Good day, ladies and gentlemen and welcome to the General Electric First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. My name is Brandon and I will be your conference coordinator today. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today’s conference, Steve Winoker Vice President of Investor Communications. Please proceed.

Thanks, Brandon. Good morning, all and welcome to GE’s first quarter 2019 earnings call. I am joined by our Chairman and CEO, Larry Culp and CFO, Jamie Miller. Before we start, I would like to remind you that the press release presentation, supplemental, and 10-Q have been available since earlier today on our investor website. We are pleased to file our 10-Q in concert with our earnings, a practice we began in October with our third quarter earnings report. Please note that some of the statements we are making today are forward looking and are based in our best view of the world and our businesses as we see them today. As described in our SEC filings and on our website, those elements can change as the world changes. With that, I will hand the call over to Larry.

Steve thanks. Good morning, everyone and thank you for joining us. I will begin with an overview of our first quarter performance and an update on our strategic priorities, Jamie will cover the quarter in greater detail and then we will take you through segment performance and I will wrap up before we go to questions. To start, as we said in March, on our outlook call, 2019 is a reset year for GE as we make decisions and investments that will position us well for the long-term, but we will have near-term impacts on our financial performance, particularly our cash flows. And while we have made some progress in the first quarter delivering results ahead of our own expectations, especially on industrial free cash flows, this is largely due to timing of certain orders and customer collections we expected later in the year. You know as well as I do that one quarter is a data point, not a trend. The guidance we provided a month ago remains unchanged. It’s early in the year and this is one quarter in a multi-year transformation. In total, we are confident in our ability to deliver on our full year expectations that we laid out for you last month during the outlook call. We continue to believe that our 2020 and 2021 financial results will be meaningfully better. With respect to the quarter, orders were up 9% organically due to strength in Power, Aviation and Oil and Gas. Industrial revenue was up 5% organically driven by growth in each segment, except for Power. Industrial operating margins contracted 160 basis points organically driven by declines in Power, Renewable Energy and Aviation. And all of this resulted in adjusted EPS of $0.14 and GAAP continuing EPS of $0.11. Our adjusted industrial free cash flow…

Thanks, Larry. I will start with the first quarter summary. Note that our results on a continuing basis include transportation and its history, which was reclassified to discontinued operations this quarter. Also our Lighting business is now included in our corporate results. Orders were $26.2 billion, up 1% reported and up 9% organically with strength in equipment orders up 11% organically driven by Power, Healthcare and Oil & Gas. Services orders were up 7% organically driven principally by Aviation. Revenue was down 2% with Industrial segment revenues down 2% on a reported basis and up 5% organically driven by Aviation, Oil & Gas and Healthcare. Both equipment and services revenues were up 5% organically. Adjusted industrial profit margins were 8.8% in the quarter, down 120 basis points year-over-year on a reported basis and down 160 basis points on an organic basis driven by significant declines in Renewables, Aviation and Power. Aviation margins were down primarily from the CFM to LEAP engine transition, margin contraction in the first quarter was in line with our expectation and we continue to expect industrial margin expansion for the year. Net earnings per share, was $0.40 which includes discontinued operations for both GE Capital and Transportation. In the quarter, we recorded a $2.5 billion after-tax gain related to the sale of Transportation to Wabtec, which is included in discontinued operations. GAAP continuing EPS was $0.11 and adjusted EPS was $0.14. I will walk through adjusted EPS on the right hand side of the page. Starting from GAAP continuing EPS of $0.11, we had $0.05 of gains, principally from the sale of ServiceMax, as well as a gain from a favorable resolution on an NBCU tax audit for which we had indemnified Comcast. On restructuring and other items, we incurred $0.03 of charges, principally in corporate…

Jamie thanks. You will recall that most of Slide 9 was what we have shared with you back on March 14 during our outlook call. We stand by our full year guidance and as we have discussed much of our first quarter performance had to do with timing. The only new news on this slide is the addition of the 737 MAX and the key variable, which we are monitoring closely. Our industrial businesses have strong fundamentals, which gives me confidence that we can make them better cash generators. We expect free cash flow to return to positive territory next year and accelerate thereafter in 2021 as the headwinds diminish and our operational improvements yield results. Longer term, as I have said previously, from an aspirational perspective, we should see the opportunity over time for our free cash flow margins to be at least double the mid-single digit rate that we saw in 2018. While 2019 is a reset, it will be one of intensity, focus and transparency with all of you. We are committed to creating value for our employees, our customers and our shareholders. Thanks for your continued interest in GE. With that, we will open the line for questions.

