Revenue growth was 5% year-over-year; Organic revenue growth* of 6%
Net income attributable to GE HealthCare was $375 million versus $487 million for the prior year; Adjusted EBIT* $744 million versus $700 million
Net income margin was 7.8% versus 10.6% for the prior year; Adjusted EBIT margin* was 15.4% versus Standalone EBIT margin* of 14.2%
Diluted EPS was $0.83 versus $1.07 for the prior year; Adjusted EPS* was $0.99 versus Standalone Adjusted EPS* of $0.87
Cash flow from operating activities was $650 million versus $622 million for the prior year; Free cash flow* was $570 million versus $548 million
The Company raises low end of full-year Adjusted EPS* guidance range
CHICAGO–(BUSINESS WIRE)–GE HealthCare (Nasdaq: GEHC), a leading global precision care innovator, today reported financial results for the third quarter ended September 30, 2023.
GE HealthCare President and CEO Peter Arduini said, “We delivered another strong quarter of revenue growth with margin performance demonstrating progress on productivity and price. Cash performance was strong as we leveraged lean principles to improve inventory management. We remain confident in our 2023 outlook as we continue to innovate for customers and patients.”
Third Quarter 2023 Total Company Financial Performance
Revenues of $4.8 billion increased 5% reported and 6% on an Organic basis* year-over-year, driven by volume and price.
Total company book-to-bill, defined as Total orders divided by Total revenues, was 1.03 times for the quarter, as orders dollars outpaced revenues. Total company orders increased 1% organically.
Net income attributable to GE HealthCare was $375 million versus $487 million for the prior year, and Adjusted EBIT* was $744 million versus $700 million.
Net income margin was 7.8% versus 10.6% for the prior year, down 280 basis points (“bps”) primarily impacted by standalone interest expense. Adjusted EBIT margin* was 15.4% versus 15.3%, up 10 bps. Adjusted EBIT margin* for the third quarter of 2023 increased 120 bps versus the Company’s estimated 3Q’22 Standalone Adjusted EBIT margin* of 14.2%. Margin was driven by productivity and price, and partially offset by planned investments and inflation.
Earnings per share (“EPS”) from continuing operations were $0.83 versus $1.07, down $0.24 from the prior year. Adjusted EPS* was $0.99 versus $1.20, down $0.21 from the prior year. Both comparisons were impacted by standalone interest expense. Adjusted EPS* for the third quarter of 2023 grew $0.12 versus the Company’s estimated 3Q’22 Standalone Adjusted EPS* of $0.87 with increased volume.
Cash flow from operating activities was $650 million versus $622 million, up $28 million year-over-year primarily due to strong inventory management. Free cash flow* was $570 million, up $22 million year-over-year.
Third Quarter 2023 Segment Financial Performance
Imaging
Revenues of $2.6 billion increased 5% on both a reported and Organic basis* year-over-year.
Revenue growth was driven by Molecular Imaging and Computed Tomography as well as Magnetic Resonance, due to supply chain improvements, price, and new product introductions.
Segment EBIT was $318 million versus $267 million for the prior year.
Segment EBIT margin was 12.1% versus 10.6% for the prior year, with progress on productivity, price, and volume, partially offset by planned investments.
Ultrasound
Revenues of $815 million declined 1% on both a reported and Organic basis*, following double-digit growth in the prior period.
Segment EBIT was $179 million versus $211 million for the prior year.
Segment EBIT margin was 22.0% versus 25.6% for prior year due to planned investments including Caption Health and inflation, partially offset by productivity improvements.
Patient Care Solutions
Revenues of $764 million increased 9% on both a reported and Organic basis* year-over-year.
Strong revenue growth from volume, due to supply chain fulfillment improvements and progress on price.
Segment EBIT was $80 million versus $65 million for the prior year.
Segment EBIT margin was 10.5% versus 9.3% for the prior year, driven by productivity, volume, and price, partially offset by planned investments and inflation.
Pharmaceutical Diagnostics
Revenues of $589 million increased 13% reported and 12% on an Organic basis* year-over-year.
Strong revenue growth driven by pricing actions and continued volume.
Segment EBIT of $166 million versus $159 million for the prior year.
Segment EBIT margin was 28.2% versus 30.5% for the prior year, due to raw material inflation and planned investments, partially offset by price, productivity, and volume.
