We grant stock options, restricted stock units (“RSU”), and performance share units (“PSU”) to employees under the 2023 Long-Term Incentive Plan (“LTIP”). The Talent, Culture, and Compensation Committee of the Board of Directors approves grants under the LTIP. Under the LTIP, we are authorized to issue up to approximately 41 million shares. We record compensation expense for awards expected to vest over the vesting period. We estimate forfeitures based on experience and adjust expense to reflect actual forfeitures. When options are exercised, RSUs vest, and PSUs are earned, we issue shares from authorized unissued common stock.

Stock options provide employees the opportunity to purchase GE HealthCare shares in the future at the market price of our stock on the date the award is granted (the strike price). The options become exercisable over the vesting period, typically becoming fully vested in three to three and a half years, and expire ten years from the grant date if not exercised. We value stock options using a Black-Scholes option pricing model.

RSUs provide an employee the right to shares of GE HealthCare stock when the restrictions lapse over the vesting period of three to three and a half years. Upon vesting, each RSU is converted into one share of GE HealthCare common stock. We value RSUs using the market price on the grant date.

PSUs provide an employee with the right to receive shares of GE HealthCare stock based upon achievement of certain performance metrics. PSUs are subject to an employee service period of three to three and a half years. PSUs may include a relative total shareholder return (“TSR”) modifier to determine the number of shares earned at the end of the performance period. We engage third-party valuation specialists to assist with the fair value estimate of the PSUs that include the TSR modifier using a Monte Carlo simulation to model the probability of possible outcomes.

The following tables provide the weighted average fair value of options, RSUs, and PSUs granted to employees during the year ended December 31, 2023, and the related weighted average stock option valuation assumptions used in the Black-Scholes model.


Key Assumptions in the Black-Scholes Valuation for Stock Options
	December 31, 2023
Risk-free rate	3.6	%
Dividend yield	0.01	%
Expected volatility	26.2	%
Expected term (in years)	6.2

For new awards granted in 2023, the expected volatility was derived from a peer group’s blended historical and implied volatility as GE HealthCare does not have sufficient historical volatility based on the expected term of the underlying options. The expected term of the stock options was determined using the simplified method. The risk-free interest rate was determined using the implied yield currently available for zero-coupon U.S. government issues with a remaining term approximating the expected life of the options. The dividend yield assumption is based on the expected annualized dividend payment at the date of grant.


Stock Option Activity
	Shares (in thousands)	Weighted average exercise price (in dollars)		Weighted average contractual term (in years)	Intrinsic value (in millions)
Outstanding as of January 4, 2023(1)	3,738	$	90
Granted	2,155	72
Exercised/Vested	(561)	60
Forfeited	(159)	71
Expired	(210)	127
Outstanding as of December 31, 2023	4,963	$	84	6.1	$	35
Exercisable as of December 31, 2023	2,810	$	94	3.8	$	23
Expected to vest	1,755	$	72	9.0	$	10

(1) Our common stock began “regular way” trading on The Nasdaq Stock Market LLC (“Nasdaq”) on January 4, 2023. The shares outstanding as of January 4, 2023 pertain to GE equity-based awards issued by GE in prior periods to employees of the Company that were converted to GE HealthCare equity-based awards as part of the Spin-Off.


RSU and PSU Activity
	RSUs						PSUs
	Shares (in thousands)	Weighted average grant date fair value (in dollars)		Weighted average vesting period (in years)	Intrinsic value (in millions)		Shares (in thousands)	Weighted average grant date fair value (in dollars)		Weighted average vesting period (in years)	Intrinsic value (in millions)
Outstanding as of January 4, 2023(1)	3,551	$	58				1,365	$	68
Granted	1,904	73					539	85
Exercised/Vested	(1,317)	56					—	—
Forfeited	(409)	60					(483)	72
Expired	—	—					(175)	66
Outstanding as of December 31, 2023	3,729	$	67	1.5	$	290	1,246	$	85	1.4	$	96
Expected to vest	3,333	$	60	1.5	$	258	N/A	N/A		N/A	N/A

(1) Our common stock began “regular way” trading on Nasdaq on January 4, 2023. The shares outstanding as of January 4, 2023 pertain to GE equity-based awards issued by GE in prior periods to employees of the Company that were converted to GE HealthCare equity-based awards as part of the Spin-Off.

Share-based compensation expense is recognized within Cost of products, Cost of services, SG&A, or R&D, as appropriate, in the Consolidated Statement of Income.


Share-based Compensation Expense	For the year ended
	December 31, 2023



Share-based compensation expense (pre-tax)	$	114
Income tax benefits	(23)
Share-based compensation expense (after-tax)	$	91


Other Share-based Compensation Data

Unrecognized compensation expense as of December 31, 2023(1)	$	149
Cash received from stock options exercised in the year ended December 31, 2023	34
Intrinsic value of stock options exercised and RSU/PSUs vested in the year ended December 31, 2023	106