Fresenius Medical Care AG (FME) Earnings Call Transcript

Ladies and gentlemen, welcome to the Report on Second Quarter 2026 Earnings Release and Conference Call. I am Valentina, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Dr. Dominik Heger. Please go ahead.

Thank you, Valentina. I would like to welcome everyone to our earnings call for the second quarter of 2026. I appreciate your flexibility to join this earlier call. We felt it is more helpful to have the call earlier given that we had to publish earlier than originally planned. I do apologize for the inconvenience, in particular for those of you who are located in a different time zone or those of you who cover another company hosting a call in parallel right now. As always, I start out the call by mentioning our cautionary language that is in our safe harbor statement as well as in our presentation and in all the materials that we have distributed earlier today. For further details concerning risks and uncertainties, please refer to these documents and to our SEC filings. The call is scheduled for 1 hour. In order to give everyone the chance to ask questions, we limit the number of questions as always. Thank you for making this work. 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, and welcome, everyone, and thank you for joining at this earlier time of the day. I will begin my prepared remarks on Slide 4. We continued our strong start to the year, delivering another quarter of highly profitable growth, supported by solid organic revenue development and further improvement in profitability. Operating income growth accelerated to 23%, in line with our planned phasing for the year, and we realized another quarter of margin expansion. This was also supported by the continued execution of our FME25+ transformation program, which delivered EUR 67 million of sustainable savings during the quarter. We also completed our initial EUR 1 billion share buyback program on an accelerated time line and have already launched a second EUR 1 billion program, underscoring our continued focus on disciplined capital allocation and reigniting shareholder returns. With a net leverage ratio of 2.6x, we remain around the lower end of our target corridor and continue to maintain a strong financial position. With that overview, let me turn to the key second quarter highlights across our operating segments on Slide 5. Beginning with care delivery. The international markets delivered 0.8% same-market treatment growth. In the U.S., same market treatment growth declined by 0.9%. At the same time, I am genuinely encouraged by the progress we are seeing where it matters most for our patients. Our continued focus on quality and patient care is making a real difference. Missed treatments and mortality improved in the quarter. These are outcomes that are deeply meaningful for the patients who rely on us every day and for all of us who are committed to their care. The same market treatment growth declined due to our own clear operational miss in our business development approach to capture our fair market share of referrals. This exposed an execution gap and led to a further softening of referrals in Q2 compared with Q1. We have promptly addressed this with an organizational change, enabling rapid implementation of the necessary prepared measures. While these measures will take a few months to gain traction, we remain confident in our path to restoring referral rates in the affected areas. Given the compounding effect of lower first half of referrals from the rest of the year, we now expect U.S. same market treatment growth in 2026 to be around the Q2 level. I also want to recognize the strong execution driving accelerating momentum across several strategic priorities under our Reignite strategy. We are making significant progress accelerating the rollout of our 5,008X in our clinics in the U.S. We have a dedicated slide on high-volume HDF coming up, where I will provide a further update. As we continue to strengthen our core operations, we remain disciplined in optimizing our clinic network. We have successfully completed the clinic footprint optimization, exiting around 100 select underperforming clinics. We are realizing favorable rates and seeing contributions from our revenue cycle management initiatives, providing further evidence that our operational improvement efforts are gaining traction. As already indicated, we are beginning to see the impact of our catheter-related bloodstream infection preventing efforts. We saw a 23% reduction in bloodstream infections over the past year, which supports lower infected related hospitalizations and also translates into lower patient mortality risk. Next, on value-based care. We continue to build on the strong momentum we have established in this business. The quarter reflected continued positive operating income as well as an increase in member months driven