UNITED STATESSECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 FORM 10-Q QUARTERLY REPORT PUR.
2024-10-28
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30,2024OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _Commission file number 001-41966GE Vernova Inc.(Exact name of registrant as specified in its charter)Delaware92-2646542(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)58 Charles Street,Cambridge,MA02141(Address of principal executive offices)(Zip Code)(617)674-7555(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon stock,par value$0.01 per shareGEVNew York Stock ExchangeIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and emerging growth company in Rule 12b-2 of the Exchange Act.(Check one):Large accelerated filerAccelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No There were 274,802,034 shares of common stock with a par value of$0.01 per share outstanding at July 17,2024.TABLE OF CONTENTSPageForward-Looking Statements3About GE Vernova4Managements Discussion and Analysis of Financial Condition and Results of Operations(MD&A)4Transition to Stand-Alone Company4Disposition and Acquisition Activity4Arbitration Refund5Vineyard Wind Offshore Wind Farm5Results of Operations5Segment Operations7Other Information10Capital Resources and Liquidity11Recently Issued Accounting Pronouncements13Critical Accounting Estimates13Non-GAAP Financial Measures13Controls and Procedures16Legal Proceedings16Financial Statements and Notes17Consolidated and Combined Statement of Income(Loss)17Consolidated and Combined Statement of Financial Position18Consolidated and Combined Statement of Cash Flows19Consolidated and Combined Statement of Comprehensive Income(Loss)20Consolidated and Combined Statement of Changes in Equity21Note 1Organization and Basis of Presentation23Note 2Summary of Significant Accounting Policies24Note 3Dispositions and Businesses Held for Sale24Note 4Current and Long-Term Receivables24Note 5Inventories,Including Deferred Inventory Costs25Note 6Property,Plant,and Equipment25Note 7Leases25Note 8Acquisitions,Goodwill,and Other Intangible Assets25Note 9Contract and Other Deferred Assets&Contract Liabilities and Deferred Income25Note 10Current and All Other Assets26Note 11Equity Method Investments27Note 12Accounts Payable and Equipment Project Payables27Note 13Postretirement Benefit Plans27Note 14Current and All Other Liabilities28Note 15Income Taxes28Note 16Accumulated Other Comprehensive Income(Loss)(AOCI)29Note 17Share-Based Compensation29Note 18Earnings Per Share Information30Note 19Other Income(Expense)Net31Note 20Financial Instruments31Note 21Variable Interest Entities33Note 22Commitments,Guarantees,Product Warranties,and Other Loss Contingencies33Note 23Restructuring Charges and Separation Costs35Note 24Related Parties36Note 25Segment Information37Exhibits39Form 10-Q Cross Reference Index40Signatures41FORWARD-LOOKING STATEMENTS.The public communications and SEC filings of GE Vernova Inc.(the Company,GE Vernova,our,we or us)may contain statements related to future,not past,events.These forward-looking statements often address our current expected future business and financial performance and condition based on certain assumptions and include any statement that does not directly relate to any historical or current fact.Forward-looking statements often contain words such as expect,anticipate,intend,plan,believe,seek,see,will,would,estimate,forecast,target,preliminary,range,and similar expressions.Forward-looking statements by their nature address matters that are,to different degrees,uncertain,such as the benefits we expect from our lean operating model,including cost and operational efficiencies and improvements;our expectations regarding the energy transition;the demand for our products and services,their role in the energy transition and our ability to meet those demands;our expectations of future increased business,revenues and operating results;our ability to innovate and anticipate and address customer demands;our underwriting and risk management;our ability to manage inflationary pressures;benefits we expect to receive from the Inflation Reduction Act of 2022(IRA);our acquisitions and dispositions;our investments in new product development,joint ventures and other collaborations with third parties;our restructuring program to reduce operational costs;our ability to novate or assign credit support provided by General Electric Company;litigation,arbitration and governmental proceedings involving us;the sufficiency and expected uses of our cash,liquidity,and financing arrangements;and our credit ratings.Any forward-looking statement in this report speaks only as of the date on which it is made.Although we believe that the forward-looking statements contained in this report are based on reasonable assumptions,you should be aware that many factors could affect our actual financial results,cash flows,or results of operations and could cause actual results to differ materially from those in such forward-looking statements,including but not limited to:Changes in macroeconomic and market conditions and market volatility,including risk of recession,inflation,supply chain constraints or disruptions,interest rates,the value of securities and other financial assets,oil,natural gas and other commodity prices and exchange rates,and the impact of such changes and volatility on the Companys business operations,financial results,and financial position;Global economic trends,competition,and geopolitical risks,including impacts from the ongoing geopolitical conflicts(such as the Russia-Ukraine conflict and conflict in the Middle East),demand or supply shocks from events such as a major terrorist attack,natural disasters,actual or threatened public health pandemics or other emergencies or an escalation of sanctions,tariffs or other trade tensions,and related impacts on our supply chains and strategies;Actual or perceived quality issues or product or safety failures related to our complex and specialized products,solutions,and services,the time required to address them,costs associated with related project delays,repairs or replacements,and the impact of any contractual claims for damages or other legal claims asserted in connection therewith,some of which may be for significant amounts,on our financial results,competitive position or reputation;Market developments or customer actions that may affect our ability to achieve our anticipated operational cost savings and implement initiatives to control or reduce operating costs;Significant disruptions in the Companys supply chain,including the high cost or unavailability of raw materials,components,and products essential to our business,and significant disruptions to our manufacturing and production facilities and distribution networks;Our ability to attract and retain highly qualified personnel;Our ability to obtain,maintain,protect,and effectively enforce our intellectual property rights;Our capital allocation plans,including the timing and amount of any dividends,share repurchases,acquisitions,organic investments,and other priorities;Downgrades of our credit ratings or ratings outlooks,or changes in rating application or methodology,and the related impact on the Companys funding profile,costs,liquidity,and competitive position;Shifts in market and other dynamics related to electrification,decarbonization,or sustainability;The amount and timing of our cash flows and earnings,which may be impacted by macroeconomic,customer,supplier,competitive,contractual,and other dynamics and conditions;Actions by our joint venture arrangements,consortiums,and similar collaborations with third parties for certain projects that result in additional costs and obligations;Any reductions or modifications to,or the elimination of,governmental incentives or policies that support renewable energy and energy transition innovation and technology;Our ability to develop and introduce new technologies to meet market demand and evolving customer needs,which depends on many factors,including the ability to obtain any required permits,licenses,and registrations;Changes in law,regulation,or policy that may affect our businesses,such as trade policy and tariffs,regulation and incentives related to sustainability,climate change,environmental,health and safety laws,and tax law changes;Our ability and challenges to manage the transition as a newly stand-alone public company or achieve some or all of the benefits we expect to achieve from such transition;The risk of an active trading market not being sustained for our securities or significant volatility in our stock price;andThe impact related to information technology,cybersecurity,or data security breaches at GE Vernova or third parties.These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements,and these and other factors are more fully discussed elsewhere in this Quarterly Report on Form 10-Q and in the“Risk Factors”and Managements Discussion and Analysis of Financial Condition and Results of Operations sections included in our information statement dated March 8,2024,which was attached as Exhibit 99.1 to a Current Report on Form 8-K furnished with the Securities and Exchange Commission(SEC)on March 8,2024(the Information Statement),as may be updated from time to time in our SEC filings and as posted on our website at may be other factors not presently known to us or which we currently consider to be immaterial that could cause our actual results to differ materially from those projected in any forward-looking statement that we make.We do not undertake any obligation to update or revise our forward-looking statements except as may be required by law or regulation.2024 2Q FORM 10-Q 3ABOUT GE VERNOVA.GE Vernova Inc.is a global leader in the electric power industry,with products and services that generate,transfer,orchestrate,convert,and store electricity.We design,manufacture,deliver,and service technologies to create a more reliable and sustainable electric power system,enabling electrification and decarbonization,underpinning the progress and prosperity of the communities we serve.We are a purpose-built company,uniquely positioned with a scope and scale of solutions to accelerate the energy transition,while servicing and growing our installed base and strengthening our own profitability and shareholder returns.We have a strong history of innovation which is a key strength enabling us to meet our customers needs.GE Vernova innovates and invests across our broad portfolio of technologies to help our customers meet growing demand for electricity generation and reduce the carbon intensity of power grids and electricity supply,while maintaining or improving system reliability,affordability,and sustainability.Today,approximately 25%of the worlds electricity is generated using GE Vernovas installed base of technologies.We report three business segments that are aligned with the nature of equipment and services they provide,specifically Power,Wind,and Electrification.Within our segments,Power includes gas,nuclear,hydro,and steam technologies,providing a critical foundation of dispatchable,flexible,stable,and reliable power.Our Wind segment includes our wind generation technologies,inclusive of onshore and offshore wind turbines and blades.Electrification includes grid solutions,power conversion,electrification software,and solar and storage solutions technologies required for the transmission,distribution,conversion,storage,and orchestration of electricity from point of generation to point of consumption.Our corporate headquarters is located at 58 Charles Street,Cambridge,Massachusetts 02141,and our telephone number is(617)674-7555.Our website address is .Information contained on,or that can be accessed through,our website is not part of,and is not incorporated into,this Quarterly Report on Form 10-Q.Our website at contains a significant amount of information about GE Vernova,including financial and other information for investors.We encourage investors to visit this website from time to time,as information is updated,and new information is posted.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(MD&A).The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated and combined financial statements,which are prepared in conformity with U.S.generally accepted accounting principles(GAAP),and corresponding notes included elsewhere in this Quarterly Report on Form 10-Q.The following discussion and analysis provides information that management believes to be relevant to understanding the financial condition and results of operations of the Company for the three and six months ended June 30,2024 and 2023.The below discussion should be read alongside the Managements Discussion and Analysis of Financial Condition and Results of Operations and our audited combined financial statements and corresponding notes for the year ended December 31,2023,included in the Information Statement.Unless otherwise noted,tables are presented in U.S.dollars in millions,except for per-share amounts which are presented in U.S.dollars.Certain columns and rows within tables may not add due to the use of rounded numbers.Percentages presented in this report are calculated from the underlying numbers in millions.Unless otherwise noted,statements related to changes in operating results relate to the corresponding period in the prior year.In the accompanying analysis of financial information,we sometimes use information derived from consolidated and combined financial data but not presented in our financial statements prepared in accordance with GAAP.Certain of these data are considered“non-GAAP financial measures”under SEC rules.See the Non-GAAP Financial Measures section for the reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures.TRANSITION TO STAND-ALONE COMPANY Financial Presentation Under GE Ownership.We completed our separation from General Electric Company(GE),which now operates as GE Aerospace,on April 2,2024(the Spin-Off).In connection with the Spin-Off,GE distributed all of the shares of our common stock to its shareholders and we became an independent company.Historically,as a business of GE,we relied on GE to manage certain of our operations and provide certain services,the costs of which were either allocated or directly billed to us.Accordingly,our historical costs for such services may not necessarily reflect the actual expenses we would have incurred,or will incur,as an independent company and may not reflect our results of operations,financial position,and cash flows had we been a separate,stand-alone company during the historical periods presented.See Note 1 in the Notes to the consolidated and combined financial statements for further information.Production Tax Credit Investments.Our Financial Services business offers a wide range of financial solutions to customers and projects that utilize our Power and Wind products and services.These solutions historically included making minority investments in projects,often through common or preferred equity investments where we generally seek to exit as soon as practicable once a project achieves commercial operation.Many such investments are in renewable energy U.S.tax equity vehicles that generate various tax credits,including production tax credits(PTCs),which can be used to offset an equity partners tax liabilities in the U.S.and support the overall target return on investment.In connection with the Spin-Off,GE retained all renewable energy U.S.tax equity investments of$1.2 billion and any tax attributes from historical tax equity investing activity.We will manage these investments under the Framework Investment Agreement.Additionally,during the three months ended June 30,2024,in connection with GE retaining the renewable energy U.S.tax equity investments,we recognized a$0.1 billion benefit,recorded in Cost of equipment,related to deferred intercompany profit from historical equipment sales to the related investees.See Notes 11,21 and 23 in the Notes to the consolidated and combined financial statements for further information.DISPOSITION AND ACQUISITION ACTIVITY.During the second quarter of 2024,our Steam Power business completed the sale of part of its nuclear activities to Electricit de France S.A.(EDF).In connection with the disposition,we received net cash proceeds of$0.6 billion,which is subject to customary working capital and other post-closing adjustments.As a result,we recognized a pre-tax gain of$0.9 billion recorded in Other income(expense)net in our Consolidated and Combined Statement of Income(Loss).See Notes 3,15,16 and 19 in the Notes to the consolidated and combined financial statements for further information.In the second quarter of 2023,our Gas Power business acquired Nexus Controls,a business specializing in aftermarket control system upgrades and controls field services.See Note 8 in the Notes to the consolidated and combined financial statements for further information.2024 2Q FORM 10-Q 4ARBITRATION REFUND.In June 2024,we received$306 million in cash,which represented the return of cash payments we previously made relating to two partial withdrawal liability assessments issued by a multiemployer pension plan(Fund)to which we contribute,plus interest on such amounts.We challenged the assessments in arbitration,but under the Employee Retirement Income Security Act of 1974(ERISA),we were required to make monthly payments from May 2019 to September 2023 while the matter was arbitrated.In December 2023,an arbitrator ruled that we were exempt from the alleged liability,a decision that was appealed in January 2024 in a federal court.The arbitration award triggered a legal obligation for the Fund to return the payments to us with interest,which it did in June 2024.For the period,$254 million of cash,constituting the payments previously made to the Fund,was recorded in Selling,general,and administrative expenses and$52 million of cash,constituting interest on such amounts,was recorded in Interest and other financial charges net in our Consolidated and Combined Statement of Income(Loss).As this dispute is not yet resolved,we cannot predict its ultimate resolution,including whether we will retain the funds following all final appeals,whether we are entitled to additional interest,or whether the Fund may contend it is owed interest if it prevails.VINEYARD WIND OFFSHORE WIND FARM.We are the manufacturer and supplier of turbines and blades and the installation contractor for Vineyard Wind 1 offshore wind farm in the Atlantic Ocean(Vineyard Wind),at which we have installed 24 of 62 Haliade-X 220m wind turbines to date.Subsequent to the period covered by this report,a wind turbine blade event occurred at Vineyard Wind.Debris from the blade was released into the Atlantic Ocean and some has washed ashore on nearby beaches.On July 15,2024,the U.S.Bureau of Safety and Environmental Enforcement(BSEE)issued a suspension order to cease power production and the installation of new wind turbines at the project site,pending an investigation of the event.As of the date of the filing of this report,we are currently engaged in a root cause analysis of the incident.We do not have an indication as to when BSEE will modify or lift its suspension order.Under our contractual arrangement with the developer of Vineyard Wind,we may receive claims for damages,including liquidated damages for delayed completion,and other incremental or remedial costs.These amounts could be significant and adversely affect our cash collection timelines and contract profitability.We are currently unable to reasonably estimate what impact the event,any potential claims,or the related BSEE order would have on our financial position,results of operations and cash flows.RESULTS OF OPERATIONS Summary of Second Quarter 2024 Results.Remaining performance obligations(RPO)were$115.5 billion and$114.1 billion as of June 30,2024 and 2023,respectively.For the three months ended June 30,2024,total revenues were$8.2 billion,an increase of$0.1 billion for the quarter.Net income(loss)was$1.3 billion,an increase of$1.4 billion in net income for the quarter,and net income(loss)margin was 15.6%.Diluted earnings(loss)per share was$4.65 for the three months ended June 30,2024,an increase in the diluted earnings per share of$5.19 for the quarter.Cash flows from(used for)operating activities were$0.5 billion and$(1.0)billion for the six months ended June 30,2024 and 2023,respectively.For the three months ended June 30,2024,Adjusted EBITDA*was$0.5 billion,an increase of$0.3 billion.Free cash flow*was$0.2 billion and$(1.3)billion for the six months ended June 30,2024 and 2023,respectively.RPO,a measure of backlog,includes unfilled firm and unconditional customer orders for equipment and services,excluding any purchase order that provides the customer with the ability to cancel or terminate without incurring a substantive penalty.Services RPO includes the estimated life of contract sales related to long-term service agreements which remain unsatisfied at the end of the reporting period,excluding contracts that are not yet active.Services RPO also includes the estimated amount of unsatisfied performance obligations for time and material agreements,material services agreements,spare parts under purchase order,multi-year maintenance programs,and other services agreements,excluding any order that provides the customer with the ability to cancel or terminate without incurring a substantive penalty.See Note 9 in the Notes to the consolidated and combined financial statements for further information.RPOJune 30,2024December 31,2023June 30,2023Equipment$41,561$40,478$40,183 Services 73,915 75,120 73,878 Total RPO$115,476$115,598$114,062 As of June 30,2024,RPO decreased$0.1 billion from December 31,2023,primarily at Power,due to a reduction of approximately$3.9 billion related to the sale of a portion of Steam Power nuclear activities to EDF;decreases in Wind at Offshore Wind as we continue to execute on our contracts and decreases in Onshore Wind services;partially offset by Electrification,from orders outpacing revenues across all businesses.RPO increased$1.4 billion(1%)from June 30,2023 primarily at Electrification by$5.3 billion as orders outpaced revenues across all businesses;partially offset at Power due to a reduction of approximately$3.9 billion related to the sale of a portion of Steam Power nuclear activities to EDF;and at Wind due to decreases at Offshore Wind where revenues outpaced new orders as we continue to execute on our contracts,as well as the cancellation of an order in the fourth quarter of 2023 that we received in the second quarter of 2023.Three months ended June 30Six months ended June 30REVENUES2024202320242023Equipment revenues$4,194$4,388$7,811$7,877 Services revenues 4,010 3,732 7,652 7,065 Total revenues$8,204$8,119$15,463$14,941*Non-GAAP Financial Measure2024 2Q FORM 10-Q 5For the three months ended June 30,2024,total revenues increased$0.1 billion(1%).Services revenues increased in all segments,primarily at Power due to growth in Gas Power from higher outages and transactional service volume.Equipment revenues decreased primarily at Wind from Onshore Wind as fewer units were delivered in the period,partially offset at Electrification led by growth at Grid Solutions,and at Power due to Gas Power strength.Organic revenues*exclude the effects of acquisitions,dispositions,and foreign currency.Excluding these effects,organic revenues*increased$0.1 billion(2%),organic services revenues*increased$0.3 billion(9%)and organic equipment revenues*decreased$0.2 billion(4%).Organic revenues*increased at Power and Electrification,partially offset by Wind.For the six months ended June 30,2024,total revenues increased$0.5 billion(3%).Services revenues increased in all segments,primarily at Power due to growth in Gas Power from higher outages and transactional service volume.Equipment revenues decreased primarily at Wind from Onshore Wind as fewer units were delivered in the period,partially offset at Electrification led by growth at Grid Solutions,and at Power from aeroderivative engine shipments.Organic revenues*exclude the effects of acquisitions,dispositions,and foreign currency.Excluding these effects,organic revenues*increased$0.5 billion(3%),organic services revenues*increased$0.6 billion(9%)and organic equipment revenues*decreased$0.1 billion(1%).Organic revenues*increased at Electrification and Power,partially offset by Wind.Three months ended June 30Six months ended June 30EARNINGS(LOSS)2024202320242023Operating income(loss)$527$(341)$238$(811)Net income(loss)1,280 (149)1,174 (495)Net income(loss)attributable to GE Vernova 1,294 (150)1,164 (465)Adjusted EBITDA*524 203 714 18 Diluted earnings(loss)per share(a)4.65 (0.55)4.22 (1.70)(a)The computation of earnings(loss)per share for all periods through April 1,2024 was calculated using 274 million common shares that were issued upon Spin-Off and excludes Net loss(income)attributable to noncontrolling interests.For periods prior to the Spin-Off,the Company participated in various GE stock-based compensation plans.For periods prior to the Spin-Off,there were no dilutive equity instruments as there were no equity awards of GE Vernova outstanding prior to Spin-Off.For the three months ended June 30,2024,operating income(loss)was$0.5 billion,a$0.9 billion increase,primarily due to an increase in segment results at Power of$0.1 billion,primarily at Gas Power services due to volume,price and productivity,which more than offset the impact of inflation,and improvements in Gas Power equipment profitability;at Wind of$0.1 billion,primarily due to Onshore Wind through improved pricing and the impact of cost reduction activities,and fewer losses recognized in Offshore Wind;and at Electrification of$0.1 billion,primarily due to higher volume,productivity,and price at Grid Solutions;as well as$0.3 billion received related to an arbitration refund and a$0.1 billion benefit related to deferred intercompany profit that was recognized upon GE retaining the renewable energy U.S.tax equity investments in connection with the Spin-Off.Net income(loss)was$1.3 billion,a$1.4 billion increase in net income for the quarter,primarily due to an increase in the operating income(loss)of$0.9 billion and an increase in other income of$0.7 billion driven by a$0.9 billion pre-tax gain from the sale of a portion of Steam Power nuclear activities to EDF,partially offset by an increase in provision for income taxes of$0.2 billion.Adjusted EBITDA*and Adjusted EBITDA margin*were$0.5 billion and 6.4%,respectively,for the three months ended June 30,2024,an increase of$0.3 billion and 3.9%,respectively,primarily driven by increases in segment results in Power,Wind,and Electrification.For the six months ended June 30,2024,operating income(loss)was$0.2 billion,a$1.0 billion increase,primarily due to an increase in segment results at Power of$0.3 billion,primarily attributable to Gas Power,where higher volume,favorable pricing,and increased productivity more than offset the impact of inflation;at Wind of$0.2 billion,primarily due to improved pricing and the impact of cost reduction activities at Onshore Wind,and fewer losses recognized at Offshore Wind;and at Electrification of$0.2 billion,primarily due to higher volume,productivity,and price at Grid Solutions;as well as$0.3 billion received related to an arbitration refund and a$0.1 billion benefit related to deferred intercompany profit that was recognized upon GE retaining the renewable energy U.S.tax equity investments in connection with the Spin-Off.Net income(loss)was$1.2 billion,a$1.7 billion increase in net income for the period,primarily due to an increase in the operating income(loss)of$1.0 billion and an increase in other income of$0.8 billion driven by a$0.9 billion pre-tax gain from the sale of a portion of Steam Power nuclear activities to EDF,partially offset by an increase in provision for income taxes of$0.3 billion.Adjusted EBITDA*and Adjusted EBITDA margin*were$0.7 billion and 4.6%,respectively,for the six months ended June 30,2024,an increase of$0.7 billion and 4.5%,respectively,primarily driven by increases in segment results in Power,Wind,and Electrification.*Non-GAAP Financial Measure2024 2Q FORM 10-Q 6SEGMENT OPERATIONS.Refer to the Information Statement for further information regarding our determination of segment EBITDA.Three months ended June 30Six months ended June 30SUMMARY OF REPORTABLE SEGMENTS20242023V 242023V%Power$4,455$4,131 8%$8,490$7,953 7%Wind 2,062 2,601 (21)3,701 4,352 (15)Electrification 1,790 1,505 19 3,441 2,836 21 Eliminations and other(103)(118)13 (169)(199)15 Total revenues$8,204$8,119 1%$15,463$14,941 3%Segment EBITDA Power$613$466 32%$958$643 49%Wind(117)(259)55 (289)(519)44 Electrification 129 31 F 195 1 FCorporate and other(a)(101)(35)U(150)(107)(40)Adjusted EBITDA*(b)$524$203 F$714$18 F(a)Includes our Financial Services business and other general corporate expenses,including costs required to operate as a stand-alone public company.(b)Refer to Non-GAAP Financial Measures for additional information related to Adjusted EBITDA*.Adjusted EBITDA*includes interest and other financial charges and the benefit for income taxes of Financial Services as this business is managed on an after-tax basis due to its strategic investments in tax equity investments.POWER.We believe gas power plays a critical role in the energy transition,offering a fundamental foundation of reliable and dispatchable power.Although market factors related to the energy transition,such as greater renewable energy penetration and the adoption of climate change-related legislation and policies continue to evolve,we expect the gas power market to grow over the next decade.We foresee gas power generation continuing to grow low single digits,which will play an indispensable role in ensuring grid stability and energy security.We remain focused on our underwriting discipline and risk management to ensure we are securing deals that meet our financial hurdles,where we have high confidence in delivering for our customers.During the three months ended June 30,2024,GE Vernovas gas turbine utilization was flat compared to the same period last year.Growth in Asia from fewer outages and more HA units commissioned,and flat utilization in the U.S.suppressed by increased outage activity were offset by Europe where increased nuclear,hydro,and renewable energy drove lower gas operations in the quarter.Global electricity demand increased by mid-single digits.The demand for gas equipment and services remains robust in our Gas Power business.As we work in emerging markets,there could be uncertainty in the timing of deal closures due to financing and other complexities.Power has proactively managed the impact of inflationary pressure by deploying lean initiatives to drive cost productivity measures,collaborating with our suppliers and adjusting the pricing of our products and services.Given the long-cycle nature of the business,we expect the impact of inflation will continue to be challenging and we will continue to take actions to manage it.We continue to invest in new product development.In Nuclear Power,we have an agreement with a customer for the deployment of small modular nuclear reactor technology,the first commercial contract in North America,with the potential to enable reductions in nuclear power plant costs and cycle times.In Gas Power,we continue to invest for the long-term,including decarbonization pathways that will provide customers with cleaner,more reliable power.As of June 30,2024,our fundamentals remained strong with approximately$69.5 billion in RPO and a gas turbine installed base of approximately 7,000 units with approximately 1,700 units under long-term service agreements with an average remaining contract life of approximately 10 years.As of June 30,2024,we had 32 HA-Turbines in RPO,30 being installed and commissioned,and 100 HA-Turbines in our installed base with approximately 2.5 million operating hours.Three months ended June 30Six months ended June 30Orders in units2024202320242023Gas Turbines 15 26 49 39 Heavy-Duty Gas Turbines 14 14 30 20 HA-Turbines 4 12 4 Aeroderivatives 1 12 19 19 Gas Turbine Gigawatts 4.1 2.1 9.0 4.4 Three months ended June 30Six months ended June 30Sales in units2024202320242023Gas Turbines 15 14 32 37 Heavy-Duty Gas Turbines 8 9 18 27 HA-Turbines 1 3 2 7 Aeroderivatives 7 5 14 10 Gas Turbine Gigawatts 1.5 2.3 3.7 5.9*Non-GAAP Financial Measure2024 2Q FORM 10-Q 7RPOJune 30,2024December 31,2023June 30,2023Equipment$10,978$13,636$13,980 Services 58,479 59,338 58,220 Total RPO$69,457$72,974$72,200 RPO as of June 30,2024 decreased$3.5 billion(5%)from December 31,2023,primarily due to a reduction of approximately$3.9 billion related to the sale of a portion of Steam Power nuclear activities to EDF,partially offset by orders outpacing revenues for Gas Power Heavy-Duty Gas Turbines.RPO decreased$2.7 billion(4%)from June 30,2023 primarily due to a reduction of approximately$3.9 billion related to the sale of a portion of Steam Power nuclear activities to EDF,and reductions in Hydro Power equipment and Nuclear Power services,partially offset by growth in Gas Power services and equipment.Three months ended June 30Six months ended June 30SEGMENT REVENUES AND EBITDA2024202320242023Gas Power$3,459$3,051$6,500$5,933 Nuclear Power 222 212 450 434 Hydro Power 182 220 363 397 Steam Power 592 648 1,176 1,189 Total segment revenues$4,455$4,131$8,490$7,953 Equipment$1,285$1,147$2,486$2,327 Services 3,170 2,984 6,003 5,626 Total segment revenues$4,455$4,131$8,490$7,953 Segment EBITDA$613$466$958$643 Segment EBITDA margin13.8.3.3%8.1%For the three months ended June 30,2024,segment revenues were up$0.3 billion(8%)and segment EBITDA was up$0.1 billion(32%).Segment revenues increased$0.4 billion(10%)organically*,primarily due to increases in Gas Power project commissioning and aeroderivative engine shipments,and Gas Power services driven by higher outages and transactional service volume.Segment EBITDA increased$0.1 billion(24%)organically*,primarily due to an increase in Gas Power services where volume,price,and productivity more than offset the impact of inflation,and improvements in Gas Power equipment profitability.For the six months ended June 30,2024,segment revenues were up$0.5 billion(7%)and segment EBITDA was up$0.3 billion(49%).Segment revenues increased$0.5 billion(7%)organically*,in Gas Power equipment from aeroderivative engine shipments,and Gas Power services driven by higher outages and transactional service volume.Segment EBITDA increased$0.3 billion(36%)organically*,mainly driven by improvements in Gas Power where higher volume,favorable pricing,and increased productivity offset the impact of inflation.WIND.In our Wind segment,we create value by engineering,manufacturing,and commercializing wind turbines,an important technology playing a role in the energy transition as we seek to decarbonize the worlds energy sector.As we focus on providing carbon-free electricity reliably and at scale,we have simplified our senior management structure and portfolio of product offerings,focusing on fewer and more reliable workhorse products.Workhorse products,which include our 2.8-127m,3.6-154m,and 6.1-158m onshore units,and our Haliade-250m offshore units,account for approximately 70%of our equipment RPO in Onshore Wind and Offshore Wind at June 30,2024.Included in our RPO are services agreements on approximately 24,000 of our onshore wind turbines,from an installed base of approximately 56,000 units.At Onshore Wind,we are focused on improving our overall fleet availability.We are reducing product variants and deploying repairs and other corrective measures across the fleet.Concurrently,we intend to operate in fewer geographies and focus on those geographic regions that align better with our products and supply chain footprint,positioning our workhorse products to targeted markets.Our volume mix has shifted towards the U.S.,currently representing 75%of Onshore Winds equipment RPO,while our international volume has become smaller and more profitable.Specifically in the U.S.,the IRA introduced new,and extended existing,tax incentives for at least 10 years,significantly improving project economics for our customers and turbine producers.Our projects in the U.S.generally benefit from incentives available to our customers and broadly available IRA incentives.Finally,we are continuing our restructuring program to reduce our operating costs and are seeing the benefits both operationally and financially.The offshore wind industry currently faces challenges as companies attempt to increase output and reduce cost.In our Offshore Wind business,we continue to experience pressure related to our product and project costs as we deliver on our existing backlog.Although we are deploying countermeasures to combat these pressures and are committed to driving productivity and cost improvement for our new larger turbines,changes in execution timelines or other adverse developments likely could have an adverse effect on our cash collection timelines and contract profitability,and could result in further losses beyond the amounts that we currently estimate.*Non-GAAP Financial Measure2024 2Q FORM 10-Q 8Three months ended June 30Six months ended June 30Onshore and Offshore Wind orders in units2024202320242023Wind Turbines 431 547 621 1,068 Repower Units 205 100 246 146 Wind Turbine and Repower Units Gigawatts 1.8 3.1 2.5 4.7 Three months ended June 30Six months ended June 30Onshore and Offshore Wind sales in units2024202320242023Wind Turbines 341 647 593 1,052 Repower Units 64 79 64 129 Wind Turbine and Repower Units Gigawatts 1.6 2.5 2.7 4.2 RPOJune 30,2024December 31,2023June 30,2023Equipment$13,147$13,709$13,763 Services 12,626 13,240 13,336 Total RPO$25,773$26,949$27,098 RPO as of June 30,2024 decreased$1.2 billion(4%)from December 31,2023 primarily due to decreases at Offshore Wind as we continue to execute on our contracts,and decreases in Onshore Wind services,offset in part by Onshore Wind equipment as new orders outpaced revenues in the first half of the year.RPO decreased$1.3 billion(5%)from June 30,2023 primarily due to decreases at Offshore Wind equipment,where revenues outpaced new orders as we continue to execute on our contracts,as well as the cancellation of an order in the fourth quarter of 2023 that we received in the second quarter of 2023.Onshore Wind RPO increased driven by a large order in the U.S.,partially offset by revenues outpacing orders in the international market as we continue to decrease the number of geographies in which we operate.Three months ended June 30Six months ended June 30SEGMENT REVENUES AND EBITDA2024202320242023Onshore Wind$1,560$2,174$2,619$3,597 Offshore Wind 353 285 794 534 LM Wind Power 149 142 288 221 Total segment revenues$2,062$2,601$3,701$4,352 Equipment$1,668$2,245$2,900$3,659 Services 394 356 801 692 Total segment revenues$2,062$2,601$3,701$4,352 Segment EBITDA$(117)$(259)$(289)$(519)Segment EBITDA margin(5.7)%(10.0)%(7.8)%(11.9)%For the three months ended June 30,2024,segment revenues were down$0.5 billion(21%)and segment EBITDA was up$0.1 billion(55%).Segment revenues decreased$0.5 billion(20%)organically*,primarily from Onshore Wind equipment,as fewer units were delivered in the period,partially offset by higher equipment revenues at Offshore Wind as we continue to execute on our RPO.Segment EBITDA increased$0.1 billion(57%)organically*,primarily due to Onshore Wind as a result of improved pricing and the impact of cost reduction activities,and fewer losses recognized in Offshore Wind.For the six months ended June 30,2024,segment revenues were down$0.7 billion(15%)and segment EBITDA was up$0.2 billion(44%).Segment revenues decreased$0.6 billion(15%)organically*,primarily from Onshore Wind equipment,as fewer units were delivered in the period,partially offset by higher equipment revenues at Offshore Wind as we continue to execute on our RPO.Segment EBITDA increased$0.2 billion(45%)organically*,primarily due to Onshore Wind as a result of improved pricing and the impact of cost reduction activities,and fewer losses recognized in Offshore Wind.ELECTRIFICATION.We continue to experience robust demand for our systems,equipment,and services across all businesses.Demand remains strong for large scale transmission-related equipment to interconnect renewables and move bulk power.We also benefited from higher growth in orders from other transmission activities within our Grid Solutions business.Our Grid Solutions business is positioned to support grid expansion and modernization needs globally.We participate in the onshore interconnection market and the rapidly growing offshore renewable interconnection market with new products and technology supporting a 2 GW HVDC solution standard and are developing new technology,such as grid-forming static synchronous compensators and SF6-free switchgears,that solves for a denser,more resilient,stable,and efficient electric grid with lower future greenhouse gas emissions.*Non-GAAP Financial Measure2024 2Q FORM 10-Q 9The demand for our equipment and solutions have created favorable conditions to improve pricing and contractual terms.Customer lead-times have increased as a result of demand outstripping supply,though we are proactively managing this by deploying lean initiatives to reduce lead-times and drive cost productivity.In addition,we are making investments to expand our capacity and capabilities to support this continued growth while benefiting from synergies across our Electrification businesses.RPOJune 30,2024December 31,2023June 30,2023Equipment$17,540$13,233$12,496 Services 3,139 3,109 2,875 Total RPO$20,679$16,342$15,371 RPO as of June 30,2024 increased$4.3 billion(27%)from December 31,2023 primarily due to orders outpacing revenues across all businesses.RPO increased$5.3 billion(35%)from June 30,2023 primarily driven by orders outpacing revenues across all businesses.Three months ended June 30Six months ended June 30SEGMENT REVENUES AND EBITDA2024202320242023Grid Solutions$1,142$966$2,251$1,801 Power Conversion 313 217 548 400 Electrification Software 223 213 428 431 Solar&Storage Solutions 113 109 214 204 Total segment revenues$1,790$1,505$3,441$2,836 Equipment$1,286$1,058$2,516$1,986 Services 504 447 925 850 Total segment revenues$1,790$1,505$3,441$2,836 Segment EBITDA$129$31$195$1 Segment EBITDA margin 7.2%2.1%5.7%For the three months ended June 30,2024,segment revenues were up$0.3 billion(19%)and segment EBITDA was up$0.1 billion.Segment revenues increased$0.3 billion(19%)organically*,led by growth in equipment at Grid Solutions and Power Conversion.Segment EBITDA increased$0.1 billion organically*,primarily driven by higher volume,productivity,and price across all businesses.For the six months ended June 30,2024,segment revenues were up$0.6 billion(21%)and segment EBITDA was up$0.2 billion.Segment revenues increased$0.6 billion(20%)organically*,led by growth in equipment at Grid Solutions and Power Conversion.Segment EBITDA increased$0.2 billion organically*,primarily driven by higher volume,productivity,and price across all businesses.OTHER INFORMATION.Gross Profit and Gross Margin.Gross profit was$1.7 billion and$1.1 billion for the three months ended and$2.9 billion and$2.1 billion for the six months ended June 30,2024 and 2023,respectively.Gross margin was 20.7%and 14.1%for the three months ended and 18.4%and 13.8%for the six months ended June 30,2024 and 2023,respectively.The increase in gross profit was due to an increase at Power due to an increase in Gas Power services from higher outages and favorable price,an increase in Electrification due to higher volume,productivity,and price at Grid Solutions,and an increase in Wind through improved pricing and the impact of cost reduction activities at Onshore Wind.Selling,General,and Administrative.Selling,general,and administrative costs were$0.9 billion and$1.3 billion for the three months ended and$2.1 billion and$2.5 billion for the six months ended and comprised 11.4%and 15.7%of revenues for the three months ended and 13.8%and 16.5%for the six months ended June 30,2024 and 2023,respectively.The reduction in costs was attributable to a$0.3 billion arbitration refund and ongoing cost reduction initiatives in each of the businesses,partially offset by higher corporate costs required to operate as a stand-alone public company.Restructuring Charges and Separation Costs.We continuously evaluate our cost structure and are implementing several restructuring and process transformation actions considered necessary to simplify our organizational structure.In addition,in connection with the Spin-Off,we incurred certain separation costs and recognized a benefit related to deferred intercompany profit upon GE retaining the renewable energy U.S.tax equity investments.See Note 23 in the Notes to the consolidated and combined financial statements for further information.Interest and Other Financial Charges Net.Interest and other financial charges net was less than$0.1 billion in income for both the three and six months ended June 30,2024 and less than$0.1 billion in expense for both the three and six months ended June 30,2023.The higher income in 2024 was primarily driven by interest received from an arbitration refund and a higher average balance of invested funds during the three and six months ended June 30,2024.The primary components of net interest and other financial charges are fees on cash management activities,interest on borrowings,interest earned on cash balances and short-term investments.*Non-GAAP Financial Measure2024 2Q FORM 10-Q 10Income Taxes.Our effective tax rate was 20.1%for the three months ended June 30,2024.The effective tax rate was lower than the U.S.statutory rate of 21%primarily due to a lower effective tax rate on a foreign pre-tax gain from the sale of a portion of Steam Power nuclear activities to EDF,partially offset by losses providing no tax benefit in certain jurisdictions,and an increase in income tax expense due to the reduction of certain U.S.tax attributes that are not part of the Companys stand-alone operations.Our effective tax rate was 22.1%for the six months ended June 30,2024.The effective tax rate was higher than the U.S.statutory rate of 21%primarily due to losses providing no tax benefit in certain jurisdictions,partially offset by a pre-tax gain with an insignificant tax impact from the sale of a portion of Steam Power nuclear activities to EDF.We recorded an income tax expense on a pre-tax loss in the three and six months ended June 30,2023 due to taxes in profitable jurisdictions and losses providing no tax benefit in other jurisdictions.See Note 15 in the Notes to the consolidated and combined financial statements for further information.CAPITAL RESOURCES AND LIQUIDITY.Historically,we participated in cash pooling and other financing arrangements with GE to manage liquidity and fund our operations.As a result of completing the Spin-Off,we no longer participate in these arrangements and our Cash,cash equivalents,and restricted cash are held and used solely for our own operations.Our capital structure,long-term commitments,and sources of liquidity have changed significantly from our historical practices.In connection with the Spin-Off,we received cash from GE of$0.8 billion through a cash contribution of$0.5 billion to fund future GE Vernova operations and a cash transfer of$0.3 billion restricted in connection with certain legal matters associated with legacy GE operations,such that our cash balance on the date of the completion of the Spin-Off was approximately$4.2 billion.As of June 30,2024,our Cash,cash equivalents,and restricted cash was$5.8 billion,approximately$1.0 billion of which was held in countries where access to cash may be delayed due to various regulations(including$0.1 billion in Russia and Ukraine)and$0.4 billion was restricted use cash.During the second quarter of 2024,our Steam Power business completed the sale of part of its nuclear activities to EDF.In connection with the disposition,we received net cash proceeds of$0.6 billion.During the second quarter of 2024,we also received a cash refund of$0.3 billion in connection with an arbitration proceeding.In addition,we have access to a$3.0 billion committed revolving credit facility(Revolving Credit Facility).See“Capital Resources and LiquidityDebt”below for additional information.We believe our future cash flows generated from operations,and committed credit facility will be responsive to the needs of our current and planned operations for at least the next 12 months.Consolidated and Combined Statement of Cash Flows.The most significant source of cash flows from operations is customer-related activities,the largest of which is collecting cash resulting from equipment or services sales.The most significant operating uses of cash are to pay our suppliers,employees,tax authorities,and postretirement plans.We measure ourselves on a free cash flow*basis.We believe that free cash flow*provides management and investors with an important measure of our ability to generate cash on a normalized basis.Free cash flow*also provides insight into our ability to produce cash subsequent to fulfilling our capital obligations;however,free cash flow*does not delineate funds available for discretionary uses as it does not deduct the payments required for certain investing and financing activities.We typically invest in property,plant,and equipment(PP&E)over multiple periods to support new product introductions and increases in manufacturing capacity and to perform ongoing maintenance of our manufacturing operations.We believe that while PP&E expenditures will fluctuate period to period,we will need to maintain a material level of net PP&E spend to maintain ongoing operations and growth of the business.Six months ended June 30FREE CASH FLOW(NON-GAAP)20242023Cash from(used for)operating activities(GAAP)$535$(978)Add:Gross additions to property,plant,and equipment and internal-use software(374)(283)Free cash flow(Non-GAAP)$161$(1,261)Cash from(used for)operating activities was$0.5 billion and$(1.0)billion for the six months ended June 30,2024 and 2023,respectively.Cash from(used for)operating activities increased by$1.5 billion in 2024 compared to 2023 primarily driven by:higher net income(after adjusting for depreciation of PP&E,amortization of intangible assets,and(gains)losses on purchases and sales of business interests)of$0.9 billion,including the impact of a$0.3 billion cash refund we received in connection with an arbitration proceeding in the second quarter of 2024;and an increase of$0.8 billion in contract liabilities and current deferred income,due to higher collections at Onshore Wind and lower liquidations at Offshore Wind in Wind,and higher collections at Electrification;partially offset by current contract assets of$(0.4)billion,driven by higher revenue recognition compared to billings in Offshore Wind,and on our long-term service agreements in Power.Cash from operating activities of$0.5 billion for the six months ended June 30,2024 included a$0.3 billion inflow from changes in working capital.The cash inflow from changes in working capital was primarily driven by:contract liabilities and current deferred income of$1.6 billion,driven by down payments and collections on several large projects in Grid Solutions at Electrification,and net collections at Power;current receivables of$0.7 billion,driven by collections outpacing billings,primarily at Wind and Power,and the benefits arising from the IRA related to advanced manufacturing credits of$0.2 billion;accounts payable and equipment project accruals of$0.1 billion,due to higher volume than disbursements in Power,partially offset by Wind and Electrification;inventories of$(1.3)billion,primarily in Gas Power at Power and Onshore Wind at Wind,to support fulfillment and deliveries expected in the second half of 2024;current contract assets of$(0.4)billion,driven by revenue recognition exceeding billings in our Offshore Wind business at Wind,and on our long-term service agreements in Power;and changes in due to related parties of$(0.4)billion,primarily due to settlements of payables with GE prior to the Spin-Off.*Non-GAAP Financial Measure2024 2Q FORM 10-Q 11Cash used for operating activities of$1.0 billion for the six months ended June 30,2023 included a$0.1 billion outflow from changes in working capital.The cash outflow from changes in working capital was primarily driven by:inventories of$1.2 billion,due to inventory build in Onshore Wind and Offshore Wind at Wind and Gas Power at Power;partially offset by contract liabilities and current deferred income of$(0.8)billion as a result of project collections and down payments in Power,Wind,and Electrification outpacing revenue recognition;and current receivables of$(0.3)billion,driven by collections outpacing billings primarily in Gas Power at Power and Onshore Wind at Wind.Cash from(used for)investing activities was$0.3 billion and$(0.4)billion for the six months ended June 30,2024 and 2023,respectively.Cash from(used for)investing activities increased by$0.7 billion in 2024 compared to 2023 primarily driven by:net proceeds from principal business dispositions of$0.6 billion in the second quarter of 2024,as a result of our Steam Power business sale of part of its nuclear activities to EDF in our Power segment;and the nonrecurrence of the net impact of our acquisition of Nexus Controls and other investment sales of$0.2 billion in 2023;partially offset by higher cash used for additions to PP&E and internal-use software of$(0.1)billion;and an increase in net purchases of equity method investments of$(0.1)billion,primarily driven by higher contributions to investments at our Financial Services business.Cash used for additions to PP&E and internal-use software,which is a component of free cash flow*,was$0.4 billion and$0.3 billion for the six months ended June 30,2024 and 2023,respectively.Cash from financing activities was$2.9 billion and$0.9 billion for the six months ended June 30,2024 and 2023,respectively,inclusive of$3.0 billion and$1.0 billion,respectively,of transfers from parent.Material Cash Requirements.In the normal course of business,we enter into contracts and commitments that oblige us to make payments in the future.Information regarding our obligations under lease and guarantee arrangements as well as our investment commitments is provided in Note 7 and Note 22 in the Notes to the consolidated and combined financial statements included elsewhere in this Quarterly Report on Form 10-Q as well as in Note 7 and Note 20 in the Notes to the audited combined financial statements included in the Information Statement.Additionally,we have material cash requirements related to our pension obligations as described in Note 13 to the audited combined financial statements included in the Information Statement.Debt.As of both June 30,2024 and December 31,2023,we had$0.1 billion of total debt,excluding finance leases.We have a$3.0 billion Revolving Credit Facility to fund near-term intra-quarter working capital needs as they arise.In addition,we have a$3.0 billion committed trade finance facility(Trade Finance Facility,and together with the Revolving Credit Facility,the Credit Facilities).The Trade Finance Facility is not expected to be utilized and will not provide us with direct liquidity.We believe that our financing arrangements,future cash from operations,and access to capital markets will provide adequate resources to fund our future cash flow needs.For more information about these Credit Facilities,refer to our Current Report on Form 8-K,filed with the SEC on April 2,2024.Credit Ratings and Conditions.GE historically relied on the debt capital markets to fund,among other things,a significant portion of its operations.We may continue to rely on capital markets in the future,and we have access to the Revolving Credit Facility to fund operations,as described above,to further support our liquidity needs.The cost and availability of any debt financing is influenced by our credit ratings and market conditions.Standard and Poors Global Ratings(S&P)and Fitch Ratings(Fitch)have issued credit ratings for our Company.Our credit ratings as of the date of this filing are set forth in the following table.S&PFitchOutlookStableStableLong termBBB-BBBWe are disclosing our credit ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds and access to credit.Our ratings may be subject to a revision or withdrawal at any time by the assigning rating organization,and each rating should be evaluated independently of any other rating.For a description of some of the potential consequences of a reduction in our credit ratings,see the Risks Relating to Financial,Accounting,and Tax Matters section of Risk Factors in the Information Statement.If GE Vernova is unable to maintain investment grade ratings,we could face significant challenges in being awarded new contracts,substantially increasing financing and hedging costs,and refinancing risks as well as substantially decreasing the availability of credit.The estimated liquidity impact in the event of a downgrade below investment grade was immaterial as of June 30,2024.Quantitative and Qualitative Disclosure About Market Risk.We are exposed to market risk primarily from the effect of fluctuations in foreign currency exchange rates,interest rates,and commodity prices.These exposures are managed and mitigated with the use of financial instruments,including derivatives contracts.We apply policies to manage these risks,including prohibitions on speculative trading activities.As a result of our global operations,we generate and incur a significant portion of our revenues and expenses in currencies other than the U.S.dollar.Such principal currencies include the euro,the British pound sterling,the Brazilian real,and the Indian rupee.The effects of foreign currency fluctuations on earnings were$0.1 billion for both the three and six months ended June 30,2024 and 2023.See Note 20 in the Notes to the consolidated and combined financial statements for further information.For more information about foreign exchange risk,interest rate risk,and commodity risk see the Quantitative and Qualitative Disclosure About Market Risk section of the Information Statement.*Non-GAAP Financial Measure2024 2Q FORM 10-Q 12Parent Company Credit Support.To support GE Vernova in selling products and services globally,GE often entered into contracts on behalf of GE Vernova or issued parent company guarantees or trade finance instruments supporting the performance of its subsidiary legal entities transacting directly with customers,in addition to providing similar credit support for non-customer related activities of GE Vernova(collectively,the GE credit support).In connection with the Spin-Off,we are working to seek novation or assignment of GE credit support,the majority of which relates to parent company guarantees,associated with GE Vernova legal entities from GE to GE Vernova.For GE credit support that remained outstanding at the Spin-Off,GE Vernova is obligated to use reasonable best efforts to terminate or replace,and obtain a full release of GEs obligations and liabilities under,all such credit support.Beginning in 2025,GE Vernova will pay a quarterly fee to GE based on amounts related to the GE credit support.GE Vernova will face other contractual restrictions and requirements while GE continues to be obligated under such credit support on behalf of GE Vernova.While GE will remain obligated under the contract or instrument,GE Vernova will be obligated to indemnify GE for credit support related payments that GE is required to make.As of June 30,2024,we estimated GE Vernova RPO and other obligations that relate to GE credit support to be approximately$29 billion,an over 50%reduction since year end and over 20%reduction since the Spin-Off,of which approximately$1 billion are financial guarantees.We expect approximately$16 billion of the RPO related to GE credit support obligations to contractually mature within five years from the date of the Spin-Off and credit support on financial guarantees to not exceed a year beyond separation.The underlying obligations are predominantly customer contracts that GE Vernova performs in the normal course of its business.We have no known instances historically where payments or performance from GE were required under parent company guarantees relating to GE Vernova customer contracts.RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.For a discussion of recently issued accounting standards,see Note 2 to the audited combined financial statements included in the Information Statement.CRITICAL ACCOUNTING ESTIMATES.To prepare our consolidated and combined financial statements in accordance with U.S.GAAP,management makes estimates and assumptions that may affect the reported amounts of our assets and liabilities,including our contingent liabilities,as of the date of our financial statements and the reported amounts of our revenues and expenses during the reporting periods.Our actual results may differ from these estimates.We consider estimates to be critical(i)if we are required to make assumptions about material matters that are uncertain at the time of estimation or(ii)if materially different estimates could have been made or it is reasonably likely that the accounting estimate will change from period to period.Refer to the Critical Accounting Estimates and Note 2 to the audited combined financial statements included in the Information Statement for additional discussion of accounting policies and critical accounting estimates.NON-GAAP FINANCIAL MEASURES.The non-GAAP financial measures presented in this Quarterly Report on Form 10-Q are supplemental measures of our performance and our liquidity that we believe help investors understand our financial condition and operating results and assess our future prospects.We believe that presenting these non-GAAP financial measures,in addition to the corresponding U.S.GAAP financial measures,are important supplemental measures that exclude non-cash or other items that may not be indicative of or are unrelated to our core operating results and the overall health of our company.We believe that these non-GAAP financial measures provide investors greater transparency to the information used by management for its operational decision-making and allow investors to see our results“through the eyes of management.”We further believe that providing this information assists our investors in understanding our operating performance and the methodology used by management to evaluate and measure such performance.When read in conjunction with our U.S.GAAP results,these non-GAAP financial measures provide a baseline for analyzing trends in our underlying businesses and can be used by management as one basis for financial,operational,and planning decisions.Finally,these measures are often used by analysts and other interested parties to evaluate companies in our industry.Management recognizes that these non-GAAP financial measures have limitations,including that they may be calculated differently by other companies or may be used under different circumstances or for different purposes,thereby affecting their comparability from company to company.In order to compensate for these and the other limitations discussed below,management does not consider these measures in isolation from or as alternatives to the comparable financial measures determined in accordance with U.S.GAAP.Readers should review the reconciliations below,and above with respect to free cash flow,and should not rely on any single financial measure to evaluate our business.The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow.We believe the organic measures presented below provide management and investors with a more complete understanding of underlying operating results and trends of established,ongoing operations by excluding the effect of acquisitions,dispositions,and foreign currency,which includes translational and transactional impacts,as these activities can obscure underlying trends.2024 2Q FORM 10-Q 13ORGANIC REVENUES(a),EBITDA,AND EBITDA MARGIN BY SEGMENT(NON-GAAP)RevenueSegment EBITDASegment EBITDA marginThree months ended June 3020242023V 242023V 242023V ptsPower(GAAP)$4,455$4,131 8%$613$466 32.8.3%2.5ptsLess:Acquisitions Less:Business dispositions 127 189 (21)(24)Less:Foreign currency effect 4 (4)(18)(34)Power organic(Non-GAAP)$4,324$3,946 10%$651$524 24.1.3%1.8ptsWind(GAAP)$2,062$2,601 (21)%$(117)$(259)55%(5.7)%(10.0)%4.3ptsLess:Acquisitions Less:Business dispositions Less:Foreign currency effect(17)(3)(19)(32)Wind organic(Non-GAAP)$2,079$2,604 (20)%$(98)$(227)57%(4.7)%(8.7)%4.0ptsElectrification(GAAP)$1,790$1,505 19%$129$31 F 7.2%2.1%5.1ptsLess:Acquisitions 1 Less:Business dispositions Less:Foreign currency effect 2 (1)4 (21)Electrification organic(Non-GAAP)$1,787$1,506 19%$126$52 F 7.1%3.5%3.6pts(a)Includes intersegment sales of$119 million and$115 million for the three months ended June 30,2024 and 2023,respectively.See the table titled Total Segment Revenues by Business Unit in Note 25 in the Notes to the consolidated and combined financial statements.ORGANIC REVENUES(a),EBITDA,AND EBITDA MARGIN BY SEGMENT(NON-GAAP)RevenueSegment EBITDASegment EBITDA marginSix months ended June 3020242023V 242023V 242023V ptsPower(GAAP)$8,490$7,953 7%$958$643 49.3%8.1%3.2ptsLess:Acquisitions 41 14 Less:Business dispositions 127 189 (21)(24)Less:Foreign currency effect 16 (2)(56)(83)Power organic(Non-GAAP)$8,306$7,766 7%$1,022$749 36.3%9.6%2.7ptsWind(GAAP)$3,701$4,352 (15)%$(289)$(519)44%(7.8)%(11.9)%4.1ptsLess:Acquisitions Less:Business dispositions Less:Foreign currency effect(14)(10)(33)(51)Wind organic(Non-GAAP)$3,715$4,361 (15)%$(257)$(468)45%(6.9)%(10.7)%3.8ptsElectrification(GAAP)$3,441$2,836 21%$195$1 F 5.7%5.7ptsLess:Acquisitions 2 Less:Business dispositions Less:Foreign currency effect 35 (3)(3)(31)Electrification organic(Non-GAAP)$3,404$2,839 20%$198$32 F 5.8%1.1%4.7pts(a)Includes intersegment sales of$197 million and$205 million for the six months ended June 30,2024 and 2023,respectively.See the table titled Total Segment Revenues by Business Unit in Note 25 in the Notes to the consolidated and combined financial statements.Three months ended June 30Six months ended June 30ORGANIC REVENUES(NON-GAAP)20242023V 242023V%Total revenues(GAAP)$8,204$8,119 1%$15,463$14,941 3%Less:Acquisitions 1 43 Less:Business dispositions 127 189 127 189 Less:Foreign currency effect(11)(7)37 (15)Organic revenues(Non-GAAP)$8,087$7,938 2%$15,256$14,768 3 24 2Q FORM 10-Q 14Three months ended June 30Six months ended June 30EQUIPMENT AND SERVICES ORGANIC REVENUES(NON-GAAP)20242023V 242023V%Total equipment revenues(GAAP)$4,194$4,388 (4)%$7,811$7,877 (1)%Less:Acquisitions 20 Less:Business dispositions 66 91 66 91 Less:Foreign currency effect(13)(6)30 (14)Equipment organic revenues(Non-GAAP)$4,142$4,303 (4)%$7,695$7,800 (1)%Total services revenues(GAAP)$4,010$3,732 7%$7,652$7,065 8%Less:Acquisitions 1 24 Less:Business dispositions 61 98 61 98 Less:Foreign currency effect 2 (1)7 (1)Services organic revenues(Non-GAAP)$3,946$3,636 9%$7,561$6,968 9%We believe that Adjusted EBITDA*and Adjusted EBITDA margin*,which are adjusted to exclude the effects of unique and/or non-cash items that are not closely associated with ongoing operations,provide management and investors with meaningful measures of our performance that increase the period-to-period comparability by highlighting the results from ongoing operations and the underlying profitability factors.We believe Adjusted organic EBITDA*and Adjusted organic EBITDA margin*provide management and investors with,when considered with Adjusted EBITDA*and Adjusted EBITDA margin*,a more complete understanding of underlying operating results and trends of established,ongoing operations by further excluding the effect of acquisitions,dispositions,and foreign currency,which includes translational and transactional impacts,as these activities can obscure underlying trends.We believe these measures provide additional insight into how our businesses are performing on a normalized basis.However,Adjusted EBITDA*,Adjusted organic EBITDA*,Adjusted EBITDA margin*and Adjusted organic EBITDA margin*should not be construed as inferring that our future results will be unaffected by the items for which the measures adjust.Three months ended June 30Six months ended June 30ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN(NON-GAAP)20242023V 242023V%Net income(loss)(GAAP)$1,280$(149)F$1,174$(495)FAdd:Restructuring and other charges(a)62 93 210 203 Add:Purchases and sales of business interests(b)(847)(86)(842)(86)Add:Russia and Ukraine charges(c)95 95 Add:Separation costs(benefits)(d)(91)(91)Add:Arbitration refund(e)(254)(254)Add:Non-operating benefit income(f)(134)(143)(269)(282)Add:Depreciation and amortization(g)237 218 445 422 Add:Interest and other financial charges net(h)(i)(61)8 (58)16 Add:Provision(benefit)for income taxes(i)333 167 397 145 Adjusted EBITDA(Non-GAAP)$524$203 F$714$18 FNet income(loss)margin(GAAP)15.6%(1.8).4 pts 7.6%(3.3).9 ptsAdjusted EBITDA margin(Non-GAAP)6.4%2.5%3.9 pts 4.6%0.1%4.5 pts(a)Consists of severance,facility closures,acquisition and disposition,and other charges associated with major restructuring programs.(b)Consists of gains and losses resulting from the purchases and sales of business interests and assets.(c)Related to recoverability of asset charges recorded in connection with the ongoing conflict between Russia and Ukraine and resulting sanctions.(d)Costs incurred in the Spin-Off and separation from GE,including system implementations,advisory fees,one-time stock option grant,and other one-time costs.In addition,includes$136 million benefit related to deferred intercompany profit that was recognized upon GE retaining the renewable energy U.S.tax equity investments.(e)Represents cash refund received in connection with an arbitration proceeding,constituting the payments previously made to the Fund,and excludes$52 million related to the interest on such amounts that was recorded in Interest and other financial charges net.(f)Primarily related to the expected return on plan assets,partially offset by interest cost.(g)Excludes depreciation and amortization expense related to Restructuring and other charges.(h)Consists of interest and other financial charges,net of interest income,other than financial interest related to our normal business operations primarily with customers.(i)Excludes interest expense of$1 million and$13 million and benefit for income taxes of$11 million and$45 million for the three months ended June 30,2024 and 2023,respectively,as well as interest expense of$11 million and$25 million and benefit for income taxes of$64 million and$92 million for the six months ended June 30,2024 and 2023,respectively,related to our Financial Services business which,because of the nature of its investments,is measured on an after-tax basis due to its strategic investments in renewable energy tax equity investments.*Non-GAAP Financial Measure2024 2Q FORM 10-Q 15Three months ended June 30Six months ended June 30ADJUSTED ORGANIC EBITDA AND ADJUSTED ORGANIC EBITDA MARGIN(NON-GAAP)20242023V 242023Vjusted EBITDA(Non-GAAP)$524$203 F$714$18 FLess:Acquisitions 13 Less:Business dispositions(21)(24)(21)(24)Less:Foreign currency effect(39)(88)(85)(166)Adjusted organic EBITDA(Non-GAAP)$584$315 85%$806$208 FAdjusted EBITDA margin(Non-GAAP)6.4%2.5%3.9 pts 4.6%0.1%4.5 ptsAdjusted organic EBITDA margin(Non-GAAP)7.2%4.0%3.2 pts 5.3%1.4%3.9 ptsRefer to“Capital Resources and Liquidity”for discussion of free cash flow*.CONTROLS AND PROCEDURES.Under the direction of our Chief Executive Officer and Chief Financial Officer,we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that(i)our disclosure controls and procedures were effective as of June 30,2024,and(ii)no change in internal control over financial reporting occurred during the quarter ended June 30,2024,that has materially affected,or is reasonably likely to materially affect,such internal control over financial reporting.Prior to April 2,2024,GE Vernova relied on certain business processes and internal controls over financial reporting performed by GE.In connection with the Spin-Off,responsibility for these processes and internal controls were transferred from GE to GE Vernova personnel,including internal controls and processes related to information technology,treasury,human resources(including payroll and benefit plan administration),taxes,external financial reporting,legal,and oversight functions such as corporate governance.The Company has revised and adopted policies,procedures and processes,as needed,to meet regulatory requirements applicable to a standalone public company and will continue to identify,document,and evaluate key controls to provide reasonable assurance that our internal control over financial reporting is effective.LEGAL PROCEEDINGS.We are reporting the following matter in compliance with SEC requirements to disclose administrative proceedings arising under laws that regulate the discharge of materials into the environment where a governmental authority is a party and that involve potential monetary sanctions of$300,000 or greater.In March 2024,one of our Australian subsidiaries received notice from the Australian Department of Climate Change,Energy,the Environment and Water(DCCEEW)of its intention to issue infringement notices imposing administrative fines on the subsidiary for importing equipment containing SF6 gas without an equipment license,as required by local law related to synthetic greenhouse gas management and seek a court order to impose civil penalties for delinquent reporting under such law.The applicable local law regulates the import to Australia of synthetic greenhouse gases in equipment,including certain of our switchgear products,and our subsidiary had neglected to renew the import license required under the law.We responded to DCCEEW,and following discussions with the agency,have paid approximately$0.3 million in fines to date in connection with the infringement notices.Discussions with DCCEEW regarding a court-issued civil penalty order are pending.Refer to Legal Matters in Note 22 to the consolidated and combined financial statements for additional information relating to legal matters.*Non-GAAP Financial Measure2024 2Q FORM 10-Q 16CONSOLIDATED AND COMBINED STATEMENT OF INCOME(LOSS)(UNAUDITED)Three months ended June 30Six months ended June 30(In millions,except per share amounts)2024202320242023Sales of equipment$4,194$4,388$7,811$7,877 Sales of services 4,010 3,732 7,652 7,065 Total revenues 8,204 8,119 15,463 14,941 Cost of equipment 3,853 4,621 7,545 8,196 Cost of services 2,649 2,352 5,066 4,680 Gross profit 1,702 1,147 2,852 2,065 Selling,general,and administrative expenses 938 1,272 2,140 2,458 Research and development expenses 237 216 474 418 Operating income(loss)527 (341)238 (811)Interest and other financial charges net 60 (21)46 (42)Non-operating benefit income 134 143 269 282 Other income(expense)net(Note 19)881 193 954 129 Income(loss)before income taxes 1,602 (27)1,507 (442)Provision(benefit)for income taxes(Note 15)322 122 333 53 Net income(loss)1,280 (149)1,174 (495)Net loss(income)attributable to noncontrolling interests 14 (2)(10)30 Net income(loss)attributable to GE Vernova$1,294$(150)$1,164$(465)Earnings(loss)per share attributable to GE Vernova(Note 18):Basic$4.72$(0.55)$4.25$(1.70)Diluted$4.65$(0.55)$4.22$(1.70)Weighted-average number of common shares outstanding:Basic274274274274Diluted2782742762742024 2Q FORM 10-Q 17CONSOLIDATED AND COMBINED STATEMENT OF FINANCIAL POSITION(UNAUDITED)(In millions,except share and per share amounts)June 30,2024December 31,2023Cash,cash equivalents,and restricted cash$5,779$1,551 Current receivables net(Note 4)6,419 7,409 Due from related parties(Note 24)12 80 Inventories,including deferred inventory costs(Note 5)9,346 8,253 Current contract assets(Note 9)8,702 8,339 All other current assets(Note 10)463 352 Assets of business held for sale(Note 3)1,444 Current assets 30,722 27,428 Property,plant,and equipment net(Note 6)5,168 5,228 Goodwill(Note 8)4,354 4,437 Intangible assets net(Note 8)925 1,042 Contract and other deferred assets(Note 9)614 621 Equity method investments(Note 11)2,405 3,555 Deferred income taxes(Note 15)1,383 1,582 All other assets(Note 10)2,480 2,228 Total assets$48,052$46,121 Accounts payable and equipment project payables(Note 12)$7,841$7,900 Due to related parties(Note 24)44 532 Contract liabilities and deferred income(Note 9)16,536 15,074 All other current liabilities(Note 14)4,644 4,352 Liabilities of business held for sale(Note 3)1,448 Current liabilities 29,065 29,306 Deferred income taxes(Note 15)674 382 Non-current compensation and benefits 3,224 3,273 All other liabilities(Note 14)5,040 4,780 Total liabilities 38,003 37,741 Commitments and contingencies(Note 22)Common stock,par value$0.01 per share,1,000,000,000 shares authorized,274,701,743 shares issued and outstanding as of June 30,2024 3 Additional paid-in capital 8,801 Retained earnings 1,294 Net parent investment 8,051 Accumulated other comprehensive income(loss)net attributable to GE Vernova(Note 16)(1,031)(635)Total equity attributable to GE Vernova 9,067 7,416 Noncontrolling interests 982 964 Total equity 10,049 8,380 Total liabilities and equity$48,052$46,121 2024 2Q FORM 10-Q 18CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS(UNAUDITED)Six months ended June 30(In millions)20242023Net income(loss)$1,174$(495)Adjustments to reconcile net income(loss)to cash from(used for)operating activitiesDepreciation and amortization of property,plant,and equipment(Note 6)379 347 Amortization of intangible assets(Note 8)126 123(Gains)losses on purchases and sales of business interests(851)(95)Principal pension plans net(Note 13)(186)(202)Other postretirement benefit plans net(Note 13)(121)(163)Provision(benefit)for income taxes(Note 15)333 53 Cash recovered(paid)during the year for income taxes(173)(12)Changes in operating working capital:Decrease(increase)in current receivables 683 282 Decrease(increase)in due from related parties(6)(1)Decrease(increase)in inventories,including deferred inventory costs(1,288)(1,165)Decrease(increase)in current contract assets(408)(5)Increase(decrease)in accounts payable and equipment project payables 94 (86)Increase(decrease)in due to related parties(384)54 Increase(decrease)in contract liabilities and current deferred income 1,596 788 All other operating activities(430)(401)Cash from(used for)operating activities 535 (978)Additions to property,plant,and equipment and internal-use software(374)(283)Dispositions of property,plant,and equipment 13 44 Purchases of and contributions to equity method investments(108)(40)Sales of and distributions from equity method investments 31 33 Proceeds from principal business dispositions 639 All other investing activities 51 (196)Cash from(used for)investing activities 252 (441)Net increase(decrease)in borrowings of maturities of 90 days or less(23)29 Transfers from(to)Parent 2,964 959 All other financing activities(36)(46)Cash from(used for)financing activities 2,904 942 Effect of currency exchange rate changes on cash,cash equivalents,and restricted cash(66)9 Increase(decrease)in cash,cash equivalents,and restricted cash,including cash classified within businesses held for sale 3,625 (468)Less:Net increase(decrease)in cash classified within businesses held for sale(603)(21)Increase(decrease)in cash,cash equivalents,and restricted cash 4,228 (447)Cash,cash equivalents,and restricted cash at beginning of year 1,551 2,067 Cash,cash equivalents,and restricted cash as of June 30$5,779$1,620 2024 2Q FORM 10-Q 19CONSOLIDATED AND COMBINED STATEMENT OF COMPREHENSIVE INCOME(LOSS)(UNAUDITED)Three months ended June 30Six months ended June 30(In millions)2024202320242023Net income(loss)attributable to GE Vernova$1,294$(150)$1,164$(465)Net loss(income)attributable to noncontrolling interests 14 (2)(10)30 Net income(loss)$1,280$(149)$1,174$(495)Other comprehensive income(loss):Currency translation adjustments net of taxes(117)59 (106)122 Benefit plans net of taxes(271)(84)(340)1,575 Cash flow hedges net of taxes 43 2 51 19 Other comprehensive income(loss)$(346)$(23)$(395)$1,715 Comprehensive income(loss)$934$(171)$779$1,220 Comprehensive loss(income)attributable to noncontrolling interests(4)(11)34 Comprehensive income(loss)attributable to GE Vernova$930$(172)$767$1,255 2024 2Q FORM 10-Q 20CONSOLIDATED AND COMBINED STATEMENT OF CHANGES IN EQUITY(UNAUDITED)Common stock(In millions)Common shares outstandingPar valueAdditional paid-in capitalRetained earningsNet parent investmentAccumulated other comprehensive income(loss)netEquity attributable to noncontrolling interestsTotal equityBalances as of April 1,2024$9,659$(686)$1,007$9,980 Transfers from(to)Parent,including Spin-Off-related adjustments (944)(944)Issuance of common stock in connection with the Spin-Off and reclassification of net parent investment 274 3 8,712 (8,715)Issuance of common stock in connection with employee stock plans 1 35 35 Share-based compensation expense 54 54 Net income(loss)1,294 (14)1,280 Currency translation adjustments net of taxes (117)(1)(117)Benefit plans net of taxes (271)(271)Cash flow hedges net of taxes 43 43 Changes in equity attributable to noncontrolling interests (10)(10)Balances as of June 30,2024 275$3$8,801$1,294$(1,031)$982$10,049 Balances as of April 1,2023$9,199$285$928$10,412 Net income(loss)(150)2 (149)Currency translation adjustments net of taxes 61 (2)59 Benefit plans net of taxes (84)(84)Cash flow hedges net of taxes 2 2 Transfers from(to)Parent 562 562 Changes in equity attributable to noncontrolling interests (1)(1)Balances as of June 30,2023$9,611$264$927$10,802 2024 2Q FORM 10-Q 21Common stock(In millions)Common shares outstandingPar valueAdditional paid-in capitalRetained earningsNet parent investmentAccumulated other comprehensive income(loss)netEquity attributable to noncontrolling interestsTotal equityBalances as of January 1,2024$8,051$(635)$964$8,380 Transfers from(to)Parent,including Spin-Off-related adjustments 794 794 Issuance of common stock in connection with the Spin-Off and reclassification of net parent investment 274 3 8,712 (8,715)Issuance of common stock in connection with employee stock plans 1 35 35 Share-based compensation expense 54 54 Net income(loss)1,294 (130)10 1,174 Currency translation adjustments net of taxes (106)(106)Benefit plans net of taxes (341)1 (340)Cash flow hedges net of taxes 51 51 Changes in equity attributable to noncontrolling interests 7 7 Balances as of June 30,2024 275$3$8,801$1,294$(1,031)$982$10,049 Balances as of January 1,2023$12,106$(1,456)$957$11,607 Net income(loss)(465)(30)(495)Currency translation adjustments net of taxes 124 (2)122 Benefit plans net of taxes 1,577 (2)1,575 Cash flow hedges net of taxes 19 19 Transfers from(to)Parent (2,030)(2,030)Changes in equity attributable to noncontrolling interests 4 4 Balances as of June 30,2023$9,611$264$927$10,802 2024 2Q FORM 10-Q 22NOTE 1.ORGANIZATION AND BASIS OF PRESENTATIONOrganization.On April 2,2024(the Distribution Date),General Electric Company,which now operates as GE Aerospace(GE or Parent)completed the previously announced spin-off(the Spin-Off)of GE Vernova(the Company,GE Vernova,our,we,or us).The Spin-Off was completed through a distribution of all the Companys outstanding common stock to holders of record of GEs common stock as of the close of business on March 19,2024(the Distribution),which resulted in the issuance of approximately 274 million shares of common stock.As a result of the Distribution,the Company became an independent public company.Our common stock is listed under the symbol“GEV”on the New York Stock Exchange.In connection with the Spin-Off,GE contributed cash of$515 million to GE Vernova to fund future operations and transferred restricted cash of$325 million to us such that the Companys cash balance upon completion of the Spin-Off was approximately$4,200 million.See Note 22 for further information.In connection with the Spin-Off,GE Vernova entered into several agreements with GE,including a separation and distribution agreement that sets forth certain agreements with GE regarding the principal actions to be taken in connection with the Spin-Off,including the transfer of assets and assumption of liabilities,and establishes certain rights and obligations between the Company and GE,including procedures with respect to claims subject to indemnification and related matters.Other agreements we entered into that govern aspects of our relationship with GE following the Spin-Off include:Transition Services Agreement governs all matters relating to the provision of services between the Company and GE on a transitional basis.The services the Company receives include support for digital technology,human resources,supply chain,finance,and real estate services,among others,that are generally intended to be provided for a period no longer than two years following the Spin-Off.Tax Matters Agreement governs the respective rights,responsibilities,and obligations between the Company and GE with respect to all tax matters(excluding employee-related taxes covered under the Employee Matters Agreement),in addition to certain restrictions which generally prohibit us from taking or failing to take any action in the two-year period following the Distribution that would prevent the Distribution from qualifying as tax-free for U.S.federal income tax purposes,including limitations on our ability to pursue certain strategic transactions.The agreement specifies the portion of tax liability for which the Company will bear contractual responsibility,and the Company and GE will each agree to indemnify each other against any amounts for which such indemnified party is not responsible.Certain other agreements related to employee matters,trademark license,intellectual property,real estate matters,and framework investments.Unless the context otherwise requires,references to the Company,GE Vernova,our,we,and us,refer to(i)GEs renewable energy,power,and digital businesses prior to the Spin-Off and(ii)GE Vernova Inc.and its subsidiaries following the Spin-Off.Basis of Presentation.For periods prior to the Spin-Off,the unaudited combined financial statements were derived from the consolidated financial statements and accounting records of GE,including the historical cost basis of assets and liabilities comprising the Company,as well as the historical revenues,direct costs,and allocations of indirect costs attributable to the operations of the Company,using the historical accounting policies applied by GE.The unaudited combined financial statements do not purport to reflect what the results of operations,comprehensive income,financial position,or cash flows would have been had the Company operated as a separate,stand-alone entity during the periods prior to the Spin-Off.We have prepared the accompanying unaudited consolidated and combined financial statements pursuant to the rules and regulations of the Securities and Exchange Commission(SEC)applicable to interim financial statements.Accordingly,certain information related to our significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with U.S.generally accepted accounting principles(U.S.GAAP)have been condensed or omitted.These unaudited consolidated and combined financial statements reflect,in the opinion of management,all material adjustments(which include only normally recurring adjustments)necessary to fairly state,in all material respects,our financial position,results of operations,and cash flows for the periods presented.These unaudited consolidated and combined financial statements should be read in conjunction with our audited combined financial statements,corresponding notes,and significant accounting policies for the year ended December 31,2023,included in our information statement dated March 8,2024,which was furnished as Exhibit 99.1 to a Current Report on Form 8-K furnished with the SEC on March 8,2024(the Information Statement).The information presented in tables throughout the footnotes is presented in millions of U.S.dollars unless otherwise stated.Certain columns and rows may not add due to the use of rounded numbers.Percentages presented are calculated from the underlying numbers in millions.All intercompany balances and transactions within the Company have been eliminated in the consolidated and combined financial statements.As described in Note 24,transactions between the Company and GE have been included in these consolidated and combined financial statements.Certain financing transactions with GE are deemed to have been settled immediately through Net parent investment in the Consolidated and Combined Statement of Financial Position and are accounted for as a financing activity in the Consolidated and Combined Statement of Cash Flows as Transfers from(to)Parent.For periods prior to the Spin-Off,the Consolidated and Combined Statement of Financial Position reflects all of the assets and liabilities of GE that are specifically identifiable as being directly attributable to the Company,including Net parent investment as a component of equity.Net parent investment represents GEs historical investment in the Company and includes accumulated net income and losses attributable to the Company,and the net effect of transactions with GE and its subsidiaries.2024 2Q FORM 10-Q 23NOTE 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESEstimates and Assumptions.The preparation of the consolidated and combined financial statements in conformity with U.S.GAAP requires management to make estimates based on assumptions about current,and for some estimates,future,economic and market conditions which affect reported amounts and related disclosures in the consolidated and combined financial statements.We believe these assumptions to be reasonable under the circumstances,and although our current estimates contemplate current and expected future conditions,as applicable,it is reasonably possible that actual conditions could differ from our expectations,which could materially affect our results of operations,financial position,and cash flows.Estimates are used for,but are not limited to,determining revenues from contracts with customers,recoverability of inventory,long-lived assets and investments,valuation of goodwill and intangible assets,useful lives used in depreciation and amortization,income taxes and related valuation allowances,accruals for contingencies including legal,indemnifications,product warranties,and environmental,actuarial assumptions used to determine costs of pension and postretirement benefits,valuation and recoverability of receivables,valuation of derivatives,and valuation of assets acquired and liabilities assumed as a result of acquisitions.NOTE 3.DISPOSITIONS AND BUSINESSES HELD FOR SALE.During the second quarter of 2024,our Steam Power business completed the sale of part of its nuclear activities to Electricit de France S.A.(EDF).In connection with the disposition,we received net cash proceeds of$639 million,subject to customary working capital and other post-close adjustments.As a result,we recognized a pre-tax gain of$853 million(after-tax gain of$845 million),recorded in Other income(expense)net in our Consolidated and Combined Statement of Income(Loss).See Notes 15,16 and 19 for further information.The major components of assets and liabilities of the business held for sale in the Companys Consolidated and Combined Statement of Financial Position are summarized as follows:ASSETS AND LIABILITIES OF BUSINESS HELD FOR SALEJune 30,2024December 31,2023Cash and cash equivalents$603 Current receivables,inventories,and contract assets 551 Property,plant,and equipment and intangibles net 237 Other assets 53 Assets of business held for sale$1,444 Contract liabilities and deferred income$1,001 Accounts payable and equipment project payables 177 Other liabilities 270 Liabilities of business held for sale$1,448 NOTE 4.CURRENT AND LONG-TERM RECEIVABLESCURRENT RECEIVABLES NETJune 30,2024December 31,2023Customer receivables$5,021$5,952 Non-income based tax receivables 1,071 1,048 Supplier advances and other receivables 853 924 Other receivables$1,923$1,972 Allowance for credit losses(525)(515)Total current receivables net$6,419$7,409 Activity in the allowance for credit losses related to current receivables for the six months ended June 30,2024 and 2023 consists of the following:ALLOWANCE FOR CREDIT LOSSES20242023Balance as of January 1$515$674 Net additions(releases)charged to costs and expenses 19 (2)Write-offs,net(9)(54)Foreign exchange and other 1 10 Balance as of June 30$525$628 Sales of customer receivables.From time to time,the Company sells current or long-term receivables to third parties in response to customer-sponsored requests or programs,to facilitate sales,or for risk mitigation purposes.The Company sold current customer receivables to third parties and subsequently collected$550 million and$501 million in the six months ended June 30,2024 and 2023,respectively.Within these programs,primarily related to our participation in customer-sponsored supply chain finance programs in Wind,the Company has no continuing involvement,fees associated with the transferred receivables are covered by the customer,and cash is received at the original invoice due date.Included in the sales of customer receivables in the six months ended June 30,2023 was$77 million in our Gas Power business within our Power segment,primarily for risk mitigation purposes.2024 2Q FORM 10-Q 24LONG-TERM RECEIVABLESJune 30,2024December 31,2023Long-term customer receivables$284$316 Supplier advances 225 243 Non-income based tax receivables 107 136 Other receivables 276 190 Allowance for credit losses(177)(184)Total long-term receivables net$715$701 NOTE 5.INVENTORIES,INCLUDING DEFERRED INVENTORY COSTSJune 30,2024December 31,2023Raw materials and work in process$5,300$4,685 Finished goods 2,809 2,514 Deferred inventory costs(a)1,237 1,054 Inventories,including deferred inventory costs$9,346$8,253(a)Represents cost deferral for shipped goods(such as components for wind turbine assemblies in our Wind segment)and labor and overhead costs on time and material service contracts(primarily originating in our Power segment)and other costs where the criteria for revenue recognition have not yet been met.NOTE 6.PROPERTY,PLANT,AND EQUIPMENTJune 30,2024December 31,2023Original cost$12,099$11,907 Less:Accumulated depreciation and amortization(7,580)(7,347)Right-of-use operating lease assets 649 668 Property,plant,and equipment net$5,168$5,228 Depreciation and amortization related to property,plant,and equipment was$191 million and$170 million in the three months ended and$379 million and$347 million in the six months ended June 30,2024 and 2023,respectively.NOTE 7.LEASES.Our operating lease liabilities,included in All other current liabilities and All other liabilities in our Consolidated and Combined Statement of Financial Position,were$693 million and$718 million as of June 30,2024 and December 31,2023,respectively.Expense related to our operating lease portfolio,primarily from our long-term fixed leases,was$60 million and$83 million for three months ended and$135 million and$159 million for the six months ended June 30,2024 and 2023,respectively.Our finance lease liabilities,included in All other current liabilities and All other liabilities in our Consolidated and Combined Statement of Financial Position,were$286 million and$311 million as of June 30,2024 and December 31,2023,respectively.NOTE 8.ACQUISITIONS,GOODWILL,AND OTHER INTANGIBLE ASSETSAcquisitions.In the second quarter of 2023,our Gas Power business acquired Nexus Controls,a business specializing in aftermarket control system upgrades and controls field services.GOODWILLPowerWindElectrificationTotalBalance as of January 1,2024$308$3,204$925$4,437 Currency exchange and other 2 (83)(3)(83)Balance as of June 30,2024$311$3,122$921$4,354 We assess the possibility that a reporting units fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates.In the second quarter of 2024,we did not identify any reporting units that required an interim impairment test.Intangible assets.All intangible assets are subject to amortization.Intangible assets decreased$117 million during the six months ended June 30,2024,primarily as a result of amortization.Amortization expense was$63 million and$68 million in the three months ended and$126 million and$123 million in the six months ended June 30,2024 and 2023,respectively.NOTE 9.CONTRACT AND OTHER DEFERRED ASSETS&CONTRACT LIABILITIES AND DEFERRED INCOME.Contract assets reflect revenue recognized on contracts in excess of billings based on contractual terms.Contract liabilities primarily represent cash received from customers under ordinary commercial payment terms in advance of delivery of equipment orders or servicing of customers installed base.Contract and other deferred assets increased$357 million in the six months ended June 30,2024 primarily due to the timing of revenue recognition ahead of billing mil
