GE HealthCare Technologies Inc. (GEHC) Q3 2026 Earnings Report, Transcript and Summary

Good day. Thank you for standing by. Welcome to the GE Healthcare third quarter 26 earnings conference call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Carolynne Borders, Head of Investor Relations. Please go ahead.

Thanks, operator. Good morning, and welcome to GE Healthcare's Third Quarter 26 Earnings Call. I am joined by our President and CEO, Peter J. Arduini; CFO, William K. Grogan; and Controller and Chief Accounting George Andrew Newcomb. Our conference call remarks will include both GAAP and non GAAP financial results. Reconciliations between GAAP and non GAAP measures can be found in today's press release and in the presentation slides available on our website. During this call, we will make forward looking statements about our performance. These statements are based on how we see things today. As described in our SEC filings, actual results may differ materially due to risks and uncertainties. With that, I will hand the call over to Peter.

Thanks, Carolynne. Good morning, and thank you for joining us today. Before I review highlights from the quarter, I want to take a moment to welcome Bill. He brings tremendous experience and a strong track record and I am looking forward to partnering with him as we execute against our strategy, and deliver on our priorities. Looking at our third quarter results on slide 3. We delivered strong top line growth and margin expansion across all segments. Broad based demand in advanced imaging solutions, and pharmaceutical diagnostics supported healthy orders, book-to-bill, and backlog. Heartbeat is strengthening how we run the company. And helping our teams deliver on commercial and operational simplification. A great example of performance driven by heartbeat this quarter is patient care solutions. The team identified root causes of prior supply challenges, and implemented standard work and daily management to drive ongoing improvements. This drove backlog conversion and stronger operational performance. Taken together, momentum in our business has enabled us to raise our full year 26 guidance. Which Bill will cover later in the call. Turning to Slide 4, let's look at how we are advancing our growth strategy. We reached key regulatory milestones in the quarter on 2 imaging platforms with market differentiating features. We received CE marking for PhotoNova Spectra, our photon counting CT system, and Starguide GX, our SPECT CT system, is pending FDA clearance. This broadens our ability to commercialize in more markets. We also expanded our ultrasound platforms in cardiovascular, women's health, and general imaging. With the launch of several new products to meet the growing demand for noninvasive imaging. We continue to see general imaging ultrasound as an attractive market where we are investing for the long term. With growing demand staffing constraints, and more distributed care, ultrasound's versatility across a broad range of exams is increasingly valuable. PDX delivered another excellent quarter with growth in contrast media and radiopharmaceuticals. Including proprietary tracers aligned to disease states. This was supported by momentum in precision medicine and growing demand for targeted diagnostics in oncology, cardiology, and neuro. Earlier this month, we announced our plans to acquire SoFi Bioscience. Upon close, this will establish a final mile footprint of US pet radiopharmaceutical supply. It will also strengthen our pipeline through FAPI 74, a phase 3 PET tracer with the potential to help diagnose and treat a range of cancers and other diseases. Part b is driving improvement in execution across the company, keeping our teams focused on SQDCI, safety, quality, delivery, cost, and innovation in that order. In Services, standardized digital support is helping our field engineers resolve more issues on the first visit. We expect this to save approximately 10 thousand hours of field time across CT, MR, and X-ray in the US and get customers back up faster. In AIS, stronger standard work and operating rigor around variable cost productivity delivered incremental cost reductions helping partially offset inflation. We recently entered multiyear strategic agreements with several leading technology partners to secure memory chips to strengthen the resiliency and predictability of our supply chain, amid growing cross industry demand for advanced computing components. We continue to pursue agreements to position us for the future. Lastly, before I hand the call over to Bill. Today, we announced that Jeannette Bankes who leads our PCS business, will be leaving for a CEO role at a noncompetitive publicly traded company. We thank her for her contributions and wish her the best. Leveraging our strong succession pipeline, I am excited to announce that Neil Sandy, currently head of product strategy and management for PCS, will become the CEO of the business. I have tremendous confidence in Neil's capabilities given his current role, and more than 30 years of experience in the industry. We remain focused on building on the progress the team achieved in the quarter, and we are also evaluating strategic options for this business. With that, Bill will walk through the financials and guidance. Bill?

