Operator: Good morning, ladies and gentlemen, and welcome to Siemens Healthineers Q1 Fiscal 2021 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 2 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. Marc Koebernick, Head of Investor Relations. Please go ahead, sir.

Marc Koebernick: Thank you. Good morning, ladies and gentlemen.

Welcome to our Q1 conference call. The quarterly statement and Q1 presentation were released early this morning. You can find all the documents on our IR website. I'm sitting together here with Bernd Montag and Jochen Schmitz, who will be taking you through our Q1 results and be giving you an update on further developments in our company. Following that, as usual, there will be a chance for you to ask your questions to Bernd and Jochen.

And, as usual, may I also remind you of the good old two question rule for that Q&A session. With that, I hand over to our CEO, Bernd Montag.

Bernd Montag: Thank you, Marc. The analysts and investors, thank you for dialing in and expressing your interest in Siemens Healthineers. As most of you probably already noticed, we had a strong start into the year and we pre-announced our Q1 results already last week on Tuesday and raised our fiscal year 2021 guidance.

Let me start the presentation by shedding some additional light on our financial performance in Q1. As mentioned, we had a very strong start into fiscal year 2021 across the board in terms of top line growth, profitability and cash generation. This has been driven by all of our businesses, but also has been significantly supported by COVID-19 related revenues, particularly by the rapid antigen test, but also by other COVID-19 related needs, such as very high demand for CT scanners and pull-ins of sales due to temporarily lower VAT in several European countries. Q1 revenue increased by 13% on a comparable basis, with outstanding 23% growth in Diagnostics, but also very good growth in our Imaging and Advanced Therapies businesses, with 9% and 6% respectively. Regionally, growth was strong in EMEA and Asia, more than offsetting temporary softness in the US where we continue to expect growth to normalize throughout fiscal year 2021.

But not only revenue growth was strong. Our equipment book-to-bill in Q1 stands at 1.16. With this, we are more than manifesting the turnaround, sustaining a book-to-bill ratio above 1. This creates a sound foundation for good revenue growth also in the quarters to come. In addition, it underpins that our addressable markets are driven by fundamental long-term healthcare trends.

The need for precision medicine is sustainable. We noticed that, in the past quarters, there have been ongoing discussions about so-called CapEx cycles of hospitals and so on. And I hope that this set of numbers is a strong argument that our growth is driven by structural long-term growth trends and innovation, and not by any sort of short-term CapEx cycle in a certain region of the world. In terms of profitability, we hit a new adjusted EBIT margin record level in Q1 at 19.1%, up 550 basis points year-over-year. Margins have been particularly strong in Imaging, benefiting from healthy top line growth, good product mix effects, and still lower discretionary spend.

But also Diagnostics has seen nice margin improvement thanks to a strong uptake of profitable rapid antigen tests, but also improving margins in our routine care business where procedure volumes returned to growth again. Strong top line growth and profitability levels are also the reason for a substantial 37% adjusted earnings per share increase year-over-year. This also more than doubled our free cash flow close to €700 million in Q1. Given the strong start into the year, ongoing pandemic-related demands and a higher confidence in the normalization of the underlying business on the back of our very [technical difficulty] order book, we raised our guidance for fiscal year 2021. We expect now to grow between 8% and 12% comparable in fiscal year 2021 from previously 5% to 8%.

And we increased the expected adjusted earnings per share range from €1.63 to €1.82 per share from previous €1.58 to €1.72. On a constant number of shares in constant currency, this range corresponds to 16% to 28% higher EPS. We are really making up the last ground from last fiscal year. I keep the outlook discussion short here as Jochen will spend more time discussing the raised outlook and its assumptions later. Before I move on, let me get your attention to an important step in the evolution of our management board.

From today on, Darleen Caron will be joining the Siemens Healthineers board. Together with her, we will be driving a healthy internationalization and evolution of the corporate culture. I'm looking very much forward to working with Darleen. On the next two slides, I will provide more color on the performance of Imaging and Diagnostics before I hand it over to Jochen for more details on the financials and our outlook. At the end, I will provide an update on our ESG program and our product and technology rollout for the year to come.

So, let's look at Imaging. Imaging has delivered a remarkable first quarter, returning to growth mode and at the same time delivering record margins. While in Q1, growth was good across the modalities, we saw exceptionally strong growth in our CT and X ray businesses. The latter is clearly triggered by special demand related to the pandemic. Regionally, we have once again seen our strong global presence paying off.

The strong growth in Europe and China more than offset the temporarily softer performance in the US. We continue to expect the US market to rebound in calendar year 2021. Margins hit a new record level in Q1, benefiting from strong revenue growth and good conversion, positive mix effect with significant demand for CT, but also ongoing lower discretionary spend. Even though Q1 has seen some exceptional demand in Europe and China, we believe that the good performance is not coming by chance. It is built upon the very attractive fundamentals of our industry-leading imaging business.

Siemens Healthineers is the innovation leader in imaging with around two-thirds of revenues stemming from new and upgrading products not older than three years. And as we have shown at the Meet the Management in November last year, breakthrough innovations are hitting the market this and next year, with the Magnetom Free.Max, the photon-counting CT and Syngo Carbon. Based on this innovative approach, our world class service organization and our proximity to patients and customer needs, we have consistently outperformed our addressable markets for several years. At the same time, the COVID-19 pandemic has clearly shown the high resilience of this business throughout the crisis. This is due to the high share of recurring service revenues of roughly 40%, regional diversification and the substantially increasing order backlog from long-term value partnerships.