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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30,2024OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _Commission file number 001-41966GE Vernova Inc.(Exact name of registrant as specified in its charter)Delaware92-2646542(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)58 Charles Street,Cambridge,MA02141(Address of principal executive offices)(Zip Code)(617)674-7555(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon stock,par value$0.01 per shareGEVNew York Stock ExchangeIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 duringthe preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements forthe past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company or anemerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and emerging growth company inRule 12b-2 of the Exchange Act.(Check one):Large accelerated filerAccelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No There were 275,652,970 shares of common stock with a par value of$0.01 per share outstanding at October 16,2024.TABLE OF CONTENTSPageForward-Looking Statements3About GE Vernova4Managements Discussion and Analysis of Financial Condition and Results of Operations(MD&A)4Transition to Stand-Alone Company4Disposition Activity4Arbitration Refund5Offshore Wind5Results of Operations5Segment Operations7Other Information10Capital Resources and Liquidity11Recently Issued Accounting Pronouncements13Critical Accounting Estimates13Non-GAAP Financial Measures13Controls and Procedures16Legal Proceedings17Financial Statements and Notes18Consolidated and Combined Statement of Income(Loss)18Consolidated and Combined Statement of Financial Position19Consolidated and Combined Statement of Cash Flows20Consolidated and Combined Statement of Comprehensive Income(Loss)21Consolidated and Combined Statement of Changes in Equity22Note1Organization and Basis of Presentation24Note2Summary of Significant Accounting Policies25Note3Dispositions and Businesses Held for Sale25Note4Current and Long-Term Receivables26Note5Inventories,Including Deferred Inventory Costs26Note6Property,Plant,and Equipment26Note7Leases27Note8Acquisitions,Goodwill,and Other Intangible Assets27Note9Contract and Other Deferred Assets&Contract Liabilities and Deferred Income27Note10Current and All Other Assets28Note11Equity Method Investments28Note12Accounts Payable and Equipment Project Payables28Note13Postretirement Benefit Plans28Note14Current and All Other Liabilities29Note15Income Taxes29Note16Accumulated Other Comprehensive Income(Loss)(AOCI)and Common Stock30Note17Share-Based Compensation30Note18Earnings Per Share Information31Note19Other Income(Expense)Net32Note20Financial Instruments32Note21Variable Interest Entities34Note22Commitments,Guarantees,Product Warranties,and Other Loss Contingencies34Note23Restructuring Charges and Separation Costs35Note24Related Parties36Note25Segment Information37Exhibits39Form 10-Q Cross Reference Index39Signatures40FORWARD-LOOKING STATEMENTS.The public communications and SEC filings of GE Vernova Inc.(the Company,GE Vernova,our,we or us)maycontain statements related to future,not past,events.These forward-looking statements often address our current expected future business and financialperformance and condition based on certain assumptions and include any statement that does not directly relate to any historical or current fact.Forward-lookingstatements often contain words such as expect,anticipate,intend,plan,believe,seek,see,will,would,estimate,forecast,target,preliminary,range,and similar expressions.Forward-looking statements by their nature address matters that are,to different degrees,uncertain,such as thebenefits we expect from our lean operating model,including cost and operational efficiencies and improvements;our expectations regarding the energytransition;the demand for our products and services,their role in the energy transition and our ability to meet those demands;our expectations of futureincreased business,revenues and operating results;our ability to innovate and anticipate and address customer demands;our ability to increase productioncapacity,efficiencies and quality;our underwriting and risk management;the experiences we believe we are gaining across our Haliade-X backlog related toinstallation timelines and related remediation plans;our ability to manage inflationary pressures;benefits we expect to receive from the Inflation Reduction Act of2022(IRA);our acquisitions and dispositions;our actual and planned investments,including in new product development,joint ventures and other collaborationswith third parties;our ability to meet our sustainability goals and targets;our ability to deploy innovative technologies at scale;our restructuring program toreduce operational costs;our ability to novate or assign credit support provided by General Electric Company;litigation,arbitration and governmentalproceedings involving us;the sufficiency and expected uses of our cash,liquidity,and financing arrangements;and our credit ratings.Any forward-lookingstatement in this report speaks only as of the date on which it is made.Although we believe that the forward-looking statements contained in this report arebased on reasonable assumptions,you should be aware that many factors could affect our actual financial results,cash flows,or results of operations and couldcause actual results to differ materially from those in such forward-looking statements,including but not limited to:Changes in macroeconomic and market conditions and market volatility,including risk of recession,inflation,supply chain constraints or disruptions,interest rates,the value of securities and other financial assets,oil,natural gas and other commodity prices and exchange rates,and the impact of suchchanges and volatility on the Companys business operations,financial results and financial position;Global economic trends,competition and geopolitical risks,including impacts from the ongoing geopolitical conflicts(such as the Russia-Ukraineconflict and conflict in the Middle East),demand or supply shocks from events such as a major terrorist attack,natural disasters,actual or threatenedpublic health pandemics or other emergencies,or an escalation of sanctions,tariffs or other trade tensions,and related impacts on our supply chainsand strategies;Actual or perceived quality issues or product or safety failures related to our complex and specialized products,solutions,and services,the timerequired to address them,costs associated with related project delays,repairs or replacements,and the impact of any contractual claims for damagesor other legal claims asserted in connection therewith,some of which may be for significant amounts,on our financial results,competitive position orreputation;Market developments or customer actions that may affect our ability to achieve our anticipated operational cost savings and implement initiatives tocontrol or reduce operating costs;Significant disruptions in the Companys supply chain,including the high cost or unavailability of raw materials,components,and products essential toour business,and significant disruptions to our manufacturing and production facilities and distribution networks;Our ability to attract and retain highly qualified personnel;Our ability to obtain,maintain,protect and effectively enforce our intellectual property rights;Our capital allocation plans,including the timing and amount of any dividends,share repurchases,acquisitions,organic investments,and otherpriorities;Downgrades of our credit ratings or ratings outlooks,or changes in rating application or methodology,and the related impact on the Companys fundingprofile,costs,liquidity and competitive position;Shifts in market and other dynamics related to electrification,decarbonization or sustainability;The amount and timing of our cash flows and earnings,which may be impacted by macroeconomic,customer,supplier,competitive,contractual andother dynamics and conditions;Actions by our joint venture arrangements,consortiums,and similar collaborations with third parties for certain projects that result in additional costsand obligations;Any reductions or modifications to,or the elimination of,governmental incentives or policies that support renewable energy and energy transitioninnovation and technology;Our ability to develop and introduce new technologies to meet market demand and evolving customer needs;Our ability to obtain required permits,licenses,and registrations;Changes in law,regulation or policy that may affect our businesses,such as trade policy and tariffs,regulation and incentives related to sustainability,climate change,environmental,health and safety laws,and tax law changes;Our ability and challenges to manage the transition as a newly stand-alone public company or achieve some or all of the benefits we expect to achievefrom such transition;The risk of an active trading market not being sustained for our securities or significant volatility in our stock price;andThe impact related to information technology,cybersecurity or data security breaches at GE Vernova or third parties.These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements,and these andother factors are more fully discussed elsewhere in this Quarterly Report on Form 10-Q and in the“Risk Factors”and Managements Discussion and Analysis ofFinancial Condition and Results of Operations sections included in our information statement dated March 8,2024,which was attached as Exhibit 99.1 to aCurrent Report on Form 8-K furnished with the Securities and Exchange Commission(SEC)on March 8,2024(the Information Statement),as may be updatedfrom time to time in our SEC filings and as posted on our website at may be other factors not presently known to us orwhich we currently consider to be immaterial that could cause our actual results to differ materially from those projected in any forward-looking statement that wemake.We do not undertake any obligation to update or revise our forward-looking statements except as may be required by law or regulation.2024 3Q FORM 10-Q 3ABOUT GE VERNOVA.GE Vernova Inc.is a global leader in the electric power industry,with products and services that generate,transfer,orchestrate,convert,and store electricity.We design,manufacture,deliver,and service technologies to create a more reliable and sustainable electric power system,enabling electrification and decarbonization,underpinning the progress and prosperity of the communities we serve.We are a purpose-built company,uniquelypositioned with a scope and scale of solutions to accelerate the energy transition,while servicing and growing our installed base and strengthening our ownprofitability and shareholder returns.We have a strong history of innovation which is a key strength enabling us to meet our customers needs.GE Vernovainnovates and invests across our broad portfolio of technologies to help our customers meet growing demand for electricity generation and reduce the carbonintensity of power grids and electricity supply,while maintaining or improving system reliability,affordability,and sustainability.Today,approximately 25%of theworlds electricity is generated using GE Vernovas installed base of technologies.We report three business segments that are aligned with the nature of equipment and services they provide,specifically Power,Wind,and Electrification.Withinour segments,Power includes gas,nuclear,hydro,and steam technologies,providing a critical foundation of dispatchable,flexible,stable,and reliable power.Our Wind segment includes our wind generation technologies,inclusive of onshore and offshore wind turbines and blades.Electrification includes grid solutions,power conversion,electrification software,and solar and storage solutions technologies required for the transmission,distribution,conversion,storage,andorchestration of electricity from point of generation to point of consumption.Our corporate headquarters is located at 58 Charles Street,Cambridge,Massachusetts 02141,and our telephone number is(617)674-7555.Our websiteaddress is .Information contained on,or that can be accessed through,our website is not part of,and is not incorporated into,this QuarterlyReport on Form 10-Q.Our website at contains a significant amount of information about GE Vernova,including financial andother information for investors.We encourage investors to visit this website from time to time,as information is updated,and new information is posted.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(MD&A).The followingdiscussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated and combined financialstatements,which are prepared in conformity with U.S.generally accepted accounting principles(GAAP),and corresponding notes included elsewhere in thisQuarterly Report on Form 10-Q.The following discussion and analysis provides information that management believes to be relevant to understanding thefinancial condition and results of operations of the Company for the three and nine months ended September 30,2024 and 2023.The below discussion shouldbe read alongside the Managements Discussion and Analysis of Financial Condition and Results of Operations and our audited combined financial statementsand corresponding notes for the year ended December 31,2023,included in the Information Statement.Unless otherwise noted,tables are presented in U.S.dollars in millions,except for per-share amounts which are presented in U.S.dollars.Certain columns and rows within tables may not add due to the use ofrounded numbers.Percentages presented in this report are calculated from the underlying numbers in millions.Unless otherwise noted,statements related tochanges in operating results relate to the corresponding period in the prior year.In the accompanying analysis of financial information,we sometimes use information derived from consolidated and combined financial data but not presented inour financial statements prepared in accordance with GAAP.Certain of these data are considered“non-GAAP financial measures”under SEC rules.See theNon-GAAP Financial Measures section for the reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparableGAAP financial measures.TRANSITION TO STAND-ALONE COMPANYFinancial Presentation Under GE Ownership.We completed our separation from General Electric Company(GE),which now operates as GE Aerospace,onApril 2,2024(the Spin-Off).In connection with the Spin-Off,GE distributed all of the shares of our common stock to its shareholders and we became anindependent company.Historically,as a business of GE,we relied on GE to manage certain of our operations and provide certain services,the costs of whichwere either allocated or directly billed to us.Accordingly,our historical costs for such services may not necessarily reflect the actual expenses we would haveincurred,or will incur,as an independent company and may not reflect our results of operations,financial position,and cash flows had we been a separate,stand-alone company during the historical periods presented.See Note 1 in the Notes to the consolidated and combined financial statements for furtherinformation.Production Tax Credit Investments.Our Financial Services business offers a wide range of financial solutions to customers and projects that utilize our Powerand Wind products and services.These solutions historically included making minority investments in projects,often through common or preferred equityinvestments where we generally seek to exit as soon as practicable once a project achieves commercial operation.Many such investments are in renewableenergy U.S.tax equity vehicles that generate various tax credits,including production tax credits(PTCs),which can be used to offset an equity partners taxliabilities in the U.S.and support the overall target return on investment.In connection with the Spin-Off,GE retained all renewable energy U.S.tax equityinvestments of$1.2 billion and any tax attributes from historical tax equity investing activity.We manage these investments under the Framework InvestmentAgreement with GE.Additionally,during the second quarter,in connection with GE retaining the renewable energy U.S.tax equity investments,we recognized a$0.1 billion benefit,recorded in Cost of equipment,related to deferred intercompany profit from historical equipment sales to the related investees.See Notes 11,21 and 23 in the Notes to the consolidated and combined financial statements for further information.DISPOSITION ACTIVITY.During the second quarter of 2024,our Steam Power business completed the sale of part of its nuclear activities to Electricit deFrance S.A.(EDF).In connection with the disposition,we received net cash proceeds of$0.6 billion,which is subject to customary working capital and otherpost-closing adjustments.As a result,we recognized a pre-tax gain of$0.9 billion recorded in Other income(expense)net in our Consolidated and CombinedStatement of Income(Loss).See Notes 3,15,16 and 19 in the Notes to the consolidated and combined financial statements for further information.2024 3Q FORM 10-Q 4ARBITRATION REFUND.In June 2024,we received$306 million in cash,which represented the return of cash payments we previously made relating to twopartial withdrawal liability assessments issued by a multiemployer pension plan(Fund)to which we contribute,plus interest on such amounts.We challenged theassessments in arbitration,but under the Employee Retirement Income Security Act of 1974(ERISA),we were required to make monthly payments from May2019 to September 2023 while the matter was arbitrated.In December 2023,an arbitrator ruled that we were exempt from the alleged liability,a decision thatwas appealed in January 2024 in a federal court.The arbitration award triggered a legal obligation for the Fund to return the payments to us with interest,whichit did in June 2024.During the second quarter,$254 million of cash,constituting the payments previously made to the Fund,was recorded in Selling,general,and administrative expenses and$52 million of cash,constituting interest on such amounts,was recorded in Interest and other financial charges net in ourConsolidated and Combined Statement of Income(Loss).As this dispute is not yet resolved,we cannot predict its ultimate resolution,including whether we willretain the funds following all final appeals,whether we are entitled to additional interest,or whether the Fund may contend it is owed interest if it prevails.OFFSHORE WIND.On July 13,2024,a wind turbine blade event occurred,related to a manufacturing deviation,at the Vineyard Wind offshore wind farmwhere we are the manufacturer and supplier of our newly developed Haliade-X 220m wind turbines(Haliade-X).On July 15,2024,the U.S.Bureau of Safety andEnvironmental Enforcement(BSEE)issued a suspension order to cease power production and the installation of new wind turbines at the project site.On August10,2024,BSEE issued a superseding order allowing us to resume the installation of towers and nacelles,subject to certain conditions.On October 22,2024,BSEE issued another superseding order allowing us to resume the installation of new blades,subject to certain conditions.In addition to the blade event at theVineyard Wind offshore wind farm,there have been blade events related to commissioning and installation at the Dogger Bank offshore wind farm.As we work through these issues,we are gaining experience across our Haliade-X backlog related to installation timelines including vessel availability,manufacturing and quality control processes,and various other project activities.Based on this experience,we are developing and implementing ourremediation plans,which includes updates to our project timelines to account for the slower pace of execution.As a result of the above,we have recorded incremental contract losses of approximately$0.7 billion during the third quarter which includes the impact ofchanges in execution timelines,costs to remediate quality issues,and estimates of project-related commercial liabilities.Additional changes or otherdevelopments could have an adverse effect on our cash collection timelines and contract margins and could result in further losses,which could be material.In addition,on September 12,2024,we entered into a settlement agreement regarding a project that was previously canceled by a customer resulting in a gainof approximately$0.3 billion in the quarter,which was recorded as$0.5 billion in revenues and$0.2 billion in cost of sales.The settlement included recovery ofcosts previously incurred on the canceled project.RESULTS OF OPERATIONSSummary of Third Quarter 2024 Results.Remaining performance obligations(RPO)were$117.7 billion and$112.2 billion as of September 30,2024 and2023,respectively.For the three months ended September 30,2024,total revenues were$8.9 billion,an increase of$0.7 billion for the quarter.Net income(loss)was$(0.1)billion,a decrease in net loss of$0.1 billion for the quarter,and net income(loss)margin was(1.1)%.Diluted earnings(loss)per share was$(0.35)for the three months ended September 30,2024,a decrease in diluted loss per share of$0.27 for the quarter.Cash flows from(used for)operatingactivities were$1.7 billion and$(0.7)billion for the nine months ended September 30,2024 and 2023,respectively.For the three months ended September 30,2024,Adjusted EBITDA*was$0.2 billion,an increase of less than$0.1 billion.Free cash flow*was$1.1 billion and$(1.2)billion for the nine months ended September 30,2024 and 2023,respectively.RPO,a measure of backlog,includes unfilled firm and unconditional customer orders for equipment and services,excluding any purchase order that providesthe customer with the ability to cancel or terminate without incurring a substantive penalty.Services RPO includes the estimated life of contract sales related tolong-term service agreements which remain unsatisfied at the end of the reporting period,excluding contracts that are not yet active.Services RPO alsoincludes the estimated amount of unsatisfied performance obligations for time and material agreements,material services agreements,spare parts underpurchase order,multi-year maintenance programs,and other services agreements,excluding any order that provides the customer with the ability to cancel orterminate without incurring a substantive penalty.See Note 9 in the Notes to the consolidated and combined financial statements for further information.RPOSeptember 30,2024December 31,2023September 30,2023Equipment$42,069$40,478$39,105 Services75,678 75,120 73,082 Total RPO$117,746$115,598$112,187 As of September 30,2024,RPO increased$2.1 billion(2%)from December 31,2023,primarily at Electrification by$5.6 billion from orders outpacing revenuesacross all businesses;partially offset at Power,due to a reduction of approximately$3.9 billion related to the sale of a portion of Steam Power nuclear activitiesto EDF;and at Wind,related to decreases at Offshore Wind as we continue to execute on our contracts,and have finalized the settlement of a previouslycanceled project.RPO increased$5.6 billion(5%)from September 30,2023 primarily at Electrification by$6.3 billion as orders outpaced revenues across allbusinesses;partially offset at Power due to a reduction of approximately$3.9 billion related to the sale of a portion of Steam Power nuclear activities to EDF;andat Wind due to decreases at Offshore Wind where revenues outpaced new orders as we continue to execute on our contracts,as well as the cancellation of aproject in the fourth quarter of 2023,partially offset by Onshore Wind driven by a large order in the U.S.in the fourth quarter of 2023.*Non-GAAP Financial Measure2024 3Q FORM 10-Q 5Three months ended September 30Nine months ended September 30REVENUES2024202320242023Equipment revenues$5,290$4,869$13,101$12,746 Services revenues3,623 3,383 11,276 10,448 Total revenues$8,913$8,253$24,376$23,194 For the three months ended September 30,2024,total revenues increased$0.7 billion(8%).Services revenues increased in all segments,primarily at Powerdue to growth in Gas Power from volume.Equipment revenues increased primarily at Electrification,led by growth at Grid Solutions;and at Power due to GasPower from Heavy-Duty Gas Turbine shipments;partially offset at Wind,from Offshore Wind,where revenue decreased as a result of slower execution whichwas partially offset by revenue recorded on the settlement of a previously canceled project,and Onshore Wind as more repower units were delivered in theperiod.Organic revenues*exclude the effects of acquisitions,dispositions,and foreign currency.Excluding these effects,organic revenues*increased$0.8 billion(10%),organic services revenues*increased$0.3 billion(10%)and organic equipment revenues*increased$0.5 billion(10%).Organic revenues*increased atPower and Electrification.For the nine months ended September 30,2024,total revenues increased$1.2 billion(5%).Services revenues increased in all segments,primarily at Powerdue to growth in Gas Power from higher outages and transactional service volume.Equipment revenues increased primarily at Electrification,led by growth atGrid Solutions;at Power from project commissioning and Aeroderivatives;partially offset at Wind,due to Onshore Wind where fewer units were delivered in theperiod,partially offset by higher equipment revenues at Offshore Wind as we continue to execute on our RPO and recorded revenue on the settlement of apreviously canceled project.Organic revenues*exclude the effects of acquisitions,dispositions,and foreign currency.Excluding these effects,organic revenues*increased$1.3 billion(6%),organic services revenues*increased$0.9 billion(9%)and organic equipment revenues*increased$0.4 billion(3%).Organic revenues*increased at Power andElectrification,partially offset by Wind.Three months ended September 30Nine months ended September 30EARNINGS(LOSS)2024202320242023Operating income(loss)$(359)$(307)$(122)$(1,118)Net income(loss)(99)(185)1,075(680)Net income(loss)attributable to GE Vernova(96)(170)1,068(635)Adjusted EBITDA*243 205 957 223 Diluted earnings(loss)per share(a)(0.35)(0.62)3.85(2.32)(a)The computation of earnings(loss)per share for all periods through April 1,2024 was calculated using 274 million common shares that were issued uponSpin-Off and excludes Net loss(income)attributable to noncontrolling interests.For periods prior to the Spin-Off,the Company participated in various GEstock-based compensation plans.For periods prior to the Spin-Off,there were no dilutive equity instruments as there were no equity awards of GE Vernovaoutstanding prior to Spin-Off.For the three months ended September 30,2024,operating income(loss)was$(0.4)billion,a$0.1 billion increase in operating loss,primarily due to:highercorporate costs required to operate as a stand-alone public company and separation costs;a decrease in segment results at Wind of$0.1 billion,due toincremental contract losses at Offshore Wind,partially offset by a gain recorded on the settlement of a previously canceled project and increases at OnshoreWind;partially offset by an increase in segment results at Power of$0.2 billion,primarily at Gas Power and Steam Power services due to volume,productivityand price,which more than offset the impact of inflation;and at Electrification of$0.1 billion,primarily due to higher volume,price,and productivity at GridSolutions.Net income(loss)and Net income(loss)margin were$(0.1)billion and(1.1)%,respectively,for the three months ended September 30,2024,a decrease in netloss and net loss margin of$0.1 billion and 1.1%,respectively,for the quarter,primarily due to an increase in benefit for income taxes of$0.2 billion,partiallyoffset by an increase in operating loss of$0.1 billion,and a decrease in other income(expense)of$0.1 billion.Adjusted EBITDA*and Adjusted EBITDA margin*were$0.2 billion and 2.7%,respectively,for the three months ended September 30,2024,an increase of lessthan$0.1 billion and 0.2%,respectively,primarily driven by increases in segment results at Power and Electrification,partially offset at Wind.For the nine months ended September 30,2024,operating income(loss)was$(0.1)billion,a$1.0 billion decrease in operating loss,primarily due to:anincrease in segment results at Power of$0.5 billion,primarily attributable to Gas Power,where higher volume,favorable pricing,and increased productivity morethan offset the impact of inflation;at Electrification of$0.3 billion,primarily due to higher volume,price,and productivity at Grid Solutions;at Wind of$0.1 billion,primarily at Onshore Wind as a result of improved pricing and the impact of cost reduction activities,which was partially offset by a decrease at Offshore Wind asa result of incremental contract losses in the third quarter,partially offset by a gain recorded on the settlement of a previously canceled project;as well as$0.3billion received related to an arbitration refund and a$0.1 billion benefit related to deferred intercompany profit that was recognized upon GE retaining therenewable energy U.S.tax equity investments in connection with the Spin-Off in the second quarter;partially offset by higher corporate costs required to operateas a stand-alone public company and separation costs.Net income(loss)and Net income(loss)margin were$1.1 billion and 4.4%,respectively,for the nine months ended September 30,2024,an increase of$1.8billion and 7.3%,respectively,for the period,primarily due to a decrease in operating loss of$1.0 billion and an increase in other income of$0.7 billion,driven bya$0.9 billion pre-tax gain from the sale of a portion of Steam Power nuclear activities to EDF,partially offset by an increase in provision for income taxes of$0.1billion.*Non-GAAP Financial Measure2024 3Q FORM 10-Q 6Adjusted EBITDA*and Adjusted EBITDA margin*were$1.0 billion and 3.9%,respectively,for the nine months ended September 30,2024,an increase of$0.7billion and 3.0%,respectively,primarily driven by increases in segment results at Power,Electrification,and Wind.SEGMENT OPERATIONS.Refer to the Information Statement for further information regarding our determination of segment EBITDA.Three months ended September 30Nine months ended September 30SUMMARY OF REPORTABLE SEGMENTS20242023V 242023V%Power$4,206$3,893 8%$12,696$11,845 7%Wind2,891 2,887 6,592 7,239(9)Electrification1,928 1,576 22 5,369 4,412 22 Eliminations and other(112)(103)(9)(281)(302)7 Total revenues$8,913$8,253 8%$24,376$23,194 5%Segment EBITDA Power$499$280 78%$1,457$923 58%Wind(317)(225)(41)(607)(744)18 Electrification201 65 F396 66 FCorporate and other(a)(140)85 U(290)(21)UAdjusted EBITDA*(b)$243$205 19%$957$223 F(a)Includes our Financial Services business and other general corporate expenses,including costs required to operate as a stand-alone public company.(b)Refer to Non-GAAP Financial Measures for additional information related to Adjusted EBITDA*.Adjusted EBITDA*includes interest and other financialcharges and the benefit for income taxes of Financial Services as this business is managed on an after-tax basis due to its strategic investments in tax equityinvestments.POWER.We believe gas power plays a critical role in the energy transition,offering a fundamental foundation of reliable and dispatchable power.Althoughmarket factors related to the energy transition,such as greater renewable energy penetration and the adoption of climate change-related legislation and policiescontinue to evolve,we expect the gas power market to grow over the next decade.We foresee gas power generation continuing to grow low single digits,whichwill play an indispensable role in ensuring grid stability and energy security.We remain focused on our underwriting discipline and risk management to ensurewe are securing deals that meet our financial hurdles,where we have high confidence in delivering for our customers.During the three months ended September 30,2024,GE Vernovas gas turbine utilization was flat compared to the same period last year.Growth in Asia fromfewer outages and more HA units commissioned,and higher utilization in the U.S.were offset by Europe where increased nuclear,hydro,and renewable energydrove lower gas operations in the quarter.Global electricity demand increased by low-single digits.As we work in emerging markets,there could be uncertainty in the timing of deal closures due to financing and other complexities.Power has proactivelymanaged the impact of inflationary pressure by deploying lean initiatives to drive cost productivity measures,collaborating with our suppliers and adjusting thepricing of our products and services.Given the long-cycle nature of the business,we expect the impact of inflation will continue to be challenging and we willcontinue to take actions to manage it.We are adjusting pricing of our products and services based on demand,inflation,and industry dynamics.We continue to invest in new product development.In Nuclear Power,we have an agreement with a customer for the deployment of small modular nuclearreactor technology,the first commercial contract in North America,with the potential to enable reductions in nuclear power plant costs and cycle times.In GasPower,we continue to invest for the long-term,including decarbonization technologies that will provide customers with lower carbon-emitting and more reliablepower.As of September 30,2024,our fundamentals remained strong with approximately$71.3 billion in RPO and a gas turbine installed base of approximately7,000 units with approximately 1,700 units under long-term service agreements with an average remaining contract life of approximately 10 years.As ofSeptember 30,2024,we had 36 HA-Turbines in RPO,31 being installed and commissioned,and 106 HA-Turbines in our installed base with approximately 2.7million operating hours.Three months ended September 30Nine months ended September 30Orders in units2024202320242023Gas Turbines29 20 78 59 Heavy-Duty Gas Turbines14 12 44 32 HA-Turbines9 4 21 8 Aeroderivatives15 8 34 27 Gas Turbine Gigawatts5.1 3.1 14.1 7.4 Three months ended September 30Nine months ended September 30Sales in units2024202320242023Gas Turbines18 19 50 56 Heavy-Duty Gas Turbines13 12 31 39 HA-Turbines5 2 7 9 Aeroderivatives5 7 19 17 Gas Turbine Gigawatts3.3 2.7 7.1 8.6*Non-GAAP Financial Measure2024 3Q FORM 10-Q 7RPOSeptember 30,2024December 31,2023September 30,2023Equipment$11,392$13,636$13,865 Services59,911 59,338 57,916 Total RPO$71,303$72,974$71,781 RPO as of September 30,2024 decreased$1.7 billion(2%)from December 31,2023,primarily due to a reduction of approximately$3.9 billion related to thesale of a portion of Steam Power nuclear activities to EDF,partially offset by orders outpacing revenues for Gas Power Heavy-Duty Gas Turbines and GasPower services.RPO decreased$0.5 billion(1%)from September 30,2023 primarily due to a reduction of approximately$3.9 billion related to the sale of aportion of Steam Power nuclear activities to EDF,and reductions in Hydro Power equipment,partially offset by growth in Gas Power services and equipment.Three months ended September 30Nine months ended September 30SEGMENT REVENUES AND EBITDA2024202320242023Gas Power$3,466$2,944$9,966$8,877 Nuclear Power167 158 618 591 Hydro Power181 220 544 617 Steam Power393 571 1,569 1,760 Total segment revenues$4,206$3,893$12,696$11,845 Equipment$1,426$1,291$3,912$3,618 Services2,781 2,602 8,784 8,228 Total segment revenues$4,206$3,893$12,696$11,845 Segment EBITDA$499$280$1,457$923 Segment EBITDA margin11.9%7.2.5%7.8%For the three months ended September 30,2024,segment revenues were up$0.3 billion(8%)and segment EBITDA was up$0.2 billion(78%).Segment revenues increased$0.5 billion(13%)organically*,primarily due to increases in Gas Power services volume and Gas Power equipment from Heavy-Duty Gas Turbine shipments.Segment EBITDA increased$0.1 billion(45%)organically*,primarily due to increases at Gas Power and Steam Power services,where volume,productivity,andprice more than offset the impact of inflation.For the nine months ended September 30,2024,segment revenues were up$0.9 billion(7%)and segment EBITDA was up$0.5 billion(58%).Segment revenues increased$1.0 billion(9%)organically*,primarily at Gas Power services driven by higher outages and transactional volume and increases inGas Power equipment from project commissioning and Aeroderivatives.Segment EBITDA increased$0.4 billion(39%)organically*,mainly driven by improvements at Gas Power where higher volume,favorable pricing,and increasedproductivity offset the impact of inflation.WIND.In our Wind segment,we create value by engineering,manufacturing,and commercializing wind turbines,an important technology playing a role in theenergy transition as we seek to decarbonize the worlds energy sector.As we focus on providing carbon-free electricity reliably and at scale,we have simplifiedour senior management structure and portfolio of product offerings,focusing on fewer and more reliable workhorse products.Workhorse products,which includeour 2.8-127m,3.6-154m,and 6.1-158m onshore units,and our Haliade-X 220m offshore units,account for approximately 70%of our equipment RPO in OnshoreWind and Offshore Wind at September 30,2024.Included in our RPO are services agreements on approximately 24,000 of our onshore wind turbines,from aninstalled base of approximately 56,000 units.At Onshore Wind,we are focused on improving our overall fleet availability.We are reducing product variants and deploying repairs and other correctivemeasures across the fleet.Concurrently,we intend to operate in fewer geographies and focus on those geographic regions that align better with our productsand supply chain footprint,positioning our workhorse products to targeted countries.Our volume mix has shifted towards the U.S.,currently representingapproximately 75%of Onshore Winds equipment RPO,while our international volume has become smaller and more profitable.Specifically in the U.S.,the IRAintroduced new,and extended existing,tax incentives through at least 2033,significantly improving project economics for our customers and turbine producers.Our projects in the U.S.generally benefit from incentives available to our customers and broadly available IRA incentives.Finally,we are continuing ourrestructuring program to reduce our operating costs and are seeing the benefits both operationally and financially.In our Offshore Wind business,we continue to experience pressure related to our product and project costs,and execution timelines,as we deliver on ourexisting backlog.We are committed to driving quality improvements,installation efficiencies,and cost productivity,including steps to right-size the business.*Non-GAAP Financial Measure2024 3Q FORM 10-Q 8Three months ended September 30Nine months ended September 30Onshore and Offshore Wind orders in units2024202320242023Wind Turbines249 411 870 1,479 Repower Units132 27 378 173 Wind Turbine and Repower Units Gigawatts1.2 1.8 3.8 6.4 Three months ended September 30Nine months ended September 30Onshore and Offshore Wind sales in units2024202320242023Wind Turbines515 666 1,108 1,718 Repower Units182 50 246 179 Wind Turbine and Repower Units Gigawatts2.4 2.6 5.1 6.7 RPOSeptember 30,2024December 31,2023September 30,2023Equipment$12,182$13,709$12,561 Services12,788 13,240 12,831 Total RPO$24,969$26,949$25,392 RPO as of September 30,2024 decreased$2.0 billion(7%)from December 31,2023 primarily due to decreases at Offshore Wind as we continue to execute onour contracts and have finalized the settlement of a previously canceled project.RPO decreased$0.4 billion(2%)from September 30,2023 primarily due todecreases at Offshore Wind,where revenues outpaced new orders as we continue to execute on our contracts,as well as the cancellation of a project in thefourth quarter of 2023,partially offset by increased Onshore Wind RPO driven by a large order in the U.S.recorded in the fourth quarter of 2023.Three months ended September 30Nine months ended September 30SEGMENT REVENUES AND EBITDA2024202320242023Onshore Wind$2,355$2,281$4,974$5,878 Offshore Wind388 455 1,183 989 LM Wind Power148 151 436 372 Total segment revenues$2,891$2,887$6,592$7,239 Equipment$2,494$2,527$5,394$6,186 Services397 360 1,198 1,052 Total segment revenues$2,891$2,887$6,592$7,239 Segment EBITDA$(317)$(225)$(607)$(744)Segment EBITDA margin(11.0)%(7.8)%(9.2)%(10.3)%For the three months ended September 30,2024,segment revenues were flat and segment EBITDA was down$0.1 billion(41%).Segment revenues decreased(1%)organically*,primarily at Offshore Wind as a result of the slower execution,which was partially offset by revenues recordedon the settlement of a previously canceled project.Onshore Wind revenues increased as more repower units were delivered in the period.Segment EBITDA decreased$0.1 billion(60%)organically*,due to incremental contract losses at Offshore Wind,partially offset by a gain recorded on thesettlement of a previously canceled project and increases at Onshore Wind.For the nine months ended September 30,2024,segment revenues were down$0.6 billion(9%)and segment EBITDA was up$0.1 billion(18%).Segment revenues decreased$0.7 billion(9%)organically*,primarily at Onshore Wind where fewer units were delivered in the period,partially offset by higherequipment revenues at Offshore Wind as we continue to execute on our RPO and recorded revenues on the settlement of a previously canceled project.Segment EBITDA increased$0.1 billion(15%)organically*,primarily at Onshore Wind as a result of improved pricing and the impact of cost reduction activities.Offshore Wind decreased as a result of incremental contract losses in the third quarter,partially offset by a gain recorded on the settlement of a previouslycanceled project.ELECTRIFICATION.We continue to experience robust demand for our systems,equipment,and services across all businesses.Demand remains strong forlarge scale transmission-related equipment to interconnect renewables and move bulk power.We also continue to benefit from higher growth in orders fromother transmission activities within our Grid Solutions business.Our Grid Solutions business is positioned to support grid expansion and modernization needs globally.We participate in the onshore interconnection market andthe rapidly growing offshore renewable interconnection market with new products and technology supporting a 2 GW HVDC solution standard.We havedeveloped and seek to continue developing new technologies,such as grid-forming static synchronous compensators and SF-free switchgears,with theintention of solving for a denser,more resilient,stable,and efficient electric grid with lower future greenhouse gas emissions.*Non-GAAP Financial Measure62024 3Q FORM 10-Q 9We are adjusting pricing and contractual terms of our products and services based on demand,inflation,and industry dynamics.Customer lead-times haveincreased as a result of demand outstripping supply,though we are proactively managing this by deploying lean initiatives to reduce lead-times and drive costproductivity.In addition,we are making investments to expand our capacity and capabilities to support this continued growth while benefiting from synergiesacross our Electrification businesses.RPOSeptember 30,2024December 31,2023September 30,2023Equipment$18,624$13,233$12,774 Services3,288 3,109 2,881 Total RPO$21,912$16,342$15,655 RPO as of September 30,2024 increased$5.6 billion(34%)from December 31,2023 primarily due to orders outpacing revenues across all businesses.RPOincreased$6.3 billion(40%)from September 30,2023 primarily driven by orders outpacing revenues across all businesses.Three months ended September 30Nine months ended September 30SEGMENT REVENUES AND EBITDA2024202320242023Grid Solutions$1,270$979$3,521$2,780 Power Conversion310 286 858 686 Electrification Software218 204 646 635 Solar&Storage Solutions130 108 344 311 Total segment revenues$1,928$1,576$5,369$4,412 Equipment$1,451$1,116$3,967$3,102 Services477 461 1,402 1,310 Total segment revenues$1,928$1,576$5,369$4,412 Segment EBITDA$201$65$396$66 Segment EBITDA margin10.4%4.1%7.4%1.5%For the three months ended September 30,2024,segment revenues were up$0.4 billion(22%)and segment EBITDA was up$0.1 billion.Segment revenues increased$0.4 billion(24%)organically*,led by growth in equipment at Grid Solutions and Power Conversion.Segment EBITDA increased$0.1 billion organically*,primarily driven by higher volume,price,and productivity across all businesses.For the nine months ended September 30,2024,segment revenues were up$1.0 billion(22%)and segment EBITDA was up$0.3 billion.Segment revenues increased$0.9 billion(21%)organically*,led by growth in equipment at Grid Solutions and Power Conversion.Segment EBITDA increased$0.3 billion organically*,primarily driven by higher volume,price,and productivity across all businesses.OTHER INFORMATIONGross Profit and Gross Margin.Gross profit was$1.1 billion and$1.1 billion for the three months ended and$4.0 billion and$3.1 billion for the nine monthsended September 30,2024 and 2023,respectively.Gross margin was 12.4%and 12.7%for the three months ended and 16.3%and 13.4%for the nine monthsended September 30,2024 and 2023,respectively.The increase in gross profit for the quarter was due to an increase at Power due to Gas Power services fromfavorable volume,productivity,and price,which more than offset inflation;an increase at Electrification due to higher volume,price,and productivity at GridSolutions;partially offset by a decrease at Wind,as a result of Offshore Wind incremental contract losses,partially offset by a gain recorded on the settlement ofa previously canceled project and an increase in Onshore Wind through improved pricing.The increase in gross profit for the year was due to increases atPower and Electrification,due to the reasons described above,and at Wind,due to Onshore Wind through improved pricing and the impact of cost reductionactivities,and a gain recorded on the settlement of a previously canceled project at Offshore Wind,partially offset by incremental contract losses at OffshoreWind.Selling,General,and Administrative.Selling,general,and administrative costs were$1.2 billion and$1.1 billion for the three months ended and$3.4 billionand$3.6 billion for the nine months ended and comprised 13.8%and 13.8%of revenues for the three months ended and 13.8%and 15.5%of revenues for thenine months ended September 30,2024 and 2023,respectively.The increase in costs for the quarter was attributable to labor inflation,higher corporate costsrequired to operate as a stand-alone public company,and separation costs,which more than offset cost reduction initiatives.The reduction in costs for the yearwas attributable to a$0.3 billion arbitration refund received in the second quarter of 2024,and cost reduction initiatives,partially offset by higher corporate costsrequired to operate as a stand-alone public company and separation costs.*Non-GAAP Financial Measure2024 3Q FORM 10-Q 10Restructuring Charges and Separation Costs.We continuously evaluate our cost structure and are implementing several restructuring and processtransformation actions considered necessary to simplify our organizational structure.In addition,in connection with the Spin-Off,we incurred and will continue toincur certain one-time separation costs and recognized a benefit related to deferred intercompany profit upon GE retaining the renewable energy U.S.tax equityinvestments.See Note 23 in the Notes to the consolidated and combined financial statements for further information.Interest and Other Financial Charges Net.Interest and other financial charges net was less than$0.1 billion and$0.1 billion in income for the three andnine months ended September 30,2024,respectively,and less than$0.1 billion and$0.1 billion in expense for the three and nine months ended September 30,2023,respectively.The higher income in 2024 was primarily driven by a higher average balance of invested funds interest received from an arbitration refundduring the nine months ended September 30,2024.The primary components of net interest and other financial charges are fees on cash management activities,interest on borrowings,and interest earned on cash balances and short-term investments.Income Taxes.We recorded an income tax benefit on a pre-tax loss with an effective tax rate of 18.9%for the three months ended September 30,2024.Theeffective tax rate was lower than the U.S.statutory rate of 21%primarily due to a portion of the pre-tax loss providing no tax benefit in certain jurisdictions.We recorded an income tax expense on pre-tax income with an effective tax rate of 22.4%for the nine months ended September 30,2024.The effective tax ratewas higher than the U.S.statutory rate of 21%primarily due to losses providing no tax benefit in certain jurisdictions,partially offset by a pre-tax gain with aninsignificant tax impact from the sale of a portion of Steam Power nuclear activities to EDF.We recorded an income tax expense on a pre-tax loss in the three and nine months ended September 30,2023 due to taxes in profitable jurisdictions and lossesproviding no tax benefit in other jurisdictions.See Note 15 in the Notes to the consolidated and combined financial statements for further information.CAPITAL RESOURCES AND LIQUIDITY.Historically,we participated in cash pooling and other financing arrangements with GE to manage liquidity andfund our operations.As a result of completing the Spin-Off,we no longer participate in these arrangements and our Cash,cash equivalents,and restricted cashare held and used solely for our own operations.Our capital structure,long-term commitments,and sources of liquidity have changed significantly from ourhistorical practices.In connection with the Spin-Off,we received cash from GE of$0.8 billion through a cash contribution of$0.5 billion to fund future GEVernova operations and a cash transfer of$0.3 billion restricted in connection with certain legal matters associated with legacy GE operations,such that ourcash balance on the date of the completion of the Spin-Off was approximately$4.2 billion.As of September 30,2024,our Cash,cash equivalents,and restrictedcash was$7.4 billion,approximately$1.4 billion of which was held in countries where access to cash may be delayed due to various regulations(including$0.1billion in Russia and Ukraine)and$0.5 billion was restricted use cash.During the third quarter of 2024,we received proceeds of$0.7 billion from the sale of aportion of our equity interest in GE Vernova T&D India Ltd(formerly known as GE T&D India Ltd).During the second quarter of 2024,our Steam Power businesscompleted the sale of part of its nuclear activities to EDF.In connection with the disposition,we received net cash proceeds of$0.6 billion.During the secondquarter of 2024,we also received a cash refund of$0.3 billion in connection with an arbitration proceeding.In addition,we have access to a$3.0 billioncommitted revolving credit facility(Revolving Credit Facility).See“Capital Resources and LiquidityDebt”below for additional information.We believe ourfuture cash flows generated from operations and committed credit facility will be responsive to the needs of our current and planned operations for at least thenext 12 months.Consolidated and Combined Statement of Cash Flows.The most significant source of cash flows from operations is customer-related activities,the largest ofwhich is collecting cash resulting from equipment or services sales.The most significant operating uses of cash are to pay our suppliers,employees,taxauthorities,and postretirement plans.We measure ourselves on a free cash flow*basis.We believe that free cash flow*provides management and investorswith an important measure of our ability to generate cash on a normalized basis.Free cash flow*also provides insight into our ability to produce cashsubsequent to fulfilling our capital obligations;however,free cash flow*does not delineate funds available for discretionary uses as it does not deduct thepayments required for certain investing and financing activities.We typically invest in property,plant,and equipment(PP&E)over multiple periods to support new product introductions and increases in manufacturing capacityand to perform ongoing maintenance of our manufacturing operations.We believe that while PP&E expenditures will fluctuate period to period,we will need tomaintain a material level of net PP&E spend to maintain ongoing operations and growth of the business.Nine months ended September 30FREE CASH FLOW(NON-GAAP)20242023Cash from(used for)operating activities(GAAP)$1,662$(745)Add:Gross additions to property,plant,and equipment and internal-use software(533)(464)Free cash flow(Non-GAAP)$1,129$(1,209)*Non-GAAP Financial Measure2024 3Q FORM 10-Q 11Cash from(used for)operating activities was$1.7 billion and$(0.7)billion for the nine months ended September 30,2024 and 2023,respectively.Cash from(used for)operating activities increased by$2.4 billion in 2024 compared to 2023 primarily driven by:higher net income(after adjusting fordepreciation of PP&E,amortization of intangible assets,and(gains)losses on purchases and sales of business interests)of$1.3 billion,including the impact ofa$0.3 billion cash refund we received in connection with an arbitration proceeding in the second quarter of 2024;an increase of$1.2 billion in accounts payableand equipment project payables,primarily due to lower disbursements,including reductions in prepayments;and an increase of$0.7 billion in contract liabilitiesand current deferred income,due to higher collections at Electrification and Power,and lower liquidations,including the settlement of a previously canceledproject in 2024,at Wind;partially offset by a decrease in due to related parties of$(0.5)billion,primarily due to settlements of payables with GE prior to the Spin-Off in 2024.Cash from operating activities of$1.7 billion for the nine months ended September 30,2024 included a$0.9 billion inflow from changes in working capital.Thecash inflow from changes in working capital was primarily driven by:contract liabilities and current deferred income of$1.7 billion,driven by down payments andcollections on several large projects in Grid Solutions at Electrification,and net collections at Power,partially offset by liquidations and the settlement of apreviously canceled project at Wind;accounts payable and equipment project payables of$1.0 billion,due to material purchases outpacing disbursements,andreductions in prepayments;inventories of$(1.2)billion,primarily in Gas Power,to support fulfillment and deliveries expected in the fourth quarter of 2024 and in2025;changes in due to related parties of$(0.4)billion,primarily due to settlements of payables with GE prior to the Spin-Off;and current contract assets of$(0.2)billion,driven by revenue recognition exceeding billings on our equipment and other service agreements in Electrification and Power.Cash used for operating activities of$0.7 billion for the nine months ended September 30,2023 included a less than$0.1 billion outflow from changes in workingcapital.The cash outflow from changes in working capital was primarily driven by:inventories of$(1.1)billion,primarily due to inventory build in Gas Power atPower;a decrease in accounts payable and equipment project payables of$(0.2)billion,driven by higher disbursements in Onshore Wind at Wind;contractliabilities and current deferred income of$1.0 billion as a result of project collections and down payments in Power and Electrification outpacing revenuerecognition,partially offset by lower collections and higher revenue recognition in Wind;and current receivables of$0.2 billion,driven by collections outpacingbillings primarily in Power and Wind.Cash from(used for)investing activities was$0.1 billion and$(0.5)billion for the nine months ended September 30,2024 and 2023,respectively.Cash from(used for)investing activities increased by$0.6 billion in 2024 compared to 2023 primarily driven by:net proceeds from principal businessdispositions of$0.6 billion in the second quarter of 2024,as a result of our Steam Power business sale of part of its nuclear activities to EDF in our Powersegment;and the nonrecurrence of the net impact of our acquisition of Nexus Controls and other investment sales of$0.2 billion in 2023;partially offset by adecrease in sales of and distributions from equity method investments of$(0.2)billion,primarily driven by our Financial Services business.Cash used foradditions to PP&E and internal-use software,which is a component of free cash flow*,was$0.5 billion for both the nine months ended September 30,2024 and2023.Cash from financing activities was$3.5 billion and$0.7 billion for the nine months ended September 30,2024 and 2023,respectively.Cash from financingactivities increased by$2.8 billion in 2024 compared to 2023 primarily driven by:higher transfers from parent of$2.3 billion;and proceeds from the sale of anapproximately 16%equity interest in GE Vernova T&D India Ltd,a power transmission and distribution solution provider,of$0.7 billion in the third quarter of2024,which is reflected in All other financing activities.After the sale,we retained a controlling interest in GE Vernova T&D India Ltd.Material Cash Requirements.In the normal course of business,we enter into contracts and commitments that oblige us to make payments in the future.Information regarding our obligations under lease and guarantee arrangements as well as our investment commitments is provided in Note 7 and Note 22 in theNotes to the consolidated and combined financial statements included elsewhere in this Quarterly Report on Form 10-Q as well as in Note 7 and Note 20 in theNotes to the audited combined financial statements included in the Information Statement.Additionally,we have material cash requirements related to ourpension obligations as described in Note 13 to the audited combined financial statements included in the Information Statement.Debt.As of both September 30,2024 and December 31,2023,we had$0.1 billion of total debt,excluding finance leases.We have a$3.0 billion RevolvingCredit Facility to fund near-term intra-quarter working capital needs as they arise.In addition,we have a$3.0 billion committed trade finance facility(TradeFinance Facility,and together with the Revolving Credit Facility,the Credit Facilities).The Trade Finance Facility has not been and is not expected to be utilized,and does not contribute to direct liquidity.We believe that our financing arrangements,future cash from operations,and access to capital markets will provideadequate resources to fund our future cash flow needs.For more information about these Credit Facilities,refer to our Current Report on Form 8-K,filed with theSEC on April 2,2024.Credit Ratings and Conditions.GE historically relied on the debt capital markets to fund,among other things,a significant portion of its operations.We maycontinue to rely on capital markets in the future,and we have access to the Revolving Credit Facility to fund operations,as described above,to further supportour liquidity needs.The cost and availability of any debt financing is influenced by our credit ratings and market conditions.Standard and Poors Global Ratings(S&P)and Fitch Ratings(Fitch)have issued credit ratings for our Company.Our credit ratings as of the date of this filing are set forth in the following table.S&PFitchOutlookStableStableLong termBBB-BBB*Non-GAAP Financial Measure2024 3Q FORM 10-Q 12We are disclosing our credit ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds and access to credit.Our ratings may be subject to a revision or withdrawal at any time by the assigning rating organization,and each rating should be evaluated independently ofany other rating.For a description of some of the potential consequences of a reduction in our credit ratings,see the Risks Relating to Financial,Accounting,andTax Matters section of Risk Factors in the Information Statement.If GE Vernova is unable to maintain investment grade ratings,we could face significant challenges in being awarded new contracts,substantially increasingfinancing and hedging costs,and refinancing risks as well as substantially decreasing the availability of credit.The estimated liquidity impact in the event of adowngrade below investment grade was immaterial as of September 30,2024.Quantitative and Qualitative Disclosure About Market Risk.We are exposed to market risk primarily from the effect of fluctuations in foreign currencyexchange rates,interest rates,and commodity prices.These exposures are managed and mitigated with the use of financial instruments,including derivativescontracts.We apply policies to manage these risks,including prohibitions on speculative trading activities.As a result of our global operations,we generate andincur a significant portion of our revenues and expenses in currencies other than the U.S.dollar.Such principal currencies include the euro,the British poundsterling,the Brazilian real,and the Indian rupee.The effects of foreign currency fluctuations on earnings were less than$0.1 billion and$(0.1)billion for the threeand nine months ended September 30,2024,respectively.The effects of foreign currency fluctuations on earnings were$(0.1)billion and$(0.2)billion for thethree and nine months ended September 30,2023,respectively.See Note 20 in the Notes to the consolidated and combined financial statements for furtherinformation.For more information about foreign exchange risk,interest rate risk,and commodity risk see the Quantitative and Qualitative Disclosure AboutMarket Risk section of the Information Statement.Parent Company Credit Support.To support GE Vernova in selling products and services globally,GE often entered into contracts on behalf of GE Vernova orissued parent company guarantees or trade finance instruments supporting the performance of its subsidiary legal entities transacting directly with customers,inaddition to providing similar credit support for non-customer related activities of GE Vernova(collectively,the GE credit support).In connection with the Spin-Off,we are working to seek novation or assignment of GE credit support,the majority of which relates to parent company guarantees,associated with GE Vernovalegal entities from GE to GE Vernova.For GE credit support that remained outstanding at the Spin-Off,GE Vernova is obligated to use reasonable best efforts toterminate or replace,and obtain a full release of GEs obligations and liabilities under,all such credit support.Beginning in 2025,GE Vernova will pay a quarterlyfee to GE based on amounts related to the GE credit support.GE Vernova will face other contractual restrictions and requirements while GE continues to beobligated under such credit support on behalf of GE Vernova.While GE will remain obligated under the contract or instrument,GE Vernova will be obligated toindemnify GE for credit support related payments that GE is required to make.As of September 30,2024,we estimated GE Vernova RPO and other obligations that relate to GE credit support to be approximately$21 billion,an over 60%reduction since year end and over 40%reduction since the Spin-Off,of which approximately$1 billion are financial guarantees.We expect approximately$12billion of the RPO related to GE credit support obligations to contractually mature within five years from the date of the Spin-Off and credit support on financialguarantees to not exceed a year beyond separation.The underlying obligations are predominantly customer contracts that GE Vernova performs in the normalcourse of its business.We have no known instances historically where payments or performance from GE were required under parent company guaranteesrelating to GE Vernova customer contracts.RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.In November of 2023,the Financial Accounting Standards Board(FASB)issued ASU No.2023-07,Segment Reporting(Topic 280):Improvements to Reportable Segment Disclosures.The amendments are intended to increase reportable segmentdisclosure requirements primarily through enhanced disclosures about significant segment expenses.The ASU is effective on a retrospective basis for fiscalyears beginning after December 15,2023,and interim periods with fiscal years beginning after December 15,2024.We have evaluated the impact of thisguidance and do not expect a significant impact to our financial statements.In December 2023,the FASB issued ASU No.2023-09,Income Taxes(Topic 740):Improvements to Income Tax Disclosures.The amendments requiredisclosure of specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold and furtherdisaggregation of income taxes paid for individually significant jurisdictions.The ASU is effective for fiscal years beginning after December 15,2024,with earlyadoption permitted.We are currently evaluating the impact that this guidance will have on the disclosures within our consolidated and combined financialstatements.CRITICAL ACCOUNTING ESTIMATES.To prepare our consolidated and combined financial statements in accordance with U.S.GAAP,managementmakes estimates and assumptions that may affect the reported amounts of our assets and liabilities,including our contingent liabilities,as of the date of ourfinancial statements and the reported amounts of our revenues and expenses during the reporting periods.Our actual results may differ from these estimates.We consider estimates to be critical(i)if we are required to make assumptions about material matters that are uncertain at the time of estimation or(ii)ifmaterially different estimates could have been made or it is reasonably likely that the accounting estimate will change from period to period.Refer to the CriticalAccounting Estimates and Note 2 to the audited combined financial statements included in the Information Statement for additional discussion of accountingpolicies and critical accounting estimates.NON-GAAP FINANCIAL MEASURES.The non-GAAP financial measures presented in this Quarterly Report on Form 10-Q are supplemental measures ofour performance and our liquidity that we believe help investors understand our financial condition and operating results and assess our future prospects.Webelieve that presenting these non-GAAP financial measures,in addition to the corresponding U.S.GAAP financial measures,are important supplementalmeasures that exclude non-cash or other items that may not be indicative of or are unrelated to our core operating results and the overall health of our company.We believe that these non-GAAP financial measures provide investors greater transparency to the information used by management for its operational decision-making and allow investors to see our results“through the eyes of management.”We further believe that providing this information assists our investors inunderstanding our operating performance and the methodology used by management to evaluate and measure such performance.When read in conjunctionwith our U.S.GAAP results,these non-GAAP financial measures provide a baseline for analyzing trends in our underlying businesses and can be used bymanagement as one basis for financial,operational,and planning decisions.Finally,these measures are often used by analysts and other interested parties toevaluate companies in our industry.2024 3Q FORM 10-Q 13Management recognizes that these non-GAAP financial measures have limitations,including that they may be calculated differently by other companies or maybe used under different circumstances or for different purposes,thereby affecting their comparability from company to company.In order to compensate forthese and the other limitations discussed below,management does not consider these measures in isolation from or as alternatives to the comparable financialmeasures determined in accordance with U.S.GAAP.Readers should review the reconciliations below,and above with respect to free cash flow,and should notrely on any single financial measure to evaluate our business.The reasons we use these non-GAAP financial measures and the reconciliations to their mostdirectly comparable U.S.GAAP financial measures follow.We believe the organic measures presented below provide management and investors with a more complete understanding of underlying operating results andtrends of established,ongoing operations by excluding the effect of acquisitions,dispositions,and foreign currency,which includes translational andtransactional impacts,as these activities can obscure underlying trends.ORGANIC REVENUES(a),EBITDA,AND EBITDA MARGIN BY SEGMENT(NON-GAAP)RevenueSegment EBITDASegment EBITDA marginThree months ended September 3020242023V 242023V 242023V ptsPower(GAAP)$4,206$3,893 8%$499$280 78.9%7.2%4.7ptsLess:Acquisitions Less:Business dispositions 172 (10)Less:Foreign currency effect(3)36(30)Power organic(Non-GAAP)$4,210$3,721 13%$463$320 45.0%8.6%2.4ptsWind(GAAP)$2,891$2,887%$(317)$(225)(41)%(11.0)%(7.8)%(3.2)ptsLess:Acquisitions Less:Business dispositions Less:Foreign currency effect(1)(32)(11)(34)Wind organic(Non-GAAP)$2,892$2,919(1)%$(306)$(191)(60)%(10.6)%(6.5)%(4.1)ptsElectrification(GAAP)$1,928$1,576 22%$201$65 F10.4%4.1%6.3ptsLess:Acquisitions 1(3)Less:Business dispositions Less:Foreign currency effect(4)12 6 8 Electrification organic(Non-GAAP)$1,932$1,564 24%$198$57 F10.2%3.6%6.6pts(a)Includes intersegment sales of$120 million and$106 million for the three months ended September 30,2024 and 2023,respectively.See the table titledTotal Segment Revenues by Business Unit in Note 25 in the Notes to the consolidated and combined financial statements.ORGANIC REVENUES(a),EBITDA,AND EBITDA MARGIN BY SEGMENT(NON-GAAP)RevenueSegment EBITDASegment EBITDA marginNine months ended September 3020242023V 242023V 242023V ptsPower(GAAP)$12,696$11,845 7%$1,457$923 58.5%7.8%3.7ptsLess:Acquisitions41 14 Less:Business dispositions127 360(21)(34)Less:Foreign currency effect13(2)(21)(112)Power organic(Non-GAAP)$12,515$11,487 9%$1,485$1,069 39.9%9.3%2.6ptsWind(GAAP)$6,592$7,239(9)%$(607)$(744)18%(9.2)%(10.3)%1.1ptsLess:Acquisitions Less:Business dispositions Less:Foreign currency effect(15)(42)(44)(85)Wind organic(Non-GAAP)$6,607$7,280(9)%$(563)$(659)15%(8.5)%(9.1)%0.6ptsElectrification(GAAP)$5,369$4,412 22%$396$66 F7.4%1.5%5.9ptsLess:Acquisitions3 1(3)Less:Business dispositions Less:Foreign currency effect31 9 3(23)Electrification organic(Non-GAAP)$5,336$4,403 21%$396$89 F7.4%2.0%5.4pts(a)Includes intersegment sales of$317 million and$311 million for the nine months ended September 30,2024 and 2023,respectively.See the table titled TotalSegment Revenues by Business Unit in Note 25 in the Notes to the consolidated and combined financial statements.2024 3Q FORM 10-Q 14Three months ended September 30Nine months ended September 30ORGANIC REVENUES(NON-GAAP)20242023V 242023V%Total revenues(GAAP)$8,913$8,253 8%$24,376$23,194 5%Less:Acquisitions 1 44 1 Less:Business dispositions 172 127 360 Less:Foreign currency effect(8)(20)29(35)Organic revenues(Non-GAAP)$8,921$8,100 10%$24,177$22,868 6%Three months ended September 30Nine months ended September 30EQUIPMENT AND SERVICES ORGANIC REVENUES(NON-GAAP)20242023V 242023V%Total equipment revenues(GAAP)$5,290$4,869 9%$13,101$12,746 3%Less:Acquisitions 20 Less:Business dispositions 93 66 184 Less:Foreign currency effect(7)(20)24(35)Equipment organic revenues(Non-GAAP)$5,296$4,797 10%$12,992$12,597 3%Total services revenues(GAAP)$3,623$3,383 7%$11,276$10,448 8%Less:Acquisitions 1 24 1 Less:Business dispositions 79 61 176 Less:Foreign currency effect(2)5 Services organic revenues(Non-GAAP)$3,625$3,303 10%$11,185$10,271 9%We believe that Adjusted EBITDA*and Adjusted EBITDA margin*,which are adjusted to exclude the effects of unique and/or non-cash items that are not closelyassociated with ongoing operations,provide management and investors with meaningful measures of our performance that increase the period-to-periodcomparability by highlighting the results from ongoing operations and the underlying profitability factors.We believe Adjusted organic EBITDA*and Adjustedorganic EBITDA margin*provide management and investors with,when considered with Adjusted EBITDA*and Adjusted EBITDA margin*,a more completeunderstanding of underlying operating results and trends of established,ongoing operations by further excluding the effect of acquisitions,dispositions,andforeign currency,which includes translational and transactional impacts,as these activities can obscure underlying trends.We believe these measures provide additional insight into how our businesses are performing on a normalized basis.However,Adjusted EBITDA*,Adjustedorganic EBITDA*,Adjusted EBITDA margin*and Adjusted organic EBITDA margin*should not be construed as inferring that our future results will be unaffectedby the items for which the measures adjust.*Non-GAAP Financial Measure2024 3Q FORM 10-Q 15Three months ended September 30Nine months ended September 30ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN(NON-GAAP)20242023V 242023V%Net income(loss)(GAAP)$(99)$(185)46%$1,075$(680)FAdd:Restructuring and other charges(a)209 105 419308Add:Purchases and sales of business interests(b)(6)(842)(92)Add:Russia and Ukraine charges(c)95Add:Separation costs(benefits)(d)27 (64)Add:Arbitration refund(e)(254)Add:Non-operating benefit income(f)(130)(134)(399)(415)Add:Depreciation and amortization(g)289 206 734628Add:Interest and other financial charges net(h)(i)(35)11(93)27Add:Provision(benefit)for income taxes(i)(17)208 380353Adjusted EBITDA(Non-GAAP)$243$205 19%$957$223FNet income(loss)margin(GAAP)(1.1)%(2.2)%1.1 pts4.4%(2.9)%7.3 ptsAdjusted EBITDA margin(Non-GAAP)2.7%2.5%0.2 pts3.9%1.0%2.9 pts(a)Consists of severance,facility closures,acquisition and disposition,and other charges associated with major restructuring programs.(b)Consists of gains and losses resulting from the purchases and sales of business interests and assets.(c)Related to recoverability of asset charges recorded in connection with the ongoing conflict between Russia and Ukraine and resulting sanctions primarilyrelated to our Power business.(d)Costs incurred in the Spin-Off and separation from GE,including system implementations,advisory fees,one-time stock option grant,and other one-timecosts.In addition,includes$136 million benefit related to deferred intercompany profit that was recognized upon GE retaining the renewable energy U.S.taxequity investments at the time of the Spin-Off in the second quarter.(e)Represents a cash refund received related to an arbitration proceeding with a multiemployer pension plan,constituting the payments previously made to theFund,and excludes$52 million related to the interest on such amounts that was recorded in Interest and other financial charges net in the second quarter.(f)Primarily related to the expected return on plan assets,partially offset by interest cost.(g)Excludes depreciation and amortization expense related to Restructuring and other charges.Includes amortization of basis differences included in Equitymethod investment income(loss)which is part of Other income(expense).(h)Consists of interest and other financial charges,net of interest income,other than financial interest related to our normal business operations primarily withcustomers.(i)Excludes interest expense(income)of$(1)million and$11 million and benefit for income taxes of$6 million and$39 million for the three months endedSeptember 30,2024 and 2023,respectively,as well as interest expense of$11 million and$36 million and benefit for income taxes of$70 million and$131million for the nine months ended September 30,2024 and 2023,respectively,related to our Financial Services business which,because of the nature of itsinvestments,is measured on an after-tax basis due to its strategic investments in renewable energy tax equity investments.Three months ended September 30Nine months ended September 30ADJUSTED ORGANIC EBITDA AND ADJUSTED ORGANICEBITDA MARGIN(NON-GAAP)20242023V 242023Vjusted EBITDA(Non-GAAP)$243$205 19%$957$223FLess:Acquisitions(3)11Less:Business dispositions(10)(21)(34)Less:Foreign currency effect14(53)(70)(220)Adjusted organic EBITDA(Non-GAAP)$231$269(14)%$1,037$477FAdjusted EBITDA margin(Non-GAAP)2.7%2.5%0.2 pts3.9%1.0%2.9 ptsAdjusted organic EBITDA margin(Non-GAAP)2.6%3.3%(0.7)pts4.3%2.1%2.2 ptsRefer to“Capital Resources and Liquidity”for discussion of free cash flow*.CONTROLS AND PROCEDURES.Under the direction of our Chief Executive Officer and Chief Financial Officer,we evaluated our disclosure controls andprocedures and internal control over financial reporting and concluded that(i)our disclosure controls and procedures were effective as of September 30,2024,and(ii)no change in internal control over financial reporting occurred during the quarter ended September 30,2024,that has materially affected,or isreasonably likely to materially affect,such internal control over financial reporting.Prior to April 2,2024,GE Vernova relied on certain business processes and internal controls over financial reporting performed by GE.In connection with theSpin-Off,responsibility for these processes and internal controls were transferred from GE to GE Vernova personnel,including internal controls and processesrelated to information technology,treasury,human resources(including payroll and benefit plan administration),taxes,external financial reporting,legal,andoversight functions such as corporate governance.The Company has revised and adopted policies,procedures,and processes,as needed,to meet regulatoryrequirements applicable to a standalone public company and will continue to identify,document,and evaluate key controls to provide reasonable assurance thatour internal control over financial reporting is effective.*Non-GAAP Financial Measure2024 3Q FORM 10-Q 16LEGAL PROCEEDINGS.We are reporting the following matter in compliance with SEC requirements to disclose administrative proceedings arising underlaws that regulate the discharge of materials into the environment where a governmental authority is a party and that involve potential monetary sanctions of$300,000 or greater.In March 2024,one of our Australian subsidiaries received notice from the Australian Department of Climate Change,Energy,theEnvironment and Water(DCCEEW)of its intention to issue infringement notices imposing administrative fines on the subsidiary for importing equipmentcontaining SF gas without an equipment license,as required by local law related to synthetic greenhouse gas management and seek a court order to imposecivil penalties for delinquent reporting under such law.The applicable local law regulates the import to Australia of synthetic greenhouse gases in equipment,including certain of our switchgear products,and our subsidiary had neglected to renew the import license required under the law.We responded to DCCEEW,and following discussions with the agency,paid approximately$0.3 million in fines in connection with the infringement notices during the three months endedJune 30,2024.Discussions with DCCEEW regarding a court-issued civil penalty order are pending and we expect additional fines associated with such ordermay be more than$300,000.Refer to Legal Matters in Note 22 to the consolidated and combined financial statements for additional information relating to legalmatters.62024 3Q FORM 10-Q 17CONSOLIDATED AND COMBINED STATEMENT OF INCOME(LOSS)(UNAUDITED)Three months ended September 30Nine months ended September 30(In millions,except per share amounts)2024202320242023Sales of equipment$5,290$4,869$13,101$12,746 Sales of services3,623 3,383 11,276 10,448 Total revenues8,913 8,253 24,376 23,194 Cost of equipment5,076 5,005 12,621 13,201 Cost of services2,728 2,196 7,794 6,876 Gross profit1,109 1,051 3,962 3,116 Selling,general,and administrative expenses1,226 1,135 3,366 3,593 Research and development expenses243 223 717 641 Operating income(loss)(359)(307)(122)(1,118)Interest and other financial charges net36(21)82(63)Non-operating benefit income130 134 399 415 Other income(expense)net(Note 19)71 179 1,025 307 Income(loss)before income taxes(122)(16)1,385(458)Provision(benefit)for income taxes(Note 15)(23)169 310 222 Net income(loss)(99)(185)1,075(680)Net loss(income)attributable to noncontrolling interests3 15(7)45 Net income(loss)attributable to GE Vernova$(96)$(170)$1,068$(635)Earnings(loss)per share attributable to GE Vernova(Note 18):Basic$(0.35)$(0.62)$3.90$(2.32)Diluted$(0.35)$(0.62)$3.85$(2.32)Weighted-average number of common shares outstanding:Basic275274274274Diluted2752742772742024 3Q FORM 10-Q 18CONSOLIDATED AND COMBINED STATEMENT OF FINANCIAL POSITION(UNAUDITED)(In millions,except share and per share amounts)September 30,2024December 31,2023Cash,cash equivalents,and restricted cash$7,395$1,551 Current receivables net(Note 4)7,221 7,409 Due from related parties(Note 24)5 80 Inventories,including deferred inventory costs(Note 5)9,377 8,253 Current contract assets(Note 9)8,592 8,339 All other current assets(Note 10)550 352 Assets of business held for sale(Note 3)1,444 Current assets33,141 27,428 Property,plant,and equipment net(Note 6)5,148 5,228 Goodwill(Note 8)4,444 4,437 Intangible assets net(Note 8)869 1,042 Contract and other deferred assets(Note 9)618 621 Equity method investments(Note 11)2,376 3,555 Deferred income taxes(Note 15)1,499 1,582 All other assets(Note 10)2,758 2,228 Total assets$50,853$46,121 Accounts payable and equipment project payables(Note 12)$8,942$7,900 Due to related parties(Note 24)58 532 Contract liabilities and deferred income(Note 9)16,908 15,074 All other current liabilities(Note 14)5,324 4,352 Liabilities of business held for sale(Note 3)1,448 Current liabilities31,233 29,306 Deferred income taxes(Note 15)823 382 Non-current compensation and benefits3,233 3,273 All other liabilities(Note 14)5,047 4,780 Total liabilities40,336 37,741 Commitments and contingencies(Note 22)Common stock,par value$0.01 per share,1,000,000,000 shares authorized,275,627,753 shares outstandingas of September 30,20243 Additional paid-in capital9,374 Retained earnings1,198 Treasury common stock,218,290 shares at cost(40)Net parent investment 8,051 Accumulated other comprehensive income(loss)net attributable to GE Vernova(Note 16)(1,031)(635)Total equity attributable to GE Vernova9,504 7,416 Noncontrolling interests1,014 964 Total equity10,517 8,380 Total liabilities and equity$50,853$46,121 2024 3Q FORM 10-Q 19CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS(UNAUDITED)Nine months ended September 30(In millions)20242023Net income(loss)$1,075$(680)Adjustments to reconcile net income(loss)to cash from(used for)operating activitiesDepreciation and amortization of property,plant,and equipment(Note 6)715 531 Amortization of intangible assets(Note 8)188 181(Gains)losses on purchases and sales of business interests(859)(210)Principal pension plans net(Note 13)(280)(304)Other postretirement benefit plans net(Note 13)(189)(235)Provision(benefit)for income taxes(Note 15)310 222 Cash recovered(paid)during the year for income taxes(299)28 Changes in operating working capital:Decrease(increase)in current receivables28 160 Decrease(increase)in due from related parties(5)12 Decrease(increase)in inventories,including deferred inventory costs(1,151)(1,051)Decrease(increase)in current contract assets(234)(68)Increase(decrease)in accounts payable and equipment project payables970(210)Increase(decrease)in due to related parties(366)110 Increase(decrease)in contract liabilities and current deferred income1,660 1,008 All other operating activities98(240)Cash from(used for)operating activities1,662(745)Additions to property,plant,and equipment and internal-use software(533)(464)Dispositions of property,plant,and equipment16 54 Purchases of and contributions to equity method investments(110)(77)Sales of and distributions from equity method investments32 220 Proceeds from principal business dispositions639 All other investing activities94(209)Cash from(used for)investing activities138(477)Net increase(decrease)in borrowings of maturities of 90 days or less(23)30 Transfers from(to)Parent2,933 681 All other financing activities579(54)Cash from(used for)financing activities3,489 656 Effect of currency exchange rate changes on cash,cash equivalents,and restricted cash(48)(22)Increase(decrease)in cash,cash equivalents,and restricted cash,including cash classified withinbusinesses held for sale5,241(587)Less:Net increase(decrease)in cash classified within businesses held for sale(603)(7)Increase(decrease)in cash,cash equivalents,and restricted cash5,844(581)Cash,cash equivalents,and restricted cash at beginning of year1,551 2,067 Cash,cash equivalents,and restricted cash as of September 30$7,395$1,486 2024 3Q FORM 10-Q 20CONSOLIDATED AND COMBINED STATEMENT OF COMPREHENSIVE INCOME(LOSS)(UNAUDITED)Three months ended September 30Nine months ended September 30(In millions)2024202320242023Net income(loss)attributable to GE Vernova$(96)$(170)$1,068$(635)Net loss(income)attributable to noncontrolling interests3 15(7)45 Net income(loss)$(99)$(185)$1,075$(680)Other comprehensive income(loss):Currency translation adjustments net of taxes99(48)(7)74 Benefit plans net of taxes(79)(94)(418)1,481 Cash flow hedges net of taxes(20)39 30 58 Other comprehensive income(loss)$(103)$(395)$1,613 Comprehensive income(loss)$(98)$(287)$680$933 Comprehensive loss(income)attributable to noncontrollinginterests3 14(9)48 Comprehensive income(loss)attributable to GE Vernova$(96)$(274)$672$981 2024 3Q FORM 10-Q 21CONSOLIDATED AND COMBINED STATEMENT OF CHANGES IN EQUITY(UNAUDITED)Common stock(In millions)CommonsharesoutstandingParvalueAdditionalpaid-incapitalRetainedearningsTreasurycommonstockNet parentinvestmentAccumulatedothercomprehensiveincome(loss)netEquityattributable tononcontrollinginterestsTotalequityBalances as of July 1,2024275$3$8,801$1,294$(1,031)$982$10,049 Issuance of shares in connection withequity awards(a)1 9 (40)(31)Share-based compensation expense 50 50 Net income(loss)(96)(3)(99)Currency translation adjustments net oftaxes 99 99 Benefit plans net of taxes (79)(79)Cash flow hedges net of taxes (20)(20)Changes in equity attributable tononcontrolling interests(b)514 34 548 Balances as of September 30,2024276$3$9,374$1,198$(40)$(1,031)$1,014$10,517 Balances as of July 1,2023$9,611$264$927$10,802 Net income(loss)(170)(15)(185)Currency translation adjustments net oftaxes (50)1(48)Benefit plans net of taxes (94)(94)Cash flow hedges net of taxes 39 39 Transfers from(to)Parent (71)(71)Changes in equity attributable tononcontrolling interests 10 10 Balances as of September 30,2023$9,371$160$924$10,454(a)During the third quarter,restrictions lapsed on 435,719 shares of GE Vernova common stock in connection with the vesting of performance shares originallyawarded by General Electric Company,now operating as GE Aerospace.We withheld 218,290 shares of GE Vernova common stock to satisfy taxwithholding obligations,resulting in$40 million of Treasury common stock.(b)Primarily relates to proceeds from the sale of an approximately 16%equity interest in GE Vernova T&D India Ltd,a power transmission and distributionsolution provider,in the third quarter of 2024,net of directly attributable taxes.2024 3Q FORM 10-Q 22CONSOLIDATED AND COMBINED STATEMENT OF CHANGES IN EQUITY(UNAUDITED)Common stock(In millions)CommonsharesoutstandingParvalueAdditionalpaid-incapitalRetainedearningsTreasurycommonstockNet parentinvestmentAccumulatedothercomprehensiveincome(loss)netEquityattributable tononcontrollinginterestsTotalequityBalances as of January 1,2024$8,051$(635)$964$8,380 Transfers from(to)Parent,includingSpin-Off-related adjustments 794 794 Issuance of common stock inconnection with the Spin-Off andreclassification of net parent investment274 3 8,712 (8,715)Issuance of shares in connection withequity awards(a)2 45 (40)4 Share-based compensation expense 104 104 Net income(loss)1,198 (130)7 1,075 Currency translation adjustments netof taxes (7)(7)Benefit plans net of taxes (420)1(418)Cash flow hedges net of taxes 30 30 Changes in equity attributable tononcontrolling interests(b)514 41 555 Balances as of September 30,2024276$3$9,374$1,198$(40)$(1,031)$1,014$10,517 Balances as of January 1,2023$12,106$(1,456)$957$11,607 Net income(loss)(635)(45)(680)Currency translation adjustments netof taxes 75(1)74 Benefit plans net of taxes 1,483(2)1,481 Cash flow hedges net of taxes 58 58 Transfers from(to)Parent (2,100)(2,100)Changes in equity attributable tononcontrolling interests 14 14 Balances as of September 30,2023$9,371$160$924$10,454(a)During the third quarter,restrictions lapsed on 435,719 shares of GE Vernova common stock in connection with the vesting of performance shares originallyawarded by General Electric Company,now operating as GE Aerospace.We withheld 218,290 shares of GE Vernova common stock to satisfy taxwithholding obligations,resulting in$40 million of Treasury common stock.(b)Primarily relates to proceeds from the sale of an approximately 16%equity interest in GE Vernova T&D India Ltd,a power transmission and distributionsolution provider,in the third quarter of 2024,net of directly attributable taxes.2024 3Q FORM 10-Q 23NOTE 1.ORGANIZATION AND BASIS OF PRESENTATIONOrganization.On April 2,2024(the Distribution Date),General Electric Company,which now operates as GE Aerospace(GE or Parent)completed thepreviously announced spin-off(the Spin-Off)of GE Vernova(the Company,GE Vernova,our,we,or us).The Spin-Off was completed through a distribution of allthe Companys outstanding common stock to holders of record of GEs common stock as of the close of business on March 19,2024(the Distribution),whichresulted in the issuance of approximately 274 million shares of common stock.As a result of the Distribution,the Company became an independent publiccompany.Our common stock is listed under the symbol“GEV”on the New York Stock Exchange.In connection with the Spin-Off,GE contributed cash of$515 million to GE Vernova to fund future operations and transferred restricted cash of$325 million to us such that the Companys cash balance uponcompletion of the Spin-Off was approximately$4,200 million.See Note 22 for further information.In connection with the Spin-Off,GE Vernova entered into several agreements with GE,including a separation and distribution agreement that sets forth certainagreements with GE regarding the principal actions to be taken in connection with the Spin-Off,including the transfer of assets and assumption of liabilities,andestablishes certain rights and obligations between the Company and GE,including procedures with respect to claims subject to indemnification and relatedmatters.Other agreements we entered into that govern aspects of our relationship with GE following the Spin-Off include:Transition Services Agreement governs all matters relating to the provision of services between the Company and GE on a transitional basis.Theservices the Company receives include support for digital technology,human resources,supply chain,finance,and real estate services,among others,that are generally intended to be provided for a period no longer than two years following the Spin-Off.Tax Matters Agreement governs the respective rights,responsibilities,and obligations between the Company and GE with respect to all tax matters(excluding employee-related taxes covered under the Employee Matters Agreement),in addition to certain restrictions which generally prohibit us fromtaking or failing to take any action in the two-year period following the Distribution that would prevent the Distribution from qualifying as tax-free for U.S.federal income tax purposes,including limitations on our ability to pursue certain strategic transactions.The agreement specifies the portion of taxliability for which the Company will bear contractual responsibility,and the Company and GE will each agree to indemnify each other against anyamounts for which such indemnified party is not responsible.Certain other agreements related to employee matters,trademark license,intellectual property,real estate matters,and framework investments.Unless the context otherwise requires,references to the Company,GE Vernova,our,we,and us,refer to(i)GEs renewable energy,power,and digitalbusinesses prior to the Spin-Off and(ii)GE Vernova Inc.and its subsidiaries following the Spin-Off.Basis of Presentation.For periods prior to the Spin-Off,the unaudited combined financial statements were derived from the consolidated financial statementsand accounting records of GE,including the historical cost basis of assets and liabilities comprising the Company,as well as the historical revenues,direct costs,and allocations of indirect costs attributable to the operations of the Company,using the historical accounting policies applied by GE.The unaudited combinedfinancial statements do not purport to reflect what the results of operations,comprehensive income,financial position,or cash flows would have been had theCompany operated as a separate,stand-alone entity during the periods prior to the Spin-Off.We have prepared the accompanying unaudited consolidated and combined financial statements pursuant to the rules and regulations of the Securities andExchange Commission(SEC)applicable to interim financial statements.Accordingly,certain information related to our significant accounting policies andfootnote disclosures normally included in financial statements prepared in accordance with U.S.generally accepted accounting principles(U.S.GAAP)havebeen condensed or omitted.These unaudited consolidated and combined financial statements reflect,in the opinion of management,all material adjustments(which include only normally recurring adjustments)necessary to fairly state,in all material respects,our financial position,results of operations,and cash flowsfor the periods presented.These unaudited consolidated and combined financial statements should be read in conjunction with our audited combined financialstatements,corresponding footnotes,and significant accounting policies for the year ended December 31,2023,included in our information statement datedMarch 8,2024,which was attached as Exhibit 99.1 to a Current Report on Form 8-K furnished with the SEC on March 8,2024(the Information Statement).Theinformation presented in tables throughout the footnotes is presented in millions of U.S.dollars unless otherwise stated.Certain columns and rows may not adddue to the use of rounded numbers.Percentages presented are calculated from the underlying numbers in millions.All intercompany balances and transactions within the Company have been eliminated in the consolidated and combined financial statements.As described inNote 24,transactions between the Company and GE have been included in these consolidated and combined financial statements.Certain financingtransactions with GE are deemed to have been settled immediately through Net parent investment in the Consolidated and Combined Statement of FinancialPosition and are accounted for as a financing activity in the Consolidated and Combined Statement of Cash Flows as Transfers from(to)Parent.For periods prior to the Spin-Off,the Consolidated and Combined Statement of Financial Position reflects all of the assets and liabilities of GE that arespecifically identifiable as being directly attributable to the Company,including Net parent investment as a component of equity.Net parent investmentrepresents GEs historical investment in the Company and includes accumulated net income and losses attributable to the Company,and the net effect oftransactions with GE and its subsidiaries.2024 3Q FORM 10-Q 24NOTE 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESEstimates and Assumptions.The preparation of the consolidated and combined financial statements in conformity with U.S.GAAP requires management tomake estimates based on assumptions about current,and for some estimates,future,economic and market conditions which affect reported amounts andrelated disclosures in the consolidated and combined financial statements.We believe these assumptions to be reasonable under the circumstances,andalthough our current estimates contemplate current and expected future conditions,as applicable,it is reasonably possible that actual conditions could differfrom our expectations,which could materially affect our results of operations,financial position,and cash flows.Estimates are used for,but are not limited to,determining revenues from contracts with customers,recoverability of inventory,long-lived assets and investments,valuation of goodwill and intangible assets,useful lives used in depreciation and amortization,income taxes and related valuation allowances,accruals forcontingencies including legal,indemnifications,product warranties,and environmental,actuarial assumptions used to determine costs of pension andpostretirement benefits,valuation and recoverability of receivables,valuation of derivatives,and valuation of assets acquired and liabilities assumed as a resultof acquisitions.Revenues from the Sale of Equipment.Sales of equipment includes the sales of gas turbines,wind turbines and repower units,and other power generationequipment related to energy production.Performance Obligations Satisfied Over Time.We recognize revenue on agreements for the sale of customized goods including power generation equipmentand long-term construction contracts on an over-time basis as we customize the customers equipment during the manufacturing or integration process andobtain right to payment for work performed.We recognize revenue as we perform under the arrangements using the percentage of completion method,which is based on our costs incurred to date relativeto our estimate of total expected costs and the transaction price to which we expect to be entitled.Variable consideration is included in the transaction price if,inour judgment,it is expected that a significant future reversal of cumulative revenue under the contract will not occur.Some of our contracts with cust
