Siemens Healthineers AG

XETRA:SHL

Earnings Call Transcript 2021-Q2

[Operator]

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 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, Head of Investor Relations]

Thank you, operator. Good morning, dear analysts and investors. Thanks a lot for dialing in this time of the day, especially to those of you for whom it's a bank holiday. I'm sitting here with our CEO, Bernd Montag; and our CFO, Jochen Schmitz, who will be taking you through the details of our Q2 fiscal year '21 results. You can find all the material, charts, earnings release and the half year report on the Investor Relations section of our website. Before I hand over to Bernd, I have 2 housekeeping items. Firstly, I would like to make you aware of a PERCEPTION study, which we will be conducting towards June, together with our partner quantifier. Obviously, it will be hugely appreciated to see you participating in helping us prepare for our Capital Market Day mid-November. Secondly, I would like to remind you of our 2-question rule in the Q&A following the presentations.And with that said, I will pass the word to Bernd Montag, CEO of Siemens Healthineers. Bernd, the floor is yours.

[Bernhard Montag, President, CEO & Chairman of Management Board]

Yes. Thank you, Marc, and good morning also from my side. Thanks for dialing in and expressing your interest in Siemens Healthineers. Let me start the presentation by shedding some light on the financial performance of Q2. We recorded a continued very strong comparable revenue growth with 13%. Diagnostic revenues were again strong with 29% comparable revenue growth year-on-year, driven by antigen sales and accompanied by solid underlying growth in our core business.Imaging revenue increased by 7% on a comparable basis, while Advanced Therapies came in with 2%. We continued to see strong growth for CT and X-Ray Products. But not only revenue growth was strong, our equipment book-to-bill in Q2 stands at 1.08, further increasing our backlog. This substantiates the perspectives for good revenue growth in the quarters to come. The reported adjusted EBIT margin of 16.8% is on a solid level. The reduction of 120 basis points year-over-year was due to adverse effects with rather one-off character this year compared to positive effects in Q2 last year. Jochen will elaborate on this topic later. Adjusted basic earnings per share are at EUR 0.44. This is a 5% decline year-over-year, which is driven by the increased number of shares due to the equity raises in March and September last year, which represents a headwind of 8 percentage points alone.We are raising the outlook for comparable revenue growth from 8% to 12% to now 14% to 17%, and for adjusted EPS from EUR 1.63 to EUR 1.82 to now EUR 1.90 to EUR 2.05. This is now incorporating an increased average number of shares and increased antigen revenue assumption of EUR 750 million, better-than-expected operational developments and the contribution from Varian for the second half. I keep the outlook discussion short here as Jochen will spend much more time discussing the raised outlook and its assumptions later. Furthermore, during this quarter, we have successfully closed our combination with Varian.Let me first express that I'm very proud that we successfully closed this very important combination. I am thrilled that we can now work together with Varian's talented, highly motivated colleagues to shape the future of health care and to create a world without fear of cancer. Varian has been successful in building a strong trusted brand, strong customer loyalty, and Varian has been transforming into the leading and most comprehensive multimodal cancer company. Together with Varian, we are making 2 leaps in 1 step, a leap in accelerating the fight against cancer and a leap in our impact on health care overall. We are combining our unique and highly complementary market-leading portfolios and capabilities to support clinicians around the globe to achieve better outcomes in cancer care. We are combining Varian's portfolio in cancer care with Siemens Healthineers' expertise in, in vitro diagnostics, best-in-class imaging and advanced therapies in the field of minimally invasive procedures. Thus, better than any other company in our industry, we can address the entire clinical pathway of -- for cancer patients, but also for many other diseases, from early detection, diagnosis and therapy all the way to aftercare. We will accelerate digital and AI-enriched offerings, enable data-driven physician care. Together, we are the most holistic partner for the entire customer spectrum. In diagnosis, we have the most comprehensive portfolio with in vivo and in vitro solutions. To put this into perspective, with our global installed base in Imaging and Lab Diagnostics, we have 240,000 patient touch points worldwide every single hour. We provide technologies that are relevant for about 70% to 75% of the clinical decisions made in the health care system. On the lab diagnostic side, we provide about 10 billion tests per year on average. In therapy, so far, we have been primarily focused on the imaging part, i.e., the guiding part of minimally invasive techniques in cardiology, neurology and oncology. With the acquisition of Corindus, we have made a significant step into helping perform endovascular procedures precisely and fast in a safe manner. Now with Varian. We are materially enlarging our scope into cancer therapy. Varian has a deep portfolio of leading radiation therapy delivery solutions from linear accelerators to proton therapy, radiation therapy planning and oncology information system software, an expanding array of interventional solutions, multidisciplinary oncology software offerings and, through CTSI, an unmatched service presence in supporting cancer care.Let's not forget, over the next 20 years, new cancer cases are expected to grow by 67% to 30 million cancer patients annually. What's even more staggering is that only about half of these people have access to care. And for those who do have access, a significant variability in the quality of care, and we will help to address this. We all recognize that cancer care must evolve to address this gap, and that's exactly the purpose of combining our strength with Varian. Together, we want to establish a new level of intelligence and precision, accessibility and affordability to fight against cancer.By combining imaging and therapy delivery systems with seamless interface, we see a unique opportunity to improve efficiencies and enhance the patient experience along the entire cancer treatment pathway. We will harness the power of intelligent cancer care, applying AI and machine learning to improve clinical processes and workflows to customized personalized treatment planning and delivery techniques that meet every patient's unique needs everywhere and to build comprehensive decision support tools informed by data-driven insights. We will expand our enterprise service offerings by Varian's end-to-end solution competence in oncology, making us even more unique for our largest customers. As one company, we are on the path to eliminating the fear of cancer, instead turning it into a manageable chronic disease, one that we can help customers and patients successfully