Furthermore, we have consistently been capable to increase our already industry-leading margins. We believe our track record of continued outperformance, innovation lead and reaping the benefits of our unmatched scale will continue to prove successful and we have strengthened our positions throughout the pandemic. Let's switch to Diagnostics. As I highlighted already in my initial remarks, we have seen outstanding performance in our Diagnostics business in Q1, with 23% comparable revenue growth and materially improved adjusted EBIT margins at 12%. This strong performance is based on two factors.

First, our core routine care business delivered solid mid-single digit comparable revenue growth and improved margins. Second, we saw very strong contribution from our well-positioned COVID-19 portfolio, especially the rapid COVID-19 antigen test. In our core business, we have seen a normalization of reagent volumes, but also some tailwind from customer pull-ins. In addition, we have made good progress in the market adoption of Atellica and in signing further large deals, with the most prominent example being a large deal signed in Australia with close to 90 Atellica modules. We have also made good progress in installations for Atellica at major clients like Quest, where we have the installation almost completed.

On the right hand side of the slide, we provide an overview of our well-positioned COVID-19 related testing portfolio, which had a significant positive contribution in Q1. The portfolio ranges from the rapid antigen test to our total antibody and quantitative antibody tests as well as our molecular COVID-19 tests. Our quick response to the pandemic paid off this quarter, and we saw a significant contribution from COVID-19 related tests in revenues and profits, particularly from the antigen test. Especially in Q2, we expect further meaningful contribution by it before we then anticipate slowing revenues in H2 due to increasing vaccination and price erosion for antigen tests. But more detail on this later by Jochen.

So, overall, I'm very pleased with the performance of our Diagnostics business as it's not only benefiting by strong tailwind from COVID-19 related tests, but also our underlying routine care business posting improved revenue growth in the mid-single digits, the Atellica rollout is progressing as planned, and we continue to win important large deals, thanks to our innovative product portfolio which will further improve with our upcoming low to mid volume analyzer Atellica CI1900. With this, I will now hand over to Jochen. Jochen Schmitz : Thank you, Bernd. And also, very good morning from my side. Let us now have a closer look at the financials of our first quarter.

As Bernd has said, we had a very strong start into the fiscal year across the board. On the orders side, we again had an equipment book-to-bill ratio well above 1, with 1.16. The positive order growth came mainly from Imaging, with equipment order growth in the low teens, and they're in mainly from computer tomography where we saw a significant demand driven by the pandemic. Total comparable order growth including service was 11% year-over-year. On the revenue line, we saw significant comparable growth of 13.3% year-over-year.

This growth was on a solid comparable 5% growth in prior-year quarter, a quarter still unaffected by the pandemic. This was driven by excellent equipment revenue growth in the low teens, with very strong growth, both in computer tomography and X ray products. Both businesses saw high demand for their products, partially also due to the role CT and X ray diagnostics play in the fight against the pandemic. The other business that saw high demand was our point of care business, with the rapid antigen test, which was a significant contribution to the very strong growth of the group as well. Across the businesses, we also saw increased activity in the fight against COVID-19.

For example, by government programs in China which also contributed to growth. I am highlighting these COVID-19 topics because I want to make clear that, yes, this was a great quarter, but we should not miss the fact that a fair share of this revenue growth would likely not have been there without the pandemic-related demand. Although it's not straightforward to distinguish these effects from normal quarter, let me give you a rough ballpark on what we thought these effects were in Q1. We estimated that these three effects, demand for CT and X ray, antigen and other COVID-19 related testing, and government programs added up to 7 percentage points to revenue growth this quarter. So, even if you would take this out, you would see a very decent performance with underlying growth of above 6% in Q1.

And in the other direction, I should also highlight that we made this good growth despite a flattish US market, which is lagging in the recovery as expected and guided by us. We expect US to gain momentum again in the course of this fiscal year. So, we are very happy that the underlying business is in very good shape even if you see through the current needs of the pandemic. Similarly, for our resilient service business, which was very resilient throughout the pandemic and which grew solidly in the mid-single digits. Looking at the geographic distribution, we saw excellent growth in EMEA of 26%, also supported by antigen test volume.

This excellent growth number was achieved despite a tough comparable of 10% growth in the prior-year quarter because every geography in EMEA contributed to growth. Germany, for example, contributed strongly with over 50% revenue growth supported by the lower VAT ending in our Q1 and by the antigen test sales. In Asia, we saw growth of 13%, also an excellent performance on a tough comparable of 10% in the prior-year quarter. In Asia, China contributed strongly with over 20% growth, driven by government programs to prepare for possible second wave, for example, by setting up fever clinics, which need to be equipped with CTs and X ray systems. Americas posted soft growth of 2% year-over-year, with an expected flattish development in the United States.

Now, looking at our earnings this quarter. Adjusted earnings per share went up significantly by 37% year-over-year to €0.49 per euro (sic) [per share]. The strong year-over-year increase was clearly driven by the very strong revenue line and the very strong profit line of €738 million adjusted EBIT. The high profitability of 19.1% adjusted EBIT margin in Q1 came from excellent conversion in the Imaging business as well as in Diagnostics. I will go into more detail of this excellent performance later when we look at the segments.