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Nasdaq 2Q24Quarterly UpdateJuly 25,20242DisclaimersNon-GAAP InformationIn addition to disclosing results determined in accordance with U.S.GAAP,Nasdaq also discloses certain non-GAAP results of operations,including,but not limited to,non-GAAP net income attributable to Nasdaq,non-GAAP diluted earnings per share,non-GAAP operating income,non-GAAP operating expenses,and non-GAAP EBITDA,that include certain adjustments or exclude certain charges and gains that are described in the reconciliation table of U.S.GAAP to non-GAAP information provided at uses this non-GAAP information internally,along with U.S.GAAP information,in evaluating our performance and in making financial and operational decisions.We believe our presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations.In addition,we believe the presentation of these measures is useful to investors for period-to-period comparisons of results as certain items do not reflect ongoing operating performance.These measures are not in accordance with,or an alternative to,U.S.GAAP,and may be different from non-GAAP measures used by other companies.In addition,other companies,including companies in our industry,may calculate such measures differently,which reduces their usefulness as a comparative measure.Investors should not rely on any single financial measure when evaluating our business.This information should be considered as supplemental in nature and is not meant as a substitute for our operating results in accordance with U.S.GAAP.We recommend investors review the U.S.GAAP financial measures included in this presentation.When viewed in conjunction with our U.S.GAAP results and the accompanying reconciliations,we believe these non-GAAP measures provide greater transparency and a more complete understanding of factors affecting our business than U.S.GAAP measures alone.We understand that analysts and investors regularly rely on non-GAAP financial measures,such as those noted above,to assess operating performance.We use these measures because they highlight trends more clearly in our business that may not otherwise be apparent when relying solely on U.S.GAAP financial measures,since these measures eliminate from our results specific financial items that have less bearing on our ongoing operating performance.Organic revenue and expense growth,organic change and organic impact are non-GAAP measures that reflect adjustments for:(i)the impact of period-over-period changes in foreign currency exchange rates,and(ii)the revenues,expenses and operating income associated with acquisitions and divestitures for the twelve month period following the date of the acquisition or divestiture.Reconciliations of these measures can be found in the appendix to this presentation.Foreign exchange impact:In countries with currencies other than the U.S.dollar,revenues and expenses are translated using monthly average exchange rates.Certain discussions in this presentation isolate the impact of year-over-year foreign currency fluctuations to better measure the comparability of operating results between periods.Operating results excluding the impact of foreign currency fluctuations are calculated by translating the current periods results by the prior periods exchange rates.Restructuring programs:In the fourth quarter of 2023,following the closing of the Adenza acquisition,our management approved,committed to and initiated a restructuring program,“Adenza Restructuring”to optimize our efficiencies as a combined organization.In connection with this program,we expect to incur pre-tax charges principally related to employee-related costs,contract terminations,real estate impairments and other related costs.We expect to achieve benefits primarily in the form of expense and revenue synergies.In October 2022,following our September announcement to realign our segments and leadership,we initiated a divisional alignment program with a focus on realizing the full potential of this structure.In connection with the program,we expect to incur pre-tax charges principally related to employee-related costs,consulting,asset impairments and contract terminations over a two-year period.We expect to achieve benefits in the form of both increased customer engagement and operating efficiencies.Costs related to the Adenza restructuring and the divisional alignment programs will be recorded as“restructuring charges”in our consolidated statements of income.We will exclude charges associated with this program for purposes of calculating non-GAAP measures as they are not reflective of ongoing operating performance or comparisons in Nasdaqs performance between periods.Cautionary Note Regarding Forward-Looking StatementsInformation set forth in this communication contains forward-looking statements that involve a number of risks and uncertainties.Nasdaq cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information.When used in this communication,words such as“expects,”“enables,”“will,”“plans,”“pro forma,”target,outlook,“estimates,”and similar expressions and any other statements that are not historical facts are intended to identify forward-looking statements.Such forward-looking statements include,but are not limited to(i)projections relating to our future financial results,total shareholder returns,growth,dividend program,trading volumes,products and services,ability to transition to new business models or implement our new corporate structure,taxes and achievement of synergy targets,(ii)statements about the closing or implementation dates and benefits of certain acquisitions,divestitures and other strategic,restructuring,technology,environmental,de-leveraging and capital allocation initiatives,(iii)statements about our integrations of our recent acquisitions,(iv)statements relating to any litigation or regulatory or government investigation or action to which we are or could become a party,and(v)other statements that are not historical facts.Forward-looking statements involve a number of risks,uncertainties or other factors beyond Nasdaqs control.These factors include,but are not limited to,Nasdaqs ability to implement its strategic initiatives,economic,political and market conditions and fluctuations,geopolitical instability,government and industry regulation,interest rate risk,U.S.and global competition.Further information on these and other factors are detailed in Nasdaqs filings with the U.S.Securities and Exchange Commission,including its annual reports on Form 10-K and quarterly reports on Form 10-Q which are available on Nasdaqs investor relations website at http:/ and the SECs website at www.sec.gov.Nasdaq undertakes no obligation to publicly update any forward-looking statement,whether as a result of new information,future events or otherwise.Website DisclosureNasdaq intends to use its website,as a means for disclosing material non-public information and for complying with SEC Regulation FD and other disclosure obligations.3Nasdaqs strong financial and operational results were underpinned by broad-based growth across our three divisions and another quarter of double-digit Solutions growth.We continued the momentum in our Financial Technology division as financial institutions remain focused on resilience,risk management,and infrastructure modernization.We are also pleased with our progress across our strategic priorities.We are delivering on our integration targets ahead of schedule,we have exciting AI-driven innovation within our products,and we are starting to see results in cross-sells through our One Nasdaq strategy.Strategic Update4 Record volume of shares and notional value traded in the Closing Cross in the quarter,including the largest notional liquidity event on the Nasdaq Stock Exchange for the Russell Reconstitution in June.Market Technology generated a key upsell with a G-SIB client leveraging the Nasdaq trading platform to operate an ATS.LiquidityEnhance liquidity by modernizing markets with innovative technology Pillars of StrategyRecent Accomplishments Verafin continued its penetration of the core SMB client base,adding 53 new clients.AxiomSL and Calypso had 58 upsells and signed 6 new clients,while also realizing 2 cross-sells of our AxiomSL solution to Calypso clients.IntegrityEnsure and enhance the integrity of the worlds financial system throughregulatory compliance and financial crime management technology solutions 72%eligible operating company win rate in U.S.Listings,reflecting 31 operating company IPOs that raised over$3 billion in proceeds.Index achieved a second consecutive quarter of record ETP AUM,ending the quarter at$569 billion.TransparencyProvide access and transparency to capital markets to enable economic growth and empower informed investment and capital markets decision-making5Total($)Year over year change(%)1Year over yearpro forma change(%)1,2Year over yearorganic change(%)Net Revenues$1,159M 25% 10% 7%Solutions Revenues$901M 34% 13% 9%Operating Margin53% 1 ppt 1 ppt 0 pptAnnualized Recurring Revenues(ARR)$2,668M 29% 7% 6%Annualized SaaS Revenues$975M 29% 17% 13%Strong execution delivering double-digit Solutions growth in 2Q24For all non-GAAP information throughout this presentation,the U.S.GAAP to non-GAAP reconciliations may be found at of organic revenue growth can be found in the appendix to this presentation.Organic revenue growth is considered a non-GAAP metric.1 Includes Adenza contribution.For all defined terms,refer to the appendix to this presentation.2 Pro forma results are presented assuming AxiomSL and Calypso were included in the prior year quarterly results.Pro forma growth excludes the impacts of foreign currency except for AxiomSL and Calypso,which are not yet calculated on an organic basis.Achieved another quarter of double-digit pro forma Solutions revenue growth above the top-end of our medium-term revenue growth outlook range,all while generating positive operating leverage Maintained listings leadership with a 72%eligible U.S.operating company IPO win rate,reflecting 31 operating company IPOs that raised over$3 billion in proceeds.Achieved record ETP AUM linked to Nasdaq indices,ending the quarter at$569 billion,including$53 billion of net inflows in the trailing twelve month period as well as$17 billion in 2Q24.eVestment deployed a new AI-powered feature for Market Lens called Pension Meeting Minutes Summarization,which provides asset managers with key insights on current and future pension fund strategies to help inform their business development and engagement priorities with top pension fund decision-makers.Introduced a generative AI tool within IR Insight,currently in beta testing,that allows users to synthesize and derive insights from peer earnings calls,conference presentations,and shareholder meetings.This tool helps Investor Relations professional prepare for earnings,respond to investor questions,and support executive reporting.6Index LTM ETP AUM net inflows $53BEligible U.S.operating company IPO win rate1 in 2Q2472pital Access Platforms-Operational Highlights$5$10$21$17$533Q234Q231Q242Q24LTMIndex ETP AUM Net Inflows($B)1 Excludes IPOs that,based on our analysis,did not meet quantitative Nasdaq listing standards.The difference between the average eligible operating company win rate and average total win rate over the last five years is less than 1%.7 Executed 4 cross-sells this quarter,including 2 cross-sells of our AxiomSL solution to Calypso clients.AxiomSL and Calypso generated 58 combined upsells and added 6 new clients in 2Q,with 68%of new bookings cloud-based.Within Financial Crime Management Technology,Verafin signed 53 small-and-medium bank(SMB)clients in the quarter,advancing its leadership position amongst this core SMB client cohort.In July,Verafin signed a new,international Tier 1 bank that also reflects a cross-sell.Verafin continued the rollout of its first integrated generative AI tool,Entity Research Copilot,with the solution available to more than 250 banks to date and with expected completion in 3Q.In addition to 6 new clients and 29 upsells,Surveillance scheduled a beta launch of an AI copilot feature that during proof-of-concept testing provided an estimated 33%reduction in investigation time with improved overall outcomes.Market Technology signed 2 new clients and had 9 upsells.AxiomSL Upsells 29Financial Technology-Operational HighlightsNew FinTech ClientsNew AxiomSL&Calypso Clients 6FinTech Upsells 96Calypso Upsells 29FinTech Cross-Sells 4 678#1 market share in multi-listed U.S.optionsMarket Share by Asset Class229%single venue of liquidity for traded-listed U.S.cash equities#1#1 market share in Euro cash equities markets1740.71.70.8).2).3.1.2.1.3.1q.4q.6r.0q.7s.5%U.S.equity options(%)U.S.equities-matched(%)Euro cash equities(%)2Q233Q234Q231Q242Q24 Generated record Index Options revenues.Record volume of shares and notional value traded in the Closing Cross in the quarter,including the largest notional liquidity event on the Nasdaq Stock Exchange for the Russell Reconstitution in June.Finalized the rollout of Dynamic M-ELO,the first SEC approved AI-powered order type in the quarter,with a 20%increase in both volumes for this order type and improvement in fill rates compared to the prior static version.1 Euro cash equities markets include cash equities exchanges of Sweden,Denmark,Finland and Iceland.2 Not to scale.Revenue Capture by Asset Class3$0.12$0.12$0.12$0.12$0.12$0.69$0.67$0.66$0.64$0.72$0.12$0.13$0.12$0.12$0.12U.S.optionsU.S.equitiesEuro cash equities2Q233Q234Q231Q242Q24Market Services-Operational Highlights3 Not to scale.U.S.options reflects rate per contract,U.S.cash equities reflects revenue per 1,000 shares matched,and Euro cash equities reflects revenue per$1,000 traded in all European Equity Exchanges.19Nasdaq delivered a quarter of strong top-line growth and positive operating leverage.We successfully executed on our first deleveraging goal and achieved our year-end 2024 actioned synergy target six months in advance.Looking ahead,we are well-positioned to deliver durable organic growth and profitability,and make progress on our capital allocation priorities.Financial Performance10Driving Resilient Growth,Creating Sustainable Value(US$millions,except per share)2Q242Q23%pro forma%organicNet Revenues$1,159$92525%7%Solutions Revenues$901$67334%9%Solutions as a%of Net revenues78s%5 ppt2 ppt1 pptOperating Expenses$539$44122%7%7%Operating Income$620$48428%7%Operating Margin53R%1 ppt1 ppt0 pptIncome Before Income Taxes$524$45715%Net Income attributable to Nasdaq$397$35013%Diluted EPS1$0.69$0.71(3)%7fective Tax Rate24.2#.4%1 pptDividend Per Share$0.24$0.229%Non-GAAP Financial Results1 Diluted EPS reflects weighted average diluted shares outstanding of 579.0 million in 2Q24 and 493.6 million in 2Q23.Solutions pro forma revenue growth 13%Pro forma year-over-year operating margin expansionPro forma growth in non-GAAP expenses 7%Pro forma net revenue growth 10%1 ppt2Q24 Consolidated Financial PerformanceOperating margin53Net Revenue 2Q23 Pro Forma to 2Q24 7%YoY organic growth$438$20$13$8$5$(11)$(16)$22$23$5022Q23New Sales/Lisitngs-AlphaAUM Inflow&NewPrice Increase-AlphaUpgrades-AlphaChurn(partial-Full)-AlphaChurn-Delistings-BetaOnetime fees(Incl.ETFM)-BetaMkt Perf.-Beta2Q24$1.1B$1.2B2Q23 Pro formaMacro/BetaExisting Clients increasesChurnNew Clients,Cross-Sell&Other innovationMarket Share&CaptureFX&Other2Q24 10%YoY pro forma growthNasdaq RevenuePro Forma Adenza Revenue 2% 7%-2% 4%-1%8%Alpha growthNote:Totals may not sum due to rounding.12$834$859$910$932$975$755$773$812$828$852$79$86$98$104$123Nasdaq ex.AxiomSL&CalypsoAxiomSL&Calypso2Q233Q234Q231Q242Q24Recurring Revenue KPIs Reflect Solid GrowthAnnualized SaaS Revenues($Ms)Annualized Recurring Revenue($Ms)$2,494$2,518$2,585$2,612$2,668$2,067$2,081$2,127$2,139$2,182$427$437$458$473$486Nasdaq ex.AxiomSL&CalypsoAxiomSL&Calypso2Q233Q234Q231Q242Q24 7%YoY pro forma growth 17%YoY pro forma growth2Q233Q234Q231Q242Q24SaaS as a%of ARR ex.AxiomSL&Calypso 377899%SaaS a%of Pro Forma ARR 334567% 4 pptAxiomSL&Calypso Pro formaAxiomSL&Calypso Pro forma13 Data and Listing Services:Revenues increased on an organic basis as higher data sales,higher data usage,new listings,and pricing were mostly offset by the impact of 2023 delistings and downgrades and lower amortization of prior period initial listing fees.Index:Revenues increased due to record ETP AUM linked to Nasdaq indices including the impact of$53 billion in ETP AUM net inflows in the last twelve months and growth in trading volume of futures contracts linked to the Nasdaq-100 Index.Workflow and Insights:Revenues increased primarily due to growth in innovative Analytics products.2Q24 Financial Highlights(US$millions)2Q242Q23$%pro forma1%(organic)Data and Listing Services$187$187$01%1%Index$167$129$3829)%Workflow and Insights$127$122$54%4%Total Revenues$481$438$4310%Operating income2$271$241$3012%Operating margin256U%1 ppt1 pptAnnualized SaaS revenues$414$394$205%5%ARR$1,226$1,216$101%11 Organic and pro forma are the same for Capital Access Platforms as it was not impacted by the Adenza acquisition.2 The Capital Access Platforms operating income and margin reflects the allocation of certain costs that support the operation of various aspects of Nasdaqs business,including Market Services,to units other than Capital Access Platforms.$1,216$1,222$1,235$1,220$1,2262Q233Q234Q231Q242Q24ARR($M)Capital Access Platforms-Financial PerformancePeriod ending and average ETP AUM($B)$418$411$473$519$569$381$423$436$492$531Period ending ETP AUM($B)Average ETP AUM($B)2Q233Q234Q231Q242Q24(US$millions)2Q242Q23$%pro forma%(organic)1Financial Crime Mgmt Technology$67$54$1324$%Regulatory Technology$95$35$6016%6pital Markets Technology$258$146$11214%2%Total Revenues$420$235$18516%8%Operating income2$199$96$10325%2%Operating margin247A%6 ppt3 ppt-2 pptARR$1,442$851$59113%Annualized SaaS revenues$561$361$20028!%Pro forma margin expansionPro forma YoYrevenue growth Financial Crime Management Technology revenue growth was primarily due to higher SaaS revenues related to price increases,upsells,and new bookings.Regulatory Technology pro forma revenue growth was primarily due to an increase in subscription revenue for both AxiomSL and Surveillance.Capital Markets Technology pro forma revenue growth was driven by an increase in subscription revenue for Calypso,Trade Management Services,and Market Technology,partially offset by lower Market Technology professional services revenue due to a large project delivery in the comparative period.2Q24 Financial Highlights14 16% 3 ppt$1,278$1,296$1,350$1,392$1,442851859892919956427437458473486AxiomSL&CalypsoFintech(ex.AxiomSL&Calypso)2Q233Q234Q231Q242Q24ARR($M)1 Organic change excludes impact of AxiomSL and Calypso and FX of$(1)M.2 Including Adenza revenues of$129M and operating income of$63M in 2Q23,on a pro forma basis,revenues would have been$364M and operating income would have been$159M resulting in operating margin of 44%.*For all defined terms,refer to the appendix to this presentation.Pro forma YoY ARR growth 13%Financial Technology-Financial PerformanceAxiomSL&Calypso Pro forma U.S.equity derivatives revenue increased due to higher industry volumes and record index options revenue,partially offset by a decline in both capture and share,while maintaining market share leadership.U.S.cash equities revenue increased primarily due to higher industry volumes and strong capture,partially offset by lower share.European cash equities trading revenue increased due to higher share and value traded.U.S.tape plan revenue decreased primarily due to lower industry-wide usage volume.Overall results were positively impacted by 1 additional trading day versus the comparable period.15(US$millions)2Q242Q23$%pro forma1%(organic)U.S.equity derivatives$90$89$11%1%U.S.cash equities$86$79$79%9%European cash equities$26$24$28%8%U.S.tape plans$31$35$(4)(11)%(11)%Other$17$15$213%Total Net Revenues$250$242$83%3%Operating income$146$143$32%2%Operating margin58Y%(1)ppt(1)ppt2Q24 Financial HighlightsU.S.index options volume growthMaintained#1 market share in multi-listed U.S.options29%#1 market share in relevant Euro cash equities markets74%Market Services-Financial Performance1 Organic and pro forma is the same for Market Services as it was not impacted by the Adenza acquisition.5124.5%-26.5%Non-GAAP Tax Rate12024 Non-GAAP Operating Expense Guidance11 U.S.GAAP operating expense and tax rate guidance are not provided due to the inherent difficulty in quantifying certain amounts due to a variety of factors including the unpredictability in the movement in foreign currency rates,as well as future charges or reversals outside of the normal course of business.$2.145B-$2.185BSupporting Growth with Appropriate Resources$507$5392Q232Q24 7%Pro forma growthYear-over-Year2Q24 Pro Forma Non-GAAP Operating Expense52S%2Q232Q24 1 pptPro forma margin expansion2Q24 Pro Forma Non-GAAP Operating Margin 10%Pro formaNet revenue growthvs.4.1x-0.1x0.0 x-0.1x3.9x1Q24leverage ratioChange in Commercial PaperChangein Euro rate and Amortization of debt issue costsEBITDA 2Q24 leverage ratioGross Leverage Ratio Bridge17(US$millions)Beg-of-periodEnd-of-PeriodGross Debt$9,989$(174)$(18)$9,797LTM EBITDA$2,458$74$2,532$328MFree cash flowin 2Q24$58M2Q24 repurchases$0.24/$138M 2Q24 dividend/share/total dividendannualized payout ratio of 37We are committed to deleveraging and are at 3.9x gross leverage at the end of 2Q24111-1Q24 and 2Q24 leverage ratio reflects Nasdaq gross debt to last-twelve-months(LTM)EBITDA,pro-forma for Adenza acquisition.Note:Numbers may not sum due to rounding.100%Free cash flowconversion ratio(LTM)$58M2Q24 share repurchases1AppendixSupplemental Adenza Financial Information19*Please see Appendix for non-GAAP reconciliations.Medium-Term Outlook11 Over 3-5 years.Growth outlook assumes stable market backdrop.2 See slide 16 for 2024 guidance.3 Low single digits 0%to 3%,mid single digits 3%to 7%,high single digits 7%to 13%to 17%,high teens 17%to 23%to 27%,high twenties 27%to 30%.Medium-Term Growth Outlook3Data and Listing ServicesLow single digitsWorkflow and InsightsHigh single/low double digitsIndexMid to high single digitsCapital Access Platforms5-8%Fin Crime Mgmt TechnologyMid 20sRegulatory TechnologyHigh single/low double digitsCapital Markets TechnologyHigh single/low double digitsFinancial Technology10-14%AxiomSL and Calypso combinedLow to mid teens with mid teens ARR growthTotal Solutions Revenues8-11%Market ServicesNo outlook givenOther RevenuesNo outlook givenTotal Net RevenuesNo outlook givenNon-GAAP Operating Expenses25-8%Tax Rate2No outlook givenReportedReportedAdenzaPro FormaTotal VariancePro Forma impact2Q242Q232Q232Q23$%FX$pital Access Platforms$481$438$438$4310%$(1)4410%Financial Crime Management Technology675454132424%Regulatory Technology95354782131616pital Markets Technology258146822283013%(1)3114%Financial Technology4202351293645615%(1)5716%Total Solutions Revenues9016731298029912%(2)10113%Market Services,net revenues25024224283%Other revenues(divestitures)81010(2)(20)%(1)(1)(10)%Total Revenues,net1,1599251291,05410510%(3)10810%Operating expenses53944166507326%(2)347%Operating income620484635477313%(1)7414%Operating margin53RIR%ARRCapital Access Platforms1,2261,2161,216101%(3)131%Financial Crime Management Technology2582072075125Q25%Regulatory Technology3381321743063210210pital Markets Technology8465122537658111%(1)8211%Financial Technology1,4428514271,27816413%(1)16513%Total ARR2,6682,0674272,4941747%(4)1787%SaaSCapital Access Platforms414394394205 5%Financial Technology5613617944012128128%Total SaaS9757557983414117117%Total Non-GAAP Pro Forma 2Q24 VarianceBack to index($s in millions)2021Total Variance Net Impacts:2Q24 Total Variance1Acq.&Div.Impact2FX ImpactOrganic Impact3All figures in US$Millions2Q242Q23$M%$M%$M%$Mta and Listing Services$187$187$%$%($1)(1)%$1 1%Index 167 129 38 298 29%Workflow and Insights 127 122 5 4%5 4pital Access Platforms 481 438 43 10%(1)D 10%Financial Crime Mgmt Technology$67$54$13 24%$%$%$13 24%Regulatory Technology 95 35 60 171X 166%2 6pital Markets Technology 258 146 112 770 75%(1)(1)%3 2%Financial Technology 420 235 185 798 71%(1) 8%Total Solutions Revenue 901 673 228 348 25%(2)b 9%Market Services 250 242 8 3%8 3%Other 8 10 (2)(20)%(1)(10)%(1)(10)%Total Revenue less transaction-based expenses 1,159 925 234 257 18%(2)i 7%Non-GAAP Operating Expenses 539 441 98 22g 15%(2)3 7%Non-GAAP Operating Income 620 484 136 280 216 7%Non-GAAP Operating Margin 53R%Non-GAAP Diluted EPS2$0.69$0.71($0.02)(3)%($0.07)(10)%$%$0.05 7%Note:The sum of the percentage changes may not tie to the percent change in total variance due to rounding.1 Reflects the inclusion of Adenza financials as well as the impact of the conclusion of the Nasdaq Fixed Income platform service agreement.2 Acquisition and divestiture impact,substantially all of which relates to Adenza,was offset by the increase in weighted average shares outstanding resulting from the issuance of shares to fund the Adenza transaction.3 Regulatory Technology and Capital Markets Technology organic impact reflects the year-over-year organic change in Surveillance and Marketplace Technology businesses,respectively.22Net Revenues2Q241Q244Q233Q232Q232023Data and Listing Services$187$186$189$188$187$749 Workflow and Insights 127 125 126 124 122 493 Index 167 168 146 144 129 528 Capital Access Platforms 481 479 461 456 438 1,770 Financial Crime Technology Management 67 64 60 58 54 223 Regulatory Technology 95 90 125 102 82 389 Capital Markets Technology 258 238 255 216 228 921 Financial Technology 420 392 440 376 364 1,533 Solutions$901$871$901$832$802$3,303 Market Services 250 237 247 236 242 987 Other 8 9 10 10 10 39 Total$1,159$1,117$1,158$1,078$1,054$4,329 Note:2Q24 and 1Q24 are as reported.Pro Forma Trends ARR Trends2Q241Q244Q233Q232Q23Data and Listing Services$668$665$682$679$678 Workflow and Insights 484 481 481 471 466 Index 74 74 72 72 72 Capital Access Platforms 1,226 1,220 1,235 1,222 1,216 Financial Crime Technology Management 258 243 226 216 207 Regulatory Technology 338 328 325 312 306 Capital Markets Technology 846 821 799 768 765 Financial Technology 1,442 1,392 1,350 1,296 1,278 Total$2,668$2,612$2,585$2,518$2,494(U.S.$millions)(U.S.$millions)23Note:2Q24 and 1Q24 are as reported.(U.S.$millions)2Q241Q244Q233Q232Q23umn12023Capital Access PlatformsNet revenues$481$479$461$456$438$1,770 Expenses210200210202197 799 Operating income271279251254241 971 Operating Margin 56XTVUU%Financial Technology Net revenues420392440376364 1,533 Expenses221216207208205 822 Operating income199176233168159 711 Operating Margin 47ESEDF%Market ServicesNet revenues250237247236242 987 Expenses10410410510099 405 Operating income146133142136143 582 Operating Margin 58VWXYY%OtherNet revenues89101010 39 Expenses44546 21 Operating income45564 18 TotalNet revenues 1,159 1,117 1,158 1,078 1,054 4,329 Expenses539524527514507 2,047 Operating income620593631564547 2,282 Operating Margin 53STRRSpreciation3132313030121EBITDA6516256625945772,403Non-GAAP Pro Forma Operating Income,Operating Margin and EBITDA24Note:The sum of the quarters may not equal the full year totals due to rounding.Net revenues include a purchase price adjustment on deferred revenue associated with the Verafin transaction of$28 million in 2021,and$1 million in 1Q22.(U.S.$millions)2Q241Q244Q233Q232Q231Q234Q223Q22mn120232022202120202019Capital Access PlatformsNet revenues$481$479$461$456$438$415$419$422$1,770$1,682$1,566$1,285$1,122 Expenses210200210202197190209189 799 768 724 636 575 Operating income271279251254241225210233 971 914 842 649 547 Operating Margin 56XTVUTPUUTTQI%Financial Technology Net revenues420392399238235229231217 1,099 864 772 637 609 Expenses221216184143139141147135 605 565 513 414 366 Operating income1991762159596888482 494 299 259 223 243 Operating Margin 47ETA868E545%Market ServicesNet revenues250237247236242260245239 987 988 1,005 902 713 Expenses10410410510099999787 405 361 341 317 297 Operating income146133142136143161148152 582 627 664 585 416 Operating Margin 58VWXYbdYcfeX%OtherNet revenues89101010101112 39 48 77 79 91 Expenses44546676 21 27 38 47 57 Operating income45564446 18 21 39 32 34 TotalNet revenues 1,159 1,117 1117940925914906890 3,895 3,582 3,420 2,903 2,535 Expenses539524504449441436460417 1,830 1,721 1,616 1,414 1,295 Operating income620593613491484478446473 2,065 1,861 1,804 1,489 1,240 Operating Margin 53SURRRISSRSQI%Non-GAAP Operating Income and Margin25Debt Overview(US$millions)6/30/20243/31/2024Maturity Date Commercial Paper$50$224NA Revolver(SOFR 119 bps)1$(4)$(4)Dec 2027 3.85%Notes$499$499Jun 2026Acquisition term loan agreement$Nov 2026 1.75%Euro Notes$639$644Mar 2029 0.875%Euro Notes$639$643Feb 2030 1.65%Notes$645$645Jan 2031 0.90%Euro Notes$655$659Jul 2033 2.50%Notes$644$644Dec 2040 3.25%Notes$487$487Apr 2050 3.95%Notes$541$541Mar 2052 5.65%Notes$498$498Jun 20255.35%Notes$993$992Jun 20284.5%Euro Notes$795$801Feb 20325.55%Notes$1,240$1,240Feb 20345.95%Notes$738$738Aug 20536.10%Notes$738$738Jun 2063 Total Debt Obligations$9,797$9,989 Less Cash and Cash Equivalents2$(416)$(388)Net Debt$9,381$9,601$9.4B Net DebtWell Laddered Debt Maturities1 The revolver spread is as of 6/30/2024.This includes debt issuance costs of$4M at 6/30/2024 and$4M at 3/31/2024.2 Excludes$24M of restricted cash at 6/30/2024 and$21M at 3/31/2024.Adenza debtPrior debt(US$millions)24 25 2628 29 30 31 32 33 34405052 536301002003004005006007008009001,0001,1001,2001,3003.9%pre-tax weighted average cost of debt at 2Q24-end*Prior to the cumulative impact of Accretion of debt issuance costs and debt discount&Other fees.This was$3M in 2Q24.261 Net of change in Section 31 fees receivables of$47M in LTM,$18M in 2021-2024 YTD;$63M in 2024 YTD;$(68)M in 2023;$79M in 2022;and$(56)M in 2021.Free Cash Flow Calculation(US$millions)LTM2024 YTD2023202220212021-2024 YTDCash flow from operations$1,707$990$1,696$1,706$1,083$5,475Capital expenditure(170)(91)(158)(152)(163)(564)Cash flow from operations less capital expenditures$1,537$899$1,538$1,554$920$4,911Verafin structuring items323323Section 31 fees,net1(41)(67)92(103)10628Free cash flow$1,496$832$1,630$1,451$1,349$5,262Uses of cash flowShare repurchases$168$58$269$308$468$1,103Cash paid for ASR agreement325475800Net repayment/(borrowing)of debt96581(4,952)334(409)(4,446)Acquisitions,net of dispositions and other5,7665,766412,2408,047Verafin structuring items323323Dividends paid5002654413833501,439Total uses of cash flow$6,530$904$1,524$1,391$3,447$7,266Historical Cash Flow/Uses of Cash Flow2024 YTD free cash flow excluding Section 31 fees totaled$832 million.2021 free cash flow includes the impact of Verafin related tax and structuring items,described below:The Verafin purchase price of$2.75B reflected certain amounts that were paid post close due to tax and other structuring items.These included a tax payment of$221M and a purchase price holdback escrow of$102M.The cash outflow for the tax liability is offset within acquisitions of businesses,net of cash and cash equivalents acquired within investing activities,leading to no impact on the total change in cash and cash equivalents and restricted cash and cash equivalents for the year ended December 31,2021.27Solutions Organic Revenue GrowthSolutionsCurrent PeriodPrior-year PeriodTotal VarianceOrganic ImpactOther Impact(1)All figures in US$Millions$%$%$%2Q24 Pro Forma Variance$901$802 99 121 13%(2)%2Q24901673 228 34b 96 25%1Q24 871 644 227 35t 113 24%4Q23 860 650 210 32X 92 23%3Q23 694 639 55 9R 8%3 232,8692,546 323 134 79 6 22 2,552 2,344 208 97 10%(19)(1) 21 2,356 1,940 416 21)5 151 6 20 1,962 1,770 192 118 9$ 1 19 1,770 1,635 135 88 7 2%Note:The sum of the percentage changes may not tie to the percent change in total variance due to rounding.1 Other impact includes acquisitions,divestitures,and changes in FX rates.2 Solutions revenue for organic growth calculations have not been recast for our Nordic power trading and clearing business.3 Solutions revenue are not recast for the Broker Services wind down that occurred in 2022.4 Solutions revenue are not recast for the NPM contributionand NFI sale that occurred in 2021 and the Broker Services wind down that occurred in 2022.28Market Services Organic Revenue GrowthNote:The sum of the percentage changes may not tie to the percent change in total variance due to rounding.1.Other impact includes acquisitions,divestitures and changes in FX rates.2.Market Services revenues for organic growth calculations have not been recast for the Nordic power trading and clearing business.3.Market Services revenues for organic growth calculations have not been recast for the sale of NFI that occurred in 2021.Market Services DivisionTotal VarianceOrganic ImpactOther Impact(1)All figures in US$MillionsCurrent PeriodPrior-year Period$%$%$%2Q24$250$242 8 3%8 3%1Q24 237 260 (23)(9)%(23)(9)%4Q23 247 245 2 1%1%1%3Q23 236 239 (3)(1)%(4)(2)%1 23987988 (1)%3%(4) 22 1,019 1,037 (18)(2) 1%(30)(3) 21 1,037 932 105 11 10 2 20 941 755 186 252 24%4 1 19 755 794 (39)(5)%(25)(3)%(14)(2)Market Services Additional Detail(US$in Millions)2Q241Q244Q233Q232Q23U.S.Equity Derivatives Trading$90$91$91$92$89U.S.Cash Equity Trading8674747179European Cash Equity Trading2626242224U.S.Tape Plans3128343535Other11718241615Market Services Net Revenues$250$237$247$236$2421 Other includesNordic fixed income trading&clearing,Nordic derivatives,and Canadian cash equities trading.4Q23 results include a$7 million non-recurring payment.30Our ESG StrategyEnvironmental:Reduce our environmental impact andcarbon footprint while managing climate risk across our operationsSocial:Attract and retain a diverse,motivatedworkforce and foster a workplace cultureof inclusivity and belongingGovernance:Maintain robust corporate governance policies and practicesExternal Impact Invested in new ESG-related products and services,including launching Nasdaq Metrio,Sustainable Lens,and eVestment ESG Analytics to help our investor and corporate clients achieve their own ESG objectives.Hosted Nasdaqs inaugural New York and San Francisco Climate Week Conferences and Stockholm ESG Summit bringing together corporates,investors,climate tech innovators,standard-setters,and rating and ranking organizations for impactful discussions.Corporate Sustainability Published our combined 2023 Annual Sustainability Report(with GRI,SASB,WEF and UNGC CoP indexes)and Task Force on Climate-Related Financial Disclosures(TCFD)Report.Third Party Recognition Named one of the Worlds Most Sustainable Companies of 2024 by TIME and Statista.Named one of Americas Most Responsible and Greenest Companies of 2024 by Newsweek.MSCI ESG Rating maintained at AA,placing Nasdaq in MSCIs Leader category.Named to CDP Climate Change A List and CDP Supplier Engagement Leaderboard.Awarded“Best Company for Sustainability Reporting,Technology&Telecoms,Large Cap,2023”by ESG Investing.Named,for the 8th consecutive year,to the Dow Jones Sustainability North America Index(DJSI North America).2023/24 HighlightsSolidifySupportEnableESG Solutions:Support our clients by providing relevantinsights and innovative technology designed to help them achieve their ESG related objectivesFinancial Technology:Provide mission-critical capital markets,regulatory and financial crime management technology solutions to the financial services industry while advancing industry wide modernizationPurpose:Our purpose-led initiatives drive economic progress and impact acrossthe communities we serveExternal ImpactCorporate Sustainability31ARR:ARR for a given period is the current annualized value derived from subscription contracts with a defined contract value.This excludes contracts that are not recurring,are onetime in nature,or where the contract value fluctuates based on defined metrics.ARR is currently one of our key performance metrics to assess the health and trajectory of our recurring business.ARR does not have any standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies.ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items.For AxiomSL and Calypso recurring revenue contracts,the amount included in ARR is consistent with the amount that we invoice the customer during the current period.Additionally,for AxiomSL and Calypso recurring revenue contracts that include annual values that increase over time,we include in ARR only the annualized value of components of the contract that are considered active as of the date of the ARR calculation.We do not include the future committed increases in the contract value as of the date of the ARR calculation.ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.AUM:Assets Under Management.Corporate Solutions:Our corporate solutions business serves both public and private companies and organizations through our Investor Relations Intelligence offerings,Governance Solutions&ESG Solutions.ETP:Exchange Traded Product.Free Cash Flow Conversion Ratio:Free cash flow,or FCF,conversion ratio is calculated by dividing FCF by Non-GAAP net income attributable to Nasdaq.Gross Retention:As used herein for AxiomSL and Calypso,ARR in the current period over ARR in the prior year period for existing customers excluding price increases and upsells and excluding new customers.Net Retention:As used herein for AxiomSL and Calypso,ARR in the current period over ARR in the prior year period for existing customers including price increases and upsells and excluding new customers.Net Revenues:Revenues less transaction-based expenses.NFI:Nasdaqs former U.S.Fixed Income business,which was sold in June 2021.NPM:Nasdaq Private Market.Pro forma:Pro forma results are presented assuming AxiomSL and Calypso were included in the prior year quarterly results.These results are not calculated in a manner consistent with the pro forma requirements in Article 11 of Regulation S-X.Pro forma growth excludes the impacts of foreign currency except for AxiomSL and Calypso,which are not yet calculated on an organic basis.Solutions:Revenues from our Capital Access Platforms and Financial Technology segments.Defined Terms32Investor Relations Website:http:/Investor Relations Contact:Ato GarrettSenior Vice President,Investor RFor Additional Investor Relations Information
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Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-Q(Mark O.
2024-10-25
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF1934For the quarterly period ended September 30,2024ORoTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF1934For the transition period from _ to _Commission File Number:001-34756Tesla,Inc.(Exact name of registrant as specified in its charter)Texas91-2197729(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)1 Tesla RoadAustin,Texas78725(Address of principal executive offices)(Zip Code)(512)516-8177(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon stockTSLAThe Nasdaq Global Select MarketIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934(“Exchange Act”)during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to suchfiling requirements for the past 90 days.Yes x No oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes xNo oIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or anemerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”inRule 12b-2 of the Exchange Act:Large accelerated filerxAccelerated fileroNon-accelerated fileroSmaller reporting companyoEmerging growth companyoIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.oIndicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes o No xAs of October 18,2024,there were 3,210,059,659 shares of the registrants common stock outstanding.TESLA,INC.FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30,2024INDEX PagePART I.FINANCIAL INFORMATIONItem 1.Financial Statements4Consolidated Balance Sheets4Consolidated Statements of Operations5Consolidated Statements of Comprehensive Income6Consolidated Statements of Redeemable Noncontrolling Interests and Equity7Consolidated Statements of Cash Flows9Notes to Consolidated Financial Statements10Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations26Item 3.Quantitative and Qualitative Disclosures about Market Risk35Item 4.Controls and Procedures35PART II.OTHER INFORMATIONItem 1.Legal Proceedings36Item 1A.Risk Factors36Item 2.Unregistered Sales of Equity Securities and Use of Proceeds36Item 3.Defaults Upon Senior Securities36Item 4.Mine Safety Disclosures36Item 5.Other Information36Item 6.Exhibits37 Signatures381Table of ContentsForward-Looking StatementsThe discussions in this Quarterly Report on Form 10-Q contain forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995.Forward-looking statements are based on assumptions with respect to the future andmanagements current expectations,involve certain risks and uncertainties and are not guarantees.These forward-lookingstatements include,but are not limited to,statements concerning supply chain constraints,our strategy,competition,futureoperations and production capacity,future financial position,future revenues,projected costs,profitability,expected costreductions,capital adequacy,expectations regarding demand and acceptance for our technologies,growth opportunities andtrends in the markets in which we operate,prospects and plans and objectives of management.The words“anticipates,”“believes,”“could,”“estimates,”“expects,”“intends,”“may,”“plans,”“projects,”“will,”“would,”“predicts”and similarexpressions are intended to identify forward-looking statements,although not all forward-looking statements contain theseidentifying words.We may not actually achieve the plans,intentions or expectations disclosed in our forward-looking statementsand you should not place undue reliance on our forward-looking statements.Future results may differ materially from the plans,intentions and expectations disclosed in the forward-looking statements that we make.These forward-looking statements involverisks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements,including,without limitation,the risks set forth in Part I,Item 1A,“Risk Factors”of the Annual Report on Form 10-K for the fiscalyear ended December 31,2023 and that are otherwise described or updated from time to time in our other filings with theSecurities and Exchange Commission(the“SEC”).The discussion of such risks is not an indication that any such risks haveoccurred at the time of this filing.We do not assume any obligation to update any forward-looking statements.Table of ContentsPART I.FINANCIAL INFORMATIONITEM 1.FINANCIAL STATEMENTSTesla,Inc.Consolidated Balance Sheets(in millions,except per share data)(unaudited)September 30,2024December 31,2023AssetsCurrent assetsCash and cash equivalents$18,111$16,398 Short-term investments15,537 12,696 Accounts receivable,net3,313 3,508 Inventory14,530 13,626 Prepaid expenses and other current assets4,888 3,388 Total current assets56,379 49,616 Operating lease vehicles,net5,380 5,989 Solar energy systems,net5,040 5,229 Property,plant and equipment,net36,116 29,725 Operating lease right-of-use assets4,867 4,180 Digital assets,net184 184 Intangible assets,net158 178 Goodwill253 253 Deferred tax assets6,486 6,733 Other non-current assets4,989 4,531 Total assets$119,852$106,618 LiabilitiesCurrent liabilitiesAccounts payable$14,654$14,431 Accrued liabilities and other10,601 9,080 Deferred revenue3,031 2,864 Current portion of debt and finance leases2,291 2,373 Total current liabilities30,577 28,748 Debt and finance leases,net of current portion5,405 2,857 Deferred revenue,net of current portion3,350 3,251 Other long-term liabilities9,810 8,153 Total liabilities49,142 43,009 Commitments and contingencies(Note 10)Redeemable noncontrolling interests in subsidiaries70 242 EquityStockholders equityPreferred stock;$0.001 par value;100 shares authorized;no shares issued and outstanding Common stock;$0.001 par value;6,000 shares authorized;3,207 and 3,185 shares issued andoutstanding as of September 30,2024 and December 31,2023,respectively3 3 Additional paid-in capital37,286 34,892 Accumulated other comprehensive loss(14)(143)Retained earnings32,656 27,882 Total stockholders equity69,931 62,634 Noncontrolling interests in subsidiaries709 733 Total liabilities and equity$119,852$106,618 The accompanying notes are an integral part of these consolidated financial statements.4Table of ContentsTesla,Inc.Consolidated Statements of Operations(in millions,except per share data)(unaudited)Three Months Ended September 30,Nine Months Ended September 30,2024202320242023RevenuesAutomotive sales$18,831$18,582$53,821$57,879 Automotive regulatory credits739 554 2,071 1,357 Automotive leasing446 489 1,380 1,620 Total automotive revenues20,016 19,625 57,272 60,856 Energy generation and storage2,376 1,559 7,025 4,597 Services and other2,790 2,166 7,686 6,153 Total revenues25,182 23,350 71,983 71,606 Cost of revenuesAutomotive sales15,743 15,656 45,602 47,919 Automotive leasing247 301 761 972 Total automotive cost of revenues15,990 15,957 46,363 48,891 Energy generation and storage1,651 1,178 5,157 3,770 Services and other2,544 2,037 7,192 5,723 Total cost of revenues20,185 19,172 58,712 58,384 Gross profit4,997 4,178 13,271 13,222 Operating expensesResearch and development1,039 1,161 3,264 2,875 Selling,general and administrative1,186 1,253 3,837 3,520 Restructuring and other55 677 Total operating expenses2,280 2,414 7,778 6,395 Income from operations2,717 1,764 5,493 6,827 Interest income429 282 1,127 733 Interest expense(92)(38)(254)(95)Other(expense)income,net(270)37(142)317 Income before income taxes2,784 2,045 6,224 7,782 Provision for income taxes601 167 1,403 751 Net income2,183 1,878 4,821 7,031 Net income(loss)attributable to noncontrolling interests andredeemable noncontrolling interests in subsidiaries16 25 47(38)Net income attributable to common stockholders$2,167$1,853$4,774$7,069 Net income per share of common stock attributable to commonstockholdersBasic$0.68$0.58$1.51$2.23 Diluted$0.62$0.53$1.38$2.03 Weighted average shares used in computing net income pershare of common stockBasic3,1983,1763,1923,171Diluted3,4973,4933,4893,481The accompanying notes are an integral part of these consolidated financial statements.5Table of ContentsTesla,Inc.Consolidated Statements of Comprehensive Income(in millions)(unaudited)Three Months Ended September 30,Nine Months Ended September 30,2024202320242023Net income$2,183$1,878$4,821$7,031 Other comprehensive income(loss):Foreign currency translation adjustment445(289)121(343)Unrealized net gain on investments,net of tax8 7 8 8 Net loss realized and included in net income 4 Comprehensive income2,636 1,596 4,950 6,700 Less:Comprehensive income(loss)attributable tononcontrolling interests and redeemable noncontrollinginterests in subsidiaries16 25 47(38)Comprehensive income attributable to commonstockholders$2,620$1,571$4,903$6,738 The accompanying notes are an integral part of these consolidated financial statements.6Table of ContentsTesla,Inc.Consolidated Statements of Redeemable Noncontrolling Interests and Equity(in millions)(unaudited)Three MonthsEnded September30,2024RedeemableNoncontrollingInterestsCommon StockAdditionalPaid-InCapitalAccumulatedOtherComprehensiveLossRetainedEarningsTotalStockholdersEquityNoncontrollingInterests inSubsidiariesTotalEquitySharesAmountBalance as ofJune 30,2024$72 3,194$3$36,443$(467)$30,489$66,468$723$67,191 Settlement ofwarrants 9 Issuance ofcommon stockfor equityincentiveawards 4 340 340 340 Stock-basedcompensation 503 503 503 Distributions tononcontrollinginterests(3)(29)(29)Net income1 2,167 2,167 15 2,182 Othercomprehensiveincome 453 453 453 Balance as ofSeptember 30,2024$70 3,207$3$37,286$(14)$32,656$69,931$709$70,640 Nine MonthsEnded September30,2024RedeemableNoncontrollingInterestsCommon StockAdditionalPaid-InCapitalAccumulatedOtherComprehensiveLossRetainedEarningsTotalStockholdersEquityNoncontrollingInterests inSubsidiariesTotalEquitySharesAmountBalance as ofDecember 31,2023$242 3,185$3$34,892$(143)$27,882$62,634$733$63,367 Settlement ofwarrants 9 Issuance ofcommon stockfor equityincentive awards 13 787 787 787 Stock-basedcompensation 1,565 1,565 1,565 Distributions tononcontrollinginterests(11)(66)(66)Buy-outs ofnoncontrollinginterests(166)42 42 42 Net income5 4,774 4,774 42 4,816 Othercomprehensiveincome 129 129 129 Balance as ofSeptember 30,2024$70 3,207$3$37,286$(14)$32,656$69,931$709$70,640 7Table of ContentsThree MonthsEnded September30,2023RedeemableNoncontrollingInterestsCommon StockAdditionalPaid-InCapitalAccumulatedOtherComprehensiveLossRetainedEarningsTotalStockholdersEquityNoncontrollingInterests inSubsidiariesTotalEquitySharesAmountBalance as ofJune 30,2023$288 3,174$3$33,436$(410)$18,101$51,130$764$51,894 Issuance ofcommon stockfor equityincentiveawards 5 254 254 254 Stock-basedcompensation 513 513 513 Distributions tononcontrollinginterests(10)(33)(33)Buy-outs ofnoncontrollinginterests(5)(2)(2)(2)Net income4 1,853 1,853 21 1,874 Othercomprehensiveloss (282)(282)(282)Balance as ofSeptember 30,2023$277 3,179$3$34,201$(692)$19,954$53,466$752$54,218 Nine MonthsEnded September30,2023RedeemableNoncontrollingInterestsCommon StockAdditionalPaid-InCapitalAccumulatedOtherComprehensiveLossRetainedEarningsTotalStockholdersEquityNoncontrollingInterests inSubsidiariesTotalEquitySharesAmountBalance as ofDecember 31,2022$409 3,164$3$32,177$(361)$12,885$44,704$785$45,489 Issuance ofcommon stockfor equityincentiveawards 15 548 548 548 Stock-basedcompensation 1,473 1,473 1,473 Distributions tononcontrollinginterests(24)(83)(83)Buy-outs ofnoncontrollinginterests(8)3 3(12)(9)Net(loss)income(100)7,069 7,069 62 7,131 Othercomprehensiveloss (331)(331)(331)Balance as ofSeptember 30,2023$277 3,179$3$34,201$(692)$19,954$53,466$752$54,218 The accompanying notes are an integral part of these consolidated financial statements.8Table of ContentsTesla,Inc.Consolidated Statements of Cash Flows(in millions)(unaudited)Nine Months Ended September 30,20242023Cash Flows from Operating ActivitiesNet income$4,821$7,031 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation,amortization and impairment3,872 3,435 Stock-based compensation1,420 1,328 Inventory and purchase commitments write-downs247 361 Foreign currency transaction net unrealized loss(gain)197(317)Deferred income taxes418(316)Non-cash interest and other operating activities83 94 Changes in operating assets and liabilities:Accounts receivable144 377 Inventory(1,107)(1,953)Operating lease vehicles(82)(1,858)Prepaid expenses and other assets(2,639)(1,992)Accounts payable,accrued and other liabilities2,504 1,922 Deferred revenue231 774 Net cash provided by operating activities10,109 8,886 Cash Flows from Investing ActivitiesPurchases of property and equipment excluding finance leases,net of sales(8,556)(6,592)Purchases of solar energy systems,net of sales(6)Purchases of investments(20,797)(13,221)Proceeds from maturities of investments17,975 8,959 Proceeds from sales of investments200 138 Business combinations,net of cash acquired(64)Net cash used in investing activities(11,184)(10,780)Cash Flows from Financing ActivitiesProceeds from issuances of debt4,360 2,526 Repayments of debt(1,783)(887)Proceeds from exercises of stock options and other stock issuances788 548 Principal payments on finance leases(291)(340)Debt issuance costs(6)(23)Distributions paid to noncontrolling interests in subsidiaries(76)(105)Payments for buy-outs of noncontrolling interests in subsidiaries(124)(17)Net cash provided by financing activities2,868 1,702 Effect of exchange rate changes on cash and cash equivalents and restricted cash(8)(142)Net increase(decrease)in cash and cash equivalents and restricted cash1,785(334)Cash and cash equivalents and restricted cash,beginning of period17,189 16,924 Cash and cash equivalents and restricted cash,end of period$18,974$16,590 Supplemental Non-Cash Investing and Financing ActivitiesAcquisitions of property and equipment included in liabilities$2,727$1,717 Leased assets obtained in exchange for finance lease liabilities$32$1 Leased assets obtained in exchange for operating lease liabilities$1,232$1,548 The accompanying notes are an integral part of these consolidated financial statements.9Table of ContentsTesla,Inc.Notes to Consolidated Financial Statements(unaudited)Note 1 Overview&Summary of Significant Accounting PoliciesOverviewTesla,Inc.(“Tesla”,the“Company”,“we”,“us”or“our”)was incorporated in the State of Delaware on July 1,2003 andconverted to a Texas corporation on June 13,2024.Unaudited Interim Financial StatementsThe consolidated financial statements,including the consolidated balance sheet as of September 30,2024,the consolidatedstatements of operations,the consolidated statements of comprehensive income,the consolidated statements of redeemablenoncontrolling interests and equity for the three and nine months ended September 30,2024 and 2023,and the consolidatedstatements of cash flows for the nine months ended September 30,2024 and 2023,as well as other information disclosed in theaccompanying notes,are unaudited.The consolidated balance sheet as of December 31,2023 was derived from the auditedconsolidated financial statements as of that date.The interim consolidated financial statements and the accompanying notes shouldbe read in conjunction with the annual consolidated financial statements and the accompanying notes contained in our AnnualReport on Form 10-K for the year ended December 31,2023.The interim consolidated financial statements and the accompanying notes have been prepared on the same basis as theannual consolidated financial statements and,in the opinion of management,reflect all adjustments,which include only normalrecurring adjustments,necessary for a fair statement of the results of operations for the periods presented.The consolidated resultsof operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any otherfuture years or interim periods.ReclassificationsCertain prior period balances have been reclassified to conform to the current period presentation in the consolidatedfinancial statements and the accompanying notes.Revenue RecognitionRevenue by sourceThe following table disaggregates our revenue by major source(in millions):Three Months Ended September 30,Nine Months Ended September 30,2024202320242023Automotive sales$18,831$18,582$53,821$57,879 Automotive regulatory credits739 554 2,071 1,357 Energy generation and storage sales2,228 1,416 6,616 4,188 Services and other2,790 2,166 7,686 6,153 Total revenues from sales and services24,588 22,718 70,194 69,577 Automotive leasing446 489 1,380 1,620 Energy generation and storage leasing148 143 409 409 Total revenues$25,182$23,350$71,983$71,606 Automotive SegmentAutomotive SalesDeferred revenue related to the access to our Full Self Driving(Supervised)(“FSD”)Capability features and their ongoingmaintenance,internet connectivity,free Supercharging programs and over-the-air software updates primarily on automotive salesamounted to$3.61 billion and$3.54 billion as of September 30,2024 and December 31,2023,respectively.10Table of ContentsDeferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied,orpartially unsatisfied,as of the balance sheet date.Revenue recognized from the deferred revenue balances as of December 31,2023and 2022 was$711 million and$360 million for the nine months ended September 30,2024 and 2023,respectively.Of the totaldeferred revenue balance as of September 30,2024,we expect to recognize$821 million of revenue in the next 12 months.Theremaining balance will be recognized at the time of transfer of control of the product or over the performance period.We have financing receivables on our consolidated balance sheets related to loans we provide for financing our automotivedeliveries.As of September 30,2024 and December 31,2023,we had current net financing receivables of$245 million and$242million,respectively,in Accounts receivable,net,and$868 million and$1.04 billion,respectively,in Other non-current assets forthe long-term portion.We offer resale value guarantees to our commercial banking partners in connection with certain vehicle leasing programs.Under these programs,we originate the lease with our end customer and immediately transfer the lease and the underlying vehicleto our commercial banking partner,with the transaction being accounted for as a sale under ASC 606,Revenue from Contracts withCustomers.We estimate a guarantee liability in accordance with ASC 460,Guarantees and record it within other liabilities on ourconsolidated balance sheet.On a quarterly basis,we assess the estimated market value of vehicles sold under this program todetermine whether there have been changes to the amount of expected resale value guarantee liabilities.The total recordedguarantee liabilities on vehicles sold under this program were immaterial as of September 30,2024 and December 31,2023.Ourmaximum exposure on the guarantees we provide if they are unable to sell the vehicle at or above the vehicles contractual residualvalue at the end of the lease term was$1.04 billion and$166 million as of September 30,2024 and December 31,2023,respectively.Automotive Regulatory CreditsAs of September 30,2024,total transaction price allocated to performance obligations that were unsatisfied or partiallyunsatisfied for contracts with an original expected length of more than one year was$4.72 billion.Of this amount,we expect torecognize$683 million in the next 12 months and the rest over the remaining performance obligation period.Additionally,changesin regulations on automotive regulatory credits may significantly impact our remaining performance obligations and revenue to berecognized under these contracts.Automotive Leasing RevenueDirect Sales-Type Leasing ProgramLease receivables relating to sales-type leases are presented on the consolidated balance sheets as follows(in millions):September 30,2024December 31,2023Gross lease receivables$584$780 Unearned interest income(48)(78)Allowance for expected credit losses(7)(6)Net investment in sales-type leases$529$696 Reported as:Prepaid expenses and other current assets$171$189 Other non-current assets358 507 Net investment in sales-type leases$529$696 11Table of ContentsEnergy Generation and Storage SegmentEnergy Generation and Storage SalesWe record as deferred revenue any non-refundable amounts that are collected from customers related to prepayments,whichis recognized as revenue ratably over the respective customer contract term.As of September 30,2024 and December 31,2023,deferred revenue related to such customer payments amounted to$1.73 billion and$1.60 billion,respectively,mainly due tocontractual payment terms.Revenue recognized from the deferred revenue balances as of December 31,2023 and 2022 was$1.09billion and$511 million for the nine months ended September 30,2024 and 2023,respectively.As of September 30,2024,totaltransaction price allocated to performance obligations that were unsatisfied or partially unsatisfied for contracts with an originalexpected length of more than one year was$6.61 billion.Of this amount,we expect to recognize$4.23 billion in the next 12months and the rest over the remaining performance obligation period.We have financing receivables on our consolidated balance sheets related to loans we provide for financing our energyproducts.As of September 30,2024 and December 31,2023,we had current net financing receivables of$32 million and$31million,respectively,in Accounts receivable,net,and$641 million and$578 million,respectively,in Other non-current assets forthe long-term portion.Income TaxesWe are subject to income taxes in the U.S.and in many foreign jurisdictions.Significant judgment is required in determiningour provision for income taxes,our deferred tax assets and liabilities and any valuation allowance recorded against our net deferredtax assets that are not more likely than not to be realized.We monitor the realizability of our deferred tax assets taking into accountall relevant factors at each reporting period.In completing our assessment of realizability of our deferred tax assets,we considerour history of income(loss)measured at pre-tax income(loss)adjusted for permanent book-tax differences on a jurisdictionalbasis,volatility in actual earnings,excess tax benefits related to stock-based compensation in recent prior years and impacts of thetiming of reversal of existing temporary differences.We also rely on our assessment of the Companys projected future results ofbusiness operations,including uncertainty in future operating results relative to historical results,volatility in the market price ofour common stock and its performance over time,variable macroeconomic conditions impacting our ability to forecast futuretaxable income,and changes in business that may affect the existence and magnitude of future taxable income.Our valuationallowance assessment is based on our best estimate of future results considering all available information.Our provision for or benefit from income taxes for interim periods is determined using an estimate of our annual effectivetax rate,adjusted for discrete items,if any,that are taken into account in the relevant period.Each quarter,we update our estimateof the annual effective tax rate,and if our estimated tax rate changes,we make a cumulative adjustment.Net Income per Share of Common Stock Attributable to Common StockholdersThe following table presents the reconciliation of net income attributable to common stockholders to net income used incomputing basic and diluted net income per share of common stock(in millions):Three Months Ended September 30,Nine Months Ended September 30,2024202320242023Net income attributable to common stockholders$2,167$1,853$4,774$7,069 Less:Buy-outs of noncontrolling interest 2(42)(3)Net income used in computing basic and diluted netincome per share of common stock$2,167$1,851$4,816$7,072 12Table of ContentsThe following table presents the reconciliation of basic to diluted weighted average shares used in computing net income pershare of common stock attributable to common stockholders(in millions):Three Months Ended September 30,Nine Months Ended September 30,2024202320242023Weighted average shares used in computing net incomeper share of common stock,basic3,1983,1763,1923,171Add:Stock-based awards290304286297Convertible senior notes 212Warrants9111011Weighted average shares used in computing net incomeper share of common stock,diluted3,4973,4933,4893,481The following table presents the potentially dilutive shares that were excluded from the computation of diluted net incomeper share of common stock attributable to common stockholders,because their effect was anti-dilutive(in millions):Three Months Ended September 30,Nine Months Ended September 30,2024202320242023Stock-based awards15131812Restricted CashOur total cash and cash equivalents and restricted cash,as presented in the consolidated statements of cash flows,was asfollows(in millions):September 30,2024December 31,2023September 30,2023December 31,2022Cash and cash equivalents$18,111$16,398$15,932$16,253 Restricted cash included in prepaid expenses andother current assets483 543 453 294 Restricted cash included in other non-current assets380 248 205 377 Total as presented in the consolidated statements of cashflows$18,974$17,189$16,590$16,924 Accounts Receivable and Allowance for Doubtful AccountsDepending on the day of the week on which the end of a fiscal quarter falls,our accounts receivable balance may fluctuateas we are waiting for certain customer payments to clear through our banking institutions and receipts of payments from ourfinancing partners,which can take up to approximately two weeks based on the contractual payment terms with such partners.Ouraccounts receivable balances associated with sales of energy storage products are dependent on billing milestones and paymentterms negotiated for each contract,and our accounts receivable balances associated with our sales of regulatory credits aredependent on contractual payment terms.Additionally,government rebates can take up to a year or more to be collected dependingon the customary processing timelines of the specific jurisdictions issuing them.These various factors may have a significantimpact on our accounts receivable balance from period to period.As of September 30,2024 and December 31,2023,governmentrebates receivable was$315 million and$378 million,respectively,in Accounts receivable,net for the current portion and animmaterial amount and$207 million,respectively,in Other non-current assets for the long-term portion in our consolidated balancesheets.Financing ReceivablesAs of September 30,2024 and December 31,2023,the vast majority of our financing receivables were at current status withan immaterial balance being past due.As of September 30,2024 and December 31,2023,the majority of our financing receivables,excluding MyPower notes receivable,were originated in 2023 and 2022.13Table of ContentsAs of September 30,2024 and December 31,2023,the total outstanding balance of MyPower customer notes receivable,netof allowance for expected credit losses,was$250 million and$266 million,respectively,of which$5 million was due in the next12 months.As of September 30,2024 and December 31,2023,the allowance for expected credit losses was$36 million.Concentration of RiskCredit RiskFinancial instruments that potentially subject us to a concentration of credit risk consist of cash,cash equivalents,investments,restricted cash,accounts receivable and other finance receivables.Our cash and investments balances are primarily ondeposit at high credit quality financial institutions or invested in highly rated,investment-grade securities.These deposits aretypically in excess of insured limits.As of September 30,2024 and December 31,2023,no entity represented 10%or more of ourtotal receivables balance.Supply RiskWe are dependent on our suppliers,including single source suppliers,and the inability of these suppliers to deliver necessarycomponents of our products in a timely manner at prices,quality levels and volumes acceptable to us,or our inability to efficientlymanage these components from these suppliers,could have a material adverse effect on our business,prospects,financial conditionand operating results.WarrantiesAccrued warranty activity consisted of the following(in millions):Three Months Ended September 30,Nine Months Ended September 30,2024202320242023Accrued warranty-beginning of period$5,795$4,465$5,152$3,505 Warranty costs incurred(380)(335)(1,048)(911)Net changes in liability for pre-existing warranties,including expirations and foreign exchange impact231 15 295 426 Provision for warranty717 577 1,964 1,702 Accrued warranty-end of period$6,363$4,722$6,363$4,722 Recent Accounting PronouncementsRecently issued accounting pronouncements not yet adoptedIn November 2023,the Financial Accounting Standards Board(“FASB”)issued Accounting Standards Update(“ASU”)No.2023-07,Improvements to Reportable Segment Disclosures(Topic 280).This ASU updates reportable segment disclosurerequirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief OperatingDecision Maker(“CODM”)and included within each reported measure of a segments profit or loss.This ASU also requiresdisclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses thereported measures of a segments profit or loss in assessing segment performance and deciding how to allocate resources.The ASUis effective for annual periods beginning after December 15,2023,and interim periods within fiscal years beginning afterDecember 15,2024.Adoption of the ASU should be applied retrospectively to all prior periods presented in the financialstatements.Early adoption is also permitted.This ASU will likely result in us including the additional required disclosures whenadopted.We are currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31,2024.14Table of ContentsIn December 2023,the FASB issued ASU No.2023-08,Accounting for and Disclosure of Crypto Assets(Subtopic 350-60).This ASU requires certain crypto assets to be measured at fair value separately on the balance sheet with changes reported in thestatement of operations each reporting period.This ASU also enhances the other intangible asset disclosure requirements byrequiring the name,cost basis,fair value,and number of units for each significant crypto asset holding.The ASU is effective forannual periods beginning after December 15,2024,including interim periods within those fiscal years.Adoption of the ASUrequires a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reportingperiod in which an entity adopts the amendments.Early adoption is also permitted,including adoption in an interim period.However,if the ASU is early adopted in an interim period,an entity must adopt the ASU as of the beginning of the fiscal year thatincludes the interim period.This ASU will result in gains and losses recorded in the consolidated financial statements andadditional disclosures when adopted.We are currently evaluating the adoption of this ASU and it could materially affect thecarrying value of our crypto assets held and the gains and losses relating thereto,depending on the fair value at adoption.In December 2023,the FASB issued ASU No.2023-09,Improvements to Income Tax Disclosures(Topic 740).The ASUrequires disaggregated information about a reporting entitys effective tax rate reconciliation as well as additional information onincome taxes paid.The ASU is effective on a prospective basis for annual periods beginning after December 15,2024.Earlyadoption is also permitted for annual financial statements that have not yet been issued or made available for issuance.This ASUwill likely result in the required additional disclosures being included in our consolidated financial statements,once adopted.Note 2 Fair Value of Financial InstrumentsASC 820,Fair Value Measurements(“ASC 820”)states that fair value is an exit price,representing the amount that wouldbe received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.As such,fair value isa market-based measurement that should be determined based on assumptions that market participants would use in pricing anasset or a liability.The three-tiered fair value hierarchy,which prioritizes which inputs should be used in measuring fair value,iscomprised of:(Level I)observable inputs such as quoted prices in active markets;(Level II)inputs other than quoted prices inactive markets that are observable either directly or indirectly and(Level III)unobservable inputs for which there is little or nomarket data.The fair value hierarchy requires the use of observable market data when available in determining fair value.Ourassets and liabilities that were measured at fair value on a recurring basis were as follows(in millions):September 30,2024December 31,2023 Fair ValueLevel ILevel IILevel IIIFair ValueLevel ILevel IILevel IIICertificates of deposit andtime deposits$10,329$10,329$6,996$6,996$Commercial paper4,162 4,162 470 470 U.S.governmentsecurities3,393 3,393 5,136 5,136 Corporate debt securities196 196 480 480 Money market funds1,784 1,784 109 109 Total$19,864$1,784$18,080$13,191$109$13,082$All of our money market funds were classified within Level I of the fair value hierarchy because they were valued usingquoted prices in active markets.Our U.S.government securities,certificates of deposit,commercial paper,time deposits andcorporate debt securities are classified within Level II of the fair value hierarchy and the market approach was used to determinefair value of these investments.15Table of ContentsOur cash,cash equivalents and investments classified by security type as of September 30,2024 and December 31,2023consisted of the following(in millions):September 30,2024 Adjusted CostGrossUnrealizedGainsGrossUnrealizedLossesFair ValueCash and CashEquivalentsShort-TermInvestmentsCash$13,784$13,784$13,784$Certificates of deposit and time deposits10,327 2 10,329 600 9,729 Commercial paper4,160 3(1)4,162 945 3,217 U.S.government securities3,391 3(1)3,393 998 2,395 Corporate debt securities195 1 196 196 Money market funds1,784 1,784 1,784 Total cash,cash equivalents and short-terminvestments$33,641$9$(2)$33,648$18,111$15,537 December 31,2023 Adjusted CostGrossUnrealizedGainsGrossUnrealizedLossesFair ValueCash and CashEquivalentsShort-TermInvestmentsCash$15,903$15,903$15,903$Certificates of deposit and time deposits6,995 1 6,996 6,996 U.S.government securities5,136 1(1)5,136 277 4,859 Corporate debt securities485 1(6)480 480 Commercial paper470 470 109 361 Money market funds109 109 109 Total cash,cash equivalents and short-terminvestments$29,098$3$(7)$29,094$16,398$12,696 The following table summarizes the fair value of our investments by stated contractual maturities as of September 30,2024(in millions):Due in 1 year or less$15,336 Due in 1 year through 5 years201 Total$15,537 Disclosure of Fair ValuesOur financial instruments that are not re-measured at fair value include accounts receivable,financing receivables,otherreceivables,digital assets,accounts payable,accrued liabilities,customer deposits and debt.The carrying values of these financialinstruments materially approximate their fair values,other than our 2.00%Convertible Senior Notes due in 2024(“2024 Notes”),which matured in the second quarter of 2024,and digital assets.We estimated the fair value of the 2024 Notes using commonly accepted valuation methodologies and market-based riskmeasurements that are indirectly observable,such as credit risk(Level II).In addition,we estimate the fair values of our digitalassets based on quoted prices in active markets(Level I).The following table presents the estimated fair values and the carryingvalues(in millions):September 30,2024December 31,2023 Carrying ValueFair ValueCarrying ValueFair Value2024 Notes$37$443 Digital assets,net$184$729$184$487 16Table of ContentsNote 3 InventoryOur inventory consisted of the following(in millions):September 30,2024December 31,2023Raw materials$5,555$5,390 Work in process1,791 2,016 Finished goods(1)5,950 5,049 Service parts1,234 1,171 Total$14,530$13,626(1)Finished goods inventory includes products-in-transit to fulfill customer orders,new vehicles,used vehicles and energyproducts available for sale.We write-down inventory for any excess or obsolete inventory or when we believe that the net realizable value of inventoryis less than the carrying value.During the three and nine months ended September 30,2024,we recorded write-downs of$46million and$114 million,respectively,in Cost of revenues in the consolidated statements of operations.During the three and ninemonths ended September 30,2023,we recorded write-downs of$43 million and$148 million,respectively,in Cost of revenues inthe consolidated statements of operations.Note 4 Property,Plant and Equipment,NetOur property,plant and equipment,net,consisted of the following(in millions):September 30,2024December 31,2023Machinery,equipment,vehicles and office furniture$18,227$16,309 Land and buildings10,680 9,498 Leasehold improvements3,584 3,136 Tooling3,782 3,129 Computer equipment,hardware and software2,818 2,409 AI infrastructure3,693 1,510 Construction in progress8,026 5,791 50,810 41,782 Less:Accumulated depreciation(14,694)(12,057)Total$36,116$29,725 Construction in progress is primarily comprised of ongoing construction and expansion of our facilities,equipment andtooling related to the manufacturing of our products as well as AI-related assets which have not yet been placed in service.Depreciation expense during the three and nine months ended September 30,2024 was$1.05 billion and$2.96 billion,respectively.Depreciation expense during the three and nine months ended September 30,2023 was$897 million and$2.44billion,respectively.17Table of ContentsNote 5 Accrued Liabilities and OtherOur accrued liabilities and other current liabilities consisted of the following(in millions):September 30,2024December 31,2023Accrued purchases(1)$2,424$2,721 Accrued warranty reserve,current portion1,839 1,546 Payroll and related costs1,513 1,325 Taxes payable(2)1,265 1,204 Customer deposits994 876 Operating lease liabilities,current portion797 672 Sales return reserve,current portion226 219 Other current liabilities1,543 517 Total$10,601$9,080(1)Accrued purchases primarily reflects receipts of goods and services for which we had not yet been invoiced.As we areinvoiced for these goods and services,this balance will reduce and accounts payable will increase.(2)Taxes payable primarily includes value added tax,income tax,sales tax,property tax and use tax payables.Note 6 Other Long-Term LiabilitiesOur other long-term liabilities consisted of the following(in millions):September 30,2024December 31,2023Operating lease liabilities$4,290$3,671 Accrued warranty reserve4,524 3,606 Other non-current liabilities996 876 Total other long-term liabilities$9,810$8,153 Note 7 DebtThe following is a summary of our debt and finance leases as of September 30,2024(in millions):Net Carrying ValueUnpaidPrincipalBalanceUnusedCommittedAmount(1)ContractualInterest RatesContractualMaturity Date CurrentLong-TermRecourse debt:RCF Credit Agreement$5,000 Not applicableJanuary 2028Other8 3 11 3.96-5.75%March 2025-January 2031Total recourse debt8 3 11 5,000 Non-recourse debt:Automotive Asset-backed Notes2,073 2,107 4,195 3.95-6.57%August 2025-June 2035China Working Capital Facility 2,851 2,851 2.27%April 2025(2)Cash Equity Debt30 309 348 5.25-5.81%July 2033-January 2035Solar Asset-backed Notes4 5 10 4.80cember 2026Total non-recourse debt2,107 5,272 7,404 Total debt2,115 5,275$7,415$5,000 Finance leases176 130 Total debt and finance leases$2,291$5,405 18Table of ContentsThe following is a summary of our debt and finance leases as of December 31,2023(in millions):Net Carrying ValueUnpaidPrincipalBalanceUnusedCommittedAmount(1)ContractualInterest RatesContractualMaturity DateCurrentLong-TermRecourse debt:2024 Notes$37$37$2.00%May 2024RCF Credit Agreement 5,000 Not applicableJanuary 2028Other 7 7 28 4.70-5.75%March 2025-January 2031Total recourse debt37 7 44 5,028 Non-recourse debt:Automotive Asset-backed Notes1,906 2,337 4,259 0.60-6.57%July 2024-May 2031Cash Equity Debt28 330 367 5.25-5.81%July 2033-January 2035Solar Asset-backed Notes4 8 13 4.80cember 2026Total non-recourse debt1,938 2,675 4,639 Total debt1,975 2,682$4,683$5,028 Finance leases398 175 Total debt and finance leases$2,373$2,857(1)There are no restrictions on draw-down or use for general corporate purposes with respect to any available committed fundsunder our RCF Credit Agreement,except certain specified conditions prior to draw-down.Refer to the notes to theconsolidated financial statements included in our reporting on Form 10-K for the year ended December 31,2023 for theterms of the facility.(2)The contractual maturity date of the China Working Capital Facility is April 2025,renewable until March 2026 at ourdiscretion.As we have the intent and ability to refinance the loan on a long-term basis,we recorded it in Debt and financeleases,net of current portion in the consolidated balance sheet.Recourse debt refers to debt that is recourse to our general assets.Non-recourse debt refers to debt that is recourse to onlyassets of our subsidiaries.The differences between the unpaid principal balances and the net carrying values are due to debtdiscounts or deferred issuance costs.As of September 30,2024,we were in material compliance with all financial debt covenants.2024 NotesDuring the second quarter of 2024,the 2024 Notes reached maturity and were fully settled.Additionally,during the thirdquarter of 2024,we settled the warrants entered into in connection with the issuance of the 2024 Notes,resulting in the issuance of8.5 million shares of our common stock.The remaining warrants were settled in October 2024.Automotive Asset-backed NotesDuring the nine months ended September 30,2024,we transferred beneficial interests related to certain leased vehicles andfinancing receivables into special purpose entities and issued$1.57 billion in aggregate principal amount of Automotive Asset-backed Notes,with terms similar to our other previously issued Automotive Asset-backed Notes.The proceeds from the issuance,net of debt issuance costs,were$1.56 billion.In October 2024,we transferred beneficial interests related to certain leased vehicles into a special purpose entity and issued$783 million in aggregate principal amount of Automotive Asset-backed Notes,with terms similar to our other previously issuedAutomotive-backed Notes.China Working Capital FacilityIn April 2024,one of our subsidiaries entered into a loan agreement(the“China Working Capital Facility”)with lenders inChina for an unsecured revolving facility of up to RMB 20.00 billion to be used for certain production expenditures as well asrepayment of certain finance facilities.Borrowed funds bear interest at a rate equal to the Loan Prime Rate published by thePeoples Bank of China minus 1.18%.The China Working Capital Facility is non-recourse to our assets.19Table of ContentsNote 8 Equity Incentive PlansOther Performance-Based GrantsFrom time to time,the Compensation Committee of our Board of Directors grants certain employees performance-basedrestricted stock units and stock options.As of September 30,2024,we had unrecognized stock-based compensation expense of$487 million under these grants topurchase or receive an aggregate 4.9 million shares of our common stock.For awards probable of achievement,we estimate theunrecognized stock-based compensation expense of$457 million will be recognized over a weighted-average period of 4.3 years.For the three and nine months ended September 30,2024 and 2023,stock-based compensation expense related to thesegrants,net of forfeitures,were immaterial.Summary Stock-Based Compensation InformationThe following table summarizes our stock-based compensation expense by line item in the consolidated statements ofoperations(in millions):Three Months Ended September 30,Nine Months Ended September 30,2024202320242023Cost of revenues$184$181$566$554 Research and development191 189 572 491 Selling,general and administrative82 95 280 283 Restructuring and other 2 Total$457$465$1,420$1,328 Note 9 Income TaxesOur effective tax rate was 22%and 23%for the three and nine months ended September 30,2024,respectively,compared to8%and 10%for the three and nine months ended September 30,2023,respectively.The increase in our effective tax rate isprimarily due to the impact of releasing the valuation allowance on our U.S.deferred tax assets in the fourth quarter of 2023 andchanges in the mix of our jurisdictional earnings.Our effective tax rates for the three and nine months of 2024 and 2023 as compared to the U.S.federal statutory rate of 21%were primarily impacted by the mix of our jurisdictional earnings subject to different tax rates,valuation allowances on ourdeferred tax assets and benefits from our U.S.tax credits and the Inflation Reduction Act of 2022(“IRA”)manufacturing credits.We are subject to tax examinations in the U.S.federal,state and foreign jurisdictions.Given the uncertainty in timing andoutcome of our tax examinations,an estimate of the range of the reasonably possible change in gross unrecognized tax benefitswithin twelve months cannot be made at this time.Note 10 Commitments and ContingenciesOperating Lease Arrangements in Buffalo,New York and Shanghai,ChinaFor a description of our operating lease arrangements in Buffalo,New York,and Shanghai,China,refer to Note 15,Commitments and Contingencies,in our Annual Report on Form 10-K for the year ended December 31,2023.As of September 30,2024,we expect to meet the requirements under these arrangements,as may be modified from time to time,based on our currentand anticipated level of operations.20Table of ContentsLegal ProceedingsLitigation Relating to 2018 CEO Performance AwardOn June 4,2018,a purported Tesla stockholder filed a putative class and derivative action in the Delaware Court ofChancery against Elon Musk and the members of Teslas board of directors as then constituted,alleging corporate waste,unjustenrichment and that such board members breached their fiduciary duties by approving the stock-based compensation plan awardedto Elon Musk in 2018(the“2018 CEO Performance Award”).Trial was held November 14-18,2022.On January 30,2024,theCourt issued an opinion finding that the 2018 CEO Performance Award should be rescinded.Plaintiffs counsel filed a briefseeking a fee award of 29,402,900 Tesla shares,plus expenses of$1,120,115.50.Tesla opposed the fee request on June 7,2024,anda hearing was held on July 8,2024.At Teslas 2024 Annual Meeting of Stockholders,72%of the disinterested voting shares ofTesla,excluding shares owned by Mr.Musk and Kimbal Musk,voted to ratify the 2018 CEO Performance Award.On June 28,2024,because Teslas disinterested stockholders voted to ratify the 2018 CEO Performance Award,Mr.Musk and the other directordefendants,joined by Tesla,filed a brief seeking to revise the Courts January 30,2024 opinion,and a hearing was held on August2,2024.Litigation Related to Directors CompensationOn June 17,2020,a purported Tesla stockholder filed a derivative action in the Delaware Court of Chancery,purportedly onbehalf of Tesla,against certain of Teslas current and former directors regarding compensation awards granted to Teslas directors,other than Elon Musk,between 2017 and 2020.The suit asserts claims for breach of fiduciary duty and unjust enrichment andseeks declaratory and injunctive relief,unspecified damages and other relief.Defendants filed their answer on September 17,2020.On July 14,2023,the parties filed a Stipulation and Agreement of Compromise and Settlement,which does not involve anadmission of any wrongdoing by any party.If the settlement is approved by the Court,this action will be fully settled anddismissed with prejudice.Pursuant to the terms of the agreement,Tesla provided notice of the proposed settlement to stockholdersof record as of July 14,2023.The Court held a hearing regarding the settlement on October 13,2023,after which it took thesettlement and plaintiff counsels fee request under advisement.On August 14,2024,the parties submitted a joint letter requestingthat the Court approve and enter final judgment with respect to the settlement,and decide the fee request at a later date.Thesettlement is not expected to have an adverse impact on our results of operations,cash flows or financial position.Litigation Relating to Potential Going Private TransactionBetween August 10,2018 and September 6,2018,nine purported stockholder class actions were filed against Tesla and ElonMusk in connection with Mr.Musks August 7,2018 Twitter post that he was considering taking Tesla private.On January 16,2019,Plaintiffs filed their consolidated complaint in the United States District Court for the Northern District of California andadded as defendants the members of Teslas board of directors.The consolidated complaint asserts claims for violations of thefederal securities laws and seeks unspecified damages and other relief.The parties stipulated to certification of a class ofstockholders,which the court granted on November 25,2020.Trial started on January 17,2023,and on February 3,2023,a juryrendered a verdict in favor of the defendants on all counts.After trial,plaintiffs filed a motion for judgment as a matter of law and amotion for new trial,which the Court denied and judgement was entered in favor of defendants on July 11,2023.On July 14,2023,plaintiffs filed a notice of appeal.The appeal,which is pending in the United States Court of Appeals for the Ninth Circuit,hasbeen fully briefed by the parties,and is scheduled for oral argument on October 25,2024.Between October 17,2018 and March 8,2021,seven derivative lawsuits were filed in the Delaware Court of Chancery,purportedly on behalf of Tesla,against Mr.Musk and the members of Teslas board of directors,as constituted at relevant times,inrelation to statements made and actions connected to a potential going private transaction,with certain of the lawsuits challengingadditional Twitter posts by Mr.Musk,among other things.Several of those actions were consolidated,and all have been stayed.Inaddition to these cases,two derivative lawsuits were filed on October 25,2018 and February 11,2019 in the U.S.District Court forthe District of Delaware,purportedly on behalf of Tesla,against Mr.Musk and the members of the Tesla board of directors as thenconstituted.Those cases have also been consolidated and stayed pending resolution of the appeal in the above-referencedconsolidated purported stockholder class action.21Table of ContentsOn October 21,2022,a lawsuit was filed in the Delaware Court of Chancery by a purported shareholder of Tesla alleging,among other things,that board members breached their fiduciary duties in connection with their oversight of the Companys 2018settlement with the SEC,as amended.Among other things,the plaintiff seeks reforms to the Companys corporate governance andinternal procedures,unspecified damages,and attorneys fees.The lawsuit has been stayed pending resolution of a motion toconsolidate certain derivative lawsuits in the Delaware Court of Chancery referenced below.On November 15,2021,JPMorgan Chase Bank(“JP Morgan”)filed a lawsuit against Tesla in the Southern District of NewYork alleging breach of a stock warrant agreement that was entered into as part of a convertible notes offering in 2014.In 2018,JPMorgan informed Tesla that it had adjusted the strike price based upon Mr.Musks August 7,2018 Twitter post that he wasconsidering taking Tesla private.Tesla disputed JP Morgans adjustment as a violation of the parties agreement.In 2021,Tesladelivered shares to JP Morgan per the agreement,which they duly accepted.JP Morgan now alleges that it is owed approximately$162 million as the value of additional shares that it claims should have been delivered as a result of the adjustment to the strikeprice in 2018.On January 24,2022,Tesla filed multiple counterclaims as part of its answer to the underlying lawsuit,assertingamong other points that JP Morgan should have terminated the stock warrant agreement in 2018 rather than make an adjustment tothe strike price that it should have known would lead to a commercially unreasonable result.Tesla believes that the adjustmentsmade by JP Morgan were neither proper nor commercially reasonable,as required under the stock warrant agreements.JP Morganfiled a motion for judgment on the pleadings,which Tesla opposed,and on September 12,2024,the Court denied JP Morgansmotion.Certain Derivative Lawsuits in DelawareBefore converting from a Delaware to Texas corporation on June 13,2024,three separate derivative actions brought bypurported Tesla stockholders were filed in the Delaware Court of Chancery on May 24,June 10 and June 13,2024,purportedly onbehalf of Tesla,against current and former directors regarding topics involving Elon Musk and others,X Corp.