Morning, ladies and gentlemen, and welcome to the Siemens Healthineers Q1 Fiscal 2020 conference call. As a reminder, this conference is being recorded. Before we begin, I'd like to draw your attention to the Safe Harbor statement on page two of the Siemens Healthineers presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions, and are therefore subject to certain risks and uncertainties. At this time, I'd like to turn the call over to your host today, Mr. Marc Koebernick, Head of Investor Relations. Please go ahead, sir.
Thank you, Emma. Good morning, ladies and gentlemen, and welcome to our Q1 conference call. The earnings release and Q1 presentation were released at 7:00 A.M. this morning. You can find all documents on our IR website. Next to me are Bernd Montag and Jochen Schmitz, who will be taking you through our Q1 results and be giving you an update on some important developments in our company. Following that, there will be a chance for you to ask your questions to Bernd and Jochen. May I just remind you to limit yourselves to two questions each. Now I pass the word to the CEO of Siemens Healthineers, Bernd Montag.
Yeah. Thank you, Marc. Dear analysts and investors, let me first shed some light on the financial performance of our Q1 Fiscal Year 2020 before I give you a detailed update on where we stand in the upgrading phase of our Siemens Healthineers Strategy 2020. We had a very good start in the year in terms of top line, with comparable revenue up 5.5%, driven by imaging with around 7% and advanced therapies with around 9% both. Not only revenue had a good start, order intake was even stronger with an equipment book-to-bill of 1.2. This was the seventh consecutive quarter with a book-to-bill over one, and this creates a sound foundation for strong revenue growth also in the quarters to come. In terms of profitability, the quarter was on the weak side.
This was due to a margin dip in the imaging segment and a margin development at diagnostics, which has been very much in line with our guidance for the quarter, which we gave in November and December. Hence, two effects with kind of one-off characteristics occurred, a very bad mix in imaging and the Atellica rollout, and were the key reasons behind the comparably low margin of 13.5%. This also led to an, in absolute terms, lower adjusted EBIT, which is the key driver behind the 6% EPS cash reduction in this quarter. In terms of cash flow, the quarter was very positive. Group three cash flow increased year-over-year by EUR 268 million. To summarize, and Jochen will shed more light on the profit development in his part, we are confirming the outlook we gave to you in November.
Let me make one thing clear at this point, the imaging story is fully intact. Our growth momentum shows how we consistently outperform in this attractive field. In November, we introduced to you our internally so-called six pack, the chart summarizing our six strategic priorities in the upgrading phase of our company. We are focusing on three key themes in the three segments, and we have kicked off three groupwide initiatives. On the following two charts, I will shed some light on the inroads we have made here. I will start with the successes from the three segments. For imaging, our key theme is continuously innovating and making new markets with a focus on digitalizing healthcare, and we demonstrated this at the RSNA. An example for tapping into new markets is our new SOMATOM On.site.
With this mobile CT for head scans, we are bringing the CT scanner to the patient's bedside. This scanner revolutionizes head scanning, especially for intensive care patients, significantly reducing the risk of complications and also reducing time and staff intensity of the scanning procedure. The next example is also from our CT business. We are making further inroads when it comes to implementing the benefits of digitalization and artificial intelligence into our products. Our new single-source CT scanner, SOMATOM X.cite, comes with a revolutionary user guiding system, the myExam Companion. This is an AI-based intuitive user interface. With simple questions, it allows even less experienced staff to perform complex scanning procedures with high-quality outcomes and in addition, it improves average quality and saves time. Finally, a few words on our progress in AI.
I've spoken already a year ago about the introduction of the AI-Rad Companion Chest CT, and now we have achieved the 510(k) clearance for the product. The positive feedback we have been getting from our customers is encouraging, and we are consequently broadening the application of AI in interpreting images. As you know, the AI-Rad Companion is there to reduce workload and increase the speed for the radiologist by taking over routine tasks. At the RSNA, we have introduced two new applications, the AI-Rad Companion Prostate MR and the AI-Rad Companion Brain MR. With the new AI-based assistance, we are expanding our diagnostic offering to help our customers increase efficiency and improve the quality of care. Now over to our diagnostics segment. We are focused on manifesting our workflow leadership to successfully getting this business to market growth. Here we have made an important step ahead.
