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James Saccaro

Thanks, Pete. Start with our financial performance on Slide 4. For the third quarter of 2024, we reported revenues of $4.9 billion with organic revenue growth of 1%. This was in line with our expectations. Recall that we delivered 6% organic revenue growth in the third quarter of 2023.
On a reported basis, we saw a service revenue growth of 2% and product revenue was flat. As you can see from our reported sales detail in the quarterly filing this morning, market headwinds in China continue to impact total company sales growth in the quarter by approximately 400 basis points. Global sales growth, excluding China, was approximately 5%.
Organic orders growth was 1% year over year, driven by continued strength in the United States and in emerging markets within Rest of World. Excluding China, organic orders growth was approximately 4%. We continue to see orders dollars outpacing sales, leading to a strong company book-to-bill of 1.04 times. We exited the third quarter with a healthy backlog of $19.6 billion of $1.2 billion year over year and up $600 million sequentially. We made strong margin progress in the quarter, delivering an adjusted EBIT margin of 16.3%, up 90 basis points year over year and ahead of our expectations.
As a result, Q3 EPS adjusted was $1.14, up 15% year over year. We also had tax benefits related to our 2023 tax filings completed in the third quarter of 2024. We generated free cash flow of $651 million, up $81 million year over year.
Turning to progress we made in the third quarter our margin initiatives on Slide 5. Adjusted gross margin expanded 150 basis points, driven by focused execution with variable cost productivity initiatives, continued sales price accretion and higher margin and PIs. Of note, we've improved our cost productivity in the third quarter by partnering with global suppliers to drive deflation in direct material costs.
We're also executing cost-effective design changes with an enhanced focus on product quality and improving the customer experience. We continue to see increased sales from digitally enabled products like air recounting DL and Sonic DL in MR, driving higher margins while expanding margin.
We also invested more than $300million of sales in the quarter. We remain committed to investment in innovation, focusing on differentiating technology and research collaboration. This includes exciting research and AI and cloud technologies that Peter will talk more about later. Two years since the spin, we're pleased to have exited the majority of the TSAs and are on track to exit the remaining agreements on time. This positions us well to further optimize our cost structure.
As discussed on prior calls, we see substantial opportunity over the next few years as it relates to IT and other structural cost optimization initiatives. one example of this is the implementation of software to eliminate duplicate and non value added applications by aligning licenses with space Pacific roles and responsibilities will deliver an annual savings of approximately $4 million.
This is one of the many projects we have in our IT transformation roadmap. Given the volume pressures, we're maintaining a disciplined approach to our discretionary spending. Before we turn to our segments.
As a reminder, we're now reporting results in our new segment structure, which went into effect on July first, image-guided therapies. Previously, part of imaging was realigned to the former ultrasound segment, which is now known as advanced visualization solutions.
This structure better aligns to future clinical trends and will better enable us to deliver strong business and customer impacts by providing the right image guidance in the right care setting.
Now let's move on to segment performance, starting with imaging on Slide 6. Organic revenue was down 1% versus the prior year due to headwinds in the China market as we expected. This was partially offset by strength in the United States. Segment EBIT margin was up 200 basis points year over year. We continued to make progress on enhancing gross margins through productivity.
Additionally, we saw a favorable mix and positive price. We continue to see strong demand, particularly in the U.S. with opportunities and replacements, upgrades and services.
Turning to Advanced Visualization Solutions on Slide 7. Organic revenue was flat year over year with increased sales volume in the U.S., offset by a decrease in China due to the previously discussed market headwinds. Segment EBIT margin decreased 190 basis points year over year, driven by unfavorable mix.
Cost productivity improvements through standardization and new product introductions offset inflation. Moving to Patient Care Solutions on Slide 8. Organic revenue was up 2% year over year, driven by backlog execution and following 9% growth from the prior year.
Segment EBIT margin increased 10 basis points year over year with improved productivity. The team has reduced past due backlog throughout the year, driven by lean principles to increase capacity.
These actions will allow for greater fulfillment flexibility in future quarters. Moving to pharmaceutical diagnostics on slide 9, we delivered another solid quarter, generating 7% year over year organic growth driven by healthy procedure volumes, and we delivered EBIT margin of approximately 31%.
We're pleased with the continued growth contribution options and margin expansion in this segment as well as the progress we've made in expanding our capacity and pipeline investments. We're encouraged by the recent CMS reimbursement proposal and the potential for patients have access to important diagnostic scans in US hospitals.
This increases our confidence that our proprietary molecules like that scan visit mill serial data and flow Ocado can be growth drivers for the Company. Overall time. If the proposed payment rule is finalized, we expect to see accelerated utilization of PET diagnostics and potentially an increase in the overall penetration rate for PAD diagnostics versus other alternatives.
Turning to slide 10, I'll walk through cash flow. We delivered strong free cash flow of $651 million, up $81 million year over year. We saw progress in driving working capital management efficiency.
We're improving our accounts payable processes, and we saw strong collections in the US. and PDX business year over year. We had a great example of lean in action on inventory management and material processes at one of our key imaging sites.
The team held at KZN and identified opportunities and implemented changes to reduce the lead time from staging through shipping, leading to approximately four $4 million of inventory savings. Again, this is just one of the many examples taking place in our facilities around the world. Looking ahead in line with seasonality, we expect to deliver strong free cash flow in the fourth quarter, which is typically our highest revenue and cash generating dealer.
Now listen to our outlook on Slide 11. We expect full year 2024 for organic revenue growth to trend toward the lower end of our 1% to 2% guidance due to the continued China market softness.
Based on this trend, we expect to see limited market benefit from China's stimulus through the first half of 2025. As a result of our strong margin performance year to date, we're raising the low end of adjusted EBIT margin guidance to be in the range of 15.8% to 16%, reflecting expansion of 70 to 90 basis points versus 2023 adjusted EBIT margin of 15.1%. As it relates to our financials, assumptions were trending towards the lower end of our adjusted tax rate range of 23% to 25%. Given some additional tax incentives recognized in the third quarter of 2024.
We also expect the revenue headwinds from foreign exchange to be less than that one-half of our percent in 2024. And with increasing confidence in our ability to grow the bottom line, we're raising the low end of the range of adjusted EPS guidance by $0.05 now to $4.25 to $4.35 per share. This reflects year-over-year growth of 8% to 11%. We continue to expect free cash flow for the year to be approximately $1.8 billion. With that, I'll turn the call back over to Peter Arduini.

