Operator: Good day, and thank you for standing by. Welcome to the GE HealthCare Q3 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will 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 today's conference is being recorded. I would now like to hand the conference over to your speaker today, Carolynne Borders, Head of Investor Relations. Please go ahead.
Carolynne Borders: Thanks, operator. Good morning and welcome to GE HealthCare's Q3 2026 earnings call. I am joined by our President and CEO, Peter Arduini, CFO, Bill Grogan, and Controller and Chief Accounting Officer, George Newcomb. 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 will 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 will hand the call over to Peter.
Peter Arduini: Thanks, Carolynne. Good morning, and thank you for joining us today. Before I review highlights from the quarter, I want to take a moment to welcome Bill. He brings tremendous experience and a strong track record, and I am looking forward to partnering with him as we execute against our strategy and deliver on our priorities. Looking at our Q3 results on slide 3, we delivered strong top-line growth and margin expansion across all segments. Broad-based demand in advanced imaging solutions and pharmaceutical diagnostics supported healthy orders, book-to-bill, and backlog. Heartbeat is strengthening how we run the company and helping our teams deliver on commercial and operational simplification. A great example of performance driven by Heartbeat this quarter is Patient Care Solutions. The team identified root causes of prior supply challenges and implemented standard work and daily management to drive ongoing improvements. This drove backlog conversion and stronger operational performance.
Peter Arduini: Taken together, momentum in our business has enabled us to raise our full year 2026 guidance, which Bill will cover later in the call. Turning to slide 4, let's look at how we are advancing our growth strategy. We reached key regulatory milestones in the quarter on two imaging platforms with market-differentiating features. We received CE marking for Photonova Spectra, our photon-counting CT system, and StarGuide GX, our SPECT/CT system, is pending FDA clearance. This broadens our ability to commercialize in more markets. We also expanded our ultrasound platforms in cardiovascular, women's health, and general imaging with the launch of several new products to meet the growing demand for non-invasive imaging. We continue to see general imaging ultrasound as an attractive market where we are investing for the long term. With growing demand, staffing constraints, and more distributed care, ultrasound's versatility across a broad range of exams is increasingly valuable.
Peter Arduini: PDX delivered another excellent quarter with growth in contrast media and radiopharmaceuticals, including proprietary tracers aligned to disease states. This was supported by momentum in precision medicine and growing demand for targeted diagnostics in oncology, cardiology, and neuro. Earlier this month, we announced our plans to acquire SOFIE Biosciences. Upon close, this will establish a final mile footprint of US PET radiopharmaceutical supply. It will also strengthen our pipeline through FAPI-74, a phase III PET tracer with the potential to help diagnose and treat a range of cancers and other diseases. Heartbeat is driving improvements in execution across the company, keeping our teams focused on SQDCI: safety, quality, delivery, cost, and innovation, in that order. In services, standardized digital support is helping our field engineers resolve more issues on the first visit.
Peter Arduini: We expect this to save approximately 10,000 hours of field time across CT, MR, and X-ray in the US and get customers back up faster. In AIS, stronger standard work and operating rigor around variable cost productivity delivered incremental cost reductions, helping partially offset inflation. We recently entered multi-year strategic agreements with several leading technology partners to secure memory chips to strengthen the resiliency and predictability of our supply chain amid growing cross-industry demand for advanced computing components. We continue to pursue agreements to position us for the future. Lastly, before I hand the call over to Bill, today, we announced that Jeannette Bankes, who leads our PCS business, will be leaving for a CEO role at a non-competitive, publicly traded company. We thank her for her contributions and wish her the best.
Peter Arduini: Leveraging our strong succession pipeline, I am excited to announce that Neal Sandy, currently head of product strategy and management for PCS, will become the CEO of the business. I have tremendous confidence in Neal's capabilities given his current role and more than 30 years of experience in the industry. We remain focused on building on the progress the team achieved in the quarter, and we are also evaluating strategic options for this business. With that, Bill will walk through the financials and guide. Bill?
Bill Grogan: Thanks, Pete. Let me start by saying how excited I am to have joined GE HealthCare. I have been impressed by the talent and commitment of the team, and I look forward to helping to build on the existing foundation as we execute on the significant opportunities ahead. Now let us turn to our Q3 financial results on slide 5. We are pleased with our strong performance on both the top and bottom line and with growth ahead of expectations. Revenue of $5.5 billion increased 6.2% organically, with growth across all segments. On a reported basis, we had strong performance in both product and service revenues at 6.7% and 8.1% growth respectively. Organic orders grew 4%. As a reminder, orders growth in the Q3 of last year was 5.7%, so we are growing mid-single digits on a strong baseline. On a trailing 12-month basis, organic orders growth was 4.6%.
