Ladies and gentlemen, welcome to the Report on Second Quarter 2025 Conference Call. I am Sandra, the Chorus Call operator. [Operator Instructions] and the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Dominik Heger. Please go ahead, sir.

Thank you, Sandra. I would like to welcome everyone to our earnings call for the second quarter of 2025. As always, I would like 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 and to our SEC filings. We will have 60 minutes for the call. To give everyone the chance to ask questions, we would like to limit the number of questions to 2. It would be great if we could make this work, as always. Let me now welcome Helen Giza, CEO and Chair of the Management Board; and Martin Fischer, our Chief Financial Officer. Helen, the floor is yours.

Thank you, Dominik. I'd also like to welcome everyone to the call. We appreciate you taking the time to join us today and for your continued interest in Fresenius Medical Care. Our second quarter results reflect continued improvement in our operational performance and disciplined execution as we transform and strengthen our company. Building on this momentum, we are well positioned to embark on our next chapter FME Reignite, which we outlined at our recent Capital Markets Day in June. Through our clear ambition to lead kidney care through exceptional patient care and innovation, we are ready to unlock our full potential to reignite Fresenius Medical Care and reignite future growth. I will begin my prepared remarks on Slide 4. In the second quarter, we delivered strong organic revenue growth of 7% with positive contributions from all 3 operating segments. Our FME25+ transformation program continued its momentum, delivering EUR 58 million in additional sustainable savings of our targeted EUR 180 million for the year. We achieved 13% operating income growth, further driving margin expansion. Our operating cash flow development increased by 75% and our net leverage ratio improved to 2.7x, which is well within our new target leverage range of 2.5x to 3x. The overall phasing of our earnings through the first half of 2025 has developed well in line with our planning, and we continue to expect accelerating earnings development in the second half of the year. Therefore, we are, of course, confirming our full year 2025 outlook. Given the strength of our cash flow profile and our belief that shareholders should meaningfully benefit in the success of our company, we announced at our Capital Markets Day that we will initiate a share buyback program of EUR 1 billion initially, which will be executed in multiple tranches. We have planned…

Thank you, Helen, and welcome to everyone on the call also from my side. I will pick up on Slide 8. In the second quarter, we achieved organic revenue growth of 7%, with all 3 segments contributing to this strong performance. Revenue increased by 5% at constant currency. The impact from divestitures executed as part of our portfolio optimization negatively impacted revenue development by 110 basis points. As a reminder, we decided to absorb the revenue and operating income effects from divestitures executed in 2024 and 2025 in our guidance range. Operating income, excluding special items, increased by 13% on a constant currency basis, primarily driven by growth in Care Enablement. As a result, we realized further margin expansion to 9.9%. Divestitures had a neutral effect on operating income margin development. Special items negatively affected group operating income by EUR 51 million. This mainly includes costs relating to FME25+ and our continued portfolio optimization offset by positive effects from the remeasurement of our investment in Humacyte. Next, on Slide 9. This slide outlines the year-over-year margin development for the second quarter. At the group level, we realized a margin increase of 80 basis points. This increase was driven by positive contributions from both Care Enablement and Care Delivery with particularly strong results from Care Enablement and was partially offset by a slightly negative impact from Value-Based Care. Net corporate costs increased by EUR 14 million from the prior year, including a positive EUR 9 million contribution from virtual power purchase agreements. In addition, foreign exchange rates development unfavorably with a negative EUR 16 million impact. The average U.S. dollar exchange rate in quarter 2 was EUR 1.13 compared to EUR 1.05 in the first quarter. Let us now have a closer look of the drivers of each segment starting with…

Thank you, Martin. I will finish my prepared remarks on Slide 15. Given our performance through the first half of the year and our expectations for growth acceleration in the second half of 2025, we are confirming our full year outlook. With the strong growth in Value-Based Care in the first half of the year, which is driven by the contracted risk types, we expect to be at the upper end of our positive to low single-digit percent revenue growth range. This revenue growth in Value-Based Care is not impacting the operating income growth. Therefore, we continue to expect to grow operating income by a high teens to high 20s percent rate compared to prior year. We are also confirming our operating income guidance range. This also includes the upper end of our guidance range, which also tells you that we continue to consider this to be a viable outcome for earnings growth. With the planned margin improvements by all 3 second half of the year. With that, I will now hand back to Dominik to start the Q&A.

Thank you, Helen. Thank you, Martin. [Operator Instructions] And with that, I hand it back to Sandra to open the Q&A. Sandra, please.

