GE HealthCare Technologies Inc. Price & Performance (GEHC)

Thanks, Carolyn, and thanks to all those joining us today. At our Investor Day, we shared progress that we've made in executing on our Precision Care strategy since becoming an independent company. Now two years into our journey, I'm pleased to say that we're continuing on the path of strong execution with our fourth quarter results. In the quarter, we saw orders growth in every segment. We also saw robust backlog and book to bill, the strongest since we became a public company. We continue to see strength in The U. S. Market For example, in a recent survey of U. S. Customers, half of those surveyed indicated they expected incremental imaging investment particularly in the outpatient setting driven by expansion plans. In China, we're beginning to see a slight improvement in the market. Evidenced by orders growth. This market is evolving in line with our previous commentary. We continue to deliver revenue growth driven by demand in our Advanced and pharmaceutical diagnostics businesses. With overall strength in The U. S. The total company, both sales volume and price were positive. In addition, sales and orders grew mid single digits excluding China in the fourth quarter. We also continue to deliver robust margin while investing in R and D. Our progress has been driven by our lean culture, creating better value for our patients and customers while delivering efficiencies across the business.

We believe our commercial GE, which is focused on securing highly strategic long term enterprise deals, that help our customers deliver on their goals differentiates GE Healthcare. What sets us apart is the way we bring together our holistic offerings. Which includes a comprehensive and integrated portfolio of AI powered equipment, proprietary RETA pharmaceuticals and services enabled by our digital capabilities. In 2024, we closed 50 enterprise deals globally laying a solid foundation for the future growth. And last month, we announced a care alliance with Sutter Health valued at $1,000,000,000 over seven years. Bringing the total value to date of large deals closed since spin to over $5,000,000,000 I'll talk more about this partnership and the impact of our enterprise strategy Our commercial strategy supports our evolution from an imaging company to a healthcare solutions provider by working together with our customers to solve their greatest GE. I'd like to share a few examples that illustrate this transformation. In 2024, we introduced approximately 40 innovations. Additionally, products launched within the last three years contributed to a strong new product introduction vitality of approximately 50% for the year. These high margin NPIs reflect the impact of our increased R and D commitment and also help us drive recurring revenue.

For example, our cath lab, Alia IGS Pulse is outperforming our expectations and we're on track to launch in the near term. We continue to advance our leadership position in AI In one year, we've gone from 58 to 85 AI enabled FDA authorizations one of the most in healthcare. To date, we've upgraded approximately 30% of our MR base with Air Recon DL and expanded Sonic DL to move beyond cardiac into other areas like brain and orthopedics. We're also making strides with the development of cloud based solutions like GE, to accelerate bringing clinical and operational applications to market. And we're executing on our disciplined M and A strategy complementing our existing technologies and solutions. Last year, we closed two acquisitions, NIM Software with AI enabled image analysis and workflow tools and intelligent ultrasound GE, adding innovative real time recognition technology GE. We also announced the planned acquisition of NMP to deepen our radiopharmaceutical distribution capabilities in Japan, and other Asian markets. Turning to our outlook for 2025, we introduced guidance for the year, which reflects healthy demand for our products and services in most of our markets globally. Which is reflected in our orders growth. This guide is in line with our current view of the China market and The U. S. Tariffs on products from China.

With that, fourth quarter and to provide more details on 2025 guidance. Thanks, Pete. Let's start with our financial performance on Slide four. For the fourth quarter of twenty twenty four, we reported revenues of $5,300,000,000 with organic revenue growth of 2% in line with our expectations, global sales growth excluding an approximate 200 basis point impact from China, was up 4% for the fourth quarter On a reported basis, service revenue grew 6% and product revenue was up [indiscernible] Organic orders growth was 6% year over year driven by continued strength in The United States and across all segments. Order dollars continued to outpace sales, helping us deliver strong total company book to bill of 1.09 times our highest since the spin We exited the fourth quarter with a record backlog of of $19,800,000,000 up $700,000,000 year over year and up $200,000,000 sequentially. We continue to make excellent progress on margin delivering an adjusted EBIT margin of 18.7% two sixty basis points year over year due to productivity and volume. As a result, fourth quarter adjusted EPS was $1.45 up 23% year over year. Free cash flow of $811,000,000 was down $145,000,000 from last year Turning to our full year results on Slide five.

For 2024, revenues of $19,700,000,000 dollars grew 1% organically versus last year in line with our guidance. On a reported basis, product revenue was flat and service revenue grew 3% Recall that we grew 8% organically in 2023. Importantly, recurring revenue, which is more predictive of of total revenues for the year. Organic orders grew 3% year over year and book to bill was 1.05 times. 2024 adjusted EBIT margin of 16.3% expanded 120 basis points year over year ahead of our guidance driven by productivity and price, Adjusted EPS of $4.49 also exceeded our guidance for the year. Growing 14% year over year In 2024, our adjusted EPS benefited by approximately $0.08 from one time tax favorability related to completing our prior year global tax filings Free cash flow of $1,600,000,000 was down $161,000,000 year over year which I'll cover later.

