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Fresenius Medical Care AG & Co. KGaA
Investor Presentation • Aug 6, 2024
165_ip_2024-08-06_43abd612-8cc4-44e8-becd-45ddc9f23d17.pdf
Investor Presentation
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Analyst Presentation
Helen Giza
CEO \& Chair of the Management Board
Martin Fischer
CFO
July 30, 2024
Q2 2024
IR Conference Call
Safe harbor statement: In this Safe harbor statement, "the Company" and "Fresenius Medical Care" refer to Fresenius Medical Care AG \& Co. KGaA, a German partnership limited by shares, prior to its conversion of legal form, and to Fresenius Medical Care AG, a German stock corporation, after its conversion of legal form. This presentation includes certain forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Act of 1934, as amended. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy or might not even be anticipated. The Company has based these forward-looking statements on current estimates and assumptions which we believe are reasonable and which are made to the best of our knowledge. Actual results could differ materially from those included in the forwardlooking statements due to various risk factors and uncertainties, including changes in business, economic or competitive conditions, changes in reimbursement, regulatory compliance issues, regulatory reforms, foreign exchange rate fluctuations, uncertainties in litigation or investigative proceedings, cyber security issues and the availability of financing. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. These and other risks and uncertainties are discussed in detail in the Company's Annual Report on Form 20-F under the headings "Forward-Looking Statements" and "Risk Factors" and under the headings in that report referred to therein, and in the Company's other reports filed with the Securities and Exchange Commission (SEC) and the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse).
Forward-looking statements represent estimates and assumptions only as of the date that they were made. The information contained in this presentation is subject to change without notice and the company does not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable law and regulations.
If not mentioned differently the term net income refers to the net income attributable to the shareholders of Fresenius Medical Care. Amounts are in Euro if not mentioned otherwise.
Implementation of measures as presented herein may be subject to information and consultation procedures with works councils and other employee representative bodies, as per local laws and practice. Consultation procedures may lead to changes on proposed measures.
Q2 2024 Highlights | Improving our financial performance while executing against our strategic plan and company transformation
Care Delivery
- Treatment volume growth remains muted driven by continued elevated mortality levels
- Growing U.S. value-based care business with slightly improved profitability compared to prior year
- Divestitures in CD International executed at pace
- Continued focus on driving operational excellence
- CMS ESRD PPS 2025 draft rule is expected to result in a $2.1 \%$ reimbursement increase
Care Enablement
- Continued momentum of pricing initiatives
- Introduction of Volume Based Procurement in first provinces in China
- Progress on FME25 savings
- Optimization of manufacturing and supply chain footprint remain in focus
-
First 5008x treatment performed in the U.S.
-
Organic revenue growth of $+2.3 \%$ supported by both segments Care Delivery and Care Enablement
- Operating income ${ }^{1}$ and operating income margin ${ }^{1}$ increase driven by Care Enablement
- Additional FME25 savings of EUR 57 million achieved and on track to reach the upper end of the full year savings target range
- Net financial debt and net leverage ratio improved
- First recognition of virtual Power Purchase Agreements (vPPA) slightly benefit operating income by around EUR 6 million
- FY 2024 outlook confirmed
G2 2024 | Revenue development driven by solid organic growth
Revenue | outlook base ${ }^{1}$
in $€$ million
Revenue growth ${ }^{1}$
- Solid organic revenue growth with growth contributions from both segments
- Divestitures realized during the second quarter negatively impacted development on outlook base by approx. 170 bps.
