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GE HealthCare Reports Second Quarter 2023 Financial Results

July 25, 2023 Off By BusinessWire
  • 2Q Revenue growth of 7% year-over-year; Organic revenue growth* of 9%
  • 2Q Net income attributable to GE HealthCare of $418 million versus $485 million for the prior year, Adjusted EBIT* of $711 million versus $719 million
  • 2Q Diluted EPS was $0.91 versus $1.04 in the prior year, Adjusted EPS* was $0.92 versus $1.15
  • Raises full-year guidance for Organic revenue growth* and Adjusted EPS* on strong execution in first half of year

CHICAGO–(BUSINESS WIRE)–GE HealthCare (Nasdaq: GEHC), a leading global precision care innovator, today reported financial results for the second quarter ended June 30, 2023.

GE HealthCare President and CEO Peter Arduini said, “We are pleased with organic orders growth of 6% for the second quarter reflecting ongoing strong global demand, and we continued to see revenue growth across our segments. We’ve made good progress with our operating priorities in the first half of the year. As a result, we’re raising our top- and bottom-line guidance for the full year as we execute our precision care strategy.”

Second Quarter 2023 Total Company Financial Performance

  • Revenues of $4.8 billion increased 7% reported and 9% on an Organic basis* year-over-year. Foreign exchange negatively impacted growth by 2%.
  • Total company orders increased 6% organically, driven by ongoing global customer demand.
  • Net income attributable to GE HealthCare was $418 million versus $485 million for the prior year, and Adjusted EBIT* was $711 million versus $719 million.
  • Net income margin was 8.7% versus 10.8% for the prior year, down 210 basis points (“bps”) primarily impacted by standalone interest expense. Adjusted EBIT margin* was 14.8% versus 16.0%, down 120 bps. Adjusted EBIT margin* for the second quarter of 2023 declined 10 bps versus the Company’s estimated 2Q’22 Standalone Adjusted EBIT margin* of 14.9%. Margins were impacted by inflation and investment, partially offset by price, productivity, and volume.
  • Earnings per share (“EPS”) from continuing operations were $0.91 versus $1.04, down $0.13 from the prior year. Adjusted EPS* was $0.92 versus $1.15, down $0.23 from the prior year. Both comparisons were impacted by standalone interest expense. Adjusted EPS* for the second quarter of 2023 grew $0.10 versus the Company’s estimated 2Q’22 Standalone Adjusted EPS* of $0.82 with increased volume.
  • Cash flow from operating activities was $(67) million versus $(19) million, down $48 million year-over-year due to standalone interest and post-retirement benefit payments. These items, coupled with increased capital expenditures, also impacted Free cash flow* of $(136) million, which was down $58 million year-over-year.

Second Quarter 2023 Segment Financial Performance

Imaging

  • Revenues of $2.6 billion increased 7% reported and 9% on an Organic basis* year-over-year.
  • Strong revenue growth was driven by Molecular Imaging and Computed Tomography as well as Magnetic Resonance, due to supply chain fulfillment improvements, stable demand, new product introductions, and price.
  • Segment EBIT was $278 million versus $306 million for the prior year.
  • Segment EBIT margin was 10.6% versus 12.5% for the prior year, with progress on productivity, volume, and price that was more than offset by inflation from prior year purchases and planned investments.

Ultrasound

  • Revenues of $839 million increased 1% reported and 3% on an Organic basis* year-over-year.
  • Solid revenue growth in Cardiovascular and Women’s Health, attributable to new product introductions with artificial intelligence (AI) capabilities that drive improved efficiency and patient outcomes.
  • Segment EBIT was $191 million versus $220 million for the prior year.
  • Segment EBIT margin was 22.8% versus 26.6% for prior year, impacted by inflation and planned investments, including the Caption Health acquisition, partially offset by productivity and price.

