Ladies and gentlemen, thank you for standing by. I'm Hailey, your Chorus Call operator. Welcome and thank you for joining the Fresenius Medical Care Earnings Release of the First Quarter 2019 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. [Operator Instructions] I would now like to turn the conference over to Dominik, Head of Investor Relations. Please go ahead sir.

Thank you, Hailey. We would like to welcome all of you to the Fresenius Medical Care earnings call for the first quarter 2019. We appreciate you joining today. Also you might be already very tired from all the earnings releases today. Before we start, I would like to use the opportunity for some short marketing. We will do a conference call on hemodialysis to explain the strategic logic and medical background. It will not be about how to model the financials. This will take place on the 20th of May at 2 P.M CET and on 27th of June we do offer a site visit to our production site in St. Wendel, in Germany. Details for both events are posted on our website. Now it is my pleasure 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 and uncertainties please refer to these documents, as well as to our SEC filing. As always, I like to limit the number of questions again to two, in order to give everyone the chance to ask the questions. I hope this works for everyone. I assume you might be tired anyhow on this eventful day. With us today is of course Rice Powell, our CEO and Chairman of the Management Board. Rice will give you some more color around the strategy and business development, go through some of the major topics of the quarter. Of course, also with us is Mike Brosnan, our Chief Financial Officer, who will give you an update on the financials and the outlook. I will now hand over to Rice. The floor is yours.

Thank you, Dominik. Good morning, good afternoon to everyone depending on where you are. It's great to have you with us today and we appreciate your interest in the first quarter of 2019. Turning to Slide 4, and looking at some key parameters of the service business. You can see our clinic growth in the quarter, patient growth and treatment growth. I would also say looking at our statement quality remains on a consistently high level. Why don't we turn to Slide 5 and you can see that in print that our quality outcomes do remain on a high level our quality indicators do look quite well. I would like to make one point you probably saw an announcement from us a couple of weeks ago that we've created the global medical office. Wanted to make sure you understand that we believe we are at the right time in our company's history to really take more of a global approach to the medicine in driving the clinical outcomes across the regions as we continue to see product businesses turn into service businesses, and the opportunities to try to work closer with payers. I'm happy to say that Frank Maddux has been appointed the Global Chief Medical Officer. Frank has been with us a number of years and most recently was the Chief Medical Officer in North America. Frank will be working very closely with the other regional Chief Medical Officers and some small staff as well to help us make sure that we're delivering the best quality of care we can from the most developed markets, Germany, U.S., France et cetera to emerging markets in any region. And I think this will help us in the years to come. Turning to Slide 6 and looking at the update of the…

Thanks, Rice and hi, everybody. So moving to chart 12 and just starting with revenue and income. You can see the high-level reference slide to guide you through the developments of the first quarter. Starting with revenues, we have adjusted the base period, Q1, 2018 for the divestiture of sound, so that was 251 million in revenues for Q1, which gets you to the base of €3.7 billion into the 6% business growth that we had or roughly €210 million on a constant currency basis. The 6% growth as Rice mentioned, reflects an organic revenue growth of 6%, 2% growth from acquisitions, this was partially offset by about a 1% decrease related to close their sold clinics and a 1% decrease related to one less dialysis day. The revenue development is clearly within our guided range of 3% to 6%. As you continue to move through to the reported numbers for the first quarter 2019, currency translation was favorable,190 million top line. In addition, we've added 22 million for transactions that under the old leasing standard, prior to the adoption of IFRS 16.We've been classified as revenues and 30 million revenues generated since are close of the next stage transaction to get to the reported revenues of €4.1 billion. Continuing on the bottom of the page with regard to net income, we're adjusting in the base period for the loss from divestitures in our Care Coordination activities in the first quarter last year and a loss generated by the sound operations of 4 million, which gets you to a base of €296 million. Business growth of 9 million, which on a constant currency basis, which gets you 3%.This is slightly above our target range of minus 2% to plus 2%. Following on there were favorable currency translation effects of 13…

Thank you, Rice, thank you, Mike for the presentation. And I'm happy to open the Q&A for more insights now. Hailey?

[Operator Instructions] The first question comes from the line of Tom Jones of Berenberg. Please go ahead.