Growth and Innovation
2023 Guidance
Full year 2023 guidance is as follows:
Organic revenue growth* in the range of 6% to 8% year-over-year.
Adjusted EBIT margin* in the range of 15.0% to 15.5%, reflecting an expansion of 50 to 100 basis points versus 2022 Standalone Adjusted EBIT margin* of 14.5%.
Adjusted effective tax rate (ETR)* in the range of 23% to 25%.
Adjusted EPS* in the range of $3.75 to $3.85, raising the low end of range, and representing 11% to 14% growth versus Standalone Adjusted EPS* of $3.38 for 2022. The prior range was $3.70 to $3.85.
Free cash flow conversion* of 85% or more for the full year. The Company’s cash flow outlook assumes that the legislation requiring R&D capitalization for tax purposes is repealed or deferred beyond 2023. The Free cash flow* impact of this legislation is up to 10 points of Free cash flow conversion* for the year.
The Company provides its outlook on a non-GAAP basis. Refer to the Non-GAAP Financial Measures in Outlook section below for more details.
Condensed Consolidated and Combined Statements of Income (Unaudited)
For the three months ended September 30
For the nine months ended September 30
(In millions, except per share amounts)
2023
2022
2023
2022
Sales of products
$
3,186
$
3,012
$
9,530
$
8,702
Sales of services
1,636
1,564
4,816
4,701
Total revenues
4,822
4,576
14,346
13,403
Cost of products
2,076
1,995
6,197
5,825
Cost of services
811
808
2,383
2,331
Gross profit
1,935
1,773
5,766
5,247
Selling, general, and administrative
996
908
3,130
2,747
Research and development
322
260
890
755
Total operating expenses
1,318
1,168
4,020
3,502
Operating income
617
605
1,746
1,745
Interest and other financial charges – net
138
2
411
18
Non-operating benefit (income) costs
(94
)
(1
)
(332
)
(4
)
Other (income) expense – net
(63
)
(18
)
(85
)
(63
)
Income from continuing operations before income taxes
636
622
1,752
1,794
Benefit (provision) for income taxes
(250
)
(129
)
(550
)
(412
)
Net income from continuing operations
386
493
1,202
1,382
Income (loss) from discontinued operations, net of taxes
(4
)
—
(4
)
12
Net income
382
493
1,198
1,394
Net (income) loss attributable to noncontrolling interests
(7
)
(6
)
(33
)
(32
)
Net income attributable to GE HealthCare
375
487
1,165
1,362
Deemed preferred stock dividend of redeemable noncontrolling interest
—
—
(183
)
—
Net income attributable to GE HealthCare common stockholders
$
375
$
487
$
982
$
1,362
Earnings per share from continuing operations attributable to GE HealthCare common stockholders:
Basic
$
0.83
$
1.07
$
2.17
$
2.97
Diluted
0.83
1.07
2.16
2.97
Earnings per share attributable to GE HealthCare common stockholders:
Basic
$
0.82
$
1.07
$
2.16
$
3.00
Diluted
0.82
1.07
2.15
3.00
Weighted-average number of shares outstanding:
Basic
455
454
455
454
Diluted
458
454
458
454
Condensed Consolidated and Combined Statements of Financial Position (Unaudited)
As of
(In millions, except share and per share amounts)
September 30, 2023
December 31, 2022
Cash, cash equivalents, and restricted cash
$
2,418
$
1,445
Receivables – net of allowances of $91 and $91
3,373
3,295
Due from related parties
27
17
Inventories
2,128
2,155
Contract and other deferred assets
1,038
989
All other current assets
484
417
Current assets
9,468
8,318
Property, plant, and equipment – net
2,355
2,314
Goodwill
12,914
12,813
Other intangible assets – net
1,332
1,520
Deferred income taxes
4,277
1,550
All other assets
2,036
1,024
Total assets
$
32,382
$
27,539
Short-term borrowings
$
7
$
15
Accounts payable
2,774
2,944
Due to related parties
102
146
Contract liabilities
1,927
1,896
All other current liabilities
2,755
2,190
Current liabilities
7,565
7,191
Long-term borrowings
10,253
8,234
Compensation and benefits
5,373
549
Deferred income taxes
62
370
All other liabilities
1,826
1,603
Total liabilities
25,079
17,947
Commitments and contingencies
Redeemable noncontrolling interests
161
230
Common stock, par value $0.01 per share, 1,000,000,000 shares authorized, 455,224,438 shares issued and outstanding as of September 30, 2023; 100 shares issued and outstanding as of December 31, 2022
5
—
Additional paid-in capital
6,469
—
Retained earnings
937
—
Net parent investment
