GEHC

Good day. Thank you for standing by. Welcome to the GE HealthCare first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear a message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference over to Carolynne Borders. Please proceed.

Thanks, operator. Good morning, welcome to GE HealthCare's first quarter 2026 earnings call. I'm joined by our President and Chief Executive Officer, Peter Arduini, and Vice President and Chief Financial Officer, 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. With that, I'll turn the call over to Peter.

Thanks, Carolynne. Good morning, and thank you for joining us. Let me start with our performance in the first quarter of 2026. We were pleased with the top-line growth that came in at the high end of our expectations, driven by our pharmaceutical diagnostics, Advanced Imaging Solutions, and imaging businesses. We also had strong services growth in the quarter. This all reflects disciplined commercial execution and accelerated customer adoption of new products designed to help clinicians enhance diagnostic accuracy and guide more precision treatment decisions across disease states. As we think about the capital equipment backdrop, we're seeing healthy customer demand globally with resilient procedure growth. Aligned to this, we saw solid performance in orders, book-to-bill, and backlog. We delivered double-digit reported growth in EMEA and rest of world, mid-single digit growth in U.S., and China sales were in line with our expectations.

We were disappointed by profit performance in the first quarter, which was impacted by a recall associated with a PDX supplier that has since been resolved. Later in the quarter, we began to see more significant increases in material cost, which we expect will continue for the remainder of the year. We remain confident in our ability to procure supply to meet customer demand, but given the inflationary environment, we're taking a prudent view and reducing our profit and free cash flow guidance for 2026. Slide four shows the inflation impacts to our profit guidance and the offsetting measures we've identified to mitigate. For background, the magnitude of specific input costs changed significantly as we moved through the first quarter, primarily related to two dynamics.

An approximate $100 million increase in the price of memory chips, which are critical components utilized in many of our products, as well as an increase in oil and freight costs of approximately $100 million. Other inflation impacts are expected to total approximately $50 million, with metals such as tungsten as an example. Prior to any mitigation, the gross impact of these costs is approximately $250 million or $0.43 per share. We expect to offset more than half of the inflation impact in 2026 with price and cost actions. Taking a prudent view for the year, we are reducing our full-year adjusted EPS guidance by $0.15 associated with the remaining inflation impact. Including this impact, we will still deliver mid to high single-digit adjusted EPS growth.

Now, I'd like to highlight strategic accomplishments that were advancing our growth strategy. In the first quarter, in precision care, we advanced our pipeline of innovation with key milestones in CT and MR, our two largest revenue-generating modalities. Regulatory clearances in both the U.S. and Japan mark an inflection point for Photonova Spectra, our differentiated photon-counting CT platform. Customer feedback about the image quality has been extremely positive, including the ultra-high resolution and soft tissue clarity in all modes of scanning. We're actively working with customers on site readiness and building a strong pipeline for future sales. In MR, we received multiple FDA clearances for next-generation technologies, including a new 3T and reduced helium platform and state-of-the-art AI-powered workflow solution. Aligned to typical imaging order conversion timelines, we expect revenue contribution from our key imaging NPIs to begin in the first half of 2027.

In PDX, we saw growth across contrast media and radiopharmaceuticals, along with growth in our molecular imaging equipment. This is driven by an aging population, increased chronic diseases, and demand for precision care globally. We're pleased to see Flyrcado continuing to ramp with a nearly 80% increase in doses since late January. We delivered over 390 doses for the week ended April 17. We're onboarding new customers, including high-volume sites, and we've seen an acceleration in the average number of doses that customers are ordering each week. We remain focused on delivering high-quality customer experience. While there will always be some week-to-week variability, we're encouraged by our trajectory, and this reinforces our confidence in our medium-term target of $500 million or more in annual revenue by 2028.

Vizamyl growth is also accelerating, supported by the expanding use of disease-modifying Alzheimer's therapies that are driving increased demand for amyloid beta imaging. Looking to the future, one of the most significant research areas we've been focused on is developing our novel gadolinium-free MRI contrast agent. If successful, this manganese-based agent would provide a differentiated alternative to gadolinium by addressing retention concerns and reducing reliance on rare earth elements. We see this as a significant opportunity to expand our role in the current $1.2 billion contrast MRI market by overcoming key challenges for both patients and clinicians. We recently reached a meaningful clinical milestone with the first patient dosed in our phase II and phase III study. This innovation is under FDA Fast Track Designation granted to drugs that address serious conditions and unmet needs and can accelerate regulatory review.

If successful, both the combination trial and Fast Track Designation would speed up the time to market. This milestone underscores both the urgency and the promise of our approach and reinforces our conviction that our innovation can significantly advance the MRI contrast landscape. In the area of growth acceleration, we delivered growth across PDX, AVS, and imaging business with strong commercial execution. In our high-margin services business, the large driver of our recurring revenue also did well in the quarter. We also completed the acquisition of Intelerad in the first quarter. This advances our strategy to deliver a fully connected cloud-first enterprise imaging ecosystem that spans hospitals and outpatient settings. We're excited about the opportunity to grow our AI, cloud, and software capabilities, leveraging our Intelerad platform.

As we focus on continued business optimization, price and cost programs are a top priority, as well as executing on our new wave of innovation that will not only drive revenue, but also margin growth. Today, we announced that we're combining Imaging and AVS to create a new segment, Advanced Imaging Solutions, led by Phil Rackliffe. This change now moves us from four distinct segments to three: AIS, PDX, and PCS, which will allow us to more effectively capitalize on our new wave of innovation, sharpen our disease state focus, and accelerate growth. As healthcare becomes more precise, the need for advanced imaging to confidently diagnose and deliver therapy is increasingly important. There's also a growing demand for connected clinical workflows that drive real-time decisions and outcomes. Structural heart and cardiology is a clear example.

It's one of the fastest-growing areas in healthcare, with a shift to less invasive image-guided therapies. At every stage of the patient journey, procedures depend on advanced imaging, spanning CT, ultrasound, and real-time guidance in the cath lab. Having vertical ownership from investment decisions to integrated supply chain in the segment will better enable us to deliver differentiated technologies while streamlining our business and reducing costs, and we're excited about this next step on our growth path, and Phil has the right focus and expertise to drive this business forward. We also announced a new global markets region led by Catherine Estrampes that we believe will strengthen how commercial teams build and scale expertise across markets and bring the full portfolio to customers globally to maximize growth in enterprise accounts. Now, I'll turn the call over to Jay to discuss the financial results. Jay?

Thanks, Pete. Let's start with a high-level look at our financial performance for the first quarter on slide six. We delivered revenue of $5.1 billion, representing 2.9% organic growth year-over-year, coming in at the high end of our expectations. Healthy global demand drove double-digit reported revenue growth in EMEA and the rest of world and mid-single-digit growth in the U.S. China revenue declined year-over-year, which was in line with our expectations, and improved sequentially. On a reported basis, we had strong performance in product and service revenues at 7.3% and 7.5% growth, respectively. Our service business continues to be a key differentiator with growth driven by a healthy capture rate. Orders grew 1.1%, following 10.3% growth in the year ago period.

We delivered a solid book to bill at 1.07x, and we exited the quarter with a record backlog of $21.8 billion, up $1.2 billion year-over-year. We were disappointed with the adjusted EBIT margin of 13.5% and adjusted EPS of $0.99. Of note, adjusted EPS included approximately $0.16 of tariff impact. Lastly, our free cash flow was $112 million in the quarter. Looking more closely at margin performance on slide seven. Adjusted EBIT margin was 13.5%, down approximately 150 basis points year-over-year. Recall that we expected to see the largest tariff impact for 2026 in the first quarter, given the timing of the 2025 policy changes.

Year-over-year margin performance was also impacted by declines in PCS and the PDX supplier issue. Commercial execution driving increased volume, strategic pricing, and contract settlements were tailwinds to margin in the quarter. Moving to segment performance, starting with imaging on slide eight, organic revenue grew 3.8% year-over-year, with robust growth in the U.S. and EMEA, particularly in CT and X-ray. We're seeing strong customer demand for our CT product line, particularly with our Revolution Vibe that is focused on the growing cardiac exam segment. EBIT performance benefited primarily from volume, but declined year-over-year due to tariff expenses. Excluding tariffs, margins would have been accretive year-over-year. Overall, we're well-positioned to capture market demand with the introduction of differentiated new products, including Photonova Spectra.

Turning to advanced visualization solutions on slide nine, we delivered organic revenue growth of 4.4% year-over-year, with continued strong performance in the U.S. and EMEA, driven by new product adoption across the portfolio. EBIT margin increased by 120 basis points year-over-year, driven by volume and contract settlements, partially offset by tariffs. We expect continued demand driven by current and future new products across cardiovascular, surgery, and ultrasound. Moving to Patient Care Solutions on slide 10, organic revenue declined 8.1% year-over-year, primarily attributed to select large monitoring installations more concentrated in the second half of the year. Total segment orders grew in the quarter, we're expecting U.S. clearance for our new premium anesthesia product in the third quarter of this year.

Segment EBIT margin declined 500 basis points year-over-year, primarily reflecting the decline in volume as well as tariff impacts. We're taking specific actions to improve PCS performance, focused on improving backlog conversion, increasing price, and optimizing segment cost structure. Moving to Pharmaceutical Diagnostics on slide 11, we delivered another strong quarter of organic revenue growth at 9.7%, driven by global strength in contrast media, continued price execution, and robust growth in our radiopharmaceutical portfolio. EBIT margin declined year-over-year, primarily due to the discrete supplier issue, planned investments in our radiopharmaceutical pipeline, and the Nihon Medi-Physics acquisition. Radiopharmaceutical adoption, including Flyrcado, is progressing well, as evidenced by the dose acceleration from late January.

Turning to our cash performance on slide 12, we delivered free cash flow of $112 million, up $13 million year-over-year, supported by working capital improvements. We continue to execute on our capital allocation strategy, including the completion of the Intelerad acquisition, which we expect to strengthen our imaging portfolio and drive total company recurring revenue. In the first quarter, Intelerad's business performance was in line with the expectations we previously shared. We've repaid $500 million of debt in the first quarter. We also returned capital to shareholders through our dividend and the repurchase of approximately $100 million of our shares. Turning to our outlook on Slide 13. We're maintaining our top-line guidance of 3%-4% organic sales growth, in line with the healthy customer demand globally and a good start to the year.