Thanks for taking my two questions. The first is my pet subject very commercial pricing. If I look at the revenue per treatment in North America [indiscernible] maybe $5 per treatment from that number for the increase use of Calcimimetics. I am not sure what's going on Medicare rights which went up about 7 to 8, it does suggest that the commercial book of business was really down very slightly. Now we know payer mix is still down reasonably year-on-year. So just wondering what I can infer from those numbers about like-for-like commercial pricing trends, I know the Q4 numbers might give you kind of caution just to expect little bit softness this year, I just wondered how Q1 developed relative to your initial expectations. And then my second question probably for Rice. I was quite surprised by the calling out growth in your health plan business as a driver of revenues in North American care coordination. My understanding was just, going back quite a bit of your season end business. So I was just wondering where it's coming from, is this more subcontracted risk base type stuff you're taking on or is there something else going on that I am missing?

Tom, it's Michael Brosnan and I'll take the first question as you anticipated. The short answer will be yes, I mean I elaborated quite a bit in our guidance in February that we were expecting flat to slight to down in terms of revenue per treatment. That was at least in part driven by our expectations with regard to some of the contracts we've been negotiating in 2019. I think you are seeing some softness in the commercial rate in the first quarter. When I look at that and put it together in terms of confirming the revenue per treatment Calcimimetics I provided I would still stick with what I indicated flat to slightly down for the full year. But you are basically seeing in Q1 what I expected would take place over the course of 2019.

So certainly what you expected.

No, go ahead please finish.

Sorry Mike, just so I guess the key thing is that at least it's not worst then any worst do you expect is progressing to plan is that fair?

That's fair.

Perfect.

And I would also to your point because you mentioned the year-over-year commercial mix, yes and I said this in February measuring year-over-year you're going to see that, but when you measure off our Q3 base coming into Q4 and Q1 that turns back to the comment Rice made that we are seeing improvement of - our low point if you will with regard to where we finished third quarter of 2018.

Talking about the health plan. As you remember correctly, we decided that the C-SNIP business was not really making it for us and so we exited that business, that leaves us with the subcaps and with the ESCO obviously, and we feel pretty good about where we are there. But I think the bigger piece of this is simply we got rid of a fairly significant drag that we were seeing with the C-SNIPs.

The next question comes from the line of Veronika Dubajova of Goldman Sachs. Please go ahead.

I will also keep it to two. My first bigger picture question is, just wondering Rice if you have any comments on that statements made by CMS around the home, hemo pilot. How you think an accelerated uptake of home hemo would play on your business and what it would mean for you guys. That's my bigger picture question, apologies. And then my second question in terms of same-store or same market growth in North America, do you think that the growth that we're seeing at the moment is sustainable, any risks that it throws back down or conversely you can see some acceleration from here? Thank you.

So on the home hemo pilot you know, we were delighted to hear CMS come out and talk about that but they are a little short on detail, so we don't really know where this will ultimately go but we are anxious to be part of the process and understand it. I would say to you, when you think about the current book of business that we've got in the ESCOs, we are running today at around 8%, 8.5% of that, roughly I want to say about 47,000, 48,000 patient is they are home patients. Now, the vast majority of that 8%, 8.5%, like 7% in change is PD and then there's 1.5%, 1.7% that's home, so we're kind of in that space today, not in a huge way but we are there and we look forward to seeing how they want to elucidate the other detail of where this - where it could go. And we'll certainly see where that happens. On same market growth, you would ask me this. We get to 3.7%. Now you are asking me, if I can keep it grow or I am not going to lose it. I would tell you that we worked hard at this. I would hope that we would continue to see good performance here. I don't think I want to speculate up and down. I'm just going bask in the moment that we got to where we are with a lot of good hardwork from people and we're going to do everything we can do to try to grow that and certainly make sure that we don't slip back down the mountain if you will.

Can I just follow up on the home HD front. I think one of the concern for investors out there is that as you see adoption of home HD, plus this profitability of your business. I know I don't want to our preview what your guys are going to say on the webcast in a few weeks but maybe just conceptually can you talk to us about within ESCOs, the experience that you have for the PD, HD and home HD patients, do you see meaningful differences in profitability between those three groups?

