Q4 2023 General Electric Co Earnings Call

Okay.

Good day, ladies and gentlemen, and welcome to the General Electric fourth quarter 2023 earnings Conference call.

At this time all participants are in a listen only mode My.

Liz: My name is Liz and I'll be your conference coordinator today.

Liz: Have you experienced issues with the webcast slides refreshing or there appears to be delays in the slide advancement. Please hit F. Five on your keyboard to refresh.

As a reminder, this conference is being recorded.

Liz: I would now like to turn the program over to your host for today's conference, Steve Winokur, Vice President of Investor Relations. Please proceed.

Steven Winoker: Thanks, Liz welcome to Ge's fourth quarter 2023 earnings call I'm joined by Chairman and CEO, Larry Culp and CFO Rahul Guy. We're also pleased to have GE ever Nova CEO, Scott strays adhere to share additional insights on our performance and business guidance. Many of the statements. We're making are forward looking and based on our best view of the world and our businesses as we see them.

Today as described in our SEC filings and website those elements may change as the world changes over to Larry.

Speaker Change: Steve Thank you and good morning, everyone.

Steven Winoker: <unk> made tremendous progress in 2023 with excellent operating results the successful spin at GE healthcare and the ongoing lean transformation of our company.

Steven Winoker: 'twenty 'twenty four will be a momentous year as we launched <unk> aerospace and <unk> in early April.

Steven Winoker: Looking at our results we more than tripled.

Steven Winoker: Our earnings and generated almost 70% more free cash flow in 2023.

Steven Winoker: <unk> aerospace drove double digit revenue profit and cash growth with continued strength in commercial engines and services.

Steven Winoker: Dave or Nova delivered meaningfully better results as renewable energy and power together generated positive profit and free cash flow.

Steven Winoker: In the year ahead, we expect both GE aerospace and GE for Nova to continue on their respective upward trajectories.

Steven Winoker: Let me spend a moment on each.

<unk> Aerospace is an exceptional franchise with our fleet of 44000 commercial engines, and 26000 rotorcraft and combat engines, plus extensive aftermarket services, representing 70% of revenue.

We live our purpose each day to invent the future of flight lift people up and bring them home safely.

It's a responsibility we take very seriously and our teams are focused on safety quality delivery and cost in that order and everything we do to support our customers and the industry.

Steven Winoker: Strategically.

Steven Winoker: Today, we are executing to meet customer needs for engines and services.

Steven Winoker: Despite the challenge supply chain environment in the quarter total engine deliveries were up 11% sequentially, including defense up over 60%.

Steven Winoker: We delever we delivered.

Steven Winoker: 1570 leap engines, representing 38% growth, yes, with more to do going forward.

Steven Winoker: As part of our lean transformation, we're developing connected flow using model lines to improve deliveries.

Steven Winoker: By focusing on key constraints, we reduce lead times for example over 40% on our ceramic matrix composite components.

Steven Winoker: And in services, we've improved lead shop visit turnaround times by double digits.

Steven Winoker: Lean is not only helping us with delivery, but more importantly, when it comes to safety and quality.

Steven Winoker: The team in Rutland, Vermont used lean problem solving fundamentals to address recurring defects in our GE Nx low pressure turbine blades. This improve first time yield by more than 50%.

Lean actions like these within our plants and in partnership with suppliers are driving improvements across GE aerospace.

Steven Winoker: For Tomorrow, we're building, our 150 billion dollar plus backlog.

Steven Winoker: At the Dubai Air show GE Aerospace along with our partners received over 450 engine commitments and several service agreements across both wide bodies and narrow bodies.

Steven Winoker: This included an Emirates order for 202, <unk> engines, and spares and a long term services agreement to power its upcoming Boeing Triple Seven X fleet.

Operator: Thank you for watching! Good day, ladies and gentlemen, and welcome to the General Electric fourth quarter 2023 earnings conference. At this time, all participants are in a listen-only mode.

Steven Winoker: And we're keeping our customers' fleets flying with durability and maintenance enhancements such as our leap one eight fuel Malibu cooling system, it's on its way to fleet introduction.

Liz: My name is Liz, and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Steve Winokur, Vice President of Investor Relations. Please proceed. Thanks.

Steven Winoker: And for the future, we're investing in R&D and developing next generation technologies.

Recently, NASA selected GE aerospace for phase two of the hybrid thermally efficient core program, which will significantly enhance fuel efficiency and reduce emissions improvements will leverage in our <unk> program.

Steven Winoker: And the National Defense Authorization Act authorized funding for the adaptive engine transition program and the next generation advanced propulsion program, which will help providing provide cutting edge future military capabilities.

Steven Winoker: Welcome to GE's fourth quarter 2023 earnings call. I'm joined by Chairman and CEO Larry Culp and CFO Rahul Ghai. We're also pleased to have GE Vernova CEO Scott Strazik here to share additional insights on performance and business guidance. Many of the statements we're making are forward-looking and based on our best view of the world and our businesses as we see them today. As described in our SEC filings and on our website, those elements may change as the world changes. Now, over to Larry.

Steven Winoker: All said GE aerospace is accelerating our progress with lean and driving value long term.

Steven Winoker: All in service of our customers, who carry the 3 billion people traveling with our engines under wing each year.

Steven Winoker: Over to <unk>, our ambition is to electrify and Decarbonize the world.

Larry Culp: Steve, thank you, and good morning everyone. GE made tremendous progress in 2023 with excellent operating results, the successful spin-off of GE Healthcare, and the ongoing lean transformation of our company. 2024 will be a momentous year as we launch GE Aerospace and GE Vernova in early April. Looking at our results, we more than tripled our earnings and generated almost 70% more free cash flow in 2023. GE Aerospace drove double-digit revenue, profit, and cash growth with continued strength in commercial engines and services. The E-Vernova delivered meaningfully better results as renewable energy and power together generated positive profit and free capital. In the year ahead, we expect both GE Aerospace and GE Vernova to continue on their respective upward trajectories. Let me spend a moment on each.

Steven Winoker: With our technology is helping to generate approximately 30% of the world's electricity and where services represent 65% of our backlog.

Steven Winoker: Our incumbency and scale position us.

Steven Winoker: The lead.

Steven Winoker: We've made a lot of progress at <unk>.

Speaker Change: I'll give you the high level framing and Scotts here today with additional color.

Speaker Change: Power delivered strong growth profit and free cash.

Speaker Change: Grid was profitable for the full year and onshore delivered another quarter of profitability.

Speaker Change: Offshore remains challenging, but I really like the way, we're using lean along with better commercial selectivity and underwriting to improve our outlook.

Speaker Change: <unk> will stand on its own soon.

I am proud of the team's work to strengthen these businesses.

Speaker Change: And on a more personal note I met Scott during my very first GE Scott site visit I have seen his leadership in action.

Larry Culp: GE Aerospace is an exceptional franchise, with our fleet of 44,000 commercial engines and 26,000 rotorcraft and combat engines, plus extensive aftermarket services representing 70% of revenue. We live our purpose each day to invent the future of flight, lift people up, and bring them home safely. It's a responsibility we take very seriously, and our teams are focused on safety, quality, delivery, and cost, in that order, in everything we do to support our customers and the industry. Strategically, today, we're executing to meet customer needs for engines and services. Despite the challenged supply chain environment, in the quarter, total engine deliveries were up 11% sequentially, including defense, up over 60%. We delivered.

Speaker Change: Led the team in executing the impressive turnaround at gas power and now the strong momentum building with our onshore and grid businesses.

Speaker Change: Importantly, Scott isn't Arden student of lean and I'm highly confident that he is the right person to lead <unk> into the future.

Speaker Change: Turning to slide three with our stronger more valuable business is delivering now GE aerospace NGE for Nova are ready to go.

We've assembled to extraordinary boards, bringing together domain expertise diverse perspectives and leadership experience to help GE aerospace and GE burn over rise to their sharper more focused missions.

Speaker Change: We've also further simplified and strengthened our balance sheet fully exiting our aercap equity stake.

Speaker Change: Looking ahead <unk> plans to publicly filed its form 10 next month.

Speaker Change: <unk> Aerospace will host Investor days on March 6th and seventh respectively in New York City.

Larry Culp: 1,570 LEAP engines, representing 38% growth, yet with more to do going forward. As part of our Lean transformation, we're developing connected flow using model lines to improve delivery. By focusing on key constraints, we've reduced lead times, for example, over 40% on our ceramic matric composite component.

Speaker Change: Both teams are excited to share how we will create greater value for our customers and shareholders alike.

Speaker Change: We hope to see many of you there now.

Speaker Change: Now over to Rahul thank.

Rahul Ghai: Thank you Larry and good morning, everyone turning to slide four we will speak to results on an organic basis.

Larry Culp: And in services, we've improved leap, shop, visit, and turnaround times by double digits. Lean is not only helping us with delivery, but more importantly when it comes to safety and quality. The team in Rutland, Vermont, used lean problem-solving fundamentals to address recurring defects in our GENX low-pressure turbine blades.

Rahul Ghai: We closed out the year with another solid quarter.

Orders were up across all segments.

Rahul Ghai: Driven by services up 24%.

Rahul Ghai: Revenue increased 13% with all segments up double digits.

Rahul Ghai: Adjusted operating profit was up 20%.

Larry Culp: This improved first-time yield by more than 50%. Lean actions like these within our plant and in partnership with suppliers are driving improvements across GER. For tomorrow, we're building our $150 billion plus backlog. At the Dubai Airshow, GE Aerospace, along with our partners, received over 450 engine commitments and several service agreements across both widebodies and narrowbodies.

Supporting margin expansion of 50 basis points, driven by volume and price net of inflation.

Rahul Ghai: This was partially offset by negative mix from higher equipment and investments in growth.

Rahul Ghai: Adjusted EPS was $1 <unk> up 56%.

Rahul Ghai: Free cash flow was $3 billion from stronger earnings and positive working capital.

Rahul Ghai: Largely driven by progress collections, including recent sizable orders.

Larry Culp: This included an Emirates order for 202 GE9X engines and spares and a long-term services agreement to power its upcoming Boeing 777X fleet. And we're keeping our customers' fleets flying with durability and maintenance enhancements, such as our LEAP-1A fuel-molecule cooling system that's on its way to fleet introduction. And for the future, we're investing in R&D and developing next-generation technology. Recently, NASA selected GE Aerospace for Phase 2 of the Hybrid Thermally Efficient Core Program, which will significantly enhance fuel efficiency and reduce emissions.

Rahul Ghai: This was partially offset by payables.

Rahul Ghai: <unk> the actions, we have taken to support our suppliers.

Rahul Ghai: For the full year.

Rahul Ghai: <unk> increased 17%.

Rahul Ghai: Aerospace and renewables led the way benefiting from robust demand better execution and pricing.

Rahul Ghai: Services was up 15% and equipment up 19%.

Rahul Ghai: Profit EPS and cash all finished above the high end of our guidance.

Rahul Ghai: Adjusted operating profit increased $2 5 billion to $5 7 billion.

Larry Culp: Improvements we'll leverage in our RISE program, and the National Defense Authorization Act authorized funding for the Adaptive Engine Transition Program and the Next Generation Advanced Propulsion Program, which will help provide cutting-edge future military capabilities. All said, GE Aerospace is accelerating its progress with lean and driving value long term, all in service of our customers who carry the 3 billion people traveling with our engines under wing each year. To GE Vernova, our ambition is to electrify and decarbonize the world.

Rahul Ghai: Adjusted margin expanded by over 300 basis points, driven by aerospace growth sizable renewables improvement and price across the three businesses partially offset.

Rahul Ghai: <unk> offset by inflation on long lead items and investments in growth.

Rahul Ghai: Adjusted EPS increased more than $2.

Supported by strong profit growth.

Rahul Ghai: And lower interest from debt reduction.

Rahul Ghai: Free cash flow was up over $2 billion to $5 $2 billion driven by significantly better earnings.

Larry Culp: With our technologies helping to generate approximately 30% of the world's electricity, and where services represent 65% of our backlog, our incumbency and scale position as, to leave. We've made a lot of progress at Brno. I'll give you the high-level framing, and Scott's here today with additional color.

Rahul Ghai: In 2023, working capital was a $1 6 billion source of cash from progress collections.

Rahul Ghai: Firstly offset by inventory build given robust growth and continued supply chain challenges.

Rahul Ghai: Ah moment in corporate.

Rahul Ghai: We ended the year with just over $1 billion of cash use and adjusted costs of roughly $460 million.

Larry Culp: Power delivered strong growth, profit, and free cash. RID was profitable for the full year, and Onshore delivered another quarter of profitability. Offshore remains challenging, but I really like the way we're using lean along with better commercial selectivity and underwriting to improve our outlook. GE Vernober will stand on its own soon. I'm proud of the team's work to strengthen these businesses. And on a more personal note, I met Scott during my very first GE Scott site visit.

Rahul Ghai: This improved year over year due to lower functional expenses and higher interest income.

Rahul Ghai: Overall, it will present significant progress since 2021 when costs were $1 $2 billion.

We are pleased to see digital turn profitable as the team prepares to formally joined GE Eva NOLA.

Rahul Ghai: Our industry, leading software helps utilities grid operators and others address the growing complexity of energy transition.

Larry Culp: I have seen his leadership in action as he's led the team in executing the impressive turnaround at gas power and now the strong momentum building with our onshore and grid business. Importantly, Scott is an ardent student of Lean, and I'm highly confident that he is the right person to lead GE Vernova into the future. Turning to slide three, with our stronger, more valuable businesses delivering now, GE Aerospace and GE Vernova are ready to go. We've assembled two extraordinary boards, bringing together domain expertise, diverse perspectives, and leadership experience to help GE Aerospace and GE Brnova rise to their sharper, more focused mission. We've also further simplified and strengthened our balance sheet, fully exiting our RCAP equity state. Looking ahead, GE Vernova plans to publicly file its Form 10 next month.

Rahul Ghai: And G Aerospace and G, where NOLA are ready to go.

Rahul Ghai: The teams are fully staffed and corporate head count, which was close to 5000, just a few years ago stands at less than 200 people.

Rahul Ghai: Who will be with us into the second quarter to execute the final spin.

This temporary costs in the first half of 2024 is embedded in <unk> aerospace's full year guidance.

Rahul Ghai: Stepping back we are pleased with our performance in 2023.

Rahul Ghai: In 2024 on a standalone basis, we expect GE aerospace and G, where NOLA to grow revenue profit and cash.

Rahul Ghai: We will share more on business guidance shortly.

Rahul Ghai: Now turning to GE aerospace.

Rahul Ghai: This quarter demand remained robust with GE and CFM departures growing high teens year over year.

Rahul Ghai: Then GE Vernova and GE Aerospace will host Investor Days on March 6th and 7th, respectively, in New York City. Both teams are excited to share how we'll create greater value for our customers and shareholders alike. We hope to see many of you there. Now, over to Rahul.

Rahul Ghai: Orders were up 10% with solid services and commercial engine orders.

Revenue was up 12%.

Rahul Ghai: Given by commercial up 15%.

Profit was up 8% benefiting from increased services volume and pricing net of inflation.

Rahul Ghai: Thank you, Larry. Good morning, everyone. Turning to slide four, we'll speak to results on an organic basis. We closed out the year with another solid quarter. Orders were up across all segments, driven by services which were up 24%. Revenue increased 13%, with all segments up double digits. Adjusted Operating Profit was up 20%, supporting a margin expansion of 50 basis points. Driven by Volume and Price, Net of Inflation, This was partially offset by a negative mix from higher equipment and investments in growth. Adjusted EPS was $1.03, up 56%.

Rahul Ghai: This was partially offset by unfavorable equipment mix from the expected higher install and lower spare engine deliveries.

Rahul Ghai: And higher investments.

Rahul Ghai: Reported margins were roughly flat year over year, and down 70 basis points organically as unfavorable mix and investments offset higher volume and price net of inflation.

Rahul Ghai: And commercial services revenue was up 23% from higher volume pricing and heavier work scopes.

External spare parts increased with higher leap volume and internal shop visits were up slightly.

Lean is enabling us to create new capacity to meet higher demand and decreased turnaround time and cost for.

Rahul Ghai: For example, our MRO team in Prestwick, Scotland use lean to remove 76 hours of waste from the engine. This assembly process.

Rahul Ghai: Which will help them to go from servicing three five engines a week to five engines a week.

Rahul Ghai: Pre-cash flow was $3 billion from stronger earnings and positive working capital, largely driven by progress collections, including recent sizable orders. This was partially offset by payables, including the actions we have taken to support our suppliers. For the full year, revenue increased 17%.

Rahul Ghai: Revenue grew 1% with leap deliveries up 22% as expected our mix continued to shift towards install engines.

Rahul Ghai: In defense.

Rahul Ghai: Book to Bill was onex, underscoring solid demand and the quality of our franchisees.

Rahul Ghai: Revenue was down 1% driven by lower services, while equipment grew double digits from higher combat engine deliveries.

Rahul Ghai: Aerospace and renewables led the way, benefiting from robust demand, better execution, and price. Services were up 15%, and equipment was up 19%. Profit, EPS, and cash all finished above the high end of our guidance. Adjusted operating profit increased $2.5 billion to $5.7 billion. Adjusted margin expanded by over 300 basis points, driven by aerospace growth, sizable renewables improvement, and price across the three businesses, although partially offset by inflation on long lead items and investments in growth. Adjusted EPS increased by more than $2.

Rahul Ghai: For the year.

Rahul Ghai: Revenue was up 22% commercial services increased 30% with external spare parts up significantly and internal shop visits up 10%.

Rahul Ghai: Commercial engines grew 21% with total engine deliveries up 25% and spare engine ratio consistent with 2022.

Rahul Ghai: Defense grew 7% with book to Bill of approximately $1 <unk> for the second consecutive year and orders were up 9%.

Rahul Ghai: Profit was $6 1 billion, increasing over $1 billion, according 5% from services growth and pricing net of inflation.

Rahul Ghai: Supported by strong profit growth and lower interest from debt reduction, pre-cash flow was up over $2 billion to $5.2 billion, driven by significantly better earnings. In 2023, working capital was a $1.6 billion source of cash from progress collections, partially offset by inventory build, given robust growth and continued supply chain challenges. A Moment to Incorporate, We ended the year with just over $1 billion of cash use and adjusted costs of roughly $460 million.

Rahul Ghai: This was more than offset this more than offset negative mix from higher leap volume and investments.

Rahul Ghai: Margins of 19, 2% expanded 90 basis points on a reported basis and 50 basis points on an organic basis.

Rahul Ghai: Free cash flow of $5 $7 billion increased approximately $800 million with improving earnings and working capital more than offsetting a DNA pressure.

Rahul Ghai: Now I'll hand, it to Scott will cover GE ever Noah.

Scott Strazik: Thanks, Rahul it's a pleasure to join you Larry and Steve on the last GE earnings call before we launched <unk> a purpose built company, that's enabling electrification and decarbonization.

