Siemens Healthineers Ag

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 Kurbenick, Head of Investor Relations. Please go ahead, sir.

Thank you operator. Good morning and welcome everyone to our Q1 earnings call for fiscal 2026. I'd like to thank each one of you for joining us today. At 7 o'clock this morning we published our Q1 2026 results. All related material for today's results release are available on the IR section of the Siemens Health News webpage. In a moment, we'll hear directly from our CEO, Ben Montag, and our CFO, Jochen Schmitz. And after their presentation, we'll have a Q&A session. To ensure everyone gets the opportunity to engage, we kindly ask that each participant limit themselves to one question. All the more so as we have quite a tight schedule today with our annual shareholders meeting starting at 10. Additionally, please note that a full transcript and recording of today's call will be made available on our Investor Relations webpage shortly after the session ends. And again, thank you for being here. And now I'd like to turn it over to our CEO, Dan Montag.

Thanks, Mark, and also a warm welcome from my side. Let me start with a brief look at key takeaways from the last quarter. Firstly, we had a good start into fiscal year 2026 and confirm our outlook. Notably, the synergetic part of our portfolio imaging and precision therapy showed strong underlying operational performance in the quarter, especially in light of substantial headwinds from tariffs and foreign exchange. However, diagnostics was affected by material market challenges in China that we did not foresee to their full extent. Secondly, we are fully on track with our preparations for the deconsolidation from Siemens AG. We began the preparation for the demerger agreement and the refinancing necessitated by the planned deconsolidation. In this context, we received a strong investment rate rating from Moody's, a clear milestone for our financial independence that demonstrates our financial strength and the resilience of our business model. And finally, the Elevating Health Globally strategy we presented at our Capital Market Day in November is gaining traction with very good feedback from customers and partners. Before diving deeper into the progress on strategy execution, let me give you my read of the quarterly print. The synergetic part of our portfolio, imaging and precision therapy, is performing very well. Fundamentals are fully intact. Strong 6% growth, a decent equipment book to build of 1.12%, and an operational margin expansion that could broadly compensate for tariffs and FX, that's really an achievement. Diagnostics recorded a revenue decline of 3%. The diagnostics business in China is challenged by material market changes primarily due to volume-based procurement but also reimbursement reductions. Since VVP is primarily price-driven, it does not just lead to decline in revenue but to a significant loss in profit at the same time. The reimbursement reductions impact primarily volume, which means another drag on revenue and conversion on top of BPP. In the Americas, on the other hand, diagnostics is operationally growing again compared to previous years. This growth shows that the Atelika portfolio is gaining traction in our biggest diagnostics market, while the illusion from our shrinking legacy is, as expected, still holding back growth. Overall, the Artelica franchise has grown by roughly 20% in Q1 like in recent years and is now at almost 70% of sales in the important core lab solution business. In Brazil, the diagnostics team renewed the contract with a large strategic diagnostics customer, a major force in the industry whose decisions have an influence on the market, one of the consolidators. Not only was the team able to retain the customer, but the customer is now adding additional analyzers beyond the existing contract, a testament to the strong demand for the Atelika franchise in the industry. Jochen will run you through the financials later. Now let me briefly recap the key elements of our strategy. What moves the world the most when it comes to healthcare are the non-communicable diseases. These are neurodegenerative diseases such as Alzheimer's, cardiovascular diseases, stroke, and cancer. The NCDs are responsible for 75% of all deaths worldwide and are precisely the diseases on which our innovations and growth initiatives are predicated. Our triangle of patient training, physician therapy, and healthcare AI is what it needs to fight the most threatening diseases. From earlier detection, to the right diagnosis, to the right therapy selection and planning, to the personalized minimally invasive treatment, and all this at scale by using healthcare AI. This is exactly what we showcase at RSNA with a series of new launches underscoring our unique clinical relevance. Our AI-driven Syngro CT coronary cockpit tool quantifies plug data and enables deeper insights for intervention planning and treatment by the physician. This AI powered software is designed to automatically segment and label coronary arteries as well as to visualize and quantify plaque types for the entire coronary vascular tree or individual lesions. Combined with the innovations like our photon counting CT and dual source technology, It offers unprecedented clarity and speed of decision-making. In precision therapy, real-time imaging is key for conducting precise and safe interventions. We move MRI into the interventional suite, offering new clinical opportunities in image-guided interventions. This XL MRI system with its excellent soft tissue contrast provides high-performance imaging without ionizing radiation and with exceptional patient access. And last but not least, there is our all-new family of angiography systems. It comes, for example, with an AI-powered reduction of image noise in real time for crisp, high-resolution images, and this at the lowest reasonable dose possible. Now let me come to our second superpower, our unmatched regional organization. Our customer specific organization is very much local, whether it is in all parts of Europe, in Malaysia, in the USA or in China. Our company's strength can be found in all these places. We have the broadest and at the same time also the deepest portfolio. We know how to address departments and medical subspecialties and we know how to address the sea level. With our intimate knowledge of the local situation and our access to the global standard of care, we are perfectly positioned to support our customers to overcome their challenges. How do we translate this into additional business? Firstly, we further expand our footprint in value partnerships, create even more long-term partnerships and become even more relevant to our customers. Secondly, drive clinical transformation along our strength in fighting the NCDs with value programs. Here we are giving support to rethink how workflows, technology and staffing work together. For example, by helping our customers to build a theranostics practice or supporting them to optimize their radiology department or to set up a stroke center. And finally, We plan to further increase impact in emerging countries. Let me give you some examples of how we are progressing on the next slide. Next to a series of other value partnerships, we entered a new 10-year value partnership with Onvida in January, a provider for healthcare in southern Arizona. This value partnership includes a $55 million capital equipment commitment and is expected to exceed the $100 million in total value over the term inclusive of service and solutions. Just a nice example of how we can improve rural health and quality of care in a long-term collaboration. It ensures clinical excellence and access to advanced diagnostic imaging, therapeutic technology, and corresponding services from maintenance to consulting. For our value programs, we see here a strong deal final building up, particularly for cancer treatment programs. And when it comes to increasing impact in emerging markets, we see very good momentum. Vietnam was outstanding. delivering a very strong start with 45 systems across 18 hospitals and clinics, including two photon-counting CT systems in the single month of December. With this, I would like to hand over to Jochen.