Yes, honestly, I could not seize that out for you because I haven't been close to it and if I did I'd get shot by the ESCO guys and probably the CMS as well, CMMI. Look what we do know is generally we do see very good clinical outcomes with home patients, in some cases we see that they have left hospital days then the in-center patients and that is a very general trend Veronika. I'm not saying that specifically to this ESCO experience that we're getting. That something a lot of we talk about it at a later date. I need to spend some time with the folks that are really running that business. I just don't want to speculate on it. But we're happy to look into that maybe we can have a chat about that at another time.

The next question is from the line of Patrick Wood of Bank of America Merrill Lynch. Please go ahead.

Just curious in the Q1 numbers and I hate to be the quarterly on this one. But if you can give any kind of quantification you know is there any else or somebody other - I know one-off into that exceptionals but the seizing related adjustments. I'm trying to understand how do you feel the performance of the business was before those factors kind of came into play the more underlying, underlying if you will, and I'm just curious if you could quantify any of those that would be very helpful. Thank you.

I guess because I did see in some of the material that all of your release before the call today some curiosity about a couple of things. So Fresenius ,hopefully understand we can't disclose the specific studio confidential you know, we've agreed to confidentiality, but maybe to help folks size it I would offer that from a modeling perspective, you could look at the Q4, 2018 EBIT margins and maybe use that premier as something indicative for full-year and I think if you do that, you'll get a sense as to what the Fresenius effect was in the first quarter. And with the just anticipating some other folks questions. With regard to the consent decree, you know, what I would say there again similar to what we did last year we have some confidentiality agreements in place but I would say big picture. For the full year would expect a similar amount, but as we mentioned last year, this is kind of lumpy in terms of when it's recognized, so the timing will be a bit different. Last year it more oriented around the second and third quarter. This year my expectation is it's probably going to be a Q1, Q4 overall impact, but the total value for the years will be roughly the same.

Yes, and then Patrick I think Mike's management before, this is the third year where we've experienced this, so I appreciate calling it a really one-off because it is kind of an entertain that we're seeing.

Maybe one quick, more structural follow-up if I could. And apologies if there is out there already but I'm just curious on any update on either the Patients Actor on the Medical Advantage side any discussions of how that's progressing on those two issues that would be kind of helpful later thoughts. Thanks.

So on the Patients Act, I would tell you that we are still bullish. We still have conversations for NDC on this, but in today's environment there, there are many, many distractions relative to what's going on, so I can't say that we've had long, long subjects to discussions about this. But it is on people's radar screen and people realize and when I say people I mean, health policy folks, staff in the Congressional offices, but I don't see a take-up in an action on it right now given what's going on in DC at this point in time. Now, Medicare Advantage continues to be good for us, if we all know the Cures Act is going to come January 1, 2021 and that'll have some impact but there's no real news that I would have to share with you this of great nature, negative nature. I think it's sort of trundling on is we thought it would on Medicare Advantage.

The next question comes from the line of Edward Ridley of Redburn. Please go ahead.

On next stage, obviously great that you might close it in the quarter and could you just go back again and looking at the very helpful by the way breakdown you gave in the financials on the various next stage effects. It seems to be that well, March, pretty good in terms of revenue side but also the operating cost was slightly higher than expected. First of all on revenue, obviously next stage also had a good year, last year organically, would it be the - we could infer that the run rate is pretty good relative to the guidance you've given on the revenue side, but equally, how much would each should be used, your disclosures you have given for the underlying profitability of next stage this year?

I guess we did tried, we provide an estimate for next stage at the time shortly after we close the transaction. So on the top line I would say maybe the best way to look at 2019 and I mentioned this previously that you just need to keep in mind when you look at next stage's reported revenues that was inclusive of our business with them. So obviously now just like all the other products deals we've done over the years around the world, once we acquire that becomes an internal revenue and cost to us. So if I think in terms of the guidance we gave of 240 million to 260 million and you look at our 2018 adjusted taking us out of NxStage's 2018 results. And also doing some cost adjustments because NxStage for the next couple of years will be selling bloodlines to B. Braun at a lower value as agreed. So when you look at that as a baseline I'd expect we're not revising our estimate for NxStage, but I would expect something in the kind of mid-single digits in terms of revenue growth off the new adjusted base excluding Fresenius Medical Care as a customer of NxStage. And on the earnings side really not much more to say at this point. We did close the business, we are getting the teams put together in terms of the leadership that came from the NxStage business with folks in our existing business that will be working together to the integration process to get this off to the right track. So probably more to come as we get through 2019, but the estimates that we provided we're holding to at this point in time.