Patient Care Solutions

  • Revenues of $770 million increased 8% reported and 9% on an Organic basis* year-over-year.
  • Strong revenue growth from progress on price and improved fulfillment through supply chain resiliency actions.
  • Segment EBIT was $84 million versus $81 million for the prior year.
  • Segment EBIT margin was 10.9% versus 11.4% for the prior year, driven by inflation and planned investment offsetting price, productivity, and volume growth.

Pharmaceutical Diagnostics

  • Revenues of $568 million increased 19% reported and 20% on an Organic basis* year-over-year.
  • Strong revenue growth driven by improving volumes that benefited from a favorable comparison versus the same period last year as well as strategic pricing.
  • Segment EBIT of $152 million versus $115 million for the prior year.
  • Segment EBIT margin was 26.8% versus 24.1% for the prior year, due to price, execution of productivity, and volume, partially offset by raw material inflation and planned investments.

Growth and Innovation

2023 Guidance

Today, the Company updated its guidance for full year 2023:

  • Organic revenue growth* in the range of 6% to 8% year-over-year versus a prior range of 5% to 7%.
  • 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 $3.70 to $3.85, representing 9% to 14% growth versus Standalone Adjusted EPS* of $3.38 for 2022. The prior range was $3.60 to $3.75.
  • 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 June 30

 

For the six months ended June 30

(In millions, except per share amounts)

2023

2022

 

2023

2022

Sales of products

$

3,213

 

$

2,903

 

 

$

6,344

 

$

5,690

 

Sales of services

 

1,604

 

 

1,581

 

 

 

3,180

 

 

3,137

 

Total revenues

 

4,817

 

 

4,484

 

 

 

9,524

 

 

8,827

 

Cost of products

 

2,084

 

 

1,915

 

 

 

4,121

 

 

3,829

 

Cost of services

 

793

 

 

773

 

 

 

1,572

 

 

1,524

 

Gross profit

 

1,940

 

 

1,796

 

 

 

3,831

 

 

3,474

 

Selling, general, and administrative

 

1,072

 

 

908

 

 

 

2,134

 

 

1,839

 

Research and development

 

298

 

 

257

 

 

 

568

 

 

495

 

Total operating expenses

 

1,370

 

 

1,165

 

 

 

2,702

 

 

2,334

 

Operating income

 

570

 

 

631

 

 

 

1,129

 

 

1,140

 

Interest and other financial charges – net

 

137

 

 

12

 

 

 

273

 

 

16

 

Non-operating benefit (income) costs

 

(123

)

 

(1

)

 

 

(238

)

 

(3

)

Other (income) expense – net

 

(14

)

 

(19

)

 

 

(22

)

 

(45

)

Income from continuing operations before income taxes

 

570

 

 

639

 

 

 

1,116

 

 

1,172

 

Benefit (provision) for income taxes

 

(137

)

 

(153

)

 

 

(300

)

 

(284

)

Net income from continuing operations

 

433

 

 

486

 

 

 

816

 

 

888

 

Income from discontinued operations, net of taxes

 

—

 

 

12

 

 

 

—

 

 

12

 

Net income

 

433

 

 

498

 

 

 

816

 

 

900

 

Net (income) attributable to noncontrolling interests

 

(15

)

 

(13

)

 

 

(26

)

 

(26

)

Net income attributable to GE HealthCare

 

418

 

 

485

 

 

 

790

 

 

874

 

Deemed preferred stock dividend of redeemable noncontrolling interest

 

—

 

 

—

 

 

 

(183

)

 

—

 

Net income attributable to GE HealthCare common stockholders

$

418

 

$

485

 

 

$

607

 

$

874

 

 

 

 

 

 

 

Earnings per share from continuing operations:

 

 

 

 

 

Basic

$

0.92

 

$

1.04

 

 

$

1.34

 

$

1.90

 

Diluted

 

0.91

 

 

1.04

 

 

 

1.33

 

 

1.90

 

Earnings per share attributable to GE HealthCare common stockholders:

 

 

 

 

 

Basic

$

0.92

 

$

1.07

 

 

$

1.34

 

$

1.93

 

