Ladies and gentlemen, thank you for standing by. I'm Timo your Chorus Call operator. Welcome and thank you for joining the Fresenius Medical Care Report on the First Quarter 2023 Earnings Results. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Dominik, Head of Investor Relations. Please go ahead sir.

Thank you, Timo. As mentioned by Tim, we would like to welcome you to our earnings call for the first quarter in 2023. We appreciate you joining today to discuss the performance for the first quarter. I will as always start out the call by mentioning our cautionary language that is in our safe harbor statement as well as in our presentation and in all the materials that we have distributed earlier today. For further details concerning risks and uncertainties please refer to these documents as well as to our SEC filings. We will try to keep the presentation short and leave time for questions that might be new to all of us in the new reporting structure. As always, we would like to limit the number of questions again to two without sub questions in order to give everyone the chance to ask questions. Should there be further questions and time left we can go a second round. It would be great if we could make this work again please. With us today is Helen Giza, our CEO and Chair of the Management Board; and still also our Acting CFO. Before I hand over to Helen, I want to remind everyone that we hosted a virtual Capital Markets Day on April 19th. If you were not able to join the slides and replay from the CMD are both available on our website for watching. With that Helen, the floor is yours.

Thank you, Dominik, and hi everyone. Thank you for joining our presentation today and for your continued interest in Fresenius Medical Care. I'll begin my prepared remarks on slide 5 today. A few weeks ago at our Capital Markets Day, we spoke at length about our operational turnaround to improve profitability. We have a clear aspiration to unlock value as the leading kidney care company and a clear path to achieve that. What I hope came across at the CMD is that we not only have a detailed plan, but we are already executing against these important initiatives. And I would like to highlight some first quarter accomplishments and area of focus before I turn to the quarter's financial performance. Starting with structure, the conversion of the legal form including the preparation of the carve-out and all the administrative filing requirements are progressing as planned. A physical EGM is expected to take place on July 14th and this is an important step towards simplifying and improving our governance structure and strengthening the rights of our free-float shareholders. Our new global operating model with two distinct global segments has been fully in place since January 1st of this year. And in April along with our CMD, we published the historical financials for the financial year 2022, reflecting the new financial reporting format. As acting CFO, I have to say this was a Herculean effort to reorient our entire reporting. And I know that we still owe you the quarterly numbers for 2022 and we'll be providing those soon. Today as promised we are able to present our first quarter results in this simplified reporting format around our two global segments; Care Delivery and Care Enablement. We continue to make progress on our FME25 transformation program. And in the first quarter we…

Thank you, Helen for the very first presentation in the new structure. I'm sure there are many questions and I'll turn it over to Q&A. Timo, could you please open the line?

Thank you. [Operator Instructions] First question is from the line of Victoria Lambert.

Thanks for taking my question. The first one is just on the outlook for wage increases this year. Is this still expected to be around 4% to 5% increases? And then my second question is just on the progress of clinic closures as your guidance for the year is still 50 to 100 closures targeted for the year and how many have you closed so far? Thank you.

Hi, Victoria. Thanks for your questions. Yes, look I think in Q1 we saw this wage inflation around this 4% maybe just a little bit over 4% which seems to be consistent across the industry. And, obviously, when you look at our guidance on labor for 2023, we have this €140 million to €180 million. Q1 looks a little strange because of the quarterly year-over-year comp from Q1 last year where obviously labor was very, very significant due to Omicron. But I think we're seeing the sizing of the labor number as the year-over-year impact holding and in line with our guidance. But I think for the quarter we did see it just a little bit over 4%. In terms of your question on clinics, we're really, really pleased with how that is progressing. We closed already 51 clinics in Q4, Q1, and I think that sizing that we've given a 50 to 100 I think if you take the midpoint of that, that's kind of how we're thinking about that right now.

We can take the next question, please.

Sure. The next question is from the line of Hassan Al-Wakeel with Barclays.

Hi, thank you for taking my questions. I have two please. Firstly, given the better development in patient dynamics in the US, could we see same market treatment growth turning positive in the second quarter? And could this perhaps point to the upper end of the volume growth guidance range being more realistic for the full year? And then secondly, could you talk about the Care Enablement strength and how significant the contribution was from China acute sales and how should we think about margins for the remainder of the year in this business? Thank you.