Peter Arduini

Thanks, Jay. We're excited to talk to you about all of the growth opportunities ahead at our Investor Day in November. But today, I'll highlight two of these opportunities we recently announced for Ocado, also known as product as this is the first and only FDA approved at 18 pet myocardial perfusion imaging tracer for patients with coronary artery disease.
It's been called a game changer by some cardiologists because of its improved diagnostic accuracy compared to traditional spec imaging and its half-life is significantly longer than the most common use cardiac PET tracers.
Ricardo will become commercially available in the U. S in early 2025, and we believe will provide a meaningful impact for clinicians and their patients. I won't go dewatered, but to give you a sense of the opportunity, we estimate that there are around $6 million myocardial perfusion imaging procedures per year in the U.S, of which we believe PETMPI makes up about 5% to 10%.
Revenue will ramp over time. And we're working with health care providers to build out the capacity required to enable greater access to Pat for cardiology, we see an opportunity for us revenues of greater than $500 million annually from this one proprietary molecule.
Once the health systems infrastructure is in place, we're excited about the opportunity for Ocado and for other radiopharmaceuticals, given the significant advancements we're seeing in this space as well as the potential changes in reimbursement that will drive more personalized care.
Additionally, we're investing in new AI and cloud based solutions to better serve our customers, face data overload and widespread operational inefficiencies that drain the resources.
We recently announced our latest advancements that helps a premier technology event in Las Vegas, including care, intellect and offering of generative a high-powered clinical and operational applications. It streamlines patient data from multiple systems into a single view to help optimize care delivery and quality across disease states.
We also shared several research projects that seek to address pressing care needs and reduce cognitive and administrative burdens on clinicians. We continue to invest in AI and cloud innovations that will drive future recurring revenue, which we'll talk more about next month.
In summary, we delivered positive sales and orders growth in the quarter, reflecting strength in the US and solid TDX revenue performance of approximately 5% sales growth and 4% orders growth Excluding China.
We see a healthy capital equipment environment. We're confident in the fundamentals of our business, supported by our innovation and our pipeline as well as our strong backlog. The team's focus on lean to improve the customer experience, enhance productivity has allowed us to deliver strong bottom-line results
As we entered the final quarter of the year our expectation for 2024 on the top line reflects the China market dynamics and with continued bottom-line expansion, driven by our team's strong operational focus and execution. With that, we'll open up the call for questions.

