Fresenius Medical Care AG

Ladies and gentlemen, thank you for standing by. I'm Timo, your course call operator. Welcome and thank you for joining the Fresenius Medical Care Earnings Call on the first quarter 2020 results. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Dominic, Head of Investor Relations. Please go ahead, sir.

Thank you, Timo. We would like to welcome all of you in these very different times to the Fresenius Megacare earnings call for the first quarter 2020. We hope you and your families are healthy and safe, and we appreciate you joining today. Now it is my pleasure, as always, to 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, uncertainties, please refer to these documents as well as to our SEC filings. As we only have 60 minutes, I would like to limit the number of questions again to two in order to give everyone the chance to ask questions. It would be great if we could make this work. With us today is in a virtual way, Reece Powell, our CEO and Chairman of the Management Board. Rhys will give you some more color on the challenges with COVID-19 and the business development in the first quarter. And of course, also with us in a similar virtual way is Helen Gieser, our Chief Financial Officer, who will give you an update on the financials and the outlook. I will now hand over to Rhys. The floor is yours.

Thank you, Dominic. Hello, everyone. It's great to have you with us today, especially under these trying circumstances. I very much appreciate your interest in Fresenius Medical Care, and let me echo Dominic's comment. I hope that you and your families are safe and extremely healthy. Before I begin my prepared remarks on the business development in the quarter, allow me to say thank you to the Fresenius Medical Care employees that are on this call. For months now, more than 120,000 employees of FMC have been working tirelessly to ensure that our patients receive their life-saving dialysis treatments in a safe environment and with the same high degree of quality that they've become accustomed to. For the FMC employees on this call, thank you. Please pass my thanks on to all your people. You are healthcare heroes. We could not do this without you. As Dominic says, we are doing something very unique today. He's in Bad Humber, Helena's in Chicago, and I'm in Boston. This is a new experience for us, and I think it's probably one that we will continue with for another quarter or two. I'll begin my prepared remarks on slide four. In these unprecedented times, our business model has proven its resilience. Our first quarter results show that our business model is solid and our outstanding performance continued. We delivered strong revenue growth of 9% with contributions from each region. Our earnings grew despite the impacts from COVID-19 pandemic. Excluding this negative impact, the first quarter results are at the top end of our target range for 2020. Our cash flow development in the first quarter was extremely strong. Helen will have more commentary for you on that in her prepared remarks. I'm happy to confirm our targets for 2020. We excluded the impacts from COVID-19 in this. We'll talk more about this, I'm sure, as the course of the day progresses. Moving to slide five. Our first absolute priority are our patients. Providing the lifesaving, high-quality treatments in the safest environment commands our undivided attention. An example of creativity and excellent performance at Fresenius Medical Care in the first quarter goes to our government relations team in Washington, D.C. We saw very early on in March that people that needed vascular access surgery didn't know what to do. Was it elective? Should we put it off? Can we get it? Can we not? And this team went to work, had very detailed conversations with Health and Human Services and CMS, and we were able to clear up a very troubling situation and have it very clearly communicated that dialysis patients need to have vascular access surgery, and it is essential. It is not elective. Just the way that our people have risen above the confusion and the issues. in this delicate time. Our global medical office, I thank them greatly. We've taken wide-ranging measures across the Fresenius medical care enterprise, and we took these measures at a very early stage. We initiated our pandemic protocol. We took protective measures, such as PPE, or personal protective equipment, masks for our patients, And everybody obviously understands that we would do this in our clinics, but we went a step further and we made these same conditions for our manufacturing facilities in order to make sure that we could protect the environment in which our products are made and we could continue supply to our patients and our customers. And despite countries locking their borders down and making moving products and goods difficult, we've been able to do so. Our manufacturing facilities have not had any disruptions, and our supply chain is functioning. And we're very thankful for that. Due to the pandemic, we had to absorb