Thanks, Peter. Let me start by saying how excited I am to have joined GE Healthcare. I have been impressed by the talent and commitment of the team, and I look forward to help build on the existing foundation as we execute on the significant opportunities ahead. Now let's turn to our third quarter financial results on Slide 5. We are pleased with our strong performance on both the top and bottom line. And with growth ahead of expectations. Revenue of $5.5 billion increased 6.2% organically. With growth across all segments. On a reported basis, we had strong performance in both product and service revenues, at 6.7%, 8.1% growth, respectively. Organic orders grew 4%. As a reminder, orders growth in the third quarter of last year was 5.7%, we are growing mid single digits on a strong baseline. On a trailing 12 month basis, organic orders growth was 4.6%. Book to bill was 1.03x and we exited the quarter with a backlog of $23.7 billion up $2.5 billion or 12% year over year. We made progress on margin expansion this quarter, delivering adjusted EBIT margin of 16.6%, up 180 basis points. I will discuss the operational drivers in more detail on the next slide. With our strong execution in the quarter, we delivered adjusted EPS of $1.34. Up 25.1%. Lastly, our free cash flow was $793 million, up $310 million versus the prior year. On slide 6, we will look at the drivers of margin expansion in the quarter. Our commercial execution helps us grow profitably, as volume provided a healthy tailwind to margin. Additionally, the price and cost mitigation actions we have been taking across the business are starting to deliver a more meaningful benefit. Tariff expense was also lower than the prior year. Margin was negatively impacted by inflationary costs for memory chips as well as the impact of higher oil prices across our supply chain. As we think about our margin expansion framework, it is built around 2 key areas underpinned by heartbeat. Commercial execution and operational simplification. Starting with commercial execution, our focus is on driving high quality profitable growth. This includes capturing strategic pricing opportunities, standardizing our product launch playbook, and bringing new products to market at higher gross margins. As I have been coming up to speed on our business, a strong example is our David cardiovascular platform. Where differentiated AI enabled capabilities supported premium pricing while a simplified design reduced manufacturing costs. On the operational side, we are simplifying how we run the business and reducing complexity across the organization. This includes advancing product platforming, optimizing our structural cost base, streamlining internal processes to eliminate rework, and the VCP examples Peter mentioned earlier. Together, these actions are helping us improve efficiency and create a more scalable operating model while supporting margin expansion. Let's move to our consolidated segment performance on slide 7. Starting with advanced imaging solutions, organic revenue grew 4.5%, driven by strength in CT, cardiovascular and interventional solutions, and surgical innovations. EBIT margin expanded 130 basis points year over year driven by volume, reduced tariff expense, and price. This was partially offset by inflation. Demand for our cardiology solutions also increased which was reflected in demand for our AI enabled CT solutions, MR upgrades, and cardiovascular ultrasound. Moving to pharmaceutical diagnostics. We delivered robust organic revenue growth of 13.8% with contributions from Contrast Media and radiopharmaceutical products. Segment EBIT margin expanded 50 basis points to 29.9%. Driven by volume and price partially offset by planned investments in new products and our innovation pipeline. As mentioned, we also announced the planned acquisition of SoFi Bioscience. SoFi's revenue will add approximately 1% of total company revenue on an annualized basis. In the full year of ownership, revenue is expected to grow in low double digits with accretive adjusted EBIT margin and adjusted EPS. Patient Care Solutions delivered significant sequential improvement in the quarter. and year-over-year organic revenue grew 8.8% driven by improved operational performance, including better product fulfillment and monitoring solutions and maternal infant care. Backlog continues to grow alongside revenue. Segment EBIT margin expanded 480 basis points year-over-year. Primarily driven by higher volume and cost productivity. Third quarter performance was better than expected with strong product fulfillment. Driven by daily management and improved supplier and factory execution. We expect this to benefit us in the future. However, keep in mind that the fourth quarter of 25 had an approximate $45 million revenue from the release of a product hold. Turning to cash performance on slide 8. We delivered free cash flow of $793 million in the third quarter. The year-over-year increase was supported by a reduction in net tariff impact, including lower payments as well as refunds in the quarter. Additionally, operational profitability and timing of collections helped drive year-over-year improvements. We also increased our cash dividend by 14% further enhancing returns to shareholders. Now let's turn to our outlook on Slide 9. Our continued execution gives us increased confidence in our outlook. As a result, we are raising several of our full year 2026 metrics. We now expect organic revenue growth of approximately 4% adjusted EBIT margin in the range of 15.5% to 15.7%. Adjusted EPS in the range of $4.95 to $5.05 per share and free cash flow in excess of $1.6 billion We expect our adjusted effective tax rate to be in the range of 20% to 21% for the full year foreign exchange tailwind to revenue of approximately 75 basis points. With that, I will turn the call back to Peter.