—
11,235
Accumulated other comprehensive income (loss) – net
(280
)
(1,878
)
Total equity attributable to GE HealthCare
7,131
9,357
Noncontrolling interests
11
5
Total equity
7,142
9,362
Total liabilities, redeemable noncontrolling interests, and equity
$
32,382
$
27,539
Condensed Consolidated and Combined Statements of Cash Flows (Unaudited)
For the nine months ended September 30
(In millions)
2023
2022
Net income
$
1,198
$
1,394
Less: Income (loss) from discontinued operations, net of taxes
(4
)
12
Net income from continuing operations
$
1,202
$
1,382
Adjustments to reconcile Net income from continuing operations to Cash from (used for) operating activities
Depreciation of property, plant, and equipment
188
169
Amortization of intangible assets
278
307
Gain on fair value remeasurement of contingent consideration
(17
)
(49
)
Net periodic postretirement benefit plan (income) expense
(291
)
8
Postretirement plan contributions
(259
)
(17
)
Provision for income taxes
550
412
Share-based compensation
81
58
Cash paid during the year for income taxes
(375
)
(664
)
Cash paid during the year for interest
(318
)
—
Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions:
Receivables
(82
)
(107
)
Due from related parties
9
22
Inventories
(85
)
(542
)
Contract and other deferred assets
(75
)
(168
)
Accounts payable
(93
)
369
Due to related parties
(87
)
(45
)
Contract liabilities
69
49
All other operating activities
356
(113
)
Cash from (used for) operating activities – continuing operations
1,051
1,071
Cash flows – investing activities
Additions to property, plant and equipment and internal-use software
(293
)
(233
)
Dispositions of property, plant, and equipment
1
3
Purchases of businesses, net of cash acquired
(147
)
—
All other investing activities
(31
)
(73
)
Cash from (used for) investing activities – continuing operations
(470
)
(303
)
Cash flows – financing activities
Net increase (decrease) in borrowings (maturities of 90 days or less)
(9
)
8
Newly issued debt, net of debt issuance costs (maturities longer than 90 days)
2,020
3
Repayments and other reductions (maturities longer than 90 days)
(9
)
(4
)
Dividends paid to stockholders
(28
)
—
Redemption of noncontrolling interests
(211
)
—
Net transfers (to) from GE
(1,317
)
(703
)
All other financing activities
(24
)
(89
)
Cash from (used for) financing activities – continuing operations
422
(785
)
Effect of foreign currency rate changes on cash, cash equivalents, and restricted cash
(34
)
(40
)
Increase (decrease) in cash, cash equivalents, and restricted cash
969
(57
)
Cash, cash equivalents, and restricted cash at beginning of year
1,451
561
Cash, cash equivalents, and restricted cash as of September 30
$
2,420
$
504
Non-GAAP Financial Measures
The non-GAAP financial measures presented in this press release are supplemental measures of GE HealthCare’s performance and its liquidity that the Company believes will help investors understand its financial condition, cash flows, and operating results and assess its future prospects. The Company believes that presenting these non-GAAP financial measures, in addition to the corresponding U.S. GAAP financial measures, are important supplemental measures that exclude non-cash or other items that may not be indicative of or related to its core operating results and the overall health of the Company. The Company believes these non-GAAP financial measures provide investors greater transparency to the information used by management for its operational decision-making and allow investors to see results “through the eyes of management.” The Company believes that providing this information assists investors in understanding its operating performance and the methodology used by management to evaluate and measure such performance. When read in conjunction with the Company’s U.S. GAAP results, these non-GAAP financial measures provide a baseline for analyzing trends in the Company’s underlying businesses and can be used by management as one basis for making financial, operational, and planning decisions. Finally, these measures are often used by analysts and other interested parties to evaluate companies in the Company’s industry.