We continue to factor in a cautious outlook on China and expect limited impact to revenue from the conflict in the Middle East. To note, the Middle East represents approximately 3% of total company revenue. Regarding foreign exchange impacts, while rates have been volatile, we currently anticipate an approximate 100 basis point benefit to revenues this year. Related to adjusted EBIT, as noted earlier, we expect approximately $250 million of gross inflation impact for the full year. We're taking price and cost actions that are expected to offset more than half of the impact, which will partially benefit this year with larger benefits in 2027. Given these dynamics, we are prudently reducing our profit outlook for 2026.

We now expect adjusted EBIT margin to be in the range of 15.4%-15.7%, reflecting expansion of 10-40 basis points year-over-year. We continue to expect tariff impact in 2026 to be lower than 2025. Note that we do not expect a material benefit following the tariff policy changes announced earlier this year. We're also reducing our adjusted EPS guidance to a range of $4.80-$5.00 per share, which represents approximately 5%-9% growth year-over-year. In the wake of the current inflationary environment, we believe this is the right thing to do. With the change in profit outlook, we now expect free cash flow of approximately $1.6 billion in 2026.

The Intelerad acquisition is expected to have a minimal impact to adjusted EBIT margin and adjusted EPS in 2026. For the second quarter, we expect year-over-year organic revenue growth to be in the range of 3%-4% and adjusted EPS performance to decline in the low single digits year-over-year. Note that we will provide a recast of financials for the new AIS segment with our second quarter 2026 reporting. With that, I'll turn the call back over to Pete. Pete?

Thanks, Jay. Turning to slide 14, this chart demonstrates the clear progress we're making to deliver on our new wave of innovation. The majority of our latest NPIs have moved from regulatory clearance to early commercial orders, which is an important step towards enabling more meaningful revenue beginning in 2027. You may recall all of these innovations are differentiated because of a unique design or AI capabilities and have higher margins than their predicate products. Several of these timelines are earlier than expected, and we feel good about the team's high say, do ratio and how we're tracking to deliver on our pipeline. In summary, we continue to view 2026 as a pivotal year with the strongest innovation cycle we've had in the past decade that we believe will accelerate revenue and margin growth.

At the same time, we're working to manage through a dynamic macro environment with operational rigor. The fundamentals of the business remain strong. We're making meaningful progress advancing our precision care strategy and unlocking value for customers, patients, and shareholders. With that, we'll open up the call for Q&A.

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

Thank you so much. As a reminder to ask a question, simply press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. Our first question is from the line of Vijay Kumar with Evercore ISI. Please proceed.

Hi, Pete and Jay. Good morning to you. Thank you for taking my question. I guess my first one is on, maybe when you look at the organic cadence, back half does imply a step up. When I look at your order growth and book-to-bill, it looks like a capital book-to-bill was well north of 1.1. Just talk about this back half revenue acceleration, just given you had some noise around PCS, but your orders are coming in well above. You know, what gets back half to be close to that mid-singles range, given we're starting the year at 3%?

Vijay, thanks for, thanks for the question. Yeah, you're right that book-to-bill came in at 1.7 all in. If you strip things out, I think, you know, the equipment obviously doing better. Look, as I said in my prepared remarks, the overall capital equipment market's healthy. That's super critical, and we're doing well. We're winning at a higher rate. The U.S. market particularly has strong procedures growth. You know, I'd mentioned on the call that EMEA and the rest of world is actually doing quite well. It's actually up double digits, which is very good to see. Mid-single U.S. and rest of world at double digit, as well as China kind of aligning to where we are.

I think that coupled with the products that we have that I just went through on the last page. The structure piece, which actually in some ways will help us be even more focused. It gives us much more technical and clinical focus specifically on these new products, like how do you differentiate our photon-counting versus the other guys. We feel quite good about that. We're well-positioned with this to continue to accelerate, you know, both orders and sales here as we go through the year. Jay, I don't know if you wanna add anything else to that.

Sure. Vijay, remember 1% orders growth in the first quarter against a 10% comp, really good start to the year and illustrative of a healthy capital environment. The backlog sits at a record level. We think, you know, from a plan standpoint, the year has shaped up on the top line consistent with what we originally expected. The other thing I would add is the key NPIs, some of the ones that we've seen in our AVS business, like Vivid Pioneer, are performing very well, and we're also seeing some benefit in our area of imaging too. Really good start on those. Those will support acceleration in the second half.

The other thing is we are expecting some improvement in PCS in the second half, attributable to some monitoring deals that are earmarked for delivery in the second half, along with the new product. Really that's the story as we look at the second half of the year.

Understood. Maybe Jay, my second one on the inflation assumptions around EPS. You know, talk about the $250 million number that you quoted. What is it assume? Is it assuming current inflation trends? Does it have some cushion if things worsen? How should we think about the cadence of that inflation impact rate? Obviously, you said noted second quarter EPS would be down. Does it assume an outsized inflation impact and then it gets better in the back half? Thank you.

Yeah. Vijay, just maybe taking a second on the overall guidance. You know, no change to sales guidance, which we feel good about, as I mentioned earlier. The issue for us really relates to some dramatic changes to certain input costs that we saw during the first quarter of the year. What it really comes down to is memory chips, the geopolitical events impacting things like oil, freight, and certain other commodity costs. What we have assumed for the rest of the year is that these commodity costs remain at elevated levels, the elevated levels they're at today, we haven't included some level of cushion against that. We've included that as the working assumption in this guidance. We have offset measures in place. We've talked about implementing price changes, that's really primarily on new orders.

We've talked about, you know, evaluating modes of transportation to impact freight exposure, and we are taking some measured cost actions. You know, the things like price will have a more prominent impact on the second half of this year and into next year than they do in the second quarter, because a lot of the sales that are represented in the second quarter, as an example, are in the backlog today. I think we've taken a prudent approach here. We obviously are disappointed that we had to lower guidance. We don't, you know, we don't like that at all, but it's the right thing to do under the circumstances. I think the actions that we're putting in place will benefit more the second half of the year, but then into next year as well.

That's helpful, Jay.

Thank you. Our next question comes from the line of Joanne Wuensch with Citi. Please proceed.

Hi, can you hear me okay?

We can hear you now.

Now, Joanne.

Wonderful. Good morning, everybody. I'm trying to sort of pull apart the first quarter a little bit more, particularly the miss in PCS. I'm just curious if you can detail that a little bit better and how do you think about this on a go-forward basis? Thank you.

Sure. So listen, as we think about the first quarter relative to our expectations, the impact was really about a supplier quality issue we encountered in our PDX business. It was roughly $0.05 of impact. It came about late in the first quarter. It led to a write-off of some product, but also a sales shortfall. Were it not for this issue, you know, we would have achieved the quarter. Obviously not pleased with the performance in the first quarter, but it was really isolated to this PDX supplier issue. PCS declined, but that was generally speaking in line with our expectations. Pete, maybe you talk about PCS performance.

I think, Joanne, to your question, Jay delineated, we had built in some cushion relatively to what we expected PCS to do. It was relatively to that area. At that point, we weren't happy with how the results were. Just to reinforce the points we made on the call is the two areas were a lot of the larger monitoring deals, which, you know, fundamentally, that revenue carries the vast majority of the margin are more second half loaded. That puts more pressure on the first half from the margins on that. The second area is the new anesthesia product. That's really our first new premium anesthesia product in many, many years. I think it's gonna be a very good product. Some customers are obviously waiting to kind of see that come out.

We feel pretty good that the clearances and stuff will be on track for Q3. As I mentioned, a little bit later in that period. Those are both orders and sales drivers. The backlog piece on the monitoring are deals that we have with well-established customers, and they'll get executed. Having said that, you know, look, I'm not pleased with the decline in this magnitude, and we're heavily focused on mitigation actions. Jay mentioned some of them for the business, but, you know, backlog conversion, pricing in this business in particular, and we're looking at the overall structure. With PCS being more of a standalone segment really in the future, we have the opportunity to do more of a strategic assessment of the portfolio and all the parts and its pieces, but ultimately, we'll address the underperformance.

Thank you.

Thanks for your question.

Our next question is from Travis Steed with Bank of America Securities.

Hey, thanks for taking the question. First I'd like to start out on Flyrcado progress, and it almost doubled the run rate in April versus January, but still far from the $500 million target. Just curious how that trended over the last three months and where you see that business going forward.

Yeah, Travis, thanks for the question. Look, you know, step by step here, I would say. It was a great quarter for the radiopharmaceutical team in general, but particularly for the molecule Flyrcado, to your point. We're pleased with the acceleration. The ramp has gone pretty much in line with what we have thought. I think if you think about some of our previous discussions, the weekly volumes have continued to increase throughout the quarter. Really, as we've thought, I think reflecting the customer demand that's out there and just the way we see new customers versus existing customers adding on. We're also hearing more positive commentary from users, which is a really important part. This becomes kind of a network of users talking to other users, and so that buzz is out there.

As we stated, the week ending April 17, we had 390 doses. We have about 31 now active CMOs. You may recall in the first quarter, we talked about the performance of those need to improve. All of those are performing well, which sets us up for continued growth. We're also expanding the customer base. I think that's, you know, the base has grown probably close to the same amount as the molecule growth during that same time period. We're on track. Price is obviously holding as well. Clinically, the integration of the workflows is progressing. We talked about that in the past. I think the workflows relative to cardiology and stuff are on track. Again, all in all, feel quite good about where it's at.

We've got still a lot of work in front of us, but, as we mentioned, this gives us confidence here of what we've talked about half billion dollar of sales molecule by 2028.

Great. Thank you. Maybe a follow-up question on China. Mention a cautious outlook on China kind of baked in, into the guidance. Curious what you're seeing there, if you're seeing any green shoots or things changing on the margin and what all is kinda baked in from a market standpoint and competition standpoint.