On Slide six, let's take a closer look at the strong progress we made on our margins in the fourth quarter and for the full year Adjusted gross margin expanded 150 basis points versus the 140 basis points versus the full year 2023. The increase in adjusted gross margin was a result of productivity improvements including partnering with suppliers on material costs design change improvements in our products and factory and service productivity. We also benefited from higher margin new products. As an example, we held a multi team Kaizen focused on improving the capacity on two of our critical manufacturing lines by shortening change over times reducing wasted motion and prep time, and implementing environmental health and safety actions we added over 1,000,000 annual patient doses of capacity we also recognized productivity improvements of more than 20% For the fourth quarter, R and D investment was 6.5% of sales 9% year over year For the full year, we invested $1,300,000,000 in R and D equating to roughly 6.7% of sales up from $1,200,000,000 in 2023 We remain committed to investing in innovation and developing unique technologies We're also cultivating research collaborations that strengthen our leadership position in fast growing areas such as theranostics, interventional cardiology GE other growth opportunities On G and A, we've exited substantially all of our TSAs with GE, further enabling us to optimize our cost structure today and into the future I'm really proud of all the teams who supported our transition to a standalone enterprise we delivered excellent improvement in adjusted EBIT margin up two sixty basis points in the fourth quarter and 120 basis points for the full year.

These results combined with our ongoing focus on execution and operational improvement give us confidence in our ability to deliver margin expansion into the future Now I'll turn to our segments. Starting with GE on Slide seven. Organic revenue in the quarter was flat versus the prior year. Strength in The U. S. And rest of world was offset by headwinds in the China market.

Segment EBIT margin was up 200 basis points year over year driven by favorable price and product mix, The fourth quarter results capped a strong year of margin expansion for GE, with an improvement of 170 basis points on a total year basis due to progress with both productivity and price, continue to see robust growth in The U. S. As customers invest in innovation. Turning to AVS on Slide eight. Organic revenue was up 4% year over year with increased sales volume in The U. S. Partially offset by a decrease in China. Segment EBIT margin increased by two forty basis points year over year driven by continued productivity through standardization and volume as well as new product introductions. Sequentially, the strong improvement in margin versus the rest of 2024 was primarily due to volume leverage in the quarter. [indiscernible] Customer demand for our ABS products remain robust. Particularly in interventional cardiology and surgery GE. Like our OEC three d platform. [indiscernible] Moving to Patient Care Solutions on Slide nine.

Organic revenue growth was flat versus prior year with services growth and improved fulfillment offset by Segment EBIT margin declined 50 basis points due to inflation and portfolio mix, partially offset by productivity actions. Sequentially, EBIT improved two twenty basis points due to volume GE, As our portfolio mix normalizes, and with continued productivity initiatives, we expect to drive improved margin performance Strong global customer partnerships, particularly in The U. S. Position us well for future growth. Moving to Pharmaceutical Diagnostics on Slide 10. We delivered another strong quarter generating 9% year over year organic growth and EBIT margin of approximately 33%. We're pleased with this continued growth in margin expansion both year over year and sequentially I would note that the year over year EBIT comparison was favorably impacted by one time items including an investment related to in licensing pet radio tracers in the fourth quarter of last year. I also wanted to highlight that we recently announced $138,000,000 investment to expand our contrast media manufacturing facility in Cork, Ireland This will create additional capacity to meet growing demand for contrast media, while offering increased flexibility and supply resiliency. Turning to cash flow on Slide 11. In the fourth quarter, we delivered healthy free cash flow of $811,000,000 This was down $145,000,000 year over year due to inventory builds in 2024.

That we expect to work down in the first half of twenty twenty five. Looking at the year, we're pleased with execution on our capital allocation initiatives. To strengthen our balance sheet we paid down $400,000,000 of debt in 2024 and an additional $250,000,000 in the first quarter of twenty twenty five.

We also executed on strategic M and A including our purchase of MIM and GE Ultrasound. As well as our planned acquisition of NMP. Let's turn to our outlook on Slide 12. For 2025, we expect revenue growth in the range of 2% to 3% which reflects continued demand for our products and services as well as our current view of market conditions in China. We're taking a measured approach that assumes China's sales performance will be negative in the first half of twenty twenty five with a sequential improvement in the second half of the year versus the first half. Leading to a low single digit decline for the year. In addition, we expect a foreign exchange headwind to revenue to be approximately 1.5%. While The U. S. Tariff dynamic is fluid, we have incorporated the new China tariffs, which are in place today, into our 2025 guidance. This impacts adjusted EBIT by approximately 10 basis points assuming eleven months of impact Therefore, we expect full year adjusted EBIT margin to be in the range of 16.7% to 16.8% representing year over year expansion of 40 to 50 basis points Operationally, we remain committed to driving productivity initiatives and expanding margins.

