Good day, and thank you for standing by. Welcome to GE Healthcare's First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note that today's conference may be recorded. I will now turn the conference over to your speaker host, Carolynne Borders, Chief Investor Relations Officer. Please go ahead.

Thanks, operator. Good morning, and welcome to GE Healthcare's First Quarter 2024 Earnings Call. I'm joined by our President and CEO, Peter Arduini; and our Vice President and CFO, Jay Saccaro. 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'll 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. And with that, I'll hand the call over to Peter.

Thanks, Carolynne, and thanks to all those joining us today. We've made good progress against our key priorities for 2024. In the first quarter, we delivered margin expansion while continuing to invest in innovation to help solve the evolving needs of customers and patients. Healthy backlog, orders growth and positive book-to-bill position us for accelerated growth for the rest of the year. Today, we reaffirmed our 2024 guidance, which Jay will discuss in greater detail. Now I'd like to highlight some milestones that illustrate our commercial execution. We're making steady progress with large multiyear multi-modality deals across equipment and service, resulting in incremental share gains. In the U.S., we secured a 10-year strategic alliance with OSF HealthCare to deliver technology, digital solutions and equipment management services to help clinicians improve care delivery and patient outcomes. We also extended our relationship with Hartford HealthCare to run through 2030. As a trusted partner, we'll continue to work together to optimize their imaging fleet and provide specialized support from our GE Healthcare service technicians. Our care pathway strategy is progressing well, enabling commercial growth opportunities and introducing us to adjacent markets with attractive growth potential. For example, last week, we announced the expansion of our collaboration with Elekta to enhance their radiation therapy planning offerings using MIM Software, which we acquired in April. In Spain, we announced the first global install of our Allia IGS Pulse system, which is our market-leading cathlab design that we expect will be a growth vehicle in this important interventional cardiology market. As we look to 2024, we see a growing funnel of opportunities for products like our IGS portfolio. Our strategic initiatives and trusted partnerships are taking hold and position us well for a future where health care is more connected, efficient and patient-centric. Looking ahead, our outlook reflects a strong global procedure environment, particularly in the United States, and customers continue to be optimistic about capital investment and market normalization. These tailwinds, combined with our focus on execution, give us confidence in our ability to deliver on our commitments for 2024 and our medium-term goals. Now I'll pass it on to Jay who will take us through the details of our first quarter performance. Jay? 1839991191.

Thanks, Pete. Let's start with our financial performance on Slide 4. For the first quarter of 2024, revenues of $4.6 billion were approximately flat organically year-over-year. Recall, this quarter's results followed the strong double-digit growth we delivered in the first quarter of 2023, which benefited from easing supply chain conditions and strong China stimulus sales. Organic orders increased 1% year-over-year, primarily driven by strength in the U.S., with orders dollars continuing to outpace sales, we generated a solid total company book-to-bill of 1.03x versus 1.01x last year. We also exited the first quarter with a healthy backlog of $18.7 billion. Adjusted EBIT margin was 14.7%, up 50 basis points year-over-year, with improvements in both gross profit margin and SG&A. First quarter adjusted EPS was $0.90, up 6% year-over-year, driven by improved margins and lower interest expense. And we generated $274 million in free cash flow from improved working capital. On Slide 5, let's take a closer look at total company revenue performance for the first quarter. Organic revenue growth was approximately flat versus the 12% that we generated in the same period last year. On a reported basis, service grew 2% and product revenue declined 3%. Product performance was impacted by the difficult year-over-year comparison. Longer term, we see good growth opportunities in both product and service, including greater service revenue from a larger installed base. China revenue declined low double digits given the stimulus that benefited the first quarter of 2023 as well as anticorruption impact in the quarter. EMEA sales were up slightly and sales in the U.S. and rest of world were flat with prior year results. Turning to Slide 6 and the progress we made in the first quarter on margin initiatives. Adjusted gross margin expanded 120 basis points as we benefited from commercial wins and…