Siemens Healthineers will be the sole supplier of Quest's Immunoassay Testing. Our Atellica Solution will enable Quest to significantly increase its capacity, productivity, as well as clinical performance, by not compromising on manual depth. For us, it means having won the globally biggest player in diagnostic testing for our Atellica Solution with all its growth potential. We are proud that Quest has chosen us as partner for their future growth and is a great proof point for the unique proposition that our Atellica has to offer. Over to Advanced Therapies, which has continued its strong growth path also in this quarter in revenue as well as in order intake. Our focus here is to take the business to a new level of growth, also by tapping into direct procedure growth as well as focusing on growing clinical fields.
For this year, it is very much an innovation from the core business that will be very supportive, the ARTIS icono. Beyond this year, it will be about more than innovations in the core. Corindus will be an important factor in achieving our targeted high single-digit growth range for the segment. Speaking of Corindus, we have successfully closed the transaction and are happy with the way the integration is going. The customer response is very promising. In terms of product development, we have also seen important milestones with the first transcontinental in a robotic PCI procedure via 5G, with the first robotic-assisted neuro intervention, and the first robotic-assisted coronary intervention in Germany, thus systematically improving feasibility of the remote case by tapping into new clinical fields and expanding geographical reach.
Let me continue with the second half of our so-called six pack, our group-wide initiatives, and please turn to the next chart. As you know, the revenue growth targets of the upgrading phase are supported by two specific group-wide initiatives. Firstly, we have identified additional growth potential in the emerging markets. The key market here obviously is China. For us, this is a EUR 20 billion market. Other focus areas are the region Middle East and Africa as well as India. For these three markets, we have concrete action plans for above market growth, ranging from go-to-market, enhanced presence, dedicated products and solutions addressing the local needs. In Q1, we have seen outstanding equipment order growth in two of these three focus regions.
Both in China and in Middle East, Africa, we grew orders double digits, north of 20% in China and even north of 30% in Middle East and Africa. In India, we are already very happy with the current performance, yet we are very excited about the prospects to come, leveraged by our action plan for this growth market. Furthermore, we also see potential from a more focused go-to-market and from dedicated offerings when it comes to key accounts. In this second group-wide horizontal initiative, we utilize our product strength and breadth and market leading global service franchise as well as our approach to digitalizing healthcare in order to drive share gains with the leading providers. In Q1, we have been able to prove again that we have the right products and setup to prevail in the race for the consolidators.
For example, in Canada, we have won an important CAD 270 million deal with Hamilton Health as part of a 15-year strategic partnership, delivering around 200 imaging modalities as well as the attached service for that period. A similar success was achieved in Russia with a EUR 100 million deal with the Moscow Department of Healthcare in a 10-year life cycle agreement, again, focused on imaging products and services. Last but not least, I would also like to mention the contract with Quest at this point. This client is really a market consolidator, which we are partnering with here. The multi-year agreement for the deployment of around 120 Atellica Solution Immunoassay Analyzers is the largest contract for our Atellica deployment for us so far. As I said earlier, this is a lighthouse contract for us. It proves that we have the right product in a bifurcating market.
On the third horizontal initiative, driving ahead our own digital transformation, we are also making good inroads supporting our agenda for further digital processes, ultimately driving productivity. This brings me to the end of my part. We are well on track for delivering on our upgrading priorities, and this also makes me optimistic for our medium-term perspectives, i.e., our ability to grow sustainably over 5% and turn this around into around 10% per annum of adjusted EPS growth. With this, I pass the word on to Jochen, who will run you in more depth through the Q1 results.
Thank you, Bernd. A very warm welcome also from my side, good morning to everyone. After Bernd gave you the highlight of the quarter and a deeper insight of the progress on our strategic priorities, let's now have a look at our financial performance in Q1. Starting with order intake. We had a very strong start into the new fiscal year with 13% comparable order growth. The main contributor to this strong order performance was again the excellent equipment order growth in the high teens. Therein, advanced therapies grew equipment orders impressively in the double digits. Imaging had also impressive equipment order growth in the lower teens. As Bernd has pointed out, this is the seventh consecutive quarter with a positive equipment book-to-bill underlying our outlook to grow the top line at above 5%. Obviously, this strong total order growth.
equipment and service, grew our order backlog. Let me point out that this grown backlog fills our pipeline equally for revenues in the remainder of this fiscal year, as well as beyond. In addition to our order performance this quarter, our revenue performance in Q1 is also a proof point for sustained revenue growth above 5%. In Q1, revenue grew by 5.5% comparable with growth across all of our businesses. Imaging posted strong growth, advanced therapies was even stronger, and also diagnostics posted solid growth this quarter. Let me remind you that our revenue growth KPI is comparable, which excludes year-over-year effects from foreign exchange and from portfolio, meaning revenues from our recent acquisition, Corindus and ECG Management Consultants, are excluded from our growth KPI.