Rahul Ghai: This improved year over year due to lower functional expenses and higher interest in. Overall, it represents significant progress since 2021, when costs were $1.2 billion. We are pleased to see digital turn profitable as the team prepares to formally join GE Vernova. Our industry-leading software helps utilities, grid operators, and others address the growing complexity of energy transition, and GE Aerospace and GE Vernova are ready to go. The teams are fully staffed, and corporate headcount, which was close to 5,000 just a few years ago, stands at less than 200 people, who will be with us into the second quarter to execute the final spin.

Scott Strazik: We built a strong experienced leadership team and we're excited to welcome Jessica <unk> to our leadership team as president overseeing technology innovation and growth I am encouraged by what our team accomplished in 2023 as we deliver meaningfully better results now.

Scott Strazik: Our renewable energy and power businesses combined drove double digit revenue growth.

Scott Strazik: Slightly profitable improving profit over $1 billion in.

Scott Strazik: <unk> $600 million of cash this year.

Scott Strazik: At renewable energy, our operational turnaround produced sizable improvement.

Scott Strazik: In the fourth quarter orders were just over $5 billion, including the cancellation of a large offshore order that was originally booked in <unk> 'twenty three.

Excluding this cancellation orders grew over 20% led by stronger onshore equipment and Repower.

Rahul Ghai: This temporary cost in the first half of 2024 is embedded in GE Aerospace's full-year guidance. Stepping back, we are pleased with our performance in 2023. In 2024, on a standalone basis, we expect GE Aerospace and GE Vernova to grow revenue, profit, and cash. We will share more on business guidance shortly. Now turning to GE Aerospace. This quarter, demand remained robust, with GE and CFM departures growing in the high teens year over year.

Scott Strazik: We also secured a record two four gigawatt order to support pattern energy Cynthia wind project expected to be the largest wind project in U S history.

Scott Strazik: Revenue increased double digits.

Scott Strazik: <unk> grew double digits for the fifth consecutive quarter.

Scott Strazik: Offshore more than doubled as we deliver on our existing backlog and onshore grew driven by North America equipment volume.

Scott Strazik: Profit improved over $100 million onshoring grid more than offset pressure in offshore.

Scott Strazik: Looking at the year.

Rahul Ghai: Orders were up 10% with solid services and commercial engine orders. Revenue was up 12%, driven by commercial up 15%. Profit was up 8%, benefiting from increased service volume and pricing net of inflation. This was partially offset by unfavorable equipment mix from the expected higher install and lower spare engine delivery, and higher investors. Reported margins were roughly flat year-over-year and down 70 basis points organically as unfavorable mix and investments offset higher volume and price net of inflation.

Scott Strazik: Orders were 23 billion up over 50% with revenue up 17%.

Scott Strazik: Profit improved roughly $1 billion, driven by price quality and productivity in onshore and grid plus the absence of last year's largely onshore related charges.

Scott Strazik: Free cash flow was negative $1 5 billion, which improved by over half a billion dollars from better earnings and higher down payments.

Scott Strazik: Looking closer at the businesses at.

Scott Strazik: At grid price and higher volume enabled full year profitability following three consecutive quarters of profit.

Scott Strazik: While our backlog more than doubled to over 12 billion with average margins and backlog increasing approximately five points.

Rahul Ghai: In commercial, services revenue was up 23% from higher volume, pricing, and a heavier work scope. External spare parts increased with higher leap volume, and internal shop visits were up slightly. Lean is enabling us to create new capacity to meet higher demand and decrease turnaround time and cost. For example, our MRO team in Prestwick, Scotland, used Lean to remove 76 hours of waste from the engine disassembly process, which will help them to go from servicing 3.5 engines a week to five engines a week.

Scott Strazik: Lean is core here.

Take our Pennsylvania facility that makes transmission circuit breakers, we increased flow and doubled production capacity, helping reduce product lead times by about 35%.

Scott Strazik: This will speed up delivery to customers at a time when demand is rising.

Scott Strazik: Onshore has been profitable for two consecutive quarters, North America equipment orders increased more than 70%.

Scott Strazik: We've grown our global onshore equipment backlog, roughly 40% to nearly $9 billion and approximately 70% of the backlog is North America.

Scott Strazik: Importantly margins in our total onshore equipment backlog expanded over 10 points due to continued selectivity and pricing.

Rahul Ghai: Revenue grew 1% with leap deliveries up 22%. As expected, our mix continues to shift towards installed engines in defense. Book-to-bill was 1x, underscoring solid demand and the quality of our franchises. Revenue was down 1% driven by lower services, while equipment grew double digits from higher combat engine delivery. For the year, revenue was up 22%.

We're delivering reliable high performing fleets with roughly 60% of our proactive enhancement in the field completed with more to come.

Scott Strazik: We streamlined our product lineup focusing on higher quality workhorse products, roughly 70% of 2023 volume and we're still increasing productivity and lowering fixed costs significantly.

Scott Strazik: Offshore wind was challenging with losses of roughly $1 1 billion in 'twenty three.

Rahul Ghai: Commercial services increased 30%, with external spare parts up significantly, and internal shop visits up 10%. Commercial engines grew 21%, with total engine deliveries up 25%, and the spare engine ratio consistent with 2022. Defense grew 7% with book-to-bill of approximately 1.2x for the second consecutive year, and orders were up 9%. Profit was $6.1 billion, increasing over $1 billion or 25% from services growth and pricing net of inflation. This was more than offset by the positive mix from higher leap volume and investment. Margins of 19.2% expanded 90 basis points on a reported basis and 50 basis points on an organic basis. Pre-cash flow of $5.7 billion increased by approximately $800 million with improving earnings and working capital more than offsetting AD&A pressure. Now, I'll hand it to Scott, who will cover GE Renova. Thanks, Rahul.

Scott Strazik: We're executing the existing backlog improving productivity with lean.

We're starting 2024 with an equipment backlog down to roughly $4 billion, which we expect to largely complete over the next two years longer term offshore wind should play a key role in the energy transition.

Scott Strazik: The industry is beginning to reset and while it does well.

Scott Strazik: We will be highly selective on adding to the backlog.

Scott Strazik: Turning to power, we delivered another strong year led by gas power looking at the quarter orders increased 4% with gas services growing double digits.

Scott Strazik: Equipment orders declined largely as we exit steam newbuild, partially offset by higher air derivatives.

Scott Strazik: Revenue was up 12% driven by gas.

Equipment revenue grew driven by Aero derivative and heavy duty gas turbines.

Services were strong with higher contractual outages and upgrades.

Profit was over $750 million with low double digit margins driven by services strength.

Scott Strazik: As expected margins contracted given higher equipment volume in an individual quarter additional units may weigh on margins, but this drives long term growth and higher margin services, and we're always focused on price and productivity to offset inflation.

Scott Strazik: It's a pleasure to join you, Larry and Steve, on the last GE earnings call before we launch GE Vernova, a purpose-built company that's enabling electrification and decarbonization. We've built a strong, experienced leadership team, and we're excited to welcome Jessica Uhl to our leadership team as president, overseeing technology, innovation, and growth. I'm encouraged by what our team accomplished in 2023 as we deliver meaningfully better results now. Our renewable energy and power businesses combined drove double-digit revenue growth, were slightly profitable, improved profits over $1 billion, and generated $600 million of cash this year. At Renewable Energy, our operational turnaround produced sizable improvements. In the fourth quarter, orders were just over $5 billion, including the cancellation of a large offshore order that was originally booked in 2Q23. Excluding this cancellation, orders grew over 20% led by stronger onshore equipment and repower. We also secured a record 2.4 gigawatt order to support Pattern Energy's Sunzea wind project, expected to be the largest wind project in U.S. history.

Scott Strazik: For the year revenue grew 7% we.

Scott Strazik: We delivered 58 heavy duty gas turbines with 14 Ha's services were strong up mid single digits led by gas.

Scott Strazik: Profit of roughly $1 4 billion grew by 10%.

Scott Strazik: Importantly, gas achieved double digit margins this year.

Scott Strazik: Here lean is enabling higher productivity and growth for.

Scott Strazik: For example, our gas repairs team in Mexico created standard work to reduce cycle time and cost decreasing lead time by 75% and operating hours per unit by 44%.

Scott Strazik: This is helping us deliver faster for our customers.

Scott Strazik: Free cash flow was over $2 billion up roughly $200 million.

Scott Strazik: Power continues to be a strong reliable source of cash generation we're.

Scott Strazik: We're pleased with Power's performance.

Scott Strazik: Strong growing business, where higher margin services comprise around 80% of the backlog now I'll turn it back to Rahul to discuss guidance.

Thanks Scott.

Rahul: The spin just around the corner first quarter will be the last time, a reporting combined GE results, including GE aerospace and GE, where NOLA for this first quarter, we expect high single digit revenue growth driven by GE aerospace.

Scott Strazik: Revenue increase, double digits. Grid grew double digits for the fifth consecutive quarter, offshore revenue more than doubled as we delivered our existing backlog, and onshore revenue grew, driven by North America equipment. Profit improved over $100 million as onshore and grid pressure more than offset it offshore. Looking at the year, orders were $23 billion, up over 50%, with revenue up $17 billion. Profit improved roughly $1 billion driven by price, quality, and productivity in onshore and grid, plus the absence of last year's largely onshore-related charges. Free cash flow was negative $1.5 billion, which improved by over half a billion from better earnings and higher down payment. Looking closer at the business,

Rahul: Adjusted EPS of 60 to 65.

Rahul: More than doubling year over year, driven by profit improvement and the absence of preferred stock dividend.

Rahul: And free cash flow growth in line with net income growth.

Rahul: Our 2024 annual guidance reflects each business' operating independently for the full year, incorporating standalone and other impacts that each will incur separately.

Speaker Change: I'll now hand, it over to Scott and Larry to share the overall G, where NOLA and GE Aerospace guides and we will provide further details for both businesses and much Scott back to you.

Scott: Thanks, Rahul <unk> is building momentum expecting substantial profit and free cash flow growth in 2024.

Scott Strazik: At GRID, price and higher volume enabled full-year profitability following three consecutive quarters of profit. Meanwhile, our backlog more than doubled to over $12 billion, with average margins and backlog increasing approximately $5.3 billion. Lean is a core here. Take our Pennsylvania facility that makes transmission circuit breakers.

We see solid organic growth with revenue between 34 to 35 billion up low to mid single digits from 2023, and adjusted EBITDA margin at the higher end of the mid single digits range up from low single digit EBITDA margin in 'twenty three.

Scott Strazik: We increased flow and doubled production capacity, helping reduce product lead times by about 35 percent. This will speed up delivery to customers at a time when demand is rising. Onshore has been profitable for two consecutive quarters. North America equipment orders increased more than 70%. We've grown our global onshore equipment backlog roughly 40% to nearly $9 billion. And approximately 70% of the backlog is in North America.

Scott: Supporting this outlook is continued price productivity and benefits from restructuring efforts a few highlights.

Scott: We expect gas power to remain strong with continued services growth and low double digit margins onshore will continue to improve significantly achieving high single digit margins on roughly flat revenue from better mix price and cost out.

Scott: Offshore will continue to execute our current backlog with slight year over year improvement.

Scott: Finally grid will expand to mid single digit margins primarily from higher volume.

Scott Strazik: Importantly, margins in our total onshore equipment backlog expanded over 10 points due to continued selectivity and pricing. We're delivering reliable, high-performance fleets with roughly 60% of our proactive enhancement in the field completed, with more to come. We streamlined our product lineup, focusing on higher quality, workhorse products, roughly 70% of 2023, and we're still increasing productivity and lowering fixed costs significantly. However, offshore wind was challenging, with losses of roughly $1.1 billion in 2023.

Scott: And price.

Scott: Our guidance assumes roughly $200 million of stand alone and $100 million of other ongoing carve out costs.

Scott: When converting from this year's expected operating profit margin for power and renewables combined to adjusted EBITA margin for GE for Nova including these costs plus DNA the differences roughly half a billion dollars or one five points.

Scott: On free cash flow, we expect $700 to $1 1 billion from higher EBITDA and better working capital on a standalone basis, which includes absorbing our portion of the GE pension.

Scott: Given the multi decade secular talents and stronger financial trajectory ahead, we are excited to launch <unk> or Nova and partner with our customers to lead the energy transition forward with that back to Larry.

Scott: <unk> Aerospace. We're also excited about 2024, we expect another year of solid revenue growth of at least low double digits.

Scott Strazik: We're executing the existing backlog, improving productivity with lean. We're starting 2024 with an equipment backlog down to roughly four billion, which we expect to largely complete over the next two years. Longer term, offshore winds should play a key role in the energy transition. The industry is beginning to reset, and while it does, it will be highly selected.

Scott: Including mid to high teens growth in commercial which includes high teens growth in engines and mid teens growth in services.

Mid to high single digit growth for defense and systems <unk>.

Including our propulsion and additive technologies business.

Scott: On our current reporting basis, the guidance implies six six to $7 $1 billion of operating profit improving double digits at the midpoint of the range.

Scott: On a standalone basis, including roughly $600 million of corporate and other standalone cost. This comes to approximately 6% to six $5 billion of profit.

Scott Strazik: Turning to power, we delivered another strong year, led by gas power. Looking at the quarter, orders increased 4%, with gas services growing double digits. Equipment orders declined largely as we exit the Steam New Build program, partially offset by higher air derivatives.

Scott: And implies flat margins year over year.

Scott: Given the growth in leap initial my next shipments for the Triple seven X platform and other growth investments.

Scott: For free cash flow, we expect to generate over $5 billion, which remains well above 100% conversion, including standalone impacts.

Scott Strazik: Revenue is up 12% driven by gas. Equipment revenue grew, driven by error derivative and heavy-duty gas. Services were strong with higher contractual outages and up; profit was over $750 million with low double-digit margins driven by services strength. However, as expected, margins contracted given higher equipment. In an individual quarter, additional units may weigh on margins, but this drives long-term growth in higher-margin services, and we're always focused on price and productivity to offset inflation. For the year, revenue grew 7%. We delivered 58 heavy-duty gas turbines with 14 HA.

Scott: Our teams are looking forward to sharing additional insights in detail with you at our March Investor days.

Scott: In closing 2023 was an excellent year.

Scott: <unk> aerospace drove double digit growth in G. Even over delivered substantially better results. Both are on track for continued growth in 2024.

Scott: While our sites are on the future.

Scott: <unk> of what we've accomplished with over $100 billion of debt reduction behind us and $7 billion returned to shareholders. In 2023, we remain fully focused day in and day out on using lean to improve how we serve our customers and deliver value for shareholders.

Scott: Underpinning all of this is the GE team.

Scott: My sincere thanks to all of you for.

Scott: For the important work you did in 2023.

Scott: I've never been more confident in.

Scott Strazik: Services were strong, up mid-single digits, led by, and profit of roughly $1.4 billion grew by 10%. Importantly, GAS achieved double-digit margins this year. Here, Lean is enabling higher productivity and growth. For example, our gas repairs team in Mexico created standard work to reduce cycle time and cost.

Scott: And the path ahead, we have created industry leaders that will carry ge's commitment to innovation and continuous improvement, while grounded and vital missions.

Scott: At GE aerospace inventing the future of flight.

Scott: And as GE, Eva Nova Electrifying Decarbonizing World.

Scott: We're ready to go Steve over to you.

Steven Winoker: Thanks, Larry before we open the line Liz I would ask everyone in the queue to consider your fellow analysts and ask one question. So we can get to as many people as possible in the next 20 to 25 minutes. Please open the line.

Scott Strazik: Decreasing lead time by 75% and operating hours per unit by 44%. This is helping us deliver faster for our customers. Free cash flow was over $2 billion, up roughly $200 million. Power continues to be a strong, reliable source of cash.

Steven Winoker: Ladies and gentlemen, if you wish to ask a question. Please press star one one on your telephone.

Steven Winoker: If you wish to withdraw your question or your question has already been answered. Please press star one one again.

Scott Strazik: We're pleased with Power's performance. Strong Growing Business, where higher margin services comprised around 80% of the back. Now, I'll turn it back to Rahul to discuss guides.

Steven Winoker: Okay.

Steven Winoker: Okay.

Speaker Change: Our first question comes from Myles Walton with Wolfe Research.

Rahul Ghai: Thanks Scott. With the spin just around the corner, the first quarter will be the last time our reporting combined GE results, including GE Aerospace and GE Renova. For this first quarter, we expect high single-digit revenue growth driven by GE Aerospace, and adjusted EPS of $0.60 to $0.65, more than doubling year-over-year, driven by profit improvement and the absence of preferred stock dividends, and free cash flow growth in line with net income growth. Our 2024 Annual Guidance reflects each business operating independently for the full year, incorporating stand-alone and other impacts that each will incur separately.

Thanks, Good morning.

Myles Walton: Good morning Myles.

Myles Walton: I was hoping to dig in a little bit on the commercial engines high teens growth and maybe if you could break down a little bit does it still include about 2000 leap deliveries.

Myles Walton: And also is the spares ratio similar to 2003 I know you mentioned 23 was similar to 'twenty two.

Myles Walton: Myles I think from a from a CES or commercial engines and services perspective.

Myles Walton: We're gonna see engines lead the way engines will be up high teens, plus I think youre going to see services in the mid teens area specific to your question from a lead perspective, what we anticipate right now is a 20% to 25% increase in unit growth.

Myles Walton: I think we will see installs.

Ahead of spares, so that spares ratio will begin to moderate more in line with the historic average of a typical lifecycle.

Scott Strazik: I'll now hand it over to Scott and Larry to share the overall GE Vernova and GE Aerospace Guides, and we will provide further details for both businesses in March. Scott, back to you. Thanks, Rahul.

Myles Walton: So that's that's really where we are with respect to the narrow body specifics you have there.

Speaker Change: Our next question comes from the line of Joe Ritchie with Goldman Sachs.

Joe Ritchie: Hey, guys good morning.

I was like the end of an era, yeah as I've said feels like the end of an era, where to go out on a good note.

Scott Strazik: GE Vernova is building momentum, expecting substantial profit and free cash flow growth in 2024. We see solid organic growth with revenue between $34 to $35 billion, up low to mid-single digits from 2023 and adjusted EBITDA margin at the higher end of the mid-single digits range, up from a low single-digit EBITDA margin in 2023. Supporting this outlook is continued price, productivity, and benefits from restructuring. Q Highlights We expect gas power to remain strong with continued services growth and low double-digit, Onshore will continue to improve significantly. Achieving high single-digit margins on roughly flat revenue from better mix, price, and cost, Offshore will continue to execute our current backlog with slight year-over-year improvements. Finally, GRID will expand to mid-single-digit margins, primarily from higher volume and price. Our guidance assumes roughly $200 million of standalone and $100 million of other ongoing carve-outs.

Speaker Change: So my one question is for Scott Scott.

Speaker Change: Scott I'm, just trying to bridge the free cash flow comment 2023 to 2024.

Speaker Change: Clearly you guys have some numbers out on the slides, but the 2023 numbers look like.