We're assuming an adjusted effective tax rate in the range of 22% to 23% for the full year. On adjusted EPS, we expect to deliver between $4.61 and $4.75 for the full year, representing 3% to 6% growth year over year.

This includes approximately a point of impact from recently announced tariffs on products from China. Lastly, we expect to deliver free cash flow of at least $1,750,000,000 for the full year. For the first quarter of twenty twenty five, we expect organic revenue growth year over year to be in the range of 1% to 2% and adjusted EBIT margin and adjusted EPS to be approximately flat year over year When looking at the first half of twenty twenty five versus the second half of the year, we expect organic revenue growth to be stronger in the second half of the year As we move through the year, adjusted EBIT margin rate and adjusted EPS are expected to increase sequentially Overall, we're very proud of the work our teams contributed in 2024 to deliver on innovation and financial progress. We feel good about our guidance for 2025 especially with strong backlog and orders momentum. Now, I'll turn the call back to Pete.

Thanks, Jay. As you've heard today and see on Slide four our NPIs launched in the last few years have appealed to customers which translated into orders and revenue growth in 2024. This is another example of how we've made progress on our Precision Care strategy GE We expect this to continue in 2025 and beyond. We continue to evolve the way we think about innovation. Which has always been a cornerstone for GE Healthcare. Innovation is so much more than the technology we create It's about having a deep understanding of diseases and acting as a GE partner for our customers, rather than a transactional equipment vendor. By understanding unique needs of each customer, we co create a holistic offering inclusive of technology GE, services and solutions and bring it all together in a cohesive way to drive transformation for the customer. We began our long term enterprise partnership strategy to deliver Precision Care when we became an independent company. A best in class example is of how it's taking hold in our recent announcement with Sutter Health. One of the largest integrated delivery networks in The U. S. Building on a twenty year relationship, Sutter Health chose us to help them transform the way they deliver care to their 3,500,000 patients and create capacity to serve tens of thousands more across their network.

Another example is our long term agreement with Nutfield Health in The UK to provide our latest advanced imaging and ultrasound equipment technology upgrades and services over the next two decades.

As the partner of choice, these agreements bring us the while increasing capacity and access of quality care for patients. We believe our ability to bring together a holistic offering of smart devices [indiscernible] digital solutions and services is differentiating. And will result in more of these long term partnerships accelerating recurring revenue growth. In summary, on Slide 15, I'm proud of how our teams delivered in 2024 and what they do for patients every day. We continue to deliver solid results in revenue, margin, earnings and cash. And we're executing on our Precision Care strategy through commercial enterprise partner and investments in R and D to deliver innovation that solves the most pressing healthcare challenges for our patients and customers. Starting 2025, the strong momentum in orders, record backlog and book to bill. And we're also on track to launch a number of exciting NPIs including our proprietary radiopharmaceutical We've laid the groundwork for stronger sales conversion from orders which positions us well for future growth. All of that said, we're taking a measured approach to guidance as we start the year. And see how the market dynamics including China improvement and tariffs evolve. As a global company with a diversified supply chain and a significant U. S. Manufacturing base, we will continue to proactively work on potential mitigation plans.

Meanwhile, we're making good progress towards our total company medium term financial targets. I'd also note that we are humbled to be recognized by Fortune as one of its world's most admired companies for 2025. And this is really a testament to the dedication of our 53,000 global colleagues to deliver every day for patients and customers. Before we open up the call for questions, I'd like to take a few moments to share an organizational announcement. After more than twenty years with the company, Tom Westrick, President and CEO of Patient Care Solutions has decided to retire from GE Healthcare.

We expect to announce his replacement in the near future. Tom will remain with us to support a smooth transition and I'd like to thank Tom for his contributions through the years and wish him all the best his retirement. And with that, let's open up the call for questions. Thank you, Peter.

I'd like to ask participants to please limit yourself to one question and one follow-up. Operator, can you please open the line?

Our first question comes from Anthony Petrone with Mizuho Financial Group. Your line is open.

Well, thank you very much and good morning, good morning, everybody. Congratulations on a very strong overall print record bookings backlog and GE. And I think Jay, I'm going to start off on the latter. There on margin. And so maybe walk us through a little bit on the 18.7% about 120 basis points above our model. But in particular, your LRP calls for high teens to low 20s You're already in that range exiting twenty twenty four. That outlook was through 2028. So maybe just a little bit on the margin dynamics coming in ahead of expectations. How we should be thinking about that through the LRP. I'll have one quick follow-up. Thanks.