Look, China performance was in line with our expectations for Q1, and it improved sequentially, which is important because obviously in the previous quarters, it's been more challenged. We were intentional in setting a cautious outlook for 2026 and still expect the China sales to be down year-over-year. It's also important that we are seeing some level of green shoots here in the marketplace. I think, you know, look, we aren't satisfied where the China performance is at this point in time. As I mentioned under Will's leadership and honestly, the market, we're starting to see some more promising commentary. I'd say things, look, improving market predictability is super important.

A few of our operational changes that the team has put in place have enabled us to be able to be more clear and accountable, strengthening our commercial organization. We've done some things to optimize that with our distributor network, and we're seeing the benefit of that. Being more clinical, particularly in certain geographic areas, has helped us out win at a higher rate and just be more nimble. I think those are important aspects, as well as we're getting better traction with our JV, which that we have with Sinopharm on DVPs and certain tenders. Phil and I literally just came back, I think it's a week today from China, where we met with customers and leaders in our team and had an opportunity to spend some time into the marketplace and talking.

I think, you know, relative to the acceptance of our products, the excitement about the pipeline coming and the changes that we're making, again, it's still going to be a more challenged year, but I think we're starting to get more stabilization in the China market.

Great. Thanks a lot.

Thank you.

Thank you. Our next question is from Robbie Marcus with JPM.

Oh, great. Good morning and thank you for taking the questions. Two for me. Maybe, the first one, just to circle back on guidance, Jay. You know, we've seen some negative revisions over the past few years. A lot of it has been from unintended global events. How are you thinking about the amount of cushion you've put in here, especially given you've been reduced, you know, offsetting a lot of these costs the past few years? How much is, you know, legitimate offsets versus perhaps underinvestment, and how much cushion is there?

Sure. Robbie, with this reduction, we've tried to provide adequate cushion in the guidance that we have. And also adequate offsets in terms of price and cost measures. I think importantly for us, you see about $0.23 of offsets that we're reflecting in our guidance. Now, importantly, much of that is in Q3 and Q4 versus Q2, which is why you see a decline in earnings in Q2 before you start to see some acceleration in the back half of the year. That's really related to when the mitigation actions were able to kick in.

As it relates to underinvestment in the business, one thing we've been intensely focused on is ensuring that we have adequate R&D spending in place and also adequate commercial investments in place to support all of the great progress that we're making on the pipeline. We've done all of that, but as far as discretionary spending areas outside of that, we're intensely focused on mitigating those and managing those areas. I think the answer is, I believe we have adequate contingency, and I believe that we're continuing to invest in the right way in the business.

Yeah, I think, Robbie, as we've said, look, on growth, we're set up well for the rest of the year. Look, we've taken this hard decision with some of these hyperinflation items, but now it's up from here. We're not counting on hope on these plans. We've got strong operational plans to make sure that we can do the reset and be able to actually move from here upward.

Great. Maybe a quick follow-up. There are coming generics in the diagnostics business, or pharmaceutical diagnostics, sorry. Seems more like a 2027 issue than a 2026 issue. How are you positioning and thinking about generic impact into the end of the year and into 2027? Are there any measures you could do to help mute any competitive impact? Anything else we should be thinking about there? Thanks a lot.

Yeah, Robbie, look, we haven't seen any impact from any of the entrants at this point in time. Obviously, we take all competitors very seriously. You know, the reality of it is the market today is a generic market. You know, there's branded generic products that are out there, but there's already six, seven different players within the marketplace. Customers look for a full SKU lineup. You know, the more you mix SKUs, the more the probability of mistakes, resiliency in the supply chain, that product breadth and convenience, different sizes that integrate into injectors, things of that nature. Those are all of the different pieces that are out there. Obviously, to your point, we have contracting options about how we integrate products to fully offer the wide spectrum that an IDN needs and all of those things that we're constantly looking at.

Just to be clear, at this point in time, we're not really seeing any impact from any new entrants into the marketplace.

Pete, maybe if I could just ask a little clarification. I believe these are AB, you know, they're able to be switched at the pharmacy level versus branded generics. Does that change the strategy at all?

No, I mean, there's some different contracting positioning, but it also can mean that anybody within the group, any of the folks that are making products, if they're challenged on delivery or that those products can be reasonably substituted. We deal with that today, right? If we were short or one of our competitors today were short, one of us could step in. I think, you know, that dynamic we're dealing with today. That would be a similar type of competitive issue or challenge that the team is used to dealing with.

Great. Thank you very much.

Thanks, Robbie.

Thank you. Our next question comes from David Roman with Goldman Sachs.

Thank you. Good morning, everyone. Appreciate your taking the questions here. Maybe I'll start just on photon-counting CT. Could you just elaborate a little bit further on the commercial strategy here and maybe help us think through market segmentation, especially in the context of your primary competitor here, I believe having a kind of a two-tiered product and pricing structure?

Yeah, Dave, thanks for thanks for the question. I would first start out just to say with we're actually doing quite well in the CT market around the world, without even having our photon-counting system on the marketplace. The question is why is that? Well, there is a growing need for CT of different types throughout the world. This Vibe product that we introduced, just about a year ago is dedicated to cardiology, and it's just taken off tremendously. It's actually one of the biggest drivers for what's taking place in Europe and international marketplaces. We have allocated more dedicated resources and focus into the field and to CT.

Some of the changes we announced are about having more specialized reps, people that can go in and talk head-to-head, the clinical, technical, and ultimately productivity differences to customers. I think that's super important as opposed to having more of a generic discussion. We also are big believers that artificial intelligence breakthroughs are also going to change traditional CT. We have a list of different things that are going to be coming out that are going to increase resolution and capabilities in our traditional CT range and will be significantly more cost-effective for someone who wants more resolution than maybe going to photon counting. There's an interesting mix that's out there. All that being said, we're super excited about our photon counting approach.

I think when customers look at our resolution, they look at our contrast capabilities in what's called spectral imaging or being able to see tissue differentiation. They're seeing a system that doesn't have trade-offs compared to maybe what's available in the market. You have this high resolution all-in capability upfront that you don't have to make these trade-offs. You know, we're gonna come in at the ultra high-end. There's a lot of customers been waiting for us for some time. Typically, this will start with the conversion of our installed base. It will then move to broader tenders on competitive targets. We just had the approval, as you know, at the end of March, beginning of April. You know, we've got a solid funnel of opportunities, over $100 million of that.

You know, the way to think about this is that between, you know, you getting approval, it's many times four to six months that customers have to do the assessment, they have to look at. That then builds a bigger order funnel, then it's five to eight months after that, depending on does the customer have the room ready or are they building out, that the sales transfers take place. I think we feel quite good about where we are with approvals, where we are with builds, and the timing to sales conversion. The most important thing is we think we chose well on our technology approach.

It's very helpful perspective. Then maybe, Jay, just as a follow-up here on some of the input cost dynamics. Could you maybe help us understand a little bit more detail just on the phasing and impact of some of these considerations? I guess I would have expected you to have some amount of raw material on hand right now as in giving your inventory turns that would enable you to buffer kind of the impact in the immediate term, then potentially see the impact build throughout the year, maybe help us break down a little bit the timing of some of the cost headwinds, what gets realized now then what's kinda just deferred given the natural dynamics in your business from the timing of acquisition raw material through final finished goods and sale.

Yeah. Good comment, David. As we think about the impact of these incremental inflationary costs, there was limited impact in the first quarter, if any, because of what we call FIFO rolling out in future quarters the impact of higher priced raw materials. The second quarter is really the first quarter where we see a real impact from inflation. Some of it, the logistics attaches to our product at the very end in many cases. We see, you know, some of those more immediate impacts. With our faster flow items of faster turn businesses, we're starting to see an impact in the second quarter.

The largest impact will be in the third quarter and fourth quarter. The good news for us is much of the offsets that we have in place start to benefit the second half of the year. The $0.23, we're not really able to impact the second quarter in terms of those areas very much at all, but really that benefits the second half of the year. That's really the overview.

Great. Thanks so much.

Our next question comes from Larry Biegelsen with Wells Fargo.

Good morning. Thanks for taking the question. Jay, I wanted to start with the Intelerad, and how that's impacting the guidance in 2026, particularly margins and interest expense. I imagine interest expense goes up, you know, starting in the second quarter. I thought this was a, you know, a relatively high margin business. You know, do you expect the deal to be accretive to both sales, organic sales growth and EPS next year? I have one follow-up.

Sure. First, just as a reminder, Intelerad, you know, really was about extending our cloud capabilities and outpatient networks and the efficiency of care teams and helping us deliver precision care for patients globally. Really excited about that transaction. We were also very pleased to report closing it in the first quarter, that came in in line with our expectations, perhaps a little bit better. Overall, good start. The momentum is continuing in a good way. You know, we previously said double-digit sales growth is what we expect, and we expect to accelerate that a little bit over time. We also talked about margin accretion. We talked about an EBITDA margin north of 30%. All of that is holding true.

You know, of course, you have things like integration costs and so on. In the first year, we're expecting this to be slightly dilutive, but we've kinda sorta covered that in the forecast as we add EBIT, then include the incremental interest expense. What I would say is it's fairly neutral from a bottom-line standpoint in the first year. As we move to 2027, we'll see a little bit of positive contribution on the bottom line, then also as an accelerant to sales growth. We're pleased with this one. I think the strategic logic of it, as we've closed it and now are studying it even further, is more intact, and the financial profile is continuing as we expected, which is just great to see.

Hey, Jay, one follow-up, maybe on the cadence. I think you've addressed sales, but on margins and EPS in 2026, your comments on the call imply, you know, margins and EPS should be up pretty significantly in the second half of the year. Do you now expect gross margin to be down year-over-year because of inflation? Thank you.

We do expect margins to improve in the second half of the year. A lot of that benefits from, you know, some acceleration in sales in the second half of the year, the new product contribution in the second half of the year, and then those self-help initiatives I described earlier, which benefit the second half of the year. We will see a margin step-up, second half versus first half. Now, I would say that we typically see that in normal years, but we will definitely see it this year. Secondly, you know, from a gross margin standpoint, I would say it's gonna be relatively neutral year-over-year. A lot of the activities that we're putting in place will offset the inflation, relatively neutral year-over-year from a gross margin standpoint.