Question and Answer Session

Carolynne Borders

Thank you, Peter. (Instruction).

Operator

Our first question comes from the line of Robbie Marcus of JPMorgan.

All right. Good morning and thanks for taking the questions on two for me. one on margins, one on China. Maybe to start with margins on another good quarter with upside on operating margin dropped that through to EPS. That's the question is really around the line of sight on how much at the low hanging fruit has been picked already today. And what's your line of sight to future operating margin expansion as you move into on the next phase of separation?

Peter Arduini

Sure, Robbie, overall margins have trended well, as we commented. And as you can see in our financials, EBIT margin is roughly up 70 basis points on a year-to-date basis and gross margins up about 130 basis points. So, we feel really good about the initiatives that we have in the operational focus on expanding margin.
And I'll remind you all of this is done again, to lower sales volumes than we expected at the beginning of the year. And frankly, as we look at what we've delivered on so far this year, it's about that pricing. And we've talked about historically largely in line with what we've previously expected.
We've talked about variable cost productivity initiatives that have more than offset inflation. And then we also have general savings initiatives we put in place that yielded a result. I would say that one thing that we did at the midpoint of the year, when we saw a little bit more of a challenging revenue environment, we wanted to make sure we had the right cost profile for the business in place to support delivery of our earnings.
So, we put some incremental savings initiatives in place. We're really pleased with what we've been able to do on this front. So you can see the really good progress in the financial results. But I think as we look forward, we also have very good line of sight to future margin improvements.
And I would say we're really excited to share some of this at the upcoming Investor Day, kind of how we're thinking about the long-term margin profile. As we look forward, you'll see some of the continued team's continued focus on pricing, continued focus on productivity initiatives.
But what's kind of supplemented as we move into the future is first, this idea that as we come off the transition service agreements, which is been a very significant effort this year, and we expect to principally concluded this year, it does allow us to pursue a number of new initiatives that we've been unable to date.
The second thing that you'll start to see in the future is the benefit of all of these R&D investments that we've made. We are launching differentiated products that will start to highlight that for you and that has with it a real customer interest in those products saw revenue growth, the element, but also our margin element as well as we look at things like platforming.
So, the complexion changes a little bit. But what I would say is we have a long way to go on margin, and we also have very good line of sight to what we're trying to achieve.

Great. And maybe one on margin and I am sorry, on China, which was down over 20% in the quarter. And we're seeing this across the board vote with their competitors. I guess the question is really how do you think about the forward trajectory of China? Like you said, ex China business grew 5%. That's where people are sitting for the total company for next year. What's your visibility into the current trends in China and any stabilization and improvement? And how do you think about China as we move into next year is obviously that will be the biggest lever on sales growth and margin. Thanks a lot.

Peter Arduini

By probably up. Maybe about maybe I'll kind of expand a little bit on that. So, we can kind of address because I'm sure other people have questions on this. Maybe in one question between Jay and I will go a little bit through this and then have time for other topics. But look, as we said, I think the China market has been slow to recover.
I mean, we were pretty clear about this back in July as well. And as we mentioned on the call, stimulus funding coordination, I would say, is taking longer. So, customers are still doing normal purchasing, and again, this is impacting the overall growth in China market in the near term.
I would say program details for many of the 31 provinces are now available and we stay closely connected with the local markets as we have a large team on the ground. There we have a pretty good understanding of how things are evolving from is that our prepared remarks.
And we see today CC. limited market improvement really going out through the first half of 2025 about. And I'll say we think about it in four steps, particularly in capital equipment, which is this first part is our funds released our funds setup. And so yes, there are clarity about certain tenders, but where the funds are they released hasn't been fully communicated and then you move into an actually kicking off the tender process itself or is it going to be multiple awardees, single whatnot.
And then you actually have the awarding of them. So, hospitals find out which products are going to get. And in many cases, most of these products have an installation process, risers, power building setup and things of that nature that have to take place. And then there are installed in the sale takes place.
When we look at that sequence of things, ask when we basically say we eliminated recovery relative to what one would see in sales in the first half of 2025, that all being said, we believe it's the temporary challenge.
And again, over the mid to long term, we think China market is going to be obviously very attractive market. All during this time, the need is not going away. The actual demand is still big pent-up, right, that nothing has changed from that standpoint.
We're just taking a pragmatic view until we've really seen any change happening. Jay, maybe you can add a little bit more details here about how we thought about the guide and how we look at the how this all mean short.