Thanks, Bill. I would like to spend a few minutes highlighting PDX, a great example of how we are executing our D3 strategy, which brings together smart devices and drugs with a disease state focused in AI enabling more precision care. PDX has delivered at least high single digits growth for 5 straight quarters. We are investing in strengthening our supply chain and manufacturing capabilities and expand where we can create value. As populations age and chronic disease rises, clinicians need imaging that answers sharper questions. Which treatment? For which patient? And when? Managing diseases often requires imaging at several points along the patient journey. From diagnosis to treatment to monitoring. Our agents are used in many of those imaging scans. Because each scan uses a dose, PDX revenue is recurring and grows with patient volume. About 3 quarters of the portfolio today is contrast media. Where volumes grow with global procedure demand. We are also investing in what comes next, with our MR manganese based contrast agent. It has the potential to address a nearly $1.2 billion market. We are making good progress on our combined phase 2 and phase 3 international trial. The remaining balance of revenue contribution is from radiopharmaceuticals, 1 of our fastest growing markets, Here, PDX drugs and our AI enabled devices complement each other. Each new agent helps clinicians detect and monitor disease. Which drives demand for imaging, and our pet systems. We are seeing that in our molecular imaging business which grew strongly again this quarter. That combination is a differentiator for us as the only company with proprietary molecules and a large imaging portfolio. We continue to see increased demand for our radiopharmaceutical portfolio, including Visimo and Saryana. And we are also seeing strong performance from established products like GATSCAN, our SPECT imaging agent for patients with suspected Parkinson's disease types. Meanwhile, Vercado is on track. We delivered approximately 680 doses for the week ending October 23rd, and we are seeing growing adoption across a broad-based range of customer types. Those include the existing cardiac PETCT programs that have been partially or fully converted to Vercado as well as others that are converting from SPECT to PET. This adoption reflects Vercado's diagnostic capabilities, longer half life, and flexible infrastructure. To help expand the final mile distribution of these radiopharmaceuticals, we plan to acquire SoFi Bioscience. Pairing SoFi's network with our manufacturing scale will expand access and strengthen supply reliability. Enabling us to directly manage a portion of our radiopharmaceutical manufacturing. It will also position us to advance the next generation of precision care including PSMA, FAPI, and Theranostics. Where the same molecules that diagnose a disease help guide targeted treatment. Simply put, PDX provides resilient recurring revenue today with a pipeline and footprint to extend that growth. In summary, we are pleased with third quarter results and importantly, the strong contributions from our team. Heartbeat is helping us strengthen commercial and operational performance. Our focus on standard work and daily management has been critical in driving more consistent performance. We continue to advance our new wave of innovation, achieving key regulatory milestones in the quarter, and we are executing on our priorities and our performance year to date gives us confidence in delivering on our commitments for patients, customers, and shareholders. With that, we will open up the call to questions.

Thank you, Peter. I would like to ask that participants please limit yourself to 1 question and 1 follow-up. Operator, can you please open the line?

Thank you. Star 1 on your telephone and wait for your name to be announced. Withdraw your question, please press 11 again. Our first question comes from the line of Travis Steed with Bank of America Securities. Your line is now open.

Hey. Thanks for taking the question. And, Bill, looking forward to working with you. Congrats on the new job at GE. I would start with the first question. I would start with the first question on the CapEx environment. there is a lot of questions on suite 40 b and you know, the macro and kind of what you are seeing on the CapEx environment. And I did have 1 follow-up.

Hey, Travis. Thanks. Look. I mean, as you saw and we. You heard our comments we are pleased with the quarter results, the strong, you know, execution. I think you are starting to see some of the product differentiation coming through. But, you know, relative to the capital budget market, you know, particular technologies like what we do in imaging, you know, from all of our survey data and discussion with CFOs, it ranks at the top of the list. I think you know we do a survey of kind of same-store sales with customers. And fundamentally, I would say the energy and positive focus on that survey stayed the same. I mean, it positions us well, I think, as we go into Q4 into next year. I know there is been some commentary around procedures pullback here and there in different areas. You know, we have not seen that directly either in scan data or actually contrast use data at this point. And, you know, indicators that would demonstrate slowdown or changes like that have to be multiple, multiple quarters till I think we start seeing it coming through in our equipment. You know, 1 of the things about the imaging world is--or other capital equipment, a lot of these are programs that are planned You make a decision now for installation that might be 12, 18, 24 months out. And I would say our, you know, funnel is as strong as it is ever been at this point in time. So we feel good about the trajectory. You know, as we come to the end of the year and as that you know, converts into the beginning of 2027. Great.

Thank you. And the follow-up question, on the backlog this quarter was down a little bit. Book to bill 1.03 was the lowest since first quarter 2024. Is that just lumpiness you are seeing or in quarter to quarter volatility? And, you know, I guess part of it is probably fulfilling last quarter's strong orders as well.

Yeah. No. I think that is it, Travis. I mean, as you know and many of you who follow us, from an order standpoint, you know, with big deals that we do that can be, you know, $100 million plus you have some that land in a given quarter. If they slide out by a week, it obviously creates a significant lumpiness. But we feel quite good about the orders. You know, Bill had mentioned coming off strong year last year. Both PDX and AIS did well. I would comment that our pipeline of opportunities remains strong and is up. Which is, you know, an underpinning of the resiliency that we see out in the market So, you know, all of that, we feel quite good about it. I think, you know, from a standpoint of where we are with our capital equipment cycles and stuff, things are looking pretty good on the conversion. As I look out into Q4, you know, our orders booked looks a little bit better than we actually had in Q3. Great. Thanks a lot.

