Prepared remarks
Ladies and gentlemen, welcome to the report on First Quarter 2026 Earnings Conference Call. I am Valentina, the Chorus Call operator. The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Dominik Heger. Please go ahead.
Thank you, Valentina. I would like to welcome everyone to our earnings call for the first quarter 2026. 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. We will have a little bit under an hour for the call. In order to give everyone the chance to ask questions, we would limit the number of questions to 2. Thank you for making this work, as always. Let me now welcome Helen Giza, CEO and Chair of the Management Board; and Martin Fischer, our Chief Financial Officer. Helen, the floor is yours.
Thank you, Dominik. I'd like to extend a warm welcome to everyone on the call. Thank you for your continued interest in Fresenius Medical Care. I will begin my prepared remarks on Slide 4. I am pleased to report that we began 2026 with continued operational and financial progress. We realized solid organic revenue growth of 4%, reflecting positive contributions from all segments. We achieved strong operating income growth of 10%, in line with our planned phasing for the year and leading to further margin expansion. This was supported by continued execution of our FME25+ saving program, which delivered EUR 50 million in sustainable savings in the quarter. On April 30, we successfully completed our initial share buyback program of EUR 1 billion in a significantly accelerated way. It was done in less than 1 year instead of within 2 years as originally announced. We bought back 24.8 million shares or 8.5% of share capital. At the same time, our net leverage ratio of 2.6x remains around the lower end of our target corridor. Let me now turn to key first quarter highlights across our operating segments on Slide 5. Beginning with Care Delivery in the U.S., same market treatment growth declined by 37 basis points as volumes were impacted by missed treatments. We had flagged during the quarter that we experienced severe U.S. weather events in January and February. As we focus on core operational improvements with clinic closures and insurance verification, this likely had a small impact on patient inflows at the start of the year. This was further complicated by the unclear situation for many patients with their insurance coverage due to the expiry of the extended tax subsidies for ACA. Volumes also continue to face pressure from mortality remaining above pre-pandemic levels. We are maintaining our assumption of flat U.S. market treatment growth in 2026, which includes the expectation for improving volumes over the course of the year. Our Care Delivery International markets delivered 1.3% same market treatment growth. Whilst TDAPA provided a benefit to our care delivery performance, Martin will address that in his remarks. What really stands out to me is the successful execution of our FME Reignite strategy and the actions we are taking to strengthen our Care Delivery business while driving profitable growth. We understand the sense of urgency as well as the pace and momentum needed to deliver growth in our underlying business, and there are several proof points demonstrating progress already. While mortality levels are still above pre-pandemic level, we have seen a reduction in catheter-related bloodstream infections, with now around 90% of all eligible patients using an antimicrobial catheter lock solution. This is part of our FME Reignite strategic priority to increase patient quality and safety. We expect the progress we have made on increased usage of catheter lock solutions to begin to have a positive impact on missed treatments and mortality in the near future. The 5008X rollout and introduction of HighVolume HDF therapy represents the biggest operational and clinical change in our company's history. With the start of the large-scale launch in January, we have achieved a clear step-up change in rollout speed and are well on track. We surpassed 100,000 treatments on the 5008X in the first week of April and around 100 clinics have been converted to the new care system with more conversions underway as we speak. In February, as part of FME25+, we announced the biggest U.S. clinical restructuring in recent history with plans to close up to 100 clinics. Here, we are also moving at speed with 64 clinics already exited in the first quarter and the remainder expected within Q2. And finally, we have realized improvements in revenue cycle management, providing further evidence of our strategic execution. Turning to value-based care. We delivered positive operating income driven by favorable savings rate, and we realized an increase in member months from future contracting growth. Leveraging data and analytics to improve quality and coordination of care is a central component of our FME Reignite strategy. We have expanded adoption of AI-driven interventions for imminent hospital admissions of ESRD patients. Where employed, these programs have shown a reduction in hospitalizations by as much as 15% and missed dialysis treatments per member per month by up to 26% for the highest risk patients. We will continue to scale this across our VBC population. I'm also proud to report that we continue to be recognized for quality leadership in the United States Government CKCC program for multiple consecutive years. We delivered over $270 million in shared savings and achieved an 88% average quality score over the first 3 years of the program. In the most recent publicly available data, we earned over 40% of the program's high performer pool driven by our industry-leading quality. Care Enablement realized favorable business growth as sales of the 5008X in the U.S. ramp up. This is a tremendous opportunity to bring new innovation to the U.S. market and we are on track with production to supply both machines and consumables according to our targets for the year. In the first quarter, we achieved positive pricing and volume development in our markets outside of China. We faced continued pressure in China, especially from volume-based procurement and stricter tender requirements. We continue to closely monitor developments in China and assess the implications on our product portfolio and strategy as part of FME Reignite. We also continue to strengthen our core care enablement business with further FME25+ progress in streamlining our manufacturing and supply chain. I will now hand over to Martin to walk you through the first quarter financials in more detail.