Bill Grogan: Book to bill was 1.03 times, and we exited the quarter with a backlog of $23.7 billion, up $2.5 billion or 12% year over year. We made progress on margin expansion this quarter, delivering adjusted EBIT margin of 16.6%, up 180 basis points. I will discuss the operational drivers in more detail on the next slide. With our strong execution in the quarter, we delivered adjusted EPS of $1.34, up 25.1%. Lastly, our free cash flow was $793 million, up $310 million versus the prior year. On slide 6, we will look at the drivers of margin expansion in the quarter. Our commercial execution helps us grow profitably as volume provided a healthy tailwind to margin. Additionally, the price and cost mitigation actions we have been taking across the business are starting to deliver a more meaningful benefit. Tariff expense was also lower than the prior year.
Bill Grogan: Margin was negatively impacted by inflationary costs for memory chips, as well as the impact of higher oil prices across our supply chain. As we think about our margin expansion framework, it is built around two key areas underpinned by Heartbeat: commercial execution and operational simplification. Starting with commercial execution, our focus is on driving high-quality, profitable growth. This includes capturing strategic pricing opportunities, standardizing our product launch playbook, and bringing new products to market at higher gross margins. As I have been coming up to speed on our business, a strong example is our Vivid cardiovascular platform, where differentiated AI-enabled capabilities supported premium pricing while a simplified design reduced manufacturing costs. On the operational side, we are simplifying how we run the business and reducing complexity across the organization.
Bill Grogan: This includes advancing product platforming, optimizing our structural cost base, streamlining internal processes to eliminate rework, and the VCP examples Pete mentioned earlier. Together, these actions are helping us improve efficiency and create a more scalable operating model while supporting margin expansion. Let us move to our consolidated segment performance on slide 7. Starting with Advanced Imaging Solutions, organic revenue grew 4.5%, driven by strength in CT, cardiovascular and interventional solutions, and surgical innovations. EBIT margin expanded 130 basis points year over year, driven by volume, reduced tariff expense, and price. This was partially offset by inflation. Demand for our cardiology solutions also increased, which was reflected in demand for our AI-enabled CT solutions, MR upgrades, and cardiovascular ultrasound. Moving to Pharmaceutical Diagnostics, we delivered robust organic revenue growth of 13.8%, with contributions from contrast media and radiopharmaceutical products.
Bill Grogan: Segment EBIT margin expanded 50 basis points to 29.9%, driven by volume and price, partially offset by planned investments in new products and our innovation pipeline. As mentioned, we also announced the planned acquisition of SOFIE Biosciences. SOFIE's revenue will add approximately 1% of total company revenue on an annualized basis. In the full year of ownership, revenue is expected to grow in low double digits with accretive adjusted EBIT margin and adjusted EPS. Patient Care Solutions delivered significant sequential improvement in the quarter, and year-over-year organic revenue grew 8.8%, driven by improved operational performance, including better product fulfillment in monitoring solutions and maternal infant care. Backlog continues to grow alongside revenue. Segment EBIT margin expanded 480 basis points year over year, primarily driven by higher volume and cost productivity.
Bill Grogan: Third quarter performance was better than expected with strong product fulfillment, driven by daily management and improved supplier and factory execution. We expect this to benefit us in the future. However, keep in mind that the Q4 of 2025 had an approximate $45 million revenue benefit from the release of a product hold. Turning to cash performance on Slide 8, we delivered free cash flow of $793 million in the Q3. The year-over-year increase was supported by a reduction in net tariff impact, including lower payments, as well as refunds in the quarter. Additionally, operational profitability and timing of collections helped drive year-over-year improvements. We also increased our cash dividend by 14%, further enhancing returns to shareholders. Now let's turn to our outlook on Slide 9. Our continued execution gives us increased confidence in our outlook.
Bill Grogan: As a result, we are raising several of our full year 2026 metrics. We now expect organic revenue growth of approximately 4%, adjusted EBIT margin in the range of 15.5% to 15.7%, adjusted EPS in the range of $4.95 to $5.05 per share, and free cash flow in excess of $1.6 billion. We expect our adjusted effective tax rate to be in the range of 20% to 21% for the full year, and foreign exchange tailwind to revenue of approximately 75 basis points. With that, I'll turn the call back to Pete.
Peter Arduini: Thanks, Bill. I'd like to spend a few minutes highlighting PDX, a great example of how we're executing our D3 strategy, which brings together smart devices and drugs with a disease state focus in AI, enabling more precision care. PDX has delivered at least high single digits growth for five straight quarters. We're investing in strengthening our supply chain and manufacturing capabilities and expand where we can create value. As populations age and chronic disease rises, clinicians need imaging that answers sharper questions. Which treatment for which patient, and when? Managing these diseases often requires imaging at several points along the patient journey, from diagnosis to treatment to monitoring. Our agents are used in many of those imaging scans. Because each scan uses a dose, PDX revenue is recurring and grows with patient volume. About three-quarters of the portfolio today is contrast media, where volumes grow with global procedure demand.