Thank you. Our next question comes from the line of Vijay Kumar with Evercore ISI. Your line is now open.

Good morning, Peter and thanks for taking my question. Bill, congrats. On the role. I guess my first question, Peter, is on Vercado. You know, you gave the weekly dose assumption and the revenue run rate. How are you thinking about the impact of 500 run rate exiting 2028? How does Sophie help? I think it makes the last mile connectivity how should we think about the ramp when you think Sophie is part of part of GE Healthcare? Does it improve your visibility to that $500 million exit rate in fiscal 28?

Yeah, Vijay. Look. I think with Vercado, short answer is we feel very good about the $500 million exiting 2028. I kind of--as I mentioned on the call, we are progressing as we expected. Feel good about the momentum. And the weekly build. I think we are seeing broad-based growth and interest I think 1 of the interesting areas is I think we know this started out as much as with heavy interest in pet users that were already in cardiovascular, and that continues. But I think we are starting to also see now the broadening of SPECT users that are saying it is time to kind of start considering moving into the pet world. And that is important because if you remember, the long-term opportunity is over 80% SPECT to PET. So both of those are growing. I think our funnels at this point in time are up significantly. Which is what we look at on a forward metric about opportunities and what our conversion rate would be. You know, 1 of the other key metrics I mentioned last quarter was the amount of customers that we converted. We converted about the same percentage of customers this quarter as we did last. And, again, those will begin to build. it is that 60-day cycle of only a case or 2 until they get reimbursement. And then that can ramp up into double digits. So things look good. I think, again, the positivity that we see from customers or hear from customers on all the attributes discussed, image quality, dose management with larger patients, all those things are still playing out. And then just notably, I think, you know, I mentioned in the comments the larger portfolio in radiopharma meaning breast cancer imaging, imaging relative to other cancers and stuff continues to grow. And that is important because it also means that department within an institution gets more focus. So there tends to be more dollars allocated in that area as well, which we are beginning to see. that is helpful, Peter.

And maybe my second 1 on China. In the region, got back to growth. Has this. Has China bottomed out? Is it back to growth? What is the normalized outlook Peter? And there are some questions coming on maybe VBP imaging VBP in China. If there is 1, could you elaborate on what the impact is?

Yeah, Vijay. I do not know if I would give a full prediction as everything completely changed, but I can give you the play by play as we see it. And, obviously, our quarter we have seen quarterly improvement within China. I think you will see we had 7% growth in the quarter. Now albeit a majority of that was still driven by FX it was positive within the quarter. And the market is definitely recovering. We are seeing, you know, activity improvement, which you know, translates into consistency in tenders that are planned, tenders that are executed. We are actually seeing more VBP But I would say, you know, we have been changing our tactics what configurations we offer, how we go to market that way, how we think about, you know, educating and interacting with a province or a smaller community. And so I think, you know, our team there led by Will has done a really nice job of evolving the channel. That being said, I think, you know, there is still lots of wood to chop, so to speak, here on advancing growth with. Within China. But we were pleased with the results of the team put up here for the quarter. Understood. Thank you.

Thank you. Our next question comes from the line of Matthew Taylor with Jefferies. Your line is now open.

Hi, good morning. This is Matthew on for Matthew Taylor. Thanks for taking our question and congrats on the quarter. I wanted to ask about these multiyear agreements you have with technology partners and particularly on securing your memory chip supply. Could you possibly expand on how this helps you manage your costs going forward? Thanks.

Yeah, Matthew. I think you know, we mentioned on the call that we have recently aligned that. I think--look, pull the lens back big picture. it is no secret that the growth of data centers and AI has a big vortex effect on certain components around the industry. We think that is gonna most likely exist for multiple years as this ramp up goes. So we have taken an ecosystem approach to take a look at all of those things that could affect our business positively or negatively. And reached out to the suppliers in the industry with what we believe is adequate lead time to secure first supply and obviously manage pricing the best that we can. You know? At the end of the day, getting locked in pricing agreements on some of these things is not probably realistic. But being in a favored nation status that we are first in line to be able to take advantage of both supply and price is what we have been able to do. So, you know, we feel quite good about where we are relative to some of the critical components like memory chips and stuff. But I think as others have talked about, over time, this will evolve into other components and stuff, and we are already focused on that. So I feel quite good about the work that Phil and the team have done broadly to be able to secure, what we need to obviously deliver to our here, only in the, you know, the rest of the year, but into 2027. that is very helpful. Thank you.

Thank you. Our next question comes from the line of Robert with JPMorgan. Your line is now open.