navigate over the long term. Ultimately, together, we are a stronger company than ever before, shaping the future of health care as one team. At the same time, this combination carries substantial benefits for our financial profile and value for our shareholders. With Varian, we will reach a higher growth profile and will generate substantial synergies. We are fully committed to deliver our promise of over EUR 300 million of additional EBIT in fiscal year 2025 on the back of significant revenue and cost synergies. Thanks to the great efforts of our integration teams, we have already identified approximately EUR 150 million of cost synergies that we expect to reach in 2025. At the same time, we continue to see substantial revenue synergy contribution by fiscal year 2025 and even more so beyond.On the cost side, we expect relatively quick savings from actions such as the Varian delisting, back-office alignment measures and joint procurement activities, just to name a few. More importantly, we see significant synergy opportunities on the revenue side. For instance, we see potential from improved regional sales coverage by going more direct in some countries with our own sales and service teams rather than working through distributors. Furthermore, we can cross-sell into existing customers. And together with Varian, we become even more relevant for our long-term value partnerships.We will work on joint product innovations on the software and digital side, and we'll combine diagnosis with cancer care therapy solutions. Furthermore, we will drive synergies by scaling up Varian's highly successful integrated digital service offerings like CTSI, which offers a range of service offerings like intelligence, evidence-based treatment planning solutions.As part of Siemens Healthineers and alongside our Imaging, Diagnostics and Advanced Therapies segments, Varian is our new fourth pillar focused on cancer care. Varian will be led by a strong leadership team with Chris Toth as CEO, as previously already announced, taking over from Dow Wilson, and with Matthias Platsch as Head of Finance. Chris is a Varian veteran with a long history of successful leadership previous year holding position as COO and President of Varian's Oncology Systems business. Matthias Platsch is a Healthineers veteran with strong expertise in finance joining from Imaging where he was very instrumental for the success as Head of Finance. Also, for the business lines, Radiation Oncology Solutions, Multidisciplinary Oncology Proton and Interventional Solutions, we keep the talent in the company and all previous business leaders remained in Varian. This will allow us to further continue and even accelerate the huge success Varian had before. Together, we now have the most comprehensive portfolio for our customers, expanding our scale and relevance and, at the same time, becoming even more focused on tackling major disease areas. We are more global than ever before. By combining our footprints, we will establish the largest on-the-ground sales in service with the most dedicated and passionate team members. There is no other company that comes even close to what we are creating here. Unparalleled innovation power is the basis of this new company. At our Shape 21 event in November, we highlighted some of our new innovations. The MAGNETOM Free.Max will broaden the range of clinical applications for MRI systems. First systems for clinical validations are installed, and commercial deliveries will start as planned towards the end of this fiscal year. The Photon Counting CT technology will improve clinical value by significantly enhancing image quality and adding more information for the physician, but at the same time, reducing radiation dose. The first Photon Counting CTs that will be used for clinical evaluations have recently been installed at so-called clinical use test sites. First results from these sites look very, very promising. With this, we are preparing the next step towards commercial availability of the product. On the Diagnostics side, we presented the upcoming integrated immunoassay and clinical chemistry, Atellica CI 1900 analyzer for hub-and-spoke settings and for midsized labs with lower throughput needs. Also here, the R&D project is on track despite the pandemic. The Atellica VTLi is the first innovative product launch from our Minicare acquisition. This patient side analyzer is the first high sensitivity troponin eye test from a finger stick in lab test quality, and hence, expediting the diagnosis of heart attack. The substantial reduction in turnaround time achieved when introducing this wireless handheld analyzer may offer clinicians a fast pathway to help diagnose and treat their patients, helping to accelerate care and improve patient outcomes. We are confident that all these innovations will underpin our strong positioning, allowing us to further outgrow our addressable markets and tap into adjacent fields. By talking about addressable markets, let me give you some insights in the regional development of our business. We have largely seen a continuation of the developments we spoke about in Q1. EMEA and Asia Pacific saw continued strong growth. Whereas in Americas, we have a slight revenue decline but clear signs of market recovery for the second half of this fiscal year. The slight revenue decline in Americas is caused last quarter by the temporarily postponed investment decisions throughout the pandemic. Let me also highlight that Americas still had rather strong comps in Q2 2020. Order intake growth, on the other hand, had a very positive rebound in Americas, which confirms our expectations of a market recovery in the second half. Looking into EMEA. We see a significant double-digit revenue growth driven by the high demand for our rapid antigen test, plus an impressively strong underlying business. In Asia Pacific, the positive underlying growth dynamics are unchanged compared to Q1 and the team recorded a healthy double-digit revenue growth, again, driven by China. Our broad regional diversification pays into our resilient performance at all times. This, together with the service business in Imaging and Advanced Therapies, the recurring revenue stream from our reagent sales in Diagnostics and our growing order backlog in long-term value partnerships, our broad global footprint and hence regional diversification, constitute a business model creating resilience and a high revenue growth at the same time, paired with good visibility over multiple years. Innovation-driven growth, as shown on Slide 7, together with our leading position in structurally growing end markets is the first of 4 key elements of our compelling investment case. The second element is our sector-leading margin with further scope of expansion in Imaging and Advanced Therapies and with Diagnostics on track to delivering improved margins 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 image, robotic-guided intervention. In mid-April, we finally closed the transformative acquisition of Varian to become an even more holistic partner for our customers and to reach a new level of profitable growth. These 4 elements show our unique positioning to create shareholder value and to shape the future of health care.And with that, I would like to hand over to Jochen.