James Saccaro

Sure, so, when we gave guidance in July, you'll all recall, we reduced guidance roughly $400million to $600 million at the midpoint, $500 million related to China on the sales line. I mean that correlated to our total Company guide of 1% to 2%.
Our view today is within the room range of outcomes we expected, but it's just at the lower end at approximately 1%. Year to date, our sales in China are down 17%, and we now expect China to be down high for the full year.
And so what that means is it's closer to that $600 million impact. And when stimulus starts to come through, it will be a positive development. And we think we're well positioned to benefit by timing that was something that we don't want to get involved in as we as it relates to when the rebound takes place in China at 25, like at this point, I would say we expect limited benefit from the stimulus through the first half of 25. We'll watch this very carefully in the coming months, leading up to giving guidance in February.

Peter Arduini

So, I mean, in essence, we've taken fundamentally the effects of the China discussions about out of how we are thinking about the guide. We're keeping a very close watch on the marketplace and obviously worse, really well positioned when the stimulus funding comes through in the market comes back. At the same time, we've had tremendous growth in the United States.
We've got great things happening and out of other markets within Southeast Asia, we see a growth being able to be positioned well to continue to accelerate. And the rest of say in Europe.
And again, at Investor Day, what we're super excited about talking about the big three in our world, which is where radiopharmaceuticals is going, the new products that we have coming out in categories where we might not have had a leadership product that we will in the future and in digital and AI.
So, it's the combination of all those pieces together. But I'd say China, as we see it today, I think we've kind of articulated our views on it.

Appreciate it. Thanks a lot.

Peter Arduini

Thanks, Robbie.

Operator

Thank you. Our next question comes from the line of Ryan Zimmerman of BTIG.

Good morning, everyone. So, I appreciate the commentary in China and the margin actually want to ask about for Cato a little bit. Appreciate the comments you've kind of put around it from curious, there's been a lot of questions from investors around pricing now for Cato relative to maybe rubidium 82.
And when I do the math and it kind of land somewhere in that two to three range relative to where rubidium is coming in at. And so, I'm just curious if you can comment a little bit more about how you think about pricing that product, given its features, its half-life, et cetera, as a premium to what's out there in the market today?

Peter Arduini

Yes. Thanks, Ryan, for the question. We're not ready to talk specifically about the pricing we will be in the not-too-distant future. But needless to say, to your point or a product that brings better specificity sensitivity than product and in spec bring significantly better operational capabilities and economics versus the other agents that are there.
In that case, you know, ammonia rubidium, we believe the product clearly deserves a premium. And we're also, as you can imagine, right now, since we have approval, you know, the normal process here of working with CMS and other payers to be able to be positioned that way, we'll be going through a pass through indication as well, which should give a multi-year, higher window, the how all that plays out.
And then there's the backdrop here of beyond the drug itself, is that the outpatient, the perspective, outpatient payment structure, which will reimburse these agents separately. So, there's a lot of good tailwind components on it.
But as I mentioned on the call, I mean, the most important words, one hears when you're in this seat is one of your customers says, I think this is a game changer. And that's what's super exciting here about this for patients at the fact that profusion studies on amount had many new innovations and forever.
And so, this has the opportunity to really make a difference from that standpoint. And as we mentioned on the on the call, if you take a look at this, there's about 6 million myocardial perfusion studies that that are out there today and that are done on spec. And you typically have to do a rest study. And then you have the patient exercise, reduce stress and you compare the hard profusion at rest and at stress. And so that means there's two doses as it does that stress and there's a dose at rest or vice versa. And so each of those doses, obviously some have economic value that's associated with them.
So, we are feeling quite good about it. That work to do yet to kind of get to the launch play. We've got the work to do here in the rest of the year, but we're on track to what our plans are, which would be really out into later part of Q1 to be in a position to be able to launch the product and have clarity on reimburse.

Okay. Very helpful. And then for today, part of the algorithm for 4G, been in price, the market's gone to 3%. You've kind of always articulated assumption of 1% to 2% and price. I'm wondering if you'd comment, Jay, about your assumptions going into 25 on price that durability of that within your customer base and just how we should be thinking about your ability to get price going forward?