Thank you, Bernd, and also good morning from my side. Before I start, since this fiscal year, we have a new reporting structure. Just as a small recap, there are two main changes. Firstly, variant advanced therapies and ultrasound are forming the precision therapy segment. Secondly, the internal suppliers for ultrasound The segments, the so-called tech centers, which were part of the imaging segment before, moved to central items as they serve all segments. Now let me share some color on our financial performance in Q1, starting with the imaging segment. In imaging, our photon counting CT and our radiopharmaceuticals business continue to drive growth again this quarter. resulting in an imaging revenue growth of 5.7%. Two short technical remarks. Firstly, on top line, we strengthened the European footprint of the radiopharmaceutical business by an acquisition from Novartis, a transaction that we successfully closed in our Q1 of last fiscal year. For comparability reasons, the acquired revenue is from now on included in our comparability. revenue growth number. Secondly, on Imaging's adjusted EBIT margin, prior year quarter had a negative impact from special items which amounted to roughly 50 base points in the new structure. Imaging's adjusted EBIT margin of 21.6% is a result of strong operational margin expansion. Taking out prior year quarter's negative special items, And this year's headwind of around 200 basis points from tariffs and foreign exchange leads to an operational margin expansion north of 100 base points. Now over to our segment precision therapy. Precision therapy started the fiscal year with strong growth of 5.9% against a tougher comp of 8% growth in the prior year quarter. Varian has significantly contributed with 9% growth, while Advanced Therapies had, as disclosed, a softer start. Let me remind you that we will continue to provide you in our financial disclosure the segments therein varying for revenue and margin. In Precision Therapy, we saw an outstanding operational margin expansion of almost 400 base points driven by good conversion and a favorable business mix across the board. The operational margin expansion excludes the headwinds from tariffs and foreign exchange as well as a positive special item this quarter. The margin benefited from these special items by around 100 base points. The most notable item was a catch-up booking related to software revenue recognition invariant. And now let's complete the segment run-through with diagnostics. Diagnostics had a weak start due to major structural changes in the China market. The first is volume-based procurement that we repeatedly pointed out as a major headwind with regard to revenue growth, especially for the first half in fiscal year 2026. VBP essentially sets new price levels with a one-to-one impact on profit. Additionally, the diagnostic sector in China faces material market challenges now impacting volume due to reimbursement reductions impacting our diagnostic portfolio. This led to a muted demand and was another drag on the Q1 revenue line on top of VBP. Outside China, our diagnostic business posted stable revenues, though the weak diagnostic performance in Q1 is primarily due to the current challenges in the Chinese market. The revenue decline due to China obviously led to significant negative conversion missing in the EBIT line. The margin had another drag from a particular high instrument share. Bernd already mentioned a large deal in Brazil, which, for example, led to high instrument placements in Q1, which, as you know, in a razor blade business model, are always an investment into the field and consequently have a temporary dilutive effect on the bottom line. And now to conclude, let's have a look at the group. Let's start with the top line. The 6% growth in imaging and precision therapy and the 3% decline in diagnostics add up to a solid 3.8%. Noteworthy in the regions are the Americas, which grew with 9%, continuing the excellent growth we saw also in the quarters before. China, on the other hand, declined by 5%, which was exclusively due to the steep decline in diagnostics. Imaging and precision therapy in China were flattish with a positive prefix. Operationally, we saw a strong earnings performance in Q1, which offset the significant headwinds from tariffs and foreign exchange in this quarter completely. While the disclosed adjusted EBIT margin was 15%, i.e. flattish year-over-year, excluding the headwinds from foreign exchange and tariffs, the margin expanded operationally by 200 base points. Adjusted EPS was down by 3%, and excluding the headwinds from tariffs and foreign exchange on the EPS line, EPS grew by around 17% year-over-year. So the three main drivers this quarter are strong operational earnings performance, Terrace and Foreign Exchange Headwind, just as we