Thank you, Helen, and welcome to everyone on the call also from my side. I will pick up on Slide 7. In the first quarter, we achieved solid organic revenue growth of 4%, supported by growth in all 3 operating segments. At constant currency, revenue increased by 3%. Care Enablement revenue development continues to face headwinds from regulatory pressure in China. Divestitures negatively impacted revenue development by 50 basis points. We delivered strong operating income growth of 10% at constant currency. This increase was supported by contributions from all operating segments and is in line with our expected phasing for our 2026 outlook. Special items in the first quarter amounted to a net negative EUR 181 million, mainly reflecting costs associated with FME25+ as we accelerated our U.S. clinic closures. In line with expectations, FME25+ costs are planned to come down over the course of the year as costs related to U.S. clinic closures are first-half loaded. Turning to Slide 8. This chart illustrates the year-over-year improvement of the group operating income margin, highlighting a further increase of 70 basis points. With 10.1%, this is a solid start toward achieving our projected group operating income margin of 10.5% to 12% for the full year. Care Delivery was the main driver of improved profitability with a small contribution from value-based care. The higher intersegment elimination reflects the 5008X CAREsystem sales in the United States. Corporate costs increased by EUR 37 million. This was mainly driven by the planned cost of strategic IT platform investments, including preparation for the transition to SAP S/4HANA. FX translation effects were unfavorable this quarter and stood at negative EUR 34 million. The average U.S. dollar exchange rate in the first quarter was $1.17 compared to $1.16 in the fourth quarter and compared to $1.05 in the first quarter of 2025. I will now walk you briefly through the business development in each segment, starting with Care Delivery on Slide 9. Care Delivery achieved organic revenue growth of 6%, driven by both Care Delivery U.S. despite muted U.S. volumes and Care Delivery International. At constant currency, revenue increased by 5%. In the U.S., growth was driven by a positive impact from the TDAPA reimbursement regulations as well as favorable rate and payer mix effects. Our U.S. payer mix remained strong in the quarter with relatively low attrition in the exchange patient population. We expect that attrition to increase over the course of 2026 as rate periods expire and affordability pressures grow around higher premium and out-of-pocket costs. We continue to expect an impact of around EUR 50 million for full year 2026. The impact from divestitures as part of our portfolio optimization plan reduced revenue growth by about 80 basis points. The main driver here was the prior year divestment of our clinics in Brazil. Care Delivery realized strong operating income growth of 26%. This resulted in a margin improvement to 12.1%. Benefits from TDAPA reimbursement regulation for phosphate binders and catheter lock solutions were, as expected, a meaningful driver of the earnings development. We continue to assume a significant headwind from TDAPA reimbursement regulation in the second half of the year. Importantly, excluding TDAPA benefit, the underlying business realized around 6% earnings growth on a constant currency basis. This includes favorable rate and mix effects, lower implicit price concession, thanks to our revenue cycle management initiatives and partially offset planned strategic investments for the 5008X rollout in our U.S. clinics. Savings from the FME25+ program contributed positively. The anticipated labor cost increase as well as currency translation effects had a negative impact in the development. Turning to Value-Based Care on Slide 10. Value-Based Care realized 3% revenue growth on both an organic and constant currency basis. This was driven by a higher number of member months from contract expansion and positive effects from premium rates. Prior period contract true-ups also created positive growth in the first quarter. This was partially offset by the change of risk type for a large contract resulting in a different accounting treatment and lower revenue recognition. We expect revenue growth will turn negative throughout