James Saccaro

Sure. As I mentioned moments ago, we saw positive sales price in the quarter along the lines of what we expected on a year-to-date basis, prices trending well. And I think really what this comes down to and what we're incredibly excited to talk about when we meet with you all, we've invested very significantly in R&D over the last several years.
And so, as you on support your customers with new and innovative devices and new and innovative solutions price follows on, and that's something that we've seen, and we've been able to deliver on. So, we feel very good about pricing and overall margin related to new products going forward.

Peter Arduini

And I would say, Ryan, what we're getting better as an organization to do, and I'll make a call out two Katrine in our US organization about really being able to help the customer understand return on investment. Many of our products and many of our institutions are completely maxed out with procedures.
And so, you buy a new product. And yes, you may pay 100 grand more from it from us, but maybe someone else, but you can add literally have it paid for it under 18 months and you're going to have this then for another six to seven years.
And the question is, does it really maximize the value for your patients? Does it really actually have the uptime? Does it have the added features to deal with that? That's in cardiology, structured harder oncology.
And so, we're getting better at that and ultimately being able to sell value to go that direction, which is why gross margin for us on actually the cost input. But on the value side, this is extremely important metric for us.

Thank you.

Operator

Our next question come from the line of Joanne Wuensch of Citi.

Good morning and thank you for taking the question. both of you that and you gave us the number that you think that to card, I think you need could contribute $500 million once the infrastructure is in place at the hospitals. So, I'm curious what does it take for the infrastructure can be in place as this structural that human resources, something else? And then for my second question, can you give us an update on how this analysis doing? Thank you

Peter Arduini

Maybe I'll take the first partner and say maybe you can touch down. You'll look, the first part is for Ocado is a agent used in PET scanners. I think most of most of the folks on the call understand that a lot of PET has been around oncology applications.
So, if you look in your normal hospital or clinic, the majority of where you were to find pad has traditionally been in oncology, a lot that's going on there. I mentioned theragnostic on the call.
If you think about PSMA, think about breast cancer, so those systems are getting that up. I think in the initial areas, there are certain cardiac centers that have had PAD systems prior to the this where they've been using other age agents. Those will be the first areas that have the infrastructure in place. But the point being is that some customers are going to need to acquire system and have it in their cardiology area to kind of effect of the run.
We would expect in certain institutions, there will be shared use systems. But obviously for a company like us that actually makes the radio isotopes and actually makes the imaging systems makes the digital tools to integrate all this together.
There's actually a really interesting opportunity to not only have the agent sale, but also have capital equipment sales that will be part of this on the ramp. I think we're still trying to understand how fast it could be. We quoted it when it's in place over a $0.5 billion. Obviously, if you converted all of the business, it's a significantly larger number. But we're not ready to call that at this point in time, but we feel pretty good about it.
And again, it gets back to ultimately the difference that can make for a patient and the economics. It can mean for our customers to deliver that if this has great economics as great outcome for patients typically when those two things happen, yes, you have a winner on your handset and that's how we feel about that for Ocado.

James Saccaro

And then as it relates to visimel, we continue to see encouraging progress with visimel sales in the US with our sales in the U.S. nearly doubled again in the quarter over quarter. So very, very robust growth rates. On our you know, our approach in Alzheimer's really is about supporting the continuum of care across diagnostics, therapy, planning, delivery and monitoring.
And also, this area will benefit from the CMS ruling on which we expect to pass. It should also help accelerate this. It's still early stages in this area. The patient and the therapy journeys are still in the very early stages, but we remain really excited about this opportunity long term. And this is another one that will highlight that the upcoming Investor Day.

Peter Arduini

And I think, Joe, you know this to Jay mentioned in his prepared remarks with the reimbursement changes that are coming, you can take these innovate data products, some that we've already had in our portfolio and some of these that are new and now they can be reimbursed or paid for it to the value, they should be something that might have only been getting $200 for a customer could get a tenfold increase in reimbursement aligned to that, which then changes or customers thoughts about how many procedures you use this for on, in many cases, a product for like Parkinson's for dadscan that we've had for some time which have been successful can be used more widely because the economics make sense.
Our product like Cirreon up for breast cancer, which is clearly a product that's indicated that delivers better diagnostics. What has been tough because of the economics that could change as well. So again, all of these we think are positive and all of these products have higher gross margins than the rest of our portfolio. So, the mix benefit that will come through with these as well as quite got quite a positive. Thank you.