[Operator Instructions]

And the first question comes from Hugo from BNP.

I have 2, please. Maybe in terms of U.S. volume growth and if we think about 2026, obviously we have a low base in H1? Or are you confident to grow volumes in 2026 in the U.S.? That would be my first question. And second on Care Enablement, you have very strong margin expansion, 250 basis points in Q1, close to 400 basis points in Q2. How should we think about the back half of the year and the level of comfort to it probably the high end of the 2025 margin band here.

Hugo, I'll take both of those. With regards to U.S. volume growth, obviously, what we are seeing right now is this continued elevated mortality. And that's why as we've kind of concluded the first half flat, we are calling the back half flat to slightly positive. So I know it's a lot of small numbers at this point, but that does assume that the growth continues. We are really encouraged by the referral trends and the inflows, and we have seen improving trends there for 5 months in a row now. So that is really encouraging on the front-end funnel. And that comes back to what we've always said that once mortality normalizes, we see the inflows returning, the underlying fundamentals of this business, there's no reason to suggest that, that 2% plus is unchanged. So yes, we will expect to see growth going into 2026. And obviously, as we look at the development over the next few quarters, the rate of that slope will be determined in time. So I think that follows the consistent messaging we've been giving there. With Care Enablement, we're really, really pleased and encouraged with what we are seeing there. And as you rightly point out, nice progression in the margin band. We -- clearly, we still have the margin band out there for Care Enablement of 8% to 12%, and we haven't changed that but we do see H2 stronger than H1. And then we usually see the back end of the year stronger for Care Enablement, particularly in Q4 because of the sales volume. So -- it is a little bit seasonal, but the band overall, we're still confirming and really, really pleased with the progress that the Care Enablement team is making.

The next question comes from Veronika from Citibank.

Hopefully, you can hear me okay. I will also keep it to 2, if I can. The first one is just on the patient inflow dynamics, Helen, that you alluded to. Can you maybe talk to sort of how you're thinking about that in terms of the market getting better versus some of the processes that you have in the business? And I don't know if you can quantify it and also quantify maybe the mortality that you saw in the quarter just to help us with the math as we think about how things accelerate. And then I'm sorry to be on the -- to stay on the same topic, but obviously, you do have that guidance for 2% plus starting next year. So just curious how you're thinking about the ability to get into that 2% plus already in 2026? So given the dynamics that we're seeing at the moment, is that more a 2027 question? Sorry to stick to the same market, but those are the 2 most important things.

Thanks, Veronika. We'll see how many times we get asked, a different flavor of that question, but we recognize how important it is and for us to share what we are seeing in real time. Look, I think on the patient inflows, as I've mentioned, they are encouraging and positive, and it's the best too we've seen in years, but not just the fact that this quarter is strong, but as I mentioned, 5 months in a row of improving patient inflows and new patient starts I think it's a bit of both. And I think we're still, obviously, with our data trying to tease that out on -- we're doing a lot of things all at the same time, but we are definitely seeing new referrals coming in. But of course, it is helped by our improved processes to get those patients in and scheduled into treatment. So I think it's a bit of both. And I can't tease out how much is one or the other at the moment other than the inflows are positive. I think we -- on your second part of that question on the 2%, we've definitely said that, that 2% plus is based on normalized mortality. It is still somewhat elevated coming out of this flu season and with the positive inflow that helped. So I think if we had normalized mortality and the same trend of inflow that we've been seeing, that 2% obviously is unchanged. And I think like we said, it's kind of the weight of the slope as we go through 2026 will be key. But we're kind of encouraged by what we're seeing in this last quarter.

The next question comes from Hassan from Barclays.

A couple from me. Firstly, on the margins, you continue to expect an accelerating earnings development in the second half. And I wonder if the persistent weaker volume dynamics and lowered expectations here has an impact on your H2 expectations and where you expect to land in the range? And then secondly, on VBC, your guidance assumes EUR 100 million of incremental revenue year-over-year, yet you've banked EUR 200 million already in the first half. So if you could talk about the strength here and how we should think about the evolution in the second half as well as any dilution at the margin level?