showed in our waterfall chart for EPS in the fiscal year 2026. On the left side, you see the waterfall chart for EPS in fiscal year 2026 as of our Q4 earnings call from last November. Let's go through the main moving parts, starting with Foreign Exchange. We expect foreign exchange to be a headwind in every quarter this fiscal year, so the around 4 cents this quarter are in line with the around 15 cents we expect for the full fiscal year. Now, tariffs. Tariffs are also in line with what we expected last November. The year-over-year tariff headwind will predominantly impact the first half of the year. So the headwind of around $0.06 in Q1 is also in line with the around $0.15 we expect for the full fiscal year. We expect significantly lower headwinds from tariffs in the second half, in particular because of the increased tariff rates from 10% to 15% in the course of the second half. Having gone through foreign exchange and tariffs, this leaves us with our underlying operational performance on the EPS predictions. Adjusted EPS in Q1 was year-over-year down by 2 cents. Taking out the total headwind of 10 cents from foreign exchange and tariffs brings us to around 8 cents of operational earnings improvement in Q1. This was driven, as said, by the strong earnings performance of imaging and precision therapy, which more than compensated for the weak margins of diagnostics in Q1. The $0.08 operational improvements show two things. First, we are in a good position for the around $0.25 improvement we expected for the full fiscal year. And second, we continue to consistently improve our margins operationally every quarter, which brings me to the next slide. In Q1, we grew year-over-year revenues ex-Foreign Exchange again after growing revenues each quarter for several years in a row, a strong testament to our revenue growth performance. Now I will show the margin development in two different views. This one includes tariffs and Foreign Exchange, and on the next slide, excluding only tariffs. What you see on this slide is that the margins were holding up well despite tariffs. Q3 fiscal 2025, the first quarter which was impacted by tariffs, still saw year-over-year expansion. Q4 margin was only slightly down, and the margin this quarter was on a prior-year quarter level despite tariffs and, as we all know, foreign exchange headwinds. On the next slide, you see margin development excluding tariffs. and you see consistent margin expansion both sequentially and year over year. Why do we show this slide? We expect to fully mitigate the impact of tariffs over the next three years. Tariffs will be a longer but only temporary drag on the margin and consequently the ex-tariff margin development is the long-term reference for operational earnings strength. A strong proof point that we consistently turn our revenue growth into earnings growth, and this brings me to the outlook for fiscal year 2026. We confirm our outlook for fiscal year 2026, both for revenue growth and for adjusted EPS. We are fully aware that the picture on segment level is mixed this quarter, but especially the strong performance in our synergistic core of imaging and precision therapy is a strong proof point to confirm our outlook for fiscal year 2026. Before I close, let me share our latest views on Q2. We expect revenue growth for the group in Q2 to be below our outlook range of 5 to 6. Similarly, as in Q1, we expect diagnostics to continue to face market challenges in China in Q2, resulting in a revenue decline also in Q2. In Q2, we additionally faced tough comps in China. Diagnostics revenue in China rose strongly in prior years Q2, the only quarter in China last year with growth in diagnostics. Due to these tough comps in China, we expect the revenue decline of the segment to be even more pronounced in Q2 than in Q1. We expect imaging and precision therapy growth in Q2 to be around the assumptions for fiscal year 2026, means mid-single digits and mid-to-high single digits, respectively. Due to tariffs and foreign exchange, we expect margins in all segments in Q2 to be below the prior year quarter. Bear in mind that the imaging margin in Q2 2025 was the highest in the last fiscal year with a disclosed tailwind from a positive special item. Also when you look at margins sequentially this year, the precision therapy margin in Q1 also had positive special items. So we would expect a margin decline in precision therapy year over year due to tariffs and foreign exchange and quarter over quarter due to special items in Q1. For diagnostics, you would expect sequential margin improvement from normalizing mix. However, with missing conversion from year-over-year declining revenue due to ongoing market changes in China and tariff headwinds, still a clear margin decline year-over-year. And with this, I hand back to you, Mark.