[Jochen Schmitz, CFO & Member of Management Board]

Yes. Thank you, Bernd, and also a very warm welcome from my side. Let us now have a closer look at our financial performance in Q2, by the way, the last quarter, which we report without Varian. I will go first through the Q2 performance. We will then talk about the most important facts and figures around the closing, and we'll then obviously look at the remaining fiscal year as a new company. Now let me begin with the top line. We have continued our top line momentum with very strong growth, both in orders and revenue. Let me give you some color on the order development first. Comparable order growth in Q2 was at 23%, driven by excellent equipment growth, which was even a touch higher. Although Q2 '20 equipment order growth was flattish due to the start of the pandemic, it is an excellent order intake, both in absolute terms and compared to pre-COVID levels. The U.S. was a strong contributor to the equipment order growth in Q2, which is a positive precursor for second half year's revenue development of the United States. Speaking of revenues, revenue growth was at 13%, continuing the momentum from Q1, driven by strong equipment and excellent antigen test sales. Service revenue growth is back to normal levels at around 5%. The resilient growth trajectory of our service business that we saw also before the pandemic.Now switching to the regional perspective. EMEA again had excellent growth of 35%, driven by antigen test sales and by broadly distributed growth in the core businesses across the EMEA geographies. Asia Pacific again had significant growth driven also this quarter by China, but also by Japan. Americas still had a slight decline on the revenue line. But as I said before, the order dynamic showed a clear recovery for the United States, pointing towards a strong recovery in revenues for the second half of this fiscal year. Now let us look at the earnings performance in Q2. Our adjusted earnings per share was EUR 0.44 in Q2. Year-over-year, this translates into a 5% decrease at face value, which was mainly driven by the dilution from a higher share count and by foreign exchange headwinds. Bear in mind that Q2 last year was before both equity raises. Hence, we saw a dilution by the higher share count of around 8% year-over-year.On foreign exchange, we saw the drop-through from the translational foreign exchange headwind of around 5%. Comparable for share count and foreign exchange, adjusted earnings per share were up by 8%. Profit margin was at 16.8%, which is a solid level, fully in line with our full year guidance level of more than 100 basis points versus prior year, 15.5% for the full year. However, margin for the quarter was down year-over-year by 2 main topics. One being that Q2 prior year was a very tough comparable. We saw last year tailwinds from Siemens AG share plans impacting the P&L positively across all 3 segments last year, which we highlighted at that point in time, clearly. In addition, we had, last year, a positive impact in Diagnostics from higher capitalization. Taking these effects out, you would have seen roughly a flat margin development year-over-year already. In addition, year-over-year developments are related to this year's quarter. Due to our expected better performance in fiscal year 2021, we had to account for significantly higher incentives in this fiscal year. On our last outlook, we already highlighted that we expect the group margins to soften over 1 percentage point compared to our original budget incentive expenses. Now we expect group margin to be softened by around 1.5 to 2 percentage points compared to our original budget incentive expenses being part of the initial fiscal year '21 outlook we gave in November. Year-over-year, this translates into a headwind of over 2 percentage points. On a side note, it is important to understand that the incentive headwind from this year is likely to turn into an easy comp in terms of cost for the next year, whereas discretionary spend might be mirroring this effect. In case of traveling and trade shows, resuming more normal activity next year, the lower expenses this year might become a tough comp in the next fiscal year. But back to the recent Q2. As said, the incentive provisions resulted in a year-over-year drag of over 2 percentage points this quarter. We expect this effect also in the coming quarters, even a bit skewed relative to the first half year. Ongoing lower discretionary spending partly compensated this drag, but a net negative of about 100 basis points remained year-on-year margin development. For the second half, this will not be a positive year-over-year anymore. Now let's have a look at the other line items. The financial income in Q2 is adjusted for effects related with the financing for the Varian acquisition. The adjustments in Q2 is net positive because it includes reversal of the valuation for purchase price hedging for the Varian transaction. This was a negative impact of about EUR 50 million in Q1, which now became a positive effect in Q2. On the other side, we incurred around EUR 50 million other financing expenses for Varian. All in all, this translates into an adjusted financial income net of minus EUR 13 million, fully in line with our outlook from Q1. The tax rate was 27% in Q2, lower than in prior year quarter and also in line with our outlook. Now let's have a look at the segment performances in Q2. In Imaging, we saw more than 7% revenue growth on the back of strong prior year growth fueled both by healthy underlying growth in the core business as well as by pandemic-related demand, the latter in the Computed Tomography and X-Ray business. In all other modalities, we saw moderate growth. The Q2 margin was at a very healthy level of 21.1%. However, down on a very strong prior year quarter, which was positively impacted by the share plans and a normalization of mix. To remind you, Q1 fiscal year '20 was very weak in terms of mix, and we saw most of this coming back already in Q2 fiscal year '20. In this quarter, the margin was held back by the aforementioned higher incentive provisions, foreign exchange headwind as well as mix. Diagnostics saw significant growth, driven by sales related to COVID-19 testing and solid growth in the core business. Margin in Q2 was significantly up by 400 basis points year-over-year to 10.6%. The contribution from COVID-19 testing drove up margins versus the prior quarter, which had seen a material positive effect from the aforementioned share plans as well as from higher capitalization. At the same time, we also saw the headwind from incentive provisions in this quarter, in the Diagnostics segment, even a bit more pronounced than in the other segments due to the success with antigen test. I will give some additional color on Diagnostics later. Advanced Therapies saw 2% growth, a decent performance on a strong comparable of 6% in prior year quarter. Considering that Advanced Therapies, there is no portfolio for pandemic-related demand. Despite a softer growth quarter, we see Advanced Therapies well on track for substantial growth this year. Also, due to the fact that lead times in this segment can be a bit longer than in Imaging, for example, when equipping complex operating theaters for interventions. Hence, it is quite natural that there is a slight time offset to the developments we see in the core Imaging business. Q2 margins in Advanced Therapies were down to 14.2% in Q2 versus a strong prior year quarter, which was positively impacted by the aforementioned share plans. In this quarter, the margin was negatively impacted by the incentive provisions, headwinds from foreign exchange of above 100 basis points, negative mix effects due to a lower share of U.S. business and also ongoing investments for Corindus. This has led to a softer quarter. However, we are used to Advanced Therapies being sometimes a bit lumpy in the quarters due to its smaller size compared to the other segments. Fundamentally, we see a very positive development of the business, but more about this later in the outlook section. Now let us have a quick view at Varian. As you know, we closed Varian 2 weeks after the quarter end. So I will give you a quick run-through of the most important KPIs of Varian's Q2. On orders. Gross orders in Oncology Systems posted a sequential improvement in the first half of the fiscal year towards mid-single-digit growth at constant currency in Q2. This is a clear step-up versus the double-digit declines in the second half of last fiscal year, especially the momentum in the United States and in China contributed to this improvement. On revenues, we also saw a clear sequential improvement in the first half year to a still flattish year-over-year development in Q2 at constant currencies. As expected, The revenue development is trailing the order development.And finally, on margins. On an underlying basis, operating non-GAAP margins in Q2 was in the mid-teens.Now let us look closer at the Q2 performance at Diagnostics. As you can see, we have updated the slide from Q1 to reflect the latest developments. The momentum of rapid antigen test sales continues in Q2 with EUR 190 million worth of sales. The first half year, therefore, with EUR 320 million, slightly ahead of what we had assumed. Originally, we assumed EUR 300 million to EUR 350 million for the fiscal year, with the majority of sales in the first half. As you know, in March, we received, for our rapid test, the special approval for use by lay persons in Germany and recently also in France. And just now, we received the C-Mark for use by lay person. This creates a new opportunity for rapid antigen testing, the self-testing of lay person. The teams at point of care worked very hard to meet the additional and short-term demand, which arose from this opportunity. Therefore, we now updated our assumptions for rapid antigen test sales to around EUR 750 million in fiscal year 2021. We will later, in the outlook section, include this in our expectation for fiscal year 2021.Now back to the Q2 performance. If we take out the rapid antigen test sales as well as sales from other COVID-19-related tests, we get to a very solid comparable growth number in Q2 in the mid- to high single digits. In Q2 -- in Q1, we already saw solid growth in the core business. We see this as a positive proof point that growth for routine testing is being sustained. This is fully in line with our plan for Diagnostics. On the profit line, the rapid antigen test sales were a significant contributor to profitability in Q2. We expect the margin contribution to peak in Q3 based on high volumes. In the latter course of the second half of the fiscal year, we expect the margin accretion to decline due to slowing demand and respectively lower volumes as well as accelerated price erosion. On the opposite, we saw in Q2 some extraordinary headwinds like the incentive provisions being even a bit more pronounced in Diagnostics than in the other segments due to the strong revenue outperformance of