The profitability improved year-over-year as well from less discretionary spend. As said, the prior-year quarter was still unaffected from the pandemic with then normal traveling and tradeshow costs, which added up to 2 percentage points to the profitability. But it's also important to remember that last year's q1 was not a strong bottom line quarter as Imaging was suffering from very negative mix. We expect this positive year-over-year effect to diminish over the next quarters when the comparable quarters will also be affected by reduced discretionary spend and better prior-year profitability. Now, let us move further down the P&L to the interest line.

Our financial income was at minus €77 million, significantly lower than what we normally expect in a quarter, which is in the range of €10 million to €15 million. This lower income, respectively higher financial expense is to a large part from purchase price hedging and the bridge financing costs for the plant acquisition of Varian. As you know, we have a bridge financing in place to settle the bill once it is due. This is partially currency hedged with the derivative. And since the dollar has depreciated, also the value of the derivative went down, which impacted our P&L negatively on the financial income line.

On the other side, the part of the purchase price which is not hedged obviously will benefit from a lower dollar exchange rate versus the euro. Financial income net adjusted for these transaction related effects was at minus €7 million, which is the corresponding figure for the adjusted earnings per share calculation. The tax rate in Q1 is at 28%, roughly on prior-year level. Before we move to the next slide, a quick remark to our excellent cash performance this quarter. With an impressive start into the year, cash in Q1 more than doubled versus prior-year quarter, amounting to €668 million free cash flow.

We saw an improvement in operating working capital versus prior year, albeit in a very strong revenue quarter. In particular, we saw a favorable development in advances also driven by the high demand this quarter and at the end of the calendar year. All in all, things are very well managed and under control in regard to operating working capital management, and it continues to be a focus topic also going into fiscal year 2021. For more details on the Q1 cash development, please see the Q1 cash bridge in the appendix of the presentation. Now, let us have a look at the performance of the different segments in Q1.

Imaging posted 9% revenue growth, driven by very strong growth both in computer tomography and X ray products. As said, both businesses saw very strong demand in the pandemic for their products. With CTs so significantly outperforming, this was also very positive for the product mix, with this modality being very margin strong. That said, on the profitability side, Imaging posted a record Q1 margin with 23.4% adjusted EBIT, which represents a year-over-year improvement of 590 basis points. This impressive margin improvement was achieved by excellent conversion from the very strong top line and by the positive mix.

Also, the reduced discretionary spend impacted the margin positively. In addition, Imaging's profitability in the prior-year quarter was impacted by negative mix. So, it was also against a low comparable basis. Diagnostics posted outstanding growth of 23.5% in Q1, driven by revenues from COVID-19 related testing, including a significant contribution from the antigen test. At the same time, the underlying business, i.e.

excluding COVID-19 testing, returned to solid growth. On the margin side, profitability was up by 840 basis points year-over-year from the highly accretive antigen business, as well as from positive conversion in the underlying business. I will give more detailed color what this means for the Diagnostic performance going forward on the next slide. Advanced Therapies also posted strong growth of 6.3% in Q1 on a very tough comparable basis of 9% growth in the prior-year quarter. This strong performance was driven by excellent equipment growth, which was also against very tough comps.

Advanced therapies was the only segment that saw material margin impact from foreign exchange this quarter. It faced headwinds of around 100 basis points year-over-year. In addition, the dilution from Corindus did not yet fully impact the prior-year quarter since closing was in the course of Q1 fiscal year 2020. And there's a negative year-over-year effect from the Corindus dilution in the ballpark of additional 100 basis points. Taking these effects out, Advanced Therapies showed a strong development also in terms of profitability.

Let me point out that Advanced Therapies achieved a strong Q1 performance for both growth and profitability in the pandemic without any products for pandemic-related demand. Now, let me dissect the Diagnostics performance, which hopefully helps to better understand the dynamics in Q1 and going forward. As said, we saw a very good uptake of our rapid antigen tests, amounting to sales of €130 million in Q1. We expect a similar dynamic in Q2, and then demand to slow down in the second half of our fiscal year. We expect this slowdown due to the progress in vaccinations as well as increased supply from build out of production capacities in the antigen test market.

For the full fiscal year 2021, we update our assumption for antigen sales to €300 million to €350 million of sales. We also saw a positive contribution from our PCR and antibody tests to the year-over-year growth in Q1. Bear in mind that the prior-year quarter was still unaffected by the pandemic, so there were no COVID-19 related revenues yet. If you exclude the contribution from antigen, which is more than 10 percentage points accretion to growth, as well as the contribution from PCR and antibody test sales, we saw a solid Q1 revenue growth in the mid-single digits. The solid growth in Q1 was driven by the recovered routine testing, and with that, also from some pull-ins where customers restocked their reagent shelves.

We expect this solid underlying performance to continue in Q2, again with a strong contribution from antigen. In Q3, year-over-year underlying growth is expected to go up on easy comps. Q3 in the prior year was a trough quarter where Diagnostics declined by 16% due to the missing revenues from elective procedures. In Q4, we expect underlying growth to continue without significant tailwind from COVID-19 on normalized comps. Overall, we expect a solid underlying growth performance in Diagnostics assuming no further headwinds from the pandemic on elective procedures.

Looking at the profitability of Diagnostics, the antigen test sales were highly accretive to profitability, pushing up profitability by up to 5 percentage points in Q1. We would expect the margin contraction from antigen sales also to persist in Q2, but to decline in the second half due to slowing demand and increasing price erosion. However, taking out the antigen contribution, this would get you to an underlying profitability in Q1 of around 7% margin. This underlying margin of above 7% is an improvement versus prior-year quarter and shows the expected improvement in profitability versus prior year. Now, let us have a quick look at the updated procedure volume chart.

