Fresenius Medical Care AG Q1 FY2022 Earnings Call

Ladies and gentlemen, thank you for standing by. I'm Natalie, your Chorus Call operator. Welcome and thank you for joining the Fresenius Medical Care Earnings Call Report on the First Quarter 2022. So today’s call presentation all participants will be in a listen-only mode. The presentation will be followed by question and answer session. I would now like to turn the conference over to Dominik, Head of Investor Relations. Please go ahead.

Thank you, Natalie. As mentioned by Natalie, we would like to welcome you to our earnings call for the first quarter in 2022. We appreciate you joining today to discuss the performance of the first quarter and of course, of the outlook. I will, as always, 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. We are aware that today is a busy reporting day with three German companies in the sector reporting. Therefore, we will try to keep the presentation short and leave time for questions. As always, we 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. Unfortunately, we are limited to 60 minutes for the call. With us today, unfortunately, for the last time, is Rice Powell, our CEO and Chairman of the Management Board. Rice will give you some more color around the strategy and business development, and of course, also with us, Helen, our Chief Financial Officer, Chief Transformation Officer and the Deputy CEO, who will give you an update on the financials and the outlook. Before I hand over, I want to make sure that you all have in your diaries our next expert call on June 28, with Frank Maddux, our Chief Medical Officer; and Joe Turk, who heads our home activities and is former President of NxStage Medical. They will provide an update on how we are accelerating home growth. Further information is available on our website. Rice, the floor is yours.

