Earnings Call: Q3 2020

Oct 29, 2020

Ladies and gentlemen, thank you for standing by. I'm Haley, your Chorus Call operator. Welcome, and thank you for joining the Fresenius Medical Care Earnings Call on the Third Quarter twenty twenty Results. Throughout today's recorded presentation, all participants will be in a listen only mode. The presentation will be followed by a question and answer session. And I would now like to turn the conference over to Dominik, Head of Investor Relations. Please go ahead. Thank you, Haley. We would like to welcome all of you to the Fresenius Medical Care earnings call for the third quarter twenty twenty. We appreciate you joining today. Now it is my very big pleasure, as always, to start out the call by mentioning our cautionary language that is in our safe harbor statement as well as in our presentation and in all the materials that we have distributed earlier today. For further details concerning risks and uncertainties, please refer to these documents as well as to our SEC filings. I 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 can go a second round. It would be great if we could make this work. With us today in a virtual way from Boston is, of course, Ruiz Powell, our CEO and Chairman of the Management Board. Ruiz will give you some more color around the business development and go through some of the major topics of the quarter. And of course, also with us in a virtual way in Chicago is Helen Gieser, our Chief Financial Officer, who will take you through the financials and the outlook. I will now hand over to Rice. The floor is yours. Thank you, Dominic. Hello, everyone. It's great to have you with us today. I very much appreciate your interest in Fresenius Medical Care. And I sincerely hope that you and your families are safe and very healthy. Please allow me to start by saying how proud I am of the ongoing efforts of Fresenius Medical Care employees in the face of this unprecedented pandemic. Our more than 120,000 employees continue to ensure that our patients receive their life saving dialysis treatments in a safe environment and with the same high quality they've become accustomed to. Please allow me. Thank you very much FMC employees. You're my hero. Hang in there. In what has become business as usual, as Dominic has pointed out, in this current world that we live in, we are with you virtually from three locations. Let's hope our technology holds up as we go through the next hour or two. I'll start my real prepared remarks on Slide four, please. In the quarter, we had very good underlying business performance, somewhat clouded by unfavorable exchange rates. Our strong earnings generation in the third quarter proves our core value proposition and the resilience of the FMC business model. We have managed the COVID-nineteen effect to be roughly neutral for the first nine months of this year. This is partly due to government support predominantly in The United States, but also due to the steady improvements in efficiency that we continue to drive for. In North America, we were able to continue our good business development despite the headwind from calcimimetics. This is due to an improved commercial mix. If you look at our nine month figures, you will see that we are on our way to reach our targets for 2020. The new normal. The new normal is anything but normal or predictable. We feel a headwind from COVID-nineteen in our treatment volumes and at the same time higher cost for personal protective equipment, Heroes Pay, etcetera. None of us knows how long the pandemic will go as it goes back around the world in the fourth quarter of this year and continues to accelerate into 2021. Governmental support to cover the additional cost is uncertain at the present time. In light of these various moving parts, we are confirming our outlook, which includes the currently anticipated impacts. Turning to Slide five, we continue to grow while we are remaining steadfast in our commitment to quality. We consistently deliver a very high level of quality in services and products for our dialysis patients. Although we are reducing clinic growth in North America with a stronger focus on our home business, we are continuing to expand our service globally and we have seen our clinics grow by 2% to just over 4,000 clinics worldwide. In these clinics, we provided more than 40,000,000 treatments to just over 349,000 patients for the first nine months of 2020. Turning to Slide six. Quality patient care is the most important factor in our business and the top priority on our sustainability agenda. We are committed to provide the best possible outcomes for our patients around the globe. Here, I would like to focus on one of the KPIs that is the number of days patients have spent in the hospital in the quarter. Despite the challenging environment of the pandemic, the number of days that our patients were hospitalized has come down further in most of our regions. I suspect you may have some questions for that during the Q and A, and I'm happy to give you further insight. Turning to Slide seven. In the third quarter of twenty twenty, we continued to deliver strong income growth in large part due to the positive operating performance and very focused expense management. Including significant foreign currency headwinds of 6%, revenue for the quarter was stable and amounted to €4,400,000,000 While the healthcare services remained steady despite negative exchange rate effects, the products business saw its revenue decrease 1% as a result of these FX headwinds. Our operating strength was not deterred by COVID-nineteen with both operating income and net income increasing 11% at constant currency. And as we normally do, Helen will have some more insight to you in our earnings during her presentation. Turning to Slide eight, in the quarter, we delivered organic growth of 3%. We had positive contributions to organic growth from each of the four regions despite the headwinds from calcimimetics in North America and from COVID-fourteen effects in all of the other