Peter Arduini: We're also investing in what comes next with our MR manganese-based contrast agent. It has the potential to address a nearly $1.2 billion market, and we're making good progress on our combined phase II and phase III international trial. The remaining balance of revenue contribution is from radiopharmaceuticals, one of our fastest-growing markets. Here, PDX drugs and our AI-enabled devices complement each other. Each new agent helps clinicians detect and monitor disease, which drives demand for imaging and our PET systems. We're seeing that in our molecular imaging business, which grew strongly again this quarter. That combination is a differentiator for us as the only company with proprietary molecules and a large imaging portfolio. We continue to see increased demand for our radiopharmaceutical portfolio, including Vizamyl and Cerianna. We're also seeing strong performance from established products like DaTscan, our SPECT imaging agent for patients with suspected Parkinson's disease types.
Peter Arduini: Meanwhile, Flyrcado is on track. We delivered approximately 680 doses for the week ending 23 October, and we are seeing growing adoption across a broad-based range of customer types. Those include the existing cardiac PET/CT programs that have been partially or fully converted to Flyrcado, as well as others that are converting from SPECT to PET. This adoption reflects Flyrcado's diagnostic capabilities, longer half-life, and flexible infrastructure. To help expand the final mile distribution of these radiopharmaceuticals, we plan to acquire SOFIE Biosciences. Pairing SOFIE's network with our manufacturing scale will expand access and strengthen supply reliability, enabling us to directly manage a portion of our radiopharmaceutical manufacturing. It will also position us to advance the next generation of precision care, including PSMA, FAPI, and theranostics, where the same molecules that diagnose a disease help guide targeted treatment.
Peter Arduini: Simply put, PDX pairs resilient, recurring revenue today with a pipeline and footprint to extend that growth. In summary, we are pleased with Q3 results and importantly, the strong contributions from our team. Heartbeat is helping us strengthen commercial execution and operational performance. Our focus on standard work and daily management has been critical in driving more consistent performance. We continue to advance our new wave of innovation, achieving key regulatory milestones in the quarter, and we are executing on our priorities, and our performance year-to-date gives us confidence in delivering on our commitments for patients, customers, and shareholders. With that, we will open up the call to questions.
Carolynne Borders: Thank you, Peter. I would like to ask participants to please limit yourself to one question and one follow-up. Operator, can you please open the line?
Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Travis Steed with Bank of America Securities. Your line is now open.
Travis Steed: Hey, thanks for taking the question. Bill, looking forward to working with you. Congrats on the new job at GE.
Bill Grogan: Thank you.
Travis Steed: I would start with the first question, thanks. I would start with the first question on the CapEx environment. There are a lot of questions on 340B and the macro and what you are seeing on the CapEx environment, and I did have one follow-up.
Peter Arduini: Hey, Travis. Thanks. Look, as you saw and you heard our comments, we are pleased with the quarter results, the strong execution. I think you are starting to see some of the product differentiation coming through. But relative to the capital budget market, particular technologies like what we do in imaging from all of our survey data and discussion with CFOs, ranks at the top of the list. I think you know we do a survey of same store sales with customers. Fundamentally, I would say that the energy and positive focus on that survey stays the same. It positions us well, I think, as we go into Q4 into next year. I know there has been some commentary around procedures pullback here and there in different areas. We have not seen that directly either in scan data or actually contrast use data at this point.
Peter Arduini: Indicators that would demonstrate slowdown or changes like that have to be multiple quarters till I think we start seeing it coming through in our equipment. One of the things about the imaging world is, or other capital equipment, a lot of these are programs that are planned. You make a decision now for an installation that might be 12, 18, 24 months out. I would say our funnel is as strong as it has ever been at this point in time. So we feel good about their trajectory as we come into the end of the year and as that converts into the beginning of 2027.
Travis Steed: Great. Thank you. The follow-up question for the backlog this quarter was down a little bit, book to bill 1.03. It was the lowest since Q1 2024. Is that just lumpiness you are seeing or in quarter-to-quarter volatility? I guess part of it is probably fulfilling last quarter's strong orders as well.
Peter Arduini: Yeah. No, I think that is it, Travis. I think as you know, and many that follow us, from an order standpoint, with big deals that we do that can be $100 billion plus, you have some land in a given quarter. If they slide out by a week, it obviously creates a significant lumpiness, but we feel quite good about the orders. Bill had mentioned coming off a strong year last year, both PDX and AIS did well. I would comment that our pipeline of opportunities remains strong, is up, which is an underpinning of the resiliency that we see out in the marketplace. So all of that, we feel quite good about it. I think from a standpoint of where we are with our capital equipment cycles and stuff, things are looking pretty good on the conversion.
Peter Arduini: As I look out into Q4, our orders book looks a little bit better than we actually had in Q3.
Travis Steed: Great. Thanks a lot.
Peter Arduini: Thank you.
Operator: Thank you. Our next question comes from the line of Vijay Kumar with Evercore ISI. Your line is now open.