Thank you.

Operator

Our next question comes from the line of David Roman of Goldman Sachs.

Good morning, everybody. And before I ask the question, I wanted to thank you for all the very helpful disclosures on the recast of the business segmentation with all the all the supporting details, it is very helpful and appreciated.
Maybe just jump in as a follow-up to what people you just walk through here on cheese capacity to operate across the entire spectrum within pharmaceutical diagnostics. Maybe you could help us just by deconstructing that business a little bit into its components around capital or capital related items, including software and service. How much of that is on the Radiotracer side or Radiopharma side? And how we should think about the different growth levers in each of those pieces that I had. A follow-up on the P&L?

Peter Arduini

Yes, it's a really good question, David, because unlike most pharmaceutical businesses were might be an injectable or an oral sale. These are a little more complicated. And I say complicated in some ways that they have to come together in concert with other items, but also in such a way that, you know, from generics or other folks coming into it, you have to actually have the infrastructure.
So, in the case of these, to remind everyone, they are radioactive agents, how you actually make them, how you deliver them has a very select set of expertise to be able to do that, which we have. And so again, I think at the highest level, this first part is, you know, a proprietary molecule portfolio, which we have that touches in oncology.
That's going to be a beneficial tied to what's happening in actually see what you treat, what you see in the neuro space. We talk about this Mellon Alzheimer's, that's our radiopharmaceutical tracer again, to help highlight amyloid beta plaque or in the case of dad scan, the ability to actually help understand diagnosed Parkinson's.
And then the cardiology side is recorded as So we actually have kind of the trifecta of different areas here for products that you then you take a look at and you say the reimbursement environment hasn't been the greatest in the U.S. That's has the potential here to evolve. Hopefully, we're going to hear more about the rulings in the near term.
We feel pretty good about that, but that will enable those to be paid at attractive levels. The other side then as the U.S. equipment that these are used to be able to image. And so, we made pad PET/CT patch, nor are we have we don't I haven't spoken that much about it most recently.
But our StarGuide spec camera is really a one of very special product actually can be used to actually states some of the therapy drugs in combination. That's a critical component up for enabling theragnostic study. And what I mean by that is if you don't have the camera like ours, that patient study could take an hour-and-a-half versus 10 minutes and then all the sudden, you don't have a workflow solution. We have that whole package. And the last parts of the digital Integration.
And so we bought this company just a little while ago called NIM, a fantastic group of individuals, great technology in the top strategic is most advanced institutions around the world, and we're adding artificial intelligence into and capabilities. And so, what does that play product helps you be kind of at the command center, if you will, of how the doses to that patient our products working. So, you have to have all those together. And the short answer is we do. And so for a customer that's looking into buying parts of this. if they can work with someone like GE Healthcare, who has the commercial and technical team that can bring and you the whole solution, most likely customers are more willing to come to you and and look to your expertise to help implement that. And that's ultimately what we tried to do is to help customers solve their solutions and help them implement it broadly.

That said, that's really helpful in that channel. And Jay on the P&L, as you know, I know you'll provide 2025 guidance at a later date. But as we kind of think about building the building blocks to next year, we appreciate the comments around China stimulus. But as you look down the income statement, you've had this giant step up and R&D, that looks to me that starts to normalize to more sustainable growth rates.
SGA has been well managed, but it or are there any one-time things that may have occurred this year like rebasing of incentive comp because you're going to come in below the top line that we need to consider in next year? And anything that you want to call out for us at that at this point in time as they think about updating our movement into next year.

James Saccaro

Sure, David, by the way, thanks for your comment on the recast financials. I know that there are a lot of finance and accounting folks and legal folks from GE Healthcare listening in who put a lot of work into that. So, we appreciate that. As you think about next year, P&L's stopping short of any guidance.
one key variable is this China factor on to your point, and I've said this in the past, our R&D has been growing at a significantly higher rate than sales on at some point that will grow in line with sales, and we will get closer to that next year. And then from an SGA standpoint, you're right, right, incentive payouts when sales are off are lower, but it's more of a variable compensation thing.
You can kind of moves with sales. So as sales moves up, that category moves up, I don't expect to see a very dramatic onetime step-up next year as a result of reduction this year. So, I think I think the items that you characterize or the right ones, and we'll construct the rest of it on a leading up to guidance in February.