Thanks, Jay. Turning to our Precision innovation strategy on Slide 13. We're excited about recent product introductions across our segments to address customer challenges and improve patient outcomes. The industry continues to be challenged with higher rates of clinical burnout, fueled by increased demand for imaging and caring for an aging population. Our customers need solutions that increase flexibility in staffing, scheduling and operations. Digitally enabled remote scanning and connected patient monitoring are ways we can help address these issues. In the U.S., GE Healthcare is the exclusive distributor of a vendor-agnostic system that allows clinical experts to provide remote MR, CT and PET/CT scanning support and image review. By enabling virtual clinical experts to provide real-time guidance to technologists on site, we're helping to address staffing shortages and streamlining operational workflows. Our Portrait Mobile and Monitoring Solutions platform recently introduced the Portrait Vital Signs monitor in the U.S. and Europe. This new solution integrates with the EHR, allowing clinicians to customize early patient warning scores like low oxygen rates and declining blood pressure to identify patient deterioration sooner. We're also focused on advancing cancer research and creating AI to address some of the biggest challenges in cancer care. For example, immunotherapy has revolutionized the way we think about cancer treatment. However, patient outcomes vary with some response rates ranging from 15% to 30% in solid tumors and 45% to 60% in melanoma. Because of this variation, a considerable amount of research is focused on determining treatment response. AI can potentially make a difference. In our Pharmaceutical Diagnostics business, we created AI research models in collaboration with Vanderbilt University Medical Center. It demonstrated a 70% to 80% accuracy in predicting cancer patients' response to certain immunotherapies. What's unique about the approach is that we created these AI models using routinely…

Thank you, Peter. [Operator Instructions] Operator, can you please open the line?

[Operator Instructions] First question coming from the line of Suraj Kalia with Oppenheimer.

Peter, can you hear me all right?

Yes, clear.

My apologies for the background noise. So Peter, the obvious question, U.S. year-over-year was flattish. I get your point on China, in terms of ventilators and top comps. Can you set the stage for us in terms of the U.S. portion of the business, the flattish performance in the quarter and how you see it progressing through the year?

Yes, absolutely. I would just kind of start out to say from that standpoint is just remember, we talked about the compare with our toughest one of the year. So obviously, it gets better throughout the year. We talked about that in our guidance. But really, Q1 was impacted by -- fundamentally, it was 2 items. And Jay touched this on the prepared remarks. One was some fulfillment delays in PCS. I think we've got those well in hand to have them resolved by midyear. I think that's the first part of this. There were specific items, us about technology and more about actually delivery of the components. And then the China piece. And again, we know that anticorruption presents a challenging environment, and we expected that to play out through midyear. I mean those are really the 2 items. If I look at the U.S. specifically, we actually are seeing a more positive backdrop relative to orders funnel, relative to growth potential and really across all of our businesses. And I'd just say ultrasound, I talked a lot just on the call here about new products. 2023 market was somewhat down for the whole market in ultrasound. We see that actually turning around in '24. And so the timing of our new product introductions is very good as well as in imaging. So I'm rather confident on how we're going to see the capital landscape and the market evolve within the United States. But relative to the quarter, it was those 2 specific items that dampened our top line.

Got it. And Peter, my follow-up, specifically within imaging, how should we think about backlog, i.e., business that is already in the hands flowing through in the next 3 quarters versus new orders coming in versus NPI and price increase. Just kind of give us how you all are thinking about within imaging as the year progresses, which are the levers to be pulled? And how should we think about the cadence of imaging growth as the year progresses?