All right. Thank you.

Thank you. Our next question comes from Matt Taylor with Jefferies.

Thanks for taking the question. I wanted to double-click on some of the commentary you made on PDX, which had a good quarter. Good to see the progress of Flyrcado. I guess, could you help us understand what the gating factors are there to drive more production? Because it does seem like there's demand in the market. I also wanted to ask about the MRI contrast agent. You mentioned some progress on that program. Could you talk about when that could actually launch? What's the timeline to get through phase II, phase III?

Sure. Maybe I'll start on Flyrcado. We were really pleased with the progress on Flyrcado. The run rate, the annual run rate went from roughly $25 million or so to $46 million in April. We're continuing to work to accelerate that. Now, as we said historically, it's an equation that involves supply and our ability of customers to modify workflow to incorporate and sort of deliver doses at higher levels. We're incorporating new customers, we also want them to climb the ramp up from low levels to higher levels of dose utilization. It really comes down to, you know, continuing to manage the CMO network. We're intensely focused on very high levels of delivery rate. Over 95% is our target.

We'll continue to migrate and add some new CMOs, but also ensure the right delivery rate is in place. Add new customers and ensure that they're comfortable ramping their own utilization of the product. You know, we were very pleased with the progress in the quarter. I think all of the positive feedback we're getting in terms of, you know, the benefits of this particular product are coming true, so it's a good start. Pete, do you wanna talk about the other product?

I'll just comment on Flyrcado as well. I think that as we've talked about previously, customer reimbursement constructs, customers are getting that worked out both privately and through, you know, the health system structure, which is important. The workflows are, I think, our algorithm operationally, how we go to a customer and help them set up. That's definitely getting to be a more well-oiled machine. As Jay said too, with the CMOs, their how to make the product has improved. Those are all critical items. As we bring on more customers, you know, the ability to scale from I'm doing two to three patients a day to I'm doing 10 or 12 increases as we go out the year. We're optimistic about that.

We still are going slow to go fast because, again, we think this has a long-term potential being a billion-dollar molecule. Again, excited about how the team has been leading this and where we're doing, going. Your second question you asked was about the new MRI imaging agent that we have in clinical studies. This is super exciting. I think if you followed MRI imaging in general, you would say the future of imaging heavily hangs towards MRI. It's radiation-free, very friendly for children, older adults. The technology with things like AIR Recon DL are moving from where it used to be 45, 50-minute exams down to 10, 15. The modality is gonna continue to grow. One of the limitations has been the contrast agents available. Forever, it's been gadolinium.

Gadolinium's been a great workhorse, but it has challenges. It has retention challenges in the body. It really can't be used with pediatrics. It comes from sources only one part of the world. It's a rare earth element. So it's been limiting about what one can do. There's been other attempts that have been challenged over the years to come out with different agents, but we really think we've got a winner here. Obviously, we need to be able to make it through our studies successfully. We had a successful phase I, which is where a lot of these products in the past have failed relative to tox studies and overall adverse events, but we've done quite well through phase I.

This is now in a phase II, phase III combined study, which is around dose optimization to image quality. And, you might have seen some work that actually took place earlier at the Mayo Clinic, that we feel very good about. This is a manganese-based product. There have been other folks that have worked on manganese in the past. I think the difference is all about your formulation, which we have a very proprietary focused approach here that enables the molecule to be able to provide high-quality imaging comparable to GAD, but be able to remove from the body in an effective way. That's really the key here.

Obviously, if we're successful of achieving that, bringing a proprietary first to market molecule into this market where there hasn't been anything in decades, we think is a really big opportunity, not only to grow and obviously have a high-performing, highly profitable product, but it really fundamentally changes how we think about how MRI imaging for vascular imaging can be done on all types of populations. This is super exciting. The fast track and the dueling speed up this. You know, a product like this that didn't have those capabilities might be out in the 20, 30 range. With fast tracking and the combined studies, if successful, you know, this could be a 2029 type molecule introduction to the marketplace.

Great. Thanks for all the comments. Thanks, Pete.

Sure.

Thank you. Our next question is from Ryan Zimmerman with BTIG.

Thank you. Thanks for fitting me in. You know, Pete, with the, with the changes in the organizational structure with Imaging and AVS, you know, you talked about the rationale for it to some degree, but I'm wondering how you think about the benefits of it if there is, you know, increased business capture. Does the growth profile of that business collectively change or move higher, you know, from what may have been maybe a mid-single digit to maybe the high end of the mid-single digit range? I'm just wondering if you can articulate, you know, how you think about the downstream implications of those changes from an order standpoint that we may see in kind of this new segment.

Yeah, Ryan. Really, really good question. You know, look, as we thought about AIS at the highest level, it's all about what can we do to drive a higher growth profile organization. Yes, there will be some cost benefits that will help margin, but the number one priority was that. The predicate model was realistically the model that Phil was running prior to this, which you may recall, AVS was taking ultrasound and image-guided solutions to put them together. We saw an opportunity by putting them together on the way we articulate the technology story to customers to be winning at a higher level, candidly, by doing it that way. On the back end, on the R&D side, finding new ways faster to come up with differentiated products. Fundamentally, AIS is a bigger version of that.

We would expect at the street level, starting rather quickly, to be able to see us being able to bring solutions and articulate differentiated value faster with this model. I think on the upstream side, meaning on the R&D side, when you think about a cardiac pathway or an oncology pathway, all the products needed to work together now fit into that AIS construct. As far as allocation of R&D dollars, faster moving to get something done, two less meetings to meet to make a decision, all of that gets much more streamlined. That's, you know, we would expect we'll see some benefits in this this year, but obviously more benefits come in the following years as you start, you know, thinking about how you're building products and, and framing that to customers.

Yeah, understood. Then for Jay, you know, free cash flow ticked up a little bit versus last year. You know, in the face of these inflationary pressures, you guys bought back shares about $100 million or so. You had dividends. It's been a very balanced, I would say, you know, capital, you know, deployment strategy thus far. Does your prioritization of capital deployment change in the face of some of these inflationary pressures? Meaning, you know, more to share repurchases, less M&A. You know, take us through kind of your thought process, I guess, Jay, as you think about, you know, what you do with that cash, again, in the face of some of these, you know, changing input costs and so forth.

Great. Thanks for the question. Really good progress on cash flow in the quarter. I think we did a particularly nice job with respect to working capital balances. This business generates a lot of cash, and so we have the opportunity to deploy it. We will first continue to invest in the business organically, to Robbie's question earlier around R&D levels and so on. We'll continue to ensure appropriate investment so that we can drive this business forward. We'll also do discipline M&A. I think, you know, from our standpoint, the quarter was a great example of that, closing the Intelerad deal. That's a very good ROIC deal over time. It's strategically and economically accretive to the company. That's exactly the kind of M&A we will continue to do.

We will look to see when the shares sell off, and we look at them relative to the intrinsic value, we will evaluate buyback. We felt very good about the buy that we did last quarter, and we did so because, you know, we feel very strongly about the long-term prospects of the business. As we think about some of the mechanisms we're putting in place now, like pricing, which will benefit next year, like the new product momentum that will benefit next year, you know, we feel very good about the share buyback program, and we'll look to continue to do that as a supplement to M&A.

Thanks, Jay.

Thank you. We'll now take our last question from Anthony Petrone of Mizuho.

Thanks. Maybe one for Jay and then one for Pete and Jay. Just Jay, on the tariff impact, you're calling out $90 million-$100 million quarterly at the margin, in the presentation material quarterly, it seems like that level is holding. What do you actually have baked in there from tariff impact for 2026? If you do get, you know, a reimbursement decision later this year, do you get roughly $100 million back at the margin? I'll have one quick follow-up on AIS. Thanks.

Sure. Basically, we said tariff impact in 2026 will be less than 2025. That's less than $250 million or so, is what we expect to see. Based on the mitigation activities that we've put in place, the first quarter will be the biggest impact of the year, and that will trail down through the rest of the year. We have not seen as a result of the IEEPA Supreme Court ruling as those tariffs were replaced. We've assumed those tariffs remain in effect for the rest of the year, nor there is a tariff impact for the rest of the year. We've assumed that in the guidance that we've put forward. You know, that might be an opportunity.

As far as refunds, you know, we will be submitting, as many companies will, for refunds related to the tariffs that we paid last year. We're hopeful that we'll be successful in terms of recovering that. We haven't determined how we will report that or account for that, in terms of, you know, adjusted EPS or anything like that. That's not included in the forecast that we've put forth today.

Thanks. Just on AIS, and I don't know if this is across the portfolio or in AI specifically, but when you think about AI-enabled platforms, you have Intelerad in there. It's coming in as a Software as a Service model. We count seven AI-enabled assets across the portfolio at this point, various different programs. Will it all show up as Software as a Service? What are the milestones we should look for for AI-enabled capabilities? What does the economic model look like over time? Thanks.

Hey, Anthony. Yeah, great question. Look, I think a big part of our growth algorithm is really this combination of new wave of innovation. It's about better commercial execution, both on equipment as well as service. You saw some of that throughout the call here at the first quarter. I think we're gonna be able to highlight that and accelerate our growth here as we go through the year. Relative to AI, it comes in two flavors today. One is, it's the AI inside. It's why things like Vivid Pioneer are growing at very high rate right now because of four or five algorithms that make this product better than its competition, we get a higher price for it.

We get multiple 100 points, basis points improvement in margin, which is a combination of its cost, but it's really about its value. That's really the first piece. All those products that I had on the page in the deck all have embedded AI. Some of them have couple algorithms, some of them had four or five. That's piece 1. The other part you hit on, which is again, we're doing more and more, which is actually having SaaS-based capabilities for specific features. Part of our vision is to be able to sell the hardware, have it more standardized of what that feature set is, and then have a wide menu of other, SaaS cloud-enabled applications that customers can customize by that individual scanner or by their fleet.