Thank you, Dominik. Welcome, everyone. Thank you for joining our presentation today. You will have seen the announcement yesterday and Dominik has already mentioned that this will be my last earnings call as I will now shift my focus to the handover for the remainder of this year. I think now I'm looking at somewhere around 41 or 42 earnings calls for me in the role as CEO and Chairman. I have thoroughly enjoyed my time discussing FMC with you trying to answer your questions and guide you as best that we could as we took the journey through these 10 years together. Before I start with the quarter, I'd like to say a few words on the war in Ukraine. I am both touched and proud of our team there. Our colleagues are relentlessly continuing to provide for our patients even risking their lives to continue to administer dialysis treatments under the most difficult circumstances. It is admirable and it's heroic, and I'm very proud of these people. Although it has less focus in the media, the pandemic continues to be present and the highly infectious Omicron variant has put a great deal of strain on our organization. I continue to be grateful to our entire team and our frontline workers in the clinics, our production sites and distribution centers for their continued tireless work in what is an extraordinary situation for more than two years now. As flagged in our last earnings call in February, we were expecting a weak start to the year, driven by high excess mortality as well as inflationary pressures in all spending categories for the company. January excess mortality was even higher than expected. And while we did see very significant declines in February and March, overall, first quarter excess mortality was higher than we had assumed. Omicron affected us in multiple ways particularly in our health care services business in North America. I will show you later, Omicron caused infection rates to spike high in our patient population. And so we once again had to increase the number of isolation clinics, which led to additional labor costs in the forms of extra shifts, overtime, and hazardous pay. Due to its highly infectious nature, we had record absenteeism and sick leave as our employees either had to isolate for themselves or take care of their family members. Therefore, we had to employ more temporary and traveling nurses and other temporary staff in our services business. Additionally, we were short of employees in some of our manufacturing sites as well as our delivery drivers, resulting in increased supply chain costs for distribution and logistics, in particular, in the products business. Additionally, we all see higher oil and energy prices, leading to increased raw materials and logistics costs. We have a sizable negative effect, particularly on our product margins, which are already under inflationary pressures. Despite these significant adverse developments, we continue to progress in our FME25 transformation. We are also encouraged by the strong decline in COVID-19 infection rates that we have recently observed in February and March of the quarter. Consequently, we confirm our financial targets for 2022. We also continue to make good progress in several important strategic areas. The announced merger between Fresenius Health Partners, InterWell Health and Cricket Health in March is an example of how we are executing on our 2025 growth strategy while also leading the market in value-based care. The new company, which will be fully consolidated by FMC and operate under the InterWell Health brand will manage 100,000 lives. With the merger, we now target for 2025 to engage and manage the care of more than 270,000 people with kidney disease and manage roughly $11 billion of medical costs. We expect the transaction to close in the second half of this year. Despite the unprecedented and not improving labor shortage situation and the resulting lack of training capacity for our home dialysis business, I'm glad to say that we've managed to keep our share of U.S. treatments in a home setting at a high level of slightly more than 15% through the first quarter. And as you know, when we need nurses out of our training facilities to go into clinics to provide treatments, we will do that, and that does put pressure on our training capabilities. We are making good progress on our sustainability journey. As you know, we began the year by setting our global climate targets. We are now working on continuously implementing our target roadmap, and we will regularly report on our progress. We have also increased transparency on our sustainability activities. Our recently published non-financial report outlines the progress of our global sustainability program and highlights focus areas and measures we are taking to support our patients, our people, and the environment. This annual sustainability update includes more than 200 sustainability performance indicators. Turning to Slide 5. As you well know, we are very mission-focused at Fresenius Medical Care and our number one priority is delivering quality outcomes for our patients. During the first quarter, we delivered approximately 13 million life-sustaining dialysis treatments to more than 343,000 patients. The absence of growth in the number of patients and treatments directly reflects the impact of the COVID-19 pandemic. While the number of clinics increased by 1% year-over-year, mainly due to acquisitions, it is important for you to note that sequentially, the number of clinics has declined from Q4 2021 through the first quarter. Turning to Slide 6. This slide highlights our key quality indicators, which show the stability of clinical results in our patients receiving their treatments as there is no visible COVID-19 impact on the quality that we are delivering. We continue to see stable anemia as well as bone and mineral metabolism control, demonstrating that our patients are receiving consistent high-quality dialysis care even throughout the pandemic. I would ask you to note on the bottom of the chart, you can see we have now moved the days in hospital per patient year on a global basis. This is new. It's something I promised to do for you before I retired. And so let it be made known, we got this done. And you can see the first quarter of '21, and then we've made some progress in the first quarter of '22. Moving on to Slide 7. This slide compares the development of COVID-19 matching the emergence and spread of the highly contagious Omicron variant. We are extremely relieved to see that the infection rates have since come down almost as fast as they had previously spiked. We're back to the level seen before the Omicron-related surge. With the substantial spike in confirmed infections in the month of January, we once again had to increase the number of isolation clinics, leading to additional labor cost in the form of extra shifts, overtime, and hazardous pay. With 800 clinics, we had more than three times as many isolation shifts at the peak of Omicron in January than we had at the end of March when we were at around 250 isolation clinics. Tremendous impact in that period of time with the infection. Turning to Slide 8. COVID-19-related excess mortality significantly increased in January. Even though excess deaths came down strongly in February and March, excess mortality among our patient population increased to around 2,300 during the quarter, and thus, it did exceed the assumptions we had. However, the assumed full-year excess mortality range of 5,000 to 6,000 seems realistic to us at this point in time. Globally, since the start of the pandemic, excess deaths have accumulated to approximately 22,600. We expect that excess mortality in the second quarter will reflect the recently observed significant drop in our patient populations' infection rates. Turning to Slide 9. During the first quarter, we realized revenue growth of 3% in constant currency supported by positive growth in both health care services and products. Unfortunately, that growth did not fall through to the bottom line, mainly due to significant increases in labor costs, further compounded by Omicron-related costs as well as the significant costs we incurred in our supply chain in the first quarter. In addition, increased energy, raw material, and logistics costs are weighing on our product margins during the quarter. These substantial adverse developments were partially offset by an earlier than planned partial reversal of an accrual related to a revenue recognition adjustment for accounts receivables and legal dispute. So with that, we were able to deliver the quarter in line with our original expectations. We had assumed in our guidance support from the U.S. provider relief fund for our wholly-owned entities would help with the compounded labor cost. But those funds have not yet been distributed, and therefore, they did not offer us any opportunity in the first quarter. On net income, excluding special items, declined by 23% on a constant currency basis. During the quarter, we had €33 million in FME25-related costs and a €22 million negative impact related to the war in Ukraine. Both numbers relate to operating income and are reported as special items. It is now my pleasure to turn it over to Helen, who will walk you through the financials and the outlook.