By looking at our regional performance, we achieved excellent revenue growth both in EMEA as well as in Asia, with China again posting excellent growth rates, 17% comparable growth in Q1. In the Americas, we saw a flat development, mainly driven by a slight decline in the U.S. Let me put this slight decline into perspective. Revenue growth in Q1 prior year, as well as in the previous quarters, were very strong. Hence, we see this rather as a normal fluctuation among quarters in one country. We remain positive on our top-line growth in the U.S. for the remainder of the fiscal year. Now, let us move over to adjusted earnings per share in Q1. Adjusted earnings per share declined year-over-year by 6%.
The decline in adjusted EBIT and respectively a lower adjusted EBIT margin was not fully compensated by a very favorable development in the interest expense and tax lines. Let us now look at the development line by line, and let me remind you briefly that we adjust both EPS and EBIT for amortization from PPA, severance, and M&A related transaction costs starting this year. The adjusted EBIT margin decreased by 290 basis points year-over-year due to the margin development at Imaging and at Diagnostics in Q1. At Imaging, the margin decreased due to a combination of mix effects and individual negative effects with one-off characteristics. At Diagnostics, the margin development was basically as guided in our outlook for fiscal year 2020 from November last year. We expected a low Q1 margin related to the ongoing ramp-up of Atellica Solution.
Imaging and diagnostic impacted the adjusted EBIT margin on group level on a similar level, leading to the 290 base points margin decline for the group. I will give much more color on these developments in the segments later in the presentation. Within the segment margins and in the group margin, respectively, we also saw a negative impact from share-based compensation. This more technical topic has a significant impact. The way how we account for the Siemens AG stock award that were already granted to our employees before the IPO means that fair value changes of these awards go as a cost item fully through our P&L because they are considered as debt instruments for us. These valuation changes can be substantial within a quarter, depending on the relative performance of the Siemens AG share price.
This negative impact year-over-year was in the ballpark of mid EUR 20 million in Q1 for the group, impacting the year-over-year margin with around -70 basis points for the group and the segment. We saw several other year-over-year negative effects also adding up to around -70 basis points, primarily showing up in imaging. This means about - 140 basis points year-over-year from so-called non-operational developments. We got burdened year-over-year with around - 100 basis points from negative mix, finally, the expected impact from the ongoing ramp-up of Atellica Solution. Moving from the EBIT line to the interest line. In our financing interest, we saw a positive figure of EUR 7 million .
This was firstly driven by lower interest expenses from our debt restructuring from Q3 last year, which reduces our debt interest by making use of the lower EUR interest rates. Secondly, we saw in Q1 higher interest income year-over-year, turning the overall financing interest positive. The higher interest income was driven by a positive effect from international tax procedure. This brings us directly to the tax line. The tax rate in Q1 was 27%, at the lower end of our tax rate guidance for the full fiscal year. If you do the year-over-year comparison, the tax rate in Q1 2019 had been even lower, with 23%, due to positive discrete tax items in prior year. With our first quarter being already at the lower end of the full year guidance with 27%, we clearly feel more comfortable with that range for the full year.
To conclude the slide on the Q1 group performance, let me add that we had a very good start in the new fiscal year in terms of cash. The free cash flow in Q1 amounted to EUR 244 million. In Q1 prior year, we had a rather soft start with -EUR 24 million negative free cash flow. More importantly, in Q1, we saw a very good cash conversion of 4.87 of EBIT into free cash pre-tax. This was driven by an excellent conversion in Imaging. Advanced Therapies had a lower conversion due to cash outflows related to the Corindus transaction. With this, let us move on to the segment performance. On segment level, we saw in Q1 top-line growth across the board and a mixed picture on the margin side. Let us now have a look at the Imaging in Q1.
At imaging, we again saw strong comparable revenue growth of 7%, driven by significant growth in X-ray products, molecular imaging and MRI both contributed with strong growth. The adjusted EBIT margin at imaging declined year-over-year by 250 base points to 17.4%, despite some tailwind from foreign exchange. The decline was driven by a combination of two main factors impacting Q1. Negative mix effects and various individual negative effects, which I described a few seconds ago on a total company level. On the next slide, we will look closer at these effects impacting the year-over-year margin development at imaging. Before taking the deeper dive into imaging, let us now look at the other two segments. Diagnostics posted solid revenue growth of 2.6% comparable, carrying on the momentum from the previous quarter.
