GE Healthcare's first quarter 2024 earnings call was opened by Carolynne Borders, Chief Investor Relations Officer. President and CEO Peter Arduini and Vice President and CFO Jay Saccaro joined the call to discuss the company's progress in the first quarter. They reported margin expansion and continued investment in innovation to meet the changing needs of customers and patients. The company's healthy backlog, orders growth, and positive book-to-bill position them for accelerated growth for the rest of the year. They also reaffirmed their 2024 guidance. Arduini highlighted milestones in their commercial execution, including securing a 10-year strategic alliance with OSF HealthCare in the U.S. to improve care delivery and patient outcomes.

GE Healthcare has extended its partnership with Hartford HealthCare until 2030 and is working with them to optimize their imaging fleet. They are also expanding their collaboration with Elekta and have announced the first global installation of their Allia IGS Pulse system in Spain. The company sees a growing funnel of opportunities for their IGS portfolio and is confident in their ability to deliver on their commitments for 2024 and their medium-term goals. In the first quarter of 2024, the company's revenues were approximately flat compared to the previous year, following strong double-digit growth in the first quarter of 2023. This growth was due to easing supply chain conditions and strong China stimulus sales.

In the first quarter, organic orders increased by 1% due to strong performance in the U.S. The company also had a solid book-to-bill ratio and a healthy backlog. Adjusted EBIT margin improved by 50 basis points and adjusted EPS increased by 6%, driven by improved margins and lower interest expense. Total company revenue was flat, with service revenue growing by 2% and product revenue declining by 3%. The company also made progress on margin initiatives, with adjusted gross margin expanding by 120 basis points and positive price performance. Productivity and lean practices were key drivers of these improvements across all segments.

The company has been making strategic investments in advanced manufacturing technologies, such as 3D printing, to improve product capabilities and lower costs. They have also made progress in reducing SG&A costs and have seen solid progress in gross margin and adjusted EBIT margin expansion. In the Imaging segment, they had flat organic revenue growth but made progress in enhancing gross margin. In the Ultrasound segment, organic revenue was down 4% and EBIT margin decreased due to inflation and lower volume.

The team's focus on productivity and pricing helped offset challenges in the quarter. Growth is expected to accelerate in the second half of the year, with new ultrasound innovations contributing to both top and bottom line performance. Patient Care Solutions saw a decline in organic revenue due to fulfillment delays and lower ventilator volume in China, but backlog remains strong. Pharmaceutical Diagnostics had a strong quarter with 8% organic growth driven by price and volume, and the possibility of increased sales from Vizamyl in the future. Segment EBIT margin improved due to price, productivity, and volume, and the company is investing in R&D and capacity expansion to meet global demand for imaging agents.

The company's lean methodology has helped improve cash flow and working capital, providing financial flexibility for future growth and M&A opportunities. The company reaffirms its full year 2024 guidance and expects growth in the second half of the year due to new product launches, strong backlog, and healthy procedure trends. Recent product introductions across all segments aim to address customer challenges and improve patient outcomes.

The healthcare industry is facing challenges with burnout and staffing shortages, especially with an aging population. GE Healthcare offers solutions such as remote scanning and patient monitoring to address these issues. They also have a new platform that integrates with the EHR to identify patient deterioration sooner. In addition, they are using AI to advance cancer research and improve treatment outcomes, with a 70-80% accuracy in predicting response to immunotherapies.

GE Healthcare has developed AI models using data from electronic health records, which can help clinicians match patients to the most effective treatment and avoid unnecessary side effects and costs. These models will be integrated into their digital tools and are a result of increased investments in R&D. The company has also made significant enhancements to their general imaging platform, including the launch of 3 upgraded systems and a new mid-tier solution with AI and wireless probe integration. They have also introduced new software features for urology and launched a handheld system with AI cardiac guidance, expanding the use cases for ultrasound in point-of-care settings.

In the first quarter, GE Healthcare saw advancements in ultrasound technology, driven by AI. This has led to increased efficiency and productivity, as well as collaborations to address patient needs globally. The company also announced an upcoming Investor Day to showcase their technology and innovation plans. During the Q&A session, Peter Arduini addressed concerns about the flat growth in the U.S. and attributed it to top comps and a focus on China.

In the paragraph, Peter Arduini discusses the flattish performance in the quarter and how it is expected to improve throughout the year. He mentions two factors that impacted the quarter: fulfillment delays in PCS and challenges in China due to anticorruption measures. However, he remains confident in the growth potential and orders funnel in the U.S., particularly in the ultrasound and imaging markets. He also talks about the timing of new product introductions and price increases as levers to be pulled in the imaging business.

The Chinese stimulus plans are expected to benefit the company's addressed markets through the remainder of the year. There is evidence of hospitals submitting new orders as a result of the potential stimulus.

Peter Arduini discusses the current data on the company's performance and how it has been affected by various factors. He mentions that the company's anticorruption efforts will continue to have an impact until mid-year, but will improve in the second half. He also talks about the new stimulus plan, which will provide cash grants to a larger group of institutions and may have a multiyear impact. The rollout of the stimulus has caused some customers to delay orders in order to understand the rules, but the company expects an uptake in orders once the rules are clarified. The impact of the stimulus on sales will vary depending on the timing of orders, with ultrasound products benefiting sooner and installed products benefiting later. Overall, Arduini sees the current landscape as positive.