Yeah.

Thanks, Jochen. Let's go over to Q&A. As said earlier on, I'd like to ask you to limit yourselves to one question each. We are a bit time constrained today. So if you wish to ask a question, please press the star key followed by the digit 5 on your telephone keypad if you haven't done that already. And again, ladies and gentlemen, please press star five on your telephone keypad. First caller on the line would be Veronica Dubajova from Citi. So, Veronica, please go ahead.

Thank you, guys. Good morning, and thank you for taking my question. I want to obviously talk about diagnostics. And, Jochen, just curious to get your thoughts, given the structural changes that you are seeing in the business, So how is your thinking about the long-term margin potential for diagnostics changing? Do you still think we can get to a mid-teens margin here or towards a mid-teens margin? Or does what you're seeing in China fundamentally alter that trajectory? And then maybe if you could also kind of touch upon your expectation for diagnostics also for the full year on 26. I think the prior guidance divisionally had been for minor margin expansion. I was hoping we could get an update on that. Thank you.

Yeah, thanks, Veronica, for... Two obvious questions, I would say. First of all, let me start with the second question. It was clear, and that was also restarted, I would say, also the guidance for this, that the first half for diagnostics will be a tough one because of missing, luckily missing volume-based procurement last year in the first half and then being exposed to it in the second half. Therefore, it was clear that the first half will be weaker than the second half. So this has not changed. Obviously, Q1, because of also the trajectory and what we have seen in the market, was a bit more pronounced, negatively pronounced than initially assumed. And this might also lead potentially to that we might need to change the assumptions slightly on diagnostics going forward for this fiscal year. But a bit too early to tell. And I think it's important to note why we also, I would say, wholeheartedly confirmed our outlook. We saw a super strong start profitability-wise in the synergistic core. Therefore, we feel very good about the outlook. Now, coming to your first question, was more the midterm outlook on diagnostics. I think when we look at the trajectory, at the plans we have, and also at the relevance this China business meanwhile only has for diagnostics, we still feel that the midterm guidance we have out there for diagnostics is a valid one. The current China revenue portion in diagnostics is meanwhile down to 7%, 8%. And I think we will hopefully reach this year then the new baseline in the business. We will also adjust, obviously, according to the baseline, our footprint accordingly. And I'm pretty sure that we will be able to get to midterms margins despite the fact that we see maybe a different baseline in China.

Thanks, Veronica.

That's very helpful.

So we move on to Graham Doyle from UBS. Graham, you should be live now. Please ask a question.

Morning. Thanks a lot, guys. Just two quick ones. You called out PetNet and PCCT in terms of driving imaging. Is there any way of quantifying how much of a benefit that's been in the numbers in Q1 so we can think about that going forward? And then just your overall message on China. Is Excluding diagnostics, what are you seeing? Because it looks to me like the market was probably down in the second half and some of your peers are finding it a little more difficult than you are. So just a good sense of what you're seeing on the imaging and varying portfolios in particular.

