Good morning, ladies and gentlemen, welcome to the Siemens Healthineers 2018 third quarter conference call. As a reminder, this conference is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on page two of the Siemens Healthineers presentation. This conference 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.
Welcome to our Q3 conference call. Our earnings release and Q3 presentation have been released at 7:00 this morning and available on our website. We have here today our CEO, Bernd Montag, and our CFO, Jochen Schmitz, on the call to review our Q3 results. Bernd will start with the highlights of the quarter, Jochen will give more details on our financial performance. Afterwards, we will have time for Q&A with Bernd and Jochen. With that, I would like to hand over to Bernd.
Thank you, Florian. Good morning, everybody. Thank you for joining, welcome to our Q3 earnings call. Let's jump right in. Growth in this quarter has been strong with 5%. A very strong Imaging business has been the main driver, which grew by 8% in this quarter. Also in Diagnostics, growth improved sequentially now to +1% in Q3, also overall growth at Diagnostics has still been low. We are pleased with instrument sales growing at double digits. This is very encouraging since it points towards a growing installed base and, as a result, growing reagent sales going forward. Another positive development has been the accelerating Atellica shipments. More than 300 analyzers this quarter, more than doubling the size of our Atellica installed base.
With a total of 560-plus analyzers in the market, we are fully on track to achieve our fiscal year 2018 goal of 800 to 1,000 analyzers shipped, as well as our fiscal year 2020 target of 7,000 analyzers. In this quarter, we experienced again heavy foreign exchange headwinds, which left its marks on our profitability. Our adjusted profit margin was minus 110 basis points below prior year at 16.0% this quarter, heavily impacted by adverse foreign exchange effects of 140 basis points. Profitability at our Diagnostics business has been lower. It was held back by two special items this quarter. An initially dilutive large automation contract and peaking Atellica ramp-up costs negatively impacted Diagnostics performance this quarter. Jochen will come back to this later, but we don't expect these effects to repeat in Q4.
Foreign exchange headwinds and a higher tax rate affected our adjusted net income, which came in 7% lower than in the prior year quarter. Cash conversion is improving on segment level but has been held back on a company level by a special pension funding in the U.S. and cash out of IPO costs. We confirm our guidance of 3%-4% organic growth and an adjusted profit margin of 17%-18%. Now go into more detail. First and foremost, this quarter we introduced two new major innovations that expand our lead in precision medicine. After launching our mid-range ultrasound platform, Juniper, earlier this year in Vienna, we just had another major product launch within our ultrasound business. End of June, we introduced our new ACUSON Sequoia, a completely new high-end ultrasound platform for general imaging. Perhaps you remember the name Sequoia.
It has been the gold standard in radiology ultrasound around 20 years ago when we acquired ACUSON. Our new ACUSON Sequoia is a brand-new system built up from the ground with unique features. It offers a deep abdominal transducer called the DAX, by the way, like stock market index, with unique depth of investigation and high-resolution imaging from the near to far field in real time. This expands ultrasound scanning towards precision medicine by enabling high-resolution imaging that adapts to patient size and personal characteristics and therefore allows imaging with consistency and clarity. Scanning becomes also faster because there is less need to adjust the focal point while scanning due to the high resolution from the near to the far field. Another major introduction is our new digital PET/CT, our new Biograph Vision, now also available in the United States.
It offers unseen resolution and performance in the field of digital PET/CT. Its proprietary technology has extremely small crystal elements, giving the highest resolution of large-bore PET/CT scanners. This enables the clinician to precisely detect smaller lesions than before and closely monitor the progress of treatment. At the same time, scanning is also quicker and with less radiation due to the system offering the industry's fastest time of site performance. Furthermore, the system comes with algorithms which are feeding artificial intelligence into applications used for different pathologies. Not on this slide, but also an important market introduction, our high sensitivity troponin I test, which is now also available in the U.S. for both Atellica as well as our legacy Centaur system. Let's have a closer look at Atellica, where we are making good progress.
Shipments accelerated materially in Q3 with more than 300 analyzers shipped this quarter, and we are well on track to achieve our targets. Atellica proves to be highly competitive, and we are winning deals against all major competitors. More than 35% of the analyzers shipped so far have been to new customers, which is significantly above the 20% that we have assumed in our business plan for our full year 2020 target. Some of the competitive takeaways in the quarter include CSE in Germany, Herlev and Gentofte in Denmark, as well as the College of Southern Nevada in the United States. As we see accelerating shipments, please be aware that depending on the configuration, it can take up to three to four months from the time of shipping until the reagent revenue kicks in.