by contracting growth. We are demonstrating how our vertically integrated model translates into better patient outcomes. We are seeing meaningful improvements across key clinical measures such as reduced miss treatments, lowered mortality and hospitalization rates when FME patients are managed by interwell Health. On October 12, we will host an expert call with Tom O'Connor, the CEO of Value-Based Care, where we will give more insights into this segment. Information about the call is available on our Investor Relations website. Turning to care enablement. The 5,008X rollout gained also momentum for care enablement with growing sales supporting favorable business growth. Overall, we continue to realize positive pricing and volume development outside of China, driving momentum in our underlying business. Despite recent headwinds from regulatory changes, China remains an attractive products market for FME. With refreshed leadership, we are reviewing our strategy to win as well as our product portfolio for this market. We are navigating elevated raw material and logistics costs, driven by the conflict in the Middle East. While these external cost pressures remain a headwind and are something we are monitoring closely, they are currently absorbed in our guidance range. This further reinforces the importance of our continued execution of our FME25+ program to drive sustainable savings. Before I turn to the 5008X update, there are 2 other innovations that I want to highlight. Recently, we introduced -- sorry, recently, we announced the introduction of TherapyWise, a cloud-based analytics capability designed to provide retrospective program level insight into kidney replacement therapy delivered in acute and hospital critical care settings. TherapyWise reflects our continued focus on innovation and critical care by applying data analytics. This helps hospital and clinical leaders gain visibility into how kidney replacement therapy is delivered across their organizations, supporting informed discussions around workflow, consistency and quality improvement. We also launched kinexus, marking a significant milestone in our home dialysis strategy and our broader digital transformation journey. By bringing peritoneal dialysis and home hemodialysis capabilities together on a single platform, we are creating a more connected experience for patients, caregivers and clinical teams. We have already achieved our patient go live with encouraging initial feedback, and we look forward to expanding adoption as we continue to scale the platform globally. Most importantly, kinexus establishes a global digital foundation that will enable future innovation and help us advance our commitment to delivering high-quality person-centered home care. Next on Slide 6. I'm excited to update you on the progress we are making with our 5,008X rollout, which is accelerating as planned. We are firmly on track to meet our 2026 targets, including converting around 20% of our machines in our own clinics. By late July, we had converted 227 clinics across 23 states, representing 10% of our machine base. Of the more than 600,000 treatments on the 5008X around 170,000 have been HDF and more than 100,000 high-volume HDF. So far, we have produced 4 million consumables for the 5008X, which is in line with our plan and is rapidly ramping up. Our extensive planning efforts have covered around 5,000 renal nurses and patient care technicians. It has been a tremendous undertaking to achieve all of this, and I am proud of how much we have accomplished so far. Last Wednesday, we announced BEACON-US, which is a major research initiative designed to generate real-world evidence for high-volume HDF in routine U.S. clinical practice. This reflects our commitment to bringing innovation to patients thoughtfully, responsibly and with rigorous scientific evaluation at scale. We are encouraged by the positive early experiences we are seeing from both patients and clinicians. To give you some examples, patients report feeling better both and after dialysis. And for example, data shows 40% fewer muscle cramps. More than 70% of treatments using auto subs technology in our research cohorts are already reaching the high-volume HDF target of at least 23 liters of convective volume per session. Clinical experience suggests simplified clinician workflows, optimize resource utilization, including reduced water consumption and a much quieter overall dialysis clinic experience. Early observations are tracking consistently with previously published international, randomized and real-world studies including the landmark EU-funded CONVINCE study that collectively have associated high-volume HDF with fewer hospitalizations, fewer missed treatments and improved survival outcomes compared with conventional hemodialysis. I will now hand over to Martin to walk you through the second quarter financials in more detail.