regions. North America contributed 2% organic growth despite a sizable headwind from calcimimetics and slower growth in the number of treatments due to COVID-nineteen. A further improved payer mix supported this development. The 1% organic growth in EMEA was largely driven by the services business benefiting from an increase in the same market treatment in several countries and regions. We saw a stronger organic growth in Asia Pacific and particularly Latin America, but obviously the exchange rate developments there were unfavorable to the reported figures. Turning to Slide nine. Despite the challenges presented by COVID-nineteen on a global basis, Healthcare Services showed solid organic growth of 3% in the quarter. Growth drivers for North America included some prior year adjustments, which Helen will discuss later, growth in same market treatments and a higher commercial revenue. At the same time, we faced the expected headwinds from lower reimbursement for calcimimetics and in addition slower growth for the number of treatments due to COVID-nineteen. These effects were dragged on the dialysis services. In Europe, Middle East and Africa, growth was driven by an increase in same market treatments across several countries and regions as previously mentioned. In Asia Pacific, we had an 8% same store growth driven by the Asian portion of the region and achieved a strong performance in Care Coordination. Turning to Slide 10, products. Product revenues were impacted by sizable currency headwinds. Excluding the currency headwinds, dialysis products saw an overall revenue increase of 4%, driven by higher sales of products for acute care treatments, machines for chronic treatment and peritoneal dialysis products. The negative organic growth for dialysis products in EMEA can be explained by tenders that have been postponed into Q4 that were planned for in Q3 in the areas of Eastern Europe and The Middle East. On the other hand, the non dialysis product revenue increased by 20% to EUR24 million. As in the previous quarter, this is partly due to the current development of the pandemic. This concludes my prepared remarks and it's my pleasure to turn it over to Helen. Thank you, Rice. Hi, everyone, and a warm welcome again from Chicago. Hope you're all doing well. Whoever imagined that this would be our third quarter working remotely and operating under a pandemic. Rice has already outlined the solid revenue development. I will focus my comments on giving you more flavor on the earnings side. Moving on to Slide 12. To provide a meaningful analysis on the quarter, I need to remind you of adjustments made last year. In the third quarter of last year, we had a revenue recognition adjustment for accounts receivable in legal dispute of minus EUR 84,000,000 as well as a reduction in patient attribution and a decrease in savings rates for ESCOs of minus 46,000,000 On the other hand, we had a positive remeasurement effect of the fair value of the Humacyte investment of €76,000,000 This had been the prior year effect as the basis for comparison. More interesting, of course, has been our successful management of the current situation that has allowed us to perform so well in the third quarter of this year. Rice already mentioned the currency headwinds and the negative but expected effects from calcimimetics on revenue and organic growth as well as the positive impacts from higher commercial revenues. Maybe to add to this, from an operational perspective, we had also been able to manage our costs tightly when it comes to pharmaceuticals like ESAs or vitamins. Now let's have a look at the numbers. In the bar chart on the left, you see the regional contributions and corresponding margins. The group operating income before corporate cost and cost allocation improved by EUR43 million and reached EUR721 million. After corporate cost and cost allocation, this results in a group margin increase of 80 basis points to 14.3%. Let us have a look at the developments on a regional level. In North America, operating income increased to €514,000,000 resulting in a margin of 16.8%. Besides the already mentioned prior year effect, the margin increase was driven by an improved commercial mix and our ongoing focus on efficiency measures despite the expected headwinds from calcimimetics and COVID-nineteen. In EMEA, operating income remained at the same level as last year and amounted to EUR 99,000,000, which gives us a margin of 14.6%. Unfortunately, operating income development at constant currency was negatively influenced by foreign currency transaction effect. A favorable impact from cost management initiatives and business growth increased operating income in Asia Pacific to EUR97 million and a margin of 20%. In our Cura clinics in Australia, we were able to provide more elective surgeries, and this clearly supported the performance in the region. In a challenging economic environment with very significant current headwinds, operating income in Latin America stayed at reported EUR 11,000,000. At constant currency, the picture is very different. Here, we would have seen an increase of 28%. I think it's also worth commenting on the year to date effect of COVID. As Rich mentioned, we had been able to manage the COVID-nineteen effect to be roughly neutral through September. This was partly due to government support like the CARES Act in The United States and suspension of the Medicare sequestration, but also due to the steady improvements in efficiency we have been focusing on. As a result, we were able to nearly offset the decrease in treatments and increased costs associated with COVID-nineteen. Nevertheless, we had to absorb a negative impact on net income of EUR 7,000,000 in the first nine months. I will now move to Slide 13. Let me now take a look at the cash flow for the last quarter. In Q3, we generated €746,000,000 of operating cash, resulting in the margin percentage margin of 17%. As you recall, in Q2, we received advanced payments under The U. S. Federal Advanced Payments Program and expected a negative effect