Fresenius Medical Care AG & Co. KGaA (FMS) Earnings

Management highlights

Overall Financial Performance - Group organic revenue grew 5% YoY in Q2 2026 (4% at constant currency); divestitures reduced group growth by 50 basis points - Group operating income increased 23% YoY at constant currency, in line with planned 2026 phasing - Group operating margin expanded 180 basis points YoY - Operating cash flow grew 11% YoY; free cash flow remained stable at €625 million - Net leverage ratio stands at 2.6x, near the lower end of the 2.5-3x target corridor, maintaining a strong balance sheet Capital Allocation - Completed the initial €1 billion accelerated share buyback program ahead of schedule, and launched a second €1 billion program to be executed in tranches over 12 months - By the end of Q2 2026, 2.5 million shares had been repurchased for €94 million (16% of the first €600 million tranche) Operational Execution - FME25 Plus Transformation Program delivered €67 million of sustainable savings in Q2 2026 - Completed footprint optimization, exiting approximately 100 underperforming clinics in the first half of 2026 - Achieved a 23% year-over-year reduction in catheter-related bloodstream infections, supporting lower mortality and hospitalization rates - The 5008X high-volume HDF rollout in U.S. clinics is on track to hit 2026 targets: as of late July 2026, 227 clinics across 23 states have been converted (10% of the company's total machine base), over 600,000 treatments have been delivered, and 5,000 renal nurses and technicians have completed training - Launched the BeaconUS real-world evidence research initiative for high-volume HDF in U.S. clinical practice; early results track with previous studies showing improved patient outcomes and clinician workflows - Launched two new digital innovations: TherapyWise, a cloud-based analytics tool for acute kidney replacement therapy, and Connexus, a unified digital platform for home dialysis that establishes a global foundation for future home care innovation U.S. Care Delivery Operational Update - Same market treatment growth declined 0.9% in Q2 2026 due to an internal execution gap in business development processes for capturing referrals, not broader market weakness - Organizational changes have been implemented to address the referral gap; improvements are expected to take a few months to gain full traction

Guidance

- Confirms the full year 2026 outlook: expects broadly flat full year revenue, with operating income remaining at the elevated 2025 level, with a mid-single-digit percentage change upside/downside range - Expects full year 2026 U.S. same market treatment growth to be around the Q2 2026 level of -0.9% due to the compounding effect of lower first half referrals - Expects a negative year-over-year Tdapa headwind of €50 million for full year 2026, revised down from the prior expectation of a €100 million headwind; Tdapa will be a sizable headwind in H2 2026 leading to negative YoY earnings growth in the second half - Expects underlying care delivery profitability to continue improving through H2 2026 despite lower U.S. treatment volumes and a tougher H2 2025 comparison base - Expects care enablement margin improvement in H2 2026 and full year 2026, with current Middle East conflict-related cost increases fully absorbed within the existing guidance range - Reaffirms full year 2026 value-based care guidance of around break-even performance; now expects 2026 value-based care revenue to decline €150-200 million YoY, an improvement from the prior expectation of a €300 million decline - Maintains the full year 2026 ACA subsidy expiration headwind expectation of €50 million, which is developing in line with initial forecasts

Segment performance

1. Care Delivery: 5% constant currency revenue growth, 7% organic revenue growth; organic growth of 7% in the U.S. (partially offset by lower treatment volumes from referral challenges); divestitures negatively impacted growth by 90 basis points. Operating income grew 45% with 390 basis points of margin expansion; underlying operating income (excluding TAFNEOS impacts) improved 34% driven by higher rates, FME25 Plus savings, and revenue cycle management improvements. This segment contributed 48% of total group organic revenue. 2. Value-Based Care: 9% revenue growth on both organic and constant currency basis, driven by increased member months and favorable premium rates, partially offset by accounting changes for a large contract. Operating income reached €18 million, up from a €9 million loss in the prior year period, with a 500 basis points margin improvement, marking another profitable quarter. This segment contributed 7% of total group organic revenue. 3. Care Enablement: 3% organic revenue growth, supported by positive pricing and volume outside of China, with growing 5008X sales contributing to momentum. Regulatory headwinds in China and elevated raw material/logistics costs from the Middle East conflict drove a 5% decline in quarterly earnings. Negative impacts from China headwinds reached €20 million in Q2 2026, partially offset by FME25 Plus savings and positive performance outside China. This segment contributed 45% of total group organic revenue.

Risks & headwinds

- Execution gap in U.S. care delivery business development has led to lower-than-expected referral capture and same market treatment growth, with negative compounding effects on full year 2026 treatment volumes - Ongoing regulatory pressure and stricter tender requirements in China create continued headwinds for Care Enablement segment revenue and earnings - Elevated raw material and logistics costs driven by the Middle East conflict are an ongoing headwind for Care Enablement, though current impacts are absorbed within guidance - The 1% preliminary U.S. dialysis bundle rate increase is lower than current inflation, creating margin pressure - ACA subsidy expiration has led to patient loss from exchange plans, creating a €50 million full year 2026 headwind - Special items in Q2 2026 totaled a negative €103 million, including a €71 million impairment from the recommended revocation of TAFNEOS marketing authorization by the European Commission

Analyst Q&A

• Q: What caused the Q2 2026 U.S. same market treatment growth deceleration, what corrective actions are being taken, and when can we expect growth to recover? /

  A: Multiple parallel operational initiatives (100 clinic closures, 5008X rollout, operational restructuring, and new insurance verification processes following ACA subsidy expiration) stretched clinic operational capacity, masking an underlying internal execution gap. The core issue is that the company is not capturing its fair share of incoming referrals, with referred patients not being converted to in-clinic treatments rather than broader market weakness. The company has made organizational changes to the business development team to address the gap, and while management is confident referral rates will recover, improvements will not meaningfully impact 2026 full year results due to the compounding effect of lower first half referrals, with benefits mostly pulling through into 2027.

• Q: Is the U.S. volume growth slowdown caused by an overfocus on profitability at the expense of volume growth? /

  A: This is not the case. Profitability-focused initiatives like closing clearly unprofitable clinics had only a small impact on overall same market treatment growth, as the company retained most patients from closed clinics. Teams focused on rate and yield improvement are separate from business development teams focused on referral growth. The slowdown is fully isolated to the referral capture execution gap, which has now been addressed with targeted organizational changes.

• Q: How much did the 5008X rollout disrupt U.S. clinic operations and treatment growth, and how are external sales progressing? /

  A: Only around 10% of the U.S. clinic network has been converted to 5008X so far, so the rollout has not caused meaningful broad disruption to overall operations. Early clinical results are tracking with prior study data, with high patient and clinician satisfaction, and the BeaconUS research initiative is collecting large-scale real-world evidence. External sales are minimal in 2026 as production capacity is prioritized for internal clinic conversion; excess capacity is allocated to external pilots, and any unclaimed external capacity will be reallocated to speed up the internal rollout.

• Q: If U.S. same market treatment growth remains at Q2 2026 levels into 2027, will the company need additional clinic closures to manage fixed costs? /

  A: Management believes the current clinic footprint, after exiting 100 underperforming clinics, is appropriately sized for the expected medium-term volume outlook. The company's core expectation remains that referral capture improvements will drive a return to growth, and while management will continually adjust capacity and overhead to align with volumes if needed, no additional large-scale closure program is currently planned.