- Group operating margin improvement driven by Care Enablement
- Special items include legacy portfolio optimization costs, FME25 related costs and positive effects from Humacyte remeasurements
- Divestitures realized during the second quarter had a neutral effect on operating income
[^0]
[^0]: 1 At constant currency, adjusted for special items and divestments closed in 2023. Reconciliation table for special items, 2023 divestitures and Fx (2024 outlook base), to reported growth rates: page 19
Q2 2024 | Operating margin improvement driven by Care Enablement
1 At constant currency, adjusted for special items and divestments closed in 2023. Reconciliation table for special items, 2023 divestitures and Fx (2024 outlook base): page 19
G2 2024 | Care Delivery with organic growth despite !/at U.S. volumes
Q2 2023
outlook base ${ }^{1}$
- U.S. revenue development driven by a growing value-based care business, reimbursement rate increases and a favorable payor mix
- Elevated mortality continued to weigh on U.S. same market treatment growth
- Divestitures realized during the second quarter negatively impacted revenue development on outlook base by approx. 240 bps
- Earnings development as expected mainly impacted by higher personnel expenses and inflationary cost increases
- Business growth and savings from the FME25 program contributed positively
[^0]
[^0]: In Q2 2024, revenue was EUR 3,771 million, operating income was EUR 332 million. In Q2 2023, revenue was EUR 3,873 million, operating income was EUR 384 million.
1 At constant currency, adjusted for special items and divestments closed in 2023. Reconciliation table for special items, 2023 divestitures and Fx (2024 outlook base), to reported growth rates: page 19
G2 2024 | Care Enablement delivers on margin expansion
- Solid revenue growth in Q2 as positive pricing momentum continues
In Q2 2024, revenue was EUR 1,363 million, operating income was EUR 68 million. In Q2 2023, revenue was EUR 1,325 million, operating income was EUR 2 million.
1 Al constant currency, adjusted for special items and divestments closed in 2023. Reconciliation table for special items, 2023 divestitures and Fx (2024 outlook base), to reported growth rates: page 19
Q2 2024 | Lower net financial debt and further improved net leverage ratio
| in € million | G2 2024 | Q2 2023 | H1 2024 | H1 2023 |
|---|---|---|---|---|
| Operating cash flow | 442 | 1,007 | 570 | 1,150 |
| - Capital expenditures, net | $-153$ | $-155$ | $-283$ | $-296$ |
| Free cash flow | 289 | 852 | 287 | 854 |
| - Free cash flow after investing activities | 765 | 874 | 824 | 853 |
| Total net debt and lease liabilities | 10,658 | 11,714 | 10,658 | 11,714 |
Net leverage ratio (Net debt/EBITDA)
2021
2022
2023
Key developments in Q2 2024
- Operating cash flow decreased by 56\%, negatively impacted by
- EUR 407 million primarily as a result of changing vendors post the cyber incident at Change Healthcare; cash impact expected to be recovered in Q3
- phasing of federal income tax payments in the U.S.
- Divestment proceeds of EUR 0.5bn mainly used to deleverage in line with disciplined financial policy
- Dividend payment in Q2 2024
- Total debt and lease liabilities (EUR 11.8bn) as well as total net debt and lease liabilities (EUR 10.7bn) decreased significantly compared to Q2 2023
Outlook | FY 2024 assumptions
In EUR million, except same market treatment growth; all changes year-over-year; FY 2024 assumptions as published on Feb 20, 2024
1 Adjusted for the exit from less profitable acute care contracts ( $0.3 \%$ in H1 2024); 2 Business growth excludes impact from foreign currency transactions
FY 2024 | Outlook confirmed
FY 2024 Outlook
Revenue
(outlook base) ${ }^{1}$
Key
Low- to mid-single digit
percent growth
FY 2023 basis: EUR 19.0bn
Marketing income
(outlook base) ${ }^{1}$
Mid- to high-teens
percent growth
FY 2023 basis: EUR 1.54bn
Mid-term Outlook
Group operating income margin
$10 \%$ to $14 \%$ by 2025
Revenue and operating income, as referred to in the outlook, are both on a constant currency basis, excluding special items, the business impact from closed divestitures in 2023 and settlement agreement with the U.S. government in 2023 (Tricare). Special items will be provided as separate KPI ("Revenue (outlook base)", "Operating income (outlook base)") to capture effects that are unusual in nature and have not been foreseeable or not foreseeable in size or impact at the time of providing the outlook. These items are excluded to ensure comparability of the figures presented with the Company's financial targets which have been defined excluding special items. See page 19 for reconciliation table for special items.