Yes. Great. Thanks. Let me comment and Jay, you can jump in as well on this. So we've got a very solid backlog for our imaging business. I think we feel quite good about the diversity of it, the mix of it and it actually being growing with price in the back. And then new platforming capabilities that are coming in like our IGS system, our new cath lab, which will come in and actually bring better margins. So it's positioned well from that standpoint. We think the profile is going to be more second half just as we've communicated. There hasn't been a lot. We're going to clearly see a pickup in the second quarter but the majority of it is more profiled out towards Q3 and Q4. And again, that really hasn't changed from what we've laid out our initial guidance on. I would say from a broader order standpoint, we expect that we will see an uptick in broader imaging orders both in Q2, 3 and 4. Most likely having a larger step-up in the second half. And some of that's tied to the China stimulus discussion that we had from an order standpoint. But even the U.S. profile, when you take a look at the products that we've got laid out, some of the big deals that we have visibility into the pipeline, they're probably going to nest more so in that second half of the year.

And our next question coming from the line of Edward Ridley-Day with Redburn Atlantic.

So my first question, just to follow up actually on the China stimulus plans. The new Chinese stimulus that is being discussed. We've seen headline details from the authorities there but not much more. Could you speak to what you see the benefit these might be for your addressed markets through the remainder of the year? And your peer yesterday was talking about some evidence of hospital submitting new orders as a result of the potential new stimulus. I don't know if you can speak to that first, please?

Yes. So look, the data is unveiling as we speak. So I think we don't have perfect information on it. But I think if you look at since our guidance, what is new is obviously, not anticorruption, that's out there. And it's going to continue, we believe, to be tough through mid-year as we said before, we believe that that's going to continue to begin to improve in the second half. What is new is the stimulus. And from our understanding of it, the prior stimulus was more about low interest rates or relief relative to loans, where this will actually be specific cash grants, which then would reach a larger group of institutions that aren't just looking for loans but are looking for supplemental dollars to buy equipment. So we think that, obviously, opens us up to a larger population. The second piece to that then as well is that its ability to be multiyear. And so we'll see how that ultimately plays out. But those are the 2 characteristics. Relative to the rollout of it, I would say what we did see at the end of the first quarter is actually a little bit of tapping of the brakes of some orders in China relative to stimulus coming in and you say, "Well, why would that be?" Customers taking a look at to say, "I really want to understand the rules of it. So when I submit an order, I make sure I get the full benefit of the stimulus." So we believe that there's going to be clarity to the stimulus rules, so to speak, at some point here in Q2 and post those rules. Then we would expect an uptake in orders. And then how that plays out, if the orders come sooner, there's more possibility for sales within the year. If the orders come later, businesses like ultrasound that you can do flow shipments, most likely would benefit sooner. Whereas installed products would probably be a little bit later. But net-net, this is all positive and kind of how we see the landscape as we speak right now.

That's very helpful. And just a quick follow-up actually on your Radio Pharmaceutical business. If you can give us any color on when we should expect FDA approval for Flurpiridaz? And also any other updates that we should be thinking about or looking for in the remainder of the year?

Yes. Look, I mean Flurpiridaz, if it's your reference, is an agent that's in our PDx business that will be used for cardiac imaging and PET/CT. We think it's going to be a really breakthrough approach to be able to do cardiac perfusion imaging and PET/CT. And a lot of it, as you know, is tied to logistics, the half-life and the ability to ship a product there as opposed to have to generate it in fundamentally seconds on site. File has been submitted to the FDA, and we'll provide updates here on the milestones. I think from what I hear from the team, we have everything in. We're not assuming anything within our 24 guidance. I mean this will be more of a '25, '26, '27 event as those ramp up. But all things good, and we'll be waiting to hear back from the agency, if there's any questions or follow-ups that they have for us.

Our next question coming from the line of Sezgi Ozener with HSBC.

I hope you can hear me all right.

Yes.

Great. My first one is on your confidence on the full year '24 outlook. Given the lower book-to-bill, are you more on the lower end? Or do you -- are you equally confident on both ends of your guidance? And the second one is on your pricing versus volume comments. I've seen that the positive pricing comment. Has this been reflected formally across the segments as well as across the region? Some color there would be really helpful.