Diagnostics. If you take out the accretion from all COVID-19-related test sales in Q2 and the extraordinary headwinds, we saw that the underlying profitability was in the mid-single digits, in line with what we saw in Q1. The fact that underlying profitability is being sustained is another positive proof point that we are on track in Diagnostics with what we have planned. Now let us shift gears from the Q2 performance in the segments to the successful closing of the Varian transaction and what this means for our balance sheet. Let me start with the cash performance in the first half. We saw an outstanding cash performance in the first 6 months. We generated cash of over EUR 1 billion, significantly above the prior year period. This cash performance was driven by a strong contribution in operating working capital. We also saw a positive impact from advances, for example, from increased government funding for health care as well as unused budgets from last year being filled up with orders now. In addition, we also saw a lower cash-out from incentives due to the fact that last year's, we were lower in target achievement due to the pandemic. This high cash generation comes in at the right time since we had a large bill to settle in April. As you know, we closed the Varian transaction on April 15. And shortly before, we completed the financing with the second and last equity raise end of March. With this last step, we achieved a very solid financing mix of around 65% debt and 35% equity for the transaction. The debt portion was financed with term loans by Siemens AG at arms length with very favorable market rates in March. Shortly before this, Siemens AG raised debt on the capital markets with the same maturity profile. The equity portion of 35% was within the range of up to 50% of the total financing, and most importantly, enabled us to achieve an optimal financing mix for the company going forward.This brings me directly to our leverage post-closing. Our net debt as of March 31 is, from our today's standpoint, understated because the proceeds from the equity raise in March already sit on our balance sheet while, obviously, the bill for the transaction was settled on the day of closing on April 15. Therefore, we calculated a pro forma net debt and leverage, which approximates our balance sheet assuming we would have closed the transaction on March 31. In this pro forma scenario, our net debt would be around EUR 14.4 billion, adding the net debt, respectively, net cash position of both companies. On a pro forma EBITDA where we added the EBITDA of the last 12 months of both companies, we would be at a leverage of about 4.2x net debt over EBITDA as of March 31. This leverage of 4.2x represents what we communicated as an optimal finance mix for the company. On the one side, we may use our healthy balance sheet by taking on debt at favorable market rates. And on the other hand, we raised the right amount of equity to end up with a leverage slightly above 4 at the top end of solid investment grade like territory. From there, we will now further delever with the strong cash generation of the combined company in the coming years.Let me now share some details on the transaction. Bear in mind that it was only 2 weeks ago that we closed the transaction, so the analysis is still at an early stage and figures are based on our first estimates. But let me start with something that is already 100% clear. Varian will be reported as a new segment and will thereby fully transparent to the markets. To make sure that we can provide the transparency with correct books and records, the teams are working hard to harmonize accounting methods for our first joint disclosure in Q3. Due to the harmonization being still work in progress, our estimates contain a certain degree of uncertainty due to differences in accounting methods, EG in revenue recognition. With Varian consolidated, we consequently incorporate Varian into our outlook for this fiscal year. More on this later in the outlook section. Any views beyond 2021, we would refer to our planned Capital Market Day in autumn where we intend to give you an update of the combined company also on the longer-term prospects. With the transaction of that size, we will also incur sizable transaction-related costs and PPA effects. For second half, we expect costs in the range between EUR 0.2 billion and EUR 0.3 billion, EG for transaction and integration-related costs as well as for transaction-related costs in financial income. These costs will be eliminated for our adjusted EBIT and adjusted EPS figures. Within these costs, we expect a negative impact on the financial income net from the valuation of the aforementioned deal contingent forward for the Varian financing as the U.S. dollar-euro relationship changed again until the closing date. We saw the effect from this forward already negatively impacting Q1, then reversing in Q2. The valuation has been finalized with the closing. So we expect in Q3, negative impact of EUR 0.1 billion in financial net income. The total PPA effects are currently estimated to be between EUR 0.5 billion and EUR 0.7 billion, whereas PPA effects are obviously higher at the beginning and becoming lesser over time. Regarding the tax effects, we do not expect material effects on the tax rate for this fiscal year. Regarding the financing expenses, we entered into several term loans amounting to a USD 10 billion total with Siemens AG. We then did a debt restructuring and converted the U.S. dollar loans into synthetic euro-denominated loans, benefiting from the lower interest rate in the Eurozone. By doing that, we achieved an average interest rate of around 0.3% per annum. Therefore, we expect around EUR 25 million to EUR 30 million of interest expenses per annum in the coming fiscal years for the Varian debt financing. Let us now have a closer look on what to expect in the remaining fiscal year 2021. We raised our outlook again compared to our previous outlook from Q1 for 3 main reasons: First, better-than-expected developments in our operational business; second, an updated assumption on the rapid antigen testing; and third, we incorporate Varian into our outlook. We raised the outlook for comparable growth to 14% to 17% growth based on a raised growth guidance in all 3 segments. We expect Imaging to grow clearly above 8% on the back of a strong order book and expected recovery in the U.S. market. Diagnostic is now expected to grow above 25% due to the updated rapid antigen test sales assumption of around EUR 750 million sales in fiscal 2021. Advanced Therapies is expected to grow above 7%, also based on a healthy order book and the recovery in the U.S. market.For Diagnostics, we have also raised the guidance on profitability. We now expect Diagnostic margins to exceed 10% in fiscal year 2021. Consequently, group margins are expected to improve by up to 200 basis points in fiscal year '21. In the previous outlook, we expect an improvement of over 100 basis points. All other assumptions on margins and tax remain unchanged. Now let us have a closer look at the raise of the EPS outlook. The outlook for adjusted earnings per share was raised to EUR 1.90 to EUR 2.05 in fiscal year 2021. As you know, the midpoint of our previous guidance was at about EUR 1.73 adjusted EPS. We -- when you now look at the increased growth rate by 5 to 6 percentage points, including the higher antigen assumption, we would expect around EUR 0.16 to EUR 0.18 of EPS accretion from these higher operations to around a midpoint of EUR 1.90. Adjusted EPS without Varian on the original share count of 1.072 billion shares. Just to be super clear on this, the EUR 1.90 are roughly calculated the midpoint expectation, excluding Varian.So now we incorporate Varian into the calculation. Going forward, we expect a revenue contribution from Varian in the second half between EUR 1.2 billion and EUR 1.4 billion. Bear in mind that this will not show in the comparable growth rate for fiscal year '21 since portfolio effects are excluded for 12 months after closing. On the earnings side, we expect an adjusted EBIT margin at Varian between 12% and 14% in the second half of the year. Let me remind you that the contribution is incorporated from the day of closing onwards, so we cannot account for revenues and profits in the first 2 weeks of April. Let me also remind you, as stated earlier, that these are our first estimates and they contain a degree of uncertainty due to the harmonization of accounting methods. We have, for example, identified a difference in the rules for revenue recognition. At Healthineers, we recognize revenue at a later stage than Varian has been doing until now. This is also one of the reasons why we choose to guide in ranges for the remaining fiscal year. The adjusted financial income will be expected to be negative with EUR 50 million to EUR 70 million financial expenses in fiscal '21. The slight increase versus previous guidance results from the interest expenses were the debt financing for Varian of around EUR 15 million to EUR 30 million per annum, respectively, EUR 12 million to EUR 15 million for our half year. Other transaction-related financing costs are taken out of our adjusted EPS number accordingly. Including the debt financing, we expect Varian to be accretive to our adjusted earnings per share this fiscal year between EUR 0.09 and EUR 0.12. Before we now incorporate the Varian EPS accretion into our outlook, let us briefly look at the share counts. Previously, we expect an average share count of 1.072 billion shares for fiscal year '21. After the capital raise, end of March, we now have a total new share count of 1.128 billion. which will be fully effective for fiscal year 2022. In fiscal year 2021, we still see an average share count of about 1.1 billion for the EPS calculation, yet higher than the previous outlook. Hence, we see a dilution of around 2% or around EUR 0.05 from the higher average share count versus the previous outlook, which we need to consider when adding the Varian EPS accretion. The EPS accretion of Varian, including the share count dilution would then roughly be between EUR 0.04 to EUR 0.07 in fiscal '21. Adding this to the rough adjusted EPS calculation without Varian of around EUR 1.90, this would bring us to a midpoint range between EUR 1.94 and EUR 1.97. This rough calculation gets us -- gets you in the ballpark of our new outlook of EUR 1.90 to EUR 2.05 adjusted earnings per share.Knowing that this was a lot of stuff, I hope it was still helpful in terms of understanding the bits and pieces that went into our outlook. Before we go to the Q&A, let me share our current view on Q3. In Imaging, we expect the strong momentum to continue both in top line and in margins. In Diagnostics, we already highlighted the expected opportunities from rapid antigen test sales on top of a solid core business. And for Advanced Therapies, we expect a clear rebound in Q3, both in top line and in margins. And with this, I close the presentation and hand it back to you, Marc.