Thanks, Hassan. As you know, we have one quarter under our belt and we saw that at minus 0.3%. Obviously, it does include the impact of the clinic closures as well as some of the acute unprofitable contracts that we're exiting. I think right now we still feel pretty good regarding our guidance of minus 1% to plus 1%. I'm not going to tighten that guidance yet. I think we just need to see another quarter or two under our belt. But obviously, we're pleased with the development from Q4 to Q1. The – your question on the CE strand, the China impact was roughly around 20 million of operating income in the quarters and obviously – and we saw that as a kind of accelerated pull forward, which we're encouraged by but we obviously, would expect the kind of the forecast that we had for the back of the year now to have already been achieved. I'm not going to give kind of the guidance by quarter on CE and what we're seeing. But obviously, what we outlined at Capital Markets, where – of executing against every component of that. And I know we haven't guided between CD and CE and don't intend to at this stage but very encouraged by the progress in the first quarter, particularly in Care Enablement. But that inflation number is real. As you can see we have over €50 million or so of inflation in Q1 against a guided number that looks to be tracking against that full year.

Very helpful. Thank you.

The next question is from the line of Veronika Dubajova with Citi. Your question, please.

Hi, Helen. Hi, Dominik. Thank you for taking my questions. I have two, please. One Helen, I just wanted to circle back to the wage, overall labor dynamics. Obviously, you commented on inflation. I think the other sort of dynamics that you've been seeing is the switch from temporary to permanent labor. And you also gave us some stats on the openings. As you look through the second and the third quarter, would you expect those open positions to come back down to the historical 2,500 to 3,000? And if that is the case, are you still comfortable with that €140 million to €180 million labor cost headwind that you've assumed for the full year? And then I have a follow-up after that. But that was a lengthy question. So I think we could get it out of the way first.

Okay. Let me hit the labor one. And hi, Veronika, thank you for the question. Look there's a lot of moving parts on labor as I think you can appreciate. What we are seeing and I think consistent with the industry is definitely a decline in the use of contract labor both in kind of traveling nurses if you will as well as a decline in agency. At the same time we're seeing a decline in volume. We're also seeing a decline in hourly rates. I touched on the kind of what we're seeing on the kind of the inflationary aspect if you will. And of that that 4,000 open positions, we are encouraged by that. It's about down 10%, as I said over the last quarter. And those open positions still set at around 50-50 between PCTs and nurses. But we're encouraged with our recruiting efforts there and kind of where the sources are coming from either in referrals or rehires. And on top of that our turnover trends are improving, quarter-over-quarter as well. So look, I think we're on a good track. I still feel good about the €140 million to €180 million. We obviously had assumed that we would be reducing open positions and kind of reducing some of this over the course of the year when we gave guidance. So for now I feel good. And I think we just take this quarter by quarter, as we go through the year. But I think we're seeing it the same way as the industry and obviously encouraged by it.

Okay. That's great. And then my second question is, just on the sort of one-time contribution from China to Crit Care. Apologies, if I missed this in your prepared remarks, but what would the products growth have been excluding that? And do you expect that to reverse out in the rest of the year or just not to recur? Thank you.

Yeah. I didn't say in my prepared remarks, but I think I just answered in the question from Hassan, which was the about €20 million of EBIT impact for the year. Really -- I mean, that's kind of a pull forward of, how we'd forecast might there be a little bit of favorability. We'll see as the rest of the year demand plays out. But yeah, I think that was -- did I answer both aspects of that Veronika?

Yeah. That's perfect. Thank you. Thanks Helen. And thanks Dominik.

Yeah. Thanks.

The next question is from the line of Oliver Metzger with ODDO.

Hi. Good afternoon. Two questions from my side. The first one is also on your U.S. clinics network. So on net base, we were down by 2%. You also made few comments regarding recent closures. That's basically the reflection of the lower volumes. Now, things really seem to normalize. So how should we think conceptually about, your clinic network? Do you regard if we talk about one, two-year horizon by a -- sorry further consultation is still necessary, or do you expect at one point of time isn't some net growth also in the context of the home hemodialysis. And that's also part of my second question because, you mentioned the HHD machines. And how should we think about the output of your machines versus your internal demand? In theory, I would assume you could digest all the machines you produce just only for yourself but you still want to sell some in the open market. So potentially can you give us some more visibility on how we should think about these external sales of the machines?

