Fresenius Medical Care AG American Depositary Shares (Each representing 1/2 of an Ordinary Share)

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 the 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 touchtone telephone. please 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. As mentioned by Timo, 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 you could make this work again, please. With us today is Helen Gieser, 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 and are worth watching. With that, Helen, the floor is yours.

Thank you, Dominic, 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 five 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 will 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 achieved sustainable savings of 60 million euro, which keeps us on track to achieve 250 to 300 million euro in savings by the end of this year. In terms of other strategic drivers, we are seeing a necessary and overdue increase in home trainings in the U.S. by 14%, and we have expanded our value-based care population in the first quarter by 5% to around 95,000 lives. We also realized the first tangible results of our portfolio optimization efforts with a discontinuation of a development program for PD cycler. And we are continuously working on developing a winning culture focused on accountability and underpinned by our efforts around sustainability, diversity, equity, and inclusion. And as a sign of our commitment to gender equity in the workplace, we signed the United Nations Women's Empowerment Principles last month. Turning to slide six, our patients are core and center to everything we do. Through the Global Medical Office, we are continuously monitoring our clinical performance to enhance care, and we take a consistent global approach to pursue equity and high standards of care across diverse patient populations. An important KPI in this regard is our Quality Index, a global indicator for patient well-being and treatment success. The Quality Index considers dialysis effectiveness, vascular access, and anemia management. And we are tracking this on a quarterly basis and saw sequential stability at a high level. Next on slide seven. While we continue to face macro pressures and the annualization effect of COVID-19 related excess mortality, I'm encouraged by the improving trends and execution on our turnaround plans. During the first quarter, both care delivery and care enablement segments contribute to organic growth. This was driven by improving sequential volume development in care delivery and strong performance within our critical care business and care enablement. Our expected strong year-over-year decline in operating income was moderated by several factors. An improved business performance, like the phasing of critical care product sales in China, which were especially strong in the first quarter, and the turnaround measures starting to materialize. As I just referenced and we'll speak more about in a moment, we executed the first steps of our legacy portfolio optimization. Turning to slide eight. In the first quarter, we delivered revenue growth of 2% at constant currency, and we continued to deliver organic growth with positive contributions from both care delivery and care enablement in line with our expectations. During the first quarter, operating income on our guided basis which is in constant currency and excludes special items and U.S. provider relief funding, declined by 13%, resulting in a margin of 7.5%. As expected, our business development continued to be impacted by macroeconomic inflationary pressures. While we are seeing signs of stabilization, the increased costs, especially relating to raw materials, continue to put pressure on care enablement. At the same time, the turnaround drivers are leading to improved business performance, which was also supported by the phasing of strong product sales in China. A significant contributor to the year over decline in the margin relates to the absence of positive prior year effect in the base in care delivery. Moving to slide nine. This slide shows our operating income development compared to the first quarter of 2022. Starting from the left, you can see how we get to the starting point on our guidance basis, which excludes special items and the U.S. Provider Relief Funds applied in 2022. It is a milestone for us to share for the first time the earnings development of our two operating segments, and I will go into specific detail on the margin drivers for the segments later. With inter-segment eliminations, operating income for products transferred between care enablement and care delivery remained stable year on year. In the new reporting format, we have significantly reduced the corporate bucket, and development of the corporate line was stable year over year. By far the biggest special item in the quarter related to our legacy portfolio optimization, especially in our care enablement business. I will speak more to that when I get to the segments. Other special items relate to FME25 costs. The huma site investment remeasurement and costs associated with the conversion of legal form. We are still assuming costs of 50 to 100 million euro for the conversion of legal form for the year. And most of these costs in this respect will be incurred after the shareholders have approved the change of the legal form later this year. Turning to slide 10. In care delivery, we continue to execute on our turnaround plan to drive operational efficiencies, and we are seeing green shoots of recovery, particularly around labor trends and volume. We are seeing stabilization in the U.S. labor market. Our open positions for direct patient care staff have decreased since year end by around 10% to 4,000. As a reminder, historically, we would have had around 2,500 to 3,000 open positions at any point in time. The improved staffing situation enables us to increase our home dialysis trainings and also increases our ability to take on new patients. And while the annualization effect of COVID-19 related