Q2 2025 GE HealthCare Technologies Inc Earnings Call

And there'll be a question and answer session to ask a question during the session. You'll need to press star 1, 1 on your telephone, you will then hear an automated message. Advising your hand is raised to withdraw your question. Please press star 1 1 again, please be advised that these conference is being recorded. I would now like to turn the conference over to your speaker today. Carolyn borders, please go ahead.

Thanks, operator. Good morning and welcome to GE Healthcare's second quarter 2025 earnings call.

I'm joined by our president and CEO Peter, arduini and vice president, and CFO J. Sakura

Our conference call remarks will include both GAAP and non-GAAP financial results. Reconciliations between GAAP and non-GAAP measures can be found in today's press release and in the presentation slides available on our website. During this call, we'll make forward-looking statements about our performance. These statements are based on how we see things today, as described in our SEC filings. Actual results may differ materially due to risks and uncertainties. With that, I'll hand the call over to Peter.

Thanks, Caroline. Good morning, and thank you all for joining today.

I'm pleased to report that we delivered another solid quarter marked by continued business execution, healthy customer demand and ongoing progress with our Precision Care strategy.

In the second quarter, we saw orders growth across all segments, backlog remains at record levels and strong book to Bill. Reflect continued, customer investment in Capital Equipment.

For example, we're seeing this in imaging in advanced visualization solutions for outpatient cardiac and orthopedic settings.

we're also, observing healthy procedure volumes globally, Revenue growth in the period was driven by strength in the US and EMA regions

Looking at commercial execution, I'd like to highlight significant wins and long-term Enterprise deals that demonstrate our continued momentum.

During the second quarter in the US, we secured our largest order, ever of omni Legend, PET CT systems.

We also entered a strategic collaboration with Ascension, valued at up to $90 million in the first year. We broadened our long-term relationship with one of the largest providers in Mexico and secured a $250 million, 5-year collaboration in Europe.

These strategic collaborations leverage, our D3 strategy, which is about bringing to Market, world-class Solutions, with smart devices and drugs, enabling disease State Solutions with digital and AI.

Success in our Global strategy, is evidenced by the adoption of new product introductions, which generated over 50% of our sales. This demonstrates the success of our R&D Investments

Our commercial teams go to market with a Solutions, mindset, clinical expertise and deep product domain. All of this enables us to better. Serve patient needs and help our customers. Create sustainable long-term growth in the quarter, we delivered strong EPS to spite a mixed macroeconomic landscape.

Overall, we're optimistic given customer investment, our operational, execution, and increasing Clarity in the global trade landscape. Now I'll turn the call over to Jay to provide more details on the quarter. J.

Thanks, Pete. Let's start with our financial performance on slide 4. We reported revenues of $5 billion in the quarter, with organic growth of 2%.

At the high end of our expected range on a reported basis. Service Revenue grew 7% driven by global growth in new, and existing customer agreements. Including Enterprise deals product, Revenue was up 2%,

We delivered healthy organic orders growth of 3% year-over-year, with first half order growth of 7%.

Book-to-bill for the quarter was strong at 1.07 times, and we exited the quarter with a record backlog of $21.3 billion.

Backlog was up 2.2 billion dollars year-over-year and it was up 700 million sequentially.

Adjusted ebit margin in the quarter was 14.6% down, 80 basis points year-over-year due to tariff impacts. This was partially offset by lean actions and volume.

We continue to execute on our optimization initiatives in line with our medium-term profitability goals.

We delivered strong adjusted EPS in the quarter of 1.6 cents, per share up 6% year-over-year. This included approximately 8 cents of impact from tariffs.

Expense.

Lastly, free cash flow of 7 million in the quarter.

Was up 189 million versus the prior year.

Taking a closer look at margin performance in the second quarter on slide 5 adjusted gross margin, declined, 180 basis points year-over-year.

Due to terrific expenses and new product Investments.

Given the Tariff Dynamics. We thought it would be helpful to also look at performance in the first half of 2025, adjusted gross margin for the first half of the Year decreased 50 basis points and adjusted ebit, margin decreased, 20, basis points, including the impact of tariffs. This was partially offset by productivity and increased volume. We remain focused on what's in our control, including driving productivity initiatives and implementing tariff mitigation actions.

Let's move on to segment performance, starting with Imaging on slide 6.

Organic Revenue in the quarter was up 1% versus the prior year. This was driven by strong execution in Emma and the US largely offset by China. Headwinds

Segment ebit, margin declined, 110 basis, points year-over-year driven by tariff pressure. This was partially offset by productivity improvements, excluding tariffs Imaging, margin would have increased year-over-year and sequentially.

Overall Capital Equipment, demand and procedure growth, remain, healthy as customers invest in imaging innovation.

According to Advanced visualization Solutions on slide 7 or organic Revenue was up 2% year-over-year with continued strong performance in the us as customers invest in AI, enhance ultrasound Solutions, across multiple care settings.

Segment EBIT margin increased 20 basis points year-over-year, driven by productivity and volume. As we look ahead, we expect continued strength in growth markets, driven by product launches across the portfolio to accelerate growth and recurring revenue.

Returning to Patient Care Solutions on slide 8, organic Revenue was flat year-over-year growth. In Monitoring Solutions, was offset by life support Solutions which faced the difficult year-over-year comparisons. This was largely due to the strong backlog conversion in the second quarter of last year.

