The operator introduces the GE Healthcare's Second Quarter 2024 Earnings Conference Call, and the Chief Investor Relations Officer, Carolynne Borders, welcomes participants. The conference will include both GAAP and non-GAAP financial results, and forward-looking statements will be made. In the second quarter, GE Healthcare saw 1% organic revenue and 3% orders growth, with strength in the U.S. and resilience in the ultrasound market. Excluding China, global revenue and orders growth were 4% and 6% respectively. The company believes they are gaining market share and investing in products and services for future growth.

The company is facing challenges in China, with a decline in sales growth expected for the year. However, they are maintaining their EPS guidance and are confident in the long-term potential of the market. The team has implemented lean processes and identified improvements, resulting in higher customer satisfaction and increased win rates. The company is committed to continuous improvement and recently completed a global CEO Kaizen week to drive and execute process changes.

The teams at the company were focused on improving growth, reducing costs, and improving working capital. One team created a plan to reduce costs for a CT platform, while another focused on improving responsiveness to customer demand and cost savings for CT and PET/CT products. They also implemented a new tool to help optimize manufacturing flow and meet customer demand. The company had a strong quarter in the U.S. and secured a significant amount of contracts. They also announced the development of AI tools to improve clinical and operational efficiencies.

In the second quarter of 2024, our company saw a 1% increase in revenues, with a 3% increase in organic orders. However, market challenges in China impacted overall sales growth. We maintained a strong backlog of $19 billion and our adjusted EBIT margin increased by 60 basis points. Adjusted EPS also saw a 9% increase. Free cash flow was negative due to the timing of certain payments. On the next slide, we will dive deeper into the performance of each segment during the quarter.

In the fifth paragraph, the company discusses their strong sales growth in their PDx segment and their progress on margin expansion. They attribute this success to lean capabilities and cost optimization actions, such as consolidating vendors and moving to the cloud. They also mention a Kaizen event that led to increased capacity and cost reduction in their court facility. Overall, the company saw an increase in gross margin and EBIT margin in the first half of 2024, with particularly strong performance in their PDx and Imaging segments.

In the second quarter, the company invested over $300 million in R&D, leading to a 10% growth and increased margins. The Imaging segment had flat organic revenue growth due to difficult comparisons and China market challenges, but saw an increase in EBIT margin. Ultrasound segment saw a 1% decline in organic revenue due to China market challenges, but EBIT margin decreased due to lower sales and inflation. Patient Care Solutions saw a 1% increase in organic revenue and a decrease in EBIT margin due to product mix, but with new product introductions and a healthy backlog, future growth is expected. Pharmaceutical Diagnostics had a strong quarter with 14% organic growth and an improved EBIT margin of 31.2% due to sales volume, productivity, and pricing.

In the second quarter, the company saw margin expansion in their segment and is making investments to meet the high demand for contrast agents and radiopharmaceuticals. They are particularly encouraged by the growth in the molecular imaging market. Free cash flow was negative due to timing of payments, but they expect strong cash generation for the full year. The company is lowering their organic revenue growth guidance for 2024 due to market headwinds in China, but raising their adjusted EBIT margin expansion guidance. They are reaffirming their expected adjusted EPS and free cash flow for the year.

In the third quarter, the company expects a 1% growth in organic revenue and a similar expansion in adjusted EBIT margin. The fourth quarter is expected to have the highest growth in both categories. The company also expects foreign exchange to have a minimal impact on revenue in 2024. The CEO highlights the company's lean culture and its ability to bring innovative solutions to market. The recent CMS reimbursement proposal is expected to benefit patients and unlock the value of the company's radiopharmaceuticals and scanners. This change will also help hospitals cover their costs better. The company is seeing momentum with existing products and expects future molecules to benefit from the new reimbursement rule.

In the second quarter, Vizamyl doses continued to grow in the U.S. with the recent FDA approval of donanemab, and the company anticipates further sales growth for their diagnostic amyloid PET agent. They also introduced a smaller detector for their Omni Legend platform and a low-cost cyclotron for in-house production of tracers and radioisotopes. The company is aligning their ultrasound and image guided therapies businesses to better serve clinicians, and have made strategic leadership appointments to support these changes. The company's team is committed to delivering for their customers.