excess mortality continues to weigh on growth, we see sequential improvement. In the first quarter, our same market treatment growth in the U.S. was slightly negative at minus 0.3%. compared to minus 1.9% in the fourth quarter of last year. And as a reminder, for full year 2023, we expected a U.S. dialysis treatment growth between minus one and plus 1% compared to last year. For Care Delivery International, same market treatment growth was positive at 0.5%. This improved trend in volumes is supportive of both revenue growth as well as improving operational efficiencies and clinic utilization. The optimization of clinical infrastructure is underway. More than 50 US clinics have been closed during Q4 2022 and Q1 of 2023. And overall, our FME25 transformation initiatives are moving forward, and we continue to deliver on clinical operational efficiencies. Next on slide 11, Here we look at how these trends translated into financial performance for care delivery. Revenue increased by 3% on a reported basis and 1% at constant currency. Care delivery U.S. revenue grew at 2% reported, mainly driven by positive exchange rate effects. It declined by 2% on a constant currency basis due to a negative organic development and the absence of positive prior year effects. Care Delivery International saw strong revenue growth of 5% reported and 12% on a constant currency basis. At constant currency, this was mainly driven by strong organic growth, which was mostly due to the effects of hyperinflation in various markets and due to contributions from acquisitions. Operating income from care delivery decreased by 8 million euro, resulting in a margin of 8% on our guided basis. The negative business growth development largely relates to the absence of positive prior year effects, which include the partial reversal of an accrual related to a revenue recognition adjustment for accounts receivable in legal dispute, the reconciliation of revenues for the final performance year of the ESCO program, and last, the suspension of sequestration in the U.S. Besides these base effects, we have seen a promising development in price and volume impacted by timing of claims in Interwell Health. While we still assume a labor headwind for the full year, on a comparative basis, we saw slightly better labor and inflationary impacts compared to the first quarter of 2022, when the entire industry was facing significant staffing challenges due to Omicron. The easing of the U.S. labor market since then has meant moderating wage increases and significantly reduced usage of and rates paid for temporary labor. And finally, care delivery had a strong contribution from FME25 savings, mainly due to clinical operational efficiencies. Turning to slide 12. Even though we have seen some stabilization in the macro environment, care enablement continues to face significant inflationary pressures, and delivering on our turnaround plans are more important than ever. Although much of our business is locked into longer-term contracts, pricing and contract excellence are among the most important initiatives which we did launch at the end of last year. As mentioned at the CMD, we are already executing on our legacy portfolio optimization measures, which are treated as a special item. In the first quarter, we terminated the development of VersaPD, a US-specific PD cycler. This decision was as a result of strategically aligning on a global PD cycler portfolio. Improved business performance and care enablement was driven by higher sales of critical care products in China, as the government there made a big push to ensure all hospitals were well equipped for future pandemic situations. Therefore, we do not expect this level of critical care sales to continue in the remainder of the year, as a significant portion of the expected demand for the year has been covered in the first quarter. Care enablement performance was additionally supported by higher sales of home hemodialysis machines. In addition, our FME25 transformation program is on track and delivering savings for the business. and savings in the first quarter largely related to productivity efficiencies. The strong inflationary pressures and high material prices are expected to continue to weigh on our cost development in care enablement for the remainder of the year. Next on slide 13. Here we look at how these trends have translated into financial performance. Care enablement revenue increased by 3% on a reported and constant currency basis. As I just highlighted, growth was driven by higher sales of critical care products in China and home hemodialysis products. Operating income for care enablement decreased by 27 million euro, resulting in the margin of 5.2% on our guided basis. Inflation continues to be the biggest headwind for this business. It was partially offset by FME25 savings and positive business growth. Excluded from the shown operating income on guidance base is the largest special item in the quarter, the 83 million euro write-off associated with the previously mentioned discontinuation of the PD cycler program. Turning to slide 14. The slightly lower operating cash flow in the quarter was mainly due to the decrease in net income. Free cash flow conversion remained at the stable level. While toward the upper end of our self-imposed range, our leverage ratio of 3.4 times remained in our target corridor of 3 to 3.5 times. And as I have emphasized previously, deleveraging remains our top capital allocation priority, especially given the high interest rate environment. I'll conclude with our outlook on slide 16. We reiterate our guidance for 2023. We have described 2023 as a year of level setting. And while we continue to face certain headwinds, I am encouraged that we are already seeing green shoots of recovery and traction on our turnaround plans. Thus, we remain confident in our path to unlock value as the leading kidney care company and to achieve the improved operating profit margin of 10 to 14% in 2025. That concludes my prepared remarks. I'll now turn back to Dominic.

