GE HealthCare reports third quarter 2024 financial results

October 30, 2024 |

19 min read

Revenue growth was 1% year-over-year; Organic revenue growth* was 1%
Net income margin was 9.7% versus 7.8% for the prior year; Adjusted earnings before interest and taxes (EBIT) margin* was 16.3% versus 15.4%
Diluted earnings per share (EPS) were $1.02 versus $0.83 for the prior year; Adjusted EPS* was $1.14 versus $0.99
Cash flow from operating activities was $742 million versus $650 million for the prior year; Free cash flow* was $651 million versus $570 million
Company raises low end of full-year 2024 Adjusted EBIT margin* and Adjusted EPS* guidance with continued execution; trending toward the lower end of Organic revenue growth* range

CHICAGO--(BUSINESS WIRE)--GE HealthCare (Nasdaq: GEHC) today reported financial results for the third quarter ended September 30, 2024.

GE HealthCare President and CEO Peter Arduini said, “In the third quarter, we reported sales and orders growth of 1% globally. Both sales and orders grew in the mid-single digits excluding China, with particular strength in the U.S. across all segments. Pharmaceutical Diagnostics also delivered solid performance, driven by healthy procedure volumes. Ongoing lean initiatives across the organization are delivering better value to patients and customers and have resulted in robust margin expansion.”

Third quarter 2024 total company financial performance

Revenues of $4.9 billion increased 1% on both a reported and Organic* basis year-over-year. Positive revenue growth in the U.S. and in Pharmaceutical Diagnostics (PDx) was offset by continued market softness in China.
Total company book-to-bill was 1.04 times. Total company orders increased 1% organically year-over-year.
Net income attributable to GE HealthCare was $470 million versus $375 million for the prior year, and Adjusted EBIT* was $795 million versus $744 million.
Net income margin was 9.7% versus 7.8% for the prior year, up 190 basis points (bps). Adjusted EBIT margin* was 16.3% versus 15.4%, up 90 bps as both measures saw benefits from productivity and price.
Diluted EPS was $1.02 versus $0.83, up $0.20 from the prior year. Adjusted EPS* was $1.14 versus $0.99, up $0.15 from the prior year as both measures saw improved EBIT and lower tax expense.
Cash flow from operating activities was $742 million, up $92 million year-over-year. Free cash flow* was $651 million, up $81 million year-over-year.

Third quarter 2024 segment financial performance (Unaudited)

Effective July 1, 2024, Image Guided Therapies, previously part of the Imaging segment, was realigned to the Ultrasound segment to better match its clinical usage and realize stronger business and customer impact by providing the right image guidance in the right care setting. The Ultrasound segment was subsequently renamed Advanced Visualization Solutions (AVS). Historical segment financial information presented herein has been recast to conform to the new reportable segments structure. The Company is providing recast financial information for fiscal years 2022, 2023, and the six months ended 2024 via a Form 8-K filed today with the U.S. Securities and Exchange Commission.

Segment *($ in millions)*	Imaging	Advanced Visualization Solutions	Patient Care Solutions	Pharmaceutical Diagnostics
Segment Revenues	$2,229	$1,216	$779	$625
YoY % change	—%	—%	2%	6%
YoY % Organic* change	(1)%	—%	2%	7%
Segment EBIT	$287	$232	$82	$193
YoY % change	18%	(9)%	3%	16%
Segment EBIT Margin	12.9%	19.0%	10.6%	30.9%
YoY change	200 bps	(190) bps	10 bps	270 bps
YoY refers to year-over-year comparison on a recast basis

Growth and innovation

Mr. Arduini continued, “The recent FDA approval of our Flyrcado™ (flurpiridaz F18) injection in the U.S. is an important moment in molecular imaging as we continue to address unmet patient needs and advance more precise, personalized care. Flyrcado is a first-of-its-kind PET myocardial perfusion imaging (MPI) agent for the detection of coronary artery disease. This milestone achievement has the potential to expand clinical and patient access to PET MPI.”

Recent innovation and commercial highlights

2024 Guidance

Today, the Company updates full-year 2024 guidance as follows:

Organic revenue growth* trending toward the lower end of the range of 1% to 2% year-over-year, given the continued China market softness
Adjusted EBIT margin* in the range of 15.8% to 16.0%, reflecting an expansion of 70 to 90 basis points versus 2023 Adjusted EBIT margin* of 15.1%; this compares to prior guidance of 15.7% to 16.0%
Adjusted effective tax rate (ETR)* trending toward the lower end of the 23% to 25% range, given additional tax incentives recognized in third quarter 2024
Adjusted EPS* in the range of $4.25 to $4.35, representing 8% to 11% growth versus Adjusted EPS* of $3.93 for 2023; this compares with prior range of $4.20 to $4.35
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.