Speaker Change: Apples to apples right not burden for corporate it looks like you're expecting a pretty meaningful pickup in 2024th but maybe just talk to us about the puts and takes.

Speaker Change: And what's embedded.

Speaker Change: Embedded in the low and the high end of the guide for 'twenty four.

Speaker Change: You bet Joe at the start I mean, we're proud of the $600 million of free cash flow that we generated with power and renewable segments. In 2023, now as we get to an apples and apples basis, we need to back out from that reportable free cash flow of $600 million are stand alone and carve out costs of approximately.

Speaker Change: <unk> $300 million in addition to pension and some variables, we're working through with taxes that will all be clear and the form 10 filing in the middle of February jumping off of that starting point, we expect to see real EBITDA growth that will drive free cash flow with it from low single digit EBITDA growth to the.

Speaker Change: High end of the mid single digit EBITDA range that we're talking about in addition to working capital continuing to be a source of cash that drives us up towards that $700 million to $1 1 billion of positive free cash flow at <unk> now the real drivers of the variability in that.

Speaker Change: Range come down primarily to two things one is offshore wind execute execution and how quickly we install the wind turbines in both the Atlantic and the North Sea proud of the fact that we've got 14 megawatt wind turbines in both cases connected to the grid today and really the EDF timing of the transaction close on steel.

Larry Culp: When converting from this year's expected operating profit margin for power and renewables combined to adjusted EBITDA margin for GE Vernova, including these costs plus DNA, the difference is roughly half a billion dollars, or 1.5 points, on free cash. We expect $700 million to $1.1 billion from higher EBITDA and better working capital on a stand-alone basis, which includes absorbing our portion of the GE pension. Given the multi-decade secular talons and stronger financial trajectory ahead, we are excited to launch GE Vernova and partner with our customers to lead the energy transition forward. With that, back to Larry.

Speaker Change: As the two largest variables for us on that $700 million to $1 $1 billion guide, but with a lot of confidence that we go into 'twenty four expecting to see substantial improvement off of 2023.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Ken Herbert with RBC capital markets.

Kenneth Herbert: Yes, hi, good morning, maybe Larry for for the 2024 mid teens commercial services outlook can you provide any more granularity on the implied assumptions maybe for spare parts and price compared to other services and then within that maybe some comments on how much improvement in the turnaround times are embedded in the <unk>.

Ken Herbert: <unk>.

Larry Culp: At GE Aerospace, we're also excited about 2024. We expect another year of solid revenue growth, at least low double digits, including mid- to high-teens growth in commercial, which includes high-teens growth in engines, and mid-teens growth in services, amid high single-digit growth for defense and systems, including our propulsion and additive technologies. On our current reporting basis, the guidance implies $6.6 to $7.1 billion of operating profit, improving double digits at the midpoint of the range. On a stand-alone basis, including roughly $600 million of corporate and other stand-alone costs, this comes to approximately $6 to $6.5 billion of profit and applies flat margins year-over-year.

Ken Herbert: Ken Good morning, I think that what we are.

Anticipating on the services side is.

Ken Herbert: In effect mid single digit.

Ken Herbert: Parcher growth really being the foundation.

Ken Herbert: We will see I think internal shop visits.

Ken Herbert: Grow more rapidly than we are likely to see spare parts were going to get pricing benefit we're going to see work scope improvements and thats really how you ladder up.

Ken Herbert: From that departures number to what we would expect to see in terms of mid teens services growth.

Ken Herbert: Robert Yes, just Ken just to add a couple of couple of data points is due to that response, as Larry said departures and up 6%.

Kenneth Herbert: We are entering 2024 with.

Robert: Some catch up to do on our shop visits.

Robert: Given the supply chain challenges in 2023, we could not get as many shop visits completed as we would have liked so as we enter 2020 for given the demand outlook given the increase in traffic we are expecting our shop visits to be up kind of low double digits to mid teens and adding to what Larry said on.

Larry Culp: Given the growth and leap, initial Minex shipments, and for the 777X platform and other growth investors. For free cash flow, we expect to generate over $5 billion, which remains well above 100% conversion, including stand-alone impact. Our teams are looking forward to sharing additional insights and detail with you at our March Investor Day. In closing, 2023 was an excellent year.

Scope and pricing that pushes our revenue from shop visits kind of towards the higher end of that teens, and then spares growth moderates and the spares growth will be below that of the shop visit growth. When you combine all that you'll get to that mid teens.

Robert: This was growth that we just mentioned.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Julian Mitchell with Barclays.

Hi, good morning.

Julian Mitchell: Good morning, Hey.

Julian Mitchell: Just a question maybe for Scott on the.

Julian Mitchell: Free cash flow again, so often over so I just wanted to try and understand I think working capital is assumed as a source. So maybe help us understand kind of what the orders intake assumption is for that over this year I think it was up 25% the orders in 2023.

Larry Culp: GE Aerospace drove double-digit growth, and GE Vernova delivered substantially better results; both are on track for continued growth in 2024. While our sights are on the future, we're proud of what we've accomplished. With over $100 billion in debt reduction behind us and $7 billion returned to shareholders in 2023, we remain fully focused day in and day out on using Lean to improve how we serve our customers and deliver value for shareholders. Underpinning all of this is the GE team. My sincere thanks to all of you for the important work you did in 2023. I've never been more confident about the path ahead. We've created industry leaders that will carry GE's commitment to innovation and continuous improvement, while grounded in a vital mission, at GE Aerospace, Inventing the Future of Flight, and at GE Vernova, electrifying and decarbonizing the world. We're ready to go. Steve, it's over to you.

Julian Mitchell: So just trying to see how much sort of orders growth this year or what kind of working capital inflow from from all this year Youre expecting.

Julian Mitchell: And on that free cash flow point separately.

Julian Mitchell: There must be some assumption for sort of interest expense and so forth within that cash guide.

Julian Mitchell: So just any any framing around that please.

Speaker Change: Julien let me just kick it off and let me start with the second part first and then I'll hand, it to Scott on the orders.

Scott: Big think about the free cash flow guide for where NOLA, we'll definitely provide more detail of those form 10 comes out and then we have the investor days, but just keep in mind as we've previously discussed <unk>.

Scott: <unk> majority of the GE debt will retain with with GE aerospace. So it is not a lot of interest impact on GE over NOLA. So that's the way to think about the free cash flow for for next year more details to come on the capital structure, but Scott you want to take the auto spot you.

Steven Winoker: Thanks, Larry. Before we open the line, Liz, I'd ask everyone in the queue to consider your fellow analysts and ask one question so we can get to as many people as possible in the next 20 to 25 minutes. Please open the line. Ladies and gentlemen, if you wish to ask a question, please press star 1 1 on your telephone. If you wish to withdraw your question or if your question has already been answered, please press star 1 1 again.

Scott: You bet Rahul Thank you and Julian I think to your point to begin with we had a big Cynthia order with onshore wind in the fourth quarter across grid, there were a number of large.

Speaker Change: Each ADC orders with tenant and as a as an example, and you can expect in every year in any quarter, specifically that we're going to see those types of transactions. So those we don't expect to see a repeat in 'twenty four versus 23, but with onshore wind as an example, our largest renewables business.

Operator: Our first question comes from Myles Walton with Wolf Research. Thanks, good morning. Hey Myles.

Larry Culp: I was hoping to dig in a little bit on the commercial engines, the high teens growth, and maybe if you could break it down a little bit, does it still include about 2,000 leap deliveries? And also, is the spares ratio similar to 23? I know you mentioned 23 was similar to 22.

Speaker Change: We see our customers actively investing in replenishing their project book right now I mean, they really.

Speaker Change: Utilized all the projects they had prior to having clarity on the PTC and we do think the orders profile in 'twenty for much like the revenue and shipments profile will be more backend loaded than first half loaded than onshore wind, but with very active individual projects.

Speaker Change: Orders are going to be more flattish than then.

Larry Culp: Myles, I think from a CES or commercial engines and services perspective, we're going to see engines lead the way. Engines will be up in the high teens plus. I think you're going to see services in the mid-teens area.

Speaker Change: And then up in onshore on grid. The one point I'd make is although we are can I expect as much in a large <unk> orders to the extent we had with tenants in 2023. The reality is even if you back out the H VDC orders and grid, our second largest renewable.

Myles Alexander Walton: Specific to your question, from a LEAP perspective, what we anticipate right now is a 20 to 25% increase in unit growth. I think we'll see installs get ahead of SPARES, so that SPARES ratio will begin to moderate more in line with the historic average of a typical life cycle. So that's really where we are with respect to the narrow body specifics you have.

Speaker Change: Mobile's business, our orders and grid grew by over 20% in 2023 power Transformers. As an example of business. We don't talk about as much grew orders by 40%.

Speaker Change: And we expect to continue to see that strength. So there may be less headline orders of the magnitude of his son, Zika or the tenant <unk> projects, but there's a lot of healthy demand across the renewables that we expect to continue into 2024 that contributes towards our free cash flow generation continue to be greater than 100%.

Operator: Our next question comes from the line of Joe Ritchie with Goldman Sachs. Hey guys, good morning. Feels like the end of an era. Yeah, as I said, feels like the end of an era. Way to go out on a good note.

Joe Ritchie: So my one question is for Scott. So Scott, I'm just trying to bridge the free cash flow comments, 2023 to 2024. Clearly, you guys have some numbers out on the slides, but the 2023 numbers look like it's not apples to apples, right? Like not burdened for corporate.

Speaker Change: And that significant free cash flow growth that we just talked about.

Thank you.

Our next question will come from the line of Sheila <unk> with Jefferies.

Speaker Change: Good morning, guys. Thank you good morning Sheila.

Scott Strazik: It looks like you're expecting a pretty meaningful pickup in 2024. So maybe just talk to us about the puts and takes and what's embedded in the low and the high end of the guide for 2024. You bet, Joe.

Speaker Change: Larry This is for you maybe if you could just offer your perspective on the quality of options, we've seen across the industry.

Does it change your approach in regards to ensuring the integrity of your own supply chain.

Speaker Change: And distinct grapples with the leap challenges, obviously, but you also mentioned.

Scott Strazik: At the start, I mean, we're proud of the $600 million of free cash flow that we generated with the power and removal segments in 2023. Now, as we get to an apples-to-apples basis, we need to back out from that reportable free cash flow of $600 million, our standalone and carve out costs of approximately $300 million, in addition to pension and some variables we're working through with taxes that will all be clear in the Form 10 filing in the middle of February. Jumping off of that starting point, we expect to see real EBITDA growth that will drive free cash flow with it from low single-digit EBITDA growth to the high end of the mid-single-digit EBITDA range that we're talking about, in addition to working capital continuing to be a source of cash that drives us up towards that $700 million to $1.1 billion of positive free cash flow at Vernova. Now, the real drivers of the variability in that range come down primarily to two things.

Speaker Change: <unk> production in 2024, how does that flow into your assumptions on free cash flow for things like inventory build.

Speaker Change: Sheila there's a lot there I think from a.

Sheila: Let's take safety <unk>.

Speaker Change: I'm strongly of the view that the industry.

Speaker Change: Not to speak for the industry, but having been close to this business for almost two years.

Speaker Change: Everybody understands the solemn responsibility we have.

Speaker Change: The world over I think from a GE aerospace perspective, as you and I have talked.

B the operating framework the lean transformation that's been underway here is very much rooted in.

Speaker Change: An <unk> approach safety first and foremost before quality before delivery before cost.

Speaker Change: And we not only talk that way.

Speaker Change: We work hard to make sure we operate that way day in and day out Fortunately at GE Aerospace, we have a long history of being hyper focused on safety. If you go back for example to I think 2013 are.

Speaker Change: Our safety management system was really the first of its kind we were the first OEM.

Scott Strazik: One is offshore wind power and how quickly we install the wind turbines in both the Atlantic and the North Sea. I'm proud of the fact that we've got 14 megawatt wind turbines in both cases connected to the grid today, and really, the EDF timing of the transaction is close to steam as the two largest variables for us on that 700 million to 1.1 billion dollar guide, but with a lot of confidence that we go into 24 expecting to see substantial improvement off of 2023. Our next question will come from the line of Ken Herbert with RBC Capital Markets. Yeah, hi, good morning.

To implement such a scheme well before the FAA required.

Speaker Change: The industry to do so.

And we have been building on that but that approach never assumes perfection right. So we layer in.

Speaker Change: All sorts of.

Speaker Change: <unk> and audits process capabilities to make sure that we're doing all that we possibly can.

Speaker Change: To deliver safety to deliver quality over time and that that applies.

Speaker Change: In the commercial realm of comply applies on the defense side legacy platforms, new new platforms like leap in Nymex.

Kenneth George Herbert: Maybe Larry, for the 2024 mid-teens commercial services outlook, can you provide any more granularity on the implied assumptions, maybe for spare parts and price compared to other services? And then within that, maybe some comments on how much improvement in the lead turnaround times is embedded in the guide? Ken, good morning.

Speaker Change: And I'd also say that when we talk about our leadership behaviors of humility transparency and focus.

Speaker Change: That really helps undergirds all of that work because if if we.

Speaker Change: We have an opportunity to improve if we've missed something we want folks to come forward share that with us. So we can get after get to root cause and lay in corrective action. So that's really the general approach from our nine ex perspective.

Larry Culp: You know, I think that what we're, Anticipating on the services side is, In effect, mid-single-digit, departure growth really being the foundation. We will see, I think, internal shop visits. , , , , , , , grow more rapidly, then we're likely to see spare parts, we're going to get pricing benefit, we're going to see work scope improvements. And that's really how you ladder up, from that departures number to what we would expect to see in terms of mid-teens services growth. Rahul.

Speaker Change: We do know that that will be a pressure on us in 2024, we're assuming eif's may of 'twenty five we will begin to ship engines in the back half of 'twenty. Four is really the beginning of the lifecycle for for that platform. We're thrilled to be underway on the triple seven accidents, it's an exciting.

Speaker Change: Form.

Rahul Ghai: Yeah, just to add a couple of dot points to that response, as Larry said, departures are up 6%. You know, we are entering 2024 with some catch up to do on our shop visits. Given the supply chain challenges in 2023, we could not get as many shop visits completed as we would have liked.

Speaker Change: But it will be a financial headwind for us for the foreseeable future as we ramp not only the volumes, but obviously.

Speaker Change: Improve the overall cost structure of that business with an eye towards building the installed base and the service annuities.

Annuities that that will come over time.

Speaker Change: Sheila just to add to that on the free cash flow part of your question. We've Nymex has been a headwind on free cash flow, even even in 2020 three as we start bringing in inventory.

Rahul Ghai: So as we enter 2024, given the demand outlook, given the increase in traffic, we are expecting our shop visits to be up kind of low double digits to mid-teens. And, you know, adding to what Larry said about scope and pricing, that pushes our revenue from shop visits kind of towards the higher end of the teens. And spares growth kind of moderates, and the spares growth will be below that of the shop visit growth. But you combine all that, and you get to that mid-teens services growth that we just mentioned. Thank you. Our next question will come from the line of Julian Mitchell with Barclays. Hi, good morning.

Speaker Change: <unk> are shipping this year as Larry said towards the back half of this year. So it will continue to impact our free cash flow negatively.

Speaker Change: To some extent, but it's not a material driver of overall as you've seen greater than $5 billion of free cash flow for 2020 forward, including absorption of a corporate pension and the interest expense.

Speaker Change: So that that you saw so still feel pretty good about the free cash flow for credit 24, and the <unk> is not a material driver of the free cash flow for the year.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Andrew <unk> with Bank of America.

Andrew: Hi, yes, good morning.

Andrew: Andrew Good morning, Yeah. Good morning, just one last time for me for G. But yeah a question for Rahul maybe.

Julian Mitchell: Good morning. Hey, just a question for Scott on the free cash flow again for Vanova. So I just want to try and understand, you know, I think working capital is assumed as a source of funds. So maybe it could help us understand kind of what the orders intake assumption is for Vanova this year. I think it was up 25% for orders in 2023. So just trying to see what sort of order growth this year or what kind of working capital inflow from orders you're expecting. And on that free cash flow point separately, there must be some assumption about sort of interest expense and so forth within that cash guide. So just any framing around that.

Rahul: Maybe just.

You gave us an overview for the company into the first quarter.

Speaker Change: But maybe just detail by business for G until the first quarter little bit more color. Thanks sure. Andrew. So if you look at the first quarter Guide you know aerospace is going to start the year strong revenue up mid teens with the commercial growth rates in the first quarter kind of in line with what we have projected.

Andrew: For full year.

Speaker Change: And the margins on a business as usual kind of pre all the standalone expenses, we do expect our.

Speaker Change: Margins to be flat to slightly up for the first quarter on a year over year basis for aerospace.

Speaker Change: For renewables as Scott said, there will be profit improvement during the year, but that improvement will be more backend loaded as we start converting the higher margin onshore wind orders that Scott referenced in his prepared remarks.

Scott Strazik: Julian, let me just kick it off, and let me start with the second part first, and then I'll hand it to Scott on the orders. You know, as you think about the free cash flow guide for Wernova, we'll definitely provide more details as Form 10 comes out, and then we have the investor days. But just keep in mind, as we've previously discussed, the vast, vast majority of the GE debt will remain with GE Aerospace. So there is not a lot of interest impact on GE Vernova.

Speaker Change: It started shipping those those orders that we got in 'twenty three into the second half of 2024, so there's a little bit of lag between order to revenue conversion and so the renewables improvement will be more back end loaded the first quarter for renewables would look a lot like the fourth quarter for renewables. So think about roughly in the same zone.

And for our typical seasonality.

Speaker Change: Low single digit growth some margin expansion year over year in the first quarter.

Speaker Change: But just one other point I want to make on the first quarter is that given the board, where NOLA and aerospace teams are fully staffed up to become Standalone public companies and we are operating with a very very small corporate staff and <unk>.

Rahul Ghai: So that's the way to think about the free cash flow for next year. More details to come on the capital structure. But Scott, do you want to take the auto spot?

Speaker Change: Historic corporate expense will now be fully absorbed in the two businesses and the corporate.

Speaker Change: Expense in first quarter will be effectively zero, so majority of that expense going to aerospace and the balance to lenovo, but the way to think about first quarter margins for both companies is just as we think to offer absorption off incremental cost and.

Scott Strazik: You bet, Rahul. Thank you. And Julian, I think to your point, to begin with, you know, we had a big order with Onshore Wind in the fourth quarter across grid. There were a number of large HVDC orders, with Tenet as an example. And you can't expect every year, in any quarter specifically, that we're going to see those types of transactions. So we don't expect to see a repeat in 24 versus 23.

Speaker Change: Just given in line with the reported margin guidance that we provided for full year. So that's the way to think about the first quarter margins.