Thank you. [Operator Instructions] And from Barclays we have Julian Mitchell. Please go ahead.

Thanks. Good morning.

Good morning Julian.

Good morning.

Good morning. Maybe just a first question around industrial margins, you have got the guidance for them to grow slightly in 2019. In Q1, they are obviously down a fair amount, so maybe give us some update as to how quickly you dig out from that down 160 bps? When do we start to see the margins expand year-on-year?

Good morning, Julian. So, we planned for margin contraction in the first quarter and that’s really been a combination of volume and cost productivity that over the course of the year will drive margin accretion. We saw declines in Power and Aviation and renewables, but for the rest of the year we have got renewables with a significant volume ramp with positive margin. We have got Power with non-repeat charges or at least charges not at the same level in the second half, which really impacted margins last year and healthcare, we see continued growth and those things really offset the Aviation mix headwinds. And as we look at it, this does ramp through the year more in the second half, but we believe we are on track for the OMX expansion for the year.

Thank you very much. And then my second question, just around the industrial free cash flow. Appreciate the detail around the timing and how that swings around on a quarter-to-quarter basis, but just to clarify, if I look at the working capital plus contract assets outflow, in aggregate that was I think $2.5 billion in Q1. Is it fair to say that, that was the maximum outflow from those items we should expect on a quarterly basis this year or is there some risk that because of lumpiness or what have you there could be a larger outflow at some point in the next three quarters?

If you look at this quarter compared to our total year plan, I would say the answer to that is yes, this is a very high impact quarter for both. Having said that, when you look at industrial free cash flow this quarter it was significantly better than we expected, but as we mentioned in our comments, that was largely due to timing. And when you look at the causes of some of that timing shifting with progress in aviation – I am sorry, Power and Aviation orders which in Power drove higher progress collections and you saw better underlying collections in services and lower project disbursements in Power as well. And you also saw some timing with respect to customer payments at Aviation accrued discounts. So when you look at that in totality that was most of the timing impact in the quarter. We do expect that to largely balance out over the rest of the year. So, you will see that shifting.

From Melius Research, we have Scott Davis. Please go ahead.

Hi, good morning.

Going morning.

Good morning, Scott.

I wanted to backup Larry a little bit, because there is not a ton new here versus your outlook call just a month ago, but what’s your sense now, you have had a chance to visit factories each of the different businesses. I mean, is there any – are there seeds of lean and daily management and best practices at all that you can build on or you have to start from scratch?

Scott, I have been out a good bit here of late. It’s the beauty of being on the other side of outlook get to spend more time with the businesses. Seeds, is probably the right way to frame it. Somebody shared with me as I have been poking around here a little bit that lean in certain quarters has been a four-letter word over time. But as I have seen a number of our facilities, what I have been very impressed by is some of the legacy lean expertise around 5S, around good flow within a line or a sell and frankly within a facility. But there is a lot of opportunity inside of those four walls, particularly with respect to how we integrate more broadly outside of any one site with our vendors and with our other facilities in any one of our segments. So in fact, I am going to have a number of our lean leaders in for half day on Wednesday of this week to really go through a little bit more to history, understand, get their perspective on what needs to be different this time around to really drive an approach here that teaches, motivates, but ultimately not only drives results, but informs a culture. And we certainly have I think the business imperatives with respect to cash and as importantly, quality and delivery for our customers to get us motivated to get after this. So, the seeds are there. We just need to water them and nurture them. And I think you will see over time and our customers will see over time real impact. But as you know, none of that really happens overnight, that in itself is a journey, but one we are going to be on here shortly.