Thank you, Helen, and welcome, everyone. I will continue on Slide 8. In the second quarter, we achieved solid organic group revenue growth of 5%, supported by growth in all 3 operating segments. At constant currency, revenue increased by 4%. Regulatory pressure in China continued to post a challenge to revenue development in care enablement. Divestitures negatively impacted group revenue development by 50 basis points in the second quarter. For the full year, we continue to assume an unfavorable impact on a year-over-year revenue growth of about 30 basis points from the execution of our portfolio optimization plan in '25 and '26. We significantly increased operating income by 23% at constant currency. This growth was driven by contributions from care delivery and value-based care segments and is in line with our planned phasing for 2026. Special items in the second quarter amounted to a negative EUR 103 million, mainly related to the Tavneos impact. As background, the European Commission recommended a revocation of the Tavneos marketing authorization led to an impairment of intangible assets at Fresenius Medical Care Renal Pharma. That resulted in a negative impact on our income from equity method of EUR 71 million, which was treated as a special item. Special items further include EUR 42 million, FME25+ onetime costs and also positive effects from the side reevaluation. I will continue on Slide 9. Our group operating margin again expanded and further improved by 180 basis points. Care delivery as well as value-based care contributed positively. I will cover the drivers of the segment profitability a little bit late. The greater intersegment elimination reflects the growing sales of the 5008X in our clinics in the U.S. With further advancing our rollout, this trend will continue. Corporate costs increased by EUR 47 million, mainly driven by the impact from virtual power purchase agreement and the planned cost of the strategic IT platform investments as we continue to transition to SAP S/4HANA. In addition, FX translation effect had an impact of negative EUR 19 million this quarter. The average U.S. dollar exchange rate in the second quarter was 1.16 compared to 1.17 in the first quarter, and compared to 1.13 in the second quarter of 2025. I will now walk you through the business development in each segment, starting with Care Delivery on Slide 10. Care Delivery realized 5% revenue growth at constant currency and organic revenue growth of 7%. In the U.S., organic growth of 7% was supported by the positive impact from TDAPA reimbursement regulations, favorable rates development and continued progress in revenue cycle management initiatives, further enhancing revenue yields. These benefits were partially offset by lower treatment volumes driven by the referral dynamics Helen discussed earlier. The International business continued to contribute positively. Divestitures, as part of our portfolio optimization negatively impacted revenue growth by around 90 basis points. The main driver here was the prior year divestment of our clinics in Brazil. Care delivery achieved strong earnings growth in line with planned phasing for the year. Accelerating operating income growth to 45% with a 390 basis point step-up in margin. Importantly, underlying operating income, excluding the TDAPA effect, improved by 34%. This improvement was driven by higher rates FME25+ contributions, in particular from the clinic closures as well as benefits from revenue cycle management. Additionally, the growth was supported by a lower prior year base, which includes effects such as elevated medical benefit costs. This more than offset the impact from lower treatment volumes in the United States. As assumed, benefits from TDAPA reimbursement regulations for phosphate binders and solutions were a driver of earnings with around EUR 18 million year-over-year benefit in the quarter. The TDAPA effects are assumed to be a headwind in the remainder of the year. Moving on to value-based care on Slide 11. Revenue in value-based care segment grew by 9% on both organic and constant currency basis. This was driven by an increased number of member months and the favorable effect from premium rates. Revenue increase was partially offset by the change of the risk type for a large contract, which resulted in a different type of accounting treatment and lower revenue recognition. Value-Based Care delivered a strong improvement in profitability in the second quarter, with operating income increasing to EUR 18 million from a EUR 9 million loss in the prior year. The margin improved by 500 basis points, marking another profit of the quarter. Supporting favorable business growth in the quarter was an improved savings rate, reflecting the strength of our contracting. FME25+ savings additionally had a smaller but positive effect on earnings as well. Looking ahead, due to the positive business development, we expect 26% revenue for value-based care to decline by EUR 150 million to EUR 200 million, which is lower than the initially assumed EUR 300 million decline. I will finish the segment overview with care enablement on Slide 12. Care Enablement delivered organic revenue growth of 3%, supported by continued positive pricing and volumes outside China. Regulatory measures and stricter tender requirements in China remained a headwind as assumed. However, the underlying momentum across the rest of the business continues to be encouraging with growing sales of the 5008X increasingly contributing to that momentum as well. The enablement earnings declined by 5% in the quarter, reflecting the adverse regulatory impact in China as well as increased inflationary pressure, including higher raw material costs and elevated logistics expenses related to the Middle East conflict. As the Middle East conflict continues, we are closely monitoring the increasing inflationary pressures and implementing mitigation measures where possible. Currently, these higher costs, especially for raw materials and transportation are absorbed in our guidance range. For our Care Enablement China business, as expected, we saw a headwind of around EUR 20 million in the second quarter. These negative effects were partially offset by positive volume and price effects outside of China and continued contributions from FME25+ savings. Next, I will look at cash flow growth on Slide 13. We delivered a strong increase in operating cash flow of 11% in the second quarter, primarily driven by disciplined working capital management. Free cash flow remained stable at EUR 625 million, while we increased our investments in the business, reflecting the continued strength of our underlying cash generation. Total net debt and lease liabilities as well as total net debt and lease liabilities increased by 6% year-over-year as expected. After canceling 8.5% of shares, which we bought back as part of the share buyback program completed in April of this year, we initiated a new share buyback program starting in May with a total volume of around a further EUR 1 billion. The new program will be executed in tranches over a 12-month period with the first tranche of up to EUR 600 million expected to be completed by mid-December. By the end of the second quarter, we already repurchased 2.5 million shares for EUR 94 million, representing 0.9% of total share capital and approximately 16% of the first tranche. After initiating our new share buyback program, we continue to maintain a net leverage ratio of 2.6x, remaining around the lower end of our target corridor of 2.5 to 3x and underscoring the strength of our balance sheet and disciplined approach to capital allocation. I will now hand back to you, Helen.