The more technical remark upfront. We have updated the chart now to show average test volume per instrument and average exams per system to exclude the effects from systems being added over time to our Smart Remote Service network. Obviously, with our large and growing installed base, this happens all the time. You can see that the picture both for central lab test volumes and for our MR exams remain on normalized levels despite the unfortunate rise of COVID-19 cases. We expect this normalized procedure volumes to continue in fiscal year 2021, which is one of the assumptions for the next topic, the updated outlook for fiscal year 2021.

So, having run through the details of numbers, I suppose you already have a sense of why we had decided to raise the outlook. Let me start with the reasoning behind the raised outlook for the group, comparable revenue from previously 5% to 8% to now 8% to 12% growth. The outlook was raised based on the ongoing pandemic-related demands and a higher confidence in the normalization of our underlying business. The assumption for the rapid antigen test revenues is now €300 million to €350 million revenues versus the previous assumption of about €100 million revenues. Given the dynamic of the pandemic, we assume that the pandemic-related demand from Q1 will not persist to the same extent through the remaining fiscal year 2021 and beyond.

We raised the top line expectations for all three segments. Imaging from at least 5% to now at least 7%. For Diagnostics, from mid to high single digit to at least mid-teens. And Advanced Therapies, from at least 5% to now at least 6% comparable growth. Further, the assumptions of the previous outlook remain unchanged.

These assumptions can be found as always in the outlook section of the quarterly statement. We are raising the EPS outlook to €1.63 to €1.82, making the year-over-year EPS growth comparable for foreign exchange as well as for the share count. The new EPS range represents a comparable adjusted EPS growth of around 16% to 28% in fiscal year 2021. In terms of qualifying the raise in top and bottom line, we continue to follow our upgrading ambition to grow EPS line, foreign exchange and share count comparable about double the speed of the top line despite the fact that we see higher anticipated incentive payments due to the good performance which are expected to soften group margins by clearly more than 1 percentage point compared to our originally budgeted incentive expenses. The other topic is exchange rates, especially the weakening US dollar, but also other currencies.

As you know, Q1 saw translational headwind from foreign exchange on the absolute revenue line of over 4 percentage points, which we expect to continue through fiscal year 2021. In addition, we now also saw a more material headwind from foreign exchange on the transactional line in Q1, which we expect to continue to be another 3 percentage points of headwind in our adjusted earnings per share number. Especially, the weakening US dollar impacted the bottom line since US dollars are a frequent transaction currency also outside the United States. This is especially true for smaller countries, where usually do not have a large local foot footprint to balance the currency exposure. But also other currencies have depreciating local currencies against the strong euro, adding to the transactional headwind.

These effects are primarily showing up in the Imaging and Advanced Therapies segment. Therefore, we did not change the profitability outlook for Imaging and Advanced Therapies, but increased the profitability guidance for Diagnostics for more than 5% initially to now more than 7%. Before we move to the other topics to look forward to in fiscal year 2021, a quick look at what to expect in Q2. We would expect Q2 performance to be strong, but slightly below the outstanding performance in Q1. Still a very decent performance within our new guidance range.

But now to the other things coming up in fiscal year 2021. We will be virtually road showing the UK and Continental Europe this week. On February 12, we will host our first virtual Annual Shareholders Meeting. Through March, we will be on various road shows and conferences before the silent period starts again in April in the run up to our Q2 results. All dates are published as always on the Investor Relations web site in case you are interested in joining us.

A quick update in the progress of the planned acquisition of Varian. We are well on track with our integration plans and we are very pleased about the progress and the positive momentum that we see in the different work streams. On the regulatory side, CFIUS has cleared the planned transaction end of November and we have filed for our EU approval. After the closing of the Varian transaction and the first couple of months as a combined company, we plan to give you more details about the new combined company on a capital market day in autumn. Something to look forward to.

The closing of Varian is still expected in the first half of the calendar year. And with this, I hand it back to Bernd.

Bernd Montag: Thank you, Jochen. Now let me come to a subject which is very close to my heart. What the world calls sustainability today has been a guiding principle for our company ever since.

Building on a long history, we are innovating to enable affordable health care for everyone, everywhere. Based on our materiality analysis, we have identified three pillars, which will be the key themes of our communication efforts going forward – improving quality of life through access to health care and innovation, contributing to a regenerative and healthy environment, advancing diversity and inclusion and driving employee engagement. And as an overarching principle, creating sustainable value through responsible business and leadership. With the launch of our new sustainability website next week on February 12, Siemens Healthineers creates more transparency on the topics environmental, social and governance for all our stakeholders. We define specific targets that guide our efforts to meet our sustainability commitments in the mid and long term.

And while sustainability has been an inherent part of our DNA, it is now also reflected in the long-term incentive compensation of our senior management and management board. For the board and certain eligible senior managers, ESG targets account for 20% of the long-term incentive compensation, following three fields of action – promoting diversity and integration and the commitment of our staff within the company, contributing to a healthy environment, for example, by reducing CO2 emissions and improving access to health care in less developed markets. Improving access to health care is driven by our continuous innovation, which brings me to our next slide. I do hope you found the time to listen to our Shape 21 and meet the management events in November. In case you did not, I really suggest you take the time to look at the recordings.