On the adjusted EBIT margin, we saw, as expected, a decline primarily related to the ramp-up of Atellica Solution. The decline is partially a function of high numbers of shipments in the prior quarter. We shipped over 600 instruments in Q4 2019 and the associated installation cost of these instruments. Consequently, these costs now impact this quarter until the number of instruments under installation normalizes and are compensated by the future healthy reagent revenue streams. Furthermore, we also saw a drag on the diagnostic margin in Q1 due to a voluntary quality action in relation to our molecular offerings. Together with the previously mentioned effect from share-based compensation, these two effects burdened the Q1 margin with around additional - 100 basis points. Now to advanced therapies, which got off into the new fiscal year with a very good start.
Advanced therapies posted very strong comparable growth of 9%, driven by significant equipment growth, especially in our angio portfolio. The adjusted EBIT margin remained nearly flat year-over-year, despite negative effects from Corindus. Since Corindus was closed one month into the quarter, the expected dilution from Corindus for the full fiscal year of 300 basis points did not impact the quarter in full. Positive effects from business mix and some tailwind from foreign exchange lifted the margin close to prior year quarter levels. Let me quickly summarize Q1 in regards to the segments. All segments posted revenue growth. Advanced therapies compensated margin dilution from Corindus with strong growth in a positive business mix. Diagnostics margin declined as expected related to the ramp-up of Atellica Solution. The imaging market declined, driven by negative mix effects and other effects with one-off characteristics.
Let us now have a closer look on these effects in Imaging. Looking at Imaging, we see this segment on track with our expectation. This continued strong top-line momentum positioned for further share gains and hereby driving further profit growth. The decline in margin in Q1 was a temporary dip driven by a combination of two main factors, negative mix effect and other effect with one of characteristics. We do not expect these effects to persist and therefore expect Q2 and fiscal year Imaging margins to be significantly better. The negative effect from unfavorable business mix was the most pronounced in this quarter. Within our business mix, there are three factors that can impact the financials within a quarter. Businesses within the Imaging geographies and market segments. In our businesses, we see different margin profiles. e.g., the strong growth in our X-ray products business had a dilutive effect.
In our geographies, we saw in Q1 very strong growth in EMEA, which is a very competitive pricing landscape and hence had a dilutive impact on the margins. In our different segments, from low-end to mid-end to high-end, there are also different margin profiles between a high-end offering and a value offering. The mix of different offerings also impacts the margin development within a quarter. To give a concrete example for an unfavorable business mix, the bulk order of mid-end X-ray machines for a large hospital chain in EMEA has a different margin profile than a high-end CT scanner in the U.S. While all this can have a material impact within a quarter, these effects normalize within the fiscal year. Let me make clear that it is highly unusual for all factors in the mix to be negative in a single reporting quarter.
You could say we saw the perfect storm in terms of mix in Q1. Those effects drove year-on-year drag of about 100 basis points. As mentioned previously, we also saw a negative impact from share-based compensation and imaging of about -70 basis points. In addition, our OpEx spends in Q1 in absolute terms were broadly as expected with ramp-up, especially related to investments into the digitalization field. However, with Q1 being the lowest revenue slice in the fiscal year, we saw lower economies of scale in OpEx in Q1. Consequently, we will see some positive conversion from OpEx in the coming quarters with the quarterly revenue slices increasing and hereby normalizing OpEx relative to revenues for the full fiscal year. Lastly, we also had other negative effects impacting Q1 year-over-year with one-off characteristics that we do not expect to persist in the course of the fiscal year.
In the ballpark, again, of -100 basis points for the imaging segment. All in all, as we have pointed out regularly during the last two years, we see some fluctuations on a quarter-by-quarter basis. There can be quarters where many variables point towards the same direction, which was unfortunately the case in this quarter. Looking at the fundamentals though, imaging is running like we expect it to. Like Bernd said, the story is fully intact. This brings me to our outlook for fiscal year 2020. We confirm our outlook for fiscal year 2020 with 5%-6% comparable revenue growth and adjusted earnings per share growth of 6%-12%. With the 5.5% revenue growth posted in this quarter, we are well on track for our revenue growth targets. Diagnostics delivered growth within the guided bandwidth for the full fiscal year, with 2.6% growth in Q1.
