Patient might have had external beam radiation. They get radiation from the drug itself. You need to look at both of those. MIM Software is really the best in the world. They are going to be part of us post close. That’s going to bring a missing link. It’s also a capability that really nobody else in the industry has when you couple that with those products. And then on the tracer side, we are the only company who has the equipment and manufacturers of tracers. Others distribute, but there is a big difference between just shipping it around and making it. And so we have the logistics capability. We also have the manufacturing capability. And we also make the cyclotrons, which, again, are particle accelerators that actually help create many of these.
So, there is multiple opportunities here either working with some of the pharmaceutical companies directly, playing a leadership role with customers on how you deliver these doses. And I just remind everybody, unlike other drugs where you can just deliver in any center, these products have a half-life, which means the moment you make them, they are degrading. And so how you actually take an order and get it to a patient that day for the right potency is one of the things we have expertise in. So, again, as these grow and what we are excited about is the impact they are going to have on patients, effectiveness and low side effects. We have got most of the capabilities to play different roles throughout the growth of this and that’s what we are planning to do.
Anthony Petrone: Helpful. And Jay, real quick on capital allocation, uses of cash for this year. Is M&A more of the priority? You did $1 billion debt pay down and then just free cash flow conversion, that would be helpful. Thanks.
Jay Saccaro: Sure. Thanks for the question. I think 2023 was really a great case study in terms of how we think about capital allocation. It starts, to your point, with free cash flow. We were able to deliver 95% conversion, which we were very proud of. We did a lot of work on the balance sheet on working capital balances and collections on inventory turns, which I commented on in my prepared remarks. And the result was we exceeded our cash flow expectations by a good margin. And we set up 2024 with another solid 90% conversion rate and free cash flow growth. And so then the question is, how do you deploy that, well, in 2023, the first thing we like to do is reinvest in the business to accelerate growth. And so what we were able to do is drive EBIT expansion of 60 basis points despite 20%-ish growth in R&D.
And we also significantly expanded CapEx investments. So, point one, reinvest in the business. The second thing we like to do is strategic M&A. Over the course of 2023, we announced three deals, IMACTIS, Caption and MIM. All of them have the profile of deals that we like, strategically relevant, accretive to our business, really solid ROIs over time. And so all of them hit the profile and made us a bit more competitive in the marketplace with more offerings for our customers. Also in 2023, we made a number of minority investments that allow us to learn about new areas in a sort of experimental manner. So, we don’t talk too much about all of those investments, but we make quite a few in 2023. And over time, we expect these to yield dividends.
We also like to focus on the balance sheet, so we paid down $1 billion in debt in 2023, significantly enhancing the financial flexibility going forward. And finally, we paid a dividend. So, I guess the way I think about it, everything was on display in 2023 in terms of how we think about a disciplined capital allocation strategy. And as we move forward, I would expect to see more of the same. All of that, though, as I have said at the beginning of this was – is unlocked by cash flow generation, which is a real area of focus for us.
Anthony Petrone: Thank you very much.
Jay Saccaro: Thanks Anthony.
Operator: Thank you. We do have time for one final question, and that will come from the line of Patrick Wood with Morgan Stanley. Your line is open.
Peter Arduini: Hi Patrick. Thank you.
Patrick Wood: Hey. I will keep it to one, just given the timing. I will make it a short one. Thank you for the detail on the pricing side. Just kind of curious like how that’s flowing through on the service book. Obviously, you get the 1-year warranty, but where you are re-signing service agreements, are you seeing a similar kind of price uplift to what you are getting on the hardware side so that, that traditional ratio between the two is remaining relatively constant? Just curious what you are seeing there. Thanks.
Peter Arduini: Patrick, we have benefited from multiyear contracts, been able to actually have escalators on not only just on upfront, but then actually have escalators through the years. And then also, we have parts, significant large parts business as well as time and material. And then the other aspect of it is different services that we offer. It might be asset tracking tools, things of that nature. But I would say we have had the good fortune across the board to be able to get some price across all those different vehicles in service. I would say the other thing, and it’s kind of a given point, but it’s important to note that when services are really one of our highest margin offerings that we have. When you are gaining share, as I mentioned earlier on the call, ultimately, to your point, when you get to month 13, that becomes a service contract.
And that higher mix of service over time also is an important driver of our future business. Thanks for that question.
Patrick Wood: Thank you.
Operator: Thank you. And Mr. Arduini, I will turn the call back over to you for any closing remarks.
Peter Arduini: Thank you. Thank you. Look, I would just like to close by saying thank you so much to our colleagues here at GE HealthCare. It’s been a great year. There has been a lot of great work and tireless efforts to go into the first year as a public company. But importantly, with all of that, the focus on our patients and customers to deliver safe, high-quality products that make a difference. It’s at the core of our lean mindset is customers first. We delivered on all of our commitments that we set to deliver in 2023 and as Jay and as we spoke about, really sets us up well for 2024. Investments we made in R&D are coming out. We have a full pipeline of new products and new clinical indications. With that, I would just like to say thank you for joining the call today. And we look forward to connecting with you at one of our upcoming conferences. Thank you so much.
Operator: This concludes today’s program. Thank you all for participating. You may now disconnect.
