty heavy.
So there's also some inherent tissue around that because you have to take the pill with a meal.
There is there is some leakage in that dynamic.
Great. Thanks for all the color.
Thank you.
Thank you our next caller is Peter Chickering with Deutsche Bank.
Hey, good afternoon, guys I guess starting off on the operating income guidance can you talk British how you're maintaining the guidance from last quarter with treatment growth getting worse.
His treatments in revenue per treatment at the lower end.
All other guidance can you sort of walk us through how you are sort of getting there is it is it from cost of quote unquote encore kidney better.
National or ITC, just how enbridge to me, there's two negative moving parts and how we're how we're maintaining operating income guidance.
Yeah generally it's two components by far the biggest one is cost per treatment.
And that's largely a labor dynamic in U S dialysis and the other is on international which was.
Roughly $10 million ahead of plan for the quarter largely non recurring so I wouldn't annualize that in the back half of the year.
Okay and then.
With the updated treatment growth.
<unk> 75 basis points 100 basis points first half year was down 70, so to get to the midpoint of range. We're now down one 1% in the back half of the year can you just talk to us about incidents mortality in transplants.
And then on the Ms treatment side.
Why would they be structural because you know I get this I get the flu in the first quarter and I get cyber security in the second quarter, but generally these patients need treatment is otherwise they die so how can miss treatments become a structural headwind.
Yeah.
Yeah. So let me start with the mistreatment right Ms treatment rate is a number that varies it has been elevated since COVID-19.
Roughly it peaked at about 1% worse than the pre COVID-19 levels in 2022, and we had expected it to come down since then and it did it was down in 'twenty three and 'twenty four it's back up again this year and I think your your point is.
Very reasonable one but again, we're talking about.
<unk>, maybe 1% maybe 15 bps, so I think.
We're comfortable with just keeping it flat relative to 2014.
Wouldn't say, it's a structural issue, but just our anticipation for the next couple of quarters, we brought it down.
A bit.
<unk>.
Let me fill out some of the other dynamics, which is really about add Mitch and mortality. So admit in Q2 was negatively impacted by cyber roughly in line with what we expected excluding that it would've been.
Our normal admit month showing year over year growth similar to what we've seen most quarters over the last few years.
Mortality again mortality remains elevated.
But consistent with what we saw in Q2 of last year.
So the the excess excess mortality we saw in Q1 from flu has come back down, but the overall mortality level.
<unk> remains higher than pre COVID-19, but consistent with last year.
Okay, great. Thanks, I'll jump back in the queue.
Peter one of the things Thats really important because sometimes the interests of being simple people talk about the teekay depopulation in GOP ones and the impact upstream.
We are not seeing it in the admit.
It's really important what you asked because it's this mortality and Mitch treatments dynamic that really needs to be rectified.
As you mentioned Miss treatments are a little trickier, but mortality we have a three pronged plan to work on it it will take some time to get there, but at the end of the day you've heard it in the opening remark, we need better clearance of middle molecule is the first step.
Two on pharma, we need more patients on <unk>.
Barely any patients on them and then number three is we're working on a whole bunch of protocols.
T to make sure that we can predict hospitalization and other things like that but.
But at the end of the day, we need to lower mortality.
Great. Thanks, so much.
Thank you.
Thank you our next caller is AJ rice with UBS.
Oh, hi, everybody.
Maybe ask about the comment on high KC 40 million more in the Q2 and it sounds like you, obviously believe that as a pull forward I wonder.
Can you maybe give us a little more of what happened and why you think that's a pull forward versus potentially a better trend in the underlying business that Mike carryover in the back half of the year.
Yes. So the reason we feel comfortable that it's a pull forward. It is it is all revenue associated with 2020 for plan years and the dynamic is as the data comes in and our App.
To aerial and accounting teams gain confidence that we are actually earned shared savings.
Then we will recognize revenue and our expectation was that we would get that level of clarity in Q3 and Q4, but we.
We were able to get some of the clarity earlier in the year and as a result, we recognized the revenue early but we didn't recognize more revenue than we had expected during the year, which is why it's a timing thing rather than a net positive for the year.
