INSERTING and REPLACING GE HealthCare Reports Fourth Quarter and Full Year 2023 Financial Results

BusinessWire

9 months ago

Delivers Strong Financial and Operating Performance in First Year as Public Company

Fourth Quarter 2023

Revenue growth was 5% year-over-year; Organic revenue growth* of 5%
Net income margin was 7.7% versus 11.2% for the prior year; Adjusted Earnings Before Interest and Taxes (EBIT) margin* was 16.1% versus the fourth quarter of 2022 Standalone Adjusted EBIT margin* of 16.1%
Cash flow from operating activities was $1.1 billion versus $1.1 billion for the prior year; Free cash flow* was $956 million versus $987 million; repaid $850 million of debt in the fourth quarter of 2023 and an additional $150 million of debt in January 2024

Full Year 2023

Revenue growth was 7% year-over-year; Organic revenue growth* of 8%
Net income margin was 8% versus 10.4% for the prior year; Adjusted EBIT margin* was 15.1% versus 2022 Standalone Adjusted EBIT margin* of 14.5%
Cash flow from operating activities was $2.1 billion versus $2.1 billion for the prior year, and Free cash flow* was $1.7 billion versus $1.8 billion last year, due to standalone interest and postretirement benefit payments
Company provides 2024 financial guidance, demonstrating progress toward medium-term financial targets

CHICAGO–(BUSINESS WIRE)–Insertion of Fourth Quarter 2023 P&L labeled “Consolidated and Combined Statements of Income” following the 2024 Guidance information.

The updated release reads:

GE HEALTHCARE REPORTS FOURTH QUARTER AND FULL YEAR 2023 FINANCIAL RESULTS

Delivers Strong Financial and Operating Performance in First Year as Public Company

Fourth Quarter 2023

Revenue growth was 5% year-over-year; Organic revenue growth* of 5%
Net income margin was 7.7% versus 11.2% for the prior year; Adjusted Earnings Before Interest and Taxes (EBIT) margin* was 16.1% versus the fourth quarter of 2022 Standalone Adjusted EBIT margin* of 16.1%
Cash flow from operating activities was $1.1 billion versus $1.1 billion for the prior year; Free cash flow* was $956 million versus $987 million; repaid $850 million of debt in the fourth quarter of 2023 and an additional $150 million of debt in January 2024

Full Year 2023

Revenue growth was 7% year-over-year; Organic revenue growth* of 8%
Net income margin was 8% versus 10.4% for the prior year; Adjusted EBIT margin* was 15.1% versus 2022 Standalone Adjusted EBIT margin* of 14.5%
Cash flow from operating activities was $2.1 billion versus $2.1 billion for the prior year, and Free cash flow* was $1.7 billion versus $1.8 billion last year, due to standalone interest and postretirement benefit payments
Company provides 2024 financial guidance, demonstrating progress toward medium-term financial targets

GE HealthCare (Nasdaq: GEHC), a leading global precision care innovator, today reported financial results for the fourth quarter ended December 31, 2023.

GE HealthCare President and CEO Peter Arduini said, “After our first year as a publicly traded company, I’m pleased to announce robust fourth quarter and full year results. This strong financial performance is a testament to our dedicated team and successful execution of our precision care strategy. We’ve made significant strides, including investing over $1 billion in R&D for future growth, helping drive more than 40 innovations in 2023. We bolstered our market position with strategic acquisitions, while at the same time paying down $1 billion in debt, setting a solid foundation for continued growth. We’re confident heading into 2024 amid the backdrop of an improved capital equipment landscape.”

Fourth Quarter 2023 Total Company Financial Performance

Revenues of $5.2 billion increased 5% on both a reported and Organic* basis year-over-year, driven by price and volume.
Total company book-to-bill was strong at 1.05 times, defined as Total orders divided by Total revenues, as the Company continues to build a robust backlog. Total company orders increased 3% organically year-over-year.
Net income attributable to GE HealthCare was $403 million versus $554 million for the prior year, and Adjusted EBIT* was $837 million versus $844 million.
Net income margin was 7.7% versus 11.2% for the prior year, down 350 basis points (bps) primarily impacted by standalone interest expense. Adjusted EBIT margin* was 16.1% versus 17.1%, down 100 bps. Adjusted EBIT margin* for the fourth quarter of 2023 was flat versus the Company’s estimated fourth quarter 2022 Standalone Adjusted EBIT margin* of 16.1% as benefits from productivity and price were offset primarily by investments.
Earnings per share (EPS) from continuing operations were $0.88 versus $1.21, down $0.33 from the prior year. Adjusted EPS* was $1.18 versus $1.31, down $0.13 from the prior year. Both comparisons were impacted by standalone interest expense. Adjusted EPS* for the fourth quarter of 2023 grew $0.12 versus the Company’s estimated fourth quarter 2022 Standalone Adjusted EPS* of $1.06.
Cash flow from operating activities was $1.1 billion, down $13 million year-over-year. Free cash flow* was $956 million, down $31 million year-over-year. Both metrics were primarily impacted by standalone interest and postretirement benefit payments. The Company repaid $850 million of debt in the fourth quarter of 2023 and an additional $150 million of debt in January 2024.