Scott Strazik: But with Onshore Wind, as an example, our largest renewables business, we see our customers actively investing in and replenishing their project book right now. I mean, they really utilized all the projects they had prior to having clarity on the PTC. And we do think the orders profile in 24, much like the revenue and shipments profile, will be more backend loaded than first half loaded on Onshore Wind. But with very active individual projects, orders are going to be more flattish than up and onshore. On grid, the one point I'd make is, although we aren't going to expect as much in large HVDC orders to the extent we had with Tenant in 2023, the reality is, even if you back out the HVDC orders for grid, our second largest renewables business, our orders and grid grew by over 20% in 2023.

Thank you.

Speaker Change: Our next question will come from the line of Seth <unk> with Jpmorgan.

Hey, Thanks, very much and good morning, good morning Seth.

Speaker Change: I don't want to.

Speaker Change: You've just given us the 2024 guidance, so I apologize for that.

Speaker Change: Jumping ahead here, but when we think about the margin cadence and aerospace are apples to apples kind of flattish as we go from 23 to.

Speaker Change: <unk> to 'twenty four what when you think about going to kind of that the.

Speaker Change: The 20% ish that you talked about for 25, how do we think about the key drivers.

Speaker Change: As we break that.

Speaker Change: Yeah sure Seth so so listen let's start with a really strong 23, right 1 billion pre op profit growth 90 basis points of margin expansion.

Seth: And better than what we said back in March right. When we were expecting five and a half billion dollars of profit flat margins year over year or so.

Seth: The 2023 shaped up a lot better than what we initially expected.

Scott Strazik: Power transformers, as an example, a business we don't talk about as much, grew orders by 40%. And we expect to continue to see that strength. So there may be fewer headline orders of the magnitude of a Sunzeo or the tenant HVDC projects, but there's a lot of healthy demand across renewables that we expect to continue into 2024 that contributes towards our free cash flow generation continuing to be greater than 100% and that significant free cash flow growth that we just talked about. Thank you.

Seth: Back in March now as you look forward to 2004, I know you kind of skipped over that here, but you know double digit profit growth.

Seth: In 2024, with the OLED ramp <unk> introduction kind of pressuring the margin rate.

Seth: But it is exactly the step that we had thought in our minds on how 2020 field forward look when we are sitting back in March right and we had we had set a 24 will be a step along the way at a 25 now as we get to 25, the biggest driver to profit growth between 24 to 25 will be the benefit from top line improvement.

Operator: Our next question will come from the line of Sheila Kailu with Jeff. Good morning, guys. Thank you. Hey, Larry, this one's for you.

Seth: And that is in line with what we've previously said pricing that offset inflation and productivity, but mix will continue to be an issue in leap OE volume ramps leap services ramps and even though leap services becomes profitable in 'twenty four it's still a margin headwind and then Nymex volume ramps in 'twenty five as well.

Larry Culp: Maybe if you could just offer your perspective on the quality lapses we've seen across the industry. How does it change your approach in regards to ensuring the integrity of your own supply chains as the industry grapples with the lead challenges? Obviously, but you also mentioned initial G9X production in 2024. How does that flow into your assumptions on free cash flow for things like inventory? Sheila, there's a lot there. I think from a safety first perspective.

Seth: So if you think about twenty-five recall, we had said 757, 6% to $8 billion of profit on the current GE reporting, which translates to roughly about 20% margins and layering in about half a billion dollars of Standalone public company expenses <unk> cost all the other things we are thinking seven 1% to $7 6 billion.

Seth: As of profit for 2025, which is in line with what we said back in March just adjusted for the incremental expenses and we'll come back to that and talk more more in March.

Larry Culp: I'm strongly of the view that the industry... Not to speak for the industry, but having been close to this business for almost two years, everybody understands the solemn responsibility we have, the world over. I think from a GE aerospace perspective, as you and I have talked, the operating framework, the lean transformation that's been underway here is very much rooted in an SQDC approach: safety first and foremost, before quality, before delivery, before cost. And we not only talk that way.

Seth: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Andrew Kaplowitz with Citigroup.

Andrew Kaplowitz: Hey, good morning, everyone, Andy Andy Good morning.

Scott maybe in terms of your 2020 for margin expectations for for Nova could you give us a little more color on the components. I think you mentioned onshore it can reach high single digit margins with a second half ramp up ramp up which would I think be meaningfully better performance than your initial expectations you set for the business and 24 last year.

Larry Culp: We work hard to make sure we operate that way day in and day out. Fortunately, at GE Aerospace, we have a long history of being hyper-focused on safety. You go back, for example, to 2013.

Andrew Kaplowitz: Does that assume you can get through most of your product reliability issues and as price cost has been a bigger driver than you would've thought.

Larry Culp: Our safety management system was really the first of its kind. We were the first OEM to implement such a scheme well before the FAA required the industry to do so. And we have been building on that. But that approach never assumes perfection, right?

Speaker Change: Andy you Bad I mean, if we go back to our original guide in 'twenty four going back to March I mean, we're largely in line with the expectations there, but if we take a step back.

Speaker Change: Gas power stronger than our expectations in March onshore wind and grid are both stronger and to your point, we talked today about onshore wind being high single digit margins in 'twenty, four and grid being mid single digit margins now gas has already gotten to low double digit margins and we'll continue to accrete, but offshore is tougher than where we were.

Larry Culp: So we layer in all sorts of checks and audits, process capabilities to make sure that we're doing all that we possibly can to deliver safety, to deliver quality over time. And that applies in the commercial realm; it applies on the defense side, legacy platforms, and new platforms like LEAP and 9F. And I'd also say that when we talk about our leadership behaviors of humility, transparency, and focus, that really helps undergird all of that work because if we have an opportunity to improve. If we've missed something, we want folks to come forward, share that with us so we can get after it, get to the root cause, and take corrective action. So, that's really the general approach from a 9X perspective.

Speaker Change: In March and that's challenging a little bit of that strength in our three largest businesses with gas grid in onshore representing about 80% of our revenue today.

Speaker Change: But also taking into account that tough offshore backlog, we've got two more years to execute through that so when you think about our three largest businesses continuing to be stronger than where we were while we really reduce our offshore backlog from 6 billion to approximately $4 billion in approximately two years to go with.

See a clear pathway in 'twenty four to accrete margin, but also then to continue to accrete our margin beyond as we liquidate the rest of the tough economics with offshore and 25.

Speaker Change: Then finally oxygen to really share with you some of our smaller businesses. We don't talk about as much but you heard me Rahul mentioned earlier, the fact that our digital business returned to profitability and we're really excited about some of those areas like grid software that will share more with you when we get to March sect. So those really are the key dynamics of 23 to 24.

Larry Culp: We do know that that will be a pressure on us in 2024. We're assuming EIS may have 25; we'll begin to ship engines in the back half of 24. It's really just the beginning of the life cycle for that platform. We're thrilled to be underwing on the 777X; it's an exciting platform. But it will be a financial headwind for us for the foreseeable future as we ramp up not only the volumes but obviously improve the overall cost structure of that business with an eye toward building the installed base and the service annuities that will come over time. Sheila, just to add to that, on the free cash flow part of your question, you know, NYNEX has been ahead on free cash flow, even in 2023, as we start bringing in inventory to start shipping this year, as Larry said, towards the back half of this year.

Speaker Change: And looking a little bit further out than even that.

Speaker Change: As we have time for one last question.

Speaker Change: Yeah.

Speaker Change: This question will come from the line of Scott <unk> with Deutsche Bank.

Scott: Hey, good morning.

Scott: Hey, Scott Good morning, Scott.

Scott: We're holding you touched on it a bit in your answer to SaaS question, but can you give a bit more detail on the flat margins implied for GE aerospace in 'twenty four and then for Larry I was hoping you can give an update on your capital allocation priorities for 'twenty for coding how share repurchases fit in relative to debt pay down. Thank you.

Rahul Ghai: So it'll continue to impact our free cash flow negatively, to some extent, but it's not a material driver overall, as you've seen, greater than $5 billion of free cash flow for 2024, including absorption of the corporate pension, and interest expense, as you saw. So I still feel pretty good about the free cash flow for 2024, and NYNEX is not a material driver of the free cash flow for the year. Our next question will come from the line of Andrew Obin with Bank of America. I guess it is.

Speaker Change: Sure Scott So as you look as we look forward to 2024, I think it's going to be another strong year right. We've guided to 600.

Speaker Change: It takes six months to seven.

$7 $1 billion of profit on a current.

Basis.

Speaker Change: And then six months to $6 billion on a standalone basis. This is after including <unk> other public company expenses.

Including $100 million to support the wind down of GE corporate office, which will now.

Andrew Burris Obin: Good morning, Andrew, good morning. Yeah, good morning. Just one last time for me to ask G. But yeah, question for Rahul.

Speaker Change: B with us kind of through second quarter. So this implies about a $750 million of profit profit growth or low double digits at the midpoint of that growth.

Andrew Burris Obin: Maybe just if you gave us an overview of the company for the first quarter, but maybe just detail by business or GE for the first quarter, a little bit more color. Sure, Andrew. So, you know, if you look at the first quarter guide, aerospace is going to start the year strong, revenue up mid-teens, with the commercial growth rates in the first quarter kind of in line with what we are projecting for full year. And the margins, on a business as usual basis, kind of pre all the standalone expenses, we do expect margins to be flat to slightly up for the first quarter on an year over year basis for aerospace. For renewables, as Scott said, there will be profit improvement during the year, but that improvement will be more back-end loaded.

Speaker Change: On margins, we do expect that those margins to be flat about two points of margin pressure that we are expecting a more than a half a point of that is coming from leap OE ramp introduction of Nymex engines, and the strong leap services growth and as I said.

Speaker Change: Set earlier, even though leap services is turning profitable just as we would've expected it is still negatively impacting the margins.

Speaker Change: And the rest of that two point headwind is coming from incremental R&D to support improvement further improvement in leap durability introduction of Nymex and then develop the next generation of products for the future of flight.

Speaker Change: This margin pressure is completely offset with benefit from volume productivity. The strong services growth that we're expecting so overall again, it's a step that it is in line with our expectations that we had laid out for the medium term outlook in March of 'twenty three.

Rahul Ghai: As we start converting the higher-margin onshore wind orders that Scott referenced in his prepared remarks, you know, we start shipping those orders that we got in 2023 into the second half of 2024. So there's a little bit of lag between order to revenue conversion. And so the renewables improvement will be more back-end loaded. The first quarter for renewable energy will look a lot like the fourth quarter for renewable energy. So think about it, you know, roughly in the same zone.

Speaker Change: Right.

Speaker Change: I don't know if you're asked that relative to my GE roll or my aerospace, we're all I suspect the latter, but just with the GE hat on for a moment.

Speaker Change: So really no change at this point, we really want to make sure. We see through the spin is I think both are rolling Scott talked at the outset, feeling very good about <unk> prospects here to be investment grade.

Speaker Change: Confident in that outlook and we want to see that through setup. Both businesses. We will in early March in New York share more at each of the Investor days as to how we're thinking about the Oh your capital structures, but the capital allocation strategies for both businesses I think in aerospace you should assume that we're going to have a compelling dividend.

Rahul Ghai: And for power, you know, typical seasonality with low single-digit growth and some margin expansion year-over-year in the first quarter. But just one other point I want to make about the first quarter is that given that both Vornova and Aerospace are fully staffed up to become standalone public companies, and we are operating with a very, very small corporate staff. And the historic corporate expense will now be fully absorbed by the two businesses.

Speaker Change: <unk>.

Speaker Change: Buybacks are going to be an important part of that overall effort beyond just covering dilution and we will certainly look to do meaningful.

Speaker Change: Value accretive M&A the mix the timing those details.

Rahul Ghai: And the corporate expense in the first quarter will be effectively zero, so the majority of that expense is going to Aerospace and the balance to Vornova. But the way to think about first-quarter margins for both companies is just as we think through after the absorption of incremental costs and just given in line with the reported margin guidance that we provided for four years. So that's the way to think about first-quarter margin. Thank you. Our next question will come from the line of Seth Seifman with JPMorgan. Hey, thanks very much and good morning.

Speaker Change: To come I really want the GE Aerospace board.

Speaker Change: Have more time with those important questions, but we're looking forward to moving beyond deleveraging playing more offense.

Speaker Change: At Aerospace and I think while Scotts got a different hand to play there are going to look to continue to certainly invest inorganically and the opportunities that.

They have around the energy transition.

Speaker Change: Whereas before we wrap I want to remind folks that Jay Aerospace will report Ges first quarter results in late April with GE for Nova holding a separate call as a result, like we did with GE healthcare, we will focus our comments in late April on aerospace, leaving GE ever Nova commentary Scott.

Seth Seifman: Good morning, Seth. I don't want to kind of, you know, you've just given us the 2024 guidance. So I apologize for jumping ahead here.

Seth Seifman: But when we think about the margin cadence in aerospace, you know, apples to apples kind of flattish as we go from 23 to 24. When you think about going to kind of that 20 percent that you talked about for 25, you know, how do we think about the key drivers as we, you know, bridge that? Yeah, sure, Seth.

Speaker Change: <unk> and his team Larry any final comments.

Scott: Steve Thanks, just to close the call again the teams delivered in 2023, both aerospace and <unk>, we're really looking forward to what's ahead.

Scott: We're both companies as independent entities.

Steven Winoker: Before that day in early April we hope to see many of you at the Investor days in March. We appreciate your time today your investment and support of GE.

Seth Seifman: So, listen, let's start with a really strong 23, right? A billion and three of profit growth, 90 basis points of margin expansion, and better than what we said back in March, when we were expecting five and a half billion dollars of profit, you know, flat margins year over year. So, you know, 2023 is shaping up a lot better than what we initially expected, you know, back in March. Now, as you look forward to 24, I know you kind of skipped over that here.

Steven Winoker: Yeah.

Speaker Change: Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Rahul Ghai: But, you know, double-digit profit growth in 2024, you know, with the OE ramp and 9S introduction kind of pressuring the margin rate. But it is exactly the step that we had thought in our minds about how 2024 would look when we were sitting back in March. Right.

Rahul Ghai: And we had said that 24 would be a step along the way to 25. Now, as we get to 25, the biggest driver of profit growth between 24 and 25 will be the benefit from top line improvement. And that that is in line with what we've previously said, you know, pricing that offsets inflation and productivity. But mix will continue to be an issue in a leap or volume ramp, and leap services ramp.

Rahul Ghai: And even though leap services becomes profitable in 24, it's still a margin headwind, and then 9x volume ramps up in 25 as well. So if you think about 25 recall, we'd said, you know, seven and a half, seven point six to eight billion dollars of profit on the current reporting, which translates to roughly about 20 percent margins and layering in about half a billion dollars of standalone public company expenses. Each cost, all the other things we are thinking seven point one to seven point six billion dollars of profit for 2025, which is in line with what we said, you know, back in March, just adjusted for the incremental. And we'll come back to that and talk more in March. Thank you. Our next question will come from the line of Andrew Kaplowitz with City. Good morning, everyone. Hey Andy,

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Andrew Kaplowitz: Andy, good morning. Scott, maybe in terms of your 2024 margin expectations for Vernova, could you give us a little more color on the components? I think you mentioned Onshore can reach high single-digit margins with the second-half ramp-up, which would, I think, be meaningfully better performance than your initial expectations you set for the business in 2024 last year. But does that assume you get through most of your product reliability issues? And has price versus cost just been a bigger driver than you would have thought? Andy, you bet.

Speaker Change: Okay.

Scott Strazik: I mean, if we go back to our original guide in 24, going back to March, I mean, we're largely in line with the expectations there. But if we take a step back, gas power is stronger than our expectations in March, while onshore wind and the grid are both stronger.

Scott Strazik: And to your point, we talked today about onshore wind being high single-digit margins in 24 and grid being mid single-digit margins. Now, gas has already gotten to low double-digit margins and will continue to accrete. But offshore is tougher than where we were in March.

Scott Strazik: And that's challenging a little bit of that strength in our three largest businesses, with gas, grid, and onshore representing about 80% of our revenue today. But also taking account that tough offshore backlog, we've got two more years to execute on that. So when you think about our three largest businesses continuing to be stronger than where we were, while we really reduce our offshore backlog from 6 billion to approximately 4 billion and approximately two years to go, we see a clear pathway in 24 to accrete margin, but also then to continue to accrete a margin beyond as we liquidate the rest of the tough economics with offshore in 25 and then find the oxygen to really share with you some of our smaller businesses.

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Scott Strazik: We don't talk about it as much, but you heard Rahul mention earlier the fact that our digital business returned to profitability. And we're really excited about some of those areas, like grid software, that we'll share more with you when we get to March 6. Those really are the key dynamics of 23 to 24 and looking a little bit further out than even that. Liz, we have time for one last question. This question will come from the line of Scott Doishley with Deutsche Bank. Hey, good morning.

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Operator: Thank you, Scott. Good morning Scott. Rahul, you touched on it a bit in your answer to Seth's question, but can you give a bit more detail on the flat margins implied for GE Aerospace in 24, and then for Larry, I was hoping you could give an update on your capital allocation priorities for 24, including how share purchases fit in relative to debt pay-down. Thank you. Yeah, sure, Scott.

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Rahul Ghai: So, you know, as you look forward to 2024, I think it's going to be another strong year, right? We've got it to six and a half, 6.6 to 7.1 billion dollars of profit on a current basis. And then six to six and a half billion dollars on a standalone basis.

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Rahul Ghai: This is after including, you know, EH&S, other public company expenses, including what $100 million to, you know, support the winding down of GE's corporate office, which will now be with us for kind of two second quarter. So this implies about 750 million dollars of profit, profit growth, low double-digit at the midpoint of that growth. Margins, we do expect that those margins to be flat, about two points of margin pressure that we are expecting.

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Rahul Ghai: More than half a point of that is coming from LEAP, the OE ramp, the introduction of 9x engines, and the strong LEAP services growth. And as I said to Seth earlier, even though LEAP services is turning profitable, just as we would have expected, it is still negatively impacting the margins. And the rest of that two point headwind is coming from incremental, you know, R&D to support further improvement in LEAP durability, the introduction of 9x, and then develop the next generation of products for the future of flight. This margin pressure is completely offset by benefits from volume, productivity, and the strong services growth that we're expecting. So overall, again, it's a step that is in line with our expectations that we had laid out for the medium-term outlook in March.

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Rahul Ghai: Scott, I don't know if you asked that relative to my GE role or my aerospace role; I suspect the latter, but just with the GE hat on for a moment, there's really no change at this point. We really want to make sure we see through the spin, as I think both Rahul and Scott talked about at the outset, feeling very good about Renova's prospects here to be investment grade.

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Larry Culp: Confident in that outlook, and we want to see that through in setting up both businesses. We will, in early March, in New York, share more at each of the investor days as to how we're thinking about the, And I think, you know, as we look at not only the capital structures but the capital allocation strategies for both businesses, I think at Aerospace, you should assume that we're going to have a compelling dividend, that buybacks are going to be an important part of that overall effort beyond just covering dilution, value I really want the GE Aerospace Board to have more time to discuss those important questions. But we're looking forward to moving beyond deleveraging and playing more offense in aerospace. And I think while Scott's got a different hand to play, they're gonna look to continue to invest inorganically in the opportunities that they have around the energy transition.