Sure. Thanks for the question, Anthony. We're very pleased with the progress that we're making on margin expansion. To your point, the margin in the fourth quarter was ahead of our expectations. But I think notably it was two sixty basis points of expansion versus the prior year 18.7% was a record for us. And as we look at the lines the P and L great performance on gross GE, 150 basis points or so. And then we also had declines in SG and A. We've talked about some of the work that we're doing to optimize this category and we were able to deliver on that.

In the fourth quarter. As we think about specific drivers of of the result we saw a benefit from volume, mix and price all contributing. It was approximately 150 basis points of EBIT margin expansion from those categories. And then interestingly from a variable cost productivity program and savings initiatives, all of that good work that we're doing fully offset any inflation or inefficiencies that we saw So all of the price volume mix was able to flow through unimpacted. Now I will tell you, we had about 100 basis points of one time items some of which we had anticipated. Some of it relates to spend from last year that was not repeated this year Some of it was related to foreign GE. And so in combination, that was about 100 basis points. But really, this was just an overall really solid performance. We talk extensively about the lean culture, and what we're trying to do and there's a lot of elements to that like safety quality and delivery. But this idea of lean's impact on cost I think, was very solid in the fourth quarter. Now as we look to the midterm, it's important not to extrapolate off of fourth quarter because seasonally fourth quarter is always by far the highest margin of the year.

So we'll see a return to normalcy in the first quarter as we look to have a nice solid margin expansion in 2025. But I do think it's safe to say we're increasingly confident in our ability to deliver margin from the business. So no change to midterm guidance. We did on the Investor Day we said we think there's an opportunity to deliver 20% plus over time And that plus was an important addition for us I think this fourth quarter print gives us more confidence in that plus.

That's very helpful. The quick follow-up would just be, you're facing I'll stick to GE, let others jump in. You're facing the pressures in China. You have some FX. You mentioned inflation. Let's assume inflation stays there, but if we have normalization in China, is it fair to say that this could be an upside case to the mid-20s on the margin side over time. Thanks again. Congratulations.

I think we'll start resetting the mid term guidance. But I think it's safe to say amidst if you look at last year's full result, 120 basis points despite very low sales growth, and despite some unplanned market volatility, And then we fast forward to this year, we're talking about sales growth that's below the midterm expectations.

And despite that, we're delivering another 40 to 50 basis points of margin expansion. So we feel really good about our opportunities to drive this going forward. And I think some of the excitement around innovation and all those products coming to market those should only bolster performance Pete, what would you add?

I think you covered it, Jay. But, Anthony, to your question, I think just as we went through the Investor Day and we talked about 20 plus, part of that is we're right on track to where we had expected to be. When you take a look at the growth rate where we're expecting to be here for this year, And then if you recall, a lot of our launches come out in 2026. And a big focus on having those that higher value prices than the segments that they're in and also higher gross GE. And again, that's been a critical part of our strategy from the beginning platforming and such. And so it's good to see that coming through. Thank you very much. One moment for our next question.

The next question comes from Craig Bishou with BIAV Securities. Your line is open.

Good morning, guys. Thanks for taking the questions. I want to start with China and maybe just see if you could elaborate on your comments on the order environment in China in Q4. And then Pete, you've been helpful in the past talking about some of the work that you guys have done province by province. To understand where each province is in the stimulus process. So just wanted to see if you can maybe provide some updated insight at the various stages for each province? And then I'll have a follow-up.

Yes, Craig. Thanks for the question. I mean, I would start out just at a high level and say fundamentally, what we said at Investor Day and what we've been communicating in between to what our expectations are. We expected to see some improvement of orders. Again, it's off of a challenging base the previous year. But that actually took place. And so again, from the standpoint of anti corruption, and then stimulus and the movement going forward on that, we've looked at this across all the provinces and we've talked in the past about the different steps in the process. And again, I would say at this point in time, it is on track to what we had laid out before, which is start seeing more orders improvement in the in the first half. Starting at later Q1, starting to see some of that in Q2, maybe having some benefits in the latter part of Q2 But the majority of the sales translation of orders would be more in the second half.

And I'll have Jake GE comment a little bit more as well about it what we said on the guide. But from what we see things right now, they're on track to to line up to exactly to that Jay, what would you add the China question?

No, I think that's right. We were encouraged to see orders growth in the fourth quarter. But as we kind of look forward we're anticipating negative growth in the first half of twenty twenty five and then we'll see some sequential improvement in the second half versus the first half So overall in our numbers, we're anticipating a low single digit revenue decline for the year. We'll watch this very carefully. As we've said previously, we think China is an attractive long term market, but clearly there's been some volatility So we've reflected that thinking in the guidance that we've shared here.