Hi, good morning. Congrats on the quarter. Thanks for taking the questions. 2 for me. First, can you talk to the guidance? It looks like it is factoring in a somewhat lower fourth quarter than The Street was expecting. And any early thoughts on 2027, both top and bottom line? You do have, some tariff refunds to overcome. You know, strong order growth, trailing 12 months. Can that translate into accelerating sales growth for next year? And then I have a follow-up. Thanks.

Hey, Thanks for the question. I will start maybe just on the 2027 piece and then toss it over to Bill to talk about implied Q4 and the rest of the year. I mean, I. Obviously, we will give guide for 2027 as we normally do out in February. But I would say, look. there is a lot of moving parts. The momentum you can see this year on top line we believe will continue. Both what you are seeing from an orders funnel, the translation of the backlog how that is translating into revenue. So we feel good about the setup that we have moving into 2027. And on the bottom line, it is a similar story. I think you know, majority of this year has not been heavily impacted by our new products that actually have higher gross margins. We will see a higher percentage of that We do have some scenarios on tariffs and stuff, which in a little bit better position, but I would caution the fact to say that you know, there is no static tariff rates these days. We have to see how some of that plays out. But in the world that we see today, we are in pretty good shape. And then on variable cost productivity and price, we have been able to offset, you know, some of the major costs, not all of them. With the combination of the 2. And I would expect all that obviously to play through into 2027. Maybe, Bill, you can talk a little bit more about how we are thinking about the guide here for this year.

Yeah. No. Thanks, Peter. Exiting the third quarter, I think we feel good about the momentum. Right? We are building across the business. And heading into the fourth quarter, our backlog is up 12% versus the prior year. Had another solid quarter of top line growth from an expectations perspective. Healthy margin and EPS expansion. Right? With margins coming in sequentially higher versus the third quarter. On the top line, AIS and PDX will drive growth for us in Q4. As I said in the prepared remarks, PCS' growth will be muted a bit due to the product hold catch up. That we experienced last year. But they will grow sequentially and have healthy year over year margin expansion. So the implied Q4 growth range of that 3% to 4% is really more around the PCS product hold comp versus any deceleration we see in the market. So I think the guide appropriately reflects the strength we have seen while remaining mindful of the dynamic macro environment.

Great. Maybe a quick follow-up here. PCS had been trending pretty negatively year to date, had a really strong quarter here. How do we think about the underlying versus any onetime items? And if it is all underlying strength, what is driving that to shift so positively? Thanks a lot.

Yeah. Robert, look, I think on PCS, and I would mentioned this, you know, in some previous calls. We actually had some installations that had timing wise, moved out more to the second half on monitoring projects. that is playing out as we had thought. And so, again, those are not 1-time things. We are gonna see that continue to play out through into the beginning and on through into 2027. But 1 of the bigger challenges we had in Q1, Q2 is just some of the supplier issues. And the team has really doubled down using our management system, Heartbeat, again, to really focus on getting out with our suppliers where we have had supply constraints. How that ties out to demand capacity planning both in our plants as well as with our customer sites. And I mentioned this focus on standard work and daily management. Think about it this way. I mean, the this team has moved really from kind of a monthly, weekly cadence to a weekly, daily cadence. And making sure that where there are any gaps relative to product capabilities, if there is any--issues relative to parts and components that they are addressed. And I think they have got the right rhythm in place. And so we would expect that you are gonna see continued improvements here from this point forward on PCS. Appreciate it. Thanks.

Thank you. Our next question comes from the line of Joanne Wuensch with Citi. Your line is now open.

Good morning. Thank you so much for taking the question. Bill, welcome to the GE Healthcare team. I am curious, thank you. What your first impressions are. How you are thinking about what you may implement or view differently for guidance and anything you feel like sharing with us now that you are here.

Yeah. No. I appreciate the question. So, maybe if I started out with just hey. What are the things that attracted me to GE Healthcare along with what I am seeing? Because I think they are fairly consistent. And there was a few things I think were at the top of mind as 1, I made the decision, and 2, my observations through the first 6 weeks. And first off, it starts with the purpose and culture. Right? The purpose of creating a world where health care has no limits is deeply embedded in how people make decisions here. Right? And there is a clear connection between our innovation and the impact we have for patients and customers. That was really important to be part of an organization that was mission focused. Right? I see a lot of opportunities to improve patient outcomes and expand access to care at a global scale And that is incredibly compelling and I think a huge opportunity for us. And I think the second thing is really around the growth opportunity. And we have highlighted some things within our prepared remarks, and some comments Peter has made, but I think we are at the forefront of health care innovation. Right? We have got a strong technology portfolio and product pipeline. We have got this new phase of innovation that I think will be extremely impactful. Leveraging our growing capabilities in AI and digital And we have this huge installed base and really deep relationship with our customers. I think bringing all those things together creates a compelling opportunity for long term growth. And then lastly, I think it is really around a meaningful opportunity for me to help partner with the teams on driving operating performance through heartbeat. I have seen strong business systems really have a big impact on results within organizations. You know, where they have a desire to continuously improve willingness to try new things to continue to deliver for their customers. Right? That philosophically, but we have also seen it in practice. So right, the heartbeat methodology and the program that we have is increasingly embedded in how the teams operate here. And I think it is a further opportunity to continue to drive rigor and productivity and just general consistency. Along with a lot of things we do across the organization. And then maybe the last thing I would say is just the quality of the leadership team. Obviously, there is significant appreciation to partner with folks like Peter and the balance of the management team that is really committed to executing for our customers and this great opportunity to drive long term shareholder value. Thank you.