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Steven Winoker: Liz, before we wrap up, I want to remind folks that GE Aerospace will report its first quarter results in late April, with GE Vernova holding a separate call. As a result, like we did with GE Healthcare, we'll focus our comments in late April on GE Aerospace, leaving GE Vernova commentary to Scott and his team. Larry, any final comments? Steve, thanks.

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Larry Culp: Just to close the call, again, the team delivered in 2023, both Aerospace and Brnova. We're really looking forward to what's ahead, were both companies as independent entities. Before that day in early April, we hope to see many of you at the Investor Days in March. We appreciate your time today, your investment, and support of GE. Thank you, ladies and gentlemen.

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Operator: This concludes today's conference. Thank you for participating. You may now disconnect. Virtual Tour via Helicopter, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day, ladies and gentlemen, and welcome to the General Electric fourth quarter 2023 earnings conference. At this time, all participants are in a listen-only mode.

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Speaker Change: Good day, ladies and gentlemen, and welcome to the General Electric fourth quarter 2023 earnings Conference call.

Speaker Change: At this time all participants are in a listen only mode.

Liz: My name is Liz and I will be your conference coordinator today.

Liz: Have you experienced issues with the webcast slides refreshing or are there appears to be delays in the slide advancement. Please had five on your keyboard to refresh.

Liz: My name is Liz, and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Steve Winokur, Vice President of Investor Relations. Please proceed. Thanks.

Liz: As a reminder, this conference is being recorded.

Liz: I would now like to turn the program over to your host for today's conference, Steve Wacker, Vice President of Investor Relations. Please proceed.

Steve Tusa: Thanks, Liz welcome to Ge's fourth quarter 2023 earnings call I'm joined by Chairman and CEO, Larry Culp and CFO Rahul Guy. We're also pleased to have <unk> CEO, Scott strays adhere to share additional insights on our performance and business guidance. Many of the statements. We're making are forward looking and based on our best view of the world and our businesses as we see them.

Steven Winoker: Welcome to GE's fourth quarter 2023 earnings call. I'm joined by Chairman and CEO Larry Culp and CFO Rahul Ghai. We're also pleased to have GE Vernova CEO Scott Strazik here to share additional insights on performance and business guidance. Many of the statements we're making are forward-looking and based on our best view of the world and our businesses as we see them today. As described in our SEC filings and on our website, those elements may change as the world changes. Now, over to Larry.

Steve Tusa: Today as described in our SEC filings and website those elements may change as the world changes over to Larry.

Steve Thank you and good morning, everyone.

Steve: <unk> made tremendous progress in 2023 with excellent operating results the successful spinoff GE healthcare and the ongoing lean transformation of our company.

Steve: 2024 will be a momentous year as we launched <unk> aerospace and <unk> in early April.

Steve: Looking at our results, we more than tripled our earnings and generated almost 70% more free cash flow in 2023.

Steve: <unk> aerospace drove double digit revenue profit and cash growth with continued strength in commercial engines and services.

Larry Culp: Steve, thank you, and good morning, everyone. GE made tremendous progress in 2023 with excellent operating results, the successful spin-off of GE Healthcare, and the ongoing lean transformation of our company. 2024 will be a momentous year as we launch GE Aerospace and GE Vernova in early April. Looking at our results, we more than tripled our earnings and generated almost 70% more free cash flow in 2023. GE Aerospace drove double-digit revenue, profit, and cash growth with continued strength in commercial engines and services. G.E.

Steve: <unk> delivered meaningfully better results as renewable energy and power together generated positive profit and free cash flow.

In the year ahead, we expect both GE aerospace <unk>, Nova to continue on their respective upward trajectories.

Steve: Let me spend a moment on each.

Steve: <unk> Aerospace is an exceptional franchise with our fleet of 44000 commercial engines, and 26000 rotorcraft and combat engines, plus extensive aftermarket services, representing 70% of revenue.

Larry Culp: Vernova delivered meaningfully better results as renewable energy and power together generated positive profit and free capital. In the year ahead, we expect both GE Aerospace and GE Vernova to continue on their respective upward trajectories. Let me spend a moment on each.

Steve: We live our purpose each day to invent the future of flight lift people up and bring them home safely.

Steve: It's a responsibility we take very seriously and our teams are focused on safety quality delivery and cost in that order and everything we do to support our customers and the industry.

Steve: Strategically today, we're executing to meet customer needs for engines and services. Despite.

Steve: Despite the challenge supply chain environment in the quarter total engine deliveries were up 11% sequentially, including defense up over 60%.

Larry Culp: GE Aerospace is an exceptional franchise, with our fleet of 44,000 commercial engines and 26,000 rotorcraft and combat engines, plus extensive aftermarket services representing 70% of revenue. We live our purpose each day to invent the future of flight, lift people up, and bring them home safely. It's a responsibility we take very seriously, and our teams are focused on safety, quality, delivery, and cost, in that order, in everything we do to support our customers in the industry. Strategically, today, we're executing to meet customer needs for engines and services. Despite the challenged supply chain environment, in the quarter, total engine deliveries were up 11% sequentially, including defense, up over 60%. We delivered.

Steve: We deliberately we delivered.

Steve: 1570, leap engines, representing 38% growth yet with more to do going forward.

Steve: As part of our lean transformation, we're developing connected flow using model lines to improve deliveries.

Steve: By focusing on key constraints, we reduce lead times for example over 40% on our ceramic matrix composite components.

Steve: And in services, we've improved lead shop visit turnaround times by double digits.

Steve: Lean is not only helping us with delivery, but more importantly, when it comes to safety and quality.

Steve: Team and Rutland, Vermont used lean problem solving fundamentals to address recurring defects in our GE Nx low pressure turbine blades. This improve first time yield by more than 50%.

Steve: Lean actions like these within our plants and in partnership with suppliers are driving improvements across GE aerospace.

For Tomorrow, we're building, our 150 billion dollar plus backlog.

Larry Culp: 1,570 LEAP engines, representing 38% growth, yet with more to do going forward. As part of our Lean transformation, we're developing connected flow using model lines to improve delivery. By focusing on key constraints, we've reduced lead times, for example, over 40% on our ceramic matric composite components.

Steve: At the Dubai Air show GE Aerospace along with our partners received over 450 engine commitments and several service agreements across both wide bodies and narrow bodies.

Steve: This included an Emirates order for 202, <unk> engines, and spares and a long term services agreement to power its upcoming Boeing Triple Seven X fleet.

Steve: And we're keeping our customers' fleets flying with durability and maintenance enhancements such as our leap one a fuel Malibu cooling system, it's on its way to fleet introduction.

Larry Culp: And in services, we've improved lead shop visit turnaround times by double digits. Lean is not only helping us with delivery, but more importantly, when it comes to safety and quality. The team in Rutland, Vermont, used lean problem-solving fundamentals to address recurring defects in our GENX low-pressure turbine blades.

Steve: And for the future, we're investing in R&D and developing next generation technologies.

<unk> selected GE aerospace for phase two of the hybrid thermally efficient core program, which will significantly enhanced fuel efficiency and reduce emissions improvements will leverage in our <unk> program.

Larry Culp: This improved first-time yield by more than 50%. Lean actions like these within our plants and in partnership with suppliers are driving improvements across GER. For tomorrow, we're building our $150 billion plus backlog. At the Dubai Airshow, GE Aerospace, along with our partners, received over 450 engine commitments and several service agreements across both widebodies and narrowbodies.

Steve: And the National Defense Authorization Act authorized funding for the adaptive engine transition program and the next generation advanced propulsion program, which will help providing provide cutting edge future military capabilities.

Steve: All said GE aerospace is accelerating our progress with lean and driving value long term.

Steve: All in service of our customers, who carry the 3 billion people traveling with our engines under wing each year.

Larry Culp: This included an Emirates order for 202 GE9X engines and spares and a long-term services agreement to power its upcoming Boeing 777X fleet. And we're keeping our customers' fleets flying with durability and maintenance enhancements such as our LEAP-1A fuel-molecule cooling system that's on its way to fleet introduction. And for the future, we're investing in R&D and developing next-generation technology. Recently, NASA selected GE Aerospace for Phase 2 of the Hybrid Thermally Efficient Core Program, which will significantly enhance fuel efficiency and reduce emissions.

Steve: Over to <unk>, our ambition is to electrify and Decarbonize the world.

Steve: With our technology is helping to generate approximately 30% of the world's electricity and where services represent 65% of our backlog, our incumbency and scale position us.

Steve: The lead.

Steve: We've made a lot of progress at <unk>.

Speaker Change: I'll give you the high level framing and Scotts here today with additional color.

Speaker Change: Power delivered strong growth profit and free cash.

Scott: Grid was profitable for the full year and onshore delivered another quarter of profitability.

Scott: Offshore remains challenging, but I really like the way, we're using lean along with better commercial selectivity and underwriting to improve our outlook.

Larry Culp: Improvements we'll leverage in our RISE program, and the National Defense Authorization Act authorized funding for the Adaptive Engine Transition Program and the Next Generation Advanced Propulsion Program, which will help provide cutting-edge future military capabilities. All said, GE Aerospace is accelerating its progress with lean and driving value long term, all in service of our customers who carry the 3 billion people traveling with our engines under wing each year. To GE Vernova, our ambition is to electrify and decarbonize the world.

Scott: <unk> will stand on its own soon.

Scott: I am proud of the team's work to strengthen these businesses.

Scott: And on a more personal note I met Scott during my very first GE Scott site visit I have seen his leadership in action as he has led the team in executing the impressive turnaround at gas power and now the strong momentum building with our onshore and grid businesses.

Scott: Importantly, Scott is an art and student of lean and I'm highly confident that he is the right person to lead <unk> into the future.

Scott: Turning to slide three with our stronger more valuable businesses, delivering now GE Aerospace N G E for Nova are ready to go.

Larry Culp: With our technologies helping to generate approximately 30% of the world's electricity and where services represent 65% of our backlog, our incumbency and scale position us as The Leader. We've made a lot of progress at Burno. I'll give you the high-level framing, and Scott's here today with additional color.

Scott: We've assembled to extraordinary boards, bringing together domain expertise diverse perspectives and leadership experience to help GE aerospace and GE burn over rise to their sharper more focused missions.

Scott: We've also further simplified and strengthened our balance sheet fully exiting our aercap equity stake.

Larry Culp: Power delivered strong growth, profit, and free cash. RID was profitable for the full year, and Onshore delivered another quarter of profitability. Offshore remains challenging, but I really like the way we're using lean along with better commercial selectivity and underwriting to improve our outlook. GE Vernober will stand on its own soon. I'm proud of the team's work to strengthen these businesses. And on a more personal note, I met Scott during my very first GE Scott site visit.

Scott: Looking ahead <unk> plans to publicly filed its form 10 next month.

Scott: <unk> Aerospace will host Investor days on March 6th and seventh respectively in New York City.

Scott: Both teams are excited to share how we will create greater value for our customers and shareholders alike.

Scott: We hope to see many of you there.

Rahul: Now over to Rahul.

Rahul: Thank you Larry and good morning, everyone turning to slide four we will speak to results on an organic basis.

Larry Culp: I have seen his leadership in action as he's led the team in executing the impressive turnaround at gas power and now the strong momentum building with our onshore and grid business. Importantly, Scott is an ardent student of Lean, and I'm highly confident that he is the right person to lead GE Vernova into the future. Turning to slide three, with our stronger, more valuable businesses delivering now, GE Aerospace and GE Vernova are ready to go. We've assembled two extraordinary boards, bringing together domain expertise, diverse perspectives, and leadership experience to help GE Aerospace and GE Brnova rise to their sharper, more focused mission. We've also further simplified and strengthened our balance sheet, fully exiting our RCAP equity state. Looking ahead, GE Vernova plans to publicly file its Form 10 next month.

Rahul: We closed out the year with another solid quarter.

Rahul: Orders were up across all segments.

Rahul: Driven by services up 24%.

Rahul: Revenue increased 13% with all segments up double digits.

Rahul: Adjusted operating profit was up 20%.

Rahul: Supporting margin expansion of 50 basis points.

Rahul: Driven by volume and price net of inflation.

Rahul: This was partially offset by negative mix from higher equipment and investments in growth.

Rahul: Adjusted EPS was $1 <unk> up 56%.

Free cash flow was $3 billion from stronger earnings and positive working capital.

Rahul: Largely driven by progress collections, including recent sizable orders.

This was partially offset by payables, including the actions we have taken to support our suppliers.

Larry Culp: Then GE Vernova and GE Aerospace will host Investor Days on March 6th and 7th, respectively, in New York City. Both teams are excited to share how we'll create greater value for our customers and shareholders alike. We hope to see many of you there. Now, over to Rahul.

For the full year revenue increased 17%.

Rahul: Aerospace and renewables led the way benefiting from robust demand better execution and pricing.

Rahul: Services was up 15% and equipment up 19%.

Rahul: Profit EPS and cash all finished above the high end of our guidance.

Rahul Ghai: Thank you, Larry. Good morning, everyone. Turning to slide four, we'll speak to results on an organic basis. We closed out the year with another solid quarter. Orders were up across all segments, driven by Services, up 24%. Revenue increased 13%, with all segments up double digits. Adjusted Operating Profit was up 20%, supporting a margin expansion of 50 basis points. Driven by Volume and Price, Net of Inflation, This was partially offset by a negative mix from higher equipment and investments in growth. Adjusted EPS was $1.03, up 56%.

Rahul: Adjusted operating profit increased $2 5 billion to $5 7 billion.

Rahul: Adjusted margin expanded by over 300 basis points, driven by aerospace growth sizable renewables improvement and price across the three businesses.

Rahul: Partially offset by inflation on long lead items and investments in growth.

Rahul: Adjusted EPS increased more than $2 supported by strong profit growth.

Rahul: And lower interest from debt reduction.

Free cash flow was up over $2 billion to $5 $2 billion driven by significantly better earnings.

Rahul: In 2023, working capital was a $1 6 billion source of cash from progress collections.

Rahul Ghai: Pre-cash flow was $3 billion from stronger earnings and positive working capital, largely driven by progress collections, including recent sizable orders. This was partially offset by payables, including the actions we have taken to support our suppliers. For the full year, revenue increased 17%.

Rahul: Firstly offset by inventory build given robust growth and continued supply chain challenges.

Rahul: Ah moment incorporate.

Rahul: We ended the year with just over $1 billion of cash use and adjusted costs of roughly $460 million.

Rahul: This improved year over year due to lower functional expenses and higher interest income.

Rahul Ghai: Aerospace and renewables led the way, benefiting from robust demand, better execution, and prices. Services were up 15%, and equipment was up 19%. Profit, EPS, and cash all finished above the high end of our guidance. Adjusted operating profit increased $2.5 billion to $5.7 billion.

Rahul: Overall, it will present significant progress since 2021 when costs were $1 $2 billion.

Rahul: We are pleased to see digital turn profitable as the team prepares to formally joined GE Eva NOLA.

Rahul: Our industry, leading software helps utilities grid operators and others address the growing complexity of energy transition.

Rahul Ghai: Adjusted margin expanded by over 300 basis points, driven by aerospace growth, sizable renewables improvement, and price across the three businesses. Partially offset by inflation on long lead items and investments in growth. Adjusted EPS increased more than $2.

Rahul: And G Aerospace and G, where NOLA are ready to go.

Rahul: The teams are fully staffed and corporate head count, which was close to 5000, just a few years ago stand at less than 200 people.

Rahul: Who will be with us into second quarter to execute the final spin.

Rahul: This temporary costs in the first half of 2024 is embedded in <unk> aerospace's full year guidance.

Rahul Ghai: Supported by strong profit growth and lower interest from debt reduction, pre-cash flow was up over $2 billion to $5.2 billion, driven by significantly better earnings. In 2023, working capital was a $1.6 billion source of cash from progress collections, partially offset by inventory build, given robust growth and continued supply chain challenges. A Moment to Incorporate, We ended the year with just over $1 billion of cash use and adjusted costs of roughly $460 million.

Rahul: Stepping back we are pleased with our performance in 2023.

Rahul: In 2024 on a standalone basis, we expect GE aerospace and G, where NOLA to grow revenue profit and cash.

Rahul: We will share more on business guidance shortly.

Rahul: Now turning to GE aerospace.

Rahul: This quarter demand remained robust with GE and CFM departures growing high teens year over year.

Rahul: Orders were up 10% with solid services and commercial engine orders.

Revenue was up 12% drill.

Rahul: Driven by commercial up 15%.

Rahul Ghai: This improved year over year due to lower functional expenses and higher interest in. Overall, it represents significant progress since 2021, when costs were $1.2 billion. We are pleased to see digital turn profitable as the team prepares to formally join GE Vernova. Our industry-leading software helps utilities, grid operators, and others address the growing complexity of energy transition, and GE Aerospace and GE Vernova are ready to go. The teams are fully staffed, and corporate headcount, which was close to 5,000 just a few years ago, stands at less than 200 people, who will be with us into the second quarter to execute the final spin.

Rahul: Profit was up 8% benefiting from increased services volume and pricing net of inflation.

Rahul: This was partially offset by unfavorable equipment mix from the expected higher install and lower spare engine deliveries.

Rahul: And higher investments.

Rahul: Reported margins were roughly flat year over year, and down 70 basis points organically as unfavorable mix and investments offset higher volume and price net of inflation.

Rahul: And commercial services revenue was up 23% from higher volume pricing and heavier work scopes.

Rahul: External spare parts increased with higher leap volume and internal shop visits were up slightly.

Rahul: Lean is enabling us to create new capacity to meet higher demand and decreased turnaround time and cost.

Rahul: For example, our MRO team in Prestwick, Scotland use lean to remove 76 hours of waste from the engine disassembly process.

Rahul Ghai: This temporary cost in the first half of 2024 is embedded in GE Aerospace's full-year guidance. Stepping back, we are pleased with our performance in 2023. In 2024, on a standalone basis, we expect GE Aerospace and GE Vernova to grow revenue, profit, and cash. We will share more on business guidance shortly. Now turning to GE Aerospace. This quarter, demand remained robust, with GE and CFM departures growing in the high teens year over year.

Rahul: Which will help them to go from servicing three five engines a week to five engines a week.

Rahul: Revenue grew 1% with leap deliveries up 22% as expected our mix continued to shift towards install engines.

Rahul: In defense.

Rahul: Book to Bill was onex, underscoring solid demand and the quality of our franchisees.

Rahul: Revenue was down 1% driven by lower services, while equipment grew double digits from higher combat engine deliveries.

Rahul: For the year.

Rahul Ghai: Orders were up 10% with solid services and commercial engine orders. Revenue was up 12%, driven by commercial up 15%. Profit was up 8%, benefiting from increased service volume and pricing net of inflation. This was partially offset by unfavorable equipment mix from the expected higher install and lower spare engine deliveries and Hire Investors. Reported margins were roughly flat year-over-year and down 70 basis points organically as unfavorable mix and investments offset higher volume and price net of inflation.

