Siemens Healthineers Ag

Please stand by, we are about to begin. Please stand by, we are about to begin. Good morning, ladies and gentlemen, and welcome to Siemens Healthineers Conference Call. As a reminder, this conference is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on page two of the Siemens Healthineers presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Mark Kubanek, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning and welcome to our fourth quarter 2024 earnings call. I'd like to thank each one of you for joining us today. At 7 a.m. this morning, we published our Q4 results and all the related materials of today's results release. They are available on our IR section of the Siemens Health and Years webpage. In a moment, we'll hear directly from our CEO, Bernd Montag, and CFO Johann Schmitz, who will walk us through this quarter's results and provide insights on the past quarter, our outlook, and on our growth prospects. After the presentation, we will open the floor for a Q&A session. To ensure everyone gets an opportunity to engage, we kindly ask that each participant limit themselves to maximum two questions. Additionally, please note that a full transcript and a recording of today's call will be made available on our investor relations webpage shortly after the session ends. Again, thank you for being here.

And now I'll turn it over to Bernd. Thanks, Mark. Dear analysts and investors, our team has delivered an outstanding performance in Q4. We achieved growth in all regions. Only China was declining. This growth was on back of a healthy global market reflected by the book-to-bill of 1.12. Our comparable revenue grew by 7% ex-antigen on strong COMs of plus 11% in Q4 last year. This was driven by strong growth in imaging, variant, and advanced therapies. We also saw a strong 16% growth in adjusted EPS supported by impressive margins at imaging and advanced therapies. I am especially happy... about the good development of our free cash flow, which more than doubled compared to Q4 last year, supported especially by good progress in our inventory levels. Jochen will expand on this in his part. So we have finished this year strong, as indicated early on. Let me briefly run you through the highlights of the full year 2024 from our perspective. First, I would like you to focus on the right side of the chart. We achieved our guidance. Again. Let me allude to China. We achieved our group outlook despite significant headwinds from China, headwinds on growth and margins that were much more intense and longer lasting than we assumed initially. Despite this fact, we achieved our initial outlook nevertheless. Our business is fully intact. Our unique setup provides unparalleled resilience even when the going gets tougher. Looking at 2024 in its entire tier clearly proves this point. We grew comparable revenue by 5.2% ex-antigen and achieved an adjusted EPS of 2 euros and 23 cents, we are proposing an unchanged dividend of 95 cents per share for fiscal year 24. When we started the year, we introduced the concept of the two cores. On the one side, we have our synergistic core where imaging variant and advanced therapies create a unique portfolio of products and solutions, elevating our relevance for customers. In this unique setup, continued innovation sets us even further apart from any competitor. In 2024, we again introduced significant innovations to the market, essentially across the board with the 1.5 Tesla Magnetum Flow Low Helium MRI, our breakthrough innovation in mammography, the Mammomat B-Brilliant or the Rapid Arc Dynamic Atvarian, just to name a few examples. Our innovative strength and our unique portfolio as well as unique set of capabilities has driven continued market share gains for years already and again in 2024. So the strong book to build for the Group is the logical consequence of this strength, achieved despite a weak contribution from China. I am very proud of the team which delivered this strong performance. I am also proud of the successful transformation in our other core where we are transforming to win in the diagnostics market. With the successful and diligent implementation of our transformation program, we have on the one hand prepared the business for future success and on the other hand driven a step change in profitability. Jochen will give you some more details in his part. And on the next chart, I will briefly show you our outlook for 2025. We are expecting 5% to 6% comparable revenue growth for the fiscal year 2025. For EPS, we are guiding for a range of €2.35 to €2.50 per share. This highlights our expectation for very good underlying profitability improvements, nicely overcompensating year-over-year headwinds from lower financial income and a normalizing tax rate. Jochen will give you more insights on the underlying assumptions for our outlook. And with this, I hand it over to Jochen.