The speaker thanks their government affairs and policy team for advocating for a proposed CMS hospital outpatient rule. They express optimism for the future due to a strong backlog, solid orders growth, and a strong pipeline of innovation. They also mention the delay in the rollout of the stimulus program in China and how it may impact their 2025 plans.

The rollout of a new stimulus in China is taking longer than expected due to collaboration between the central government and 31 provinces. As a result, the company has taken this out of their numbers for the year, but expects it to have a positive impact on orders in late 2024. The company saw a decline in sales of $100 million in the second quarter and is not expecting any impact from the China stimulus for the rest of the year. The company has adjusted their guidance for 2024, with a projected $500 million impact in China.

The speaker discusses the company's outlook for the future, specifically in regards to the Chinese market. They mention a potential stimulus package and their belief that they are well-positioned to take advantage of it. They also mention that historically, China has made up around 14% of their business, but this year it will be around 11-12%. The speaker then answers a question about the company's ability to maintain margins and EPS despite a revenue reduction, attributing it to their focus on lean culture and cost initiatives.

The company saw margin expansion in the second quarter due to variable cost productivity initiatives and G&A initiatives. The same is expected for the third quarter, with an uptick in the fourth quarter due to price increases and continued cost containment. They are confident in their medium-term goals and expect to see catch-up from China next year. The company is focused on executing their initiatives to offset $500 million in costs and is confident in their mid-single digit growth outlook for 2025.

The speaker expresses confidence in the company's medium-term goals for revenue and profit. They mention the potential positive impact of China's market and highlight the core changes in the company that have been made. They also mention their upcoming Investor Day in November where they will showcase their new products and increased R&D investment. The speaker feels good about the company's position and plans for the future. The questioner asks about the potential impact of China's market and the speaker responds by reiterating their confidence in the company's goals and mentioning their upcoming Investor Day.

The paragraph discusses two topics - orders and bookings, and Alzheimer's disease. Despite challenges in China, orders and bookings have increased by 3%, with a book-to-bill ratio of 1.06. The U.S. market has shown strong growth, with orders outpacing sales in all segments. There is optimism for continued growth in the U.S. market, with customers planning to invest more in capital in the second half. In terms of Alzheimer's disease, the company's PET/CT solution is preferred, but there are new blood-based tests being developed.

The company is pleased with their share position in the U.S. market and has launched new products in ultrasound. They have seen positive reception and have a growing backlog. The U.S. team has had a great quarter and has implemented new sales processes and disciplines. The company is also seeing growth in areas such as vascular lab and is confident about the U.S. market based on signals from customers. As for the radiopharmaceutical side, the company expects to see growth in various diagnostics.

The speaker discusses the potential acceptance and integration of new therapies for Alzheimer's disease and other conditions, as well as the recent changes in CMS reimbursement that could drive growth. They also mention that their guidance has been adjusted, but do not provide further details on the changes.

The company's assumptions for their financial performance remain unchanged, with a reduction in revenue due to uncertainty in China. The company is confident in delivering on their projected EPS range, thanks to strong performance in the first half and productivity initiatives. The company has launched multiple new products and upgrades, particularly in the MR and Ultrasound segments, which are expected to drive growth in the second half. Despite a slight dip in revenue in the current quarter, orders for these products have been positive, indicating a positive outlook for the future.

The speaker discusses the growth of the company's surgical C-arm OEC business and new software applications that bring Cath Lab capabilities into a mobile C-arm. They also mention the success of their Allia platform and monitoring systems. The company has made investments in Photon Counting, next-generation MRI, and PET/CT imaging, which will be highlighted at their upcoming Investor Day. The speaker also talks about the underlying drivers of growth in China, which has historically been a robust market for the company with a projected growth of 6-8%.

Last year, the company had a strong year with double-digit growth, but this year they are experiencing a decline due to limited buying activity by hospitals waiting for clarity on stimulus. The decline is not related to the age of the installed base, as recent purchases were mostly at lower-end hospitals. The company sees long-term potential in the Chinese market, with a large untapped population and restrictions on selling used equipment.