Financial rounding

Certain columns and rows in this document may not sum due to the use of rounded numbers. Percentages presented are calculated from the underlying whole-dollar amounts.

Condensed Consolidated Statements of Income (Unaudited)
	For the three months ended September 30						For the nine months ended September 30
*(In millions, except per share amounts)*		2024			2023			2024			2023
Sales of products	$	3,201		$	3,186		$	9,454		$	9,530
Sales of services		1,662			1,636			4,899			4,816
Total revenues		4,863			4,822			14,353			14,346
Cost of products		2,033			2,076			6,045			6,197
Cost of services		805			811			2,378			2,383
Gross profit		2,026			1,935			5,930			5,766
Selling, general, and administrative		1,034			996			3,139			3,130
Research and development		316			322			967			890
Total operating expenses		1,350			1,318			4,106			4,020
Operating income		676			617			1,824			1,746
Interest and other financial charges – net		130			138			383			411
Non-operating benefit (income) costs		(102	)		(94	)		(306	)		(332	)
Other (income) expense – net		(9	)		(63	)		(1	)		(85	)
Income from continuing operations before income taxes		658			636			1,747			1,752
Benefit (provision) for income taxes		(168	)		(250	)		(435	)		(550	)
Net income from continuing operations		490			386			1,312			1,202
Income (loss) from discontinued operations, net of taxes		—			(4	)		—			(4	)
Net income		490			382			1,312			1,198
Net (income) loss attributable to noncontrolling interests		(19	)		(7	)		(40	)		(33	)
Net income attributable to GE HealthCare		470			375			1,272			1,165
Deemed preferred stock dividend of redeemable noncontrolling interest		—			—			—			(183	)
Net income attributable to GE HealthCare common stockholders	$	470		$	375		$	1,272		$	982

Earnings per share from continuing operations attributable to GE HealthCare common stockholders:
Basic	$	1.03		$	0.83		$	2.79		$	2.17
Diluted		1.02			0.83			2.77			2.16
Earnings per share attributable to GE HealthCare common stockholders:
Basic	$	1.03		$	0.82		$	2.79		$	2.16
Diluted		1.02			0.82			2.77			2.15
Weighted-average number of shares outstanding:
Basic		457			455			456			455
Diluted		459			458			459			458

Condensed Consolidated Statements of Financial Position (Unaudited)
	As of
*(In millions, except share and per share amounts)*	September 30, 2024			December 31, 2023
Cash, cash equivalents, and restricted cash	$	3,568		$	2,504
Receivables – net of allowances of $104 and $98		3,418			3,525
Due from related parties		6			32
Inventories		2,124			1,960
Contract and other deferred assets		1,046			1,000
All other current assets		476			389
Current assets		10,638			9,410
Property, plant, and equipment – net		2,539			2,500
Goodwill		13,138			12,936
Other intangible assets – net		1,132			1,253
Deferred income taxes		4,309			4,474
All other non-current assets		2,098			1,881
Total assets	$	33,855		$	32,454
Short-term borrowings	$	1,007		$	1,006
Accounts payable		2,911			2,947
Due to related parties		7			99
Contract liabilities		1,915			1,918
Current compensation and benefits		1,422			1,518
All other current liabilities		1,409			1,493
Current liabilities		8,670			8,981
Long-term borrowings		9,306			8,436
Non-current compensation and benefits		5,388			5,782
Deferred income taxes		59			68
All other non-current liabilities		1,920			1,877
Total liabilities		25,343			25,144
Commitments and contingencies
Redeemable noncontrolling interests		177			165
Common stock, par value $0.01 per share, 1,000,000,000 shares authorized, 457,144,443 shares issued as of September 30, 2024; 455,342,290 shares issued as of December 31, 2023		5			5
Treasury stock, at cost, 291,053 shares as of September 30, 2024 and 0 shares as of December 31, 2023		(25	)		—
Additional paid-in capital		6,551			6,493
Retained earnings		2,558			1,326
Accumulated other comprehensive income (loss) – net		(771	)		(691	)
Total equity attributable to GE HealthCare		8,317			7,133
Noncontrolling interests		18			12
Total equity		8,335			7,145
Total liabilities, redeemable noncontrolling interests, and equity	$	33,855		$	32,454