[Marc Koebernick, Head of Investor Relations]

Yes. So Patrick Wood from Bank of America will be the first one to ask his questions, 2 of them. Patrick, floor is yours.

[Patrick Andrew Robert Wood]

Perfect. I'll tell you what, I'll be kind and keep it to just one, so people have a lot of time. The order book number was considerably larger than I think at least I was expecting going into the quarter, the 23%. And obviously, in Imaging, you start to analyze a slightly easier period of time for Q3 and Q4. I guess in the context of that order book and then the softening comps within that part of the business, why wouldn't we expect growth to be -- and I appreciate you've just raised the guidance, but more than the sort of greater than 8%? That would imply there's something either rolling off or something that I'm missing. Any color around that and the order book would be great.

[Jochen Schmitz, CFO & Member of Management Board]

Patrick, thanks for the question. And if you -- what I said is I said clearly above 8%. And so I gave you some guidance that it might be more -- clearly more than 8%. Secondly, if you look at prior year's numbers, and you don't look by quarter, you see that we were still positive last year with regard to growth rates in Imaging on a full year basis. Now we guide for a number clearly above 8%. That means if you add those 2 numbers together, you might end up with a double-digit number, divide this by 2, and you see that we are growing more than 5% per annum, what is the original guidance we have for Imaging when we announce our upgrading phase. So I think this is a very, very solid development, and we feel very, very comfortable with our development in Imaging. And if you look at market share data, in particular also from the United States and where we have already data in, it looks very, very good.

[Operator]

[Operator Instructions]

[Marc Koebernick, Head of Investor Relations]

Okay. That did the trick. We're a bit irritated for a second. So since Falko actually figured it out, he should be the next one to ask the question. So Falko, the floor is yours. Please go ahead.

[Falko Friedrichs, Research Analyst]

Can you hear me? Hello, hello. Can you hear me?

[Marc Koebernick, Head of Investor Relations]

Yes, we hear you.

[Falko Friedrichs, Research Analyst]

Perfect. Two questions, please. Firstly, on the COVID-19 antigen tests and specifically on the margin, the EBIT margin for these tests. If I remember correctly, that level should have been around 50% in the first quarter. Could you share some color on how it looked in the second quarter now and what your expectation is for the next few quarters? And then my second question is on the underlying Diagnostics business. Thank you for sharing the color you just gave us. But can you give a little bit more detail on how you're progressing with the Atellica rollout, on how the routine diagnostic testing levels are coming back and what we can expect here over the next 2 quarters this year?

[Jochen Schmitz, CFO & Member of Management Board]

Yes. Thanks, Falko, for your question. On the COVID-19 antigen testing, what we clearly highlighted last time was that we said that this test is a source test that the contribution margin of those kind of tests is about 50% of our -- more or less of our self-developed tests. Obviously, it's also depending very much on the price development of those tests, and this is -- I think these are tests, which are available by a lot of competitors. So we expect, therefore, also with maybe slowing demand and increasing supply, an accelerated price erosion over time, in particular in the second half of our fiscal year also towards the Q4. In Q2, we saw a price level around EUR 4 per test, which was a bit lower than in Q1. And with this, I give it back to Bernd.

[Bernhard Montag, President, CEO & Chairman of Management Board]

For the Diagnostics business, ex antigen, yes, whether -- So we are making very good progress in our efforts to further mature the Atellica platform. We are very well on track with topics like the installation of [indiscernible] with further streamlining the processes, reducing costs -- reducing onetime efforts in the installations and also ongoing support costs. We are very happy with the development in the United States, which was often a topic in our calls where we -- where the team is doing an excellent job.We saw a slight -- in the pandemic, a slight, say, reduction of the -- when it comes to Atellica installation, simply because of the pandemic or the changes in priorities when it comes to what our customers are focusing on. But that is more in the 10%, 20% range. But when it comes to the revenue development, we will now enter in Q3 a period of extremely easy comps, yes. Q3 last year was the most problematic one for diagnostics, simply because of the reduction in elective procedures. So that we will now see in Q3 and Q4 a good growth driven by this year. But in the end, we will then get into a growth trajectory in the low to mid-single digits as the normal -- as the target is for this business once the dust has settled off the pandemic.

[Marc Koebernick, Head of Investor Relations]

Okay. So Michael Jungling from Morgan Stanley should be next in line. [Operator Instructions] Michael?

[Michael Klaus Jungling, MD, Head of MedTech & Services and Analyst]

Great. Can you hear me?

