Fresenius Medical Care AG

Ladies and gentlemen, welcome to the report of the third quarter 2024 of Fresenius Medical Care Conference Call. I'm Sandra, the course call operator. I would like to remind you that all participants will be listened only mode and the conference is being recorded. A replay will be available on the company's website. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dominic Heger, Head of Investor Relations. Please go ahead.

Thank you, Sandra. I would like to welcome everyone to our earnings call for the third quarter of 2024. Thank you for joining us today. I start 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. The call is scheduled for 60 minutes. We have prepared a presentation and will have time for your questions after the prepared remarks. We would like to limit the number of questions to two in order to give everyone the chance to ask a question. Let me now welcome Helen Gieser, CEO and Chair of the Management Board, and Martin Fisher, CFO of Fresenius Medical Care. Following the prepared remarks, we are happy to take your questions. Helen, the floor is yours.

Thank you, Dominic, and welcome, everybody. Thank you for joining our presentation today and for your continued interest in Fresenius Medical Care, which we appreciate even more given the attention to the U.S. elections today. Before I start with details on the quarter, it's important for me to say a few words up front. I'm continuously inspired by the dedication of our employees around the world who go above and beyond to ensure our patients receive the life-sustaining dialysis treatments they need and with the highest level of care irrespective on how much effort, challenge, and difficult the environment around them is. We see what continued in the Ukraine and Russia and more broadly in the Middle East and other crisis areas. Also, the U.S. faced some severe weather events including Hurricane Beryl in Texas in July and Hurricanes Helene and Milton impacting the southeastern United States this fall. In anticipation of these hurricanes, we mobilized command centers a week in advance to begin the coordination with our local teams, doctors, hospitals, and local authorities. We worked closely with patients to find alternative appointment times where patients could receive life-sustaining dialysis treatments before and immediately after the storms. Thanks to the tremendous response by our team, we were able to get our patients the treatment they require. Many thanks to the teams around the world who did an outstanding job in all these situations. I'll now begin my prepared remarks on slide four. The third quarter marked another period where our clear focus on improving operational performance and continued momentum in our company transformation directly resulted in strong improvement in our financial performance and meaningful progress towards our 2025 group margin target. Across both of our operating segments, we are realizing important progress as well as demonstrating our industry-leading capabilities. Beginning with care delivery, in the third quarter, we reached an important and reassuring milestone as underlying same-market treatment growth in the U.S. turned positive. While the volume development is positive, it remains muted in the U.S. due to still elevated mortality. We continue to work on the volume pieces that are in our control, such as streamlining the admissions process and reducing mistreatment. As a result of these efforts, in the third quarter, we recorded improvement in cancellation rates and lower mistreatments. In our international business, we saw same-market treatment growth accelerate to 3%, demonstrating that underlying trends for our industry worldwide remain intact. We like how the future of our international portfolio shapes up, following the significant progress we made on our portfolio optimization. And as a result, we are more focused on growth markets with attractive returns. As already mentioned, thanks to the excellent hurricane disaster response by our teams, we were able to provide our patients their treatments and minimize mistreatments. In the third quarter, hurricanes and weather-related events only had a negative impact of five basis points on treatment volumes due to our strong disaster preparedness and quick response. I'm proud to say that our continued focus on quality of care as part of our day-to-day clinic operations has not wavered either. Fresenius Medical Care Dialysis Centers in the U.S. routinely rank amongst the safest and highest quality dialysis centers in the country. as measured by the CMS five-star quality rating system. In the just recently published rating for 2023, 65% of our dialysis centers in the U.S. received a rating of three stars or higher. This was higher than the nationwide averages, which found fewer than 60% of all dialysis centers received similar three-star or higher ratings. Earlier in October, it was reported that Interwell, our value-based care business, achieved best-in-class quality performance in the first year of the U.S. government's CKCC program. Interwell operated 10 of the top 10 and 17 of the top 20 highest-scoring kidney contracting entities based on results recently published by the Center for Medicare and Medicaid Innovation. These results are a testament to the incredible partnership with our physician partners and our leading efforts to deliver value-based care initiatives and opportunities to the market. We believe this further strengthens Interwell's position as the partner of choice for nephrologists, payers, and patients in the future. While these results demonstrate our industry-leading efforts to deliver value-based care, we must also acknowledge that value-based care is still a relatively nascent industry with lumpy and at times volatile financial returns. CMS also announced the final ESRG PPS reimbursement increase for 2025 just last Friday. While the 2.7 percent increase is slightly better than the draft rule, it is still below what we would have liked to see given the inflationary pressures on our industry. It is in line with our moderate assumption for reimbursement increases in our 2025 margin outlook. Our care enablement business has continued to achieve improving returns through the third quarter and has maintained the significant margin progress realized in the first six months. Solid volume growth as well as continued execution of targeted pricing initiatives and significant contributions from our FME25 program supported the strong performance. As expected, we did experience a greater negative price impact in China related to the implementation of volume-based procurement. This developed in line with our assumptions and China remains an important and attractive market for our product business. Beyond our pricing initiatives, the continued optimization of our supply chain and manufacturing footprint remains a critical focus of our FME25 program. At the same time, we are focused on the future, ensuring we are strategically positioned to leverage our industry-leading capabilities and maximizing opportunities. We are fully on track with our preparations for the launch of our HDF-enabled 5008X machine in the United States at the end of next year, with full commercial launch in 2026. And we have seen strong interest at the American Society of Nephrology Congress at the end of October. While the 5008X will not need IV solutions for operations, we are also today benefiting from our vertically integrated business model. Thanks to our care enablement team stepping up after the hurricane's impact, On one of our competitors' production sites, we had no interruptions in supply due to access to our own IV solution and PD products for our patients. As a consequence, we were not only able to accept more new PD patients at the end of the quarter in care delivery, but additionally, we were able to help other dialysis providers with access to products from our production. Moving to slide five. Turning to our specific third quarter developments, we delivered organic revenue growth of 2% with positive contributions from both care delivery and care enablement. As mentioned, our underlying USA market treatment growth turned positive in the quarter with 0.2% growth when adjusted for the exit of acute contracts. This also includes a five basis points negative impact from the hurricanes. Both segments realized both increased operating income and increased operating income margins. Care delivery extended well into its target band for 2025, and care enablement improved its margins significantly year over year. This was supported by strong contributions from the execution of our FME25 program. FME25 contributed 64 million euro in additional savings resulting in 173 million euro by the end of the third quarter. We are well ahead of the targeted 100 to 150 million euro for 2024. And with this acceleration, we now expect to achieve already in 2024 around 200 million euro. This confirms how well we are on track to achieve our target of €650 million in sustainable savings by the end of 2025. In line with our disciplined financial policy, we further reduced our net financial debt and improved our net leverage ratio to below our target corridor, which Martin will speak about later. Given our year-to-date performance through the third quarter and development against our assumptions to date, we confirm our revenue growth outlook and tighten Our previous operating income outlook towards the upper end of our range was 16% to 18% growth for full year 2024. I'll now hand you over to Martin to take you through the third quarter financial performance in more detail.