The paragraph is an introduction to the GE HealthCare First Quarter 2025 Earnings Conference Call. Carolynne Borders, along with President and CEO Peter Arduini and Vice President and CFO Jay Saccaro, discusses the quarter's financial results, including strong revenue and profit growth. The company experienced record double-digit orders growth, particularly in the U.S. market, driven by investments in imaging products for cardiology and oncology. They also noted market share gains and significant customer relationships, including a new agreement with Sutter Health and continued partnerships with other major organizations.

Luke's University Health Network is experiencing strong growth, with a 4% organic performance boost across segments, and healthy margins and earnings per share. However, they are revising their 2025 guidance due to the impact of tariffs, especially from U.S.-China and other global trade actions. They estimate a $1.75 per share gross impact from tariffs but have mitigated over 50% of this through strategic actions, reducing the net impact to $0.80 per share. They included an additional $0.05 in their February guidance, totaling a $0.85 effect. By 2026, they aim to further optimize the supply chain to lower this impact below $0.85 per share, assuming the current tariff rates persist.

The paragraph outlines the company's operational and financial performance for the first quarter of 2025. They reported revenues of $4.8 billion with 4% organic growth and strong growth in the U.S. They saw a 3% increase in service revenue and a 2% rise in product revenue, with a robust 10% growth in organic orders. The book-to-bill ratio was strong at 1.09, and they concluded the quarter with a record backlog of $20.6 billion. The company's adjusted EBIT margin improved to 15%, and they achieved an adjusted EPS of $1.01, a 12% increase year-over-year. Free cash flow was $98 million, down due to timing, but overall results exceeded expectations.

In the first quarter, the company experienced an 80 basis point increase in adjusted gross margin year-over-year, attributed to higher volumes, new high-margin products, and productivity initiatives like a new lean management system in their imaging team. This system reduced backlog by over $25 million, enhancing customer satisfaction and cash flow. R&D investment was 7% of sales, increasing 6% year-over-year, signifying a commitment to innovation and product leadership. The company also improved operational efficiency in SG&A and launched the radiopharmaceutical Flyrcado. Overall, the adjusted EBIT margin improved by 30 basis points year-over-year. Imaging segment revenue grew 5% year-over-year, driven by strong U.S. performance, resulting in a 130 basis point increase in segment EBIT margin. Advanced visualization solutions saw a 3% rise in organic revenue and a 10 basis point increase in segment EBIT margin, primarily due to volume and productivity improvements.

The company's product roadmap is focused on boosting recurring revenue through digital and AI in ultrasound and IGT products. Patient care solutions saw a 2% organic revenue growth, though EBIT margins fell by 450 basis points due to investments, tariffs, and product mix. The focus is on launching higher gross margin products and improving margins through automation and supplier consolidation. The PCS portfolio is receiving ongoing investments to boost recurring revenue. Pharmaceutical diagnostics showed 8% organic growth with a strong EBIT margin, supported by R&D and new product introductions, including Flyrcado and Vizamyl. The acquisition of Nihon Medi-Physics is expected to contribute $150 million in inorganic revenue by 2025. Free cash flow decreased to $98 million due to timing changes in compensation payments, inventory builds, and managing tariffs. Capital allocation priorities remain the same.

In the first quarter of 2025, the company repaid $250 million of debt and announced a $1 billion share repurchase program. While the full-year organic revenue growth guidance remains at 2% to 3%, the company anticipates a low-single-digit decline in sales in China, although improvement is expected in the second half of the year. The impact of foreign exchange rates is expected to be neutral to revenue. Adjusted EBIT margin guidance has been revised down to 14.2% to 14.4% due to an estimated $475 million impact from new tariffs. The adjusted effective tax rate is forecasted to be 21% to 22%. The company remains committed to investing in organic growth and strategic M&A, while maintaining R&D investments to support future innovation.