All changes year-over-year
G2 2024 | Profit and Loss
| Q2 2024 € million |
Q2 2023 € million |
Growth in \% | Growth in \% cc | |
|---|---|---|---|---|
| Revenue | 4,766 | 4,825 | $-1$ | $-2$ |
| Revenue (outlook base) ${ }^{1}$ | 4,743 | 4,741 | 0 | |
| Operating income | 425 | 357 | 19 | 21 |
| Operating income margin in \% | 8.9 | 7.4 | ||
| Operating income (outlook base) ${ }^{1}$ | 433 | 400 | 8 | |
| Operating income margin (outlook base) ${ }^{1}$ in \% | 9.1 | 8.4 | ||
| Net interest expense | 85 | 81 | 6 | 4 |
| Income before taxes | 340 | 276 | 23 | 25 |
| Income tax expense | 99 | 81 | 22 | 28 |
| Tax rate in \% | 29.1 | 29.3 | ||
| Non-controlling interest | 54 | 55 | $-2$ | $-3$ |
| Net income | 187 | 140 | 33 | 34 |
| Net income (outlook base) ${ }^{1}$ | 207 | 176 | 18 |
1: Reconciliation table for special items, 2023 divestitures and Fx (2024 outlook base), reported growth rates: page 19 | cc = at constant currency
| H1 2024 € million |
H1 2023 € million |
Growth in \% | Growth in \% cc | |
|---|---|---|---|---|
| Revenue | 9,491 | 9,529 | 0 | 0 |
| Revenue (outlook base) ${ }^{1}$ | 9,565 | 9,360 | 2 | |
| Operating income | 671 | 618 | 9 | 10 |
| Operating income margin in \% | 7.1 | 6.5 | ||
| Operating income (outlook base) ${ }^{1}$ | 849 | 738 | 15 | |
| Operating income margin (outlook base) ${ }^{1}$ in \% | 8.9 | 7.9 | ||
| Net interest expense | 174 | 163 | 6 | 7 |
| Income before taxes | 497 | 455 | 9 | 11 |
| Income tax expense | 139 | 126 | 10 | 14 |
| Tax rate in \% | 28.0 | 27.7 | ||
| Non-controlling interest | 100 | 102 | $-1$ | $-1$ |
| Net income | 258 | 227 | 14 | 15 |
| Net income (outlook base) ${ }^{1}$ | 405 | 322 | 26 |
1: Reconciliation table for special items, 2023 divestitures and Fx (2024 outlook base), reported growth rates: page 20 | cc = at constant currency
2023 base for 2024 targets, reconciliation adjustments
Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures for comparison with outlook
| Group | Care Delivery | Care Enablement | Corporate | Inter-segment eliminations | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| € million | Q2 2024 | Q2 2023 | Growth rate | Q2 2024 | Q2 2023 | Growth rate | Q2 2024 | Q2 2023 | Growth rate | Q2 2024 | Q2 2023 | Q2 2024 | Q2 2023 |
| Revenue | 4,766 | 4,825 | $-1 \%$ | 3,771 | 3,873 | $-3 \%$ | 1,363 | 1,325 | $3 \%$ | -- | -- | $-368$ | $-373$ |
| Divestitures (NCP, Argentina) | -- | $-84$ | -- | $-87$ | -- | $-3$ | -- | -- | -- | 6 | |||
| Revenue excl. 2023 divestitures | 4,766 | 4,741 | 3,771 | 3,786 | 1,363 | 1,322 | -- | -- | $-368$ | $-367$ | |||
| Foreign currency translation | $-23$ | -- | $-28$ | -- | 2 | -- | -- | -- | 3 | -- | |||