Segment EBIT margin declined by 240 basis points, primarily driven by inflation and an unfavorable portfolio mix. This was partially offset by productivity actions.

We remain focused on new product, introductions including monitoring anesthesia and labor Delivery Solutions which we expect to drive growth and improve margin over time.

Moving to pharmaceutical Diagnostics on slide 9. We delivered another quarter of solid growth at 5% organically. This was versus a difficult comparison in the second quarter of 2024 when organic sales grew 14%

Even margin declined, 200 basis points, year-over-year due to planned us radio, pharmaceutical Investments, Nihon metaphysics, and FX headwinds which were partially offset by price.

We remain confident in our growth outlook for PDX, giving continued strength, and Global Imaging procedures that drive the need for Imaging agents and the consistent growth of radio Pharmaceuticals.

Let's look at Cash. Performance on slide 10, we deliver free cash flow of 7 million up, 180 m, 9 million dollars year-over-year primarily due to timing the prior year period, reflects our annual employee compensation payments, that were paid in the second quarter but now, they are paid in the first quarter. We continue the strategically, manage our working capital and monitor inventory cycle times.

Turning to Capital allocations. Our priorities remain intact. In April, we announced a board authorized, share repurchase program of 1 billion dollars. And the second quarter we repurchased approximately 100 million dollars of our shares. Reflecting our view of strong long-term growth opportunities.

We also issued 1.5 billion dollars in bonds to refinance, our November 2025 debt maturity. Additionally, we're focused on investing in organic growth. Maintaining our dividends and pursuing strategic m&a that aligns with our portfolio strategy.

We've made significant progress with mitigating actions and continue to implement these initiatives across the globe.

As outlined on the slide, we've continued to make prudent assumptions regarding the bilateral U.S. and China tariffs, as well as announced tariffs for the EU, Mexico, Canada, and Japan. In essence, as we did last quarter, we're only assuming the current agreed-upon tariffs.

In April, we guided to an adjusted EPS range of 3.90 to 4 dollars which reflected 85 cents of total. Net tariff impact post, the significant remediation work performed by our teams with the easing of tariffs. We expect to realize and Improvement of approximately 40 cents from the prior full year, adjusted EPS guidance. We also expect a 13 cents Improvement due to commercial execution, tax and interest.

The total net tariff impact in our adjusted EPS guidance for 2025 is now 45 cents and the second quarter, the impact from tariffs with less than fifty million dollars.

We will continue to drive mitigation actions into 2026 and Beyond as a result in 2026. We expect less than 45 cents of adjusted, EPS impacts from tariffs.

Now.

Let's turn to our full outlook on Slide 12 for the full year 2025, reflective of continued positive customer sentiment in many of the global markets we serve, and continued business momentum. We are raising our organic revenue growth guidance to approximately 3%.

Based on where rates are today, we expect FX to be a 50 basis, point Tailwind to revenue.

For adjusted EBIT margin, we are now forecasting a range of 15.2% to 15.44% for the full year, compared to our previous guidance of 14.2% to 14.4%.

Our adjusted effective tax rate is expected to be in the range of 20 to 21% for the full year, compared to a range of 21 to 22% in our prior guidance.

This compares favorably to 2024 by 80 to 180 basis points, primarily due to the uiz of tax attributes post spin.

For adjusted EPS. We now expect between 4 dollars and 443 and 4.63 cents for the full year.

This is up versus our prior estimate of 390 to 410 per share.

We now expect to deliver free cash flow of at least 1.4 billion for the full year versus our prior expectation of at least 1.2 billion dollars 2025 will be impacted by tariff, payments as previously discussed.

Provide additional insight to the third quarter of 2025. We currently anticipate year-over-year organic Revenue growth for the quarter to be in the range of 2 to 3%. We expect adjusted, EPS to decline, High single digits. Year-over-year, due to tariff. Impacts with that. I'll turn the call back over to Pete, Pete.

Ing Solutions made up of AI enabled equipment and digital tools.

Imaging is a core component of nuclear medicine and a Cornerstone to Precision Care.

recently, 1 of the largest gpos reported that pet is expected to outpace other modalities in the coming years, in part due to an aging population and the rise of Novel Therapeutics,

As a result, our customers are looking to g health care as the partner to help them increase capacity and build infrastructure to better manage their patient flow. We believe our comprehensive offering of nuclear medicine Solutions across multiple care, areas puts us at an advantage. So, let me explain why.

In Alzheimer's, momentum, began 2 years ago, with the FDA approval of the first Amal targeting therapies. Since then we acquired MIM software and have integrated differentiating AMOLED assessment and therapy monitoring tools into our devices.

We continue to see demand for vizel, our diagnostic pet ammo agent. And just last month, the FDA updated visma label to allow for quantification of omalo and patient selection for treatment. It also removes limitations for use for monitoring therapy response and predicting development of dementia.

And oncology updated guidelines are driving increased. Use of seriana scans for certain patients, with metastatic breast cancer.

Serana revenues have increased significantly year-over-year and meanwhile MIM continues to be a differentiator for us to drive efficiencies and complex work, flows, like theranostics 1 of the fastest growing areas of nuclear medicine.

We're continuing to advance the commercial ramp up for focado. It's now covered by all 7, Medicare administrative contractors.

And included on cardiac pet policies and more than half of the nation's commercially insured population.