In this paragraph, the company has revised its full-year adjusted EPS guidance to between $3.90 and $4.10, reflecting a 9% to 13% year-over-year decline due to an $0.80 net incremental tariff impact. Previous guidance was $4.61 to $4.75. The adjusted EPS estimate does not consider potential share repurchases. The company now expects free cash flow of at least $1.2 billion for the full year, down from the prior expectation of $1.75 billion, due to tariff payments. Tariffs will have a bigger impact in the second half of 2025 due to inventory liquidation timing. For the second quarter of 2025, the company anticipates 1% to 2% organic revenue growth and a high single-digit decline in adjusted EPS year-over-year. Improved global trade conditions or reduced tariffs could positively impact adjusted EBIT, adjusted EPS, and free cash flow. The company appreciates its global team's efforts to navigate a dynamic environment and reiterates its commitment to long-term growth. The speaker ends by handing over the call to Peter Arduini, who intends to discuss innovation and business transformation.

The paragraph discusses the progress and achievements of GE Healthcare, highlighting the launch of innovative products such as Flyrcado, a myocardial perfusion imaging agent, and the Revolution Vibe cardiac CT system. These products are expected to enhance personalized care and cardiology. The paragraph also mentions receiving CMS pass-through pricing, record orders, and strong growth driven by a positive customer sentiment and new product pipelines. The company is actively addressing macro challenges, including supply chain management and tariff impacts, while controlling expenses and maintaining long-term investments in innovation to protect margins, earnings, and cash flow.

In the conference call, before opening the floor for questions, the company introduced Jeannette Bankes as the new CEO of patient care solutions, highlighting her extensive experience in the MedTech industry. During the Q&A session, Larry Biegelsen from Wells Fargo asked about the impact of tariffs and their cadence, and Jay Saccaro responded. Jay explained that the estimated tariff impact for the current year is $0.85, concentrated in the second to fourth quarters, but expects this to decrease next year through mitigation strategies like duty drawback and USMCA compliance.

The paragraph discusses the company's strategy for mitigating impacts in 2026 by enhancing local manufacturing, dual sourcing, and multi-sourcing their supply chain. They experienced minimal tariff impacts in Q1, but expect greater impacts in subsequent quarters, mainly due to high-cost inventory affecting the P&L. They anticipate the impact in early 2026 to be similar to Q4 of the previous year but expect that their mitigation strategies will begin to ease the impacts throughout the year. Larry Biegelsen asks about the improvements in China and its potential impact, specifically regarding VBP (Value-Based Procurement).

The paragraph discusses the company's outlook for its operations in China, highlighting that they anticipate a mid-single-digit decline in the first half of the year, with Q2 being particularly challenging. They expect improvements in the second half, with no significant market changes influencing their forecast. Despite reports of potential market rebounds, the company maintains consistency in its projections and closely monitors tender money releases. Value-based procurement (VBP) strategies are integrated into their plans, with bulk tender buys becoming more frequent at the provincial level. Their approach adapts to these procurement dynamics with specific configurations and cost structures. The discussion then shifts to addressing tariff dynamics, where Jason Bednar of Piper Sandler acknowledges the details shared and inquires about mitigation efforts in response to these tariffs, noting existing and future cost-saving initiatives.

In this paragraph, Peter Arduini addresses the impact of tariffs and the measures GE Healthcare is taking to mitigate them. He acknowledges that while the situation is still evolving and contains many variables, the company's medium-term growth and margin potential remain unchanged from what was presented at the Investor Day. Although the strategies may differ slightly now, GE Healthcare is confident in its ability to leverage multiple strategies to maintain profitability and growth. The company is taking a cautious approach to the current trade environment, planning for scenarios where tariffs persist, and considering options like localizing production and dual supply chains. Arduini remains positive about the long-term profitability and growth prospects of GE Healthcare.

In the paragraph, Jason inquires about potential impacts on business from administrative changes such as tariffs, budget cuts, and headcount reductions at key healthcare agencies, specifically regarding interactions with the FDA and the planned photon counting CT submission. Peter Arduini responds that, so far, there have been no observable impacts from these changes. Although there are concerns, especially regarding NIH funding affecting academics, no specific effects have materialized. Regarding the FDA, despite some cuts initially, no delays are anticipated for their 510(k) submissions and product approval plans. Jason acknowledges Peter's response, and the operator introduces the next question from Vijay Kumar, who shifts the topic to China and tariffs.