And just on that topic, really Larry, I mean, if you are a GE employee, you have gotten kicked around pretty hard the last couple of years, I mean, is there a sense of kind of a stability and excitement, are people still shopping their resumes and trying to get the hell out of there or what’s your sense of really the stability on the people side of the organization?

Scott, I suspect both dynamics are in play. Right, I get a chance to go down to Pensacola, one of our key renewable facilities here in the U.S. sent a little note out to the organization in terms of what I saw. The response I got was really encouraging in terms of just how many people appreciated not only the visit, but the observations and what it could mean more broadly, but we don’t take anybody for granted, we know we still have to make sure our value proposition for our team is as robust as the one we try to craft for investors. So, that too is a work in process.

From Vertical Research, we have Jeff Sprague. Please go ahead.

Thank you. Good morning, everyone.

Good morning Jeff.

Hey, Jeff. Good morning.

Good morning. Hey, just again kind of back to cash flow, if you thought about this simplistically right, you are through Q1, you are kind of at the midpoint of your cash flow estimate for the year. But I wonder if you are suggesting to us that, that Q2 cash flow was negative because of the timing issues that you are mentioning. And as part and parcel of that too, I was wondering why it would be that you would expect maybe some spike back up from this relatively low level of intra company revolver usage in this first quarter?

Hi, good morning, Jeff. So, with respect to free cash flow, when I was commenting on Julian’s question, I talked about the timing element. The other piece that we expect to significantly shift throughout the year is restructuring MBD as well as the timing of our supply chain finance transition. So you have got timing reversals just in the core. You had really flat restructuring this quarter which we expect to ramp throughout the year to a much more significant level. We had no supply chain finance impact this quarter that really starts in second quarter and is really more of a second half loaded item. And then we have got some watch items too, I mean, I mentioned in my comments, renewables execution is certainly something we’re watching and power just general variability in operations is something we’re watching as well. So when you start to look at second quarter, yes, we do think second quarter will be negative, but when you really look at the cadence of these, I mean, this is obviously lumpy and from a timing perspective, we expect most of that difference that you saw to reverse throughout the year. But and then you asked a question about intra-quarter and why that might be shifting? From an intra-quarter perspective, a lot of this depends on the timing of disposition activity. So, in the first quarter, we had the Wabtec cash coming in February, which helped us in terms of normalizing that peak and that variability. And then as we look at the rest of the year, it will just depend on the timing of some of our sell downs and how that might relate to our plans.

And from JPMorgan, we have Steve Tusa. Please go ahead.

Hey guys, good morning.

Good morning.

Good morning Steve.

Thanks a lot for all the detail. The 10-Q is very helpful. Just a follow-up on Jeff’s question, maybe a little bit of magnitude, I mean, I think in the prior kind of high level was a portion of the annual declines across the quarters, obviously first quarter didn’t come out that way, should we kind of...

It was actually hard. You broke up a little bit.

I think we heard you though. You were talking about magnitude, magnitude in the first quarter. Yes.

Yes, yes, the I think the high level we were just assuming was basically just cut up the annual prorated – you know, pro-rate those declines over the four quarters. You obviously came in better than that in the first quarter. When we kind of try and calibrate on the rest of the year, you know, should we still assume, OK, there is a prorated decline in the second quarter and then the second half is kind of more heavily loaded. Is that the right mindset at this stage of the game?

Yes, the way I would frame it is that, we still believe we’re within the range of our guidance, so negative two to zero, one industrial free cash flow. As I said before, this is lumpy, but maybe a simple way to think about it is to think about the 2018 free cash flow, think about our guide and the difference between that, I’d really think about may be spreading that over the next three quarters, maybe some simple math there.

Okay, that’s really helpful. And one last question, just on Aviation, do you guys, you talked about progress payments and timing. Is there anything that you guys are there any kind of contractual abilities to provide discounts to customers to maybe bringing cash a little bit earlier, your prepayment discounts, is that kind of standard industry practice for you guys at various times, either quarterly or over the course of the year that you can kind of time that cash flow?