(formerly Twitter)and x.AI.These suits assert various claims,including breach of fiduciary duty and breach of contract,and seek unspecifieddamages and other relief.On August 6,2024,the plaintiffs in these three actions moved to consolidate the matters into a singlecase,and a hearing on that motion is scheduled for November 18,2024.Litigation and Investigations Relating to Alleged Discrimination and HarassmentOn February 9,2022,the California Civil Rights Department(“CRD,”formerly“DFEH”)filed a civil complaint againstTesla in Alameda County,California Superior Court,alleging systemic race discrimination,hostile work environment and payequity claims,among others.CRDs amended complaint seeks monetary damages and injunctive relief.The case is currently indiscovery.Trial is scheduled for September 15,2025.Additionally,on June 1,2022 the Equal Employment Opportunity Commission(“EEOC”)issued a cause finding againstTesla that closely parallels the CRDs allegations.On September 28,2023,the EEOC filed a civil complaint against Tesla in theUnited States District Court for the Northern District of California asserting claims for race harassment and retaliation and seeking,among other things,monetary and injunctive relief.On June 16,2022,two Tesla stockholders filed separate derivative actions in the U.S.District Court for the Western Districtof Texas,purportedly on behalf of Tesla,against certain of Teslas current and former directors.Both suits assert claims for breachof fiduciary duty,unjust enrichment,and violation of the federal securities laws in connection with alleged race and genderdiscrimination and sexual harassment.Among other things,plaintiffs seek declaratory and injunctive relief,unspecified damagespayable to Tesla,and attorneys fees.On July 22,2022,the Court consolidated the two cases and on September 6,2022,plaintiffsfiled a consolidated complaint.On November 7,2022,the defendants filed a motion to dismiss the case and on September 15,2023,the Court dismissed the action but granted plaintiffs leave to file an amended complaint.On November 2,2023,plaintiff filedan amended complaint purportedly on behalf of Tesla,against Elon Musk.On December 19,2023,the defendants moved todismiss the amended complaint,which the Court granted on April 12,2024,with leave for plaintiffs to amend.On May 15,2024,plaintiffs filed a second amended consolidated complaint purportedly on behalf of Tesla,against Mr.Musk.On July 1,2024,thedefendants moved to dismiss the second amended consolidated complaint.22Table of ContentsOther Litigation Related to Our Products and ServicesWe are also subject to various lawsuits that seek monetary and other injunctive relief.These lawsuits include proposed classactions and other consumer claims that allege,among other things,purported defects and misrepresentations related to our productsand services.For example,on September 14,2022,a proposed class action was filed against Tesla,Inc.and related entities in theU.S.District Court for the Northern District of California,alleging various claims about the Companys driver assistancetechnology systems under state and federal law.This case was later consolidated with several other proposed class actions,and aConsolidated Amended Complaint was filed on October 28,2022,which seeks damages and other relief on behalf of all personswho purchased or leased from Tesla between January 1,2016,to the present.On October 5,2022,a proposed class actioncomplaint was filed in the U.S.District Court for the Eastern District of New York asserting similar state and federal law claimsagainst the same defendants.On September 30,2023,the Court dismissed this action with leave to amend the complaint.OnNovember 20,2023,the plaintiff moved to amend the complaint,which Tesla opposed.On August 8,2024,the Court denied theplaintiffs motion for leave to file an amended complaint and entered judgment for Tesla.On September 5,2024,the plaintiff fileda notice of appeal to United States Court of Appeals for the Second Circuit.On March 22,2023,the plaintiffs in the NorthernDistrict of California consolidated action filed a motion for a preliminary injunction to order Tesla to(1)cease using the term“FullSelf-Driving Capability”(FSD Capability),(2)cease the sale and activation of FSD Capability and deactivate FSD Capability onTesla vehicles,and(3)provide certain notices to consumers about proposed court-findings about the accuracy of the use of theterms Autopilot and FSD Capability.Tesla opposed the motion.On September 30,2023,the Court denied the request for apreliminary injunction,compelled four of five plaintiffs to arbitration,and dismissed the claims of the fifth plaintiff with leave toamend the complaint.On October 31,2023,the remaining plaintiff in the Northern District of California action filed an amendedcomplaint,which Tesla moved to dismiss,and on May 15,2024,the Court granted in part and denied in part Teslas motion.OnOctober 2,2023,a similar proposed class action was filed in San Diego County Superior Court in California.Tesla subsequentlyremoved the San Diego County case to federal court and on January 8,2024,the federal court granted Teslas motion to transfer thecase to the U.S.District Court for the Northern District of California.Tesla moved to compel arbitration,which the plaintiff did notoppose,and on June 27,2024,the Court stayed the case pending arbitration.On February 27,2023,a proposed class action was filed in the U.S.District Court for the Northern District of Californiaagainst Tesla,Inc.,Elon Musk and certain current and former Company executives.The complaint alleges that the defendants madematerial misrepresentations and omissions about the Companys Autopilot and FSD Capability technologies and seeks moneydamages and other relief on behalf of persons who purchased Tesla stock between February 19,2019,and February 17,2023.Anamended complaint was filed on September 5,2023,naming only Tesla,Inc.and Elon Musk as defendants.On November 6,2023,Tesla moved to dismiss the amended complaint.On September 30,2024,the Court granted Teslas motion to dismiss withoutprejudice.On March 14,2023,a proposed class action was filed against Tesla,Inc.in the U.S.District Court for the Northern Districtof California.Several similar complaints were also filed in the same court and these cases have now all been consolidated.Thesecomplaints allege that Tesla violates federal antitrust and warranty laws through its repair,service,and maintenance practices andseeks,among other relief,damages for persons who paid Tesla for repairs services or Tesla compatible replacement parts fromMarch 2019 to March 2023.On July 17,2023,these plaintiffs filed a consolidated amended complaint.On September 27,2023,thecourt granted Teslas motion to compel arbitration as to three of the plaintiffs,and on November 17,2023,the court granted Teslasmotion to dismiss without prejudice.The plaintiffs filed a Consolidated Second Amended Complaint on December 12,2023,whichTesla moved to dismiss.Plaintiffs also appealed the courts arbitration order,which was denied.On June 17,2024,the Courtgranted in part and denied in part Teslas motion to dismiss the Consolidated Second Amended Complaint.The Company intends to vigorously defend itself in these matters;however,we cannot predict the outcome or impact.Weare unable to reasonably estimate the possible loss or range of loss,if any,associated with these claims,unless noted.23Table of ContentsCertain Investigations and Other MattersWe regularly receive requests for information,including subpoenas,from regulators and governmental authorities such asthe National Highway Traffic Safety Administration,the National Transportation Safety Board,the Securities and ExchangeCommission(“SEC”),the Department of Justice(“DOJ”),and various local,state,federal,and international agencies.The ongoingrequests for information include topics such as operations,technology(e.g.,vehicle functionality,vehicle incidents,Autopilot andFSD Capability),compliance,finance,data privacy,and other matters related to Teslas business,its personnel,and related parties.We routinely cooperate with such formal and informal requests for information,investigations,and other inquiries.To ourknowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred.We cannot predictthe outcome or impact of any ongoing matters.Should the government decide to pursue an enforcement action,there exists thepossibility of a material adverse impact on our business,results of operation,prospects,cash flows,financial position or brand.We are also subject to various other legal proceedings,risks and claims that arise from the normal course of businessactivities.For example,during the second quarter of 2023,a foreign news outlet reported that it obtained certain misappropriateddata including,purportedly non-public Tesla business and personal information.Tesla has made notifications to potentially affectedindividuals(current and former employees)and regulatory authorities and we are working with certain law enforcement and otherauthorities.On August 5,2023,a putative class action was filed in the United States District Court for the Northern District ofCalifornia,purportedly on behalf of all U.S.individuals impacted by the data incident,followed by several additional lawsuits,thateach assert claims under various state laws and seeks monetary damages and other relief.If an unfavorable ruling or developmentwere to occur in these or other possible legal proceedings,risks and claims,there exists the possibility of a material adverse impacton our business,results of operations,prospects,cash flows,financial position or brand.Note 11 Variable Interest Entity ArrangementsThe aggregate carrying values of the variable interest entities assets and liabilities,after elimination of any intercompanytransactions and balances,in the consolidated balance sheets were as follows(in millions):September 30,2024December 31,2023Assets Current assets Cash and cash equivalents$51$66 Accounts receivable,net28 13 Prepaid expenses and other current assets263 361 Total current assets342 440 Operating lease vehicles,net451 Solar energy systems,net2,524 3,278 Other non-current assets190 369 Total assets$3,507$4,087 Liabilities Current liabilities Accrued liabilities and other$36$67 Deferred revenue7 6 Current portion of debt and finance leases1,930 1,564 Total current liabilities1,973 1,637 Deferred revenue,net of current portion81 99 Debt and finance leases,net of current portion1,826 2,041 Total liabilities$3,880$3,777 24Table of ContentsNote 12 Segment Reporting and Information about Geographic AreasWe have two operating and reportable segments:(i)automotive and(ii)energy generation and storage.The following tablepresents revenues and gross profit by reportable segment(in millions):Three Months Ended September 30,Nine Months Ended September 30,2024202320242023Automotive segment Revenues$22,806$21,791$64,958$67,009 Gross profit$4,272$3,797$11,403$12,395 Energy generation and storage segment Revenues$2,376$1,559$7,025$4,597 Gross profit$725$381$1,868$827 The following table presents revenues by geographic area based on the sales location of our products(in millions):Three Months Ended September 30,Nine Months Ended September 30,2024202320242023United States$12,584$10,893$35,602$33,472 China5,665 5,020 14,893 15,642 Other international6,933 7,437 21,488 22,492 Total$25,182$23,350$71,983$71,606 The following table presents long-lived assets by geographic area(in millions):September 30,2024December 31,2023United States$32,367$26,629 Germany4,447 4,258 Other international4,342 4,067 Total$41,156$34,954 The following table presents inventory by reportable segment(in millions):September 30,2024December 31,2023Automotive$12,266$11,139 Energy generation and storage2,264 2,487 Total$14,530$13,626 Note 13 Restructuring and OtherIn the second quarter of 2024,we initiated and substantially completed certain restructuring actions to reduce costs andimprove efficiency.As a result,we recognized$583 million of employee termination expenses in Restructuring and other in ourconsolidated income statement.These expenses were substantially paid with an immaterial accrual remaining in Accrued liabilitiesand other in our consolidated balance sheet as of September 30,2024.25Table of ContentsITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONSThe following discussion and analysis should be read in conjunction with the consolidated financial statements and therelated notes included elsewhere in this Quarterly Report on Form 10-Q.OverviewOur mission is to accelerate the worlds transition to sustainable energy.We design,develop,manufacture,lease and sellhigh-performance fully electric vehicles,solar energy generation systems and energy storage products.We also offer maintenance,installation,operation,charging,insurance,financial and other services related to our products.Additionally,we are increasinglyfocused on products and services based on AI,robotics and automation.In 2024,we produced approximately 1,314,000 consumer vehicles and delivered approximately 1,294,000 consumervehicles through the third quarter.We are focused on profitable growth,including by leveraging existing factories and productionlines to introduce new and more affordable products,further improving and deploying our FSD capabilities,including through ourplanned robotaxi product,reducing costs,increasing vehicle production,utilized capacity and delivery capabilities,improving anddeveloping our vehicles and battery technologies,vertically integrating and localizing our supply chain,and expanding our globalinfrastructure,including our service and charging infrastructure.In 2024,we deployed 20.41 GWh of energy storage products through the third quarter.We are focused on ramping theproduction and increasing the market penetration of our energy storage products.During the three and nine months ended September 30,2024,we recognized total revenues of$25.18 billion and$71.98 billion,respectively,representing increases of$1.83 billion and$377 million,respectively,compared to the same periods inthe prior year.During the three and nine months ended September 30,2024,our net income attributable to common stockholderswas$2.17 billion and$4.77 billion,respectively,representing an increase of$314 million and a decrease of$2.30 billion,respectively,compared to the same periods in the prior year.We continue to ramp production and build and optimize ourmanufacturing capacity,expand our operations while focusing on further cost reductions and operational efficiencies to enableincreased deliveries and deployments of our products,and invest in research and development to accelerate our AI,software,andfleet-based profits for further revenue growth.We ended the third quarter of 2024 with$33.65 billion in cash and cash equivalents and investments,representing anincrease of$4.55 billion from the end of 2023.Our cash flows provided by operating activities were$10.11 billion during the ninemonths ended September 30,2024,compared to$8.89 billion during the same period ended September 30,2023,representing anincrease of$1.22 billion.Capital expenditures amounted to$8.56 billion during the nine months ended September 30,2024,compared to$6.59 billion during the same period ended September 30,2023,representing an increase of$1.96 billion.Overallgrowth has allowed our business to generally fund itself,and we will continue investing in a number of capital-intensive projectsand research and development in upcoming periods.Management Opportunities,Challenges and Uncertainties and 2024 OutlookAutomotiveProductionThe following is a summary of the status of production of each of our announced vehicle models in production and underdevelopment,as of the date of this Quarterly Report on Form 10-Q:Production LocationVehicle Model(s)Production StatusFremont FactoryModel S/Model XActive Model 3/Model YActiveGigafactory ShanghaiModel 3/Model YActiveGigafactory Berlin-BrandenburgModel YActiveGigafactory TexasModel YActive CybertruckActiveGigafactory NevadaTesla SemiPilot productionVariousNext Generation PlatformIn developmentTBDRoadsterIn development26Table of ContentsWe are focused on growing our manufacturing capacity,which includes capacity for manufacturing newer vehicle modelssuch as our Cybertruck,Tesla Semi and future vehicles utilizing aspects of our next generation platform,and ramping theproduction at our Gigafactories to their installed production capacities as well as increasing production rate and efficiency at ourcurrent factories.The next phase of production growth will depend on the continued ramp at our factories and be initiated byadvances in autonomy and the introduction of new products,including those built on our next generation vehicle platform,as wellas our ability to add to our available sources of battery cell supply by manufacturing our own cells that we are developing to havehigh-volume output,lower capital and production costs and longer range.Our goals are to improve vehicle performance,decreaseproduction costs and increase affordability and customer awareness.These plans are subject to uncertainties inherent in establishing and ramping manufacturing operations,which may beexacerbated by new product and manufacturing technologies we introduce,the number of concurrent international projects,anyindustry-wide component constraints,labor shortages and any future impact from events outside of our control.For example,during the first quarter of 2024,we experienced a sequential decline in production volumes partially caused by the early phase ofthe production ramp of the updated Model 3 at our Fremont factory,and factory shutdowns at Gigafactory Berlin-Brandenburgresulting from shipping diversions caused by the Red Sea conflict and an arson attack.Moreover,we have set ambitioustechnological targets with our plans for battery cells as well as for iterative manufacturing and design improvements for ourvehicles with each new factory.AutomotiveDemand,Sales,Deliveries and InfrastructureOur cost reduction efforts,cost innovation strategies,and additional localized procurement and manufacturing are key to ourvehicles affordability and have allowed us to competitively price our vehicles.We will also continue to generate demand byimproving our vehicles performance and functionality,including through product offerings and features based on artificialintelligence such as Autopilot,FSD(Supervised),and other software,and delivering new vehicles and vehicle options.In addition,we have been increasing awareness,and expanding our vehicle financing programs,including attractive leasing terms for ourcustomers.Moreover,we expect to continue to benefit from ongoing electrification of the automotive sector and increasingenvironmental regulations and initiatives.However,we operate in a cyclical industry that is sensitive to shifting consumer trends,political and regulatory uncertainty,including with respect to trade and the environment,all of which can be compounded by inflationary pressures,rising energyprices,interest rate fluctuations and the liquidity of enterprise customers.For example,as inflationary pressures increased acrossthe markets in which we operate,central banks in developed countries raised interest rates rapidly and substantially,whichimpacted the affordability of vehicle lease and finance arrangements.Further,sales of vehicles in the automotive industry also tendto be cyclical in many markets,which may expose us to increased volatility as we expand and adjust our operations.Moreover,asadditional competitors enter the marketplace and help bring the world closer to sustainable transportation,we will have to adjustand continue to execute well to maintain our momentum.Additionally,our suppliers liquidity and allocation plans may be affectedby current challenges in the North American automotive industry,which could reduce our access to components or result inunfavorable changes to cost.These macroeconomic and industry trends have had,and will likely continue to have,an impact on thepricing of,and order rate for our vehicles,and in turn our operating margin.Changes in government and economic incentives ortariffs may also impact our sales,cost structure and the competitive landscape.We will continue to adjust accordingly to suchdevelopments,and we believe our ongoing cost reduction,including improved production innovation and efficiency at our newestfactories and lower logistics costs,and focus on operating leverage will continue to benefit us in relation to our competitors,whileour new products will help enable future growth.As our production increases,we must work constantly to similarly increase vehicle delivery capability so that it does notbecome a bottleneck on our total deliveries.We are also committed to reducing the percentage of vehicles delivered in the thirdmonth of each quarter,which will help to reduce the cost per vehicle.As we expand our manufacturing operations globally,we willalso have to continue to increase and staff our delivery,servicing and charging infrastructure accordingly,maintain our vehiclereliability and optimize our Supercharger locations to ensure cost effectiveness and customer satisfaction.In particular,as otherautomotive manufacturers have announced their adoption of the North American Charging Standard(“NACS”)and agreementswith us to utilize our Superchargers,we must correspondingly expand our network in order to ensure adequate availability to meetcustomer demands.We also remain focused on continued enhancements of the capability and efficiency of our servicingoperations.27Table of ContentsEnergy Generation and Storage Demand,Production and DeploymentThe long-term success of this business is dependent upon incremental volume growth.We continue to increase theproduction and capabilities of our energy storage products to meet high levels of demand,including the introduction of Powerwall3 in 2024,the construction of a new Megafactory in Shanghai and the ongoing ramp at our Megafactory in Lathrop,California.ForMegapack,energy storage deployments can vary meaningfully quarter to quarter depending on the timing of specific projectmilestones and logistics.As these product lines grow,we will have to maintain adequate battery cell supply for our energy storageproducts.At the same time,changes in government and economic incentives or tariffs may also impact our sales,cost structure andthe competitive landscape.Cash Flow and Capital Expenditure TrendsOur capital expenditures are typically difficult to project beyond the short-term given the number and breadth of our coreprojects at any given time,and may further be impacted by uncertainties in future global market conditions.We are simultaneouslydeveloping and ramping new products,building or ramping manufacturing facilities on three continents,piloting the developmentand manufacture of new battery cell technologies,expanding our Supercharger network and investing in autonomy and otherartificial intelligence enabled training and products,and the pace of our capital spend may vary depending on overall priorityamong projects,the pace at which we meet milestones,production adjustments to and among our various products,increasedcapital efficiencies and the addition of new projects.Owing and subject to the foregoing as well as the pipeline of announcedprojects under development,all other continuing infrastructure growth and varying levels of inflation,we currently expect ourcapital expenditures to exceed$11.00 billion in 2024 and be between$8.00 to$10.00 billion in each of the following two fiscalyears.Our business has generally been consistently generating cash flow from operations in excess of our level of capital spend,and with better working capital management resulting in shorter days sales outstanding than days payable outstanding,our salesgrowth is also generally facilitating positive cash generation.We have and will continue to utilize such cash flows,among otherthings,to invest in autonomy,do more vertical integration,expand our product roadmap and provide financing options to ourcustomers.At the same time,we are likely to see heightened levels of capital expenditures during certain periods depending on thespecific pace of our capital-intensive projects and other potential variables such as rising material prices and increases in supplychain and labor expenses resulting from changes in global trade conditions and labor availability.Overall,we expect our ability tobe self-funding to continue as long as macroeconomic factors support current trends in our sales.Critical Accounting Policies and EstimatesFor a description of our critical accounting policies and estimates,refer to Part II,Item 7,Critical Accounting Policies andEstimates in our Annual Report on Form 10-K for the year ended December 31,2023.There have been no material changes to ourcritical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31,2023.Recent Accounting PronouncementsSee Note 1,Overview&Summary of Significant Accounting Policies,to the consolidated financial statements includedelsewhere in this Quarterly Report on Form 10-Q.28Table of ContentsResults of OperationsRevenues Three Months EndedSeptember 30,ChangeNine Months EndedSeptember 30,Change(Dollars in millions)20242023$ 242023$%Automotive sales$18,831$18,582$249 1%$53,821$57,879$(4,058)(7)%Automotive regulatory credits739 554 185 33%2,071 1,357 714 53%Automotive leasing446 489(43)(9)%1,380 1,620(240)(15)%Total automotive revenues20,016 19,625 391 2W,272 60,856(3,584)(6)%Services and other2,790 2,166 624 29%7,686 6,153 1,533 25%Total automotive&services and othersegment revenue22,806 21,791 1,015 5d,958 67,009(2,051)(3)%Energy generation and storage segmentrevenue2,376 1,559 817 52%7,025 4,597 2,428 53%Total revenues$25,182$23,350$1,832 8%$71,983$71,606$377 1%Automotive&Services and Other SegmentAutomotive sales revenue increased$249 million,or 1%,in the three months ended September 30,2024 as compared to thethree months ended September 30,2023,due to an increase of approximately 23,000 combined Model 3 and Model Y cashdeliveries and an increase of 8,000 deliveries of other models primarily due to our production ramp of Cybertruck.Additionally,werecognized$326 million of FSD revenue for Cybertruck and certain features such as Actually Smart Summon in the third quarter of2024.The increases were partially offset by lower average selling price on our vehicles driven by overall price reductions andattractive financing options provided year over year as well as mix.Automotive sales revenue decreased$4.06 billion,or 7%,in the nine months ended September 30,2024 as compared to thenine months ended September 30,2023,primarily due to lower average selling price on our vehicles driven by overall pricereductions and attractive financing options provided year over year as well as mix.Additionally,there was a decrease ofapproximately 17,000 combined Model 3 and Model Y cash deliveries partially due to the early phase of the production ramp ofthe updated Model 3 at our Fremont factory.The decreases were partially offset by an increase of approximately 19,000 deliveriesof other models primarily due to our production ramp of Cybertruck and an increase in FSD revenue compared to the prior period,as discussed above.Automotive regulatory credits revenue increased$185 million,or 33%,in the three months ended September 30,2024 ascompared to the three months ended September 30,2023.Automotive regulatory credits revenue increased$714 million,or 53%,in the nine months ended September 30,2024 as compared to the nine months ended September 30,2023.These increases weredriven by demand for credits in North America as other automobile manufacturers scale back on their battery electric vehicle plans.Automotive leasing revenue decreased$43 million,or 9%,in the three months ended September 30,2024 as compared tothe three months ended September 30,2023.Automotive leasing revenue decreased$240 million,or 15%,in the nine monthsended September 30,2024 as compared to the nine months ended September 30,2023.The decreases were primarily due to lowerdirect sales-type leasing deliveries and a decrease in lease buyouts.Services and other revenue increased$624 million,or 29%,in the three months ended September 30,2024 as compared tothe three months ended September 30,2023.Services and other revenue increased$1.53 billion,or 25%,in the nine months endedSeptember 30,2024 as compared to the nine months ended September 30,2023.The increases were primarily due to increases innon-warranty maintenance services and collision revenue,used vehicle revenue,paid Supercharging revenue,insurance servicesrevenue and part sales revenue.Energy Generation and Storage SegmentEnergy generation and storage revenue increased$817 million,or 52%,in the three months ended September 30,2024 ascompared to the three months ended September 30,2023.Energy generation and storage revenue increased$2.43 billion,or 53%,in the nine months ended September 30,2024 as compared to the nine months ended September 30,2023.The increases wereprimarily due to increases in Megapack and Powerwall deployments compared to the prior periods.29Table of ContentsCost of Revenues and Gross MarginThree Months EndedSeptember 30,ChangeNine Months EndedSeptember 30,Change(Dollars in millions)20242023$ 242023$%Cost of revenuesAutomotive sales$15,743$15,656$87 1%$45,602$47,919$(2,317)(5)%Automotive leasing247 301(54)(18)v1 972(211)(22)%Total automotive cost of revenues15,990 15,957 33 0F,363 48,891(2,528)(5)%Services and other2,544 2,037 507 25%7,192 5,723 1,469 26%Total automotive&services andother segment cost of revenues18,534 17,994 540 3S,555 54,614(1,059)(2)%Energy generation and storagesegment1,651 1,178 473 40%5,157 3,770 1,387 37%Total cost of revenues$20,185$19,172$1,013 5%$58,712$58,384$328 1%Gross profit total automotive$4,026$3,668$10,909$11,965 Gross margin total automotive20.1.7.0.7%Gross profit total automotive&servicesand other segment$4,272$3,797$11,403$12,395 Gross margin total automotive&services and other segment18.7.4.6.5%Gross profit energy generation andstorage segment$725$381$1,868$827 Gross margin energy generation andstorage segment30.5$.4&.6.0%Total gross profit$4,997$4,178$13,271$13,222 Total gross margin19.8.9.4.5%Automotive&Services and Other SegmentCost of automotive sales revenue increased$87 million,or 1%,in the three months ended September 30,2024 as comparedto the three months ended September 30,2023 due to the increases in deliveries year over year as discussed above,partially offsetby a decrease in the average combined cost per unit of our vehicles primarily from lower raw material costs,freight and duties aswell as mix.Cost of automotive sales revenue decreased$2.32 billion,or 5%,in the nine months ended September 30,2024 as comparedto the nine months ended September 30,2023 due to a decrease in the average combined cost per unit of our vehicles primarilyfrom lower raw material costs,freight and duties as well as mix,in addition to the volume changes in deliveries year over year asdiscussed above.The decreases were partially offset by higher costs for Cybertruck and the updated Model 3 at our Fremontfactory as a result of the temporary under-utilization of manufacturing capacity as production ramps.Cost of automotive leasing revenue decreased$54 million,or 18%,in the three months ended September 30,2024 ascompared to the three months ended September 30,2023.Cost of automotive leasing revenue decreased$211 million,or 22%,inthe nine months ended September 30,2024 as compared to the nine months ended September 30,2023.The decreases wereprimarily due to a decrease in direct sales-type leasing cost of revenue driven by lower deliveries and a decrease in our directoperating lease cost of revenue driven by lower lease payoffs compared to the prior periods.Cost of services and other revenue increased$507 million,or 25%,in the three months ended September 30,2024 ascompared to the three months ended September 30,2023.Cost of services and other revenue increased$1.47 billion,or 26%,in thenine months ended September 30,2024 as compared to the nine months ended September 30,2023.The increases were primarilydue to volume increases in used vehicle sales,insurance services,paid Supercharging,non-warranty maintenance services andcollision and part sales.30Table of ContentsGross margin for total automotive increased from 18.7%to 20.1%in the three months ended September 30,2024 ascompared to the three months ended September 30,2023 primarily due to lower average combined cost per unit of our vehicles,anincrease in FSD revenue and an increase in regulatory credits revenue,partially offset by lower average selling price on ourvehicles,as discussed above.Gross margin for total automotive decreased from 19.7%to 19.0%in the nine months ended September 30,2024 ascompared to the nine months ended September 30,2023 primarily due to lower average selling price on our vehicles and temporaryunder-utilization of manufacturing capacity during production ramps,partially offset by lower average combined cost per unit ofour vehicles,an increase in regulatory credits revenue and an increase in FSD revenue,as discussed above.Gross margin for total automotive&services and other segment increased from 17.4%to 18.7%in the three months endedSeptember 30,2024 as compared to the three months ended September 30,2023.Gross margin for total automotive&services andother segment decreased from 18.5%to 17.6%in the nine months ended September 30,2024 as compared to the nine monthsended September 30,2023.The changes in gross margin are primarily due to the automotive gross margin factors discussed above.Energy Generation and Storage SegmentCost of energy generation and storage revenue increased$473 million,or 40%,in the three months ended September 30,2024 as compared to the three months ended September 30,2023.Cost of energy generation and storage revenue increased$1.39billion,or 37%,in the nine months ended September 30,2024 as compared to the nine months ended September 30,2023.Theincreases in cost of revenues were primarily due to increases in Megapack and Powerwall deployments,partially offset byincreases in IRA manufacturing credits recognized as compared to the prior periods.Gross margin for energy generation and storage increased from 24.4%to 30.5%in the three months ended September 30,2024 as compared to the three months ended September 30,2023.Gross margin for energy generation and storage increased from18.0%to 26.6%in the nine months ended September 30,2024 as compared to the nine months ended September 30,2023.Theincreases were primarily due to margin improvements for our energy storage products driven by cost reductions,including benefitsfrom IRA manufacturing credits,and a higher proportion of our storage business,which operated at a higher gross margin,withinthe segment as compared to the prior periods.Research and Development ExpenseThree Months EndedSeptember 30,ChangeNine Months EndedSeptember 30,Change(Dollars in millions)20242023$ 242023$%Research and development$1,039$1,161$(122)(11)%$3,264$2,875$389 14%As a percentage of revenues4%5%5%4%Research and development(“R&D”)expenses decreased$122 million,or 11%,in the three months ended September 30,2024 as compared to the three months ended September 30,2023 primarily due to a decrease in vehicle programs,partially offsetby an increase in AI related costs year over year.R&D expenses as a percentage of revenue decreased from 5%to 4%in the threemonths ended September 30,2024 as compared to the three months ended September 30,2023 primarily due to lower R&Dexpenses in the current period.R&D expenses increased$389 million,or 14%,in the nine months ended September 30,2024 as compared to the ninemonths ended September 30,2023.The overall increases were primarily driven by additional costs year over year related to AIprograms.R&D expenses as a percentage of revenue increased from 4%to 5%in the nine months ended September 30,2024 ascompared to the nine months ended September 30,2023 as we continue to expand our product roadmap and technologies.Selling,General and Administrative ExpenseThree Months EndedSeptember 30,ChangeNine Months EndedSeptember 30,Change(Dollars in millions)20242023$ 242023$%Selling,general and administrative$1,186$1,253$(67)(5)%$3,837$3,520$317 9%As a percentage of revenues5%5%5%51Table of ContentsSelling,general and administrative(“SG&A”)expenses decreased$67 million,or 5%,in the three months endedSeptember 30,2024 as compared to the three months ended September 30,2023 driven by a$40 million decrease in employee andlabor costs,including professional services and a$32 million decrease in marketing expenses.SG&A expenses increased$317 million,or 9%,in the nine months ended September 30,2024 as compared to the ninemonths ended September 30,2023 driven by a$168 million increase in employee and labor costs,including professional services,and a$153 million increase in facilities related expenses.Restructuring and OtherThree Months EndedSeptember 30,ChangeNine Months EndedSeptember 30,Change(Dollars in millions)20242023$ 242023$%Restructuring and other$55$55 Notmeaningful$677$677 NotmeaningfulIn the second quarter of 2024,we initiated and substantially completed certain restructuring actions to reduce costs andimprove efficiency.As a result,we recognized$583 million of employee termination expenses in Restructuring and other in ourconsolidated income statement.These expenses were substantially paid with an immaterial accrual remaining in Accrued liabilitiesand other in our consolidated balance sheet as of September 30,2024.Interest IncomeThree Months EndedSeptember 30,ChangeNine Months EndedSeptember 30,Change(Dollars in millions)20242023$ 242023$%Interest income$429$282$147 52%$1,127$733$394 54%Interest income increased$147 million,or 52%,in the three months ended September 30,2024 and increased$394 million,or 54%,in the nine months ended September 30,2024 as compared to the three and nine months ended September 30,2023,respectively.The increases were primarily due to higher interest earned on our cash and cash equivalents and short-terminvestments compared to the prior periods due to increases in our portfolio balance and higher interest rates.Other(Expense)Income,NetThree Months EndedSeptember 30,ChangeNine Months EndedSeptember 30,Change(Dollars in millions)20242023$ 242023$%Other(expense)income,net$(270)$37$(307)Notmeaningful$(142)$317$(459)NotmeaningfulOther(expense)income,net,changed unfavorably by$307 million in the three months ended September 30,2024 ascompared to the three months ended September 30,2023.Other(expense)income,net changed unfavorably by$459 million in thenine months ended September 30,2024 as compared to the nine months ended September 30,2023.The unfavorable changes wereprimarily due to fluctuations in foreign currency exchange rates on our intercompany balances.As our intercompany balances aresignificant in nature and we do not typically hedge foreign currency risk,we can experience significant fluctuations in foreigncurrency exchange rate gains and losses from period to period.Provision for Income TaxesThree Months EndedSeptember 30,ChangeNine Months EndedSeptember 30,Change(Dollars in millions)20242023$ 242023$%Provision for income taxes$601$167$434 260%$1,403$751$652 87fective tax rate22%8#2Table of ContentsOur provision for income taxes increased by$434 million in the three months ended September 30,2024 and increased by$652 million in the nine months ended September 30,2024 as compared to the three and nine months ended September 30,2023,respectively.Our effective tax rate increased from 8%to 22%in the three months ended September 30,2024 and increased from10%to 23%in the nine months ended September 30,2024 as compared to the three and nine months ended September 30,2023,respectively.These increases are primarily due to the impact of releasing the valuation allowance on our U.S.deferred tax assets inthe fourth quarter of 2023 and changes in mix of jurisdictional earnings.See Note 9,Income Taxes,to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.Liquidity and Capital ResourcesWe expect to continue to generate net positive operating cash flow as we have done in the last five fiscal years.The cash wegenerate from our core operations enables us to fund ongoing operations and production,our research and development projects fornew products and technologies including our proprietary battery cells,additional manufacturing ramps at existing manufacturingfacilities,the construction of future factories,and the continued expansion of our retail and service locations,body shops,MobileService fleet,Supercharger,including to support NACS,energy product installation capabilities and autonomy and other artificialintelligence enabled products.In addition,because a large portion of our future expenditures will be to fund our growth,we expect that if needed we willbe able to adjust our capital and operating expenditures by operating segment.For example,if our near-term manufacturingoperations decrease in scale or ramp more slowly than expected,including due to global economic or business conditions,we maychoose to correspondingly slow the pace of our capital expenditures.Finally,we continually evaluate our cash needs and maydecide it is best to raise additional capital or seek alternative financing sources to fund the rapid growth of our business,includingthrough drawdowns on existing or new debt facilities or financing funds.Conversely,we may also from time to time determine thatit is in our best interests to voluntarily repay certain indebtedness early.Accordingly,we believe that our current sources of funds will provide us with adequate liquidity during the 12-month periodfollowing September 30,2024,as well as in the long-term.See the sections below for more details regarding the material requirements for cash in our business and our sources ofliquidity to meet such needs.Material Cash RequirementsFrom time to time in the ordinary course of business,we enter into agreements with vendors for the purchase of componentsand raw materials to be used in the manufacture of our products.However,due to contractual terms,variability in the precisegrowth curves of our development and production ramps,and opportunities to renegotiate pricing,we generally do not havebinding and enforceable purchase orders under such contracts beyond the short-term,and the timing and magnitude of purchaseorders beyond such period is difficult to accurately project.As discussed in and subject to the considerations referenced in Part I,Item 2,Managements Discussion and Analysis ofFinancial Condition and Results of OperationsManagement Opportunities,Challenges and Uncertainties and 2024 OutlookCash Flow and Capital Expenditure Trends in this Quarterly Report on Form 10-Q,we currently expect our capital expenditures tosupport our projects globally to exceed$11.00 billion in 2024 and be between$8.00 to$10.00 billion in each of the following twofiscal years.We also have certain obligations in connection with our operations at Gigafactory New York and GigafactoryShanghai,as outlined in Part II,Item 7,Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesMaterial Cash Requirements in our Annual Report on Form 10-K for the year endedDecember 31,2023.As of September 30,2024,we and our subsidiaries had outstanding$7.42 billion in aggregate principal amount ofindebtedness,of which$2.12 billion is current.For details regarding our indebtedness,refer to Note 7,Debt,to the consolidatedfinancial statements included elsewhere in this Quarterly Report on Form 10-Q.Sources and Conditions of LiquidityOur sources to fund our material cash requirements are predominantly from our deliveries and servicing of new and usedvehicles,sales and installations of our energy storage products,interest income,and proceeds from debt facilities and equityofferings,when applicable.33Table of ContentsAs of September 30,2024,we had$18.11 billion and$15.54 billion of cash and cash equivalents and short-terminvestments,respectively.Balances held in foreign currencies had a U.S.dollar equivalent of$3.32 billion and consisted primarilyof Chinese yuan and euros.We had$5.00 billion of unused committed credit amounts as of September 30,2024.For detailsregarding our indebtedness,refer to Note 7,Debt,to the consolidated financial statements included elsewhere in this QuarterlyReport on Form 10-Q.We continue adapting our strategy to meet our liquidity and risk objectives,such as investing in U.S.government securitiesand other investments,invest in autonomy,do more vertical integration,expand our product roadmap and provide financingoptions to our customers.Summary of Cash Flows Nine Months Ended September 30,(Dollars in millions)20242023Net cash provided by operating activities$10,109$8,886 Net cash used in investing activities$(11,184)$(10,780)Net cash provided by financing activities$2,868$1,702 Cash Flows from Operating ActivitiesNet cas
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This is an English translation prepared for the convenience of non-resident shareholders.Should there be anyinconsistency between the translation and the official Japanese text,the latter shall prevail.Consolidated Financial Results for the Six Months Ended September 30,2023 1-1,Showa-cho,Kariya,Aichi 448-8661,Japan DATE:October 31,2023Representative:Shinnosuke Hayashi DENSO CORPORATION President CODE:6902Contact:Yoshimasa Shinoda Listed on the Tokyo and Director Nagoya Stock ExchangesTelephone: 81-566-61-7910 Scheduled date of commencement of dividend payment:November 27,2023 (URL https:/ of yen,except per share figures)1.Consolidated financial results for the six months ended September 30,2023(from April 1,2023 to September 30,2023)(1)Consolidated operating results(Percentages indicate the change of the same period of the previous year)RevenueOperating profitProfit before incometaxesProfit for the periodSix months endedMillions of yen%Millions of yen%Millions of yen%Millions of yen%September 30,20233,513,49816.3211,82036.3247,66345.1185,60159.3September 30,20223,020,11416.9155,413(2.5)170,644(6.7)116,507(5.7)Profit attributable toowners of the parentcompanyComprehensive incomefor the periodBasic earnings per shareDiluted earnings pershareSix months endedMillions of yen%Millions of yen%Yen YenSeptember 30,2023168,92359.7824,801 563.756.40September 30,2022105,798(6.1)124,264(49.1)34.68(Note)On October 1,2023,the Company effected a 4-for-1 split of common stock.Basic earnings per share is calculated on theassumption that the stock split was implemented at the beginning of the year ended Mar.2023.(2)Consolidated financial position Total assetsTotal equityEquity attributable toowners of the parentcompanyRatio of equityattributable to ownersof the parent companyto total assetsAs ofMillions of yenMillions of yenMillions of yen%September 30,20238,416,2345,305,1515,105,26560.7March 31,20237,408,6624,579,7114,376,92859.1 2.Cash dividends Annual dividends per share Firstquarter-endSecondquarter-endThirdquarter-endFiscalyear-endTotal YenYenYenYenYenYear ended March 31,202390.0095.00185.00Year ending March 31,2024100.00 Year ending March 31,2024 (Forecast)27.00(Note)Change in cash dividends:YesOn October 1,2023,the Company effetced a 4-for-1 spilit of common stock.Due to the stock spilit,the total dividend for theyear ending Mar.2024 is not disclosed.If the stock spilit is not considered,the year-end dividend for the year ending Mar.2024 would be 108.00 and the total dividend for the year ending Mar.2024 would be 208.00.3.Consolidated earnings forecasts for the fiscal year ending March 31,2024(from April 1,2023 to March 31,2024)(Percentages indicate the change of the same period of the previous year)RevenueOperating profitProfit beforeincome taxesProfit for the yearProfit attributableto owners of theparent companyBasicearningsper share Millions ofyen%Millions ofyen%Millions ofyen%Millions ofyen%Millions ofyen%YenFull year7,000,0009.4630,00047.9684,00049.7518,00048.9470,00049.4156.91 (Note)Change in consolidated earings forecasts for the fiscal year ending March 31,2024:YesOn October 1,2023,the Company effected a 4-for-1 split of common stock.Basic earnings per share is calculated on theassumption that the stock split was implemented at the beginning of the year ended Mar.2023.Notes(1)Significant changes in scope of consolidated subsidiaries:NoneIn:-(Company Name:)Out:-(Company Name:)(2)Changes in accounting policies and accounting estimates1)Changes in accounting policies due to the revision of the accounting standards:None2)Changes in accounting policies except for those in 1):None3)Changes in accounting estimates :None (3)Number of shares issued(ordinary shares)1)Number of shares issued at the endof the period(including treasury shares)FY2024 2nd quarter3,151,779,804sharesFY20233,151,779,804shares2)Number of treasury shares at the end ofthe periodFY2024 2nd quarter156,406,288sharesFY2023156,491,724shares3)Average number of shares issued duringthe six months ended September 30FY2024 2nd quarter2,995,338,453sharesFY20232nd quarter3,050,335,147shares (Note)On October 1,2023,the Company effected a 4-for-1 split of common stock.Number of shares issued(ordinary shares)iscalculated on the assumption that the stock split was implemented at the beginning of the year ended Mar.2023.This Financial Results report is not required to be audited by certified public accountants or audit firm.List of Contents of Attachments Summary of Consolidated Financial Results for the Six Months Ended September 30,20232Consolidated Statement of Financial Position4Consolidated Statement of Income6Consolidated Statement of Comprehensive Income7Consolidated Statement of Changes in Equity8Consolidated Statement of Cash Flows10Notes to Consolidated Financial Statements11Assumption for Going Concern11Segment information11Subsequent events12 -1-Summary of Consolidated Financial Results for the Six MonthsEnded September 30,2023 1.Summary of Management ResultsAmid the progression of global warming,aging societies and the increase in traffic accidents are becoming serioussocial issues,the Group has formulated the DENSO Group Long-term Policy 2030.In addition to strength thevalue of“green”and“peace of mind,”the Group has been contributing to the creation of a society with smilingfaces through the provision of new value that will be inspired by the Groups initiatives.In order to realize theDenso Group 2030 Long-Term Policy and respond to the drastically changing industrial structure and businessenvironment,the Group has formulated the Mid-term Policy for 2025,which outlines the path and goals of whatactivities we will focus on and what vision we will take over the medium term.Mid-term Policy for 2025 focuses onhuman resources,and the Group believes that the development of human resources that create“a group ofprofessionals with the ability to turn ideas into reality,”the strong promotion of diversity and inclusion,and thecreation of an organization that is strong in change and full of vitality will bring together the strengths of each andevery employee and become the driving force behind the realization of the policy.The Group will establish a solidbusiness foundation in safety/quality,risk management,and profitability improvement,and promote the creation ofnew value through business portfolio reform to achieve both solutions to social issues and business growth.For the six months ended September 30,2023,revenue increased by 493.4 billion or 16.3%,year over year,to3,513.5 billion due to strong vehicle sales mainly in Japan and North America,depreciation of the yen and salesexpansion mainly in focus field such as electrification and safety,in spite of Japanese and Western vehicles inChina continue slow sales.Operating profit increased by 56.4 billion or 36.3%,year over year,to 211.8 billion due to production volumeincrease,depreciation of the yen and efforts of cost reduction,despite continue to rise costs of parts mainly inelectronic components and accelerate investments such as R&D expenses.Profit before income taxes increasedby 77.0 or 45.1%,year over year,to 247.7 billion.Profit for the period increased by 69.1 or 59.3%,year overyear to 185.6 billion.Profit attributable to owners of the parent company increased by 63.1 billion or 59.7%to168.9 billion.By geographical segment,revenue increased in all regions,year over year,due to strong vehicle sales mainly inJapan and North America in spite of Japanese and Western vehicles in China continue slow sales.Operating profitincreased except Japan,where there were soaring costs of parts mainly in electronic components and allowanceof quality costs,due to production volume increase and global profitability improvement activities.Revenue in Japan increased by 322.3 billion,or 18.5%,year over year,to 2,061.2 billion due to strong vehiclesales.Operating profit decreased by 5.8 billion,or 6.4%,year over year,to 85.2 billion due to rise costs of partsmainly in electronic components and allowance of quality costs despite improvement of profitability.Revenue in North America increased by 141.6 billion,or 19.8%,year over year,to 856.6 billion due to salesexpansion mainly in focus field such as electrification and safety.An operating profit of 14.2 billion wasrecorded in contrast to operating loss of 13.0 billion in the previous year due to improvement of profitability.Revenue in Europe increased by 50.9 billion,or 15.8%,year over year,to 372.8 billion due to strong vehiclesales.Operating profit increased of 10.3 billion,or 285.0%,year over year,to 13.9 billion due to improvement ofprofitability.-2-Revenue in Asia increased by 13.1 billion,or 1.4%,year over year,to 974.0 billion due to strong vehicle salesexcept China and depreciation of the yen in spite of slow sales of Japanese and Western vehicles inChina.Operating profit increased by 20.8 billion,or 30.9%,year over year,to 88.2 billion due to improvement ofprofitability.Revenue in other regions increased by 6.7 billion,or 12.4%,year over year,to 60.3 billion.Operating profitincreased by 0.1 billion,or 0.8%,year over year,to 11.5 billion due to improvement of profitability.2.Summary of Financial PositionTotal assets as of September 30,2023,increased by 1,007.6 billion,to 8,416.2 billion mainly due to an increasein other financial assets.The total for current and non-current liabilities increased by 282.1 billion,to 3,111.1 billion mainly due to anincrease in deferred tax liabilities.Equity increased by 725.4 billion,to 5,305.2 billion mainly due to an increase in mark-to-market of investmentsecurities.3.Summary of Financial ForecastThe full-year forecast for the fiscal year ending March 31,2024,reflecting strong performance for the six monthsended September 30,2023,revision of the annual foreign exchange rate assumptions toward depreciation of theyen and increase in vehicle production in the third quarter,the Group expect revenue is 7,000.0 billion,operatingprofit is 630.0 billion.Profit before income taxes is 684.0 billion,profit for the year is 518.0 billion,profit attributable to owners of theparent company is 470.0 billion.The exchange rate assumption is 1USD=141 yen.1EUR=152 yen.The above is included future forecast based on information currently available.Actual results may differ materiallyfrom these forecasts due to changes in business operations,exchange rate fluctuations,and other internal andexternal factors.-3-Consolidated Statement of Financial Position(Unit:Millions of yen)As of Mar.31,2023As of Sep.30,2023Assets Current assets Cash and cash equivalents733,850918,966Trade and other receivables1,263,7681,286,772Inventories1,119,7801,149,363Other financial assets33,71618,820Other current assets126,472121,221Subtotal3,277,5863,495,142Assets held for sale25,509Total current assets3,277,5863,520,651Non-current assets Property,plant and equipment1,955,2402,026,917Right-of-use assets43,64241,981Intangible assets170,212186,773Other financial assets1,699,2022,366,838Investments accounted for using the equity method110,173117,896Retirement benefit assets78,21277,339Deferred tax assets42,96744,757Other non-current assets31,42833,082Total non-current assets4,131,0764,895,583Total assets7,408,6628,416,234 -4-(Unit:Millions of yen)As of Mar.31,2023As of Sep.30,2023Liabilities and equity Current liabilities Bonds and borrowings303,509350,375Trade and other payables1,219,3171,257,211Other financial liabilities54,64153,805Income tax payables42,63034,858Provisions106,524138,750Other current liabilities70,163103,840Subtotal1,796,7841,938,839Liabilities directly associated with assets held for sale10,375Total current liabilities1,796,7841,949,214Non-current liabilities Bonds and borrowings585,765537,290Other financial liabilities30,92926,934Retirement benefit liabilities249,266249,217Provisions1,6431,645Deferred tax liabilities151,507335,786Other non-current liabilities13,05710,997Total non-current liabilities1,032,1671,161,869Total liabilities2,828,9513,111,083Equity Capital stock187,457187,457Capital surplus273,664273,711Treasury stock(252,270)(252,136)Other components of equity955,8291,587,359Retained earnings3,212,2483,308,874Equity attributable to owners of the parent company4,376,9285,105,265Non-controlling interests202,783199,886Total equity4,579,7115,305,151Total liabilities and equity7,408,6628,416,234 -5-Consolidated Statement of Income(Unit:Millions of yen)Six months endedSep.30,2022Six months endedSep.30,2023Revenue3,020,1143,513,498Cost of revenue(2,626,450)(3,011,459)Gross profit393,664502,039Selling,general and administrative expenses(240,644)(290,033)Other income18,61212,471Other expenses(16,219)(12,657)Operating profit155,413211,820Finance income25,64637,202Finance costs(5,043)(11,550)Foreign exchange(losses)gains(4,410)31Share of the(loss)profit of associates and joint ventures accountedfor using the equity method(962)10,160Profit before income taxes170,644247,663Income tax expenses(54,137)(62,062)Profit for the period116,507185,601Attributable to:Owners of the parent company105,798168,923Non-controlling interests10,70916,678 (Unit:Yen)Earnings per share Basic34.6856.40Diluted -6-Consolidated Statement of Comprehensive Income(Unit:Millions of yen)Six months endedSep.30,2022Six months endedSep.30,2023Profit for the period116,507185,601Other comprehensive(loss)income Items that will not be reclassified subsequently to profit or loss Net fair value(loss)gain on equity instruments designated as FVTOCI(202,564)449,790Remeasurements of defined benefit pension plans(135)40Share of other comprehensive(loss)income of investments accountedfor using the equity method(7)36Total(202,706)449,866Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations205,546184,089Cash flow hedges(3,263)(1,006)Share of other comprehensive income of investments accounted forusing the equity method8,1806,251Total210,463189,334Total other comprehensive income7,757639,200Comprehensive income for the period124,264824,801Attributable to:Owners of the parent company104,807799,295Non-controlling interests19,45725,506 -7-Consolidated Statement of Changes in Equity(Unit:Millions of yen)Equity attributable to owners of the parent companyCapitalstockCapitalsurplusTreasurystockOther components of equityNet fair valuegain on equityinstrumentsdesignated asFVTOCIRemeasurementsof defined benefitpension plansAs of April 1,2022187,457273,803(152,346)788,476Profit for the periodOther comprehensive(loss)income(202,272)(139)Comprehensive(loss)income for theperiod(202,272)(139)Acquisition of treasury stock(59,961)Disposal of treasury stock1987DividendsChanges in the ownership interest insubsidiaries without a loss of controlTransfer to retained earnings(11,339)139OtherTotal transactions with the owners19(59,874)(11,339)139As of September 30,2022187,457273,822(212,220)574,865 As of April 1,2023187,457273,664(252,270)660,038Profit for the periodOther comprehensive income(loss)449,12242Comprehensive income(loss)for theperiod449,12242Acquisition of treasury stock(19)Disposal of treasury stock43153DividendsChanges in the ownership interest insubsidiaries without a loss of control4Transfer to retained earnings1,200(42)OtherTotal transactions with the owners471341,200(42)As of September 30,2023187,457273,711(252,136)1,110,360 -8-(Unit:Millions of yen)Equity attributable to owners of the parent companyNon-controllinginterestsTotalequityOther components of equityRetainedearningsTotalExchangedifferencesontranslatingforeignoperationsCashflowhedgesTotalAs of April 1,2022187,086(2,779)972,783 3,017,660 4,299,357190,169 4,489,526Profit for the period105,798105,79810,709116,507Other comprehensive(loss)income204,683(3,263)(991)(991)8,7487,757Comprehensive(loss)income for theperiod204,683(3,263)(991)105,798104,80719,457124,264Acquisition of treasury stock(59,961)(59,961)Disposal of treasury stock106106Dividends(64,886)(64,886)(20,873)(85,759)Changes in the ownership interest insubsidiaries without a loss of controlTransfer to retained earnings(11,200)11,200Other1,2711,271(886)385Total transactions with the owners(11,200)(52,415)(123,470)(21,759)(145,229)As of September 30,2022391,769(6,042)960,592 3,071,043 4,280,694187,867 4,468,561 As of April 1,2023300,274(4,483)955,829 3,212,248 4,376,928202,783 4,579,711Profit for the period168,923168,92316,678185,601Other comprehensive income(loss)182,214(1,006)630,372630,3728,828639,200Comprehensive income(loss)for theperiod182,214(1,006)630,372168,923799,29525,506824,801Acquisition of treasury stock(19)(19)Disposal of treasury stock196196Dividends(71,141)(71,141)(28,426)(99,567)Changes in the ownership interest insubsidiaries without a loss of control4(5)(1)Transfer to retained earnings1,158(1,158)Other222830Total transactions with the owners1,158(72,297)(70,958)(28,403)(99,361)As of September 30,2023482,488(5,489)1,587,359 3,308,874 5,105,265199,886 5,305,151 -9-Consolidated Statement of Cash Flows(Unit:Millions of yen)Six monthsendedSep.30,2022Six monthsendedSep.30,2023Cash flows from operating activities Profit before income taxes170,644247,663Depreciation181,893186,990Decrease in retirement benefit liabilities(1,134)(2,159)Decrease in retirement benefit assets2,0241,041Interest and dividend income(24,621)(36,888)Interest expenses4,1747,098Foreign exchange gains(10,919)(9,742)Share of the loss(profit)of associates and joint ventures accounted for usingthe equity method962(10,160)(Gains)losses on sales or disposal of property,plant and equipment(847)3,484Decrease in trade receivables47,17671,842(Increase)decrease in inventories(34,766)26,749Decrease in trade payables(63,721)(30,842)(Decrease)increase in provisions(28,735)30,443Other32,15371,006Subtotal274,283556,525Interest received5,73113,529Dividends received24,12423,254Interest paid(3,923)(7,480)Income taxes paid(59,846)(84,741)Net cash provided by operating activities240,369501,087Cash flows from investing activities Decrease in time deposits5,04923,213Purchases of property,plant and equipment(184,210)(194,410)Proceeds from sales of property,plant and equipment11,5716,937Purchases of intangible assets(22,266)(23,977)Purchases of equity instruments(16,999)(21,035)Purchases of debt instruments(130)(133)Proceeds from sales of equity instruments18,570746Proceeds from sales and redemption of debt instruments126247Payments for acquisition of subsidiaries and other businesses(11,110)Proceeds from sales of subsidiaries or other businesses17,9809,451Other601(894)Net cash used in investing activities(169,708)(210,965)Cash flows from financing activities Net increase(decrease)in short-term borrowings32,880(52,703)Proceeds from borrowings39,09884,141Repayments of long-term borrowings(51,118)(54,156)Repayments of lease liabilities(14,151)(20,046)Redemption of bonds(40,000)Dividends paid(64,886)(71,141)Dividends paid to non-controlling interests(20,873)(28,426)Purchase of treasury stock(59,961)(19)Other6,101(2,445)Net cash used in financing activities(172,910)(144,795)Foreign currency translation adjustments on cash and cash equivalents54,21445,974Net(decrease)increase in cash and cash equivalents(48,035)191,301Cash and cash equivalents at beginning of period867,808733,850Cash and cash equivalents included in assets held for sales(6,185)Cash and cash equivalents at end of period819,773918,966-10-Notes to Consolidated Financial Statements Assumption for Going ConcernThere are no applicable items.Segment information(1)Outline of reportable segmentsIn the six-month period ended September 30,2023,there were no material changes to the method used to identifythe reportable segments,the businesses activities carried out by each reportable segment,or the measurementstandards used to determine segment profits.(2)Revenue,profit/loss for each reportable segmentFor the Six months ended September 30,2022(Unit:Millions of yen)Reportable segment Others(Note)Eliminations ConsolidatedJapanNorthAmericaEuropeAsiaTotalRevenue Customers1,126,684707,704292,644840,152 2,967,184 52,9303,020,114Intersegment612,2597,27229,281120,770769,582692(770,274)Total1,738,943714,976321,925960,922 3,736,766 53,622(770,274)3,020,114Segment profit or losses91,031(12,980)3,60567,357149,01311,403(5,003)155,413Finance income25,646Finance costs(5,043)Foreign exchange losses(4,410)Share of the loss of associates and joint ventures accounted for using the equity method(962)Profit before income taxes170,644 (Note)Others is an operating segment that is not included in the reportable segments,such as business activities ofsubsidiaries in South America.For the Six months ended September 30,2023(Unit:Millions of yen)Reportable segment Others(Note)Eliminations ConsolidatedJapanNorthAmericaEuropeAsiaTotalRevenue Customers1,439,068847,078337,376830,622 3,454,144 59,3543,513,498Intersegment622,1299,51335,428143,404810,474925(811,399)Total2,061,197856,591372,804974,026 4,264,618 60,279(811,399)3,513,498Segment profit85,18814,18013,87988,200201,44711,499(1,126)211,820Finance income37,202Finance costs(11,550)Foreign exchange gains31Share of the profit of associates and joint ventures accounted for using the equity method10,160Profit before income taxes247,663 (Note)Others is an operating segment that is not included in the reportable segments,such as business activities ofsubsidiaries in South America.-11-Subsequent eventsStock split and partial amendment of Articles of IncorporationAt the meeting of the Board of Directors held on July 28,2023,Denso corporation(hereinafter referred to asthe Company)resolved to implement a stock split and partial amendment of Articles of Incorporation.(1)Purpose of the stock splitThe purpose is to create an environment that makes it easier to invest in DENSO stocks and to grow thenumber of company investors by reducing the amount per investment unit.(2)Overview of the stock split1)Method of the stock splitAs of Saturday,September 30,2023,the shares of common stock owned by shareholders on that date weresplit into 4 shares per share.2)The number of shares to be increase by the stock splitTotal number of issued shares before the stock split 787,944,951 sharesIncrease in number of shares due to the stock split 2,363,834,853 sharesTotal number of issued shares after the stock split 3,151,779.804 sharesTotal number of issuable shares after the stock split 6,000,000,000 shares 3)Schedule for the stock splitPublic notice of record date Thursday,September 14,2023Record date Saturday,September 30,2023Effective date Sunday,October 1,2023(3)Partial amendment to the Articles of Incorporation due to the stock splitDue to the stock split described above,the Company partially amend its Articles of Incorporation,to increasethe total number of shares which the Company is authorized to issue from 1,500,000,000 to 6,000,000,000,effective as of Sunday,October 1,2023,pursuant to Article 184,Paragraph 2 of the Companies Act.(4)Impact on per share informationPer share information assuming that the stock split was performed at the beginning of the six months endedSeptember 30,2022 is as follows.Six months endedSeptember 30,2022Six months endedSeptember 30,2023Basic earnings per share(Yen)34.6856.40Diluted earnings per share(Yen)Equity per share:attributable to owners of the parent company(Yen)1,418.731,704.38(Note)Earnings per share-diluted is not presented as there are no shares with dilutive effect.-12-
2024-10-24
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This is an English translation prepared for the convenience of non-resident shareholders.Should there be anyinconsistency between the translation and the official Japanese text,the latter shall prevail.Consolidated Financial Resultsfor the Nine Months Ended December 31,2023 1-1,Showa-cho,Kariya,Aichi 448-8661,Japan DATE:February 2,2024Representative:Shinnosuke Hayashi DENSO CORPORATION President CODE:6902Contact:Tadashi Arai Listed on the Tokyo and Director,Finance&Accounting Div.Nagoya Stock ExchangesTelephone: 81-566-61-7910 Scheduled date of commencement of dividend payment:-(URL https:/ of yen,except per share figures)1.Consolidated financial results for the nine months ended December 31,2023(from April 1,2023 to December 31,2023)(1)Consolidated operating results(Percentages indicate the change of the same period of the previous year)RevenueOperating profitProfit before incometaxesProfit for the periodNine months endedMillions of yen%Millions of yen%Millions of yen%Millions of yencember 31,20235,354,88915.5238,576(11.0)288,715(3.2)206,795(4.5)December 31,20224,635,68215.6267,9484.6298,1550.5216,5622.3 Profit attributable toowners of the parentcompanyComprehensive incomefor the periodBasic earnings per shareDiluted earnings pershareNine months endedMillions of yen%Millions of yen%Yen YenDecember 31,2023175,622(11.2)758,828 644.858.64December 31,2022197,8012.3101,879(76.1)65.17(Note)On October 1,2023,the Company effected a 4-for-1 split of common stock.Basic earnings per share is calculated on theassumption that the stock split was implemented at the beginning of the year ended Mar.2023.(2)Consolidated financial position Total assetsTotal equityEquity attributable toowners of the parentcompanyRatio of equityattributable to ownersof the parent companyto total assetsAs ofMillions of yenMillions of yenMillions of yencember 31,20238,319,5455,129,6904,933,66659.3March 31,20237,408,6624,579,7114,376,92859.1 2.Cash dividends Annual dividends per share Firstquarter-endSecondquarter-endThirdquarter-endFiscalyear-endTotal YenYenYenYenYenYear ended March 31,202390.0095.00185.00Year ending March 31,2024100.00 Year ending March 31,2024 (Forecast)27.00(Note)Change in cash dividends:NoneOn October 1,2023,the Company effetced a 4-for-1 spilit of common stock.Due to the stock spilit,the total dividend for theyear ending Mar.2024 is not disclosed.If the stock spilit is not considered,the year-end dividend for the year ending Mar.2024 would be 108.00 and the total dividend for the year ending Mar.2024 would be 208.00.3.Consolidated full-year financial results forecast for the fiscal year ending March 31,2024(from April 1,2023 to March 31,2024)(Percentages indicate the change of the same period of the previous year)RevenueOperating profitProfit beforeincome taxesProfit for the yearProfit attributableto owners of theparent companyBasicearningsper share Millions ofyen%Millions ofyen%Millions ofyen%Millions ofyen%Millions ofyen%YenFull year7,120,00011.2495,00016.2548,00019.9430,00023.6380,00020.8128.52 (Note)Change in consolidated earings forecasts for the fiscal year ending March 31,2024:YesFor more information,see Notice Concerning Revisions to Consolidated Full-Year Financial Results Forecast releasedtoday(February 2,2024).On October 1,2023,the Company effected a 4-for-1 split of common stock.Basic earnings per share is calculated on theassumption that the stock split was implemented at the beginning of the year ended Mar.2023.Notes(1)Significant changes in scope of consolidated subsidiaries:NoneIn:-(Company Name:)Out:-(Company Name:)(2)Changes in accounting policies and accounting estimates1)Changes in accounting policies due to the revision of the accounting standards:None2)Changes in accounting policies except for those in 1):None3)Changes in accounting estimates :Yes(Note)For more information,see Notes to Consolidated Financial Statements(Changes in accounting estimates).(3)Number of shares issued(ordinary shares)1)Number of shares issued at the endof the period(including treasury shares)FY2024 3rd quarter3,151,779,804sharesFY20233,151,779,804shares2)Number of treasury shares at the end ofthe periodFY2024 3rd quarter164,892,558sharesFY2023156,491,722shares3)Average number of shares issued duringthe nine months ended December 31FY2024 3rd quarter2,994,878,500sharesFY20233rd quarter3,035,263,433shares (Note)On October 1,2023,the Company effected a 4-for-1 split of common stock.Number of shares issued(ordinary shares)iscalculated on the assumption that the stock split was implemented at the beginning of the year ended Mar.2023.This Financial Results report is not required to be audited by certified public accountants or audit firm.List of Contents of Attachments Summary of Consolidated Financial Results for the Nine Months Ended December 31,20232Consolidated Statement of Financial Position4Consolidated Statement of Income6Consolidated Statement of Comprehensive Income7Consolidated Statement of Changes in Equity8Consolidated Statement of Cash Flows10Notes to Consolidated Financial Statements11Assumption for Going Concern11Changes in accounting estimates11Segment information11 -1-Summary of Consolidated Financial Results for the NineMonths Ended December 31,2023 1.Summary of Management ResultsAmid the progression of global warming,aging societies and the increase in traffic accidents are becoming serioussocial issues,the Group has formulated the DENSO Group Long-term Policy 2030.In addition to strength thevalue of“green”and“peace of mind,”the Group has been contributing to the creation of a society with smilingfaces through the provision of new value that will be inspired by the Groups initiatives.In order to realize theDenso Group 2030 Long-Term Policy and respond to the drastically changing industrial structure and businessenvironment,the Group has formulated the Mid-term Policy for 2025,which outlines the path and goals of whatactivities we will focus on and what vision we will take over the medium term.Mid-term Policy for 2025 focuses onhuman resources,and the Group believes that the development of human resources that create“a group ofprofessionals with the ability to turn ideas into reality,”the strong promotion of diversity and inclusion,and thecreation of an organization that is strong in change and full of vitality will bring together the strengths of each andevery employee and become the driving force behind the realization of the policy.The Group will establish a solidbusiness foundation in safety/quality,risk management,and profitability improvement,and promote the creation ofnew value through business portfolio reform to achieve both solutions to social issues and business growth.For the nine months ended December 31,2023,revenue increased by 719.2 billion or 15.5%,year over year,to5,354.9 billion due to strong vehicle sales mainly in Japan and North America,depreciation of the yen and salesexpansion mainly in focus field such as electrification and safety.Operating profit decreased by 29.4 billion or 11.0%,year over year,to 238.6 billion due to continue to rise costsof parts mainly in electronic components and provision for warranty reserve,in spite of production volumeincrease,depreciation of the yen and efforts of cost reduction.Profit before income taxes decreased by 9.4 billionor 3.2%,year over year,to 288.7 billion.Profit for the period decreased by 9.8 billion or 4.5%,year over year to206.8 billion.Profit attributable to owners of the parent company decreased by 22.2 billion or 11.2%to 175.6billion.By geographical segment,revenue increased in all regions,year over year,due to easing semiconductorshortages and strong vehicle sales mainly in Japan and North America.Operating profit increased in each regiondue to production volume increase and improvement of profitability,except in Japan,where there was provision forwarranty reserve.Revenue in Japan increased by 456.6 billion,or 17.0%,year over year,to 3,148.3 billion due to strong vehiclesales and depreciation of yen.Operating profit decreased by 124.3 billion,or 84.8%,year over year,to 22.4billion due to provision for warranty reserve despite production volume increase and efforts of cost reduction.Revenue in North America increased by 203.8 billion,or 18.8%,year over year,to 1,286.0 billion due to salesexpansion mainly in focus field such as electrification and safety.An operating profit of 27.5 billion was recordeddue to production volume increase and efforts of cost reduction in contrast to operating loss of 15.0 billion in theprevious year.Revenue in Europe increased by 79.7 billion,or 16.2%,year over year,to 570.4 billion due to strong vehiclesales.Operating profit increased of 13.3 billion,or 145.6%,year over year,to 22.4 billion due to productionvolume increase and efforts of cost reduction.-2-Revenue in Asia increased by 51.7 billion,or 3.5%,year over year,to 1,521.2 billion.Operating profit increasedby 35.9 billion,or 31.6%,year over year,to 149.4 billion due to production volume increase and completion ofstructural reform in Korea.Revenue in other regions increased by 5.1 billion,or 6.6%,year over year,to 81.9 billion.Operating profitdecreased by 0.3 billion,or 2.3%,year over year,to 15.1 billion due to foreign exchange.2.Summary of Financial PositionTotal assets as of December 31,2023,increased by 910.9 billion,to 8,319.5 billion mainly due to an increase inother financial assets.The total for current and non-current liabilities increased by 360.9 billion,to 3,189.9 billion mainly due to anincrease in deferred tax liabilities.Equity increased by 550.0 billion,to 5,129.7 billion mainly due to an increase in mark-to-market of investmentsecurities.3.Summary of Financial ForecastThe full-year forecast for the fiscal year ending March 31,2024,reflecting revision of the annual foreign exchangerate assumptions toward depreciation of the yen,the Group expect revenue is 7,120.0 billion,operating profit is 495.0 billion due to provision for warranty reserve despite efforts of cost reduction and profitability improvmentactivities.Profit before income taxes is 548.0 billion,profit for the year is 430.0 billion,profit attributable to owners of theparent company is 380.0 billion.The exchange rate assumption is 1USD=144 yen.1EUR=155 yen.The above is included future forecast based on information currently available.Actual results may differ materiallyfrom these forecasts due to changes in business operations,exchange rate fluctuations,and other internal andexternal factors.-3-Consolidated Statement of Financial Position(Unit:Millions of yen)As of Mar.31,2023As of Dec.31,2023Assets Current assets Cash and cash equivalents733,850803,820Trade and other receivables1,263,7681,212,938Inventories1,119,7801,135,011Other financial assets33,71632,130Other current assets126,472249,449Total current assets3,277,5863,433,348Non-current assets Property,plant and equipment1,955,2401,994,025Right-of-use assets43,64240,819Intangible assets170,212190,803Other financial assets1,699,2022,387,808Investments accounted for using the equity method110,173117,641Retirement benefit assets78,21277,235Deferred tax assets42,96745,200Other non-current assets31,42832,666Total non-current assets4,131,0764,886,197Total assets7,408,6628,319,545 -4-(Unit:Millions of yen)As of Mar.31,2023As of Dec.31,2023Liabilities and equity Current liabilities Bonds and borrowings303,509394,743Trade and other payables1,219,3171,184,782Other financial liabilities54,64149,105Income tax payables42,63033,801Provisions106,524279,267Other current liabilities70,163109,391Total current liabilities1,796,7842,051,089Non-current liabilities Bonds and borrowings585,765533,420Other financial liabilities30,92925,783Retirement benefit liabilities249,266240,372Provisions1,6431,580Deferred tax liabilities151,507327,073Other non-current liabilities13,05710,538Total non-current liabilities1,032,1671,138,766Total liabilities2,828,9513,189,855Equity Capital stock187,457187,457Capital surplus273,664273,467Treasury stock(252,270)(270,269)Other components of equity955,8291,497,094Retained earnings3,212,2483,245,917Equity attributable to owners of the parent company4,376,9284,933,666Non-controlling interests202,783196,024Total equity4,579,7115,129,690Total liabilities and equity7,408,6628,319,545 -5-Consolidated Statement of Income(Unit:Millions of yen)Nine months endedDec.31,2022Nine months endedDec.31,2023Revenue4,635,6825,354,889Cost of revenue(4,004,360)(4,554,279)Gross profit631,322800,610Selling,general and administrative expenses(365,662)(566,181)Other income22,78327,676Other expenses(20,495)(23,529)Operating profit267,948238,576Finance income47,47166,569Finance costs(9,840)(20,083)Foreign exchange losses(6,880)(8,114)Share of the(loss)profit of associates and joint ventures accountedfor using the equity method(544)11,767Profit before income taxes298,155288,715Income tax expenses(81,593)(81,920)Profit for the period216,562206,795Attributable to:Owners of the parent company197,801175,622Non-controlling interests18,76131,173 (Unit:Yen)Earnings per share Basic65.1758.64Diluted -6-Consolidated Statement of Comprehensive Income(Unit:Millions of yen)Nine months endedDec.31,2022Nine months endedDec.31,2023Profit for the period216,562206,795Other comprehensive(loss)income Items that will not be reclassified subsequently to profit or loss Net fair value(loss)gain on equity instruments designated as FVTOCI(220,865)436,832Remeasurements of defined benefit pension plans(1)(1,313)Share of other comprehensive income of investments accounted forusing the equity method2931Total(220,837)435,550Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations101,822110,286Cash flow hedges(2,119)826Share of other comprehensive income of investments accounted forusing the equity method6,4515,371Total106,154116,483Total other comprehensive(loss)income(114,683)552,033Comprehensive income for the period101,879758,828Attributable to:Owners of the parent company78,183720,960Non-controlling interests23,69637,868 -7-Consolidated Statement of Changes in Equity(Unit:Millions of yen)Equity attributable to owners of the parent companyCapitalstockCapitalsurplusTreasurystockOther components of equityNet fair valuegain on equityinstrumentsdesignated asFVTOCIRemeasurementsof defined benefitpension plansAs of April 1,2022187,457273,803(152,346)788,476Profit for the periodOther comprehensive(loss)income(220,480)(5)Comprehensive(loss)income for theperiod(220,480)(5)Acquisition of treasury stock(100,007)Disposal of treasury stock1987DividendsChanges in the ownership interest insubsidiaries without a loss of control(85)Transfer to retained earnings(12,401)5OtherTotal transactions with the owners(66)(99,920)(12,401)5As of December 31,2022187,457273,737(252,266)555,595 As of April 1,2023187,457273,664(252,270)660,038Profit for the periodOther comprehensive income(loss)436,235(1,305)Comprehensive income(loss)for theperiod436,235(1,305)Acquisition of treasury stock(18,152)Disposal of treasury stock43153DividendsChanges in the ownership interest insubsidiaries without a loss of control(240)Transfer to retained earnings(5,378)1,305OtherTotal transactions with the owners(197)(17,999)(5,378)1,305As of December 31,2023187,457273,467(270,269)1,090,895 -8-(Unit:Millions of yen)Equity attributable to owners of the parent companyNon-controllinginterestsTotalequityOther components of equityRetainedearningsTotalExchangedifferencesontranslatingforeignoperationsCashflowhedgesTotalAs of April 1,2022187,086(2,779)972,783 3,017,660 4,299,357190,169 4,489,526Profit for the period197,801197,80118,761216,562Other comprehensive(loss)income102,986(2,119)(119,618)(119,618)4,935(114,683)Comprehensive(loss)income for theperiod102,986(2,119)(119,618)197,80178,18323,696101,879Acquisition of treasury stock(100,007)(100,007)Disposal of treasury stock106106Dividends(132,777)(132,777)(24,157)(156,934)Changes in the ownership interest insubsidiaries without a loss of control(85)(294)(379)Transfer to retained earnings(12,396)12,396Other1,2711,271(910)361Total transactions with the owners(12,396)(119,110)(231,492)(25,361)(256,853)As of December 31,2022290,072(4,898)840,769 3,096,351 4,146,048188,504 4,334,552 As of April 1,2023300,274(4,483)955,829 3,212,248 4,376,928202,783 4,579,711Profit for the period175,622175,62231,173206,795Other comprehensive income(loss)109,582826545,338545,3386,695552,033Comprehensive income(loss)for theperiod109,582826545,338175,622720,96037,868758,828Acquisition of treasury stock(18,152)(18,152)Disposal of treasury stock196196Dividends(146,029)(146,029)(42,422)(188,451)Changes in the ownership interest insubsidiaries without a loss of control(240)(2,231)(2,471)Transfer to retained earnings(4,073)4,073Other332629Total transactions with the owners(4,073)(141,953)(164,222)(44,627)(208,849)As of December 31,2023409,856(3,657)1,497,094 3,245,917 4,933,666196,024 5,129,690 -9-Consolidated Statement of Cash Flows(Unit:Millions of yen)Nine monthsendedDec.31,2022Nine monthsendedDec.31,2023Cash flows from operating activities Profit before income taxes298,155288,715Depreciation273,053280,221Decrease in retirement benefit liabilities(1,777)(10,559)Decrease in retirement benefit assets2,7561,126Interest and dividend income(46,402)(66,082)Interest expenses7,57510,992Foreign exchange gains(9,018)(6,777)Share of the loss(profit)of associates and joint ventures accounted for usingthe equity method544(11,767)Losses on sales or disposal of property,plant and equipment3245,501Decrease in trade receivables95,821128,888(Increase)decrease in inventories(87,067)17,876Decrease in trade payables(52,189)(23,037)(Decrease)increase in provisions(38,858)171,830Other(7,713)45,073Subtotal435,204832,000Interest received10,53424,996Dividends received41,33543,903Interest paid(7,153)(11,190)Income taxes paid(91,727)(133,458)Net cash provided by operating activities388,193756,251Cash flows from investing activities Decrease in time deposits2,8464,994Purchases of property,plant and equipment(262,215)(287,676)Proceeds from sales of property,plant and equipment12,99410,261Purchases of intangible assets(38,061)(38,023)Purchases of equity instruments(17,999)(95,735)Purchases of debt instruments(268)(277)Proceeds from sales of equity instruments20,2588,553Proceeds from sales and redemption of debt instruments438605Payments for acquisition of subsidiaries and other businesses(11,110)Proceeds from sales of subsidiaries or other businesses17,9805,096Other206943Net cash used in investing activities(263,821)(402,369)Cash flows from financing activities Net(decrease)increase in short-term borrowings(7,716)96,498Proceeds from borrowings64,74484,375Repayments of long-term borrowings(74,420)(109,983)Repayments of lease liabilities(22,244)(28,667)Redemption of bonds(40,000)(50,000)Dividends paid(132,777)(146,029)Dividends paid to non-controlling interests(24,157)(40,509)Purchase of treasury shares(100,007)(18,152)Increase in deposits for purchase of treasury shares(81,870)Other8,180(5,255)Net cash used in financing activities(328,397)(299,592)Foreign currency translation adjustments on cash and cash equivalents26,36815,680Net(decrease)increase in cash and cash equivalents(177,657)69,970Cash and cash equivalents at beginning of period867,808733,850Cash and cash equivalents at end of period690,151803,820-10-Notes to Consolidated Financial Statements Assumption for Going ConcernThere are no applicable items.Changes in accounting estimates Provision for warranty reserve was recorded as an expense related to defects in some of the products produced by theconsolidated companies in the past.However,the estimate was changed in the three-month period ended December 31,2023 based on the subsequent situations.As a result of this change,provisions for current liabilities,selling,general and administrative expenses increased by179.4 billion,respectively.Segment information(1)Outline of reportable segmentsIn the nine-month period ended December 31,2023,there were no material changes to the method used to identifythe reportable segments,the businesses activities carried out by each reportable segment,or the measurementstandards used to determine segment profits.(2)Revenue,profit/loss for each reportable segmentFor the Nine months ended December 31,2022(Unit:Millions of yen)Reportable segment Others(Note)Eliminations ConsolidatedJapanNorthAmericaEuropeAsiaTotalRevenue Customers1,757,607 1,071,228446,960 1,284,131 4,559,926 75,7564,635,682Intersegment934,10210,96743,745185,398 1,174,2121,079(1,175,291)Total2,691,709 1,082,195490,705 1,469,529 5,734,138 76,835(1,175,291)4,635,682Segment profit or losses146,678(14,955)9,120113,522254,365 15,429(1,846)267,948Finance income47,471Finance costs(9,840)Foreign exchange losses(6,880)Share of the loss of associates and joint ventures accounted for using the equity method(544)Profit before income taxes298,155 (Note)Others is an operating segment that is not included in the reportable segments,such as business activities ofsubsidiaries in South America.-11-For the Nine months ended December 31,2023(Unit:Millions of yen)Reportable segment Others(Note 1)Eliminations ConsolidatedJapan(Note 2)NorthAmericaEuropeAsiaTotalRevenue Customers2,182,556 1,271,439516,911 1,303,071 5,273,977 80,9125,354,889Intersegment965,77714,51853,455218,175 1,251,9251,027(1,252,952)Total3,148,333 1,285,957570,366 1,521,246 6,525,902 81,939(1,252,952)5,354,889Segment profit22,35827,51622,401149,437221,712 15,0811,783238,576Finance income66,569Finance costs(20,083)Foreign exchange gains(8,114)Share of the profit of associates and joint ventures accounted for using the equity method11,767Profit before income taxes288,715 (Note 1)Others is an operating segment that is not included in the reportable segments,such as business activities ofsubsidiaries in South America.(Note 2)Provision for warranty reserve of 191,201 million is included in the segment profit of Japan segment.-12-