Thank you, Rice, and hi, everybody. I'll pick up with the regional developments on Slide 11. First of all, with organic growth of 2%, it is good that we are seeing a sequential slight improvement in same-store growth. In North America, revenue increased by 9%. Constant currency growth of 2% was supported by the earlier than planned reversal of an accrual of around €20 million on the net income level that Rice has just mentioned. The adverse COVID-19 impact on the healthcare services business clearly had a negative impact on the development in the quarter. Therefore, organic growth was flat. Revenue in the EMEA region increased by 1%. At constant currency, this 3% growth was mainly due to organic growth in the healthcare services business, which was achieved despite the negative impact of COVID-19. In Asia-Pacific, revenue increased by 8% in the first quarter. At constant currency, the 4% growth was mainly driven by organic growth in the healthcare products business. And Latin America revenue increased by 15% in the first quarter, mainly driven by strong organic growth in both the healthcare services and healthcare products business. Moving to Slide 12. Healthcare services delivered revenue growth of 3% in constant currency, mainly driven by organic growth, which was achieved despite the adverse impact of COVID-19, the already mentioned partial reversal of an accrual and contributions from acquisitions. While same-market treatment growth is still negative, it has improved a bit compared with the fourth quarter. Once again, Asia-Pacific stood out as a positive regional contributor, delivering positive same-market treatment growth of around 2%. In healthcare services, the adverse impact from COVID-19-related excess mortality on organic growth amounted to approximately 290 basis points. Turning to Slide 13. Revenue for our healthcare products business also increased by 3% in constant currency, driven by higher sales of in-center disposables and renal pharmaceuticals. This was somewhat offset by lower sales of machines for chronic treatment. Turning to Slide 14. Here, we show the operating margin development for the first quarter with 180 basis points, the largest impact on margins year-over-year relates to adverse developments in business growth driven by the already mentioned negative effects of COVID-19 on the utilization of our clinics and downstream assets. The difficult inflationary environment impacted the margin with 80 basis points year-over-year. The continued high labor costs were further increased by the negative effect from Omicron, which required the operation of more isolation shifts and clinics. Increased supply chain costs and the general macroeconomic inflationary cost increases in areas such as raw materials and freight, are only examples of cost increases every company has currently experienced, and this added to the unfavorable margin development in the quarter. Unfortunately, these headwinds more than offset the positive impact from higher average reimbursement rates, increased treatment volumes as well as the first contribution from our FME25 transformation program, consisting of initial savings from our reorganization towards the new operating model. Turning to special items. We incurred €33 million in costs related to FME25 resulting from the reorganization towards our new operating model. And of this amount, approximately €19 million was recorded in corporate and around €13 million in North America. In the first quarter of this year, we also had negative impacts of €22 million related to the war in Ukraine, consisting mainly of bad debt expense in Ukraine and Russia. These costs have been treated as special items. And over the next few months, we will have to observe and assess in more detail how our future business operations in both of these countries will develop and what scenarios may arise. The sequential 210 basis point deterioration of the operating margin compared to the fourth quarter of 2021 was impacted by COVID-19-related excess mortality that has continued to accumulate. This development shows the magnitude COVID-19 continues to have on our business. Turning to Slide 15. You will recall the list of tails and headwinds and related assumptions for the impact that we provided to you in February so that you could understand what went into our 2022 outlook. I would now like to give you some color on where we stand with the most important assumptions. As Rice described in detail, this has been a tough quarter for us. Another way of explaining the quarterly development to you is to explain how most of our tailwinds and headwinds already impacted the quarter. As mentioned on the previous slide, business growth was negatively impacted by a number of reasons with excess mortality being a sizable negative driver. In the further course of this year, we continue to expect a material tailwind from business growth based on organic growth and leveraging our infrastructure, further penetration of home treatments, and the expansion of our value-based care arrangements. FME25 savings already amounted to approximately €9 million. We expect the quarterly savings to step up in the next quarters as we proceed further with the implementation of FME25, and we are well on track to reach the guided range. Turning to the outlined headwinds. We continue to expect COVID-19-related excess mortality of 5,000 to 6,000. We assume that the first quarter will have had the biggest impact. Accordingly, of the roughly €100 million negative impact we anticipate for the full year, approximately one-third of this headwind was affecting the first quarter. The number of patient-facing open positions in the U.S. has increased by around 1,000 further openings. While this has helped us to counterbalance and reduce the impact from significant wage inflation, Omicron-related additional overtime and hazardous pay, this is not the way we plan to continue in the next quarters. We clearly target to reduce the number of open positions significantly over the course of the year. To mitigate the impact on the future cost base, we focus on one-time measures like retention payments, but also have to accept that new hires might come in at higher compensation levels. Our full-year assumption, which includes provider relief funding remains that we will have €100 million higher costs beyond the typical 3% wage inflation. Should we receive provider relief funding in excess of our assumptions for our wholly-owned subsidiaries, we will apply this to ease at least some of the pressure in our labor market situation with measures like the mentioned retention payments. This will be neutral to our guidance. As we did not have costs related to a ballot initiative in 2021, the potential ballot initiative in California could translate to a €20 million to €30 million headwind. So far this year, an amount of approximately $1 million has been spent on assets to defeat the ballot initiative. For the unfavorable macroeconomic inflationary environment and the elevated cost in the supply chain, we had put in a headwind assumption of €50 million. This was prior to the war in Ukraine accelerating the macroeconomic inflationary environment. In the first quarter, we've experienced a headwind of €16 million. This is likely to be an increasing challenge for us as for all other companies. And we are looking to accelerate some of our savings initiatives to compensate for the resulting effects. Moving to Slide 16. During the first quarter, we generated operating cash flows of €159 million, which equates to 3.5% of revenue. The decrease was mainly driven by the continued recoupment of the U.S. government's advanced payments initially received in 2020 under the CARES Act and a decrease in net income, partially offset by a favorable impact from trade accounts and other receivables from unrelated parties. €170 million was recouped in the first quarter of 2022. With the recoupment of funds in our lower EBITDA, our net leverage ratio of 3.5 is within our target range. I'd like to continue with Slide 18. Despite the significant Omicron-related adverse developments, we were able to deliver a quarter that was in line with our original expectations. Given the significant drop in excess mortality in February and March, we reiterate our guidance and continue to expect low to mid-single-digit revenue and net income growth on a constant currency basis and before special items. I would like to flag to you that based on our current discussions with our auditors, we are likely to adopt hyperinflation accounting at our Turkish subsidiary from the second quarter onwards. From today's point of view, we expect this to have a low to mid-double-digit million euro impact on operating income in the second quarter and would be treated as a special item. That concludes my prepared remarks, and I will now turn back over to Dominik to begin the Q&A.