From a discounting perspective, we do see discounting of both across both engines and services. And typically, when we contract on a deal, we will have differences in our contracts with both airframers and with the customers in terms of whether it’s discounting or timing of cash flow. So, yes, that can vary.

And from Cowen & Company we have Gautam Khanna. Please go ahead.

Yes, thank you. Just a follow-up on the last question, on the 737 MAX delivery hiatus, can you just talk a little bit about what that does in terms of quarterly cash burn for every quarter that that extends? What does that do in terms of receivables you can collect or your inventory that you have to build?

Right, right. Well, I think our expo right, I think our exposure is as you frame it and obviously, we share that exposure with our joint venture partner Safran and they were talking the other day about a €200 million exposure in the second quarter if things stay as they are. And we probably have something in that same range as a headwind with respect to our own business, our own side of the JV in the second quarter. And part we can handle some of that, but again what we try to do is, make just make sure people understand no news obviously that, that’s a fluid situation with some uncertainties while we have given ourselves a little bit of room with the annual guide, none of us know for certain how that’s going to play out and we, we just wanted to flag that accordingly.

Understood. And just to follow up on that, if you could comment on, I know you guys are catching up, it sounds like in May with the underlying 52 a month rate on the 1B, LEAP-1B. If you could just talk about where you are on the cost curve of that program and when you expect to be at breakeven on the OE shipments and what the opportunity is to move beyond that, you know, profitable on the OE and when?

Yes. So, it’s consistent with our view over the last year, which has been breakeven in 2021. We do expect it ranges depending on the LEAP-1A or LEAP-1B more than 10% cost out this year on the engine. And if you remember, since the end of ‘16 already we’ve taken up more than 40%, so good path here, but break-even in 2021.

From RBC Capital, we have Deane Dray. Please go ahead.

Thank you. Good morning everyone.

Hey, Deane. Good morning.

Hey Deane.

Hey, Larry, you commented on the healthcare business, the RemainCo healthcare business, you’ve got flexibility and optionality. Maybe give us an update there, we know the IPO is on hold, but could you share with us any updated thinking?

Well, I mean, I would just say, we don’t think of it as RemainCo, obviously the BioPharma business is a wonderful franchise and will be in what I believe to be good hands on the other side of the sale. But our go-forward healthcare business is an exceptionally strong franchise. I think you see that in the first quarter print, but I think more importantly, we sit really at the heart of precision health, that gives us organic optionality let alone inorganic optionality. As we get into our operating reviews, I’m really encouraged by what I see both in terms of performance around our KPIs operationally and commercially, but frankly what Kieran and company are framing as some of our improvement potential, I’ve been to two of their sites back to what Scott was poking at, frankly a lot of opportunity for lean in those businesses, particularly with respect to quality and delivery-oriented improvements. So, we’re excited about that business as part of GE and we’ll play it forward in the way that best serves our customers and shareholders. So, stay tuned.

Got it. And then just a separate topic, and I’m really not used to asking you about contingency in a forecast or guidance for the year, but we know there is contingency built in. You suggested in your remarks that the 737 has eaten into that a bit, but maybe you can frame for us, I’m not sure how quantitative, but just qualitatively, where contingency is in terms of your framework for the year?

Well, I think that we probably will refrain from trying to quantify the size of the contingency just to keep it as a contingency, right. But we’re encouraged by the start of the year Deane on cash again, given that we’ve got a fair bit of positive timing effects here, that will balance out. We can safely conclude our contingencies effectively in hand, a little bit of pressure here as I highlighted, given what we know here in the second quarter around MAX, we’ll see how the second half plays out. We don’t have all of that baked in, but we don’t want to necessarily bring excuses forward, we want to deliver results, and that’s the mindset that we’ve got here.

And from Wolfe Research, we have Nigel Coe. Please go ahead.

Good morning.

Good morning Nigel.

Good morning.

Hey Nigel.

Yes. But I venture to maybe dial back the bit more detail on the Power Services performance during the quarter. I’ll be particularly interested in how the transactional business is faring?