Condensed Consolidated Statements of Cash Flows (Unaudited)
	For the nine months ended September 30
*(In millions)*		2024			2023
Net income	$	1,312		$	1,198
Less: Income (loss) from discontinued operations, net of taxes		—			(4	)
Net income from continuing operations	$	1,312		$	1,202
Adjustments to reconcile Net income from continuing operations to Cash from (used for) operating activities
Depreciation of property, plant, and equipment		203			188
Amortization of intangible assets		237			278
Gain on fair value remeasurement of contingent consideration		(19	)		(17	)
Net periodic postretirement benefit plan (income) expense		(271	)		(291	)
Postretirement plan contributions		(257	)		(259	)
Share-based compensation		92			81
Provision for income taxes		435			550
Cash paid during the year for income taxes		(375	)		(375	)
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Receivables		83			(82	)
Due from related parties		24			9
Inventories		(157	)		(85	)
Contract and other deferred assets		(33	)		(75	)
Accounts payable		3			(93	)
Due to related parties		(72	)		(87	)
Contract liabilities		(25	)		69
Current compensation and benefits		(97	)		37
All other operating activities - net		(41	)		1
Cash from (used for) operating activities – continuing operations		1,042			1,051
Cash flows – investing activities
Additions to property, plant and equipment and internal-use software		(299	)		(293	)
Dispositions of property, plant, and equipment		—			1
Purchases of businesses, net of cash acquired		(259	)		(147	)
Purchases of investments		(33	)		(21	)
All other investing activities - net		(83	)		(10	)
Cash from (used for) investing activities – continuing operations		(674	)		(470	)
Cash flows – financing activities
Net increase (decrease) in borrowings (maturities of 90 days or less)		—			(9	)
Newly issued debt, net of debt issuance costs (maturities longer than 90 days)		994			2,020
Repayments and other reductions (maturities longer than 90 days)		(162	)		(9	)
Dividends paid to stockholders		(41	)		(28	)
Redemption of noncontrolling interests		—			(211	)
Net transfers (to) from GE		—			(1,317	)
Proceeds from stock issued under employee benefit plans		31			31
Taxes paid related to net share settlement of equity awards		(90	)		(31	)
All other financing activities - net		(28	)		(24	)
Cash from (used for) financing activities – continuing operations		704			422
Cash from (used for) operating activities – discontinued operations		(4	)		—
Effect of foreign currency rate changes on cash, cash equivalents, and restricted cash		(2	)		(34	)
Increase (decrease) in cash, cash equivalents, and restricted cash		1,066			969
Cash, cash equivalents, and restricted cash at beginning of year		2,506			1,451
Cash, cash equivalents, and restricted cash as of September 30	$	3,572		$	2,420

Supplemental disclosure of cash flows information
Cash paid during the year for interest	$	(339	)	$	(318	)
Non-cash investing activities
Acquired but unpaid property, plant, and equipment	$	72		$	80

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. When read in conjunction with the Company’s U.S. GAAP results, these non-GAAP financial measures provide a baseline for analyzing trends in GE HealthCare’s underlying businesses and can be used by management as one basis for making financial, operational, and planning decisions. Descriptions of the reported non-GAAP measures are included below.

The Company reports Organic revenue and Organic revenue growth rate to provide management and investors with additional understanding and visibility into the underlying revenue trends of the Company’s established, ongoing operations, as well as provide insights into overall demand for its products and services. To calculate these measures, the Company excludes the effect of acquisitions, dispositions, and foreign currency rate fluctuations.

The Company reports EBIT, Adjusted EBIT, Adjusted EBIT margin, Adjusted net income, Adjusted net income margin, and Adjusted earnings per share to provide management and investors with additional understanding of its business by highlighting the results from ongoing operations and the underlying profitability factors, on a normalized basis. To calculate these measures the Company excludes, and reflects in the detailed reconciliations below, the following adjustments as applicable: Interest and other financial charges - net, Net (income) loss attributable to noncontrolling interests, Non-operating benefit (income) costs, Benefit (provision) for income taxes and certain tax related adjustments, and certain non-recurring and/or non-cash items. GE HealthCare may from time to time consider excluding other non-recurring items to enhance comparability between periods. Adjusted EBIT margin and Adjusted net income margin are calculated by taking Adjusted EBIT, or Adjusted net income, divided by Total revenues for the same period.