And I've in the past used a simple kind of four process step about province was announced that they have the money they'll announce a tender, they'll grant the order and then you'll ship it. I mean, we're pretty much aligned to that kind of step two. The tenders are starting to to take place. And again, I think our guidance is very much aligned to how we think this is going to roll out for the year.

Got it. That's helpful.

And just thinking about the hospital CapEx environment in The U. S. And around the world. It sounds like you guys see a pretty solid market or environment. So I guess I wanted to ask if that is true and then maybe just touch on some of the competitive dynamics in the markets I know one of your competitors recently talked about competitive wins. So we'd love to hear what you're seeing on the competitive front as well as the overall market environment.

Yes. I would say, Craig, look, from a CapEx standpoint, ex the China discussions we just made, we see improvements pretty much around the world. I would say I'd start Europe and say Europe was a more challenging year last year. I think we had mentioned in some previous comments about government changes that people put pauses on and took a look at things, we would expect to start seeing that moving in a more positive direction here in 2025. In The United States, it was a strong year. And again, as hospital system probably one of the oldest installed bases around different countries around the world, we're seeing again that upgrade taking place And what underpins that, which is happening around the world, but more so in The U. S. Is just strong growth of GE, which I know you guys all see in some of the device companies, interventional procedures up strong double GE, surgical procedures moving to outpatient centers, requiring ultrasound and C arms, Those are a lot of the things that we're seeing to benefit and we believe are going to continue. The need against for Cath Labs to handle many of the growth in structured heart and orthopedic procedures as an example.

So from that standpoint, that's kind of the marketplace. You asked about the competitive environment. Obviously, from a China standpoint, it's obviously been a very strong competitive market with local players as well as multinationals, but we feel quite confident in how we've laid out our ability And I would say, when you take a look at the markets around the world, we tend to be a little bit stronger in The U. S. Than maybe we are in Europe GE based on us being The U. S. Largest U. S. Imaging company. But we believe we're doing quite well in each of the segments. I would kind of harken back to our Investor Day to say, look, we have a new product coming out in CT that will be on track to launch and discuss Next year, we have an evolution in our molecular imaging pipeline with a full body pet that will be coming out And so in certain areas there, I think some of our players are converting some of their own installed base, which is helping some of their growth. But we feel very confident that across our installed base and in many cases exemplified in some of the larger wins.

We're doing quite well. You add in those new products in the coming years, Those are again as I mentioned at Investor Day, it's worth one to two points of additional growth from the new products are going to be coming out.

Thanks, guys.

One moment for our next question. Our next question comes from Vijay Kumar with Evercore.

Your line is open.

Hi, guys. Good morning. Thank you for taking my question.

Maybe, Jay, one on guidance question here.

The 2% to 3% organic, I think ex China, it's in a rounded something like 2.5% to 3.5%. If I look at your capital book to bill, it was close to 1.1x in fiscal 'twenty four. I think you ended the year at 1.16x.

Why is 2.5 to 3.5 ex China the right number? When Q4 we exited Q4 at 4% organic.

What is the guide assuming for volume versus price in [indiscernible] Sure. Thanks for the question. So overall, as you say, we have China down low single digit on a full year basis. And so excluding China, you get close to the mid single digit midterm aspiration And I will tell you we were very encouraged with the order performance in the fourth quarter 6% with a very attractive book to bill. Is exactly where we hope to end the year and we were able to deliver on that. A lot of that has to do with a buoyant capital environment as Pete described. And a lot of it has to do with great performance from the team. As we think about though the sales guidance, a lot of those orders have delivery dates either in the second half of this year or into next year. And so from our standpoint, while that's a very, very encouraging sign, it's not something that impacts Q1 or Q2 revenues. And so important for us to be very thoughtful about when those deliveries take place and how things look as it relates to guidance for the year. So what I would say is from a fourth quarter standpoint, the record backlog that we put in place the high book to bill along with the orders growth gives us increasing confidence as we look at the health of the business.

And I think we've reflected that with a reasonable guidance for this year. Pete, anything to add? I think you covered it, Jay GE. Think you covered it. I mean, you mentioned you raised the question about Fercado, Vijay GE.

We feel really good about where we are just to be clear, we're on track to our launch we've referenced before first dosing here within first quarter and then ultimately launch April. We're well on track to that. And at this point in time, we're assuming in our plans roughly around $30,000,000 of revenue for the year.

That's helpful guys. And maybe one more guidance related question here. Q1, I think I heard you say flat GE.

Is there anything one off in Q1 Is that sort of a gross margin impact or is this an OpEx line item which would drive the flat margins?