At the 2025 Society of nuclear medicine and molecular Imaging annual meeting, a clinical abstract featuring data, from the purees, the active agent in forcado, received the Cardiology abstract of the Year award.

As the world looks to address these devastating diseases, we're confident that our investments thus far, and in the future will pay off in the form of real patient impact and customer interest to grow their service lines.

Our nuclear medicine approach with smart devices and a portfolio of drugs enabled by digital, and AI is a great example of D3 in action.

As a partner, we're not only helping customers Define the future but delivering Solutions at a time when they're ready to embrace it.

As we conclude the call, we're pleased with the orders and revenue performance in the second quarter and in the first half of the year, which has been supported by strong customer demand.

We continue leading in Ai and Healthcare. Topping the fda's, AI enabled, medical device list for the fourth year, running with 100 authorization.

We help Drive clinical confidence improve productivity for customers and fuel our growth.

We're also on track to deliver progress on our Innovation Pipeline with many of our higher margin products launches planned in the second half of this year and into 2026.

Our capital allocation strategy primarily focused on organic and inorganic investments, while also returning cash to shareholders through a dividend and share repurchases. This demonstrates our financial flexibility.

We continue to drive long-term value through our strategic priorities with healthy markets, solid operating execution, and a global trade environment. That's becoming more clear. We're pleased to be in a position to raise our 2025 guidance today.

I want to thank our teams for another strong quarter of execution and for their Relentless Focus to deliver for patients and customer global.

Now, let's open up the call for questions.

Thank you, Peter. I'd like to ask participants to please limit. Yourself to 1 question and 1, follow-up. Operator, can you please open the line?

Thank you, ladies and gentlemen, if you have a question or a comment at this time, please press star 1, 1 on your telephone. If your question has been answered, you wish to move yourself from the queue. Please press star 1 1 again, we will pause for a moment while we compile, our Q&A roster.

Our first question comes from Vijay Kumar with Evercore ISI. Your line is open.

Regions you ask Europe and what are China's bottom?

Hey Vijay. Thanks for, uh, thanks for the question. Yeah, I mean, you know, our orders, obviously, in the first half. We're about 7%, uh, when you take a look across the 2 and when we take a look at the the the different markets around the world, I'll kind of go around the horn and I'd say us you know, 1 of the things we've talked about has a an aging installed base particularly in in imaging probably older than many around the world some of that with the pauses that took place during Co. So there is a robust replacement cycle that's going on. I think that's 1 aspect of the US. Uh, the other aspect is many of the new clinical, uh, and products that are coming out, either on the drug or the device side. I mean, if you think of electrophysiology and what's happening in that boom driving. The need for advanced cath Labs, as as an example or what's happening relative to certain Pharmaceuticals and the need for more Mr. Follow-up Imaging. I mean, those are just

examples that are are driving and we see those Trends to be robust. The other which is a big obvious. 1 is the need for productivity. It's difficult for us, uh, hospitals to get staff and so equipment. That moves a patient swiftly, through the institution with a high quality diagnosis is a is, a very important asset. And hence, when we look at some of the cert

Surveys that come out are most recent Capital survey still has a rather a bullish view on spending and and committing money towards our equipment. Um, we haven't seen any significant pullbacks I'd say in any of the data at this point in time. Even from some of the most recent, uh, bills that were passed in in Washington. So stay tuned on that. Obviously, some of those won't come into effect until maybe 26, but we aren't seeing anything at this point in time. Europe, we're actually seeing some good growth. Uh, I would say last year, I'd mentioned that with some government changes there were pauses, most notably, like in the UK and France, we're actually seeing recovery in geographies there, uh, from from a capital decision standpoint, uh, UK Germany. So I think that plays out obviously, we'll have to see how the final negotiations. Take place with some of the terror bills does that affect things but at this point, we're not seeing a lot, I think Emerging Markets countries like Indonesia. Um there's a lot of activity going.

Going on, uh, in a positive way for for us. I know as well as other players and Latin America, we're seeing strong. I I'd say China, we're seeing activity, pick up. But the market recovery is taking a little bit longer. And so, you know, our our Focus there is, is that it's probably still going to take a little bit more time to to evolve. We think, the longer term Outlook will be positive, just based on the size of the country. But we have a, I'd still say, a paced view of of how that market will recover. I don't know. Jay

Anything you'd add to that? Yeah, sure Vijay. Just as it relates to your specific comment um, on equipment book to bill. You know, we reported 1.07 Times by the way, this was after 1.09 times in the first quarter um and the same number in the fourth quarter. So we're really pleased with this book to build performance. The strength of the markets that were experiencing right now. As we look at the as you know, with that calculation um we incorporate PDX and service Revenue at 1 to 1. So to your point um equipment booked a bill and all 3 of those quarters was well above 1.1. So I think it's a it's really a good backdrop as we look to accelerate the business over the midterm, that that's helpful comments here and maybe 1 follow up. If I met you, you're a car of assumptions. You're mitigating, you know, half half the impact here, in fiscal, 25 not noted. That fiscal. 26 impact will be lesser, uh, than 25, maybe elaborate on on that the actions.

Uh, the companies taking or any of these actions, um, or things that you would call as causing regret, if rates were to change, come down in in, uh, in a based on all that, you know, right now. Uh, do we have visibility to high singles EPS for fesco, 26. Thank you.