| Revenue (outlook base) | 4,743 | 4,741 | $0 \%$ | 3,743 | 3,786 | $-1 \%$ | 1,365 | 1,322 | $3 \%$ | -- | -- | $-365$ | $-367$ |
| Operating Income | 425 | 357 | $19 \%$ | 332 | 384 | $-14 \%$ | 68 | 2 | 4309\% | 30 | $-25$ | $-5$ | $-4$ |
| FME25 program | 40 | 25 | 16 | 8 | 24 | 17 | 0 | 0 | -- | -- | |||
| Humacyte remeasurements | $-46$ | 4 | -- | -- | $-12$ | -- | $-34$ | 4 | -- | -- | |||
| Legacy portfolio optimization | 15 | 10 | 28 | 10 | $-11$ | 0 | 1 | -- | $-3$ | -- | |||
| Legal form conversion costs | 2 | 5 | -- | -- | 0 | -- | 2 | 5 | -- | -- | |||
| Divestitures (NCP, Argentina) | -- | $-1$ | -- | $-2$ | -- | $-2$ | -- | 3 | -- | -- | |||
| Sum of special items \& divestitures | 11 | 43 | 44 | 16 | 1 | 15 | $-31$ | 12 | $-3$ | -- | |||
| Operating income excl. special items and 2023 divestitures | 436 | 400 | 376 | 400 | 69 | 17 | $-1$ | $-13$ | $-8$ | $-4$ | |||
| Foreign currency translation | $-3$ | -- | $-4$ | -- | 0 | -- | 1 | -- | 0 | -- | |||
| Operating income (outlook base) | 433 | 400 | $8 \%$ | 372 | 400 | $-7 \%$ | 69 | 17 | $308 \%$ | 0 | $-13$ | $-8$ | $-4$ |
2023 base for 2024 targets, reconciliation adjustments
Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures for comparison with outlook
| Group | Care Delivery | Care Enablement | Corporate | Inter-segment eliminations | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| € million | H1 2024 | H1 2023 | Growth rate | H1 2024 | H1 2023 | Growth rate | H1 2024 | H1 2023 | Growth rate | H1 2024 | H1 2023 | H1 2024 | H1 2023 |
| Revenue | 9,491 | 9,529 | $0 \%$ | 7,559 | 7,628 | $-1 \%$ | 2,660 | 2,635 | $1 \%$ | -- | -- | $-728$ | $-734$ |
| Divestitures (NCP, Argentina) | -- | $-169$ | -- | $-173$ | -- | $-10$ | -- | -- | -- | 14 | |||
| Revenue excl. 2023 divestitures | 9,491 | 9,360 | 7,559 | 7,455 | 2,660 | 2,625 | -- | -- | $-728$ | $-720$ | |||
| Foreign currency translation | 74 | -- | 43 | -- | 35 | -- | -- | -- | $-4$ | -- | |||
| Revenue (outlook base) | 9,565 | 9,360 | $2 \%$ | 7,602 | 7,455 | $2 \%$ | 2,695 | 2,625 | $3 \%$ | -- | -- | $-732$ | $-720$ |
| Operating Income | 671 | 618 | $9 \%$ | 521 | 669 | $-22 \%$ | 138 | $-23$ | n.a. | 17 | $-15$ | $-5$ | $-13$ |
| FME25 program | 67 | 51 | 27 | 24 | 40 | 28 | 0 | $-1$ | -- | -- | |||
| Humacyte remeasurements | $-61$ | $-15$ | -- | -- | $-22$ | -- | $-39$ | $-15$ | -- | -- | |||
| Legacy portfolio optimization | 158 | 94 | 175 | 11 | $-11$ | 83 | 0 | -- | $-6$ | -- | |||
| Legal form conversion costs | 3 | 7 | -- | -- | 0 | -- | 3 | 7 | -- | -- | |||
| Divestitures (NCP, Argentina) | -- | $-17$ | -- | $-17$ | -- | $-6$ | -- | 6 | -- | -- | |||
| Sum of special items \& divestitures | 167 | 120 | 202 | 18 | 7 | 105 | $-36$ | $-3$ | $-6$ | -- | |||