In the first quarter, we're going to we'll expect to see a little bit of gross margin improvement and a little of OpEx investment. The interesting thing that's happening is we have a lot of exciting launches coming. So we have to make sure from an R and D standpoint we're funding those for success. Some crucial programs with crucial milestones coming this year.

So that investment is coming to bear in the first quarter. And then secondly, from an SG and A standpoint, we're excited about this Flercato launch and a number of other launches that are taking place across the company. But that does require having adequate investment. We don't want to under club the investments in any of these crucial new product launches. So you're going to see a little bit of offsets from an OpEx standpoint to gross margin expansion leading to the margin that we've described in the first quarter.

So VJ, just a simple example is obviously we're expanding our cardiology GE call points, So we're adding sales force, marketing to be prepared for the launch. That would be an investment One moment for our next question. Our next question comes from Matt Taylor with Jefferies. Your line is open. Hi, good morning. Thank you for taking the question. Noticed you talked about the order growth being up across the segments. And I guess I was wondering if you could help us a little bit more with any segment color in terms of the growth expectations for 2025 and particularly on PDX given the ORKEDO commentary you just gave? Yes.

I think we were definitely pleased to see order strength across the board.

It was one of a rare quarter when every single business saw consistent orders growth. So that was really great. And on a full year basis, I think robust As we look at 2025 guidance, I guess what I would say is we'll expect PDX growth broadly speaking, in line with the growth of 2024. And then the rest of the business, we'll expect to see growth broadly speaking in line with the corporate average. So those are a couple of the dynamics Pete mentioned the Flercato assumption. Embedded in PDX. But beyond that, I think a nice environment overall contributes to the growth profile that we'll lay out for next year.

Can I just ask one follow-up on Forteado? Doug, with the $30,000,000 Can you just talk about the gaining factors and how you expect reimbursement to evolve and then the steps through actually getting on contract or is the need for hospitals to sort of reach your referral pattern and where their capital is placed, is that a gating factor? Maybe just talk about how you think that evolves throughout the year?

Yes. Thanks, Matt. So again, as we spoke a little bit about this at Investor Day and the midterm opportunity again we believe on this is $500,000,000 type of product to drug. And so that hasn't changed at all from that standpoint. As I mentioned GE in the previous question, our launch preparations are well on track, which is a combination of sales force It is reimbursement. It's also manufacturing scale up and all of those are on track. Keep in mind that with a radiopharmaceutical The typical way that we work our manufacturing structure is in partnerships with contract manufacturing organizations. Why would that be? Because you need to have them closer to the cluster where the products are serving.

So we actually have a selection of CMOs already set up that will be ready to produce right in the beginning. And we also then target our sales operations within those geographic [indiscernible] So that manages how fast you ramp you go a little bit more methodically. We're also targeting centers that have cardiovascular pet capabilities already. Why? Because they're already doing these patients. In some cases with Robidium, This would give them better options as far as how they can actually implement it. And then we'll be working on adding additional capacity into other areas. But other unlike other drugs where you can ship something put it on the shelf and convert over time, remember this is just in time delivery. There's a little bit more orchestration to it. But this is what we do on other molecules day in and day out. So we feel good about it But again, it's why we have a more measured approach as as we roll that out To your point on coding and things, we're well down on the road on that. I'd say from a coating and HCP, CS codes and stuff, We're on track here to have approvals and the fundamentally the code in effect in April We've also filed through pass through We would expect to have that not too far off of that date, but we'll see when that comes in.

But we feel really good about how this is playing out. And as I mentioned, our first commercial doses are are going to be here, not in the too far distant future. Great. Thanks, Steve. Thanks, Jay. Thank you. One moment for our next question.

Our next question comes from Joanne Wuish with Citi. Your line is open.

Good morning and thank you for taking the questions. GE just put them both out there. Once Can you just spend a moment on the first quarter, please? I'm trying to just piece through some of the year over year commentary on how to think about maybe some of the headwinds. I get the revenue headwinds, but I want to make sure I appreciate the up margin headwinds and what your And then second off, if you could just sort of broadly and this probably take up the rest of the call, talk about the competitive landscape and what you're really seeing versus globally? Thank you.

Sure. So as we think about the first quarter obviously, we're going to have a decline from a sales standpoint. Have a decline in China. And then we'll have growth in the rest of the world. But I think from a P and L standpoint, really the noteworthy items relate to this investment that we've described. From both an R and D and SG and A standpoint, We will see a bit of growth in the first quarter in those categories. And so it will offset some of the expansion that we'll see from a gross margin standpoint. Landing us to a flat number But as we go forward through the rest of the year, you start to get the benefit of some sales attached to the new products that we're launching and some of the R and D investment moderates over time. And so really it's not specific one timers per se. But it's this imbalance between we want really want to make sure that we're investing for success on our way to driving the sales growth for the year. We want to make sure we're investing for success as we look to support the midterm with some of these new products And so that's leading to the first quarter margin that you'll see And then Joanne, to your question on competitive nature and things, I would say look, as you know, I would say there's similarities between many of the companies that we compete with, but there's no compositions between any of us that are the same.