a sizably higher cost in the first quarter. This is fully reflected in our reported numbers. There is no benefit from the CARES Act included in the reported results for the first quarter. The benefits of the CARES Act were only initiated in April, and I'm sure we'll have more discussion on that as we go through Helen's presentation in the Q&A. In the U.S., Fresenius Medical Care is cooperating with other dialysis providers to create isolation clinics and dedicated shifts for COVID-positive patients. A critical aim of this collaboration is to keep dialysis patients out of the hospital whenever possible. In these times, it is so incredibly important to free up the limited hospital resources to deal with the severe cases of COVID that are not necessarily dialysis-related. This is a way that we believe we are making a positive contribution to the healthcare situation in the U.S. in general. Moving on to slide six. In the first quarter, we provided more than 13 million treatments to more than 348,000 patients in more than 4,000 clinics worldwide. The slower growth of our clinical infrastructure, which you can see is at 1%, is the result of several things. Please recall, in 2019, we did a dedicated restructuring that optimized our clinical infrastructure specifically in the United States. We are growing our home business considerably. This requires fewer clinics to be built. And thirdly, in the Asia Pacific region, we had a legal interpretation that changed in one of our markets, which led us to make the decision that we would deconsolidate some 20-odd clinics that we had consolidated for a number of years. But with the government change and a different view of this, we decided it made sense to deconsolidate these clinics. But we have kept the product business. But those three items have contributed to the 1% growth in clinics. We consistently deliver a very high quality level of quality and services, and our products and our dialysis pay for our patients worldwide. Turning to slide seven, if you would. This is our quality indicators. I think you see stable performance in the first quarter. You can see we've made progress in the number of hospital days per year on a patient basis. We will see what Q2 brings, but at this point we feel good about what we're able to deliver from our quality standpoint, and we like the sustained performance that we are contributing. Turning to slide eight. Our business performance in the first quarter was very strong despite the pandemic. Revenue increased by 9%, with solid organic growth of 3.8%. we delivered growth in both Dallas's services and products. As already mentioned, despite the impact of the pandemic, we saw a positive operating performance with an increase in operating and net income. Helen, as she typically does, will take you through the details of that in her prepared remarks. Moving to slide nine. All regions contributed to an overall organic growth rate of around 4%. The highest growth contribution in absolute terms came from North America with a 10% revenue increase. EMEA, Asia Pacific, and Latin America followed with a 4% growth. Now, please, if we take a look at the next slide, we'll focus on healthcare services. The COVID-19 pandemic did not affect revenues in our healthcare services business in the first quarter. As you can see, we delivered strong growth, organic, as well as same markets. The increase was supported by acquisitions and an increase in dialysis stays as well. In North America, same market growth continued with a 3% increase. As planned and we've discussed, we did close a number of clinics as part of our 2019 cost optimization program and obviously that has a negative drag on the growth rate. In EMEA, We realized organic growth of 4% and Asia Pacific's growth of 6% was supported by an increase in the core dialysis business as well as care coordination. Moving to slide 11, I'm sorry, in my last prepared slide. The products business delivers strong reported growth of 10%. To be taken into account is the acquisition effect from NextAge that helped here. In the light of the COVID-19 pandemic, the organic growth of 2% is a solid number. The strong organic growth in dialysis products in North America was not only driven by higher revenues from renal pharmaceuticals, renal disposables, and home hemodialysis products, but also by higher sales of products for acute care treatments in the intensive care units. At the same time, we saw a decrease in Asia Pacific, mainly due to lower sales of dialysis machines in China in particular. This is a consequence of the pandemic. Here, the higher sales of acute products cannot overcompensate for the lower sales of the dialysis equipment. Revenue from non-dialysis products increased significantly year on year. mainly due to the higher sales of Novolung machines, which can be used to treat COVID patients in the intensive care units. And this is from our Xenios acquisition of several years ago. At this point, I'll end my prepared remarks and gladly turn it over to you, Helen. Please.