Thank you, Bernd, and also a warm welcome from my side. Let me reiterate that this was an impressive Q4. We continued our strong order intake, grew revenue by 7% ex-antigen on very tough comps, with growth in all regions except China, and expanded margins by nearly 100 base points ex-antigen. We were especially pleased that the margin extension came from excellent conversion in imaging, variant, and advanced therapies. And the operational improvement fell through to earnings per share. Adjusted EPS grew by 16% year-over-year ex-antigen. And, of course, we are happy to report that we more than doubled free cash in Q4. I will add more color on this later. So, as said, an impressive Q4. Now let's have a look at the segment's performance in more detail, starting with imagings. Imaging grew strongly by almost 8% against a very tough comparable of 11% growth in the prior year quarter. We saw particularly strong growth in computer tomography and in molecular imaging, where new traces for Theranostic drove volumes in our U.S. PetNet business. The adjusted EBIT margin in imaging came in at an outstanding 24.2%. This corresponds to a year-over-year margin expansion of 180 base points driven by excellent conversion in the high-volume Q4. With this strong finish, as indicated, reached our margins assumptions for imaging laid out in November 23 at the lower end with 21.1%, despite significantly stronger headwinds from China than initially assumed. Now let's have a look at varying advanced therapies on the next slide. Varian delivered a very strong finish in Q4 with more than 1.1 billion euros revenue after very steady quarters in Q1 to Q3, each with more than 0.9 billion euros. A great achievement also in terms of consistency, marking significant progress in comparison to last fiscal. The excellent growth of 10% was against very tough comms of 30% in the prior year quarter. Having in mind, last year's Q4 caught up on revenues from Q3 spillovers. Looking at margin performance, Varian achieved a solid 17.1% margin, the highest margin quarter in fiscal year 24, after continuous sequential margin expansion every quarter in 2024. A really decent performance, taking into account around 100 base points of currency headwinds in Q4. Advanced Therapies continues its successful top-line performance with strong comparable revenue growth of 7%. In terms of the adjusted EBIT margin, we saw an expansion of 250 base points year-over-year driven by excellent conversion from growth in the high-volume Q4, nicely showing what the business is capable of, returning consistently to industry-leading margin levels. And now let's have a look at Diagnostics. Excluding antigen, diagnostics continued to grow by 1%. Bear in mind that we still had roughly 50 million of antigen revenue in last year's Q4. By the way, for the last time. Diagnostic achieved a year-over-year margin expansion from 2% ex-antigen in the prior year quarter to 5% this quarter. Margin was held back by prior period effects of over 200 base points, clearly with a one-off character. These were primarily related to increased provisions for reimbursement requests in the Italian healthcare industry, which related to prior year periods. Excluding these effects, the margin would have amounted again to about 7% in Q4. Hence, the business saw again very decent underlying margin expansion from the transformation program. Our strict execution of the transformation program made us achieve the envisioned 300 million euros of total savings a year ahead of time. As a result, we see the step change in profitability at Diagnostics and we are now a sounder, business sustainability at lower cost levels, and significantly less complexity. The investment of 450 million euros transformation cost during 23 and 24, consisting of severance and other restructuring, paid off. We now have a streamlined portfolio and, as I said, a leaner organization and are significantly less complex. As we have further transformational potential, I will touch on the financial effects of the next phase of the transformation in our segment assumptions later in the call. Let me now focus your attention from our segment performance onto our achievements in free cash flow. Free cash flow has not only more than doubled in Q4, free cash flow has also increased significantly in the full fiscal year by more than 60% to 2.1 billion euros. This was driven by higher earnings and by lower inventory levels, which improved the inventory turn significantly in Q4 year over year. Let me highlight another development in operating working capital terms. The terms of receivables, and I include here contract assets in that number, remain stable in Q4 year-over-year despite the high volume Q4. This is visible progress from our cash program, which we also see in the consistently increasing cash conversion rate throughout the year, and we expect to see more progress from the cash program in 2025. The cash conversion rate improved to 0.9 for the full fiscal year, driven by good progress in all segments. All segments reported a conversion rate in fiscal year 2024, which was on target to what we laid out back in 2021 at our capital market day. So we keep the focus on improving earnings and operating working capital turns to drive free cash flow. But before we dive further into next fiscal year, let's have a quick recap on last fiscal year. In fiscal year 2024, we delivered every quarter more revenue at better margins, sequentially as well as year over year. We were able to do this based on our strong fundamentals, a continuously expanding order backlog, substantiating future revenue growth, a consistently higher share of recurring revenue, and a financial framework that protects margin expansion, for example, of our successful managed pricing measures to counter inflationary effects. And this added up to a very successful fiscal year 2024. But now let's turn from last year to the next year to our fiscal year 2025. Also, next year, we expect very good revenue and earnings growth. We expect comparable revenue growth of 5% to 6% in fiscal year 2025, and we expect adjusted basic earnings per share between €2.35 and €2.50. In other words, earnings will grow at least at the rate of revenue and on the upper end by low double digits. This earnings growth includes a year-over-year headwind in financial income and in tax expenses. which we expect to more than compensate with healthy margins expansion in all segments. Please be reminded of the fact that this is an outlook for the full fiscal year and performance in a single quarter may differ. I will add some more color on the expected segment performance on the next slide with the underlying assumptions for the group outlook. Let me share first our underlying assumption on the development in China in fiscal year 25. We assume China revenue in the first half of fiscal year 2025 to decline mid-single digit to high single digit percentage points. And in the second half of 2025, we assume revenue to be roughly at the level of the second half of fiscal 2024. Let me add that we expect healthy development in the other 90% of the business in the Americas, in EMEA, and in Asia Pacific Japan. And this brings me to the underlying assumption for the route outlook for segments and other items. We assume for fiscal year 2025, revenue grows in margin expansion in all segments. On the slide, you see the assumption for each segment. We are giving a bit more color on the assumed margin expansion in variant and diagnostics, since they are additional drivers which come on top of the margin expansion from scales. Varian continues to benefit from the combination both in faster growth and in margin expansion. And the diagnostic margin benefits from the transformation savings rolling fully into fiscal year 2025 as well as from further identified transformation potential. The assumption for diagnostic also includes some headwinds from volume-based procurement in China expected to impact the growth and margin expansion more in the second half of the fiscal year. Let me emphasize one thing. These are assumptions for the full year and quarterly performance may differ. That said, I would like to briefly allude to our current view on Q1. We expect a soft Q1 with revenue growth to be below the group outlook and imaging variant advanced therapies to be below the respective growth assumptions. With soft growth, we would also expect margin development in these three segments in Q1 year-over-year to be rather held back versus the full-year assumption of broad-based margin expansion. Bear in mind that Q4 with the year-end finish is not a good precursor for Q1. Diagnostics will stay on track on its transformation path. Two comments on the other assumptions. The year-over-year decrease in financial income comes from the falling away of extraordinary tailwind from equity income in 2024. The tax rate normalizes in 2025 after we saw some extraordinary positive effects bring the tax rate down the last two years that we do not assume to repeat itself in fiscal year 2025. And on that note, I hand it over to Bernd to talk about our more medium-term growth perspectives and sources of growth.

