Hello everybody out there. Shortly ahead of our summer break, Bernd, Jochen, and myself are getting together to wrap up the past quarter. While we are looking forward to a few days off, I do hope that our listeners would also find some time to get out. As usual, we try to distill the key points of discussion and deliver to you a compact summary of what we believe you need to know if you did not get a chance to meet us, or if you simply want to remind yourself ahead of your next discussion involving Siemens Healthineers. Let's kick it off. Firstly, I will give our CEO, Bernd Montag, a chance to warm us up. What were the highlights of Q3 fiscal 2026 from your point of view, Bernd?
Yeah, Marc, a clear highlight was definitely the outstanding equipment book-to-bill of 1.27x. When we unpack this a little bit, even excluding all Value Partnerships, we achieved a book-to-bill of 1.17x, which more than makes up for the softness we had in Q2. In addition, the two very prestigious Value Partnerships and big Value Partnerships we signed in the U.S. with Cleveland Clinic and Vanderbilt Health demonstrate two things from my perspective. On the one hand, that the U.S. market is very much intact, and on the other hand, that the team Healthineers can really be proud that we can win such prestigious frontrunners of modern healthcare as long-term partners. Another highlight, the very strong growth of Precision Therapy with 9% in this quarter, led by Advanced Therapies due to the launch of the new ARTIS platforms.
Imaging growth, on the other hand, was a bit soft here on tough comps of 12% from the previous year quarter, and here we saw some revenue shifts into the next quarter. Diagnostics, unfortunately, still challenged in the quarter. The expected slowdown of the decline did not yet materialize in Q3, and mainly because of this continued top-line weakness in Diagnostics, we lowered the outlook range from previous 4.5%-5%, to now 3.5%-4% in the top line. On the other hand, additionally, we raised the lower and upper ends of the EPS guidance by EUR 0.15 each exactly by the impact of the tariff refunds we received in Q3.
Thanks, Bernd. With Diagnostics continuing to be a significant drag, investors obviously wanted to better understand the reasons for the Diagnostics performance in the quarter. Jochen, could you give some more color?
Yeah. Thanks for handing over the hot potato. We have seen continued weakness stemming from the structural market rebasing in China and the fading out of our legacy platform as a consequence of our transformation program towards Atellica. When the expected slowdown in the revenue decline did not materialize, we were a bit more optimistic about the decline slowing down. That didn't happen, and that's also the main reason for the adjusted group outlook on top line. We now expect for diagnostics a full year decline of around 5 percentage points, thereof around 80% is China-related. The remainder is mainly driven by the transformation and ongoing Dimension Vista platform sunset in the United States. And obviously, the bottom line was also impacted by these effects. The main driver behind the China decline is also price decline. We saw a negative conversion, obviously, from the significant revenue decline.
The positive in the quarter was that we saw margins ex refunds of 3%. They are still low, but they are sequentially improved versus Q2, and this was as laid out as last quarter's pre-close podcast.
Yeah. Jochen, we also got some questions tucking into this topic of the general diagnostics weakness, whether this had any impact on our plans to carve out the business and how the plans, they are progressing. Maybe again, for you, Jochen.
Yeah, in general, the preparations for the carve-out are advancing very well. The decision on carve-out will likely still occur in the course of this calendar year. The carve-out itself will then take up to 24 months, because this is a complex process also due to legal topics such as product registrations and legal entity setups and IT infrastructure and other things. But in general, we don't see any impact of the recent performance on our strategic path forward.
The other unexpected bit in this quarter's release was probably related to Imaging. We received a lot of questions about the softer growth in the quarter. Obviously, we had tough comps of 12% in the prior year quarter. What else is there to mention, Bernd?