Thank you, Martin. I will pick up with our outlook on Slide 15. We continue to expect a broadly flat revenue development. For earnings, our priority is to sustain the higher level of profitability established in 2025. Accordingly, we expect operating income to remain at a consistently elevated level in 2026 with an upside downside range of a mid-single-digit percentage change. While we do not provide quarterly phasing, we communicated that we expected a strong first half earnings contribution in 2026, supported by the mentioned underlying earnings improvement and positive TDAPA effects. TDAPA is expected to become a sizable headwind in the third and fourth quarters, resulting in negative earnings growth in the second half. For full year TDAPA contributions, we now expect a lower year-over-year headwind of around EUR 50 million compared with the previously anticipated negative impact of around EUR 100 million. The second quarter demonstrates that the strategic actions we are taking are yielding meaningful improvements in underlying profitability and care delivery. Despite the headwinds from lower treatment volumes in the U.S. and a tougher base in the second half of the year, we expect continued improvement in the underlying profitability of care delivery. Overall, we expect to deliver care enablement margin improvement in the second half and full year 2026 as we continue to execute our Reignite strategy, while offsetting increased inflationary pressure from the Middle East conflict in our care enablement business. And we continue to assume value-based care to perform around breakeven for the year, reflecting the assumed phasing of contributions and prior year effects. Given our strong first half performance and current expectations for the remainder of the year, we are confirming our full year outlook. This concludes our prepared remarks, and I will now hand back to Dominik to begin the Q&A session.