It means that reagent revenues associated with Atellica will ramp up with a time lag to our shipments. At the same time, we are making good progress on expanding the menu and the market reach of Atellica. Seven additional assays have been approved in the U.S., bringing the total menu now to 157 assays in this market. At the end of Q4, we expect to have 170 plus assays approved in the U.S. Our market registrations in Japan and China are also on track. Japan is scheduled for the fourth quarter and China next year as planned. With that, I hand over to Jochen to go through the financials in more depth.
Thank you, Bernd, and also a very warm welcome from my side. Let me now give you some more color on our Q3 results. Our order intake of around EUR 3.5 billion has been strong, with 6% comparable growth year-over-year. Therapies has been growing very strongly, again in the double digits. Imaging recorded mid to high single digit growth, while orders at Diagnostics grew at the same rate as revenues. Revenue growth accelerated further in Q3 with 4.7% overall comparable growth after 3.6% in Q2. All regions contributed to growth, with the U.S. growing by 7%, EMEA and Asia-Pacific with 4% each. China had a weaker quarter with -4% on very tough comps. Year to date, revenue growth has been strong with 9%, and Q3 orders have been very strong, with close to 20% growth.
We do not see this as an issue, but more as quarterly fluctuation. The adjusted profit margin with 16% is down 110 base points year-over-year, driven by strong foreign exchange headwinds of 140 base points and the lower profitability at Diagnostics. After the IPO, we had to change the way we account for the Siemens AG stock awards that have been already granted to our employees. As part of Siemens, the valuation is locked in at date of grant, and these are equity instruments. On a standalone basis, this has changed. Now the valuation changes go as cost items fully through our P&L and are spread out across our business segments and functional costs, as they are now considered to be cash settled instruments.
This was now a bit technical but necessary as this topic of potential fluctuations will be with us until all Siemens AG stock awards are fully vested. This has been only partially compensated by a positive effect in our central items associated with a gain from the special funding of our U.S. pension plans. The effect from share-based payments, as explained beforehand, had a negative impact on our margin of approximately 80 base points, whereas the pension-related gain had a positive impact of approximately 60 base points. Combined, these two effects reduced our margin by 20 base points. Adjusted net income came in at EUR 334 million, which is 7% under prior year quarter on lower adjusted profit and a higher tax rate of 32%. The interest expenses net were significantly lower in Q3 with EUR 34 million compared to previous quarter due to the more favorable capital structure post-IPO.
Let's now move on one level deeper to our segments. As mentioned before, Imaging has been the driver behind our very healthy top-line development. The revenue growth at Imaging has been very strong with 8%, driven by molecular imaging, X-ray products, and Magnetic Resonance. Regionally, we saw strong growth across the board, particularly in the U.S. Adjusted profit margin has been heavily impacted by foreign exchange headwinds of more than 200 basis points. Taking out the negative impact from foreign exchange, the margin has improved by 140 basis points year-over-year. Diagnostics grew in Q3 by 1% comparable, another slight sequential improvement compared to Q2. Although overall growth is still muted, double-digit instrument growth both in Q3 as well as year-to-date points toward a growing installed base and subsequent improvement of reagent growth.
Geographically, we saw modest revenue growth for Diagnostics in Asia Pacific and in EMEA, and only flattish growth in America. Diagnostics profitability was low this quarter because of two effects, which we don't expect to continue going forward. Bernd has already mentioned the large automation contract in the U.S. Although the deal overall is margin accretive when looking at the full lifespan of the contract, it is the way it is structured that it had an initial negative profit impact. Also, Atellica transition costs peaked in this quarter. Q3, we have been hit by a combination of strong Atellica shipments with limited reagent revenues. With increasing Atellica reagent revenues, the transition impact will go down again already in Q4. When adding the two effects together, they impacted Diagnostics profit negatively by around 150 plus basis points in this quarter.