So maybe I'll start. Then Jay, you can talk a little bit more about some of the book-to-bill and the cadence. But look, as I walked through just a minute ago, the impact for the first quarter, including the difficult comp, we expect that to alleviate through the year, which, again, gives us strong confidence in our ability to hit our guidance. And again, 4 things. The comps get better quarter-over-quarter. Funnel growing on orders and sales. We have good visibility into, including our service funnel. So how does service grow? When you won share in a previous year, you have 1 year of warranty. When it comes off of warranty, it becomes part of a contract. We're starting to see the benefit of that service growth now in '24. Three, the new products against across the whole product line, but particularly in ultrasound and select areas in Imaging to new products and then an improving China. So that's really the 4 items that kind of gives us confidence. Jay, maybe over to you to talk a little bit how we think about book-to-bill and price.

Sure. From a book-to-bill standpoint, you have to recall that we include in our book-to-bill calculation, both service and PDx coming in at 1:1. So if we were to adjust those 2 items out, the actual book-to-bill is much higher. So we feel good about the overall book-to-bill that we have for the quarter. The other thing I would say is the backlog sits at near record levels. So we're sitting at roughly $19 billion of backlog. We feel very good about the orders that we have in the backlog. It's a robust pipeline of future sales that we have in place. So overall, that's great. And then as we think about pricing, the pricing environment continues to be solid. We highlighted at the beginning of the year, we expect 1% to 2% in pricing impact to sales. And we're trending very much in line with those expectations. So we had a good quarter from a pricing standpoint. From a volume standpoint, I think Pete highlighted some temporary issues that we've been navigating which we expect to resolve. The other thing to remember is that comps get a lot easier as we move through the rest of the year. So I think all of those elements come into play as we were able to firmly reiterate guidance from a sales and an EPS standpoint.

And our next question coming from the line of Craig Bijou with Bank of America Securities.

I wanted to start on order growth. And you guys have seen low single-digit order growth over the last 3 quarters. And I understand that there are a couple of reasons for that. But wanted to see if you guys could maybe give a little bit more color on how that order growth translates into revenue growth in subsequent quarters. And your confidence that order growth will really accelerate over '24, and then be able to drive kind of the mid-single-digit revenue growth target that you guys have put out there.

Yes, Craig, thanks for the question. It's a great question. Look, the reality of it is, is that over the last year plus, 1.5 years, we've actually had a positive book-to-bill ratio again. And we give that ratio with everything in, so that you can see not just the capital piece, but you kind of get a feel for the total composite of it. I think as long as that is a positive scenario and the backlog is almost about $1 billion higher than where it was pre-COVID, we've got a lot of gas in the tank to deliver on mid-single-digit revenue growth. So that's just kind of how the profile of this works. And I think you guys understand with some of the capital that can be lumpy. So shipments tend to be a little bit smoother, but you can pick up significant and a couple of large IDN deals in a given quarter, and your orders can spike up in that quarter and that can be lower in the following quarter. But that's kind of how we see it from that standpoint. The interesting part here is that over the last, I'd say, 12, 18 months, the markets that we've played in and we track these with third-party data, have been probably in the neighborhood of only up 1 point or they've been down a couple of points, relative to different markets in the world. Our outlook, when we see what the rest of this year is and going into '25, definitely brings a more positive view, which we would expect to see orders pick up relative to those markets. So that's one aspect of it. The other side is when you start winning share, and I mentioned this on a previous comment, and you start growing your…

Great. And if I could follow up on the hospital CapEx sentiment. You mentioned that it's still pretty good. So are you hear -- I know you guys -- you survey your customers often. So are you hearing any concern given that the interest rate environment, it looks like we're not going to see many more cuts. And then just on top of that, maybe just talk about how the pricing, your ability to get that price that Jay mentioned in one of the previous calls. How does that get impacted in -- if there's some concern or hesitation on capital spending by hospitals?