[Marc Koebernick, Head of Investor Relations]

Yes.

[Michael Klaus Jungling, MD, Head of MedTech & Services and Analyst]

Excellent. I have 2 questions. Firstly, when it comes to the synergies with Varian, am I misinterpreting a more positive tone on what you are now seeing when it comes to Varian synergies, perhaps also on the cost? Because previously, I think of the more than EUR 300 million. I think, originally, there was EUR 200 million of revenue synergies and EUR 100 million of cost. And your slide deck today refers to EUR 150 million of cost synergies. Is that a correct interpretation of the tone and the messaging that you are trying to send today? And then question number two is when it comes to the revenue synergies, how quickly can you change some of these distributor contracts, et cetera, that are part of the revenue synergy calculation? Can you talk about how quickly they can be adjusted and in what regions you will intend to do these first?

[Jochen Schmitz, CFO & Member of Management Board]

Michael, I will start and then hand over to Bernd. On the synergy side, yes, I mean, first of all, it's always important to remind that this transaction is definitely not a consolidation gain. Therefore, we highlighted very early in the process the great opportunity on the synergy side from revenue. This has not changed. On the other hand, and therefore, we were also maybe a bit cautious with regard to cost synergies. By the way, we always guided for more than EUR 300 EBIT synergies from cost and revenue that is not new. That is exactly what we did say in early August. And now we -- as we obviously worked our way together with Varian to the synergy profile, we have now much -- I would say, much more grip around the synergies, in particular on the cost side. And therefore, we felt comfortable to guide now for a concrete number on the cost side with EUR 150 million, at least. So that is not necessarily a super clear signal on higher synergies as we did not -- as we were not super clear on how high they will ultimately be until 2025. But it is a clear signal that we have gotten our arms around it together with Varian and have a much more concrete number now on the cost synergies already.

[Bernhard Montag, President, CEO & Chairman of Management Board]

Yes, Michael, regarding the going direct, the main geographies are the growth geographies in Latin America, Eastern Europe and Asia below the countries of the size of India and China. Of course, we are in direct a long time already, and this is very successful. Typically, this is a process which can take 1 to 2 years here because we want to do this in an amicable way, and also make sure that we don't break customer relationships and so on. So it's not happening immediately, but it will happen and the plans are in place.

[Michael Klaus Jungling, MD, Head of MedTech & Services and Analyst]

Okay. Maybe I can quickly follow up on these revenue synergies with these growth countries. Can you talk about whether you will have to incur some significant financial expenditures? Perhaps you do some settlements or early settlements with the distributors that Varian has used in the past and the willingness for those parties to now enter into transactions, perhaps bring those forward.

[Jochen Schmitz, CFO & Member of Management Board]

Michael, as you can imagine, this is a case-by-case -- or there is a case-by-case assessment necessary. And there's -- and they will not be -- there's not a clear pattern. But obviously, if you start buying something out of an existing contract, you need to do something on the settlement side for this. We have not fully figured out what it means and what the exact, I would say, time lines per country and per case will be. And as you can imagine, this is also a topic, which is heavily antitrust related. Therefore, we could not do everything already. But I think we will be in a much better position to talk about this in more detail at the latest when we lay out our mid-term plans for Varian.

[Marc Koebernick, Head of Investor Relations]

Okay. Thanks, Michael. David Adlington will be next in line from JPMorgan. So please, David. Floor is yours for your 2 questions.

[David James Adlington]

So firstly, just on the Varian again. Just picking up on the 12% to 14% margin target for this -- for the second half. You touched a little bit, I think the 15% they've done historically. Just any commentary in terms of any particular headwinds or whether that's just a timing thing in terms of particular quarters? And then second, sorry, I may have missed it, but did you give an order growth number for Varian in the quarter as well?

[Jochen Schmitz, CFO & Member of Management Board]

Yes. Dave, thanks for the questions. What I said on the order numbers for Varian, I said we clearly see significant sequential improvement, and we had a double-digit decline in the last year on the -- in Q3, Q4. And now we saw already promising Q1. And now we are in mid-single-digit growth rates in Radiation Oncology on the other side. So clear uptick. And on your second question with regard to -- or first question with regard to the margin profile for the second half. And as we guided for, we saw underlying about 15% profitability, but I also hinted towards this accounting harmonization topics. What do I mean by this? Or what have we found out, so to say? It's not a big topic. It's just a temporary topic. But we have a different policy on revenue recognition.Siemens Healthineers recognizes revenues later than Varian did so far. We recognize revenue normally when equipment has arrived at the customer side. Varian does recognize and has the contracts laid out in that way, normally ex factory. This can be several weeks difference depending on where the equipment has to land at the end of the day. And as you know, the fiscal year-end is end of September for us as it was for Varian beforehand. September is the strongest month of the year. Therefore, there is a certain whatever risk. It's not a risk because it will end up in our books anyway, maybe in a different quarter. But there is a risk that some of the revenue will shift with full contribution margin into the next the next quarter. And as September is more pronounced than all the other months, this might be a bigger effect on Q4, but it also depends on how quickly we can adjust, so to say, the shipment behaviors and things like this. Therefore, there is significant uncertainty to this. But again, not a valuation-related uncertainty, just a temporary, so to say, a recognition topic in which quarter we will show the revenue and the related contribution margin. Therefore, those numbers are still -- given with a significant level of uncertainty, but we felt that we should give you some indication of what we currently see. And please have in mind, we can openly talk about this since 2 weeks. So this is obviously my forward-looking statements. It's a topic you cannot talk before you don't have the closing in place. And so far, this topic.

[Marc Koebernick, Head of Investor Relations]

So thanks, David. So Scott Bardo from Berenberg would be the next in line. Scott, please your 2 questions.

[Scott Bardo, Analyst]

So clearly, COVID-19 antigen tests have presented a meaningful surprise to your initial expectation this year. I wonder if you could please comment on the demand you may see for serology. I know you put a lot of infrastructure in place here and have a good test. I wonder are you starting to see some demand here, which could also be a positive surprise?The second question just follows on from David, please, just around the harmonization. And thank you, Jochen, for your sort of timing-related comments there. But just putting those into some sort of context. I think that as we look into the next year, in fiscal 2022, we'll look for some sort of starting margin for Varian. And I think Varian guided prior to COVID for around 17.5% to 18.5% margins for 2020 prior to COVID. Can you give us some flavor at least of whether this is a reasonable starting point, if you like, to incorporate in our modeling?