on the cash flow development and net leverage ratio in the second half of this year. However, following further clarification on the recoupment regulation, we now expect to return those advanced payments in the first quarter of next year. The decrease in operating cash flow from last year was largely driven by increased inventory levels, accounts payable and accounts receivable activities with related parties. CapEx amounted to €239,000,000 clearly below last year's level due to a lower level lower number of new clinics and various changes in management of our investment process and strict risk adjusted hurdle rate. This leads to a free cash flow of $5.00 €7,000,000 in Q3. And lastly, when you look at the leverage ratios on the bottom left of the page, including IFRS 16, the leverage ratio improved to a 2.8x net debt to EBITDA ratio. And this solid financial position is confirmed by the ratings you see on the right. Sorry, excluding the effect of the funds received under The U. S. Federal Advanced Payments Program, the ratio would be at three point zero, clearly in our target range of three to 3.5. Let's turn to Slide 14. Our guidance slide is unchanged. We are maintaining our guidance of mid to high single digit revenue and net income growth for 2020. We have delivered significant net income growth and are ahead of our net income target range on a nine month basis. This has caused many of you to ask why we have not updated our guidance. Like many others, we faced some quite some uncertainty for the fourth quarter. We see rising infection rates of COVID-nineteen all around the world. No decision has been made on a new CARES Act funding in The U. S. Due to the upcoming elections, and we have been seeing an impact on the treatment growth number due to the effects of COVID-nineteen. Taking all this uncertainty into account, it would not be credible to consider a change to the guidance at the moment. So far, due to stringent cost management measures and support funding, we have been able to manage the net effect of COVID-nineteen to be neutral. We continue to believe that we'll be able to deliver the full year results within our stated guidance range despite the effects of COVID-nineteen and outlined unknowns in the remainder of the year. With that, I close my prepared remarks and turn it back to Dominic. Thank you, Helen. Thank you, Rice, for the presentation. I'm happy to turn it over to Q and A. Could you please open the lines, Hailey? Thank you. You. And the first question is from the line of Patrick Wood of Bank of America. Please go ahead. Perfect. Thank you very much for taking my questions and hi, everyone. The first one, maybe, Rice, you flagged on the hospital days per patient per year falling in North America within the 3Q. So just curious to get some color around what's going on there. And then maybe for the second question, obviously, the CARES money has helped you guys, plus your efficiencies, to work through the incremental COVID costs that you've seen so far. But if you were in our shoes, what would be wrong about assuming a, whatever it is, dollars 30,000,000, 40,000,000 per quarter impact maybe for the first half of next year? Or I'm just trying to conceptually understand if there's no more money available or if you choose to not take it, should we be thinking about that as a rough run rate for costs within the base business at the EBIT level? Hey, Patrick. Thank you. Hospital days. So what we're seeing here is in the in part of Q2 as well as looking at Q3, what we've seen is in the dialysis population, many, many people avoided going anywhere near a hospital. People try very hard to stay out of their doctor's offices, etcetera. And so hospitalizations that would be what I would consider normal course for a dialysis patient, be it a PD patient that's going in new getting a PD catheter inserted or someone who's having to get an access cleaned up for hemodialysis, etcetera, They stayed away from physicians and out of the hospital. And so I think that's driven the days down somewhat. Now obviously, the other side of that equation is if you think about people that were COVID positive dialysis patients and they went into the hospital, many of them unfortunately were not able to survive that and it was just a small number of days before they passed and they came out. So I think that's the way we are interpreting the data as we look at it for at least Q3. I think it could be different in Q4. We'll have to see how this plays out. We are not seeing as many people by a long shot putting off things they need to have done if it's vascular work, etcetera. So I think we may see something a little different in Q4, but we'll have to just wait and see how it turns out. And on the second piece of that, I'll take one piece and I'll let Helen finish up on it. I think the big question it's a very fair question. And I think the biggest question that we cannot answer today is what is the intensity level of COVID going to be in the fourth quarter and then in 2021 as it goes forward. If we come to a place particularly in The U. S. Where they shut the school systems down again, it is an entirely different set of circumstances we have to deal with through childcare stipends, etcetera than what we are seeing today. We're not doing it today as the schools are back open and people are there, but there are virtual things going on. There are some schools that are hinting they may have to close. So it really does depend on how significant and severe the lockdowns are in Europe as well as here. It's just hard for us, I think, to try to give you any kind of calculus, if you will, on that. Helen, anything you'd like to add? Yes. Thanks, Rice, and Patrick. I guess the additional color I would add, if you think about how we have applied the money that we did receive through this year already, of roughly $280,000,000 that we received, we applied just under 200,000,000 of that to the first half of the year. But if you look at Q3, we have applied around $40,000,000 of the CARES funding in Q3, which