Okay. Thanks, maybe I'll also just ask.
I think in the prepared remarks, you said the cyber attack also had an impact on revenue per treatment I really wasn't.
Maybe I'm missing something that's obvious but it wasn't clear to me why that would occur.
The dynamic there is that something that you think is going to impact the back half as well.
Yeah. So you heard it right a J, we do think the cyber incident had an impact on RPT. We don't think it will impact the second half of the year. There are really two components to this the larger one is impact on revenue for.
<unk> done in Q2 so.
Think about as we're working our way through the cyber incident. Some processes have gone manual some things are us other processes are either delayed or not being done if I had to give you a couple of examples here it would be something like prior authorizations or.
Sure.
Data gathering of certain elements that you had won on a claim.
And as we're working either manually or in a delayed fashion. We expect some of the claims that would normally get approved we will not get approved for Q2. So that's the bigger chunk the smaller chunk relates to older claim.
<unk> that were in the queue that had been previously denied and we're now working to get them reapproved, either gathering information that wasn't on the claim or updating coverage that that had changed and just as.
As time moves on it gets harder and harder to collect on those claims and so we think the the impact of the cyber incident.
Systems and other processes will lower our ultimate yield and basically increased bad debt on some of those older claims.
Okay, alright, thanks, a lot.
Yeah.
Thank you. Our next caller is Justin Lake with Wolfe Research you May go ahead Sir.
Thanks I appreciate it just.
Just a few numbers questions for me.
Joel I think you said last quarter, you expected revenue per treatment ex binders at about 3% for the year.
Curious if you've got an updated assumption on that number.
Yeah, we would peg the number now at around 2.25% for the year and the Big difference really is the RPT impact of that.
Cyber incident.
Even though that was you're saying you think is contained to the quarter. How much was that of an impact to the revenue per treatment in the quarter do you have a number there.
I'd call it $40 million to $50 million.
Great.
Then you talked about the MS treatments in the first half of the year.
And then I think you talked about the second half as being flat year over year, where before you would expected it to be down is that right.
That's right.
And what was the growth year over year I missed treatments in the first half.
Just trying to get a comparison there was a little it was a little worse in Q1 than in Q2, but it averaged about 50 bips.
For the first half of the year.
Okay got it.
Then last one for me is just you gave or youre, giving her treatment growth number.
Oh down 75 to 100 bps and that's total treatment growth.
What do you think that equity totaled.
U S treatment or not.
Right, that's total U S treatment growth or Brian.
I think most people, including myself focus on same store non acquired.
What do you think that equates to there.
I would say the same stored non acquired number would be roughly down 50 bps.
Okay. So on a non acquired basis, you're expecting things to get a little bit better than the second quarter.
Look more like the first quarter and that's because you think the second quarter cyber attack kind of filters throw in is done.
Why do you expect it to get better than the first half.
Yeah.
I don't think Mag is a great number for modeling.
Yes.
So.
A little reluctant to answer your question remember year over year growth also depends on the shape of.
The census trend from the prior year. So you can't just rely on quarter over quarter numbers, but I would say.
<unk> growth in the back half of the year you'd you'd expect it to be.
Worse in Q3, and then better in Q4.
Got it thanks.
Thank you once again, if you would like to ask a question you May Press Star One our next caller is Kevin Fischbeck with Bank of America. You May go ahead Sir.
Great. Thanks.
I wanted to ask another question about the volumes I guess in particular.
The increase mortality I appreciate the comments about some of the things that you guys are planning to do to address it but it's still not clear to me why we have a higher mortality issue to begin with because I guess higher mortality implies something that is it.
Above where it was pre COVID-19. So the issue that you do you address you singled out kind of sound like newer options to potentially address the issue rather than something went backwards and we're going to get it back to where it was it's more that it's elevated and now you have new tools to potentially bring it down so I'm trying to figure out why mortality in your view.
Persistently.
Elevated versus where it was historically.
Yeah. Thanks for the question, Kevin actually the actuarial teams are asking that across the country, because not just elevated and kidney, but it's elevated and all disease state.
Hi processes is that Covid had an impact.
