GE HealthCare Technologies Inc. — Fiscal 2023 Form 10-K Summary
Business context and reporting period
GE HealthCare is a global medical technology, pharmaceutical diagnostics, and digital solutions company serving approximately 160 countries through four segments: Imaging, Ultrasound, Patient Care Solutions (PCS), and Pharmaceutical Diagnostics (PDx). The filing covers the fiscal year ended December 31, 2023. GE completed the company’s spin-off on January 3, 2023; therefore, 2023 results reflect an independent public company, while 2022 and earlier results are historical combined carve-out results and are not necessarily comparable to post-spin-off results.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $19,552 million | $18,341 million | +7% reported; +8% organic |
| Gross profit | $7,922 million | $7,179 million | +10% |
| Operating income | $2,435 million | $2,522 million | -3% |
| Operating margin | 12.5% | 13.8% | -130 basis points |
| Net income attributable to GE HealthCare | $1,568 million | $1,916 million | -18% |
| Net income margin | 8.0% | 10.4% | -240 basis points |
| Adjusted EBIT | $2,956 million | $2,861 million | +3% |
| Adjusted EBIT margin | 15.1% | 15.6% | -50 basis points |
| Diluted EPS from continuing operations | $3.04 | $4.18 | -$1.14 |
| Cash flow from operating activities | $2,101 million | $2,134 million | -2% |
| Free cash flow | $1,715 million | $1,828 million | -6% |
Revenue growth was broad-based. Imaging revenue increased 6% to $10,581 million, Ultrasound increased 1% to $3,457 million, PCS increased 8% to $3,142 million, and PDx increased 18% to $2,306 million. PDx benefited from pricing and improved demand. Imaging benefited from supply-chain fulfillment improvements, new product introductions, and pricing. Ultrasound profitability declined, while Imaging, PCS, and PDx Segment EBIT increased.
Gross profit improved, with product and service cost productivity and pricing partially offset by inflation. However, SG&A increased $651 million and R&D increased $179 million, primarily due to stand-alone company costs, commercial and marketing investments, and higher R&D spending. Interest and other financial charges increased $465 million to $542 million because of debt issued in connection with the spin-off.
Liquidity, debt, and capital resources
- Cash, cash equivalents, and restricted cash were $2,504 million at December 31, 2023, compared with $1,445 million at December 31, 2022.
- Total borrowings were $9,442 million, up from $8,249 million. Debt consisted primarily of $8,250 million of senior unsecured notes and $1,150 million outstanding under the variable-rate Term Loan Facility.
- The company drew $2,000 million under the Term Loan Facility in January 2023 and repaid $850 million in the fourth quarter. It repaid an additional $150 million in January 2024.
- The company had $3,500 million of revolving credit capacity, with no borrowings outstanding at year-end. Management stated that available cash, operating cash flow, capital-market access, and credit facilities should fund operations, debt service, taxes, and investments for at least the next 12 months.
- Credit ratings were investment grade with stable outlooks: Moody’s Baa2, S&P BBB, and Fitch BBB.
- Cash dividends totaled $0.12 per share for 2023, with a $0.03 per-share fourth-quarter dividend payable in the first quarter of 2024.
Material changes versus the prior comparable period
- The spin-off from GE made 2023 the first full year of stand-alone operations. New public-company, financing, pension, tax, information technology, and transition-service costs affected comparability.
- Spin-off and separation costs were $270 million in 2023 versus $14 million in 2022.
- Non-operating benefit income increased to $382 million, primarily due to pension plans transferred from GE, partially offsetting higher interest costs.
- Net postretirement obligations were substantially higher following the transfer of GE plans. At December 31, 2023, total projected benefit obligations were $23,881 million, plan assets were $19,218 million, and the funded deficit was $4,663 million.
- Remaining performance obligations increased 2% to $14,655 million, including $4,930 million of product obligations and $9,725 million of service obligations.
- The company acquired Caption Health for upfront consideration of $127 million plus holdback and potential earn-out payments. Caption Health provides AI-guided ultrasound technology.
- Restructuring expense declined to $54 million from $146 million, but approximately $20 million of additional restructuring expense was expected, primarily over the following 12 months.
Outlook, management commentary, risks, and unusual items
The filing does not provide a specific 2024 revenue, margin, earnings, or cash-flow guidance target. Management emphasized opportunities in precision care, digital and AI solutions, cloud and edge offerings, imaging, pharmaceutical diagnostics, and recurring service and consumables revenue.
- Key operating risks include supply-chain disruption, inflation, shortages or price volatility for helium, iodine, rare earth minerals, logistics constraints, and manufacturing interruptions.
- Demand depends partly on hospital capital budgets, government funding, reimbursement rates, healthcare cost controls, and public procurement activity.
- Geopolitical risks include the Russia-Ukraine conflict, sanctions and export licensing requirements, tensions involving China, the Israel region, and the Red Sea. Revenue from Russia and Ukraine was $340 million in 2023 versus $395 million in 2022.
- The company continues to cooperate with the SEC and Department of Justice regarding voluntary self-disclosures beginning in 2018 concerning tender irregularities and potential FCPA violations in certain Chinese provinces. The potential duration, outcome, penalties, and costs were not determinable from the filing.
- A separate lawsuit involving contracts with the Iraqi Ministry of Health remained active in appellate proceedings; the Supreme Court had invited the Solicitor General to submit a brief, and the district-court proceedings were stayed.
- Cybersecurity, data privacy, product liability, regulatory approvals, recalls, intellectual property, antitrust, anti-kickback, FCPA, tax, and environmental compliance remain material risks.
- GE retained approximately 13.5% of the company’s outstanding common stock and has stated that it intends to monetize its remaining ownership over time, potentially increasing share-price volatility.
- The company announced an agreement in January 2024 to acquire MIM Software, subject to customary closing conditions and regulatory approvals.
Most important facts for investors to verify
- Whether revenue growth and Segment EBIT momentum continue after the 2023 spin-off-related cost effects diminish.
- The company’s ability to reduce leverage while funding capital expenditures, pensions, dividends, acquisitions, and digital and AI investments.
- The timing and financial impact of the $1.0 billion senior-note maturity in 2024 and other scheduled debt maturities.
- Progress on stand-alone cost reductions, transition-service exits, and the approximately $20 million of remaining restructuring expense.
- Developments in the SEC and DOJ FCPA reviews, the Iraqi Ministry of Health litigation, and other legal or regulatory contingencies.
- Execution and customer adoption of cloud, edge, software, and AI offerings, including regulatory, cybersecurity, privacy, and clinical-performance risks.
- Funding requirements and sensitivity of the company’s substantial pension and other postretirement obligations to interest rates, asset returns, and actuarial assumptions.