Yeah. We indeed expected a softer Imaging quarter from the beginning on, but with mid-single-digit growth of around 4% against these tough comps. Unfortunately, there were a couple of factors that ultimately prevented us from truly making it. Firstly, we did not anticipate that the site readiness for MRI installations in the field could not keep up with the steep ramp-up of factory output driven by the strong demand for our DryCool products. Additionally, we also had minor topics like some import control-related delays in the NIA region. Both topics are purely timing issues and are not structural, and we expect this revenue miss of roughly 1.5 percentage points or EUR 50 million to shift into the next quarter.
Thanks, Bernd. That's good news. Speaking of the next quarter, Jochen, could you walk us through the segment expectations for Q4?
Yeah. For Q4 Imaging, we expect to see accelerated growth into the higher single digit. As Bernd alluded to, we saw shifts in MRI from Q3 into Q4, and we expect good growth momentum also in computed tomography, also with the two new photon counting platforms now also available in China. Precision Therapy will stay strong with growth in the higher single digits, but not at the 9%. We also expect continued strong momentum in Advanced Therapies. As I said before, Diagnostics is expected to see a mid-single-digit percentage decline again, similar to what we saw throughout the fiscal year. On margins, and here I refer to ex-refunds, for Imaging, we expect a sequential margin expansion compared to Q3 margin ex-refunds from the accelerated growth.
Year-over-year, margins should also expand, but keep in mind that inflation in the supply chain is clearly intensifying in Q4, and foreign exchange will probably also be a headwind in the quarter due to hedging activity. In Precision Therapy, year-over-year margin expansion will be tough against a very high prior year quarter of 17%, but we expect a good sequential improvement whereas the 14% margin ex-tariff refund from Q3. In Diagnostics, we again expect a significant year-over-year margin decline as a consequence of a top-line decline, but at least sequentially flat compared to Q3 margins ex refunds.
Is there something you are aware of in terms of below-the-line EBIT items for the full year?
For the full fiscal year, we expect now a tax rate close to 23% only, coming from the initial assumption of 24%-26%. We expect financial income now around -EUR 330 million only, as less negative, due to some tariff-related refunds into the interest expense line.
The below-the-line items also played a role in our bridge to 2027 that we showed in our Q3 presentation. People wanted to make sure they fully understood this. Jochen, could you please walk us through the EPS bridge?
Yeah, for sure. First of all, we showed this bridge to share some insight about the moving parts for fiscal year 2027, which we already know today. Let's start off with the jump-off basis. This should be the fiscal year 2026 guide ex refund, so something between EUR 2.20 and EUR 2.30. The more technical topics are the low tax rate I just mentioned this year, will normalize again next year into that ballpark of 24%-26%. We need to refinance regularly maturing loans at higher rates. This will lead to decreased financial income, means more negative financial income. This has nothing to do with the Siemens AG deconsolidation process.
Then we expect when the spin-off has happened and deconsolidation is in effect, some separation costs, recurring separation costs from Siemens AG, not the fully annualized number, but the proportional number according to the time of the deconsolidation. Altogether, this is between EUR 0.12 and EUR 0.15 of EPS headwind from those items. The other moving part is the additional inflation in the supply chain, particular from memory chips, certain raw materials, and logistic costs. The headwind from the inflation is coincidentally the same ballpark as the mitigation measures from pricing and cost program we put in place to mitigate initially the tariff impact. As of now, we assume for those two items a wash.
Most people who did the math came to an adjusted EPS of around EUR 2.35 in fiscal 2027. Is this directionally the right way of thinking?
Yeah, directionally, absolutely it is the right way to think. If you start at the EUR 2.25 in 2026, the midpoint of our guidance ex refunds, you should get to a number clearly above EUR 2.25 for 2027, and this is, from our standpoint, a prudent expectation for fiscal year 2027. We are now in the midst of our planning process, so we will have more assurance on the moving parts, obviously, when we disclose our Q4 results and the outlook for next fiscal year.
Bernd, we also got, especially talking about fiscal 2027, questions around China. What are the implications for the Chinese market following the latest announcement on centralized procurement?