Number one on just a delay of care.
And secondly that co morbid conditions and in particular more acutely sick people are dying faster.
So those are the two but theyre hypothesis. There is no real study that can prove that to now I don't know if <unk> seen anything else want to add.
Well first welcome back Kevin.
Look.
<unk> said it right. This is we believe a holdover from Covid and you see it nationally the mortality rate for all cause mortality in the U S is up.
Roughly similar to what Davita sees our mortality is up so it's a national issue, it's not a kidney issue I think the point.
We were trying to emphasize here is we're not passively waiting for the environment to improve although obviously that would help but there are things that we and the rest of the industry can do to improve mortality and this is not a new dynamic this year.
Is really the underpinning of volume growth for the better part of 20 years pre Covid was mortality improvements.
In the dialysis community as a result of things that dialysis providers were able to accomplish.
And then as that.
Helpful. I guess as we think about the three things that you outlined as a way to try to mitigate this I mean, how should we think about the timing of these and when they might expect to impact results.
Yes, the timing will be gradual.
If you look at the better clearance of middle molecule.
HTS or the cutoff dialyzer.
That will take some time to play out.
If you look at pharma and <unk> again here.
Here, we are X years into it and the numbers are in the low teens patients.
The drugs. So also slow and then on the protocols and systems again, they are theyre gradual and they're incremental but its the cumulative portfolio of things that over time has an impact but.
You should think about it in years and not just a couple of quarters.
Okay, and then I guess, maybe the last question. It sounded like you know the story for the quarter as you obviously had some headwinds from volume headwinds from pricing, but you were able to offset it on the cost side of things.
Are these cost initiatives things that you can still pull even when volumes come back I mean, it's it's been impressive to see the cost control. The last few years does that mean when volumes.
Do you start to come back that you should be.
Growing even faster than the three to seven O I or like is it. It seems that you can maintain this cost control then.
There's a lot of opportunity once volumes normalize.
Well, we've taken a lot of pride in our operational excellence discipline, and we're always looking for variable that can move the needle.
The short answer is of course.
No because it depends on what volume pickups et cetera, but I.
Our hope and our strategy right now is that we will continue the sufficiency and of course as technology advances.
Think we can make it happen.
But there's no inherent.
Roadblock to controlling cost if volumes are growing.
There's nothing like no obvious okay.
Alright perfect. Thanks.
Thank you.
Thank you our next caller is Ryan Langston with TD Cowen you May go ahead Sir.
Thanks, Good evening, maybe just to Kevin's question, a little bit more I guess on the patient care cost any specifics on what's sort of driving that performance and I guess I think it sounds like you are.
Expecting this to continue through the rest of the year. If that's true is there really any reason why we shouldnt expect us to carry into next year.
The main driver.
Joe said is productivity and if you were going to double click because as you know productivity has a lot of variables in there.
You would say that our teammates are staying longer.
Retention is a bit better and our training costs have come down a bit.
We are more effective at putting people in their jobs.
Effectively quicker.
Got it and then just lastly, I guess on the cyber incident does this have any sort of impact on longer term spending sort of expectations in terms of hardware software or anything you might.
We need to invest in just to mitigate the chances of this happening again thanks.
It's a it's a marginal costs look at the end of the day.
Cyber criminals are quite sophisticated and they keep reinventing themselves and so.
The corporations and the industry has to continue to innovate ourselves.
So we've made some investments that we believe to be appropriate and prudent, but I don't think I would call out anything material.
Would you like to go to the next question.
Yes. Please.
Are you done.
Yeah. Good thank you.
Alright, thank you.
Our next caller is Lisa Clive with Bernstein, you May go ahead.
Hi, just a question on the new technologies available in the market.
And this focus on removing larger molecules.
Baxter is there another dialect dialyzer, it's been in the market in the U S for several years and obviously FMC is ramping up there they're HTS rollout.
The rollout for next year.
But there are no Ah and I guess also for HTS, because you've run clinics in Europe too.
How much have you used these technologies in your clinics, thus far and and I suppose.
How are you going to go about really collecting the clinical data running.