Great. Uh, thanks. Thanks. BJ. Overall we're we're very pleased with the work that the organization is undertaking on tariffs. Um, it's been daily work, the board and, you know, a lot of progress over the last several months.

As we think about the actions, I would bucket them in 2 pieces. Um, the first set are no regrets moves, um, that we immediately implemented.

Exemptions Bonded, Logistics simple supplier changes where we have dual sourcing in place and so all of those activities, you know, are things that we benefited from immediately and we will likely leave in place um for the foreseeable future.

The second piece though relates to, um, the broader restructuring of the supply chain. And so, as we gain Clarity on how the final tariff deals, look, um, we're starting to invest in some more substantive changes, for example, shifting manufacturing to more local for local or working with our supply base to move capacity, within their Network to more tariff friendly geographies. Those items are longer lead, time items. They would do require some investment but from our standpoint, you know, you don't want to do those kinds of moves until you have Clarity on Final, trade deals. And so as we've seen these trade deals Shape Up. Um, we're still we're now in a position to begin to execute on some of these which we'll do in the second half of the year. Um and then those will benefit 2026 to your point. It's really important that we have 2026 below 2025 impacts.

Um that's that's a clear area of focus for us as we look to mitigate these things. As far as EPS growth for next year, no comment that this stage um will work through that in the coming months, as we put together our plans for 2026

See anything to add? Yeah, I would just just say, uh, BJ. I mean, we, we've been really all over this 1. I think, uh, it's going to set us up well going into 26 but also into 27, sometimes these events. Also cause you to really take a deep look at your, your businesses. And so we're doing a lot of house cleaning as well. Configurations, things of that nature. Um, you know, I give you an example, our vascular business. We've had a product that's used in Orthopedics, uh, that was only made in China. We had the capability to make it and, uh, in Utah, we'll make them in both locations and so we can better serve the customers and probably the turnaround time. When a customer wants 1, we've cut the lead time probably in half with that change, you know, ultrasound probes. We make them in 4 different places around the world. Sometimes that was led by 1, sold decision, maybe cost, or something. As we see where these rates are. We can actually titrate where we want to make specific ones. So, I, I would say,

Our customer service is going to improve, as well as resolving issues. Both of those are going to improve as we just get smarter when we think about the geo landscape of where we want to make investments and how we provide customer service and support, but also what the costs are associated with them.

That's helpful. Thank you.

Why?

1 moment for our next question.

Our next question comes from Joanne winch with City, your line is open.

Uh, good morning and thank you for taking the question. Um, I want to spend a minute or 2 talking about the order book. Uh, looks like the order growth decelerated versus the first quarter. Um can you um help us understand the drivers? Were there any pull forwards in the first quarter um or is this a better way to look at this more on a year over year um book to Bill type of order book. Thank you so much.

Sure, as Pete mentioned earlier Joanne, we're we're really pleased with the health of the customer Capital environment. We think it's a robust backdrop, um, surveys confirm that and our performance confirms it as well. Second quarter order growth of 3%. Was certainly below q1, but we knew that was going to happen. Look to bill was healthy, um, as I mentioned moments ago and we had a record backlog, um, over 21 billion dollars which really sets us up. Well, um, heading into next year. Um, we did expect some moderation as I said and and it's important to look at this not on.

A quarter basis, but on a period, a little bit more extended than that. If you look at the first half orders growth, we're at 7%, I think if you look at the last 9 months of orders, we're at 7 or 6%. If you look at the last year, we're at Mid single digit growth. So when we talk about this midterm aspiration of driving mid single digit. Um, growth, certainly the performance that we've seen on a 36912 basis all supports that we're seeing strength and US AMA Emerging Markets. Um, customers are committed to cap back. So you know, I I wouldn't um, oh overanalyze the the deceleration from q1 to Q2 we did have a large customer order in the first quarter that did help uh, the order growth a little bit. But um, overall we're we're encouraged by the environment.

With Capital Equipment. It's always going to be a little bit, lumpy by quarter and the more that we are successful with Enterprise deals where you get a large commitment, we have posed cut in a given quarter for the next 1824 months of deliveries. We're going to put those in right then, we're obviously not going to spread them out or such, and so that's going to create lumpiness. And so, as Jay said, the retrospective look is is super important there. Um, but we feel very good about, uh, the position where we're in, and obviously, with new products coming. Uh, after you know, 2 3 years of investment that, uh, we would expect that to accelerate here in future quarters.

Very helpful. Thank you. 1 moment for our next question.

Our next question comes from Larry biegelsen with Wells, Fargo, your line is open.

Uh, good morning. Thanks for taking the question.

Pete. I wanted to ask about the progress with uh, forrado, what what feedback you hearing from customers, you know, what are some of the barriers uh to adoption that you're addressing. And how are you feeling about the 30s in in uh, guidance for 2025? And I did have 1 follow up.