You would know. I mean, we're not in radiation treatment, some others aren't in monitoring, no one else really is in radiopharmaceutical drug development. Similar to we are. So there's a lot of mix changes that play through there. But I would say in the core imaging area where there is some commonality in things, We've done well across the globe. I think we've probably done a little bit better in The U. S. Than maybe we've done in Europe. Maybe some others have had some better experiences one spot or the other in those areas. I think that we've been able to take some share from certain players in the marketplace. I think that may be true for others as well. There's a mix that obviously always takes place But I would say one of the interesting things in a capital business where you have a large installed base and you talk about sales growth in a given window and I'll just refer back to us like with their Recon DL, We've made really good progress there and we've actually taken some share meaning new sockets that we didn't have But the vast majority of that is converting our own installed base which shows up in growth and share expansion by bringing new capabilities to those areas.

I think for all of us, there's always windows of time where you're converting your own installed base faster And if you're converting it with a product that costs twice or three times as much as what you have, you obviously have a higher sales growth during that period of time. And we know when we introduce some of our products such as Full Body Pet and some of the premium things in the area like photon counting, those ASPs will be significantly higher than what we're shipping today. And you'll see some of that growth in dollars come through. When it comes to socket share, like what you're holding on to in growth, we know we're doing well just from the reported share numbers and things in the marketplace. So hopefully that helps a little bit with some added color.

It does. Thank you. Our next question comes from Larry Biegelsen with Wells Fargo.

Your line is open.

Good morning. Thanks for taking the questions. Good morning.

Pete, maybe talk about the Sutter deal, dollars one billion seven years. Is that linear or almost $150,000,000 a year? And what are you assuming for 2025? And do you see similar opportunities elsewhere? And I had one follow-up. Yes, Larry. I'll start with the end of your question. We see lots of opportunity Down the road, as you can imagine, even when you announce things like this, you get calls from other folks and things. And we're really kind of getting our value stride together. And again, some of these structures in the past were more about if you buy a lot, you get a lower [indiscernible] A big part of what we offer is if you work with us on this, we help you actually drive better productivity, better outcomes, better patient experience. And ultimately then it's a win win on both sides. And so we feel really good about it. I think the Nuffield Health in The UK is a good example as well. So expect to see more With Sutter, like most of these, it's not always linear. And so it's not always just back ended. It based on the account. I would say in a case like Sutter, which is all and with the earthquake regs that exist, site renovations and changes are probably the longest lead item.

So we'll see more of those things taking place in the mid window time of the year. But I would also go to say that the orders for Sutter those will be coming into our order book here in the first half of the year. We'll put some of those in. And then each year thereafter.

So that's to come, but we feel really good about that improve patient lives in Northern California.

That's helpful. One more for you, Pete. It sounded like at JPMorgan that you expect to be more [indiscernible] Are you still focused on tuck in M and A and any update on the areas of interest? Thank you.

Yes, Larry, I think for us, we believe that tuck in M and A is super important. I think as tuck in M and A can be of various sizes, right? They can be GE, they can be smaller. The key is that they have a very strong strategic fit and they fit into our financial returns framework. And I think we've Jay and I have a cadence weekly. We have a strategic cadence that happens both [indiscernible] looking at what we're solving for with organic investments and what makes the most sense within organic. And as we change our lens again to be more than just an imaging company, be much more healthcare solutions company, you start looking longitudinally at things you can plug in to bring more value. And again, as we meet with customers like Sutter, they're looking for how do you not just solve point solutions, how does this all connect together? So M and A will play an important part of that and we're optimistic here in 2025 and honestly into 2026 with a strong balance sheet the cash flow generation that we have that M and A can be a more healthy participation into our play.

The NMP deal that we announced in the fall, which really gives us a beachhead for radiopharmaceutical manufacturing capabilities in Japan and also outside of Japan into Southeast Asia That's another great example of taking a capability now with the new molecules coming and kind of having in each region of the world, Europe, U. S. And Asia having a radiopharmaceutical capability. So again, examples like that that plug into our strategy that makes sense. Expect to see more.

Thank you.

One moment for our next question.

Our next question comes from David Roman Goldman Sachs.

Your line is open.

Thank you and good morning everybody.