Diluted

 

0.91

 

 

1.07

 

 

 

1.33

 

 

1.93

 

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)

June 30, 2023

December 31, 2022

Cash, cash equivalents, and restricted cash

$

1,939

$

1,445

 

Receivables – net of allowances of $92 and $91

 

3,370

 

3,295

 

Due from related parties

 

27

 

17

 

Inventories

 

2,264

 

2,155

 

Contract and other deferred assets

 

1,044

 

989

 

All other current assets

 

596

 

417

 

Current assets

 

9,240

 

8,318

 

Property, plant, and equipment – net

 

2,357

 

2,314

 

Goodwill

 

12,929

 

12,813

 

Other intangible assets – net

 

1,423

 

1,520

 

Deferred income taxes

 

4,349

 

1,550

 

All other assets

 

2,013

 

1,024

 

Total assets

$

32,311

$

27,539

 

Short-term borrowings

$

5

$

15

 

Accounts payable

 

2,835

 

2,944

 

Due to related parties

 

168

 

146

 

Contract liabilities

 

2,003

 

1,896

 

All other current liabilities

 

2,570

 

2,190

 

Current liabilities

 

7,581

 

7,191

 

Long-term borrowings

 

10,233

 

8,234

 

Compensation and benefits

 

5,167

 

549

 

Deferred income taxes

 

81

 

370

 

All other liabilities

 

1,926

 

1,603

 

Total liabilities

 

24,988

 

17,947

 

Commitments and contingencies

 

 

Redeemable noncontrolling interests

 

209

 

230

 

Common stock, par value $0.01 per share, 1,000,000,000 shares authorized, 454,808,732 shares issued and outstanding as of June 30, 2023; 100 shares issued and outstanding as of December 31, 2022

 

5

 

—

 

Additional paid-in capital

 

6,451

 

—

 

Retained earnings

 

576

 

—

 

Net parent investment

 

—

 

11,235

 

Accumulated other comprehensive income (loss) – net

 

70

 

(1,878

)

Total equity attributable to GE HealthCare

 

7,102

 

9,357

 

Noncontrolling interests

 

12

 

5

 

Total equity

 

7,114

 

9,362

 

Total liabilities, redeemable noncontrolling interests, and equity

$

32,311

$

27,539

 

Condensed Consolidated and Combined Statements of Cash Flows (Unaudited)

 

 

 

For the six months ended June 30

(In millions)

2023

2022

Net income

$

816

 

$

900

 

Income (loss) from discontinued operations, net of taxes

 

—

 

 

12

 

Net income from continuing operations

$

816

 

$

888

 

Adjustments to reconcile Net income to Cash from (used for) operating activities

 

 

Depreciation and amortization of property, plant, and equipment

 

124

 

 

112

 

Amortization of intangible assets

 

189

 

 

204

 

Gain on fair value remeasurement of contingent consideration

 

(3

)

 

—

 

Net periodic postretirement benefit plan (income) expense

 

(207

)

 

6

 

Postretirement plan contributions

 

(180

)

 

(12

)

Provision for income taxes

 

300

 

 

284

 

Share-based compensation

 

52

 

 

39

 

Cash paid during the year for income taxes

 

(271

)

 

(443

)

Cash paid during the year for interest

 

(250

)

 

—

 

Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions:

 

 

Receivables

 

(32

)

 

(161

)

Due from related parties

 

10

 

 

(1

)

Inventories

 

(172

)

 

(447

)

Contract and other deferred assets

 

(64

)

 

(96

)

Accounts payable

 

(40

)

 

282

 

Due to related parties

 

(11

)

 

(48

)

Contract liabilities

 

111

 

 

84

 

All other operating activities

 

29

 

 

(242

)

Cash from (used for) operating activities – continuing operations

 

401

 

 

449

 

Cash flows – investing activities

 

 

Additions to property, plant, and equipment

 

(213

)

 

(159

)

Dispositions of property, plant, and equipment

 

1

 