Sure, Nigel. Let me give you a little bit of color there. I think if we look at orders, we were encouraged, though not satisfied, the order book was up slightly. Revenues were down and that was largely a function of mix. Good underlying volume, but frankly some of the higher price point outages were down year-on-year. Good bit of noise in the margins there, but when we when I look at it operationally, we were up slightly. So I think Scott and Company would say, some progress a long, a long way to go here both with respect to the top line and delivering on the improved pricing, we’re seeing in that order book, right. It’s one thing to write that order with better pricing, we need to execute on it, to see that really play out in the margins. But a decent start I’d say to ‘19.

Okay, great. And then Larry, your comments on the free cash margin doubling. I think you said, more than double, obviously no timeline on that, but for most of the people buying your stock today have 3-year to 5-year horizon. How aspirational is that margin target, high single-digits margin, do you see that as I wouldn’t say a line of sight, but do you think that’s feasible target within a 3-year to 4-year time horizon?

Well, I would say, Nigel, we put a 3-year time table on it, it would no longer be aspirational right. It would be a mid-term outlook. But I think I just see strong performance in a number of parts of the Company, but also the signs, the cash has not always been a priority. Part of what I think we’re seeing in power and part of what we’re working on elsewhere is to make sure that when we go cut deals to drive and fill the order book that we’re thinking about the cash over the lifecycle of that order, right, because we want to get paid and we’d like to get paid sooner rather than later. We’ve talked a little bit about lean. I don’t want to make this a teaching on lean, but there are a lot of opportunities to improve our free cash flow as that becomes more a part of our fabric. And that will have positive impact I think for customers as well as it will for us. When you get into the real flow in a supply chain, there are opportunities, particularly as we deal with our vendors and with each other in a more integrated pole-oriented way. I was at a facility recently talking about or asking about Kanban. Somebody said, what’s that? You can take that two different ways. I took that as a good thing, that’s an opportunity to drive more pull, more flow in the facilities. But first things first, right. We need to deliver on what we said back in March relative to this year. Nobody is proud of the fact that cash flow number, probably going to have parenthesis around it, but it is what it is, next year when you walk in with line of sight on positive free cash, and then a significant uptick in ‘21. So, I think for today we’ll keep the aspirations aspirational and maybe with a little bit more progress we can dial that in a little bit more tightly.

From Deutsche Bank, we have Nicole DeBlase. Please go ahead.

Yes, thanks. Good morning.

Good morning.

Hey Nicole.

Hey, so I’m going to apologize because I was on another call, so if these have been answered or if you guys answered them in prepared remarks, I am sorry about that.

Another call?

I know. I am sorry, it’s such a busy day. So, the first question just around the renewables business, just margins came in a bit weaker than we had expected. I know this is a tough year for renewables, but if you could talk a little bit about like the trajectory from here if 1Q is reflective of the full year?

Good morning, Nicole. So renewables, we were encouraged by orders, we were encouraged by pricing really stabilizing, but they did have a tougher quarter, while megawatt volume was up 13% year-over-year, we did see some volume slippages in the quarter and pricing impact was small as we talked about, but we had strong product cost control, which was really good. Our challenge here is that, we got a couple of things really impacting year-over-year and then we do expect margin accretion throughout the year, so year-over-year we have the impact from the consolidation of the Alstom JV. We had some project execution issues, some in offshore and hydro, we had a non-repeat from first quarter of ‘18 of some favorability. We also had an offshore contract termination that was favorable in the quarter. So net-net that was a negative. We have higher R&D, higher depreciation and China tariffs that are affecting us operationally and we’ve got lower PPA amortization or purchase price amortization. So, year-over-year, you see that impacting our margin. Having said that, we have got a very steep volume ramp as we talked about this year, so for the year, more than doubling in the second quarter with an even more significant ramp in the third and fourth quarter, good margin backlog, so that’s good. You will still see R&D being up 9% year-over-year and I think you’ll see more moderation in how we’re managing our legacy projects, some of this noise is us just continuing to burn off some of that order book in renewables. So, hopefully, that gives you a little bit of color.