Diagnostics sees an acceleration of growth, yet below the lower end of the group range of 5%-6%. Imaging and Advanced Therapies were both above the guided bandwidth of growth. For Imaging, the guidance was to grow within the group range. In Q1, Imaging grew above that with 6.7%. For Advanced Therapies, the guidance was to clearly grow within the group range. In Q1, Advanced Therapies grew clearly above that with 9.5%. With Imaging and Advanced Therapies now posting growth well above the guided range, we see both Imaging and Advanced Therapies being in the position of achieving growth rather towards the higher end of the group outlook of 5%-6%. This strong top-line development will obviously also support the absolute adjusted EBIT development, further driving the adjusted earnings per share.
Let me briefly run you through the implications of this Q1 on our full-year margin expectations, starting with the segment. For Imaging, achieving a margin improvement at prior years has obviously become more challenging. We continue to expect Imaging to expand margins in the remainder of fiscal year 2020 versus prior year. For Diagnostics, we continue to expect Diagnostics margin to slightly decrease in fiscal year 2020 versus 2019 due to foreign exchange headwind, the integration of the Minicare acquisition, and the low Q1 contribution. We should have seen trough in the Diagnostics margins in Q1. For Advanced Therapies, we continue to expect margin to significantly decrease due to the acquisition of Corindus Vascular Robotics.
Although the Q1 does show that the business is in great shape and able to compensate some of the downside organically. Regarding our interest expenses for fiscal year 2020, we have outlined EUR 60 million to EUR 80 million interest in fiscal year 2020. With the higher interest income in Q1, we would now expect interest expenses to be at the lower end of that range, or even below. Regarding our tax rate, we assume it to be in the range between 27%-30% for the fiscal year. Overall, we confirm our earnings per share growth of 6%-12% in fiscal year 2020, particularly driven by a strong revenue contribution with some support from the interest line and the tax line. With this, I hand it back to the operator.
Thank you, gentlemen. We will start today's question and answer session, where we would like to ask you to limit yourself to two questions. If you wish to ask a question, please press the star or asterisk key, followed by the digit one on your telephone keypad. Again, ladies and gentlemen, please press star one on your telephone keypad. Our first question comes from the line of Scott Bardo from Berenberg. Please go ahead.
Yeah. Thanks so much for taking my questions. Just really wanted to explore the softer imaging margin this quarter. I think, Jochen, you mentioned that there were about 100 basis points of non-operational one-offs within this quarterly margin. I just wonder if you could provide a little bit more clarity as to what they were, please. Just to understand, I think you were very clear about the various product and geographic mix weighing on the division this quarter. It's my feeling that most of the major radiology players have been talking about somewhat softer dynamics in X-ray. I wonder if you can confirm whether the end market for X-ray has deteriorated at all, or there's any notable price pressure which is a little bit more operational than one-off in nature. Thanks.
Yeah. Thanks, Scott, for the first question. I referred to three aspects in the imaging margin development. As you referred to, it was mix with - 100 basis points is what this kind of awkward thing on the share-based compensation valuation of Siemens AG stock awards with 70 basis points negative impact. The last topic, I think your question was referred to, was about the other one-offs or items with one-off characters. These were a bunch of things which had a positive impact last year in Q1. Not so much a negative this year. We had to also in 2018 in a similar amount of positive things, very similar in imaging. Therefore, this was not, so to say, highlighted last year in 2019.
Obviously with having nothing like this year and referring to what I've said on the mix side with regard to, so to say, perfect storm on the mix side. This put the additional 100 basis points negative to the imaging margin. Definitely a topic which is not expected for the remainder of the fiscal year.
Yes, Scott. The other question regarding X-ray, to put things into perspective, first of all, the X-ray business, what we call XP, X-ray product, is about 12% of our imaging business last year. It had a very good growth contribution in this quarter. It is a business which on the margin side is more on the lower side traditionally, than the, let's say more and more advanced or more higher end technologies like MR and CT, and contributed with this also to the mix impact here, which Jochen explained. I do not see a particular margin pressure also in the X-ray business itself. It's a normal course of business and maybe bear in mind, Jochen, in his explanations did not mention price as a topic when it comes to comparable products.
Very good. Perhaps just one follow-up. I see you've been announcing some pretty strong strategic partnerships with Hamilton and others. Can you please just remind us of the differences in these sorts of contracts as compared to straight capital sale, what that means for your cash positioning and predictability of the business, and perhaps do these contracts announced meaningfully contribute to your order book growth in a given quarter? Thank you.
Yeah. Scott, thanks for the question. No contract is the same. Even if they are large, they differ in nature. Generally speaking, those large contracts do give you, I would say, a better predictability for the future because they are obviously larger and they last for several years. This is one classical characteristic. Often, almost always, they are combined with the financing component, which at the end of the day is done by a third party, not by ourselves. Often out of historic reasons, with Siemens Financial Services. Therefore, this is also not a cash flow drain for us. It does not make a big difference from a cash flow perspective. I think obviously when they enter the order book, we book them according to the IFRS rules. We do not do any adjustments to this.