Okay. Hey Larry. Thanks for the question. Look, I'll start with the 30. I mean, we feel good about it. Let me tell you a little bit. It's probably less about the 30s of it that positions us for the next 2, 3 4 years in, in the ramp. But look, we're pleased with the with the progress. And, uh, you know, some of the first things are is expanding the manufacturing footprint. Keep in mind, this is a product that, you know, we make the API, we make the, the chemistry Labs, but the real, uh, actual manufacturing happens at CMOS contract. Manufacturing organizations. Close to the site of delivery. We set a goal that we need to have about 25 this year to meet those numbers. Uh, we're roughly about 18. So we're actually on track or slightly ahead of where we need to be, and I think that's, you know, will help us reach over 90% of the pet, uh, uh, Imaging sights that that we've targeted here by the end of the year. So, that's, that's an important characteristic. The other 1 is, can you pay for it? Um, I'd mentioned earlier.

The max all 7 in the US. The Medicare administrators are covering and now we have over 65% of the commercially insured beneficiaries. Um, covering it, I think we'll pick up the other substantial covered lives here and then not too distant future. So from a reimbursement standpoint, feel good that we're on track to that you know, building the the Partnerships and the structures we've always talked about is probably 1 of the most critical things. Uh it's this training program with the physician.

The tax clinical applications even you know, the feedback on reimbursement and billing is this ramps up that cycle time? Honestly, is 1 of the most critical things and today I know from when we engage a customer until they get, uh, reimbursement and they get the cycle working to pay takes about 90 days. The reality of it is we need to work on it and we have our, you know, lean processes we're looking through with customers, how we get that down to 40 or 30 days, when you get to that level of you, engage a customer in 30 days later, they can be up and running in Billing. That's when the real philosophy takes that, we don't need to reach that velocity and get to the targets we have for this year, but we need that velocity to to grow. This thing's into 100 plus millions of dollars of growth down the road. So, that's the work. Um, the feedback has been fantastic, uh, hands down when someone sees the image quality on a on uh uh, product like this versus any of the

Predicate products out there particularly on obese patients or older patients. Um, they're it's really second to none so that's been great feedback that we've been receiving on it overall.

Super helpful J. Uh the gross margin came in in line with our expectations but was still down about 180 basis points year-over-year. It looks like tariffs were about an 80 to 90 basis. Point headwind in the quarter, what are the other factors that impacted the gross margin in the quarter? And how should we think about the gross margin for the rest of the year? Thanks.

Total engineering and product spending at the company, about 70% of it sits within R&D. Um, and about 30%, sits within cost of goods sold.

Of the 30%, it's made up of sustaining engineering, but also programs that pass technical feasibility and are close to launch.

And what happened in the second quarter is. We had about 50 basis points of impact from programs that shifted from pre-, technical feasibility, to technical feasibility as they approached the launch date. Um, it's a really nice Dynamic. Now, overall total program and product spending, you know was basically flat in the quarter. So R&D was down 8% but this Dynamic really explains that reduction we kind of look at this as a very a very good piece of news from our standpoint you know as we think about um you know the continued performance on the pipeline and driving that forward. Um it was just it was a great performance in the quarter and so that did in fact, negatively impact gross margin by about 50 basis points. The other thing I would say is we had about 50 basis points of impact from in our service business. Um, what happened here is we had some negative mix given the startup costs for new multi vendor service contracts. As part of large Enterprise wins that we have in

In place. When you take on the service on day 1, the margin is a little bit lower um and as you convert some of those accounts to more GE Healthcare products which is really the design, the the service margin improves. So in the second quarter that was a bit of a headwind. But again, as I look at the long-term Contours of the business, I think. Um, it is really good news Pete. I don't know if you'd add anything to this. No, I think you, I think you covered it, J. I think the main thing is, is when you look at engineering based type programs. In R&D, we're, we're spending, uh, significant amount of funds. We're making good progress with, um, the advancements of some of the Key Programs. We spoke about in Mr. And CT, and, and me are the reasons that this conversion moving forward. You know, we'll be talking about some of these and launches in in future, uh, months and quarters. So that's all great. Great, exciting news. And I think the Jay's point on the service side, the 2 sides of this

As these Enterprise deals evolve, they actually margins increase with them over time because of this phenomena. And also as we add some of these new products into the contracts that have more AI have more digital capabilities to capture rate on service and the price to serve actually goes up. And so from a from a standpoint of total margin dollars contributing that also has a pretty significant effect. The Vitality of the install of the of the products we're selling with the service contract. So

Um feel good about gross margin is you guys know. It's a huge Focus for us and something we're going to continue to drive

All right, thanks so much, guys.

1 moment, 1 moment for our next question.

Our next question comes from Robbie Marcus. The JP Morgan. Your line is open.

Oh, great. Uh, good morning. Thanks for taking the questions, uh, 2 from me, uh, wanted to start off with China. Um, what you saw on the quarter, um what the environments, like, how you're thinking about it for the rest of the year. And if there's a uh, extra China growth rate, you're willing to give on the rest of the business.

Hey, Robbie, let me, let me start and then maybe I'll turn it over to Jay. Give a little bit more details as well. Look in China. Um, I'd say we're seeing activity pick up. Um, you know, that being that being said, the velocity of the activities peaking at picking up, but the pace of the recovery itself, meaning actual pose, and people buying just taking a little bit longer. So seeing some uptick in activity, but things are taking a little longer tender Cycles. In particular at the provincial level, have have kind of extended um and just taking a little bit of talker to get done and so I we look at the back half of the Year our expectations is that's going to continue that idea of bid to award is still going to be a little bit longer. So we've reflected a slightly more conservative back half for

As well in China, um, in the next 1824 months as well. Some of these higher-end products that won't be part of different tenders, they'll stand alone. Uh, so we're excited about those as well. Jay, what, what would you add here?