Yes, that’s super helpful Jamie, thanks. And then kind of a similar question on capital, a little bit better in the first quarter, what drove that relative to the guidance for $500 million to $800 million loss in the full year and I guess what’s the cadence from here throughout the rest of ‘19?

Yes, so capital did come in well above plan. And a couple of bigger items that drove that, which were lumpy. First is the impact of the tax law change in the quarter was about $100 million. The second, we did have asset sales in GECAS totaling $86 million of gain and both of those I would characterize as either one-off or timing in terms of just when they might occur. We sold the supply chain finance business to MUFG as well in the quarter that was $25 million and we had some other capital corporate favorability. But bottom line is when you look at the cadence, so first of all, this was an unusually high quarter for us. We do continue to expect the negative $500 million to negative $800 million for the year. Remember that our preferred dividend hits us in the second quarter and in the fourth quarter, so that’s a sizable negative. And then we will have other asset sale impacts throughout the year, which again are going to be lumpy.

From Citi, we have Andrew Kaplowitz. Please go ahead.

Hey good morning guys.

Good morning.

Andrew, good morning.

Larry, just focusing on the $3 billion gas power equipment business, you mentioned in the 2019 outlook call that, that was one of your key focus areas for improvement in terms of profitability and today you mentioned that the 4.5 gigawatts of orders were at higher margin and lower risk. Can you give us some more color on what lower risk means and do you think any of the improvement in orders was actually the result of a better US market?

Well, I think that all of that comes together right to see the 3H orders that we got in the first quarter, we got a couple more here in April really suggest the U.S. market, which we thought would be better than I think some allowed, came in at the start of the year better than we had anticipated. Looks like our share position will be somewhere in the 40% range when that comes out, so I think by and large, again we don’t want to get too excited those words we were aiming to get, we just got them earlier, but that’s all good and because it’s a U.S. based order book on balance that is part of what we’re referring to in terms of the risk. But I just want to highlight that in the order structure that we put in place in gas power where we’re running at less, we’re running with if you will, less borders within the business, the regions really are more integrated. And we’re trying to drive process, so that we are more mindful about the margin and the degree of difficulty, which translates into risk around any of these projects, whether they’re close to Schenectady or a long way from home. So that too is not something that happens overnight, but I think given what we’ve seen here at the beginning of the year we’re encouraged by that. And as we go through our monthly operating reviews with Scott and the team, we get into some of the process improvements, the lean activity both with respect to how we write these deals and execute on the projects, let alone the service side with the outages, I think you’ll see better execution over time.

And Larry, related to that, you have obviously been trying to fix your execution issues in power. So, while we know a lot of the cash performance was timing related, did your execution related power cash drag begin to improve and what’s the probability that power cash flow is actually not worse than the $2.7 billion outflow in ‘18?

Well, I’m not sure we would really point to too many high impact material process improvements in terms of capital or at least working capital at this point. But that said, there is a lot that we still want to do from a restructuring perspective. I think that’s why despite their start of the year, which was far better than we had anticipated, we’re hanging on the full-year guidance because we want to make sure we not only give ourselves the latitude to do all that we can to adjust the cost structure here, I don’t want anyone to think that this is a risk free segment for us at this point, because we got off to a good start in a few places.

And I would say we’re monitoring things operationally. I mean I mentioned before that we do expect continued variability in power throughout the year. In the quarter, free cash flow for power was negative, it was significantly better than we expected, but for the year, we continue to expect it to be significantly negative. So hopefully that’s a little color.

From Bank of America, we have Andrew Obin. Please go ahead.

Yes, good morning. Can you hear me?

Good morning, Andrew.

I have just a question, just a follow-up on Power orders, we’ve been tracking U.S. utilities CapEx and it seems to be going up and I was thinking a lot of it had to do with pipeline, frankly. But are you seeing any positive trends on maintenance as well as you talk to your customers?

I’m sorry, Andrew on...

