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Q3 Earnings

Steve Winoker: GE Releases Its Q3 Results

Today, GE released its third-quarter results for 2019.  We saw industrial strength amid global volatility in the quarter, and our results today reflect one more quarter’s progress on a multi-year transformation. Below are some select highlights from our results, and I encourage you to read the full materials and listen to our earnings call on GE’s investor website.

  • Organic orders were down 1% year over year with services up 3% and equipment down 4%. Year to date, organic orders are up 3%, primarily driven by services up 7%.
  • Backlog ended the quarter at $386B, up 14% year over year, with equipment of $80B, up 4%, and services of $306B, up 17%.
  • Organic industrial segment revenue* growth of 7%; services made up almost half our revenues this quarter.
  • Adjusted GE industrial profit margin* expansion of 150bps; +130bps organic
  • Positive Industrial free cash flow* at $650 million; negative $(1.6)B YTD, ahead of our Outlook
  • Adjusted EPS* of $0.15; continuing EPS of negative $(0.15), largely driven by non-cash charges in Insurance $(0.09) and Hydro $(0.08)
  • Raising 2019 Industrial free cash flow* outlook to $0 – $2B despite headwinds from MAX and tariffs; maintaining 2019 adjusted EPS outlook of $0.55 – $0.65 despite lost income from Baker Hughes

In addition to the results above, we are doing what we said we would do on our two overarching priorities:

Improve our financial position:  In the quarter, we sold down the remainder of our stake in Wabtec and a portion of our stake Baker Hughes, which resulted in $4.6B of net cash proceeds in the quarter. We also took an after-tax non-cash charge of $8.2 billion in discontinued operations related to a change in how we account for Baker Hughes now that we no longer are a majority owner.

We also announced or completed more than $9 billion of total Industrial deleveraging actions, including completing a ~$5 billion debt tender, repaying a portion of the intercompany loans from GE Capital, and announcing multiple changes related to U.S. pension benefits that we expect will reduce our Industrial net debt* by $4-6 billion through 2020.

Strengthen our businesses: We continued to stabilize Power, manage our production ramp in Renewable Energy with minimal disruptions, and commercialize new products across GE’s businesses. We are seeing signs of traction across the company in 2019, and our businesses are making enhancements that will position us to reward investors over time.

GE Chairman and CEO Larry Culp said, “This quarter, during strategy reviews with each of our businesses, we identified and prioritized operating improvements and growth investments that will drive sustainable results. We have more work to do, and we will continue to take actions to improve our financial position and strengthen our businesses as we prepare for 2020 and beyond. I remain confident that we will unlock value for GE’s stakeholders as our transformation accelerates.”

As always, feel free to reach out with any questions, comments or suggestions. Thank you for your continued interest in GE.

Steve Winoker is the vice president for investor communications at GE.

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*Non-GAAP Financial measures

In this document, we sometimes use information derived from consolidated financial data but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP).  Certain of these data are considered “non-GAAP financial measures” under the U.S. Securities and Exchange Commission rules.  These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in our quarterly report on Form 10-Q, and the appendix of this presentation, as applicable.

Our financial services business is operated by GE Capital Global Holdings LLC (GECGH).  In this document, we refer to GECGH as “GE Capital”.  We refer to the industrial businesses of the Company including GE Capital on an equity basis as “GE”. “GE (ex-GE Capital)” and /or “Industrial” refer to GE excluding GE Capital.

 GE’s Investor Relations website at www.ge.com/investor and our corporate blog at www.gereports.com, as well as GE’s Facebook page and Twitter accounts, contain a significant amount of information about GE, including financial and other information for investors. GE encourages investors to visit these websites from time to time, as information is updated and new information is posted.

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