 

3

 

Purchases of businesses, net of cash acquired

 

(147

)

 

—

 

All other investing activities

 

9

 

 

(29

)

Cash from (used for) investing activities – continuing operations

 

(350

)

 

(185

)

Cash flows – financing activities

 

 

Net increase (decrease) in borrowings (maturities of 90 days or less)

 

(12

)

 

—

 

Newly issued debt, net of debt issuance costs (maturities longer than 90 days)

 

2,000

 

 

—

 

Repayments and other reductions (maturities longer than 90 days)

 

(6

)

 

(1

)

Dividends paid to shareholders

 

(14

)

 

—

 

Redemption of noncontrolling interests

 

(211

)

 

—

 

Net transfers (to) from GE

 

(1,317

)

 

(225

)

All other financing activities

 

6

 

 

(54

)

Cash from (used for) financing activities – continuing operations

 

446

 

 

(280

)

Effect of foreign currency rate changes on cash, cash equivalents, and restricted cash

 

(3

)

 

(15

)

Increase (decrease) in cash, cash equivalents, and restricted cash

 

494

 

 

(31

)

Cash, cash equivalents, and restricted cash at beginning of year

 

1,451

 

 

561

 

Cash, cash equivalents, and restricted cash as of June 30

$

1,945

 

$

530

 

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, that can 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 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*

 

 

 

 

 

 

 

 

For the three months ended June 30

 

For the six months ended June 30

($ In millions)

2023

2022

% change

 

2023

2022

% change

Imaging revenues

$

2,620

 

$

2,449

7

%

 

$

5,116

 

$

4,760

7

%

Less: Acquisitions(a)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Dispositions(b)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Foreign currency exchange

 

(47

)

 

—

 

 

 

(145

)

 

—

 

Imaging Organic revenue*

$

2,667

 

$

2,449

9

%

 

$

5,261

 

$

4,760

11

%

Ultrasound revenues

$

839

 

$

828

1

%

 

$

1,698

 

$

1,643

3

%

Less: Acquisitions(a)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Dispositions(b)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Foreign currency exchange

 

(15

)

 

—

 

 

 

(55

)

 

—

 

Ultrasound Organic revenue*

$

854

 

$

828

3

%

 

$

1,753

 

$

1,643

7

%

PCS revenues

$

770

 

$

713

8

%

 

$

1,551

 

$

1,429

9

%

Less: Acquisitions(a)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Dispositions(b)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Foreign currency exchange

 

(6

)

 

—

 

 

 

(23

)

 

—

 

PCS Organic revenue*

$

776

 

$

713

9

%

 

$

1,574

 

$

1,429

10

%

PDx revenues

$

568

 

$

478

19

%

 

$

1,126

 

$

962

17

%

Less: Acquisitions(a)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Dispositions(b)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Foreign currency exchange

 

(6

)

 

—

 

 

 

(25

)

 

—

 

PDx Organic revenue*

$

574

 

$

478

20

%

 

$

1,151

 

$

962

20

%

Other revenues

$

20

 

$

16

25

%

 

$

33

 

$

33

—

%

Less: Acquisitions(a)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Dispositions(b)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Foreign currency exchange

 

—

 

 

—

 

 

 

—

 

 

—

 

Other Organic revenue*

$

20

 

$

16

25

%

 

$

33

 

$

33

—

%

Total revenues

$

4,817

 

$

4,484

7

%

 

$

9,524

 

$

8,827

8

%

Less: Acquisitions(a)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Dispositions(b)

 

—

 

 

—

 

 

 

—

 

 

—

 

Less: Foreign currency exchange

 

(74

)

 

—

 

 

 

(248

)

 

—

 

Organic revenue*

$

4,891

 

$

4,484

9

%

 

$

9,772

 

$

8,827

11

%

Contacts

Investor Relations Contact:
Carolynne Borders

+1-631-662-4317

[email protected]

Media Contact:
Tor Constantino

+1-585-441-1658

[email protected]

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