GE HealthCare Reports Third Quarter 2023 Financial Results

• 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

• GE HealthCare and Novo Nordisk to Collaborate to Advance Novel Non-Invasive Treatment for Type 2 Diabetes and Obesity with Ultrasound
• GE HealthCare’s growing list of medical institutions conducting human subject research studies with its novel photon counting CT[i] technology further expands with the addition of Stanford Medicine
• GE HealthCare Launches Enhanced Venue Family Point-of-Care Ultrasound Systems Featuring AI-Driven Caption Guidance
• GE HealthCare Awarded a $44 Million Grant to Develop Artificial Intelligence-Assisted Ultrasound Technology Aimed at Improving Outcomes in Low-and-Middle-Income Countries
• Mayo Clinic and GE HealthCare enter strategic collaboration to advance innovation in medical imaging and theranostics
• GE HealthCare Introduces Vscan Air SL, a Wireless Handheld Ultrasound Device for Rapid Assessments of Cardiac and Vascular Patients
• GE HealthCare Launches CardioVisio for Atrial Fibrillation, a Digital, Patient-Centric Clinical Decision Support Tool to Enable Precision Care
• GE HealthCare Receives FDA Clearance for Portrait Mobile, A First-Of-Its-Kind, Wireless Monitoring Solution Aiding Early Detection of Patient Deterioration

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.

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.

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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