The Company reports Adjusted tax expense and Adjusted effective tax rate (“Adjusted ETR”) to provide investors with a better understanding of the normalized tax rate applicable to the business and provide more consistent comparability across periods. Adjusted tax expense excludes the income tax related to the pre-tax income adjustments included as part of Adjusted net income and certain income tax adjustments, such as adjustments to deferred tax assets or liabilities. The Company may from time to time consider excluding other non-recurring tax items to enhance comparability between periods. Adjusted ETR is Adjusted tax expense divided by income before income taxes less the pre-tax income adjustments referenced above.

The Company reports Free cash flow and Free cash flow conversion to provide management and investors with an important measure of the ability to generate cash on a normalized basis and provide insight into the Company’s flexibility to allocate capital. Free cash flow is Cash from (used for) operating activities - continuing operations including cash flows related to the additions and dispositions of property, plant, and equipment (“PP&E”) and additions of internal-use software. Free cash flow does not represent residual cash flows available for discretionary expenditures, due to the fact that the measure does not deduct the capital required for debt repayments. Free cash flow conversion is calculated by taking Free cash flow divided by Adjusted net income.

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. In order to compensate for the discussed 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. The detailed reconciliations of each non-GAAP financial measure to the most directly comparable U.S. GAAP financial measure are provided below, and no single financial measure should be relied on to evaluate our business.

Non-GAAP Financial Reconciliations

Organic Revenue*
Unaudited	For the three months ended September 30							For the nine months ended September 30
*($ in millions)*		2024			2023	% change			2024			2023	% change
Imaging revenues	$	2,229		$	2,236	—	%	$	6,462		$	6,552	(1	)%
Less: Acquisitions(1)		16			—				29			—
Less: Dispositions(2)		—			—				—			—
Less: Foreign currency exchange		(8	)		—				(65	)		—
Imaging Organic revenue*	$	2,220		$	2,236	(1	)%	$	6,497		$	6,552	(1	)%
AVS revenues	$	1,216		$	1,214	—	%	$	3,692		$	3,712	(1	)%
Less: Acquisitions(1)		—			—				—			—
Less: Dispositions(2)		—			—				—			—
Less: Foreign currency exchange		(2	)		—				(22	)		—
AVS Organic revenue*	$	1,218		$	1,214	—	%	$	3,713		$	3,712	—	%
PCS revenues	$	779		$	764	2	%	$	2,298		$	2,315	(1	)%
Less: Acquisitions(1)		—			—				—			—
Less: Dispositions(2)		—			—				—			—
Less: Foreign currency exchange		—			—				(4	)		—
PCS Organic revenue*	$	779		$	764	2	%	$	2,302		$	2,315	(1	)%
PDx revenues	$	625		$	589	6	%	$	1,862		$	1,715	9	%
Less: Acquisitions(1)		—			—				—			—
Less: Dispositions(2)		—			—				—			—
Less: Foreign currency exchange		(5	)		—				(13	)		—
PDx Organic revenue*	$	630		$	589	7	%	$	1,876		$	1,715	9	%
Other revenues	$	15		$	19	(22	)%	$	39		$	52	(25	)%
Less: Acquisitions(1)		—			—				—			—
Less: Dispositions(2)		—			—				—			—
Less: Foreign currency exchange		—			—				—			—
Other Organic revenue*	$	15		$	19	(21	)%	$	39		$	52	(25	)%
Total revenues	$	4,863		$	4,822	1	%	$	14,353		$	14,346	—	%
Less: Acquisitions(1)		16			—				29			—
Less: Dispositions(2)		—			—				—			—
Less: Foreign currency exchange		(15	)		—				(104	)		—
Organic revenue*	$	4,863		$	4,822	1	%	$	14,427		$	14,346	1	%

(1)	Represents revenues attributable to acquisitions from the date the Company completed the transaction through the end of four quarters following the transaction.
(2)	Represents revenues attributable to dispositions for the four quarters preceding the disposition date.