Thanks, Jochen. We have shown you this chart quite a few times before. Hence, I am only bringing it up as a reminder. It summarizes the key long-term drivers of growth for our business and how we plan to address these drivers. To make this a bit more tangible, the following chart showcases three concrete examples for how we innovate continuously for better diagnosis and treatment, addressing key clinical needs, and one example that nicely shows how the world innovates for us. In this first example, I will show you how we innovate in cardiac care. Coronary artery disease affects more than 100 million people and results in millions of deaths each year, making it the most common cause of death globally. This results in about 13 million invasive catheter procedures every year. More than half of these procedures are for diagnosis purposes only, where obstructive coronary artery disease cannot be excluded by the clinical assessment alone. Conventional CT scanners are limited when it comes to cardiac imaging in terms of speed of image acquisition, spatial resolution, and soft tissue resolution. Even the best of the traditional scanners can struggle with heavily calcified coronary arteries and stent imaging, making it hard for physicians to provide precise answers or concrete diagnosis. Or, for the lovers of clinical detail, conventional CT examinations suffer from moderate specificity and positive predictive value. This is mainly due to the so-called calcium blooming, an artifact which is caused by high-density structures such as calcified plaques and metallic objects which appear larger than their true size. Besides the effect on the stenosis grading, small but relevant components of plaques may be not recognizable in conventional examinations. Consequently, in most institutions, invasive procedures with a catheter are still the method of choice for an accurate diagnosis of obstructive disease, especially in challenging cases. With photon counting computer tomography, we developed a radically new technology which will change this. Photon counting computer tomography visualizes small coronary vessels, stents, and plaques in high resolution without artifacts. It helps physicians to provide precise answers to guide treatment and therapy decisions, enabling them to perform angiography procedures even for the patients with stents and heavy calcifications. This significantly reduces the need for invasive procedures for diagnostic-only purposes. It allows for faster treatment and reduces the burden for patients. But every patient, every case is different. To achieve a maximum personalized treatment, interventionists need precise information and seamless workflows. Our systems are embedded into a fully integrated workflow, allowing for faster pre-procedural planning with patient-centered scan protocols for detailed anatomic assessments. This significantly supports the intervention with our angiography systems and facilitates especially challenging procedures. We are setting the standard in coronary CT angiography with our photon-counting CT technology. It is the technology of the future in CT, and this is just one example how it is changing standards of care. More than 12 million people suffer from a stroke with more than half of them dying and many left with permanent disability per year. Stroke is a leading cause of death and disability worldwide. With an aging population, we will see a significant increase in the number of stroke cases and deaths from stroke. Almost 80% of stroke cases are caused by obstruction, that is the blockage of arteries in the brain leading to reduced blood supply to the brain tissue. Brain cells start to die within minutes. Each minute saved in the time between onset of symptoms and treatment of an acute stroke increases the chances for good clinical outcomes. Rapid treatment may make the difference between living independently and needing constant nursing care. Therefore, time is brain. In order to do so, our customers need to understand the cause of the stroke to determine the right treatment. They need to understand the complex anatomy and flow dynamic. Therefore, image quality and a seamless and fast workflow are of the essence. We offer a versatile portfolio for fast stroke diagnosis and treatment. Let me pick out two innovations that speed up stroke care substantially. To save time right from the start, we are about to launch a CT scanner dedicated to ambulance cars, triaging the patient while still on the road, thus enabling fast diagnosis to select the right treatment. Complementary to this innovation, we provide a fast and easy data sharing platform between the mobile stroke unit and the hospital, Stroke Connect. Second, we offer a one-stop shop in stroke workflow, also known as NGO-only approach, leading to a significant time reduction in door-to-reperfusion times compared to the standard workflow. Our customers can decide to skip computer tomography when the patient arrives in the hospital and to bring him or her directly to the angiosuite. Our artist icono can perform diagnosis and treatment as a one-stop shop on the angiosystem. And it pays off. We are market leader in interventional neuroradiology and are the leading partner in stroke care. Another area of market leadership is our suite of offerings in the cancer care continuum. In contrast to stroke treatment, the cancer patient journey is less straightforward and linear, and care is personalized and often multidisciplinary. We face 20 million new cancer cases per year worldwide, while the number of new cases keeps on growing. And every case is different. At Siemens Healthineers, We are bringing intelligence to the cancer care continuum by delivering