| Operating income excl. special items and 2023 divestitures | 838 | 738 | 723 | 687 | 145 | 82 | $-19$ | $-18$ | $-11$ | $-13$ | |||
| Foreign currency translation | 11 | -- | 6 | -- | 4 | -- | 0 | -- | 1 | -- | |||
| Operating income (outlook base) | 849 | 738 | $15 \%$ | 729 | 687 | $6 \%$ | 149 | 82 | $81 \%$ | $-19$ | $-18$ | $-10$ | $-13$ |
Debt
| OZ 2024 € million |
FY 2023 € million |
FY 2022 € million |
|
|---|---|---|---|
| Debt | |||
| Short-term debt from unrelated parties | 322 | 457 | 644 |
| + Short-term debt from related parties | - | - | 4 |
| + Current portion of long-term debt | 481 | 487 | 694 |
| + Current portion of lease liabilities from unrelated parties | 592 | 593 | 650 |
| + Current portion of lease liabilities from related parties | 25 | 24 | 24 |
| + Long-term debt, less current portion | 6,854 | 6,960 | 7,171 |
| + Lease liabilities from unrelated parties, less current portion | 3,378 | 3,419 | 3,875 |
| + Lease liabilities from related parties, less current portion | 101 | 110 | 130 |
| + Debt and lease liabilities included within liabilities directly associated with assets held for sale | 17 | 137 | - |
| Total debt and lease liabilities | 11,770 | 12,187 | 13,192 |
| - Cash and cash equivalents ${ }^{1}$ | $-1,112$ | $-1,427$ | $-1,274$ |
| Total net debt and lease liabilities | 10,658 | 10,760 | 11,918 |
1 Includes cash and cash equivalents included within assets held for sale.
Reconciliation of adjusted EBITDA and net leverage ratio to the most directly comparable IFRS financial measures
| LTM C2 2024 € million |
FY 2023 € million |
FY 2022 € million |
|
|---|---|---|---|
| Net income | 762 | 732 | 895 |
| + Income tax expense | 314 | 301 | 325 |
| - Interest income | $-85$ | $-88$ | $-68$ |
| + Interest expense | 432 | 424 | 360 |
| + Depreciation and amortization | 1,566 | 1,613 | 1,718 |
| + Adjustments ${ }^{1}$ | 423 | 409 | 320 |
| Adjusted EBITDA | 3,412 | 3,391 | 3,550 |
| Net leverage ratio (Net debt/EBITDA) | 3.1 | 3.2 | 3.4 |
[^0]
[^0]: 1 Acquisitions and divestitures made for the last twelve months with a purchase price above a $€ 50 \mathrm{M}$ threshold as defined in the Syndicated Credit Facility (2024: €49 M; 2023: €35 M), non-cash charges, primarily related to pension expense (2024: €57 M; 2023: €56 M), impairment loss (2024: €213 M; 2023: €139 M) and special items, including costs related to the FME25 Program (2024: €128 M; 2023: €106 M), Legal Form Conversion Costs (2024: €27 M; 2023: €30 M), Legacy Portfolio Optimization (2024: €108 M; 2023: €128 M) and Humacyte Remeasurements (2024: €61 M; 2023: €15 M).
LTM = Last Twelve Months
- For the years 2015-17 ROIC as reported within the Form 20-F.