Yes. Let me start and then, Jay, you can kind of fill in some of the gaps on this. I think again, if you compare it to over a year ago, you're taking a look at an environment where hospitals were primarily in the red, heavily tied to labor cost. We're seeing that moderate and most of our customers, particularly our big important IDNs back in the black. So I think that's a quarterly. Relative to rates, it's obviously out there. It's a topic. We haven't really seen it come up in a major discussion that's limiting how things are playing out. I still think the underlying play here is that demand for procedures is just still on continuing to grow. So if you think about some of our peer group of the device companies that are showing very high growth rates in their implants, we're showing that same kind of growth in our PDx business because we see that day-to-day. The effect of that on equipment isn't in that same quarter. The effect on the equipment is usually 3 to 4 quarters out. Why is that? Because you're using current equipment, and then you start adding capacity constraints and you need to buy upgrades or new equipment. And so that's what also gives us confidence that we're going to see that pick up in later quarters. But at this point in time, backlogs to get an MR scan or a PET still are much longer than they were pre-COVID. And that brings high-value procedures with into an institution. And again, that's what gives us confidence we're going to continue to see investments that take place, particularly in the United States. Jay, I don't know the price.

That's exactly right. I think -- and we do a survey each quarter. Pete's comments are very reflective of what we heard from our customers, continued procedure volume demand, staffing shortages, ease, good economics for the hospitals. Interest rates really have played a less prominent role in some of those discussions and survey results. So we feel quite good about that. From a pricing standpoint, as I said, we've talked about -- we're talking about low single digit, 1%, 2% price increases. And what we're finding is that's not the difference between buying and not buying. It's not really -- the decisions aren't that sensitive. And so as we continue to emphasize this focus on pricing discipline across the organization, we've been able to see that driving a positive impact for the company.

Our next question coming from the line of Larry Biegelsen with Wells Fargo.

A follow-up on China. So sales were down about 11% in Q1 in China. What are the expectations for the rest of the year? Does the new stimulus represent potential upside to the prior guidance? And I had one follow-up.

Yes. I think it will depend upon when the details of the stimulus package are laid out. Because as Pete said earlier, we did see some hesitancy amongst customers as they wait clarity on the stimulus rules before submitting orders and that makes complete sense to me. We've seen that continue in the second quarter of the year. And so from our standpoint, the stimulus package, Larry, we view that as a good long-term catalyst for the market. Exactly when that shapes up with respect to 2024 is something that we're watching. To the extent that we get clarity sooner, then it certainly could be a positive catalyst versus guidance previous to the extent that we're still waiting and there's still hesitancy amongst customers with respect to orders, it could be a sort of a negative in the short term. But again, I think from our standpoint, we're very pleased to learn about this. And long term, it's a very positive development for the overall market.

Yes. I mean, Larry, the only thing I would add is from our guide, not a lot has changed. The first half, we guided would be negative. The second half will be positive. I think in the second half, the STEM is going to have an effect of probably having a bigger step up in Q4 than Q3 just because of the delivery time to ship equipment. If it gets more clarified within Q2, and you could actually have a little bit sooner. But I think those are the dynamics. I think the good part is, even if it's later, that then benefits a Q1 '25 or Q2 '25, but we're expecting that there's going to be clarity here before we get into the half, and we'll see how that plays out. So fundamentally, our guidance doesn't change, but stimulus could have a benefit to it. But at this point in time, we need to see more of the cards be unveiled.

That's helpful. Pete, you've been very active on the business development front, but mostly very small deals. Is that what we should expect going forward? And maybe just refresh us on areas of interest and if you think robotics is -- would fit within GE Healthcare?