intuitive and specialized therapy workflows, improving patient outcomes. Let me give you two examples. First, a radiation therapy workflow integrated with MRI intelligence. But why dedicating MRI for radiation therapy? Computer tomography still remains an essential part of radiation treatment planning across many tumor types due to its high geometric accuracy, morphologic information for contouring, and electron density information that is important for dose calculation. However, The improved target visualization in MR can be powerful due to its superior soft tissue contrast, as many tumors are of soft tissue types. This enables better target delineation, better identification of organs at risk, and better contribution to accurate treatment planning, delivery, and monitoring. allowing daily treatments to be adopted to the patient's deformations and tumor response and enabling innovative radiation treatment delivery, including intelligent dose modulation. This helps clinicians to easily reduce dose to organs at risk, improve treatment plan quality, and plan complex cases in less time. Second, We accelerate the adoption of newer modalities of care. Our latest example is an image-guided interventional microwave ablation system that is based on our leading imaging and radiation therapy competencies. This interventional system further personalizes care as it directly addresses ablation zones and it is designed to spare healthy tissues for more predictable outcomes. To sum it up, our ongoing innovations along the cancer care pathway allow for more targeted treatment and personalized therapies to improve patient outcomes. This will pave the way for future growth. Growth for us not only comes... comes from our own innovations. It is also the result of the healthcare world innovating for us. New therapy approaches in cancer care and neurology based on innovations in pharma directly impact growth in our molecular imaging business and further substantiate our growth ambitions. Most prominent examples are Alzheimer's and Theranostics, with disease-modifying therapies that propel the need for our molecular imaging solutions. Alzheimer's disease and dementia impacts about 50 million people. About 1.5 million people die every year in the context of Alzheimer's disease complications. Several groundbreaking immunotherapy treatments have recently emerged that work to reduce beta amyloid plaques that are discussed as the main trigger of Alzheimer's disease and other dementias. The first two drugs have been cleared by FDA, and this is just the beginning. PET imaging plays a critical role in the Alzheimer's disease care pathways as it is one of the only modalities available to evaluate beta amyloid plaque burden and the success of the new drugs. Adding to this molecular imaging is also the key modality for theranostics, a highly targeted and individualized treatment using a radioactive agent to identify and mark cancer cells and a second agent to destroy those cells. Theranostics has proven effective in extending lives and improving quality of life of patients, especially also for those who have not responded to traditional cancer treatments such as radiation, chemotherapy, and immunotherapy. A pharma pipeline currently covers more than 25 other cancer types. PET CT scans and SPECT CT scans, as well as MRI, play a key role for the clinician to select the right treatment for the right patient and to monitor therapy progress. We offer the broadest PET CT portfolio in the market, from ultra-high-end systems for research to systems targeted to bringing digital PET CT to a broader market. This is combined with the leading pet radiodiagnostic pharmacy network in the U.S., which we are about to further expand into Europe. This is another showcase how we lay the foundation for another future growth engine, helping healthcare providers and patients to deal with non-communicable diseases. However, not only the depth... but also the breadth of our portfolio stands out and makes us an attractive partner for entire healthcare systems. Lately, we signed and booked further substantial 10-year contracts which sustain our growth profile. With Ballard Health, We signed one of our largest oncology partnerships, including a true beam linear accelerators, which offer high-precision treatment options for a broad range of patient needs, and one ethos adaptive radiation radiotherapy system, which also incorporates AI to prepare precise calculations for oncologists. Additionally, we provide a portfolio of products and services to support the health system's unified oncology ecosystem. With the Ohio State University Wexner Medical Center, we signed one of the largest value partnerships in the US with the aim to improve diagnosis and treatment across cardiology, oncology, and neurology. The agreement aims to enhance clinical outcomes and drive value with initiatives related to operational efficiency, workforce development, digitalization, and sustainability. These examples of long-term partnerships are great proof points that our innovative strength, our unique capability and portfolio are a sound foundation of attractive medium-term growth. A foundation that is reflected in our mid-term ambitions for beyond 2025. You may recall we introduced this framework in November 23, and with the successful year 24 and our outlook 25, we clearly confirmed this mid-term ambition. For group comparable revenue, we expect to grow mid to high single digits, and for adjusted EPS, we expect to be a double-digit compounder. This is supported by the segment trajectories where we expect continuous growth and margin expansion. And on that note, I'd like to end and hand it over to Mark for the Q&A.