Thank you, Rice. Thank you, Helen, for your presentation. I will now hand back to Nathalie to open the Q&A. We look forward to your questions.

And the first question is from the line of Patrick Wood from Bank of America. Please go ahead.

The first question is about the challenges posed by input cost inflation and wage inflation. I'm interested in how you view the midterm outlook, particularly regarding compensation for the dialysis industry, including CMS, exchange plans, and managed care providers. I'm curious about how these factors may influence their ability to manage pricing and maintain good medical loss ratios for their customers. Additionally, how much of these costs do you think can ultimately be passed back up the chain in the coming years? The second question pertains to the recent quarter where we've observed a slight reversal in the clinic base, at least sequentially. Is this related to FME25, or is it more about general efficiencies you're looking to achieve? Any insights on this would be appreciated.

Patrick, it's Rice. I'll address both questions. Regarding cost inflation and what we might expect from payers, I believe we need to differentiate between different types of payers. For government payers like Medicare fee-for-service, reimbursement will be influenced by cost reports that reflect a two-year lag. I do think the rates need to increase due to the inflation we are experiencing. The situation with commercial payers is more complex and will depend on negotiations and our strategy in light of the inflationary pressures we are facing. It's essential that everyone recognizes the unprecedented level of inflation, especially in the U.S., and we cannot ignore it, nor do we intend to. I believe there will be repercussions because of this. Regarding the reduction of clinics, we are simply indicating that we are evaluating our clinic operations and assessing our needs. There will be some adjustments. Helen will discuss FME25, and part of this evaluation relates to our current circumstances. If certain clinics are no longer necessary due to the pandemic and ongoing impacts, we may reduce them, particularly as home care becomes more relevant. I wouldn't interpret this as a significant trend, but rather as a practical response to our current situation and how we plan to manage it.

Appreciate the answers. And sorry to see you go, but hopefully, you can reset after a very intense sort of 7, 8 years.

I have two questions regarding the freeway merger. First, concerning value-based care, you currently have 80,000 patients with end-stage disease and 10,000 with kidney disease. If the merger occurs, you aim to increase the patient base from 100,000 to 270,000 by 2025. Could you provide more details about the underlying assumptions for this growth? Additionally, will the mix between chronic kidney disease and end-stage renal disease remain at the 80 to 20 ratio? My second question relates to your previous call, where you mentioned compensation for value-based care as 100 basis points of medical costs under management. This amount is projected to grow as a result of the merger, from €6 billion in 2022 to €11 billion by 2025. Given that Cricket primarily focuses on chronic kidney disease, can you shed light on the margin potential for each? Do you still consider the 100 basis points target realistic for the new entity?