Rahul: Revenue was up 22% commercial services increased 30% with external spare parts up significantly and internal shop visits up 10%.

Rahul: Commercial engines grew 21% with total engine deliveries up 25% and spare engine ratio consistent with 2022.

Rahul: Defense grew 7% with book to Bill of approximately $1 <unk> for the second consecutive year and orders were up 9%.

Rahul: Profit was $6 $1 billion, increasing over $1 billion, according 5% from services growth and pricing net of inflation.

Rahul Ghai: In commercial, services revenue was up 23% from higher volume, pricing, and a heavier work scope. External spare parts increased with higher leap volume, and internal shop visits were up slightly. Lean is enabling us to create new capacity to meet higher demand and decrease turnaround time and cost. For example, our MRO team in Prestwick, Scotland, used Lean to remove 76 hours of waste from the engine disassembly process, which will help them to go from servicing 3.5 engines a week to five engines a week. Revenue grew 1%, with lead deliveries up 22%. As expected, our mix continued to shift towards install engines in defense.

Rahul: This was more than offset this more than offset negative mix from higher leap volume and investments.

Rahul: Margins of 19, 2% expanded 90 basis points on a reported basis and 50 basis points on an organic basis.

Free cash flow of $5 $7 billion increased approximately $800 million with improving earnings and working capital more than offsetting a DNA pressure.

Speaker Change: Now I'll hand, it to Scott will cover GE over NOLA.

Scott: Thanks, Rahul it's a pleasure to join you Larian, Steve on the last <unk> earnings call before we launched <unk> a purpose built company, that's enabling electrification and decarbonization.

Rahul Ghai: Book-to-bill was 1X, underscoring solid demand and the quality of our franchises. Revenue was down 1% driven by lower services, while equipment grew double digits from higher combat engine delivery. For the year, revenue was up 22%.

Scott: We built a strong experienced leadership team and we're excited to welcome Jessica <unk> to our leadership team as president overseeing technology innovation and growth I am encouraged by what our team accomplished in 2023, as we deliver meaningfully better results now our renewable energy and power businesses.

Rahul Ghai: Commercial services increased 30%, with external spare parts up significantly, and internal shop visits up 10%. Commercial engines grew 21%, with total engine deliveries up 25%, and the spare engine ratio consistent with 2022. Defense grew 7% with book-to-bill of approximately 1.2x for the second consecutive year, and orders were up 9%. Profit was $6.1 billion, increasing over $1 billion or 25% from services growth and pricing net of inflation. This was more than offset by the positive mix from higher leap volume and investment. Margins of 19.2% expanded 90 basis points on a reported basis and 50 basis points on an organic basis. Pre-cash flow of $5.7 billion increased by approximately $800 million with improving earnings and working capital more than offsetting AD&A pressure. Now, I'll hand it to Scott, who will cover GE Renova. Thanks, Rahul.

Scott: <unk> drove double digit revenue growth were slightly profitable improving profit over $1 billion and generated $600 million of cash this year.

Scott: At renewable energy, our operational turnaround produced sizeable improvement.

In the fourth quarter orders were just over $5 billion, including the cancellation of a large offshore order that was originally booked into Q 'twenty three.

Scott: Excluding this cancellation orders grew over 20% led by stronger onshore equipment and Repower.

Scott: We also secured a record two four gigawatt order to support pattern energy Cynthia wind project expected to be the largest wind project in U S history.

Scott: Revenue increased double digits grid grew double digits for the fifth consecutive quarter.

Scott: Offshore more than doubled as we deliver on our existing backlog and onshore grew driven by North America equipment volume.

Scott: Profit improved over $100 million onshoring grid more than offset pressure in offshore.

Scott: Looking at the year.

Scott: Orders were 23 billion up over 50% with revenue up 17%.

Scott Strazik: It's a pleasure to join you, Larry, and Steve on the last GE earnings call before we launch GE Vernova, a purpose-built company that's enabling electrification and decarbonization. We've built a strong, experienced leadership team, and we're excited to welcome Jessica Uhl to our leadership team as president, overseeing technology, innovation, and growth. I'm encouraged by what our team accomplished in 2023 as we deliver meaningfully better results now. Our renewable energy and power businesses combined drove double-digit revenue growth, were slightly profitable, improved profits over $1 billion, and generated $600 million of cash this year. At Renewable Energy, our operational turnaround produced sizable improvements. In the fourth quarter, orders were just over $5 billion, including the cancellation of a large offshore order that was originally booked in 2Q23. Excluding this cancellation, orders grew over 20% led by stronger onshore equipment and repower. We also secured a record 2.4 gigawatt order to support Pattern Energy's Sunzea wind project, expected to be the largest wind project in U.S. history.

Scott: Profit improved roughly $1 billion, driven by price quality and productivity in onshore and grid plus the absence of last year's largely onshore related charges.

Free cash flow was negative $1 5 billion, which improved by over half a billion dollars from better earnings and higher down payments.

Scott: Looking closer at the businesses.

Scott: At grid price and higher volume enabled full year profitability following three consecutive quarters of profit.

Scott: While our backlog more than doubled to over 12 billion with average margins and backlog increasing approximately five points.

Scott: Lean is core here.

Scott: Take our Pennsylvania facility that makes transmission circuit breakers, we increased flow and doubled production capacity, helping reduce product lead times by about 35%.

This will speed up delivery to customers at a time when demand is rising.

Scott: Onshore has been profitable for two consecutive quarters, North America equipment orders increased more than 70%.

Scott: We've grown our global onshore equipment backlog, roughly 40% to nearly $9 billion and approximately 70% of the backlog is North America.

Scott: Importantly margins in our total onshore equipment backlog expanded over 10 points due to continued selectivity and pricing.

Scott: We're delivering reliable high performing fleets with roughly 60% of our proactive enhancement in the field completed with more to come.

Scott Strazik: Revenue increased double digits. Grid grew double digits for the fifth consecutive quarter, offshore grew more than doubled as we delivered our existing backlog, and onshore grew, driven by North America equipment. Profit improved over $100 million as onshore and grid pressure more than offset it offshore. Looking at the year, orders were $23 billion, up over 50%, with revenue up $17 billion. Profit improved roughly $1 billion driven by price, quality, and productivity in onshore and grid, plus the absence of last year's largely onshore-related charges. Free cash flow was negative $1.5 billion, which improved by over half a billion from better earnings and higher down payment.

Scott: We streamlined our product lineup focusing on higher quality workhorse products, roughly 70% of 2023 volume.

Scott: And we're still increasing productivity and lowering fixed costs significantly.

Scott: Offshore wind was challenging with losses of roughly $1 1 billion and 23.

Scott: We're executing the existing backlog improving productivity with lean.

Scott: We're starting 2024 with an equipment backlog down to roughly $4 billion, which we expect to largely complete over the next two years longer term offshore wind should play a key role in the energy transition.

Scott: The industry is beginning to reset and while it does will.

Scott Strazik: Looking closer at the business, at GRID, price and higher volume enabled full-year profitability following three consecutive quarters of profit. Meanwhile, our backlog more than doubled to over $12 billion, with average margins and backlog increasing approximately $5.3 billion. Lean is a core here. Take our Pennsylvania facility that makes transmission circuit breaks.

Scott: It will be highly selective on adding to the backlog.

Scott: Turning to power, we delivered another strong year led by gas power looking at the quarter orders increased 4% with gas services growing double digits.

Scott: Equipment orders declined largely as we exit steam newbuild, partially offset by higher air derivatives.

Scott: Revenue was up 12% driven by gas.

Equipment revenue grew driven by Aero derivative and heavy duty gas turbines.

Scott Strazik: We increased flow and doubled production capacity, helping reduce product lead times by about 35%. This will speed up delivery to customers at a time when demand is rising. I'm sure he's been profitable for two consecutive quarters.

Scott: Services were strong with higher contractual outages and upgrades.

Scott: Profit was over $750 million with low double digit margins driven by services strength.

Scott: As expected margins contracted given higher equipment volume in an individual quarter additional units may weigh on margins, but this drives long term growth and higher margin services.

Scott Strazik: North America equipment orders increased more than 70% We've grown our global onshore equipment backlog roughly 40% to nearly $9 billion, and approximately 70% of the backlog is in North America. Importantly, margins in our total onshore equipment backlog expanded over 10 points due to continued selectivity and price. We're delivering reliable, high-performance fleets with roughly 60% of our proactive enhancement in the field completed, with more to come. We streamlined our product lineup, focusing on higher quality workhorse products, roughly 70% of 2023, and we're still increasing productivity and lowering fixed costs significantly. However, offshore wind was challenging with losses of roughly 1.1 billion in 2023.

Scott: We're always focused on price and productivity to offset inflation.

Scott: For the year revenue grew 7%, we delivered 58 heavy duty gas turbines with 14 Ha's services were strong up mid single digits led by gas.

Profit of roughly $1 4 billion grew by 10%.

Scott: Importantly, gas achieved double digit margins this year here.

Here lean is enabling higher productivity and growth.

For example, our gas repairs team in Mexico created standard work to reduce cycle time and cost decreasing lead time by 75% and operating hours per unit by 44%.

Scott Strazik: We're executing the existing backlog, improving productivity with lean. We're starting 2024 with an equipment backlog down to roughly four billion, which we expect to largely complete over the next two years. Longer term, offshore winds should play a key role in the energy transition. The industry is beginning to reset, and while it does, it will be highly selected.

Scott: This is helping us deliver faster for our customers.

Scott: Free cash flow was over $2 billion up roughly $200 million.

Scott: Power continues to be a strong reliable source of cash generation we're.

We're pleased with Power's performance.

Scott: Strong growing business, where higher margin services comprise around 80% of the backlog now I'll turn it back to Rahul to discuss guidance.

Rahul: Thanks Scott.

Rahul: The spin just around the corner first quarter will be the last time, a reporting combined <unk> results, including GE aerospace and GE, where NOLA for this first quarter, we expect high single digit revenue growth driven by GE aerospace.

Scott Strazik: Turning to Power. We delivered another strong year, led by gas power. Looking at the quarter, orders increased 4% with gas services growing double digits. Equipment orders declined largely as we exit Steam New Build, partially offset by higher aerodynamics. Revenue is up 12% driven by gas. Equipment revenue grew, driven by Arrow Derivative and heavy-duty gas; services were strong with higher contractual outages and up; profit was over $750 million with low double-digit margins driven by services strength. As expected, margins contracted given higher equipment. In an individual quarter, additional units may weigh on margins, but this drives long-term growth in higher-margin services, and we're always focused on price and productivity to offset inflation. For the year, revenue grew 7%. We delivered 58 heavy-duty gas turbines with 14 HA.

Rahul: Adjusted EPS of 60 to 65.

Rahul: More than doubling year over year, driven by profit improvement and the absence of preferred stock dividend.

Rahul: And free cash flow growth in line with net income growth.

Rahul: Our 2024 annual guidance reflects each business' operating independently for the full year, incorporating standalone and other impacts that each will incur separately.

I'll now hand, it over to Scott and Larry to share the overall G, where NOLA and GE Aerospace guides and we will provide further details for both businesses and much Scott back to you.

Scott: Thanks, Rahul <unk>, Nova is building momentum expecting substantial profit and free cash flow growth in 2024 weeks.

Scott Strazik: Services were strong, up mid-single digits, led by; profit of roughly $1.4 billion grew by 10%. Importantly, GAAF achieved double-digit margins this year. Here, Lean is enabling higher productivity and growth. For example, our gas repairs team in Mexico created standard work to reduce cycle time and cost.

Scott: We see solid organic growth with revenue between 34 to 35 billion up low to mid single digits from 2023, and adjusted EBITDA margin at the higher end of the mid single digits range up from low single digit EBITDA margin in 'twenty three.

Importing this outlook is continued price productivity and benefits from restructuring efforts.

Scott Strazik: Decreasing lead time by 75% and operating hours per unit by 44%. This is helping us deliver faster for our country. Free cash flow was over $2 billion, up roughly $200 million. Power continues to be a strong, reliable source of cash. We're pleased with Power's performance. Strong Growing Business, where higher margin services comprised around 80% of the backlog. Now, I'll turn it back to Rahul to discuss Ghai.

Scott: Few highlights.

Scott: We expect gas power to remain strong with continued services growth and low double digit margins.

Scott: Onshore will continue to improve significantly achieving high single digit margins on roughly flat revenue from better mix price and cost out.

Scott: Offshore will continue to execute our current backlog with slight year over year improvement.

Rahul Ghai: Thanks, Scott. With the spin just around the corner, the first quarter will be the last time our reporting combined GE results, including GE Aerospace and GE Renova. For this first quarter, we expect high single-digit revenue growth driven by GE Aerospace, and adjusted EPS of $0.60 to $0.65, more than doubling year-over-year, driven by profit improvement and the absence of preferred stock dividends, and free cash flow growth in line with net income growth. Our 2024 Annual Guidance reflects each business operating independently for the full year, incorporating stand-alone and other impacts that each will incur separately.

Scott: Finally grid will expand to mid single digit margins, primarily from higher volume and price.

Scott: Our guidance assumes roughly $200 million of stand alone and $100 million of other ongoing carve out costs.

Scott: When converting from this year's expected operating profit margin for power and renewables combined to adjusted EBITDA margin for <unk>, including these costs plus DNA the differences roughly half a billion dollars or one five points.

Scott: On free cash flow, we expect $700 to $1 1 billion from higher EBITDA and better working capital on a standalone basis, which includes absorbing our portion of the GE pension.

Given the multi decade secular talents and stronger financial trajectory ahead, we are excited to launch <unk> and partner with our customers to lead the energy transition forward with that back to Larry.

Scott Strazik: I'll now hand it over to Scott and Larry to share the overall GE Vernova and GE Aerospace Guides, and we will provide further details for both businesses in March. Scott, back to you. Thanks, Rahul.

Larry Culp: Hey, Jay Aerospace. We're also excited about 2024, we expect another year of solid revenue growth up at least low double digits.

Larry Culp: Including mid to high teens growth in commercial which includes high teens growth in engines and mid teens growth in services.

Scott Strazik: GE Vernova is building momentum, expecting substantial profit and free cash flow growth in 2024. We see solid organic growth with revenue between $34 to $35 billion, up low to mid-single digits from 2023 and adjusted EBITDA margin at the higher end of the mid-single digits range, up from a low single-digit EBITDA margin in 2023. Supporting this outlook is continued price, productivity, and benefits from restructuring. Q Highlights We expect gas power to remain strong with continued services growth and low double-digit, onshore will continue to improve significantly, achieving high single-digit margins on roughly flat revenue from better mix, price, and cost. Offshore will continue to execute our current backlog with slight year-over-year improvements.

Mid to high single digit growth for defense and systems <unk>.

Larry Culp: Including our propulsion and additive technologies business.

Larry Culp: On our current reporting basis, the guidance implies six six to $7 $1 billion of operating profit.

Larry Culp: Proving double digits at the midpoint of the range.

On a standalone basis, including roughly $600 million of corporate and other standalone cost. This comes to approximately 6% to $6 $5 billion of profit.

Larry Culp: And implies flat margins year over year.

Given the growth in leap initial my next shipments for the Triple seven X platform and other growth investments.

Larry Culp: For free cash flow, we expect to generate over $5 billion, which remains well above 100% conversion, including standalone impacts.

Scott Strazik: Finally, GRID will expand to mid-single-digit margins primarily from higher volume and price. Our guidance assumes roughly $200 million of stand-alone and $100 million of other ongoing carve-outs. When converting from this year's expected operating profit margin for power and renewables combined to adjusted EBITDA margin for GE Vernova, including these costs plus DNA, the difference is roughly half a billion dollars, or 1.5 points, on free cash.

Larry Culp: Our teams are looking forward to sharing additional insights in detail with you at our March Investor days.

Larry Culp: In closing 2023 was an excellent year.

Larry Culp: <unk> aerospace drove double digit growth in GE, even over delivered substantially better results. Both are on track for continued growth in 2024.

Larry Culp: While our sites are on the future. We're proud of what we've accomplished with over $100 billion of debt reduction behind us and $7 billion returned to shareholders. In 2023, we remain fully focused.

Larry Culp: We expect $700 million to $1.1 billion from higher EBITDA and better working capital on a stand-alone basis, which includes absorbing our portion of the GE pension. Given the multi-decade secular talons and stronger financial trajectory ahead, we are excited to launch GE Vernova and partner with our customers to lead the energy transition forward. With that, back to Larry.

Larry Culp: In and day out on using lean to improve how we serve our customers and deliver value for shareholders.

Larry Culp: Underpinning all of this is the GE team.

Larry Culp: My sincere thanks to all of you for.

Larry Culp: For the important work you did in 2023.

Larry Culp: I've never been more confident in.

Larry Culp: And the path ahead, we've created industry leaders that will carry ge's commitment to innovation and continuous improvement, while grounded and vital missions.

Larry Culp: At GE Aerospace, we're also excited about 2024. We expect another year of solid revenue growth, at least low double digits, including mid- to high-teens growth in commercial, which includes high-teens growth in engines, and mid-teens growth in service, amid high single-digit growth for defense and systems, including our propulsion and additive technologies. On our current reporting basis, the guidance implies $6.6 to $7.1 billion of operating profit, improving double digits at the midpoint of the range. On a stand-alone basis, including roughly $600 million of corporate and other stand-alone costs, this comes to approximately $6 to $6.5 billion of profit and applies flat margins year over year.

Larry Culp: At GE aerospace inventing the future of flight.

Larry Culp: And as GE, <unk> electrifying and Decarbonising World.

Speaker Change: We're ready to go Steve over to you.

Steve: Thanks, Larry before we open the line Liz I would ask everyone in the queue to consider your fellow analysts and ask one question. So we can get to as many people as possible in the next 20 to 25 minutes. Please open the line.

Speaker Change: Ladies and gentlemen, if you wish to ask a question. Please press star one one on your telephone.

Speaker Change: If you wish to withdraw your question or your question has already been answered. Please press star one one again.

Speaker Change: Okay.

Speaker Change: Our first question comes from Myles Walton with Wolfe Research.

Larry Culp: Given the growth and leap, initial Minex shipments, and for the 777X platform and other growth investors. For free cash flow, we expect to generate over $5 billion, which remains well above 100% conversion, including stand-alone impact. Our teams are looking forward to sharing additional insights and detail with you at our March Investor Day. In closing, 2023 was an excellent year.

Myles Walton: Thanks, Good morning.

Myles Walton: Good morning Myles.

Myles Walton: I was hoping to dig in a little bit on the commercial engines high teens growth and maybe if you could break down a little bit does it still include about 2000 leap deliveries.

Myles Walton: And also is the spares ratio similar to 2003 I know you mentioned 23 with similar to 'twenty two.

Speaker Change: Myles I think from a from.

Speaker Change: From a CES of commercial engines and services perspective.

