Helmut Zodl
Vice President & Chief Financial Officer at General Electric
Thanks, Pete. Turning to our financial performance. For the first quarter of 2023 revenues of$4.7 billion increased 8% year-over-year and grew double-digit at 12% organically. This was primarily driven by strong product growth across all segments. Adjusted EBIT margin improved year-over-year to 14.1%, growing 150 basis points on a standalone basis versus last year. Margin was up to the higher volume, which was partially offset by the mix of products versus services.
In addition, we were able to mostly offset inflation and planned investments through our pricing and productivity actions. But we are pleased with our margin performance during the quarter, there is room for more improvement. We have lean action plans in place to continue to expand margins further through volume, price and productivity initiatives across the company.
Adjusted EPS was $0.85, up 35% on a standalone basis, driven by our strong revenue growth as well as margin expansion efforts. Free cash flow of $325 million was down $46 million as expected based on the spin related items which I will discuss shortly. Total company book-to-bill, which as a reminder is a calculation of total orders divided by total revenue was 1.01 times. This was driven by strong revenue growth across all our segments, led by recurring PDx sales. We continue to see customers invest in solutions to drive better clinical insights and productivity across the US, China and Europe.
Moving to revenue performance. We grew 12% organically year-over-year. Foreign exchange was a headwind of 4% to revenue growth during the quarter. On a reported basis, product revenue increased 12% year-over-year, driven by PDx sales with strong demand from increased procedures. Services revenue grew 1% versus the first quarter of 2022. Our strong product growth will translate to services growth as we go forward. From a regional perspective, we are pleased to see all regions growing, with China up double digits.
We are pleased with our margin performance this quarter as we continue to focus on improvement in delivery, price and productivity. We delivered a positive sales price for four consecutive quarters with growth in all segments. These efforts combined with our productivity initiatives enabled us to generate year-over-year and sequential gross margin expansion. We also continue to see supply constraints easing with spot buys and logistics costs down sequentially and year-over-year.
The actions we've taken to broaden our supply base, coupled with the continued application of lean principles has helped us to requalify almost 8,000 parts since COVID began. This has led to the lowest number of red flag parts since the first quarter of 2021, enabling us to deliver for patients and customers, which is our top priority.
As we look at our platform initiatives, we have made good progress in CT with increased standardization of components across the portfolio. We've identified opportunities for simplification in sourcing, purchasing and manufacturing. We are in the process of implementing similar changes in MR. Following our spin-off from GE, we are on track with planned exit of TSAs, with approximately 40 exited to date. We remain focused on reducing G&A costs, for example, with real estate expense and IT costs. Moving forward, we see opportunities to expand margins through additional actions. For instance, in logistics with greater shift from air to ocean and create a platform standardization. Before I get into the segment commentary, let me remind you that in 2023 approximately $200 million of recurring standalone costs will be impacting our segment EBIT margin rates. These costs are generally allocated based on revenue and did not exist in 2022.
Turning to imaging. We saw strong organic revenue growth, up 12% year-over-year. This was led by MR as well as molecular imaging entity, driven by supply-chain fulfillment improvements and growth in revenue from NPIs. We expect continued high growth throughout the first half of 2023 that will normalize throughout the rest of the year. Imaging, the margin is expected to remain healthy, supporting topline growth. Segment EBIT margin of 7.7% declined 120 basis points year-over-year as planned investments and mix outweighs at higher-volume. Productivity and pricing initiatives more than offset inflation. We expect sequential margin rate improvement as we move throughout the year.
Through lean efforts in Imaging, we initiated a rolling 13-week schedule to maximize factory output and customer satisfaction. This will improve fulfillment as well as working capital. Overall, we expect steady growth in demand in 2023 with a number of drivers, including a continuous backlog of procedures, expanding indications for high-end diagnostic exams and new therapies requiring precision imaging.
Moving to ultrasound. We saw strong organic revenue growth, up 10% year-over-year, led by cardiovascular, general imaging and women's health products. This was driven by NPIs and improving supply chain fulfillment with fewer electronic component shortages. While we expect growth to normalize as we move throughout the rest of the year, we continue to see strong customer demand in both hospital and other care settings. Segment EBIT margin of 24.1% was up 50 basis points year-over-year. We realized benefits from productivity and pricing initiatives, along with volume growth. This enabled us to offset headwinds from inflation and planned investments, including the Caption Health acquisition. We expect the EBIT margin rate will remain generally in line with the prior year. We continue to focus on patient and customer-centric innovation, especially digital and artificial intelligence solutions.