I wanted just to start on the ABS business here for a sec. [indiscernible] in that category tied to select procedure volume growth, but you maybe help us understand sort of the inflection point that you saw in that business this quarter with respect to growth and how we should think about the underlying drivers there on a go [indiscernible] Yes, David. So in ABS, again, just remind everybody, the biggest chunks of that are large ultrasound business and then also intervention Well, lab, so cath labs, surgical and stuff. And so we saw ultrasound actually have a very good quarter overall. Some of that is tied to our new platforms that were launched early last year. That we're getting traction. And again, still with a pressured China market, And so throughout other areas within the world, we actually did quite well within that net [indiscernible] We also have some new launches and things coming this year. More so later in the second half within the cardiovascular side, which we're quite excited about and think that's going to continue to drive it. But specifically, our cath lab the Ollie IGS Pulse, just has exceeded expectations. I think we're talking to customers that candidly probably wouldn't have a dialogue with us in the past.

Relative to the performance of our lab. Some of that is the output to do bariatric patients get views from a cardiac procedures that you can't radiation efficiency for someone who's going to be in the lab for structured heart for long cases. And they're seeing a premium lab that's really one of the top one or two out in the marketplace. So we're seeing the orders come in from that standpoint. And then on the surgical side, OEC, which has been a very strong brand worldwide, With the growth in surgery centers and the movement of more orthopedic procedures out You need to have a high quality surgical C arm. You need to have ultrasound like our logic all of those are doing very well because of that. And you may recall, we migrated what we call OEC three d capabilities onto that lab in the outpatient center. And so as more of these sophisticated procedures go there, our OEC C arm has in many cases procedures that were only tied to fixed C arms in the past. So that's been growing significantly fast as well and we would expect those trends to continue here as we get into 25.

That's a very helpful perspective. Thank you. And Jay GE, maybe I'm trying to piece together some of the moving parts here. On the free cash flow side. You referenced in your prepared remarks inventory being a headwind here, but as I look through the cash flow the cash flows that you disclosed, it looks like inventory was actually down year over year. You saw a benefit in accounts payable. Year over year. So I was just trying to understand the factors influencing the declines in free cash flow here and why that reverses in 2025?

Yes. I think, David, the miss on 2024 as we looked at our expectations really comes down to an inventory build that occurred in the latter part of the year. Some of that was strategic inventory levels, some of it was we have further optimization opportunity in terms of how we manage inventory. It's an opportunity for improvement for us. We saw some sales volatility in specific categories. Which makes it tough for careful inventory planning. And so as I look at the inventory balance as we sit here today, we really do see an opportunity moving into next year optimizing inventory, we should see some turns improvement next year We should see operational working capital overall improve through a lot of the lean measures that we're focused on. But this is a it's an opportunity for us. I would say that some of the performance will benefit next year from the drawdown of inventory levels that are inflated at this point in time.

Got it. Thank you. One moment for our next question. Our last question comes from Robby Marcus with JPMorgan.

Your line is open.

Great. Thanks for taking the questions. Maybe first on the capital equipment market outlook. Given all the pressures we're seeing with hospitals in The U. S, How are you feeling about the outlook here? And what's the assumption on the capital market including guidance?

Yes, Ravi. As I was mentioning, I think when you take a look at the underlying GE growth, and the ability to execute on GE growth, particularly on the interventional [indiscernible] the need to actually leverage GE ultra in multiple points of care we feel pretty good about it. And I think as we've done different surveys with customers and such, we think that's out there. I think obviously there's a lot of open questions about how certain reimbursement changes either it'd be inpatient or outpatient rates or what plays out with certain drug reimbursement programs that are out there. But we're not seeing at this point in time, I would say people put the brakes on and anticipation of any type of change. I would also say that particularly in our core capabilities, which is the MR and CT and MI world ultrasound Many of those products, even in worlds where it's tighter CapEx environment and it's a tighter cost environment, tend to be accelerators to generate profit for the institution. And so we haven't seen a lot of signs of that. But at this point in time, we're still seeing a pretty robust capital market estimates for The U. S. And then as I mentioned for Europe, where it was a little bit slower in the second half of the year last year, where we're expecting to see somewhat of a pickup, but not to the same level we're seeing in The U. S. You add?

No, I think that's right. And Ravi, we've talked in the past about the survey work that we do on a quarterly basis with our major customers. And everything that we're seeing is pointing to a continued robust environment We'll watch very carefully how things evolve and how policy initiatives impact this, but as of now, the environment seems solid.

Great. Maybe a quick follow-up, Jay. Free cash flow was down year over year. What was the reason for that in 'twenty four? And how do we think about that in '25. Thanks.

Now the key driver of the reduction of free cash flow relates to inventory.

We did have some strategic inventory build as we ended the year and we also have some optimization opportunities in terms of how we manage that. A lot of this comes down to sales and operations planning and make sure there's an incredibly tight link between sales forecast and what you make. And there's opportunity there. And so I expect this will normalize over the course of the year and we will see some improvement in terms through next year, which is the catalyst for the growth in free cash flow year over year.

Great. Thanks a lot.

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