Fourth Quarter 2023 Segment Financial Performance

Imaging

Revenues of $2.8 billion increased 4% on both a reported and Organic* basis year-over-year.
Segment EBIT was $337 million versus $321 million for the prior year.
Segment EBIT margin was 11.9% versus 11.8% for the prior year.

Ultrasound

Revenues of $944 million declined 1% reported and 2% on an Organic* basis year-over-year.
Segment EBIT was $244 million versus $285 million for the prior year.
Segment EBIT margin was 25.8% versus 29.8% for prior year.

Patient Care Solutions

Revenues of $827 million increased 5% reported and 4% on an Organic* basis year-over-year.
Segment EBIT was $110 million versus $130 million for the prior year.
Segment EBIT margin was 13.3% versus 16.5% for the prior year.

Pharmaceutical Diagnostics

Revenues of $591 million increased 25% reported and 23% on an Organic* basis year-over-year.
Segment EBIT was $144 million versus $109 million for the prior year.
Segment EBIT margin was 24.4% versus 23.0% for the prior year.

Full Year 2023 Total Company Financial Performance

Revenues of $19.6 billion increased 7% year-over-year and 8% on an Organic* basis with growth across all segments and regions.
Total company book-to-bill was 1.03 times, as orders dollars outpaced revenues. Total company orders increased 3% organically year-over-year.
Net income attributable to GE HealthCare was $1.6 billion versus $1.9 billion for the prior year, and Adjusted EBIT* was $3.0 billion versus $2.9 billion in the same period last year.
Net income margin was 8% versus 10.4% for the prior year, down 240 bps, primarily impacted by standalone interest expense. Adjusted EBIT margin* was 15.1% versus 15.6% last year, down 50 bps. Adjusted EBIT margin* for the full year 2023 was up 60 bps versus the Company’s estimated full year 2022 Standalone Adjusted EBIT margin* of 14.5% last year. Margin benefited from productivity, price, and volume, and was partially offset by inflation.
EPS from continuing operations was $3.04 compared to $4.18 for full year 2022, down $1.14 from the prior year. Adjusted EPS* was $3.93, versus $4.63 in prior year. Both comparisons were impacted by standalone interest expense. Adjusted EPS* for the full year 2023 grew $0.55 versus the Company’s estimated full year 2022 Standalone Adjusted EPS* of $3.38.
Cash flow from operating activities was $2.1 billion, down $33 million year-over-year, and Free cash flow* was $1.7 billion, down $113 million year-over-year, due to standalone interest and postretirement benefit payments.
Cash flow conversion, defined as cash from operating activities divided by net income attributable to GE HealthCare, was 134% while Free cash flow conversion* was 95% for 2023.

Growth and Innovation

2024 Guidance

Full year 2024 guidance is as follows:

Organic revenue growth* of approximately 4% year-over-year.
Adjusted EBIT margin* in the range of 15.6% to 15.9%, reflecting an expansion of 50 to 80 basis points versus 2023 Adjusted EBIT margin* of 15.1%.
Adjusted effective tax rate (ETR)* in the range of 23% to 25%.
Adjusted EPS* in the range of $4.20 to $4.35, representing 7% to 11% growth versus Adjusted EPS* of $3.93 for 2023.
Free cash flow* of approximately $1.8 billion.

The Company provides its outlook on a non-GAAP basis. Refer to the Non-GAAP Financial Measures in Outlook section below for more details.

