Ladies and gentlemen, thank you for standing by. I'm Nathalie your Chorus Call operator. Welcome and thank you for joining the Fresenius Medical Care Report on the Third Quarter 2022. 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.

Thank you, Nathalie. As mentioned by Nathalie, we would like to welcome you to our earnings call for the third quarter 2022, which is a day earlier than originally planned. I do apologize for the inconvenience that might have caused. We will start with our presentation followed by a Q&A session. As always, I start out the cautionary -- I 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 yesterday. For further details concerning risks and uncertainties, please refer to these documents as well as to our SEC filings. We are aware that this is a call on short notice in your calendars in the middle of the reporting season. Therefore, we will try to keep the presentation short and leave time for questions. As always, we would like to limit the number of questions again to two in order to give everyone the chance to ask questions. Should there be further questions and time left, we are happy to go a second round. It would be great if we could make this work. The call is scheduled for 60 minutes. With us today for the first time is Carla Kriwet, our new CEO and Chair of the Management Board, who has started less than a month ago. Carla will share with you her first impressions of the company and initial strategic thinking. Of course, also with us is Helen Giza our Deputy CEO Chief Financial Officer and Chief Transformation Officer. Helen will give you an update on the business development, financial performance and outlook. This quarter only Helen will be available for the Q&A. I will now hand over to Carla, the floor is yours.

Thank you, Dominik. This is a privilege [ph] for me to say hello and welcome everyone to our Fresenius Medical Care Earnings Call. Thank you for joining our presentation. I'm very excited to be here today as CEO. Throughout my first months with the company, I've seen firsthand the incredible commitment of our employees around the world. The patient-centric mindset and clinical excellence is truly inspiring and it is just one example of the many great assets we have to build on. At the same time, there's a clear urgency for bold interventions to drive business turnaround and to position Fresenius Medical Care for future sustainable and profitable growth. I would like to share what I'm focusing on and will begin on slide three. Our FME 25 transformation program is already underway and on track to deliver much needed financial transparency and simplification. We are currently transitioning to our new global operating model centered around our business segments, care delivery and care enablement and supported by global G&A functions and our global medical office. Furthermore, our execution plans are on track to deliver €500 million of EBIT by 2025. Within care delivery, we have already started to address the substantial labor challenges. We are employing bold measures to fix our clinical operations to drive higher efficiency and productivity without sacrificing patient care. In addition, we will further consolidate our footprint. For care enablement, we are introducing mitigating initiatives, including pricing actions, to address impacts from inflation and supply chain constraints. We are advancing measures to reduce our cost of production, including platform strategies and optimization of our manufacturing footprint. Furthermore, we will regain innovation leadership and are developing a winning digital strategy that will leverage our unparalleled patient data sets to deliver unique value for our patients and customers. In…

Thanks, Carla. Hi, everyone. I'll pick up on slide 4. I'd like to start my prepared remarks with a quarterly performance before we go to the update on our outlook and implications for 2023. In the third quarter, our business delivered revenue growth of 15% reported due to the weak euro and 3% at constant currency. On a constant currency basis and before special items, the operating income declined by 18%. On the same basis, our net income declined by 25%, which brings us to an 18% decline year-to-date. Our business development continued to be impacted by the US labor market situation and slower organic growth in healthcare services than anticipated. Additionally, the persistent challenging macroeconomic environment with inflationary pressures and global supply chain constraints continues to heavily impact our Healthcare Products business. COVID-19-related excess mortality was somewhat elevated during the third quarter, but has broadly developed in line with our assumptions for the year. We are closely monitoring the development of infection rates in the fall. The closing of the InterWell Health merger during the third quarter marked an important milestone for our value-based care capabilities and our continued leadership in this highly relevant strategic area. The numerous challenges that we and many others in the healthcare industry need to master right now are unprecedented. Following our guidance revision in Q2, we immediately initiated necessary interventions in our North America healthcare services business. However, these initiatives are taking longer than anticipated to show the expected results. While we expect to see some benefit from these measures in the fourth quarter, we are expecting a more meaningful contribution in 2023. We had assumed flat organic growth in health care services in North America for the second half of the year. It has sequentially improved, but not to the degree expected.…

Thank you, Carla. Thank you, Helen for the presentation. I'm happy to turn it over to Q&A. Nathalie, could you please open the line.

Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session [Operator Instructions] And our first question is from the line of Tom Jones from Berenberg. Please go ahead.

Good afternoon. And thanks for taking my questions. Helen, I had two really. We'll have more, but I'll stick to two. The first is on labor. Obviously, it's been a bit of a headwind for everybody in the industry and many other healthcare businesses. You talked a fair bit about recruitment, but it also feels that employee retention has been a bit of an issue. So I just wondered if you could comment on what you've been doing to improve employee retention across the business. And the second question was just on the cost savings. Forgive me, I know, it's early in the process for you, so you may not be able to say too much. But from my recollection this will be the fifth cost-saving program. We had GEP I, GEP II, the group optimization program FME25. One does have to start to wonder where the cost savings are going to come from given this is a fifth go-round on trying to find incremental cost savings. You've gone through the fat into the muscle down to the bone where else is there to go? Short of chopping hole lins off, I guess is the question. So maybe it's just a bit of sort of broad high-level color on, how you're thinking about making yet more cost reductions across the business without meaningfully impacting the revenue growth of the business.

Thanks Tom, great to hear from you. So let's start with labor. You said labor continues to be a headwind also headache, I think at this point. Clearly there's a lot going on in our efforts here on recruitment as you said, but more importantly, retention. We are experiencing higher turnover and retention challenges with our newer tenant employees. And we're really getting into a lot of the analysis root cause and KPIs around that. We're really focusing on selecting the white focused and tailored training. We're adopting a buddy system in our clinics. And all of this is -- we're making sure we have the right leadership support within our clinics as well. So I think a lot going on in that area. And I think we're starting to see the benefit of that pull-through. On cost savings, you're right, we have done a number of cost saving programs. And I know you've been here long enough to remember them all. Look, I think FME25 was more around the operating segments and organizational design and getting the structure set-up I think what we obviously need to do now as we talk about a turnaround plan is really focused on our structural cost. As we know, we have been with COVID for 2.5 years and we haven't really adjusted our clinic structure as an example, because we know that we were leaking on operating leverage. So I think the -- as Carla outlined the areas of focus, I think it's kind of just going more deeper now into the structural with this reduced kind of profit margin profile that we have. So, more to come in February, but yes, I think we can clearly then speak to why it's different to where we're going to look at the cost.

Sure. And maybe just a quick follow-up on the recruitments and retention side, nurses in particular tend to boomerang a bit as the macroeconomic situation improves and then wanes again. Obviously things have been pretty good for health care staff in the last couple of years, COVID aside but pretty good financially for them. Are we starting to see any evidence yet that the more challenging broader economic picture is pushing more nurses back into the workforce or encouraging the nurses you do have to work longer hours and I ask the question last quarter but it might be worth an update now as…

Yeah. No, I mean it is a metric that we track and we are seeing about third of our new hires about 13% are actually coming from Boomerang. And I think a testament to our strong employee base is about third of our employees are coming from the retention -- sorry the referral program. So yeah, look, I think we are seeing some stabilization as I mentioned. And I think we're obviously looking at the kind of the macroeconomic environment from a recession perspective which may additionally push more people into the workforce. So yeah, some -- it's nice to see this stabilize. And I think it's good for us to see this focus on this 5,000 priority positions that we can really bring in the right people. And I think here as you've already had to say the focus on the training is really important.

That’s all very clear. I’ll get back in the queue.

The next question is from the line of Graham Doyle from UBS. Please go ahead.

Thanks for taking my questions. Just one on Q4 and what's implied around that. So we know you obviously flagged the provider relief funds into Q4 as being clearly within the guidance. Is there anything else we should be thinking about? And should we look at Q4 as probably the best indicators to the smooth rooting you have for next year. So maybe that should be our base for, which to extrapolate 2023? And then just one question on vaccination rates, can you give us any update in terms of the US specifically around booster rates there in your patient population? Thank you.