Management recognizes that these non-GAAP financial measures have limitations, including that they may be calculated differently by other companies or may be used under different circumstances or for different purposes, thereby affecting their comparability from company to company. In order to compensate for these and the other limitations, management does not consider these measures in isolation from or as alternatives to the comparable financial measures determined in accordance with U.S. GAAP. Readers should review the reconciliations and should not rely on any single financial measure to evaluate the Company’s business.
The Company defines these non-GAAP financial measures as:
Organic revenue: Total revenues excluding the effects of: (1) net sales from recent acquisitions and dispositions with less than a full year of comparable net sales; and (2) foreign currency exchange rate fluctuations in order to present revenue on a constant currency basis.
Organic revenue growth rate: Rate of change when comparing Organic revenue, period over period.
Adjusted EBIT: Net income attributable to GE HealthCare excluding the effects of: (1) Interest and other financial charges – net; (2) Non-operating benefit (income) costs; (3) Provision (benefit) for income taxes; (4) Income (loss) from discontinued operations, net of taxes; (5) Net (income) loss attributable to noncontrolling interests; (6) restructuring costs; (7) acquisition, disposition related charges (benefits); (8) Spin-Off and separation costs; (9) (gain) loss of business and asset dispositions; (10) amortization of acquisition related intangible assets; and (11) investment revaluation (gain) loss. In addition, the Company may from time to time consider excluding other nonrecurring items to enhance comparability between periods.
Adjusted EBIT margin: Adjusted EBIT divided by Total revenues for the same period.
Standalone Adjusted EBIT: Adjusted EBIT including the effects of recurring and on-going costs to operate new functions required for a standalone company that management believes provide a better depiction of the operations of GE HealthCare as a standalone company.
Standalone Adjusted EBIT margin: Standalone Adjusted EBIT divided by Total revenues for the same period.
The Company believes that Organic revenue and Organic revenue growth rate, by excluding the effect of acquisitions, dispositions, and foreign currency rate fluctuations, provide management and investors with additional understanding of the Company’s core, top-line operating results and greater visibility into underlying revenue trends of its established, ongoing operations. Organic revenue and Organic revenue growth rate also provide greater insight regarding the overall demand for its products and services.
The Company believes Adjusted EBIT, Adjusted EBIT margin, Standalone Adjusted EBIT, and Standalone Adjusted EBIT margin provide management and investors with additional understanding of its business by highlighting the results from ongoing operations and the underlying profitability factors. These metrics exclude interest expense, interest income, non-operating benefits (income) costs, and tax expense, as well as non-recurring and/or non-cash items, which may have a material impact on the Company’s results. The Company believes this provides additional insight into how its businesses are performing, on a normalized basis. However, these non-GAAP financial measures should not be construed as inferring that the Company’s future results will be unaffected by the items for which the measure adjusts.
Adjusted net income: Net income attributable to GE HealthCare excluding (1) Non-operating benefit (income) costs; (2) restructuring costs; (3) acquisition, disposition related charges (benefits); (4) Spin-Off and separation costs; (5) (gain) loss of business and asset dispositions; (6) amortization of acquisition-related intangible assets; (7) investment revaluation (gain) loss; (8) tax effect of reconciling items (items 1-7); (9) certain tax adjustments as described in Adjusted tax expense definition below and (10) Income (loss) from discontinued operations, net of taxes. In addition, the Company may from time to time consider disclosing other nonrecurring items to enhance comparability between periods.
Adjusted EPS: Diluted earnings per share from continuing operations excluding the per share impact of: (1) deemed preferred stock dividend of redeemable noncontrolling interest, (2) Non-operating benefit (income) costs; (3) restructuring costs; (4) acquisition, disposition related charges (benefits); (5) Spin-Off and separation costs; (6) (gain) loss of business and asset dispositions; (7) amortization of acquisition-related intangible assets; (8) investment revaluation (gain) loss; (9) tax effect of reconciling items (items 1-8); and (10) certain tax adjustments as described in Adjusted tax expense definition below. In addition, the Company may from time to time consider disclosing other nonrecurring items to enhance comparability between periods.
Standalone Adjusted EPS: Adjusted EPS including the per share impact of the effects of recurring and on-going costs to operate new functions required for a standalone company and interest expense associated with third party debt that management believes provide a better depiction of the operations of GE HealthCare as a standalone company.