As already mentioned, we don't expect these additional effects to repeat in Q4, therefore expect a more normalization of margins. On a separate note, our two recent acquisitions in Diagnostics continue to perform well. Fast Track Diagnostics saw revenue growth in the high single digits, and Epocal saw even strong double-digit growth rates. In Advanced Therapies, we experienced another lower growth quarter. This has been expected, as the structure and timing of our orders booked pointed toward another softer quarter. Since Advanced Therapies is our smallest segment, it experiences the highest quarterly volatility. Adjusted profit margin was down 40 basis points year-over-year due to very high foreign exchange headwinds of more than 300 basis points. If you take out the negative impact from foreign exchange, the margin has improved by over 250 basis points year-over-year.
This shows clearly the operational good performance and positive mix in this quarter versus prior year. After looking at the top and bottom line performance, let us now look at the cash development this quarter. On an operational level, that means on a segment level before interest and taxes, cash conversion materially improved compared to Q2. Imaging with a cash conversion rate of 1.2, Advanced Therapies even higher with 1.6. Also Diagnostics saw an improvement to 0.4 versus previous quarters. It is important to understand that the cash conversion rate at Diagnostics is structurally lower because of additions to operating leases, capitalized R&D costs over a shorter period than the amortization period, and investments into the two factories in Walpole, Massachusetts, and Shanghai, China.
In Q3, we had some non-operational cash outs in our settle items from the U.S. pension funding of EUR 126 million, and from cash out of portions of the IPO cost of EUR 41 million. In the cash flow statement, you see this impact in our assets and liabilities. If we exclude these non-operational cash outs, the free cash flow pre-tax for the group is EUR 461 million, resulting in an operational cash conversion rate of 0.9 for the overall group. We are coming to our last slide, our guidance for fiscal year 2018. As Bernd has already pointed out, we reaffirm our guidance of 3%-4% growth and an adjusted profit margin of 17%-18%.
Below the line, we still expect a tax rate of 28%-30% for the full fiscal year, probably closer to the lower end of the range as we saw positive tax rates in the first half of fiscal year 2018. Interest expenses will likely be a bit higher in the range of EUR 170 million-EUR 190 million for the full year, partially on back of stronger U.S. dollar. Foreign exchange has been a heavy headwind so far this year. In Q4, we will continue to face considerable foreign exchange headwinds as last year's Q4 has been hedged on very favorable terms. To remind, it is 1.07. Current hedging of the U.S. dollar for Q4 is still above 120. With this, I would like to close and hand it over next to the operator for Q&A.
Thank you. We will start today's question and answer session. 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 today comes from Ian Douglas-Pennant from UBS. Please go ahead, sir.
Thanks for taking my question. It is Ian Douglas-Pennant at UBS. First, on your long-term margin guidance that you have given, at what point do you need to revisit that if currency rates continue to move against you? The second question is on the impact of the stock option revaluations. Was there any impact of these options in Q1 and Q2? Because you were under Siemens at that point, did it go straight to equity? Were any of the divisions impacted more or less than others? The final subpart of that question is, at what point do all of those options kind of expire and this isn't an issue anymore? Thanks.
Thanks for the question. I think mid-term guidance and foreign exchange, so far we have no intent to change our mid-term guidance. I think if you look at the historical financials, when we did the Capital Markets Day, historical financials on Imaging and Advanced Therapies were already within the margin ranges. Imaging was just at the lower end of the range, and AT was even slightly above the upper end. We made clear that this mid-term guidance is also because of foreign exchange headwinds. Let's see how that goes over time. We have no intentions to change it for now. With regard to stock awards, the impacts in Q1 and Q2 were much less. We had to use the same accounting method on a stand-alone basis.
It is depending, in particular, on the share price and volatility development of the Siemens stocks which influences the valuation of those stock awards. The impact on the different segments should be relatively similar. If you use the 80 basis points, I think that is a good proxy for every segment. Generally speaking, the base impact should go down year by year as those stock awards vested. Should be done within the next three years.
Could I just quickly follow up on that? Maybe I should follow up with Florian afterwards, because it seems like the decline in the Siemens stock price in calendar Q1 was, roughly speaking, the same as the increase in Q2. I'm obviously misunderstanding something as to why the impact wouldn't be exactly the same, but the other way around.
We should not go too much into option valuation here in this regard, volatility plays also a role of share.
I see. Okay. Very fair. Thank you very much.
By the way, Florian is currently whispering, but he said that, by the way, the logic also plays a role. How does the Siemens stock perform against a peer basket, which will also influence the relative performance against the peer basket, will also influence the valuation. Yeah.