Hi, Graham. Thanks. Happy to take your question. Yeah, as you mentioned in Q4, obviously, I think if you look about the midpoint of our guidance that does translate into a lower Q4. I think there's a couple of things there. We did have some one-time items in Q3, I’ll say one-time maybe just unusual. We did have the long-term incentive plan benefit in Q3 as a result of the stock price true-up and the short-term incentive true-ups. The -- so -- and then we also had a higher volume on consent payment for pharmaceuticals hit in Q3. So I think that artificially lifted up Q3 as you compare it to Q4. Obviously as you heard me speak on the call, for Q4 we are still expecting this lower organic growth to persist. And as you also rightly mentioned the labor costs are totally naked if you will in Q4 with no offset, so that kind of also impact the quarter. And obviously that's how we spoke about it on the headwind tailwinds. I don't think it's -- I mean it's a hard question. I'm not going to get into what you should start modeling 2023, but I think for 2022 what we do expect is a lot of these intervention measures that the North America team are executing on to really start to kick in, in Q4 but more importantly through 2023. So that obviously is an important driver for us. On the vaccination rates, I mean, obviously we're in flu season and boost the season. I don't have the exact numbers to hand on the percentages, but what we're seeing is just a slight increase in the vaccination rate, but nothing of note and nothing of concern I would say.

That’s super clear. Thank you. I’ll jump back in the queue.

The next question is from the line of James Vane-Tempest from Jefferies. Please go ahead.

Hi. Thanks for taking my question. Two if I may please. Firstly at 2Q, you mentioned how delayed new starts were impacting the business. Just wondering how that's changed in Q3 and how that's impacted mix as we move through the year as I imagine some of the new patients coming in are probably more commercial patients? Secondly, just look on -- I know you don't want to comment on 2023, but perhaps I can keep my question to the nine months we've seen this year. I know you gave a net income bridge, but if we were to think about what the impact this year so far has been from the ballot costs and funding relief, which you've received. Are you able to give us a sense in terms of what the nine-month net income number would be excluding those two factors? Because I think from nine months in the relief, I think the net income ex special items was €660 million. So would that be closer to €500 million? Thank you.

Cool. A lot to absorb there James. So on your 2Q mix and commercial mix, we're not really seeing any variation there. That's been very, very resilient and pretty stable. So nothing to note there as we now look at Q3 and our guidance coming out. I think, I probably have to have Dominik and the team follow-up with you on the net income bridge excluding those items. I don't have the…

So I think the ballot was 2023.

The ballot I can speak to. Yes, that was always 2023.

Both the funding relief and provider relief funds, we received I think €280 million or so.

But James was your question what would net income be without those items?

Exactly yes. In terms of -- because if we're going to start thinking what the base is going to be for this year for items not expected to come into next year. I think people are after a sense in terms of, what the floor is to kind of grow the business from into next year.

Yes, let us follow up with you on that James.

Thank you.

The next question is from the line of Hassan Al-Wakeel from Barclays. Please go ahead.

Hi. Thank you for taking my questions. I have two, please. Firstly, -- following up on Q4 and into next year, could you elaborate and potentially help us quantify some of the building blocks for next year given what is implied by your guidance for Q4, as an exit rate. Should we be thinking of a net headwind, and earnings potentially being down in 2023 given the size of the provider relief funding at €200 million plus that is not recurring next year? Secondly, at Q2, Helen you talked about wage inflation running at 9% to 10% in aggregate. I wonder if this has changed at all and how you think about this into Q4 and next year. Where have open positions trended? And how reliant are you still on contract stuff? Thank you.