Yes. Look, Larry, I would just say on your last point on robotics, it's not a -- from a surgical standpoint, it's not a top priority focus for us. I think from a broader standpoint of robotics and AI. And I mentioned our Allia IGS is actually a robot that actually comes into position and how it's used, it's one of the only that's actually used within the cath lab from that standpoint. But tuck-in deals of the right size that have a strategic fit into a core business that enable us to connect different parts of our portfolio to bring more differentiated capability. That's what we're looking at, both in partnership and in acquisitions. So I think that's what you should stay focused on that, that is our primary target. And as we've always said, a larger deal came up, it actually was a really good fit for us, we would obviously take a look at it. But our 85%, 90% target range is the type of deals like the MIM deal that we did that are just really good fits into one, our priorities, right, growing our care pathway within Oncology, linking our products to make them more differentiated on how they actually work together. And we just have a very good funnel of opportunities like those.

Our next question coming from the line of Ryan Zimmerman with BTIG.

A lot has been asked. I want to ask two separate questions. One, [indiscernible] numbers were off to, I think, a strong start for Biogen, at least, that's what it seemed like. And so just curious how the conversation around Alzheimer's has changed at all? Or the trajectory that you're expecting, I think, for the uptake and kind of patient adoption? And then I have a second one on margins.

Yes, Ryan. So you heard Jay's comments probably on the call. Relatively, we saw some slight upticks here for Vizamyl. I would just again remind everyone what we said is our expectation was that we'll start seeing some uptick more in the second half of the year. I think that's pretty much in line with what we're expecting. I think since we gave guidance, there's been some discussions that the Lilly drug might be a little bit delayed coming out. But when the combination of all of those from a diagnostic standpoint, which is what our role is, we expect to see some of that picking up in the second half of the year. Now relative to any type of major material moves, this is not a '24 play as far as we see it right now. I think we think that, again, in the '25, '26, '27range based on the adoption of both molecules, that's when you're going to see an uptick. There is reimbursement now for the agent in the outpatient center. That's still being worked through an inpatient. And I think as that gets more cleared up, that's also going to drive more need for the product. But we were encouraged to see on a ratio standpoint, the numbers are up significantly from an actual dose standpoint. But we would view that as positive and on track to what we've already communicated on what the ramp should look like during the year.

Okay. And then, Jay, we spend a little -- go ahead, sorry.

No. I would say go ahead and ask your next question, Ryan.

Just, Jay, on gross margins for a bit here. You got some segments kind of down, you got some segments up, in terms of EBIT margin. Pricing, I think we all understand those dynamics but there are still, I think, a lot of TSAs left. And just help us understand kind of the trajectory of gross margin as you see it today and kind of what you're tackling to get that higher outside of maybe price pickup?

Yes. Overall, I think we were very pleased with the first quarter margin performance. And gross margin, in particular, we expanded 120 basis points, really driven by pricing and productivity. Now there's an element that has not yet featured in our numbers, which is related to some of the new products that Pete referenced in his discussion. We'll see benefits from some of the new imaging and some of the new ultrasound products that will also support gross margin expansion. But in the first quarter, it was really about pricing. I discussed that and productivity. In my prepared remarks, I talked a little bit about some of the lean initiatives and what we call the variable cost productivity initiatives that we have in place. And it's safe to say we're off to a great start from a productivity standpoint. We delivered, I think, mid-single digits in each of our businesses, more than offsetting inflation and allowing us to drive this gross margin going forward. And so as we look at things on a full year basis, we will continue to see solid margin -- gross margin performance, supporting the EBIT expansion that we've laid out, 50 to 80 basis points of EBIT expansion. But really nice to see in the face of flat sales, the 50 basis points of expansion that we saw in the first quarter. Now you referenced another comment, which relates to TSAs and we're making good progress there. A lot of great support from GE but also a lot of good work on our team side. We've eliminated, we've removed roughly [ 330 ] -- we're on a path to completing virtually all of the TSAs by year-end. And what will happen as a result of this, I would say, it predominantly impacts SG&A over time. It will allow us to optimize our structure, optimize our IT systems for the needs of our organizations or really a gating factor to get at all of that is coming off the TSA. So we've seen a little bit of benefit in terms of SG&A and G&A savings this year, we'll expect to see more next year as we stand on our own 2 feet as an independent company. So overall, that's really the story on margin. Pete, anything to add?