Oliver, I'll address your first question, and then Helen can respond to your second. When considering the growth from 100,000 to 275,000, it's important to note that the opportunity in the chronic kidney disease space is approximately two to three times larger in terms of the number of patients we can help compared to Stage 5 patients. Much of that increase from 100,000 covered lives to 275,000 will center on the CKD population due to the abundance of opportunities there. It’s a bit challenging to provide an exact breakdown between CKD and end-stage renal disease at this moment, as that information is not yet available, but we can work on it. The primary driver is the significant opportunity presented by Stage 3 and 4 patients compared to Stage 5. Now, Helen, I’ll hand it over to you regarding medical cost under management.

Yes. Oliver, well, as we think about the medical cost under management, yes, we see that as kind of around that 1%. We still think that makes sense to us mix. And obviously, over time, we would be looking to see how we could improve that. But I think 1% for modeling purposes is a good number to use.

I have two questions, one for each of you. Firstly, for Helen, regarding Q4, you provided insight into the percentage of net income expected in Q1. Could you share your expectations for how net income will progress in the upcoming quarters? That guidance for Q1 was quite useful, and it would be great if you could offer similar insights for Q2. The second question is more of a broad perspective for Rice. While we're all concerned about mortality rates in your clinics and the cost inflation you're facing, you are a leading figure in the industry, which gives you an advantage in managing these challenges compared to smaller operators and product manufacturers. I'm curious about your thoughts on the long-term outlook for the industry. Do you anticipate any changes that could ultimately benefit FMC once we navigate through the current difficulties? It would be interesting to understand your vision for the industry's future as we move ahead.

Tom, I'll take the first question. As you expected, I won't give you the percentage for Q2, but I think what you can expect is Half 2 will be better than Half 1. And obviously, we expect to improve on that profitability by quarter as we go through the year, ramping up as we get to the back half of the year. It's probably the best I can provide color to on that for now.

Tom, nobody's ever referred to me as a 500-pound gorilla before. Just for the record, I've lost about 20 pounds. I believe this will be an interesting time for the industry as we emerge from COVID. It could be quite significant that we are coming out of COVID while inflation remains high. If these factors separate and if people become quite focused on reducing inflation, it may not be as difficult as I currently perceive. I expect to see some smaller providers exit the market, as I think they will face significant challenges. A major issue is simply burnout. After 2.5 years, there are physicians and caregivers who will really struggle with what comes next if inflationary pressures remain intense. However, I still believe that the home sector will thrive and grow substantially. I anticipate that we will see some innovative deal structures and collaboration among organizations as they seek to overcome their weaknesses by partnering with others. This isn't a direct reflection of our merger, but people need to move away from the notion that they can acquire everything they need and everything will turn out fine. Sometimes, as I have learned the hard way, you have to team up with someone who has more expertise than you do, bringing your own value to the collaboration while they contribute theirs. I think the current situation will encourage this kind of partnership as we progress, and it greatly piques my interest. It's likely something I'll reflect on while navigating the metaphorical 500-pound gorilla, Tom.

Good. And all the best for the future, Rice, and well done over the last years, it's been a challenging sort of 10-year period for the company, but we'll miss you.

I have two questions. First, regarding cost savings, it appears you have achieved about a 20 basis point improvement, which is at the lower end of your full-year guidance. Could you elaborate on what measures you've taken to reach this point? Should we anticipate results closer to the upper end of the range this year? Second, with the recent leadership change in the business, we still have targets and a strategy set for 2025. Can you comment on how this change will affect continuity and how the market should interpret these developments?

Helen, do you want to take that first one?

Yes, go ahead with your question on the cost improvement specifically around 25?

It seems like we are off to a solid start in the first quarter, and we might not have much work left to reach the middle of our performance range for the full year 2022. Should we then consider aiming for the higher end of the range regarding cost savings for 2022?

Yes, thank you for the clarification. We are off to a good start and observing some early savings from initiatives we've already implemented, especially in areas like technology and procurement within the G&A functions. We're also beginning to see savings from clinic operations and the restructuring of our operating model. We continually strive to accelerate our efforts. Some labor matters, in consultation with workers' councils, require us to proceed at a measured pace, but we are not overly concerned. We have numerous initiatives that we intend to leverage as quickly as possible. Our current expectation is that we will see an increase in savings throughout the year. Furthermore, the inflationary challenges we are facing are trending negatively, but we hope to address some of these challenges through accelerated countermeasures. Overall, we are encouraged by the progress of the transformation and our ability to achieve savings in Q1, which aligns with our phased expectations.