In terms of understanding our innovative strength, this is really helpful. In the meanwhile, let me briefly highlight some of our upcoming breakthrough product innovations and technology rollouts which will underpin our market leadership. The soon-to-be-rolled out Magnetom Free.Max broadens the range of clinical applications for MRI systems and brings MRI where it couldn't go so far. We enlarged the bore size to 80 centimeters, making the opening considerably larger than that of a conventional scanner and hence making the experience even more comfortable for patients. Photon-counting CT technology will improve the clinical value by significantly enhancing image quality and adding more information for the physician, while at the same time reducing the radiation dose.

Syngo Carbon is the connecting element to simplify workflow and make it easier for different departments in the hospital to work together. It enables physicians to draw data from different departments to integrate diagnostics and assessment information in one unified environment. At our Shape 21 event last year in November, we showcased our upcoming integrated immunoassay and clinical chemistry Atellica analyzer for mid-sized labs with lower throughput. The Atellica CI1900 complements our portfolio besides the Atellica solution for the high throughput labs. With it, we can also equip hub and spoke settings for large healthcare providers.

In our Advanced Therapy business, we remain fully convinced that robotics will play a major role in minimally invasive procedures in the future, and hence further advance into our robotic supported stroke treatment. We are confident that these innovations will underpin our very strong positioning, allowing us to further outgrow our addressable markets. Once the acquisition of Varian is concluded, we will be able to even further expand our product offering along the entire clinical pathway of cancer care, from diagnosis to therapy. This will then further improve our investment case, which is a very attractive one. Innovation-driven growth, as shown on the slide before, together with our leading position in structurally growing end markets is the first of our four elements of the compelling Siemens Healthineers investment case.

The second element is our sector-leading margins with further scope of expansion in Imaging and Advanced Therapies, and with Diagnostics on track to deliver improved margins over time on the back of accelerating growth. Expanding our portfolio into attractive adjacent growth markets marks the third pillar in creating shareholder value. 18 months ago, we acquired Corindus to further advance minimally invasive therapy by combining imaging and robotic-guided intervention. In last August, we announced the transformative acquisition of Varian to become an even more holistic partner for our customers and to reach a new level of profitable growth. And last, but not least, we have proven in the past 12 months that our business model enables resilient performance at all times.

The service business in Imaging and Advanced Therapies; our broad global footprint, and hence, regional diversification; the recurring revenue stream from reagent sales in Diagnostics, and finally, our growing order backlog and long-term value partnerships are all constituents of a business model creating resilience and a high revenue growth that's at the same time paired with high visibility over multiple years. These four elements show our unique positioning to create shareholder value and to shape the future of healthcare. And with this, I hand it over to the operator for the Q&A.

Operator: [Operator Instructions].

Marc Koebernick: I have Patrick Wood who was the fastest to press star, five.

Patrick, the floor is yours to ask your questions.

Patrick Wood: I'll ask my two please. The first one is, on the order book side of things, obviously very strong order number. I'm just curious, is that predominantly Imaging, i.e. what's the underlying Imaging order book? The reason I ask is, obviously, as comps get a little bit easier and you had a very strong Q1 and the demand is there, I'm trying to understand the 7% or greater than 7% guidance, how much upside risk there is there? So, the order book split, I guess, the first question.

And then the second question, I'm just curious, obviously, in the AGM documents, you guys are trying to nominate Peer Schatz to the board. And I'm just curious if that signals a slightly more holistic view from you guys about the diagnostic market overall and the technologies within it. Obviously, sample prep and QuantiFERON is all pretty different from immunoassay. But I'm just curious, does that signal a broader thought process in the overall diagnostics space? And those are my two.

Jochen Schmitz: Patrick, it's Jochen.

Let me start with your first question on the order book. The equipment order growth was about 8% on the overall company, driven by – on the growth side, driven by Imaging, and here in particular also on the CT side, as we said, on the X ray side, but all the other business lines also showed solid growth profiles. And by this, we also saw then significant book-to-bill ratio. On the Advanced Therapies side, the other segment which is affected by the equipment order intake, we saw no growth there. But we need to have in mind that last year was an extraordinary quarter for Advanced Therapies.

And here, we saw also a book-to-bill ratio clearly above 1 in Q1. So, we are very satisfied with this. And this is also the basis, I think, for our raised revenue line for both segments, for Imaging raised from 5% to 7% and for Advanced Therapies from 5% to 6%. And the second question, I think…

Bernd Montag: Yeah, Patrick. I hope I understood the question correctly.

First of all, looking at the numbers and what we are doing in Diagnostics, I'm very, very happy with the agility of the organization that we were able to go into fields in which we are basically normally not active or not focusing [indiscernible] development of the PCR tests, but then also especially with the very, very fast availability of a rapid test in an area that we normally don't play. So, take this as a proof of agility of our team. I would not interpret it too much as a precursor of going more intensively into other areas. Our claim to fame in Diagnostics and our clear strategy is we want to be the company which stands for high quality, for productivity which is about equipping, especially the large labs, bringing best level of clinical performance paired with workflow excellence. The molecular market is currently very hot, of course, maybe overheated.

So, we are watching it extremely prudently and carefully.

Marc Koebernick: I would hand the word over to our next person on the line. That's Scott Bardo from Berenberg.

Scott Bardo: Two relatively short-term questions, if I may. I think you've previously commented that the North American market has been lagging with around one quarter as compared to dynamics in Europe and Asia.