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. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. In the interest of time, please limit yourself to two questions only. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. This question is from the line of Victoria with Labrits.

Your question, please. 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. Is your guidance for the year 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. Yeah, 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, you know, when you look at our guidance on labor for 23, you know, we have this 140 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 this sizing of the labor number as the year-over-year impact holding 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, you know, I think that sizing that we've given of 50 to 100, I think if you take the midpoint of that, that's kind of how we're thinking about that right now.

Timo, we can take the next question, please.

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

Hi, thank you for taking my questions. I have two, please. Firstly, given the better development in patient dynamics in the U.S., 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 around our guidance of minus one to plus one. 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. Your question on the CE strand, The China impact was roughly around 20 million of operating income in the quarter. And obviously, you know, we saw that as a kind of an accelerated pull forward, which, you know, which we're encouraged by. But we obviously would expect, you know, the kind of forecast that we had for the back of the year now to have already been achieved. You know, I'm not going to give, you know, kind of the guidance by quarter on CE and what we're seeing. Obviously, what we outlined at capital markets, we're 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. you know, we have over 50 million or so of inflation in Q1 against a, you know, a guided number that looks to be tracking against that fall year.

Very helpful. Thank you. The next question is from the line of Veronica Dubaioba, which is your question, please.

Hi, Helen. Hi, Dominic. Thank you for taking my questions. I have two, please. One, Helen, just wanted to circle back to the wage problem. overall labor dynamics. Obviously, you commented on inflation. I think the other dynamic that you've been seeing is the switch from temporary to permanent labor. 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 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 figured we could get it out of the way first.

Okay. Let me hit the labor one. And hi, Veronica. 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, you know, kind of what we're seeing on the, you know, the kind of the inflationary aspect, if you will. And of that, you know, 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 to 180. 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, you know, 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 CritCare. I apologize if I missed this in your prepared remarks, but what would the product's growth have been excluding that, I guess? 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 my prepared remarks, but I think I just answered it in the question from Hassan, which was the about $20 million of EBIT impact for the year. Really, I mean, that kind of is 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 it. Did I answer both aspects of that, Veronica?

Yep, that's perfect. Thank you. Thanks, Helen. Thanks so much. I'll catch you guys later.

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

Hi. Good afternoon. Two questions from my side. The first one is also on your U.S. clinics network. So on NetBase, we were down by 2%. You also made the comments regarding recent closures. That's basically the reflection of the low volumes. Now things really seem to normalize. So how should we think conceptually about your clinic network? Do you regard, if we talk about a one-to-year horizon, that a further consolidation is still necessary, or do you expect at one point of time even some net growth also in the context of the home hemo dialysis. 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, you can 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, you know, 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. 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 in the increase in trainings 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, you know, this is just going to get us back to, you know, the kind of the plans that we had pre-pandemic, which was carefully utilizing the network of both clinics and home, and not overbuilding 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 So our goal is to obviously supply as much of the market with our machines as possible. And, you know, obviously we've seen some benefits from that this quarter.

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

Yes, thanks for taking my question. I 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 expect the utilization of the clinics to be at the end? Are they still going to be certain clinics in the network work about 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 the 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 U.S., you know, across 2,600 clinics. You know, 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 market today 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, you know if you can appreciate this is a complex overview of the entire network Where we need for you know, things like network adequate adequacy and so on and obviously, you know the balance with home and 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 think 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 Edlington with JP Morgan.

Hi, guys. Thanks for the question. So maybe just on the U.S. pricing on the care delivery side, some of what you're seeing on the private side and what your expectations were for 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, James. I just want to make sure I understood your question correctly, because you said CD in products, but I'm assuming you mean clinic, I'm assuming you mean CD in services?

That's correct.

Sorry. Yeah, yeah. That's okay. We're all reorienting 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, you know, we've had this discussion over the last, you know, last month in terms of, you know, the kind of the mechanisms, right, for PPS and the cost reports and, you know, all things being equal that should hold that when inflation is 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 view on that.