Running sort of effectively I assume clinical trials in <unk> and how long do you think it will really take to get an idea of how much of an impact these new technologies can make.
Yes, So let me unpack it and see if I get to all your questions number one.
We are experienced on both.
The H D F in the middle molecule dialyzer.
We are using different brands, so I won't get into what what brand of dialyzer, we are using.
Different countries have different beliefs, and so in countries, where HTS is there sometimes you have almost the entire country there and sometimes you have literally only 20%. So it's got dynamics of clinical practices. It's Scott.
Dynamics of reimbursement and other things.
So as you know the convince study had some very.
Encouraging results on mortality.
And now there is a study in Spain called the mother study and that is literally putting both technology head to head.
At the end of the day, what we want is what's best for the patient and what our physicians and patients want.
But of course, we're watching the science, because it's a lot easier.
The dialyzer than it is to change your fleet of machines and prescriptions and all the other things, but at the end of the day. If that's what the doctors want are that's where the science point of course, we will do it. So we are watching like you are and we're conducting a couple of studies ourselves and we will be building.
As appropriate.
Okay, and just a follow up on the phosphate binders are theres a lot of generics in the market and then there's I guess two newer alternatives are the payloads on that better because I know one of them should be going generic soon or is do you see this is more of an adherence problem.
Rather than a cost problem.
I would say.
Robert Bleed more adherence the mix.
We saw it hasnt changed much between Q1 Q2.
That said look we're only about six months into this so we're still learning.
That said I think from an O.
I stand point, we feel.
Really good about where we are for the year.
The number.
Moving pieces are going down every quarter, so the $50 million of Oi feels like a pretty reasonable estimate for the rest of the year.
Great Thanks for that.
Thank you Lisa Thank you.
And our next caller is Peter Chickering with Deutsche Bank You May go ahead Sir.
Hey, guys. Thanks for let me back in the queue.
Free cash flow I guess tracking about $112 million for the first half of the year, but guidance was reiterated at 1 billion was up like two 5 billion. I guess can you bridge, how you get back to that level of free cash flow in the back half of the year.
<unk>.
Yeah.
Free cash flow is generally lighter in the first half of the year and the cyber incident slowed us down a lot in Q2, so catching up on cyber will be the biggest component I think cash taxes is probably the other thing I'd point to.
Two in the back half of the year that will be significantly better than the first half.
Okay, Great and then on <unk> as big reversal of operating income into Q page.
Patients began growing again I guess, what are you seeing there and what are you assuming the back half of year.
Just because you guys unloaded a bunch of patients in the first quarter or just kind of what what should we expect for ITC in the back half of the year.
So.
Look I Casey was roughly breakeven for the first half of the year, we haven't changed our guide for the year of call. It negative 20 million ish. So that's what you should expect negative 20 over the back half of the year typically Q4.
Should be a better quarter than Q3, although the phasing of.
Oh Ini Casey is is very variable and tough to predict as you can see based on what happened in Q2.
Okay.
A few quick he's here what is your M&A penetration at this point are you still getting positive pricing pressure or pricing tailwind from growth and M&A.
There's really not much to call out any more on MA were roughly moving with the market, there's really very little to of note there.
Okay and then.
On hix subsidies expiring for 2026 can those patients get enrolled the American kidney fund for.
The drop into government reimbursements.
Certainly a possibility yes.
Okay, and then last second last one here what was the commercial mix this quarter any changes to home dialysis.
Immaterial.
Minor minor variability on both so nothing to call out.
Okay, and then my last one here I promise here.
That Berkshire.
Selling him out today was that just part of the normal.
They get to that 45% range and that's what that's what it is that's.
That's exactly right Peter was it was in the normal course, he was pursuing the standstill agreement that we have with them.
Great. Thanks, so much.
Thank you.
Thank you at this time, we are showing no further questions I'll turn the call back over to you.
Okay. Thank you Michelle and thank you all for your time this afternoon.
Highlighted today, we're first and foremost committed to providing exceptional care for our patients.
We achieve our clinical objectives, our financial performance will follow.
Thank you all for joining the call and be well.
Thank you. This concludes today's conference call you May go ahead and disconnect at this time.