Thank you. Maybe, Graham, I start with the forbidden second question, because Mark asked for one question, but it's not a forbidden question. So, I mean, on China, the X diagnostics, we are comfortable with what we projected when entering the year of more or less flat development. happy with the market share development, which is maybe also a bit of the difference to what you heard from others. But we also don't see a reason, yeah, to change to a more positive outlook here. So the kind of prudent assumption of a flat volume development in China is in the synergetic core is what we stick to and we basically also see confirmed so far.

Through your first question, Graham, my imaging grew 5.7%. What we highlight, that's the logic we have, grows faster than 5.7. That is why we highlight things, what is over proportionally growing. And obviously the photon counting CT with us being, I would say, clearly ahead of the camp, portfolio of offerings is giving nice tailwind to the growth trajectory in CT. And we are very happy with what we see here. On PetNet, we had a very strong quarter. As you know, this is solely in Q1, solely driven by the United States because we have not baked in the comparable revenue numbers in Q1 yet for Europe because it is coming only starting 12 months after closing. And you also can see then, you saw also the strong Americas numbers. They are partially also driven by the nice, I would say, growth in the procedure-based businesses, which goes even beyond PetNet, which is also the nice growth rate we see in ultrasound-based catheters and even in our smallest catheters. portion or portfolio item in procedure-based business which is interventional oncology. So we are very happy with what we see here and the growth rates in PetNet are clearly double-digit.

Thanks, Graeme.

Thanks a lot. Apologies, Mark. No worries. No worries.

No good. So moving on to the next caller in the queue, that would be Hassan from Barclays. Hassan, please go ahead, ask your question.

Thank you for taking my question. Another on margins, but on the core business, given the strong start, despite the 100 basis points one-off, um can you elaborate on the variant one-off and how you're thinking about the building blocks for margins for the rest of the year in the call given tariff headwinds and whether your divisional margin outlooks for precision therapy and imaging that you outlined in the cmd of minor margin declines remain thank you um hassan i might repeat more or less with the different with the opposite prefix

my statement to diagnostics beforehand. I think obviously a good start, a very good start is helping everything we wanted to achieve in imaging and precision therapy on top and bottom line. As the start in diagnostic was exactly the opposite, I think we will need to think that through and see what the next quarter exactly will bring, and then we might need to update the assumptions which are forming the basis for the outlook. After Q1, for us, the main message is that we see us very, very strong in our core, that we see an unfortunate, but from our standpoint, temporary and ring-fenced issue for diagnostic in China. And that the combination of both will first of all allow us to confirm our company outlook at this point in time. And it also gives us, I would say, a lot of optimism looking even into the midterm and our midterm ambition.

Perfect. Thank you.

Thanks, Vincent. Moving on to the next one in the line, that would be Julien Odeur from Bank of America. Julien, please go ahead.

Thank you. Thank you very much. Good morning. So my question is on emerging margin. So adjusted for the effects of the tariff plus the special items, I think the margin would have been at 120 pips in Q1, which is basically well above your mid-term target you just issued some months ago. I'm just wondering if the main drivers are, I mean, the one that you're basically exiting today, the front-on-counting city and the pet nets, given, I mean, size growth on one side and the accretive profile for the margin on the, let's say, on the other side. And how should we think about the coming quarters, given these trends are just very likely to continue? And because you say diagnosis may be a little bit softer on margin versus initial expectations, would you say imaging and PT could upset it? And, I mean, that's why you're keeping the guidance unchanged. Thank you.

I start with the second one. I think you are totally right. So when you have 80% of your portfolio performing better and 20% revenue-wise weaker, I think that's more or less, and you are early in the year with the first quarter, then you can, I would say, the main rationale behind us confirming our outlook. So that is clear. My I'm sure we talked since eight years about imaging margins and that they also sometimes fluctuate a bit quarter by quarter. on an always very high level, industry leading in every regard. And this quarter was a decent mixed quarter, but the margin with 21.6 will be not the highest for the year. That's not what it is, but it was a good start. We are very happy with what we've seen. But I think it would also be not prudent to assume that we now will every quarter improve margins by underlying by 120 base points. That's not what it is. Is photon counting CT per se Helping on the margin expansion, yes it is. Petnet is not necessarily a huge margin tailwind, because here you know we don't own the IP. We manufacture and distribute this. We have a completely different P&L profile in that business. Significantly lower gross margin, but also a very, very significantly lower OPEX margin. portion in there, so that the margins are more or less in PetNet, slightly better than the average, but not much.