If we have a clear commitment for a several-year contract, the full contract volume according to the contract we have signed enters the backlog calculation. Often we see with those contracts, over time, above and beyond the signed contract, an increase in share of wallet in those accounts. This is obviously not accounted for at that point in time in the backlog. This is something which really does help. Obviously, it makes a huge difference if an institution enters in such a large contract, and then we have almost daily interaction on what are the needs of the customer. This gives you an intimacy which allows you to better understand the customer and ultimately then benefit from this higher share of wallet. We have experience in those kind of contracts in certain areas for more than two decades.
U.K., the Netherlands, particularly in Europe, but this is now a trend which accelerated significantly in the U.S. also.
Yeah. Definitely something that plays to our strength. Maybe one more comment, I mean, regarding what is booked as an order and what not. I mean, in Hamilton it is part of the order book, and we look at the other two bigger transactions or bigger deals, quote unquote, we mentioned, they are not part of the order book. Moscow is a one tender which will be booked over time. The same holds true for Quest. There's something, so to say, on top, giving us confidence for our revenues to come.
Very good. Thanks very much indeed.
Thank you. We'll take our next question today from Patrick Wood from Bank of America. Please go ahead.
Perfect. Thank you for taking my two questions. The first one, I'm afraid, is going to be kind of predictable. Just questioning around China and whether you think the viral outbreak could have either an effect on the rate of installations of new systems. I get obviously that the systems, people will get them, but the rate of installation. Alternatively, if you think that there's going to be any kind of effect on the production facilities that you guys have in the country, just some color around that would be helpful. That would be the first question. Second question, I'd love to know, within the order book, roughly what the growth was ex Hamilton and particularly, in the U.S., what you're sort of hearing from customers there, how far do you think we're through this larger replacement cycle that we've been going through?
It sounds like you're still pretty confident there, but some color would be helpful. Thank you.
I mean, Patrick, coronavirus, thank you for putting the disclaimer looking for the, this is the expected question, probably I need to give you also the expected answer. For the time being, our priority is of course to safeguard our employees and to help wherever we can help. We have made rapid donations, installed systems where there was the need and we are very carefully watching our employees in China as well as globally. This is priority number one. The factories are up and running. So far we don't see an impact. Certainly, there can be delays in terms of installation and so on. We don't see this yet, we have our eyes wide open. Of course, priority is helping where we can help, making sure that our employees are fine, making sure that business continuity is there.
Bear in mind, I mean, this is something which at worst, so to say, is a delay and will be caught up. From that point of view, I think it's nothing we need to be super concerned about in the long run. The second question, I mean, regarding Hamilton.
I can take that. I mean, if you do rough calculation, their order growth was in the ballpark of 13%+ . If you would take Hamilton out, you are slightly shy of 10. Still very healthy. Actually, I mean, we have discussed that. We have even put this topic as one of the priorities on our what we call six pack. We can take it out. On the other hand, we see a clear trend in the market towards larger deals. Therefore, this becomes much more a normality, so to say, and therefore might also be not the right approach to take it out, generally speaking. At the end of the day, it's part of our system.
Yeah. Patrick, then there was the other connotation about the U.S. market in general. First of all, I don't really see, and we had multiple discussions on this, a replacement rate or whatever, or a wavy pattern in demand. Imaging is a growth technology because of procedure growth, because of end customer and clinical demand. The U.S., to put things into perspective, it's clear this is more a lower single-digit growth market. Also bear in mind, this is 30% or so of our total market. We see a very healthy development in Europe. In this quarter, of course, more on the spectacular side there with the 20% on the revenue side. We are definitely acting in the high single-digits, plus the growth markets in especially China, India, and Middle East Africa.
Also bear in mind when it comes to the revenue line, yes, we had a bit of a shy start in the U.S., which contributed to the mix effect Jochen spoke about. We have a super healthy backlog in the U.S., which we will convert in the next quarters. From that point of view, I'm also very positive about the development in the U.S.
Super. Thanks for the questions, guys.
Thank you. Our next question today comes from Veronika Dubajova from Goldman Sachs. Please go ahead.