Vijay Kumar: Good morning, Pete, and thanks for taking my question. Bill, congrats on the role. I guess my first question, Pete, is on Flyrcado. You gave the weekly dose assumption and the revenue run rate. How are you thinking about the path to 500 run rate exiting 2028? How does SOFIE help? I think it makes the last mile connectivity, but how should we think about the ramp when you think SOFIE's part of GE HealthCare? Does it improve your visibility to that half a billion exit created in fiscal 2028?
Peter Arduini: Yeah, Vijay, look, I think with Flyrcado, short answer is we feel very good about the $0.5 billion exiting 2028. As I mentioned on the call, we are progressing as we expected. Feel good about the momentum and the weekly bill. I think we are seeing broad-based growth and interest. I think one of the interesting areas is, as I think we know, this started out as much as with heavy interest in PET users that were already in cardiovascular, and that continues. But I think we are starting to also see now the broadening of SPECT users that are saying it is time to start considering moving into the PET world. That is important because if you remember, the long-term opportunity is over 80% SPECT to PET. So both of those are growing.
Peter Arduini: I think our funnels at this point in time are up significantly, which is what we look at on a forward metric about opportunities and what our conversion rate would be. One of the other key metrics I mentioned last quarter was the amount of customers that we converted. We converted about the same percentage of customers this quarter as we did last. Again, those will begin to build. It is that 60-day cycle of only a case or two until they get reimbursement, and then that can ramp up into double digits. So things look good. I think, again, the positivity that we see from customers or hear from customers on all the attributes discussed, image quality, dose management with larger patients, all those things are still playing out.
Peter Arduini: Then just notably, I think, and I mentioned in the comments, the larger portfolio at radiopharma, meaning breast cancer imaging relative to other cancers and stuff, continues to grow. That is important because it also means that department within an institution gets more focus. So there tends to be more dollars allocated in that area as well, which we are beginning to see.
Vijay Kumar: That is helpful, Pete. Maybe my second one on China. The region got back to growth. Has China bottomed up? Is it back to growth? What is the normalized outlook, Pete? There are some questions coming on maybe VBP, imaging VBP in China. If there is one, could you elaborate on what the impact is?
Peter Arduini: Yeah, Vijay, I don't know if I would give a full prediction as everything completely changed, but I can give you the play-by-play as we see it. We've seen quarterly improvement within China. I think you'll see we had 7% in the growth in the quarter. A majority of that was still driven by FX. It was positive within the quarter. The market is definitely recovering. We're seeing activity improvement, which translates into consistency in tenders that are planned, tenders that are executed. We are absolutely seeing more VBP, but I would say we've been changing our tactics, what configurations we offer, how we go to market that way, how we think about educating and interacting with a province or a smaller community. I think our team, led by Bill, has done a really nice job of evolving the channel.
Peter Arduini: That being said, I think there's still lots of wood to chop, so to speak, here on advancing growth within China. But we were pleased with the results that the team put up here for the quarter.
Vijay Kumar: Understood. Thank you.
Operator: Thank you. Our next question comes from the line of Matt Taylor with Jefferies. Your line is now open.
[Analyst] (Jefferies): Hi, good morning. This is Matthew on for Matt Taylor. Thanks for taking our question, and congrats on the quarter. I wanted to ask about these multi-year agreements you have with technology partners, and particularly on securing your memory chip supply. Could you possibly expand on how this helps you manage your costs going forward? Thanks.
Peter Arduini: Yeah, Matthew, I think we mentioned on the call that we've recently aligned that. I think, look, pull the lens back big picture. It's no secret that the growth of data centers in AI has a big vortex effect on certain components around the industry. We think that's going to most likely exist for multiple years as this ramp-up goes. So we've taken an ecosystem approach to take a look at all of those things that could affect our business positively or negatively, and reached out to the suppliers in the industry with what we believe is adequate lead time to secure first supply and obviously manage pricing the best that we can.
Peter Arduini: At the end of the day, getting locked in pricing agreements on some of these things isn't probably realistic, but being in a favored nation status that we're first in line to be able to take advantage of both supply and price is what we've been able to do. So we feel quite good about where we are relative to some of the critical components like memory chips and stuff. But I think as others have talked about, over time, this will evolve into other components and stuff, and we're already focused on that. I feel quite good about the work that Phil and the team have done broadly to be able to secure what we need to obviously deliver to our customers here, not only in the rest of the year, but into 2027.
[Analyst] (Jefferies): That's very helpful. Thank you.
Operator: Thank you. Our next question comes from the line of Robbie Marcus with J.P. Morgan. Your line is now open.
Robert Marcus: Hi. Good morning. Congrats on the quarter. Thanks for taking the questions. Two from me. First, can you talk to the guidance? It looks like it is factoring in a somewhat lower Q4 than the street was expecting. Any early thoughts on 2027, both top and bottom line? You do have some tariff refunds to overcome, strong order growth, trailing 12 months. Can that translate into accelerating sales growth for next year? Then I have a follow-up. Thanks.