Moving to patient care solutions. Revenue was up 11% organically, driven by volume and price. This resulted from greater backlog fulfillment as supply challenges eased, particularly for electronic components. We benefited from tools side production for highly constrained products. Revenue was also driven by the launch of key MPI's contributing to increased volume, such as CARESCAPE Canvas and the P100 series of acute cure molecules PCS [Indecipherable] remained strong, which will contribute to revenue growth into the future. We expect quarterly revenue dollars to remain relatively consistent through 2023.
PCS margins of 14% increased 490 basis points compared to the first quarter of last year, driven by productivity, price and volumes. These are partially offset by inflation as well as planned investments. Productivity in the first quarter was driven by favorable logistics and lower spot buys. We expect EBIT margin rates to normalize throughout 2023.
Moving to pharmaceutical diagnostics. We saw strong organic revenue growth, up 19% year-over-year, driven by price, increased procedures and the stabilization of supply. We expect continued revenue growth for the year based on the favorable comparisons in the second quarter and the fourth quarter. Segment EBIT margin of 27.8% declined 70 basis points year-over-year, mainly driven by raw material inflation and planned investments. This was partially offset by price and volume and productivity, which also drove 480 basis points of sequential improvement. We continue to expect this segment to deliver strong EBIT margin performance. As we look ahead, we are investing in capacity to meet future customer demand.
Next, I'll walk through our cash performance. During the quarter, we generated $325 million of free cash flow. This was down $46 million year-over-year, impacted by $85 million of incremental postretirement benefits payments and $42 million of interest payments, which were not in our 2022 actuals. Without these new postretirement related items, year-over-year free cash flow would have been positive for the quarter.
Working capital improved year-over-year, primarily driven by collections and inventory efficiency. We have leveraged lean to implement a daily inventory management system. In the first quarter, we achieved solid results from controlling and better predicting inventory inputs and outputs with shorter lead times and improved revenue conversion cycle. As a result, we saw faster inventory churns and over 100 [Phonetic] million of improvement in intra quarter inventory.
Strong cash flow generation will allow us to pay down debt and investing organically and inorganically in our business. We are pleased to initiate a dividend with opportunity for growth over time. Our dividend philosophy is driven by prudent capital planning, develop a strong revenue and earnings growth potential and a robust free cash flow profile. Our balance sheet remains strong with significant financial flexibility.
Let's move now to our outlook. For the full year of 2023, we are reaffirming our guidance. We continue to expect year-over-year organic revenue growth in the range of 5% to 7% with strong organic growth in the first half of the year versus the second half. In line with seasonality, we expect revenue dollars to grow first half to second half. Our current view is a foreign exchange headwind of less than 1 percentage points for the year.
We continue to expect full year adjusted EBIT margins to be in the range of 15% to 15.5%. This would represent an expansion of 50 to 100 basis points over a 2022 standalone adjusted EBIT margin of 14.5%. We also expect to see an increase in adjusted EBIT margin rate from the first half of the year to the second half, driven by higher volume and productivity benefits.
We expect R&D investment to grow at the higher end of the 2023 organic revenue growth range. Our guidance for adjusted effective tax rate remains in the range of 23% to 25%. Our full year 2023 adjusted EPS is unchanged in the range of $3.60 to $3.75, representing 7% to 11% growth. This compares to 2022 standalone adjusted EPS of $3.38.
We continue to expect free cash flow conversion to be 85% or more for the full year. Our cash flow outlooks assume that the legislation requiring R&D capitalization for tax purposes is repealed or deferred beyond 2023. The free cash flow impact of this legislation would represent up to 10 points of free cash flow conversion for the year. For 2023, we expect capital expenditures to be in the range of $350 million to $400 million.
I'd like to add that our second and fourth quarter cash flow will be impacted by interest payments as roughly 75% of our interest expense related to our long-term debt is paid out in these quarters. Given this interest payment timing, we expect lower cash generation in the second quarter versus the first quarter. Cash flow will be substantially higher in the second half of the year relative to the first half due to typical cash seasonality and annual timing of supplier and compensation payments.
In closing, it has been a strong start to the year and we are confident in reaffirming our guidance. Now, I'll hand back to Pete.