The paragraph discusses the financial impact of tariffs between the U.S. and China on a company's operations. Jay Saccaro mentions that the total tariff impact for the year is around $500 million, with the U.S.-China tariffs accounting for $375 million of this. The company exports a significant amount of products both to and from China and hasn't counted on any tariff exemptions. Saccaro also outlines a hypothetical scenario where tariff reductions could potentially increase earnings per share by $0.40 annually. Peter Arduini adds that the company exports advanced technology products like x-ray and MRI components from the U.S. to China, highlighting the importance of this trade relationship.

The paragraph discusses the impact of tariffs on the company's operations and finances. Due to tariffs, particularly a 125% tariff on certain components sourced from China, the company has seen a reduction in its free cash flow forecast by $550 million. Although they manufacture products in various locations, around 20% of components are affected by the high tariffs. The company plans to adjust by localizing supply chains across its 43 plants. Despite the tariffs, the company's first-quarter free cash flow was strong, but the tariff-related costs primarily affect inventory and cash flow before impacting the profit and loss statement. There are no other current changes in the free cash flow, and the company remains focused on operational improvements.

The paragraph features a discussion between Vijay Kumar and Peter Arduini about Flyrcado and its progress, as well as concerns related to the business environment in China. Arduini expresses confidence in Flyrcado, noting that its launch in April was successful and they are on track to meet their revenue target of $30 million by 2025. He mentions the expansion of their Contract Manufacturing Organization in the U.S. and positive feedback regarding the clinical image quality of Flyrcado's myocardial perfusion. Arduini also addresses questions about the impact of anti-dumping allegations in China, though he doesn't directly answer the question about pharmaceutical diagnostics and tariffs.

In the paragraph, Peter Arduini discusses several key points: the successful initial dosing of a product in mid-February and its commercial launch at the American College of Cardiology, generating significant interest. Additionally, the product received pass-through status from CMS for reimbursements on April 1. Concerning the Chinese market, Arduini addresses an anti-dumping investigation initiated by a private company, which involves numerous multinational companies, not just theirs. He reassures that the investigation does not pose a material risk to their business in China. A meeting with China's Ministry of Commerce on April 6 emphasized fair treatment, with positive comments indicating that they are not targeted. Arduini expresses confidence in maintaining their role in the Chinese market, alongside ongoing discussions about tariffs. Robbie Marcus closes by mentioning a query about the pharmaceutical sector and tariffs, prompting Jay to address it.

In the paragraph, Jay Saccaro explains that the company has not included potential impacts from 232 tariffs in their guidance, as these have not been quantified or officially announced. The company's PDX business, which primarily deals with products used alongside imaging equipment, might be affected by these tariffs, but it's unclear how. Saccaro mentions the business’s positive pricing dynamics, which will be monitored closely. In response to David Roman's question about tariffs, Saccaro outlines the company's focused approach on controlling spending in areas like travel and headcount while ensuring key investments in R&D, sales, and marketing are protected to support new product launches. The company is balancing spending controls with sustaining necessary business investments.

The paragraph discusses the company's strategy for managing tariffs and mitigating their impact on costs. It mentions earmarking funds for spending on mitigation efforts for the following year, including savings through duty drawbacks, USMCA, and tariff code exemptions. It outlines a plan for achieving savings this year and a funnel of opportunities for next year, contingent on final tariff agreements. Peter Arduini adds that the company is assessing the global tariff landscape before making moves like shifting production between plants or countries, and highlights ongoing adjustments in business areas like vascular, molecular imaging, and CT.

The paragraph discusses the company's ability to adapt its production and supply chain strategies by leveraging its four plants and global supply base to shift manufacturing across different regions. This flexibility supports their confidence in mitigating disruptions in the second half of the year and beyond. In response to David Roman's inquiry about mergers and acquisitions (M&A) during market dislocation, Peter Arduini affirms that M&A is a key part of their capital allocation strategy. The company focuses on organic investments and strategic acquisitions that enhance top-line growth and margins. They are particularly interested in acquiring assets that offer additional growth opportunities.