Thanks, Hassan. You know, what I'm going to tell you about the guidance for 2023 and the building blocks like literally we are in kind of budget meetings morning -- noon and night right now. So really too early to tell, what that net outcome is going to be. We recognize that we have a number of headwinds to overcome and obviously, the kind of the growth assumptions here at key. But also the turnaround plan and those kind of inventions are something that we need to spend more time on, so that we can realistically evaluate what contribution that can make in 2023. So we will ask for your continued patience there. I think on wage inflation, we are seeing it around 6% to 7% currently, I would say. I don't know that's an average and it's not necessarily not just efficiencies. But I think that's a good proxy, for what we're seeing currently. On open positions, and I know we have maybe in this call modified, how we're thinking about open positions and I think appropriately, so. As we think about -- we always said, 2,500 to 3,000 open positions was kind of a normal run rate for us. And then we started to track all open positions and you know, how that's trended over the last few quarters 11,000 going to 8,000 and today we're talking about 5,000. And I think what's really important there, is that this is about the critical positions that we are focused on filling, with the right -- the right capability to the right hiring standard. So we feel really good about where we are there. And then you asked about wage inflation open positions. Did I miss something else? Agency. That's, right. Thank you. Now keeping me on is here today. The agency costs obviously, we're focused on. We are starting to see that overall cost come down, not coming down as much as we needed to, but I think there's very concerted efforts on there. I think we're also seeing agency rates come down slightly too. So we have a volume and a rate there, but we are seeing the trend starting to come down. I think we'll see more impact of that reduction in Q4.

That's really helpful, Helen. Maybe, if I could just follow up on the first part. You talked about one-offs in the quarter. Could you help quantify? I think one was around pharmaceuticals and the other one was around remuneration.

Yes, well, happy to do so. So the remuneration is around €40 million and the pharmaceutical higher volume consent payment is also around €40 million.

Excellent. Thank you.

The next question is from the line of Veronika Dubajova from Citi. Please go ahead.

Hi. Good afternoon. Carla and Helen, thank you for taking my questions. I'll keep it to two please. One is, I guess, I mean, I'm going to circle back to what everyone else has tried to ask, but I'm going to ask it differently, which is, Helen, if I look at your guidance and what it implies for the fourth quarter, are there any reasons why that would be representative as a starting point for 2023? Are there either positives or negatives that might make it not a fair and true account of where the business is as we move into next year? So that's my first question. And my second question and I appreciate it. I think I ask you this every quarter. So far neither you nor I have been able to predict this correctly, but I'm just curious Helen on everything that you see when you feel that we might return to a positive same market or same-store growth rate in the US?

Welcome back. It's great to hear your voice again. So, yes, Q4, is it representative? I mean, look, I think, it's what we're thinking for Q4 is like it's pretty kind of stable to kind of -- be kind of what we're seeing today. There's not much of an uplift really projected. I think the thing to think about for the quarter is what I touched on earlier with the previous question is, we are expecting our efforts to take hold. I mean, there's a ton of work going on with the teams tackling labor and growth and kind of the clinic operations and so on, but we also -- we've got a lot of volatility. We're waiting to see kind of what the COVID numbers play out with and so on. So you can kind of see is why I kind of have widened kind of the range somewhat. Look we're working hard on it. I -- hard to predict at this point, but we also hope for the improvements to start to take hold. Gosh, Veronika, your second question on when will we see same-store growth, look, we're kind of -- we're in the low negatives right minus one-ish. We hope that we will start to see that turn the corner early next year, but as we said, we've been running on it constantly. We keep trying to predict the impact of COVID and hard to imagine that since the start were just around 25,000 excess mortality at this point. So, again, the winter is key on that and maybe another one to ask for patients on, and obviously, more to come, a lot more to come in February.

Understood. Thank you so much, Helen.

The next question is from the line of Oliver Metzger from ODDO BHF. Please go ahead.

Hi. Two questions from my side. The first one is on your development in EMEA. So it seems for me to be a quite good quarter on services as well as product. So last year was not ultra-high, but could you also comment on underlying trends in which you expect to continue into Q4. Second question is following the closing of InterWell Health merger. So, where do you stand right now with medical costs under management in a moment please?

Thanks, Oliver. Good to hear you. On EMEA, I don't think there's anything of note to call out on the quarter itself. We have a comp year-over-year from a license from one of our partners from that's in the last year's results. So, I think that kind of assists the year-over-year growth if you will, but nothing else of significance on the volumes. However, I would say, clearly in EMEA, the inflation and supply chain challenges are something that we're watching and continuing probably into Q4. On your InterWell question, we are kind of looking at €5 billion to €6 billion medical costs under management and that 1% margin is fully on track. And we're really excited about this merger and the possibilities here, a real important foundational building block of our strategy.