Thank you, Bernd. And I would just briefly ask the operator to remind the audience of the rules of engagement for the Q&A, and then we can get started.

Thank you, gentlemen. We will start today's question and answer session where we would like to ask you to limit yourself to two questions. If you wish to ask a question, please press the star key followed by the digit 5 on your telephone keypad. Again, ladies and gentlemen, please press star 5 on your telephone keypad.

Okay, good. We would get started now, and the first one on the line, that would be Julien Dormois from Jefferies. So, Julien, you should be live now. Go ahead.

Yes. Hi. Good morning, Bernd, Shior, and Marc. Thanks for taking my questions. I will limit myself to two. The first one relates to, I guess, the guidance for next year for fiscal year 25 and particularly focusing on imaging. You are indicating that you target low double-digit to mid double-digit margin expansion. I think in previous conversations, you were still hopeful that you could deliver maybe up to 100 basis points of margin expansion. So maybe just trying to dissect what is behind this maybe slightly more cautious approach to margin expansion. Is that mostly about China or is there anything else behind? And the second question. It's a broader question and relates to the news that probably happened overnight and possibly the victory of Mr. Trump in the U.S. How do you envisage the possible return of tariffs in the U.S., and how do you think you're prepared for something like this? Thank you very much.

Good morning, Julian, on guidance on imaging. I think we were very clear about how we assume China in our guidance, and this has obviously also a clear effect on imaging, to say that up front. And maybe to recall, when we talk about imaging margin expansion in normal years, we guide for 20 to 80 base points based on scale. When we had the discussion about what we expect for 2025 earlier, we were still back then assuming that China would be growing, and this would then make the 100 base point margin expansion definitely a possible scenario. And as we said in the call, We assume for China in the first half a decline in the mid-single digits to high single-digit percentage points, and we expect the second half to be more on the level of the second half of fiscal year 2024. And this has obviously also an impact on margins, so the short answer is yes, it's China.

And for the other question on the outcome of the election, maybe first of all, when it comes to the U.S. market, we don't expect major impacts on demand or different health care policies. I think this is also an important angle, and it would have made our customers nervous already in the last year in case they would have expected a change here depending on who wins the election. Sorry, but your question was more around terrorists. Let me dissect it into two answers. On the one hand, there is the topic of, let's say, a U.S. versus China situation. Here we are very, very well positioned because basically we have a twin factory set up. We can deliver from China to China, and we deliver to the U.S. from the U.S. and from Europe. I think the second question maybe is what is the impact of even more tariffs, yeah, when it comes to potential Europe versus United States situations. And here let me remind you, yeah, that... despite Jochen and I may be speaking with a German accent, Siemens Healthineers is a company which has more employees in the U.S. than in Germany. Two out of the four segments are headquartered in the United States. and diagnostics, and even in the imaging segment, ultrasound and molecular imaging are headquartered in the U.S. So we are, from a trade flow point of view, much more balanced than sometimes people assume.

Very clear. Thanks for the French accent. Have a good day.

So then we go to the next one on the queue. That would be Hassan from Barclays. So, Hassan, please go ahead.

Morning. Thank you for taking my questions. Firstly, another on China. Can you talk about the guidance for next year and your assumptions? for China to be down mid-single digit to high single digit in H1 and flat in H2, and how conservative you think these are given all the trends over the last year, and is stimulus something that would be upside, and what are your latest thoughts on stimulus? And then secondly, you call out the strength in CT in the quarter. What's driving this by region and to what extent are you seeing a significant contribution from photon counting CT? And how is the mix of customers for this technology trending? And is it becoming a lot broader than academic and teaching hospitals? Thank you.

Hassan, let me start with China. I just make sure that the China assumption is, again, very clear. Mid-single-digit to high-single-digit percentage points decline in the first half, and then the assumption for the second half is, as you rightfully said, more flattish relative year over year. We expect our assumption to be a prudent assumption, and why did we pick this assumption at this point in time? Because we have not seen yet a significant trigger point for a turnaround. The bigger part of the stimulus program is still work in progress. There is obviously a lot of pent-up demand, but it's unclear when this will happen. And that are the main drivers behind our prudent assumption on China for this fiscal year.