Okay. Thanks very much.
Welcome.
Thank you. Our next question comes from Romain Zana, from Exane BNP Paribas. Please go ahead.
Yes, good morning. Thanks for taking my questions. The first one will be on Imaging. I was wondering to what extent you would attribute your great performance to the market acceleration as a whole, or rather greater market share gains. In that case, maybe a softening competition. I'm alluding here to GE, mainly because Philips also had a robust performance. How long do you think it would be sustainable? The second question, still on Imaging. I was wondering if you could give us a bit more granularity by modality. Have you experienced some acceleration in ultrasound, for example? Or is it still led by, let's say, your main leading franchise in Imaging? Thank you.
Yeah. Thank you, Romain. On Imaging, first of all, I don't think that we see a major change currently when it comes to the market growth data. Our basic assumption for the mid-term is that the Imaging expectant market grows by 3%. For us, because of our leading installed base, our service business grows typically by 5%. Yeah. This is about 40% of Imaging. These overall assumptions are also true currently. I don't see a reason to deviate from that. I'm sure this has been another quarter of market share gains. The assumption is right here that not everybody could have won. Yeah. Particular strength, to answer the second point, we have seen particular strength in MRI, X-ray, and molecular imaging.
For ultrasound, it is a little bit too early to see the impact of the new product, which is really a spectacular add-on. First shipments will happen in Q4 only. Yeah. This has not been a contributing factor already for the Q3 uptime revenue.
Okay, thank you. If I may just a follow-up one on Forex and Diagnostics in particular. I was thinking that the bulk of the diagnostic instruments were produced in the U.S., can you just explain why you are experiencing such big Forex headwind on margin, or at least this quarter?
On Imaging. What's your question on Imaging?
On Diagnostics.
On Diagnostics, actually, we don't have headwind from foreign exchange. We had slight tailwind from foreign exchange as in the other quarters.
Okay.
with roughly 70 base points.
Okay. Understand better now. Thank you.
Yeah.
Thank you. Our next question comes from Veronika Dubajova from Goldman Sachs. Please go ahead.
Good morning, gentlemen. Thank you for taking my questions. I have two, please. My first one is on the Imaging business growth. I'm wondering, Bernd, how you're thinking about the momentum, not just for the fourth quarter, but really into 2019. If I look, the order book has been strong. Obviously, you're delivering some pretty impressive numbers, but the comps do get a little bit more difficult. I'd love to get your thoughts on whether you think that this current mid-single-digit growth rate for Imaging that you are kind of tracking to on a 12-month basis, is that sustainable beyond the fourth quarter of this year and potentially could it accelerate? That's my first question. My second question is on the Diagnostics margins.
I was curious to hear your comment about you expect it to return to a more normalized level in the fourth quarter. Is the first half of the year a good proxy for what normalized margins and Diagnostics look like at this stage? Thank you.
Thank you, Veronika. When it comes to Imaging, Q3 has of course been very strong. Also after a very strong Q2 already. As you know, Q4 is, for us, always a very strong quarter. Don't expect the same growth rate on top of this extremely strong slide possibly we have in the last years. We are very bullish when it comes to market and confident when it comes to this being another year with market share gains in Imaging. Outlook for the next year, as careful as I should be here, I would expect Imaging to be clearly within the growth we project in the midterm for the overall company of 4%-6%. The Imaging Segment, assume it to be in that range also in the next year.
On Diagnostics margin, what does normalization mean? I think if you look at the guidance we gave, we said 150 basis points from those special items we do not need to be repeated in Q4. The share-based payments, that is still the 80 basis points also applies 100% also to Diagnostics, yeah. Not knowing what share-based payments will do on the Siemens stock award in Q4. I would say between 150 and 150 plus basis points better than Q3 should be a good proxy. Q4.
Okay, thank you. Can I just follow up, Bernd, on the Imaging growth? I'm just curious, I look at your numbers, they look pretty strong. I look at the Philips numbers, they look pretty strong. GE sequentially seemed to have seen some improvement, and I know you said you don't think the market's accelerated. Where do you think these share gains are coming from if we see the large three players performing as strongly as they are?
Yeah.
Who is the weak player in the market?