the year, primarily due to the change in accounting treatment. Operating income for Value-Based Care increased significantly in relative terms and the margin was enhanced by 100 basis points. Value-Based Care was profitable for the second consecutive quarter. The increase in business growth was mainly driven by an enhanced savings rate. FME25+ program-related savings resulted from the reorganization of the team to take advantage of integration with Fresenius Medical Care and becoming more efficient while aligning staffing with our strategic priorities. Higher inflation and currency translation effects were offsetting factors. I will turn to Care Enablement on Slide 11. Revenue in Care Enablement increased by 1% on an organic and constant currency basis. Organic revenue development reflects continued positive volumes and pricing, excluding adverse regulatory impacts in China, which include volume-based procurement and switcher tender requirements. Revenue was also supported by strong sales of the 5008X CAREsystems in the United States. Care Enablement earnings slightly increased on a constant currency basis, leading to a 40 basis point margin improvement. Business growth was impacted by adverse regulatory impacts in China and negative currency translation effects. Positive volume and price effect outside of China contributed positively to business growth. Additional FME25+ savings from continued progress in manufacturing and supply chain initiatives supported margin expansion. Inflationary costs increased and had a negative effect. Next, I will look at the cash flow growth on Slide 12. As always in the first quarter, we have a seasonality effect in invoicing, which is why the quarter typically represents a relatively low share of the full year operating cash flow. This year, while on the typically lower quarter 1 level, we realized a strong increase in operating cash flow by 39%. The main driver was favorable working capital management. Free cash flow increased by 94% to EUR 40 million. Total debt and lease liabilities as well as total net debt and lease liabilities were broadly stable compared to the prior year period. As part of our share buyback program, we repurchased a total of 23.3 million shares for EUR 941 million by the end of the first quarter. This represents 7.9% of share capital. On April 30, we successfully completed our initial share buyback program of EUR 1 billion. We bought back in an accelerated way, 24.8 million shares or 8.5% of share capital. With 2.6x, our net leverage ratio continued to be around the lower end of our self-imposed target corridor of 2.5 to 3x. I will now hand back to Helen.
Thanks, Martin. I will pick up with the outlook slide on Slide 14. Given our strong first quarter performance and current expectations for the remainder of 2026, we are confirming our full year outlook. We continue to expect a broadly flat revenue development. For earnings, we assume operating income will remain on a consistently high level as 2025 with an upside-downside range of a mid-single-digit percentage change. We clearly target to maintain our enhanced profitability. Unchanged to our assumptions, we do expect a positive earnings growth in the first half of 2026. Due to the phasing of the regulatory TDAPA effects, which should present a significant headwind in the second half of the year, we assume a negative earnings growth in the back half of 2026. As you will be asking about the impacts from the Middle East crisis, I want to say that we are closely monitoring inflationary impacts from higher oil prices, raw material costs and other supply chain and transportation cost-related topics. So far, there were no meaningful interruptions of our local operations during the first quarter and the financial impacts are currently absorbed within our range of inflation assumptions for our 2026 outlook. We are closely monitoring this, have implemented mitigation measures, and we'll keep you updated. This concludes my prepared remarks, and I 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, as always, I would like to remind you please start with 2 questions only and if you have time left, we'll go a second round. And with that, I hand it over to Valentina to open the Q&A, please.
Back over to you, Dominik, for the first question.
The first question comes from Graham from UBS.