leaves us with about $40,000,000 going into Q4. As Rice mentioned, Q3 has I wouldn't say COVID had stabilized, but we certainly weren't in the full lockdown measures you know, things like child care stipends and emergency pay and so on that we saw the first half of the year. So bearing in mind what we have left available to apply through Q4, I think as Rice mentioned, it's really going to depend on how this progresses pretty much the last two months of the year. Without question, we are seeing an increased price pressure on things like PPE. We all know the world's supply and demand challenges with that, which has resulted in higher prices. So I think we're trying to get our heads around all of that, Patrick, as we go into 2021, but obviously, a lot of uncertainty depending on how the next few months play out here. Totally understand. Thanks for taking my questions, guys. The next question is from Ronika Chibadjova of Goldman Sachs. Please go ahead. Hi, good morning, Helen, Ruiz. Good afternoon, Dominic. Thanks for taking my questions. I'll keep it to two please. My first one is on the revenue per treatment dynamics. Obviously, I appreciate this is a metric you're no longer disclosing. But if I just look at the sort of headline figures on revenues in North America and the number of treatments. It seems to me like maybe we've had a little bit of slippage. So I was hoping, Helen, maybe you can quantify, one, what the calcimimetics impact was in excluding that sort of especially in The U. S, what the revenue per treatment dynamic would have been on an underlying basis both sequentially and year on year, just to give us some sense for where your rates are, where your mix is from that perspective? And then my second question is probably very much expected, which is on mortality. Obviously, this is something you've been flagging as is the headwind from referrals. If I look at that 1% growth rate that you've reported in the same market in The U. S. In the third quarter, Rice, can you decompose to us what the headwind is from mortality versus what it is from referrals? And how are you thinking about sort of when might say market trough? Is third quarter the right quarter to be expecting that? Or do you see sort of incremental risks from here as we move into Q4? Thanks, guys. Helen, Thank go ahead with the first you. So hi, Veronica. You know we're not disclosing revenue per treatment, and we're not disclosing the impact of calcimimetics. But by far, the biggest impact on our revenue in North America for Q3 was the calcimimetics negative effect. And when we always have indicated that and you'll continue to see that negative effect going into Q4 as well. Brian, this is Rice. On second question, mortality referrals. So here's the way I'll try to message through this. As we look at these two activities, if you will, two occurrences, I would say they're somewhat equally weighted. But we saw more of a referral issue in the second quarter going into the third quarter because that's when we really saw no one going to the doctor or referrals just sort of dried up. What we see today and we track this weekly is the referrals are getting much better. They're coming back to a normal level, not quite there yet, but we see good steady improvement week to week on the referral base. On the mortality side of this, it is an impact. We think we can work our way through it. If it stays the way it is today, we can clear this, I believe, over time next year. But again, the biggest unknown for us, as I've said with Patrick, is the intensity of what is coming in Q4 and beyond in 2021. As I said during the Capital Markets Day, we clearly see COVID around the world through at least the first half of next year. I just don't see this going away. So that's what's driving some of our concern about how we would try to give you better feeling or guidance on that. We just don't have enough to go on at this point. That's very helpful. And Helen, if I can push my luck, if you're not going to give us the calcimimetics number, can you at least confirm that excluding calcimimetics revenue per treatment was either flat or up in The U. S. In the third quarter? Of course, yes. And I'm sorry, when I mentioned calcimimetics, I probably should have clarified that was the biggest negative driver. But of course, we are seeing a positive trend there. Don't forget though that is impacted with the prior year adjustment from last year. But as we've mentioned, we are seeing positive commercial mix. We have the positive impact from sequestration and from pharmaceuticals. So as you can imagine, there's a lot of pluses and minuses going into that, but overall trending positive, but the biggest positive being because of the prior year adjustment. Understood. Thank you, guys, very much. That helps. Yes. The next question is from Susanna Lutzik of Bernstein. Please go ahead. Hi, can you hear me? Yes. Yes. Hi. I registered as my associate. Sorry, it's Lisa Clyde. That's why I was a little thrown. I have two questions. One on your comments around positive payer mix. Is this coming from private patients growing faster year on year? Or is it really around Medicare growing more slowly? And if the private patients growth is faster, is it do you think due to share gains or is it around newly diagnosed patients maintaining private insurance longer due to their ability to do home dialysis? And then I'll follow-up with my second question. Hey, Lisa, it's Rice. So I would say there's a little bit of all of that is correct. So let me try to parse it out. Positive payer mix, obviously with mortality rates that we're seeing and the segment of our patient mix being older patients that unfortunately are not surviving COVID, most of them are on the Medicare book of business, if you will. So as that has as mortality has grown with that segment of the population, obviously they've dropped off and we all understand who contributes what in our patient mix. So Medicare is down because of that. Payer mix is up because, a, we have gained some share in some places