Speaker Change: We're going to see engines lead the way engines will be up high teens, plus I think youre going to see services in the mid teens area specific to your question from a lead perspective, what we anticipate right now is a 20% to 25% increase in unit growth.

Larry Culp: GE Aerospace drove double-digit growth, and GE Vernova delivered substantially better results; both are on track for continued growth in 2024. While our sights are on the future, we're proud of what we've accomplished. With over $100 billion in debt reduction behind us and $7 billion returned to shareholders in 2023, we remain fully focused day in and day out on using Lean to improve how we serve our customers and deliver value for shareholders. Underpinning all of this is the GE team. My sincere thanks to all of you for the important work you did in 2023. I've never been more confident about the path ahead. We've created industry leaders that will carry GE's commitment to innovation and continuous improvement, while grounded in a vital mission, at GE Aerospace, Inventing the Future of Flight, and at GE Vernova, electrifying and decarbonizing the world. We're ready to go. Steve, it's over to you.

Speaker Change: I think we will see installs yet.

Speaker Change: Get ahead of spares, so that spares ratio will begin to moderate more in line with the historic average of a typical lifecycle.

Speaker Change: So that's that's really where we are with respect to the narrow body specifics you have there.

Speaker Change: Our next question comes from the line of.

Speaker Change: Joe Ritchie with Goldman Sachs.

Joe Ritchie: Hey, guys good morning.

Joe Ritchie: I was like the end of an era, yeah as I said it feels like the end of an era, where to go out on a good note.

Speaker Change: So my one question is for Scott.

Speaker Change: Scott I'm, just trying to bridge the free cash flow comments 2023 to 2024.

Scott: Yes, clearly you guys have some get the numbers out on the slide but 2023 numbers look like.

Scott: Apples to apples right like not burden for corporate it looks like you're expecting a pretty meaningful pickup in 2024th but maybe just talk to us about the puts and takes.

Scott: And what's embedded.

Embedded in the low and the high end of the guide for 'twenty four.

Speaker Change: You bet Joe at the start I mean, we're proud of the $600 million of free cash flow that we generated with power and renewable segments. In 2023, now as we get to an apples and apples basis, we need to back out from that reportable free cash flow of $600 million are stand alone and carve out costs of approximately.

Steven Winoker: Thanks, Larry. Before we open the line, Liz, I'd ask everyone in the queue to consider your fellow analysts and ask one question so we can get to as many people as possible in the next 20 to 25 minutes. Please open the line. Ladies and gentlemen, if you wish to ask a question, please press star 1 1 on your telephone. If you wish to withdraw your question or if your question has already been answered, please press star 1 1 again.

Speaker Change: <unk> $300 million in addition to pension and some variables, we're working through with taxes that will all be clear and the form 10 filing in the middle of February jumping off of that starting point, we expect to see real EBITDA growth that will drive free cash flow with it from low single digit EBITDA growth to the.

Operator: Our first question comes from Myles Walton with Wolf Research. Thanks. Good morning. Morning, Myles.

Speaker Change: High end of the mid single digit EBITDA range that we're talking about in addition to working capital continuing to be a source of cash that drives us up towards that $700 million to $1 1 billion of positive free cash flow at vornado, but now the real drivers of the the variability in that.

Larry Culp: I was hoping to dig in a little bit on the commercial engines, the high teens growth, and maybe if you could break it down a little bit, does it still include about 2,000 leap deliveries? And also, is the spares ratio similar to 23? I know you mentioned 23 was similar to 22. Myles, I think from a CES or commercial engines and services perspective, we're going to see engines lead the way. Engines will be up high teens plus, and I think you're going to see services in the mid-teens area.

Range come down primarily to two things one is offshore wind execute execution and how quickly we install the wind turbines in both the Atlantic and the North Sea proud of the fact that we've got 14 megawatt wind turbines in both cases connected to the grid today and really the EDF timing of the transaction closed on steel.

Speaker Change: As the two largest variables for us on that 700 million to $1 $1 billion guide, but with a lot of confidence that we go into 'twenty four expecting to see substantial improvement off of 2023.

Myles Alexander Walton: Specific to your question, from a LEAP perspective, what we anticipate right now is a 20 to 25% increase in unit growth. I think we'll see installs get ahead of SPARES, so that SPARES ratio will begin to moderate more in line with the historic average of a typical life cycle. So that's really where we are with respect to the narrow body specifics you have.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Ken Herbert with RBC capital markets.

Kenneth Herbert: Yes, hi, good morning.

Kenneth Herbert: Larry for for the 2024 mid teens commercial services outlook can you provide any more granularity on the implied assumptions maybe for spare parts and price compared to other services and then within that maybe some comments on how much improvement in the turnaround times are embedded in the guide.

Operator: Our next question comes from Joe Ritchie with Goldman Sachs. Hey guys, good morning. Feels like the end of an era. Yeah, as I said, feels like the end of an era. Way to go out on a good note.

Ken Good morning, I think that what we're.

Kenneth Herbert: Anticipating on the services side is.

Kenneth Herbert: In effect mid single digit.

Kenneth Herbert: Parcher growth really being the foundation.

Kenneth Herbert: We will see I think internal shop visits.

Kenneth Herbert: <unk>.

Joe Ritchie: So my one question is for Scott. So Scott, I'm just trying to bridge the free cash flow comments, 2023 to 2024. Clearly, you guys have some numbers out on the slides, but the 2023 numbers look like they're not apples to apples, right? Like not burdened for corporate.

Kenneth Herbert: Grow more rapidly than we are likely to see spare parts were going to get pricing benefit we're going to see work scope improvements and thats really how you ladder up.

Kenneth Herbert: From that departures number to what we would expect to see in terms of mid teens services growth.

Speaker Change: Yes, just to just to add a couple of couple of data points is due to that response as Larry said departures and up 6%. We are entering 2024 with.

Joe Ritchie: It looks like you're expecting a pretty meaningful pickup in 2024. So maybe just talk to us about the puts and takes and what's embedded in the low and the high end of the guide for 2024. You bet, Joe.

Some catch up to do on our shop visits.

Speaker Change: Given the supply chain challenges in 2023, we could not get as many shop visits completed as we would have liked so as we enter 2020 for a given the demand outlook given the increase in traffic we are expecting our shop visits to be up kind of low double digits to mid teens and adding to what Larry said on.

Scott Strazik: At the start, I mean, we're proud of the $600 million of free cash flow that we generated with the power and removal segments in 2023. Now, as we get to an apples-to-apples basis, we need to back out from that reportable free cash flow of $600 million, our standalone and carve out costs of approximately $300 million, in addition to pension and some variables we're working through with taxes that will all be clear in the Form 10 filing in the middle of February. Jumping off of that starting point, we expect to see real EBITDA growth that will drive free cash flow with it from low single-digit EBITDA growth to the high end of the mid-single-digit EBITDA range that we're talking about, in addition to working capital continuing to be a source of cash that drives us up towards that $700 million to $1.1 billion of positive free cash flow at Vernova. Now, the real drivers of the variability in that range come down primarily to two things. One is offshore wind power and how quickly we install the wind turbines in both the Atlantic and the North Sea.

Speaker Change: Scope and pricing that pushes our revenue from shop visits kind of towards the higher end of that teens, and then spares growth moderates and the spares growth will be below that of the shop visit growth. When you combine all that youll get to that mid teens.

Versus growth that we just mentioned.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Julian Mitchell with Barclays.

Hi, good morning.

Julian Mitchell: Good morning, Hey.

Julian Mitchell: Just a question maybe for Scott on the.

Free cash flow again, so often over so just wanted to try and understand I.

Julian Mitchell: I think working capital is assumed as a source. So maybe help us understand kind of what the orders intake assumption is for that over this year I think it was up 25% the orders in 2023.

Julian Mitchell: So just trying to see how much sort of orders growth this year or what kind of working capital inflows from from all this year, we are expecting.

Julian Mitchell: And on that free cash flow point separately.

Julian Mitchell: There must be some assumption for sort of interest expense and so forth within that cash guide.

Scott Strazik: I'm proud of the fact that we've got 14 megawatt wind turbines in both cases connected to the grid today. And really, the EDF timing of the transaction is close to steam as the two largest variables for us on that $700 million to $1.1 billion guide, but with a lot of confidence that we go into 2024 expecting to see substantial improvement off of 2020. Our next question will come from the line of Ken Herbert with RBC Capital Markets. Yeah, hi, good morning.

So just any any framing around that please.

Julien let me just kick it off and let me start with the second part first and then I'll hand, it to Scott on the orders.

Scott: They think about the free cash flow guide for where NOLA will definitely provide more detailed those form 10 comes out and then we have the investor days, but just keep in mind as we've previously discussed <unk>.

Scott: <unk> majority of the GE debt will retain with with GE aerospace. So it is not a lot of interest impact on GE over NOLA. So that's the way to think about the free cash flow for for next year more details to come on the capital structure, but Scott you want to take the auto spot you.

Kenneth George Herbert: Maybe Larry, for the 2024 mid-teens commercial services outlook, can you provide any more granularity on the implied assumptions, maybe for spare parts and price compared to other services? And then within that, maybe some comments on how much improvement in the lead turnaround times is embedded in the guide? Ken, good morning.

Scott: You bet Rahul Thank you and Julian I think to your point to begin with we had a big Cynthia order with onshore wind in the fourth quarter across grid, there were a number of large.

Speaker Change: H VDC orders with tenant and as an as an example, and you can expect in every year in any quarter, specifically that we're going to see those types of transactions. So those we don't expect to see a repeat in 'twenty four versus 23, but with onshore wind as an example, our largest renewables busy.

Larry Culp: You know, I think that what we're, Anticipating on the services side is, In effect, mid-single digit, departure growth really being the foundation. We will see, I think, internal shop visits. , , , , , , , grow more rapidly, then we're likely to see spare parts, we're going to get pricing benefit, we're going to see work scope improvements. And that's really how you ladder up, from that departures number to what we would expect to see in terms of mid-teens services growth. Rahul.

Speaker Change: <unk>.

Speaker Change: We see our customers actively investing in replenishing their project book right now I mean, they really.

Speaker Change: Utilized all of the projects they had prior to having clarity on the PTC and we do think the orders profile in 'twenty for much like the revenue and shipments profile will be more backend loaded than first half loaded than onshore wind, but with very active individual projects.

Speaker Change: Or is there going to be more flattish than than up in onshore on grid. The one point I'd make is although we aren't going to expect as much in.

Rahul Ghai: Yeah, just to add a couple of dot points due to that response, as Larry said, departures are up 6%. You know, we are entering 2024 with some catch up to do on our shop visits. Given the supply chain challenges in 2023, we could not get as many shop visits completed as we would have liked.

Speaker Change: Large <unk> orders to the extent, we had with tenants in 2023. The reality is even if you back out the H VDC orders and grid, our second largest renewables business.

Speaker Change: Our orders in grid grew by over 20% in 2023 power Transformers as an example of business. We don't talk about as much grew orders by 40% and we expect to continue to see that strength. So there may be less headline orders of the magnitude of a sudden ZEA or the tenant HV DC projects, but there's a.

Rahul Ghai: So as we enter 2024, given the demand outlook, given the increase in traffic, we are expecting our shop visits to be up kind of low double digits to mid-teens. And, you know, adding to what Larry said about scope and pricing, that pushes our revenue from shop visits kind of towards the higher end of the teens. And spares growth kind of moderates, and the spares growth will be below that of the shop visit growth. But you combine all that, and you get to that mid-teens services growth that we just mentioned. Thank you. Our next question will come from the line of Julian Mitchell with Barclays. Hi, good morning. Good morning.

Speaker Change: A lot of healthy demand across renewables that we expect to continue into 2024 that contributes towards our free cash flow generation continue to be greater than 100% and that significant free cash flow growth that we just talked about.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Sheila <unk> with Jefferies.

Speaker Change: Good morning, guys. Thank you good morning, Sheila Paul Larry. This is for you maybe if you could just offer your perspective on.

Speaker Change: The quality of options, we've seen across the industry. How does it change your approach in regards to ensuring the integrity of your own supply chain.

Julian Mitchell: Hey, just a question maybe for Scott on the free cash flow again for Vanova. So I just wanted to try and understand, you know. I think working capital is assumed as a source. So maybe help us understand kind of what the assumption of orders intake is for Vanova this year. I think it was up 25% on orders in 2023. So just trying to see how much sort of orders growth this year or what kind of working capital inflow from orders you're expecting. And on that free cash flow point separately, there must be some assumption for sort of interest expense and so forth within that cash guide. So just any framing around that.

Speaker Change: And as gene grapples with elite challenges, obviously, but you also mentioned <unk> production in 2024, how does that flow into your assumptions on free cash flow for things like inventory build.

Speaker Change: Yeah.

Speaker Change: Sheila there is a lot there I think from a.

Speaker Change: Let's take safety first.

I'm strongly of the view that the industry.

Speaker Change: Not to speak for the industry, but having been close to this business for almost two years.

Speaker Change: Everybody understands.

The solemn responsibility we have.

Speaker Change: The world over.

Speaker Change: I think from a GE aerospace perspective, as you and I have talked.

Speaker Change: B the operating framework the lean transformation that's been underway here is very much rooted in.

Rahul Ghai: Julian, let me just kick it off, and let me start with the second part first, and then I'll hand it to Scott on the orders. You know, as you think about the free cash flow guide for Wernova, we'll definitely provide more details as Form 10 comes out, and then we have the investor days. But just keep in mind, as we've previously discussed, the vast, vast majority of the GE debt will remain with GE Aerospace. So there is not a lot of interest impact on GE Vernova.

Speaker Change: And as Judy C approach safety first and foremost before quality before delivery before cost.

Speaker Change: And we not only talk that way we.

We work hard to make sure we operate that way day in and day out Fortunately at GE Aerospace, we have a long history of being hyper focused on safety and you go back for example to I think 2013.

Speaker Change: Our safety management system is really the first of its kind we were the first OEM.

Rahul Ghai: So that's the way to think about the free cash flow for next year. More details to come on the capital structure. But Scott, do you want to take the auto spot?

To implement such a scheme well before the FAA required.

Speaker Change: The industry to do so.

Scott Strazik: You bet, Rahul. Thank you. And Julian, I think to your point, to begin with, you know, we had a big order with Onshore Wind in the fourth quarter across grid. There were a number of large HVDC orders, with Tenet as an example. And you can't expect every year, in any quarter specifically, that we're going to see those types of transactions. So we don't expect to see a repeat in 24 versus 23.

Speaker Change: And we have been building on that but that approach never assumes perfection right. So we layer in all sorts of checks and audits process capabilities to make sure that we're doing all that we possibly can.

Speaker Change: To deliver safety to deliver quality overtime and that that applies.

Speaker Change: In the commercial realm of comply applies on the defense side legacy platforms, new new platforms like leap in Nymex.

Speaker Change: And I would also say that when we talk about our leadership behaviors of humility transparency and focus.

Speaker Change: That really helps undergirds all of that work because if if we.

Scott Strazik: But with Onshore Wind, as an example, our largest renewables business, we see our customers actively investing in and replenishing their project book right now. I mean, they really utilized all the projects they had prior to having clarity on the PTC. And we do think the orders profile in 24, much like the revenue and shipments profile, will be more backend loaded than the first half loaded Onshore Wind. But with very active individual projects, orders are going to be more flattish than up and onshore. On grid, the one point I'd make is, although we aren't going to expect as much in large HVDC orders to the extent we had with Tenant in 2023, the reality is, even if you back out the HVDC orders for grid, our second largest renewables business, our orders and grid grew by over 20% in 2023. Power transformers, as an example, a business we don't talk about as much, grew orders by 40%.

We have an opportunity to improve if we've missed something we want folks to come forward share that with us. So we can get after get to root cause and lay in corrective action. So that's really the general approach from our nine ex perspective.

Speaker Change: We do know that that will be a pressure on us in 2024, we're assuming eif's may of 'twenty five will begin to ship engines in the back half of 'twenty. Four is really the beginning of the lifecycle for for that platform. We're thrilled to be underway on the triple seven axis, it's an exciting platts.

Speaker Change: Form.

Speaker Change: But it will be a financial headwind for us for the foreseeable future as we ramp not only the volumes, but obviously.

Speaker Change: Improve the overall cost structure of that business with an eye towards building the installed base and the service annuities.

Speaker Change: Annuities that that will come over time.

Speaker Change: Sheila just to add.

Sheila: Add to that on the free cash flow part of your question. We've Nymex has been a headwind on free cash flow, even even in 2023 as we start bringing in inventory <unk>.

Sheila: Not shipping this year as Larry said towards the back half of this year. So it will continue to impact our free cash flow negatively.

Scott Strazik: And we expect to continue to see that strength. So there may be fewer headline orders of the magnitude of a Sunzeo or the tenant HVDC projects, but there's a lot of healthy demand across renewables that we expect to continue into 2024 that contributes towards our free cash flow generation continuing to be greater than 100% and that significant free cash flow growth that we just talked about. Thank you.

Speaker Change: To some extent, but it's not a material driver of overall as you've seen greater than $5 billion of free cash flow for 2020 forward, including absorption off.

Speaker Change: The corporate pension and the interest expense.

Speaker Change: So that that you saw so still feel pretty good about the free cash flow for credit quality four and the <unk> is not a material driver of the free cash flow for the year.

Operator: Our next question will come from the line of Sheila Kailu with Jeff. Good morning, guys. Thank you. Hey, Larry, this one's for you.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Andrew <unk> with Bank of America.

Andrew Kaplowitz: Hi, Yes, good morning, good morning.

Larry Culp: Maybe if you could just offer your perspective on the quality lapses we've seen across the industry. How does it change your approach in regards to ensuring the integrity of your own supply chains as the industry grapples with the lead challenges? Obviously, but you also mentioned initial G9X production in 2024. How does that flow into your assumptions on free cash flow for things like inventory? Sheila, there's a lot there. I think from a safety first perspective.

Andrew Kaplowitz: Andrew Good morning. Good morning, just one last time for air for GE, but yeah, a question for Rahul.

Rahul: Maybe just if you gave us an overview for the company and to the first quarter, but maybe just detail by business.

For GE and for the first quarter liberate more color. Thanks.

Sure Andrew So if you look at the first quarter guide.

Speaker Change: Aerospace is going to start the year strong revenue up mid teens with the commercial growth rates in the first quarter kind of in line with what we are projecting for full year and the margins on a business as usual kind of pre all the standalone expenses, we do expect our margins.

Larry Culp: I'm strongly of the view that the industry... Not to speak for the industry, but having been close to this business for almost two years, everybody understands the solemn responsibility we have, the world over. I think from a GE aerospace perspective, as you and I have talked, the operating framework, the lean transformation that's been underway here is very much rooted in the SQDC approach: safety first and foremost before quality, before delivery, before cost. And we do not only talk that way.

Speaker Change: Margins to be flat to slightly up for the first quarter on a year over year basis for aerospace.