Peter Arduini: Hey, Robbie. Thanks for the question. I will start maybe just on the 2027 piece and then toss it over to Bill to talk about implied Q4 or the rest of the year. Obviously, we will give guide for 2027, as we normally do out in February. I would say, look, there is a lot of moving parts. The momentum you can see this year on top line, we believe will continue, both what you are seeing from an orders funnel, the translation of the backlog, how that is translating into revenue. So we feel good about the setup that we have moving into 2027. On the bottom line, it is a similar story. I think, the majority of this year has not been heavily impacted by our new products that actually have higher gross margins. We will see a higher percentage of that.
Peter Arduini: We do have some scenarios on tariffs and stuff, which we are in a little bit better position, but I would caution the fact to say that there are no static tariff rates these days. We have to see how some of that plays out. In the world that we see today, we are in pretty good shape. Then on variable cost, productivity, and price, we have been able to offset some of the major costs, not all of them, with the combination of the two. I would expect all that obviously to play through into 2027. Maybe, Bill, you can talk a little bit more about how we are thinking about the guide here for this year.
Bill Grogan: Yeah. No, thanks, Pete. Exiting Q3, I think we feel good about the momentum we are building across the business. Heading into Q4, our backlog is up 12% versus the prior year. We had another solid quarter of top-line growth from an expectations perspective, with healthy margin and EPS expansion. With margins coming in sequentially higher versus Q3. On the top line, AIS and PDX will drive growth for us in Q4. As I said in the prepared remarks, PCS's growth will be muted a bit due to the product hold catch-up that we experienced last year. They will grow sequentially and have healthy year-over-year margin expansion. So the implied Q4 growth range of 3% to 4% is really more around the PCS product hold comp versus any deceleration we see in the market.
Bill Grogan: I think the guide appropriately reflects the strength we have seen while remaining mindful about the dynamic macro environment.
Robert Marcus: Great. Maybe a quick follow-up here. PCS had been trending pretty negatively year to date. Had a really strong quarter here. How do we think about the underlying versus any one-time items? If it is all underlying strength, what is driving that to shift so positively? Thanks a lot.
Peter Arduini: Yeah, Robbie. Look, I think on PCS, and I had mentioned this in some previous calls, we actually had some installations that had, timing-wise, moved out more to H2 on monitoring projects. That is playing out as we had thought. Again, those are not one-time things. We are going to see that continue to play out through into the beginning and on through into 2027. One of the bigger challenges we had in Q1, Q2 is just some of the supplier issues. The team has really doubled down using our management system, Heartbeat, to really focus on getting out with our suppliers, where we have had supply constraints, how that ties out to demand capacity planning, both in our plants as well as with our customer sites. I mentioned this focus on standard work and daily management. Think about it this way.
Peter Arduini: This team has moved really from kind of a monthly, weekly cadence to a weekly, daily cadence. Making sure that where there are any gaps relative to product capabilities, if there is any tape issues relative to parts and components, that they are addressed. I think they have got the right rhythm in place. We would expect that you are going to see continued improvements here from this point forward on PCS.
Robert Marcus: Appreciate it. Thanks.
Peter Arduini: Thanks.
Operator: Thank you. Our next question comes from the line of Joanne Wuensch with Citi. Your line is now open.
Joanne Wuensch: Good morning. Thank you so much for taking the question. Bill, welcome to the GE HealthCare team. I am curious.
Bill Grogan: Thank you.
Joanne Wuensch: what your first impressions are, how you are thinking about what you may implement or view differently for guidance, and anything you feel like sharing with us now that you are here.
Bill Grogan: Yeah. No, I appreciate the question. So maybe if I started out with just, hey, what are the things that attracted me to GE HealthCare along with what I am seeing, because I think they are fairly consistent. There were a few things that I think were at the top of mind as, one, I made the decision, and two, my observations through the first six weeks. First off, it starts with the purpose and culture, right? The purpose of creating a world where healthcare has no limits is deeply embedded in how people make decisions here, right? There is that clear connection between our innovation and the impact we have for patients and customers. That was really important to be part of an organization that was mission-focused, right?
Bill Grogan: I see a lot of opportunities to improve patient outcomes and expand access to care at a global scale, and that is incredibly compelling and I think a huge opportunity for us. I think the second thing is really around the growth opportunity. We have highlighted some things within our prepared remarks and some comments Peter Arduini has made, but I think we are at the forefront of healthcare innovation, right? We have got a strong technology portfolio and product pipeline. We have got this new phase of innovation that I think will be extremely impactful, leveraging our growing capabilities in AI and digital. We have this huge installed base and really deep relationships with our customers, and I think bringing all those things together creates a compelling opportunity for long-term growth.
