In the third quarter earnings call for GE HealthCare, CEO Peter Arduini discusses the company's growth, margin, and cash flow performance. He also mentions the launch of new products and collaborations focused on artificial intelligence and a grant from the Bill & Melinda Gates Foundation for ultrasound tools in low and middle-income countries.

In the second quarter, we signed a contract with BARDA and announced a strategic collaboration with Mayo Clinic, representing over $80 million in funding. Despite challenges, we have remained focused on financial and operational execution. In the third quarter, we saw strong organic revenue growth and a robust backlog of orders. Our recent customer survey showed no significant change in sentiment on capital spending in the second half of the year. While orders growth can be variable, our backlog gives us confidence in future quarters.

The company provides both book-to-bill and total backlog metrics to reflect their performance. The anticorruption campaign in China has had a limited impact on orders and revenue, and the company expects this to continue in the fourth quarter. China remains an important market with potential for growth. The company has made progress in productivity and business optimization, resulting in improved delivery performance, reduced risk of component availability, and better customer satisfaction. They have also achieved adjusted EBIT margin expansion while increasing R&D investment. The company remains committed to creating value for shareholders through various capital allocation strategies, and they have raised their adjusted EPS range for 2023. Overall, global markets have remained resilient and the company's backlog is healthy.

In the third quarter of 2023, the company saw a 5% increase in revenues, driven by increased volume and price. Book-to-bill was at a healthy level of 1.03x and order dollars continue to outpace revenues. Adjusted EBIT margin improved by 60 basis points due to increased volume and productivity actions. Adjusted EPS was $0.99, up 14% on a stand-alone basis. Revenues grew organically by 6% in all regions. Adjusted gross margin was strong at 41%, driven by pricing and productivity initiatives. The company is also optimizing G&A spend and has exited 130 transition service agreements to create efficiencies.

In the third quarter, the company saw strong revenue growth in their imaging segment, driven by new product introductions and improved efficiency. This resulted in a 150 basis point increase in segment EBIT margin compared to the same period last year. In the Ultrasound segment, revenue was down 1% due to a challenging comparison to the previous year, but the market is stabilizing and the company continues to maintain their global leadership position. Demand for newly launched products in the Women's Health and Cardiovascular businesses remained solid. Overall, the company remains on track to deliver on their 2023 adjusted EBIT margin expansion guidance.

In the third quarter, Segment EBIT margin for the company was 22%, which was a decrease of 360 basis points from the previous year. This was due to planned investments in cash and health, but was partially offset by improvements in productivity. The company is committed to investing in both organic and inorganic growth, as well as integrating AI technology into their precision diagnostics. In the US, they have incorporated AI Guidance Technology into their portfolio for cardiac exams and are exploring other uses for AI in Ultrasound. In the Patient Care Solutions segment, organic revenue increased by 9%, driven by volume and price improvements. The company has also launched new monitoring products and is excited about their potential impact. In the Pharmaceutical Diagnostics segment, there was a 12% increase in organic revenue, but Segment EBIT margin decreased by 230 basis points due to inflation and investments.

The company has seen a stable EBIT margin and strong growth in global imaging procedures, which drive the demand for contrast agents. The cash flow performance was strong, with an increase of $22 million year-over-year due to better inventory management and easing supply chain constraints. The company has made progress in addressing legacy liabilities and reducing costs. They expect to continue investing and deleveraging, with a projected organic revenue growth of 6% to 8% and an adjusted EBIT margin of 15.0% to 15.5%. The adjusted EPS range for the full year has been raised to $3.75 to $3.85 per share.

GE HealthCare is investing in various areas to advance their precision care strategy. They are making progress in developing photon counting CT technology and have partnered with Stanford Medicine for research. In Ultrasound, they are collaborating with Novo Nordisk to explore non-invasive methods for treating chronic diseases. In PDx, they have signed a licensing agreement for diagnostic tracers and have topped the FDA's list for the most artificial intelligence-enabled device authorizations.

GE HealthCare is dedicated to investing in research and development to bring innovative technologies to improve healthcare delivery. They have centralized their Care Pathway strategy under their Chief Technology Officer and are focused on connecting their products across modalities for different disease states through digital solutions. An example of this is their recent launch of CardioVisio, which integrates patient data from multiple devices and provides evidence-based clinical decision support for A-Fib. In the future, they plan to expand this technology to address other conditions and continue to integrate devices and digital solutions to support various areas of healthcare.

The speaker discusses the company's financial and operational progress and thanks their employees for their efforts. They also mention the release of their first sustainability report and emphasize the importance of corporate responsibility. The speaker then opens the call for questions and the first question is about the company's orders and growth, specifically in China. The speaker notes that overall, there has been strong demand for their products globally, including in China, and mentions the strong demand for ventilators, CT scans, ultrasound, and monitoring equipment during the COVID-19 pandemic.

The company is expecting a normalized market environment in 2024, which is viewed as positive. In Q3, there was limited impact from the anticorruption campaign in China, with orders and sales up over 2022. The company's AI solutions and CardioVisio products are priced competitively, and the company has caught up with inflation in terms of pricing. The AI monetization is still in early stages, but the company is excited about its potential.

The company is focusing on incorporating AI into their products to increase margins and provide value to customers. They plan to price these products based on their value and expect to see high margins, potentially up to 80%. The company also expects price impacts on sales this year and over the midterm. They are on track for their goals and have a disciplined pricing culture in place. Looking forward, the company is focused on future growth opportunities.