The Company believes Adjusted net income, Adjusted EPS, and Standalone Adjusted EPS provide investors with improved comparability of underlying operating results and a further understanding and additional transparency regarding how it evaluates the business. These non-GAAP financial measures also provide management and investors with additional perspective regarding the impact of certain significant items on the Company’s condensed consolidated and combined earnings. However, they should not be construed as inferring that the Company’s future results will be unaffected by the items for which the measure adjusts.
Adjusted tax expense and Adjusted effective tax rate (“ETR”): Adjusted tax expense is Income tax expense less the income tax related to pre-tax income adjustments above and certain income tax adjustments. Examples of certain income tax adjustments include the accrual of a deferred tax liability on the prior period earnings of certain of the Company’s foreign subsidiaries for which the Company is no longer permanently reinvested. Adjusted ETR is Adjusted tax expense divided by Income before income taxes less pre-tax income adjustments above. Adjusted tax expense and Adjusted ETR can be used by investors to review the income tax expense and effective tax rate for the Company’s operations on a consistent basis.
Free cash flow: Cash from (used for) operating activities – continuing operations adjusting for the effects of (1) additions to property, plant and equipment (“PP&E”) and internal-use software; (2) dispositions of PP&E; and (3) impact of factoring programs.
Free cash flow conversion: Free cash flow divided by Adjusted net income.
The Company believes that Free cash flow and Free cash flow conversion provide management and investors with important measures of the Company’s ability to generate cash on a normalized basis. These metrics also provide insight into the Company’s flexibility to allocate capital, including reinvesting in the Company for future growth, paying down debt, paying dividends, and pursuing other opportunities that may enhance stockholder value. The Company believes investors may find it useful to compare Free cash flow performance without the effects of the factoring program discontinuation. However, they should not be construed as inferring that the Company’s future results will be unaffected by the items for which the measure adjusts.
Organic Revenue*
Unaudited
For the three months ended September 30
For the nine months ended September 30
($ In millions)
2023
2022
% change
2023
2022
% change
Imaging revenues
$
2,635
$
2,516
5
%
$
7,751
$
7,276
7
%
Less: Acquisitions(1)
—
—
—
—
Less: Dispositions(2)
—
—
—
—
Less: Foreign currency exchange
(14
)
—
(159
)
—
Imaging Organic revenue*
$
2,649
$
2,516
5
%
$
7,910
$
7,276
9
%
Ultrasound revenues
$
815
$
823
(1
)%
$
2,513
$
2,466
2
%
Less: Acquisitions(1)
—
—
—
—
Less: Dispositions(2)
—
—
—
—
Less: Foreign currency exchange
1
—
(54
)
—
Ultrasound Organic revenue*
$
814
$
823
(1
)%
$
2,567
$
2,466
4
%
PCS revenues
$
764
$
701
9
%
$
2,315
$
2,130
9
%
Less: Acquisitions(1)
—
—
—
—
Less: Dispositions(2)
—
—
—
—
Less: Foreign currency exchange
1
—
(22
)
—
PCS Organic revenue*
$
763
$
701
9
%
$
2,337
$
2,130
10
%
PDx revenues
$
589
$
522
13
%
$
1,715
$
1,485
15
%
Less: Acquisitions(1)
—
—
—
—
Less: Dispositions(2)
—
—
—
—
Less: Foreign currency exchange
2
—
(23
)
—
PDx Organic revenue*
$
587
$
522
12
%
$
1,738
$
1,485
17
%
Other revenues
$
19
$
14
36
%
$
52
$
46
13
%
Less: Acquisitions(1)
—
—
—
—
Less: Dispositions(2)
—
—
—
—
Less: Foreign currency exchange
—
—
—
—
Other Organic revenue*
$
19
$
14
36
%
$
52
$
46
13
%
Total revenues
$
4,822
$
4,576
5
%
$
14,346
$
13,403
7
%
Less: Acquisitions(1)
—
—
—
—
Less: Dispositions(2)
—
—
—
—
Less: Foreign currency exchange
(10
)
—
(258
)
—
Organic revenue*
$
4,832
$
4,576
6
%
$
14,604
$
13,403
9
%
Contacts
Investor Relations Contact:
Carolynne Borders
+1-631-662-4317
[email protected]
Media Contact:
Tor Constantino
+1-585-441-1658
[email protected]