Thanks. I just wondered what you were seeing on the private side as well, the pricing.

On the private side, on the pricing, no, nothing of note, I would say. You know, we're on this 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 Wayne Tempest with Jefferies. Your question, please.

Hi, good afternoon. Thanks for taking my questions. It's James Wayne Tempest in 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 missed treatments and is that why volumes are better? The 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 we 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, you know, the VersiPD write-off is a significant one. And the way I'm thinking about, you know, this portfolio and these different buckets is maybe fourfold. You've got these, you know, initiatives and projects that sit under FME25, which are really, you know, kind of this structural, operational, internal changes that are driving efficiencies and savings. Then we've got, you know, this bucket, which I would call the R&D product portfolio, of which, versus PD, 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 into what we're doing there and this is by far the largest. Then I think we've got this country bucket and, you know, we've talked about this international services market where we have said we will exit and divest, you know, kind of non-performing or non-profitable markets where we can't make a significant or meaningful difference in the profitability, and that might be because of reimbursement. It may be 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, you know, this project 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 first question on mistreatment, 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 a lesser 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, you know, that also includes the fact that we have, you know, termination of clinics and 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 A.B. Bernstein. Your question, please.

Heather, just two questions for me. Number one, DeVita and Medtronic have started this product, JV. Baxter is now going to be a standalone company. There's a lot of moving parts with the competitive landscape. And given the discontinued product, how should we think about the FMC product business from here? You know, 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, you know, 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 patients 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 rates now and should continue on that path. Thanks.

Thanks, Lisa, and appreciate your questions. Yeah, look, obviously we're watching the market developing in this space with Mozark and Baxter quite closely. We obviously are cleaning up our own portfolio. Versa PD 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 you know, where we have some challenges on profitability and we're focused on that. So, you know, we feel good about what we have in our portfolio and what we can do with it. On your second question on new patient starts and training and home, I mean, obviously the labor challenge really thwarted our ability to train, you know, in the home setting. And to see this bump, you know, after many, many quarters where we haven't seen anything is really, really encouraging. You know, and the focus is really back on pulling through, you know, the training and the starts in home. So I hope this is the start of the, you know, the kind of the acceleration again that, you know, 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 access 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. 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, yeah, 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 CF Questions.

Thank you, Operator. Good afternoon or morning, Helen. Thanks for the presentation. I have two questions, one on PD and the other on the same store market growth. On PD, I was a bit surprised by this, you know, right off of the PD Cycle Program. Could you discuss now how you think that, you know, will impact, you know, future growth and the achievability of these, you know, 25 percent, you know, home dialysis treatment target midterm. And then the second question is just on excess mortality. To follow up on that, you know, I think there is quite a substantial drop off, you know, In this 12-month mortality rate, particularly internationally in Q2, looking at the comp rate, is it reasonable to assume that, you know, we should see, you know, some positive, you know, growth also in the U.S., you know, 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, you know, we feel that Safe Sleep has a much more competitive profile for PD than what the CPD has 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. You know, your question on excess mortality is a good one and one that we've asked ourselves many times, right? 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 you know, better trends in Europe than maybe the U.S. And I think we reported that at CMD as well. We'll see how that plays out in the U.S. over time. It'll be what it'll be, but I think it'll be an interesting dynamic, you know, after all the unfortunate lives that we have lost over the last three years.

Okay. Thank you. I appreciate the comment.

Thank you.

The next question is from the line of Zesky, who is now 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 hopes whatsoever that there might be another provider relief 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, Jessica, for your question. We're not anticipating any PRF or any government funding for this year. That was clearly stated in our guidance assumptions. You know, our hope and anticipation now is that, you know, the increased cost base gets reflected in the reimbursement rate increase prospectively here. So, you know, no anticipation of anything there, or funding or discussions, quite honestly. You know, on the portfolio, as I mentioned, you know, when I was going through, you know, kind of the different buckets, obviously this is an R&D program that we have discontinued, but we feel better programming development that replaces that, so there's no volume implications. And then I think, you know, anything else that we would do, I think, you know, anything that we're looking at would be quite small and smaller in nature and don't anticipate, hard 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 Dominique 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 is now concluded and you may disconnect your telephone. Thank you for joining. Have a pleasant day. Goodbye.