Questions and answers
Obviously, congratulations on the 5008X rollout, that's obviously an update and big undertaking. I was hoping you might be able to contextualize that and some of the other growth drivers that you expect to build through the year. It's just when I look at the underlying growth for Q1, if you adjust the TDAPA, it looks like there's quite a bit of work to do as we go through the year when we think of the kind of mid-teens implied growth in consensus for 2027. So I'm thinking how do you get there? How do you get to that sort of mid-teens growth for next year when you exit that TDAPA piece? So is it more cost savings? Is there another TDAPA coming? Presumably the volume uplift won't start just yet from HVHDF. But if we could get a sense as to which of those drivers are making you confident on that?
Thanks, Graham. I'll take that. Obviously, we outlined a lot of the drivers for Reignite and how we get to those mid-teens margins. The specific building blocks clearly are ongoing FME25+, as you rightly said. The 5008X obviously is expected to ramp up, not just over this year, but over the next couple of years as well. The work that we are doing and have constantly spoken to about improving inflows and outflows is quite multifactorial. We're working on improving our internal processes and even the work that we are doing on the catheter lock solutions in improving patient safety and patient quality will have a positive effect as will HDF on treatment volumes, reduced hospitalizations, reduced missed treatments and, of course, improved mortality. As we think about revenue cycle management, we've got some nice contribution coming in for that. That will continue to ramp up over the course of the year. And then the clinic closures, which is a big part of the one-time cost in Q1, will start to deliver savings continuing to compound over the course of the year. So a lot of building blocks there, not new building blocks, but ones that we're continuing to work through. I think the other piece, as we go more specific and many of those are specific to Care Delivery. As we think about Care Enablement, obviously there's FME25+ there. And I think the China piece, and I'm sure there'll be questions on that, we've sized that for the year, knew that we'd have a bigger impact in Q1. That should also be behind us or more heavily loaded in the first half. And then that ongoing work on good contracting, pricing, reimbursement and volume. So I'm confident in the plans. We've really underscored and underpinned the initiatives across all 3 segments, and we're executing against that to be crystal clear on the aspiration to be at mid-teens margins for Care Delivery and Care Enablement. I think that's why it's important we understand the TDAPA piece. We understand the cliff that will happen. We are really focused on that underlying improvement and personally really encouraged by that 6% underlying improvement in Care Delivery in the quarter. So recognize a lot of moving parts, a lot of good initiatives, and I think we're really starting to see them come through, but the clear building blocks of how we get there.
Also maybe just a quick follow-up on DefenCath, are you seeing the benefits fairly quickly? It seems like something you might see a little bit of a tailwind relatively quickly.
For DefenCath, yes. With having more than 90% of our patients on that, we are really starting to see a real improvement and reduction in bloodstream-related infections. So really encouraged by that work. Of course, with DefenCath, that is a TDAPA period, but the underlying catheter lock solution is really good for patient safety and patient quality. So outside the financial impact of that, there's a clear improvement that should be expected to translate into reduced hospitalizations and reduced missed treatments for patients over time.
The next question comes from Hassan from Barclays.
Firstly, on the TDAPA benefit in the quarter, can you talk to the split of the EUR 80 million, be it phosphate binders versus catheter lock in the quarter and how you see Q2 and H2? And if this is consistent with the expectations that you set out in February? And then secondly, on same market treatment growth, if you could help unpack some of the underlying dynamics and if possible, how much of the headwind you think you may have seen from weather in Q1? And with no second flu spike, do you expect growth to swing quite meaningfully in the second quarter, all else equal? Or is there something else in Q1 that should constrain that improvement that you might be seeing, be it inflow or mortality?
Got it. So the contribution of TDAPA for the first quarter, as you said, Hassan, was about EUR 80 million on a constant currency basis. We have also told you and shared with you that the catheter lock solution contribution from 2025 to 2026 would be in equal size, meaning EUR 90 million for the first half year. And we saw about half of that come through in the first quarter as well. The remainder between that and the EUR 80 million is a binder contribution. Overall, our TDAPA contribution has developed as expected. And we have, as a reminder, positive contributions for the first half of 2026, and we expect negative headwinds in the second half. That's why when we talk about operating income improvement for the first half, we expect positive growth and for the second half, a negative growth expectation year-over-year.