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Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2024orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission file number001-38730LINDE PLC(Exact name of registrant as specified in its charter)Ireland98-1448883(State or other jurisdiction of incorporation)(I.R.S.Employer Identification No.)10 Riverview Drive,ForgeDanbury,Connecticut43 Church Street WestUnited States 06810Woking,Surrey GU21 6HTUnited Kingdom(Address of principal executive offices)(Zip Code)(203)837-2000 44 14 83 242200(Registrants telephone number,including area code)N/A(Former name,former address and former fiscal year,if changed since last reportSecurities registered pursuant to Section 12(b)of the Act:Title of each classTrading symbol(s)Name of each exchange on which registeredOrdinary shares(0.001 nominal value per share)LIN NASDAQIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for suchshorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitionsof“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and emerging growth company in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No At March 31,2024,480,676,281 ordinary shares(0.001 par value)of the Registrant were outstanding.1 Table of Contents INDEXPART I-FINANCIAL INFORMATION Item 1.Financial Statements(unaudited)Consolidated Statements of Income-Quarters Ended March 31,2024 and 20234Consolidated Statements of Comprehensive Income-Quarters Ended March 31,2024 and 20235Condensed Consolidated Balance Sheets-March 31,2024 and December 31,20236Condensed Consolidated Statements of Cash Flows-Three Months Ended March 31,2024 and 20237Notes to Condensed Consolidated Financial Statements8Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations23Item 3.Quantitative and Qualitative Disclosures about Market Risk41Item 4.Controls and Procedures41PART II-OTHER INFORMATIONItem 1.Legal Proceedings42Item 1A.Risk Factors42Item 2.Unregistered Sales of Equity Securities and Use of Proceeds42Item 3.Defaults Upon Senior Securities42Item 4.Mine Safety Disclosures42Item 5.Other Information42Item 6.Exhibits43Signature442 Table of Contents Forward-looking StatementsThis document contains“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995.These forward-lookingstatements are identified by terms and phrases such as:anticipate,believe,intend,estimate,expect,continue,should,could,may,plan,project,predict,will,potential,forecast,and similar expressions.They are based on managements reasonable expectations and assumptions as of the date the statements are madebut involve risks and uncertainties.These risks and uncertainties include,without limitation:the performance of stock markets generally;developments inworldwide and national economies and other international events and circumstances,including trade conflicts and tariffs;changes in foreign currencies and ininterest rates;the cost and availability of electric power,natural gas and other raw materials;the ability to achieve price increases to offset cost increases;catastrophic events including natural disasters,epidemics,pandemics such as COVID-19,and acts of war and terrorism;the ability to attract,hire,and retainqualified personnel;the impact of changes in financial accounting standards;the impact of changes in pension plan liabilities;the impact of tax,environmental,healthcare and other legislation and government regulation in jurisdictions in which the company operates;the cost and outcomes of investigations,litigationand regulatory proceedings;the impact of potential unusual or non-recurring items;continued timely development and market acceptance of new products andapplications;the impact of competitive products and pricing;future financial and operating performance of major customers and industries served;the impactof information technology system failures,network disruptions and breaches in data security;and the effectiveness and speed of integrating new acquisitionsinto the business.These risks and uncertainties may cause future results or circumstances to differ materially from adjusted projections,estimates or otherforward-looking statements.Linde plc assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances.The above listed risksand uncertainties are further described in Item 1A.Risk Factors in Linde plcs Form 10-K for the fiscal year ended December 31,2023 filed with the SEC onFebruary 28,2024,which should be reviewed carefully.Please consider Linde plcs forward-looking statements in light of those risks.3 Table of Contents LINDE PLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Millions of dollars,except per share data)(UNAUDITED)Quarter Ended March 31,20242023Sales$8,100$8,193 Cost of sales,exclusive of depreciation and amortization4,216 4,431 Selling,general and administrative860 822 Depreciation and amortization949 948 Research and development38 36 Other charges 18 Other income(expense)-net58(5)Operating Profit2,095 1,933 Interest expense-net65 37 Net pension and OPEB cost(benefit),excluding service cost(50)(45)Income Before Income Taxes and Equity Investments2,080 1,941 Income taxes463 430 Income Before Equity Investments1,617 1,511 Income from equity investments48 41 Net Income(Including Noncontrolling Interests)1,665 1,552 Less:noncontrolling interests(38)(36)Net Income Linde plc$1,627$1,516 Per Share Data Linde plc ShareholdersBasic earnings per share$3.38$3.08 Diluted earnings per share$3.35$3.06 Weighted Average Shares Outstanding(000s):Basic shares outstanding481,949 491,817 Diluted shares outstanding485,592 495,676 The accompanying notes are an integral part of these financial statements.4 Table of Contents LINDE PLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Millions of dollars)(UNAUDITED)Quarter Ended March 31,20242023NET INCOME(INCLUDING NONCONTROLLING INTERESTS)$1,665$1,552 OTHER COMPREHENSIVE INCOME(LOSS)Translation adjustments:Foreign currency translation adjustments(744)229 Income taxes Translation adjustments(744)229 Funded status-retirement obligations(Note 7):Retirement program remeasurements(4)(249)Reclassifications to net income(3)(8)Income taxes12 63 Funded status-retirement obligations5(194)Derivative instruments(Note 4):Current unrealized gain(loss)2(75)Reclassifications to net income(6)Income taxes(1)16 Derivative instruments1(65)TOTAL OTHER COMPREHENSIVE INCOME(LOSS)(738)(30)COMPREHENSIVE INCOME(LOSS)(INCLUDING NONCONTROLLING INTERESTS)927 1,522 Less:noncontrolling interests(23)(34)COMPREHENSIVE INCOME(LOSS)-LINDE PLC$904$1,488 The accompanying notes are an integral part of these financial statements.5 Table of Contents LINDE PLC AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Millions of dollars)(UNAUDITED)March 31,2024December 31,2023AssetsCash and cash equivalents$4,848$4,664 Accounts receivable-net5,009 4,718 Contract assets217 196 Inventories2,100 2,115 Prepaid and other current assets928 927 Total Current Assets13,102 12,620 Property,plant and equipment-net24,418 24,552 Goodwill26,289 26,751 Other intangible assets-net12,001 12,399 Other long-term assets4,537 4,489 Total Assets$80,347$80,811 Liabilities and equityAccounts payable$2,885$3,020 Short-term debt4,046 4,713 Current portion of long-term debt1,046 1,263 Contract liabilities1,827 1,901 Other current liabilities4,585 4,820 Total Current Liabilities14,389 15,717 Long-term debt15,227 13,397 Other long-term liabilities10,502 10,602 Total Liabilities40,118 39,716 Redeemable noncontrolling interests13 13 Linde plc Shareholders Equity(Note 10):Ordinary shares,0.001 par value,authorized 1,750,000,000 shares,2024 issued:490,766,972 ordinaryshares;2023 issued:490,766,972 ordinary shares1 1 Additional paid-in capital39,570 39,812 Retained earnings9,708 8,845 Accumulated other comprehensive income(loss)(6,528)(5,805)Less:Treasury shares,at cost(2024 10,090,691 shares and 2023 8,321,827 shares)(3,922)(3,133)Total Linde plc Shareholders Equity38,829 39,720 Noncontrolling interests1,387 1,362 Total Equity40,216 41,082 Total Liabilities and Equity$80,347$80,811 The accompanying notes are an integral part of these financial statements.6 Table of Contents LINDE PLC AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Millions of dollars)(UNAUDITED)Three Months Ended March 31,20242023Increase(Decrease)in Cash and Cash EquivalentsOperationsNet income-Linde plc$1,627$1,516 Add:Noncontrolling interests38 36 Net Income(including noncontrolling interests)1,665 1,552 Adjustments to reconcile net income to net cash provided by operating activities:Other charges,net of payments(55)(61)Depreciation and amortization949 948 Deferred income taxes(35)4 Share-based compensation38 30 Working capital:Accounts receivable(361)(131)Inventory(27)(59)Prepaid and other current assets(50)(5)Payables and accruals(65)(64)Contract assets and liabilities,net(50)(66)Pension contributions(11)(10)Long-term assets,liabilities and other(44)(230)Net cash provided by(used for)operating activities1,954 1,908 InvestingCapital expenditures(1,048)(829)Acquisitions,net of cash acquired(808)Divestitures,net of cash divested and asset sales7 3 Net cash provided by(used for)investing activities(1,041)(1,634)FinancingShort-term debt borrowings(repayments)-net(631)1,199 Long-term debt borrowings2,456 60 Long-term debt repayments(610)(542)Issuances of ordinary shares16 13 Purchases of ordinary shares(1,041)(859)Cash dividends-Linde plc shareholders(669)(623)Noncontrolling interest transactions and other(189)(12)Net cash provided by(used for)financing activities(668)(764)Effect of exchange rate changes on cash and cash equivalents(61)16 Change in cash and cash equivalents184(474)Cash and cash equivalents,beginning-of-period4,664 5,436 Cash and cash equivalents,end-of-period$4,848$4,962 The accompanying notes are an integral part of these financial statements.7 Table of Contents INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements-Linde plc and Subsidiaries(Unaudited)Note 1.Summary of Significant Accounting Policies9Note 2.Supplemental Information10Note 3.Debt11Note 4.Financial Instruments11Note 5.Fair Value Disclosures13Note 6.Earnings Per Share Linde plc Shareholders15Note 7.Retirement Programs16Note 8.Commitments and Contingencies16Note 9.Segments18Note 10.Equity19Note 11.Revenue Recognition198 Table of Contents 1.Summary of Significant Accounting PoliciesLinde plc(Linde or the company)is an incorporated public limited company formed under the laws of Ireland.Lindes registered office is located at TenEarlsfort Terrace,Dublin 2,D02 T380 Ireland.Lindes principal executive offices are located at Forge,43 Church Street West,Woking,Surrey GU21 6HT,United Kingdom and 10 Riverview Drive,Danbury,Connecticut,06810,United States.Presentation of Condensed Consolidated Financial Statements-In the opinion of Linde management,the accompanying condensed consolidated financialstatements include all adjustments necessary for a fair statement of the results for the interim periods presented and such adjustments are of a normal recurringnature.The accompanying condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements ofLinde plc and subsidiaries in Lindes 2023 Annual Report on Form 10-K.There have been no material changes to the companys significant accounting policiesduring 2024.Reclassifications Certain prior periods amounts have been reclassified to conform to the current years presentation.Accounting Standards to be ImplementedImprovements to Reportable Segments Disclosures-In November 2023,the FASB issued guidance requiring enhanced disclosure related to reportablesegments.The new standard is effective for fiscal years beginning after December 15,2023,and interim periods within fiscal years beginning after December15,2024,with early adoption permitted.The adoption of this standard will only impact disclosures within the companys consolidated financial statements andthe company is evaluating the impact this guidance will have on those disclosures.Linde will adopt this guidance in fiscal year 2024.Improvements to Income Tax Disclosures-In December 2023,the FASB issued guidance requiring enhanced disclosure related to income taxes.Thestandard requires additional or modified disclosures related to the income tax rate reconciliation,disaggregation of income taxes paid,and several otherdisclosures.The new standard is effective for fiscal years beginning after December 15,2024,with early adoption permitted.The adoption of this standard willonly impact disclosures within the companys consolidated financial statements and the company is evaluating the impact this guidance will have on thosedisclosures.Linde will adopt this guidance prospectively in fiscal year 2025.9 Table of Contents 2.Supplemental InformationReceivablesLinde applies loss rates that are lifetime expected credit losses at initial recognition of the receivables.These expected loss rates are based on an analysis of theactual historical default rates for each business,taking regional circumstances into account.If necessary,these historical default rates are adjusted to reflect theimpact of current changes in the macroeconomic environment using forward-looking information.The loss rates are also evaluated based on the expectations ofthe responsible management team regarding the collectability of the receivables.Gross trade receivables aged less than one year were$4,920 million and$4,667 million at March 31,2024 and December 31,2023,respectively,and gross receivables aged greater than one year were$372 million and$354 millionat March 31,2024 and December 31,2023,respectively.Other receivables were$167 million and$154 million at March 31,2024 and December 31,2023,respectively.Receivables aged greater than one year are generally fully reserved unless specific circumstances warrant exceptions,such as those backed byfederal governments.Accounts receivable net of reserves were$5,009 million at March 31,2024 and$4,718 million at December 31,2023.Allowances for expected credit losseswere$450 million at March 31,2024 and$457 million at December 31,2023.Provisions for expected credit losses were$44 million and$53 million for thethree months ended March 31,2024 and 2023,respectively.The allowance activity in the three months ended March 31,2024 and 2023 related to write-offs ofuncollectible amounts,net of recoveries and currency movements is not material.InventoriesThe following is a summary of Lindes consolidated inventories:(Millions of dollars)March 31,2024December 31,2023InventoriesRaw materials and supplies$604$614 Work in process410 390 Finished goods1,086 1,111 Total inventories$2,100$2,115 10 Table of Contents 3.DebtThe following is a summary of Lindes outstanding debt at March 31,2024 and December 31,2023:(Millions of dollars)March 31,2024December 31,2023SHORT-TERMCommercial paper$3,784$4,483 Other bank borrowings(primarily non U.S.)262 230 Total short-term debt4,046 4,713 LONG-TERM(a)(U.S.dollar denominated unless otherwise noted)1.20%Euro denominated notes due 2024(b)607 1.875%Euro denominated notes due 2024(c)324 332 4.800%Notes due 2024300 300 4.700%Notes due 2025599 599 2.65%Notes due 2025399 399 1.625%Euro denominated notes due 2025537 550 3.625%Euro denominated notes due 2025539 551 0.00%Euro denominated notes due 2026757 774 3.20%Notes due 2026724 724 3.434%Notes due 2026198 198 1.652%Euro denominated notes due 202787 90 0.25%Euro denominated notes due 2027808 827 1.00%Euro denominated notes due 2027541 553 1.00%Euro denominated notes due 2028(c)765 780 3.00%Euro denominated notes due 2028(d)752 3.375%Euro denominated notes due 2029805 824 1.10%Notes due 2030697 697 1.90%Euro denominated notes due 2030111 114 1.375%Euro denominated notes due 2031811 829 3.20%Euro denominated notes due 2031(d)915 0.55%Euro denominated notes due 2032805 823 0.375%Euro denominated notes due 2033534 546 3.625%Euro denominated notes due 2034698 714 1.625%Euro denominated notes due 2035857 876 3.40%Euro denominated notes due 2036(d)748 3.55%Notes due 2042666 666 2.00%Notes due 2050296 296 1.00%Euro denominated notes due 2051738 755 Non U.S.borrowings252 226 Other10 10 16,273 14,660 Less:current portion of long-term debt(1,046)(1,263)Total long-term debt15,227 13,397 Total debt$20,319$19,373(a)Amounts are net of unamortized discounts,premiums and/or debt issuance costs as applicable.(b)In February 2024,Linde repaid 550 million of 1.20%notes that became due.(c)March 31,2024 and December 31,2023 included a cumulative$41 million and$46 million adjustment to carrying value,respectively,related to hedgeaccounting of interest rate swaps.Refer to Note 4.(d)In February 2024,Linde issued 700 million of 3.00%notes due in 2028,850 million of 3.20%notes due in 2031 and 700 million of 3.40%notes due in2036.The company maintains a$5 billion and a$1.5 billion unsecured revolving credit agreement with a syndicate of banking institutions that expire on December7,2027 and December 4,2024,respectively.There are no financial maintenance covenants contained within the credit agreements.No borrowings wereoutstanding under the credit agreements as of March 31,2024.The weighted-average interest rates of short-term borrowings outstanding were 4.7%and 4.8%as of March 31,2024 and December 31,2023,respectively.4.Financial InstrumentsIn its normal operations,Linde is exposed to market risks relating to fluctuations in interest rates,foreign currency exchange rates,energy and commoditycosts.The objective of financial risk management at Linde is to minimize the negative impact of such fluctuations on the companys earnings and cash flows.To manage these risks,among other strategies,Linde routinely enters into various derivative financial instruments(“derivatives”)including interest-rate swapand treasury rate lock agreements,currency-swap agreements,forward contracts,currency options,and commodity-swap agreements.These instruments arenot entered into for trading purposes and Linde only uses commonly traded and non-leveraged instruments.There are three types of derivatives that the company enters into:(i)those relating to fair-value exposures,(ii)those relating to cash-flow exposures,and(iii)those relating to foreign currency net investment exposures.Fair-value exposures relate to recognized assets or liabilities,and firm commitments;cash-flowexposures relate to the variability of future cash flows associated with recognized assets or liabilities,or forecasted transactions;and net investment exposuresrelate to the impact of foreign currency exchange rate changes on the carrying value of net assets denominated in foreign currencies.When a derivative is executed and hedge accounting is appropriate,it is designated as either a fair-value hedge,cash-flow hedge,or a net investment hedge.Currently,Linde designates all interest-rate and treasury-rate locks as hedges for accounting purposes;however,cross-currency contracts are generally notdesignated as hedges for accounting purposes.Certain currency contracts related to forecasted transactions are designated as hedges for accounting purposes.Whether designated as hedges for accounting purposes or not,all derivatives are linked to an appropriate underlying exposure.On an ongoing basis,thecompany assesses the hedge effectiveness of all derivatives designated as hedges for accounting purposes to determine if they continue to be highly effective inoffsetting changes in fair values or cash flows of the underlying hedged items.If it is determined that the hedge is not highly effective through the use of aqualitative assessment,then hedge accounting will be discontinued prospectively.Counterparties to Lindes derivatives are major banking institutions with credit ratings of investment grade or better.The company has Credit Support Annexes(CSAs)in place for certain entities with their principal counterparties to minimize potential default risk and to mitigate counterparty risk.Under the CSAs,the fair values of derivatives for the purpose of interest rate and currency management are collateralized with cash on a regular basis.As of March 31,2024,theimpact of such collateral posting arrangements on the fair value of derivatives was insignificant.Management believes the risk of incurring losses on derivativecontracts related to credit risk is remote and any losses would be immaterial.The following table is a summary of the notional amount and fair value of derivatives outstanding at March 31,2024 and December 31,2023 for consolidatedsubsidiaries:11 Fair Value Notional AmountsAssets(a)Liabilities(a)(Millions of dollars)March 31,2024December 31,2023March 31,2024December 31,2023March 31,2024December 31,2023Derivatives Not Designated as HedgingInstruments:Currency contracts:Balance sheet items$5,104$4,567$35$46$17$26 Forecasted transactions217 335 3 11 3 6 Total$5,321$4,902$38$57$20$32 Derivatives Designated as Hedging Instruments:Currency contracts:Forecasted transactions$777$749$8$20$1$4 Commodity contractsN/AN/A11 3 18 7 Interest rate swaps108 1,214 1 2 4 Total Hedges$885$1,963$19$24$21$15 Total Derivatives$6,206$6,865$57$81$41$47(a)Amounts as of March 31,2024 and December 31,2023 included current assets of$53 million and$73 million which are recorded in prepaid and other current assets;long-term assets of$4million and$8 million which are recorded in other long-term assets;current liabilities of$32 million and$41 million which are recorded in other current liabilities;and long-term liabilities of$9million and$6 million which are recorded in other long-term liabilities.Balance Sheet ItemsForeign currency contracts related to balance sheet items consist of forward contracts entered into to manage the exposure to fluctuations in foreign-currencyexchange rates on recorded balance sheet assets and liabilities denominated in currencies other than the functional currency of the related operating unit.Certain forward currency contracts are entered into to protect underlying monetary assets and liabilities denominated in foreign currencies from foreignexchange risk and are not designated as hedging instruments.For balance sheet items that are not designated as hedging instruments,the fair value adjustmentson these contracts are offset by the fair value adjustments recorded on the underlying monetary assets and liabilities.Forecasted TransactionsForeign currency contracts related to forecasted transactions consist of forward contracts entered into to manage the exposure to fluctuations in foreign-currency exchange rates on(1)forecasted purchases of capital-related equipment and services,(2)forecasted sales,or(3)other forecasted cash flowsdenominated in currencies other than the functional currency of the related operating units.For forecasted transactions that are designated as cash flow hedges,fair value adjustments are recorded to accumulated other comprehensive income(loss)with deferred amounts reclassified to earnings over the same timeperiod as the income statement impact of the associated purchase.For forecasted transactions that do not qualify for cash flow hedging relationships,fair valueadjustments are recorded directly to earnings.Linde is hedging forecasted transactions for a maximum period of three years.Commodity ContractsCommodity contracts are entered into to manage the exposure to fluctuations in commodity prices,which arise in the normal course of business from itsprocurement transactions.To reduce the extent of this risk,Linde enters into a limited number of electricity,natural gas,and propane gas derivatives.Forforecasted transactions that are designated as cash flow hedges,fair value adjustments are recorded to accumulated other comprehensive income(loss)withdeferred amounts reclassified to earnings over the same time period as the income statement impact of the associated purchase.Linde is hedging commoditycontracts for a maximum period of three years.Net Investment HedgesAs of March 31,2024,Linde has 12.9 billion($14.0 billion)Euro-denominated notes and intercompany loans and 4.7 billion($0.7 billion)CNY-denominated intercompany loans that are designated as hedges of the net investment positions in certain foreign operations.Since hedge inception,the deferredgain recorded within cumulative translation adjustment component of12 accumulated other comprehensive income(loss)in the consolidated balance sheet is$318 million(deferred gain of$274 million in the consolidated statementof comprehensive income for the three months ended March 31,2024).As of March 31,2024,exchange rate movements relating to previously designated hedges that remain in accumulated other comprehensive income(loss)is ata gain of$56 million.These movements will remain in accumulated other comprehensive income(loss),until appropriate,such as upon sale or liquidation ofthe related foreign operations at which time amounts will be reclassified to the consolidated statements of income.Interest Rate SwapsLinde uses interest rate swaps to hedge the exposure to changes in the fair value of financial assets and financial liabilities as a result of interest rate changes.These interest rate swaps effectively convert fixed-rate interest exposures to variable rates;fair value adjustments are recognized in earnings along with anequally offsetting charge/benefit to earnings for the changes in the fair value of the underlying financial asset or financial liability(See Note 3).In addition,as of December 31,2023,Linde was using interest rate swaps with a notional value of 1 billion to hedge the variability of future cash flows offorecasted transactions due to interest rate risk and had designated this as a cash flow hedge.The interest rate swaps were terminated during the first quarter of2024 with the February debt issuance and the settlement values were immaterial.Derivatives Impact on Consolidated Statements of IncomeThe following table summarizes the impact of the companys derivatives on the consolidated statements of income:Amount of Pre-Tax Gain(Loss)Recognized in Earnings*Quarter Ended March 31,(Millions of dollars)20242023Derivatives Not Designated as Hedging InstrumentsCurrency contracts:Balance sheet itemsDebt-related$(15)$(39)Other balance sheet items(8)(1)Total$(23)$(40)*The gains(losses)on balance sheet items are offset by gains(losses)recorded on the underlying hedged assets and liabilities.Accordingly,the gains(losses)for the derivatives and the underlyinghedged assets and liabilities related to debt items are recorded in the consolidated statements of income as interest expense-net.Other balance sheet items and anticipated net income gains(losses)are generally recorded in the consolidated statements of income as other income(expenses)-net.The amounts of gain or loss recognized in accumulated other comprehensive income(loss)and reclassified to the consolidated statement of income was notmaterial for the three months ended March 31,2024 and 2023,respectively.Net impacts expected to be reclassified to earnings during the next twelve monthsare also not material.5.Fair Value DisclosuresThe fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:Level 1 quoted prices in active markets for identical assets or liabilitiesLevel 2 quoted prices for similar assets and liabilities in active markets or inputs that are observableLevel 3 inputs that are unobservable(for example cash flow modeling inputs based on assumptions)Assets and Liabilities Measured at Fair Value on a Recurring BasisThe following table summarizes assets and liabilities measured at fair value on a recurring basis:13 Table of Contents Fair Value Measurements Using Level 1Level 2Level 3(Millions of dollars)March 31,2024December 31,2023March 31,2024December 31,2023March 31,2024December 31,2023AssetsDerivative assets$57$81$Investments and securities*16 16 11 12 Total$16$16$57$81 11$12 LiabilitiesDerivative liabilities$41$47$*Investments and securities are recorded in prepaid and other current assets and other long-term assets in the companys condensed consolidated balancesheets.Level 1 investments and securities are marketable securities traded on an exchange.Level 2 investments are based on market prices obtained from independentbrokers or determined using quantitative models that use as their basis readily observable market parameters that are actively quoted and can be validatedthrough external sources,including third-party pricing services,brokers and market transactions.Level 3 investments and securities consist of a venture fund.For the valuation,Linde uses the net asset value received as part of the funds quarterly reporting,which for the most part is not based on quoted prices inactive markets.In order to reflect current market conditions,Linde proportionally adjusts by observable market data(stock exchange prices)or currenttransaction prices.Changes in level 3 investments and securities were immaterial.The fair value of cash and cash equivalents,short-term debt,accounts receivable-net,and accounts payable approximate carrying value because of the short-term maturities of these instruments.The fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues.Long-term debt is categorized within Level 2 ofthe fair value hierarchy.At March 31,2024,the estimated fair value of Lindes long-term debt portfolio was$14,843 million versus a carrying value of$16,273million.At December 31,2023,the estimated fair value of Lindes long-term debt portfolio was$13,337 million versus a carrying value of$14,660 million.Differences between the carrying value and the fair value are attributable to fluctuations in interest rates subsequent to when the debt was issued and relative tostated coupon rates.14 Table of Contents 6.Earnings Per Share Linde plc ShareholdersBasic and diluted earnings per share is computed by dividing Net income Linde plc for the period by the weighted average number of either basic or dilutedshares outstanding,as follows:Quarter Ended March 31,20242023Numerator(Millions of dollars)Net Income Linde plc$1,627$1,516 Denominator(Thousands of shares)Weighted average shares outstanding481,398 491,321 Shares earned and issuable under compensation plans551 496 Weighted average shares used in basic earnings per share481,949 491,817 Effect of dilutive securitiesStock options and awards3,643 3,859 Weighted average shares used in diluted earnings per share485,592 495,676 Basic Earnings Per Share$3.38$3.08 Diluted Earnings Per Share$3.35$3.06 There were no antidilutive shares for any period presented.15 Table of Contents 7.Retirement ProgramsThe components of net pension and postretirement benefits other than pensions(“OPEB”)costs for the three months ended March 31,2024 and 2023 areshown below:Quarter Ended March 31,(Millions of dollars)20242023Amount recognized in Operating ProfitService cost$21$21 Amount recognized in Net pension and OPEB cost(benefit),excluding service costInterest cost91 92 Expected return on plan assets(138)(129)Net amortization and deferral(3)(8)(50)(45)Net periodic benefit cost(benefit)$(29)$(24)Components of net periodic benefit expense for other post-retirement plans for the three months ended March 31,2024 and 2023 were not material.Linde estimates that 2024 required contributions to its pension plans will be in the range of approximately$30 million to$40 million,of which$11 millionhave been made through March 31,2024.8.Commitments and ContingenciesContingent LiabilitiesLinde is subject to various lawsuits and government investigations that arise from time to time in the ordinary course of business.These actions are based uponalleged environmental,tax,antitrust and personal injury claims,among others.Linde has strong defenses in these cases and intends to defend itself vigorously.It is possible that the company may incur losses in connection with some of these actions in excess of accrued liabilities.Management does not anticipate thatin the aggregate such losses would have a material adverse effect on the companys consolidated financial position or liquidity;however,it is possible that thefinal outcomes could have a significant impact on the companys reported results of operations in any given period(see Note 17 to the consolidated financialstatements of Lindes 2023 Annual Report on Form 10-K).Significant matters are:During 2009,the Brazilian government published Law 11941/2009 instituting a new voluntary amnesty program(“Refis Program”)which allowedBrazilian companies to settle certain federal tax disputes at reduced amounts.During 2009,the company decided that it was economically beneficial tosettle many of its outstanding federal tax disputes and such disputes were enrolled in the Refis Program,subject to final calculation and review by theBrazilian federal government.The company recorded estimated liabilities based on the terms of the Refis Program.Since 2009,Linde has been unableto reach final agreement on the calculations and initiated litigation against the government in an attempt to resolve certain items.Open issues relate tothe following matters:(i)application of cash deposits and net operating loss carryforwards to satisfy obligations and(ii)the amount of tax reductionsavailable under the Refis Program.It is difficult to estimate the timing of resolution of legal matters in Brazil.At March 31,2024,the most significant non-income tax claims in Brazil,after enrollment in the Refis Program,relate to state VAT tax matters.Thetotal estimated exposure relating to such claims,including interest and penalties,as appropriate,is approximately$115 million.Linde has not recordedany liabilities related to such claims based on management judgment and opinions of outside counsel.During 2023,the Brazilian Supreme Court issued a decision confirming the constitutionality of a specific federal income tax,with retroactive effect.Asa result of this decision,the company recorded a reserve based on its best estimate of potential settlement.This decision has not yet been finalized andis subject to ongoing motions for clarification.Because litigation in Brazil historically takes many years to resolve,it is very difficult to estimate thetiming of resolution of these matters;however,it is possible that certain of these matters may be resolved within the near term.The company isvigorously defending against the proceedings.16 Table of Contents On and after April 23,2019 former shareholders of Linde AG filed appraisal proceedings at the District Court(Landgericht)Munich I(Germany),seeking an increase of the cash consideration paid in connection with the previously completed cash merger squeeze-out of all of Linde AGs minorityshareholders for 189.46 per share.Any such increase would apply to all 14,763,113 Linde AG shares that were outstanding on April 8,2019,when thecash merger squeeze-out was completed.The period for plaintiffs to file claims expired on July 9,2019.In November 2023,the court issued a decisionrejecting the plaintiffs claims in their entirety and determining that the cash merger squeeze-out consideration was appropriate.The plaintiffs haveappealed this decision.The company believes the consideration paid was fair and that the claims are not supported by sufficient evidence,and no reserve has been established.We cannot estimate the timing of resolution.In December 2022,a Russian court based in St.Petersburg(St.Petersburg Court)issued an injunction preventing(i)the sale of any shares in Lindessubsidiaries and joint ventures in Russia,and(ii)the disposal of any of the assets in those entities exceeding 5%of the relevant companys overall assetvalue.The injunction was requested by RusChemAlliance(RCA)to secure payment of a possible award under an arbitration proceeding RCA intendedto file against Linde Engineering for alleged breach of contract under the agreement to build a gas processing plant in Russia entered into in July 2021.Performance of the agreement was lawfully suspended by Linde Engineering on May 27,2022 in compliance with applicable sanctions.In March2023,RCA filed a claim in St.Petersburg against Linde GmbH for recovery of advance payments under the agreement(GPP Claim),andsubsequently(i)added Linde and other Linde subsidiaries as defendants,and(ii)is seeking payment of alleged damages from Linde and guarantorbanks.In March 2024,RCA filed a similar claim for repayment and damages against Linde for alleged breach of contract under the agreement to builda liquefied natural gas plant in Russia entered into in September 2021(“LNG Claim”,and together with the GPP Claim,the“Russian Claims”).In accordance with the dispute resolution provisions of the agreements,in 2023,Linde filed a notice of arbitration with the Hong Kong InternationalArbitration Centre(HKIAC)against RCA to claim that(i)RCA has no entitlement to payment,(ii)RCAs Russian Claims claims are in breach of thearbitration agreement which requires HKIAC arbitration,and(iii)RCA must compensate Linde for the losses and damages caused by the injunction.Additionally,Linde filed for and obtained an anti-suit injunction from a Hong Kong court against RCA directing RCA to seek a stay of the claims andordering it to resolve any disputes in accordance with HKIAC arbitration.In January,2024,the Hong Kong court issued a final judgment in Lindes favor(i)granting a permanent anti-suit injunction against RCA to seek a stayof the GPP claim and not start an LNG claim,(ii)granting a permanent,global anti-enforcement injunction against RCA for the GPP claim,and(iii)ordering that the injunction issued by the St.Petersburg Court be lifted(“HK Court Judgement”).Despite the judgments of the Hong Kong court and similar orders issued by the HKIAC arbitration tribunals,the St.Petersburg injunction affectingLindes shares and assets has not been lifted,the proceeding in St.Petersburg has not been stayed and RCA is continuing to pursue its claims in Russia.In February 2024,the St.Petersburg Court decided the GPP Claim in favor of RCA.Linde appealed this decision in March 2024.RCA cannot enforcethe decision(including foreclosing on the shares of the Russian entities)until after the appeal is decided in St.Petersburg.Linde does not expect a material adverse impact on earnings from this decision given the liability recorded as of March 31,2024 and the immaterialremaining investment value of its deconsolidated Russia subsidiaries.As of March 31,2024,Linde has a contingent liability of$1.2 billion recorded inOther long-term liabilities,which represents advance payments previously recorded in contract liabilities related to terminated engineering projectswith RCA.As a result of the contract terminations,Linde no longer has future performance obligations for these projects.It is difficult to estimate the timing of resolution of these matters.The company intends to vigorously defend its interests in both the Russian Claimsand arbitration proceedings.17 Table of Contents 9.SegmentsFor a description of Linde plcs operating segments,refer to Note 18 to the consolidated financial statements on Linde plcs 2023 Annual Report on Form 10-K.The table below presents sales and operating profit information about reportable segments and Other for the three months ended March 31,2024 and 2023.Quarter Ended March 31,(Millions of dollars)20242023SALESAmericas$3,560$3,551 EMEA2,091 2,177 APAC1,591 1,598 Engineering539 540 Other319 327 Total sales$8,100$8,193 Quarter Ended March 31,(Millions of dollars)20242023SEGMENT OPERATING PROFITAmericas$1,088$1,025 EMEA687 607 APAC447 423 Engineering100 149 Other19 2 Segment operating profit2,341 2,206 Other charges(18)Purchase accounting impacts-Linde AG(b)(246)(255)Total operating profit$2,095$1,933(a)Sales reflect external sales only.Intersegment sales,primarily from Engineering to the industrial gases segments,were$391 million and$294 million for the three months ended March 31,2024and 2023.(b)Represents purchase accounting impacts related to the 2018 merger.(a)18 Table of Contents 10.EquityEquityA summary of the changes in total equity for the three months ended March 31,2024 and 2023 is provided below:Quarter Ended March 31,(Millions of dollars)20242023ActivityLinde plcShareholdersEquityNoncontrollingInterestsTotalEquityLinde plcShareholdersEquityNoncontrollingInterestsTotalEquityBalance,beginning of period$39,720$1,362$41,082$40,028$1,346$41,374 Net income(a)1,627 38 1,665 1,516 36 1,552 Other comprehensive income(loss)(723)(15)(738)(28)(2)(30)Noncontrolling interests:Additions(reductions)11 11 2 2 Dividends and other capital changes(9)(9)(29)(29)Dividends to Linde plc ordinary share holders($1.39 per share in 2024 and$1.275 per share in2023)(669)(669)(623)(623)Issuances of ordinary shares:For employee savings and incentiveplans(126)(126)(63)(63)Purchases of ordinary shares(1,038)(1,038)(890)(890)Share-based compensation38 38 30 30 Balance,end of period$38,829$1,387$40,216$39,970$1,353$41,323(a)Net income for noncontrolling interests excludes net income related to redeemable noncontrolling interests which is not significant for the three months ended March 31,2024 and 2023 and whichis not part of total equity.The components of Accumulated other comprehensive income(loss)are as follows:March 31,December 31,(Millions of dollars)20242023Cumulative translation adjustment-net of taxes:Americas$(3,714)$(3,618)EMEA(1,139)(737)APAC(1,426)(1,037)Engineering(214)(93)Other392 113(6,101)(5,372)Derivatives-net of taxes8 7 Pension/OPEB(net of$72 million and$60 million tax benefit at March 31,2024 and December 31,2023,respectively)(435)(440)$(6,528)$(5,805)11.Revenue RecognitionRevenue is accounted for in accordance with ASC 606.Revenue is recognized as control of goods or services are transferred to customers in an amount thatreflects the consideration to which an entity expects to be entitled to receive in exchange for the goods or services.Contracts with CustomersLinde serves a diverse group of industries including healthcare,chemicals and energy,manufacturing,metals and mining,food and beverage,and electronics.19 Table of Contents Industrial GasesWithin each of the companys geographic segments for industrial gases,there are three basic distribution methods:(i)on-site or tonnage;(ii)merchant or bulkliquid;and(iii)packaged or cylinder gases.The distribution method used by Linde to supply a customer is determined by many factors,including thecustomers volume requirements and location.The distribution method generally determines the contract terms with the customer and,accordingly,the revenuerecognition accounting practices.Lindes primary products in its industrial gases business are atmospheric gases(oxygen,nitrogen,argon,rare gases)andprocess gases(carbon dioxide,helium,hydrogen,electronic gases,specialty gases,acetylene).These products are generally sold through one of the threedistribution methods.Following is a description of each of the three industrial gases distribution methods and the respective revenue recognition policies:On-site.Customers that require the largest volumes of product and that have a relatively constant demand pattern are supplied by cryogenic and process gas on-site plants.Linde constructs plants on or adjacent to these customers sites and supplies the product directly to customers by pipeline.Where there are largeconcentrations of customers,a single pipeline may be connected to several plants and customers.On-site product supply contracts generally are totalrequirement contracts with terms typically ranging from 10-20 years and contain minimum purchase requirements and price escalation provisions.Many of thecryogenic on-site plants also produce liquid products for the merchant market.Therefore,plants are typically not dedicated to a single customer.Additionally,Linde is responsible for the design,construction,operations and maintenance of the plants and our customers typically have no involvement in these activities.Advanced air separation processes also allow on-site delivery to customers with smaller volume requirements.The companys performance obligations related to on-site customers are satisfied over time as customers receive and obtain control of the product.Linde haselected to apply the practical expedient for measuring progress towards the completion of a performance obligation and recognizes revenue as the company hasthe right to invoice each customer,which generally corresponds with product delivery.Accordingly,revenue is recognized when product is delivered to thecustomer and the company has the right to invoice the customer in accordance with the contract terms.Consideration in these contracts is generally based onpricing which fluctuates with various price indices.Variable components of consideration exist within on-site contracts but are considered constrained.Merchant.Merchant deliveries generally are made from Lindes plants by tanker trucks to storage containers at the customers site.Due to the relatively highdistribution cost,merchant oxygen and nitrogen generally have a relatively small distribution radius from the plants at which they are produced.Merchantargon,hydrogen and helium can be shipped much longer distances.The customer agreements used in the merchant business are usually three-to seven-yearsupply agreements based on the requirements of the customer.These contracts generally do not contain minimum purchase requirements or volumecommitments.The companys performance obligations related to merchant customers are generally satisfied at a point in time as the customers receive and obtain control ofthe product.Revenue is recognized when product is delivered to the customer and the company has the right to invoice the customer in accordance with thecontract terms.Any variable components of consideration within merchant contracts are constrained;however,this consideration is not significant.Packaged Gases.Customers requiring small volumes are supplied products in containers called cylinders,under medium to high pressure.Linde distributesmerchant gases from its production plants to company-owned cylinder filling plants where cylinders are then filled for distribution to customers.Cylinders maybe delivered to the customers site or picked up by the customer at a packaging facility or retail store.Linde invoices the customer for the industrial gases andthe use of the cylinder container(s).The company also sells hardgoods and welding equipment purchased from independent manufacturers.Packaged gases aregenerally sold under one to three-year supply contracts and purchase orders and do not contain minimum purchase requirements or volume commitments.The companys performance obligations related to packaged gases are satisfied at a point in time.Accordingly,revenue is recognized when product is deliveredto the customer or when the customer picks up product from a packaged gas facility or retail store and the company has the right to payment from the customerin accordance with the contract terms.Any variable consideration is constrained and will be recognized when the uncertainty related to the consideration isresolved.EngineeringThe company designs and manufactures equipment for air separation and other industrial gas applications manufactured specifically for end customers.Sale ofequipment contracts are generally comprised of a single performance obligation.Revenue from sale of equipment is generally recognized over time as Lindehas an enforceable right to payment for performance completed to date and performance does not create an asset with alternative use.For contracts recognizedover time,revenue is recognized primarily using a cost incurred input method.Costs incurred to date relative to total estimated costs at completion are used tomeasure progress toward satisfying performance obligations.Costs incurred include material,labor,20 Table of Contents and overhead costs and represent work contributing and proportionate to the transfer of control to the customer.Changes to cost estimates and contractmodifications are typically accounted for as part of the existing contract and are recognized as cumulative adjustments for the inception-to-date effect of suchchange.Contract Assets and LiabilitiesContract assets and liabilities result from differences in timing of revenue recognition and customer invoicing.Contract assets primarily relate to sale ofequipment contracts for which revenue is recognized over time.The balance represents unbilled revenue which occurs when revenue recognized under themeasure of progress exceeds amounts invoiced to customers.Customer invoices may be based on the passage of time,the achievement of certain contractualmilestones or a combination of both criteria.Contract liabilities include advance payments or right to consideration prior to performance under the contract.Contract liabilities are recognized as revenue as performance obligations are satisfied under contract terms.Linde has contract assets of$217 million and$196million at March 31,2024 and December 31,2023,respectively.Total contract liabilities are$2,901 million at March 31,2024(current of$1,827 million and$1,074 million within other long-term liabilities in the condensed consolidated balance sheets).As of March 31,2024,Linde has approximately$409 millionrecorded in contract liabilities related to engineering projects in Russia subject to sanctions.Total contract liabilities were$2,950 million at December 31,2023(current contract liabilities of$1,901 million and$1,049 million within other long-term liabilities in the condensed consolidated balance sheets).Revenuerecognized for the three months ended March 31,2024 that was included in the contract liability at December 31,2023 was$358 million.Contract assets andliabilities primarily relate to the Engineering business.Payment Terms and OtherLinde generally receives payment after performance obligations are satisfied,and customer prepayments are not typical for the industrial gases business.Payment terms vary based on the country where sales originate and local customary payment practices.Linde does not offer extended financing outside ofcustomary payment terms.Amounts billed for sales and use taxes,value-added taxes,and certain excise and other specific transactional taxes imposed onrevenue producing transactions are presented on a net basis and are not included in sales within the consolidated statement of income.Additionally,salesreturns and allowances are not a normal practice in the industry and are not significant.Disaggregated Revenue InformationAs described above and in Note 19 to Linde plcs 2023 Annual Report on Form 10-K,the company manages its industrial gases business on a geographic basis,while the Engineering and Other businesses are generally managed on a global basis.Furthermore,the company believes that reporting sales by distributionmethod by reportable geographic segment best illustrates the nature,timing,type of customer,and contract terms for its revenues,including terms and pricing.The following tables show sales by distribution method at the consolidated level and for each reportable segment and Other for three months ended March 31,2024 and March 31,2023.(Millions of dollars)Quarter Ended March 31,2024SalesAmericasEMEAAPACEngineeringOtherTotal%Merchant$1,117$686$529$55$2,387 29%On-Site782 441 668 1,891 23%Packaged Gas1,607 951 322 7 2,887 36%Other54 13 72 539 257 935 12%Total$3,560$2,091$1,591$539$319$8,100 100%(Millions of dollars)Quarter Ended March 31,2023SalesAmericasEMEAAPACEngineeringOtherTotal%Merchant$1,043$699$551$55$2,348 29%On-Site804 538 643 1,985 24%Packaged Gas1,638 928 354 20 2,940 36%Other66 12 50 540 252 920 11%Total$3,551$2,177$1,598$540$327$8,193 100! Table of Contents Remaining Performance ObligationsAs described above,Lindes contracts with on-site customers are under long-term supply arrangements which generally require the customer to purchase theirrequirements from Linde and also have minimum purchase requirements.Additionally,plant sales from the Linde Engineering business are primarilycontracted on a fixed price basis.The company estimates the consideration related to future minimum purchase requirements and plant sales was approximately$48 billion.This amount excludes all on-site sales above minimum purchase requirements,which can be significant depending on customer needs.In thefuture,actual amounts will be different due to impacts from several factors,many of which are beyond the companys control including,but not limited to,timing of newly signed,terminated and renewed contracts,inflationary price escalations,currency exchange rates,and pass-through costs related to natural gasand electricity.The actual duration of long-term supply contracts ranges up to twenty years.The company estimates that approximately half of the revenuerelated to minimum purchase requirements will be earned in the next five years and the remaining thereafter.22 Table of Contents Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations(MD&A)Non-GAAP MeasuresThroughout MD&A,the company provides adjusted operating results exclusive of certain items such as Other charges,net gains or losses on sale ofbusinesses,purchase accounting impacts of the Linde AG merger and pension settlement charges.Adjusted amounts are non-GAAP measures which areintended to supplement investors understanding of the companys financial information by providing measures which investors,financial analysts andmanagement find useful in evaluating the companys operating performance.Items which the company does not believe to be indicative of on-going businessperformance are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis.Inaddition,operating results,excluding these items,is important to managements development of annual and long-term employee incentive compensation plans.Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAPmeasures.The non-GAAP measures and reconciliations are separately included in a later section in the MD&A titled Non-GAAP Measures and Reconciliations.23 Table of Contents Consolidated ResultsThe following table provides summary information for the three months ended March 31,2024 and 2023.The reported amounts are GAAP amounts from theConsolidated Statements of Income.The adjusted amounts are intended to supplement investors understanding of the companys financial information and arenot a substitute for GAAP measures:Quarter Ended March 31,(Millions of dollars,except per share data)20242023VarianceSales$8,100$8,193(1)%Cost of sales,exclusive of depreciation and amortization$4,216$4,431(5)%As a percent of sales52.0T.1%Selling,general and administrative$860$822 5%As a percent of sales10.6.0preciation and amortization$949$948%Other charges$18(100)%Other income(expense)-net$58$(5)1,260%Operating profit$2,095$1,933 8%Operating margin25.9#.6%Interest expense-net$65$37 76%Net pension and OPEB cost(benefit),excluding service cost$(50)$(45)11fective tax rate22.3.2%Income from equity investments$48$41 17%Noncontrolling interests$(38)$(36)6%Net Income Linde plc$1,627$1,516 7%Diluted earnings per share$3.35$3.06 9%Diluted shares outstanding485,592 495,676(2)%Number of employees66,195 65,381 1justed Amounts(a)Operating profit$2,341$2,206 6%Operating margin28.9&.9fective tax rate22.7$.1%Net Income Linde plc$1,821$1,693 8%Diluted earnings per share$3.75$3.42 10%Other Financial Data(a)EBITDA$3,092$2,922 6%As percent of sales38.25.7justed EBITDA$3,116$2,963 5%As percent of sales38.56.2%(a)Adjusted Amounts and Other Financial Data are non-GAAP performance measures.A reconciliation of reported amounts to adjusted amounts can be found in the Non-GAAP Measures andReconciliations section of this MD&A.ReportedIn the first quarter of 2024,Lindes sales were$8,100 million,$93 million below prior year.Cost pass-through,representing the contractual billing of energycost variances primarily to onsite customers,decreased sales by 2%in the quarter,with minimal impact on operating profit.Volumes decreased sales by 1%inthe quarter versus the 2023 respective period.The aforementioned drivers were partially offset by 2%higher price attainment.Reported operating profit for the first quarter of 2024 of$2,095 million,or 25.9%of sales,was 8ove prior year.The reported year-over-year increase wasprimarily driven by higher pricing and productivity initiatives which more than offset adverse impacts from cost inflation and lower volumes.The reportedeffective tax rate(ETR)was 22.3%in the first quarter 2024 versus 22.2%in the first quarter 2023.Diluted earnings per share(EPS)was$3.35,or 9ove EPS of$3.06 in the first quarter of 2023,primarily due to higher net income-Linde plc and lower diluted shares outstanding.AdjustedIn the first quarter of 2024,adjusted operating profit of$2,341,or 28.9%of sales,was 6%higher as compared to 2023,driven by higher pricing,andproductivity initiatives,partially offset by cost inflation and lower volumes.The adjusted ETR was 22.7%in the first quarter 2024 versus 24.1%in the 2023quarter,primarily due to higher tax benefits from share based24 Table of Contents compensation.On an adjusted basis,EPS was$3.75,10ove the 2023 adjusted EPS of$3.42,driven by higher adjusted net income-Linde plc and lowerdiluted shares outstanding.OutlookLinde provides quarterly updates on operating results,material trends that may affect financial performance,and financial guidance via quarterly earningsreleases and investor teleconferences.These updates are available on the companys website,but are not incorporated herein.25 Table of Contents Results of operationsThe changes in consolidated sales compared to the prior year are attributable to the following:Quarter Ended March 31,2024 vs.2023%ChangeFactors Contributing to Changes-SalesVolume(1)%Price/Mix2%Cost pass-through(2)%Currencyquisitions/divestitures%Engineering%(1)%SalesSales decreased$93 million or 1%for the first quarter of 2024 versus the respective 2023 period.Cost pass-through decreased sales by 2%in the quarter,withminimal impact on operating profit.Volumes decreased sales by 1%in the quarter versus the respective 2023 period,primarily driven by the manufacturing endmarket.Currency translation was flat in the quarter.Higher pricing across all geographic segments contributed 2%to sales in the quarter.Cost of sales,exclusive of depreciation and amortizationCost of sales,exclusive of depreciation and amortization decreased$215 million,or 5%,for the first quarter of 2024 primarily due to lower cost pass-through,lower volumes and productivity gains which more than offset cost inflation.Cost of sales,exclusive of depreciation and amortization was 52.0%of sales,respectively,for the first quarter versus 54.1%respective 2023 period.The decrease as a percentage of sales in the quarter was primarily due to higher pricingand lower cost pass-through.Selling,general and administrative expensesSelling,general and administrative expense(SG&A)increased$38 million,or 5%,for the first quarter of 2024 driven by higher costs.SG&A was 10.6%offirst quarter sales versus 10.0%for the respective 2023 period.Depreciation and amortizationReported depreciation and amortization expense increased$1 million for the first quarter of 2024.On an adjusted basis,depreciation and amortization increased$11 million,for the first quarter of 2024 driven by new project start ups.Other chargesThere were no other charges during the first quarter of 2024 and other charges were$18 million for the first quarter of 2023,primarily due to the intercompanyreorganization related to delisting from the Frankfurt Stock Exchange.On an adjusted basis,these benefits and costs have been excluded in both periods.Other income(expense)-netReported other income(expense)-net was a benefit of$58 million for the first quarter of 2024 driven by$43 million in insurance recoveries primarily withinthe Other segment.Operating profitOn a reported basis,operating profit increased$162 million,or 8%,for the first quarter of 2024.The increase in the quarter was primarily due to higherpricing,savings from productivity initiatives and lower other charges,which more than offset the adverse impacts of cost inflation and lower volumes in thefirst quarter of 2024.On an adjusted basis,which excludes the impacts of merger-related purchase accounting as well as other charges,operating profit increased$135 million,or6%in the first quarter of 2024.Operating profit growth was driven by higher pricing and productivity initiatives,which more than offset the effects of costinflation and lower volumes during the period.A discussion of operating profit by segment is included in the segment discussion that follows.Interest expense-netReported interest expense-net increased$28 million for the first quarter of 2024.On an adjusted basis,interest expense increased$21 million for the firstquarter of 2024 versus the respective 2023 period.The increase in both periods was driven primarily by higher interest rates on debt.26 Table of Contents Net pension and OPEB cost(benefit),excluding service costReported net pension and OPEB cost(benefit),excluding service cost were benefits of$50 million versus$45 million for the respective 2023 period.Theincrease in the benefit primarily relates to higher expected return on assets and lower amortization of deferred losses year-over-year.Effective tax rateThe reported effective tax rate(ETR)for the quarter was 22.3%versus 22.2%for the respective 2023 period.While the rate is relatively flat year over year,2024 included higher tax benefits from share based compensation and 2023 included a net decrease in uncertain tax positions.Effective January 1,2024,Lindeis subject to the 15%global minimum tax rate provisions of the OECDs framework for Pillar Two,the implementation of which did not have a significantimpact on the effective tax rate for the quarter.On an adjusted basis,the ETR for the quarter was 22.7%versus 24.1%for the respective 2023 period.The decrease in the adjusted ETR is primarily due tohigher tax benefits from share based compensation in 2024.Income from equity investmentsReported income from equity investments for the first quarter of 2024 was$48 million versus$41 million for the respective 2023 period.On an adjusted basis,income from equity investments for the first quarter was$66 million versus$59 million in the respective 2023 period.Noncontrolling interestsAt March 31,2024,noncontrolling interests consisted primarily of non-controlling shareholders investments in APAC(primarily China).Reportednoncontrolling interests income increased$2 million for the first quarter of 2024 from the respective 2023 period.Net Income Linde plcReported net income-Linde plc increased$111 million,or 7%,for the first quarter of 2024 versus the respective 2023 period.On an adjusted basis,which excludes the impacts of purchase accounting and other charges,net income-Linde plc increased$128 million,or 8%,for the firstquarter of 2024 versus the respective 2023 period.On both a reported and adjusted basis,the increase was driven by higher operating profit.Diluted earnings per shareReported diluted earnings per share increased$0.29,or 9%,for the first quarter of 2024 versus the comparable 2023 period.On an adjusted basis,diluted EPS increased$0.33,or 10%,for the first quarter of 2024 versus the respective 2023 period.The increase on both a reported and adjusted basis is primarily due to higher net income-Linde plc and lower diluted shares outstanding.EmployeesThe number of employees at March 31,2024 was 66,195,an increase of 814 employees from March 31,2023 due primarily to acquisitions.Other Financial DataEBITDA was$3,092 million for the first quarter of 2024 as compared to$2,922 million in the respective 2023 period.The increase was driven by higher netincome-Linde plc versus prior year.Adjusted EBITDA increased to$3,116 million for the first quarter 2024 from$2,963 million in the respective 2023 period.The higher EBITDA was primarilydue to higher net income-Linde plc versus the respective prior period.See the Non-GAAP Measures and Reconciliations section for definitions and reconciliations of these adjusted non-GAAP measures to reported GAAPamounts.Other Comprehensive Income(Loss)Other comprehensive losses for the first quarter were$738 million.The loss in the quarter resulted primarily from currency translation adjustments of$744million.The translation adjustments reflect the impact of translating local currency foreign subsidiary financial statements to U.S.dollars,and are largelydriven by the movement of the U.S.dollar against major currencies including the Euro,British pound and the Chinese yuan.See the Currency section of theMD&A for exchange rates used for translation purposes and Note 10 to the condensed consolidated financial statements for a summary of the currencytranslation adjustment component of accumulated other comprehensive income(loss)by segment.27 Table of Contents Segment DiscussionThe following summary of sales and operating profit by segment provides a basis for the discussion that follows.Linde plc evaluates the performance of itsreportable segments based on operating profit,excluding items not indicative of ongoing business trends.The reported amounts are GAAP amounts from theConsolidated Statements of Income.Quarter Ended March 31,(Millions of dollars)20242023VarianceSALESAmericas$3,560$3,551%EMEA2,091 2,177(4)%APAC1,591 1,598%Engineering539 540%Other319 327(2)%Total sales$8,100$8,193(1)%SEGMENT OPERATING PROFITAmericas$1,088$1,025 6%EMEA687 607 13%APAC447 423 6%Engineering100 149(33)%Other19 2 850%Segment operating profit$2,341$2,206 6%Reconciliation to reported operating profit:Other charges(18)Purchase accounting impacts-Linde AG(246)(255)Total operating profit$2,095$1,933 28 Table of Contents Americas Quarter Ended March 31,(Millions of dollars)20242023VarianceSales$3,560$3,551%Operating profit$1,088$1,025 6%As a percent of sales30.6(.9%Quarter Ended March 31,2024 vs.2023%ChangeFactors Contributing to Changes-SalesVolume(1)%Price/Mix3%Cost pass-through(2)%Currencyquisitions/divestitures%The Americas segment includes Lindes industrial gases operations in approximately 20 countries including the United States,Canada,Mexico,and Brazil.SalesSales for the Americas segment increased$9 million in the first quarter versus the respective 2023 period.Higher pricing contributed 3%to sales in the quarter.Cost pass-through decreased sales by 2%for the first quarter with minimal impact on operating profit.Volumes decreased sales by 1%for the first quarterdriven primarily by the manufacturing and healthcare end markets.Operating profitOperating profit in the Americas segment increased$63 million,or 6%,in the first quarter versus the respective 2023 period,driven primarily by higher pricingand continued productivity initiatives which more than offset cost inflation and lower volumes during the quarter.EMEA Quarter Ended March 31,(Millions of dollars)20242023VarianceSales$2,091$2,177(4)%Operating profit$687$607 13%As a percent of sales32.9.9%Quarter Ended March 31,2024 vs.2023%ChangeFactors Contributing to Changes-SalesVolume(2)%Price/Mix3%Cost pass-through(5)%Currencyquisitions/divestitures%(4) Table of Contents The EMEA segment includes Lindes industrial gases operations in approximately 45 European,Middle Eastern and African countries including Germany,United Kingdom,France,the Republic of South Africa and Sweden.SalesEMEA segment sales decreased by$86 million,or 4%,in the first quarter compared to the respective 2023 period.Higher price attainment increased sales by3%in the quarter.Volumes decreased sales by 2%in the quarter led by the manufacturing end market.Cost pass-through decreased sales by 5%in the quarterwith minimal impact on operating profit.Currency translation was flat in the quarter.Operating ProfitOperating profit for the EMEA segment increased by$80 million,or 13%,in the first quarter compared to the respective 2023 periods.The increase inoperating profit in the first quarter was driven primarily by higher pricing and continued productivity initiatives,partially offset by cost inflation and lowervolumes.APAC Quarter Ended March 31,(Millions of dollars)20242023VarianceSales$1,591$1,598%Operating profit$447$423 6%As a percent of sales28.1&.5%Quarter Ended March 31,2024 vs.2023%ChangeFactors Contributing to Changes-SalesVolume/Equipment3%Price/Mix1%Cost pass-through%Currency(4)quisitions/divestitures%The APAC segment includes Lindes industrial gases operations in approximately 20 Asian and South Pacific countries and regions including China,Australia,India,and South Korea.SalesSales for the APAC segment decreased$7 million in the first quarter versus the respective 2023 period.Higher pricing contributed 1%to sales in the quarter.Volumes increased 3%in the quarter including project start-ups in the electronics and chemicals and energy end markets.Currency translation decreased salesby 4%,driven primarily by the weakening of the Australian dollar,Korean won and Chinese yuan against the U.S.dollar.Operating profitOperating profit in the APAC segment increased$24 million,or 6%,in the first quarter versus the respective 2023 period,driven by continued productivityinitiatives which more than offset the impact of currency and cost inflation during the first quarter.30 Table of Contents Engineering Quarter Ended March 31,(Millions of dollars)20242023VarianceSales$539$540%Operating profit$100$149(33)%As a percent of sales18.6.6%Quarter Ended March 31,2024 vs.2023%ChangeFactors Contributing to Changes-SalesCurrency%Other%SalesEngineering segment sales were flat in the first quarter as compared to the respective 2023 periods.Operating profitEngineering segment operating profit decreased$49 million,or 33%,in the first quarter compared to the respective 2023 period due to prior years benefit fromhigher margin on lawful wind down of projects subject to sanctions in Russia.31 Table of Contents Other Quarter Ended March 31,(Millions of dollars)20242023VarianceSales$319$327(2)%Operating profit(loss)$19$2 850%As a percent of sales6.0%0.6%Quarter Ended March 31,2024 vs.2023%ChangeFactors Contributing to Changes-SalesVolume/price(2)%Currencyquisitions/divestitures%(2)%Other consists of corporate costs and a few smaller businesses including Linde Advanced Material Technologies(LAMT)and global helium wholesale,whichindividually do not meet the quantitative thresholds for separate presentation.SalesSales for Other decreased$8 million for the first quarter versus the respective 2023 period.Sales decreased 2%due to lower volumes in the helium businesspartially offset by higher pricing in the coatings business.Operating profitOperating profit in Other increased$17 million in the first quarter versus the respective 2023 period.The increase in the quarter was driven primarily by aninsurance recovery in the period for the coatings business partially offset by higher costs due to helium and corporate.32 Table of Contents CurrencyThe results of Lindes non-U.S.operations are translated to the companys reporting currency,the U.S.dollar,from the functional currencies.For mostoperations,Linde uses the local currency as its functional currency.There is inherent variability and unpredictability in the relationship of these functionalcurrencies to the U.S.dollar and such currency movements may materially impact Lindes results of operations in any given period.To help understand the reported results,the following is a summary of the significant currencies underlying Lindes consolidated results and the exchange ratesused to translate the financial statements(rates of exchange expressed in units of local currency per U.S.dollar):Percentage of YTD 2024Consolidated SalesExchange Rate forIncome StatementExchange Rate forBalance Sheet Year-To-Date AverageMarch 31,December 31,Currency2024202320242023Euro18%0.92 0.93 0.93 0.92 Chinese yuan7%7.19 6.84 7.22 7.10 British pound5%0.79 0.82 0.79 0.79 Australian dollar4%1.52 1.46 1.53 1.47 Brazilian real4%4.95 5.19 5.01 4.86 Canadian dollar3%1.35 1.35 1.35 1.32 Korean won3%1,329 1,275 1,347 1,288 Mexican peso3.97 18.66 16.56 16.97 Indian rupee2.04 82.24 83.40 83.21 South African rand1.89 17.74 18.88 18.36 Swedish krona1.40 10.45 10.66 10.07 Thailand bhat15.66 33.94 36.39 34.14 33 Table of Contents Liquidity,Capital Resources and Other Financial DataThe following selected cash flow information provides a basis for the discussion that follows:(Millions of dollars)Three months ended March 31,20242023NET CASH PROVIDED BY(USED FOR):OPERATING ACTIVITIESNet income(including noncontrolling interests)$1,665$1,552 Non-cash charges(credits):Add:Depreciation and amortization949 948 Add:Deferred income taxes(35)4 Add:Share-based compensation38 30 Add:Other charges,net of payments(55)(61)Net income adjusted for non-cash charges2,562 2,473 Less:Working capital(553)(325)Less:Pension contributions(11)(10)Other(44)(230)Net cash provided by(used for)operating activities$1,954$1,908 INVESTING ACTIVITIESCapital expenditures(1,048)(829)Acquisitions,net of cash acquired(808)Divestitures,net of cash divested and asset sales7 3 Net cash provided by(used for)investing activities$(1,041)$(1,634)FINANCING ACTIVITIESDebt increase(decrease)-net1,215 717 Issuances(purchases)of common stock-net(1,025)(846)Cash dividends-Linde plc shareholders(669)(623)Noncontrolling interest transactions and other(189)(12)Net cash provided by(used for)financing activities$(668)$(764)Effect of exchange rate changes on cash and cash equivalents$(61)$16 Cash and cash equivalents,end-of-period$4,848$4,962 Cash Flow from OperationsCash provided by operations of$1,954 million for the three months ended March 31,2024 increased$46 million,or 2%,versus 2023.The increase was drivenprimarily by higher net income adjusted for non-cash charges,partially offset by higher net working capital and other cash requirements.Linde estimates that total 2024 required contributions to its pension plans will be in the range of approximately$30 million to$40 million,of which$11million has been made through March 31,2024.InvestingNet cash used for investing of$1,041 million for the three months ended March 31,2024 decreased$593 million versus 2023,due to lower acquisitions,net ofcash acquired partially offset by higher capital expenditures.Capital expenditures for the three months ended March 31,2024 were$1,048 million,$219 million higher than the prior year due primarily to investments innew plant and production equipment for backlog growth requirements.34 Table of Contents At March 31,2024,Lindes sale of gas backlog of large projects under construction was approximately$4.9 billion.This represents the total estimated capitalcost of large plants under construction.There were no acquisitions for the three months ended March 31,2024.Acquisitions,net of cash acquired were$808 million,for the three months endedMarch 31,2023 and related primarily to the acquisition of nexAir in the Americas.Divestitures,net of cash divested and asset sales for the three months ended March 31,2024 and 2023 were$7 million and$3 million,respectively.FinancingCash used for financing activities was$668 million for the three months ended March 31,2024 as compared to$764 million for the three months ended March31,2023.Cash provided by debt was$1,215 million in 2024 versus cash provided by debt of$717 million in 2023,driven primarily by higher net debtissuances.In the first quarter of 2024 Linde issued 700 million of 3.00%notes due in 2028,850 million of 3.20%notes due in 2031 and 700 million of3.40%notes due in 2036.In February 2024,Linde repaid 550 million of 1.20%notes that became due.Net purchases of ordinary shares were$1,025 million in 2024 versus$846 million in 2023.For additional information related to the share repurchase programs,see Part II Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.Cash dividends of$669 million increased$46 million from 2023 driven primarily by a 9%increase in quarterly dividends per share from$1.275 per share to$1.39 per share,partially offset by lower shares outstanding.Cash used for Noncontrolling interest transactions and other was$189 million for the threemonths ended March 31,2024 versus cash used of$12 million for the respective 2023 period.The company continues to believe it has sufficient operating flexibility,cash,and funding sources to meet its business needs around the world.The companyhad$4.8 billion of cash as of March 31,2024,and has a$5 billion and a$1.5 billion unsecured and undrawn revolving credit agreement with no associatedfinancial covenants.No borrowings were outstanding under the credit agreements as of March 31,2024.The company does not anticipate any limitations on itsability to access the debt capital markets and/or other external funding sources and remains committed to its strong ratings from Moodys and Standard&Poors.Legal ProceedingsSee Note 8 to the condensed consolidated financial statements.35 Table of Contents NON-GAAP MEASURES AND RECONCILIATIONS(Millions of dollars,except per share data)The following non-GAAP measures are intended to supplement investors understanding of the companys financial information by providing measures whichinvestors,financial analysts and management use to help evaluate the companys operating performance and liquidity.Items which the company does notbelieve to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and futurebusiness trends on a consistent basis.Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and arenot a substitute for similar GAAP measures.Quarter Ended March 31,20242023Adjusted Operating Profit and Operating MarginReported operating profit$2,095$1,933 Add:Other charges 18 Add:Purchase accounting impacts-Linde AG(c)246 255 Total adjustments246 273 Adjusted operating profit$2,341$2,206 Reported percentage change8justed percentage change6%Reported sales$8,100$8,193 Reported operating margin25.9#.6justed operating margin28.9&.9justed Depreciation and amortizationReported depreciation and amortization$949$948 Less:Purchase accounting impacts-Linde AG(c)(240)(250)Adjusted depreciation and amortization$709$698 Adjusted Other Income(Expense)-netReported Other Income(Expense)-net$58$(5)Less:Purchase accounting impacts-Linde AG(c)(6)(5)Adjusted Other Income(Expense)-net$64$Adjusted Interest Expense-NetReported interest expense-net$65$37 Add:Purchase accounting impacts-Linde AG(c)2 9 Adjusted interest expense-net$67$46 36 Table of Contents Adjusted Income Taxes(a)Reported income taxes$463$430 Add:Purchase accounting impacts-Linde AG(c)60 57 Add:Other charges5 45 Total adjustments65 102 Adjusted income taxes$528$532 Adjusted Effective Tax Rate(a)Reported income before income taxes and equity investments$2,080$1,941 Add:Purchase accounting impacts-Linde AG(c)244 246 Add:Other charges 18 Total adjustments244 264 Adjusted income before income taxes and equity investments$2,324$2,205 Reported Income taxes$463$430 Reported effective tax rate22.3.2justed income taxes$528$532 Adjusted effective tax rate22.7$.1%Income from Equity InvestmentsReported income from equity investments$48$41 Add:Purchase accounting impacts-Linde AG(c)18 18 Adjusted income from equity investments$66$59 Adjusted Noncontrolling InterestsReported noncontrolling interests$(38)$(36)Add:Purchase accounting impacts-Linde AG(c)(3)(3)Adjusted noncontrolling interests$(41)$(39)Adjusted Net Income-Linde plc(b)Reported net income-Linde plc$1,627$1,516 Add:Other charges(5)(27)Add:Purchase accounting impacts-Linde AG(c)199 204 Total adjustments194 177 Adjusted net income-Linde plc$1,821$1,693 37 Table of Contents Adjusted Diluted EPS(b)Reported diluted EPS$3.35$3.06 Add:Pension settlement charge Add:Other charges(0.01)(0.05)Add:Purchase accounting impacts-Linde AG(c)0.41 0.41 Total adjustments0.40 0.36 Adjusted diluted EPS$3.75$3.42 Reported percentage change9justed percentage change10justed EBITDA and%of SalesNet Income-Linde plc$1,627$1,516 Add:Noncontrolling interests38 36 Add:Net pension and OPEB cost(benefit),excluding service cost(50)(45)Add:Interest expense65 37 Add:Income taxes463 430 Add:Depreciation and amortization949 948 EBITDA$3,092$2,922 Add:Other charges 18 Add:Purchase accounting impacts-Linde AG(c)24 23 Total adjustments24 41 Adjusted EBITDA$3,116$2,963 Reported sales$8,100$8,193%of salesEBITDA38.25.7justed EBITDA38.56.2%(a)The income tax expense(benefit)on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income taxexpense(benefit)and included both current and deferred income tax amounts.(b)Net of income taxes which are shown separately in“Adjusted Income Taxes and Adjusted Effective Tax Rate”.(c)The company believes that its non-GAAP measures excluding Purchase accounting impacts-Linde AG are useful to investors because:(i)the 2018 business combination was a merger of equalsin an all-stock merger transaction,with no cash consideration,(ii)the company is managed on a geographic basis and the results of certain geographies are more heavily impacted by purchaseaccounting than others,causing results that are not comparable at the reportable segment level,therefore,the impacts of purchase accounting adjustments to each segment vary and are notcomparable within the company and when compared to other companies in similar regions,(iii)business management is evaluated and variable compensation is determined based on resultsexcluding purchase accounting impacts,and;(iv)it is important to investors and analysts to understand the purchase accounting impacts to the financial statements.A summary of each of the adjustments made for Purchase accounting impacts-Linde AG are as follows:Adjusted Operating Profit and Margin:The purchase accounting adjustments for the periods presented relate primarily to depreciation and amortization related to the fair value step up of fixed assetsand intangible assets(primarily customer related)acquired in the merger and the allocation of fair value step-up for ongoing Linde AG asset disposals(reflected in Other Income/(Expense).Adjusted Interest Expense-Net:Relates to the amortization of the fair value of debt acquired in the merger.Adjusted Income Taxes and Effective Tax Rate:Relates to the current and deferred income tax impact on the adjustments discussed above.The income tax expense(benefit)on the non-GAAP pre-taxadjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense(benefit)and included both current and deferred incometax amounts.Adjusted Income from Equity Investments:Represents the amortization of increased fair value on equity investments related to depreciable and amortizable assets.Adjusted Noncontrolling Interests:Represents the noncontrolling interests ownership portion of the adjustments described above determined on an entity by entity basis.38 Table of Contents Net Debt and Adjusted Net DebtNet debt is a financial liquidity measure used by investors,financial analysts and management to evaluate the ability of a company to repay its debt.Purchaseaccounting impacts have been excluded as they are non-cash and do not have an impact on liquidity.March 31,2024December 31,2023(Millions of dollars)Debt$20,319$19,373 Less:cash and cash equivalents(4,848)(4,664)Net debt15,471 14,709 Less:purchase accounting impacts-Linde AG(5)(7)Adjusted net debt$15,466$14,702 39 Table of Contents Supplemental Guarantee InformationOn May 3,2023,the company filed a Form S-3 Registration Statement with the SEC(the Registration Statement).Linde plc may offer debt securities,preferred shares,depositary shares and ordinary shares under the Registration Statement,and debt securities exchangeablefor or convertible into preferred shares,ordinary shares or other debt securities.Debt securities of Linde plc may be guaranteed by Linde Inc and/or LindeGmbH.Linde plc may provide guarantees of debt securities offered by its wholly owned subsidiaries Linde Inc.or Linde Finance under the RegistrationStatement.Linde Inc.is a wholly owned subsidiary of Linde plc.Linde Inc.may offer debt securities under the Registration Statement.Debt securities of Linde Inc.willbe guaranteed by Linde plc,and such guarantees by Linde plc may be guaranteed by Linde GmbH.Linde Inc.may also provide(i)guarantees of debt securitiesoffered by Linde plc under the Registration Statement and(ii)guarantees of the guarantees provided by Linde plc of debt securities of Linde Finance offeredunder the Registration Statement.Linde Finance B.V.is a wholly owned subsidiary of Linde plc.Linde Finance may offer debt securities under the Registration Statement.Linde plc willguarantee debt securities of Linde Finance offered under the Registration Statement.Linde GmbH and Linde Inc.may guarantee Linde plcs obligations underits downstream guarantee.Linde GmbH is a wholly owned subsidiary of Linde plc.Linde GmbH may provide(i)guarantees of debt securities offered by Linde plc under the RegistrationStatement and(ii)upstream guarantees of downstream guarantees provided by Linde plc of debt securities of Linde Inc.or Linde Finance offered under theRegistration Statement.In September 2019,Linde plc provided downstream guarantees of all pre-existing Linde Inc.and Linde Finance notes,and Linde GmbH and Linde Inc.,respectively,provided upstream guarantees of Linde plcs downstream guarantees.Linde plc has filed a base prospectus with the Luxembourg Stock Exchange for a 10.0 billion debt issuance program,under which Linde plc may offer debtsecurities.Linde Inc.and Linde GmbH have provided to Linde plc upstream guarantees in relation to debt securities of Linde plc offered under the Europeandebt program.For further information about the guarantees of the debt securities registered under the Registration Statement(including the ranking of such guarantees,limitations on enforceability of such guarantees and the circumstances under which such guarantees may be released),see“Description of Debt Securities Guarantees”and“Description of Debt Securities Ranking”in the Registration Statement,which subsections are incorporated herein by reference.The following tables present summarized financial information for Linde plc,Linde Inc.,Linde GmbH and Linde Finance on a combined basis,aftereliminating intercompany transactions and balances between them and excluding investments in and equity in earnings from non-guarantor subsidiaries.40 Table of Contents (Millions of dollars)Statement of Income DataThree Months Ended March 31,2024Twelve months ended December 31,2023Sales$1,938$8,143 Operating profit336 1,656 Net income(57)735 Transactions with non-guarantor subsidiaries759 3,004 Balance Sheet Data(at period end)Current assets(a)$5,467$4,423 Long-term assets(b)13,329 13,833 Current liabilities(c)9,765 10,882 Long-term liabilities(d)59,698 56,546(a)From current assets above,amount due from non-guarantorsubsidiaries$2,477$1,753(b)From long-term assets above,amount due from non-guarantor subsidiaries575 816(c)From current liabilities above,amount due to non-guarantorsubsidiaries1,698 1,684(d)From long-term liabilities above,amount due to non-guarantor subsidiaries40,763 39,458 Item 3.Quantitative and Qualitative Disclosures About Market RiskRefer to Item 7A.to Part II of Lindes 2023 Annual Report on Form 10-K for discussion.Item 4.Controls and Procedures(a)Based on an evaluation of the effectiveness of Lindes disclosure controls and procedures,which was made under the supervision and with theparticipation of management,including Lindes principal executive officer and principal financial officer,the principal executive officer and principalfinancial officer have each concluded that,as of the end of the quarterly period covered by this report,such disclosure controls and procedures areeffective in ensuring that information required to be disclosed by Linde in reports that it files under the Exchange Act of 1934 is recorded,processed,summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms,and accumulated andcommunicated to management including Lindes principal executive officer and principal financial officer,to allow timely decisions regarding requireddisclosure.(b)There were no changes in Lindes internal control over financial reporting that occurred during the quarterly period covered by this report that havematerially affected,or are reasonably likely to materially affect,Lindes internal control over financial reporting.41 Table of Contents PART II-OTHER INFORMATIONLinde plc and SubsidiariesItem 1.Legal ProceedingsSee Note 8 to the condensed consolidated financial statements for a description of current legal proceedings.Item 1A.Risk FactorsThrough the quarterly period covered by this report,there have been no material changes to the risk factors disclosed in Item 1A to Part I of Lindes AnnualReport on Form 10-K for the year ended December 31,2023.Item 2.Unregistered Sales of Equity Securities and Use of ProceedsPurchases of Equity Securities-Certain information regarding purchases made by or on behalf of the company or any affiliated purchaser(as defined in Rule10b-18(a)(3)under the Securities Exchange Act of 1934,as amended)of its ordinary shares during the quarter ended March 31,2024 is provided below:PeriodTotal Numberof SharesPurchased(Thousands)AveragePrice PaidPer ShareTotal Numbers of SharesPurchased as Part ofPublicly AnnouncedProgram(1)(Thousands)Approximate DollarValue of Shares thatMay Yet be PurchasedUnder the Program(2)(Millions)January 2024927$406.00 927$15,989 February 2024742$424.79 742$15,674 March 2024743$466.22 743$15,327 First Quarter 20242,412$430.33 2,412$15,327(1)On February 28,2022,the companys board of directors approved the repurchase of$10.0 billion of its ordinary shares(2022 program)which could takeplace from time to time on the open market(and could include the use of 10b5-1 trading plans),subject to market and business conditions.The 2022program has a maximum repurchase amount of 15%of outstanding shares and began on March 1,2022 and expires on July 31,2024.On October 23,2023,the companys board of directors approved the repurchase of$15.0 billion of its ordinary shares(2023 program)which could take placefrom time to time on the open market(and could include the use of 10b5-1 trading plans),subject to market and business conditions.The 2023 programbegan on October 23,2023 and will terminate on the earlier of the date as the maximum authority under the 2023 program is reached or the boardterminates the 2023 program.(2)As of March 31,2024,the company repurchased$9.7 billion of its ordinary shares pursuant to the 2022 program.As of March 31,2024,$0.3 billion and$15.0 billion of share repurchases remain authorized under the 2022 and 2023 programs,respectively.Item 3.Defaults Upon Senior SecuritiesNone.Item 4.Mine Safety DisclosuresNot applicable.Item 5.Other InformationNone.42 Table of Contents Item 6.Exhibits(a)Exhibits31.01 Rule 13a-14(a)Certification31.02 Rule 13a-14(a)Certification32.01 Section 1350 Certification(such certifications are furnished for the information of the Commission and shall not be deemedincorporated by reference into any filing under the Securities Act or the Exchange Act).32.02 Section 1350 Certification(such certifications are furnished for the information of the Commission and shall not be deemedincorporated by reference into any filing under the Securities Act or the Exchange Act).101.INS XBRL Instance Document:The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags areembedded within the Inline XBRL document.101.SCH XBRL Taxonomy Extension Schema101.CAL XBRL Taxonomy Extension Calculation Linkbase101.LAB XBRL Taxonomy Extension Label Linkbase101.PRE XBRL Taxonomy Extension Presentation Linkbase101.DEF XBRL Taxonomy Extension Definition Linkbase*Indicates a management contract or compensatory plan or arrangement.43 Table of Contents SIGNATURELinde plc and SubsidiariesPursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersignedthereunto duly authorized.Linde plc (Registrant)Date:May 2,2024 By:/s/Kelcey E.Hoyt Kelcey E.Hoyt Chief Accounting Officer44 RULE 13a-14(a)CERTIFICATIONSLinde plc and SubsidiariesEXHIBIT 31.01I,Sanjiv Lamba,certify that:1.I have reviewed this Quarterly Report on Form 10-Q of Linde plc;2.Based on my knowledge,this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made,in light of the circumstances under which such statements were made,not misleading with respect to the period covered by this report;3.Based on my knowledge,the financial statements,and other financial information included in this report,fairly present in all material respects thefinancial condition,results of operations and cash flows of the registrant as of,and for,the periods presented in this report;4.The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined inExchange Act Rules 13a-15(e)and 15d-15(e)and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)for the registrant and have:(a)Designed such disclosure controls and procedures,or caused such disclosure controls and procedures to be designed under our supervision,to ensurethat material information relating to the registrant,including its consolidated subsidiaries,is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting,or caused such internal control over financial reporting to be designed under our supervision,toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures,as of the end of the period covered by this report based on such evaluation;and(d)Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscalquarter(the registrants fourth fiscal quarter in the case of an annual report)that has materially affected,or is reasonably likely to materially affect,theregistrants internal control over financial reporting;and5.The registrants other certifying officer and I have disclosed,based on our most recent evaluation of internal control over financial reporting,to theregistrants auditors and the audit committee of the registrants board of directors(or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrants ability to record,process,summarize and report financial information;and(b)Any fraud,whether or not material,that involves management or other employees who have a significant role in the registrants internal control overfinancial reporting.May 2,2024By:/s/Sanjiv LambaSanjiv LambaChief Executive OfficerRULE 13a-14(a)CERTIFICATIONSLinde plc and SubsidiariesEXHIBIT 31.02I,Matthew J.White,certify that:1.I have reviewed this Quarterly Report on Form 10-Q of Linde plc;2.Based on my knowledge,this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made,in light of the circumstances under which such statements were made,not misleading with respect to the period covered by this report;3.Based on my knowledge,the financial statements,and other financial information included in this report,fairly present in all material respects thefinancial condition,results of operations and cash flows of the registrant as of,and for,the periods presented in this report;4.The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined inExchange Act Rules 13a-15(e)and 15d-15(e)and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)for the registrant and have:(a)Designed such disclosure controls and procedures,or caused such disclosure controls and procedures to be designed under our supervision,to ensurethat material information relating to the registrant,including its consolidated subsidiaries,is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting,or caused such internal control over financial reporting to be designed under our supervision,toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures,as of the end of the period covered by this report based on such evaluation;and(d)Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscalquarter(the registrants fourth fiscal quarter in the case of an annual r