CT is kind of our first modality as well as ultrasound that leads in that. I think you're gonna see more and more of that continue to grow, and we're in a good spot now. Back to Intelerad. Why is that important? Because not only in outpatient but in inpatient, the more that we integrate those tools, that will be the reading interface, not only for the diagnosis, but also in many cases, deploying the AI tools. That's all, you know, well thought through of how we continue to leverage that. Again, thanks for the question.

Thank you. This concludes our question and answer session. Please proceed with any closing remarks.

Thanks for your interest in GE HealthCare. Again, we look forward to connecting and chatting with many, if not all of you here in some upcoming conferences. Thanks again.

This concludes our conference. Thank you for participating, and you may now disconnect.

Good day, and thank you for standing by. Welcome to GE HealthCare Technologies Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, 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 your hand is raised. Please note that today's conference is being recorded. I will now turn the call over to your speaker host for today, Carolynne Borders. Please go ahead.

Thanks, Operator. Good morning, and welcome to GE HealthCare Technologies Inc.'s Fourth Quarter and Full Year 2025 Earnings Call. I'm joined by our President and CEO, Peter Arduini, and 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. With that, I'll hand the call over to Peter.

Thanks, Carolynne. Good morning, and thank you for joining us. As I look back on our performance in 2025, our third year as a public company, I'm incredibly proud of the meaningful progress that we're making on our innovation renaissance to deliver for our customers and improve patient lives. In the fourth quarter, we delivered strong financial performance above our expectations. This included double-digit organic revenue growth in pharmaceutical diagnostics and mid-single-digit growth in imaging and advanced visualization solutions. We delivered strong bottom-line and cash performance in the fourth quarter, excluding tariffs. The overall capital equipment environment remained healthy. Demand in the US and EMEA remained strong. In our recent US customer survey, we saw an increase in the number of large customers that plan to invest in capital equipment in 2026. We secured multiple large agreements in the quarter and extended several others. A great example is our seven-year agreement with the University of Rochester Medical Center to advance diagnostics and precision medicine. This collaboration crosses every aspect of our enterprise. From AI-enabled imaging equipment and radiopharmaceutical production to system-wide patient monitoring solutions and services. In November, we announced the planned acquisition of IntelliRed. We expect this will accelerate our fully connected cloud-first imaging ecosystem by adding digital tools and SaaS offerings that enhance clinical operations, drive recurring revenue, and enable more personalized patient care. As a reminder, in the first full year of ownership, we expect IntelliRed revenues to be approximately $270 million, which is growing in the low double digits, with an adjusted EBITDA in excess of 30%. Finally, we advanced Heartbeat, our proprietary business system, which we implemented midyear as the next step in our lean journey we started a few years back. And I'll talk more about this shortly. Moving to 2025 highlights on slide four. We made meaningful progress across the three pillars of our strategic framework. Let's start with precision care. With diseases becoming more prevalent, complex, and chronic, the need for integrated solutions has never been greater. As the only diagnostic imaging company with a full portfolio of contrast media and radiopharmaceuticals, we differentiate ourselves with our D3 strategy. We bring together smart devices and drugs across disease states enabled by digital AI and cloud to help support earlier, more accurate diagnosis and ultimately therapy delivery. Our three-year vitality rate for new products is strong at 55%, up approximately 5% from our prior year. Recall, this means 55% of our revenue is coming from new products. This reinforces that we're delivering the right offerings for our customers. We're making solid progress on our launches. For example, our Omni Total Body Pet and NexGen spec are commercially available in Europe, strengthening our position in diagnostics. Our regulatory timelines for products we announced at RSNA are all on track, including Photonovo Spectra Photon Counting CT and Cigna MR with Freelance. Additionally, customers have great things to say about VividPioneer, our most advanced cardiovascular ultrasound system, which has been contributing to strong growth in AVS. And Forcado for myocardial perfusion, both of which are currently in the market. We're pleased to report that our Flaccato ramp has been progressing well. You may recall at our last earnings call that we said we're going slow to go fast to help ensure customers have a high-quality experience. And that starts with being able to deliver doses consistently. I'm happy to say we're starting the year with our CMO partners more consistently operating at approximately 95% on time to delivery to meet customer demand, which allows us to begin bringing on more patients. In the week ended January 23, we delivered 220 doses of FERCATO. And we expect the weekly dose rate to continue to increase throughout the year. These improvements allow us to onboard more customers, and we've been making solid progress in reducing the cycle time to activate a new customer. Overall, the customer experience with FERCATO has been quite positive based on its many advantages. Also, recently, the American Society of Nuclear Cardiology recommended PET as the preferred imaging modality over SPECT, the current standard of care, reinforcing a meaningful shift towards PET and nuclear cardiology. As I stated before, our confidence in our ability to deliver $500 million or more in Vorcado revenue by year-end 2028 remains intact. And in the long run, we see a billion-dollar opportunity for this novel molecule. Turning to our second pillar, we accelerated growth with more than $7 billion in enterprise deals globally since our spin. For example, we entered 2025 with one of the largest collaborations, Sutter Health. In addition, we signed a multiyear agreement with the Ministry of Health in Indonesia, where we have installed more than 300 advanced CT scanners in urban and remote hospitals. Many of these deals have a service component that delivers strong recurring revenue with attractive margins. In 2025, our service business grew mid-single digits. With the launch of many new advanced products, we would expect our capture rate of service agreements to increase in the future with all the new wave of innovation entering the market. We're also executing on our disciplined capital allocation strategy with tuck-in acquisitions like Neon Metaphysics and Eichometrics, and our planned acquisition of IntelliRed. These transactions elevate our portfolio and are expected to drive recurring revenue and supplement top-line growth and profitability. Turning to business optimization, our third strategic pillar. We continue to advance our business system Heartbeat to improve the customer experience and drive productivity to deliver margin expansion. Our teams accomplished this by remaining focused on helping clinicians provide care for patients, delivering greater value for customers and shareholders. We're gaining momentum with our clinical and solution selling strategy in EMEA, with several multimodality deals, including a twenty-year collaboration with Nuffield Health, the UK's largest healthcare charity. The combination of our differentiated portfolio, our team's deep expertise across disease states, and best-in-class services sets us apart with our customers globally. Turning to slide five. Underpinning our execution is a step change in how we run the company, anchored in key metrics around safety, quality, delivery, cost, and innovation, or SQDCI. Heartbeat is about driving the right leadership behaviors, culture, and KPIs supported by disciplined processes and tools for problem-solving and continuous improvement. Think of Heartbeat as the steady pulse that ultimately runs through our organization to deliver results. An example of where we've deployed Heartbeat in the back half of 2025 was related to a key priority to improve past-due backlog, which relates to site readiness or our ability to deliver product. Heartbeat provides a structured approach to problem-solving by eliminating steps, improving information flow across the value stream from our plants all the way to the customer. We increased visibility to orders to help ensure timely delivery, strengthened alignment with our factories, and improved how we manage customer site readiness. Because of this, we were able to drive an average monthly improvement of 25% in past-due backlog versus the prior year, ultimately translating into improved sales and cash conversion in 2025. It's early days, but we're building our Heartbeat muscle and already seeing the impact. I'm excited about the progress our teams have made to date. With that, I'll turn it over to Jay to discuss our financial results.