And I guess, given the pretty strong performance we've seen in Europe and Asia, this quarter, and actually in the previous quarter, is it fair to say that in the upcoming quarter then, we should see an inflection in demand in North America, or is there now reason to revise the recovery assumption for that market? So that's question number one, please. And the second question, just related to your antigen test revenues, I know you guide today for your rapid antigen test sales and the strong demand you see there. I think previously, the group have highlighted entering in with a laboratory-based antigen test. I wonder if you could share some thoughts on the opportunity there, and whether that indeed represents upside to your rapid antigen test guidance. Thanks.

Bernd Montag: To your first question on the North American market. What we said, remember, most of you read it, we said we do not expect to see the market recovery before calendar year 2021. That was what we said in November.

Jochen Schmitz: I think we were very happy with the stable performance we have seen last quarter. I would expect to be a bit more cautious.

I would expect to see, I would say, solid growth coming out of the North American market revenue line to our business with our Q3 more than with our Q2, I would say, is our current thinking in this regard.

Bernd Montag: And with regards to the antigen question, we're well on track in the development of the lab-based antigen test. A little bit of the unknown is the EUA process. There's currently almost a traffic jam in this process because of all the topics from vaccination to tests. It is not really baked into this number because this is too early to tell what role this will play and at what point in time it can come.

In the same, I would say also about antibody tests. There's also a potential, but I don't want to oversell this. The antibody tests get a more significant role in conjunction with the vaccination with controlling, monitoring immune status. But I think it's not responsible to guide for topics when there is no scientific proof yet. So, not baked in a theoretical upside, but nothing I would recommend to put into a model.

Marc Koebernick: The next person on the line, next question would be coming from Veronica from Goldman Sachs. Can you hear us, Veronica? We'll take the next question then. That will be Lisa Clive now. Sorry, Veronica.

Lisa Clive: Two questions, please.

First of all, as we think about the mix of your business across recurring revenues, there's a lot of opportunity on the service side for increased use of software as a service, et cetera, in addition to the just sort of bog standard kind of service contracts that you have. Can you just give us an update on what that evolution looks like, particularly an increase in partnerships with big hospital systems, where we should expect that contribution to be in sort of maybe five years' time? And then a somewhat related question, particularly just focused on hospitals trying to become more efficient. If you could give us an update on your sort of informatics systems within the radiology suite and whether there's been a sort of change in the conversations around that through the COVID period?

Bernd Montag: When it comes to the more recurring aspect of the so-called value partnerships or these new kinds of services, I would look at it in this way that, in the end, these are long-term deals. We are talking this quarter, in January, we announced the deal or the partnership with Manchester Trust in the UK, about 100 million and so on. So, I would estimate – or that a nice target would be that this becomes, over time, another 10% of our overall revenue, so that we can say, hey, 40% is the normal service business as a recurring business and that, step by step, a certain proportion of the equipment business is coming from these value partnerships with higher and long-term visibility, so that this, in this five-year timeframe, grows to a 10% contribution off the top line.

So, just as a rough estimate. So this gives us even more resilience and further eases all the concerns about CapEx environment and so on, which we discuss very often. And in the same topic or related is our emphasis on building out the software business. And also new business models in the digital space. You have asked about as-a-service models, technology-enabled services.

And, yes, you are definitely right here, the pandemic has definitely increased the readiness of customers to go to follow that path.

Marc Koebernick: I would now ask Michael Jungling.

Michael Jungling: I have two questions. Firstly, I wanted to ask a question around the incentive payments. Can you comment on what is incorporated in your fiscal 2021 guidance? I recall about a year ago or so, when the Siemens share price was extraordinarily high, we – or at least I was somewhat surprised by the high impact on your margins.

Is the current share price of €130 for Siemens reflected in that guidance? And should we be, not concerned, but cognizant of some sort of share price structure using Siemens Healthineers shares that may be impacting your profitability this year? And then secondly, on the Varian funding, can you comment on the funding structure for Varian? In the past communications, you highlighted the importance of investment grade debt or rating? Does the higher cash flow, the lower net debt position give you confidence that you can now use the majority for the purchase in debt rather than raising new equity? Thank you.

Jochen Schmitz: My comment on the incentive payment was more targeted towards the incentive payments independent of the Siemens stock price movements. And we have built in roughly the existing share price of Siemens into our forecast. So, therefore, I would – you never know what the share price does of Siemens relative to its competitors and things like this. But this is built in.

The year-over-year delta between incentive payouts was more related to the high target achievement we expect for this fiscal year relative to last fiscal year. That was more the topic. On the Varian funding, obviously, when you have to sign a big check, it helps when you have the ability to organically generate free cash flow. And that obviously improves our – I would say our flexibility, how we find our solution with regard to the financing mix. And we have said right out from the beginning that we would go only up to 50% of financing via equity and the rest will be debt and [indiscernible] still holding up obviously.

And as I think said in several instances already, we will ask for approval our authority to do another equity measure if necessary in the next AGM, but we will carefully look at the markets and we will also carefully adhere to our capital allocation framework with regard to solid investment grade rating. So, I think I cannot say more in this regard. And it's very, very consistent with what we have said before.

Marc Koebernick: Veronica, you should be now live.

Veronika Dubajova: I have two please.

My first one is just following up on the strong CT and X ray demand which you have seen through this quarter, both from a revenue and order perspective. And just kind of curious, why you guys think this is materializing now as opposed to earlier in the pandemic. The cadence of contributions seems to have improved as we've moved through the quarter. So just kind of curious what you're seeing. And how much of a tailwind, what are your expectations? The strong order growth that you booked this quarter for CT and X ray, any risks of cancellations as you think about those and kind of what's the tailwind as you think about the remainder of the year from that? And my second question is on the antigen revenue contribution.