Good morning, gentlemen. I would like to follow up on a couple of questions that have been asked, just trying to understand better the moving parts in imaging. Jochen, thank you for your explanation. I'm just a little surprised because heading into the quarter, you should have had fairly good visibility on the 100 basis points of one-offs that you had last year, and also fairly good visibility on the mix. Slightly surprised that you hadn't flagged the margin softness the same way that you had done for diagnostics. Maybe if you can help us understand what, if anything, has changed in imaging as you look at the business, because it sounds like on a full-year basis, you're also somewhat more cautious on the margin improvement. I'm not sure I fully understand that. If you can give us some color on that would be helpful.
My second question is a follow-up on the coronavirus question that Patrick has asked. Obviously, there's a fair amount of disruption to both the supply chain and the manufacturing operations, I think of pretty much everyone who operates in China. If you could help us understand kind of what your inventory build is for this market, and maybe just remind us how much of your production across the business sits in China today. Thank you.
You want me to comment first?
Veronika, on China, as I said, currently, so far, factories are up and running and producing as planned. A lot of the Chinese production is from China for China. When it comes to export, we would have alternatives because we have some kind of a, let's say, twin factory setting for most of the topics. Where we can, depending on demand and depending on end user location, decide whether, especially on the MRI and CT side, whether products are shipped out of the German locations or Shanghai's, let's say, Shenzhen.
Veronika, on imaging, first of all, I think this is important, and you said that also very clear. There is no change in storyline for imaging. The top line is anyway fully intact. The temporary dip on the profitability side, and the emphasis is on temporary. The insight into the predictability of dip is clearly, I think, on the one-offs was clear. We knew this, no doubt. On the mix side, entering into the quarter, we have hoped for a bit more U.S.-based revenue, which obviously, for whatever reason, did not materialize, but it's just postponed into later quarters. Actually, based on our current backlog forecast, how it will transmit into revenue and the prediction for the full fiscal year, we see the mix effect to fully come back and to the turnaround in the coming quarters.
Therefore, we feel very confident on margin improvement versus prior year in imaging. Obviously, with a 17. 4% in Q1. It might be a bit more prudent, a bit more cautious on how much additional margin we will produce in that business. What I can see, and therefore I'm very confident, is I see even more momentum on the top line than maybe even more momentum than we have anticipated entering into the year. I look at the backlog and how the backlog reach for this fiscal year is this year relative to our revenue forecast, higher than it was last year on imaging. Which gives me a lot of confidence in that business. Again, nothing, so to say, to announce, because the storyline is fully intact.
That's helpful. Thank you very much.
Welcome.
Thank you. Our next question comes from Ed Ridley-Day from Redburn. Please go ahead.
Hi. Good morning. Thank you for taking my questions. Just on the Chinese situation. Clearly CT and X-ray are the prime means of diagnosing the virus. I presume that you're going to be very active in that space. Both either on the imaging side or the diagnostic side, would this in any way increase demand for your business? On diagnostics, can you give us some of the information that you have historically given us? What were your new customer win rates on the Atellica, and can you give us a guide on the first quarter shipments, please?
In China, as I said, whenever we were asked to help in the last days, we helped. It was under the headline of helping and not under the headline of generating additional business. You look into now how things will develop over time. It is also a question, if the infrastructure in place, not only from an equipment perspective, but also is there the hospital, is there the trained staff and so on. That, really a hike in demand is not really what I would expect. It's also not currently our priority. The priority is here. As I said to help where we can, to protect our employees. Also to make sure that we have proper business continuity.
The second question sorry. Diagnostics.
On diagnostics. We continue to see very good win rates. Testing one example. I say one, because we reflect already in previous communications, that when it comes to the big labs we are very happy with the win rate of above 80% in the case of labs doing more than 30,000 tubes or tests per day.
Yeah.
It is also true for the mid-markets and so on, where we've been in segments where we haven't been winning before. That is the main message, and that is why we built the system. Without Atellica, we wouldn't have that perspective. We see good growth geographically, in Europe, in Asia, and in the U.S. We talked about this. It is now about capitalizing on the opportunity. I'm also very happy what I see there. You asked about shipments. We don't want to make this the key KPI here, but I can tell you, we talked about the high amount of shipments we had in Q4, which are now under installation. Much we have shipped in this quarter, Atellica, according to plan. It's a number between 350 and 400. I think in the 370 range, as far as I recall. Yes. Just confirmed.
What is also a good aspect is that in this quarter, we got more systems live than we shipped. That is also one of the big topics here burdening the P&L that we have these instruments in transition.
Yes.
Which is simply the result of shipping and now have been in the installation phase at some point in time. We need to convert that, in abstract term backlog. It is a good development that in Q1 we saw the orders beating the shipments.