Utility, U.S. utilities CapEx, just trending positively, beyond orders for new gas power, are you seeing more spending on maintenance out of the U.S. utilities.

I wouldn’t say that we’ve seen anything material in terms of the underlying budget scopes that we see on balance with our domestic customers. For us, it’s really about execution on the CS side CSA side of a service book and just executing better as we alluded to earlier on a transaction side, not only in terms of our customer outreach, visibility still I think south of 90% today, getting a little bit better each quarter, let alone our share. I know that’s a high priority for Scott, as he walks into the second quarter.

And just a follow-up question, so I think Kevin Cox has been there now all of like maybe a month and a half, but what structural changes are you, if any, are you implementing under him, any new approaches, how you manage people inside the Company? Thank you.

Kevin will be thrilled to know that you were asking about this. For those that don’t know Kevin, Kevin Cox is our new Senior Vice President for Human Resources direct report to me. Kevin, top HR Executive in his field came to us from American Express, grew up at Pepsi, seen a lot of change, seen a lot of challenge, we’re thrilled to have him. He is still I think inside his 100-day tour of the Company. So, what we try to do with new people is give them as much time to get their bearings. So, it’s Kevin hasn’t laid out his answer to this question necessarily to the internal team, let alone the Board. He is on the June meeting docket. So, I’ll just not get into too much detail other than to allude to some of these cultural dynamics that, that we highlighted in our prepared remarks, right. There is a lot we can do in terms of our formal processes and systems to drive the cultural change that, that we aspire to. And one of the reasons I wanted Kevin here on this team is he has done that and is very keen to be a part of that here at GE. So, somebody we’re excited to have on the team and we’ll certainly make sure that as time progresses, we give investors exposure to Kevin in what we’re doing on, if you will, the softer side of the transformation here.

And from Credit Suisse, we have John Walsh. Please go ahead.

Hi, good morning.

Good morning.

Good morning John.

So just a question here and a follow-up. So, I guess thinking about the margin progression here, talking about the second half being better, how much of that’s really driven by your internal initiatives, whether it’s restructuring in the Power HQ versus, you know, assuming we get a better macro here in the second half. And then as a follow-up to that, just, you talked about absolute pricing in renewables in the script, just wonder if you could give some color around absolute pricing in Power and Healthcare and the other parts of the portfolio?

So, in terms of margin projection and over the balance of the year, I would say, we look at that as all things that we see, we’ve tried to set a very realistic plan based on things we see and can control. And in terms of the broader macro market, I mean, I’ll let Larry comment on that, but roughly in line with where we see it today as how we planned.

Yes, I don’t think we’ve made any macro call here with respect to the guide in March let alone the confirmation here today. If anything from a macro perspective, clearly, we’ve got the PTC dynamic in renewables, but otherwise, we’re really assuming more of a steady state in our served markets. Obviously, passenger miles, is a strong indicator for us in aviation, that looks good. Power is in its own cycle healthcare tends to be somewhat resilient as well. So, I really can’t think of anything other than PTC in terms of sequential external lift that we’re going to get.

Yes. And then just commenting on your pricing question, so pricing this quarter was flat across the company. We saw slight positives at Aviation, slight negatives as per usual at Healthcare. In Power, basically flat, Larry talked before about equipment orders in the quarter were margin accretive to backlog. In addition to the comments he made, I would also just add that the underwriting framework that has been implemented there, I think has been very helpful as well, more focus on risk-adjusted cash returns and margins no longer comping on share just a more balanced risk return framework there, but flat at Power and then we talked about renewables being slightly negative. We do see it moderating both as PTC demand is driving price moderation but also just as you’re seeing more price stability in the non-U.S. auctions.

Thank you. We have no further questions at this time. Mr. Winoker, do you have any additional remarks?

I just want to thank everybody for joining us. I know we’re over our time. If for whatever reason we didn’t get to you in any case, the team and I will be available through the week to help further. Thanks everybody. See you next time.

Thank you, ladies and gentlemen, this concludes today’s conference. Thank you for joining. You may now disconnect.