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Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30,2024orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission file number001-38730LINDE PLC(Exact name of registrant as specified in its charter)Ireland98-1448883(State or other jurisdiction of incorporation)(I.R.S.Employer Identification No.)10 Riverview Drive,ForgeDanbury,Connecticut43 Church Street WestUnited States 06810Woking,Surrey GU21 6HTUnited Kingdom(Address of principal executive offices)(Zip Code)(203)837-2000 44 14 83 242200(Registrants telephone number,including area code)N/A(Former name,former address and former fiscal year,if changed since last reportSecurities registered pursuant to Section 12(b)of the Act:Title of each classTrading symbol(s)Name of each exchange on which registeredOrdinary shares(0.001 nominal value per share)LIN NASDAQIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for suchshorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitionsof“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and emerging growth company in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No At June 30,2024,477,502,737 ordinary shares(0.001 par value)of the Registrant were outstanding.1 Table of Contents INDEXPART I-FINANCIAL INFORMATION Item 1.Financial Statements(unaudited)Consolidated Statements of Income-Quarters Ended June 30,2024 and 20234Consolidated Statements of Income-Six Months Ended June 30,2024 and 20235Consolidated Statements of Comprehensive Income-Quarters Ended June 30,2024 and 20236Consolidated Statements of Comprehensive Income-Six Months Ended June 30,2024 and 20237Condensed Consolidated Balance Sheets-June 30,2024 and December 31,20238Condensed Consolidated Statements of Cash Flows-Six Months Ended June 30,2024 and 20239Notes to Condensed Consolidated Financial Statements10Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations24Item 3.Quantitative and Qualitative Disclosures about Market Risk41Item 4.Controls and Procedures41PART II-OTHER INFORMATIONItem 1.Legal Proceedings42Item 1A.Risk Factors42Item 2.Unregistered Sales of Equity Securities and Use of Proceeds42Item 3.Defaults Upon Senior Securities42Item 4.Mine Safety Disclosures42Item 5.Other Information42Item 6.Exhibits43Signature442 Table of Contents Forward-looking StatementsThis document contains“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995.These forward-lookingstatements are identified by terms and phrases such as:anticipate,believe,intend,estimate,expect,continue,should,could,may,plan,project,predict,will,potential,forecast,and similar expressions.They are based on managements reasonable expectations and assumptions as of the date the statements are madebut involve risks and uncertainties.These risks and uncertainties include,without limitation:the performance of stock markets generally;developments inworldwide and national economies and other international events and circumstances,including trade conflicts and tariffs;changes in foreign currencies and ininterest rates;the cost and availability of electric power,natural gas and other raw materials;the ability to achieve price increases to offset cost increases;catastrophic events including natural disasters,epidemics,pandemics such as COVID-19,and acts of war and terrorism;the ability to attract,hire,and retainqualified personnel;the impact of changes in financial accounting standards;the impact of changes in pension plan liabilities;the impact of tax,environmental,healthcare and other legislation and government regulation in jurisdictions in which the company operates;the cost and outcomes of investigations,litigationand regulatory proceedings;the impact of potential unusual or non-recurring items;continued timely development and market acceptance of new products andapplications;the impact of competitive products and pricing;future financial and operating performance of major customers and industries served;the impactof information technology system failures,network disruptions and breaches in data security;and the effectiveness and speed of integrating new acquisitionsinto the business.These risks and uncertainties may cause future results or circumstances to differ materially from adjusted projections,estimates or otherforward-looking statements.Linde plc assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances.The above listed risksand uncertainties are further described in Item 1A.Risk Factors in Linde plcs Form 10-K for the fiscal year ended December 31,2023 filed with the SEC onFebruary 28,2024,which should be reviewed carefully.Please consider Linde plcs forward-looking statements in light of those risks.3 Table of Contents LINDE PLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Millions of dollars,except per share data)(UNAUDITED)Quarter Ended June 30,20242023Sales$8,267$8,204 Cost of sales,exclusive of depreciation and amortization4,251 4,316 Selling,general and administrative840 833 Depreciation and amortization958 960 Research and development36 35 Other charges 22 Other income(expense)-net2(27)Operating Profit2,184 2,011 Interest expense-net70 52 Net pension and OPEB cost(benefit),excluding service cost(49)(45)Income Before Income Taxes and Equity Investments2,163 2,004 Income taxes508 438 Income Before Equity Investments1,655 1,566 Income from equity investments45 46 Net Income(Including Noncontrolling Interests)1,700 1,612 Less:noncontrolling interests(37)(37)Net Income Linde plc$1,663$1,575 Per Share Data Linde plc ShareholdersBasic earnings per share$3.46$3.22 Diluted earnings per share$3.44$3.19 Weighted Average Shares Outstanding(000s):Basic shares outstanding479,973 489,618 Diluted shares outstanding483,177 493,549 The accompanying notes are an integral part of these financial statements.4 Table of Contents LINDE PLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Millions of dollars,except per share data)(UNAUDITED)Six Months Ended June 30,20242023Sales$16,367$16,397 Cost of sales,exclusive of depreciation and amortization8,467 8,747 Selling,general and administrative1,700 1,655 Depreciation and amortization1,907 1,908 Research and development74 71 Other charges 40 Other income(expense)-net60(32)Operating Profit4,279 3,944 Interest expense-net135 89 Net pension and OPEB cost(benefit),excluding service cost(99)(90)Income Before Income Taxes and Equity Investments4,243 3,945 Income taxes971 868 Income Before Equity Investments3,272 3,077 Income from equity investments93 87 Net Income(Including Noncontrolling Interests)3,365 3,164 Less:noncontrolling interests(75)(73)Net Income Linde plc$3,290$3,091 Per Share Data Linde plc ShareholdersBasic earnings per share$6.84$6.30 Diluted earnings per share$6.79$6.25 Weighted Average Shares Outstanding(000s):Basic shares outstanding480,943 490,727 Diluted shares outstanding484,366 494,685 The accompanying notes are an integral part of these financial statements.5 Table of Contents LINDE PLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Millions of dollars)(UNAUDITED)Quarter Ended June 30,20242023NET INCOME(INCLUDING NONCONTROLLING INTERESTS)$1,700$1,612 OTHER COMPREHENSIVE INCOME(LOSS)Translation adjustments:Foreign currency translation adjustments(280)(96)Income taxes6 1 Translation adjustments(274)(95)Funded status-retirement obligations(Note 7):Retirement program remeasurements11(5)Reclassifications to net income(3)(8)Income taxes(5)2 Funded status-retirement obligations3(11)Derivative instruments(Note 4):Current unrealized gain(loss)(13)(9)Reclassifications to net income7 2 Income taxes1 1 Derivative instruments(5)(6)TOTAL OTHER COMPREHENSIVE INCOME(LOSS)(276)(112)COMPREHENSIVE INCOME(LOSS)(INCLUDING NONCONTROLLING INTERESTS)1,424 1,500 Less:noncontrolling interests(27)(14)COMPREHENSIVE INCOME(LOSS)-LINDE PLC$1,397$1,486 The accompanying notes are an integral part of these financial statements.6 Table of Contents LINDE PLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Millions of dollars)(UNAUDITED)Six Months Ended June 30,20242023NET INCOME(INCLUDING NONCONTROLLING INTERESTS)$3,365$3,164 OTHER COMPREHENSIVE INCOME(LOSS)Translation adjustments:Foreign currency translation adjustments(1,024)133 Income taxes6 1 Translation adjustments(1,018)134 Funded status-retirement obligations(Note 7):Retirement program remeasurements7(254)Reclassifications to net income(6)(16)Income taxes7 65 Funded status-retirement obligations8(205)Derivative instruments(Note 4):Current unrealized gain(loss)(11)(84)Reclassifications to net income7(4)Income taxes 17 Derivative instruments(4)(71)TOTAL OTHER COMPREHENSIVE INCOME(LOSS)(1,014)(142)COMPREHENSIVE INCOME(LOSS)(INCLUDING NONCONTROLLING INTERESTS)2,351 3,022 Less:noncontrolling interests(50)(48)COMPREHENSIVE INCOME(LOSS)-LINDE PLC$2,301$2,974 The accompanying notes are an integral part of these financial statements.7 Table of Contents LINDE PLC AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Millions of dollars)(UNAUDITED)June 30,2024December 31,2023AssetsCash and cash equivalents$4,626$4,664 Accounts receivable-net5,001 4,718 Contract assets226 196 Inventories2,094 2,115 Prepaid and other current assets896 927 Total Current Assets12,843 12,620 Property,plant and equipment-net24,575 24,552 Goodwill26,365 26,751 Other intangible assets-net11,851 12,399 Other long-term assets4,581 4,489 Total Assets$80,215$80,811 Liabilities and equityAccounts payable$2,859$3,020 Short-term debt3,326 4,713 Current portion of long-term debt1,261 1,263 Contract liabilities1,767 1,901 Other current liabilities4,291 4,820 Total Current Liabilities13,504 15,717 Long-term debt16,931 13,397 Other long-term liabilities10,229 10,602 Total Liabilities40,664 39,716 Redeemable noncontrolling interests13 13 Linde plc Shareholders Equity(Note 10):Ordinary shares,0.001 par value,authorized 1,750,000,000 shares,2024 and 2023 issued:490,766,972 ordinary shares1 1 Additional paid-in capital39,560 39,812 Retained earnings10,721 8,845 Accumulated other comprehensive income(loss)(6,794)(5,805)Less:Treasury shares,at cost(2024 13,264,235 shares and 2023 8,321,827 shares)(5,309)(3,133)Total Linde plc Shareholders Equity38,179 39,720 Noncontrolling interests1,359 1,362 Total Equity39,538 41,082 Total Liabilities and Equity$80,215$80,811 The accompanying notes are an integral part of these financial statements.8 Table of Contents LINDE PLC AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Millions of dollars)(UNAUDITED)Six Months Ended June 30,20242023Increase(Decrease)in Cash and Cash EquivalentsOperationsNet income-Linde plc$3,290$3,091 Add:Noncontrolling interests75 73 Net Income(including noncontrolling interests)3,365 3,164 Adjustments to reconcile net income to net cash provided by operating activities:Other charges,net of payments(75)(61)Depreciation and amortization1,907 1,908 Deferred income taxes(184)(61)Share-based compensation78 66 Working capital:Accounts receivable(422)(175)Inventory(23)(85)Prepaid and other current assets(62)(39)Payables and accruals(393)(458)Contract assets and liabilities,net(189)117 Pension contributions(24)(25)Long-term assets,liabilities and other(95)(293)Net cash provided by(used for)operating activities3,883 4,058 InvestingCapital expenditures(2,181)(1,688)Acquisitions,net of cash acquired(152)(834)Divestitures,net of cash divested and asset sales22 24 Net cash provided by(used for)investing activities(2,311)(2,498)FinancingShort-term debt borrowings(repayments)-net(1,336)(1,116)Long-term debt borrowings4,828 2,115 Long-term debt repayments(957)(1,641)Issuances of ordinary shares21 21 Purchases of ordinary shares(2,481)(1,767)Cash dividends-Linde plc shareholders(1,334)(1,246)Noncontrolling interest transactions and other(217)(22)Net cash provided by(used for)financing activities(1,476)(3,656)Effect of exchange rate changes on cash and cash equivalents(134)17 Change in cash and cash equivalents(38)(2,079)Cash and cash equivalents,beginning-of-period4,664 5,436 Cash and cash equivalents,end-of-period$4,626$3,357 The accompanying notes are an integral part of these financial statements.9 Table of Contents INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements-Linde plc and Subsidiaries(Unaudited)Note 1.Summary of Significant Accounting Policies11Note 2.Supplemental Information11Note 3.Debt12Note 4.Financial Instruments12Note 5.Fair Value Disclosures14Note 6.Earnings Per Share Linde plc Shareholders16Note 7.Retirement Programs16Note 8.Commitments and Contingencies17Note 9.Segments19Note 10.Equity20Note 11.Revenue Recognition2110 Table of Contents 1.Summary of Significant Accounting PoliciesLinde plc(Linde or the company)is an incorporated public limited company formed under the laws of Ireland.Lindes registered office is located at TenEarlsfort Terrace,Dublin 2,D02 T380 Ireland.Lindes principal executive offices are located at Forge,43 Church Street West,Woking,Surrey GU21 6HT,United Kingdom and 10 Riverview Drive,Danbury,Connecticut,06810,United States.Presentation of Condensed Consolidated Financial Statements-In the opinion of Linde management,the accompanying condensed consolidated financialstatements include all adjustments necessary for a fair statement of the results for the interim periods presented and such adjustments are of a normal recurringnature.The accompanying condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements ofLinde plc and subsidiaries in Lindes 2023 Annual Report on Form 10-K.There have been no material changes to the companys significant accounting policiesduring 2024.Reclassifications Certain prior periods amounts have been reclassified to conform to the current years presentation.Accounting Standards to be ImplementedImprovements to Reportable Segments Disclosures-In November 2023,the FASB issued guidance requiring enhanced disclosure related to reportablesegments.The new standard is effective for fiscal years beginning after December 15,2023,and interim periods within fiscal years beginning after December15,2024,with early adoption permitted.The adoption of this standard will only impact disclosures within the companys consolidated financial statements andthe company is evaluating the impact this guidance will have on those disclosures.Linde will adopt this guidance in fiscal year 2024.Improvements to Income Tax Disclosures-In December 2023,the FASB issued guidance requiring enhanced disclosure related to income taxes.Thestandard requires additional or modified disclosures related to the income tax rate reconciliation,disaggregation of income taxes paid,and several otherdisclosures.The new standard is effective for fiscal years beginning after December 15,2024,with early adoption permitted.The adoption of this standard willonly impact disclosures within the companys consolidated financial statements and the company is evaluating the impact this guidance will have on thosedisclosures.Linde will adopt this guidance prospectively in fiscal year 2025.2.Supplemental InformationReceivablesLinde applies loss rates that are lifetime expected credit losses at initial recognition of the receivables.These expected loss rates are based on an analysis of theactual historical default rates for each business,taking regional circumstances into account.If necessary,these historical default rates are adjusted to reflect theimpact of current changes in the macroeconomic environment using forward-looking information.The loss rates are also evaluated based on the expectations ofthe responsible management team regarding the collectability of the receivables.Gross trade receivables aged less than one year were$4,956 million and$4,667 million at June 30,2024 and December 31,2023,respectively,and gross receivables aged greater than one year were$375 million and$354 million atJune 30,2024 and December 31,2023,respectively.Other receivables were$128 million and$154 million at June 30,2024 and December 31,2023,respectively.Receivables aged greater than one year are generally fully reserved unless specific circumstances warrant exceptions,such as those backed byfederal governments.Accounts receivable net of reserves were$5,001 million at June 30,2024 and$4,718 million at December 31,2023.Allowances for expected credit losseswere$458 million at June 30,2024 and$457 million at December 31,2023.Provisions for expected credit losses were$84 million and$83 million for the sixmonths ended June 30,2024 and 2023,respectively.The allowance activity in the six months ended June 30,2024 and 2023 related to write-offs ofuncollectible amounts,net of recoveries and currency movements is not material.InventoriesThe following is a summary of Lindes consolidated inventories:(Millions of dollars)June 30,2024December 31,2023InventoriesRaw materials and supplies$593$614 Work in process422 390 Finished goods1,079 1,111 Total inventories$2,094$2,115 11 Table of Contents 3.DebtThe following is a summary of Lindes outstanding debt at June 30,2024 and December 31,2023:(Millions of dollars)June 30,2024December 31,2023SHORT-TERMCommercial paper$3,019$4,483 Other bank borrowings(primarily non U.S.)307 230 Total short-term debt3,326 4,713 LONG-TERM(a)(U.S.dollar denominated unless otherwise noted)1.20%Euro denominated notes due 2024(c)607 1.875%Euro denominated notes due 2024(b)(e)332 4.800%Notes due 2024300 300 4.700%Notes due 2025599 599 2.65%Notes due 2025400 399 1.625%Euro denominated notes due 2025535 550 3.625%Euro denominated notes due 2025535 551 0.00%Euro denominated notes due 2026751 774 3.20%Notes due 2026725 724 3.434%Notes due 2026199 198 1.652%Euro denominated notes due 202787 90 0.25%Euro denominated notes due 2027803 827 1.00%Euro denominated notes due 2027537 553 1.00%Euro denominated notes due 2028(b)762 780 3.00%Euro denominated notes due 2028(d)747 3.375%Euro denominated notes due 2029800 824 1.10%Notes due 2030697 697 1.90%Euro denominated notes due 2030110 114 3.375%Euro denominated notes due 2030(f)799 1.375%Euro denominated notes due 2031805 829 3.20%Euro denominated notes due 2031(d)909 0.55%Euro denominated notes due 2032799 823 0.375%Euro denominated notes due 2033530 546 3.625%Euro denominated notes due 2034693 714 3.500%Euro denominated notes due 2034(f)795 1.625%Euro denominated notes due 2035851 876 3.40%Euro denominated notes due 2036(d)743 3.55%Notes due 2042665 666 3.75%Euro denominated notes due 2044(f)743 2.00%Notes due 2050297 296 1.00%Euro denominated notes due 2051732 755 Non U.S.borrowings234 226 Other10 10 18,192 14,660 Less:current portion of long-term debt(1,261)(1,263)Total long-term debt16,931 13,397 Total debt$21,518$19,373(a)Amounts are net of unamortized discounts,premiums and/or debt issuance costs as applicable.(b)June 30,2024 and December 31,2023 included a cumulative$38 million and$46 million adjustment to carrying value,respectively,related to hedgeaccounting of interest rate swaps.Refer to Note 4.(c)In February 2024,Linde repaid 550 million of 1.20%notes that became due.(d)In February 2024,Linde issued 700 million of 3.00%notes due in 2028,850 million of 3.20%notes due in 2031 and 700 million of 3.40%notes due in2036.(e)In May 2024,Linde repaid 300 million of 1.875%notes that became due.(f)In June 2024,Linde issued 750 million of 3.375%notes due in 2030,750 million of 3.500%notes due in 2034 and 700 million of 3.75%notes due in2044.The company maintains a$5 billion and a$1.5 billion unsecured revolving credit agreement with a syndicate of banking institutions that expire on December7,2027 and December 4,2024,respectively.There are no financial maintenance covenants contained within the credit agreements.No borrowings wereoutstanding under the credit agreements as of June 30,2024.The weighted-average interest rates of short-term borrowings outstanding were 4.2%and 4.8%as of June 30,2024 and December 31,2023,respectively.4.Financial InstrumentsIn its normal operations,Linde is exposed to market risks relating to fluctuations in interest rates,foreign currency exchange rates,energy and commoditycosts.The objective of financial risk management at Linde is to minimize the negative impact of such fluctuations on the companys earnings and cash flows.To manage these risks,among other strategies,Linde routinely enters into various derivative financial instruments(“derivatives”)including interest-rate swapand treasury rate lock agreements,currency-swap agreements,forward contracts,currency options,and commodity-swap agreements.These instruments arenot entered into for trading purposes and Linde only uses commonly traded and non-leveraged instruments.There are three types of derivatives that the company enters into:(i)those relating to fair-value exposures,(ii)those relating to cash-flow exposures,and(iii)those relating to foreign currency net investment exposures.Fair-value exposures relate to recognized assets or liabilities,and firm commitments;cash-flowexposures relate to the variability of future cash flows associated with recognized assets or liabilities,or forecasted transactions;and net investment exposuresrelate to the impact of foreign currency exchange rate changes on the carrying value of net assets denominated in foreign currencies.When a derivative is executed and hedge accounting is appropriate,it is designated as either a fair-value hedge,cash-flow hedge,or a net investment hedge.Currently,Linde designates all interest-rate and treasury-rate locks as hedges for accounting purposes;however,cross-currency contracts are generally notdesignated as hedges for accounting purposes.Certain currency contracts related to forecasted transactions are designated as hedges for accounting purposes.Whether designated as hedges for accounting purposes or not,all derivatives are linked to an appropriate underlying exposure.On an ongoing basis,thecompany assesses the hedge effectiveness of all derivatives designated as hedges for accounting purposes to determine if they continue to be highly effective inoffsetting changes in fair values or cash flows of the underlying hedged items.If it is determined that the hedge is not highly effective through the use of aqualitative assessment,then hedge accounting will be discontinued prospectively.Counterparties to Lindes derivatives are major banking institutions with credit ratings of investment grade or better.The company has Credit Support Annexes(CSAs)in place for certain entities with their principal counterparties to minimize potential default risk and to mitigate counterparty risk.Under the CSAs,the fair values of derivatives for the purpose of interest rate and currency management are collateralized with cash on a regular basis.As of June 30,2024,theimpact of such collateral posting arrangements on the fair value of derivatives was insignificant.Management believes the risk of incurring losses on derivativecontracts related to credit risk is remote and any losses would be immaterial.The following table is a summary of the notional amount and fair value of derivatives outstanding at June 30,2024 and December 31,2023 for consolidatedsubsidiaries:12 Fair Value Notional AmountsAssets(a)Liabilities(a)(Millions of dollars)June 30,2024December 31,2023June 30,2024December 31,2023June 30,2024December 31,2023Derivatives Not Designated as HedgingInstruments:Currency contracts:Balance sheet items$7,556$4,567$39$46$42$26 Forecasted transactions206 335 2 11 3 6 Total$7,762$4,902$41$57$45$32 Derivatives Designated as Hedging Instruments:Currency contracts:Forecasted transactions$562$749$5$20$1$4 Commodity contractsN/AN/A10 3 20 7 Interest rate swaps 1,214 1 4 Total Hedges$562$1,963$15$24$21$15 Total Derivatives$8,324$6,865$56$81$66$47(a)Amounts as of June 30,2024 and December 31,2023 included current assets of$53 million and$73 million which are recorded in prepaid and other current assets;long-term assets of$3 millionand$8 million which are recorded in other long-term assets;current liabilities of$61 million and$41 million which are recorded in other current liabilities;and long-term liabilities of$5 millionand$6 million which are recorded in other long-term liabilities.Balance Sheet ItemsForeign currency contracts related to balance sheet items consist of forward contracts entered into to manage the exposure to fluctuations in foreign-currencyexchange rates on recorded balance sheet assets and liabilities denominated in currencies other than the functional currency of the related operating unit.Certain forward currency contracts are entered into to protect underlying monetary assets and liabilities denominated in foreign currencies from foreignexchange risk and are not designated as hedging instruments.For balance sheet items that are not designated as hedging instruments,the fair value adjustmentson these contracts are offset by the fair value adjustments recorded on the underlying monetary assets and liabilities.Forecasted TransactionsForeign currency contracts related to forecasted transactions consist of forward contracts entered into to manage the exposure to fluctuations in foreign-currency exchange rates on(1)forecasted purchases of capital-related equipment and services,(2)forecasted sales,or(3)other forecasted cash flowsdenominated in currencies other than the functional currency of the related operating units.For forecasted transactions that are designated as cash flow hedges,fair value adjustments are recorded to accumulated other comprehensive income(loss)with deferred amounts reclassified to earnings over the same timeperiod as the income statement impact of the associated purchase.For forecasted transactions that do not qualify for cash flow hedging relationships,fair valueadjustments are recorded directly to earnings.Linde is hedging forecasted transactions for a maximum period of three years.Commodity ContractsCommodity contracts are entered into to manage the exposure to fluctuations in commodity prices,which arise in the normal course of business from itsprocurement transactions.To reduce the extent of this risk,Linde enters into a limited number of electricity,natural gas,and propane gas derivatives.Forforecasted transactions that are designated as cash flow hedges,fair value adjustments are recorded to accumulated other comprehensive income(loss)withdeferred amounts reclassified to earnings over the same time period as the income statement impact of the associated purchase.Linde is hedging commoditycontracts for a maximum period of three years.Net Investment HedgesAs of June 30,2024,Linde has 16.8 billion($18.2 billion)Euro-denominated notes and intercompany loans and 4.7 billion($0.7 billion)CNY-denominatedintercompany loans that are designated as hedges of the net investment positions in certain foreign operations.Since hedge inception,the deferred gainrecorded within cumulative translation adjustment component of13 accumulated other comprehensive income(loss)in the consolidated balance sheet is$453 million(deferred gain of$135 million and$409 million in theconsolidated statement of comprehensive income for the quarter and six months ended June 30,2024,respectively).As of June 30,2024,exchange rate movements relating to previously designated hedges that remain in accumulated other comprehensive income(loss)is again of$56 million.These movements will remain in accumulated other comprehensive income(loss),until appropriate,such as upon sale or liquidation of therelated foreign operations at which time amounts will be reclassified to the consolidated statements of income.Interest Rate SwapsLinde uses interest rate swaps to hedge the exposure to changes in the fair value of financial assets and financial liabilities as a result of interest rate changes.These interest rate swaps effectively convert fixed-rate interest exposures to variable rates;fair value adjustments are recognized in earnings along with anequally offsetting charge/benefit to earnings for the changes in the fair value of the underlying financial asset or financial liability(See Note 3).In addition,as of December 31,2023,Linde was using interest rate swaps with a notional value of 1 billion to hedge the variability of future cash flows offorecasted transactions due to interest rate risk and had designated this as a cash flow hedge.The interest rate swaps were terminated during the first quarter of2024 with the February debt issuance and the settlement values were immaterial.Derivatives Impact on Consolidated Statements of IncomeThe following table summarizes the impact of the companys derivatives on the consolidated statements of income:Amount of Pre-Tax Gain(Loss)Recognized in Earnings*Quarter Ended June 30,Six Months Ended June 30,(Millions of dollars)2024202320242023Derivatives Not Designated as Hedging InstrumentsCurrency contracts:Balance sheet itemsDebt-related$(2)$(44)$(17)$(83)Other balance sheet items2(1)(5)(2)Total$(45)$(22)$(85)*The gains(losses)on balance sheet items are offset by gains(losses)recorded on the underlying hedged assets and liabilities.Accordingly,the gains(losses)for the derivatives and the underlyinghedged assets and liabilities related to debt items are recorded in the consolidated statements of income as interest expense-net.Other balance sheet items and anticipated net income gains(losses)are generally recorded in the consolidated statements of income as other income(expenses)-net.The amounts of gain or loss recognized in accumulated other comprehensive income(loss)and reclassified to the consolidated statement of income was notmaterial for the six months ended June 30,2024 and 2023,respectively.Net impacts expected to be reclassified to earnings during the next twelve months arealso not material.5.Fair Value DisclosuresThe fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:Level 1 quoted prices in active markets for identical assets or liabilitiesLevel 2 quoted prices for similar assets and liabilities in active markets or inputs that are observableLevel 3 inputs that are unobservable(for example cash flow modeling inputs based on assumptions)14 Table of Contents Assets and Liabilities Measured at Fair Value on a Recurring BasisThe following table summarizes assets and liabilities measured at fair value on a recurring basis:Fair Value Measurements Using Level 1Level 2Level 3(Millions of dollars)June 30,2024December 31,2023June 30,2024December 31,2023June 30,2024December 31,2023AssetsDerivative assets$56$81$Investments and securities*17 16 11 12 Total$17$16$56$81 11$12 LiabilitiesDerivative liabilities$66$47$*Investments and securities are recorded in prepaid and other current assets and other long-term assets in the companys condensed consolidated balancesheets.Level 1 investments and securities are marketable securities traded on an exchange.Level 2 investments are based on market prices obtained from independentbrokers or determined using quantitative models that use as their basis readily observable market parameters that are actively quoted and can be validatedthrough external sources,including third-party pricing services,brokers and market transactions.Level 3 investments and securities consist of a venture fund.For the valuation,Linde uses the net asset value received as part of the funds quarterly reporting,which for the most part is not based on quoted prices inactive markets.In order to reflect current market conditions,Linde proportionally adjusts by observable market data(stock exchange prices)or currenttransaction prices.Changes in level 3 investments and securities were immaterial.The fair value of cash and cash equivalents,short-term debt,accounts receivable-net,and accounts payable approximate carrying value because of the short-term maturities of these instruments.The fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues.Long-term debt is categorized within Level 2 ofthe fair value hierarchy.At June 30,2024,the estimated fair value of Lindes long-term debt portfolio was$16,598 million versus a carrying value of$18,192million.At December 31,2023,the estimated fair value of Lindes long-term debt portfolio was$13,337 million versus a carrying value of$14,660 million.Differences between the carrying value and the fair value are attributable to fluctuations in interest rates subsequent to when the debt was issued and relative tostated coupon rates.15 Table of Contents 6.Earnings Per Share Linde plc ShareholdersBasic and diluted earnings per share is computed by dividing Net income Linde plc for the period by the weighted average number of either basic or dilutedshares outstanding,as follows:Quarter Ended June 30,Six Months Ended June 30,2024202320242023Numerator(Millions of dollars)Net Income Linde plc$1,663$1,575$3,290$3,091 Denominator(Thousands of shares)Weighted average shares outstanding479,130 489,061 480,246 490,201 Shares earned and issuable under compensation plans843 557 697 526 Weighted average shares used in basic earnings per share479,973 489,618 480,943 490,727 Effect of dilutive securitiesStock options and awards3,204 3,931 3,423 3,958 Weighted average shares used in diluted earnings per share483,177 493,549 484,366 494,685 Basic Earnings Per Share$3.46$3.22$6.84$6.30 Diluted Earnings Per Share$3.44$3.19$6.79$6.25 The weighted-average of antidilutive securities excluded from the calculation of diluted earnings per share was 353,145 and 225,739 for the quarter and sixmonths ended June 30,2024,respectively.There were no antidilutive securities in the respective 2023 periods.7.Retirement ProgramsThe components of net pension and postretirement benefits other than pensions(“OPEB”)costs for the quarter and six months ended June 30,2024 and 2023are shown below:Quarter Ended June 30,Six Months Ended June 30,(Millions of dollars)2024202320242023Amount recognized in Operating ProfitService cost$21$21$42$42 Amount recognized in Net pension and OPEB cost(benefit),excluding service costInterest cost91 94 182 186 Expected return on plan assets(137)(131)(275)(260)Net amortization and deferral(3)(8)(6)(16)(49)(45)(99)(90)Net periodic benefit cost(benefit)$(28)$(24)$(57)$(48)Components of net periodic benefit expense for other post-retirement plans for the quarter and six months ended June 30,2024 and 2023 were not material.Linde estimates that 2024 required contributions to its pension plans will be in the range of approximately$30 million to$40 million,of which$24 millionhave been made through June 30,2024.16 Table of Contents 8.Commitments and ContingenciesContingent LiabilitiesLinde is subject to various lawsuits and government investigations that arise from time to time in the ordinary course of business.These actions are based uponalleged environmental,tax,antitrust and personal injury claims,among others.Linde has strong defenses in these cases and intends to defend itself vigorously.It is possible that the company may incur losses in connection with some of these actions in excess of accrued liabilities.Management does not anticipate thatin the aggregate such losses would have a material adverse effect on the companys consolidated financial position or liquidity;however,it is possible that thefinal outcomes could have a significant impact on the companys reported results of operations in any given period(see Note 17 to the consolidated financialstatements of Lindes 2023 Annual Report on Form 10-K).Significant matters are:During 2009,the Brazilian government published Law 11941/2009 instituting a new voluntary amnesty program(“Refis Program”)which allowedBrazilian companies to settle certain federal tax disputes at reduced amounts.During 2009,the company decided that it was economically beneficial tosettle many of its outstanding federal tax disputes and such disputes were enrolled in the Refis Program,subject to final calculation and review by theBrazilian federal government.The company recorded estimated liabilities based on the terms of the Refis Program.Since 2009,Linde has been unableto reach final agreement on the calculations and initiated litigation against the government in an attempt to resolve certain items.Open issues relate tothe following matters:(i)application of cash deposits and net operating loss carryforwards to satisfy obligations and(ii)the amount of tax reductionsavailable under the Refis Program.It is difficult to estimate the timing of resolution of legal matters in Brazil.At June 30,2024,the most significant non-income tax claims in Brazil,after enrollment in the Refis Program,relate to state VAT tax matters.The totalestimated exposure relating to such claims,including interest and penalties,as appropriate,is approximately$110 million.Linde has not recorded anyliabilities related to such claims based on management judgment and opinions of outside counsel.During 2023,the Brazilian Supreme Court issued a decision confirming the constitutionality of a specific federal income tax,with retroactive effect.Asa result of this decision,the company recorded a reserve based on its best estimate of potential settlement.This decision has not yet been finalized andis subject to ongoing motions for clarification.Because litigation in Brazil historically takes many years to resolve,it is very difficult to estimate thetiming of resolution of these matters;however,it is possible that certain of these matters may be resolved within the near term.The company isvigorously defending against the proceedings.On and after April 23,2019 former shareholders of Linde AG filed appraisal proceedings at the District Court(Landgericht)Munich I(Germany),seeking an increase of the cash consideration paid in connection with the previously completed cash merger squeeze-out of all of Linde AGs minorityshareholders for 189.46 per share.Any such increase would apply to all 14,763,113 Linde AG shares that were outstanding on April 8,2019,when thecash merger squeeze-out was completed.The period for plaintiffs to file claims expired on July 9,2019.In November 2023,the court issued a decisionrejecting the plaintiffs claims in their entirety and determining that the cash merger squeeze-out consideration was appropriate.The plaintiffs haveappealed this decision.The company believes the consideration paid was fair and that the claims are not supported by sufficient evidence,and no reserve has been established.We cannot estimate the timing of resolution.In December 2022,a Russian court based in St.Petersburg(St.Petersburg Court)issued an injunction preventing(i)the sale of any shares in Lindessubsidiaries and joint ventures in Russia,and(ii)the disposal of any of the assets in those entities exceeding 5%of the relevant companys overall assetvalue.The injunction was requested by RusChemAlliance(RCA)to secure payment of a possible award under an arbitration proceeding RCA intendedto file against Linde Engineering for alleged breach of contract under the agreement to build a gas processing plant in Russia entered into in July 2021.Performance of the agreement was lawfully suspended by Linde Engineering on May 27,2022 in compliance with applicable sanctions.In March2023,RCA filed a claim in St.Petersburg against Linde GmbH for recovery of advance payments under the agreement(GPP Claim),andsubsequently(i)added Linde and other Linde subsidiaries as defendants,and(ii)is seeking payment of alleged damages from Linde and guarantorbanks.In March 2024,RCA filed a similar claim for repayment and damages against Linde for alleged breach of contract under the agreement to builda liquefied natural gas plant in Russia entered into in September 2021(“LNG Claim”,and together with the GPP Claim,the“Russian Claims”).17 Table of Contents In accordance with the dispute resolution provisions of the agreements,in 2023,Linde filed a notice of arbitration with the Hong Kong InternationalArbitration Centre(HKIAC)against RCA to claim that(i)RCA has no entitlement to payment,(ii)RCAs Russian Claims are in breach of thearbitration agreement which requires HKIAC arbitration,and(iii)RCA must compensate Linde for the losses and damages caused by the injunction.Additionally,Linde filed for and obtained an anti-suit injunction from a Hong Kong court against RCA directing RCA to seek a stay of the claims andordering it to resolve any disputes in accordance with HKIAC arbitration.In January,2024,the Hong Kong court issued a final judgment in Lindes favor(i)granting a permanent anti-suit injunction against RCA to seek a stayof the GPP claim and not start an LNG claim,(ii)granting a permanent,global anti-enforcement injunction against RCA for the GPP claim,and(iii)ordering that the injunction issued by the St.Petersburg Court be lifted(“HK Court Judgement”).Despite the judgments of the Hong Kong court and similar orders issued by the HKIAC arbitration tribunals,the St.Petersburg injunction affectingLindes shares and assets has not been lifted,the proceeding in St.Petersburg has not been stayed and RCA is continuing to pursue its claims in Russia.In February 2024,the St.Petersburg Court decided the GPP Claim in favor of RCA.Linde appealed this decision unsuccessfully in March 2024.Lindeexpects RCA to enforce the decision by seizing assets that were previously frozen by the court.Linde intends to claim all damages related to or risingfrom RCAs enforcement of the decision in the HKIAC arbitration proceedings.Linde does not expect a material adverse impact on earnings from this decision given the liability recorded as of June 30,2024 and the immaterialremaining investment value of its deconsolidated Russia subsidiaries.As of June 30,2024,Linde has a contingent liability of$1.2 billion recorded inOther long-term liabilities,which represents advance payments previously recorded in contract liabilities related to terminated engineering projectswith RCA.As a result of the contract terminations,Linde no longer has future performance obligations for these projects.It is difficult to estimate the timing of resolution of these matters.The company intends to vigorously defend its interests in both the Russian Claimsand arbitration proceedings.18 Table of Contents 9.SegmentsFor a description of Linde plcs operating segments,refer to Note 18 to the consolidated financial statements on Linde plcs 2023 Annual Report on Form 10-K.The table below presents sales and operating profit information about reportable segments and Other for the quarter and six months ended June 30,2024 and2023.Quarter Ended June 30,Six Months Ended June 30,(Millions of dollars)2024202320242023SALESAmericas$3,655$3,541$7,215$7,092 EMEA2,091 2,160 4,182 4,337 APAC1,657 1,683 3,248 3,281 Engineering544 495 1,083 1,035 Other320 325 639 652 Total sales$8,267$8,204$16,367$16,397 Quarter Ended June 30,Six Months Ended June 30,(Millions of dollars)2024202320242023SEGMENT OPERATING PROFITAmericas$1,159$1,070$2,247$2,095 EMEA704 630 1,391 1,237 APAC474 472 921 895 Engineering96 107 196 256 Other(11)7 8 9 Segment operating profit2,422 2,286 4,763 4,492 Other charges(22)(40)Purchase accounting impacts-Linde AG(b)(238)(253)(484)(508)Total operating profit$2,184$2,011$4,279$3,944(a)Sales reflect external sales only.Intersegment sales,primarily from Engineering to the industrial gases segments,were$485 million and$876 million for the quarter and six months ended June30,2024,respectively,and$335 million and$629 million for the respective 2023 periods.(b)Represents purchase accounting impacts related to the 2018 merger.(a)19 Table of Contents 10.EquityA summary of the changes in total equity for the quarter and six months ended June 30,2024 and 2023 is provided below:Quarter Ended June 30,(Millions of dollars)20242023ActivityLinde plcShareholdersEquityNoncontrollingInterestsTotalEquityLinde plcShareholdersEquityNoncontrollingInterestsTotalEquityBalance,beginning of period$38,829$1,387$40,216$39,970$1,353$41,323 Net income(a)1,663 37 1,700 1,575 37 1,612 Other comprehensive income(loss)(266)(10)(276)(89)(23)(112)Noncontrolling interests:Additions(reductions)(11)(7)(18)Dividends and other capital changes(55)(55)(36)(36)Dividends to Linde plc ordinary share holders($1.39 per share in 2024 and$1.275 per share in2023)(665)(665)(623)(623)Issuances of ordinary shares:For employee savings and incentiveplans(15)(15)(35)(35)Purchases of ordinary shares(1,407)(1,407)(912)(912)Share-based compensation40 40 36 36 Balance,end of period$38,179$1,359$39,538$39,911$1,324$41,235 Six Months Ended June 30,(Millions of dollars)20242023ActivityLinde plcShareholdersEquityNoncontrollingInterestsTotalEquityLinde plcShareholdersEquityNoncontrollingInterestsTotalEquityBalance,beginning of period$39,720$1,362$41,082$40,028$1,346$41,374 Net income(a)3,290 75 3,365 3,091 73 3,164 Other comprehensive income(loss)(989)(25)(1,014)(117)(25)(142)Noncontrolling interests:Additions(reductions)11 11(11)(5)(16)Dividends and other capital changes(64)(64)(65)(65)Dividends to Linde plc ordinary share holders($2.78 per share in 2024 and$2.55 per share in2023)(1,334)(1,334)(1,246)(1,246)Issuances of ordinary shares:For employee savings and incentiveplans(141)(141)(98)(98)Purchases of ordinary shares(2,445)(2,445)(1,802)(1,802)Share-based compensation78 78 66 66 Balance,end of period$38,179$1,359$39,538$39,911$1,324$41,235(a)Net income for noncontrolling interests excludes net income related to redeemable noncontrolling interests which is not significant for the quarter and six months ended June 30,2024 and 2023and which is not part of total equity.20 Table of Contents The components of Accumulated other comprehensive income(loss)are as follows:June 30,December 31,(Millions of dollars)20242023Cumulative translation adjustment-net of taxes:Americas$(4,055)$(3,618)EMEA(1,100)(737)APAC(1,433)(1,037)Engineering(248)(93)Other471 113(6,365)(5,372)Derivatives-net of taxes3 7 Pension/OPEB(net of$67 million and$60 million tax benefit at June 30,2024 and December 31,2023,respectively)(432)(440)$(6,794)$(5,805)11.Revenue RecognitionRevenue is accounted for in accordance with ASC 606.Revenue is recognized as control of goods or services are transferred to customers in an amount thatreflects the consideration to which an entity expects to be entitled to receive in exchange for the goods or services.Contracts with CustomersLinde serves a diverse group of industries including healthcare,chemicals and energy,manufacturing,metals and mining,food and beverage,and electronics.Industrial GasesWithin each of the companys geographic segments for industrial gases,there are three basic distribution methods:(i)on-site or tonnage;(ii)merchant or bulkliquid;and(iii)packaged or cylinder gases.The distribution method used by Linde to supply a customer is determined by many factors,including thecustomers volume requirements and location.The distribution method generally determines the contract terms with the customer and,accordingly,the revenuerecognition accounting practices.Lindes primary products in its industrial gases business are atmospheric gases(oxygen,nitrogen,argon,rare gases)andprocess gases(carbon dioxide,helium,hydrogen,electronic gases,specialty gases,acetylene).These products are generally sold through one of the threedistribution methods.Following is a description of each of the three industrial gases distribution methods and the respective revenue recognition policies:On-site.Customers that require the largest volumes of product and that have a relatively constant demand pattern are supplied by cryogenic and process gas on-site plants.Linde constructs plants on or adjacent to these customers sites and supplies the product directly to customers by pipeline.Where there are largeconcentrations of customers,a single pipeline may be connected to several plants and customers.On-site product supply contracts generally are totalrequirement contracts with terms typically ranging from 10-20 years and contain minimum purchase requirements and price escalation provisions.Many of thecryogenic on-site plants also produce liquid products for the merchant market.Therefore,plants are typically not dedicated to a single customer.Additionally,Linde is responsible for the design,construction,operations and maintenance of the plants and our customers typically have no involvement in these activities.Advanced air separation processes also allow on-site delivery to customers with smaller volume requirements.The companys performance obligations related to on-site customers are satisfied over time as customers receive and obtain control of the product.Linde haselected to apply the practical expedient for measuring progress towards the completion of a performance obligation and recognizes revenue as the company hasthe right to invoice each customer,which generally corresponds with product delivery.Accordingly,revenue is recognized when product is delivered to thecustomer and the company has the right to invoice the customer in accordance with the contract terms.Consideration in these contracts is generally based onpricing which fluctuates with various price indices.Variable components of consideration exist within on-site contracts but are considered constrained.Merchant.Merchant deliveries generally are made from Lindes plants by tanker trucks to storage containers at the customers site.Due to the relatively highdistribution cost,merchant oxygen and nitrogen generally have a relatively small distribution21 Table of Contents radius from the plants at which they are produced.Merchant argon,hydrogen and helium can be shipped much longer distances.The customer agreements usedin the merchant business are usually three-to seven-year supply agreements based on the requirements of the customer.These contracts generally do not containminimum purchase requirements or volume commitments.The companys performance obligations related to merchant customers are generally satisfied at a point in time as the customers receive and obtain control ofthe product.Revenue is recognized when product is delivered to the customer and the company has the right to invoice the customer in accordance with thecontract terms.Packaged Gases.Customers requiring small volumes are supplied products in containers called cylinders,under medium to high pressure.Linde distributesmerchant gases from its production plants to company-owned cylinder filling plants where cylinders are then filled for distribution to customers.Cylinders maybe delivered to the customers site or picked up by the customer at a packaging facility or retail store.Linde invoices the customer for the industrial gases andthe use of the cylinder container(s).The company also sells hardgoods and welding equipment purchased from independent manufacturers.Packaged gases aregenerally sold under one to three-year supply contracts and purchase orders and do not contain minimum purchase requirements or volume commitments.The companys performance obligations related to packaged gases are satisfied at a point in time.Accordingly,revenue is recognized when product is deliveredto the customer or when the customer picks up product from a packaged gas facility or retail store and the company has the right to payment from the customerin accordance with the contract terms.EngineeringThe company designs and manufactures equipment for air separation and other industrial gas applications manufactured specifically for end customers.Sale ofequipment contracts are generally comprised of a single performance obligation.Revenue from sale of equipment is generally recognized over time as Lindehas an enforceable right to payment for performance completed to date and performance does not create an asset with alternative use.For contracts recognizedover time,revenue is recognized primarily using a cost incurred input method.Costs incurred to date relative to total estimated costs at completion are used tomeasure progress toward satisfying performance obligations.Costs incurred include material,labor,and overhead costs and represent work contributing andproportionate to the transfer of control to the customer.Changes to cost estimates and contract modifications are typically accounted for as part of the existingcontract and are recognized as cumulative adjustments for the inception-to-date effect of such change.Contract Assets and LiabilitiesContract assets and liabilities result from differences in timing of revenue recognition and customer invoicing.Contract assets primarily relate to sale ofequipment contracts for which revenue is recognized over time.The balance represents unbilled revenue which occurs when revenue recognized under themeasure of progress exceeds amounts invoiced to customers.Customer invoices may be based on the passage of time,the achievement of certain contractualmilestones or a combination of both criteria.Contract liabilities include advance payments or right to consideration prior to performance under the contract.Contract liabilities are recognized as revenue as performance obligations are satisfied under contract terms.Linde has contract assets of$226 million and$196million at June 30,2024 and December 31,2023,respectively.Total contract liabilities are$2,820 million at June 30,2024(current contract liabilities of$1,767 million and$1,053 million within other long-term liabilities in the condensed consolidated balance sheets).As of June 30,2024,Linde hasapproximately$397 million recorded in contract liabilities related to engineering projects in Russia subject to sanctions.Total contract liabilities were$2,950million at December 31,2023(current contract liabilities of$1,901 million and$1,049 million within other long-term liabilities in the condensed consolidatedbalance sheets).Revenue recognized for the six months ended June 30,2024 that was included in the contract liability at December 31,2023 was$674 million.Contract assets and liabilities primarily relate to the Engineering business.Payment Terms and OtherLinde generally receives payment after performance obligations are satisfied,and customer prepayments are not typical for the industrial gases business.Payment terms vary based on the country where sales originate and local customary payment practices.Linde does not offer extended financing outside ofcustomary payment terms.Amounts billed for sales and use taxes,value-added taxes,and certain excise and other specific transactional taxes imposed onrevenue producing transactions are presented on a net basis and are not included in sales within the consolidated statement of income.Additionally,salesreturns and allowances are not a normal practice in the industry and are not significant.Disaggregated Revenue InformationAs described above and in Note 19 to Linde plcs 2023 Annual Report on Form 10-K,the company manages its industrial gases business on a geographic basis,while the Engineering and Other businesses are generally managed on a global basis.Furthermore,the company believes that reporting sales by distributionmethod by reportable geographic segment best illustrates22 Table of Contents the nature,timing,type of customer,and contract terms for its revenues,including terms and pricing.The following tables show sales by distribution method at the consolidated level and for each reportable segment and Other for the quarter and six monthsended,June 30,2024 and June 30,2023.(Millions of dollars)Quarter Ended June 30,2024SalesAmericasEMEAAPACEngineeringOtherTotal%Merchant$1,178$691$568$52$2,489 30%On-Site807 412 668 1,887 23%Packaged Gas1,616 969 348 7 2,940 36%Other54 19 73 544 261 951 11%Total$3,655$2,091$1,657$544$320$8,267 100%(Millions of dollars)Quarter Ended June 30,2023SalesAmericasEMEAAPACEngineeringOtherTotal%Merchant$1,094$704$570$53$2,421 30%On-Site756 493 677 1,926 23%Packaged Gas1,638 946 366 12 2,962 36%Other53 17 70 495 260 895 11%Total$3,541$2,160$1,683$495$325$8,204 100%(Millions of dollars)Six Months Ended June 30,2024SalesAmericasEMEAAPACEngineeringOtherTotal%Merchant$2,295$1,377$1,096$107$4,875 30%On-Site1,589 853 1,336 3,778 23%Packaged Gas3,222 1,920 670 14 5,826 36%Other109 32 146 1,083 518 1,888 11%Total$7,215$4,182$3,248$1,083$639$16,367 100%(Millions of dollars)Six Months Ended June 30,2023SalesAmericasEMEAAPACEngineeringOtherTotal%Merchant$2,137$1,404$1,122$108$4,771 29%On-Site1,560 1,031 1,321 3,912 24%Packaged Gas3,276 1,874 721 32 5,903 36%Other119 28 117 1,035 512 1,811 11%Total$7,092$4,337$3,281$1,035$652$16,397 100%Remaining Performance ObligationsAs described above,Lindes contracts with on-site customers are under long-term supply arrangements which generally require the customer to purchase theirrequirements from Linde and also have minimum purchase requirements.Additionally,plant sales from the Linde Engineering business are primarilycontracted on a fixed price basis.The company estimates the consideration related to future minimum purchase requirements and plant sales was approximately$50 billion.This amount excludes all on-site sales above minimum purchase requirements,which can be significant depending on customer needs.In thefuture,actual amounts will be different due to impacts from several factors,many of which are beyond the companys control including,but not limited to,timing of newly signed,terminated and renewed contracts,inflationary price escalations,currency exchange rates,and pass-through costs related to natural gasand electricity.The actual duration of long-term supply contracts ranges up to twenty years.The company estimates that approximately half of the revenuerelated to minimum purchase requirements will be earned in the next five years and the remaining thereafter.23 Table of Contents Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations(MD&A)Non-GAAP MeasuresThroughout MD&A,the company provides adjusted operating results exclusive of certain items such as Other charges,net gains or losses on sale ofbusinesses,purchase accounting impacts of the Linde AG merger and pension settlement charges.Adjusted amounts are non-GAAP measures which areintended to supplement investors understanding of the companys financial information by providing measures which investors,financial analysts andmanagement find useful in evaluating the companys operating performance.Items which the company does not believe to be indicative of on-going businessperformance are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis.Inaddition,operating results,excluding these items,is important to managements development of annual and long-term employee incentive compensation plans.Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAPmeasures.The non-GAAP measures and reconciliations are separately included in a later section in the MD&A titled Non-GAAP Measures and Reconciliations.24 Table of Contents Consolidated ResultsThe following table provides summary information for the quarters and six months ended June 30,2024 and 2023.The reported amounts are GAAP amountsfrom the Consolidated Statements of Income.The adjusted amounts are intended to supplement investors understanding of the companys financial informationand are not a substitute for GAAP measures:Quarter Ended June 30,Six Months Ended June 30,(Millions of dollars,except per share data)20242023Variance20242023VarianceSales$8,267$8,204 1%$16,367$16,397%Cost of sales,exclusive of depreciation andamortization$4,251$4,316(2)%$8,467$8,747(3)%As a percent of sales51.4R.6Q.7S.3%Selling,general and administrative$840$833 1%$1,700$1,655 3%As a percent of sales10.2.2.4.1preciation and amortization$958$960%$1,907$1,908%Other charges$22(100)%$40(100)%Other income(expense)-net$2$(27)107%$60$(32)288%Operating profit$2,184$2,011 9%$4,279$3,944 8%Operating margin26.4$.5&.1$.1%Interest expense-net$70$52 35%$135$89 52%Net pension and OPEB cost(benefit),excludingservice cost$(49)$(45)9%$(99)$(90)10fective tax rate23.5!.9.9.0%Income from equity investments$45$46(2)%$93$87 7%Noncontrolling interests$(37)$(37)%$(75)$(73)3%Net Income Linde plc$1,663$1,575 6%$3,290$3,091 6%Diluted earnings per share$3.44$3.19 8%$6.79$6.25 9%Diluted shares outstanding483,177 493,549(2)H4,366 494,685(2)%Number of employees65,987 66,270e,987 66,270justed Amounts(a)Operating profit$2,422$2,286 6%$4,763$4,492 6%Operating margin29.3.9).1.4fective tax rate23.5#.7#.1#.9%Net Income Linde plc$1,859$1,760 6%$3,680$3,453 7%Diluted earnings per share$3.85$3.57 8%$7.60$6.98 9%Other Financial Data(a)EBITDA$3,187$3,017 6%$6,279$5,939 6%As percent of sales38.66.88.46.2justed EBITDA$3,206$3,059 5%$6,322$6,022 5%As percent of sales38.87.38.66.7%(a)Adjusted Amounts and Other Financial Data are non-GAAP performance measures.A reconciliation of reported amounts to adjusted amounts can be found in the Non-GAAP Measures andReconciliations section of this MD&A.ReportedIn the second quarter of 2024,Lindes sales were$8,267 million,$63 million above prior year.The increase in sales was driven by 3%higher price attainment.Engineering increased sales by 1%in the quarter.Volumes were flat in the quarter versus the 2023 respective period,as base volume declines were largelyoffset by new project start-ups.Currency translation decreased sales by 2%in the quarter driven primarily by the weakening of the Brazilian real,Chinese yuanand Euro against the U.S.Dollar.Cost pass-through,representing the contractual billing of energy cost variances primarily to onsite customers,decreased salesby 1%in the quarter,with minimal impact on operating profit.Reported operating profit for the second quarter of 2024 of$2,184 million,or 26.4%of sales,was 9ove prior year.The reported year-over-year increasewas primarily driven by higher pricing and productivity initiatives which more than offset adverse impacts from cost inflation and currency translation.Thereported effective tax rate(ETR)was 23.5%in the second quarter 2024 versus 21.9%in the second quarter 2023.Diluted earnings per share(EPS)was$3.44,or 8ove EPS of$3.19 in the second quarter of 2023,primarily due to higher net income-Linde plc and lower diluted shares outstanding.25 Table of Contents AdjustedIn the second quarter of 2024,adjusted operating profit of$2,422 million,or 29.3%of sales,was 6%higher as compared to 2023,driven by higher pricing,andproductivity initiatives,partially offset by cost inflation and currency translation.The adjusted ETR was 23.5%in the second quarter 2024 versus 23.7%in the2023 quarter.On an adjusted basis,EPS was$3.85,8ove the 2023 adjusted EPS of$3.57,driven by higher adjusted net income-Linde plc and lowerdiluted shares outstanding.OutlookLinde provides quarterly updates on operating results,material trends that may affect financial performance,and financial guidance via quarterly earningsreleases and investor teleconferences.These updates are available on the companys website,but are not incorporated herein.26 Table of Contents Results of operationsThe changes in consolidated sales compared to the prior year are attributable to the following:Quarter Ended June 30,2024 vs.2023Six Months Ended June 30,2024 vs.2023%Change%ChangeFactors Contributing to Changes-SalesVolume%Price/Mix3%2%Cost pass-through(1)%(1)%Currency(2)%(1)quisitions/divestitures%Engineering1%1%SalesSales increased$63 million or 1%for the second quarter of 2024 and decreased$30 million for the six months ended June 30,2024 versus the respective 2023periods.Higher pricing contributed 3%to sales in the quarter and 2%in the year-to-date period.Engineering increased sales by 1%in the quarter and was flatin the year-to-date period.Currency translation decreased sales by 2%in the quarter and 1%in the year-to-date period versus the respective 2023 periodsdriven primarily by the weakening of the Brazilian real,Chinese yuan and Euro against the U.S.Dollar.Cost pass-through decreased sales by 1%in both thequarter and year-to-date periods,with minimal impact on operating profit.Volumes were flat in both the quarter and year-to-date periods versus 2023,as basevolume declines were largely offset by new project start-ups.Cost of sales,exclusive of depreciation and amortizationCost of sales,exclusive of depreciation and amortization decreased$65 million,or 2%,for the second quarter of 2024 and decreased$280 million,or 3%forthe six months ended June 30,2024 primarily due to lower cost pass-through and productivity gains which more than offset cost inflation.Cost of sales,exclusive of depreciation and amortization was 51.4%and 51.7%of sales,respectively,for the second quarter and six months ended June 30,2024 versus52.6%and 53.3%for the respective 2023 periods.The decrease as a percentage of sales in the quarter was primarily due to higher pricing and lower cost pass-through.Selling,general and administrative expensesSelling,general and administrative expense(SG&A)increased$7 million,or 1%,for the second quarter of 2024 and increased$45 million or 3%for the sixmonths ended June 30,2024 driven by higher costs.SG&A was 10.2%of second quarter sales for both 2023 and 2024.In the year-to-date period SG&A was10.4%and 10.1%of sales versus the respective 2023 period.Depreciation and amortizationReported depreciation and amortization expense decreased$2 million for the second quarter of 2024 and decreased$1 million,for the six months ended June30,2024.On an adjusted basis,depreciation and amortization increased$12 million,for the second quarter of 2024 and increased$23 million for the year-to-date perioddriven by new project start ups.Other chargesThere were no other charges for the quarter and six months ended June 30,2024 and other charges of$22 million and$40 million for the respective 2023periods.On an adjusted basis,these benefits and costs have been excluded in both periods.Other income(expense)-netReported other income(expense)-net was a benefit of$2 million for the second quarter of 2024 and$60 million for the year-to-date period driven by$43 million in insurance recoveries primarily within the Other segment recognized during the first quarter.Operating profitOn a reported basis,operating profit increased$173 million,or 9%,for the second quarter of 2024 and increased$335 million,or 8%,for the six months endedJune 30,2024.The increase in the quarter and year-to-date periods of 2024 was primarily due27 Table of Contents to higher pricing,savings from productivity initiatives and lower other charges,which more than offset the adverse impacts of cost inflation and currency.On an adjusted basis,which excludes the impacts of merger-related purchase accounting as well as other charges,operating profit increased$136 million,or6%in the second quarter of 2024 and increased$271 million,or 6%for the six months ended June 30,2024.Operating profit growth was driven by higherpricing and productivity initiatives,which more than offset the effects of cost inflation and currency during the quarter and year-to-date periods of 2024.Adiscussion of operating profit by segment is included in the segment discussion that follows.Interest expense-netReported interest expense-net increased$18 million for the second quarter of 2024 and increased$46 million for the six months ended June 30,2024.On anadjusted basis,interest expense increased$15 million for the second quarter of 2024 and increased$36 million for the six months ended June 30,2024 versusthe respective 2023 period.The increase in both periods was driven primarily by higher interest rates on debt.Net pension and OPEB cost(benefit),excluding service costReported net pension and OPEB cost(benefit),excluding service cost were benefits of$49 million and$99 million for the quarter and six months ended June30,2024,respectively,versus$45 million and$90 million for the respective 2023 periods.The increase in the benefit primarily relates to higher expectedreturn on assets and lower amortization of deferred losses year-over-year.Effective tax rateThe reported effective tax rate(ETR)for the quarter and six months ended June 30,2024 was 23.5%and 22.9%versus 21.9%and 22.0%for the respective2023 periods.The increase in the quarter rate is primarily related a 2023 tax refund that did not repeat in 2024,partially offset by tax benefits from arepatriation in the current year.The increase in the year to date rate is primarily related to a prior year benefit from a net decrease in the companys uncertaintax positions and a tax refund.Effective January 1,2024,Linde is subject to the 15%global minimum tax rate provisions of the OECDs framework for PillarTwo,the implementation of which did not have a significant impact on the effective tax rate for the quarter or year-to-date periods.On an adjusted basis,the ETR for the quarter and six months ended June 30,2024 was 23.5%and 23.1%versus 23.7%and 23.9%for the respective 2023periods.The decrease in the year-to-date rate is primarily due to tax benefits from a repatriation and higher tax benefits from share based compensation.Income from equity investmentsReported income from equity investments for the second quarter and six months ended June 30,2024 was$45 million and$93 million versus$46 million and$87 million for the respective 2023 periods.On an adjusted basis,income from equity investments for the second quarter and six months ended June 30,2024 was$63 million and$129 million versus$64million and$123 million for the respective 2023 periods.Noncontrolling interestsAt June 30,2024,noncontrolling interests consisted primarily of non-controlling shareholders investments in APAC(primarily China).Reportednoncontrolling interests income was$37 million for the second quarter of 2024 and the respective 2023 period.For the six months ended June 30,2024noncontrolling interests income was$75 million versus$73 million in the respective 2023 period.Net Income Linde plcReported net income-Linde plc increased$88 million,or 6%,for the second quarter of 2024 and increased$199 million,or 6%,for the six months ended June30,2024 versus the respective 2023 periods.On an adjusted basis,which excludes the impacts of purchase accounting and other charges,net income-Linde plc increased$99 million,or 6%,for thesecond quarter of 2024 and increased$227 million,or 7%,for the six months ended June 30,2024 versus the respective 2023 periods.On both a reported and adjusted basis,the increase was driven by higher operating profit.Diluted earnings per shareReported diluted earnings per share increased$0.25,or 8%,for the second quarter of 2024 and increased$0.54,or 9%,for the six months ended June 30,2024versus the respective 2023 periods.On an adjusted basis,diluted EPS increased$0.28,or 8%,for the second quarter of 2024 and increased$0.62,or 9%for the six months ended June 30,2024versus the respective 2023 periods.The increase on both a reported and adjusted basis is primarily due to higher net income-Linde plc and lower diluted shares outstanding.28 Table of Contents EmployeesThe number of employees at June 30,2024 was 65,987,a decrease of 283 employees from June 30,2023.Other Financial DataEBITDA was$3,187 million for the second quarter of 2024 as compared to$3,017 million in the respective 2023 period.EBITDA was$6,279 million for thesix months ended June 30,2024 as compared to$5,939 million in the respective 2023 period.The increase was driven by higher net income-Linde plc versusprior year.Adjusted EBITDA increased to$3,206 million for the second quarter 2024 from$3,059 million in the respective 2023 period.Adjusted EBITDA was$6,322million for the six months ended June 30,2024 as compared to$6,022 million in the respective 2023 period.The higher EBITDA was primarily due to highernet income-Linde plc versus the respective prior periods.See the Non-GAAP Measures and Reconciliations section for definitions and reconciliations of these adjusted non-GAAP measures to reported GAAPamounts.Other Comprehensive Income(Loss)Other comprehensive losses for the second quarter and six months ended June 30,2024 were$276 million and$1,014 million,respectively.The loss in thequarter and year-to-date period resulted primarily from currency translation adjustments of$274 million and$1,018 million,respectively.The translationadjustments reflect the impact of translating local currency foreign subsidiary financial statements to U.S.dollars,and are largely driven by the movement ofthe U.S.dollar against major currencies including the Euro,British pound and the Chinese yuan.See the Currency section of the MD&A for exchange ratesused for translation purposes and Note 10 to the condensed consolidated financial statements for a summary of the currency translation adjustment componentof accumulated other comprehensive income(loss)by segment.Segment DiscussionThe following summary of sales and operating profit by segment provides a basis for the discussion that follows.Linde plc evaluates the performance of itsreportable segments based on operating profit,excluding items not indicative of ongoing business trends.The reported amounts are GAAP amounts from theConsolidated Statements of Income.Quarter Ended June 30,Six Months Ended June 30,(Millions of dollars)20242023Variance20242023VarianceSALESAmericas$3,655$3,541 3%$7,215$7,092 2%EMEA2,091 2,160(3)%4,182 4,337(4)%APAC1,657 1,683(2)%3,248 3,281(1)%Engineering544 495 10%1,083 1,035 5%Other320 325(2)c9 652(2)%Total sales$8,267$8,204 1%$16,367$16,397%SEGMENT OPERATING PROFITAmericas$1,159$1,070 8%$2,247$2,095 7%EMEA704 630 12%1,391 1,237 12%APAC474 4721 895 3%Engineering96 107(10)6 256(23)%Other(11)7(257)%8 9(11)%Segment operating profit$2,422$2,286 6%$4,763$4,492 6%Reconciliation to reported operating profit:Other charges(22)(40)Purchase accounting impacts-Linde AG(238)(253)(484)(508)Total operating profit$2,184$2,011$4,279$3,944 29 Table of Contents Americas Quarter Ended June 30,Six Months Ended June 30,(Millions of dollars)20242023Variance20242023VarianceSales$3,655$3,541 3%$7,215$7,092 2%Operating profit$1,159$1,070 8%$2,247$2,095 7%As a percent of sales31.70.21.1).5%Quarter Ended June 30,2024 vs.2023Six Months Ended June 30,2024 vs.2023%Change%ChangeFactors Contributing to Changes-SalesVolume%Price/Mix4%3%Cost pass-through%(1)%Currency(1)%(1)quisitions/divestitures%1%3%2%The Americas segment includes Lindes industrial gases operations in approximately 20 countries including the United States,Canada,Mexico,and Brazil.SalesSales for the Americas segment increased$114 million,or 3%,in the second quarter and increased$123 million,or 2%for the six months ended June 30,2024versus the respective 2023 periods.Higher pricing contributed 4%to sales in the quarter and 3%in the year-to-date period.Cost pass-through was flat in thesecond quarter and decreased sales 1%in the year-to-date period with minimal impact on operating profit.Currency translation decreased sales by 1%in boththe quarter and year-to-date periods driven primarily by the weakening of the Brazilian real against the U.S.Dollar.Volumes were flat in the second quarter andyear-to-date period as contributions from project start-ups were largely offset by base volume declines.Operating profitOperating profit in the Americas segment increased$89 million,or 8%,in the second quarter and increased$152 million,or 7%,for the six months ended June30,2024 versus the respective 2023 periods,driven primarily by higher pricing and continued productivity initiatives which more than offset cost inflation.EMEA Quarter Ended June 30,Six Months Ended June 30,(Millions of dollars)20242023Variance20242023VarianceSales$2,091$2,160(3)%$4,182$4,337(4)%Operating profit$704$630 12%$1,391$1,237 12%As a percent of sales33.7).23.3(.5%Quarter Ended June 30,2024 vs.2023Six Months Ended June 30,2024 vs.2023%Change%ChangeFactors Contributing to Changes-SalesVolume(1)%(2)%Price/Mix3%3%Cost pass-through(4)%(5)%Currency(1)quisitions/divestitures%(3)%(4)0 Table of Contents The EMEA segment includes Lindes industrial gases operations in approximately 45 European,Middle Eastern and African countries including Germany,United Kingdom,France,the Republic of South Africa and Sweden.SalesEMEA segment sales decreased by$69 million,or 3%,in the second quarter and decreased$155 million or 4%for the six months ended June 30,2024compared to the respective 2023 periods.Higher price attainment increased sales by 3%in the quarter and year-to-date periods.Volumes decreased sales by 1%in the quarter and 2%in the year-to-date period driven by the metals and mining end market.Cost pass-through decreased sales by 4%in the quarter and 5%inthe year-to-date period with minimal impact on operating profit.Currency translation decreased sales by 1%in the quarter driven primarily by the weakeningof the Euro against the U.S.Dollar and was flat in the year-to-date period.Operating ProfitOperating profit for the EMEA segment increased by$74 million,or 12%,in the second quarter and increased by$154 million,or 12%for the six monthsended June 30,2024 compared to the respective 2023 periods.The increase in operating profit in the second quarter and year-to-date period was drivenprimarily by higher pricing and continued productivity initiatives,partially offset by cost inflation and lower volumes.APAC Quarter Ended June 30,Six Months Ended June 30,(Millions of dollars)20242023Variance20242023VarianceSales$1,657$1,683(2)%$3,248$3,281(1)%Operating profit$474$472%$921$895 3%As a percent of sales28.6(.0(.4.3%Quarter Ended June 30,2024 vs.2023Six Months Ended June 30,2024 vs.2023%Change%ChangeFactors Contributing to Changes-SalesVolume/Equipment%2%Price/Mix%Cost pass-through1%(1)%Currency(3)%(2)quisitions/divestitures%(2)%(1)%The APAC segment includes Lindes industrial gases operations in approximately 20 Asian and South Pacific countries and regions including China,Australia,India,and South Korea.SalesSales for the APAC segment decreased$26 million,or 2%in the second quarter and decreased$33 million,or 1%,for the six months ended June 30,2024versus the respective 2023 periods.Pricing was flat in the quarter and year-to-date periods.Volumes were flat in the quarter and increased 2%for year-to-dateperiod including project start-ups in the electronics and chemicals and energy end markets.Currency translation decreased sales by 3%,in the quarter and 2%for the year-to-date period driven primarily by the weakening of the Australian dollar,Korean won and Chinese yuan against the U.S.dollar.Operating profitOperating profit in the APAC segment increased$2 million in the second quarter and increased$26 million,or 3%in the six months ended June 30,2024versus the respective 2023 periods,driven by continued productivity initiatives which more than offset the impact of currency and cost inflation.31 Table of Contents Engineering Quarter Ended June 30,Six Months Ended June 30,(Millions of dollars)20242023Variance20242023VarianceSales$544$495 10%$1,083$1,035 5%Operating profit$96$107(10)%$196$256(23)%As a percent of sales17.6!.6.1$.7%Quarter Ended June 30,2024 vs.2023Six Months Ended June 30,2024 vs.2023%Change%ChangeFactors Contributing to Changes-SalesCurrency(1)%Other11%5%5%SalesEngineering segment sales increased$49 million,or 10%,in the second quarter and increased 48 million,or 5%,in the six months ended June 30,2024 ascompared to the respective 2023 periods driven by project timing.Operating profitEngineering segment operating profit decreased$11 million,or 10%,in the second quarter and decreased$60 million or 23%in the six months ended June 30,2024 compared to the respective 2023 period due to prior years benefit from higher margin on lawful wind down of projects subject to sanctions in Russia.Other Quarter Ended June 30,Six Months Ended June 30,(Millions of dollars)20242023Variance20242023VarianceSales$320$325(2)%$639$652(2)%Operating profit(loss)$(11)$7(257)%$8$9(11)%As a percent of sales(3.4)%2.2%1.3%1.4%Quarter Ended June 30,2024 vs.2023Six Months Ended June 30,2024 vs.2023%Change%ChangeFactors Contributing to Changes-SalesVolume/price(1)%(2)%Currency(1)quisitions/divestitures%(2)%(2)%Other consists of corporate costs and a few smaller businesses including Linde Advanced Material Technologies(LAMT)and global helium wholesale,whichindividually do not meet the quantitative thresholds for separate presentation.SalesSales for Other decreased$5 million for the second quarter and decreased$13 million for the six months ended June 30,2024 versus the respective 2023periods.Underlying sales decreased 1%in the quarter and 2%in the year-to-date periods due to lower volumes in the helium business.The impact of currencytranslation decreased sales by 1%in the quarter and was flat in the year-to-date period.Operating profitOperating profit in Other decreased$18 million in the second quarter and decreased$1 million,or 11%in the six months ended June 30,2024 versus therespective 2023 periods.The decrease in the quarter was driven by higher costs due to helium,which was partially offset by an insurance recovery for thecoatings business in the year-to-date period.32 Table of Contents CurrencyThe results of Lindes non-U.S.operations are translated to the companys reporting currency,the U.S.dollar,from the functional currencies.For mostoperations,Linde uses the local currency as its functional currency.There is inherent variability and unpredictability in the relationship of these functionalcurrencies to the U.S.dollar and such currency movements may materially impact Lindes results of operations in any given periods.To help understand the reported results,the following is a summary of the significant currencies underlying Lindes consolidated results and the exchange ratesused to translate the financial statements(rates of exchange expressed in units of local currency per U.S.dollar):Percentage of YTD 2024Consolidated SalesExchange Rate forIncome StatementExchange Rate forBalance Sheet Year-To-Date AverageJune 30,December 31,Currency2024202320242023Euro18%0.93 0.93 0.93 0.92 Chinese yuan7%7.22 6.93 7.27 7.10 British pound5%0.79 0.81 0.79 0.79 Australian dollar4%1.52 1.48 1.50 1.47 Brazilian real4%5.08 5.07 5.59 4.86 Mexican peso4.10 18.15 18.32 16.97 Canadian dollar3%1.36 1.35 1.37 1.32 Korean won3%1,350 1,295 1,377 1,288 Indian rupee2.23 82.21 83.39 83.21 South African rand1.73 18.19 18.19 18.36 Swedish krona1.54 10.49 10.60 10.07 Thailand bhat16.17 34.19 36.70 34.14 33 Table of Contents Liquidity,Capital Resources and Other Financial DataThe following selected cash flow information provides a basis for the discussion that follows:(Millions of dollars)Six months ended June 30,20242023NET CASH PROVIDED BY(USED FOR):OPERATING ACTIVITIESNet income(including noncontrolling interests)$3,365$3,164 Non-cash charges(credits):Add:Depreciation and amortization1,907 1,908 Add:Deferred income taxes(184)(61)Add:Share-based compensation78 66 Add:Other charges,net of payments(75)(61)Net income adjusted for non-cash charges5,091 5,016 Less:Working capital(1,089)(640)Less:Pension contributions(24)(25)Other(95)(293)Net cash provided by(used for)operating activities$3,883$4,058 INVESTING ACTIVITIESCapital expenditures(2,181)(1,688)Acquisitions,net of cash acquired(152)(834)Divestitures,net of cash divested and asset sales22 24 Net cash provided by(used for)investing activities$(2,311)$(2,498)FINANCING ACTIVITIESDebt increase(decrease)-net2,535(642)Issuances(purchases)of common stock-net(2,460)(1,746)Cash dividends-Linde plc shareholders(1,334)(1,246)Noncontrolling interest transactions and other(217)(22)Net cash provided by(used for)financing activities$(1,476)$(3,656)Effect of exchange rate changes on cash and cash equivalents$(134)$17 Cash and cash equivalents,end-of-period$4,626$3,357 Cash Flow from OperationsCash provided by operations of$3,883 million for the six months ended June 30,2024 decreased$175 million,or 4%,versus 2023.The decrease was drivenprimarily by higher net working capital requirements including lower inflows from contract liabilities from engineering customer advanced payments andhigher cash taxes and interest,partially offset by higher net income adjusted for non-cash charges.Linde estimates that total 2024 required contributions to its pension plans will be in the range of approximately$30 million to$40 million,of which$24million has been made through June 30,2024.InvestingNet cash used for investing activities of$2,311 million for the six months ended June 30,2024 decreased$187 million versus 2023,due to lower acquisitions,net of cash acquired,partially offset by higher capital expenditures.Capital expenditures for the six months ended June 30,2024 were$2,181 million,$493 million higher than the prior year due primarily to investments in newplant and production equipment for backlog growth requirements.34 Table of Contents At June 30,2024,Lindes sale of gas backlog of large projects under construction was approximately$4.7 billion.This represents the total estimated capitalcost of large plants under construction.Acquisitions,net of cash acquired were$152 million for the six months ended June 30,2024 and relate primarily to packaged gas businesses in the Americas.Acquisitions,net of cash acquired were$834 million,for the six months ended June 30,2023 and related primarily to the acquisition of nexAir in theAmericas.Divestitures,net of cash divested and asset sales for the six months ended June 30,2024 and 2023 were$22 million and$24 million,respectively.FinancingCash used for financing activities was$1,476 million for the six months ended June 30,2024 as compared to$3,656 million for the six months ended June 30,2023.Cash provided by debt was$2,535 million in 2024 versus cash used for debt of$642 million in 2023,driven primarily by higher net debt issuances.InFebruary 2024,Linde repaid 550 million of 1.20%notes that became due and issued 700 million of 3.00%notes due in 2028,850 million of 3.20%notesdue in 2031 and 700 million of 3.40%notes due in 2036.In May 2024,Linde repaid 300 million of 1.875%notes that became due.In June 2024 Lindeissued 750 million of 3.375%notes due in 2030,750 million of 3.500%notes due in 2034 and 700 million of 3.75%notes due in 2044.Net purchases of ordinary shares were$2,460 million in 2024 versus$1,746 million in 2023.For additional information related to the share repurchaseprograms,see Part II Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.Cash dividends of$1,334 million increased$88 million from 2023 driven primarily by a 9%increase in quarterly dividends per share from$1.275 per share to$1.39 per share,partially offset by lower shares outstanding.Cash used for Noncontrolling interest transactions and other was$217 million for the six monthsended June 30,2024 versus cash used of$22 million for the respective 2023 period.The company continues to believe it has sufficient operating flexibility,cash,and funding sources to meet its business needs around the world.The companyhad$4.6 billion of cash as of June 30,2024,and has a$5 billion and a$1.5 billion unsecured and undrawn revolving credit agreement with no associatedfinancial covenants.No borrowings were outstanding under the credit agreements as of June 30,2024.The company does not anticipate any limitations on itsability to access the debt capital markets and/or other external funding sources and remains committed to its strong ratings from Moodys and Standard&Poors.Legal ProceedingsSee Note 8 to the condensed consolidated financial statements.35 Table of Contents NON-GAAP MEASURES AND RECONCILIATIONS(Millions of dollars,except per share data)The following non-GAAP measures are intended to supplement investors understanding of the companys financial information by providing measures whichinvestors,financial analysts and management use to help evaluate the companys operating performance and liquidity.Items which the company does notbelieve to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and futurebusiness trends on a consistent basis.Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and arenot a substitute for similar GAAP measures.Quarter Ended June 30,Six Months Ended June 30,2024202320242023Adjusted Operating Profit and Operating MarginReported operating profit$2,184$2,011$4,279$3,944 Add:Other charges 22 40 Add:Purchase accounting impacts-Linde AG(c)238 253 484 508 Total adjustments238 275 484 548 Adjusted operating profit$2,422$2,286$4,763$4,492 Reported percentage change9%8justed percentage change6%6%Reported sales$8,267$8,204$16,367$16,397 Reported operating margin26.4$.5&.1$.1justed operating margin29.3.9).1.4justed Depreciation and amortizationReported depreciation and amortization$958$960$1,907$1,908 Less:Purchase accounting impacts-Linde AG(c)(237)(251)(477)(501)Adjusted depreciation and amortization$721$709$1,430$1,407 Adjusted Other Income(Expense)-netReported Other Income(Expense)-net$2$(27)$60$(32)Less:Purchase accounting impacts-Linde AG(c)(1)(2)(7)(7)Adjusted Other Income(Expense)-net$3$(25)$67$(25)Adjusted Interest Expense-NetReported interest expense-net$70$52$135$89 Add:Purchase accounting impacts-Linde AG(c)1 4 3 13 Adjusted interest expense-net$71$56$138$102 36 Table of Contents Quarter Ended June 30,Six Months Ended June 30,2024202320242023Adjusted Income Taxes(a)Reported income taxes$508$438$971$868 Add:Purchase accounting impacts-Linde AG(c)56 67 116 124 Add:Other charges 34 5 79 Total adjustments56 101 121 203 Adjusted income taxes$564$539$1,092$1,071 Adjusted Effective Tax Rate(a)Reported income before income taxes and equity investments$2,163$2,004$4,243$3,945 Add:Purchase accounting impacts-Linde AG(c)237 249 481 495 Add:Other charges 22 40 Total adjustments237 271 481 535 Adjusted income before income taxes and equity investments$2,400$2,275$4,724$4,480 Reported Income taxes$508$438$971$868 Reported effective tax rate23.5!.9.9.0justed income taxes$564$539$1,092$1,071 Adjusted effective tax rate23.5#.7#.1#.9%Income from Equity InvestmentsReported income from equity investments$45$46$93$87 Add:Purchase accounting impacts-Linde AG(c)18 18 36 36 Adjusted income from equity investments$63$64$129$123 Adjusted Noncontrolling InterestsReported noncontrolling interests$(37)$(37)$(75)$(73)Add:Purchase accounting impacts-Linde AG(c)(3)(3)(6)(6)Adjusted noncontrolling interests$(40)$(40)$(81)$(79)Adjusted Net Income-Linde plc(b)Reported net income-Linde plc$1,663$1,575$3,290$3,091 Add:Other charges(12)(5)(39)Add:Purchase accounting impacts-Linde AG(c)196 197 395 401 Total adjustments196 185 390 362 Adjusted net income-Linde plc$1,859$1,760$3,680$3,453 37 Table of Contents Quarter Ended June 30,Six Months Ended June 30,2024202320242023Adjusted Diluted EPS(b)Reported diluted EPS$3.44$3.19$6.79$6.25 Add:Other charges(0.02)(0.01)(0.08)Add:Purchase accounting impacts-Linde AG(c)0.41 0.40 0.82 0.81 Total adjustments0.41 0.38 0.81 0.73 Adjusted diluted EPS$3.85$3.57$7.60$6.98 Reported percentage change8%9justed percentage change8%9justed EBITDA and%of SalesNet Income-Linde plc$1,663$1,575$3,290$3,091 Add:Noncontrolling interests37 37 75 73 Add:Net pension and OPEB cost(benefit),excluding service cost(49)(45)(99)(90)Add:Interest expense70 52 135 89 Add:Income taxes508 438 971 868 Add:Depreciation and amortization958 960 1,907 1,908 EBITDA$3,187$3,017$6,279$5,939 Add:Other charges 22 40 Add:Purchase accounting impacts-Linde AG(c)19 20 43 43 Total adjustments19 42 43 83 Adjusted EBITDA$3,206$3,059$6,322$6,022 Reported sales$8,267$8,204$16,367$16,397%of salesEBITDA38.66.88.46.2justed EBITDA38.87.38.66.7%(a)The income tax expense(benefit)on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income taxexpense(benefit)and included both current and deferred income tax amounts.(b)Net of income taxes which are shown separately in“Adjusted Income Taxes and Adjusted Effective Tax Rate”.(c)The company believes that its non-GAAP measures excluding Purchase accounting impacts-Linde AG are useful to investors because:(i)the 2018 business combination was a merger of equalsin an all-stock merger transaction,with no cash consideration,(ii)the company is managed on a geographic basis and the results of certain geographies are more heavily impacted by purchaseaccounting than others,causing results that are not comparable at the reportable segment level,therefore,the impacts of purchase accounting adjustments to each segment vary and are notcomparable within the company and when compared to other companies in similar regions,(iii)business management is evaluated and variable compensation is determined based on resultsexcluding purchase accounting impacts,and;(iv)it is important to investors and analysts to understand the purchase accounting impacts to the financial statements.A summary of each of the adjustments made for Purchase accounting impacts-Linde AG are as follows:Adjusted Operating Profit and Margin:The purchase accounting adjustments for the periods presented relate primarily to depreciation and amortization related to the fair value step up of fixed assetsand intangible assets(primarily customer related)acquired in the merger and the allocation of fair value step-up for ongoing Linde AG asset disposals(reflected in Other Income/(Expense).Adjusted Interest Expense-Net:Relates to the amortization of the fair value of debt acquired in the merger.Adjusted Income Taxes and Effective Tax Rate:Relates to the current and deferred income tax impact on the adjustments discussed above.The income tax expense(benefit)on the non-GAAP pre-taxadjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense(benefit)and included both current and deferred incometax amounts.Adjusted Income from Equity Investments:Represents the amortization of increased fair value on equity investments related to depreciable and amortizable assets.Adjusted Noncontrolling Interests:Represents the noncontrolling interests ownership portion of the adjustments described above determined on an entity by entity basis.38 Table of Contents Net Debt and Adjusted Net DebtNet debt is a financial liquidity measure used by investors,financial analysts and management to evaluate the ability of a company to repay its debt.Purchaseaccounting impacts have been excluded as they are non-cash and do not have an impact on liquidity.June 30,2024December 31,2023(Millions of dollars)Debt$21,518$19,373 Less:cash and cash equivalents(4,626)(4,664)Net debt16,892 14,709 Less:purchase accounting impacts-Linde AG(4)(7)Adjusted net debt$16,888$14,702 39 Table of Contents Supplemental Guarantee InformationOn May 3,2023,the company filed a Form S-3 Registration Statement with the SEC(the Registration Statement).Linde plc may offer debt securities,preferred shares,depositary shares and ordinary shares under the Registration Statement,and debt securities exchangeablefor or convertible into preferred shares,ordinary shares or other debt securities.Debt securities of Linde plc may be guaranteed by Linde Inc and/or LindeGmbH.Linde plc may provide guarantees of debt securities offered by its wholly owned subsidiaries Linde Inc.or Linde Finance under the RegistrationStatement.Linde Inc.is a wholly owned subsidiary of Linde plc.Linde Inc.may offer debt securities under the Registration Statement.Debt securities of Linde Inc.willbe guaranteed by Linde plc,and such guarantees by Linde plc may be guaranteed by Linde GmbH.Linde Inc.may also provide(i)guarantees of debt securitiesoffered by Linde plc under the Registration Statement and(ii)guarantees of the guarantees provided by Linde plc of debt securities of Linde Finance offeredunder the Registration Statement.Linde Finance B.V.is a wholly owned subsidiary of Linde plc.Linde Finance may offer debt securities under the Registration Statement.Linde plc willguarantee debt securities of Linde Finance offered under the Registration Statement.Linde GmbH and Linde Inc.may guarantee Linde plcs obligations underits downstream guarantee.Linde GmbH is a wholly owned subsidiary of Linde plc.Linde GmbH may provide(i)guarantees of debt securities offered by Linde plc under the RegistrationStatement and(ii)upstream guarantees of downstream guarantees provided by Linde plc of debt securities of Linde Inc.or Linde Finance offered under theRegistration Statement.In September 2019,Linde plc provided downstream guarantees of all pre-existing Linde Inc.and Linde Finance notes,and Linde GmbH and Linde Inc.,respectively,provided upstream guarantees of Linde plcs downstream guarantees.Linde plc has filed a base prospectus with the Luxembourg Stock Exchange for a 15.0 billion debt issuance program,under which Linde plc may offer debtsecurities.Linde Inc.and Linde GmbH have provided to Linde plc upstream guarantees in relation to debt securities of Linde plc offered under the Europeandebt program.For further information about the guarantees of the debt securities registered under the Registration Statement(including the ranking of such guarantees,limitations on enforceability of such guarantees and the circumstances under which such guarantees may be released),see“Description of Debt Securities Guarantees”and“Description of Debt Securities Ranking”in the Registration Statement,which subsections are incorporated herein by reference.The following tables present summarized financial information for Linde plc,Linde Inc.,Linde GmbH and Linde Finance on a combined basis,aftereliminating intercompany transactions and balances between them and excluding investments in and equity in earnings from non-guarantor subsidiaries.40 Table of Contents (Millions of dollars)Statement of Income DataSix Months Ended June 30,2024Twelve months ended December 31,2023Sales$3,844$8,143 Operating profit720 1,656 Net income(151)735 Transactions with non-guarantor subsidiaries1,506 3,004 Balance Sheet Data(at period end)Current assets(a)$8,454$