Bill Grogan: Then lastly, I think it is really around a meaningful opportunity for me to help partner with the teams on driving operating performance through Heartbeat. I have seen strong business systems really have a big impact on results within organizations, where they have a desire to continuously improve and a willingness to try new things to continue to deliver for their customers. That philosophically, but we have also seen it in practice. The Heartbeat methodology and the program that we have is increasingly embedded in how the teams operate here, and I think it is a further opportunity to continue to drive rigor and productivity and just general consistency along a lot of things we do across the organization. Then maybe last thing I would say is just the quality of the leadership team.
Bill Grogan: Obviously, there is a significant appreciation to partner with folks like Pete and the balance of the management team that is really committed to executing for our customers and this great opportunity to drive long-term shareholder value.
Operator: Thank you. Our next question comes from the line of Lawrence Biegelsen with Wells Fargo. Your line is now open.
Lawrence Biegelsen: Good morning. Thanks for taking the question. Pete, two for me. One, Omnipaque, it is an important product for you. A competitor is guiding to $50 million-plus in generic Omnipaque sales for next year. What share of that do you think comes from GE HealthCare, and how does generic Omnipaque impact your ability to grow PDX at a high single-digit rate, which is your midterm goal? I had one follow-up.
Peter Arduini: Yeah, Larry. Look, thanks for the question. I am not going to comment on maybe an entrance as what their proposal of what they may do or not do. But again, just to remind you and others is that, this is a generic market already. It has been for over 15-plus years. There have been a half dozen-plus players that have been coming in and come out of the marketplace. So again, it is not as a first proprietary product with its first generic change coming in. That is not the dynamic we are dealing with here. We will see how it ultimately plays out. This is a business that you need to actually have multiple SKUs. You need to have integration with injectors, all of those things that play out in the marketplace.
Peter Arduini: But I do think one of the most important parts are, is this market right now today, capacity is maxed out.
Peter Arduini: If you take a look at demand in many cases with supply is right at an equilibrium where in some quarters, some months, we are almost maximizing that out. So I think an entrance that comes in that has some level of supply, it will be absorbed within the industry. We are expecting this whole market to grow. We have mentioned this in previous sessions, almost 2x over the next 7 to 10 years. So in a product like this, because it is interchangeable, not only with us, but with anybody else in the marketplace, it is going to fill the gap of the opportunities that exist. So, we believe they will take a little bit of business. I think it will be from the broader marketplace, not just from GE HealthCare, but we feel quite good about our positioning.
Peter Arduini: Again, this is not the first time that we have faced a generic player coming into the marketplace.
Lawrence Biegelsen: Yeah, just wanted to confirm, PDX is still a high single-digit grower. For my second question, new CFO here. Hi, Bill. Nice to meet you. Are the midterm targets still intact, and how should we think about the path to your 2028 goals in 2027? Just asking Robbie's question a little bit differently. Thanks for taking the question.
Peter Arduini: Yeah, sure, Larry. Look on PDX, we feel quite good about its growth. It has been growing double digits. The radiopharma side is growing significantly faster. That is going to continue based on all my previous comments, but we feel good about that. Look, on medium term, I will comment and then maybe have Bill make a few comments. We continue to feel good about the medium-term targets, full stop. I think on top line, we are seeing strong progress here. We have talked about being a mid-single digit grower. I think if you look at our trailing 12 months, we are roughly at 5%. That is mid-single digits. You saw it this quarter, Larry. On margin, while the macroeconomic environment has created some headwinds for us, I think we found space and oxygen in what we have been able to do with new platforms, cost productivity, and also price.
Peter Arduini: We feel good about both top and bottom-line metrics in the midterm, which again, we have defined by the 2028 numbers. Bill, I do not know, maybe you want to add some comments.
Bill Grogan: I appreciate the question, Larry. So relatively early in my tenure, but what I have seen so far gives me confidence in the direction we are headed. To Pete's point on the growth side, I think the fundamental drivers of the market are strong, and we have this wave of new product introductions that are differentiated and customers are really excited about. On the margin side, I think there is the foundational elements there to progress on the margin aspirations that we have. I think there is a big part of just leveraging the strong top-line growth with better product mix
Bill Grogan: with these new product introductions we have, and then building the productivity engine through Heartbeat and the benefits that a strong operating system has. I am looking forward to partnering with the teams on that, bringing some of the things out of my tool set to help kind of enhance the capabilities. We know that will be a huge driver of our gross margin improvements going forward.
Lawrence Biegelsen: Thanks so much.
Operator: Thank you. Our next question comes from the line of Ryan Zimmerman with BTIG. Your line is now open.
Ryan Zimmerman: Good morning. Can you hear me okay?
Peter Arduini: Well, Ryan, good morning.
Ryan Zimmerman: Morning. Bill, congrats. Good to have you in Chicago, or it would be all Brewers talk, I think, on this call, so appreciate that.
Bill Grogan: There is always next year.