May I ask one follow-up to your second answer? So, when you say €5 billion to €6 billion medical customer management, I think you were at roughly €6 billion at the beginning of the year. So my thought was that the merger creates even more exposure to value-based care. Has anything changed over last months?

No, I think that was always the plan. And I think what I'm just speaking to is kind of currently what we're seeing it at a €5 billion to €6 six billion. So, no cause for concern there, Oliver.

Okay. Great. Thank you.

The next question is from the line of David Adlington from JPMorgan. Please go ahead.

Thanks for taking the questions. Just coming back to the -- those nonrecurring positive items in the -- in third quarter you sort of quantified it. I just wonder, if you could quantify those year-to-date or perhaps better for the full year 2022. And second, just sort of conceptual one. I just wondered why you were recognizing those one-off gains within the kind of operating income. And were you assuming that those gains or those positive effects within your guidance at the start of the year? Thanks.

No, it's pretty clean, David. Let me take both questions. The long-term incentive plan obviously tied to our performance and stock price. That goes up and down every quarter. It's just unfortunately with our Q2 announcement we had a big drop in Q3. So, that's obviously favorable to our P&L. And obviously, that fluctuation will go up or down the next quarter. So, it's not like a onetime. It's just kind of -- I call it unusual. It's a big number, €40 million in one quarter, but we do that kind of market -- kind of price adjustment every quarter. The other one on payments for pharmaceuticals. That's also normal business, we have them every year. Normally, they're in Q4. We have this one in Q3. So, they're not special items and don't need an adjustment. I think, they're just not large enough in nature and obviously, impacting the quarter to be worth talking about.

Excellent. I don't think there's accrual on legal dispute as well as able to quantify that.

Yes. That was the accrual on legal dispute, that we did back in 2019, and we were able to release some of that accrual in Q2 -- Q1, Q1 -- kind of pull that number somewhere, yes. So roughly, yes maybe mid-30s €35 million or something. I don't have the exact numbers to hand, but it sounds about right and that was in Q1. So -- but that was -- we took a bigger charge back in €36 million. So we took a big charge on that back in 2019. But as that case continues we have been able to release some of it.

Perfect. That’s helpful. Thank you very much.

You bet.

The next question is from the line of Robert Davies from Morgan Stanley. Please go ahead.

Thank you for taking my questions. I'd just be interested if you could give us some sense across your facilities at the current capacity utilization. I ask in context of your scope to reduce either site locations or headcount. I just wondering obviously you have certain minimum requirements of people or facilities in each location. Just wondered where capacity utilization sits? And where you see the most scope or if there is any scope to make changes there? And then the second one was just really if you could give us an update on what you're seeing on the home dialysis front. Are you still seeing continued uptick there? Is it as fast as you expected -- slower? Are the associated costs higher or lower than you previously thought? Those are my questions. Thank you.

Hi, Robert, good to have you on the call. Look forward to getting to know you better. So welcome. On the site location percentage, as you can imagine that is part of our full assessment. We are doing a full scope analysis of all of our clinics and the utilization and the footprint. And I think that will be part of our kind of footprint analysis and turnaround plan. I don't have the numbers kind of to hand of kind of the utilization of each clinic obviously, but something that we are doing a full assessment of. And you can expect to be in scope for part of that cost reduction and structural cost reduction plan. Obviously, that has been hurting our operating leverage where we do have underutilization. On home, still growing. It's kind of at 15.4% now of US treatments and we're happy that it's growing. It is slower than we would like. Obviously some of the training and so on has been impacted by the kind of lower staffing issues. And it does continue to grow more than the center and will be a key growth area for us. And for us we've not necessarily seen the full benefit of the lower costs yet, but we are absolutely kind of focused on that and continuing to pull that through as another one of our key strategies.

Thank you. Maybe just as a follow-up to the first answer you gave. Do you have any sense of the variability of utilization levels? Is it sort of plus and minus 5% around an 80 level? Is it -- some at 90, some at 10. Can you give us some sense of where there's real sort of low-hanging fruit across your business?