and we're also doing very well with new patients coming on. So I would say it's some of both. Okay. And then turning to the European dialysis business. If I look at the margins historically, the EMEA business peaked at, I think, at 22% EBIT margin in 2015, bottomed out in 2018 at 15%. Across Europe, is there a noble difference in profitability, mainly I'm talking about dialysis services, by country? Sort of assuming a fairly steady geographic mix from here, what do you think is a reasonable long term run rate for the EBIT margin in the region? Yes. So I would say and you know, as we were in 2015, we were probably in EMEA a 60% product business, 40% service and that has grown over time. So that's part of what's driving that as we've always said is that service business grows because of labor and what you have to do, you're going to see some margin compression there. I think that it should level out in the teens. I think 15% is a little low. I'd like to see it higher and the efficiencies we're trying to drive should get there. The other thing that we're seeing, Lisa, is in the quarter in Eastern Europe and in The Middle East, picked up about four fifty, four seventy five new patients, which is a good thing. But the reason that when you see that kind of growth, it does put some pressure on your margin. The other problem that we're seeing is some of our countries in Europe have gone more nationalistic, Hungary, Poland, like that. They are stipulating demanding higher wages, which we understand for their nursing staff, particularly in the time of COVID. And so we have to respond to that accordingly. That's also put some pressure on the margins there. Okay. Thanks very much. I'll hop back in the queue. Sure. The next question is from Michael Jemmeling of Morgan Stanley. Please go ahead. Yes. Thank you. Thank you kindly. Two questions, please. If I just look at your midterm guidance that you had given us a few weeks ago, I'm just sort of would like to know how that is applicable to 2021 in with the backdrop of same treatment growth slowing, then you also have the falling away of the sequestration. You've got the benefit of Medicare Advantage. On a net basis, are you viewing 2021 as a year that suits that midterm guidance? That's question number one. And question number two, if there is CARES two money available, if I can call it that, would you accept the funding that you would get from the government? Michael, it's Rice. So CMD, we gave you the midterm guidance. What we are saying here as we look at 2021, remember that guidance did not include COVID. So what will be interesting for us as we move into next year is trying to get an understanding of what COVID is going to contribute or take away if you will and where is that going go. So that will make it challenging for us. However, as we gave that guidance today, the CMD not knowing where COVID will end up I think we said that we see this as linear. It's pretty much going to be an even keel. It's not a hockey stick. But again, we didn't know how to really place a bet on what happens with COVID in 2021. And a number of you guys have been very nervous about Biden being elected, what happens with him and we have none of that in there as well because we're simply going to wait and see what happens to the election here come next week or whenever they get it resolved. Relative to CARES two money, we would have to look and see what is the money for. If it is as CARES one or package was for the expenses that we were very comfortable or exactly why the money was made available. Of course, we would take it and do what we need to offset expenses that are extraordinary as a result of COVID. So we would just have to see where it goes. If you recall, we did not take PPE money because we didn't think we needed it for that. We simply felt comfortable that that very first package of money that came to us was exactly what we needed through all our conversations. So we just have to see what happens if there is another package and what are the details of the package. Okay. Maybe I can also follow-up on the 2021 guidance. If I just look at the fourth quarter for Sea Market Treatment growth, and I think you've partly answered it, but I want to clarify something. What would make that number look better in the fourth quarter? Because if I look at the rising cases in The United States, it doesn't seem intuitive that it would improve anytime soon. So can we assume that there's a very high chance that we end up with flat same market treatment growth for your business in North America in the fourth quarter? It certainly could happen. I would tell you the thing that you really have to be paying attention to is hospitalization rates and then looking at the mortality. And as we have looked at that at the moment, and that's part of the conundrum that I think we all are trying to understand as governments are locking down, we are not seeing the mortality rate anywhere near where it was in Q2, Q3. So it's going to take some time. Now granted, Michael, we don't get to mortality rates daily. It takes some there's some lag time there. So we'd have to look at that. The other interesting thing for us will be what happens to the general public, if you will, and the general flu season. There has been lots discussed about is that going to be a synergistic effect or not. So they're just a bunch of unknowns that we can't get our arms around at this moment. But I think we'll work our way through that. As I said, the referrals are approaching normal. The growth is good there month to month. So we feel good about that. We're getting close to where we were pre COVID and the mortality will continue to manage that as closely and as tightly as we can and do the analytics on that. Great. Thank you. Super helpful. Bye bye. And the next question is from Tom Jones of Berenberg. Please go ahead. Thanks for taking my questions. I had two, one for Rice and maybe one for Helen. Rice, on the volume growth issue, we're all a lot of investors are obviously focusing on the mortality side of