Thanks, Hassan. Why don't I tackle the half 2 trend? And then Martin, maybe you can take the VBC trend. So yes, Hassan, clearly, the softer volume for half 2 does have an impact. However, we've always said that it's the volume number alone with small numbers, it's quite small. So it was never going to make or break the year. We just recognize the underlying metric is obviously important for future growth. So it doesn't have that significant or big impact at all in the back half. What we know is half 2 is always stronger than half 1. And you always -- you kind of -- you've seen this historically, as you followed us and Q4 is always stronger than Q3, but half 2 always stronger. So clearly, we have that built in. And then in the back half for H2 development, we will see continued benefits from rate and mix. The work that we are doing on rev cycle improvement, as we already touched on the talk outline, will also hit in. And then we're really pleased with the momentum we're seeing on FME25. And of course, all the work that we are doing on continuing operational improvements will continue to have that momentum. So it is a little bit of seasonal and also the ramping up of the work that's underway and the programs and initiatives that we are already executing on. Martin?

Yes, I'm more than happy to take the VBC one. We are very pleased with what we saw in the first half. Also, we have expanded contracting activities in the meantime, have about 148,000 patients under programs. And we will expect more than EUR 1.9 billion to your point in the full year when we look at it. When it comes to the operating margin, we always said that it is slightly negative to neutral. And as we also said, there's a certain dynamic when it comes to gross revenue recognition. And we expect that we still are within that operating margin corridor. So there is a limited conversion that comes from the additional volume to our operating income.

The question comes from Oliver Metzger from ODDO.

The first one is also that beneath mortality, you talked also about the missed treatments to a flu season. So is this an area where you already see a return to the normal baseline or it's still also at an elevated level? The second one is in addition to Hassan's question on Value-Based Care. As it's now a separate business unit, we have got, thanks to Dominik's team, some historic data. But eventually not enough to identify some patterns. So can you give us an indication of when you see some more of this typical pay days? And also whether we should think rather in years and quarters about the progress on the bottom line.

Yes. Thanks, Oliver. I think I'll snag those questions. So mortality -- the flu effect obviously impacted mortality and missed treatment. So it's kind of a double effect on outflows, if you will. That is still elevated over last year. And as we were kind of quantifying that the flu effect through half 1, it is around that 40 to 60 basis points still of elevation over what is already a higher mortality from last year. So I think that it's fair to say that there's still that elevation. And I think as we come into quarter 3, seeing how that develops kind of bringing down the mortality level. Obviously, the work that we are doing ourselves on [missed] treatments that are in our control, we're tackling as well with the operational improvement. So they are elevated, and we continue to work on those to improve that post- pandemic and post-flu season. Martin give you a nice outline on how we're thinking about Value-Based Care numbers. Of course, it is a new segment. We are getting under what the right KPIs are. And I think you can expect us to continue to give more transparency on the KPIs as we move forward. Martin talked about the number of lives that we're covering, but we're also talking about membership and membership months because I think that's an important metric for us to continue to track as well in terms of how many months of members we are covering. So I think more to come, Oliver, as we kind of get more mature in our reporting here, as you can appreciate pulling it all out and having the historical data was a good step in the right direction. So for this year, you can see member months and memberships. And obviously, that varies too. And I think as we continue to progress with this segment, we'll figure out if there's more metrics to provide next year.

So next question comes from Richard from Goldman Sachs.

2, please. So the first one is how much benefit was there from phosphate binders in H1? And how should we think about the remaining benefit into the second half? And then the second one is another one on treatment volume dynamics. But could you help us put the 5 months of better inflow into historical context? I mean, is it fair to say that that's the first time since COVID that you've seen that consistency in patient inflows. That would be really helpful just to sort of frame that shift.

Martin, do you want to take binders half 1?

Yes. So regarding phosphate binders, we did see quarter 2 develop in line on how we expected the quarter to develop. We did see a double-digit million positive contribution for Care Delivery. As we pointed out, we also had highlighted in the first half that in quarter 1, we had a bit of a stronger development. And then in quarter 2, it came in, in line with what we assumed. So we are, for the first half in line with our expectations.

Thanks, Martin. And Richard, on treatment, yes, I think it's fair to say that this has been our strongest quarter 2 since 2020 from an inflow perspective, and that not just that it's the strongest quarter we've seen but also the monthly improvement we have seen over the last 5 months consistently is a new trend for us as well. So for us, we can kind of see that, that work has clearly started at the back. Even though we had few we could see this inflow in referrals improving Q1 into Q2 and the work that we are doing is clearly paying off there.

The next question comes from James from Jefferies. James Alexander Stewart Vane-Tempest 2, if I may, please. Confirming the guidance range, including the upper end, I'm just kind of curious the levers to get you there at the upper end of the margin range if volumes are expected to remain flat this year. And then the second question is just again regarding lower volumes. If volumes don't get to the 2% plus as an exit rate next year, how does that impact your thoughts on timing for capital allocation decisions, just given cash flow is so reliant on higher volumes?