Thanks, Martin. And I'll take the same market treatment growth because I expect people have a similar question here, too. We all know we're in small numbers on small numbers here. We know that we had weather in January and February that did result in missed treatments. Flu was similar in Q1 2026 to what it was in Q1 2025. We did see slightly lower referrals in the first part of the year. And obviously, we know we've got a lot of clinic closures and restructuring underway. We also know that the ACA piece did cause a lot of uncertainty for patients, and we're also refining our own patient insurance verification processes. So our guide is unchanged. We still expect to be flat for the full year. I haven't even seen April numbers yet, so I'm not in a position to give insights into Q2 specifically. We do expect to continue to improve over the course of the year. And the other impacts that I spoke to on Graham's question—things like bloodstream-related infections, HDF and the ongoing work we're doing across the operation on improving inflows and outflows—are important. Mortality is still elevated, and that is something we continue to try to impact through some of these other measures. All in all, it's small numbers. While we're all looking for that to turn positive, because of the small base it's not really impacting operating income as we've consistently said, but we're feeling good about the work underway and we'll continue to see more as Q2 develops.
The next question comes from Veronika from Citi.
Can you guys hear me?
We can hear.
Two for me, please. The first one is slightly bigger. I know we're early in the HDF rollout, but just curious to get some feedback from you both in terms of operationally how that rollout is going in your own clinics, how you're feeling about some of the early signs of mortality benefits that you're seeing, if any — I know it's very early, but to the extent that you could talk about it. And I guess some of the training costs that you've budgeted for in the year, how you're tracking against those? And then I have a bigger picture follow-up question.
Sure. And as you know, it's my favorite topic. So we can spend the rest of the call talking about HDF, if you like. Putting that aside, I'm really happy and excited about how it's going and the progress we're making. We are accelerating at speed now. If you look at our website, you'll see clinics 'coming soon,' and we've already passed the 100 clinics that we were at by the end of the quarter. Training is going well. Those costs are being incurred as we had forecast. So that's all fine. The adoption in the clinics is really positive. It's easier to train. The staff are liking it. It's less noisy, less disruptive with alarms. More importantly, the feedback from our patients is terrific. We're clearly seeing the immediate benefits of patients feeling better on these treatments, feeling less tired, etc. We are tracking the data from patient one. We've had 100,000 treatments and over 100 clinics, and we are starting to get that data set into a form that we can begin to tease out some KPIs and report on them. We have said we'll start to provide more color once we're through the first half. Everything so far in real-world evidence is supporting what we had seen through the studies. So yes, it's big—it's the biggest thing we've ever done—but the level of excitement and engagement and adoption by our teams, our physicians and our patients is terrific. So very happy with how that's going.
That's super helpful, Helen. And I think maybe to sort of bleed it into my second question: I'm sure we're all anxiously awaiting the return of same market treatment growth to positive territory. I know you can't predict when that happens. But fundamentally, if we're here again in 12 to 18 months' time and we haven't seen any progress on same market treatment growth, how will you think differently about operating or running the business? We're seeing more clinic closures this year. Just curious, high-level, what should we be expecting from you in response to that? I know that's not your working assumption, but to the extent that we're there in 2027, what would you do?
First of all, my expectation is that in 12 to 18 months we would not still be at negative same market treatment growth. I do expect this to continue to improve. I feel really good about the work the teams are doing in addressing operational improvements and efficiencies and addressing inflows and outflows. If we look 18 months from now, we will have technically converted a significant portion of our machines to HDF, so we should be seeing more impact from HDF. Where we have underutilized capacity or we don't have profitable growth, we would trim the network accordingly, but that is not our working assumption. Every month, every data point gives us new insight. What we're seeing in the work we're doing—patient safety initiatives as well as HDF—all point to improvements in mortality, missed treatments and hospitalizations. We would flex different cost levers if needed. The team has shown they can move at speed with the clinic exits: 64 clinics in the first quarter and close to 90 done through April. So we can act decisively if required.
The next question comes from Hugo from BNP Paribas.