[Bernhard Montag, President, CEO & Chairman of Management Board]

Scott, yes, I'll take the first one on serology. I mean yes, we have a very, very good antibody test. I mean, the investment was in developing the test. I mean you mentioned infrastructure. There is not an infrastructure investment, I mean the test run on our established Atellica systems plus also the legacy systems. I think on serology, it's currently not a big business. There is some interest. And in the end, it will be -- the question will be is -- will after the vaccination, the topic of testing the immune status become a clinical reality, which is, so to say, the bullish case, the more bearish case is to say. Well, in other infectious diseases, this is also not happening. So vaccination is just refreshed without doing a companion diagnostics on it. So currently, I look at it as a potential upside, but not one I would bet on.

[Jochen Schmitz, CFO & Member of Management Board]

Scott, thanks for your question on the starting margin point for next fiscal year. I tried to say that we want to talk about 2022 around November, but I can give you at least, I would say, some color on it. And the most recent disclosure of Varian for the future was the proxy filing they gave. This was, by the way, the number they showed us during the process. That's how the procedure is. And the proxy filing for 2022 suggests 16.8%. That is obviously without synergies.On the other hand, you know that the synergies, we will see synergies kicking in from costs rather quickly. On the other hand, depending on the way how we start working on the revenue synergies, which in particular entail also R&D and some market development expenses, this net synergy might be a bit lower than what the cost synergies alone would suggest. Therefore, this is something we need to work out. I mean we obviously did not have yet a deep dive with Varian on their planning. This is starting in the coming months. And I think it's a bit too early, but I would say the proxy filing is the best information and the most recent one you can look at.

[Marc Koebernick, Head of Investor Relations]

Thanks, Scott. So Veronika Dubajova from Goldman Sachs will be next line. Veronika, floor is yours.

[Veronika Dubajova, Equity Analyst]

I have 2, please. My first one is on the Imaging order growth. Pretty astounding performance, in particular versus your competitors. And I'm just curious, Bernd, if you can talk to a little bit more color kind of what's driving that order growth? You mentioned U.S. or the Americas seeing strong performance. But if you can give some regional color, divisional color. And then the last couple of quarters, you've seen a fairly healthy tailwind from CT. Maybe if you can just break out the contribution from that to the order growth number, that would be super helpful, just so we can think about the revenue composition from that order growth and how that translates into our models. And then my second question is just on the broader sort of portfolio. Obviously, you've just -- you're just digesting a very significant acquisition. But there's been some rumors in the press suggesting that you might be considering a divestiture of a smaller, less core business. And so I'm just curious if you can comment on that. And in general, your appetite to do any portfolio pruning now that you have Varian in.

[Bernhard Montag, President, CEO & Chairman of Management Board]

Yes. So on the imaging side, some more color, I mean, let's start with a more regional view. I mean what we see is a very strong European business, which is driven, I mean, by healthy underlying demand on the one hand here, but then also certainly the -- some pandemic readiness investments still. And also the government programs too, a bit of stimulus in it. In China, which is basically the most important market to look at when it comes to APAC, there is a super strong underlying growth plus a special demand on the CT side for establishing the so-called fever clinics, which is a government-triggered program, which is driving the special increase on the CT side. This is now slowly going down again. So this is really more of a one-off character. And we see in the United States now the effect of, call it, unfreezing frozen budgets, which has created a situation where we have now already very good order growth while revenue is not yet following because of the timing of the orders.We saw good market share development again in the United States on the order side, which is encouraging, especially because we also don't have a big value partnership transaction in the order book in this quarter. So when you take it from a -- let's say, from overall timing of orders and revenue point of view, geographically, we might see or we will see some normalization over time in Europe and the normalization to the normal high growth rates in China. But we will see the U.S. coming back. I mean, I think what is really important to look at -- to be conscious of when you look at the strong numbers we present in this quarter, that the Americas contributed minus 1% to the top line. So -- and when this super important market comes back here, it will compensate definitely a big portion of a normalization in Europe and in Asia.And the same, you can also see in the modality mix, there is currently a very high CT mix in it. But at the expense of -- at the expense, so to say, of MR and MI, Molecular Imaging, PET/CTs and so on, since they are not really pandemic-related, are a little bit down priority side. And so we will see a similar normalization of the mix on the modality side, which also implies there is no real mix effect and adverse mix effect to be expected when it comes to margins from a geographical point of view, but also from a modality mix point of view.Your portfolio question. I mean, we are -- of course, it is -- you know how we build our portfolio in a way of being, on the one hand, super strong in the focus -- in the mainly focus on certain businesses on the 4 verticals. But as important, it's about using the scale so that we can use our sales force and go -- can do key account management together to team up that we can use service and that we can also be meaningful when it comes to digitalization, but also when it comes to the value partnerships. This is how we look at the portfolio, and this is also why certain businesses often need -- and if they don't 100% fit into this type of story, why we choose to find optimized setups for them. And this is what has triggered also the rumors in the press. But in the end, when you look at the strategy, it is about building this portfolio of leading businesses, which are leading on the one hand when compared stand-alone. But on the other hand, which benefits from the big trends and from being under one roof.

[Marc Koebernick, Head of Investor Relations]

Okay. Thanks, Veronika. So Ed Ridley-Day from Redburn would be the second, but last in the line. [Operator Instructions] Ed, floor is yours.

[Edward Nicholas Ridley-Day]

Congratulations on closing the deal. And Jochen, thanks for the very clear guidance this morning. Just on the PPA adjustment, just to be clear, that will be excluded from adjusted disclosures for -- related to Varian. That would be my first question. And also just follow-up on Advanced Therapies. Can you give a detail a bit on core in the additional investment you're making there and how we should see Advanced Therapies perhaps accelerating into next year?

[Jochen Schmitz, CFO & Member of Management Board]

Okay. Ed, on your first question, a quick one. Yes, we exclude this from the -- PPA related to Varian is not part of the adjusted EPS guidance, as already, I think, clearly laid out in the annual report according to our definition of adjusted EPS. It is not part of it. I just gave the numbers to give you a glimpse on what the reported numbers will look like. It will be impacted.Okay. On -- I kick it off on Advanced Therapies. For the moment, we had that during our time of being a public listed company, several times that we saw some development in Advanced Therapies. But on a yearly basis, it's a very solid business. We expect -- as I said, we expect more than 7% growth, and we stick to our initial guidance that we will stick with industry-leading margins in that business, and therefore, expect a significant improvement in margin already in the -- in Q3 and Q4 again. So therefore, nothing to worry about.On the investment side, we did a significant investment into that business with Corindus. As you know, Corindus is an investment in an adjacent market, endovascular robotics, a market which needs to be developed and a market where we are relatively early stage. We are still on a heavy R&D road map working. Therefore, we are constantly investing into that road map on an increasing basis as planned. Due to the fact that the pandemic hit the planet, the development of the market and the coverage of the additional cost for R&D and market development is not to the extent yet covered by revenue with regard to Corindus. And I think that is a bit the topic why we see even year-over-year an increasing burden, so to say, on the profitability side from Corindus on the Advanced Therapies.It is currently a bit difficult to predict how quickly we will get out of this. Depending on what -- how quickly we will see revenue starting covering the additional cost on the R&D and selling side. But we see a promising funnel, but it is still a business, which is new to the planet. Endovascular robotics is not an existing procedure. Therefore, it's also a bit more difficult to predict than, I would say, a market development in CT or MRI. But we are very, very satisfied with what we did here in this regard with regard to the acquisition. Unfortunately, we were -- if you want to say that in hindsight, we were a bit unlucky with the pandemic. But I think this is, relatively speaking, a minor topic considering a pandemic of this size.