Ryan, I would just say and again, just to remind everyone, I mean our focus on the increased R&D dollars is obviously new products. But a really important part of it is kind of doing this gross margin triple, which is getting price out of a new product, increased volume because of differentiated features and reducing the actual cost of that product because of platforming. And so when you do that, obviously, if you can get the growth in the lift because of people want it's differentiated, you get more price at lower cost. We have this focus as we mentioned, that any new product comes out at a higher gross margin. And again, that's something we drive across the whole portfolio.

Our next question coming from the line of Graham Doyle with UBS.

Can I just ask one, again, it's on China, but just to get context for things that we go through a year. So firstly, just on revenues. The comps do get -- I think the comps get a bit easier on the revenue side. But am I correct in saying you did grow revenues in H2? And are you assuming a sort of catch-up now in the numbers that you flagged earlier in the year, that H2 would grow enough to offset this sort of H1 weakness? And then just one question on order intake. I know you've gone to sort of great lengths to explain how the growth sort of algorithm should work through the year on order intake. But what sort of number are we looking for? Because it seems like mid-single-digit growth, when you combine what's happened over the last sort of 12, 18 months, it wouldn't make me super bullish that you could do high single-digit growth in revenue terms next year. But is there something we missed in terms of how you can translate, say, 5% to 6% growth for the next 3 quarters into better revenue growth for 2025?

Sure. Maybe first on the China comp and the contours of the year. As you recall, last year, we saw roughly 20% organic growth in the first half of the year. So when we gave guidance originally, we said first half, negative; second half, positive. And one of the things that we're watching very carefully is the time line around this new stimulus package. As I said earlier, I think this is long term, very positive for the market. But how much of this impact we see in 2024 really relates to sharing more guidance from the government and then also customers acting on it? So we're very bullish. But what that means is certainly, there's going to be some positive impact relative to our previous expectations in the fourth quarter related to stimulus. But what happens in the third quarter and how much of that demand is pent-up paid off in the third quarter versus delayed to the fourth quarter? How much of the fourth quarter stimulus impacts Q1 and Q2 of 2025 to Pete's comments earlier? That's really a question that we're watching very carefully. And so we're optimistic about this. But I think it's -- as we think about the third and fourth quarter, third quarter will be much very flattish in that sort of a range with fourth quarter seeing some of that pent-up demand paid off. But again, a lot of this depends on when all of this comes together from a customer demand standpoint. As it relates to the order one, maybe, Pete, do you want to address that?

Yes. I think, Graham, I mean, it's a little bit more of the same. I mean, the first part is, again, the markets that we participate in around the world over the last 18 months coming out of COVID, have either been roughly flat or slightly down. We see that trend over the next 2 years. Again, a lot of it tied to this lagging indication that the more actually procedures are growing, more patients are coming into the systems. You need more things that we make. So that's a really important one. And again, I think across all of our markets this year, we'll actually see an uptick over the '23 window. The new NPIs is a big deal. And so again, that adds some pricing growth. It also adds to some share gains with it. And then services. So we have been gaining some share in the last couple of years. Our prior 78%, we haven't probably gained as much. When you do that, you start growing your service base and service becomes a bigger contributor within your overall capabilities. And then the last part is these care pathway here is that we've been nurturing start to bring more growth in the next year or so. Again, from how Alzheimer's we talked about, the cardiovascular care pathways and how products work together, but even a product like Flurpiridaz, those are some of the things that we take a look at, that will continue to kind of drive a focus on mid-single-digit growth in orders that will then translate that into revenue. And then based on timing, you may be slightly higher or lower in a given quarter, but that's the formula that we're executing on.

Great. A cheeky quick follow-up on China. Just because the sort of stimulus package or idea that you sort of mentioned, I know Philips and Siemens have referenced something similar. Presumably that relates to this medical equipment renewal because it doesn't, on the surface look, particularly ambitious in terms of the 6% CAGR on spend. But is this something you've seen in the past where these things can expand and become bigger? Is that what gives you some cautious optimism around that?