Our next question comes from the line of Lawrence Biegelsen with Wells Fargo. Your line is now open.

Good morning. Thanks for taking the question. Peter, 2 for me. 1, Omnipaque. it is an important product for you. You know a competitor is guiding to $50 million-plus in generic, you know, Omnipaque sales for next year. What share of that do you think comes from GE Healthcare? And how does generic Omnipaque, you know, impact your ability to grow PDX at a high single digit rate, which is your midterm goal? And I had 1 follow-up.

Yes, Larry. Look, thanks for the question. You know, I am not gonna comment on maybe an entrant is what their proposal of what they may do or not do. But again, just to remind you and others is that you know, this is a generic market already. it is been for over 15 plus years. there is been you know, a half dozen plus players that have been coming in and come out of the marketplace. And so again, it is not as a first proprietary product with a first generic change coming in. that is not the dynamic we are dealing with here. We will see how it ultimately plays out. This is a business that you need to actually have multiple SKUs. You need to have integration with injectors. All of those things that play out in the marketplace. But I do think 1 of the most important parts is this market right now today capacity is maxed out. So if you take a look at demand, demand in many cases with supply is right at an equilibrium where in some quarters, some months, we are almost maximizing that out. So I think an entrant that comes in that has some level of supply it will be absorbed within the industry. You know, we are expecting this whole market to grow We have mentioned this in previous sessions, almost 2 x over the next, you know, 7 to 10 years. So. And a product like this, because it is interchangeable, not only with us, but with anybody else in the marketplace, it is gonna fill the gap of the, you know, the opportunities that exist. So, you know, we believe they will take a little bit of business I think it will be from the broader marketplace, not just from a GE Healthcare, but we feel quite good about our positioning. And, again, this is not the first time that we have faced a generic player coming into the marketplace. Yeah.

Just wanted to confirm PDX is still a high single digit grower. And for my second question, with the new CFO here, hi, Bill. Nice to meet you. Are the midterm targets still intact? And how should we think about the past-year 2028 goals in 2027? Just asking David's question a little bit differently. Thanks for taking the question.

Yeah. Sure, Larry. I mean, look. On PDX, we feel quite good about its growth. it is been growing double digits The radiopharmaceutical side is growing significantly fast. that is gonna continue based on all my previous comments, but we feel good about that and look. On medium term, I will comment and then maybe have Bill make a few comments. We continue to feel good about the medium term targets, full stop. I think on top line, you know, we are seeing the strong progress here. We have talked about being a mid single digit grower. I think if you look at our trailing 12 months, we are roughly at 5%. that is mid single digits. You saw it this quarter, Larry. And then on margin, you know, while the macroeconomic environment has created some headwinds for us, I think we found space and oxygen in what we have been able to do with new platforms, cost productivity, and also price. So we feel good about both top and bottom line metrics in the midterm, which again, we have defined by the 28 numbers. So Bill, I do not know if maybe you want to add some comments.

No. I appreciate the question, Larry. So, hey, so relatively early in my tenure, but you know, what I have seen so far gives me confidence in the direction we are headed. You know, to Peter's point on the growth side, I think the fundamental drivers of the market are strong. And we have this wave of new product introductions that are differentiated and customers are really excited about. On the margin side, right, I think there is the foundational elements there to progress. On the margin aspirations that we have. You know, I think there is a big part of just leveraging the strong top line growth with better product mix. With these new product introductions we have and then building the productivity engine through heartbeat. And the benefits that a strong operating system has. And I am looking forward to partnering with the teams on that bringing some of the things that I have--out of my tool set to help kind of enhance the capabilities. I know that will be a huge driver of our gross margin improvements going forward. Thanks so much.

Thank you. Our next question comes from the line of Ryan Zimmerman with US Bancorp BTIG. Your line is now open.

Good morning. Can you hear me okay? Again, Ryan. Good morning. Good morning. And, Bill, congrats. it is good to have you in Chicago, or it would be all brewers talk, I think, on this call. So appreciate that. there is always But yeah, there is always next year for the Cubs. that is right. So just, you know, a couple questions for me.