The speaker discusses the progress of a new radio pharmaceutical product, Flurpiridaz, which is expected to receive FDA approval in the next few years. The company is confident in their full year 2024 outlook, despite a lower book-to-bill ratio. They also mention positive pricing trends across segments and regions.

The speaker discusses the impact of the first quarter and expects it to improve throughout the year, giving them confidence in meeting their guidance. They mention four factors contributing to their confidence: improving comps, growing funnel on orders and sales, service growth, and new products. The speaker then hands over to Jay to talk about book-to-bill and pricing, mentioning a robust backlog and solid pricing environment. They also mention some temporary issues that they expect to resolve.

The speaker discusses how comps will become easier as the year progresses and reiterates their guidance for sales and EPS. They also mention that order growth has been low single-digit over the past three quarters, but they have a positive book-to-bill ratio and a backlog of $1 billion, giving them confidence in achieving mid-single-digit revenue growth. They also note that capital can be lumpy, with orders spiking in one quarter and lower in the next.

The speaker discusses the current state of the markets and how they have only seen a small increase or decrease in the past year. However, they have a positive outlook for the rest of the year and into 2025, which they expect will lead to an increase in orders. They also mention the potential for service revenue to contribute more to overall revenue, as well as recent product launches and winning market share. Overall, they are confident in their ability to achieve mid-single-digit growth in the next few years based on their backlog and expected market growth.

The company expects to see an increase in the second half of the year, with mid-single-digit growth over multiple quarters. They are not concerned about the impact of interest rates on hospital capital spending and believe the demand for procedures will continue to drive growth in their business. The effect of this growth on equipment sales may be seen in 3 to 4 quarters as hospitals may need to upgrade or purchase new equipment to meet capacity constraints.

The company is confident that there will be an increase in demand for their products in the coming quarters due to longer backlogs for procedures and continued investments in the US. They also expect a positive impact from their pricing discipline. However, sales in China were down in Q1 and the potential impact of the new stimulus package on the rest of the year will depend on when the details are laid out. Customers are currently waiting for clarity before submitting orders.

The speaker believes that the stimulus package will be a positive long-term catalyst for the market and they are closely watching for further developments. They expect the first half of the year to be negative and the second half to be positive, with a potential boost from the stimulus package. The company has been active in small business deals and is not currently prioritizing robotics and AI.

The speaker mentions the Allia IGS robot and how it is used in the cath lab. They are looking for tuck-in deals that have a strategic fit into their core business. They are primarily focused on smaller deals like the MIM deal, but would consider a larger deal if it was a good fit. The speaker also mentions that they are seeing some slight upticks in Vizamyl numbers and that they expect to see more in the second half of the year. There have been discussions about a potential delay in the release of the Lilly drug.

The company expects to see an increase in sales in the second half of the year due to a combination of factors. However, there are no major material moves expected in the near future. The adoption of new molecules in 2025-2027 is expected to drive further growth. The reimbursement for the agent in outpatient centers is positive, but it is still being worked out for inpatient centers. The company is pleased with the first quarter margin performance, with gross margin expanding due to pricing and productivity. The introduction of new products in the future is also expected to support gross margin expansion.

The speaker discussed the company's productivity initiatives and how they have led to a solid gross margin performance and EBIT expansion. They also mentioned progress in eliminating TSAs, which will result in SG&A and G&A savings. The focus on increased R&D spending is aimed at developing new products that can increase volume and reduce costs.

The speaker discusses the growth strategy for the company, focusing on differentiated products and higher gross margins. They also address questions about the impact of the Chinese market on revenue and order intake, stating that they expect a turnaround in the second half of the year due to a new stimulus package, and that they are monitoring the situation closely.

The company is optimistic about the impact of government guidance and customer actions on their business in 2024. They expect to see some positive impact in the fourth quarter due to stimulus, but are uncertain about how much demand will be pent-up and when it will be paid off. In terms of their markets, they expect to see flat or slightly down trends over the next 2 years, but anticipate an uptick in the '23 window. The company also expects to see growth from new NPIs and services, which could lead to share gains.

The speaker discusses how growing their service base will contribute to overall capabilities, and mentions specific care pathways that will drive growth in the next year. They also mention a potential stimulus package in China that could lead to increased spending on medical equipment.

The speaker discusses the potential impact of recent developments in China on the company's growth outlook, particularly in the ultrasound segment. They highlight the positive market dynamics and expect a ramp-up in revenue and orders throughout the year. They also mention that the challenges in China have affected the business, but improvements in the market, as well as the implementation of China STEM, are expected to have a positive impact on ultrasound.

The speaker discusses the growth of ultrasound sales in China and around the world, particularly due to new product introductions. They also mention easing comps and accelerating growth in the second half of the year, with benefits accruing to the second half. The speaker also mentions modest improvement in organic growth and margin in the second quarter, with low single-digit sales and continued margin expansion. No comments were made about consensus EPS. The call concludes with the speaker thanking the operator.

The speaker thanks the audience for attending and hopes their questions were answered. They express confidence in meeting their annual goals and look forward to future communication. The operator then ends the conference.

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