Ryan Zimmerman: But, yeah, there is always next year for the Cubs. That is right. Just a couple of questions from me. First, there has been some dynamics in the general imaging ultrasound market. Siemens pulling back a little bit, Philips having some recalls. Pete, you made some comments about ultrasound, your commitment to it. Remind us what the opportunity is for GE HealthCare, and do you see maybe some near-term benefit from the disruptions that are occurring in that segment of the market?
Peter Arduini: Yeah, Ryan, look, to your point, I mentioned this on the call, general imaging ultrasound is a super important market for us. It is an important market in the US, but it is actually a growing market around the world. Multi-purpose capabilities, Southeast Asia, Latin America. We see this in Eastern Europe as well. It is an entrée into multiple use that then moves into specialization, and actually having those products that way is critical. For us, this is a big business. In many cases, I understand while some people made decisions where they are, we are actually quite formidable in the space. It is a critical platform for us globally. As a result of that, we have continued to invest.
Peter Arduini: When you hear the brand name LOGIQ, which is the most well-known brand in general imaging around the world, it has been a significant winner, I would say, in the space.
Peter Arduini: As we talk to customers, obviously, when you have a fleet of products, you want to be able to grow on it and build it over years. We think there will be some opportunities that will play out for us ultimately. But this, again, has been one of our strong suits for many, many years, and the platforming work that Phil and the team have done in ultrasound that leverages cost, but productivity, this also will benefit across this platform. So, we think it is a great business, and you are going to see us continue to invest and take advantage of what market opportunities arise.
Ryan Zimmerman: Understood. Maybe, turning to tariffs and margins, I appreciate your comments. As I think about next year's numbers, again, appreciating that we are not going to get guidance, the Street is not assuming really a whole lot of margin expansion on the gross margin line for next year. In fact, it is roughly flat. Bill, this is not water filtration, but it still has the same impact on. There is still tariffs to deal with. Wondering if you could kind of elaborate on kind of what the dynamics are from a tariff standpoint, how you think about that impact for next year. I know Robbie called out the tariff refund headwind, but certainly, there is still a tariff component to consider as we think about next year. Frankly, can we see margins expand in 2027? Appreciate it. Thank you.
Peter Arduini: Yeah. Ryan, maybe I will start and then maybe have George here just kind of reconcile what we said for this year. Then Bill, if you want to jump in, just commentary for next year, I think that would make some sense. Look, obviously, on the whole tariff piece on guide, as I mentioned, we will talk more about that as we get into our 2027 guide window. Regarding the biggest uncertain thing on tariffs out there is what happens with Section 232. That is probably the biggest swing item out there. I am assuming we will probably hear more this year about how that plays out. We have been planning as though those will be increased rates at some level. What does that mean? We are preparing for price, we are preparing for cost productivity. We have actually moved components, as we have talked about.
Peter Arduini: We have moved certain systems, scenarios to countries to be able to offset some of that. Our focus is how things play out. We want to make the right actions and take the right actions to still be able to have an accretive model. That is part of our plan that we are going in there. George, you may want to comment just on what we stated here in the quarter and how to think about it.
George Newcomb: Yeah, sure. In Q3, our tariffs were down year over year. That is a result of a couple of things. One is the mitigation actions that the team has been driving. Secondly, is just the lower overall rates that we are seeing. Then there was about $4 million of IEEPA tariff refunds related to 2026 that we recognized in the quarter. Consistent with how we treated this in Q2 2026, we did adjust out about $9 million of refunds related to 2025. Bill, do you want to comment on.
Bill Grogan: Yeah. To your point about next year, obviously, between tariffs and inflation, I think both are going to be persistent. Assuming a steady state to where we are at current levels, I think we feel good about our ability to mitigate those actions through the team's ability to get increased pricing, continue to build our capabilities there. Then a significant amount of supply chain actions, where we have done things internally and then partnered with key suppliers to minimize some of the volatility and reduce our exposure. Obviously, we will give you more context when we come out in 2027. Overall, understand it is an issue, but confident in the team's ability to mitigate it.
Ryan Zimmerman: Thank you. Appreciate it.
Peter Arduini: Sure.
Operator: Thank you. Our next question comes from the line of Jason Bednar with Piper Sandler. Your line is now open.
Jason Bednar: Yep. Morning. Thanks for taking the questions. Pete, you and the team have been talking about realizing price to a greater degree. That has been a clear part of the strategy. Can you talk about where you are at in this journey of capturing price? Are you finding even more headroom here real-time on pricing as a result of passing through inflationary pressures that you are experiencing?
Peter Arduini: Yeah, Jason. Look, pricing is always tough in this business, mainly because obviously our customers run at very low margins. We are sensitive to that. We try to make sure we look at all of the things around the edges first. There have been some cases here where we have had to take actual list price or price increases on certain products. We do that selectively. I think an important aspect of our whole NPI process is, does a product bring really differentiated productivity and outcomes for a customer? When those match up, paying more for price that you are going to see threefold in productivity changes in a world where you have employee shortages and in a world where you are really looking for productivity, that is really the match-up that we go for. We have got quite a few new products coming out that hit that mark.
