25-Jul-2023

GE HealthCare Reports Second Quarter 2023 Financial Results

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
carolynne.borders@gehealthcare.com

Media Contact:
Tor Constantino
+1-585-441-1658
tor.constantino@gehealthcare.com

Read full story here

Editor Details

Company:
- Businesswire

Last Updated: 25-Jul-2023