I have two, please. First, on the EUR 200 million to EUR 300 million inflation headwind that's in the guide. Could you give an indication of how you track against that guide and given macro uncertainties, what room do you have with either the top or the low end of that guidance? Martin, you mentioned ACA subsidies expiring — will you account for patients that are signed up in ACA marketplaces? I think generally there is at least a 1- to 3-month grace period for the first event. In other words, would there be a stronger impact in Q2 from your EUR 50 million estimate or some type of reversal that we should be aware of?
So far for the first quarter, we are tracking in line with our assumptions on the inflation side. We also saw only minimal impact from the conflict and from the macro environment. We are closely monitoring that, as Helen outlined, and we are also taking mitigating actions. But for quarter 1, this is well in line with the development. As we see it today, this is within the band of our assumptions for inflation as well.
On the ACA subsidies, we had guided an impact of around EUR 50 million for the year. We're watching open enrollment and the uptake of patients. In Q1 we actually saw lower-than-expected patient attrition. The mechanics include that patients have to make their first premium payment, and we don't yet know after that first month whether they stay on. There is a grace period, and we don't know from an affordability standpoint if they will remain on the exchange or move to Medicare or Medicare Advantage. We believe our assumption of EUR 50 million for the year is still a reasonable estimate, but we would not necessarily start to see that impact until Q2, with more potential compounding in Q3 and Q4. It's something we're watching closely, but for now we're holding the assumption.
The next question comes from Aisyah from Morgan Stanley.
My first one is on China. Could you quantify the impact from volume-based procurement and the tender exclusion in the quarter versus the guidance of a little under EUR 50 million that you saw last year? And do you have a clearer view on when you could reenter the tender this year? Second, on Value-Based Care: your performance in the quarter was clearly ahead of expectations. Would this mean we see a steeper decline for the remainder of the year, or does this drive a bit of upside to the original guidance? At what point will you have better visibility on the margin side of things?
Aisyah, on China, we gave an expectation that we would see a little bit below EUR 50 million for the full year. In quarter 1 we saw about half of that come through as expected. This is in line with how we looked at China for the full year and we expect lower effects in the coming quarters. Regarding Value-Based Care, yes, we had an uptick in the quarter partly driven by prior period adjustments which helped offset the headwinds from the change in revenue recognition for a large contract. Given the volatility of the Value-Based Care business and that quarter 1 was a supportive quarter, it's too early to change the outlook for the year. We have given you a EUR 300 million assumption and that is still what we currently work with.
Martin, if I could push on the inflation side: you mentioned you're monitoring the situation closely. If the current conflict is prolonged, which areas of your cost base would be most sensitive to incrementally higher inflation? Would it be energy, freight, plastics, etc.?
When we look at different buckets, typically you look at energy, transportation costs and oil-price-exposed materials like plastics. On the energy side, we are rather well hedged — about 70% of our exposure is hedged — so that is limited. But continued high oil prices would affect transportation and plastic-based materials. We are currently absorbing this within our guidance assumption for the year and are taking mitigating actions where possible.
The next question comes from Anna from Bank of America.
I wanted to follow up on the HVHDF rollout and how the costs are unfolding versus your expectations. I think you said you rolled out to about 100 clinics versus an implied goal of closer to 500. Should we be thinking that the costs accelerate in Q2 and into the back half of the year, maybe compounding the headwind from the TDAPA roll-off? And then how are you thinking about that going into 2027? Previously you said the savings from the HVHDF rollout would offset the cost. Is that still the right way to think about it?
Anna, our plan is to replace about 20% of the machines of the installed base in 2026. The costs are front-end loaded because we have to train, install and run them, and the benefits lag. Costs will continue as we accelerate installations; they're roughly linear to the number of machines we install over the course of the year. The benefits lag but will come to offset some of those costs in later years. Nothing remarkable to comment on beyond what we originally guided — it's in line with the number of machines we are deploying.
The next question comes from Oliver from ODDO.