Yeah. Thanks Oliver for your questions. Look, I think, obviously we had underutilized capacity in our clinic network. And obviously, we are addressing that with the clinic closures and probably still expect some more to happen over the course of the year. At the same time, we want to make sure that we are driving productivity and efficiencies to make sure we're maximizing that overhead structure. So the other piece of this which you touched on is obviously as home now starts to ramp back up. We're really encouraged by what we saw and the increase in training here in the quarter. That will obviously kind of take some of that capacity. So in terms of normalizing, it's been a while since we've talked about normalizing. I think this is just going to get us back to the kind of the plans that we had pre-pandemic which was carefully utilizing the network of both clinics and home not over building and not having too much capacity. So I think from here on in the volumes will naturally take care of itself, and that infrastructure will follow. On your second question regarding HHD, obviously, it's important to us that we have as you mentioned enough machines for our own business but also we have capacity and we have external third-party customers and we don't see that changing. So our goal is to obviously supply as much of the market with our machines as possible. And obviously we've seen some benefit from that this quarter.

One quick follow-up, did you see significant room for an increase of production capacities for HHD machines?

We're not capacity constrained there.

Yeah. Okay. Got it. Thank you.

The next question is from the line of Robert Davies with Morgan Stanley. Your question please.

Hi there. Thanks for taking my questions. Just wanted to pick up on your capacity utilization comment earlier across your clinics, given the sort of clinic numbers you were talking about earlier where do you the utilization of the clinics to be at the end? Are there still going to be certain clinics in the network work actually the utilization is still very low, but you just have to hold on to them for strategic reasons or political reasons where you couldn't exit them? That was my first question. And then the second one was just on I guess the overall profitability guidance over the medium term. I just wonder in terms of kind of current market developments, is there anything that sort of changed your thinking versus what you previously gave out? And what would take you to sort of lower or upper end of that guidance range? Thank you.

Thanks for your question Robert. Look obviously capacity we look across our entire network and in the US across 2,600 clinics. Obviously our utilization has been under what we would have liked it to have been -- if I recall, Bill said we were around 60% at the moment when we gave Capital Markets Day update a couple of weeks ago. Obviously, we continue to want to drive that number up and kind of continue to increase that. So -- but of course, you're right. It does vary state-by-state region-by-region. So if you can appreciate this is a complex overview of the entire network of -- things like network adequacy and so on. And obviously the balance with home. So, it's a number -- we track these clinics clinic-by-clinic. We track the utilization clinic-by-clinic. So, that's really part of the underlying operations and focus on improving our operating leverage. On your second question on guidance and do I change that guidance and what would have to happen to be on the higher end? Look it's Q1. We have a lot of moving parts. I'm pleased with how the first quarter has developed but I'm going to continue to be careful and cautious here and take it quarter-by-quarter and hopefully have more of an update in Q2.

Okay. Thank you.

The next question is from the line of David Adlington with JPMorgan.

Hey guys. Thanks for the question. So, maybe just on the US pricing on the Care Delivery side. I just wonder what you're seeing there obviously on the private side and what your expectations were evolution from here on sort of price mix through the rest of the year? And maybe sort of following on from that, any early thoughts on the proposal for CMS for next year, which will be out fairly shortly?

Hi David. I just want to make sure I understood your question correctly because you said CD and products, but I'm assuming you mean clinic -- assuming you mean CD and Services?

That's correct, sorry.

Yes, that's okay. We're all re-orienting to the new model. So, you're asking what are we assuming for reimbursement and what we're expecting or what we're seeing there in CMS? Obviously, we've had this discussion over the last months in terms of the kind of the mechanisms right for PPS and the cost reports and all things being equal that should hold that when inflation is high and the costs are high you should get that in the reimbursement but obviously with a lag. As you know we have 3% assumed in for this year the MedPAC report that preliminary and kind of feeds into the preliminary PPS suggested a full increase but we'll see how that plays out depending on the CMS logic here. I think it's about July that we start to see a preliminary PPS rate. So, I think by the time we get to Q2 we'll have more of a review on that.