Great. Appreciate your taking the questions.

Operator

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

Good morning. Thanks for taking my question. Morning. I just wanted to follow up maybe a little bit on David's comment. What's the message on 2025 given here? China comments have limited recovery through the first half for limited benefit. I think the stimulus in the first half of 2025, I'm asking because the comps get easier for China in the first quarter of 2025 declined eight the first quarter this year. Yes. So, the message on China, that declines or grows in 2025? And how does that impact the mid-single digit top line growth and margin progression next year? i have one follow-up.

James Saccaro

No, Larry, I think we'll stop short of giving guidance for next year. On because, you know, I think what we've seen is there's a lot of volatility in that market in particular on. And so, we're going to wait for a lot to gather a lot more information before we give guidance in February on as it relates to mid-term guidance, we feel very good about mid-term compounded mid-single digit organic revenue growth and unit capital business some years are above, as we saw in 22, 23, some years below as we saw in 24 on. But on balance, we've been able to execute on this mid single digit growth. And we look forward to talking to you more about that at our Investor Day.
From a margin standpoint, we feel very good about what we've been able to do in 2024 on delivering at the high end of the range despite a low end revenue guide on and the pipeline for margin looks really good in 2025 and beyond.
And so, as you will, that's kind of all we're prepared to say in terms of the outlook for the Company on an as it relates to 25, it's more wait-and-see to see how this market does. We think long term, China represents a really good and attractive market for GE Healthcare. We've been there a long time. We've been manufacturing there over 30 years.
So, it's a robust environment, but that time proving sort of anticipating the timing of this recovery has proved to be a really challenging forecasting exercise. So based on all of that, we're going to be conservative when we give guidance as we typically are, and we're going to be thoughtful and incorporate all the information.
We'll get a lot more information in the coming months. And then the last thing I would say, as you know, looking at things over time, we feel very good about the margin expansion plans. So that's something that I think we've been intensely focused on, and we've been able to deliver on margin despite a wide range of outcomes on revenue as we've seen people. Pete, would you add to that?

Peter Arduini

I think you hit it. As you know, we've got our Investor Day in less than a month here in November on the 21st. And I think we're going to tried to lay our case out there on what we've got for top-line growth over the next three years, which fundamentally, as you guys all know in this industry, it takes some time to be able to execute on some of the programs and we feel super good.
And one of the goals is to show you what we've done with the R&D money, which is the NPI pipeline in areas that you expected in areas that I hope you'll be impressed with its going to open up new growth areas for us within our portfolio. So how we're evolving the digital and AI front and again, not only just in inside the products, but products by themselves that are digital in nature. And then this whole radiopharmaceutical piece. And to me that those three levers for all, particularly in some of the Western developed markets where precision medicine is becoming and adopt, but at a faster rate.

That's very helpful. Just to sneak a quick follow-up to that, right. Can you confirm the implied Q4 organic growth is slightly above 2% based on the guidance and what gets better in Q4 versus Q3 and with the confidence in the sequential ramp in dollars from Q3 to Q4? Thank you.

James Saccaro

Yes. So Q3 came in as we expected, roughly 1% in the fourth quarter. We do reflect the China dynamic. Fourth quarter is typically our strongest quarter of the year. From a volume standpoint. I think last year we had $ 400 million step up from 3Q to 4Q. We're expecting, I think, roughly similar levels as we look at the numbers this year, maybe a little bit more. I mean, how are we going to get their hands about continued strength in our PTX and service business. Those things will step up in the fourth quarter. We've had we've made a lot of positive comments about the you U.S. market. We expect that to continue.
And then the last thing I would say is we do have a an analytic that we put in place on each of our quarters, looking at conversion of backlog, looking at what's done, repeatable recurring revenue backlog and then how much do we need to sell and install in the quarter.
And so just to walk through that very briefly, about half of our revenue is related to recurring items, notably service and PDX. And we have a very good line of sight in that area.
The remaining half is equipment related, and equipment related comes down to two pieces. How much you counting on from the backlog and how much are you counting to sell and install in the quarter? From the backlog were over 75% secured, as we say at this point, which is very comparable to historic rates, and we feel good about that component.
And then the other piece is how much do you sell and install in the quarter. And as we look at the funnel and anticipated conversion to all orders and sales will expect to see conversion rate similar to what we've had in the past. And so, nothing dramatic in terms of trajectory differences and all of that yields that roughly 2% revenue growth in the fourth quarter. So, there's a lot of different ways to look at it, but that's more detailed way there. We go through it. I mean, we feel good about the fourth quarter.