James, I'll take the first one, and I'll give the capital allocation question to Martin. Obviously, what we tried to do is lay out the building blocks of the headwinds and tailwinds on guidance. And there's a range for them all. And I think it's fair to say if we hit the bottom end of all those building blocks, we'd be at the bottom end of the range. And if we hit the top end, the converse would be true. And obviously, we are -- our job as management is to balance all of those to make them all as strong as possible. The building blocks that we gave in -- with 2024 are the same building blocks that hasn't changed, right? So we are continuing to track quite well within those blocks, and we're managing our way through those. I think what maybe we want to reiterate is kind of what I said in an earlier answer, is we know that there is acceleration in the back half. Some of that is the natural phasing and stronger business performance with the volume seasonality, particularly on CE but H1 was completely in line with our plan. And we always knew that our H1 phasing would look like this. But the continued momentum on rate and mix, the revenue cycle, as we mentioned, the strong momentum in FME25+, the operating improvements, labor. So we obviously touched on the softness on volume. Labor regular inflation is tracking kind of favorable -- sorry, in line with our expectations, but we did have an unfavorable hit in Q2 for the medical benefit costs. I think, like the whole -- many corporations are seeing, and you saw across the insurance companies, higher claims and higher cost of claims. But I think that is more of a half 1 phenomenon. So I think we're just managing each one of these building blocks with a high degree of rigor, a high degree of focus, pulling through on the programs, and that's what's giving us the confidence for the back half 2 development.

Yes, James. And on capital allocation, we did outline in the Capital Markets Day, the clear prioritization of investment into the core with our CapEx of EUR 500 million to EUR 1 billion with a lower leverage ratio and returns to our shareholders. And we have announced the EUR 1 billion over 2 years. And you saw that we have a strong cash flow generation in quarter 2 and development. And you also see that the first half, as Helen outlined, expected in line with our expectations, and we expect an acceleration for the second half. So we will start with the first tranche of the share buyback in August, and we feel very confident about our ability to execute the program overall as planned.

The next question comes from Graham from UBS.

They kind of the repeat of what we had earlier, but maybe for some slightly different information. In terms of phosphate binders and their contribution to the business growth in Care Delivery, how much more do you think we have to go in the second half? And what do you think makes us takes up differential if that sort of eases in terms of contribution in the second half? And then you've talked a lot about the inflows, which is super helpful. Could you give us a sense as to what the percentage growth is? So is it like 1%, 2% in terms of year-over-year? And has that been trending like this for quite some time? And then just a quick one. Is there any way of discerning what is like share gains versus what is just the kind of funnel picking up?

Okay. Martin, do you want to binder and I'll take inflows?

Yes, more than happy to. Graham, as I outlined, the first half developed in our expectation with a double-digit million contribution for the second quarter and starting stronger in the first quarter. But then after the first half, we feel good about what we saw with phosphate binders. There is still certain topics that we are very close to like utilization and certain pricing developments. But so far, we are feeling good about what we saw, and that also gives us confidence for our full year overall assumptions.

Yes, Graham. And then on inflows, look, I think a couple of things to your question. the trend that we're seeing that referral improvement that we have seen these last 5 months equates to just under about 1% improvement in referrals year-to-date. But about a bit more than that in Q2. So it was closer to 2% improvement in that referral improvement in Q2. So that also speaks to the kind of the improving trend since 2020, but also the last 5 months. In terms of your question on share gain, we know that the work that we are doing operationally internally is paying off. And I think those improvements are clearly visible in our operation. We'll, obviously, have to see how the rest of the market kind of reports out this quarter. But I think for us, it's definitely kind of the patient trend and the work that we're doing is supporting that effort kind of the improving that cancellation rate is also kind of adding to our accepted referral growth. So it kind of -- there's a lot -- even when you've kind of got the new patient starts, we have been struggling to get them in and scheduled in time. The front-end work on improving the scheduling is also a key driver of this. So I think this trend, we have been seeing it for a few quarters now. It's not just the last month or so. It's been a consistent trend that we're encouraged by. And obviously, we had a lot of work to do with the turnaround in Care Delivery. So I think that is speaking for itself. But I also recognize that we're still talking small numbers.

The next question comes from David from JPMorgan .