Yes, Graham, it's Rice. So let me see if I can walk a fine line here. Look, I would say this, the business is going to do just fine with me not being around. So I think the targets that we've set and the way we've vetted these targets among the management board and we presented them to our employee base and to the Supervisory Board. I can truly sit here right now at this moment in time and tell you that '23, '24, and '25 will be over in the blink of an eye. It goes really quick. And so I think Carl is going to come in and take her read. She's going to work with his great management board, and they're going to figure out what they want to do. But I tend to think it may be a little reaching more like 5 years, 7 years out because we have a lot of work to do to get to where we wanted to be in '25. And I think we'll stay that course to try to get there. But make no doubt about it, there will be I'm sure some shifts in strategy and some different thinking we'll have to react to the world that we're in as we look a little further out 5, 7 years or whatever. But that's what my experience would tell me might be the way this plays out. But we also have to leave that open for Carl to come in and get our feet on the ground and start thinking about this as well.

First, I want to thank Rice for your help over the last 10 years; it's been a pleasure, and I hope you find time to catch more fish. Regarding the questions about wage inflation, I would like to know what you are currently experiencing in terms of percentage wage increases and how that compares to your original expectations for guidance. Additionally, I would like to know where your vaccination rates currently stand, as this information has been provided in the previous quarters but is not included in this quarter's slide.

Helen, do you want to take one, and I'll speak to two.

Yes, I'm happy to do so. David, the entire topic of labor inflation is quite complex with many factors at play. When we provided guidance, we mentioned a net increase of around 5%. As you can see from our experience in Q1, we have seen some benefits from open positions, which have been balanced out by higher wage pressures, particularly due to increased infection rates related to Omicron affecting employee attendance and costs from temporary labor, shift premiums, and overtime. Moving forward, we are carefully considering measures that can help us navigate these challenges in a temporary manner for 2022, such as retention strategies or one-time sign-on bonuses rather than permanent changes which relate more to wage compression as we fill those roles. We anticipate that labor pressures will increase over the year, but this aligns with our initial guidance expectations, with some offsets from relief still anticipated. It’s a complex situation with labor, but we feel we have a good grip on it as things stand today, and we are maintaining the percentage we shared last quarter.

David, thank you for your best wishes. And I'll send you some pictures, okay? Some big fish pictures down the road. Vaccination rates. So on the patient side of this, we're at about 81%, up just a little bit from the other quarter slightly. But I'm happy to report on the employee side, we're at 96%. So we've had significant improvement there. And as we all know, the multimillion-dollar question will be, is there going to be another surge in the fourth quarter? And so we're going to continue to push. We are still trying to get patients vaccinated. We're in a good place with employees. But we never say never. So we're just going to keep pushing it as best we can. But there's an awful lot of fatigue out there, as you can imagine, on getting vaccinated.

Sure. Maybe just have a quick follow-up on the open positions habit. I think you mentioned a thousand this quarter, up to about 7,000. Is that right?

That's right.

Are you noticing a higher turnover rate than usual, and how does that affect the training of the new hires?

Yes, I appreciate the challenges you're facing, and that's exactly what we're experiencing. However, I believe we are beginning to make progress in filling the open positions through our top-notch employee referral programs and campus recruitment efforts. I feel confident that we're making an impact, and hopefully next quarter, we'll be discussing our progress in addressing the staffing levels, which we expect will start to decrease from this peak.

We have some people come back, Dave, we're actually rehiring some people. I think they've had a chance to clear their head and rethink about what they want to do. So that is beginning to happen for us as well. And that's great if we can do that.

So that's great. That was fast. Thank you. Sticking to two. That was, I think, one of our casseroles. Thank you very much. And as it was recent last call, I don't say goodbye. I'll hand over to Rice.

Thanks, Dominik. Listen, it's been a pleasure. Some quarters more than others, I might say. But I just want to wish you all well, and I appreciate the interest you've had in the company and when you supported us, I appreciate it, and when you disagreed with us, understood it. But I wish you all very well, stay healthy, and you guys just enjoy what you're doing. Thank you.

Ladies and gentlemen, the conference has now concluded. You may now disconnect the line. Thank you for joining and have a pleasant day. Goodbye.