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Bayer-Half-Year Financial Report as of June 30,2024 A Interim Group Management ReportKey Events 1 Modest performance in challenging agricultural market environment/Group sales at 11.1 billion (Fx&p adj. 3.1%)/EBITDA before special items declines to 2.1 billion(16.5%),impacted by currency headwinds/Crop Science posts slight increase in sales and sharp fall in earnings /Pharmaceuticals and Consumer Health report higher sales (Fx&p adj.)and lower earnings /Core earnings per share at 0.94 (23.0%)/Net income at minus 34.0 million/Free cash flow at 1.3 billion/Group outlook confirmedHalf-Year Financial Report 2024 Bayer Half-Year Financial Report as of June 30,2024 Contents 2Contents Bayer Group Key Data _ 3 Interim Group Management Report as of June 30,2024 _ 4 Key Events _ 4 1.Overview of Sales,Earnings and Financial Position _ 4 1.1 Earnings Performance _ 4 1.2 Business Development by Division _ 8 1.3 Asset and Financial Position of the Bayer Group _ 16 2.Research,Development,Innovation _ 18 Crop Science _ 18 Pharmaceuticals _ 19 Consumer Health _ 21 Leaps by Bayer _ 22 3.Report on Future Perspectives and on Opportunities and Risks _ 22 3.1 Future Perspectives _ 22 3.2 Opportunities and Risks _ 23 Condensed Consolidated Interim Financial Statements as of June 30,2024 _ 24 Bayer Group Condensed Consolidated Income Statements _ 24 Bayer Group Condensed Consolidated Statements of Comprehensive Income _ 25 Bayer Group Condensed Consolidated Statements of Financial Position _ 26 Bayer Group Condensed Consolidated Statements of Cash Flows _ 27 Bayer Group Condensed Consolidated Statements of Changes in Equity _ 28 Notes to the Condensed Consolidated Interim Financial Statements of the Bayer Group _ 29 Events After the End of the Reporting Period _ 40 Responsibility Statement _ 41 Report on Review of Interim Financial Information _ 42 Financial Calendar _ 43 Reporting Principles _ 43 Masthead _ 43 Bayer Half-Year Financial Report as of June 30,2024 Key Data 3Bayer Group Key Data Change(%)Change(%)million Q2 2023Q2 2024ReportedFx&p adj.H1 2023H1 2024ReportedFx&p adj.Sales 11,044 11,144 0.9 3.125,433 24,909 2.1 1.0Change in sales1 Volume 7.4% 1.6%6.6% 0.5%Price 0.8% 1.5% 2.1% 0.5%Currency 4.3%2.2%1.7%3.1%Portfolio 1.3%0.0%1.2%0.0%Sales by region Europe/Middle East/Africa 3,307 3,500 5.8 7.47,946 7,991 0.6 4.3North America 4,038 4,154 2.9 1.89,944 9,914 0.3 0.0Asia/Pacific 2,235 2,107 5.7 2.24,416 4,021 8.9 4.0Latin America 1,464 1,383 5.5 4.83,127 2,983 4.6 2.6EBITDA1 2,331 1,667 28.56,649 5,872 11.7Special items1(196)(444)(349)(651)EBITDA before special items1 2,527 2,111 16.56,998 6,523 6.8EBITDA margin before special items1 22.9.9.5&.2IT1(956)525.2,017 3,617 79.3Special items1(2,490)(490)(2,921)(697)EBIT before special items1 1,534 1,015 33.84,938 4,314 12.6Financial result(618)(622).(985)(1,123).Net income(from continuing and discontinued operations)(1,887)(34).291 1,966.Earnings per share from continuing and discontinued operations()(1.92)(0.03).0.30 2.00.Core earnings per share1 from continuing operations()1.22 0.94 23.04.17 3.76 9.8Net cash provided by(used in)operating activities(from continuing and discontinued operations)484 2,410.(3,066)260.Free cash flow1(473)1,273.(4,575)(1,353).Net financial debt(at end of period)39,620 36,760 7.239,620 36,760 7.2Cash flow-relevant capital expenditures(from continuing and discontinued operations)606 628 3.61,072 1,074 0.2Research and development expenses 1,228 1,499 22.12,799 2,925 4.5Depreciation,amortization and impairment losses/loss reversals 3,287 1,142 65.34,632 2,255 51.3Number of employees (at end of period)2 102,048 96,567 5.4102,048 96,567 5.4Personnel expenses (including pension expenses)2,480 3,050 23.05,739 6,090 6.1 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”2 Employees calculated as full-time equivalents(FTEs)Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management ReportKey Events 4Interim Group Management Report as of June 30,2024 Key Events Financing activities In June 2024,we placed our first-ever bond on the Chinese capital market.Known as a Panda bond,the issuance had a volume of CNY 2 billion(256 million),a maturity of two years and a coupon of 2.2%.1.Overview of Sales,Earnings and Financial Position1 1.1 Earnings Performance Second quarter of 2024 Group sales Group sales increased by 3.1%(Fx&portfolio adj.)to 11,144 million in the second quarter of 2024(Q2 2023:11,044 million;reported: 0.9%).There was a negative currency effect of 240 million(Q2 2023:553 million).Sales in Germany amounted to 659 million(Q2 2023:638 million).Sales at Crop Science increased slightly against the prior-year quarter,primarily due to higher sales of our glyphosate-based herbicides and soybean seeds.However,we registered significant declines for our non-glyphosate-based herbicides and at Fungicides.Sales at Pharmaceuticals were up,largely driven by significant gains for Nubeqa and Kerendia and further increases for Eylea and our Radiology business.However,growth was mainly held back by declines for Xarelto.Sales at Consumer Health also increased,largely thanks to growth in the Dermatology,Nutritionals and Digestive Health categories.EBITDA before special items Group EBITDA before special items decreased by 16.5%to 2,111 million.This figure included a negative currency effect of 129 million(Q2 2023:120 million).EBITDA before special items at Crop Science declined considerably,mainly due to an unfavorable product mix and a reduction in allocations to provisions for the Group-wide short-term incentive(STI)program in the prior-year quarter.Pharmaceuticals posted a decline in EBITDA before special items that was attributable to the product mix,high negative currency effects and the aforementioned reduction in allocations to STI provisions in the prior-year quarter.EBITDA before special items at Consumer Health fell,mainly due to an increase in costs and higher investments in our products.The Group EBITDA margin before special items came in at 18.9%.1 For definition of alternative performance measures see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 5Depreciation,amortization and impairments Depreciation,amortization and impairment losses net of impairment loss reversals amounted to 1,142 million(Q2 2023:3,287 million).They comprised 692 million(Q2 2023:2,610 million)in amortization and impairments on intangible assets and 450 million(Q2 2023:677 million)in depreciation and impairments on property,plant and equipment.Impairment losses,net of impairment loss reversals,totaled 121 million(Q2 2023:2,301 million),with intangible assets accounting for 72 million(Q2 2023:2,035 million).A total of 46 million in impairment losses,net of impairment loss reversals,were included in special items(Q2 2023:2,298 million).EBIT and special items EBIT of the Bayer Group came in at 525 million(Q2 2023:minus 956 million)after net special charges of 490 million(Q2 2023:2,490 million).The special charges primarily related to expenses for ongoing restructuring measures and affected all divisions and functional areas.EBIT before special items decreased by 33.8%to 1,015 million(Q2 2023:1,534 million).The following special items were taken into account in calculating EBIT and EBITDA:A 1 Special Items1 by Category million EBIT Q2 2023 EBITQ2 2024EBITH1 2023EBITH1 2024EBITDAQ2 2023EBITDAQ2 2024EBITDA H1 2023 EBITDAH1 2024Total special items(2,490)(490)(2,921)(697)(196)(444)(349)(651)Restructuring(166)(329)(281)(529)(166)(325)(281)(524)of which in the Reconciliation(27)(121)(54)(138)(27)(120)(54)(137)Acquisition/integration(16)(18)(16)(18)Divestments/closures(2)(43)(50)(42)(2)(2)(50)(1)Litigations/legal risks(35)(185)(81)(181)(35)(184)(81)(181)of which in the Reconciliation(28)(183)(88)(209)(28)(183)(88)(209)Impairment losses/loss reversals(2,298)(2,576)(4)(4)Other 27 67 85 55 27 67 85 55 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”2 Where not already included in the other special items categories A 2 Special Items1 by Functional Cost million EBIT Q2 2023 EBITQ2 2024EBITH1 2023EBITH1 2024EBITDAQ2 2023EBITDAQ2 2024EBITDA H1 2023 EBITDAH1 2024Total special items(2,490)(490)(2,921)(697)(196)(444)(349)(651)Cost of goods sold(46)(79)(342)(114)(15)(79)(33)(114)Selling expenses(91)(114)(129)(179)(106)(68)(144)(133)Research and development expenses 148(40)128(91)(10)(40)(30)(91)General administration expenses(37)(145)(82)(191)(37)(144)(82)(190)Other operating income/(expenses)(2,464)(112)(2,496)(122)(28)(113)(60)(123)1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Net income After a financial result of minus 622 million(Q2 2023:minus 618 million),income before income taxes amounted to minus 97 million(Q2 2023:minus 1,574 million).The financial result was nearly level year on year,with an increase in net interest expense offset by an improvement in the net amounts of exchange gains and losses and of miscellaneous financial income and expenses.Taking into account income from income taxes of 71 million(Q2 2023:income tax expense of 315 million)and accounting for noncontrolling interest,net income amounted to minus 34 million(Q2 2023:minus 1,887 million).Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 6A 3 Financial Result1 million Q2 2023Q2 2024H1 2023 H1 2024Income(loss)from investments in affiliated companies(53)(57)(100)(55)Net interest expense(327)(411)(540)(717)Other financial income/(expenses)(238)(154)(345)(351)of which interest portion of discounted provisions(102)(117)(216)(218)of which exchange gain(loss)(72)(20)(57)(61)of which miscellaneous financial income/(expenses)(64)(17)(72)(72)Total(618)(622)(985)(1,123)of which special items(net)(74)(95)(166)(147)1 Further information on the financial result is given in Note 10 of the Annual Report 2023.Core earnings per share Core earnings per share decreased by 23.0%to 0.94(Q2 2023:1.22),mainly due to the decline in earnings at all divisions.Earnings per share(total)came in at minus 0.03(Q2 2023:minus 1.92).The difference between this figure and the one for core earnings per share is mainly due to amortization and special charges for ongoing restructuring measures.A 4 Core Earnings per Share1 million Q2 2023Q2 2024H1 2023 H1 2024EBIT1(as per income statements)(956)525 2,017 3,617 Amortization and impairment losses/loss reversals on goodwill and other intangible assets 2,610 692 3,276 1,388 Impairment losses/loss reversals on property,plant and equipment,and accelerated depreciation included in special items 271 50 555 76 Special items(other than accelerated depreciation,amortization and impairment losses/loss reversals)196 444 349 651 Core EBIT1 2,121 1,711 6,197 5,732 Financial result(as per income statements)(618)(622)(985)(1,123)Special items in the financial result2 74 95 166 147 Income taxes(as per income statements)(315)71(739)(518)Special items in income taxes Tax effects related to amortization,impairment losses/loss reversals and special items(57)(324)(529)(531)Income after income taxes attributable to noncontrolling interest (as per income statements)2(8)(2)(10)Above-mentioned adjustments attributable to noncontrolling interest(12)(1)(12)(1)Core net income from continuing operations 1,195 922 4,096 3,696 Shares(million)Weighted average number of shares 982.42 982.42 982.42 982.42 Core earnings per share from continuing operations1 1.22 0.94 4.17 3.76 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”2 Includes in particular the changes in the fair value of the interests in Century Therapeutics,United States,and Pyxis Oncology,United States,as well as interest cost for the provisions for litigations/legal risks Personnel expenses and employee numbers The number of employees in the Bayer Group as of the closing date fell by 5.4%year on year to 96,567(June 30,2023:102,048).Personnel expenses increased by 23.0%to 3,050 million in the second quarter(Q2 2023:2,480 million),mainly due to the aforementioned reduction in allocations to provisions for the Group-wide short-term incentive(STI)program in the prior-year period as well as expenses for our restructuring programs.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 7First half of 2024 Group sales Group sales rose by 1.0%(Fx&portfolio adj.)to 24,909 million in the first half of 2024(H1 2023:25,433 million;reported:2.1%).There was a negative currency effect of 765 million(H1 2023:451 million).Sales in Germany amounted to 1,388 million(H1 2023:1,406 million).Crop Science registered a slight decline in sales that was mainly due to significantly lower volumes for our non-glyphosate-based herbicides and our Fungicides business.Our glyphosate-based products posted substantial volume increases that offset the impact of lower prices.Sales at Pharmaceuticals were up,largely driven by significant gains for Nubeqa and Kerendia as well as further increases for Eylea and our Radiology business.However,growth was mainly held back by declines for Xarelto and Adalat.Sales at Consumer Health advanced slightly,largely due to gains in the Dermatology and Digestive Health categories.EBITDA before special items EBITDA before special items at the Bayer Group dropped by 6.8%to 6,523 million(H1 2023:6,998 million).This figure included a negative currency effect of 335 million.The EBITDA margin before special items declined to 26.2%.EBITDA before special items at Crop Science declined significantly,mainly due to an unfavorable product mix,price declines for our glyphosate-based products and a reduction in allocations to provisions for the Group-wide short-term incentive(STI)program in the prior-year period.Pharmaceuticals posted an increase in EBITDA before special items that was primarily attributable to lower selling and R&D expenses.EBITDA before special items at Consumer Health was down due to a rise in costs,higher investments in our products and negative currency effects.Depreciation,amortization and impairments Depreciation,amortization and impairment losses net of impairment loss reversals amounted to 2,255 million in the first six months of 2024(H1 2023:4,632 million).They comprised 1,388 million(H1 2023:3,275 million)in amortization and impairments on intangible assets and 867 million(H1 2023:1,357 million)in depreciation and impairments on property,plant and equipment.Impairment losses,net of impairment loss reversals,totaled 148 million(H1 2023:2,635 million),and included 73 million in net impairment losses on intangible assets(H1 2023:2,074 million).A total of 46 million in impairment losses,net of impairment loss reversals,were included in special items(H1 2023:2,576 million).EBIT and special items EBIT of the Bayer Group amounted to 3,617 million in the first half of the year(H1 2023:2,017 million)after net special charges of 697 million(H1 2023:2,921 million)that were mainly related to ongoing restructuring programs.EBIT before special items decreased by 12.6%to 4,314 million(H1 2023:4,938 million).Net income After a financial result of minus 1,123 million(H1 2023:minus 985 million),income before income taxes in the first half of the year came in at 2,494 million(H1 2023:1,032 million).The deterioration in the financial result was largely attributable to higher interest expense due to increased interest rates.After income tax expense of 518 million(H1 2023:739 million),income after income taxes was 1,976 million(H1 2023:293 million).After adjusting for income from discontinued operations after income taxes and income attributable to noncontrolling interest,net income came to 1,966 million(H1 2023:291 million).Core earnings per share Core earnings per share decreased by 9.8%to 3.76(H1 2023:4.17),mainly due to the decline in earnings at the Crop Science Division.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 8Earnings per share(total)came in at 2.00(H1 2023:0.30).The difference between this figure and the one for core earnings per share is mainly due to amortization and special charges for ongoing restructuring measures.1.2 Business Development by Division Crop Science A 5 Key Data Crop Science Change(%)1Change(%)1 million Q2 2023Q2 2024ReportedFx&p adj.H1 2023H1 2024ReportedFx&p adj.Sales 4,924 4,981 1.2 1.113,275 12,888 2.9 1.4Change in sales1 Volume 15.1% 3.8.2% 1.4%Price 3.4%2.7% 2.6%2.8%Currency 3.3% 0.1%0.6%1.5%Portfolio 2.0%0.0%1.8%0.0%Sales by region Europe/Middle East/Africa 973 1,096 12.6 13.23,270 3,175 2.9 2.1North America 2,273 2,360 3.8 2.76,455 6,482 0.4 0.8Asia/Pacific 651 611 6.14.41,283 1,130 11.9 8.3Latin America 1,027 914 11.010.12,267 2,101 7.3 9.1EBITDA1 666 446 33.03,915 3,235 17.4Special items1(59)(78)(77)(138)EBITDA before special items1 725 524 27.73,992 3,373 15.5EBITDA margin before special items1 14.7.50.1&.2IT1(2,207)(229).112 1,834.Special items1(2,353)(79)(2,649)(138)EBIT before special items1 146(150).2,761 1,972 28.6Net cash provided by(used in)operating activities 338 1,519.(3,026)(1,346).Cash flow-relevant capital expenditures 283 266 6.0491 476 3.1Research and development expenses 382 618 61.8982 1,243 26.6 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Second quarter of 2024 Sales Sales at Crop Science rose by 1.1%(Fx&portfolio adj.)to 4,981 million in the second quarter of 2024.Growth was mainly driven by higher sales of our glyphosate-based herbicides,with a particularly strong performance in North America.Sales of soybean seeds also increased.However,we recorded substantial sales declines for our non-glyphosate-based herbicides and our Fungicides business in a soft market environment./At Corn Seed&Traits,we recorded a slight drop in sales,mainly due to lower volumes in Latin and North America amid a decline in planted acreages./In our Herbicides business,we recorded substantial volume increases for our glyphosate-based products across all regions.By contrast,sales of our non-glyphosate-based products declined in all regions,especially in Latin America due to adverse weather conditions and Asia/Pacific as a result of falling market prices./Business at Fungicides was down sharply,mainly as a result of lower volumes and prices in North and Latin America./Sales at Soybean Seed&Traits climbed by a double-digit percentage,mainly driven by substantially higher volumes in North America./Sales at Insecticides increased,largely driven by higher Movento volumes in the Europe/Middle East/Africa region.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 9/Our Cotton Seed business was impacted by a negative regional price-mix effect in North America that was only partially offset by higher volumes in the Asia/Pacific and North America regions./Business at Vegetable Seeds was up,primarily due to price increases in the Europe/Middle East/Africa region./Sales in the reporting unit“Other”came in at the prior-year level.In the Industrial Turf&Ornamental(IT&O)business,volume increases more than offset price declines.A 6 Sales by Strategic Business Entity Change(%)1Change(%)1 million Q2 2023Q2 2024ReportedFx&p adj.H1 2023H1 2024ReportedFx&p adj.Crop Science 4,9244,981 1.2 1.113,27512,888 2.9 1.4Corn Seed&Traits 1,2321,211 1.7 2.84,5004,453 1.0 0.7Herbicides 1,2761,381 8.2 8.73,1652,982 5.8 4.4of which glyphosate-based products2 486685 40.9 41.71,1911,342 12.7 13.2Fungicides 819709 13.4 12.41,8731,644 12.2 10.2Soybean Seed&Traits 446506 13.5 12.41,0541,110 5.3 5.3Insecticides 348369 6.0 6.9808828 2.5 4.3Cotton Seed 137127 7.3 9.6451417 7.5 7.8Vegetable Seeds 195211 8.2 9.0376395 5.1 7.1Other 471467 0.8 0.61,0481,059 1.0 2.5 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”2 As of 2024,our business with glyphosate-based products is for the first time being reported separately within the Herbicides strategic business entity;the prior-year figures are likewise shown separately.Earnings EBITDA before special items at Crop Science decreased by 27.7%to 524 million in the second quarter of 2024(Q2 2023:725 million),mainly due to an unfavorable product mix and a reduction in allocations to provisions for the Group-wide short-term incentive(STI)program in the prior-year quarter.By contrast,there was a positive currency effect of 49 million(Q2 2023:negative currency effect of 96 million).The EBITDA margin before special items declined by 4.2 percentage points to 10.5%.EBIT amounted to minus 229 million in the second quarter of 2024(Q2 2023:minus 2,207 million)after net special charges of 79 million(Q2 2023:2,353 million)that primarily related to ongoing restructuring measures.A 7 Special Items1 Crop Science million EBITQ2 2023EBITQ2 2024EBITH1 2023EBITH1 2024EBITDAQ2 2023EBITDAQ2 2024EBITDAH1 2023EBITDAH1 2024Restructuring(26)(77)(53)(166)(26)(77)(53)(166)Acquisition/integration(16)(18)(16)(18)Divestments/closures(4)(22)(4)(22)Litigation/legal risks(8)(2)22 28(8)(1)22 28 Impairment losses/loss reversals(2,298)(2,576)(4)(4)Other(1)(2)(1)(2)Total special items(2,353)(79)(2,649)(138)(59)(78)(77)(138)1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 10First half of 2024 Sales In the first half of 2024,sales at Crop Science declined by 1.4%(Fx&portfolio adj.)to 12,888 million in a soft market environment,mainly due to significantly lower volumes for our non-glyphosate-based herbicides and our Fungicides business.By contrast,we recorded a substantial increase in sales of our glyphosate-based products.Sales at Corn Seed&Traits rose,especially in Europe/Middle East/Africa.However,growth was slowed by lower volumes in North and Latin America.In our Herbicides business,we recorded declines for our non-glyphosate-based products in all regions,largely due to increased competitive pressure in the Europe/Middle East/Africa region.Our glyphosate-based products saw a substantial increase in volumes and a market-driven decline in prices,especially in North America,with demand returning to normal levels.Business at Fungicides was down in all regions,with sales primarily impacted by significantly lower volumes in the Europe/Middle East/Africa region due to adverse weather and market conditions.Sales at Soybean Seed&Traits were up,primarily driven by higher volumes in North and Latin America.Our Insecticides business reported an increase in sales that was largely due to higher volumes and prices in the Europe/Middle East/Africa region.However,price declines in Latin America had a negative impact.Sales at Cotton Seed decreased,mainly due to negative regional price-mix effects in North America.Sales at Vegetable Seeds increased,with business growing particularly in Europe/Middle East/Africa due to higher prices.In the reporting unit“Other”,we registered a slight increase in sales that was predominantly due to higher volumes.Earnings EBITDA before special items at Crop Science declined by 15.5%to 3,373 million in the first half of 2024,mainly due to price declines for glyphosate-based products,an unfavorable product mix and a reduction in allocations to provisions for the Group-wide short-term incentive(STI)program in the prior-year period.There was a negative currency effect of 43 million(H1 2023:42 million).The EBITDA margin before special items decreased by 3.9 percentage points to 26.2%.EBIT came in at 1,834 million(H1 2023:112 million)after net special charges of 138 million(H1 2023:2,649 million)that primarily related to ongoing restructuring measures.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 11Pharmaceuticals A 8 Key Data Pharmaceuticals Change(%)1Change(%)1 million Q2 2023Q2 2024ReportedFx&p adj.H1 2023H1 2024ReportedFx&p adj.Sales 4,557 4,605 1.1 4.58,964 8,963 0.0 4.2Change in sales1 Volume 0.9% 1.5%0.7% 2.3%Price 0.7% 3.0%0.7% 1.9%Currency 4.8%3.4%2.8%4.2%Portfolio 0.8%0.0%0.9%0.0%Sales by region Europe/Middle East/Africa 1,789 1,812 1.3 2.93,560 3,634 2.1 4.5North America 1,171 1,256 7.3 6.42,281 2,366 3.7 3.8Asia/Pacific 1,356 1,272 6.2 1.62,661 2,459 7.6 1.8Latin America 241 265 10.0 40.7462 504 9.1 38.2EBITDA1 1,304 1,293 0.82,368 2,392 1.0Special items1(75)(29)(117)(124)EBITDA before special items1 1,379 1,322 4.12,485 2,516 1.2EBITDA margin before special items1 30.3(.7.7(.1IT1 1,047 1,040 0.71,853 1,912 3.2Special items1(75)(32)(117)(128)EBIT before special items1 1,122 1,072 4.51,970 2,040 3.6Net cash provided by operating activities 442 1,047.1,149 1,856 61.5Cash flow-relevant capital expenditures 245 262 6.9450 440 2.2Research and development expenses 794 822 3.51,674 1,578 5.7 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Second quarter of 2024 Sales In the Pharmaceuticals Division,we increased sales by 4.5%(Fx&portfolio adj.)to 4,605 million in the second quarter of 2024.We registered significant gains for our new products Nubeqa and Kerendia,and also posted continued sales growth for Eylea and our Radiology business.By contrast,business was mainly held back by declines for Xarelto due to patent expirations./As expected,sales of our oral anticoagulant Xarelto decreased markedly as a result of competitive pressure from generics,especially in Canada and Europe.License revenues recognized as sales in the United States,where Xarelto is marketed by a subsidiary of Johnson&Johnson,were down against the prior-year quarter./Our ophthalmology drug Eylea delivered strong growth with contributions from all regions,mainly driven by higher volumes in Japan and Canada./Sales of our cancer drug Nubeqa rose significantly,with gains in all regions.The product therefore maintained its growth momentum,especially in the United States and Europe,with strong increases in volumes./We also achieved considerable gains for Kerendia,our product for the treatment of patients with chronic kidney disease associated with type 2 diabetes,mainly thanks to a substantial rise in volumes in the United States.The expansion of business in China also contributed to the positive development./The strong increase in sales of our long-term contraceptives in the Mirena product family was driven by higher volumes and prices,particularly in the United States and Brazil./Business with our pulmonary hypertension treatment Adempas was up significantly,especially in the United States.As in the past,sales reflected the proportionate recognition of the upfront and milestone payments resulting from the sGC collaboration with Merck&Co.,United States./Sales of Aspirin Cardio,our product for the secondary prevention of heart attacks,increased,with business mainly up in China following a weak prior-year quarter.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 12/The substantial sales declines for Stivarga,our cancer drug,and Adalat,our product for the treatment of hypertension and coronary heart disease,were primarily attributable to lower volumes in China./We again registered very strong performance in our Radiology business,especially for CT Fluid Delivery and Ultravist,driven by increased volumes and prices.A 9 Best-Selling Pharmaceuticals Products Change(%)1Change(%)1 million Q2 2023Q2 2024ReportedFx&p adj.H1 2023H1 2024ReportedFx&p adj.Xarelto 1,039904 13.0 10.61,9821,830 7.7 4.8Eylea 814843 3.6 7.71,6031,625 1.4 5.6Nubeqa 201380 89.1 90.0379663 74.9 78.4Mirena/Kyleena/Jaydess 296322 8.8 11.1599615 2.7 5.5Adempas 164181 10.4 10.8316352 11.4 12.7Kogenate/Kovaltry/Jivi 192180 6.3 4.2384347 9.6 7.6YAZ/Yasmin/Yasminelle 180168 6.7 1.2332333 0.3 10.5Aspirin Cardio 131160 22.1 29.6312311 0.3 8.1CT Fluid Delivery 125139 11.2 11.1249273 9.6 10.5Adalat 144112 22.2 20.1321239 25.5 21.7Stivarga 145125 13.8 10.7278237 14.7 10.4Ultravist 124122 1.6 10.6242236 2.5 10.3Gadovist product family 115108 6.1 0.4233213 8.6 1.8Kerendia 67115 71.6 72.9119200 68.1 69.9Betaferon/Betaseron 6056 6.7 6.1117102 12.8 11.9Total best-selling products 3,7973,915 3.1 6.47,4667,576 1.5 5.5Proportion of Pharmaceuticals sales 83%Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Earnings EBITDA before special items at Pharmaceuticals decreased by 4.1%to 1,332 million in the second quarter of 2024(Q2 2023:1,379 million).The increase in sales was offset by an unfavorable product mix,which primarily related to the declines for Xarelto,as well as high negative currency effects of 150 million(Q2 2023:40 million)and a reduction in allocations to provisions for the Group-wide short-term incentive(STI)program in the prior-year quarter.By contrast,earnings benefited from a decrease in selling expenses for our more mature products.In addition,higher investments in early-stage research and our cell and gene therapy and chemoproteomics technologies were offset by significantly lower expenses for projects in advanced clinical development.The EBITDA margin before special items declined by 1.6 percentage points to 28.7%.EBIT came in at 1,040 million in the second quarter of 2024(Q2 2023:1,047 million)after net special charges of 32 million(Q2 2023:75 million).Special charges from ongoing restructuring measures were partly offset by special gains from the measurement of contingent considerations at fair value.A 10 Special Items1 Pharmaceuticals million EBITQ2 2023EBITQ2 2024EBITH1 2023EBITH1 2024EBITDAQ2 2023EBITDAQ2 2024EBITDAH1 2023EBITDAH1 2024Restructuring(106)(99)(161)(184)(106)(96)(161)(180)Divestments/closures 2 (28)1 2 (28)1 Litigations/legal risks 1 (15)1 (15)Other 28 67 87 55 28 67 87 55 Total special items(75)(32)(117)(128)(75)(29)(117)(124)1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 13First half of 2024 Sales Sales at Pharmaceuticals increased by 4.2%(Fx&portfolio adj.)to 8,963 million in the first half of 2024.Growth was largely driven by our new products Nubeqa and Kerendia,as well as by Eylea and our Radiology business,which maintained their strong performance.By contrast,business was held back by declines for Xarelto due to patent expirations and for Adalat as a result of tender procedures in China.As expected,Xarelto sales declined due to competitive pressure from generics.By contrast,we recorded encouraging gains for Eylea,primarily thanks to strong volume growth.Nubeqa sales increased considerably,largely driven by significantly higher volumes in the United States and Europe.We also posted substantial gains for Kerendia,especially in the United States and China.Adempas sales likewise rose markedly,mainly driven by business in the United States.Sales of Kogenate/Kovaltry/Jivi were down due to competitive pressure and lower volumes.Our YAZ/Yasmin/Yasminelle business developed very positively compared with a weak prior-year period.The substantial declines for Adalat and Stivarga were mainly attributable to lower volumes in China.Our Radiology business continued to post strong gains,especially for CT Fluid Delivery and Ultravist,driven by increased volumes and prices.Earnings EBITDA before special items at Pharmaceuticals rose by 1.2%to 2,516 million in the first half of 2024.Earnings benefited from a decrease in selling expenses for our more mature products.Costs for R&D activities also decreased,with a significant decline in expenses for projects in advanced clinical development more than offsetting an increase in investments,especially for our cell and gene therapy and chemoproteomics technologies.By contrast,earnings were impacted by high negative currency effects of 277 million(H1 2023:46 million)and a reduction in allocations to provisions for the Group-wide short-term incentive(STI)program in the prior-year period.The EBITDA margin before special items rose by 0.4 percentage points to 28.1%.EBIT amounted to 1,912 million(H1 2023:1,853 million)after net special charges of 128 million(H1 2023:117 million).Special charges from ongoing restructuring measures were partly offset by special gains arising primarily from the measurement of contingent considerations at fair value.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 14Consumer Health A 11 Key Data Consumer Health Change(%)1Change(%)1 million Q2 2023Q2 2024ReportedFx&p adj.H1 2023H1 2024ReportedFx&p adj.Sales 1,466 1,458 0.5 5.33,039 2,890 4.9 1.6Change in sales1 Volume 4.4%5.5%4.2%9.0%Price 9.8% 10.8% 8.9% 10.6%Currency 7.0%5.8%3.5%6.3%Portfolio 0.4%0.0%0.2%0.2%Sales by region Europe/Middle East/Africa 448 495 10.5 14.4964 1,018 5.6 10.2North America 594 536 9.8 10.51,206 1,064 11.8 11.1Asia/Pacific 228 224 1.8 0.5472 432 8.5 5.0Latin America 196 203 3.6 38.2397 376 5.3 27.3EBITDA1 328 280 14.6701 602 14.1Special items1(7)(34)(13)(43)EBITDA before special items1 335 314 6.3714 645 9.7EBITDA margin before special items1 22.9!.5#.5.3IT1 239 135 43.5521 364 30.1Special items1(7)(75)(13)(84)EBIT before special items1 246 210 14.6534 448 16.1Net cash provided by operating activities 52 138.235 357 51.9Cash flow-relevant capital expenditures 35 45 28.655 71 29.1Research and development expenses 53 65 22.6105 120 14.3 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Second quarter of 2024 Sales Consumer Health increased sales by 5.3%(Fx&portfolio adj.)to 1,458 million in the second quarter of 2024,with double-digit percentage gains in the Dermatology and Nutritionals categories.We also registered strong growth at Digestive Health amid an improved supply situation.By contrast,sales declined markedly in the Allergy&Cold business,in part due to a weaker season./Sales in Europe/Middle East/Africa grew by a double-digit percentage.We recorded substantial gains in the Digestive Health category,mainly driven by Iberogast and Rennie.Sales were also up significantly at Nutritionals and Dermatology,partly thanks to Supradyn,Elevit and Bepanthen.Business in the Allergy&Cold category was down markedly,largely due to weaker demand for cough and cold products./Sales in North America decreased significantly,with declines in all categories that were partly attributable to customers continuing to optimize their inventories,as expected.This effect primarily impacted our Allergy&Cold business.Sales of allergy products were additionally held back by a weaker season.The Nutritionals and Pain&Cardio categories also saw substantial declines.The launch of Iberogast in the United States benefited sales at Digestive Health and partially offset declines for other products in the category./Sales in Asia/Pacific were level with the prior-year quarter.We registered significant gains in the Dermatology category,driven by Bepanthen and Canesten,as well as product-line extensions for KangWang.By contrast,we posted declines at Pain&Cardio and in the allergy business due to reduced demand./Sales in Latin America were up,especially at Pain&Cardio,thanks to Actron and the Aspirin product family,and at Nutritionals,largely driven by Supradyn and Redoxon.By contrast,the Allergy&Cold business declined slightly.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 15A 12 Sales by Category Change(%)1Change(%)1 million Q2 2023Q2 2024ReportedFx&p adj.H1 2023H1 2024ReportedFx&p adj.Consumer Health 1,4661,458 0.5 5.33,0392,890 4.9 1.6Nutritionals 348356 2.3 11.6723691 4.4 5.7Allergy&Cold 323265 18.0 17.6733600 18.1 17.1Dermatology 337374 11.0 13.8682723 6.0 10.5Pain&Cardio 229212 7.4 8.5445393 11.7 4.7Digestive Health 216245 13.4 14.5426467 9.6 11.8Other 136 53.8 19.53016 46.7 27.0 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Earnings EBITDA before special items at Consumer Health decreased by 6.3%to 314 million in the second quarter of 2024(Q2 2023:335 million).This was mainly due to a rise in costs and higher investments in our strong brands,such as the market launch of Iberogast in the United States.In addition,the prior-year quarter had benefited from income from the sale of minor,nonstrategic brands.These effects were partially offset by our continuous cost and price management efforts.There was a negative currency effect of 17 million(Q2 2023:31 million).The EBITDA margin before special items declined by 1.4 percentage points to 21.5%.EBIT amounted to 135 million(Q2 2023:239 million)after special charges of 75 million(Q2 2023:7 million)relating to restructuring and the winding down of Care/of,the direct-to-consumer nutritional supplements business in the United States.A 13 Special Items1 Consumer Health million EBITQ2 2023EBITQ2 2024EBITH1 2023EBITH1 2024EBITDAQ2 2023EBITDAQ2 2024EBITDAH1 2023EBITDAH1 2024Restructuring(7)(32)(13)(41)(7)(32)(13)(41)Divestments/closures (43)(43)(2)(2)Total special items(7)(75)(13)(84)(7)(34)(13)(43)1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”First half of 2024 Sales Sales at Consumer Health advanced by 1.6%(Fx&portfolio adj.)to 2,890 million in the first half of 2024.We recorded substantial growth in the Digestive Health category amid an improved supply situation.We also benefited from strong performance in the Dermatology category,which was mainly driven by Bepanthen and Canesten,as well as encouraging gains at Nutritionals.In addition,the Pain&Cardio category grew in Latin America(Fx&portfolio adj.).By contrast,we registered considerable declines in the Allergy&Cold business against a strong prior-year period,driven by a weaker season and inventory optimization by our customers in North America.Earnings EBITDA before special items at Consumer Health declined by 9.7%to 645 million in the first half of 2024.This was mainly due to a rise in costs and higher investments in our strong brands,such as the market launch of Iberogast in the United States,as well as material negative currency effects of 63 million(H1 2023:35 million).In addition,the prior-year period had benefited from income from the sale of minor,nonstrategic brands.However,we were able to partially offset these effects thanks to our continuous cost and price management efforts.The EBITDA margin before special items declined by 1.2 percentage points to 22.3%.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 16EBIT amounted to 364 million(H1 2023:521 million)after special charges of 84 million(H1 2023:13 million)relating to restructuring and the winding down of Care/of,the direct-to-consumer nutritional supplements business in the United States.1.3 Asset and Financial Position of the Bayer Group Statement of Cash Flows A 14 Bayer Group Summary Statements of Cash Flows million Q2 2023 Q2 2024 H1 2023 H1 2024Net cash provided by(used in)operating activities(total)484 2,410(3,066)260 Net cash provided by(used in)investing activities(total)(1,097)(2,603)505(2,300)Net cash provided by(used in)financing activities(total)272(692)1,934(15)Change in cash and cash equivalents due to business activities(341)(885)(627)(2,055)Cash and cash equivalents at beginning of period 4,854 4,725 5,171 5,907 Change due to exchange rate movements and to changes in scope of consolidation(32)48(63)36 Cash and cash equivalents at end of period 4,481 3,888 4,481 3,888 Second quarter of 2024 Net cash provided by operating activities/Net operating cash flow in the second quarter of 2024 amounted to 2,410 million(Q2 2023:484 million).This increase was partly due to lower payments for the Group-wide short-term incentive(STI)program and positive effects arising from the reduction of inventories.Payments to resolve proceedings in the litigations surrounding glyphosate,PCBs and dicamba resulted in a net outflow of 28 million(Q2 2023:153 million).Net cash used in investing activities/Net investing cash flow in the second quarter of 2024 stood at minus 2,603 million(Q2 2023:minus 1,097 million)./Net cash outflows for current financial assets totaled 2,044 million(Q2 2023:net cash inflows of 12 million)and were mainly attributable to investments in money market funds.Net cash used in financing activities/There was a net cash outflow of 692 million for financing activities in the second quarter of 2024(Q2 2023:net cash inflow of 272 million)./This included net borrowings of 55 million(Q2 2023:3,025 million).The high prior-year figure was largely attributable to the issuance of new senior bonds for general corporate purposes./Net interest payments came to 604 million(Q2 2023:416 million)./The Bayer Group paid out 113 million(2023:2,360 million)in dividends.Free cash flow/Free cash flow(total)came in at 1,273 million in the second quarter of 2024(Q2 2023:minus 473 million),mainly due to the increase in operating cash flow.First half of 2024 Net cash provided by operating activities/Net operating cash flow in the first half of 2024 came in at 260 million(H1 2023:minus 3,066 million).This increase was primarily due to lower payments overall to resolve proceedings in the litigations surrounding glyphosate,dicamba,Essure and PCBs,with a net payout of 195 million(H1 2023:1,689 million).Net cash used in investing activities/Net investing cash flow in the first half of 2024 came in at minus 2,300 million(H1 2023:505 million).This decline was largely driven by outflows for current financial assets due to investments in money market funds.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report1.Overview of Sales,Earnings and Financial Position 17Net cash used in financing activities/There was a net cash outflow of 15 million for financing activities in the first half of 2024(H1 2023:net cash inflow of 1,934 million).The high net cash inflow in the prior-year period was partly attributable to the issuance of new senior bonds for general corporate purposes,but also included outflows for the dividend payout for the Bayer Group.Free cash flow/Free cash flow(total)amounted to minus 1,353 million in the first half of 2024(H1 2023:minus 4,575 million).This development was mainly attributable to the significant increase in operating cash flow.Net financial debt A 15 Net Financial Debt1 million Dec.31,2023Mar.31,2024June 30,2024Change vs.Mar.31(%)Bonds and notes 40,852 41,312 41,794 1.2of which hybrid bonds2 4,878 4,879 4,880 Liabilities to banks3 784 1,765 1,577 10.7Lease liabilities 1,238 1,251 1,247 0.3Liabilities from derivatives4 217 69 89 29.0Other financial liabilities 1,915 1,871 1,871 Receivables from derivatives4(39)(72)(179) 148.6Financial debt 44,967 46,196 46,399 0.4Cash and cash equivalents(5,907)(4,725)(3,888)17.7Current financial assets5(4,562)(3,983)(5,751) 44.4Net financial debt1 34,498 37,488 36,760 1.9 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”2 Classified as debt according to IFRS 3 Including both financial and nonfinancial liabilities 4 Including the market values of interest-rate and currency hedges of recorded transactions 5 Including short-term receivables with maturities between 3 and 12 months outstanding from banks and other companies as well as financial investments in debt and equity instruments that were recorded as current on first-time recognition /Net financial debt of the Bayer Group decreased by 0.7 billion to 36.8 billion in the second quarter of 2024(March 31,2024:37.5 billion),mainly as a result of cash inflows from operating activities./In June 2024,Bayer AG placed its first bond on the Chinese capital market.Known as a Panda bond,the issuance has a volume of CNY 2 billion(256 million),a maturity of two years and a coupon of 2.2%./The rating agencies currently assess Bayer as follows:A 16 Rating Rating agency Long-term ratingShort-term ratingOutlookS&P Global Ratings BBBA-2stableMoodys Baa2P-2negativeFitch Ratings BBBF2stable Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report2.Research,Development,Innovation 18Asset and capital structure A 17 Bayer Group Summary Statements of Financial Position million Dec.31,202331.03.2024June 30,2024Change vs.Mar.31(%)Noncurrent assets 78,70379,71479,715Assets held for sale 51141 92.9Other current assets 37,50540,15340,143Current assets 37,55640,16740,144 0.1Total assets 116,259119,881119,859Equity 33,07835,76235,847 0.2Noncurrent liabilities 53,72453,48952,451 1.9Current liabilities 29,45730,63031,561 3.0Liabilities 83,18184,11984,012 0.1Total equity and liabilities 116,259119,881119,859 /Between the first quarter and June 30,2024,total assets remained nearly unchanged at 119.9 billion./Noncurrent assets were level in the second quarter,at 79.7 billion.Major factors here included a 0.3 billion net decline in other intangible assets(mainly due to amortization)and a 0.2 billion increase in deferred tax assets./Total current assets were largely stable at 40.1 billion.The main effects here included a 0.7 billion decline in receivables and a 0.3 billion decrease in inventories for Crop Sciences seasonal business,as well as a 0.8 billion reduction in cash and cash equivalents,which were offset by a 1.9 billion increase in investments in money market funds./At 35.8 billion,equity was likewise nearly level compared with March 31,2024.The equity ratio was nearly unchanged at 29.9%as of June 30,2024(March 31,2024:29.8%)./Liabilities were also virtually unchanged compared with the previous quarter,amounting to 84.0 billion as of June 30,2024.The placement of the Panda bond on the Chinese capital market( 0.3 billion)was a particularly significant effect.This was offset by a 0.3 billion decline in trade accounts payable,among other things.2.Research,Development,Innovation Crop Science License agreements/collaborations In April,we announced a new agreement with UK-based company AlphaBio Control to secure an exclusive license for the first-ever biological insecticide available for arable crops,including oilseed rape and cereals.Targeted for initial launch in 2028,the new bioinsecticide has potential for use against Coleoptera insects,which are widespread in the United Kingdom and throughout much of Europe.It will also support Bayers commitment to reduce the environmental impact of crop protection products by 30%by 2030 without negatively impacting crop yields and health.In May,as part of our strategic open innovation approach,we announced the advancement of two initiatives with external partners to bring forward genome editing in vegetables.We have also entered into a collaboration agreement with the South-Korean biotech company G FLAS to develop genome-edited tomato varieties that are nutritionally enhanced with vitamin D3.Additionally,we have acquired a license from the startup company Pairwise,United States,that grants us rights to commercialize Pairwises genome-edited varieties and to use the underlying technologies to develop new varieties.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report2.Research,Development,Innovation 19Pharmaceuticals We regularly review our research and development pipeline so that we can give priority to advancing the most promising pharmaceutical projects.Phase II and III clinical projects The following table shows our most important drug candidates currently in Phase II of clinical testing:A 18 Research and Development Projects(Phase II)Project Indication Anti alpha2-antiplasmin Thrombolysis As of July 24,2024 The following table shows our most important drug candidates currently in Phase III of clinical testing:A 19 Research and Development Projects(Phase III)Project Indication Aflibercept 8 mg(VEGF inhibitor)1 Macular edema secondary to retinal vein occlusion Asundexian(FXIa inhibitor)Secondary prevention of ischemic stroke Darolutamide(ODM-201,AR antagonist)Hormone-sensitive metastatic prostate cancer Darolutamide(ODM-201,AR antagonist)/ADT without chemotherapy Adjuvant treatment for localized prostate cancer with very high risk of recurrence Darolutamide(ODM-201,AR antagonist)/ADT Hormone-sensitive prostate cancer in patients with a high risk of biochemical recurrence(BCR)Elinzanetant(neurokinin 1,3 receptor antagonist)Vasomotor symptoms associated with menopause Finerenone(MR antagonist)Heart failure with mid-range or preserved ejection fraction Finerenone(MR antagonist)Non-diabetic chronic kidney disease Finerenone(MR antagonist)Chronic kidney disease in type 1 diabetes Gadoquatrane(MRI contrast agent)Magnetic resonance imaging Vericiguat(sGC stimulator)2 Stable heart failure with reduced ejection fraction(HFrEF)As of July 24,2024 1 In collaboration with Regeneron Pharmaceuticals,Inc.,United States 2 In collaboration with Merck&Co.,Inc.,United States The nature of drug discovery and development is such that not all compounds can be expected to meet the predefined project goals.It is possible that any or all of the projects listed above may have to be discontinued due to scientific and/or commercial reasons and will not result in commercialized products.It is also possible that the requisite US Food and Drug Administration(FDA),European Medicines Agency(EMA)or other regulatory approvals will not be granted for these compounds.Moreover,we regularly review our research and development pipeline so that we can give priority to advancing the most promising pharmaceutical projects.The following material developments occurred in the first half of 2024:Aflibercept/In May,we initiated the clinical Phase III PHOTONIC study investigating Eylea 8 mg in diabetic macular edema(DME)in China.Zabedosertib/In April,we decided not to further pursue the development of zabedosertib,a Phase II project in the indication atopic dermatitis.We remain determined to driving advances in the field of immunology.Runcaciguat/In June,we decided not to further pursue the development of runcaciguat,a soluble guanylate cyclase(sGC)activator in Phase II clinical development,in the indication nonproliferative diabetic retinopathy(NPDR).We will continue the sGC activator/CKD development program with the oral sGC activator BAY3283142,a follow-up compound to runcaciguat which shows an improved PK/PD(pharmacokinetic/pharmacodynamic)profile and is currently completing Phase I clinical development.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report2.Research,Development,Innovation 20Filings and approvals The most important drug candidates currently in the approval process are:A 20 Main Products Submitted for Approval Project Region Indication Aflibercept 8mg(VEGF inhibitor)1 China Neovascular age-related macular degeneration(nAMD)As of July 24,2024 1 In collaboration with Regeneron Pharmaceuticals,Inc.,United States Darolutamide/In July,the ARANOTE study reached its primary endpoint.In the study arm with darolutamide and androgen deprivation therapy,the radiographic progression-free survival was significantly increased in patients with metastatic hormone-sensitive prostate cancer compared to the study arm without darolutamide.Cell and gene therapy With the expansion of our development portfolio to include cell and gene therapies,we now have new,potentially transformative therapy forms that intervene in disease mechanisms and can even halt or reverse the progression of diseases in the future.Our development portfolio comprises seven projects at different stages of clinical development.These projects cover several therapeutic areas with a high unmet medical need,both in rare diseases and in more prevalent diseases.Our two most advanced programs are in Parkinsons disease and congestive heart failure.The following material developments occurred in the first half of 2024:/In February 2024,we announced that the first patient had been randomized in AskBios Phase II gene therapy trial for congestive heart failure GenePHIT.GenePHIT is a clinical trial to evaluate the safety and efficacy of the one-time administration of gene therapy candidate AB-1002 for the treatment of adults with non-ischemic cardiomyopathy and New York Heart Association(NYHA)Class III heart failure symptoms.In April 2024,we announced that the US Food and Drug Administration(FDA)had granted Fast Track Designation to AB-1002./Also in April 2024,we announced together with our subsidiary AskBio that the Phase Ib trial of AB-1005,an investigational gene therapy candidate for the treatment of Parkinsons disease,continued to show positive results at 18 months.In July,we announced that the US FDA had granted AB-1005 Fast Track Designation,and the British Medicines and Healthcare products Regulatory Agency(MHRA)had awarded the MHRA Innovation Passport./Similarly,in March 2024,we announced together with our subsidiary BlueRock Therapeutics that the Phase I trial of bemdaneprocel,an investigational cell therapy candidate for the treatment of Parkinsons disease,continued to show positive results at 18 months./In May 2024,we announced that the US FDA had granted the Regenerative Medicine Advanced Therapy(RMAT)designation for the Parkinsons disease cell therapy candidate bemdaneprocel.Chemoproteomics The chemoproteomics platform technology of our US subsidiary Vividion Therapeutics,Inc.,enables us to unlock a multitude of traditionally undruggable target molecules with precision oncology therapeutics.In July 2024,Vividion announced plans to expand its capacities with the construction of a new research and development center and corporate headquarters in San Diego,California.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report2.Research,Development,Innovation 21External innovation In the area of external innovation,progress was made as follows in the first half of 2024./In January,our US subsidiary BlueRock Therapeutics announced the in-licensing of the iPSC cell therapy candidate OpCT-001 for the treatment of primary photoreceptor diseases from FUJIFILM Cellular Dynamics,Inc.,United States,and Opsis Therapeutics,LLC,United States./In March,we announced the acquisition of exclusive commercialization rights for acoramidis in Europe from Eidos Therapeutics Inc.,United States,BridgeBio International GmbH,Switzerland,and BridgeBio Europe B.V.,Netherlands,to strengthen our cardiology portfolio./Also in March,we announced a collaboration with Aignostics GmbH,Germany,to identify novel targets in the area of precision oncology therapies./Likewise in March,we announced a collaboration with Thermo Fisher Scientific Inc.,United States,in the field of precision oncology to jointly develop diagnostic tests based on next-generation sequencing./In April,we announced a collaboration with Google Cloud Limited,Ireland,to develop AI-powered solutions for radiologists./Also in April,we announced a research collaboration with Evotec SE,Germany,in the field of precision cardiology./In June,we announced a collaboration with Samsung Electronics America,Inc.,United States,in the area of womens healthcare./Likewise in June,we announced plans to build the Berlin Center for Gene and Cell Therapies in cooperation with Charit Universittsmedizin Berlin.The aim of this collaboration with the Berlin-based university hospital is to accelerate the translation of research results into healthcare applications.At the same time,we are aiming to establish a leading biotech ecosystem for novel therapies in Berlin and help startups in particular transition their innovative gene and cell therapy approaches to clinical development.The project will receive funding from the German Federal Ministry of Education and Research and the State of Berlin.Construction is scheduled to begin in 2025.Consumer Health Our Consumer Health Division continued to innovate to meet consumer needs in the first half of 2024.In particular,we are advancing our vision for digitally led,precision-health solutions.Following the launch of the Aspirin Cardio Risk Assessment tool in the United States in 2023,we expanded the tool to the Middle East,enabling individuals to assess their cardiovascular risk factors.Under our One A Day brand in the United States,we also launched our first holistic precision-health ecosystem focused on helping consumers manage their healthy aging journey.This ecosystem encompasses a biological age test,a specially formulated supplement and a companion lifestyle app.Iberogast,our plant-based digestive health product,launched in the United States,where we premiered an innovative and consumer-driven softgel format.As part of the market launch,we also expanded the Liquid Drops format to the US market.Both presentations offer American consumers a new,differentiated and science-backed option for relieving many digestive health symptoms.Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report3.Report on Future Perspectives and on Opportunities and Risks 22Leaps by Bayer Our impact investment arm Leaps by Bayer announced investments in two new companies in the first half of 2024.Leaps participated in a financing round for Ji Xing Pharmaceuticals Limited,Cayman Islands,to develop novel therapies for the treatment of unmet medical needs in the fields of cardiovascular diseases and ophthalmology for China.Leaps also invested in Sudo Biosciences,Inc.,United States,a biotech company that is working on the development of novel therapies for inflammatory and neurodegenerative diseases such as multiple sclerosis.Furthermore,two of the companies in the Leaps portfolio announced IPOs:Metagenomi Inc.,United States,which conducts research in the field of cell and gene therapy,and BoundlessBio,Inc.,United States,which develops innovative therapies for patients with intractable cancers.In addition,the Leaps portfolio company eGenesis,Inc.,United States,made medical history by successfully performing the first-ever intracorporeal transplantation of a porcine kidney into a living human patient.It also announced the successful completion of an extracorporeal perfusion of a brain-dead research donor using a genetically engineered porcine liver.In agriculture,our Crop Science Division and the Leaps portfolio company Gro Direto LLC,United States,announced the commercialization of a new digital offering called Barter View in Brazil.Barter View enables farmers in rural regions to use their mobile phones to manage their trading operations while simultaneously allowing real-time retrieval of information and up-to-date prices.As already mentioned in the section on the Crop Science Division,we also acquired a license from the Leaps portfolio company Pairwise Plants LLC,United States,a food and agricultural technology startup company that develops new genomic technologies for the development of innovative products.3.Report on Future Perspectives and on Opportunities and Risks 3.1 Future Perspectives 3.1.1 Economic Outlook Global economic situation largely unchanged Based on International Monetary Fund(IMF)data,we continue to expect the global economy to grow by a below-average,low-single-digit percentage in 20242.Risks to inflation will likely increase,as could trade tensions and political uncertainty,all of which could lead to higher-for-even-longer interest rates.We now expect the seed and crop protection market to see further pressure and decline by 1%3(previously:grow by 2%)in 2024.Prices for key active ingredients and agricultural products remain low,and price-driven generics pressure continues across all geographies,especially in herbicides.Although the market for seeds and traits is growing moderately,driven by vegetable seeds as well as acreage increase in soybeans and cotton,it is not able to offset the negative market environment for crop protection products.We now expect the pharmaceuticals market to expand by approximately 9%4(previously:7%)in 2024.Innovative products will continue to drive growth and more than offset losses due to the expiration of patents.We now expect growth of approximately 4%5(previously:5%)in the consumer health market in 2024,driven mostly by price increases,with slightly lower growth than in the prior year due to softening economic conditions,led by deceleration in China.2 Source:International Monetary Fund(as of July 2024)3 Source:Bayers estimate(as of June 2024),plus various local sources;currency-adjusted 4 Source:IQVIA Market Prognosis(as of March 2024),all rights reserved;currency-adjusted 5 Source:Bayers estimate(as of July 2024),taking into account external sources;currency-adjusted Bayer Half-Year Financial Report as of June 30,2024 A Interim Group Management Report3.Report on Future Perspectives and on Opportunities and Risks 233.1.2 Corporate Outlook We confirm our Group outlook for the year 2024 as published in the Annual Report 2023 and the Quarterly Statement for the first quarter of 2024.For the Crop Science Division,we expect currency-and portfolio-adjusted sales growth and the EBITDA margin before special items to come in at the lower end of the projected ranges.For the Pharmaceuticals Division,however,we now anticipate currency-and portfolio-adjusted sales growth of between 0%and 3%(previously:between minus 4%and 0%).3.2 Opportunities and Risks As a global enterprise with a diversified portfolio,the Bayer Group is exposed to a wide range of internal and external developments and events that could significantly impact the achievement of our financial and nonfinancial objectives.Opportunity and risk management at Bayer forms an integral part of the Group-wide corporate governance system.Our opportunity and risk management process and opportunity and risk status are outlined in detail in the Annual Report 2023,A 3.2“Opportunity and Risk Report.”Overall assessment by the Board of Management We currently have not identified any material changes in our risk status compared with the assessment given in the Annual Report 2023.In the opinion of the Board of Management,the Bayer Groups continued existence remains unendangered.Significant developments that have occurred in respect of the legal risks since publication of the Annual Report 2023(Note 30 to the Consolidated Financial Statements)are described in the Notes to the Condensed Consolidated Interim Financial Statements under“Legal Risks.”Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportBayer Group Condensed Consolidated Income Statements 24Condensed Consolidated Interim Financial Statements as of June 30,2024 Bayer Group Condensed Consolidated Income Statements B 1 million Q2 2023Q2 2024H1 2023H1 2024Net sales 11,044 11,144 25,433 24,909 Cost of goods sold(4,718)(4,994)(10,451)(10,457)Gross profit 6,326 6,150 14,982 14,452 Selling expenses(3,196)(3,362)(6,590)(6,607)Research and development expenses(1,228)(1,499)(2,799)(2,925)General administration expenses(489)(688)(1,147)(1,271)Other operating income 614 523 998 792 Other operating expenses(2,983)(599)(3,427)(824)EBIT1(956)525 2,017 3,617 Equity-method income(loss)(45)(35)(82)(49)Financial income 63 95 212 256 Financial expenses(636)(682)(1,115)(1,330)Financial result(618)(622)(985)(1,123)Income before income taxes(1,574)(97)1,032 2,494 Income taxes(315)71(739)(518)Income after income taxes(1,889)(26)293 1,976 of which attributable to noncontrolling interest(2)8 2 10 of which attributable to Bayer AG stockholders(net income)(1,887)(34)291 1,966 Earnings per share Basic(1.92)(0.03)0.302.00Diluted(1.92)(0.03)0.302.00 1 For definition see Annual Report 2023,A 2.3 Alternative Performance Measures Used by the Bayer Group.Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportBayer Group Condensed Consolidated Statements of Comprehensive Income 25Bayer Group Condensed Consolidated Statements of Comprehensive Income B 2 million Q2 2023Q2 2024H1 2023H1 2024Income after income taxes(1,889)(26)293 1,976 of which attributable to noncontrolling interest(2)8 2 10 of which attributable to Bayer AG stockholders(1,887)(34)291 1,966 Remeasurements of the net defined benefit liability for post-employment benefit plans 234 55 744 6 Income taxes(64)(8)(196)5 Other comprehensive income from remeasurements of the net defined benefit liability for post-employment benefit plans 170 47 548 11 Changes in the fair value of equity instruments measured at fair value 1(41)(13)(44)Income taxes(4)4(3)6 Other comprehensive income from equity instruments measured at fair value(3)(37)(16)(38)Other comprehensive income that will not be reclassified subsequently to profit or loss 167 10 532(27)Changes in the fair value of cash flow hedges(49)31(66)(22)Reclassified to profit or loss(20)(11)(1)(24)Income taxes 16(8)14 5 Other comprehensive income from cash flow hedges(53)12(53)(41)Changes in time value of options used as hedging instrument(1)6(7)7 Income taxes (2)2(2)Other comprehensive income from time value of options(1)4(5)5 Changes in exchange differences recognized on translation of operations outside the eurozone 231 199(211)949 Reclassified to profit or loss 12(1)12(1)Other comprehensive income from exchange differences 243 198(199)948 Other comprehensive income relating to associates accounted for using the equity method (1)(2)(3)Other comprehensive income that may be reclassified subsequently to profit or loss 189 213(259)909 Total other comprehensive income1 356 223 273 882 of which attributable to noncontrolling interest 3 1 4 of which attributable to Bayer AG stockholders 353 223 272 878 Total comprehensive income(1,533)197 566 2,858 of which attributable to noncontrolling interest 1 8 3 14 of which attributable to Bayer AG stockholders(1,534)189 563 2,844 1 Other comprehensive income is recognized outside profit or loss in equity.Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportBayer Group Condensed Consolidated Statements of Financial Position 26Bayer Group Condensed Consolidated Statements of Financial Position B 3 million June 30,2023Dec.31,2023June 30,2024Noncurrent assets Goodwill 36,92232,29932,896Other intangible assets 23,43823,36322,985Property,plant and equipment 13,17713,32113,487Investments accounted for using the equity method 930850817Other financial assets 1,8672,2672,362Other receivables 1,2121,1321,252Deferred taxes 5,3445,4715,916 82,89078,70379,715Current assets Inventories 13,76813,94713,088Trade accounts receivable 13,7179,34313,442Other financial assets 3,1494,8366,136Other receivables 2,0792,0301,959Claims for income tax refunds 1,5691,4421,630Cash and cash equivalents 4,4815,9073,888Assets held for sale 14511 38,77737,55640,144Total assets 121,667116,259119,859 Equity Capital stock 2,5152,5152,515Capital reserves 18,26118,26118,261Other reserves 16,17212,15114,911Equity attributable to Bayer AG stockholders 36,94832,92735,687Equity attributable to noncontrolling interest 176151160 37,12433,07835,847Noncurrent liabilities Provisions for pensions and other post-employment benefits 3,5964,0143,569Other provisions 8,2967,7847,702Refund liabilities 19414182Contract liabilities 517436367Financial liabilities 36,55738,17637,397Income tax liabilities 1,4511,5231,581Other liabilities 1,028987817Deferred taxes 717790836 52,35653,72452,451Current liabilities Other provisions 3,6183,2413,441Refund liabilities 8,0145,4638,390Contract liabilities 1,6573,8561,371Financial liabilities 9,9606,8309,181Trade accounts payable 5,9707,4566,127Income tax liabilities 799619906Other liabilities 2,1691,9922,145 32,18729,45731,561Total equity and liabilities 121,667116,259119,859 Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportBayer Group Condensed Consolidated Statements of Cash Flows 27Bayer Group Condensed Consolidated Statements of Cash Flows B 4 million Q2 2023Q2 2024H1 2023H1 2024Income after income taxes(1,889)(26)293 1,976 Income taxes 315(71)739 518 Financial result 618 622 985 1,123 Income taxes paid(406)(361)(872)(799)Depreciation,amortization and impairment losses(loss reversals)3,287 1,142 4,632 2,255 Change in pension provisions(139)(158)(247)(275)(Gains)losses on retirements of noncurrent assets(20)(7)(42)(62)Decrease(increase)in inventories(163)391(194)957 Decrease(increase)in trade accounts receivable 856 680(3,532)(4,129)(Decrease)increase in trade accounts payable(300)(187)(1,458)(1,358)Changes in other working capital,other noncash items(1,675)385(3,370)54 Net cash provided by(used in)operating activities 484 2,410(3,066)260 Cash outflows for additions to property,plant,equipment and intangible assets(606)(628)(1,072)(1,074)Cash inflows from the sale of property,plant,equipment and other assets 60 5 102 101 Cash inflows from divestments less divested cash(20)9(14)16 Income tax payments related to divestments and asset sales(290)(355)Cash inflows from noncurrent financial assets 130 9 130 9 Cash outflows for noncurrent financial assets(95)(49)(246)(94)Cash outflows for acquisitions less acquired cash(353)(482)(95)Interest and dividends received 65 95 162 255 Cash inflows from(outflows for)current financial assets 12(2,044)2,280(1,418)Net cash provided by(used in)investing activities(1,097)(2,603)505(2,300)Capital contributions 23 23 Dividend payments(2,360)(113)(2,360)(113)Issuances of debt 3,750 1,371 5,936 2,930 Retirements of debt(725)(1,316)(1,066)(2,008)Interest paid including interest-rate swaps(422)(609)(605)(799)Interest received from interest-rate swaps 6 5 6 5 Cash outflows for the purchase of additional interests in subsidiaries (30)(30)Net cash provided by(used in)financing activities 272(692)1,934(15)Change in cash and cash equivalents due to business activities(341)(885)(627)(2,055)Cash and cash equivalents at beginning of period 4,854 4,725 5,171 5,907 Change in cash and cash equivalents due to changes in scope of consolidation(1)(1)Change in cash and cash equivalents due to exchange rate movements(31)48(62)36 Cash and cash equivalents at end of period 4,481 3,888 4,481 3,888 Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportBayer Group Condensed Consolidated Statements of Changes in Equity 28Bayer Group Condensed Consolidated Statements of Changes in Equity B 5 million Capital stockCapitalreservesOtherreservesEquityattributableto Bayer AGstockholdersEquity attributable to non-controlling interestEquityJan.1,2023 2,51518,26117,997 38,773 153 38,926 Total comprehensive income Income after income taxes 291 291 2 293 Other comprehensive income 272 272 1 273 Miscellaneous other changes Equity transactions with owners Dividend payments(2,358)(2,358)(2)(2,360)Other changes(30)(30)22(8)June 30,2023 2,51518,26116,172 36,948 176 37,124 Jan.1,2024 2,51518,26112,151 32,927 151 33,078 Total comprehensive income Income after income taxes 1,966 1,966 10 1,976 Other comprehensive income 878 878 4 882 Miscellaneous other changes Equity transactions with owners Dividend payments(108)(108)(5)(113)Other changes 24 24 24 June 30,2024 2,51518,26114,911 35,687 160 35,847 Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportNotes to the Condensed Consolidated Interim Financial Statements of the Bayer Group 29Notes to the Condensed Consolidated Interim Financial Statements of the Bayer Group Explanatory Notes Accounting policies The consolidated interim financial statements as of June 30,2024,were prepared in condensed form in compliance with IAS 34 according to the International Financial Reporting Standards(IFRS)of the International Accounting Standards Board(IASB),London,which are endorsed by the European Union,and the Interpretations of the IFRS Interpretations Committee in effect at the closing date.Reference should be made as appropriate to the Notes to the Consolidated Financial Statements for the 2023 fiscal year,particularly with regard to the main recognition and valuation principles.As regards those Notes listed standards,amendments and interpretations to be applied for the first time in fiscal 2024,none have had any material impact on the Bayer Group this fiscal year.Impact of the geopolitical situation We do not currently see any material impact of Russias invasion of Ukraine or the Middle East conflict on our business operations and thus the Groups financial position or results of operations.We are continually analyzing the future direct and indirect effects of economic and political developments on the valuation of assets and liabilities,such as possible impacts on supply chains and energy supplies.Impact of climate-related matters We are continuing to monitor the risks from climate-related matters and to develop innovative and sustainable methods to minimize these risks.Taking the latest information and assumptions into account,we do not currently see any fundamentally changed expectations with regard to the Groups financial position or results of operations.Changes in underlying parameters Changes in the underlying parameters relate primarily to currency exchange rates and the interest rates used to calculate pension obligations.The exchange rates for major currencies against the euro varied as follows:B 6 Exchange Rates for Major Currencies Closing rateAverage rate 1/Dec.31,2023 June 30,2023 June 30,2024H1 2023H1 2024BRL Brazil 5.365.305.875.485.48CAD Canada 1.461.441.471.461.47CNY China 7.877.907.807.497.82GBP United Kingdom 0.870.860.850.880.85INR India 91.9789.0489.2088.8590.01JPY Japan 156.34157.08171.82145.51164.19MXN Mexico 18.7418.5419.5619.6518.48USD United States 1.111.091.071.081.08 Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportNotes to the Condensed Consolidated Interim Financial Statements of the Bayer Group 30B 7 Application of IAS 29(Financial Reporting in Hyperinflationary Economies)Company name Place of business Applied sinceBayer S.A.Buenos Aires,Argentina July 1,2018Bayer Trk Kimya Sanayii Limited Sirketi Istanbul,Turkey April 1,2022Monsanto Gida Ve Tarim Ticaret Ltd Sirketi Istanbul,Turkey April 1,2022Bayer Tohumculuk ve Tarim Limited Sirketi Istanbul,Turkey March 7,2023 The effects in initial and ongoing accounting have so far been immaterial for the Group.In Argentina,hyperinflation is based on the index“IPC Nacional Empalme IPIM”(2017=100)with an index value of 6,347 as of June 30,2024(December 31,2023:3,533),and an annual inflation rate of 80%since December 31,2023(prior-year period:51%).In Turkey,hyperinflation is based on the“Consumer price index(2003=100)”with an index value of 2,319 as of June 30,2024(December 31,2023:1,859),and an annual inflation rate of 25%since December 31,2023(prior-year period:20%).The most important interest rates used to calculate the present value of pension obligations are given below.Provisions for pensions and other post-employment benefits declined by 445 million to 3,569 million compared with December 31,2023.This was mainly the result of changes in discount rates and the development of plan assets.B 8 Discount Rate for Pension Obligationsc.31,2023June 30,2023June 30,2024Germany 3.804.203.80United Kingdom 4.355.004.95United States 4.905.105.30 Segment reporting As of June 30,2024,the Bayer Group comprised the three reportable segments Crop Science,Pharmaceuticals and Consumer Health.B 9 Key Data by Segment Crop SciencePharmaceuticalsConsumer Health million Q2 2023Q2 2024Q2 2023Q2 2024Q2 2023Q2 2024Net sales(external)4,924 4,981 4,5574,6051,4661,458Currency-and portfolio-adjusted change1 18.5% 1.1% 0.2% 4.5% 5.4% 5.3%Intersegment sales 0 8 8922Net sales(total)4,924 4,989 4,5654,6141,4681,460EBIT1(2,207)(229)1,0471,040239135EBITDA before special items1 725 524 1,3791,322335314Net cash provided by operating activities 338 1,519 4421,04752138Depreciation,amortization,impairment losses/loss reversals 2,873 675 25725389145 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportNotes to the Condensed Consolidated Interim Financial Statements of the Bayer Group 31B 9(continued)Key Data by Segment All other segmentsEnabling functionsand consolidationGroup million Q2 2023Q2 2024Q2 2023Q2 2024Q2 2023Q2 2024Net sales(external)9495 3 5 11,044 11,144Currency-and portfolio-adjusted change1 120.5% 1.7%8.2% 3.1%Intersegment sales 00(10)(19)Net sales(total)9495(7)(14)11,044 11,144EBIT1 4(6)(39)(415)(956)525EBITDA before special items1 2012 68(61)2,527 2,111Net cash provided by operating activities 484 2,410Depreciation,amortization,impairment losses/loss reversals 1618 52 51 3,287 1,142 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”B 10 Key Data by Segment Crop SciencePharmaceuticalsConsumer Health million H1 2023H1 2024H1 2023H1 2024H1 2023H1 2024Net sales(external)13,275 12,888 8,9648,9633,0392,890Currency-and portfolio-adjusted change1 8.6%1.4%1.4% 4.2% 4.7% 1.6%Intersegment sales 1 25 91843Net sales(total)13,276 12,913 8,9738,9813,0432,893EBIT1 112 1,834 1,8531,912521364EBITDA before special items1 3,992 3,373 2,4852,516714645Net cash provided by(used in)operating activities(3,026)(1,346)1,1491,856235357Depreciation,amortization,impairment losses/loss reversals 3,803 1,401 515480180238 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”B 10(continued)Key Data by Segment All other segmentsEnabling functionsand consolidationGroup million H1 2023H1 2024H1 2023H1 2024H1 2023H1 2024Net sales(external)145159 10 9 25,433 24,909Currency-and portfolio-adjusted change1 55.5% 8.4%4.5% 1.0%Intersegment sales 00(14)(46)Net sales(total)145159(4)(37)25,433 24,909EBIT1 18(13)(487)(480)2,017 3,617EBITDA before special items1 5122(244)(33)6,998 6,523Net cash provided by(used in)operating activities (3,066)260Depreciation,amortization,impairment losses/loss reversals 3335 101 101 4,632 2,255 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”To simplify the consolidation process,leases between fully consolidated companies continue to be recognized as operating leases under IAS 17 within the segment data in the consolidated financial statements of the Bayer Group even after the first-time application of IFRS 16 as of January 1,2019.This does not have any relevant impact on the respective key data used in the steering of the company and internal reporting to the Board of Management as the chief operating decision maker.Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportNotes to the Condensed Consolidated Interim Financial Statements of the Bayer Group 32The following table shows the reconciliation of EBITDA before special items of the above-mentioned segments and the reconciliation to income before income taxes of the Group from continuing operations:B 11 Reconciliation of Segments EBITDA Before Special Items to Group Income Before Income Taxes million Q2 2023Q2 2024H1 2023H1 2024EBITDA before special items of segments 2,459 2,172 7,242 6,556 EBITDA before special items of enabling functions and consolidation 68(61)(244)(33)EBITDA before special items1 2,527 2,111 6,998 6,523 Depreciation,amortization and impairment losses/loss reversals before special items of segments(941)(1,046)(1,959)(2,108)Depreciation,amortization and impairment losses/loss reversals before special items of corporate functions and consolidation(52)(50)(101)(101)Depreciation,amortization and impairment losses/loss reversals before special items(993)(1,096)(2,060)(2,209)EBIT before special items of segments 1,518 1,126 5,283 4,447 EBIT before special items of enabling functions and consolidation 16(111)(345)(133)EBIT before special items1 1,534 1,015 4,938 4,314 Special items of segments(2,435)(186)(2,779)(350)Special items of enabling functions and consolidation(55)(304)(142)(347)Special items1(2,490)(490)(2,921)(697)EBIT of segments(917)940 2,504 4,097 EBIT of enabling functions and consolidation(39)(415)(487)(480)EBIT1(956)525 2,017 3,617 Financial result(618)(622)(985)(1,123)Income before income taxes(1,574)(97)1,032 2,494 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”In the second quarter of 2024,special items of 329 million were due to ongoing restructuring programs.The special items of the prior-year quarter were mainly in connection with an impairment loss on goodwill in the Crop Science Division of 2,436 million.Scope of consolidation Changes in the scope of consolidation The consolidated financial statements as of June 30,2024,included 310 companies(December 31,2023:340 companies).Four joint ventures(December 31,2023:four)and 41 associates(December 31,2023:42)were accounted for in the consolidated financial statements using the equity method according to IAS 28(Investments in Associates and Joint Ventures).Acquisitions,divestments and discontinued operations Acquisitions There were no material acquisitions as of June 30,2024.Acquisitions in 2023 On February 13,2023,we completed the acquisition of 100%of the shares in Blackford Analysis Ltd.,United Kingdom,a global provider of radiology AI platform technology.Bayer paid an upfront consideration of around 46 million to acquire Blackford.Further amounts of up to around 54 million are payable upon the achievement of predefined research and development milestones.A liability of 30 million,weighted according to the probability that the payments will have to be made,was recognized for this purpose.The purchase price mainly pertained to goodwill,which in turn largely reflected the anticipated innovation potential and amounted to around 68 million based on the purchase price allocation.The goodwill is not tax-deductible.In addition,an amount of around 10 million was recognized for patents and technologies,some 2 million for other assets,and approximately 7 million for liabilities.The purchase price allocation was completed in the fourth quarter of 2023.Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportNotes to the Condensed Consolidated Interim Financial Statements of the Bayer Group 33Blackford provides platform infrastructure and access to a rich clinical application(ClinApp)ecosystem focused on medical imaging and analytics.The acquisition follows a development and license agreement between the two companies in 2020 that laid the foundation for Bayers recently launched medical imaging platform,Calantic Digital Solutions.The acquired companies are assigned to the Pharmaceuticals segment.Assets held for sale and discontinued operations There were no discontinued operations to report in 2024 or 2023.The assets held for sale,net of directly related liabilities,totaled around 1 million as of June 30,2024.The prior-year figure of around 14 million related to the planned sale of a production facility in Spain.The transaction was completed in the second quarter of 2024.Goodwill,other intangible assets and property,plant and equipment In the second quarter of 2024,Bayer decided to wind down its direct-to-consumer nutritional supplements business Care/of.As of June 30,2024,the decision resulted in depreciation,amortization and impairments on assets totaling some 55 million,of which around 44 million on intangible assets(36 million thereof primarily for the Care/of trademark),6 million on property,plant and equipment,and 5 million on inventories.Financial instruments The following tables show the carrying amounts and fair values of the individual financial assets and liabilities by category of financial instrument under IFRS 9 and a reconciliation to the corresponding line items in the statements of financial position.Since the line items“Trade accounts receivable,”“Other receivables,”“Financial liabilities”and“Other liabilities”contain both financial instruments and nonfinancial assets or liabilities(such as other tax receivables),the reconciliation is shown in the column headed“Nonfinancial assets/liabilities.”Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportNotes to the Condensed Consolidated Interim Financial Statements of the Bayer Group 34B 12 Carrying Amounts and Fair Values of Financial Instruments June 30,2024 Measured at fair valuefair value for information4 Measurement category(IFRS 9)1 Measured atamortized costBased onquoted pricesin activemarkets(Level 1)Based onobservablemarket data(Level 2)Based onunobservableinputs(Level 3)Nonfinancialassets/liabilities million CarryingamountCarryingamountCarryingamountCarryingamountCarryingamountTotalTrade accounts receivable 12,936216 42 24813,442AC 12,936 12,936FVTPL,mandatory2 216 216FVOCI(recycling)42 42Nonfinancial assets 248248Other financial assets 2,2243,214 1,229 1,8318,498AC 2,198 2,0942,198FVTPL,mandatory2 3,154 898 1,4995,551FVTOCI(no recycling),designated3 55 263318Derivatives 5 331 69405Lease receivables 26 2626Other receivables 424 1012,6863,211AC 424 424424FVTPL,mandatory2 101101Nonfinancial assets 2,6862,686Cash and cash equivalents 3,888 3,888AC 3,888 3,8883,888Total financial assets 19,4723,430 1,271 1,93226,105of which AC 19,446 19,446of which FVTPL 3,370 898 1,6005,868 Financial liabilities 46,40389 8646,578AC 45,15629,11213,39345,156Derivatives 89 89Lease liabilities 1,247 1,247Nonfinancial liabilities 8686Trade accounts payable 6,127 6,127AC 6,127 6,127Other liabilities 1,1066 89 8788832,962AC 1,106 1,1071,106FVTPL(nonderivative),mandatory2 872872Derivatives 6 89 6101Nonfinancial liabilities 883883Total financial liabilities 53,6366 178 87854,698of which AC 52,389 52,389of which derivatives 6 178 6190 1 AC:at amortized cost FVTOCI:at fair value through other comprehensive income FVTPL:at fair value through profit or loss 2 Measured at fair value through profit or loss as required by IFRS 9 3 Measured at fair value through other comprehensive income under IFRS 9.5.7.5 4 Fair value of the financial instruments at amortized cost under IFRS 7.29(a)Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportNotes to the Condensed Consolidated Interim Financial Statements of the Bayer Group 35B 13 Carrying Amounts and Fair Values of Financial Instruments Dec.31,2023 Measured at fair valuefair value for information4 Measurement category(IFRS 9)1 Measured atamortized costBased onquoted pricesin activemarkets(Level 1)Based onobservablemarket data(Level 2)Based onunobservableinputs(Level 3)Nonfinancialassets/liabilities million CarryingamountCarryingamountCarryingamountCarryingamountCarryingamountTotalTrade accounts receivable 8,771327 2459,343AC 8,771 8,771FVTPL,mandatory2 327 327FVTOCI(recycling)627 627Nonfinancial assets 245245Other financial assets 9472,849 1,520 1,7877,103AC 919 897919FVTPL,mandatory2 2,774 1,379 1,4945,647FVTOCI(no recycling),designated3 63 261324Derivatives 12 141 32185Lease receivables 28 2828Other receivables 387 822,6933,162AC 387 387387FVTPL,mandatory2 8282Nonfinancial assets 2,6932,693Cash and cash equivalents 5,907 5,907AC 5,907 5,9075,907Total financial assets 16,0123,176 1,520 1,86922,577of which AC 15,984 15,984of which FVTPL 3,113 1,439 1,6086,160 Financial liabilities 44,703217 8645,006AC 43,46528,55812,58843,465Derivatives 217 217Lease liabilities 1,238 1,238Nonfinancial liabilities 8686Trade accounts payable 7,456 7,456AC 7,456 7,456Other liabilities 9328 91 1,0319172,979AC 932 932932FVTPL(nonderivative),mandatory2 1,0301,030Derivatives 8 91 1100Nonfinancial liabilities 917917Total financial liabilities 53,0918 308 1,03154,438of which AC 51,853 51,853of which derivatives 8 308 1,0311,347 1 AC:at amortized cost FVTOCI:at fair value through other comprehensive income FVTPL:at fair value through profit or loss 2 Measured at fair value through profit or loss as required by IFRS 9 3 Measured at fair value through other comprehensive income under IFRS 9.5.7.5 4 Fair value of the financial instruments at amortized cost under IFRS 7.29(a)Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportNotes to the Condensed Consolidated Interim Financial Statements of the Bayer Group 36Due to the short maturities of most trade accounts receivable and payable,other financial receivables and liabilities,and cash and cash equivalents,their carrying amounts at the closing date do not significantly differ from the fair values.Trade accounts receivable are measured at fair value through other comprehensive income if they can potentially be transferred as part of factoring agreements.The fair values of financial assets and liabilities measured at amortized cost that are given for information are the present values of the respective future cash flows based on observable market data.The present values are determined by discounting the cash flows at a closing-date interest rate,taking into account the term of the assets or liabilities and also the creditworthiness of the counterparty in certain cases.Where a market price is available,however,this is deemed to be the fair value.The fair values of financial assets measured at fair value correspond to quoted prices in active markets(Level 1),or are determined using valuation techniques based on observable market data as of the end of the reporting period(Level 2),or are the present values of the respective future cash flows,determined on the basis of unobservable inputs(Level 3).The fair values of derivatives for which no publicly quoted prices exist in active markets(Level 1)are determined using valuation techniques based on observable market data as of the end of the reporting period(Level 2).In applying valuation techniques,credit or debt value adjustments are determined to account for the credit risk of the contractual party or Bayer.Currency and commodity forward contracts are measured individually at their forward rates or forward prices on the closing date.These depend on spot rates or prices,including time spreads.The fair values of interest-rate hedging instruments and cross-currency interest-rate swaps were determined by discounting future cash flows over the remaining terms of the instruments at market rates of interest,taking into account any foreign currency translation as of the closing date in certain cases.Fair values measured using unobservable inputs are categorized within Level 3 of the fair value hierarchy.This essentially applies to certain debt or equity instruments,in some cases to the fair values of embedded derivatives,and to obligations for contingent consideration in business combinations.Credit risk is frequently the principal unobservable input used to determine the fair values of debt instruments classified as“FVTPL at fair value through profit or loss”by the discounted cash flow method.Here the credit spreads of comparable issuers are applied.A significant increase in credit risk could result in a lower fair value,whereas a significant decrease could result in a higher fair value.However,a relative change of 10%in the credit spread does not materially affect the fair value.When determining the fair values of contingent consideration within the“FVTPL(nonderivative)at fair value through profit or loss”category,the principal unobservable input is the estimation of the probability that,for example,pre-defined milestones for research and development projects will be achieved or that sales targets will be attained,as well as the timing of the payments.Changes in these estimates may lead to significant increases or decreases in fair value.Embedded derivatives are separated from their respective host contracts if the contracts do not represent financial assets and are not closely related to them.Such host contracts are generally sale or purchase agreements relating to the operational business.The embedded derivatives cause the cash flows from the contracts to vary with exchange-rate or price fluctuations,for example.The internal measurement of embedded derivatives is performed using appropriate valuation models,such as discounted cash flow models,which are based on unobservable inputs.The relevant models include planned sales and purchase volumes,and prices derived from market data.Regular monitoring is carried out based on these fair values as part of quarterly reporting.Changes in the fair value of an embedded derivative from a long-term structured renewable energy credit(REC)purchase agreement in the United States are recognized in other operating income or expenses.As of June 30,2024,the positive fair value was 68 million(June 30,2023:9 million).Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportNotes to the Condensed Consolidated Interim Financial Statements of the Bayer Group 37The changes in the amount of financial assets and liabilities recognized at fair value based on unobservable inputs(Level 3)for each financial instrument category were as follows:B 14 Development of Financial Assets and Liabilities(Level 3)million Assets FVTPL1FVTOCI(no recycling)1Derivatives(net)Liabilities FVTPL(nonderivative)1TotalCarrying amounts(net),January 1,2024 1,576 261 31(1,030)838 Gains(losses)recognized in profit or loss(8)31 56 79 of which related to assets/liabilities recognized in the statements of financial position(8)31 56 79 Gains(losses)recognized outside profit or loss (8)(8)Additions of assets(liabilities)27 5 32 Settlements of(assets)liabilities 134 134 Changes in scope of consolidation (1)(1)Exchange differences 5 6 1(32)(20)Carrying amounts(net),June 30,2024 1,600 263 63(872)1,054 1 See table B 12 for definitions of measurement categories.B 15 Development of Financial Assets and Liabilities(Level 3)million Assets FVTPL1FVTOCI(no recycling)1Derivatives(net)Liabilities FVTPL(nonderivative)1TotalCarrying amounts(net),January 1,2023 1,473 340 8(1,729)92 Gains(losses)recognized in profit or loss 15 11 74 100 of which related to assets/liabilities recognized in the statements of financial position 15 11 74 100 Gains(losses)recognized outside profit or loss (10)(10)Additions of assets(liabilities)136 20 (31)125 Settlements of(assets)liabilities(126)463 337 Changes in scope of consolidation (61)(61)Exchange differences(2)(5)26 19 Carrying amounts(net),June 30,2023 1,496 284 19(1,197)602 1 See table B 13 for definitions of measurement categories.The changes recognized in profit or loss were included in other operating income/expenses,as well as in the financial result in interest income,exchange gains or losses,and other financial income and expenses.Financial liabilities In June 2024,Bayer AG placed its first-ever bond on the Chinese capital market.Known as a Panda bond,the issuance had a volume of CNY 2 billion(256 million),a maturity of two years and a coupon of 2.2%.The proceeds will be used for general corporate purposes.To find out more about the maturities of financial liabilities,please see the table on maturities in Note 24 to the consolidated financial statements in the Bayer Annual Report 2023.Bayer Half-Year Financial Report as of June 30,2024 B Condensed Consolidated Interim Group Financial ReportNotes to the Condensed Consolidated Interim Financial Statements of the Bayer Group 38Legal Risks To find out more about the Bayer Groups legal risks,please see Note 30 to the consolidated financial statements in the Bayer Annual Report 2023,which can be downloaded at .Since the Bayer Annual Report 2023,the following significant changes have occurred in respect of the legal risks:Roundup(glyphosate):A large number of lawsuits from plaintiffs claiming to have been exposed to glyphosate-based products manufactured by Bayers subsidiary Monsanto have been served upon Monsanto in the United States.Glyphosate is the active ingredient contained in a number of Monsantos herbicides,including Roundup-branded products.Plaintiffs allege personal injuries resulting from exposure to those products.As of July 15,2024,Monsanto had reached settlements and/or was close to settling in a substantial number of claims.Of the approximately 172,000 claims in total,approximately 114,000 have been settled or are not eligible for various reasons.As of July 23,2024,there have been 23 Roundup trials concluded before both federal and state courts in California,Missouri,Oregon,Arkansas,Delaware and Pennsylvania.In fourteen of those trials,favorable outcomes were achieved on behalf of Monsanto,including eleven defense verdicts,one hung jury resulting in a mistrial,one directed verdict on behalf of Monsanto,and one dismissal of plaintiffs claims with prejudice mid-trial.In the other nine trials,the plaintiffs were awarded compensatory damages and,in most cases,punitive damages.In July 2024,one of the eleven defense verdicts was overturned by the appellate court,and a re-trial may be scheduled.PCBs:Bayers subsidiary Monsanto has been named in lawsuits brought by various governmental entities in the United States claiming that Monsanto,Pharmacia and Solutia,collectively as a manufacturer of PCBs,should be responsible for a variety of damages due to PCBs in the environment,including bodies of water.PCBs are chemicals that were widely used for various purposes until the manufacture of PCBs was prohibited by the EPA in the United States in 1979.In April 2024,the Maine Attorney General filed suit in state court alleging claims for damages related to PCB contamination of the states environment,so that there are now six attorney general cases pending.In July 2024,Bayer agreed,without admission of liability,to pay US$160 million to settle the lawsuit with the City of Seattle,US$35 million of which was devoted to PCB remediation.Seattle was one of the municipalities that opted out of the class settlement reached in 2020.In May 2024,the Court of Appeals for the State of Washington handed down its opinion in the first of the Sky Valley Education Center(SVEC)personal injury cases to go to trial(Erickson et al.).The Court of Appeals reversed the lower-court decision and remanded the cases for further proceedings,eliminating the entirety of the compensatory and punitive damages in that case,based on multiple trial errors.Many of the identified errors should,in Bayers opinion,carry through the other SVEC trials to date.The plaintiffs have appealed the decision to the Washington Supreme Court.BASF arbitration:In 2019,Bayer was served with a request