The speaker responds to a question about the company's revenue consensus for 2024 and shares that they are pleased with their execution so far this year and have a backlog in place for 2024. They also mention that they regularly survey customers and are seeing a positive backdrop for 2024. The CEO adds that they have received positive feedback from health system leaders and that the market outlook remains strong.

In this paragraph, the speaker discusses the positive outlook for 2024 and the company's backlog conversion to forward revenues. They mention that customers are showing incremental positive views about 2024 and that the aging installed base and procedural growth are causing them to think ahead about their needs. The speaker also states that the company is optimistic about making the turn into 2024. The questioner then asks about the backlog conversion and the speaker responds by saying that the backlog is solid and that they will start next year with a backlog close to where they are currently, which is $1 billion above pre-COVID levels. They also mention that the business can be lumpy on the orders front and that China is a key market.

The company has seen a lot of news and some impact from the China anticorruption measures, but they were still able to outperform the previous year. In the US, longer deals are taking longer to close due to higher project costs. The implied 4Q earnings are up by $0.02 and the company is pleased with their performance and strong free cash flow in the third quarter.

In the fourth quarter, the company's confidence in achieving their full year outlook has increased and they have raised the low end of their forecast. There have been no major changes in the outlook, except for a slight impact from foreign exchange. The company is focused on executing in the fourth quarter and setting themselves up for a successful 2024. Historically, it was difficult to get paid for innovation, but the company has been able to successfully take price mix on recent innovations. This is due to a convergence of factors, including the higher costs during the COVID pandemic and the company's strategy to be fairly compensated for their innovations. The company is also optimistic about being fairly compensated for their photon counting technology in the long-term.

The company's products have a high ROI and are held for several years, making them a good investment. Innovation and digital advancements also contribute to higher prices and value for customers. The company is seeing success with upgrades and software applications, and there may be changes in specifications for different modalities.

Peter Arduini and Patrick Wood discuss the bundled deals and how customers are bundling purchasing and less direct pricing or the systems themselves that they're buying within those deals. Arduini mentions that there are very few brand-new customers to imaging and that there tends to be a larger fleet discussion that takes place. He also talks about how there is a multisite fleet strategy becoming more common both domestically and in big markets around the world. Larry Biegelsen asks about the expected order growth in 2023, which was originally expected to be mid-single-digit.

The speaker explains that the company's mid-single digit revenue growth in 2024 is due to a strong book-to-bill ratio and a high-quality backlog. They do not give specific orders guidance, but feel confident in the setup and customer outlook. The CEO adds that the backlog is healthy and has grown throughout the year.

The company's PDx business continues to be strong and is driving service growth, which has higher margins and multiyear continuity. The company feels confident about its position and is on track to achieve its goal of high teens to 20% adjusted EBIT margin over the medium term. The company's culture of lean and focus on operational execution improvements are driving margin enhancements, along with pricing and innovation.

The paragraph discusses various factors that have contributed to the growth and success of the company, including the introduction of new high-margin products, optimization strategies, and a focus on productivity. The company has also been able to grow its R&D investments while maintaining efficiency. The speaker clarifies that despite challenges in the Chinese market, the company was able to see growth there.

The speaker discusses the potential impact of the anticorruption efforts on businesses that primarily sell and install products versus those with a backlog. They credit their China team for navigating the market and express confidence in its future growth. The speaker also mentions progress in exiting TSAs from GE and the importance of achieving independence for unlocking cost savings opportunities.

The company is pleased with its progress towards becoming an independent company and is making good progress in eliminating TSAs. They expect to see incremental margin expansion as a result. In terms of orders, China has shown positive results and the US market remains solid, but there have been delays in some larger deals due to customers needing to go through additional approval processes.

The speaker believes that the current costs of labor and public work will not have a long-term impact on the industry. There is still a high demand for medical procedures in Western Europe and the United States, and the team is performing well in a challenging macro environment. Some countries in Southeast Asia are investing in high diagnostic capabilities. Overall, the outlook for the industry is positive.

The speaker is asking for clarification on a disclosure made in the 10-Q regarding an amendment to the employee pension plan at GE Healthcare. The speaker asks for more details on what is changing and how it will affect the company's balance sheet and cash flow. The speaker also mentions the company's active approach to managing their balance sheet and reducing risk, including freezing a portion of the US pension plan. The amendment will result in lower service costs and projected cash contributions in 2025 and beyond.

Suraj Kalia congratulates the gentlemen on their quarter and asks two questions, one for Jay and one for Peter. Jay is asked to comment on how GE is mitigating geopolitical risks, while Peter is asked about a potential collaboration for using ultrasound for therapy in peripheral diseases. Peter clarifies that they are not entering into other therapies, but have been researching the use of peripheral ultrasound for stimulation of nerves and potentially changing disease states. He also mentions a recent collaboration with Novo Nordisk in this area.

The company is discussing a longer-term investment opportunity with a pharmaceutical partner. Despite a volatile macroeconomic backdrop, the company's sales have remained resilient and are expected to continue growing due to factors such as a large backlog, recurring revenue, and a lean operating model. The company's CEO expresses confidence in the business's performance and turns the call over to his colleague for final comments.

The company has overcome macro challenges and is looking forward to finishing the year strong and maintaining momentum in 2024. They hope to see investors at upcoming meetings and at a major congress in November. The call has ended.

This summary was generated with AI and may contain some inaccuracies.