[Edward Nicholas Ridley-Day]

And can you speak to the installed base now or...

[Jochen Schmitz, CFO & Member of Management Board]

On Corindus?

[Edward Nicholas Ridley-Day]

Yes.

[Jochen Schmitz, CFO & Member of Management Board]

Yes. It's still a limited number. I don't have the numbers even exactly with me, but we -- I think we talk about smaller triple-digit number of systems in the field.

[Marc Koebernick, Head of Investor Relations]

Okay. So last question would be -- no, not last question, second but last, again, would be Daniel Wendorff from Commerzbank.

[Daniel Wendorff, Team Head of Healthcare & Chemicals]

Yes. One is on the incentive provisions. What is the normal burdening level we should expect in the fiscal year maybe to give a bit more color here? And what operational performances would really make these incentive provisions really noticeable for us on the analyst side in your results? That would be my first question. And then maybe a broader question on the integration of Varian. Maybe you can lay out the thoughts to report Varian as a separate segment and not combining it with Imaging, for example, as a separate new system or segment.

[Bernhard Montag, President, CEO & Chairman of Management Board]

Yes. Maybe I start -- I mean, first of all, we want to, on the Varian side, on the one hand, ensure transparency, which is very important. But on the other hand, when it comes to the business, it is -- it deserves its own logic. This is very much about a customer group, I mean, in the core, core business, radiation therapy, which is -- which deserves its own go-to-market, its own focus on the R&D side, like Imaging does when it comes to radiology. And typically, the combination is then when it comes to building the digital bridge between the two, when it comes to building imaging components into the therapy delivery or combining the offering in -- when it comes to larger transactions, which are then typically happening on the institutional level and not on the specific level. So this is why Varian, as much as Advanced Therapies, which is catering towards cardiology, neurology, deserves its own business logic. One comment on the incentives before Jochen goes into it. We have to see -- I mean, last year -- I mean this is, of course, very much about how are we doing compared to the original targets in a year, yes? So it's not to be seen in historical numbers. It is what is the target. I mean, last year, we have been in the -- and the team, so to say, has been in the unfortunate situation that the target have been set pre-pandemic. And you know that, typically, we want to be in the upgrading phase. We said we want to grow by more than 5%, and we ended up with 0 revenue growth, which in the last fiscal year had an impact on the incentives. While in this year, it is simply the opposite. So it is an extraordinary good year following an extraordinarily bad year when it comes to deviation from target because, I mean, this year, the team is really doing a super great job in using every opportunity from the pandemic and helping the health care systems. So this is the reason why there's also a big swing factor in the P&L, in this "cost item" over time. And it will certainly normalize in the years to come.

[Jochen Schmitz, CFO & Member of Management Board]

Dan, I think Bernd's explanation was perfect. And I just want -- I mean, I just can give you maybe -- normally, we would be in a payout situation, I would say. Normally, you are between 80% and 120%. Last year, we were particularly low. And remember, this year, early November, when we gave guidance, when the targets were set, we anticipate, for example, on antigen testing, EUR 100 million worth of revenue. Now it's EUR 750 million. This all makes a big difference. But on the other hand, we also saw then a relatively, I would say, unexpected performance on the CT side, X-ray side. So it's not only antigen, but also antigen. Therefore, this year, we are at a particular high payout level because on the target achievement. And as you know, in theory, it goes from 0 to 200%. And over the 2 years now, we are going more to the extremes in both years. And next year, let's assume next year will be more a normal year, and we were in the 100% arena. Therefore, it will suggest some upside year-over-year next year and then we're hopefully back in normal territory.

[Marc Koebernick, Head of Investor Relations]

Thanks, Dan. Now last questions would be coming from William Mackie from Kepler Cheuvreux. So William, ask your questions, please?

[William Mackie, Head of Capital Goods Research]

Jochen, Marc, just 1 question I wanted to come to with regard to logistics, supply chains and the integrity of your supply chains at this time and also, I mean, immediate disruptions. Could you just talk a little bit about where the risks in the supply chains are? I know you have a relatively localized manufacturing and relatively small volumes in terms of unit outputs. But are you seeing any stresses or risks relating to components in semiconductors? And particularly with regard to end markets, is there any specific risk relating to India, which may cause disruption in the third and fourth quarter?

[Bernhard Montag, President, CEO & Chairman of Management Board]

Yes. Thank you, Bill. Now I need to say 2 things. On the one hand, we have it under control. And we -- I want to -- when I think about the people in the organization who will potentially listen to the call, I don't want to make it sound too easy because a lot of work is done to ensure the supply chain integrity when you look at what our challenges now. And then there is really the topic of availability in the electronics market, I mean, which we have under control. And then there are escalations, but this is handled very diligently also with safety stocks and so on here. So this is not a topic, which you need to worry about. Second challenge is, and this is when it comes to, what we call, factory installation. This is cross-border teams. We have people do the installation of systems and need to cross borders, which is not so easy now and then when it comes to the pandemic rules here where we are in constant work of making sure that we have all the support of governments and so on to do this. And we manage this for the last 12 months very successfully, and I don't see this changing. But it requires a lot of attention as much as it requires attention now and then to make -- ensure, I mean, that flights with antigen tests onboard can really come from -- can really land in France and so on and so on. So a lot of topics are managed and sometimes even micromanaged as we speak, and the team is doing a great job. When it comes to India, certainly a tragic development. We are helping as much as possible. India is, for us, from a supply chain point of view, it is not a -- not so much a hardware topic. It is the hub when it comes to software development. So we will -- we have more than 2,000 highly skilled software engineers and digital experts in India. They are in very good hands, yes. And the transition to home office has also very successfully worked there. So no risk to the supply chain coming from India.

[Marc Koebernick, Head of Investor Relations]

This brings us to the end of today's call. Thanks for all your questions. Thanks for taking part. And as usual, even myself will always be available for any follow-ups. Thank you.

[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.