Consolidated and Combined Statements of Income
Unaudited	For the three months ended December 31						For the years ended December 31
*(In millions, except per share amounts)*		2023			2022			2023			2022
Sales of products	$	3,597		$	3,342		$	13,127		$	12,044
Sales of services		1,609			1,596			6,425			6,297
Total revenues		5,206			4,938			19,552			18,341
Cost of products		2,268			2,150			8,465			7,975
Cost of services		782			856			3,165			3,187
Gross profit		2,156			1,932			7,922			7,179
Selling, general, and administrative		1,152			884			4,282			3,631
Research and development		315			271			1,205			1,026
Total operating expenses		1,467			1,155			5,487			4,657
Operating income		689			777			2,435			2,522
Interest and other financial charges – net		131			59			542			77
Non-operating benefit (income) costs		(50	)		(1	)		(382	)		(5	)
Other (income) expense – net		(1	)		1			(86	)		(62	)
Income from continuing operations before income taxes		609			718			2,361			2,512
Benefit (provision) for income taxes		(193	)		(151	)		(743	)		(563	)
Net income from continuing operations		416			567			1,618			1,949
Income (loss) from discontinued operations, net of taxes		—			6			(4	)		18
Net income		416			573			1,614			1,967
Net (income) loss attributable to noncontrolling interests		(13	)		(19	)		(46	)		(51	)
Net income attributable to GE HealthCare		403			554			1,568			1,916
Deemed preferred stock dividend of redeemable noncontrolling interest		—			—			(183	)		—
Net income attributable to GE HealthCare common stockholders	$	403		$	554		$	1,385		$	1,916

Earnings per share from continuing operations attributable to GE HealthCare common stockholders:
Basic	$	0.89		$	1.21		$	3.06		$	4.18
Diluted		0.88			1.21			3.04			4.18
Earnings per share attributable to GE HealthCare common stockholders:
Basic	$	0.89		$	1.22		$	3.05		$	4.22
Diluted		0.88			1.22			3.03			4.22
Weighted-average number of shares outstanding:
Basic		455			454			455			454
Diluted		458			454			458			454

Consolidated and Combined Statements of Income
	For the years ended December 31
*(In millions, except per share amounts)*		2023			2022			2021
Sales of products	$	13,127		$	12,044		$	11,165
Sales of services		6,425			6,297			6,420
Total revenues		19,552			18,341			17,585
Cost of products		8,465			7,975			7,196
Cost of services		3,165			3,187			3,215
Gross profit		7,922			7,179			7,174
Selling, general, and administrative		4,282			3,631			3,563
Research and development		1,205			1,026			816
Total operating expenses		5,487			4,657			4,379
Operating income		2,435			2,522			2,795
Interest and other financial charges – net		542			77			40
Non-operating benefit (income) costs		(382	)		(5	)		3
Other (income) expense – net		(86	)		(62	)		(123	)
Income from continuing operations before income taxes		2,361			2,512			2,875
Benefit (provision) for income taxes		(743	)		(563	)		(600	)
Net income from continuing operations		1,618			1,949			2,275
Income (loss) from discontinued operations, net of taxes		(4	)		18			18
Net income		1,614			1,967			2,293
Net (income) loss attributable to noncontrolling interests		(46	)		(51	)		(46	)
Net income attributable to GE HealthCare		1,568			1,916			2,247
Deemed preferred stock dividend of redeemable noncontrolling interest		(183	)		—			—
Net income attributable to GE HealthCare common stockholders	$	1,385		$	1,916		$	2,247

Earnings per share from continuing operations attributable to GE HealthCare common stockholders:
Basic	$	3.06		$	4.18		$	4.91
Diluted		3.04			4.18			4.91
Earnings per share attributable to GE HealthCare common stockholders:
Basic	$	3.05		$	4.22		$	4.95
Diluted		3.03			4.22			4.95
Weighted-average number of shares outstanding:
Basic		455			454			454
Diluted		458			454			454