Thank you, Helen. Thank you, Martin. Before I hand over for the Q&A, I would like to remind everyone to limit your questions to 2. If we have remaining time, we can go another round. With that, I hand it over to Valentina to open the Q&A, please.

[Operator Instructions] Back over to you for the first question.

Thank you, Valentina. And the first question comes from Jonathan from Barclays.

The first one is just on market treatment growth. If you could just help us to understand really the detail on the deceleration from Q1 to Q2 in that number, specifically on the referral piece. I'm really just trying to understand what you could do to improve the inflow of patients there? And how should we think about the relative impact to clinic closures, referrals, the outflow issues of patients that you'd previously pointed to? And then thank you for giving the 2026 expectation. So is it fair to assume that you expect same market treatment growth in the U.S. to get worse throughout the year? How do you see the phasing? And where do you expect to exit 2027 from a say, market treatment growth perspective?

Thanks, Jonathan. I'll take that question and recognizing there's probably a lot of similar questions around same market treatment growth, I think it's helpful to kind of just maybe walk through that in a bit more detail than normal. As we already outlined, the same market treatment growth declined by 0.9% in the quarter. At the same time, we are encouraged by the progress we are seeing where it matters for our patients and that focus on quality and patient care is making a real difference, and we were really encouraged to see treatment and mortality declining in the quarter. As we discussed in Q1, we are executing a lot in parallel in the U.S. dialysis business, which is an operational stretch. We obviously exited around 100 clinics with execution speed, I would say, in half 1, we've closed clinics faster than we would -- than we ever have before. Obviously, the progress on HDF is exciting. But at the same time, that does cause a fair amount of work in the clinics that we are impacting there. And at the same time, there has been a major clinic operations, we touched about kind of a couple of thousand people with the whole focus here on driving profitable growth. In the same time, recognizing that we had the ACA subsidies expiring, we also have implemented some enhanced insurance verification on our patients. And while we are pleased with the quality and patient safety initiatives, obviously rolling out these solutions did also have an impact on the operation. So all of that is really to say the clinic operations of managing significant demand in parallel. And I think we saw that emerge on referrals in Q1 with a little softness there. And I would say that there was an underestimation of the impact that created. As we came out of Q1 into Q2, it was clear that there was -- while that disruption may have been understood, it was clear that it was masking an underlying issue. And I think what we -- as I've kind of worked kind of closely with the team there with Kathy directly, it's clear now that we have an operational miss specifically in the business development approach, which is capturing our fair market share of referrals. We are not seeing a market issue. We are seeing a volume capture issue in terms of getting the patients that we see into our clinics. So that was the execution gap that has led to a further softening of referrals in Q2 compared to Q1. We are all over it. We've made some -- we obviously saw the organizational changes. We've also made organizational changes in the business development group. That will take a few months to gain traction. Kathy is crystal player of those priorities, and we do remain confident in our path to restoring those referral rates in those effective areas. And obviously, we're looking at this region by region. However, given the compounding effect of the lower first half referrals on the rest of the year, that's why we are now saying we expect the same market treatment growth in '26 to be around the Q2 level. Obviously, that compounding effect has caused the gap. We also know that we've got to do work that will take time. So that's why I think we're trying to be realistic here and call the similar level to Q2. Obviously, we do expect that work to take hold and for that benefit to pull through. But realistically, I think we're seeing that move into '27 than were originally thinking in '26. In terms of kind of the exit rate for 2027, clearly, I'm not going to speak to that today. I think we can kind of see where we see '26, what '27 looks like, I need a few more quarters under our belt. And obviously, we'll be able to give that outlook when we get to February. The kind of the areas of focus as you can appreciate, are making sure that when we get those referrals, they're accepted referrals, and we are gaining our fair share there. We had said, and I think it's fair to acknowledge this that we didn't have an inflow issue earlier or maybe the end of last year, it was an outflow issue. I think we have done some significant work on outflows, and that's really showing up in the mortality and mistreatment numbers. What we have now is not a market or a patient issue, we have an accepted referral and inflow issue that is 1,000% the focus of and the organization. So I think that answered all the pieces there. And the apologies for the longer answer, I think it was one that's on a lot of people's minds.

The next question comes from Veronika from Citi.

I have 2 places apologies. The first 1 is going to be on the same market. And Helen, I just want to get a better shape of understanding of the quarter. I appreciate your don't report monthly. But I remember when you were on the road, you were talking about April being down 40 basis points. So not hugely similar, which would suggest that May and June really sort of fell off the cliff in terms of USA market treatment growth rate. was kind of wondering if you could comment on that. And I guess if you have any early indications for how the referral piece is improving in July relative to how -- or it must have been in May and June, that might be helpful to give us a little bit of a confidence in terms of the forward path? And then my second question is on the TDAPA binder assumption for the year. By my math, you're probably at around 130 already for H1. It sounds like the new guidance is 150 to 170, just trying to understand if maybe you're being a little too conservative on that, given how strong the first half of the year has come in?

Yes. Thanks, Veronika. I'll take the same market treatment growth, and I'll have Martin walk us through the TDAPA numbers because I know there's a lot of numbers here on that one. Yes, look, you're right. When we were on the road in April, we were already indicating that April may be kind of a similar level coming out of the softness of Q1. I mean don't forget, April still had the benefit of the lower flu base in 2025. So that was kind of maybe also not giving us the clear picture. There's no question, as you see the number for the quarter that May and June did deteriorate, and I think that's where the focus has been over the last couple of months is really getting under what the root cause is and where the area of focus was. I mean I can buy disruption to our point, but we also have to make sure that the underlying in cooperation is operating as we expect it to. And I'm the last person here want to speak to an operational miss, but clearly, we have one here, and that's why I think we're just being careful on how we guide the rest of the year. In July, I haven't seen numbers yet. But I think the fact that we are thinking calling it for a similar level to Q2, I don't expect to see the improvement overnight, but I do expect to see it take hold as we go through the next couple of quarters here. Martin, do you want to take TDAPA?