- ROIC adjusted in 2018 for the divestiture of Care Coordination activities, FCPA-related charge, U.S. Ballot Initiatives, U.S. tax reform / including these effects, ROIC for FY 2018 was $12.4 \%$
- ROIC adjusted in 2019 for the effects of IFRS 16, NxStage, FCPA, Cost optimization costs, divestiture of Care Coordination activities / including these effects, ROIC for FY 2019 was 6.8\% (excl. IFRS 16)
- ROIC in 2020 excl. the impact of the Latin America impairment (special item) and in 2021 excluding FME25 (special item)
- ROIC for 2020 and 2021 was $7.5 \%$ and $5.5 \%$ excl. IFRS 16 and excl. Latin America impairment in 2020
- ROIC in 2022 adjusted for the effects of the FME25 program, the Humacyte Investment Remeasurement, the net gain related to InterWell Health, the effects of hyperinflation in Turkiye and impacts related to the war in Ukraine
- ROIC in 2023 and 2024 adjusted for the effects of the FME25 program, Legal Form Conversion Costs, Legacy Portfolio Optimization and Humacyte Remeasurements
Exchange rates, U.S. dialysis days per quarter, definitions
Exchange rates
| Q2 2024 | FY 2023 | FY 2022 | ||
|---|---|---|---|---|
| €:USD | Period end | 1.071 | 1.105 | 1.067 |
| Average | 1.081 | 1.081 | 1.053 | |
| €:CNY | Period end | 7.775 | 7.851 | 7.358 |
| Average | 7.801 | 7.660 | 7.079 | |
| €:RUB | Period end | 92.066 | 100.215 | 78.138 |
| Average | 98.160 | 92.461 | 73.365 | |
| €:BRL | Period end | 5.892 | 5.362 | 5.639 |
| Average | 5.492 | 5.401 | 5.440 |
U.S. dialysis days per quarter
| Q1 | Q2 | Q3 | Q4 | Full year | |
|---|---|---|---|---|---|
| 2024 | 78 | 78 | 79 | 79 | 314 |
| 2023 | 77 | 78 | 79 | 78 | 312 |
| 2022 | 77 | 78 | 79 | 79 | 313 |
Definitions
| cc | at constant currency |
|---|---|
| HD | Hemodialysis |
| PD | Peritoneal dialysis |
| Net income | Net income attributable to shareholders of FME |
| LTM | Last-Twelve-Months |
Continuous monitoring of clinical performance to enhance care
Quality index components
Dialysis effectiveness
Measures how sufficiently the body is cleansed of waste substances
Vascular access
Measures the share of patients who do not receive dialysis via a dialysis catheter but rather via safer vascular access alternatives that reduce risk of infection and improve outcomes
Anemia management
Measures hemoglobin levels and specific medications given during dialysis to achieve optimum clinical outcomes, such as overall health and well-being
Quality index
Global indicator for patient well-being and treatment success
Patients, treatments, clinics
| as of June 30, 2024 | as of June 30, 2023 | ||||
|---|---|---|---|---|---|
| Patients | Treatments | Clinics | Patients | Treatments | |
| United States | 206,306 | 15,412,884 | 2,628 | 206,692 | 15,525,016 |
| Growth in \% | 0 | $-1$ | 0 | ||
| International | 104,731 | 8,706,925 | 1,129 | 137,394 | 10,287,972 |
| Growth in \% | $-24$ | $-15$ | $-20$ | ||
| Total | 311,037 | 24,119,809 | 3,757 | 344,086 | 25,812,988 |
| Growth in \% | $-10$ | $-7$ | $-7$ |
IR event calendar
Date
November 5, 2024
February 25, 2025
September 3, 2024
September 4, 2024
September 4, 2024
September 5, 2024
September 9, 2024
September 10, 2024
September 16, 2024
September 23-24, 2024
September 25, 2024
September 27, 2024
November 6, 2024
November 12-13, 2024
November 12-14, 2024
Event
Report on $3^{\text {rd }}$ quarter 2024: Earnings Release and Conference Call (Quiet Period Oct 22 - Nov 4,2024)
Report on $4^{\text {th }}$ quarter / Full Year 2024: Earnings Release and Conference Call (Quiet Period Jan 28 - Feb 02, 2025)
Commercezbank / ODDO BHF Corporate Conference 2024, Frankfurt
Goldman Sachs Annual European MedTech \& Healthcare Services Conference, London
Morgan Stanley Global Healthcare Conference, New York
IR Roadshow, Milan
Citi Group Investor Call
J.P. Morgan European Healthcare CEO Call Series
IR Expert Call on HDF
Berenberg \& Goldman Sachs German Corporate Conference, Munich
Bernstein 20th Pan European Annual Strategic Decisions Conference, London
Jefferies virtual CEO "Back to School Series"
Q3 2024 CEO Roadshow, London
UBS Flagship European Conference, London
Q3 2024 CFO Roadshow, U.S.
Dates and/or participation might be subject to change
Contacts