Thanks, Ria. Thank you very much. Moving on in the queue to David Edling from J.P. Morgan. David Edling, please. David, go ahead.

Morning, guys. Yeah, just maybe on Varian, given the fact you confirmed you're launching a new product in September, I just wondered if you're expecting a bit of an air pocket on US orders between now and then as customers wait on the new system. Thank you.

I mean, the short answer is no. And we will also see to some extent, but I want to be a bit careful to not disclose too much when it comes to to the new product or quite new technology because in a way it's also a question is it a product or is it a new, a complete new philosophy of treatment. And Varian has a very strong track record when it comes to taking care of existing customers of installed base. So it is a topic which we don't really see. and where we also know how to, where the team knows quite well how to handle this. And in the end, I mean, a topic where you also don't need to be, let's say, too concerned is that typically the time between orders and revenue on the variant side is pretty long, so that the current revenue line is pretty much secured with the orders we have in-house and then we can still have a discussion with customers who have issued orders once the new technology is announced whether they want to stick with the original scope of their order or whether they want to convert, which potentially also comes with a price.

And David, as one data point, book to bill in Q1, invariant equipment book to bill, which is exactly referring to what you are asking for, was very healthy again.

Thanks, guys. Thanks, David. Next one in the queue will be Julien Dormois from Jefferies. Julien, please go ahead.

Hi, good morning, guys. Hope you can hear me okay. My question is related to diagnostics. Obviously, a new round of challenges coming now this time from China. Could we just get a sense of what is your commitment to the business for the mid to long run given this new round of challenges and obviously difficult financials once again coming from the division?

Thank you.

Yeah, I mean, I want to qualify a little bit the new round of challenges. I mean, we knew that China was The transition in China is a topic for our diagnostics business as much as it is a topic for all competitors and peers in the market. It's a process which lasts a couple of quarters. And that is not changing materially how we look at diagnostics. And how we look at diagnostics, I think we have also indicated at the Capital Market Day, we have as part of the transformation program, verticalized the business, meaning it steers its own sales and service as a vertical entity. We have been also very clear that there is a synergetic core of Siemens Healthineers around the strategic triangle. They are comprising the two businesses, imaging and precision therapy. and that we want to give diagnostics even more freedom after that successful transformation with now 70% Atelika revenue in the core lab, 20% growth rate to further verticalize its structure to then also create optionalities. And we will take it from there. It is very clear this is a business within This is a business with its own logic and we want to run it as independently as possible and there is of course optionality in the long run whether we are the better owner or not. When I say the synergies are limited, I'm kind of indicating how we are thinking.

Thank you very much. Okay, moving on to Hugo from Exxon. Hugo, please ask your question.

Hi, hello. Thanks for taking my questions. Just a quick follow-up on the previous question, the focus on China operation. You made comments that you would be looking at streamlining the China businesses. Does it mean that you will be just keen to make that more efficient across all businesses or reassessing whether operating the three businesses in China still makes sense? And I guess how far would you be willing to go? And if you can give us a sense of the value of the Chinese assets on the balance sheets. Thank you.

So first of all, there was no comment regarding China at all, or commitment to... The only topic which maybe Johan was commenting on, since in diagnostics the volume in the Chinese market is going to a significantly lower level, we are also adjusting our go-to-market structure. And on the other hand, I mean, there is also an opportunity for efficiency because the more volume-based the procurement, the less, let's say, retail, quote, unquote, go-to-market you need. Otherwise, we are happy with 8,000. employees in China. We have about 1,000 R&D employees in China, about 10% of our workforce generating about, I don't know, 12%, 11%, 12% of revenues. We are And we see it also, we had that in our assumption for the mid-term targets here that China will slowly return to growth. We baked in an assumption of 5 percent growth into the mid-term targets, which is the mid-term is defined as the period of 27 to 2030. And I hope that answers the question.