You know, first, there is been some dynamics in the imaging. In the general imaging ultrasound market. You know, Siemens pulling back a little bit. Philips having some recalls. Peter, you made some comments about ultrasound, your commitment to it. You know, remind us what the opportunity is for GE Healthcare and do you see maybe some near term benefit from the disruptions that are occurring in that segment of the market? Yeah. Ryan, look. Yeah. And to your point, I mentioned this on the call. General ultrasound, you know, imaging ultrasound is a super important market for us. it is an important market in The US. But it is actually a growing market around the world. multipurpose capabilities, Southeast Asia, Latin America. We see this in Eastern Europe as well. it is an entree into multiple uses that then moves into specialization. And actually having those products that way is critical. For us, this is a big business. In many cases, I understand while some people made decisions where they are, we are actually quite formidable in the space. it is a critical platform for us for us, globally. And so you know, as a result of that, we have continued to invest. When you hear the brand name Logic, which is the most well known brand in general imaging, around the world. It has been a, you know, significant winner, I would say, in the space. As we talk to customers, obviously, when you have a fleet of products, you want to be able to grow on it and build it over years. We think there will be some opportunities that will you know, play out for us ultimately. This, again, has been 1 of our strong suits for many, many years. And the platforming work that Phil and the team have done in ultrasound that leverages cost, but productivity this also will benefit across this platform. So, you know, we think it is a great business, and you are gonna see us continue to invest and take advantage of what market opportunities arise.

Understood. And maybe, you know, turning to tariffs and margins, I appreciate your comments. As I think about next year's numbers, and, again, appreciating that we are not gonna get guidance. So the street is not assuming really a whole lot of margin expansion on the gross margin line for next year. In fact, it is it is roughly flat. And so, you know, Bill, this is not water filtration, but it still has the same you know, impact on. You know, there is still tariffs to deal with. And so wondering if you could kind of elaborate on kind of what the dynamics are from a tariff standpoint how you think about that impact for next year I know Robbie called out the tariff refund headwind, but certainly, there is still a tariff component to consider as we think about next year. And, you know, frankly, can we see margins expand in 2027 Appreciate it. Thank you.

You know, Ryan, maybe I will start, and then maybe have George here just kinda reconcile what we said for this year. And then, Bill, if you wanna jump in, just commentary for next year, I think that would make some sense. But you know, look. Obviously, on the whole tariff piece on guide, as I mentioned, we will talk more about that as we get into our 2027 guide window. But, you know, we are--you know, regarding the biggest uncertain thing on tariffs out there is what happens with section 32. that is the, you know, the. Probably the biggest swing item out there. I am assuming we will probably hear more this year about how that plays out. We have been planning as though, you know, those will be increased rates at some level. And so what does that mean? We are preparing for price. We are preparing for cost productivity. We have actually moved components as we have talked about. We have moved certain system scenarios to countries to be able to offset some of that. So you know, our focus is how things play out We wanna make the right actions and take the right actions still be able to have an accretive model. I mean, that is part of our plan that we are going in there. George, you may wanna comment just on what we stated here in the quarter and how to think about it.

Yeah, sure. So, in the third quarter, our tariffs were down year-over-year. You know, that is a result of a couple of things. 1 is the mitigation actions that the team has been driving. Secondly is just the lower overall rates that we are seeing And then there was about $4 million of AIPA tariff refunds related to 2026 that we recognized in the quarter, consistent with how we treated this in 2Q 2026, we did adjust out about $9 million of refunds related to 2025. And, Bill, do you wanna comment on?

Yeah. I mean, to your point about next year, obviously between tariffs and inflation, think both are gonna be persistent. So assuming kind of a steady state to where we are at current levels, I think we feel good about our ability to mitigate those actions through the team's ability to get increased pricing, continue to build our capabilities there. And then a significant amount of supply chain actions, you know, where we have done things internally and then partnered with key suppliers to minimize some of the volatility and reduce our exposure. So obviously, we will give you more context when we come out in 2027. But overall, understand, you know, it is an issue, but confident in the team's ability to mitigate it. Thank you. Appreciate it.

Thank you. Our next question comes from the line of Jason Bednar with Baird. Your line is now open.

Morning. Thanks for taking the questions. Peter, you and the team have been talking about realizing price to a greater degree. that is been a clear part of the strategy. Can you talk about where you are at in this journey of capturing price? And are you finding even more headroom here real time on pricing as a result of passing through inflationary pressures that you are experiencing?