Yes. Veronika, so on TDAPA, as we said, we have seen about EUR 80 million effect in quarter 2, and also, we said that we expect after the first past tailwinds is to turn into a headwind for quarter 3 and quarter 4. Now total TDAPA contribution, we are now saying will be a negative EUR 50 million overall on a year-over-year basis, and that is reduced from around EUR 100 million we had on the previous expectations. As a reminder, we had last year a EUR 310 million positive year-over-year contribution. And we said there was a EUR 90 million. Is unchanged, positive EUR 90 million first half, negative EUR 90 million in the second half. So year-over-year, that is a wash or a 0 effect. For the binders, yes, we did see in the first half around the EUR 70 million positivity year-over-year. And we expect this to turn into a headwind of around EUR 120 million year-over-year in the second half, then resulting in the EUR 50 million for the full year. The lower headwinds is predominantly driven by our Pharma business, where we see lower-than-expected headwinds, and that gives us -- or gives you an impression on the overall picture.

That's helpful. And Helen, can I just follow up. One of the things that really struggled this quarter is the volume growth at wars in the U.S. Clinics business, but it looks like your revenue mix is good, your revenue management is good. Is there a risk here about your sort of so focused on profitability that you've ended up at a place where volume growth is suffering. Is that the issue that we're looking at?

No, I don't believe so. The work that we identified on rate and yield were very obvious things for us to go after, where we were lagging, and we've made tremendous strides in those. And in many ways, there are different teams internally within CB as well focused on those. We will look at profitability measures like the clinic closures where we really can't see a way to make that clinic profitable. That obviously has been a profitability focus for us, but not at the -- not at the detriment of the weight and the yield that you're talking about. But we clearly knew right, that when we were closing these clinics, while we've held on a significant portion of these patients, we knew we were giving up some of that volume, and we saw that play out in the market in Q1. Expect that to continue to play out in the market in Q2. I think the -- that was kind of a smaller piece of the overall same market treatment growth development, though. But we're very mindful, Veronika, of what trade-offs we are making, and we don't go into any of them likely, but clearly, the profitability play on both the restructuring reorg and the clinic closures has been meaningful for us. And a smaller part of that same market treatment growth give up. The real issue here is we're really focused to the business development area on accepted referrals. And we can see that by area. So it is isolated, which is why I'm kind of confident that we've got the right plans in place. We've got the right people now in place, and we can get at it.

The next question comes from Oliver from ODDO BHF. Oliver, the floor to yours.

Two questions from my side. First, about the ARR commercial mix. So would you describe that you started initiatives to improve the mix since last fall have contributed already significantly to some of these mix improvements. Second question is still very early days, but we saw recently, the first indications about the bundled rate which also caused some volatility in the share price. Could you share with us how you think about what the first indications? And yes, change, but it would be great to hear you.

Yes. Thanks, Oliver. I think I can tackle both of those. On the commercial mix, we continue to be very encouraged by the improvements that we see there. The weight improvement is real. We've done a lot of work in that area. It is slightly down to ACA that obviously has developed in line with our expectations. But overall, really pleased with the work that has been done on the commercial mix. On the bundle rate, the 1% always disappointing. Clearly, we're in preliminary period were offering up a lot of comments to the administration on the moving pieces of that. We'll see what final brings. But overall, it's always challenging when it's less than inflation.

I was less about the bundle rates, but more about also the additions which come to the total rate.

Oh, you mean the TDAPA add-on payment?

Yes. Yes. Okay.

Yes, sorry. I heard you say bundle and I thought you were talking about the PPS rate that also came out since last quarter.

No, no, no. I meant also including TDAPA, sorry.

Yes. Look, 2 things there. Again, some of this is preliminary. We do expect the government to continue to capture the pricing for the next couple of quarters before it comes final. So for that, we would expect that payment to come down as it brings in more quarters, reflecting the lower prices and the rebates that exist in that. So that should come down as we get to final. And I think what we would see, we wouldn't be surprised that, that continues to develop in line with our expectations. It's high right now just because it's -- I think it's a 2-quarter lag off to what more data would come in and show.