Consolidated and Combined Statements of Financial Position
	As of
*(In millions, except share and per share amounts)*	December 31, 2023			December 31, 2022
Cash, cash equivalents, and restricted cash	$	2,504		$	1,445
Receivables – net of allowances of $98 and $91		3,525			3,295
Due from related parties		32			17
Inventories		1,960			2,155
Contract and other deferred assets		1,000			989
All other current assets		389			417
Current assets		9,410			8,318
Property, plant, and equipment – net		2,500			2,314
Goodwill		12,936			12,813
Other intangible assets – net		1,253			1,520
Deferred income taxes		4,474			1,550
All other assets		1,881			1,024
Total assets	$	32,454		$	27,539
Short-term borrowings	$	1,006		$	15
Accounts payable		2,947			2,944
Due to related parties		99			146
Contract liabilities		1,918			1,896
All other current liabilities		3,011			2,190
Current liabilities		8,981			7,191
Long-term borrowings		8,436			8,234
Compensation and benefits		5,782			549
Deferred income taxes		68			370
All other liabilities		1,877			1,603
Total liabilities		25,144			17,947
Commitments and contingencies
Redeemable noncontrolling interests		165			230
Common stock, par value $0.01 per share, 1,000,000,000 shares authorized, 455,342,290 shares issued and outstanding as of December 31, 2023; 100 shares issued and outstanding as of December 31, 2022		5			—
Additional paid-in capital		6,493			—
Retained earnings		1,326			—
Net parent investment		—			11,235
Accumulated other comprehensive income (loss) – net		(691	)		(1,878	)
Total equity attributable to GE HealthCare		7,133			9,357
Noncontrolling interests		12			5
Total equity		7,145			9,362
Total liabilities, redeemable noncontrolling interests, and equity	$	32,454		$	27,539





Consolidated and Combined Statements of Cash Flows
	For the years ended December 31
*(In millions)*		2023			2022			2021
Net income	$	1,614		$	1,967		$	2,293
Less: Income (loss) from discontinued operations, net of taxes		(4	)		18			18
Net income from continuing operations	$	1,618		$	1,949		$	2,275
Adjustments to reconcile Net income from continuing operations to Cash from (used for) operating activities
Depreciation of property, plant, and equipment		248			228			225
Amortization of intangible assets		362			405			400
Gain on fair value remeasurement of contingent consideration		(17	)		(65	)		—
Net periodic postretirement benefit plan (income) expense		(332	)		9			25
Postretirement plan contributions		(357	)		(18	)		(20	)
Share-based compensation		114			67			76
Provision for income taxes		743			563			600
Cash paid during the year for income taxes		(474	)		(851	)		(615	)
Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions:
Receivables		(185	)		(231	)		(1,336	)
Due from related parties		4			13			157
Inventories		111			(402	)		(435	)
Contract and other deferred assets		10			(222	)		23
Accounts payable		(13	)		481			263
Due to related parties		(84	)		(33	)		(21	)
Contract liabilities		26			138			(21	)
All other operating activities		327			103			11
Cash from (used for) operating activities – continuing operations		2,101			2,134			1,607
Cash flows – investing activities
Additions to property, plant and equipment and internal-use software		(387	)		(310	)		(248	)
Dispositions of property, plant, and equipment		1			4			15
Purchases of businesses, net of cash acquired		(147	)		—			(1,481	)
All other investing activities		(25	)		(92	)		(47	)
Cash from (used for) investing activities – continuing operations		(558	)		(398	)		(1,761	)
Cash flows – financing activities
Net increase (decrease) in borrowings (maturities of 90 days or less)		(12	)		9			(7	)
Newly issued debt, net of debt issuance costs (maturities longer than 90 days)		2,006			8,198			5
Repayments and other reductions (maturities longer than 90 days)		(855	)		(3	)		(10	)
Dividends paid to stockholders		(41	)		—			—
Redemption of noncontrolling interests		(211	)		—			—
Net transfers (to) from GE		(1,317	)		(8,934	)		(238	)
All other financing activities		(48	)		(92	)		(13	)
Cash from (used for) financing activities – continuing operations		(478	)		(822	)		(263	)
Cash from (used for) operating activities – discontinued operations		—			(21	)		—
Effect of foreign currency rate changes on cash, cash equivalents, and restricted cash		(10	)		(3	)		(34	)
Increase (decrease) in cash, cash equivalents, and restricted cash		1,055			890			(451	)
Cash, cash equivalents, and restricted cash at beginning of year		1,451			561			1,012
Cash, cash equivalents, and restricted cash as of December 31	$	2,506		$	1,451		$	561

Supplemental disclosure of cash flows information
Cash paid during the year for interest	$	(570	)	$	—		$	(21	)
Non-cash investing activities
Acquired but unpaid property, plant, and equipment	$	140		$	136		$	93

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 and disposition-related charges (benefits); (8) Spin-Off and separation costs; (9) (gain) loss on 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 benefit (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 and disposition-related charges (benefits); (4) Spin-Off and separation costs; (5) (gain) loss on 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.

Contacts

Investor Relations Contact:
Carolynne Borders

+1-631-662-4317

carolynne.borders@gehealthcare.com

Media Contact:
Tor Constantino

+1-585-441-1658

tor.constantino@gehealthcare.com

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