And just curious, Bernd, if you could update us with where your manufacturing capacity is right now and whether there is any scope to increase it further from the current levels should demand persist at higher and higher levels than you anticipate? Thank you.

Bernd Montag: Question one, the demand for a CT and X ray, it's mainly European and Chinese topic. There is a big focus on building up so-called fever clinics in China for basically pandemic readiness. We see similar topics in Europe, paired with investment programs of governments. And this is baked into the number we gave you when it comes to the full year forecast, as Jochen has explained.

Risk of cancellations, I do not see at all. It is even as an anecdote the case that we sometimes get upfront payments to ensure the delivery, which is also, by the way, one of the reasons – one smaller reason, but one of the contributors to the strong cash flow. So, this is baked in and there's no risk of cancellations. When it comes to the antigen tests, capacity is not the limiting factor. Capacity is where it needs to be.

It is now really about how does the need for the tests develop? What are programs in society, in programs by governments, but also how fast is the progress on the vaccination front? As I said, capacity is not the limiting factor.

Jochen Schmitz: We saw also throughout the pandemic, also last year, in CT, very, very solid demand on this topic because CT obviously is the modality for lung screening, and therefore it was not negatively impacted by COVID-19, generally speaking.

Marc Koebernick: Our next person on the line would Will Mackie from Kepler.

William Mackie: I think my first question would be back to Diagnostics, and putting aside what we're observing with antigen and PCR, but looking at the impressive step up in the performance of the underlying business. Could you perhaps talk to some of the drivers that enabled that step up? And is this a new base level? And how should we expect it to develop? Or how do you expect it to develop towards those mid-term objectives for profitability and diagnostics? That's the first question.

And the second, if we could dive back into Imaging, and perhaps you could elaborate a little bit more on how you see the demand in China that's being sustained by measures you've mentioned, such as the COVID clinics, or perhaps more detail on how the second half recovery in North America, and specifically USA, is underpinned in your assumptions? Is that just that what you can see in CapEx budgets from your customer base? Thank you.

Jochen Schmitz: Let me kick it off with your Diagnostics question. First of all, we are very satisfied with the underlying performance of Diagnostics in Q1 and the start into this fiscal year. We saw, as I said, roughly mid-single digit growth rates underlying in Diagnostics. Obviously, a good number to kick off a year.

And you know that our mid-term target is to get to mid-single digit growth as we see this as the market growth in our main businesses there. Is that now already a new baseline or is it just a good start into a year? I think I gave you also hint that we also saw some upstocking of our customers in this regard. Also, most likely to have, I would say, some inventory in case COVID-19 also affects logistics or other things. And therefore, I would not overestimate the first quarter. But I would say, definitely, a clear proof point to our self-help potential story in Diagnostics.

Bernd Montag: On the Imaging side, China, I see as a very healthy and sustainable development. Yes, there is a little bit of a special boost for that very particular CT topic. But when you look at the overall development, also in not COVID-related technologies, it's very healthy. We have to see this country as in a much, much, much more normal state than we are in Europe. There is normal business going on.

And as you know from other industries also, and also when you look at Siemens and what happened to their business in Q1, a lot of growth was coming from China on the industrial side. And this is not so much a COVID exceptional effect. This is also carried by a very, very healthy core business in a healthy economy. Coming to the US, I think one very important aspect is what Jochen showed again, the return of the procedures, which is sustainable, where we don't see a wave two effect in the numbers. And that will very clearly also set free the investment decisions, also those which have been put on hold because customers see a return to normality of patient volume and, with this, a return to normality when it comes to their cash flow and from that point of view to their planning.

We have a healthy order backlog in the US. Will we see much of an uptick coming from orders in this fiscal year, which then translate also in revenue in this fiscal year? I would say no. But it gives us a good perspective also moving into the next fiscal year. And we also will see revenue slightly recovering towards the second half of this fiscal year.

Marc Koebernick: Next in line will be Max Yates.

Max Yates: My first question is on the discretionary cost savings in Imaging. Could you give us an idea of exactly how much these were in in 2020 and what your assumption within the around 22% margin for Imaging is on how these discretionary costs evolve in 2021? That will be my first question. And then the second one would just be around – you mentioned the Varian work streams that are underway, the integration is on track. Is there anything that you would share with us at this point around sort of what has surprised you as you've done more work on the acquisition and the integration? That will be my second question.

Jochen Schmitz: I take the first one on the discretionary cost savings.

When I gave you some indication on what we see, it's about 200 basis points year-over-year in Q1. Obviously, Q2 was – last year was still more – not a normal quarter, but had still a decent level of discretionary, in particular travel costs and also advertising costs. And then, in Q3 and Q4, it really went significantly down. Difficult to predict how the pandemic exactly will hopefully leave the planet over time. But I would expect that we see still a positive contribution also in Q2, but with definitely limiting impact or no impact or slightly negative impact moving into Q3 and Q4.

But you can be rest assured that we look at this topic very, very carefully and that we also believe that the word after the pandemic, or having the pandemic under control, and travel will be possible again that we will be very, very careful in how we, say, restart those kind of costs again.