When it comes to the timing, this is largely an effect of the very strong U.S. revenue slice in the second half of the last fiscal year, and especially in the fourth quarter, which contained a lot of also CT business, and we also assume a pretty strong continuation of the U.S. momentum, which was a little bit back-end loaded in the last fiscal year. When it comes to photon counting in general, I mean, first of all, maybe I want to say here this topic of you kind of imply it's in the academic centers and that is this a limitation or not. So first of all, it is super important to be in the academic centers, not only because it's a market, but because these are the trailblazers for creating new standards of care. Here we are extremely happy with how things are going, how new applications are developed, and one of the examples I gave in the presentation is really about new ways of using CT. We currently have as customers, on the one hand, the academic centers. We have the high-end imaging centers who differentiate by quality using the technology as a strong proof point for their own leading position. And we have many, many early adopters where the technology is, for example, used for initiating like cardiac screening programs and totally new applications. So the conviction in the community is stronger than ever that this is the method of the future and that it's just a question of time when every institution will have a photon-counting CT. And it's a half-well-kept secret that you can expect at RS&A the next step when it comes to bringing this technology to additional price points and with this to additional market segments.

Perfect. Thank you. I will see you there.

Great. Exactly. Thanks, Hasan. So we move over to David Adling from J.P. Morgan. David, your line should be free.

morning guys and apologies if you address this i missed parts of the call but um maybe i'm afraid just going back to china uh maybe to remind us what the orders have done there over the last 12 months and through q4 and just returning to hassan's question uh how how that translates into the sales uh profile you've given for this year and whether that could impact that second half flat expectations just moving on from that really it's just a slightly bigger question Are you seeing any increase in China for a China for China policy and imaging? And does the local competition, do you think, have the capacity to really step into that opportunity? Thanks.

David, let me start again with how we baked in, from an assumption standpoint, China into our outlook. First of all, first half, mid to high single-digit decline, second half, flat. This is the assumption we baked into our outlook. As I said beforehand, this is a prudent outlook. What I did not say is that we – and I think we should say that always, that we still believe this is a temporary topic in China and that the China market will stay attractive in the mid- and long-term, absolutely. When we look at the equipment order – development over time, over the last quarters, we see a relatively low level, but relatively stable low level. And that is the main assumption. We have not seen yet a significant trigger which would have changed our assumption to be a bit more prudent with regard to China. With this, I hand over to Bernd.

I mean, the question about local competition and potential tailwind given to them. And first of all, I really want to make clear that what we see in the anti-corruption campaign is affecting every vendor or every company. And this is not what sometimes people suspect a means to make it harder for the multinational companies. And maybe as two proof points for this, we have overall in the last 12 months slightly gained market share in China in this difficult situation. And when you look at the numbers of United Imaging as one of the local companies, you also see that they saw a significant decline in their numbers, including a heavily loss-making quarter. I mean, overall, It's very much about building scale in China, which we have successfully done, and we are continuing to build on this. We have, as you may know, about 8,000 employees in China. We have our full product line in CTMR and so on and so on, also in Varian. as local production and also about 1,000 R&D engineers. And so from that point of view, we are very well positioned, and this scale helps us. And a little bit of a different way to look at it is, yeah, I mean, we maybe grew up, or at least I grew up, when I grew up in imaging and CT and so on, I learned, There is four companies, yeah, or three and a half global companies, yeah, when it comes to the world, yeah. So there is Siemens Healthineers or Siemens Medizintechnik back then, GE Phillips, and then there was Toshiba, which is now Canon, yeah. And what you see is that in China, it's just a different game. It is a Siemens GE United Imaging game in imaging, and you can basically see that those who are lacking scale have a real difficult time in this market. But I'm very optimistic about our position, and we get a lot of also encouragement and support when it comes to the local authorities. That's great.

Thank you. Thanks, David. So we go to the next one in the queue. That would be Ugo from Exxon. So please go ahead, Ugo.

Hi, guys. Hello. Thank you for taking my questions. I have two. First, on the E.ON 2025 midterm ambition, could you confirm that the double-digit adjusted EPS growth assume or not a china recovery and relies or not on the china recovery uh second on diagnostics uh could you expand maybe a bit on the incremental transformation potential that you are uncovering and or is it expected to to to play out this year thank you yeah you go um first on on the midterm targets as reiterated by band in his presentation yeah and um

It's most likely a bit too early to say exactly what the assumptions are in detail, what we baked in here also. But I think it's also important to repeat what I said on China. We expect the Chinese market to be an attractive market in the mid- and long-term. And this, I think, gives you an answer. Obviously, we expect to see China contributing to growth in the future, absolutely. Secondly, on diagnostic transformation, I think, first of all, we are extremely happy what we have seen so far in diagnostics. Margin pivoted from slightly below zero in 2020. 23 now to north of 5%, between 5% and 6%. And we expect this to proceed this year with margin expansion potential of 200 to 400 base points. This is the assumption we baked into our outlook. And this is, I would say, another significant step forward. And this significant step forward comes, first of all, from, I would say, the – full potential of the measures we have already taken in 2024, but also additional measures we can take while we, so to say, consolidate our legacy footprint. And here I deliberately use the word footprint because we also have saving measures which kick in a bit later than others because we have stopped selling legacy platforms, but we have not yet, because we could not yet, because we have still an installed base of legacy, resolve all, I would say, all the footprint which is needed to cater for the legacy platforms. These are the main drivers behind further savings potentials.