Thanks, Pete. Let's start with our financial performance for the fourth quarter on Slide six. We delivered revenue of $5.7 billion, which grew 4.8% organically year over year, exceeding our expectations. On a reported basis, product revenue grew 7.9% and service revenue grew 5.5%. In the quarter, orders growth was 2% following 5.6% growth in the year-ago period. We exited the quarter with a record backlog of $21.8 billion, which grew $2 billion year over year and $600 million sequentially. We delivered a book-to-bill ratio of 1.06 times. Adjusted EBIT margin was 16.7%, down 200 basis points. Margin was negatively impacted by approximately $100 million in tariff expense as well as unfavorable mix. This was partially offset by volume and price. Adjusted EPS was $1.44 per share, down 0.7%, including approximately 17¢ of tariff impact. Excluding this impact, adjusted EPS grew 11%. Lastly, free cash flow was $916 million in the quarter, up $105 million, which included an approximate $90 million tariff impact. Turning to our full-year results on slide seven. We made excellent progress in 2025, supported by strong end markets, particularly in the US and EMEA. This enabled us to deliver revenue of $20.6 billion with organic growth of 3.5%, ahead of guidance. On a reported basis, product revenue increased 4.5% and service revenue grew 5.6%. For the year, organic orders grew in the mid-single digits. We recorded record backlog, and book-to-bill was solid at 1.07 times. 2025 adjusted EBIT margin of 15.3% declined 100 basis points versus the prior year, and adjusted EPS of $4.59 grew 2.2%. Full-year results included a tariff impact of approximately $245 million to EBIT and 43¢ to adjusted EPS. Excluding these impacts, adjusted EBIT margin would be up 20 basis points for the year, and adjusted EPS would grow 12%. The improvement was driven by volume and price. Turning to margin performance on Slide eight. Mitigating tariff impact is another example of Heartbeat in action. For example, we enhanced manufacturing flexibility by shifting a PETCT line from the Middle East to the US and a surgery line from Asia to the US, leveraging existing infrastructure. We also partnered with large vertically integrated contract manufacturers to reposition production within their global networks to more favorable geographies. This is a clear proof point of how Heartbeat enables execution, accelerates change, and delivers measurable results. We're pleased with the work our teams are doing to drive operational efficiency, productivity, and SG&A optimization. At the same time, we deployed more than $1.7 billion of innovation investment in 2025. We're doing this in a targeted way, prioritizing programs that strengthen our competitiveness and support durable, profitable growth. Let's move on to segment performance, starting with imaging on slide nine. Organic revenue in the quarter was 5.3% versus the prior year, driven by strong execution in EMEA and the US, particularly in nuclear medicine. Segment EBIT margin benefited from volume and price but declined year over year due to tariff pressure. Imaging margin was accretive excluding tariffs, and EBIT margin improved sequentially as a result of continued operational rigor. Overall, we expect to continue to grow this business through large enterprise deals and new product launches. Turning to Advanced Visualization Solutions on slide 10. Organic revenue for the quarter was up 4.2%, with continued strong performance in the US and EMEA. New product adoption across the portfolio also contributed to revenue growth. EBIT performance was driven by volume growth and productivity gains, offset by tariffs and inflation. EBIT margin increased excluding the impact of tariffs. We've seen progress driven by NPIs with growth in surgery, cardiovascular, and women's health. Key introductions like Vivid Pioneer are strengthening our leadership in cardiovascular ultrasound. Looking ahead, our roadmap is focused on differentiated data-driven technologies to accelerate recurring revenue. Turning to patient care solutions on slide 11. Organic revenue improved sequentially, with restoration of shipments from the third-quarter product hold. Organic revenue declined 1.1% versus the prior year due to a decline in life support solutions. EBIT margin improved 530 basis points sequentially, driven by volume recovery from the product hold, but declined 380 basis points year over year largely due to unfavorable mix and tariffs. Our monitoring transformation remains on track, driven by digitally integrated NPIs that enable improved clinical decision support and workflow management as well as large commercial agreements. Looking ahead, we are also confident that our cost productivity funnel and structural optimization actions position PTS for profitability improvement in the future. Moving to pharmaceutical on Slide 12. We delivered another strong quarter with organic sales growth of 12.7%. This was driven by global growth in contrast media, pricing execution, and adoption of our US radiopharmaceutical NPI portfolio. EBIT grew 10%, and sequential margin expanded 20 basis points. While margin declined 330 basis points year over year due to ongoing planned investments in NPIs, along with the Nehan Metaphysics acquisition. We're executing our strategy and expect continued robust growth driven by global demand for contrast media and radiopharmaceuticals for PET imaging. Now let's look at cash performance and capital deployment on slide 13. For the year, we delivered free cash flow of $1.5 billion. This included approximately $285 million tariff impact. Free cash flow conversion was 72%. Reinvesting in innovation and organic growth is a top priority. This is translating into a differentiated product portfolio that we expect to improve our competitive position globally. We also look to deploy capital inorganically, as evidenced by the seven acquisitions we've closed since spin. We're pleased that we've also been able to deleverage the balance sheet and solidify our investment-grade credit ratings. During the year, we returned capital through our dividend and new share repurchase program, which was authorized by our board in April. Since that time, we've repurchased $200 million in shares at an average price of $71. We continue to demonstrate conviction that our business strategy will drive meaningful shareholder return over time. Let's turn to our outlook on Slide 14. For 2026, we expect organic revenue growth of 3% to 4%. We've taken a prudent approach to this guidance, which reflects a healthy capital equipment environment and continued commercial execution while factoring in a cautious outlook on China. Relative to foreign exchange, we expect the benefit to revenue to be approximately 150 basis points for the year. Adjusted EBIT is expected to be in the range of 15.8% to 16.1%, reflecting 50 to 80 basis points of expansion. We continue to expect the impact from tariffs in 2026 to be less than 2025. We plan to continue our tariff mitigation actions in 2026, including supply chain shifts, product transfers to more tariff-efficient geographies, and expansion of duty-free USMCA efforts. Our adjusted effective tax rate is expected to be in the range of 20% to 21% for the full year. On adjusted EPS, we expect to deliver a range of $4.95 to $5.15, representing 8% to 12% growth. Lastly, we anticipate free cash flow of approximately $1.7 billion for the full year, representing growth of 13%. For the first quarter, we expect year-over-year organic revenue growth to be in the range of 2% to 3%. While we expect to see the largest tariff impact in the first quarter of the year, given the timing of the 2025 policy changes, we still expect mid-single-digit adjusted EPS growth driven by an increase in volume. For the first quarter, recall that we had particularly strong orders growth last year supported by a strong US market, along with the initial booking of a large enterprise deal. As Pete mentioned, we've got a robust pipeline of NPIs upon clearance, and we expect these to drive future orders growth beginning in 2026. With that, I'll turn the call back over to Pete.

Thanks, Jay. In conclusion, we entered 2026 with strong momentum. As part of our ongoing commitment to innovation, we're proud of the demonstrated progress in our pipeline of new products. We are deploying our business system Heartbeat across the enterprise to drive top and bottom-line growth. We have significant opportunities in large, resilient end markets, a record backlog, and are accelerating innovation both organically and inorganically. We also see a solid runway for additional margin expansion over time. Lastly, I'd like to recognize our colleagues worldwide who have navigated a dynamic environment while remaining focused on delivering for our customers and patients every day. With that, we'll open up the call for Q&A.

Thank you, Peter. I'd like to ask participants to please limit yourself to one question and one follow-up. Operator, can you please open the line? Thank you. Question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press 11 again. Please stand by while we compile the Q&A roster. Now first question coming from the line of Matthew Taylor with Jefferies. Your line is now open.

Hi. Thanks for taking the question. I did want to ask first for a little bit more color about the 2% order growth. If you could talk about the composition of that and just the outlook for orders and book-to-bill as you look into 2026, given now trailing twelve-month orders in kind of the mid-single-digit range, what are some of the puts and takes I guess, what are some of the headwinds and tailwinds for orders next year?

Sure. Matt, thanks for the question. So we were actually pleased with the order book performance in the fourth quarter. And as I've said in the past, when we think about the health of the business, we really look at three different areas. We look at book-to-bill, which was 1.06 times in the fourth quarter, 1.07 times on a trailing twelve-month basis. So robust book-to-bill. We look at the backlog. The backlog sits at a record level. It was up $2 billion year over year. And then finally, we look at the order growth rate. Now when we look at orders, we do look at it in a couple of different ways. We look at the trailing twelve-month as you pointed out, solidly in the mid-single digits. And we also look at a kind of two-year comparison, two-year compounded growth or stacked growth to eliminate some anomalies there. And, again, this gets us to about 4% in the quarter. So we feel pleased with the order backdrop. And then as we look to next year, a few things are gonna happen. Now first, we'll have a difficult comp in the first quarter of the year related to the Sutter deal and some of those bookings. Then as we move through the rest of the year, we'll start to see the benefit of many of the new products that we highlighted at RSNA start to come into the order book. So we're really gonna see a bit of an acceleration as we approach the second half of the year, versus early in the year. We think this is a really good setup for '26. But, you know, as we think about sales impact, we start to see a great sales impact in 2027. Pete, anything to add?

No. Just to the point that you mentioned, Jay, for '26 this year, with all the new products we launched in Q4, it's not untypical. You know, we have we're on track to all of those approvals. But until we have those approvals, we can't take an order on this. And once we get that approval, the orders will come in and ramp up rather quickly. And if you recall, you know, there's nine products that probably are the nine biggest ones. We got in the last decade. So all of those have, you know, $100 million plus type capabilities in growth. So once we get the right global regulatory approvals, we'll be able to start bringing those into the order book. So from that standpoint, the size of our backlog, I mean, we feel very good where we're positioned here as we start.

Great. And as a follow-up, can I ask a question on Fortetto? It's my favorite topic. So just wanted to get more color on the current state of supply, how things are going with the big partners that you signed, the kind of reception that you're getting from facilities adopting Mercado into existing Rubinium or SPECT workflows?

Yeah. No. Look. I think, you know, broadly, as I mentioned in the prepared remarks, we feel really good about where we are with Arcado. The feedback, what's always so important here is how do clinicians feel about this product and making a difference in the diagnosis of a patient. And it is unanimous on the feedback relative to what we're hearing, relative to the image quality, the specificity, the sensitivity that it brings, and then also, ultimately, the convenience that it will bring to people that just can't ultimately have a generator on-site. So it has all of those capabilities. That being said, the process to implement is different. And so you know, the thing that we talked about in our last call, I mentioned it here in the comments, we're consistently delivering the doses as a critical item for us to focus on. To provide the best experience. Because, again, if that doesn't show up that morning, that's a missed patient. So we really, you know, throttle back how many patients and customers we would bring on until the what we call OTD, on-time delivery, is at a 95% rate. And we're roughly in that rate. So, you know, you heard the numbers that I talked about. You know, January, you know, roughly 220 was kind of what the weekly number was. I think we said on January 23. The important part then is now that we have that CMO level, we can continue now to be able to increase that level. And so we would expect that the doses will go up each of the following weeks. So I think that's the really important part here in that that consistency is key. We'll be bringing on more CMOs to go into more geographies. And specifically to your point, you know, with the CVA, CDL, two of the biggest players really in North America here. We're on the go slow to go fast, but I think both of those, we have great relationships. They see the potential. They see the opportunity to continue to expand. And so we feel very good about where we are at this point in time.

Great. Thanks for all the color.

Thank you. Our next question coming from the line of Robbie Marcus with JPMorgan. Your line is now open.

Hi. Thanks. This is Alan on for Robbie. Just to start off, can you talk through some of your assumptions for China and how we should think about potential upside when it comes to EPS versus street expectations as well?

Okay. So I think we got two questions here. One on China and then EPS. And I think that's related to 2026. The you know, from a from a China standpoint, really, this has evolved broadly in line with our expectations. We previously commented that the second half would be worse than the first half. And we also anticipated that the fourth quarter would be the most challenging quarter of the year largely driven by prior year growth. So I would say all of that kinda came in line with our expectations. While we feel very good about the progress that our team is making in China, and we are seeing some improvements in things like VBP win rates, we're also seeing a more robust imaging funnel and some tender wins there. You know, we really wanted to take a cautious approach to China when we put together this guidance. And so in our 3% to 4% total company guidance, we're anticipating a decline in China in 2026. You know, we'll watch this as we move throughout the year. But, again, we wanted to take a prudent approach at this point. And then let's see how things evolve. Pete, anything to add to this?