the COVID equation, but that's just one side of a kind of very unfortunate coin, the other being the impact of acute kidney injury. So in nondialysis patients, so I guess my question for you is, if you could roll the clock forward two, three years to the other side of this pandemic, do you think that what you'll lose on the mortality side will be offset by a bigger pool of patients who have been pushed further down the CKD spectrum by acute kidney injury? Or do you think that's just wishful thinking? And then the related question to that is, do you think that if there is a bit of a dynamic where non ESRD COVID patients are suffering kidney damage in hospital that through your Acute Services business, you maybe have a bit of a better window on those patients and therefore could potentially pick up some share? And then I have a question for Helen, but I'll follow-up on that one. Sure. So Tom, look, we are seeing today there is a contribution that we are seeing from AKI patients. It's not a one for one, if you will, at this particular point in time as we look understand it. I think there will be a continued contribution to that. And so that will help us as we look out to the future. The real question is, does it ever get to be a one to one and what do you think your growth will be? I also think people shouldn't lose sight of the fact that we know how to acquire clinics, we know how to do things to see how are other people doing this, are we missing something, what do we need to be doing differently if anything to try to make sure that we can continue to get the growth that we're looking for. On the acute services side, yes, there is no question in my mind, Tom, when we went through the Q2 and the Q3 experience, particularly in New York City, Chicago, Los Angeles, the fact that we were providing acute services to so many of those health systems clearly gave us a good understanding of what was coming and when those patients were going to need our help and then what would be the cycle of them leaving the ICU hopefully and then coming into the clinics for their treatment to see will their kidneys come back or not. We've seen very good growth in the acute side of our business. It was mid single, upper single digit in Q3. So that's clearly giving us some benefit. That's very clear. And then, Helen, just one clarification really. Was wondering if you could just explain what you mean by your comment that margins constant currency margins in EMEA were affected by currency. That seems to be a bit of a contradiction in terms to me. So if you could just briefly explain the mechanism behind that, that would be helpful. Of course, Tom. So within our EMEA region, we do have some transaction currency effect between the euro and dollar as well. We do hedge where we can, but we did have about a €13,000,000 effect on our transaction impact in EMEA in the quarter. A lot of that was in the Middle East region. Okay. That's very clear. Thanks for clarifying. Thank you. The next question is from Oliver Metzger of Commerzbank. Please go ahead. Hi. Thanks a lot for taking my question. The first one is about Medicare Advantage. So in the past, you commented that visibility should become better up from October as the first patients start to enroll beginning for 2021. So do you have already any indication how many patients have signed up for a Medicare Advantage contract? My second question is about the metrics you provide at Slide twenty six. It's about patients, treatments and clinics. I'm a little bit confused to see that you report slower patient growth, but treatment growth is higher, which means that basically, you do more treatments per patients among most regions. In the last call, I remember that you commented that even some patients skip their treatment. So could you comment on this discrepancy or how this development can be explained, please? It's Rice. Nothing that I can tell you on Medicare Advantage. I think we are in the second week of enrollment. We're not tallying enrollment week to week. We're just not set up to do that. So you're a little ahead of the game there. As we've said, we believe it will take us until probably January when the enrollment closes mid December gives us the couple of weeks in December and then into January that we'll be able to that out. Now as to your second question and you didn't make it region specific, but that's okay. My answer to you would be my guess is, I'd have to do a little more work on it. It's going to come from the home side. Remember, home patients, if they are PD patients and we're seeing good growth, about high single digit, I think we were eight percent PD patient growth or treatments in Q3, they typically are going to do PD five, six times a week. And then obviously if it's home hemodialysis with appropriate physician agreement, they can go from three to four treatments a week, although it does have to be medically justified as I said. So I think that would be the difference. We're going to have to dig a little bit into that, but I'm pretty sure that's going to be what we find, Oliver, we can always, through Dom, come back and verify that for you. Okay. Thank you. The next question is from Christoph Gretler of Credit Suisse. I have still two questions. The first is just on corporate costs. They are running substantially below, I think, the run rate at least kind of that you were discussing and you were guiding for now in the past. Could you maybe update that line for us? And then the second question is now just on, again, come back on your full year guidance. I mean you're running essentially now kind of 15% net income growth year to date. And Q4 is a fairly easy comp base on the earnings side. So is there still really a reasonable kind of central expectation scenario for fiscal 'twenty that you're basically kind of pointing to for with high single digit growth? I mean, we are already kind of October or not. That will be all. Yes. Chris, Helen, you want to take number one, and I'll take number two? Yes. Happy to. Hi, Chris. So yes, corporate