Good morning,
“I've been with GE Healthcare now for two years,” CFO Helmut Zodl tells me. “And really my motivation to come here was to prepare the company and do the spinoff.” So attending GE Healthcare’s first investor day conference in New York City on Thursday felt like “being in the Super Bowl or the World Cup finals,” he says.
Originally from Austria, Zodl has worked globally in finance for the past 25 years. His vast experience includes various finance and divisional CFO roles at both Lenovo and IBM over the course of 15 years, he says. Now, he’s finance chief of the health care spinoff of the industrial conglomerate General Electric and navigating it into a new era.
GE Healthcare, which produces medical imaging equipment and tech devices, is expected to begin trading on Nasdaq on Jan. 4, under the ticker GEHC. Last month, the board of directors approved the spinoff, and a distribution to GE shareholders of at least 80.1% of the outstanding shares of GE Healthcare. For every three shares of GE stock an individual currently owns, they will receive one share of GE Healthcare.
In 2021, GE had a total revenue of $72.4 billion. The health care spinoff is the first step of GE’s plans to separate into three public companies. It plans to combine its renewable energy, power, and digital into one business, in early 2024. And then GE will become “an aviation-focused company shaping the future of flight,” according to the company.
I asked Zodl if going it alone in this macroenvironment is a concern.
Looking back at the 2000 dot com crash, or the recession in 2008, “our industry is quite stable, even during economic downturns” he says. “We are still seeing strong demand with our customers,” he explains. The long-term trends GE Healthcare sees include an aging population in a growing middle class with the need for better care and new types of medicines coming to the market, he says. “People still have to go to emergency rooms,” Zodl says. "People still have to do procedures."
However, Zodl does have a recession playbook, which includes optimizing cost structure to fulfill customer demand, and ensuring there’s enough liquidity. “We're going to be spinning off with strong liquidity—$1.8 billion cash on the balance sheet and a $3.5 billion facility that really will help us in case there will be a slowdown.”
Four areas—imaging, ultrasound, patient care solutions, and pharmaceutical diagnostics—make up the company’s about $18 billion in annual revenue.
“The imaging business, which is anything from a CT, MRI, and X-ray, is the biggest business—$9 to $10 billion,” Zodl says. GE Healthcare serves 1 billion patients every year with more than 2 billion procedures through services and devices, he says.
For the next three to five years, the company’s looking at organic mid-single-digit revenue growth, Zodl says. And margin expansion from the mid-to-high teens to 20% and free cash flow conversion of around 85% as an organization, he explains. “We’ll have a disciplined capital allocation framework to pay down debt, invest in the business, and strategic M&A, where it makes sense,” he says.
“The digital layer is becoming more and more important in our industry,” says Zodl, who has the IT division report to him. He recently hired Jahid Khandaker as the new chief information officer. Khandaker joins GE Healthcare from Western Digital, a data storage solutions company.
“You need to think about digital in two ways—on the device or in the cloud where it helps drive better clinical outcomes with A.I. enablement," Zodl explains. This could be something like a measurement of a heart valve, or the measurement of a baby still in the womb, he says.
The other use for digital is to help productivity for clinicians. “A lot of challenges that our customers are facing are really around having staff shortages and having to do more with less stuff,” Zodl says.
He continues, “I spend a lot of time building the finance, IT, and strategy organizations. But I also spend a lot of time with [GE Healthcare CEO Peter Arduini] on building the overall organization as a team.”
I asked Zodl about his own leadership style. “I would call it servant leadership,” he says. “I’m here to help the teams, not the teams helping me.”
Have a good weekend.
Sheryl Estrada
sheryl.estrada@fortune.com