Well, there's a couple of different views out there. There's a larger stimulus number that's in the trillions of yen that's touching multi-industry and that is money that actually is kind of stipend dollars, if you will, that will go to particular areas within health care and other industries. So what that direct distribution looks like it's a big number. That's more of what we're actually referencing. And so again, if you compare it to the previous stimulus, which was interest-free loans, this is portrayed laid out to actually be dollars that will be granted to actually buy equipment. And again, so we believe that will have a larger appeal because by definition, many customers weren't even going for a loan. So this opens up the field for that and it also is being expressed at this point to be not a 90-day or 120-day window, but to be a multiyear approach. So again, more to come and see what the details are on it, but from when we gave guidance to start the year, this is net-net positive, really any way you look at it from a China outlook. And we'll see what it means for this year. But clearly, if implemented the way it's described, it will have a bigger impact as well going into next year.

Our next question coming from the line of Matt Taylor with Jefferies.

I was hoping you could comment on 2 things. One is that you identified the catalyst in Ultrasound and the resolution for some of the fulfillment issues to resolve catalyst for growth inflection through the year in those segments. Could you help us understand how much inflection that could drive as you work through the launches and resolve the challenges?

So Matt, let me just take. I'll take a hit at the ultrasound piece. I think you're referring to the PCS shipments on that. You can touch on that. Look, I think with Ultrasound, again, I think the first part is, is that when we look at our market dynamics, they are definitely continuing to improve. And as I say, one of the top 2 largest players worldwide, that has a positive impact. From a standpoint of the compares, I mean, if you take a look at our expectation is that we will continue to ramp our revenue growth throughout the year from Q2 on. And then also from an order standpoint, it's a highly correlated business. I mean just to give you an idea, a vast majority of this business is sell and install. China, this tends to be a larger portion of our business. And so some of the effect that we felt here in the first quarter was directly correlated to the challenges in China. And I think even China STEM will help ultrasound. But ex-China around the world, U.S., Europe, we're bullish on how we'll see the pickup within China -- excuse me, in ultrasound and particularly because of the new product introductions that we've laid out. Jay, what about that?

Yes. And just at the highest level, Matt, I do think we have easing comps throughout the year, and I think that's supportive of the accelerated growth profile at a GE HealthCare level. With respect to PCS, we'll see accelerating growth as we move forward here, with the second half of the year, more similar to growth rates that we saw last year. And as we resolve some of the bottlenecks in the second quarter, we'll see some level of improved growth. But then again, more of those benefits will accrue to the second half of the year.

Great. And can I ask a follow-up on phasing? You talked about some sequential improvement in organic growth and margin in the second quarter. And that would be modest improvement. If I think about what modest means, maybe going to slightly positive organic and, I don't know, 20 to 40 basis points on margin. If I flow that through, consensus EPS looks like it needs to come down a little bit. Is that kind of thinking your math wrong? Or can you help us at all with the second quarter?

From a second quarter standpoint, we're looking at low single digits on the sales and continued -- we'll see a reasonable expansion versus the prior year. So -- and that will actually, the first quarter is the lowest quarter of the year. So we'll see a little bit more sequential margin expansion more similar to year-over-year improvements versus last year, similar to what we saw in the first quarter. So I don't have the -- we don't talk about consensus. We don't get into that. But I think those are the dimensions that are in play in the second quarter.

And that concludes the question-and-answer session. Speakers, please proceed with any closing remarks.

Thank you, operator. Thanks, everyone, for joining us today. Hopefully, we addressed your questions. We've got all the right pieces in place here to deliver on our annual guidance that we've laid out, and we look forward to connecting with each of you and some upcoming calls or conferences in the next few months. Thank you very much.

Ladies and gentlemen, that concludes our conference for today. Thank you for your participation. You may now disconnect.