Larry Biegelsen: That’s very helpful. And Pete, I would love to get an update on your progress with the photon counting CT technology. What are the next steps and milestones in the process to bring this to the market in the U.S. and outside the U.S.? Thank you.
Peter Arduini: Yes. Larry thanks. Yes, photon counting, obviously, very exciting technology for CT, really probably the biggest transformation to come to CT in the last 30-some years beyond multi-slice. And it has that opportunity to bring better resolution, reduce dose, but also bring functional capabilities within the CT world, which typically is a great anatomical imager, but doesn’t show what’s happening more to cellular or an organ level. And photon has that capability. There is obviously some other players in the marketplace currently. We have beta sites that are actually running where we are actually doing a lot of work currently. We believe our technology approach, which is the use of a deep silicone is unique in a lot of different ways.
But I would just say for the whole broader sector, all of us that are playing in it, I think this is going to be a strong revolution for the whole industry mainly because CT’s ability to be installed in many different places and it’s just ubiquitous use for so many different diagnoses. So, stand by, more to come, we will be talking more about it throughout the year, but we are making good progress on the platform. So, thanks for the question.
Larry Biegelsen: Thank you.
Operator: Thank you. [Operator Instructions] And that will come from the line of Joanne Wuensch with Citi. Your line is open.
Peter Arduini: Good morning Joanne.
Joanne Wuensch: Good morning and thank you for taking my question. As you move more and more into AI-enabled technology, could you comment on your thoughts and how to translate that to dollars and plans. Is it a subscription model, is it Software-as-a-Service, how do we think about that?
Peter Arduini: Yes, Joanne, it’s a great question. And I would say our strategies are evolving. And it will be, in many ways, multi-facet. So, just to give an example, in today’s world, where we have a product like AIR Recon DL, which again is this new way of actually how an MRI actually creates an imaging using artificial intelligence and the corresponding upgrades that we can take to our installed base. Today, those fundamentally result in a higher price value proposition, higher gross margins for an acquisition in that space. And I think there is still going to be plenty of those opportunities to say this product by itself and this product plus AI is actually 4 points, 5 points, 10 points higher in gross margin because of what it actually does.
And that will still account for a reasonable part of our growth. The second part then is actually bringing certain capabilities via a SaaS model as their pure standalone software capability. So, take in my prepared remarks, I talked about the App Orchestrator. There is a great example of a product that will be cloud-based, can fit on many different pack systems and work with multi-vendor equipment. And customers may decide that at one hospital or their whole network, they want it. And so they could pay for one on-site capability of SaaS, they could pay for multiple. And then riding upon that will be applications from other third-parties. And we will have an opportunity to say, you will get 70%, we will take 30% as an enabler into our broader installed base in others.
And so there is a multifaceted way. I would say in 2024, one of our big operating priorities or big priorities we have is really building out this go-to-market and monetization model. But it’s going to evolve everything from more value to a piece of hardware, which we can actually attain more value for all the way through different – almost down to buy the use capabilities. That – again, that’s going to expand over multiple years, but that’s how we are thinking about it and putting in place the right type of SaaS backbone for the whole company.
Joanne Wuensch: Thank you very much.
Operator: Thank you. One moment for our next question. And that will come from the line of Graham Doyle with UBS. Your line is open.
Peter Arduini: Hi Graham.
Graham Doyle: Good morning guys. Thanks for taking my questions. Can we just touch on China again, just to clarify one of the statements earlier? You said you are expecting no growth, but also negative growth in the first half. And just is it negative or no growth, i.e., flat? And just for the full year, are you expecting China to grow? And then just a quick clarification one after that on the order book. Thank you.
Jay Saccaro: Sure. On China, we expect a decline in the first half. But remember, in Q1 of 2023 and Q2 of 2023, we had around 20% growth. So, we have always kind of modeled the decline in the first half, growth in the second half. And as a result, we are expecting growth for the year.
Graham Doyle: Perfect. That’s super clear. And then just on the orders, I think you mentioned quite a sizable multiyear contract win. Does that get all booked in the Q4 ‘23 as well then?
Peter Arduini: Yes. Graham, what I actually, I think referenced was over the year, multiple enterprise deals that we won that amount to over $2.5 billion. Our current process is as we bring in significant amounts of orders, we typically don’t book out beyond a 2-year window of our orders. So, we have something that’s captured for 5 years, 6 years, 10 years. We aren’t actually booking years seven – excuse me, 3 years and beyond in our current order book. That’s not our approach that we implement. So, the order we put in the 3% growth are very near-term orders that we won in the fourth quarter that will see play out in ‘24 and in ‘25.
Graham Doyle: Perfect. And really quick one on that and photon came to you – you brought up earlier. Is it your expectation that on – I don’t know, like call it, a 5-year view, this becomes kind of the standard of care within CT more broadly as it becomes economic, and we should expect that this – most CTs in Europe and certainly the U.S. become photon counting?
Peter Arduini: I think 5 years is a little bit optimistic. I mean I think I have heard what others have said as well. I think in the 10-year window, that’s probably more realistic. Keep in mind, 85% of all CTs in the world tend to be more mid-tier value-based products. Some of them sell for $200,000, $300,000 in different parts of the world. So, it’s a wide community of what’s in a CT. To your point is on the premium end and stuff, I think in the 5-year window, yes, you are going to see a significant higher percentage of photon counting.
Graham Doyle: Perfect. Thank you very much guys. I will jump in the queue.
Peter Arduini: Thank you.
Operator: Thank you. One moment for our next question. And that will come from the line of Anthony Petrone with Mizuho. Your line is open.
Peter Arduini: Good morning Anthony.
Anthony Petrone: Good morning Pete. How are you? Good morning Jay. Congrats on a solid year and your post-spin. Maybe I will start, Pete, with just a question on Theranostics. You have it in the slide deck here. Obviously, GE HealthCare, well positioned on the diagnostics side. You mentioned growth organically and inorganically. Just wondering how you are thinking about the other pieces of Theranostics. You have therapeutics and supply chain. You can grow more in diagnostics. So, just maybe your thoughts on how that space is consolidating and where GE can play specifically? And I will have a follow-up for Jay on capital allocation.
Peter Arduini: Yes. No, it’s a good question. I mean obviously, at the baseline level, as these therapies take off, PET/CT is a critical product. I mean for all practical purposes, it’s a limited world of folks that manufacture a PET/CT and PET/MR. We are one of them. We think to do this effectively, you have to have a multi-head SPECT/CT. We have a 12-head system called the StarGuide. None of our major competitors really have that product. Why is that important, if you have a traditional two-head, it’s an hour to do the study versus you can do it in 15 minutes or less. You can’t run an effective Theranostics department if you don’t have a multi-head camera. So, that’s kind of a stick [ph]. The next thing is you need to integrate those images and look at them together to diagnose, look at radiation dose.