For renewables as Scott said, they will be profit improvement during the year, but that improvement will be more backend loaded as we start converting the higher margin onshore wind orders that Scott referenced in his prepared remarks.

Speaker Change: And start shipping those those orders that we got in 'twenty three into the second half of 2024, so there's a little bit of lag between order to revenue conversion and so the renewables improvement will be more back end loaded the first quarter for renewables will look a lot like the fourth quarter for renewables. So think about roughly in the same zone.

Larry Culp: We work hard to make sure we operate that way day in and day out. Fortunately, at GE Aerospace, we have a long history of being hyper-focused on safety. You go back, for example, to 2013.

Larry Culp: Our safety management system was really the first of its kind. We were the first OEM to implement such a scheme well before the FAA required the industry to do so. And we have been building on that. But that approach never assumes perfection, right?

Speaker Change: And for power typical seasonality with low single digit growth some margin expansion year over year in the first quarter.

Speaker Change: But just one other point I want to make on the first quarter is that given that board, where NOLA and aerospace teams are fully staffed up to become Standalone public companies and we are operating with a very very small corporate staff and.

Larry Culp: So we layer in all sorts of checks and audits, process capabilities to make sure that we're doing all that we possibly can to deliver safety, to deliver quality over time. And that applies in the commercial realm; it applies on the defense side, legacy platforms, and new platforms like LEAP and 9-Act. And I'd also say that when we talk about our leadership behaviors of humility, transparency, and focus, that really helps undergird all of that work because if we have an opportunity to improve. If we've missed something, we want folks to come forward, share that with us so we can get after it, get to the root cause, and take corrective action. So, that's really the general approach from a 9X perspective.

Speaker Change: The historic corporate expense will now be fully absorbed in the two businesses and.

Speaker Change: On the corporate expense in first quarter will be effectively zero. So majority of that expense going to aerospace and the balance to lenovo, but the way to think about first quarter margins for both companies is just as we think to offer absorption off incremental cost and just.

Just given in line with the reported margin guidance that we provided for full year. So that's the way to think about the first quarter margins.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Seth <unk> with Jpmorgan.

Speaker Change: Hey, Thanks, very much and good morning, good morning Seth.

Speaker Change: Don't want to.

Seth: You've just given us the 2024 guidance, so I apologize for that.

Larry Culp: We do know that that will be a pressure on us in 2024. We're assuming EIS may have 25, and we'll begin to ship engines in the back half of 24. It's really the beginning of the lifecycle for that platform. We're thrilled to be underwing on the 777X.

Seth: Jumping ahead here.

Seth: We think about the margin cadence and aerospace are apples to apples kind of flattish as we go from 23%.

Seth: <unk> to 'twenty four what when you think about going to kind of that the.

Seth: The 20% ish that you talked about for 25, how do we think about the key drivers.

Larry Culp: It's an exciting platform. But it will be a financial headwind for us for the foreseeable future as we ramp not only the volumes, but obviously improve the overall cost structure of that business with an eye toward building the installed base and the service annuities that that will come over time. Sheila, just to add to that, on the free cash flow part of your question, you know, we've, NYNEX has been ahead on free cash flow, even in 2023, as we start bringing in inventory to start shipping this year, as Larry said, towards the back half of this year, so it'll continue to impact our free cash flow negatively to some extent, but it's not a material driver overall, as you've seen, you know, greater than $5 billion of free cash flow for 2024, including absorption of the corporate pension, the interest expense, so that you saw, so I still feel pretty good about the free cash flow for 2024, and the NYNEX is not a material driver of the free cash flow for the, Our next question will come from the line of Andrew Obin with Bank of America. Hi guys, good morning. Andrew, good morning. Yeah, good morning. Just one last time for me for G, but yeah, question for Rahul.

Seth: As we break that.

Speaker Change: Yeah sure Seth so so listen let's start with a really strong 23, right 1 billion pre op profit growth 90 basis points of margin expansion.

Speaker Change: And better than what we said back in March and we were expecting five and a half a billion dollars of profit flat margins year over year or so.

Speaker Change: The 2023 shaped up a lot better than what we initially expected.

Speaker Change: Back in March as you look forward to 'twenty four I know you kind of skipped over that here, but double digit profit growth.

Speaker Change: And in 2024 with the OE ramp <unk> introduction kind of pressuring the margin rate.

Speaker Change: But it is exactly the step that we had put in our minds on how 2020 field forward look when we are sitting back in March right and we had we had said <unk> 24 will be a step along the way to 25 now as we get to 'twenty five.

Speaker Change: The biggest driver to profit growth between 24% to 25 will be the benefit from top line improvement and that is in line with what we've previously said pricing that offset inflation and productivity, but mix will continue to be an issue in leap OE volume ramps leap services ramps and even though.

Speaker Change: Leap services becomes profitable in 'twenty four it's still a margin headwind and then Nymex volume ramps in 'twenty five as well. So if you think about twenty-five recall, we had said 757 $6 million to $8 million of profit on the current GE reporting, which translates to roughly about 20% margins and layering in about half of.

Rahul Ghai: Maybe just if you gave us an overview of the company for the first quarter, but maybe just detail by business or GE for the first quarter, a little bit more color. Sure, Andrew. So, you know, if you look at the first quarter guide, aerospace is going to start the year strong, revenue up mid-teens, with the commercial growth rates in the first quarter kind of in line with what we are projecting for full year. And the margins, on a business as usual basis, kind of pre all the standalone expenses, we do expect margins to be flat to slightly up for the first quarter on an year over year basis for aerospace. For renewables, as Scott said, there will be profit improvement during the year, but that improvement will be more back-end loaded as we start converting the higher-margin onshore wind orders that Scott referenced in his prepared remarks.

Speaker Change: <unk> as a standalone public company expenses Ehm has caused all the other things we are thinking seven one to $7 $6 billion of profit for for 2025, which is in line with what we said back in March just adjusted for the incremental expenses and we will come back to that and talk more more in March.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Andrew Kaplowitz with Citigroup.

Andrew Kaplowitz: Hey, good morning, everyone, Andy Andy Good morning.

Andrew Kaplowitz: Scott maybe in terms of your 2020 for margin expectations for Nova could you give us a little more color on the components. I think you mentioned onshore it can reach high single digit margins with a second half ramp up ramp up which would I think be meaningfully better performance than your initial expectations you set for the business and 24 last year. So does.

Rahul Ghai: You know, we start shipping those orders that we got in 2023 into the second half of 2024, so there's a little bit of lag between order to revenue conversion, and so the renewables improvement will be more back-end loaded. The first quarter for renewables will look a lot like the fourth quarter for renewables, so think about, you know, roughly in the same zone.

Andrew Kaplowitz: I would assume you get through most of your product reliability issues.

Price cost has been a bigger driver than you would've thought.

Speaker Change: Andy you Bad I mean, if we go back to our original guide in 'twenty four going back to March I mean, we're largely in line with the expectations there, but if we take a step back gas.

Rahul Ghai: And for power, you know, typical seasonality with low single-digit growth and some margin expansion year-over-year in the first quarter. But just one other point I want to make about the first quarter is that given that both Vornova and Aerospace are fully staffed up to become standalone public companies, and we are operating with a very, very small corporate staff. And the historic corporate expense will now be fully absorbed by the two businesses.

Speaker Change: Gas power stronger than our expectations in March onshore wind and grid are both stronger and to your point, we talked today about onshore wind being high single digit margins in 'twenty, four and grid being mid single digit margins now gas has already gotten to low double digit margins and I'll continue to accrete, but offshore is tougher than where we were.

Speaker Change: In March and that's challenging a little bit of that strength in our three largest businesses with gas grid in onshore representing about 80% of our revenue today.

Rahul Ghai: And the corporate expense in the first quarter will be effectively zero, so the majority of that expense is going to Aerospace and the balance to Vornova. But the way to think about first quarter margins for both companies is just as we think through after the absorption of incremental costs and just given in line with the reported margin guidance that we provided for full year. So that's the way to think about first quarter margin. Thank you. Our next question will come from the line of Seth Seifman with JPMorgan. Hey, thanks very much and good morning.

Speaker Change: <unk> also taken into account that tough offshore backlog, we've got two more years to execute through that so when you think about our three largest businesses continuing to be stronger than where we were while we really reduce our offshore backlog from 6 billion to approximately $4 billion in approximately two years to go with.

Speaker Change: See a clear pathway in 'twenty four to accrete margin, but also then to continue to accrete our margin beyond as we liquidate the rest of the top economics with offshore and 25.

Seth Seifman: Good morning, Seth. I don't want to kind of, you know? You've just given us the 2024 guidance. So I apologize for jumping ahead here, but when we think about the margin cadence in aerospace, you know, apples to apples kind of flattish as we go from 23 to 24. When you think about going to kind of that 20% that you talked about, for 25, you know, how do we think about the key drivers? As we, you know, bridge that? Yeah, sure, Seth.

Then finally oxygen to really share with you some of our smaller businesses. We don't talk about as much but you heard Maria who will mentioned earlier. The fact that our digital business returned to profitability and we're really excited about some of those areas like grid software that will share more with you when we get to March sex. So those really are the key dynamics of 23 to 24 in <unk>.

Speaker Change: And looking a little bit further out than even that.

Speaker Change: We have time for one last question.

Speaker Change: Okay.

Speaker Change: This question will come from the line of Scott <unk> with Deutsche Bank.

Seth Seifman: So, listen, let's start with a really strong 23, right? A billion and three of profit growth, 90 basis points of margin expansion, and better than what we said back in March, when we were expecting five and a half billion dollars of profit, you know, flat margins year over year. So, you know, 2023 is shaping up a lot better than what we initially expected, you know, back in March. Now, as you look forward to 24, I know you kind of skipped over that here.

Scott: Hey, good morning.

Hey, Scott Good morning, Scott.

We're holding you touched on it a bit in your answer to SaaS question, but can you give a bit more detail on the flat margins implied for <unk> Aerospace and <unk> 24, and then for Larry I was hoping you can give an update on your capital allocation priorities for 'twenty for coding how share repurchases fit in relative to debt pay down. Thank you.

Speaker Change: Yeah sure Scott So as we look as we look forward to 2024 I think it is going to be another strong year right. We've guided to 600.

Rahul Ghai: But, you know, double-digit profit growth in 2024, you know, with the OE ramp and 9S introduction kind of pressuring the margin rate. But it is exactly the step that we had thought in our minds about how 2024 would look when we were sitting back in March. Right.

Speaker Change: Six six to seven seven.

Speaker Change: $7 $1 billion of profit on a current.

Speaker Change: Basis.

Speaker Change: And then six months to $6 billion on a standalone basis. This is after including <unk> other public company expenses.

Rahul Ghai: And we had said that 24 would be a step along the way to 25. Now, as we get to 25, the biggest driver of profit growth between 24 and 25 will be the benefit from top line improvement. And that that is in line with what we've previously said, you know, pricing that offsets inflation and productivity. But mix will continue to be an issue in a leap or volume ramp, and leap services ramp.

Speaker Change: Including $100 million to support the wind down of <unk> corporate office, which will now.

Speaker Change: B with us kind of through second quarter. So this implies about a $750 million of profit profit growth low double digit at the mid point of that growth.

On margins, we do expect that those margins to be flat about two points of margin pressure that we are expecting a more.

Speaker Change: More than half a point of that is coming from leap OE ramp introduction of Nymex engines, and the strong leap services growth and as I said to set earlier, even though leap services is turning profitable just as we would've expected it is still negatively impacting the margins.

Rahul Ghai: And even though leap services becomes profitable in 24, it's still a margin headwind, and then 9x volume ramps up in 25 as well. So if you think about 25 recall, we'd said, you know, seven and a half, seven point six to eight billion dollars of profit on the current reporting, which translates to roughly about 20 percent margins and layering in about half a billion dollars of standalone public company expenses. Each cost, all the other things we are thinking seven point one to seven point six billion dollars of profit for 2025, which is in line with what we said, you know, back in March, just adjusted for the incremental. And we'll come back to that and talk more in March. Thank you. Our next question will come from the line of Andrew Kaplowitz with City. Good morning, everyone. Hey Andy,

Speaker Change: And the rest of that two point headwind is coming from incremental R&D to support improvement further improvement in leap durability introduction of Nymex and then develop the next generation of products for the future of flight.

This margin pressure is completely offset with benefit from volume productivity. The strong services growth that we're expecting so overall.

Speaker Change: It's a step that it is in line with our expectations that we had laid out for for the medium term outlook in March of 'twenty three.

Speaker Change: Okay.

Speaker Change: I don't know if you ask that relative to my GE roll or my aerospace, we're all I suspect the latter, but just with the GE hat on for a moment. So really no change at this point, we really want to make sure. We see through the spin is I think both Rahul and Scott talked at the outset, feeling very good about renewables prosper.

Andrew Kaplowitz: Andy, good morning. Scott, maybe in terms of your 2024 margin expectations for Vernova, could you give us a little more color on the components? I think you mentioned Onshore can reach high single-digit margins with the second half ramp up, which would, I think, be meaningfully better performance than your initial expectations you set for the business at 24 last year. But does that assume you get through most of your product reliability issues? And has price versus cost just been a bigger driver than you would have thought? Andy, you bet.

Speaker Change: <unk> here to be investment grade.

Speaker Change: Confident in that outlook and we want to see that through setup. Both businesses. We will in early March in New York share more at each of the Investor days as to how we're thinking about the capital structure, but the capital allocation strategies for both businesses I think in aerospace you should assume that we're going to have a compelling dividend.

Scott Strazik: I mean, if we go back to our original guide in 24, going back to March, I mean, we're largely in line with the expectations there. But if we take a step back, gas power is stronger than our expectations in March, while onshore wind and the grid are both stronger.

Speaker Change: <unk>.

Speaker Change: Buybacks are going to be an important part of that overall effort beyond just covering dilution and we will certainly look to do meaningful.

Scott Strazik: And to your point, we talked today about onshore wind being high single-digit margins in 24 and grid being mid single-digit margins. Now, gas has already gotten to low double-digit margins and will continue to accrete. But offshore is tougher than where we were in March.

Speaker Change: Value accretive M&A.

Speaker Change: Mix the timing those details.

Speaker Change: To come I really want the GE Aerospace board to.

To have more time with those important questions, but we're looking forward to moving beyond deleveraging playing more offense at aerospace and I think while Scotts got a different hand to play there are going to look to continue to certainly invest inorganically and the opportunities that.

Scott Strazik: And that's challenging a little bit of that strength in our three largest businesses, with gas, grid, and onshore representing about 80 percent of our revenue today. But also taking into account that tough offshore backlog, we've got two more years to execute on that. So when you think about our three largest businesses continuing to be stronger than where we were, while we really reduce our offshore backlog from six billion to approximately four billion and approximately two years to go, we see a clear pathway in 24 to accrete margin, but also then to continue to accrete a margin beyond as we liquidate the rest of the tough economics with offshore in 25 and then find the oxygen to really share with you some of our smaller businesses.

Speaker Change: They have around the energy transition.

Speaker Change: Whereas before we wrap I want to remind folks that Jay Aerospace will report Ges first quarter results in late April with GE for Nova holding a separate call as a result, like we did with GE healthcare will focus our comments in late April on aerospace, leaving GE ever Nova commentary Scott.

Speaker Change: <unk> and his team Larry any final comments.

Larry Culp: Steve Thanks, just to close the call again the teams delivered in 2023, both aerospace and <unk>, we're really looking forward to what's ahead.

Scott Strazik: We don't talk about them as much, but you heard Rahul mention earlier the fact that our digital business returned to profitability. And we're really excited about some of those areas, like grid software, that we'll share more with you when we get to March 6th. So those really are the key dynamics of 23 to 24, and looking a little bit further out than even that. Liz, we have time for one last question. This question will come from the line of Scott Doishley with Deutsche Bank. Hey, good morning.

Speaker Change: We're both companies as independent entities.

Steve: Before that day in early April we hope to see many of you at the Investor days in March. We appreciate your time today your investment and support of GE.

Steve: Yeah.

Speaker Change: Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Operator: Good morning, Scott. Rahul, you touched on it a bit in your answer to Seth's question, but can you give a bit more detail on the flat margins implied for GE Aerospace in 24? And then, for Larry, I was hoping you could give an update on your capital allocation priorities for 24, including how share purchases fit in relative to debt paydown. Thank you.

Rahul Ghai: So, you know, as you look forward to 2024, I think it's going to be another strong year, right? We've got it to six and a half, 6.6 to 7.1 billion dollars of profit on a current basis. And then six to six and a half billion dollars on a standalone basis.

Rahul Ghai: This is after including, you know, EH&S, other public company expenses, including what $100 million to, you know, support the winding down of GE's corporate office, which will now be with us for kind of two second quarter. So this implies about 750 million dollars of profit, profit growth, low double-digit at the midpoint of that growth. Margins, we do expect that those margins to be flat, about two points of margin pressure that we are expecting. However, more than half a point of that is coming from LEAP, the OE ramp, the introduction of 9x engines, and the strong LEAP services growth. And as I said, you know, to Seth earlier, even though LEAP services is turning profitable, just as we would have expected, it is still negatively impacting the margins. And the rest of that two point headwind is coming from incremental R&D to support improvement, further improvement in LEAP durability, introduction of 9x, and then develop the next generation of products for the future of flight. This margin pressure is completely offset by benefits from volume, productivity, and the strong services growth that we're expecting.

Rahul Ghai: So overall, again, it's a step that is in line with our expectations that we had laid out for the medium-term outlook in March. Scott, I don't know if you asked that relative to my GE role or my aerospace role. I suspect the latter, but just with the GE hat on for a moment, you know, really no change at this point. We really want to make sure we see through the spin, as I think both Rahul and Scott talked at the outset, feeling very good about Renova's prospects here to be investment grade.

Larry Culp: Confident in that outlook, and we want to see that truce set up both businesses. We will, in early March, in New York, share more at each of the investor days as to how we're thinking about the. I think at Aerospace, you should assume that we're going to have a compelling dividend, that buybacks are going to be an important part of that overall effort beyond just covering dilution, and we'll certainly look to do meaningful, value-accretive M&A. The mix, the timing, those details I really want the GE Aerospace Board to have more time to discuss those important questions. But we're looking forward to moving beyond leveraging and playing more offense at aerospace. And I think while Scott's got a different hand to play, they're gonna look to continue to invest inorganically in the opportunities that they have around the energy transition.

Steven Winoker: Liz, before we wrap up, I want to remind folks that GE Aerospace will report its first quarter results in late April, with GE Vernova holding a separate call. As a result, like we did with GE Healthcare, we'll focus our comments in late April on GE Aerospace, leaving GE Vernova commentary to Scott and his team. Larry, any final comments? Steve, thanks. Just to close the call, again, the team delivered in 2023, both Aerospace and Vernova. We're really looking forward to what's ahead, were both companies as independent entities. Before that day in early April, we hope to see many of you at Investor Days in March.

Larry Culp: We appreciate your time today, your investment, and your support of GE. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.