Thank you. That's a helpful color. Thank you.
Thank you. We have a question now from Michael Jüngling from Morgan Stanley. Please go ahead.
Great. Thank you. My first question is around share-based payments. Can you comment how this impacts profitability for the remainder of the next three quarters if the share price actually decreases? Do we see a reversal in charges, i.e., does your P&L actually get a tailwind if that were to happen? Question number two is, if I look at sort of the Q2 or the next quarter, Q2, after a fairly tough Q1, can you provide some comfort that you expect the margins for imaging to show a year-on-year improvement? Is that something that you would endorse, a positive year-on-year margin development in imaging? Thank you.
Yeah. Thanks, Michael. I start with the first question. I try to explain that share-based payment topic. Everything we reflect here is only related to the stock awards which were handed or granted to our employees of Siemens AG stock awards. Means everything which happened pre-IPO. That means this is over in two years, generally speaking, because then they are all vested. Secondly, it is a bit complicated. Or I would do most likely different things in my life if I would know what the impact would be next year, because at the end of the day, it is the relative performance of the Siemens AG stock price relative to a peer basket. This is difficult to predict. Obviously, last Q1, we had a slight positive. This Q1, we had a significant negative, which made up the year-over-year - 70 basis points I was referring to beforehand.
Therefore, difficult to say. With regard to Q2, we definitely expect the significantly better, as I said, significantly better profitability levels in imaging. Maybe you know that last year's Q2 was a relatively strong quarter for imaging, one of the strongest. I would hope for a better one. I would not say this, remember it was 20.9% last year. That was almost on 24% level. We will see, but what I clearly laid out is that we expect margin expansion for the remaining nine months relative to price.
Okay, great. Just to follow up on the share-based payment, just to make sure I understand this. Given that this related to past grants before the IPO, if the share price now moves of Siemens AG, will there be an impact in the remaining three quarters of this fiscal year, or is that done, and therefore we no longer have to worry about the share price movements?
You have to worry, sorry, you have to worry, so to say, for the remainder of two years. At the end of the day, if the Siemens share price develops positively relative to the Siemens AG peer basket, this is a negative for us, generally speaking, and vice versa.
Yes.
This is a bit-
So-
This is how it-
It's very useful. Just hypothetically speaking, if there was an underperformance in Siemens AG against the basket, would you have to reverse it, and therefore the charge that you booked in Q1 would reverse, and that means you could hypothetically see a tailwind in the remainder of this fiscal year?
Yes, absolutely. Technically speaking, it's not a reversal because it's a fair value calculation every quarter on this topic at the end of the day. At the end of the day, depending on logic Siemens has built up, and we have to, so to say, use this at the end of the day. Generally speaking, yes.
Great. Very helpful. Thank you.
Okay.
Thank you. We have a question.
One more question.
Thank you. We have a question now from David Adlington from JPMorgan.
Morning, guys. Thanks for taking the questions. Just a point of clarification first on the orders. I think you said you've included the Hamilton order but excluded the Moscow and the Quest order. I just wondered what was different between those orders, which meant that you recognized one and didn't recognize the other two. Just making sure I got that right. Secondly, just on the margin for the year, I think you started the year with a 17%-18% margin target. It doesn't look like you've reiterated that this morning. Just wanted to check, should we think about below for the group level, below that 17% margin target? Thank you.
On the order logic, I think I said that we book orders according to IFRS. This means when there is a signed order with a clear commitment around it, and this is moving into the order backlog. Obviously, the Quest order was not signed in Q1 but in Q2. This is an easy one. I think Bernd also pointed, therefore, it's not in the Q1 order book. Bernd pointed out to the Moscow thing, this is a tender we won. The tender has a different commitment level. We book it as they asked for the equipment based on the tender we won. That's just the nature of the different wins or the timing of the wins, which makes it a different handling with regard to the order book.
On the 17%-18% profitability level, first of all, I think we made that clear. Our guidance is what top line 5%-6% growth and adjusted EPS growth of 6%-12%. The adjusted EBIT margin is or the lever, operational lever to reach the 6%-12%. Obviously, with this relatively weak Q1, it got much more difficult to end up in the upper range of the 17%-18%. We are not changing the guidance now. Not even on this level.
Very clear. Thank you.
There's still nine months to go.
Okay, thanks a lot for everyone to participate today. As always, the team and myself will be available for questions during the day. Thank you.
Thank you. 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 www.corporate.siemens-healthineers.com/investor-relations.