Adjusted EBIT*
Unaudited	For the three months ended September 30								For the nine months ended September 30
*($ in millions)*		2024			2023		% change			2024			2023		% change
Net income attributable to GE HealthCare	$	470		$	375		25	%	$	1,272		$	1,165		9	%
Add: Interest and other financial charges – net		130			138					383			411
Add: Non-operating benefit (income) costs		(102	)		(94	)				(306	)		(332	)
Less: Benefit (provision) for income taxes		(168	)		(250	)				(435	)		(550	)
Less: Income (loss) from discontinued operations, net of taxes		—			(4	)				—			(4	)
Less: Net (income) loss attributable to noncontrolling interests		(19	)		(7	)				(40	)		(33	)
EBIT*	$	685		$	680		1	%	$	1,825		$	1,831		—	%
Add: Restructuring costs(1)		22			3					90			34
Add: Acquisition and disposition-related charges (benefits)(2)		(4	)		(14	)				(7	)		(15	)
Add: Spin-Off and separation costs(3)		56			45					182			175
Add: (Gain) loss on business and asset dispositions(4)		1			—					—			—
Add: Amortization of acquisition-related intangible assets		34			32					100			95
Add: Investment revaluation (gain) loss(5)		1			(2	)				26			(1	)
Adjusted EBIT*	$	795		$	744		7	%	$	2,217		$	2,119		5	%
Net income margin		9.7	%		7.8	%	190 bps			8.9	%		8.1	%	70 bps
Adjusted EBIT margin*		16.3	%		15.4	%	90 bps			15.4	%		14.8	%	70 bps

(1)	Consists of severance, facility closures, and other charges associated with restructuring programs.
(2)	Consists of legal, consulting, and other transaction and integration fees, and adjustments to contingent consideration, as well as other purchase accounting related charges and other costs directly related to the transactions.
(3)	Costs incurred in the Spin-Off and separation from GE, including system implementations, audit and advisory fees, legal entity separation, Founders Grant equity awards, separation agreements with GE, and other one-time costs.
(4)	Consists of gains and losses resulting from the sale of assets and investments.
(5)	Primarily relates to valuation adjustments for equity investments.

Adjusted Net Income*
Unaudited	For the three months ended September 30								For the nine months ended September 30
*($ in millions)*		2024			2023		% change			2024			2023		% change
Net income attributable to GE HealthCare	$	470		$	375		25	%	$	1,272		$	1,165		9	%
Add: Non-operating benefit (income) costs		(102	)		(94	)				(306	)		(332	)
Add: Restructuring costs(1)		22			3					90			34
Add: Acquisition and disposition-related charges (benefits)(2)		(4	)		(14	)				(7	)		(15	)
Add: Spin-Off and separation costs(3)		56			45					182			175
Add: (Gain) loss on business and asset dispositions(4)		1			—					—			—
Add: Amortization of acquisition-related intangible assets		34			32					100			95
Add: Investment revaluation (gain) loss(5)		1			(2	)				26			(1	)
Add: Tax effect of reconciling items(6)		(3	)		(4	)				(26	)		(3	)
Add: Spin-Off and other tax adjustments(7)		46			106					60			136
Less: Income (loss) from discontinued operations, net of taxes		—			(4	)				—			(4	)
Adjusted net income*	$	521		$	451		16	%	$	1,393		$	1,258		11	%
Adjusted net income margin*		10.7	%		9.4	%	140 bps			9.7	%		8.8	%	90 bps

(1)	Consists of severance, facility closures, and other charges associated with restructuring programs.
(2)	Consists of legal, consulting, and other transaction and integration fees, and adjustments to contingent consideration, as well as other purchase accounting related charges and other costs directly related to the transactions.
(3)	Costs incurred in the Spin-Off and separation from GE, including system implementations, audit and advisory fees, legal entity separation, Founders Grant equity awards, separation agreements with GE, and other one-time costs.
(4)	Consists of gains and losses resulting from the sale of assets and investments.
(5)	Primarily relates to valuation adjustments for equity investments.
(6)	The tax effect of reconciling items is calculated using the statutory tax rate, taking into consideration the nature of the items and the relevant taxing jurisdiction.
(7)	Consists of certain income tax adjustments, including 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, the impact of adjusting deferred tax assets and liabilities to stand-alone GE HealthCare tax rates, and the impact of tax legislation changes. As of the third quarter of 2024 this line additionally includes discrete tax impacts resulting from the Spin-Off and separation from GE previously reported under Tax effect of reconciling items.

Contacts

Investor Relations Contact:
Carolynne Borders
+1-631-662-4317
carolynne.borders@gehealthcare.com

Media Contact:
Jennifer Fox
+1-414-530-3027
jennifer.r.fox@gehealthcare.com

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