costs, you will recall that we guided between $450,000,000 and $470,000,000 Year to date, we're at $288 We do have some phasing of spend going into Q4. Some of that is the timing of our monitoring spend, and we also will see an increase in R and D project spend going into Q4 as well. So I feel comfortable that we are staying in that guidance range, albeit trending towards perhaps the lower end of that. But yes, I think some of this you'll see on timing in Q4. Chris, it's Rice on the guidance. It's not lost on me that if you take where we are three quarters through the year, you run your numbers, you would say, holy crap, it's going to be a terrible Q4 if you guys think it's going to be that way. Look, we don't believe it's going to be a disaster at all. We don't. Here's what we're trying to do. We're trying to be as pragmatic as we can be because we do not know if there's any CARES Act money that's going to come beyond what Helen's told you we have for the fourth quarter, 40,000,000. If schools shut down, our spending will ramp astronomically because we're going to need to pay our staff for childcare to keep them treating patients. If the intensity level of COVID drives The U. S. Particularly, but also we see it in EMEA as well to really shut down, I mean, a close the border situation, which is looks like it's happening in Europe at the moment. If it gets that way in The U. S, that's going to be an issue for us and we can't size it right now. No different than when we spoke with you guys at Q1 earnings, we said, here's what we think we can do. We don't know how long this is going to last. And then just keep in mind that the negativity that Helen has spoken about calcimimetics is staring us in the face in Q4 as well. So you can call us conservative, if you will. But I would tell you when you've got that many uncertainties and just keep in mind, the ramp up of cost that we experienced in Asia and the shutting down of that market in December, January, early February was speed of light. Then there came Europe and what happened there. And in The U. S, we went in the space of two or three weeks to total shutdown, schools closed, expenses. It's just an experience that we've endured that we think it's prudent not to take it lightly. You've never heard us say COVID is going to be over on this day or the end of that quarter because it's not possible to predict that. So that's why we're approaching our Q4 the way we are, Chris. Yes. Okay. I appreciate that. I have a follow-up then. I mean looking into 'twenty one, I mean assuming that there would be no Keres two. So basically, kind of to what extent can we actually offset this incremental, I guess, booked as revenue, this incremental kind of income with cost savings? What's your capacity to react? I mean I think that's obviously a major concern. The market has, investors have. So just kind of maybe if you have some incremental thoughts on that would be helpful. Yes. So I would say two things. One, question you could have asked me is, do you think there'll be a CARES package? And yes, I do. I never thought there'd be a CARES package before the election. It's just too much going on. I do believe there'll be a CARES package. I don't think whether it's the Democrats take over or the Republicans stay, no one's going to let the country just fall apart because they can't get that done. So I would say that there will be a package exactly the details of it. What comes with that, we'll have to see. Clearly, both sides, Democrats, Republicans, because we've spent a lot of time with them, the industry has talking about the huge increases that we are paying for personal protective equipment. They understand that. That would be a huge help for us if they decided to try to help defray what is a real gouge if you will. So we'll have to see where it goes. I think there'll be a package and I think it will be something that's going to help us in some shape, form or fashion to freight the kind of costs that we're looking at. Relative to if there wasn't, how long can you hang on or what can you do to cover that? We'll need some time to decide how much more we can pull on those levers. But I find in my mind, I find it very rare that we won't see the government come back around and help us once we get the election settled and they figure out how they want to approach it. The approaches from the Democrats might be a little different than Republicans, but nonetheless, I think they'll do what they're going to what they've said they wanted to post election. Okay. I appreciate. I mean, just thought since companies like HCA are giving back CARES money and kind of one of your competitor doesn't take any. So I mean, the government and some of the administration could come to the conclusion that you don't actually need it. So that's basically kind of the background maybe. But I appreciate your comments. Yes, yes, yes. No, and I've been asked that a lot. And we were extremely thoughtful and extremely careful in all the discussions that we had with the U. S. Government that what we would take and use that money for was exactly what they wanted it to be used for. And so I feel good about where we are. Keeping in mind, there's a lot of examples of people giving money back, depends on the type of money you took, Chris. In some cases, if it was PPE, you were told you couldn't use it for share You couldn't use it for bonuses, things like that. We never accessed that money. That was not ever in our plan. We had made our minds up that wasn't something that we needed to do. Thank you. Sure. The next question is from David Adlington of JPMorgan. So firstly, delving a bit more into the COVID impact on your organic growth. I'm just wondering maybe you're of asking the same question in a different way. But in terms of the lower referral rates for these treatments and the deaths, maybe you could just give us a ballpark in terms of which was the biggest impact? And maybe try and quantify how each of those impacted your growth? Sort of following on from that, in terms of the numbers of