The speaker discusses the potential for growth in the company based on their numbers and their focus on smart, integrated, and connected devices. They mention their strategy of D3 and how it applies to their work in the electrophysiology field, where they have improved their features and are working on solutions that incorporate ultrasound, EP devices, and data systems.

The company created the IGT ultrasound alignment to focus on cardiovascular benefits and potential partnerships or acquisitions. The recent Medicare changes have positively impacted the PDx business, which has been growing at a rate of 14%. The growth is primarily due to volume, with new products and price also contributing. Specific products, such as Vizamyl, have experienced significant growth in the U.S. market.

The new CMS ruling and approval have increased optimism for the long-term success of the Vizamyl product. While sales are currently small, the uptake of Alzheimer's therapies and implementation of diagnostic programs are expected to drive continued growth. The CMS ruling could also lead to accelerated growth in the future. The company is more optimistic about the long-term growth of their products and is working on framing up the potential benefits for hospitals and patients. The Cerianna product for metastatic breast cancer is now included in guidance documents, but implementation has been challenging due to economic factors. However, the new ruling could change this and also impact the use of therapies by pharmaceutical companies.

The speaker discusses the importance of having a company like GE HealthCare in the rapidly growing therapies market. They mention that they will be spending more time discussing this with investors, and that it will have a positive impact on their growth strategies. When asked about their guidance for China, they state that they are being conservative due to a 15% decline in sales in the first half of the year and uncertainty in the market. They have adjusted their guidance to a high teens decline in the second half and have removed the impact of stimulus on sales. They will continue to monitor the situation and hope for better results, but have made the prudent decision to remove the impact of stimulus on their forecast.

The speaker addresses a question about the decline in the market forecast, specifically in China. They mention that this decline is not specific to GE and is a broad-based market view. They also mention that the timing of the China stimulus program is uncertain and could impact orders. The speaker expresses confidence in their base case and mentions that they have decided to take out a specific order to sales piece. They also mention that they are being cautious in their forecast and that other companies in the market are not forecasting as steep of a decline in China revenue. The speaker suggests that this decline may be due to something happening in the patient monitoring market.

The company has a strong presence in China, specifically in the imaging ultrasound market. They have a sales force in all 31 provinces and are closely monitoring customer demand and timing for purchases. They had initially factored in potential stimulus into their guidance, but have since removed it due to uncertainty and the potential for reduced government support for purchases. The company is not in the business of guessing and has adjusted their guidance accordingly.

In response to a question about the company's revenue for the third and fourth quarters, the executives explained that the delay in decision-making due to uncertainty surrounding stimulus packages has affected demand in the market. They also mentioned that the strong order performance in the second quarter will have a positive impact on revenue, and that about 45% of their revenue is recurring and has low volatility, while the remaining 55% is from equipment and is influenced by the backlog.

The company has had 75% of its revenue in the last four quarters come from its backlog, with the remaining 25% sold and installed in each quarter. This trend is expected to continue in the second half of the year, with a normal step-up in the fourth quarter. This is due to the backlog and expected deliveries. The company has also gained market share in larger equipment, resulting in an increase in service contracts and higher margins. The average age of the U.S. installed base varies by modality.

The speaker discusses the average age of installed equipment in various companies, with some modalities being even older. They believe there is a need for replacement cycles due to the age of the equipment. The speaker also addresses the potential impact of China opening up and the differential impact it may have on different companies. They also discuss the growth potential for radiopharmaceuticals, despite competition and changes in Medicare policies.

The speaker discusses the potential impact of a rising China on their company and the competition in the market. They mention their ability to compete locally and their focus on value-based products. They also mention their strong position in the radiopharmaceutical market and their unique capabilities in generating isotopes and PET technology.

The speaker discusses the importance of having a distribution structure for their company's products. They believe that their molecules will have a significant impact on diagnosing diseases, but have been hindered by low reimbursement rates. They expect this to change in the near future, leading to more growth and investment opportunities. The call concludes with a reminder about the upcoming Investor Day in November.

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