I would just say, look. I think it's a good perspective on how we're thinking about China early in the year as this prudent approach. We're seeing improved commercial execution. I think Will and his team have pivoted to focus more on how we think about provincial interactions as well as the clinical selling. And so just to kinda give you a little bit proof point why we feel good about the progress is, Jay mentioned the VVP tender win rates. I know, you know, you've heard from us. You've heard from others that some of the tenders and are being disputed, which lengthens them out. Before orders are issued. But we have good insights into those ones we want. Which aren't converted to orders yet. And so we know that our rate in the last six months versus the prior twelve we're doing better. And then we would expect as those orders become issued through those tenders that later Q2 and beyond we'll start seeing some of that coming through. All that being said, I think what Jay talked about is we're taking a prudent approach when it comes to China. And, obviously, if things come through at a stronger level, that will be an upside to us. But as we enter the year, I think we're coming in at the right spot.

And then I think you said well, can you confirm you're asking about 2026 guidance? Is that the question?

EPS? Yeah. Just, you know, how you got to the range, why this is the right range.

Start off the year, and, you know, how you see upside to the initial targets.

Okay. No. Listen. Thank you. I just wanted to make sure. So as we think about the EPS guidance for 2026, maybe we pause for a second on 2025. One of the things I think our team was really proud of the ability to deliver 2% EPS growth despite a 43¢ tariff headwind. And so the result of that is we saw about 50¢ of EPS growth in 2025. You know, we were able when tariffs hit, we took action not only to reduce tariff exposure, which is something we spent a lot of energy and effort on, but we also did some self-help cost management across the business. And we saw some performance from our Heartbeat business system help improve our operating margins and reduce waste, cost productivity, etcetera. So all of that was contribute all of those things contributed to a solid performance in 2025. Now moving to 26, we're gonna see many of those things resulting in positive impacts in our numbers again without the hopeful without the drag of incremental tariffs because now tariffs are neutral to positive to our financial performance. The other thing that happens in 2026 is we start to see some benefit from new products. Although that will be more predominant in 2027. But things like Florkado, things like some of our AVS launches will impact performance on sales. In the second half of the year. And hopefully, we'll see that impact. So as we think about the growth in EPS, in 2026, at the midpoint of the range, it's about 45¢. And as we think about the drivers of it, about 30¢ will come from volume growth. About 30¢ will come from cost and productivity initiatives that we have. And then we'll offset that with continued investments in growth. For us, we're very focused on SG&A investments to drive acceleration in sales performance. We did spend in the fourth quarter to start to set that up, we'll spend next year as well along with R&D. We think these are really crucial to the mid and long-term growth of the company. So we'll continue that. That's really the complexion of how we deliver on the EPS expansion next year.

Jay. And then if I could just slip it Thank you.

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

Hey, good morning. This is Vic in for Larry. Thanks for taking the questions. Two for me. I guess your organic growth guidance of 3% to 4% implies 3.5% at the midpoint, which is what you did in 2025. Jay, I think you've said before that you expect to grow faster in 2026. So maybe just talk about why the mid of the '26 guidance is in line with 2025? And then I had a follow-up.

Yeah. Big thanks. Okay. Thanks for the question. So on the last earnings call and at JPMorgan conference, we kind of highlighted we expect to grow sales in 2026 faster than 3%. Now we expect you to grow sales in 2025 at 3%, and we did better than that. So we were pleased with that performance. But, you know, this is very consistent with what we shared. And we feel good about the guidance to start the year. Remember, at the start of last year, we guided two to three and we ultimately did a little bit better than that based on commercial execution and some of the early success in our innovation cycles. As we start this year, you know, I'll point you back to, you know, the $2 billion increase in total backlog. I think that's a great setup to support our sales growth. And a lot of this revenue outlook is built on a strong secured backlog that we have in place. We feel very good about the backlog that we've been able to develop over the last several quarters. We feel very good about the orders funnel that we have in place. So all of that sets us up well as we approach 2026. And then, also, as I just commented, you know, we're taking a pragmatic view on China. We want you know, we're watching this market very carefully. We've taken a, you know, conservative approach here. Let's see how this plays out. So it's early in the year. I think, you know, there's a lot of good momentum that our business is building. And we'll and we'll watch things very carefully. Pete, I don't know if you wanna add anything.

I think you covered it, Jay. But, I mean, the way we're set up here is, obviously, depending on when approvals come some of the new products, our ability to convert backlogs, the ability ultimately to be able to convert some of the acquisitions that we've had now that will start to roll into organic growth, all of those position us well here for the year. So I think, again, as Jay laid out, I think it's the right place to start for the year. And, you know, we're gonna be leaning in to be able to deliver.

Thanks for that answer. A quick follow-up for me. Can you maybe talk about the timing of both orders in sales for photon counting and some of the other NPIs that you've highlighted? Thank you.

Yeah. No. Thanks. You know, as we've made in my remarks here just a few minutes ago, our timelines for all of those significant launches are on track we introduced at the RSNA. And we expect those to have you know, the biggest meaningful contributions in '27, mainly because the order cycle typically is six to nine months when you get the order you know, you have many of these have to be installed within a site. That being said, you know, much of these will have an impact at some point later this year. Which we're very excited about. And, you know, as we're out with customers and stuff, there's just a lot of buzz about that pipeline that we have out there. And so, you know, things like the Alia Moveo, which is our vascular system, that now is fully approved both by the FDA and CEO. It's really our first interventional vascular system of a modern design in quite some time. We're excited about the growth that that's going to bring forward. The Omni Total Body Pet CE Mark with two installs within Australia, and then we also have a European installation. So great feedback that we're gaining. Our Starguide GX, which is the advanced system, for doing alpha as well as beta imaging is CE Mark and we're gonna be doing our first installs here quite soon. And then things such as MR with was the Sprint, Freelium, and the Bolt all of those are under review and making good progress. Christina making good progress. As well as CareStation. On Fotanova, all systems go. I mean, we're lined up. You know, we'll see how the approval timelines ultimately play out for us but we're in very good shape. Manufacturing teams getting everything ready to be able to advance that product. But I'm very proud of our engineering and manufacturing teams that have really come together. When we talk about our business, we talk about this SQDCI. And safety of our folks, safety for patients, quality of the products, getting the delivery commitments, the right cost, then gives you the right to bring innovations out to the marketplace. And that's really the philosophy that we put in place here. So feeling quite good about it. You know, this business is so much about innovation. And I think we've got the right seats in place here to set us up well, not only later this year, but ultimately into '27, '28 for our midterm targets.

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

Thank you, and congrats on the year. You know, on that point, Pete, on midterm targets, I guess I'll ask the question now, which is with the midterm targets being mid-single-digit rev growth, high teens to 20% up to EBITDA margin, etcetera. Just maybe you can kind of bridge us, I think, in terms of the twenty-sixth guide to those medium-term targets and kinda how you see that progressing over the next few years?

Wanna take a shot at it? Yeah. Sure. Look, we feel good about the midterm targets that we've put together. I think you know, one of the things that this year is a setup. But as we move to next year, you start to see the real benefit from many of the new products we launched at RSNA. We expect those products along with Orcato to help drive one to two points of additional sales growth. The medium term. And then, you know, from a margin expansion standpoint, you know, we're pleased to get back to reasonable margin expansion, 50 to 80 points. Is more reflective of what a normal year should look like. But with Heartbeat helping us to deliver higher margin NPIs, to improve productivity to optimize SG&A, you know, we expect to deliver on our high teens to 20% plus margin targets over the medium term. So all of this will flow down to EPS, and we'll continue to see this high single to low double-digit growth. So in short, we feel solid. Pete?

Yeah. And then, Ryan, just to the point, I mean, we're committed to those midterm targets. Top and bottom, full stop. I think you know, we realized that the tariffs kind of moved us back a year or two just based on that's why we really started aggressively last year with moves, with changes, things of that nature that would make a significant difference. Because our goal ultimately is to neutralize as much of that as possible. To move us obviously into that 17 to 20% plus EPS range. And hopefully, you see from even the guide this year that we put out there we've made good progress from what we've done last year. And I think our focus on our all our NPIs having higher gross margins than their predicates with the right selling and lift to that, we'll see the benefit as well as the corresponding service revenue that comes with it. All of that together you know, is gonna be very important for us, not only for our top line, but also to be able to deliver on our medium-term profit goals as well.

And, Pete, it's like you're anticipating my next question here. The RPO and the, you know, specifically, service RPO was up really well. And, you know, I'm just wondering if you can kind of elaborate on kind of the composition of service revenue, you know, and how as that becomes more predictable, you know, we can see that start to flow through, you know, particularly in the guide. You know, if I think about the midterm, you know, the three and a half percent you know, this year or whatever it may be, I mean, you know, if your service revenue and your service IPO is just becoming that much more predictable with IntelliRed and other things, I mean, just help us understand kind of what that looks like as a percentage or a composition of your broader revenue and maybe moving away from, you know, lumpier capital sales?

Yeah. We've talked extensively about our goal to expand recurring revenue. And so we're definitely pleased to see service growth. And then to your point, the Intellirad deal is another example that starts to tilt us more to recurring revenue. Services was a bright spot for us. Have to say in the fourth quarter, and in 2025, we grew sales 6%. With growth driven by both price and volume. And, you know, the reality is as we continue to expand our enterprise agreements, they typically include a meaningful multiyear service elements. The other thing that's happening is, you know, we have a growing installed base. And because of the complexity and technology embedded in our products, and because of advancements that we're making in how our service offering is delivered. Things like AI remote fix, we're seeing improved capture rates on our service business, which is a really important metric for us. And so all of that is good. And then the other thing that's happening Ryan, is we're seeing utilization based on procedures of our equipment. And when that happens and departments are constrained, and equipment is used heavily, the need for service is there. So I think there's a whole set of dynamics that are supporting continued robust growth in our service business. And, you know, our team is ready to support that. Pete?

Yeah. And, Ryan, I think you alluded to this just off the new products piece. There is a flywheel effect as you bring new products out. You bring new products out that are very sophisticated, AI-based, cloud, you know, the capture rate on the service contracts typically goes up. Mainly because they're such a sophisticated product. And a product like Total Body Pet or something like photon counting where the actual price of the product is higher than a lot of the predicate products. So is your service contract. With margins that would be at that same level. So that's some of the tailwind that we think ultimately will come along with it. It's a really important part of a sustainable revenue and profit story as well over the long run.