The next question comes from Aisyah from Morgan Stanley.

My first one is also, unfortunately, on the same market treatment growth for the international number. That number was quite weak and the weakest we've seen in 2 years. Were there any reimbursements there in the past that supports the growth and has resulted in a lower number in the quarter? And then my second question was on the ACA headwind that you expect, I guess, what was the number for the quarter, your expectations for 2026? And any early thoughts on the ACA headwind for 2027?

Thanks, Aisyah. On the international same market treatment growth, clearly, we have a lot -- there's a mix effect there. Clearly, we have a lot of countries and a lot of markets that we are focusing on. I think the piece that kind of maybe gets lost in this is we have exited some markets that had higher growth rates, so that would have an effect, and it's kind of a little bit of mix on the mix in the countries like Brazil and Malaysia, for example. And then as we already mentioned, the kind of the flu impact in Q2 as well. So nothing that we are overly concerned about their. On the ACA, we had kind of sized a EUR 50 million headwind for the full year. We had been watching that very, very closely, obviously, in Q1 to see how sticky this was. And what would happen once patients have to start paying their premiums. It did step up as expected in Q2, which has meant that we've seen existing patients leave the exchange plans due to the affordability issues. And then we have seen some patients move to other coverage like Medicare Advantage or Medicare. And of course, some are no longer treating with us. So the underlying headwind remains consistent with our initial expectation of that EUR 50 million for the full year. What we're also seeing is that we have been able to reduce the impact on our commercial mix by expanded payer relationships and signing new contracts in other geographies. So while it starts to get really difficult to tease out what patient went where, we can see what happened on the ACA exchanges, but anything else that results from that will be picked up in business growth moving forward. So we won't continue to track this ACA move. I think we've kind of been able to ring fence it for 2026, but all kind of played out as expected, even though there was this we had dynamic between Q1 and Q2 were back where we thought we would be.

So if I kind of interpret your comments and assuming that this impact kind of increases over the course of the year towards the EUR 50 million you had expected for the full year. Would it be fair to assume it's something like EUR 10 million this quarter, EUR 50 million next quarter, EUR 25 million in the quarter after that? Or is it more kind of a linear progression?

Probably neither. It's been a bit lumpy because of what happened in Q1 and then some of this grace period and then kind of how patients have fallen out. So I think we're not kind of getting into the quarter-by-quarter, but just like the whole EUR 50 million sizing for the year, but line with our half 1, half 2 phasing within our guidance range.

The next question comes from Hugo from BNPP.

I have 2, please. First quick one on tariff. Can you maybe help us the impact in Q2, what you expect for the remainder of the year? I think you guys have only a marginal impact, but would be helpful to have that number. Second, thanks for all the moving parts on 2026. But if we look forward to 2027, you guys have some tailwinds rolling off. U.S. drop to is 1% and inflation keeps trending slightly above that at 3%. Could you walk us through some of the building blocks for 2027, which would lead to EBIT growth next year if that is the plan? Or is EBIT growth of the next year?

Yes, why don't you take the tariff question and I will head up the tailwinds and headwinds discussions for 2027.

As we have discussed, we had a limited tariff exposure in the past because of the breadth of our supply chain network and how we manage to mitigate it. As such, we also expect a limited refund. We have not received or booked anything in the second quarter. We expect let's say, high single-digit kind of range in the second half year. But it is, as I said, previously on the headwinds rather limited.

Yes. Hugo, I think you can appreciate. I am not going to get into the moving pieces of 2027 guidance in August of '26 million. What I will speak to, though, is you know our usual building blocks, right? On the positive side, business performance and volume with a '25, clear expectation there that we continue to expand our margins across the business. as well as getting the benefits from the HDF rollout. On the negative side, of course, we have the usual inflation and merit increases. And then I think the bigger moving bucket for 2027 is the binders and the TDAPA roll off and that headwind into 2027. Obviously, we are not able to completely side that and won't do that today. But obviously, we've got to wait for what the final pricing does on kind of the pricing of what goes into the bundle. But I think there's -- I think we've got our arms around what the moving parts of this business are by now. And of course, we'll size them accordingly by February.