A little bit of background. The idea and intent of the Chinese government here is to bundle demand in mainly the entry-level segments on a provincial level. This doesn't really come as a surprise. Actually, the implementation comes a little bit slower than we initially have expected. The centralized procurement is not a new initiative, and it was piloted in each of the provinces, with respective targets before. You can look at this latest note more as a lessons learned from these initial experiences. The note addresses quality versus price balance rather than a pure race to the bottom, which is something which we really appreciate and see as a positive. In fiscal year 2026, the central bidding share is now roughly between 15% and 20% of the market, and it could go up in the next year, which is and will be reflected in our planning assumptions.
If this wasn't already enough in terms of guidance, people also want to discuss 2028, especially in terms of the mitigation for tariffs and inflation. What can we say there, Jochen?
Maybe to put that into perspective, when we had our capital markets day in November last year, we committed to a full mitigation of the tariff impact of EUR 400 million in 2026 by the end of 2028 with two main measures. First of all, an additional cost savings program, Lean for Growth, and better pricing, both contributing roughly 50% of the EUR 400 million. It was also clear that this has a certain time lag and will be not a linear curve, but be a bit back end loaded. Therefore, we expect more than 50% of the EUR 400 million mitigation coming through in 2028. Now we got another headwind from higher inflation costs. We will also look into additional cost measures and further pricing to also mitigate this in the future.
This, however, will take also time, and therefore, I would expect effects in 2028, but more in 2029 and maybe even beyond.
Thanks, Jochen. Now changing topic a bit, Bernd. We could also feel that people are very excited about the new Varian platform that will be launched at ASTRO. How do you feel about this potential of this new platform in the market?
Yeah, coming back to the excitement, and I am really looking forward to going to ASTRO, which is now in about seven weeks. And we have confirmed by the key opinion leaders with whom we work on that product, really quite well-substantiated hopes when it comes to this new platform. Because on the one hand, it is an extremely compelling LINAC, which brings many things to new performance levels. But in addition, this platform could help broaden the range of clinical applications which can be addressed in radiation therapy. This typically then requires clinical trials, but the promise is very much there, that this is changing how patients can be treated, and that it will make radiation therapy an option for patients who so far couldn't benefit from it. So we are very positive and are looking forward to ASTRO.
Great. Now, Bernd, on a final note, Siemens just announced that they have received binding decisions from the tax authorities regarding the spin-off, so the timeline is set for decisions at the two AGMs of Siemens and ours. During our road show, we had a couple questions connected to this topic, such as the probability of a brand fee and our view on separation costs. Could you please give us your view on those items?
Yeah. The preparations for the spin are fully on track, and we are very happy that there is now a really 100% confirmed timeline. We have quantified our expectations for the separation cost as a mid-double-digit million amount per year. I think with regard to the brand, yeah, which makes some people curious, our position is here. We have introduced, so to say, a double name, yeah, shortly prior to IPO. It is very well established in our industry for now a decade. In a way, it expresses, yeah, with Siemens, where we come from, and Healthineers who we are and what we want to build.
The question about the future brand is not so much a question of fees, but also a question of whether it makes sense having two companies who go in a very separate direction somehow share a name or share a part of a name. But I think from a capital market point of view or investor's point of view, ultimately, we do not expect a recurring brand fee in the future. At this point in time, there is no final agreement signed, but you can rest assured you will not be wrong-footed.
Thanks, Bernd. Very helpful. So before we come back to you, dear listeners, with the next edition of our wrap-up series, we will be at several conferences with management and also IR only in September. Obviously, we'll have our reporting in November and the connected road shows afterwards. You'll find our upcoming activity, all this listed on our IR website. For me, it remains now to say thank you, Bernd and Jochen, for doing this again with me, and thank you to our listeners for their interest in Siemens Healthineers. Stay safe and healthy. Bye-bye.