I think it's good to look a little bit more closely also when you look at the numbers of competition. To some extent, we report out Imaging separately. While in others it's part of whatever health systems or Diagnostics and treatment and so on. When you look at core Imaging, I mean imaging in the sense of diagnostic imaging and ultrasound, and when you look closely, then into the statements also of others, then I think it gives some light on that in this area we are very strong. That it also makes sense when you add up, yeah, so that it's clear who is winning and who is not winning, yeah.
Okay. Understood. Thank you very much.
Thank you. Our next question comes from Peter Riley from Jefferies. Please go ahead. Okay, Mr. Riley, your line is open. Please go ahead.
Hello, can you hear me?
We can indeed.
Great. Sorry for that. I've got two questions, please. Firstly, I think it's fair to say that ultrasound has been a long-running underperformer, you've got some major new product launches out now. Does this get your product portfolio by and large where you want it? Are these new products inherently higher gross margin than the ones they're replacing? Secondly, the 35% plus share of orders coming from new customers in Diagnostics in Atellica. Is there any way to characterize who these customers are? Are they large ones, small ones? Are you winning in any particular regions or against any competitors? I'm just very interested in some more color on why you're winning such a high share from new customers compared to your expectations from six, 12 months ago.
Okay, Peter, thank you. Let me comment on ultrasound. We have a clear strategy in ultrasound of focus. We focus especially on two segments, which is general imaging and its ultrasound linkage for radiology and the cardiovascular cardiology space. With the launch and the introduction of the ACUSON Sequoia as a system which is setting new standards in the high end and with the Juniper in the low-end and mid-range, we are covering the GI space extremely well and much better than we have done in the past. This has been a long-term investment in R&D.
These products definitely also have a better margin position because on the one hand, there has been a lot of emphasis on design to cost and on the other hand, I'm very confident that the special performance of these systems also allow us to give us pricing power, more pricing power than before. On the 35% in Lab Diagnostics. Without going into geography, I think the wins which please us the most is that we see that we are a very strong partner for those institutions, larger institutions. These are often bigger settings like the Hermes Pardini project, which we talked about in the last quarter already. It's really about larger labs, where the governing principle is productivity and really building the lab of the future.
When they take a fresh look at who is the best partner for automating, for reducing labor costs, for taking out variations and so on, then we are a very strong go-to company for them. This is where most of these wins come from.
Maybe to add a bit more on this, I think we see now that we get strong feedback from the early adopters with regard to clinical performance as well as hands-on time to run the lab. I think that works extremely well. As Bernd pointed out, as those customers who are more sophisticated, more complex, might also be one of the reasons why it takes a bit longer until we see the results coming from the reagent revenue stream as the implementation takes a bit longer. Just as, we'll say, a side note.
Okay. Thank you.
Thank you.
Thank you. Our next question comes from Gunnar Romer from Deutsche Bank. Please go ahead.
Gunnar Romer, Deutsche Bank. Thanks for taking my questions. The first one on Imaging. Can you talk a little bit more about the growth composition in the quarter, i.e. how the 8% breaks down in equipment and services revenues? If you can just repeat what you mentioned in your prepared remarks with regard to order intake, the mid to high single-digit growth in order intake. That relates to equipment orders in Imaging, is that right? The second question would be again on Atellica. You're talking about higher transition costs. Can you give us a little bit more color what's going on here? Also, I think even if we're adding back the 150 basis points drag, the margin is down sequentially despite some additional tailwind from currency, actually. I think when we entered the year, you were talking about gradual improvements, sequential margin improvements.
What's going on here relative to your plans and expectations at the start of the year? Just a little bit more color around that would be helpful. Thank you.
Thanks for your question, Gunnar. On Imaging, I think generally speaking, the 8%. We had even a slightly higher equipment revenue than service revenue number in there. Very healthy on the equipment side. On the order number, the 6% here, the equipment orders grew faster than service orders . Equipment orders was in the mid-single digit arena. On the Atellica transition cost, I think as we pointed out, first of all, this extraordinary contract, which put some burden on the margin in Q3. Those kind of contracts from their structural contract language do not appear too often. That was a very special one, and we do not expect that next quarter. This was one reason. The foreign exchange tailwind is not different than in the other quarters. It's in the same ballpark.