Well, the first half in China did come in better than our expectations. And I think, really what it came down to, in the second quarter, we had better than expected. Backlog conversion. Um, we are expecting and modeling some softness in the second, half versus the first half. Um, really, this is an unpredictable Market as we've as we've seen and we're, we're sort of reflecting a cautious view. Um, as we watch, you know, continued progress in tenders and awards. Um, our 3% outlook for the total company has a range of outcomes for China. Um, so we're not counting on any meaningful step up at this point. Um, and we're we're, you know, kind of having that muted uh, outlook for China as we consider the second half of the year. But as we as we look at this overall you know the Market's still large um and we we still believe it will be an important growth driver going forward.

Great. Uh, Jay, that's a a perfect segue into, uh, my follow-up question. You had a a fairly in line, second quarter versus the street on organic sales growth. You raised the 2025 forecast, a bit. Um, how should we think about the Cadence for the rest of the year? China's going down a lot.

A little bit in that guide, what, what gives you the confidence in, in moving it higher and, and what's driving it? Thanks,

Yeah, I think I think Robbie we feel very good about the second half and full year guidance, um, for a couple of reasons. And a lot of this relates to the strong performance that we've seen in the last several Quarters on order growth on book to Bill, and on backlog, all of these things are, you know, at in some cases record levels but we've seen really robust performance. Um, overall and so as we think about the Cadence, first half organic Revenue about 3%, um, the third quarter guidance, we've got guided to 2 to 3 percent. The fourth quarter is typically our seasonally strongest quarter. Um, we're expecting a little bit faster than the 2 to 3 and the 3 to 4 range, um, as we look at it and so overall, you know, I think it's a really nice story and it sets up, well, as we look for, you know, really building on that acceleration into next year. The 1 thing I will say is we do a lot of work.

In terms of looking at when deals are going to be delivered. Um, and so a lot of our work in terms of secured rate, Revenue analysis, um allows us to forecast reasonably well, um, the future quarters and so, um, I would say that we're increasingly confident in it, and it sits on the back of this robust Capital environment that we've seen, and that we've been able to capitalize on,

On over the last several months, I'll remind you some of those deals from the first quarter. Um, some of the orders related to Imaging and other equipment, they take 6912 or even longer in terms of delivery date. So uh, that supports this acceleration that we're seeing in the second half,

appreciate it. Thanks a lot.

1 moment before our next question.

Our next question comes from David Roman with Goldman Sachs, your line is open.

Thank you. Good morning, everybody. Uh, maybe we can get started with the EDX business and, Pete, I think in your prepared remarks with Imaging, you talked about increased orders for Omni Legend. Uh, can you maybe help us understand how, uh, the expectations around Licardo may be impacting your ability to see benefits across the entirety of the PET CT and nuclear Imaging continuum? And to what extent that's kind of factored into your thinking, both for the balance of this year, as well as the targets you set out last fall.

Yeah, Dave thanks for the, the question. Yeah, my in the prepared remarks, I talked about this, this double digit growth, we're seeing in all the products that are associated with nuclear medicine which are radio Pharmaceuticals the digital tools and the equipment themselves, both spec and pet systems. So we're we're seeing a good amount of pull you know how

Biology capabilities, like we're going to address with forcado, what's happening in neuro. It's hard to, you know, not take a look at and say, nuclear medicine, particularly pet the right types of systems, uh, are going to continue to grow significantly. I mean, we had some bigger orders within the quarter that for the most part, will probably play a significant role in cardiac PET Imaging in the, in the future. Um, but I think all of these platforms that customers are looking at because of the widespread approach? Is there relative to the guidance we gave last year? I, I don't think I we've really contemplated a lot of that in there what the, what the uptake could be. Um, but obviously as as we get uh, into later in the year and and we start taking a look at as we get closer to giving our 26 guidance in the beginning of next year. Um, that's going to be a critical part for us but I'm I'm quite bullish about not just what the tracers can do, but the need for added equipment, you know, in today's world there's enough

Systems to do the imaging that's out there and tomorrow's world, with the growth trajectories of some of the therapeutics and the diagnostics needed. Obviously, there will be a need for more equipment in the marketplace. So, our timing for a new full-body pad and next-generation multi-head camera for SPEC, which we really are the only one in the industry that has all of those capabilities, is exciting. We're super excited about what that can mean.

And and, and then J appreciate your your comments and response to Robbie's question on the the 6 to 9 months to see Revenue impact. But but if you look at the totality of leading indicators here, book to Bill, I think you're remaining performance obligations grew for the first time in in, in several quarters. You're talking about record, backlog. Obviously, that's a good underlying barometer for the business, but help us think about an algorithm when, when the book to Bill turns into Bill and how we should think how we should contextualize the back cap Revenue guidance against that algorithm.

Sure, I think, you know, our business has both flow and project-based sales, okay? Um, the purest of flow is PDX, um, or our service business that's that's sort of straight flow through. But then we have other flow products like ultrasound. Um, and so for orders related to Ultrasound, they typically convert 1 to 2 quarters. After the order is booked turns into sales.