Slightly different tax. So maybe just first, early thoughts on 2026 and the headwinds you might have from the annualization of phosphate binders and also the expiration of ACA subsidies? And then second question, it would be good to get your recent thoughts or your thoughts on the recent clinical data out of ProKidney for the impact on progression of their product on CKD?

David, look, I think we're definitely not giving 2026 guidance and kind of sizing out the headwinds and tailwinds today. More to come on that. But what I would say on binders is we've got this half 1 development, and Martin's touched on this already. There's a lot of things at play here. We've got the -- we got the patient numbers, the utilization rates. We've got generics, we've got branded, we've got the impact that's hitting on the clinics business, we've got the impact that is hitting pharma business, we've got the impact that's hitting pharmacy. So I think we're trying to get our arms around or not arms, we've got our arms around what we see in 2025, and it is progressing quite nicely as planned. Obviously, this utilization and what happens here, every quarter will shape what 2026 looks like. I think the thing that is key to watch for us is obviously post TDAPA period, which is January of 2027. But we're going to learn a lot about the uptake and utilization of these products by then. So I think, David, this is one where it's a quarter-by-quarter through '25. We'll obviously try and size '26, and then see what happens post-TDAPA. The other thing on this piece as well is obviously the noise on pharma pricing and potential tariffs. So I think it's just such a fluid situation. We've got good line of sight into '25 and obviously will shape '26. The ACA, I think we had already sized that on the previous call. Of course, we expect for 2026 and I can size this 2026 because we already have that it would be about 2% of U.S. CD EBIT. Obviously, past '26, we also have to see how this plays out. and what happens with the extended tax credits and do these patients end up somewhere else of exchanges in different coverage and what insurance they would take. So I think too early to call that yet, but obviously, we've got our arms around it. And then you had another question on ProKidney...

It's around the ProKidney data? Yes.

Okay. Yes.

Dominik...

Dominik, it's okay. So we'll wait for the ASN. I think they start their clinical study or the next phase of their clinical study. I think pricing -- I think there's rumors what pricing would be. But I think -- our understanding is you have to see what's the long-term effect of those shots. I think they now do 1 shot versus 2 shots. We are not the experts on that, but you have to see how long it actually holds and how long it would improve the outcomes, right? That's the big question. How it works? I think even the medical people don't fully understand, but it seems to have an effect, and I think we'll have to wait for the long-term impact to see if there's more shots they need and what's then the pricing of it. But yes, I think it's maybe not a very qualified answer, but I think there is not more that we could know by now.

That's fair enough. And maybe just one follow-up. Just in terms of the phosphate binder double-digit impacts. Could you sort of narrow down a bit whether it's low, medium, high because that's 10% to 99% range.

Martin?

Yes. So it's more -- well, to give you an indication for the quarter when we talk double digit, it's more on the lower, below mid, so to say.

And our last caller is Falko from Deutsche Bank.

I'm fine with just my 2 questions. Firstly, could you briefly remind us on the next steps for your new high-volume HDF machine rollout in the U.S.? The things we should be looking out for here and how meaningful this could potentially be for your financials this year and next? And then secondly, at current spot rates, what is your expected FX headwind on adjusted EBIT for the full year and also on sales?

Thanks, Falko. This is my favorite topic. So I will take the HDF question, and Martin not surprising will take the exchange rate question. We're continuing to go all systems fast on HDF. As you heard me say, we have all the approvals we need. We already have one clinic fully converted. And the plan is to have 30 clinics and 600 machines converted during Q3 and Q4. So really excited about the traction and the work that is happening around that. Impact in 2025 somewhat limited, obviously, the big ramp up hits in 2026. But everything going to plan and excited to get our own U.S. real data and hear firsthand from how our patients are feeling and doing after the treatment. So -- we'll continue to update that on that as the year goes to -- as the year goes by, Falko.

Yes. And Falko, for the FX, we do see quite some volatility currently in the markets over the last couple of weeks. So I'll give you a reference rate because it also changed from the last quarter to this quarter where we did see a significant development also of U.S. dollar and euro. Over the last couple of weeks, we saw a [117-ish]. It now came down a bit. But when you take that as a reference, we would expect a 3% to 4% impact on both revenue as well as earnings if it were to stay for the remainder of the full year on that level, and that effect would also then be a full year effect that we have.

Great. Okay. Perfect. So thank you very much. We will close the call now. Thank you for listening in, in the summer. We do wish you all a great summer break and are looking forward to be in touch after the break and see you on many conferences, roadshows and looking forward to reconnect.

Yes. Thank you, everybody. Enjoy rest of the summer. Take care.

Thank you. Take care.

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