On the Atellica implementation costs, I think what I mentioned briefly in my answer beforehand is that we see particular installations at a more complex customer side than initially expected, that means the meantime to result is longer than expected. That means currently the proportion of instrument revenue versus reagent revenue is for sure, it is leaning towards instrument, but it is leaning much heavier to instrument than maybe initially anticipated.
That is helpful. Thank you. Just a quick follow-up, if I may. On the structural cost savings, you were targeting EUR 50 million in the second half. Can you let us know what was the number for the third quarter, please?
Yeah, the 15 is still holding up. We are still with the EUR 50 million. I think a slightly bigger portion comes in Q4.
Okay. Thank you.
Okay.
Thank you. Our next question comes from Daniel Wendorff from Commerzbank. Please go ahead.
Daniel Wendorff of Commerzbank. Thanks for taking my questions. Two on Atellica. Another question on Atellica. Please, if you look back the last three quarters, can you potentially give us a hint what the average number of analyzers placed per customers were? You gave us a few details here in Q2 and also in Q3. When you look back over the last three quarters, and having in mind what you did in Q3, can you potentially give us a bit more color here? Has this changed? Has it not changed?
Sorry, can you repeat that question? What was the question?
Yes. The average number of analyzers placed per customer, how this has developed over the last three quarters. The second question on Atellica would be, can you give us a hint to the split of direct straight sales versus other financing models of the analyzers? That would be good. My last question would be on hedging. Given what you said on Q4, can you potentially give us a hint of how the situation will look like for 2019? Thank you.
Yeah, I can do. Can you start with the first question?
Currently the ratio of, let's say when it comes to the business model on the Atellica side, is that it's about 50/50 between seeding replacement and operating leases.
When it comes to the number of analyzers per customer, I don't have a number on the top of my mind currently because this varies extremely. As an extreme case, we talked about the 50 Atellica analyzers, which are part of one contract in the Hamad Medical Corporation. That's not in full yet. This can vary a lot. I would suggest that you follow up on that. Our IR team, Florian and team, will follow up with you to give you a little bit more detail on this.
Okay. Mm-hmm.
As I said, maybe as an indication, that we are happy about many of large deals. Which is a good thing, and which exactly relates to the strength of Atellica. Which, and I want to reiterate here also what Jochen said, which on the other hand, currently has a little bit the short-term impact that it takes a little bit longer until placement or shipments turn into reagent revenue, because of these complex settings and connecting Atellica analyzers to tracks and so on. To foreign exchange, Jochen.
According to our hedging policy, we hedge at least three months in advance, 75% of the net currency position. We have started hedging into Q1 on rates which are relatively close to rates which are currently in place. Let's see how that pans out. It's difficult to say. So far it looks that we should have some tailwind year-over-year next year from foreign exchange as currency stays as it is.
Thank you.
Okay.
Again, as a reminder to ask a question, please press star one on your telephone. We'll take the next question from Max Yates from Credit Suisse. Please go ahead
Thank you. My first question is around Advanced Therapies organic growth. Obviously, you were growing 1% this quarter. Is that a growth rate that you think reflects the market? Do you think you're undergrowing the market here? Maybe if you could give a little bit of color around how you see that growth rate continuing in the next few quarters. Is it something you're aiming to step up? What is constraining you from growing faster in that division?
Yes. When Jochen's already spoken about that this is the smallest segment and that's also why it's most, let's say, hit by quarterly fluctuations. When you look at maybe one data point is year to date, after nine months, I believe we are at 4%. Let me just confirm. I hope. Yeah, at 4% growth. That's also a good number for roughly for what we expect for the full year. We also are very happy with the order book. In both in Q2 and Q3, we saw very strong orders in Advanced Therapies. From that point of view, we believe we are pretty comfortable with the business. When it comes to longer term outlook, we assume a 4% market growth on equipment in this field, and we definitely want to grow above market in the long term.
Okay.
Which again, fits well to the 4%-6% overall target for the company in the year.
Okay, maybe the second question would just be around the M&A pipeline. If you could talk a little bit around your pipeline, whether you're seeing any interesting opportunities out there, and broadly how you're finding valuations in the market currently. Any comments around intentions there or areas of interest. If you could just update us on that would be great.