But the biggest part of the equipment portfolio, really is more Project based and that's our Imaging business. And think about this. Like, for example, if you have an Imaging, um, project in California, there are all sorts of regular regulations and licenses required, um, to get that approved earthquake code. And so on and so, our Imaging business has to

Typically a 9 to 12 month lead time from order to sale and so, you know, for Project based it's probably better to use 12 month trailing. As you look at orders to get a sense of future sales growth. Um and so what I would say is orders can be lumpy but I think over time the sales can be smooth. Um as those things emerge into the backlog and then and then and then come out of the backlog. Um, and so what's happening in our second half is you see that 2 to 3% in the third quarter? With a little bit of an uptick in the fourth quarter? That uptake is generated by some of the orders that we saw in Q4 2424, um, and q125, as they start to convert, um, into the into sales from the backlog. So, um, again to your point

Very robust backdrop, record backlog, you know, tremendous performance on a 3/4 basis. As we look at both book-to-bill and order growth, we feel like we're well positioned, um, and that's why we were able to raise guidance for the full year.

That's very high quality backlog as well as we've really taken a hard look at this. I mean, I think that's the other aspect of it is real. High quality backlog.

Thank you. 1 moment for our next question.

Our next question comes from, Matt Taylor with Jeffrey, your line is open.

Hi. Thank you for taking the question. Um, PJ you, please just a couple times on the call with, uh, some validation to The Innovation Pipeline and higher value, higher margin products that are coming, uh, end of this year. And then, next year, I was wondering, if you could kind of double click on that and highlight some of the key products that you're expecting to launch in the kind of impact that we could expect from them in 26.

I mean I I'll give a an overview. I mean, look, this has been a key feature of what we've talked about of our strategy. For how do we evolve the company to be a consistent? Mid single digit grower and even playing to the higher end of that range. Uh, at certain Windows of time, um, you know mystical digit grower and how we can move to to you know, higher end of that range. Uh a big part of this is obviously making sure that we cover any product gaps but also be able to uh deliver on differentiated products. And and we've been forthright to say we've had gaps within our portfolio versus certain competitors in the marketplace. And what I'm super excited about is that the next 18 months, we really fill all of those holes. And in some cases, I think we outperform. What's in the marketplace? That'll be a first for us, really in the last decade. And that's really a catalyst moment for this company. In many cases. Um, you know, Jay talked about the transition that's going on.

On in the Innovation work, meaning Milestones are being hit. I think the teams are doing a very good job, and have been doing a good job, both regulatory R&D, manufacturing to move things along. But if you think about as, you know, we have a full refresh in our ultrasound uh platform that's coming out. Um work that's going on in cardiovascular and Women's Healthcare and with artificial intelligence, the integration on 1 of these devices. Now, that'll allows a low

Our capable user to do things. They couldn't do in the past or automate so many steps in the in the use of the system and puts out image quality on ultrasound that rivals in some cases modalities like CT in the past things like that are going to be significant breakthroughs across the board and and handheld as well vascular. You know, look we've been somewhat of a lagard in this space. I think we have a really competent, cath, lab that's out there. Now we're winning share soon to be a vascular room soon to actually that have neurovascular. All of that is business that we don't really even play in today and so more to come on that in our Imaging business. You know, next Generation Mr. The sealed products that we're working on, uh, significant work on uni on the UI and productivity for for customers. And also, those changes also change the profitability of many of those modalities. And again, that's been an important message that

That we've we've delivered CT obviously, Photon counting. Um we're super excited about our advancements team has done a tremendous job there and I would say look and I'll do respect to the photon counting systems that are out there. They have advanced science and capability but they haven't transformed it. We think we have a platform that brings things to clinical outcomes that the current products don't have. We'll see how that ultimately plays out. But that's the reason that we're focused on our silicon based system for

The body pet we we haven't had a system. We're going to be talking more about that in the near future that's going to be critical and on the oncology care. And having a system that can change the amount of dose, of patient receives that can ultimately play into maybe different approaches to screening and evaluation. We're going to be a company that that can play into that PCS and monitoring and then a ton of AI. I mean, you mentioned, I mentioned relative to what we're, uh, communicating in the marketplace, the most most, uh, FDA approved products. We have this product Base called care intellect. Uh, you're going to hear us bring out in different care areas and college different areas around what we could traditionally call Command Center. So a lot of good progress there and then obviously PDX we talk about focado a lot all of those molecules as well. Remind you now have reimbursement in the United States where they fundamentally didn't before. So I went on a little long but I wanted to state that I'm super excited about this.

Portfolio. And I didn't even mention mammography, which we have not invested heavily in the past. We are now, and I think we're going to have some differentiated products. So you take that, and then you say you gain share, grow share, and expand your market growth with those. They all need service contracts as well. Most of those service contracts will be at higher value, higher margin than older products. So that mix of things is what, you know, we're super excited about as we launch.

Because then our opportunity to how to bring those together and and bring this D3 strategy together really come come alive. So more to come. I think it's going to be an exciting rsna for us this year and and some of the other clinical shows that we have in the fall and into the beginning of 20,

The reviews on organic and especially inorganic Investments.