It does vary by region. And obviously, the kind of geography of where our patients are. Look I think it's too early to say. The capacity is adequate to take new patients. And obviously the goal here is to lose as few patients as possible, as we do the consolidation so more to come. Again, I'm asking everyone for a lot of patients today I know -- but we need to get -- we need -- we're doing the analysis. We need to evaluate the outcome of the analysis and then make the decisions on the number of clinic closures that we are targeting.

Understood. Okay. Thank you.

The next question is from the line of Falko Friedrichs from Deutsche Bank. Please go ahead.

I have two questions as well please. Firstly, based on comments from your competitor it seems that fewer patients are transitioning from CKD to ESRD. So, my question is whether you noticed that as well and whether you have any potential explanations for that? And then secondly just a clarification question. Helen did I understand you correctly that the number of job openings went from 8,000 in Q2 to 5,000 at the moment?

Hi, Falko let me take your second question first. The - it's not that it dropped from 8,000 to 5,000. We are really -- there was a lot of open racks and a lot of open positions that were maybe not as priority and as focused in area -- in kind of the -- where the postings were being targeted. So, we are just saying that for us the relevant open position number is 5,000 now. It dropped a couple of hundred during the quarter. So we are hiring and bringing it down. And then on the CKD to ESRD, I know we kind of heard what Javier had to say and I think it's not data that we have or have insight into something that we can point to, we are just seeing less diagnosis from patients on COVID-related patients who are kind of maybe avoiding hospitals. But I think the question is, if we've got lower volumes where are the patients going. There is some going into hospitals some going into smaller dialysis clinics, but nothing that we are seeing kind of impacting that population. Our treatment numbers have been growing sequentially Q1 to Q2 and Q3. So, I think that's important. I think we're all continuing to dig into the data and the analysis of what -- of what's happening with our volume. And as I said that's a big component of our 2023 outlook is getting the wide organic growth assumptions for next year.

Okay. A quick follow-up on the first question for the job opening. So essentially out of the 8,000 you had you essentially closed a couple of job openings. Did I understand that correctly?

Yes, that's correct. So, it's like we had a lot of open racks. But now we're like really focused on all the racks worth top priority and then close the racks that maybe diluting our recruiting efforts. So rather than trying to do maybe we don't need 8,000 but maybe trying to do 7,000 at once. So, we're trying to really focus on the 5000 that have biggest impact.

Okay, that makes sense. Thanks a lot.

The next question is from the line of Sezgi from HSBC. Please go ahead.

Hi, thanks for taking my questions. I will also three [ph] questions please. First of all, in previous call, I thought it was remarkable that they started closing some clinics and I see that you still have an expansion. Is that the differentiation and strategy or should we expect to see more closings next year? And my second question -- and congratulations on the list of the FDA hold. Can we expect to recover the entire loss business on the product side from the hold of the machines, or would you expect some of the lost market share to remain lost? Your thoughts on how you expect to recover from that would be good, would be very welcome. Thanks.

Yes, happy to take those questions. So, no I don't think our strategy is different. Maybe the announcement of timing is. But no we -- obviously, we saw that we have net five in the quarter of new clinics that's kind of a function of where they were being built and where they are for our patient needs. But I think the strategy is the same. We're all looking at our cost structure and looking to see how we can optimize our clinic structures overall. So, I think that will be part of our update in February. And then yes, we are delighted with the FDA release. We have already started resuming shipments. I think we won't skip a beat. We have POs for those machines that were on hold. We already had assumed that we would resume shipments already in our outlook. So, we're just glad to have confirmation of the date and kind of get that product base back installed.

Thank you.

This concludes our Q&A session and I hand back to Dominik for closing comments.

Thank you for being so flexible to join on short notice today. This is highly appreciated. Thank you for your questions and your interest. And if you have further questions as always reach out to us and we look forward to see you soon on the road at conferences and hopefully next year. Take care.

Thanks everyone. Bye-bye.

Thank you.

Ladies and gentlemen, the conference has now concluded and you may disconnect the telephone. Thank you for joining and have a pleasant day. Good bye.