Bernd Montag: And on the Varian side, what surprises me? First of all, I'm extremely satisfied with how things are going in the integration project. What surprises me – so to use the word since you asked – how well it works in a virtual format. We have in the meantime 800 people involved on both sides in this very transformative move. Very positive spirit.

And when looking at the buckets we are discussing, it is a very promising mix of the more "mundane topics," so the cost savings from a delisting to what opportunities do we have in cross selling and using the Healthineers global footprint in terms of sales, but also in terms of production. It's about what we can do in radiation therapy by bringing technologies together, but then also very, very excitingly, how can we accelerate the path Varian has been on in conquering new space, which is on the one hand, the CTSI acquisition on the topic of oncology as a service, much faster growth when it comes to building an interventional oncology business and then joining forces on the digital side, and especially also using our strong position in AI. So, every topic, very vibrant discussions. And I really like what I see.

Marc Koebernick: Next one would be Daniel Wendorff.

Daniel Wendorff: Two, if I may. All related to Diagnostics. And the first one would be on the development of your Atellica placements. When you compare this on a quarter-on-quarter basis or a year-on-year basis, has this normalized as well? You highlighted the big Australian order in your presentation early on. So, I would definitely be keen to hear about an update there about the development basically of the Atellica placements.

And the second question is also related to your overall Atellica-related revenues, I would say. Is that possible to detail this out how the mid-single digit really underlying growth year-on-year of your Diagnostics business, how this has been helped by potentially Atellica placement related also consumable revenues? Any kind of update there, I would appreciate it. Thank you.

Jochen Schmitz: First of all, thanks, Daniel, for your questions on Atellica. I was already almost disappointed that I don't get a question on Atellica.

First of all, we made good progress on our Atellica plan. As you know, we have here a broad-based plan in place to optimize everything related around Atellica. And we are still very, very satisfied with the competitive win situation on Atellica. And when Bernd highlighted the large order we won with Atellica, we are also very satisfied how the large contract with Quest runs and things like this. This is very, very good.

And we make also, on operational side, good progress on our Atellica upgrading program. This is all good. Obviously, we were also negatively impacted last year from – as with all other instruments and all other diagnostic players with regard to the pandemic situation that also related to Atellica. We obviously, have significantly accelerated our focus and plan, not necessarily to placements of Atellica, but to installing Atellicas and to reduce the delta between the numbers which are placed and the numbers which are up and running. And I think there we made very good progress.

We are very satisfied with this – this curve of the installed system is getting closer and closer to the place number. It is a very good message for us. And obviously, the Atellica portion of revenue is constantly significantly increasing in our revenue line of Diagnostics and the growth is remarkably relative to the rest of the business, obviously, because it's a growing platform. It's also sort of cannibalizing what we do in other IA and NCC areas, but intended – it's an intended cannibalization. Therefore, the growth rate in itself is maybe not – I would say not super helpful because it's baked into our overall midterm target to get to mid-single digit growth in diagnostics.

And as I said, the revenue share of Atellica is now in a solid teens, approaching 20% of revenue of Diagnostics. And this is exactly what we have laid out in our updated plan, which we announced in November fiscal year 2019.

Marc Koebernick: The last question would be Wasi from RBC.

Wasi Rizvi: A couple left for me. Firstly, on the discretionary cost savings, the 2 percentage points at group level, I think you said it's mostly in Imaging, which makes sense because it's the biggest profit contributor.

But for the other divisions, if I look at in margin terms, it's a margin impact broadly similar for DX and Advanced Therapies, or is there a reason why it's meaningfully lower, the impact of those divisions? And then, the other question was another one on Atellica, please. You mentioned that, I think during the call, you've made good progress on the Quest contract. And then you just said you've accelerated the installations. Previously, that would have led to some kind of margin hit because you've talked about how that can cause short-term dips in the margin, but we haven't seen that this quarter. Has there been a step change in your efficiency or the costs you're incurring in installing and placing these? Or is it just that the volumes kind of made up for any shortfall caused by accelerating installations?

Jochen Schmitz: Maybe on the discretionary cost savings, definitely – maybe there was a misunderstanding.

Discretionary cost savings, what I said is 200 basis points or 2 percentage points year-over-year improvement Siemens Healthineers. And obviously, as you rightfully said, as Imaging has the biggest portion of it, it has the biggest portion of it, but not in basis points. The basis points are very, very similar across the segment, just to clarify this. It was maybe a misunderstanding.

Bernd Montag: And coming to Quest and Atellica installation processes, we track very, very diligently the progress we make on the operational site in Atellica when it comes to what are the service costs, what are the installation costs and timelines, what is the cost of production and so on and so on.

And all the topics point into the right direction, including also commercial success factors, like contract written rates and the projected margins we see in the deals which we win which then, over time, will be visible in the P&L. On the Quest side, yes, this is a cost aspect. And it's a healthy sign. One doesn't see that, so to say, directly in the P&L. And as one quote, and I hope Steve Rusckowski is fine that I say that, I had a phone call with him, the CEO of Quest, last weekend.

And he said, 'Well, Bernd, you can be proud of what your team is doing after 100 of 110 analyzers, Atellica analyzers, have been installed. So, this is a real team effort of Quest and us, but a statement like that also shows that I think the team has the arms around this highly complex installation.

Marc Koebernick: So that brings us to the end of today's call. Look forward to seeing you guys in virtual person in the next few weeks and days and at latest then in our Q2 call in May. Thanks.

Bye-bye.

Operator: 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. The website address is corporate.siemens-healthineers.com/investor-relations.