Yeah, Jason. Look, I mean, pricing is always tough in this business, mainly because, obviously, our customers run at very low margins. We are sensitive to that. We try to make sure we look at all of the things around the edges first And so, obviously, there is been some cases here where we have had to take list price or price increases on certain products. We do that selectively. I think, you know, an important aspect of our whole NPI process is you know, does a product bring really differentiated productivity and outcomes for a customer? And when those match up, you know, paying more for price that you are gonna see threefold in changes in a world where you have employee shortages and in a world where you are really looking for productivity, that is really the matchup that we go for. And, you know, we have got quite a few new products coming out that hit that mark And so that is probably the top piece. You know, we focused our incentives with our Salesforce to make sure that we obviously get volume, but we get volume with the right level of margins and price, and we have leaned in more to that most recently. I would also say just, you know, thinking about configuration management, is a big deal here, and I think you appreciate in capital equipment when you have many different options and stuff, getting the right configs in the right place in there All of those things are playing out. But, again, you know, pricing in general in our world is a good pricing outcome as a 1% to 2% window. And I think those are, you know, a lot of the efforts that have been in place across the board. All right. And then just a follow-up. Historically, Peter, I think you have usually had a certain portion of the current quarter and future quarter already spoken for with equipment installs and install schedules. Just can you help with where you are at relative to historical averages both for the current fourth quarter and as you look at that install schedule as we line up for 2027. Yeah. I mean, it starts with, Jason, having a record backlog You know, we obviously ate in a little bit this quarter, but I think year to date we are up over a couple billion dollars. So, I mean, that is a tremendous asset for us. And so as you look out into 2027, even into 2028, we have delivery dates that match up into that. You know, if I were to say Q4 versus Q3, we are right in the same normal range that we would be, which is a high secured rate. Meaning, how much new business do you actually have to sell within the quarter to make your numbers? The vast, vast majority of is already on orders that we have taken. We have validated that the site is ready. We are working with the customer because they want the equipment. So it is very much in line to what we had spoken about in Q3. All right. Very helpful. Thank you.

Thank you. Our next question comes from the line of Vic Chopra with BMO Capital Markets. Your line is now open.

Okay. Good morning, and thanks for taking the question. Bill, welcome. Looking forward to working with you. And maybe just the first question, on PCS, does that leadership change that you called out in the press release this morning, does that impact the time line of the strategic review? And could it delay a decision? And then I had a quick follow-up, please.

Yeah. No. Thanks for the question. The short answer is no. It does not. Look. We are we are very happy actually for Jeannette. Public company CEO jobs do not come around that often. We are happy for her because it is not competitive with us that makes us even more happy. But as I mentioned, the critical number 2 leader who is stepping into the role, Neil, knows this business extremely well. Has been heavily involved in actually leading much of the work around the strategic assessment. So, there is no impact relative to how we are thinking about things or the impact of the recovery work. I mean, Neil's been deep into that as well. Okay. Great. And then, on Sofie, for me. I think they already manufacture Vercado. I am just curious if owning Sofie speeds up the ramp. And can you disclose what percent of Vercado doses it supplies today? Thanks. Yeah, I will not disclose for competitive reasons the percentage, but I think you can appreciate we are pretty well distributed and spread out across multiple players based on how this works. But it is a good question. I mean, look. I would just say part of the really exciting part about radiopharmaceuticals, there is many ways to play across the ecosystem. And participate in revenue that is accretive and margins that are accretive to GE Healthcare. And so, you know, I would think less about SoFi as in terms of the Vercado ramp, although it has the potential to benefit us in more in terms of this broader opportunity. That we see across the board. And, again, having and owning some of your manufacturing base in most scenarios is obviously a positive thing, particularly in 500-plus molecules in development as we speak. So that is an exciting opportunity. And, you know, radiopharma is different than traditional pharmaceutical. Because these tracers have short half life, meaning by the end of the day, they are gone. And so you cannot simply manufacture them centrally and hold inventory, for extended periods. You need to make it every day. So now we are deeper into that process, which clearly helps us control more of our supply chain but it also allows us to participate. You know, we are gonna be dependent in working with other CMOs for a very long period of time. This just gives us more ownership and integration to play a significant role within that channel. So we are excited about it. Obviously, we need to get the deal closed. But that is part of the strategy of why we were so interested in SoFi. Thank you.

That concludes the question and answer session. Please proceed with any closing remarks.

Yes. Thank you, operator, and I thank all of our investors for your interest in GE Healthcare. We are looking forward to seeing many of you at the Radiological Society of North America in Chicago, known as RSNA. I think you are gonna see lots of our new products on display, so we are hoping that many of you can join us. Also, we are gonna be showcasing significant amounts of new AI enabled products integrated at a departmental level, integrated at a hospital level, Many of the things that we have talked about, D3 and AI, you are going to see live actually on the floor. So we are super excited about it. You know, this RSNA is a really pivotal window for us for many of those new products that will impact our growth profile and profit profile in 2027 and 2028. So with that, we will conclude our call. Thank you very much.

This concludes today's conference. Thank you for your participation. You may now disconnect.