Thanks. I just wonder what you're seeing on the private side as well on the pricing?

On the private side, on the pricing, no, nothing of note I would say. We we're on the cycle of kind of renegotiations with the bigger payers nothing of note for 2023. I think a smaller one at the end of this year but nothing of note to mention on commercial pricing.

Thank you.

The next question is from the line of James Vane-Tempest with Jefferies. Your question please.

Hi, good afternoon. Thanks for taking my questions. It's James Vane-Tempest from Jefferies. Two please. Firstly, a full year I think missed treatments were up, which I understood was somewhat of a mystery. And I was just wondering what you're seeing there and what the reasons were for mistreatments and is that why volumes are better? And second question is just on the portfolio optimization we've seen today, which isn't insignificant. I guess when we look what's more to come from portfolio optimization, would you say that's going to be more streamlining existing businesses, or would you look at other kind of further product development? Thank you.

Let me take your second question first on portfolio optimization. And yes, I acknowledge that the VersiPD write-off is a significant one. And the way I'm thinking about this portfolio and these different buckets is may be four-fold. You've got these initiatives and projects that sit under FME25, which are really kind of this structural operational internal changes, driving efficiencies and savings. Then we've got this bucket, which I would call the R&D product portfolio, of which VersiPD, we've taken a hard look at our portfolio and quickly made the decision to terminate this one. I think this will be the biggest by far. And anything that follows there will be relatively insignificant I think on the portfolio piece on products there. I think we have a good line of sight into what we're doing there and this is by far the largest. Then I think we've got this country bucket. And we've talked about this international services market, where we have said we will exit and divest kind of non-performing or non-profitable markets where we can't make it significant or meaningful difference in the profitability. And that might be because of reimbursement, it maybe for a whole host of reasons. And we are starting to progress on that. I think the challenge with that one is the timing and it's very difficult to phase and forecast when they might happen, but we have clearly identified some markets that we would want to exit. And then I think we've got this fourth bucket, which is really divesting non-core assets. And with those, I would expect to kind of get proceeds in and maybe smaller gains or losses there as we exit those. So look, I think that we're very focused on what those four buckets are and each one is being driven quite differently. We will update as we go through the year. But I think this product one and the R&D portfolio review was critical that we were making sure we were investing in the right portfolio for the future. And then I think we'll continue to update on country exits and sales of non-core assets as we go through the year. In terms of your -- it was your first question on this treatment, we are seeing that improving in the quarter compared to last year but we know it's not yet normalizing or not yet normalized I should say. We have seen promising developments in new starts and less number of mistreatments and patients are staying on the schedule. And I think that's also part of the reason why we have a 160 basis points improvement in our same market treatment growth. But of course, that also includes the fact that we have termination of clinics or clinic closures and the acute contract exits in there. So, I think it's getting better, not yet back to where it was, but promising developments would be my summary.

Thank you.

The next question is from the line of Lisa Clive with AB Bernstein. Your question please.

Hello. Just two questions for me. Number one, DaVita and Medtronic has started this product JV. Baxter is now going to be a stand-alone company. There's a lot of moving parts with the competitive landscape. And given you've discontinued products, so how should we think about the FMC products business from here? You've long been the industry leader, but given the profitability of that business, it sounds like there just hasn't been a lot of focus on new product introductions. And should we expect R&D to go up? Do you expect more commercial intensity from the sort of structural changes amongst your competitors? And then second question, just in terms of new patient start training for home hemodialysis and all that. Thank you for some of the commentary on that. But are you sort of happy that we're kind of back to normal run rate now and should continue on that path? Thanks.

Thanks, Lisa, and I appreciate your questions. Yes, look, obviously, we're watching the market developing in this space with Mosaic and Baxter quite closely. We obviously are cleaning up our own portfolio. VersiPD is a good example of that. We feel we're very focused on improving our profitability. I think that's the big key for us driving through efficiencies internally, but also on pricing externally as well. And Katarzyna I think gave a nice update on that at CMD where we talked about where we have some challenges on profitability and we're focused on that. So we feel good about what we have in our portfolio and what we can do with that. On your second question, on new patient starts and training and home, I mean obviously the labor challenge really sorted our ability to train in the home setting. And to see this bump after many, many quarters where we haven't seen anything is really, really encouraging. And the focus is really back on pulling through the training and the starts in home. So, I hope this is the start of the kind of the acceleration again, that we saw pre-COVID and gets us back on our track to hit our aspiration of 25%.