Yeah. We have specified the areas of interest for us is in the space of Advanced Therapies. On one hand, it is about expanding our presence in Diagnostics, especially in the molecular space. The Epocal and Fast Track Diagnostics acquisitions speak for that as good examples. Also with strong track records. As a third area, the topic of digital health. For us, the primary topic is really the strategic fit and not so much doing M&A for the sake of M&A. From that point of view, of course, we have a careful eye on valuations, but most importantly, it is about the strategic fit. We have our eyes open. Again, strategy must be, and synergies is the main topic for us.
Is it fair to say that the M&A targets are probably more in the pipeline, at least are probably more geared towards bolt-ons than larger deals? Do you continue to assess or have both larger and smaller?
Let's say, when we do M&A, it will not change the face of the company. Meaning, we have the three segments, we have three areas, three focus. When you look at it is by vertical. We have strong horizontal capabilities from one sales force to one digitalization strategy, to one service organization. If and when there's M&A, it will fit into that picture of the company independent of size.
Perfect. Thank you very much.
Thank you. Our next question comes from Daniel Gleim from MainFirst. Please go ahead.
Yes, hello. Thank you very much for taking my question. The first one would be on the 35% new customer wins. Could you please explain whether this is Atellica unit shipments or monetary value? If it is unit shipments, is the monetary value observation the same? That would be my first question. The second one, you seem to be on track to reach the 800 to 1,000 target for this year. If you could please comment, the competitiveness seem to be better. What could you say about your existing customers? How is the adoption going? If you could provide some color on that front as well, that would be highly appreciated. Thank you very much.
Yeah, thank you very much for the question. I think the 35% or bigger than 35% is definitely related to the unit numbers for the analyzer numbers, I would not expect that to be too different from the value amounts. I don't have the numbers with me, I would say it's relatively similar. I think with regard to the 800 to 1,000 units or analyzers as a target, I think as you pointed out, we feel well on track for this. The retention rates on our
Our install base is in the ballpark of the 90%, as expected. As we cannot ship in certain regions of the world, like China and Japan, there obviously we have no Atellica applications yet. On the other hand, we see strong, I would say, strong inroads, in particular in Europe, as you can see from the numbers we gave you. Asia is obviously lower because of China and Japan. We see, in particular also in our own install base, picking up demand on Atellica also in the Americas.
Maybe one add-on question on Japan. I think in the previous presentations you had indicated H2, now it is Q4. Could that explain why we do not have a material acceleration in the third quarter when it comes to monthly shipments compared to the last data point you gave for the last month in the last quarter?
I would say on Japan, it was always to be seen in the second half, as you mentioned. Now it's Q4. Japan is not a super important market for us. The Chinese market is a much more important market with regard to Atellica shipments. I cannot confirm to your statement that it would be a reason for any, I would say, deviations in shipments, this moves into Q4, is in Q4.
All right. Thank you very much.
You're welcome.
The last question, please. Last question.
Thank you. Our last question comes from David Adlington from JP Morgan.
Morning, guys. Thanks for taking the questions. Apologies if there's some repeat here. I actually dropped off the call for a couple of minutes. Firstly, just on tariffs, I just wondered if you had managed to sort of get your heads around potential impact and any plans you might be putting in place to potentially mitigate any impacts. Just to follow up on interest, as we look into 2019, obviously you've upped your interest expense guidance for this year. Should we be thinking about that having a bigger impact as a full-year impact for next year as well? Thank you.
Let me start with the interest topic. I think the interest topic is we are seeing slightly higher net interest expenses than originally guided, which is actually on the back of the stronger U.S. dollar, as you recall, most of our debt is denominated in U.S. dollar. I think that the original guidance we gave on a running basis, if I exercise for full year in the new capital structure, it was in the ballpark of EUR 120 million interest rates expenses net. I would expect that we will be in this ballpark of EUR 120-EUR 140 here. Let me start on tariffs. I think if you look at our value add structure, in a lot of cases, we have value add coming out of Europe/U.S. for China. We have the ability also to redirect supply from China via Europe to the U.S.
We do not see a significant impact from the tariff topic in this fiscal year. We expect to see after, I would say, redirection of the supply chain and impact of the lower mid-single digit arena for next fiscal year. Tariffs stay as they are today.
Perfect. Thanks so much, guys.
With that, I would like to close the call today. Thank you for everybody participating. As always, the IR team and myself will be available for further questions. Thank you, everybody.
Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. A recording of this conference will be available on the investor relations section of the Siemens Healthineers website. The website address is www.corporate.siemens-healthineers.com/investor-relations.