Okay. You want to take that? Yeah, sure. So our Capital allocation approach is really designed to accelerate profitable growth and it starts with the internal Investments and the organic Investments that we're making, um, Pete. Pete, talked extensively about the pipeline, which we're so excited about. But that's been unlocked by 17% R&D growth in 23, 9% in 2024. So really robust investment internally. Um, and then the next question area is m&a. You know, we're really excited about the m&a pipeline. There's a lot of interesting opportunities for us and what I would say is, you know, there are a lot of Acquisitions that make a ton of sense for us. The MIM acquisition is going extremely well. Um and it's a really nice add-on to the portfolio that we have in place. Now as far as other items related to Capital allocation, we have paid down a billion dollar billion and a half dollars, um, in debt, since the spin-off. So we've done a lot of work there.

We have a a a small dividend which has been growing. And then in the quarter we did opportunistically repurchase a hundred million dollars in shares. We saw a really big dislocation in the share price. Um relative to our intrinsic value calculations um and we took the opportunity to opportunistically repurchase shares uh in the quarter. But you know, our priorities remain investment.

The business and also this m&a, pipeline Pete, anything to add on m&a.

Just just the fact that uh, I think everyone knows we've we've been pretty forward-leaning to say in our Capital, allocation approach, as you mentioned organic and inorganic are, you know, top of the list. Um, look, we're seeing probably 1 of the most robust pipelines of opportunity since I joined the company and ones that would be very you know, strong strategic fits and creative Top Line, a creative bottom line. Obviously those are the The Sweet Spot focused areas and the current environment, you know, we're seeing dislocations. I mean we're seeing some values that probably are too high but we're also seeing some that are highly attractive and have the tape the capabilities that would fit into it. So this opens up some interesting opportunities for us and we're building a really strong m&a team and integration capabilities and looking forward to obviously leveraging that the right deals here, come along for it.

Thank you guys.

Our next question comes from Rick Wise. With stifel your light is open.

Uh, good morning. Hi Pete. Uh, hi Jay. Um, let me just quickly follow up on some of your comments earlier. Pete about Photon counting, CT. We've for a variety of reasons, talked to a bunch of ducks, uh, just in the last week or so, uh, who saw your system at rsna, they're excited about it. They're excited about the potential for, uh, improved

Resolution. Can you just update us? Uh, uh, the investor day? You said you expected a I, if I recall correctly, second, half 25, uh, filing is that on track. Just give us a sense of potential, possible approval, timelines and just touch on how quickly this could turn into a big deal for for for you. I just the reaction from the doctors. It feels like it's a it's going to be a big deal.

Yeah, Eric, thanks for the question. So look, it's obviously a gap right now. There's, uh, there's a competitor in the marketplace. That's done. A good job. Getting a product out. Getting customers to understand what the broader technology actually is. And I think, you know there's there's 3 things about this technology, we're excited about increased spatial resolution seeing greater detail. I think you're seeing that from the products that are out in the marketplace opportunity for lower radiation dose which is always good. I think you're seeing that out there and the third in the marketplace that you're not seeing is this whole broader? Spectral resolution capability. Being able to see at a tissue level, what's actually happening

We when those things happen, we'll communicate, you know, our our launch intentions are still on track and and fundamentally all of the communicate that we had laid out back in investor day. Nothing has changed at this point in time. Um, we do think this is going to be a really important, uh, launch for us, obviously. Uh, CT tends to be the Workhorse in so many institutions around the world, and the more of this can become a even more of a Swiss army knife. Meaning. It can actually help uh, make broader patient decisions. We think that's going to be super exciting. So anyhow, uh, that's that's our current update on photon counting things are coming along. Well, and

I think, uh, again second half more news to come to the street.

Got you. And just a quick last one. Um, you announced the new leader for Patient Care Solutions in April. I think they started in May. I mean, clearly work needs to be done. What gets the revenues growing again? What gets the margin story stabilized? Uh, and you said, 'improved growth in margins over time' in your commentary. Help us just better understand what's next. Thank you.

Eric, thanks for the, the questions and maybe I'll start, and, and then J. And calm, yeah. We're we're really excited about have Janette bankis join us. Who's an industry veteran, who's had experience in many different Industries, Long, great career at Boston, Scientific already having a significant impact in a very short period of time, and I just think her her eye, looking at the business, uh, the team building the capabilities to be successful. Um, she's already all over it. I I look at this business area and say of any area that can be positively disrupted by artificial intelligence and capabilities that will transform the growth of it. This is the place. So, if you look at our anesthesia business, we, we've just launched a new platform there that will start driving more growth and margin accretion. It's a more profitable platform. We just literally launched it and are in the midst of that. But our monitoring systems capability, updating all of that, that will be

really completed here within the next, uh, 18 to 24 months. There is a significant amount of AI enhancements to change how those systems actually work. Um, our Diagnostic Cardiology business and our MC business which is our

Uh, prenatal and and baby business, also heavily influenced and potentially positively disrupted with with AI. It's also where we bring to Market some of these care intellect products. So when you step back from it, it is about a refresh of products in critical care that actually bring higher margins based on a new design and approach new feature sets brought because of of digital. And then I would say this is a really interesting area too that we can bring tuck in products that we string together to bring departmental Solutions. And so uh, we'll talk more about that. I'd say as we get into the fall, but we have some really interesting things there to go. So, thanks again for your question.

That concludes the question and answer session. Please proceed with any closing remarks.

Yeah, I'd just like to say again, thanks to everyone for your interest in joining us today. We look forward to connecting with many of you on calls or at upcoming conferences in the future. That concludes our call. Thank you.

Thank you, ladies and Gentlemen, Just include today's presentation. You may now disconnect and have a wonderful day.