Appreciate it. Thank you.

Thank you. And our next question coming from the line of Anthony Petrone with Mizuho Group. Your line is now open.

Thanks. And maybe I'll stick with some of the inputs into the top-line guide to 3% to 4%. Maybe one will be on just, you know, how much price is actually in there just considering you have a fair amount of new product introductions this year versus last year. So do you think about price in 2026? And Pete and Jay both brought up IntelliRed, it came up on the last question. You know, $270 million growing low double digits, 30% margin. Maybe just a little bit timing of that deal close. And just the drivers of that business, like how many sites outpatient are live on day one, is opening new sites or just new users sort of the growth KPI that we should be looking for? Thanks.

Thanks, Anthony. Look. On price, I think from an order book standpoint with the new products, you know, some of it will show up in mix. But and for like-for-like products like for like product price, as well. But I think, you know, a lot of that will first be seen in the orders book as those new products come out. Relative to this year in revenue, we don't have any significant step-ups in price. We have price advancement this year. I think based on as the tariffs are settling out and we see how the global to plays, there could be an opportunity for more price later this year. That'll be something that we'll be taking a look at. But I think as we enter the year, we don't have any major step-ups in it from a like-for-like product. It is important, and I think you're alluding to this, all of the new products that are coming out you think about their category that they're in, we'll have quite a step up in many cases in price, I think our Vivid Pioneer, which has been quite successful, we launched earlier this year, has not only a better cost position, it also has a nice step up in price, hence then translation into better gross margin. So more to come, and we're gonna keep an eye on the marketplace make sure that, you know, we appropriately gather the right pricing for the products that we're bringing out. I guess the next question you had was on IntelliRed. Jay, maybe you wanna us off on IntelliRed.

Yeah. Sure. Maybe I'll share some elements, and then, Pete, you can add. We're very excited about the IntelliRed acquisition. We do expect that to close in the first half of the year as planned. There's some really nice elements. The combined company advances our cloud-enabled AI solutions in both radiology and cardiology. So really and then also extends our capabilities across the outpatient network. So we feel really nice about this, and we're on track to close it. Along the lines of our expectations. As we think about the financial components of the deal, we haven't incorporated that in our guidance. What we've said is it would be slightly dilutive, but we expect to offset that with cost efficiency. So what will happen when we do ultimately close the transaction is we will see an increase in interest expense, an increase in EBITDA attached to the company. There will be a revenue impact, but we'll be able to offset to make it neutral for the remainder of the year. So overall, that's really the status on the deal. Pete, anything else you'd like to highlight from strategy?

I think just the standpoint of these are the type of deals that we think make a lot of sense for the company. Relative to a strategic fit for us. The enablement of artificial intelligence to be deployed at an enterprise level, both in patient and outpatient, we know the future of diagnosis is much more the integration of multimodalities and how they're read. And so having a critical platform such as this will be super important for us. And then I just think from a deal complexion standpoint, accretive to top line, accretive to bottom line, fit strategically. These are the type of tuck-in deals that we're obviously looking at. We're excited to have the Intellirad team a part of the family. It's a group of great individuals and we're excited to get this one here closed. And in the first half.

Thank you.

And our next question coming from the line of Joanne Wuensch with Citi. Your line is now open.

Good afternoon, and thanks for taking the question. I'm sort of asking this of everybody early in the season, which is can you sort of give a state of the union on medical technology and what you're seeing? And, specifically, if you could share some comments or thoughts on the hospital CapEx environment and any impacts you may be seeing or expect to see on changes to the Affordable Care Act. Thank you so much.

Great. So, you know, the capital backdrop in the US is solid. Every quarter, we conduct a study of our top 50 US customers to really get a pulse on investment sentiment. It gives us a reasonable picture of investment plans and priorities, and we found that it's a fairly reliable survey that we conduct. What we found after completing the recent study is the US market continues to be robust, driven by customer investment, in an aging installed base. So we're seeing continued momentum on the US CapEx side. Some of that is definitely driven by strong procedure trends that we're seeing. We just finished our latest survey, and many of those customers are anticipating investment increases versus what they previously assessed. As we go over the pond, the European market has continued to improve. Over the past couple of quarters, we've seen orders recover in many European geographies. So that's another robust market. And then emerging markets, you know, really solid trends there. So I think overall, the global backdrop is pretty good. I've commented already on China. But I think it's a decent setup as we look into 2026. Pete?

Yeah, Joanne. To your question, I mean, the ACA, obviously, there's challenges for certain subsets of customers based on which patient mix is or the scenarios. But we haven't heard anything that is concerning relative to the capital environment. I think, Jay, as we survey customers, this is a critical part to it, how that's playing out. So we haven't seen anything that stood out on that. I think you'd mentioned about technologies in healthcare. I again, I do think this is one of the interesting dynamics about us and some of our other peer companies that plan this. Many cases, we are the enabler of so many breakthrough technologies, whether it be device or drug. And so with all of the new EP with all the new cardio oncology device and drugs, in many cases, we're either the early screening or planning tool or we are ultimately the helping executor of the therapy delivery. In the pharmaceutical space in particular, we play a bigger role in that, which is why in many cases, you see even as a capital environment might be tighter, our equipment typically rises to the top of the list priority because it is an enabler for profit growth within the institution. So all signs at this point look quite healthy, and we feel good about, you know, as we enter 2026 for sure.

Terrific. Thank you so much.

Thank you.

Our next question coming from the line of David Roman with Goldman Sachs. Your line is now open.

Hey, PHA and Caroline. Maybe I'll just start with just trying to put some of the pieces together in Pete's comments around the order growth in potentially being impacted by the timing of new product announcements, but then why that wouldn't impact performance in 2026? Or another way, do you freeze the market in anticipation of some of these new product launches? And then I have one follow-up on China.

Yeah, David. It's less about do you freeze the market. And we'll and able particularly in a premium area, for us, many of those products, you know, particularly just take photon counting. We haven't had a predicate product. So, yes, there are some higher-end premium ones of customers that may say, hey. I may wait till it's available. But a vast majority of those are new ones. But we don't see the order coming to the order book until it's, you know, approved. So, I mean, that's some of the basic dynamics. And I think, you know, Jay talked about trailing twelve months and the stack compare. Those are interesting ways to take a look at it because, you know, we could have multiple quarters where we're significantly higher, and then we could have multiple quarters where we're below. But what's really important is that backlog growth and then how the sales come out. And, again, I think, you know, that's an important part of this. And when you saw the sales performance particularly in imaging and some of the other businesses in the fourth quarter, a lot of that is actually the work that the teams have done relative to on-time delivery and executing that more effectively.

Okay. Very helpful. And maybe I'll switch gears from China and actually ask on Omnipaque and just the PDX business. We did see an acceleration in that franchise in 2020 in the fourth quarter, excuse me. It doesn't look like fourth Auto is probably big enough to be the contributor there. So how should we think about Omnipage? What are you seeing thus far from a competitive standpoint? On the ground? And what's kind of reflected in your guidance here?

Yes. No, I would comment and then Jay maybe you can jump in. I think, you know, Visimel, some of our other molecules as well continue to do along. I think you're correct. Based on my comments with Mercado. Not a significant contributor from that standpoint. This is where we are. Obviously, now that we have higher CMO capabilities, that kit will continue to grow. But the largest part of that business is the contrast media business. You know, we have large customers that have many, many SKU contracts with us. You know, there has been rumored discussion of new entrants coming in the area. I haven't seen anything developing at this point in time. Supply is rather tight within the industry. Just based on the players that exist. And so it's been a pretty consistent play and usually is highly correlated to procedures growth. And we've seen a pretty healthy procedures growth coming from, again, many other types of procedures in cardiology and cardi and oncology continuing to exist. So solid trends across the board there.

Thank you. Now last questioner will come from the line of Vijay Kumar with ISI. Your line is now open.

Hey, guys. Thanks for taking my question. My first question is on guidance here, Jay. What is fiscal 'twenty-six assuming for Flurcato? And you I know you mentioned China declines with China. Q4 was, I think, down teens. So maybe some noise around there on what is going on in China.

Yeah. So on the China story, we're anticipating so what I would say is the fourth quarter came in, broadly speaking, in line with our expectations. We knew if you look at the growth, the comparisons to prior year, we knew the fourth quarter was the most difficult comparison year over year. So we did anticipate a bit of a deterioration which was embedded when we said the second half was gonna be worse than the first half. And so, you know, to Pete's comments earlier, we're making some good commercial progress in China. But we're just gonna take a cautious approach here. We're budgeting China down. I'm not gonna get into specifics as to precise amounts, down. We're budgeting China down. That's included in our 3% to 4%. And maybe there's a scenario we do better than that. But we really wanted to take a cautious approach on China. As it relates to Floccato, you know, we shared the dose number in terms of what we performed in a week in January. I had previously said that was really a critical metric for us. How are we doing at that point? Now we have confidence, and we've started to open up the throttle. In terms of bringing on new customers and advancing those customers to higher states of maturity. So we're really excited about the product. We expect weekly dose numbers to grow. In the first year of launch, we'll periodically share information on doses. But again, given the number of products we have launching, the near term, we're not gonna give guidance on any specific product at this point. But we will share some information to help you model this over time. I can tell you, you know, based on the progress that we've made over the last couple of months, very pleased with the direction that we're going. Very pleased with the progress that our team is making.

That's helpful, Jack. And then maybe one clarification on my math, looks like backlog grew 10% in fiscal twenty-six. And your capital book-to-bill in Q4 was something north of 1.1. Is my math correct?

Vijay, we don't we share a book-to-bill that includes all the elements that we include with both service and PDX. So we don't comment, but I think you've done some good math. And then on the backlog, yeah, backlog was up very substantially in the fourth quarter. Really pleased with the growth there and how that sets us up for the multiyear view.

Understood. Thank you, guys.

Thank you. And that concludes our question and answer session. Speakers, please proceed with any closing remarks.

Thank you all for joining today. We look forward to connecting with you all here in the coming weeks at one of our one-on-ones or upcoming conferences. Thanks again.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. And you may now disconnect.