First, on payer mix: over the last quarters we've seen some progress. How do you think about further improvements in the payer mix? Is it still a source of additional profitability or becoming more neutral? Second, on Value-Based Care: you showed a solid increase, I think 5% in enrollment of new patients. Can you provide some data whether the growth now comes more from CKCC or from commercial programs? How do you think about further patient growth in VBC?
We are pleased with continued improvement in payer mix. Right now there's no significant ACA headwind in that mix because we're still holding on to those patients, though that could change depending on how ACA developments play out. We're focused on profitable growth; when we close clinics we don't retain every patient, but we focus on profitable patient mix. The improvement in Value-Based Care in the quarter was more from commercial than CKCC, and we're focused on better contracting and premiums as well as member months. We have had some nice wins and new relationships with larger payers.
The next question comes from James from Jefferies.
Two please. First, on operating cash flow: I noticed EUR 227 million in the quarter, up 40%. There's a line 'other working capital and noncash items' that was a positive inflow of EUR 133 million — nearly 60% of operating cash flow. If one adjusts for that line, it implies a 50% reduction in operating cash flow. Can you give color on what goes into that line and confirm if there's any factoring? Second, on the full year, can you confirm all the outlook assumptions remain valid?
James, we don't include the headwinds and tailwinds slide every quarter. Internally, that classification is developing in line with expectations. So nothing significant to point out beyond what's already discussed. The headwinds and tailwinds are very much from what we've seen in Q1 and our outlook for the year is developing in line with expectations.
What I can say is we are driving operating working capital improvements for the underlying cash performance. On the 'other' piece you referred to, I would need to look into exactly what you referenced and come back with more detail.
The next question comes from David from JPMorgan.
On ACA, have you recognized all the revenues from patients coming through? If they fall off going forward, will you have to go back and readjust numbers or take a provision through the first quarter just in case those patients come off and then you write it back later? Second, on cost inflation for Martin: what percentage of your COGS in Care Enablement is associated with plastics and what are you seeing in terms of plastics inflation?
On ACA, if a patient is present we bill for that treatment. There's no retroactive write-down because the patient received treatment and we billed. The concern is losing the patient if they drop off coverage later, which would reduce future revenue. In Q1 our patient census didn't show the attrition we initially thought, but affordability remains a risk for later in the year. We're also strengthening front-end insurance verification to make sure billing is correct.
Regarding inflation and plastics, we monitor multiple buckets: transportation, energy and plastics. We manufacture some plastic parts in different locations, so exposure varies by item and location. It's not a simple extrapolation. We are mitigating the effects, and these are built into our inflation guidance for the year.
The next question comes from Falko from Deutsche Bank.
Two questions. First, remind us how much of Care Enablement sales come from China, and how was growth excluding China in the first quarter for the segment? Second, Care Delivery International organic growth was a tad softer than previous quarters — any particular reason or just normal quarterly volatility?
On China, it's about 7% to 10% of Care Enablement revenues. It is a relevant and attractive market. We have not disclosed more granular top-line impact for the quarter beyond that.
On Care Delivery International, the slightly lower growth partly reflects comparatives; last year we had Brazil in the base which affects year-over-year comparisons. When we look market by market, we're not concerned by what's being seen here.
And the last question comes from Richard from Goldman Sachs.
On China for Care Enablement: between stricter tender requirements and volume-based procurement, how are competitive dynamics changing in that market? Martin referenced China as attractive — what scenario is embedded in your medium-term plans for Care Enablement in China?
China is an attractive market: large and profitable despite current challenges. Competitive dynamics are changing across med tech. For us it's about the right strategy and go-to-market approach in China, deciding what to do local, what to offer as premium, and where to partner. We are reassessing our portfolio and will adjust strategically as regulations evolve. We were later to market than some competitors and have learned a lot; we will continue to refine the portfolio for the Chinese market as these regulations change in real time.
Thank you. So with that, we have answered all questions. The time is up, so perfect combination. And with that, thank you for being so interested that we filled more than an hour. I'll say thank you. See you on the road at conferences and around the world.
Thanks, everybody. Have a good day. Bye-bye.
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