Thanks so much.

Operator

Thank you. Next question comes from the line of Vijay Kumar of Evercore.

Hey, guys. Thanks for taking my question, I guess Pete and have two product related questions. The first one on the absolute CO2 them in at just given all the comments you made, right? Is there any reason to think why half of all NPI procedures in the medium term can't flip forward to this flurpiridaz better for patients better for hospitals have better for supply chain? I'm just trying to think what they're what the hurdles are.

Peter Arduini

Yes, Vijay, I agree with you. All of the right components are in place. The biggest pieces are there enough PAD systems in the right locations is probably the biggest driver. So, you know, you can clearly see a step-up in locations where they have the product against product where they have the PAD system in place, but then it takes some time.
Does this assume a customer says, gee, I really want to go all in on this and they give us orders here in the next month by the systems, you're still with a packed room being prepared and installed and southern area six to nine to 12 months out. And so that's probably the biggest piece.
But again, over a horizon of three to five years. I think to your point, there are clear scenarios where you could have a much, much higher percentage of conversion, but we're just trying to be pragmatic at this point in time on how we frame this up.

That's helpful Peter. And maybe one related here. It's when you think about the system side, right. Could I Flipkart will be a driver for tech systems for you guys? I know on Leno of when you look at systems as head of PET, I think you have lots of AI product on the MRI side. Are we seeing any share gains on the system side? Could your healthcare fundamentally emerge month in a much stronger position? And on the system side,

James Saccaro

I think the answer is yes, you could clearly see this as a driver. And again, I think it's for us, I think it's for the whole the whole category that this will actually have an effect. And the question is, why? If you think about PET imaging forever, it's been FDG. So fundamentally a generic sales tracer that can be used primarily for broad oncology procedures. Now you're getting more personalized specific molecules that are tied to a given disease state.
And so, all the site and the use of PET, again, as I mentioned earlier, and neuro procedures for Alzheimer's and cardio for like for Ocado for CAR-T coronary profusion or in oncology as it's been used, but more specific. So and we'll talk about that at Investor Day about how that a pipeline of molecules is coming at, not only in diagnostics, but also in therapeutics, which will drive that.
So, we're quite excited about it. I would just say for our team, which is in molecular imaging and roll-ins business and the teams, they've done a really nice job. And we have a platform that actually is very scalable. It's upgradable in the field. And we also think we have (Technical error) has enabled us to do some early types of evaluation in this space that other products in the market can't do.
So, we'll talk more about that on November 21st. But yes, we're quite excited about this combination of new agents, reimbursement for the agents and the equipment that's integrated around at both digital and the hardware and think that's going to be a growth driver for many years to come.

Fantastic. Thanks,

Operator

Our next question comes from the line of Sachin of HSBC.
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Carolynne Borders

let's go to the next question. (Technical error)

Operator

Actually, we are on our next question, which comes from the line of NOVOTNY of BNP Paribas.

Hi, good morning and thanks for fitting me in tunneling up on China, Italy and Switzerland for that to describe ally in now in Q1 and Q4 and what visibility you have into the first half in terms of tender activity moving into the execution phase and then on Fiat Caddo, and can you detail what you have to do ahead of their launch in late Q1 annuity-like markets with new target emissions? Thank you.

Peter Arduini

Yes, I think we've kind of covered the China part of the four parts for kind of in the first step here, which, again, is we see a lot of activity coming together. The funds have into relief to the tenders have been opened, but it's kind of step one. And relative to for Ocado, I think, you know, as far as the work that has to be done, we have the FDA approval.
We're working here in the United States with CMS and what's called the max for reimbursement process. And we'll be working with selective countries around the world to do the same thing. So that's the combination of work as well as our normal ramp ups for commercialization and training of our teams, positioning all those things. But that much of that's in a position and we would suspect that will be commercializing. And in late Q1, if everything plays out, how we think. Thank you for your question.
So I think with that, we're going to wrap up with a good. So again, thank you all for joining us today. Appreciate all of your interest, and we look forward to connecting with all of you in the coming days at our Investor Day, which is just around the corner here at NASDAQ Marketplace in New York on November 21st. Thank you.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.