GE HealthCare Technologies (GEHC) Q2 2025 Earnings Call July 30, 2025 08:30 AM ET Company ParticipantsCarolynne Borders - Chief Investor Relations OfficerPeter Arduini - President & CEOJames Saccaro - VP & CFOVijay Kumar - Senior MDJoanne Wuensch. - Managing DirectorDavid Roman - Managing DirectorMatt Taylor - Managing DirectorRick Wise - Managing Director - Medical Technology & SuppliesConference Call ParticipantsLawrence Biegelsen - Senior Medical Device Equity Research AnalystRobert Marcus - Senior Analy ...

Financial Data and Key Metrics Changes - The company reported revenues of $5 billion in Q2 2025, with organic growth of 2%, at the high end of the expected range [10] - Adjusted EPS was $1.06 per share, up 6% year over year, despite approximately $0.08 impact from tariffs [12] - Free cash flow was $7 million, an increase of $189 million compared to the prior year [12] Business Line Data and Key Metrics Changes - Imaging segment organic revenue grew 1% year over year, driven by strong execution in EMEA and the U.S., but offset by challenges in China [14] - Advanced Visualization Solutions saw organic revenue increase of 2% year over year, with EBIT margin up 20 basis points due to productivity and volume [15] - Patient Care Solutions had flat organic revenue year over year, with growth in Monitoring Solutions offset by declines in Life Support Solutions [16] - Pharmaceutical Diagnostics delivered 5% organic growth, although EBIT margin declined 200 basis points due to planned investments and FX headwinds [18] Market Data and Key Metrics Changes - The U.S. market showed robust demand driven by an aging installed base and new clinical products, while Europe experienced recovery in capital decisions [40][41] - Emerging markets, particularly Indonesia and Latin America, showed positive activity, while the recovery in China is taking longer than expected [42] Company Strategy and Development Direction - The company is focused on its Precision Care strategy, with significant wins in enterprise deals and collaborations, including a $90 million deal with Ascension [7][8] - The D3 strategy aims to bring world-class solutions to market, leveraging digital and AI technologies [8] - The company is optimistic about future growth, driven by customer investment and operational execution [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding customer investment and operational execution, despite a mixed macroeconomic landscape [9] - The company raised its organic revenue growth guidance for 2025 to approximately 3%, reflecting positive customer sentiment [24] - Adjusted EBIT margin forecast for the full year is now between 15.2% and 15.4%, an increase from previous guidance [25] Other Important Information - The company announced a share repurchase program of $1 billion and repurchased approximately $100 million of its shares in Q2 [20] - The global tariff environment has improved, with the company implementing mitigation actions to reduce tariff impacts [22] Q&A Session Summary Question: Can you talk about the capital environment across different regions, U.S., Europe, and whether China's bottoming? - Management noted robust replacement cycles in the U.S. due to an aging installed base and strong demand for new clinical products, while Europe is recovering from previous pauses in capital decisions [36][40][42] Question: Can you elaborate on the actions the company is taking regarding tariffs? - The company is implementing immediate no-regret moves and longer-term restructuring of the supply chain to mitigate tariff impacts [46][49] Question: What are the drivers behind the order growth deceleration in Q2? - Management acknowledged that while Q2 order growth was 3%, it was below Q1 expectations, but emphasized the importance of looking at longer-term trends rather than quarterly fluctuations [56][58] Question: What feedback are you hearing from customers regarding Flurcato? - Management reported positive feedback on image quality and progress in expanding manufacturing capabilities, with a focus on improving reimbursement cycle times [64][70] Question: How should we think about the cadence for the rest of the year? - Management expressed confidence in the second half of the year, supported by strong order growth and backlog, with expectations for a stronger fourth quarter [88][90]

Financial Data and Key Metrics Changes - In Q1 2025, the company reported revenues of $4.8 billion, with solid organic revenue growth of 4% across all segments, particularly strong in the U.S. with high single-digit growth year over year [12][13] - Adjusted EBIT margin was 15%, up 30 basis points year over year, driven by volume and productivity improvements [14] - Adjusted EPS for the quarter was $1.01, reflecting a 12% increase year over year [14] Business Line Data and Key Metrics Changes - Imaging segment organic revenue grew 5% year over year, with EBIT margin up 130 basis points due to productivity and volume [16][17] - Advanced Visualization Solutions saw organic revenue increase of 3% year over year, with EBIT margin up 10 basis points [18] - Patient Care Solutions experienced 2% organic revenue growth, but EBIT margin declined by 450 basis points due to investments and product mix [19] - Pharmaceutical Diagnostics achieved 8% organic growth with an EBIT margin above 32% [20] Market Data and Key Metrics Changes - The U.S. market showed strong demand, particularly in imaging products focused on cardiology and oncology, contributing to record double-digit orders growth [6][12] - The company reported a record backlog of $20.6 billion, up $1.9 billion year over year [13] Company Strategy and Development Direction - The company is focused on strengthening its market presence and delivering a pipeline of innovations, including radiopharmaceuticals and next-generation imaging technologies [10][11] - The strategic approach includes optimizing the supply chain to mitigate tariff impacts and pursuing organic growth alongside strategic M&A opportunities [21][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of tariffs on profit and cash flow, estimating a total impact of $0.85 per share for 2025, with mitigation actions expected to reduce this in 2026 [10][24] - The company expects organic revenue growth for the full year 2025 to be in the range of 2% to 3%, with adjusted EPS guidance revised to between $3.90 and $4.10, reflecting a decline year over year [22][24] Other Important Information - The company announced a share repurchase program authorization of $1 billion [21] - Management emphasized the importance of maintaining R&D investments despite cost control measures in other areas [84] Q&A Session Summary Question: Tariff impact and mitigation strategies - Management detailed that the estimated tariff impact for 2025 is $0.85 per share, with mitigation strategies including duty drawback and dual sourcing to reduce future impacts [32][34] Question: China market performance and VBP impact - Management confirmed expectations of a mid-single-digit decline in China for the first half of 2025, with a sequential improvement anticipated in the second half [39][41] Question: Free cash flow reduction - The reduction in free cash flow guidance to at least $1.2 billion is attributed to tariff payments and inventory buildup [64][66] Question: Flurcato product launch and market reception - The Flurcato product is on track for a successful launch, with positive clinical feedback and expected revenue of approximately $30 million in 2025 [72][74] Question: Long-term outlook on rare earth element supply - Management expressed confidence in managing supply risks related to rare earth elements, with strategies in place for multi-sourcing [110][111]