Just quick follow-up on Patrick's question just the legal costs that were one-off but not one-off in the first quarter that affected due in North American dialysis margin. Can you give us any more color on that?

Yes, I will give you a bit more because you know our 6-K which you haven't seen yet, but which will be filed shortly. Details potentially significantly regulatory matters for the company and based on our regular review of those outstanding matters, we sometimes will increase our legal accruals so in the first quarter we increased our legal accruals by about €20 million. The largest single item in that was made to address an agreement that we had to resolve the matter with the state of Mississippi. The 6-K actually separately discloses that value. So I can just tell you today that that single item was US$15.7 million and that should hopefully give you a sense of the overall earnings effect in the North American results.

Yes, and Mike's nail that. The only thing I'll tell you is this is sort of the Mississippi matter was our growth of the grand flow settlement that we did and this is false claims that. I would say a very state attorney general decided to file and we settled this fractionally for what they thought they might get. So that's kind of the sum and substance of what happened there.

Your next question comes from the line of Oliver Metzger of Commerzbank. Please go ahead.

First one is on the ESCO programs from what were 70 programs versus that - come soon. You commented earlier that currently 8.5% of the patients in ESCO programs are already home HD patients. Are these patients valued under different criteria's and are also part of this 2017 review process. And my second question is for Mike so the depreciation and amortization charge in the first quarter was 362 million. Can you just give us a split between the underline D&A and the extraordinary amortization please?

So Oliver, relative to the ESCO it depends on which plan year these patients came into the program on and I can't tell you what number of that - or what percentage of those patients were in plan year two where they got started in plan year three. I mean we haven't I just don't know it but they are part of the program and as we've talked before our understanding is plan year two resolution if you will are the calculations of how that turned out. We're expecting that we should hear something about that in the May or June timeframe coming from CMMI.

And Oliver it's Mike, on Page 23 and 24 the material we sent out I think this would hopefully answer your question. We detail out the incremental depreciation associated with the adoption of IFRS 16. So that alone in Q1 was €167 million and in the full year we'd expect it to be just under €700 million.

The next question comes from the line of Hans Bostrom of Credit Suisse. Please go ahead.

I just had one main question. I thus understand how I marry the 6% growth in clinics, 4% in patients, and 3% in treatments which seem to be an adverse change. I mean I presume the difference is de novo that I've been opened in the first quarter. How should we think of those metrics changing over the course of this year?

Yes Hans, it's Rice. Obviously de novos do have a hand in that and so maybe let me give you a little bit of clarity. As we look at where we were coming out of 12/31/2018 we were basically looking at 59 de novos that were waiting certification. We were able in the first quarter of this year to get 15 certified of which the vast majority of those were done with the outside accreditation firm that we hired that we were able to hire as a result of legislation that was passed. But then just also keep in mind on the treatments we had one less dialysis stay in the quarter.

And should we think about these numbers sort of equalizing each other by the end of the year or is this not really the way you managed the business?

Well we don't really look at it in that level of granularity. I mean we obviously know that having one less or one more dialysis stay will make a difference in the quarter. But it is little more nuance then just trying to run those numbers out because obviously you have certifications, you got to be up and running the clinic things of that kind of nature. So it's not as straightforward, I would think as you might have expected it would be.

And actually one follow-up question. You did make specific comment about your Care Coordination business Asia Pacific which to my knowledge is mainly or maybe solely [indiscernible] in Australia y weighing on your margins. Could you elaborate on that please?

Sure. They continue to acquire and add to their footprint and so I mentioned some start-up costs associated with that, and that's really directed towards just acquisitions and de novo development in that market for.

Yes Hans I think they had Mike and I looking to each other two or three acquisitions that would make the effect that Mike is talking about.

Yes, we still feel very good about the business.

Okay. So I see we have no further questions. I do apologize to everyone who dialed in. We had technical problems with the system provider. So if you dropped off I do apologize and we have no one on list right now. So there's nothing on surplus. With that I would say we can't answer question because no one is on the list. Therefore we would close the call and I say thank you for taking the time on that busy day to dial in.

Thank you. We appreciate your answers. We know you guys and ladies are all very busy and it's something we appreciate. Thank you.

Thank you very much.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephones. Thank you for joining and have a pleasant day. Goodbye.