Peter Arduini: That is probably the top piece. We focused our incentives with our sales force to make sure that we obviously get volume, but we get volume with the right level of margins and price, and we have leaned in more to that most recently. I would also say just thinking about configuration management is a big deal here, and I think you appreciate in capital equipment, when you have many different options and stuff, getting the right configs and the right plays in there, all of those things are playing out. But again, pricing in general in our world is a good pricing outcome is a 1% to 2% window. I think those are a lot of the efforts that have been in place across the board.
Jason Bednar: All right. Thank you. Then just a follow-up. Historically, Pete, I think you have usually had a certain portion of the current and future quarter already spoken for with equipment installs and install schedules. Can you help with where you are at relative to historical averages both for the current Q4 and as you look at that install schedules you line up for 2027?
Peter Arduini: Yeah. It starts with Jason having a record backlog. We obviously ate in a little bit this quarter, but I think year to date, we are up over a couple billion dollars. So that is a tremendous asset for us. As you look out into 2027, even into 2028, we have delivery dates that match up into that. If I were to say Q4 versus Q3, we are right in the same normal range that we would be, which is a high secure rate, meaning how much new business do you actually have to sell within the quarter to make your numbers? The vast majority of it is already on orders that we have taken. We have validated that the site is ready. We are working with the customer because they want the equipment. So it is very much in line to what we had spoken about in Q3.
Jason Bednar: All right. Very helpful. Thank you.
Peter Arduini: Thank you.
Operator: Our next question comes from the line of Vik Chopra with BMO Capital Markets. Your line is now open.
Vik Chopra: Oh, hey, good morning, and thanks for taking the question. Bill, welcome. Looking forward to working with you. Maybe just the first question, on PCS, does that leadership change that you called out in the press release this morning, does that impact the timeline of the strategic review, and could it delay a decision? Then I had a quick follow-up, please.
Bill Grogan: Yeah, thanks for the question. The short answer is no, it does not. Look, we are very happy actually for Jeannette. Public company CEO jobs do not come around that often. We are happy for her because it is not competitive with us. That makes us even more happy. As I mentioned, the critical number 2 leader who is stepping into the role, Neal, knows this business extremely well, has been heavily involved in actually leading much of the work around the strategic assessment. So there is no impact relative to how we are thinking about things or the impact of the recovery work. Neal has been deep into that as well.
Vik Chopra: Okay, great. Then one on SOFIE for me. I think they already manufacture Flyrcado. I am just curious if owning SOFIE speeds up the ramp. Can you disclose what percent of Flyrcado doses it supplies today? Thanks.
Peter Arduini: Yeah, I will not disclose for competitive reasons the percentage, but I think you would appreciate we are pretty well distributed and spread out across multiple players just based on how this works. It is a good question. Look, I would just say part of the really exciting part about radiopharmaceuticals, there are many ways to play across the ecosystem and participate in revenue that is accretive and margins that are accretive to GE HealthCare. So I would think less about SOFIE as terms of the Flyrcado ramp, although it has the potential to benefit us in more of the terms of this broader opportunity that we see across the board. Again, owning some of your manufacturing base in most scenarios is obviously a positive thing, particularly in radiopharmaceuticals. We believe it is a very important aspect. Think about the pipeline of the future of therapeutics as well as diagnostics.
Peter Arduini: I believe there are over 500 molecules in development as we speak. So that is an exciting opportunity. Radiopharma is different than traditional pharmaceuticals because these tracers have short half-lives, meaning by the end of the day, they are gone. So you cannot simply manufacture them centrally and hold inventory for extended periods. You need to make it every day. So now we are deeper into that process, which clearly helps us control more of our supply chain, but it also allows us to participate. We are going to be dependent and working with other CMOs for a very long period of time. This just gives us more ownership and integration to play a significant role within that channel. So we are excited about it. Obviously, we need to get the deal closed. That is part of the strategy of why we are so interested in SOFIE.
Operator: Thank you. That concludes the question and answer session. Please proceed with any closing remarks.
Peter Arduini: Yeah. Thank you, operator. I thank all of our investors for your interest in GE HealthCare. We are looking forward to seeing many of you at the Radiological Society of North America in Chicago, known as RSNA. I think you are going to see lots of our new products in phase, so we are hoping that many of you can join us. Also, we are going to be showcasing significant amounts of new AI-enabled products integrated at a departmental level, integrated at a hospital level. Many of the things that we have talked about, D3 in action, you are going to see live actually on the floor. So we are super excited about it. This RSNA is a real pivotal window for us for many of those new products that will impact our growth profile and profit profile in 2027 and 2028.
Peter Arduini: So with that, we will conclude our call. Thank you very much.
Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