The paragraph is part of a Q&A session where Joanne Wuensch from Citi asks about the capital expenditure (CapEx) environment, particularly in hospitals, and a product related to photon counting expected for 2025 submission and 2026 approval. Jay Saccaro responds, highlighting robust demand in the hospital capital environment in both the United States and Europe, with notable order growth and a positive demand outlook. Additionally, he mentions internal and external surveys that indicate a constructive demand environment.

The paragraph discusses the positive market environment for imaging and critical care equipment, emphasizing their importance for hospital customers and Ministries of Health globally. Despite the global trade environment, there have been no significant cancellations or deferrals in customer budgets, and there is a substantial backlog. Imaging technology, such as ultrasound and CT scans, is highlighted as a tool for enhancing productivity by reducing diagnosis time, with equipment often paying for itself within a year to 1.5 years. CapEx surveys consistently prioritize these products due to their strong economic value. Additionally, Jay Saccaro mentions that the company is on track with its photon counting technology, which offers a unique approach compared to existing market offerings.

The paragraph discusses advancements in CT imaging technology, emphasizing deep silicone and spectral imaging as transformative for understanding molecular and cellular changes. Despite macroeconomic challenges, the focus on these technologies is expected to yield significant benefits, such as higher spatial resolution and dose efficiencies. The discussion then shifts to concerns about potential trade disruptions in China, particularly the export limitations on rare earth elements, which affect some products. However, Peter Arduini expresses confidence in managing these risks, citing a long-term supply strategy that includes carrying a substantial inventory of contrast agent components from multiple sources.

The paragraph discusses GE Healthcare's strategic approach in the Chinese market, emphasizing local sourcing and partnerships to integrate into the local ecosystem. The company is working on a new MRI contrast product that could transform imaging. CEO Peter Arduini is not concerned about supply issues or negative sentiment towards GE Healthcare in China, highlighting the importance of being perceived as a local player to succeed in what will become the world's second-largest healthcare market.

In this paragraph, Craig Bijou asks Peter Arduini if the strong order growth and imaging revenue in Q1 were due to any one-time factors such as mitigating tariff actions. Arduini responds by emphasizing that the growth was not due to any pull-forward of orders. Instead, he attributes the strong performance to stable operations and the enthusiasm of customers globally for their products, services, and solutions. He highlights the positive feedback from customers about their sales teams’ approach to solving problems. Arduini remains optimistic about GE Healthcare's ability to continue growing despite macroeconomic challenges. Anthony Petrone from Mizuho Financial Group congratulates the team on their success, mentioning a $550 billion figure in the context of their achievements.

The paragraph discusses the impact of tariffs on semiconductors in the context of trade between the U.S. and China, as it pertains to a company's financial outlook. It mentions that while semiconductors are not a major import item for the company, they are used in some devices, and the company is actively seeking to reduce tariff impacts. Jay Saccaro expresses optimism about keeping tariff impacts below a net effect of $0.85 and aims to maintain or improve the situation by 2025. Peter Arduini adds that the company is engaging with international administrations and focusing on relocating components and adjusting supply chains as primary means for offsetting the impact of tariffs. The approach will be updated quarterly with financial stakeholders.

The paragraph discusses the company's approach to managing growth and costs, emphasizing their strategy of balancing positive pricing with cost management to minimize customer impact. The speaker notes that while price adjustments may become necessary if tariffs remain high, the current focus is on cost efficiency. Additionally, there's a discussion about the revenue estimates for 2025 and 2028, highlighting that growth is more dependent on adoption and conversion rates in nuclear medicine rather than the availability of more PET-CT scanners. The success in this area is linked to factors like positive reimbursement and product differentiation.

The paragraph discusses a new product with superior image quality that better detects false positives and negatives compared to existing products. The business plans for geographical expansion will take time due to production and delivery logistics. There's potential for rapid growth once a critical mass is achieved. The speaker expresses excitement about the team's performance and progress. The paragraph concludes a conference call with expressions of gratitude and an invitation to future conferences.

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