And maybe just because of your second part of your question, assets and so on and so on, I think we need to differentiate between two things. And my comment was more related to what Dan answered. It was the China market, and obviously we do this in every market. If market dynamics do change, we adjust the way and the resources we put or we assign to those markets or employ to those markets. China is also a significant value adder. location for us yeah and this is also we do not plan here any changes yeah and therefore this is only related to the go-to market in diagnosis thank you thanks you all moving on to the next caller that will be Natalia from RBC Natalia go ahead please

Hi, thanks for taking my question. A follow-up on the precision therapy side. You talked to the strong varying performance and the weaker advanced therapies as expected. Are you able to talk a bit more around the drivers of the strong underlying variant margin improvement there in Q1 and what the And then just to touch on the advanced therapy side, if you're able to talk around any sort of initial feedback you're getting ahead of the new advanced therapies portfolio launch. Thank you.

I start with Varian. When we had a, people tend to forget quickly, we had also not a super strong Q4 from a top line perspective. You might recall it was only between 1 and 2%. We have now a very strong 9% growth in Varian as discussed back then and also kind of promised because we knew what is coming. Secondly, we referred to a good mix. A good mix comes in different forms and fashions. It depends often where you can recognize revenue in which countries because price levels do vary. It comes with different products, do have different margins. I would say also in particular in varying how much, so to say, After sales business, if you want to use that term, you have how much of upgrades you can bring into the field, hyper side, rapid arc dynamic, other pieces, yeah, which have different margin profiles. The relative strength in a quarter of service growth can play a role relative to equipment growth because invariant the margin data between equipment and service is more pronounced than it is in imaging and these are factors which all went in this quarter into a positive direction and helped us to show in the second quarter in a row, a very nice margin north of 19%. But we need to be careful that we don't expect this to happen all the time because, as we also highlighted, there was a positive one-timer in that. We quantified that with 100 base points. Varian is about 60% of the segment. Therefore, the 100 base points were Varian-related. Therefore, it's for Varian in itself even higher than 100 base points.

Yeah, and regarding the AT portfolio, I'm very, very positive about the feedback we get from customers. Basically, two topics which really stand out. I mean, on the one hand, there is an a lot of positive feedback for the depth of optimizing clinical workflows, of really understanding how physicians work, how seamless the systems are optimized for whether it is stroke or whether it is spine surgery. The one topic which even stands out more is this so-called Optic AI, which is the AI-based denoising of the images, which allows to produce unseen image quality at much lower dose. So you can either use it to get the same type of image quality at much lower dose, which in this case in AT means lower dose to the patient, but also lower dose for the operator, or much more detailed. And maybe as a remark in general, because we often discuss, you know, how do we monetize AI. So what this points toward is also what we see in NMR, for example, that this combination of bringing AI to improve system performance like we do with Deep Resolve and our Magnetome Free and technology is what we also now have transferred to AT. and it is differentiating the products and really making a big difference.

Thanks, Natalia. Thank you.

Thank you. So moving on to basically the last caller for today. We need to cut it short, as I already indicated earlier on. It's Falco from Deutsche Bank. So, Falco, please go ahead, ask a question.

Thank you. Good morning. Another European MedTech company told the market yesterday that they expect an update on the Section 232 list for MedTech products over the next one to two months. Is that something that you have also heard? Is there anything you could share with us in that regard?

Short answer, no. We don't have any tangible information and use in this regard.

I would also be... I think this is, I would say, difficult territory, per se, to make predictions about those things. And therefore I think we should be cautious and we should... live with and then manage the outcomes we see. That does not mean that we are not supporting our position. And the position is unchanged in the entire industry that trade barriers are ultimately to the detriment of patient and healthcare system. That if we are here maybe reluctant to predict anything, it's not that we don't work on the right things in the background. But I think it is prudent to not predict what the outcomes might be. Sorry for this.

Okay. Thank you.

Good. Thanks, Farko. So that brings us to the end of our call. Thanks for the good questions. Thanks for tuning in again. We'll be on virtual roadshow in the next few days, and especially Monday, Tuesday, Wednesday. And, of course, we have several conferences coming up in London, Miami. And if you don't meet each other or hear each other in between, we'll at latest – hear from each other with our Q2 reporting in May. So, 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.