Thank you very much. So we move on to Graham Doyle from UBS. Graham, please go ahead.

Good morning. Thanks, guys. Just two questions for me. Firstly, on the diagnostics business, the growth again for this year is low single digits. It looks reasonably slow, but obviously that's been improving in recent years. So when do you think the mix can improve to such an extent that diagnostics is in line with the group? And then maybe just a second question on the guidance. I suppose it kind of relates to China here too, which is if you roll back a year ago, you took a view on China. And in the end, you think things are worse than expected as it was for all companies. When you look at it now, it seems like a pretty cautious thing. seem to be right now. Do you think that you have built in a bit more buffer maybe this year and can withstand a bit more volatility in that guidance? Just to get a sense of how your thinking has changed over the last year. Thank you.

Yeah, Graeme, let me start with... China and the China outlook. I think, as we said, to give you again the full picture, the China market will remain an attractive market for human health in the mid and long term, no doubt for us. Therefore, we see the market weakness as a temporary topic. in the nearer term. We assumed and we believe that our assumption is a prudent assumption for this fiscal year, the mid to higher single-digit decline in the first half and then the flattish development year over year in the second half. And as said beforehand, why did we do this despite the announced stimulus program And obviously the pent-up demand, which should kick in at some point in time, is that we have not seen yet a trigger which would give us more confidence to have a more positive assumption baked into our outlook. That's it at the end of the day. And maybe repeat also what I answered to David beforehand. When we look at the trajectory of the equipment order intake in China over the last quarters, this is a relatively flattish line. And for us, a clear testament to that, the trigger has not happened yet.

Going to the diagnostics question, As you know, as a reminder, I'm sure you know, I mean, in the central lab portion of the business, which is about a little bit less than two-thirds of the diagnostics revenue, we are now in a situation where we are roughly in a 50-50 split between the Atelika franchise as revenue contributor and the legacy franchise. in the legacy revenues. The Atelika business is probably, or for sure, the fastest growing business in the central lab market. It is continuously growing. in the high teens at least. But this is compensated for a while by, on the one hand, the legacy going away and partially also switching over. But then there is also, to some extent, also an intent to also make sure that not every non-profitable organization leftover business is there to continue. So it's also a bit of a question of how to, in this case, how to balance good or how to differentiate between good and bad top line. And this is, in the end, why growth is still in the levels which you saw in this year. But on the other hand, of course, seeing that spectacular uplift of 600 base points or so and profitability shows that we are doing the right things. We will in the next, I would say in the next two years, we will still see this as the main story of this switch from legacy going down to Atelika burdening the growth rate. And, I mean, we will see a stepwise improvement there. to then go into a, what I call it, 3% to 5% or so growth rate, which is the target. When we look at the diagnostics targets, they are a little bit below that, also in the midterm, below what we say for the group, because you ask whether it is dilutive, quote-unquote, to the group growth profile. So it is slightly also in the target state, most likely, below the overall group growth.

It's great. Thank you very much, guys. I really appreciate it. Thanks, Graham. So we move on to Robert Davis from Wong Stanley. Robert, please go ahead.

Morning. Thank you for taking my questions. My first one was actually on the US market. That's been a pillar of strength for you, I guess, over the last sort of 12 months. I'd just be curious in terms of a bit more color and feedback of what's going on on the ground there, what's driving the strength and how sustainable you think those kind of impressive growth rates are. The second one was just where we're at in terms of sort of China's stimulus and how is the mechanics working? Is it any clearer yet how that's going to sort of filter through? Is it actually sort of turning up in orders yet? Who's actually paying for it? Is it sort of coming as grants or loans? Any other color would be great. Thank you.

Robert, thank you. I mean, in the U.S., it's the combination of, on the one hand, nice continued market share gains, but also a healthy market. I would say healthy, not spectacular, healthy market. When you look at market share gains, it's driven by, I mean, hands down, it's the best portfolio. And we have a great reputation. We are using our scale also, yeah, to... deliver the best service experience. We are just closer to the customer because we are just also, you know, the bigger and more successful team. And customers... somehow feeling that this is a great company to work with. I mean, we are also humble, by the way, and stay paranoid in all the topics we are doing. Another reason on top of the portfolio is that we are – when it comes to addressing the C-level and with the value partnerships, it really translates into significant business. And it is almost taking some of the market, quote-unquote, call it off the street here, because when we enter into long-term agreements, then this is not transactional business for the future, which one has to have a street fight over. And we are in a much more meaningful collaboration with these customers. So this combination of innovative strength, of better ways of addressing customers and their specific challenges here from... how to expand into ambulatory care, how to solve workforce challenges, and so on and so on. Plus, I mean, just having a really nimble sales and service organization is the sheer driver. When it comes to the market being intact, I mean, there is healthy demand, there is procedure growth, plus there is – So this ambulatory care expansion, many people, many of our customers look at building up networks, looking into the outpatient market, new care settings, which in the end also helps us to continue to build up our installed base and footprint.