Great. And just one last follow-up question. Just did you mention the specific -- the actual number of COVID aspects deaths or if not could you give us a number on that?

No. We moved away from that. It's now just all wrapped up in our organic growth number. We -- the number that we have been speaking to and I think it's probably more relevant now than ever is what is the total mortality number. And I think as of February, I don't think we have anything for later than that yet, but the overall mortality number was 18%, which compares to 17% historically. So, I think we're seeing it come down and come down rapidly, but nothing new. And we're not teasing out this excess mortality number going forward.

Okay. Thanks for that.

The next question is from the line of Christoph Gretler with CS. Your question, please.

Thank you, operator. Good afternoon all. Thanks for the presentation. Two questions. One on PD and the other on same-store market growth. On PD, I was a bit surprised by the write-off of the PD cycler program. Could you discuss how you think that will impact your future growth and the achievability of this 25% home dialysis treatment target in midterm? And then the second question is just on excess mortality to follow up on that. I think there was quite a substantial drop of in this 12-month mortality rate particularly internationally in Q2 looking at the comp base. Is it reasonable to assume that we should see some positive growth also in the US from Q2 onwards already?

Yeah. Thanks, Chris. Yeah, let me maybe give some more color on the decision around VersiPD because we feel very, very strongly about this and hence the reason why we've acted on this decision so quickly. We've taken a look at our entire portfolio. And obviously we are a global company. And when we looked at VersiPD, it was much more of a regional play. And we have another offering in development called Safe Sleep Harmony and that is a global offering. So we've discontinued the regional one, if you will to really focus on the global one. And we feel that Safe Sleep has a much more competitive profile for PD than what VersiPD was had. So sometimes you just have to make these tough decisions and I think it's given the clarity to the organization and we move on. Your question on excess mortality is a good one and one that we've asked ourselves many times right? As you -- as we normalize coming out of COVID, do we see a point where the overall mortality number is less than the previous historic excess mortality number. We haven't seen that yet. Obviously, every quarter that goes by we start to see it. But you're absolutely right. We do see better trends in Europe than maybe the US. And I think we reported that at CMD as well. We'll see how that plays out in the US over time. It will be what it will be, but I think it will be an interesting dynamic after all the unfortunate lives that we have lost over the last three years.

Okay. Thank you. Appreciate the comment.

Thank you.

The next question is from the line of Sezgi Ozener with HSBC.

Hi. Thanks for taking my questions. I hope you can hear me well. We have heard that labor market is easing, but at the same time you still have the higher year-on-year growth. Is there any hope whatsoever that there might be another provider really fund or something similar? And my second question relates to I know you looked closely into the product portfolio and what kind of other write-offs discontinuations can we expect? And can you maybe provide more color on the potential volume impact that might come from that?

Yeah. Thanks, Sezgi for your question. We're not anticipating any PRF or any government funding for this year that was clearly stated in our guidance assumptions. Our hope and anticipation now is that the increased cost base gets reflected in the reimbursement rate increase prospectively here. So no anticipation of anything there or funding or discussions quite honestly. On the portfolio, as I mentioned when I was going through kind of the different buckets obviously this is an R&D program that we have discontinued, but we feel a better program in development that replaces that. So there's no volume implications. And then I think anything else that we would do. I think anything that we're looking at would be quite smaller and smaller in nature and don't anticipate -- how to anticipate what the volume impact could be for something smaller there.

Thanks very much.

Thank you.

There are no further questions at this time and I hand back to Dominik for closing comments.

So no questions. Thank you very much for the participation the lively discussion. And with that, we would close the call now and we look forward to seeing you over the next couple of weeks on the road or virtually. So thank you for participating.

Thank you all. Thank you for your continued support. Take care.

Ladies and gentlemen, the conference has now concluded and you may disconnect your telephone. Thank you for joining. Have a pleasant day. Goodbye.