deaths, I just wondered if you could actually quantify how it's been morbid, the number of deaths you saw of COVID patients or your patients from COVID? And how you're thinking about how that impacts Q4 and into next year? And then the other question, just a clarification question. I may be misunderstanding it. But Helen, you talked about advanced payments now being repaid in Q1 rather than Q3, Q4. Can you just sort of clarify what you mean by that? Sure. Let me take your first one, and then Helen can walk you through the advanced payments. So I guess there's a way to look at the organic growth, three components there. So referrals, they dried up and we didn't see them, second quarter and a piece of third quarter. And obviously, kind of hand in hand with that are mistreatments because if people weren't going to go even see their docs, some folks weren't going to come for their treatment and that is not U. S. Specific. We saw lots of people in Asia and Europe and Latin America not going in for treatment, skipping treatment here and there. So that I think we see referrals coming back. As I said, they're approaching a normal level for us. Mistreatments today are not looking any different than what we normally see pre COVID. So I think that's come back. Those are all going to help put treatments back in the till, if you will. And then the mortality piece, I honestly can't give you mortality figures at the moment. I find out the trend lines and get a sense of what's going on. It's ticked up a little bit. I think what's going to be important for us, as I said, relative to mortality and when do you overcome that. If we see that this rest of this year and whatever it takes next year, if COVID doesn't intensify, if we don't see Q2, Q3 kind of impacts, then I think we'll find that we'll work our way through what I call the bottom out, if you will, that we've been seeing of late. It's going to come back over time. If it's very intense and we go into another round and it's on top of a bad natural flu season, we're going to have to just take a look and try to figure out when does that going to clear. I think the message I want to leave you guys with is I'm comfortable about all of this. We can't change the mortality of this, but what can we do? We can acquire clinics. We can do a lot of things to help us continue to have the growth trajectory we want to. So I'm thinking in some ways folks may be blowing this a little more out of proportion, but it's a physiological thing we can't change, but we will pull the levers and do what we need to do to try to make this better. That's why we were one of the first that came with the biggest and the best on telehealth to be able to get people back to seeing their physicians, the CKD patients, etcetera. So I think we're going to have to work through this, but let's see what the intensity levels are. I know it's hard for you guys. It's hard for us, but we can't predict that at the moment. Helen, you had oh, yes, can you take the advanced payment question for Yes, will. David. So just to clarify my statements there, we received approximately €950,000,000 advanced payments back at the end of first quarter, early second quarter. And we expected at that time that the recruitment would start one hundred and eighty days after receipt. So when I did the Q2 cash flow update, if you recall, I said that we would expect that impact of getting the cash to normalize in 2020. What we now understand is that, that recruitment could be as long as three sixty days. So we would expect to have that cash still with us through first quarter of next year. So whereas I was saying it was going to normalize on our net debt to EBITDA ratio, etcetera, I think we would now see a benefit of that because of the advanced payments being with us through all of 2020. So hopefully, clarifies, David. Yes, it does. Thank you. You bet. The next question is from James Bain Tempest of Jefferies. Hi, thanks for taking my questions. Just two, if I can, please. Firstly, if exchange rates hold for the remainder of the year, I'm just curious what that would impact your top and bottom line guidance. And then secondly, you talked a bit about increasing commercial revenue mix. But just sequentially, looking it looks like the revenue per treatment has been declining in Q3. And I'm just wondering if that's correct. And if so, why that would be? Helen, you want to take those? Yes, sure. So James, so our guidance is always in constant currency. So even though we might see kind of continued trends on the translation, it won't affect our guidance in terms of how we're thinking about it. And then the sorry, the second question on RPT. Yes, I think I kind of covered some of those drivers when Veronica asked her clarifying questions. Overall, we're seeing kind of a positive trend, but there's a lot of pluses and minuses to explain that. Obviously, prior year adjustments, but the favorability on, as I mentioned, commercial mix, the sequestration relief, but obviously offset by customer metrics and some other smaller moving parts. So yes, I think just a lot going on in the quarter and a lot of moving parts. Probably, obviously, once you adjust out the commercial mix, I think it's kind of neutralized somewhat. Yes. James, it's Rice. I would just say, if you remember when we came into 2020, we told you guys that CastleMedics was going to be a drag and that it would give it would really start to drag as you got through the back half of the year. And I think that's our biggest culprit, if you will, relative to what's pulling on us here. And we'll see that in Q4 as well. Okay, great. Thank you. Sure. And this concludes the question and answer session. I would like to turn the conference back over to Dominic for closing comments. Thank you, Haley. So unfortunately, we did run out of time now. I know there would have been one or two follow ups, but we are out of time. So I can only say and that more than ever, stay safe and hope to hear you on our next earnings call next year. Thank you. Stay well everybody. Be safe.