Robert, on... On China, first of all, the stimulus program, you asked particularly about the stimulus program. is still a work in progress. The only topic which is relatively well-defined is the smallest package, so to say, for the high-end 44 state-owned hospitals. All the others are still working. And when we look at the trajectory of the equipment order intake, it still has not picked up. It's very stable on a low level, and that is the missing trigger making us confident for delivering a more positive assumption relative to the prudent assumption of the mid to high single-digit decline in the first half and then a flattish development in the second half, just to say this again. But say this also again, in the mid and the longer term, we see, we believe in the attractiveness of the Chinese market, and there is a lot of pent-up demand. The question is, when will this kick in, yeah? Maybe one aspect, because we had that topic beforehand on diagnostics also, I think when we think about a bit more, I would say, slower growth trajectory in diagnostics, we have also here, from a growth trajectory perspective, a temporary effect which is impacting the whole industry, which is the volume-based procurement initiative particular to diagnostics in China, which was also highlighted by our main competitors in diagnostics, just to say this again. Understood.

Thank you. You're welcome. As we are almost on the top of the hour, we have the last one in the queue. That's Dylan from Stiefel, and we'll just give him a chance to ask his one or two questions, and then we will close the call afterwards. You should be live.

Thanks, guys. Just one for me. Just on phone uncounting, obviously expected a lot from R&A. Could you just remind us how you're looking at the replacement cycle as – I think there's a pretty large tail of older CTs out there. And should we be expecting a disproportionate shift in phone uncounting, similar to what we saw after the dual-source CTs came out like 50 or 20 years ago?

Sorry, I had a little bit of acoustic problems. And Mark looks like he has understood the question.

So you were making a parallel to the growth rates of CT when moving to dual source. If we expect a similar evolution with photon counting, is that what you wanted to know, Dylan? Yes, yes.

Yeah, I mean... Yes, or let's say I think maybe the more accurate, let's see, what is the better comparison? I mean, when you look at, I mean, dual source has been a huge driver of our growth. In another historic analogy is the, adoption of multi-slice CT, which was around the early 2000s, which was a technology which is similar like photon counting CT where everybody says, okay, this is going to be the future and it's just a question of time when I need to have it. Dual-source CT is a little bit of a different animal because it stayed and was always meant to stay a which is for the high-end and mid-range or upper mid-range of the CT market, while photon-counting CT really has the opportunity to address step-by-step the entire CT market down to the end. to the entry level, which is one of the topics also why we are driving now. How do we get into more volume? This is why we built up our semiconductor factory for that special material and so on and so on. We will have the economies of scale, and we are not only a leader in innovation but also a leader in technology. in scaling the technology, which is now the much more important part of the game from our point of view, because, I mean, being ahead of the curve. And this will definitely enhance the growth profile in CT because it is, in a way, when it comes to – out of two reasons. I think, on the one hand, it has the tendency for everyone to shorten – The replacement cycle, because there is a real reason, a big reason, when you have a whatever seven, eight year old CT to say, well, now when I change now, I really have a significant change where there's more like a moderate upgrade of possibilities. And the other growth driver is and that is coming back to the remarks in the beginning in my speech, that photon-counting CT also drives new applications, like this non-invasive assessment of severe coronary artery disease. It can become a screening, a larger-scale screening technology for patients from lung cancer, but also then especially to arteriosclerosis, plus many, many other applications where it's not only driving procedure growth with new procedures, but it also will be deployed at new sites of care where so far there was no CT because there was no reason to have a CT. And in the end, I mean, what you will see at RSNA will be a big step in this direction.

Exactly. That was just a cue that I wanted to pick up on. So thanks, Dylan, for the question. And thanks also for dialing in today and the good, let's say, to the point Q&A. I think I wanted to get your eyes to the fact that we'll be on the road tomorrow virtually in the U.S. Next week we'll be in the U.K., also at several conferences in the next weeks. And obviously we have the RSNA coming up soon. where we will be hosting booth tours, and you'll be having a chance to see Jochen Schmitz in person as well. So a lot of things that you can look forward to, and we look forward to seeing you on the road or virtually in meetings. So until then, bye-bye.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. A recording of this conference call will be available on the Investor Relations section of the Siemens Healthineers website.