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This is an English translation prepared for the convenience of non-resident shareholders.Should there be anyinconsistency between the translation and the official Japanese text,the latter shall prevail.Consolidated Financial Results for the Three Months Ended June 30,20241-1,Showa-cho,Kariya,Aichi 448-8661,JapanDATE:July 31,2024Representative:Shinnosuke HayashiDENSO CORPORATIONPresident and CEOCODE:6902Contact:Tadashi AraiListed on the Tokyo andDirector,Finance and Accounting Div.Nagoya Stock ExchangesTelephone: 81-566-25-5511Scheduled date of commencement of dividend payment:-(URL https:/ financial results for the three months ended June 30,2024(from April 1,2024 to June 30,2024)(1)Consolidated operating results(Percentages indicate the change of the same period of the previous year)RevenueOperating profitProfit before incometaxesProfit for the periodThree months endedMillions of yen%Millions of yen%Millions of yen%Millions of yen%June 30,20241,753,8412.4120,56827.7137,7186.5102,02110.0June 30,20231,712,86021.094,37848.3129,27056.692,74372.0Profit attributable toowners of the parentcompanyComprehensive incomefor the periodBasic earnings per shareDiluted earnings pershareThree months endedMillions of yen%Millions of yen%YenYenJune 30,202494,45910.544,605(92.0)32.45June 30,202385,46064.7555,835361.228.53(Note)On October 1,2023,the Company effected a 4-for-1 split of common stock.Basic earnings per share is calculated on theassumption that the stock split was implemented at the beginning of the year ended March 31,2024.(2)Consolidated financial position Total assetsTotal equityEquity attributable toowners of the parentcompanyRatio of equityattributable to ownersof the parent companyto total assetsAs ofMillions of yenMillions of yenMillions of yen%June 30,20248,898,0835,689,2895,478,15261.6March 31,20249,093,3705,746,5055,534,98660.9 2.Cash dividendsAnnual dividends per shareFirstquarter-endSecondquarter-endThirdquarter-endFiscalyear-endTotalYenYenYenYenYenYear ended March 31,2024100.0030.00Year ending March 31,2025Year ending March 31,2025(Forecast)32.0032.0064.00(Note)Change in cash dividends:NoneOn October 1,2023,the Company effected a 4-for-1 split of common stock.Due to the stock split,the total dividend for theyear ended March 31,2024 is not disclosed.3.Consolidated full-year financial results forecast for the fiscal year ending March 31,2025(from April 1,2024 to March 31,2025)(Percentages indicate the change of the same period of the previous year)RevenueOperating profitProfit beforeincome taxesProfit for the yearProfit attributableto owners of theparent companyBasicearningsper shareMillions ofyen%Millions ofyen%Millions ofyen%Millions ofyen%Millions ofyen%YenFull year7,330,0002.6692,00081.8745,00070.8578,00062.6525,00067.8180.36(Note)Change in consolidated earnings forecasts for the fiscal year ending March 31,2025:YesFor more information,please refer to Notice Concerning Revisions to Consolidated Full-Year Financial Results Forecastreleased today(July 31,2024).Notes(1)Significant changes in the scope of consolidation during the period:NoneIn:-(Company Name:)Out:-(Company Name:)(2)Changes in accounting policies and accounting estimates1)Changes in accounting policies due to the revision of the accounting standards:None2)Changes in accounting policies except for those in 1):None3)Changes in accounting estimates:None(3)Number of issued shares(ordinary shares)1)Number of issued shares at the end of the period(including treasury shares)FY2025 1st quarter3,151,779,804 sharesFY20243,151,779,804 shares2)Number of treasury shares at the end of the periodFY2025 1st quarter240,936,727 sharesFY2024241,014,828 shares3)Average number of issued shares during the three months ended June 30FY2025 1st quarter2,910,777,898 sharesFY2024 1st quarter2,995,301,237 shares(Note)On October 1,2023,the Company effected a 4-for-1 split of common stock.Number of issued shares(ordinary shares)iscalculated on the assumption that the stock split was implemented at the beginning of the year ended March 31,2024.Review of the Japanese-language originals of the attached consolidated quarterly financial statements by certifiedpublic accountants or an audit firm:Yes(voluntary)List of Contents of AttachmentsSummary of Consolidated Financial Results for the Three Months Ended June 30,20242Unaudited Condensed Interim Consolidated Statement of Financial Position4Unaudited Condensed Interim Consolidated Statement of Income6Unaudited Condensed Interim Consolidated Statement of Comprehensive Income7Unaudited Condensed Interim Consolidated Statement of Changes in Equity8Unaudited Condensed Interim Consolidated Statement of Cash Flows10Notes to Unaudited Condensed Interim Consolidated Financial Statements11Assumption for Going Concern11Segment information11-1-Summary of Consolidated Financial Results for the ThreeMonths Ended June 30,2024 1.Summary of Management ResultsGuided by the philosophy of green,peace of mind,and inspiring,the Company has been committed to therealization of lasting vitality for the environment and safe,comfortable,and flexible mobility for all people withthe aim of reducing the Companys environmental burden and realizing a society without traffic accidents.TheCompany will leverage the strengths gained with automobiles and broaden the perspective of the solutions toencompass society as a whole,not just vehicles,thereby contributing to solving issues faced by society.For the three months ended June 30,2024,revenue increased by 41.0 billion or 2.4%,year over year,to1,753.8 billion due to depreciation of yen despite the impact of suspended operations of Japanese customers andvehicle production decrease due to slow sales in Asia.Operating profit increased by 26.2 billion or 27.7%,year over year,to 120.6 billion due to depreciation of yenand efforts of cost reduction in spite of production volume decrease.Profit before income taxes increased by 8.4billion or 6.5%,year over year,to 137.7 billion.Profit for the period increased by 9.3 billion or 10.0%,year overyear to 102.0 billion.Profit attributable to owners of the parent company increased by 9.0 billion or 10.5%to94.5 billion.By geographical segment,revenue decreased in Asia due to the impact of slow vehicle sales.Revenue increasedin Japan,North America,Europe and other regions,year over year,due to depreciation of yen and salesexpansion mainly in focus fields such as electrification and safety.Operating profit increased in Japan,NorthAmerica and other regions due to global improvement of profitability,while decreased in Europe and Asia,wherethere was a production volume decrease.Revenue in Japan increased by 3.5 billion,or 0.4%,year over year,to 984.6 billion due to depreciation of yen despite the impact of suspended operations of Japanese customers.Operating profit increased by 20.3 billion,or81.6%,year over year,to 45.1 billion due to efforts of cost reduction in spite of production volume decrease.Revenue in North America increased by 75.2 billion,or 17.7%,year over year,to 500.1 billion due to salesexpansion mainly in focus fields such as electrification and safety.Operating profit increased by 17.0 billion,or270.2%,year over year,to 23.3 billion due to efforts of cost reduction.Revenue in Europe increased by 1.4 billion,or 0.7%,year over year,to 199.8 billion due to depreciation of yenin spite of decrease vehicle sales.Operating profit decreased by 2.5 billion,or 33.0%,year over year,to 5.0billion due to production volume decrease despite depreciation of yen and efforts of cost reduction.Revenue in Asia decreased by 2.9 billion,or 0.6%,year over year,to 461.4 billion due to decrease vehicle sales.Operating profit decreased by 4.8 billion,or 11.7%,year over year,to 35.8 billion due to production volumedecrease despite efforts of cost reduction.Revenue in other regions increased by 0.5 billion,or 1.8%,year over year,to 29.0 billion.Operating profitincreased by 1.0 billion,or 19.5%,year over year,to 5.9 billion.-2-2.Summary of Financial PositionTotal assets as of June 30,2024,decreased by 195.3 billion,to 8,898.1 billion compared with prior year-endmainly due to a decrease in other financial assets.The total for current and non-current liabilities decreased by 138.1 billion,to 3,208.8 billion compared with prioryear-end mainly due to a decrease in deferred tax liabilities.Equity decreased by 57.2 billion,to 5,689.3 billion compared with prior year-end mainly due to a decrease inother comprehensive income associated with assets held for sale.3.Summary of Financial ForecastIn the first quarter,revenue and operating profit decreased compared to the announcement at the beginning of theyear due to the impact of suspended operations of Japanese customers and the decrease in vehicle production byslow sales in Asia.From the second quarter onward,the impact of the suspended operations of Japanese customers is expected tolessen,but vehicle sales,mainly in Asia,are expected to remain slow,while depreciation of yen.Due to suchuncertainties in the external environment,the Group will maintain the announcement at the beginning of the year.Based on the above,the Group expects revenue to be 7,330.0 billion,operating profit to be 692.0billion reflecting only the downturn in the first quarter.Profit before income taxes to be 745.0 billion,profit for the year to be 578.0 billion,and profit attributable toowners of the parent company to be 525.0 billion.The exchange rates used for the assumption from the second quarter onward are 1 USD=145 yen and 1 EUR=155 yen,maintain the announcement at the beginning of the year.The above includes future forecasts based on information currently available.Actual results may differ materiallyfrom these forecasts due to changes in business operations,exchange rate fluctuations,and other internal andexternal factors.-3-Unaudited Condensed Interim Consolidated Statement ofFinancial PositionAs of June 30,2024 (Unit:Millions of yen)As of March 31,2024As of June 30,2024Assets Current assets Cash and cash equivalents789,3901,072,510Trade and other receivables1,281,2791,183,675Inventories1,172,2571,204,869Other financial assets48,39872,816Other current assets156,477175,554Subtotal3,447,8013,709,424Assets held for sale417,578389,704Total current assets3,865,3794,099,128Non-current assets Property,plant and equipment2,043,6002,081,841Right-of-use assets46,34754,405Intangible assets199,761207,717Other financial assets2,624,8392,133,920Investments accounted for using the equity method124,430127,861Retirement benefit assets105,937105,943Deferred tax assets56,05753,693Other non-current assets27,02033,575Total non-current assets5,227,9914,798,955Total assets9,093,3708,898,083 -4-(Unit:Millions of yen)As of March 31,2024As of June 30,2024Liabilities and equity Current liabilities Bonds and borrowings332,516254,153Trade and other payables1,232,4631,272,509Other financial liabilities47,67243,455Income tax payables61,76881,083Provisions295,239298,961Other current liabilities83,972105,320Subtotal2,053,6302,055,481Liabilities directly associated with assets held for sale111,34389,072Total current liabilities2,164,9732,144,553Non-current liabilities Bonds and borrowings518,205517,035Other financial liabilities29,11530,440Retirement benefit liabilities238,201239,105Provisions1,7161,775Deferred tax liabilities382,752263,442Other non-current liabilities11,90312,444Total non-current liabilities1,181,8921,064,241Total liabilities3,346,8653,208,794Equity Capital stock187,457187,457Capital surplus273,481273,186Treasury stock(452,140)(451,994)Other components of equity1,815,5581,678,414Other comprehensive income associated with assetsheld for sale258,936207,144Retained earnings3,451,6943,583,945Equity attributable to owners of the parent company5,534,9865,478,152Non-controlling interests211,519211,137Total equity5,746,5055,689,289Total liabilities and equity9,093,3708,898,083 -5-Unaudited Condensed Interim Consolidated Statement ofIncomeFor the three-month period ended June 30,2024(Unit:Millions of yen)Three-monthperiod endedJune 30,2023Three-monthperiod endedJune 30,2024Revenue1,712,8601,753,841Cost of revenue(1,484,873)(1,502,027)Gross profit227,987251,814Selling,general and administrative expenses(131,707)(133,682)Other income3,7547,128Other expenses(5,656)(4,692)Operating profit94,378120,568Finance income28,64235,696Finance costs(5,516)(7,832)Foreign exchange gains(losses)3,175(12,311)Share of the profit of associates and joint ventures accounted for usingthe equity method8,5911,597Profit before income taxes129,270137,718Income tax expenses(36,527)(35,697)Profit for the period92,743102,021Attributable to:Owners of the parent company85,46094,459Non-controlling interests7,2837,562 (Unit:Yen)Earnings per share Basic28.5332.45Diluted -6-Unaudited Condensed Interim Consolidated Statement ofComprehensive IncomeFor the three-month period ended June 30,2024(Unit:Millions of yen)Three-monthperiod endedJune 30,2023Three-monthperiod endedJune 30,2024Profit for the period92,743102,021Other comprehensive income(loss)Items that will not be reclassified subsequently to profit or loss Net fair value gain(loss)on equity instruments designated as FVTOCI322,572(194,617)Remeasurements of defined benefit pension plans335Share of other comprehensive income(loss)of investments accountedfor using the equity method17(4)Total322,592(194,586)Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations137,871132,598Cash flow hedges(865)274Share of other comprehensive income of investments accounted forusing the equity method3,4944,298Total140,500137,170Total other comprehensive income(loss)463,092(57,416)Comprehensive income for the period555,83544,605Attributable to:Owners of the parent company541,77630,642Non-controlling interests14,05913,963 -7-Unaudited Condensed Interim Consolidated Statement ofChanges in EquityFor the three-month period ended June 30,2024(Unit:Millions of yen)Equity attributable to owners of the parent companyCapitalstockCapitalsurplusTreasurystockOther components of equityNet fair valuegain on equityinstrumentsdesignated asFVTOCIRemeasurementsof defined benefitpension plansExchangedifferencesontranslatingforeignoperationsAs of April 1,2023187,457273,664(252,270)660,038300,274Profit for the periodOther comprehensive income(loss)322,2082134,971Comprehensive income(loss)forthe period322,2082134,971Acquisition of treasury stock(6)Disposal of treasury stock43153DividendsChanges in the ownership interestin subsidiaries without a loss ofcontrolTransfer to retained earnings(29)(2)Transfer to other comprehensiveincome associated with assets heldfor saleOtherTotal transactions with the owners43147(29)(2)As of June 30,2023187,457273,707(252,123)982,217435,245As of April 1,2024187,457273,481(452,140)1,301,445518,254Profit for the periodOther comprehensive(loss)income(194,181)35130,055Comprehensive(loss)income forthe period(194,181)35130,055Acquisition of treasury stock(1)Disposal of treasury stock59147DividendsChanges in the ownership interestin subsidiaries without a loss ofcontrol(354)Transfer to retained earnings(125,084)(35)Transfer to other comprehensiveincome associated with assets heldfor sale51,792OtherTotal transactions with the owners(295)146(73,292)(35)As of June 30,2024187,457273,186(451,994)1,033,972648,309-8-(Unit:Millions of yen)Equity attributable to owners of the parent companyNon-controllinginterestsTotalequityOther componentsof equityOthercomprehensiveincomeassociatedwith assetsheld for saleRetainedearningsTotalCashflowhedgesTotalAs of April 1,2023(4,483)955,829 3,212,248 4,376,928202,783 4,579,711Profit for the period85,46085,4607,28392,743Other comprehensive income(loss)(865)456,316456,3166,776463,092Comprehensive income(loss)forthe period(865)456,31685,460541,77614,059555,835Acquisition of treasury stock(6)(6)Disposal of treasury stock196196Dividends(71,141)(71,141)(21,515)(92,656)Changes in the ownership interestin subsidiaries without a loss ofcontrolTransfer to retained earnings(31)31Transfer to other comprehensiveincome associated with assets heldfor saleOther666Total transactions with the owners(31)(71,104)(70,945)(21,515)(92,460)As of June 30,2023(5,348)1,412,114 3,226,604 4,847,759195,327 5,043,086 As of April 1,2024(4,141)1,815,558258,936 3,451,694 5,534,986211,519 5,746,505Profit for the period94,45994,4597,562102,021Other comprehensive(loss)income274(63,817)(63,817)6,401(57,416)Comprehensive(loss)income forthe period274(63,817)94,45930,64213,96344,605Acquisition of treasury stock(1)(1)Disposal of treasury stock206206Dividends(87,327)(87,327)(13,997)(101,324)Changes in the ownership interestin subsidiaries without a loss ofcontrol(354)(391)(745)Transfer to retained earnings(125,119)125,119Transfer to other comprehensiveincome associated with assets heldfor sale51,792(51,792)Other4343Total transactions with the owners(73,327)(51,792)37,792(87,476)(14,345)(101,821)As of June 30,2024(3,867)1,678,414207,144 3,583,945 5,478,152211,137 5,689,289 -9-Unaudited Condensed Interim Consolidated Statement of CashFlowsFor the three-month period ended June 30,2024(Unit:Millions of yen)Three-monthperiod endedJune 30,2023Three-monthperiod endedJune 30,2024Cash flows from operating activities Profit before income taxes129,270137,718Depreciation92,51294,956Decrease in retirement benefit liabilities(751)(465)Decrease in retirement benefit assets83966Interest and dividend income(28,477)(35,517)Interest expenses3,7733,096Foreign exchange gains(6,897)(5,246)Share of the profit of associates and joint ventures accounted for using theequity method(8,591)(1,597)Losses(gains)on sales or disposal of property,plant and equipment1,539(199)Decrease in trade receivables87,94098,609Decrease(increase)in inventories30,807(602)Decrease in trade payables(36,269)(36,032)Increase in provisions5,9402,691Other54,76843,891Subtotal326,403301,369Interest received6,0897,823Dividends received22,79229,474Interest paid(4,330)(3,763)Income taxes paid(52,962)(61,732)Net cash provided by operating activities297,992273,171Cash flows from investing activities Increase in time deposits(23,251)(18,129)Purchases of property,plant and equipment(89,424)(90,582)Proceeds from sales of property,plant and equipment4,6405,486Purchases of intangible assets(11,481)(15,207)Purchases of equity instruments(5,597)(1,939)Purchases of debt instruments(133)(152)Proceeds from sales of equity instruments277295,304Proceeds from sales and redemption of debt instruments199252Other(2,625)(8,131)Net cash(used in)provided by investing activities(127,395)166,902Cash flows from financing activities Net decrease in short-term borrowings(41,577)(88,173)Proceeds from borrowings79,110503Repayments of long-term borrowings(10,884)(27)Repayments of lease liabilities(10,454)(8,222)Dividends paid(71,141)(87,327)Dividends paid to non-controlling interests(21,515)(15,123)Purchase of treasury shares(6)(1)Other(33)(1,108)Net cash used in financing activities(76,500)(199,478)Foreign currency translation adjustments on cash and cash equivalents29,97242,525Net increase in cash and cash equivalents124,069283,120Cash and cash equivalents at beginning of period733,850789,390Cash and cash equivalents at end of period857,9191,072,510-10-Notes to Unaudited Condensed Interim Consolidated FinancialStatements Basis of Presentation of Consolidated Financial StatementsThe accompanying condensed interim consolidated financial statements have been prepared in accordance with theArticle 5-2 of the Tokyo Stock Exchange and the Nagoya Stock Exchanges standards for preparation of quarterlyfinancial statements,omitting certain disclosures under the Article 5-5 of the Tokyo Stock Exchange and the NagoyaStock Exchanges standards for preparation of quarterly financial statements.A part of the disclosures required underInternational Accounting Standard 34 Interim Financial Reporting”is omitted under the Article 5-5 of the Tokyo StockExchange and the Nagoya Stock Exchanges standards for preparation of quarterly financial statements.Assumption for Going ConcernThere are no applicable items.Segment information(1)Outline of reportable segmentsIn the three-month period ended June 30,2024,there were no material changes to the method used to identify thereportable segments,the business activities carried out by each reportable segment,or the measurement standardsused to determine segment profits.(2)Revenue,profit/loss for each reportable segmentFor the three-month period ended June 30,2023(Unit:Millions of yen)Reportable segment Others(Note)Eliminations ConsolidatedJapanNorthAmericaEuropeAsiaTotalRevenue Customers685,991420,982180,842397,060 1,684,875 27,9851,712,860Intersegment295,0703,96217,51267,217383,761471(384,232)Total981,061424,944198,354464,277 2,068,636 28,456(384,232)1,712,860Segment profit24,8316,2917,45940,51679,0974,97210,30994,378Finance income28,642Finance costs(5,516)Foreign exchange gains3,175Share of the profit of associates and joint ventures accounted for using the equity method8,591Profit before income taxes129,270 (Note)Others is an operating segment that is not included in the reportable segments,such as business activities ofsubsidiaries in South America.-11-For the three-month period ended June 30,2024(Unit:Millions of yen)Reportable segmentOthers(Note)Eliminations ConsolidatedJapanNorthAmericaEuropeAsiaTotalRevenueCustomers655,370495,572182,321391,651 1,724,914 28,9271,753,841Intersegment329,1914,56117,46369,726420,94132(420,973)Total984,561500,133199,784461,377 2,145,855 28,959(420,973)1,753,841Segment profit45,09923,2884,99435,763109,1445,9435,481120,568Finance income35,696Finance costs(7,832)Foreign exchange losses(12,311)Share of the profit of associates and joint ventures accounted for using the equity method1,597Profit before income taxes137,718(Note)Others is an operating segment that is not included in the reportable segments,such as business activities ofsubsidiaries in South America.-12-
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Bayer Quarterly Statement as of March 31,2024 1 Q1 performance as expected /Group sales at 13.8 billion (Fx&p adj.0.6%),currency headwinds of 0.5 billion/EBITDA before special items falls slightly to 4.4 billion(1.3%)/Sales and earnings down at Crop Science and Consumer Health/Pharmaceuticals posts higher sales and earnings/Core earnings per share at 2.82 (4.4%)/Net income at 2.0 billion/Free cash flow at minus 2.6 billion/Currency-adjusted Group outlook confirmed Quarterly Statement First Quarter of 2024 Bayer Quarterly Statement as of March 31,2024 2Bayer Group Key Data Change(%)million Q1 2023Q1 2024ReportedFx&p adj.Sales 14,389 13,765 4.3 0.6Change in sales1 Volume 5.8%0.3%Price 4.7%0.3%Currency 0.7%3.7%Portfolio 1.3%0.0%Sales by region Europe/Middle East/Africa 4,639 4,491 3.2 2.1North America 5,906 5,760 2.5 1.2Asia/Pacific 2,181 1,914 12.2 5.9Latin America 1,663 1,600 3.8 0.7EBITDA1 4,318 4,205 2.6Special items1(153)(207)EBITDA before special items1 4,471 4,412 1.3EBITDA margin before special items1 31.12.1IT1 2,973 3,092 4.0Special items1(431)(207)EBIT before special items1 3,404 3,299 3.1Financial result(367)(501).Net income(from continuing and discontinued operations)2,178 2,000 8.2Earnings per share from continuing and discontinued operations()2.22 2.04 8.2Core earnings per share1 from continuing operations()2.95 2.82 4.4Net cash provided by(used in)operating activities (from continuing and discontinued operations)(3,550)(2,150).Free cash flow1(4,102)(2,626).Net financial debt(at end of period)36,077 37,488 3.9Cash flow-relevant capital expenditures (from continuing and discontinued operations)466446 4.3Research and development expenses 1,5711,426 9.2Depreciation,amortization and impairment losses/loss reversals 1,3451,113 17.2Number of employees(at end of period)2 101,73598,189 3.5Personnel expenses(including pension expenses)3,2593,040 6.7 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”2 Employees calculated as full-time equivalents(FTEs)Bayer Quarterly Statement as of March 31,2024 3Key Events Board of Management The Supervisory Board of Bayer AG appointed Julio Triana to Bayers Board of Management effective April 1,2024.He became President of the Consumer Health Division effective May 1,2024,and succeeded Heiko Schipper,who had asked the Supervisory Board to bring forward the end date of his contract.Schipper left the company effective April 30,2024.Innovations and product approvals In March,we announced positive topline results from the Phase III long-term study OASIS 3 relating to our investigational compound elinzanetant,which we are investigating as a non-hormonal treatment for vasomotor symptoms associated with menopause.This builds on the existing evidence from the Phase III studies OASIS 1 and 2.We will submit data from the OASIS 1,2 and 3 studies to regulatory authorities for approval of marketing authorizations for elinzanetant.Portfolio changes Also in March,we announced our acquisition of the exclusive marketing rights for acoramidis in Europe from Eidos Therapeutics Inc.,BridgeBio International GmbH and BridgeBio Europe B.V.Acoramidis is a highly potent and selective small molecule,orally administered transthyretin(TTR)stabilizer for the treatment of patients suffering from transthyretin amyloid cardiomyopathy(ATTR CM).A marketing authorization application(MAA)was filed with the European Medicines Agency(EMA)in January 2024.BridgeBio and the affiliates will receive up to US$310 million in upfront and near-term milestone payments and are eligible to receive additional undisclosed sales milestone payments and tiered royalties beginning in the low-thirties percent.Earnings Performance of the Bayer Group1 First quarter of 2024 Group sales Group sales came in at 13,765 million in the first quarter of 2024(Q1 2023:14,389 million),representing a change of 0.6%on a currency-and portfolio-adjusted basis(Fx&portfolio adj.),and 4.3%on a reported basis.There was a negative currency effect of 525 million(Q1 2023:positive currency effect of 102 million).Sales in Germany amounted to 729 million(Q1 2023:768 million).Sales at Crop Science were down year on year,largely due to lower volumes for our non-glyphosate-based herbicides and in our Fungicides business.We additionally recorded substantial price declines for our glyphosate-based products that were not fully offset by the impact of volumes returning to normal levels.Sales at Pharmaceuticals were up,driven by significant gains for Nubeqa and Kerendia as well as continued sales growth for Eylea and our Radiology business.However,growth was mainly slowed by declines for Adalat in China.Sales at Consumer Health declined slightly,mostly due to lower sales in the Allergy&Cold category.EBITDA before special items Group EBITDA before special items decreased by 1.3%to 4,412 million.This figure included a negative currency effect of 206 million(Q1 2023:4 million).Crop Science registered a decline in EBITDA before special items that was mainly due to the fall in prices for our glyphosate-based products.The increase in EBITDA before special items at Pharmaceuticals was mainly due to lower expenses for marketing and R&D activities.Consumer Health recorded a decline in EBITDA before special items that was primarily driven by currency effects.The Group EBITDA margin before special items came in at 32.1%.1 For definition of alternative performance measures see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Bayer Quarterly Statement as of March 31,2024 4EBIT and special items EBIT of the Bayer Group came in at 3,092 million(Q1 2023:2,973 million)after net special charges of 207 million(Q1 2023:431 million).The special charges primarily related to expenses for ongoing restructuring measures and affected all divisions and functional areas.EBIT before special items decreased by 3.1%to 3,299 million(Q1 2023:3,404 million).The following special items were taken into account in calculating EBIT and EBITDA:A 1 Special Items1 by Category million EBITQ1 2023EBITQ1 2024EBITDAQ1 2023EBITDAQ1 2024Total special items(431)(207)(153)(207)Restructuring(115)(200)(115)(199)of which in the Reconciliation(27)(17)(27)(17)Acquisition/integration(2)(2)Divestments(48)1(48)1 Litigations/legal risks(46)4(46)3 of which in the Reconciliation(60)(26)(60)(26)Impairment losses/loss reversals(278)Other 58(12)58(12)1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”2 Where not already included in the other special items categories Net income After a financial result of minus 501 million(Q1 2023:minus 367 million),income before income taxes amounted to 2,591 million(Q1 2023:2,606 million).The deterioration of the financial result was largely due to an increase in interest expense as a result of higher interest rates,as well as hyperinflationary effects arising primarily in Argentina.After income tax expense of 589 million(Q1 2023:424 million)and accounting for noncontrolling interest,net income amounted to 2,000 million(Q1 2023:2,178 million).A 2 Financial Result1 million Q1 2023Q1 2024 Income(loss)from investments in affiliated companies(47)2 Net interest expense(213)(306)Other financial income/(expenses)(107)(197)of which interest portion of discounted provisions(114)(101)of which exchange gain(loss)15(41)of which miscellaneous financial income/(expenses)(8)(55)Total(367)(501)of which special items(net)(92)(52)1 Further information on the financial result is given in Note 10 of the Annual Report 2023.Bayer Quarterly Statement as of March 31,2024 5Core earnings per share Core earnings per share decreased by 4.4%to 2.82(Q1 2023:2.95),mainly due to the decline in earnings at the Crop Science Division.Earnings per share(total)came in at 2.04(Q1 2023:2.22).The difference between this figure and the one for core earnings per share is mainly due to amortization.A 3 Core Earnings per Share1 million Q1 2023 Q1 2024EBIT1(as per income statements)2,973 3,092 Amortization and impairment losses/loss reversals on goodwill and other intangible assets 665 696 Impairment losses/loss reversals on property,plant and equipment,and accelerated depreciation included in special items 285 26 Special items(other than accelerated depreciation,amortization and impairment losses/loss reversals)153 207 Core EBIT1 4,076 4,021 Financial result(as per income statements)(367)(501)Special items in the financial result2 92 52 Income taxes(as per income statements)(424)(589)Special items in income taxes Tax effects related to amortization,impairment losses/loss reversals and special items(472)(207)Income after income taxes attributable to noncontrolling interest(as per income statements)(4)(2)Above-mentioned adjustments attributable to noncontrolling interest Core net income from continuing operations 2,901 2,774 Shares(million)Weighted average number of shares 982.42 982.42 Core earnings per share from continuing operations1 2.95 2.82 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”2 Includes in particular the changes in the fair value of the interests in Century Therapeutics,United States,and Pyxis Oncology,United States,as well as interest cost for the provisions for litigations/legal risks Bayer Quarterly Statement as of March 31,2024 6Business Development by Division Crop Science A 4 Key Data Crop Science Change(%)1 million Q1 2023Q1 2024ReportedFx&p adj.Sales 8,351 7,907 5.3 3.0Change in sales1 Volume 8.2%0.1%Price 7.1%2.9%Currency 1.6%2.3%Portfolio 1.6%0.0%Sales by region Europe/Middle East/Africa 2,297 2,079 9.5 2.6North America 4,182 4,122 1.4 0.2Asia/Pacific 632 519 17.9 12.3Latin America 1,240 1,187 4.3 8.2EBITDA1 3,249 2,789 14.2Special items1(18)(60)EBITDA before special items1 3,267 2,849 12.8EBITDA margin before special items1 39.16.0IT1 2,319 2,063 11.0Special items1(296)(59)EBIT before special items1 2,615 2,122 18.9Net cash used in operating activities(3,364)(2,865).Cash flow-relevant capital expenditures 208 210 1.0Research and development expenses 600 625 4.2 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”First quarter of 2024 Sales Sales at Crop Science decreased by 3.0%(Fx&portfolio adj.)to 7,907 million in the first quarter of 2024,mainly due to lower volumes for our non-glyphosate-based herbicides and our Fungicides business in Europe/Middle East/Africa.By contrast,our glyphosate-based products saw a substantial increase in volumes,which was more than offset by significant price declines as a result of reduced prices for generics./Sales at Corn Seed&Traits increased thanks to higher prices in all regions.However,volumes were down mainly in North America due to lower acreages./At Herbicides,we recorded substantial volume declines for non-glyphosate-based products,especially in Europe/Middle East/Africa,largely driven by adverse weather conditions and increased generic pressure.With respect to our glyphosate-based products,we recorded significant market-driven price declines in all regions that were not fully offset by the impact of volumes returning to normal levels.Particularly in Latin America,the negative price effect clearly outweighed the growth in volumes./Business at Fungicides was down,mainly due to a decline in volumes in Europe/Middle East/Africa that was also largely driven by adverse weather conditions and increased generic pressure.By contrast,higher volumes in Latin and North America had a positive impact.Bayer Quarterly Statement as of March 31,2024 7/Sales at Soybean Seed&Traits were level with the prior-year period./Sales at Insecticides were up,driven by higher volumes in Europe/Middle East/Africa and North America that were partially offset by a sales decline in Latin America./At Cotton Seed,volumes were down in North America amid shifts in demand into the second quarter./Business at Vegetable Seeds expanded thanks to higher prices in all regions./The reporting unit“Other”benefited from advance sales in the other parts of our seed portfolio.By contrast,we recorded declines at SeedGrowth as well as in the remaining Environmental Science businesses Lawn&Garden and Industrial Turf&Ornamental(IT&O).A 5 Sales by Strategic Business Entity Change(%)1 million Q1 2023Q1 2024ReportedFx&p adj.Crop Science 8,3517,907 5.3 3.0Corn Seed&Traits 3,2683,242 0.8 2.0Herbicides 1,8891,601 15.2 13.3of which glyphosate-based products2 705657 6.8 6.4Fungicides 1,054935 11.3 8.5Soybean Seed&Traits 608604 0.7 0.1Insecticides 460459 0.2 2.3Cotton Seed 314290 7.6 7.0Vegetable Seeds 181184 1.7 5.0Other 577592 2.6 5.0 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”2 As of 2024,our business with glyphosate-based products is for the first time being reported separately within the Herbicides strategic business entity;the prior-year figures are likewise shown separately.Earnings EBITDA before special items at Crop Science decreased by 12.8%to 2,849 million in the first quarter of 2024(Q1 2023:3,267 million),mainly due to price declines for our glyphosate-based products.There was also a negative currency effect of 92 million(Q1 2023:positive currency effect of 54 million).The EBITDA margin before special items declined by 3.1 percentage points to 36.0%.EBIT came in at 2,063 million(Q1 2023:2,319 million)in the first quarter of 2024 after net special charges of 59 million(Q1 2023:296 million)that primarily related to ongoing restructuring measures.A 6 Special Items1 Crop Science million EBITQ1 2023EBITQ1 2024EBITDAQ1 2023EBITDAQ1 2024Restructuring(27)(89)(27)(89)Acquisition/integration(2)(2)Divestments(18)(18)Litigation/legal risks 30 30 30 29 Impairment losses/loss reversals(278)Other(1)(1)Total special items(296)(59)(18)(60)1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Bayer Quarterly Statement as of March 31,2024 8Pharmaceuticals A 7 Key Data Pharmaceuticals Change(%)1 million Q1 2023Q1 2024ReportedFx&p adj.Sales 4,407 4,358 1.1 3.9Change in sales1 Volume 2.4% 3.1%Price 0.7% 0.8%Currency 0.6%5.0%Portfolio 1.0%0.0%Sales by region Europe/Middle East/Africa 1,771 1,822 2.9 6.1North America 1,110 1,110 1.1Asia/Pacific 1,305 1,187 9.0 2.0Latin America 221 239 8.1 35.4EBITDA1 1,064 1,099 3.3Special items1(42)(95)EBITDA before special items1 1,106 1,194 8.0EBITDA margin before special items1 25.1.4IT1 806 872 8.2Special items1(42)(96)EBIT before special items1 848 968 14.2Net cash provided by operating activities 707 809 14.4Cash flow-relevant capital expenditures 205 178 13.2Research and development expenses 880 756 14.1 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”First quarter of 2024 Sales In the Pharmaceuticals Division,we increased sales by 3.9%(Fx&portfolio adj.)to 4,358 million in the first quarter of 2024.We registered significant gains for our new products Nubeqa and Kerendia,and also posted continued sales growth for Eylea and our Radiology business.By contrast,negative developments included a decline in Adalat sales due to tender procedures in China./We registered a slight increase in sales for our oral anticoagulant Xarelto following a weak prior-year quarter.Gains in Europe were mainly offset by declines in Canada.Overall,business was held back by competitive pressure from generic products,as expected.License revenues recognized as sales in the United States,where Xarelto is marketed by a subsidiary of Johnson&Johnson,were down against the prior-year quarter./Sales of our ophthalmology drug Eylea advanced thanks to higher volumes and prices,with business benefiting particularly from increased volumes in Canada./Sales of our cancer drug Nubeqa grew significantly,with gains in all regions.The product therefore maintained its growth momentum,especially in the United States,Europe and China,with strong increases in volumes./We also achieved considerable gains with Kerendia,our product for the treatment of patients with chronic kidney disease associated with type 2 diabetes,mainly thanks to a substantial rise in volumes in the United States.The expansion of business in China also contributed to the positive development./Sales of our pulmonary hypertension treatment Adempas rose significantly,especially in the United States.As in the past,sales reflected the proportionate recognition of the upfront and milestone payments resulting from the sGC collaboration with Merck&Co.,United States./Our Kogenate/Kovaltry/Jivi blood-clotting medicines saw a strong decline in sales as a result of competitive pressure,particularly in the United States.Bayer Quarterly Statement as of March 31,2024 9/Sales of our YAZ/Yasmin/Yasminelle line of oral contraceptives developed very positively compared with a weak prior-year quarter./We recorded significant declines for Aspirin Cardio,our product for secondary prevention of heart attacks,with business down in China in particular./Sales of our cancer drug Stivarga also fell markedly,especially in the United States./Our Radiology business continued to post encouraging gains,especially for CT Fluid Delivery and Ultravist,primarily thanks to strong price increases.A 8 Best-Selling Pharmaceuticals Products Change(%)1 million Q1 2023Q1 2024ReportedFx&p adj.Xarelto 943926 1.8 1.7Eylea 789782 0.9 3.4Mirena/Kyleena/Jaydess 303293 3.3 0.1Nubeqa 178283 59.0 64.1Adempas 152171 12.5 14.8Kogenate/Kovaltry/Jivi 192167 13.0 11.0YAZ/Yasmin/Yasminelle 152165 8.6 21.6Aspirin Cardio 181151 16.6 7.5CT Fluid Delivery 124134 8.1 9.9Adalat 177127 28.2 23.0Ultravist 118114 3.4 10.0Stivarga 133112 15.8 10.1Gadovist product family 118105 11.0 3.3Kerendia 5285 63.5 66.2Betaferon/Betaseron 5746 19.3 18.1Total best-selling products 3,6693,661 0.2 4.6Proportion of Pharmaceuticals sales 83%Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Earnings We increased EBITDA before special items at Pharmaceuticals by 8.0%to 1,194 million in the first quarter of 2024(Q1 2023:1,106 million).Higher investments in R&D activities for our cell and gene therapy and chemoproteomics technologies were offset by significantly lower expenses for projects in advanced clinical development.With respect to our sales activities,our cost management efforts generated savings,especially for our more mature products,that clearly outweighed the increase in costs for our new products.To a lesser extent,earnings also benefited from higher income from the sale of noncore businesses.There was a high negative currency effect of 127 million(Q1 2023:6 million).The EBITDA margin before special items increased by 2.3 percentage points to 27.4%.EBIT came in at 872 million(Q1 2023:806 million)in the first quarter of 2024 after net special charges of 96 million(Q1 2023:42 million)that mainly related to ongoing restructuring projects.A 9 Special Items1 Pharmaceuticals million EBITQ1 2023EBITQ1 2024EBITDAQ1 2023EBITDAQ1 2024Restructuring(55)(85)(55)(84)Divestments(30)1(30)1 Litigations/legal risks(16)(16)Other 59(12)59(12)Total special items(42)(96)(42)(95)1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Bayer Quarterly Statement as of March 31,2024 10Consumer Health A 10 Key Data Consumer Health Change(%)1 million Q1 2023Q1 2024ReportedFx&p adj.Sales 1,573 1,432 9.0 1.8Change in sales1 Volume 3.9.1%Price 8.0% 10.3%Currency 0.1%6.8%Portfolio 0.0%0.4%Sales by region Europe/Middle East/Africa 516 523 1.4 6.5North America 612 528 13.7 11.6Asia/Pacific 244 208 14.8 10.1Latin America 201 173 13.9 16.8EBITDA1 373 322 13.7Special items1(6)(9)EBITDA before special items1 379 331 12.7EBITDA margin before special items1 24.1#.1IT1 282 229 18.8Special items1(6)(9)EBIT before special items1 288 238 17.4Net cash provided by operating activities 183 219 19.7Cash flow-relevant capital expenditures 20 26 30.0Research and development expenses 52 55 5.8 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”First quarter of 2024 Sales Sales at Consumer Health declined by 1.8%(Fx&portfolio adj.)to 1,432 million in the first quarter of 2024.We experienced reduced customer demand following a strong previous quarter in which inventories were replenished due to an improved supply situation.In addition,business in the Allergy&Cold category was down significantly due to a weaker cold season.By contrast,we registered encouraging gains at Digestive Health amid an improved supply situation.Sales were also up in the Dermatology category,partly thanks to Bepanthen./We recorded encouraging sales growth in Europe/Middle East/Africa.The Digestive Health category achieved double-digit percentage growth,mainly driven by Iberogast and Rennie.We also recorded a strong increase in sales at Nutritionals.Business in the Allergy&Cold category was down substantially due to weaker demand for cough and cold products.Sales also decreased at Pain&Cardio./Sales in North America decreased significantly,with declines in all categories that were partly due to customers optimizing their inventories.This development primarily impacted the allergy business,especially compared with the strong prior-year quarter,and the Pain&Cardio category.In addition,sales of cough and cold products were held back by a weaker season./Business in Asia/Pacific was down significantly.We registered a particularly large decline at Nutritionals amid a weaker market environment,especially in Australia and Southeast Asia.The Allergy&Cold and Pain&Cardio categories also saw a drop in sales against a strong prior year.By contrast,we recorded substantial growth at Dermatolgy,mainly driven by Kang Wang,which performed particularly well in China,and Bepanthen./We recorded strong sales growth(Fx&portfolio adj.)in Latin America,especially at Pain&Cardio,thanks to Actron and the Aspirin product family,and at Nutritionals,largely driven by Supradyn and Redoxon.By contrast,the Allergy&Cold business declined.Bayer Quarterly Statement as of March 31,2024 11A 11 Sales by Category Change(%)1 million Q1 2023Q1 2024ReportedFx&p adj.Consumer Health 1,5731,432 9.0 1.8Nutritionals 375335 10.7 0.2Allergy&Cold 410335 18.3 16.8Dermatology 345349 1.2 7.3Pain&Cardio 216181 16.2 0.7Digestive Health 210222 5.7 9.0Other 1710 41.2 32.9 Fx&p adj.=currency-and portfolio-adjusted 1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Earnings EBITDA before special items at Consumer Health declined by 12.7%to 331 million in the first quarter of 2024(Q1 2023:379 million),mainly due to negative currency effects of 46 million(Q1 2023:4 million).We were largely able to offset the decline in sales,an inflation-driven rise in costs,and higher investments in marketing our innovative products thanks to our continuous cost and price management efforts.In addition,we generated higher income from the sale of minor,nonstrategic brands.The EBITDA margin before special items declined by 1.0 percentage point to 23.1%.EBIT came in at 229 million(Q1 2023:282 million)in the first quarter of 2024 after special charges of 9 million(Q1 2023:6 million)relating to restructuring.A 12 Special Items1 Consumer Health million EBITQ1 2023EBITQ1 2024EBITDAQ1 2023EBITDAQ1 2024Restructuring(6)(9)(6)(9)Total special items(6)(9)(6)(9)1 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Bayer Quarterly Statement as of March 31,2024 12Financial Position of the Bayer Group Statement of Cash Flows Net cash used in operating activities/Net operating cash flow in the first quarter of 2024 amounted to minus 2,150 million(Q1 2023:minus 3,550 million).The improvement was partly due to the overall decrease in payments to resolve proceedings in the litigations surrounding glyphosate,PCBs,Essure and dicamba,with a net payout of 167 million(Q1 2023:1,536 million).Net cash provided by investing activities/Net investing cash flow in the first quarter of 2024 stood at 303 million(Q1 2023:1,602 million)./Net cash inflows for current financial assets totaled 626 million(Q1 2023:2,268 million).These inflows mainly related to the sale of investments in money market funds to cover operational liquidity needs./Cash outflows for acquisitions came in at 95 million(Q1 2023:129 million).This figure included a milestone payment in connection with the acquisition of the company Asklepios BioPharmaceutical,Inc.,United States.Net cash provided by financing activities/There was a net cash inflow of 677 million from financing activities in the first quarter of 2024(Q1 2023:1,662 million)./This included net borrowings of 867 million(Q1 2023:1,845 million)./Net interest payments came to 190 million(Q1 2023:183 million).Free cash flow/Free cash flow(total)came in at minus 2,626 million in the first quarter of 2024(Q1 2023:minus 4,102 million),mainly due to the improvement in operating cash flow.Net financial debt/Net financial debt of the Bayer Group increased by 3.0 billion to 37.5 billion in the first quarter of 2024(December 31,2023:34.5 billion),mainly as a result of cash outflows from operating activities due to seasonal factors.Corporate Outlook We confirm our currency-adjusted Group outlook for the year 2024 as published in the Annual Report 2023.When applying the closing rates as of March 31,2024,instead of December 31,2023,we project the following changes in currency effects with respect to our KPIs:A 13 Forecast for 2024 Currency-adjustedforecast for 2024Forecast for 2024at closing rateson Dec.31,2023Forecast for 2024at closing rateson March 31,2024 billion billion billionEBITDA before special items1 10.7 to 11.310.4 to 11.010.2 to 10.8Free cash flow1 2 to 32 to 32 to 3Net financial debt1 32.5 to 33.532.5 to 33.533.0 to 34.0 Core earnings per share1 5.10 to 5.504.95 to 5.354.80 to 5.201 For definition see Annual Report 2023,A 2.3“Alternative Performance Measures Used by the Bayer Group.”Bayer Quarterly Statement as of March 31,2024 13Condensed Consolidated Interim Financial Information as of March 31,2024 Bayer Group Condensed Consolidated Income Statements B 1 million Q1 2023Q1 2024Net sales 14,389 13,765 Cost of goods sold(5,733)(5,463)Gross profit 8,656 8,302 Selling expenses(3,394)(3,245)Research and development expenses(1,571)(1,426)General administration expenses(658)(583)Other operating income 384 269 Other operating expenses(444)(225)EBIT1 2,973 3,092 Equity-method income(loss)(37)(14)Financial income 148 161 Financial expenses(478)(648)Financial result(367)(501)Income before income taxes 2,606 2,591 Income taxes(424)(589)Income after income taxes 2,182 2,002 of which attributable to noncontrolling interest 4 2 of which attributable to Bayer AG stockholders(net income)2,178 2,000 Earnings per share Basic 2.22 2.04 Diluted 2.22 2.04 1 For definition see Annual Report 2023,A 2.3 Alternative Performance Measures Used by the Bayer Group.Bayer Quarterly Statement as of March 31,2024 14Bayer Group Condensed Consolidated Statements of Financial Position B 2 million Mar.31,2023Dec.31,2023Mar.31,2024Noncurrent assets Goodwill 39,25432,29932,763Other intangible assets 23,35223,36323,343Property,plant and equipment 13,31213,32113,472Investments accounted for using the equity method 847850840Other financial assets 1,9592,2672,362Other receivables 1,1881,1321,198Deferred taxes 5,5175,4715,736 85,42978,70379,714Current assets Inventories 13,53113,94713,437Trade accounts receivable 14,5599,34314,194Other financial assets 3,1214,8364,197Other receivables 2,0842,0302,069Claims for income tax refunds 1,4711,4421,531Cash and cash equivalents 4,8545,9074,725Assets held for sale 35114 39,62337,55640,167Total assets 125,052116,259119,881 Equity Capital stock 2,5152,5152,515Capital reserves 18,26118,26118,261Other reserves 20,08812,15114,829Equity attributable to Bayer AG stockholders 40,86432,92735,605Equity attributable to noncontrolling interest 153151157 41,01733,07835,762Noncurrent liabilities Provisions for pensions and other post-employment benefits 3,9314,0144,007Other provisions 8,3477,7847,678Refund liabilities 9814107Contract liabilities 550436401Financial liabilities 33,57138,17637,987Income tax liabilities 1,4461,5231,599Other liabilities 987987927Deferred taxes 714790783 49,64453,72453,489Current liabilities Other provisions 5,1373,2413,416Refund liabilities 7,8475,4638,009Contract liabilities 1,5223,8561,280Financial liabilities 9,7286,8308,281Trade accounts payable 6,2687,4566,398Income tax liabilities 1,2246191,022Other liabilities 2,6651,9922,224 34,39129,45730,630Total equity and liabilities 125,052116,259119,881 Bayer Quarterly Statement as of March 31,2024 15Bayer Group Condensed Consolidated Statements of Cash Flows B 3 million Q1 2023Q1 2024Income after income taxes 2,182 2,002 Income taxes 424 589 Financial result 367 501 Income taxes paid(466)(438)Depreciation,amortization and impairment losses(loss reversals)1,345 1,113 Change in pension provisions(108)(117)(Gains)losses on retirements of noncurrent assets(22)(55)Decrease(increase)in inventories(31)566 Decrease(increase)in trade accounts receivable(4,388)(4,809)(Decrease)increase in trade accounts payable(1,158)(1,171)Changes in other working capital,other noncash items(1,695)(331)Net cash provided by(used in)operating activities(3,550)(2,150)Cash outflows for additions to property,plant,equipment and intangible assets(466)(446)Cash inflows from the sale of property,plant,equipment and other assets 42 96 Cash inflows from divestments less divested cash 6 7 Income tax payments related to divestments and asset sales(65)Cash outflows for noncurrent financial assets(151)(45)Cash outflows for acquisitions less acquired cash(129)(95)Interest and dividends received 97 160 Cash inflows from(outflows for)current financial assets 2,268 626 Net cash provided by(used in)investing activities 1,602 303 Issuances of debt 2,186 1,559 Retirements of debt(341)(692)Interest paid including interest-rate swaps(183)(190)Net cash provided by(used in)financing activities 1,662 677 Change in cash and cash equivalents due to business activities(286)(1,170)Cash and cash equivalents at beginning of period 5,171 5,907 Change in cash and cash equivalents due to exchange rate movements(31)(12)Cash and cash equivalents at end of period 4,854 4,725 Bayer Quarterly Statement as of March 31,2024 16Legal Risks To find out more about the Bayer Groups legal risks,please see Note 30 to the consolidated financial statements in the Bayer Annual Report 2023,which can be downloaded at .Since the Bayer Annual Report 2023,the following significant changes have occurred in respect of the legal risks:Roundup(glyphosate):A large number of lawsuits from plaintiffs claiming to have been exposed to glyphosate-based products manufactured by Bayers subsidiary Monsanto have been served upon Monsanto in the United States.Glyphosate is the active ingredient contained in a number of Monsantos herbicides.Plaintiffs allege personal injuries resulting from exposure to those products.As of April 23,2024,Monsanto had reached settlements and/or was close to settling in a substantial number of claims.Of the approximately 170,000 claims in total,approximately 113,000 have been settled or are not eligible for various reasons.As of April 23,2024,there have been 23 Roundup trials concluded before both federal and state courts in California,Missouri,Oregon,Arkansas,Delaware and Pennsylvania.In fourteen of those trials,favorable outcomes were achieved on behalf of Monsanto,including eleven defense verdicts,one hung jury resulting in a mistrial,one directed verdict on behalf of Monsanto,and one dismissal of plaintiffs claims with prejudice mid-trial.In the other nine trials,the plaintiffs were awarded compensatory damages and,in most cases,punitive damages.PCBs:Bayers subsidiary Monsanto has been named in lawsuits brought by various governmental entities in the United States claiming that Monsanto,Pharmacia and Solutia,collectively as a manufacturer of PCBs,should be responsible for a variety of damages due to PCBs in the environment,including bodies of water.PCBs are chemicals that were widely used for various purposes until the manufacture of PCBs was prohibited by the EPA in the United States in 1979.In April 2024,the Maine Attorney General filed suit in state court alleging claims for damages related to PCB contamination of the states environment,so that there are now six attorney general cases pending.In May 2024,the Court of Appeals for the State of Washington handed down its opinion in the first of the Sky Valley Education Center(SVEC)personal injury cases to go to trial(Erickson et al.).The Court of Appeals reversed the lower-court decision and remanded the cases for further proceedings,eliminating the entirety of the compensatory and punitive damages in that case,based on multiple trial errors.Many of the identified errors should,in Bayers opinion,carry through the other SVEC trials to date.The plaintiffs are expected to appeal the decision to the Washington Supreme Court.Shareholder litigation concerning Monsanto acquisition:In Germany and the United States,investors have filed lawsuits claiming damages suffered due to the drop in the companys share price.Plaintiffs allege that the companys capital market communication in connection with the acquisition of Monsanto was flawed.In the German proceedings,approximately 280 plaintiffs withdrew their claims,so that in Germany claims of approximately 55 plaintiffs remained as of March 31,2024.Bayer Quarterly Statement as of March 31,2024 17Financial Calendar 2024 Half-Year Report August 6,2024 Q3 2024 Quarterly Statement November 12,2024 2024 Annual Report March 5,2025 Annual Stockholders Meeting 2025 April 25,2025 Reporting Principles The present document is a Quarterly Statement pursuant to Section 53 of the Exchange Rules of the Frankfurt Stock Exchange(as of April 8,2024)and does not constitute an interim report according to the International Accounting Standard(IAS)34.This Quarterly Statement should be read in conjunction with the Annual Report for the 2023 fiscal year and the additional information about the company provided therein.The Annual Report 2023 is available on our website at .The accounting policies and measurement principles applied in this Quarterly Statement are based on those used in the consolidated financial statements of the Bayer Group for fiscal 2023.Masthead Published by Date of publication Bayer AG,51368 Leverkusen,Germany Tuesday,May 14,2024 Editor English edition Danielle Staudt-Gersdorf,phone 49 214 3046309 Translation Services Email:danielle.staudt- Global Business Services Germany Investor Relations Bayer on the internet Peter Dahlhoff,phone 49 214 60001494 Email: Forward-Looking Statements This Quarterly Statement may contain forward-looking statements based on current assumptions and forecasts made by Bayer management.Various known and unknown risks,uncertainties and other factors could lead to material differences between the actual future results,financial situation,development or performance of the company and the estimates given here.These factors include those discussed in Bayers public reports which are available on the Bayer website at .The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.Legal Notice The product names designated with are brands of the Bayer Group or our distribution partners and are registered trademarks in many countries.
2024-10-24
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Report for Q2 and Half Year 2024Full year outlook reiterated in challenging environmentQ2 net sales declined 18%y-o-y in constant currency(-18%reported)primarily due to strong year-ago quarter in India.Submarine Networks business treated as discontinued operation.Positively,order intake trends continued to improve,particularly in Network Infrastructure.Comparable gross margin in Q2 increased by 450bps y-o-y to 44.7%(reported increased 380bps to 43.3%),mainly driven by Mobile Networks,in part benefiting from the resolution of an outstanding contract negotiation.Q2 comparable operating margin decreased 190bps y-o-y to 9.5%(reported up 110bps to 9.7%),mainly due to low net sales coverage of operating expenses which more than offset the Mobile Networks contract resolution.Q2 comparable diluted EPS of EUR 0.06;reported diluted EPS of negative EUR 0.03.Q2 reported EPS impacted by non-cash impairment charge of EUR514million related to Submarine Networks,presented as discontinued operation.Q2 free cash flow of EUR 0.4 billion,net cash balance EUR 5.5 billion.Buyback program planned to be accelerated.Significant progress with gross cost savings program,with EUR 400 million run-rate of savings already actioned.Nokias full year 2024 outlook is unchanged.Nokia currently expects comparable operating profit of between EUR 2.3 billion and 2.9 billion and free cash flow conversion from comparable operating profit of between 30%and 60%.EUR million(except for EPS in EUR)Q224Q223YoY changeConstant currency YoY changeQ1-Q224Q1-Q223YoY changeConstant currency YoY changeReported resultsNet sales 4466 5438(18)%(18)10 11013(19)%(18)%Gross marginC.39.580bps46.59.1t0bps Research and development expenses(1134)(1034)10%(2259)(2130)6%Selling,general and administrative expenses(715)(690)4%(1408)(1407)0%Operating profit 432 469(8)6 890(6)%Operating margin%9.7%8.60bps9.4%8.10bps Profit from continuing operations 370 287 291 570 44%Profit/(loss)from discontinued operations(512)2 (525)8 Profit/(loss)for the period(142)289 296 578(49)%EPS for the period,diluted(0.03)0.05 0.05 0.10(50)%Net cash and interest-bearing financial investments 5475 3660 50T75 3660 50%Comparable results Net sales 4466 5438(18)%(18)10 11013(19)%(18)%Gross marginD.7.2E0bps47.69.60bpsResearch and development expenses(1064)(1015)5%(2140)(2096)2%Selling,general and administrative expenses(610)(607)0%(1194)(1239)(4)%Operating profit 423 619(32)23 1090(6)%Operating margin%9.5.4%(190)bps11.5%9.90bpsProfit for the period 328 409(20)0 741 13%EPS for the period,diluted 0.06 0.07(14)%0.15 0.13 15%ROIC(1)10.0.8%(380)bps10.0.8%(380)bps(1)Comparable ROIC=Comparable operating profit after tax,last four quarters/invested capital,average of last five quarters ending balances.Refer to the Performance measures section in this report for details.Network InfrastructureMobileNetworksCloud and Network ServicesNokia TechnologiesGroup Common and OtherEUR millionQ224Q223Q224Q223Q224Q223Q224Q223Q224Q223Net sales 1522 1706 1970 2623 615 742 356 334 4 35 YoY change(11)%(25)%(17)%7%(89)%Constant currency YoY change(11)%(24)%(16)%5%(89)%Gross margin8.4A.1C.23.43.76.50.00.0%Operating profit/(loss)97 252 171 206 (25)16 258 236 (78)(91)Operating margin%6.4.8%8.7%7.9%(4.1)%2.2r.5p.7July 2024 1 I am pleased to confirm that the improving order intake momentum weve talked about for the past couple of quarters has continued in the second quarter across the group and most notably in Network Infrastructure.This trend means our backlog further expanded and we look forward to a meaningful improvement in net sales in the second half.Generally,the market remains uncertain,so we will continue to be agile and prudently manage our cost base as we navigate this environment.In Q2,we announced two significant transactions in Network Infrastructure in support of our strategic pillar of actively managing our portfolio.On 27 June,we announced an agreement to sell our Submarine Networks business to the French State.We also announced our intention to acquire Infinera to increase the scale and profitability of our Optical Networks business.This will enable us to deliver faster innovation and expand our position both with webscale customers and regionally in North America.These transactions will focus and strengthen our Network Infrastructure business with its future built on three market-leading units in Fixed Networks,IP Networks and Optical Networks.We are investing in Network Infrastructure as we see a compelling opportunity in this business to drive mid-single digit net sales growth and improve our profitability to a mid-to-high teens operating margin over time.Our financial performance in the second quarter continued to be impacted by the ongoing market weakness with net sales declining 18%year-on-year in constant currency.The most significant impact was the challenging year-ago comparison period which saw the peak of Indias rapid 5G deployment with India accounting for three quarters of the decline.In the quarter there was a benefit of EUR 150 million to both net sales and operating profit in Mobile Networks related to a portion of our contract resolution with AT&T.Our comparable operating margin was 9.5%compared to 11.4%in the prior year.We have made significant progress on our cost savings program and have already actioned run-rate savings of EUR 400 million out of our targeted EUR 800 million to EUR 1.2 billion gross cost savings by 2026.Q2 was another strong quarter for cash generation with free cash flow of EUR 394 million as our working capital position continues to normalize.Our improving cash generation means the board now intends to accelerate our on-going EUR 600 million buyback program with the view to completing it by the end of this year,compared to the previous end of 2025 target.In Network Infrastructure we secured a number of important design wins in the quarter.We won several important fiber deals,including in the US,and received orders from a US distributor for both Fixed and IP products as we gear up to supply operators under the BEAD program.It is also notable that we returned to growth in North America which was one of the first markets where we saw the 2023 market slowdown.With the challenges of 2023 behind us,and more normalized customer inventory levels,we believe we can now look forward to a stronger second half and a return to growth,which we expect to continue into 2025.In Mobile Networks the market dynamic remains challenging as operators continue to be cautious.However there has been significant customer tendering activity and we have won a number of deals this year.This has included winning new customers such as MEO in Portugal,and increasing our footprint with existing customers,demonstrating the strength of our product offering.We also concluded negotiations with AT&T related to our existing RAN contracts.This gives us clarity on the path forward and ensures that we maintain the value agreed in the contracts.In Cloud and Network Services we are making good progress with winning deals and with our organic efforts to bring new API capabilities and orchestration automation to customers.In Q2 we signed Network as Code collaboration agreements bringing our ecosystem total to 16,which includes new agreements with operators such as Orange,Telefnica,and Turkcell along with ecosystem players Google and Infobip.In Nokia Technologies we signed an agreement with a video streaming platform covering the use of Nokias multimedia technology.This is an early step in what can be a meaningful opportunity for Nokia in the future.Looking forward,we believe the industry is stabilizing and given the order intake seen in recent quarters we expect a significant acceleration in net sales growth in the second half.While the dynamic is improving,the net sales recovery is happening somewhat later than we previously expected,impacting our business group net sales assumptions for 2024.Despite this,we remain solidly on track to achieve our full year outlook supported by our quick action on cost.We are currently tracking towards the mid-point or slightly below the mid-point of our comparable operating profit guidance of EUR 2.3 to 2.9 billion and towards the higher-end of our free cash flow conversion guidance of 30%to 60%.18July 2024 2 Outlook Full Year 2024Comparable operating profit(1)EUR 2.3 billion to EUR 2.9 billionFree cash flow(1)30%to 60%conversion from comparable operating profit(1)Please refer to Performance measures section in this report for a full explanation of how these terms are defined.The outlook,long-term targets and all of the underlying outlook assumptions described below are forward-looking statements subject to a number of risks and uncertainties as described or referred to in the Risk Factors section later in this report.Along with Nokias official outlook targets provided above,below are outlook assumptions by business group that support the group level outlook.Nokia business group assumptions(full year 2024)Net sales growth(constant currency)Operating marginNetwork Infrastructure-2%to 3%(update)11.5%to 14.5%Mobile Networks-19%to-14%(update)4.0%to 7.0%(update)Cloud and Network Services-5%to 0%(update)6.0%to 9.0%Nokia provides the following approximate outlook assumptions for additional items concerning 2024:Full year 2024CommentSeasonality H2 weighted,with strong Q4(update)Average sequential increase in Network Infrastructure,Mobile Networks and Cloud and Network Services net sales combined since 2016 has been 0%in Q3 and 20%in Q4.Nokia expects a somewhat greater than average sequential increase in Q3 2024 and significantly greater than average in Q4 2024 across these combined businesses.Nokia currently expects a largely stable operating margin in Q3 due to the contract resolution benefit seen in Q2 and then a more significant improvement in Q4.Nokia Technologies operating profitat leastEUR 1.4 billionNokia expects cash generation in Nokia Technologies to be EUR 700 million below operating profit in 2024 due to prepayments received in 2023.From 2025 onwards Nokia expects greater alignment between cash generation and operating profit in Nokia Technologies.Group Common and Other operating expensesEUR 350 millionThis includes central function costs which are expected to be largely stable at approximately EUR 200 million and an increase in investment in long-term research to approximately EUR 150 million.Group Common and Other will also account for any future revaluation impacts of venture fund investments with no assumption made on this so far.Comparable financial income and expensesPositive EUR 75 to EUR 125 million(update)Reflecting improved cash generation in the first half of 2024 and interest rates remaining higher than previously expected(increasing interest income)we now expect an improved financial income and expense result.Comparable income tax rate25sh outflows related to income taxesEUR 450 millionCapital ExpendituresEUR 550 million(update)2026 targetsNokias current targets for its existing perimeter of the business for 2026 are outlined below.This does not consider pending acquisitions.The update to the Network Infrastructure operating margin assumption is related to Submarine Networks now being treated as a discontinued operation.Nokia sees further opportunities to increase margins beyond 2026 and believes an operating margin of 14%remains achievable over the longer term.Net salesGrow faster than the market Comparable operating margin(1)13%Free cash flow(1)55%to 85%conversion from comparable operating profit(1)Please refer to Performance measures section in this report for a full explanation of how these terms are defined.The comparable operating margin target for Nokia group is built on the following assumptions by business group for 2026:Network Infrastructure13-16%operating margin(update)Mobile Networks 6-9%operating marginCloud and Network Services7-10%operating marginNokia TechnologiesOperating profit more than EUR 1.1 billionGroup common and otherApproximately EUR 300 million of operating expenses18July 2024 3 Shareholder distribution DividendUnder the authorization by the Annual General Meeting held on 3 April 2024,the Board of Directors may resolve on the distribution of an aggregate maximum of EUR 0.13 per share to be paid in respect of financial year 2023.The authorization will be used to distribute dividend and/or assets from the reserve for invested unrestricted equity in four installments during the authorization period,in connection with the quarterly results,unless the Board decides otherwise for a justified reason.On 18 July 2024,the Board resolved to distribute a dividend of EUR 0.03 per share.The dividend record date is 23 July 2024 and the dividend will be paid on 1 August 2024.The actual dividend payment date outside Finland will be determined by the practices of the intermediary banks transferring the dividend payments.Following this announced distribution,the Boards remaining distribution authorization is a maximum of EUR 0.06 per share.Share buyback programIn January 2024,Nokias Board of Directors initiated a share buyback program to repurchase shares to return up to EUR 600 million of cash to shareholders in tranches over a period of two years.The first EUR 300 million phase of the share buyback program started in March 2024.Under this phase,Nokia had by 30 June 2024 repurchased 29 507 303 of its own shares at an average price per share of approximately EUR 3.41.On 27 June 2024,Nokia announced its intention to acquire Infinera in a transaction that values Infinera at US$1.7 billion equity value with up to 30%of the consideration to be paid in Nokia American depositary shares(ADSs)depending on the elections of Infinera shareholders.Nokias Board of Directors is committed to repurchase additional shares on top of the on-going EUR 600 million program to offset the dilution from the transaction to Nokia shareholders.The Board intends to increase the scale of the buyback program once the result of the Infinera shareholder elections are known(between cash and Nokia ADSs).In the interim,Nokias Board of Directors intends to accelerate the timeframe for the existing EUR 600 million share buyback program with the aim of completing the full EUR 600 million by the end of this year instead of the initial two year timeframe.Additional topicsSale of Submarine NetworksIn Q2 2024,Nokia announced it has entered into a put option agreement to sell Alcatel Submarine Networks(ASN)to the French State,represented by the Agence des participations de lEtat(APE),subject to informing and consulting with the relevant employee representatives at ASN and Nokia,along with other customary closing conditions and regulatory approvals.The put option agreement contemplates the sale of ASN for an enterprise value of EUR 350 million,while the final proceeds will depend on the working capital and net debt balances of ASN at closing.In Q2 2024,Nokia recorded a non-cash impairment charge of EUR 514 million related to the difference between the carrying value of the business and the expected proceeds from the sale.Beginning with Q2 2024,Nokia is accounting for ASN as a discontinued operation.Update on TD TechNokia holds a 51%ownership interest in TD Tech Holding Limited(“TD Tech HK”),a Hong Kong based joint venture holding company which Nokia has accounted for as an investment in associates and joint ventures.In the second quarter of 2024,TD Tech HK completed the divestment of the entire business of the joint venture through the sale of its operating subsidiaries to a consortium consisting of Huawei Technologies,Chengdu High-tech Investment Group and other buyers.Following the divestment,Nokia is in the process of exiting from its shareholding in the parent company TD Tech HK.Nokia considers the transactions as a sale of associated companies and joint ventures and has recorded a gain of EUR 186 million and net proceeds of EUR 173 million from the sale.Resolution of customer negotiationNokia resolved its outstanding negotiation with AT&T,who decided to proceed with an alternative RAN vendor for commercial reasons.Nokia had RAN-related contracts with the customer and can confirm that negotiations have been concluded such that Nokia will still receive the value that had been agreed within those contracts.Part of the resolution led to the second quarter benefiting from EUR 150 million of accelerated revenue recognition.Based on current commitments,Nokia expects its sales in Mobile Networks to AT&T to remain largely stable year-on-year in 2024 and then approximately half in 2025.Nokia will continue to look to win new opportunities with AT&T that can improve this trajectory in Mobile Networks and AT&T remains a significant customer for Nokia.Adjusted free cash flow by business groupAs Nokia continues to execute on its group strategy,with its move towards more autonomous business groups,it also aims to provide investors with greater transparency in assessing each business groups cash flow performance.Therefore,starting in Q2 2024,Nokia is now reporting adjusted free cash flow by business group.Nokia is still working to expand this metric to more periods and will provide additional historic quarter reporting at the latest with its fourth quarter financial report.The definition for adjusted free cash flow by business group is cash flows from operations minus purchases of property,plant and equipment and intangible assets(capital expenditures).Vodafone Idea In Q2 2024,Nokia Solutions and Networks India Private Limited entered into an agreement with Vodafone Idea Limited(VIL)to settle outstanding dues and convert them to an equity stake in VIL.The transaction was approved by VIL shareholders in July.The impact of the transaction is expected to be visible in Nokias Q3 results and the equity stake is subject to a six-month lock-up period.18July 2024 4 Financial ResultsQ2 2024 compared to Q2 2023Net salesIn Q2 2024,net sales decreased 18%on both a reported and a constant currency basis.On a constant currency basis,net sales declined across all networks businesses,while Nokia Technologies increased 5%.Network Infrastructure declined 11%year-on-year,although it showed sequential improvement.Mobile Networks net sales decreased 24%largely driven by India,while North America benefited from the resolution of the outstanding contract negotiation with AT&T.Additionally,Cloud and Network Services net sales decreased 16%.Gross marginReported gross margin increased 380 basis points to 43.3%in Q2 2024 and comparable gross margin increased 450 basis points to 44.7%.Gross margin performance mainly reflected improvement in Mobile Networks driven by the accelerated recognition of net sales related to the conclusion of an ongoing customer negotiation,as well as improved regional mix versus 2023.Network Infrastructure and Cloud and Network Services gross margins declined as a result of lower net sales coverage.Operating profit and marginReported operating profit in Q2 2024 decreased 8%and was EUR 432 million,or 9.7%of net sales,up from 8.6%in the year-ago quarter.Comparable operating profit decreased 32%to EUR 423 million,while comparable operating margin was 9.5%,down from 11.4%in the year-ago quarter.The decrease was mainly driven by lower net sales,as well as higher operating expenses,which in the year-ago quarter benefited from lower variable pay accruals.Excluding this impact,operating expenses would have declined year-on-year.This was somewhat offset by the accelerated recognition of net sales in Mobile Networks and higher other operating income,mainly related to the positive fluctuation in loss allowances on certain trade receivables.Nokias venture fund investments generated a benefit of approximately EUR 10 million in Q2 2024 compared to a loss of approximately EUR 10 million in Q2 2023.The impact of hedging in Q2 2024 was positive EUR 10 million,compared to a positive impact of EUR 32 million in Q2 2023.In Q2 2024,the difference between reported and comparable operating profit was primarily related to the divestment of businesses and associated companies,restructuring and associated charges,the amortization of acquired intangible assets and the impairment and write-off of assets.In Q2 2023,the difference between reported and comparable operating profit was related to the amortization of acquired intangible assets,restructuring and associated charges,the change in provisions related to past acquisitions and the partial reversal of a provision associated with a country exit.Profit from continuing operationsReported profit from continuing operations in Q2 2024 was EUR 370 million,compared to profit of EUR 287 million in Q2 2023.Comparable profit from continuing operations in Q2 2024 was EUR 328 million,compared to EUR 409 million in Q2 2023.The decrease in comparable profit from continuing operations was primarily driven by the decrease in comparable operating profit.This was partially offset by a net positive fluctuation in financial income and expenses,reflecting favorable foreign exchange rate fluctuations and higher interest income,as well as lower income tax expense.Apart from the items affecting comparability included in operating profit(and their associated tax effects),the difference between reported and comparable profit from continuing operations in Q2 2024 was mainly due to the divestment of businesses and the change in financial liability to acquire Nokia Shanghai Bell non-controlling interest.In Q2 2023,the difference between reported and comparable profit from continuing operations was mainly related to the divestment of business and the change in financial liability to acquire Nokia Shanghai Bell non-controlling interest.Profit/loss from discontinued operationsReported loss from discontinued operations in Q2 2024 was EUR 512 million,compared to a profit of EUR 2 million in Q2 2023.Q2 2024 loss from discontinued operations reflects the accounting for Submarine Networks being moved into discontinued operations.The loss is mainly related to an impairment charge of EUR 514 million.Earnings per shareReported diluted EPS from continuing operations was EUR 0.07 in Q2 2024,compared to EUR 0.05 in Q2 2023.Comparable diluted EPS from continuing operations was EUR 0.06 in Q2 2024,compared to EUR 0.07 in Q2 2023.Reported diluted EPS from discontinued operations was negative EUR 0.09 in Q2 2024,compared to 0.00 in Q2 2023.Reported diluted EPS was negative EUR 0.03 in Q2 2024,compared to EUR 0.05 in Q2 2023.Comparable diluted EPS was EUR 0.06 in Q2 2024 compared to EUR 0.07 in Q2 2023.Comparable return on Invested Capital(ROIC)Q2 2024 comparable ROIC was 10.0%,compared to 13.8%in Q2 2023.The decrease reflected higher average invested capital for the rolling four quarters,combined with lower operating profit after tax for the rolling four quarters.The higher average invested capital reflected growth in average total equity and a decrease in average total cash and interest-bearing financial investments,partially offset by a decrease in average total interest-bearing liabilities.Cash performanceDuring Q2 2024,net cash increased EUR 338 million,resulting in an end-of-quarter net cash balance of EUR 5475 million,benefiting in part from disposals and inflows from net working capital.Total cash increased EUR 247 million sequentially to EUR 9154 million.Free cash flow was positive EUR 394 million in Q2 2024.18July 2024 5 Segment DetailsNetwork Infrastructure EUR millionQ224Q223YoY changeConstant currency YoY changeQ1-Q224Q1-Q223YoY changeConstant currency YoY changeNet sales 1522 1706(11)%(11)61 3670(19)%(19)%IP Networks 586 618(5)%(6)79 1400(16)%(15)%Optical Networks 405 492(18)%(18)t9 1025(27)%(26)%Fixed Networks 532 596(11)%(11)32 1246(17)%(17)%Gross profit 585 702(17)72 1523(23)%Gross margin8.4A.1%(270)bps39.6A.5%(190)bpsOperating profit 97 252(62)3 588(69)%Operating margin%6.4.8%(840)bps6.2.0%(980)bpsNet sales by region Americas 662 653 1%107 1517(20)%(20)%APAC 314 405(22)%(22)1 890(32)%(31)%EMEA 546 649(16)%(16)54 1263(9)%(9)%Submarine Networks reported in Discontinued operationsNokia announced on 27 June 2024 that it had reached an agreement to sell its Submarine Networks business.This had previously been reported within Network Infrastructure but is now accounted for as a discontinued operation and is no longer reported as part of Network Infrastructure.Both the current and historic periods are reported now excluding Submarine Networks.Segment financial performance discussionNetwork Infrastructure net sales declined 11%on both a reported basis and constant currency basis in the second quarter.The demand environment continued to improve in Q2,with net sales increasing sequentially from Q1.Order intake showed the third consecutive quarter of improvement,with solid year-on-year order intake growth and a book-to-bill above 1 in the second quarter.IP Networks net sales declined 6%on a constant currency basis,with increases in North America,Asia Pacific and India offset by decreases in Europe,Greater China and Latin America.IP Networks saw strong double-digit growth with non-CSP customers,driven by enterprise customers,as well as increasing net sales to webscale customers.Optical Networks net sales declined 18%on a constant currency basis,as the pace of the optical market recovery continues to be slower than the rest of the Network Infrastructure markets.The decline was also in comparison to a very strong year-ago quarter which benefited from growth in India.The net sales performance reflects declines across most regions with the exception of Greater China and Middle East&Africa.Fixed Networks net sales declined 11%on a constant currency basis.The decline was mainly driven by Europe,Greater China and India.Pleasingly there was a modest increase in net sales to North America signalling a return to growth in that region after several quarters of decline.Gross profit and gross margin declined year-on-year primarily driven by lower net sales and higher indirect cost of sales.Operating profit and operating margin both declined year-on-year,reflecting lower gross profit combined with higher operating expenses.Operating margin was particularly impacted by the lower net sales coverage of operating expenses in the quarter.18July 2024 6 Mobile Networks EUR millionQ224Q223YoY changeConstant currency YoY changeQ1-Q224Q1-Q223YoY changeConstant currency YoY changeNet sales 1970 2623(25)%(24)547 5190(32)%(31)%Gross profit 851 877(3)20 1744(13)%Gross marginC.23.40bps42.93.60bpsOperating profit/(loss)171 206(17)9 342(62)%Operating margin%8.7%7.9bps3.6%6.6%(300)bpsNet sales by regionAmericas 698 582 20 14 1286(13)%(13)%APAC 602 1344(55)%(54)11 2464(55)%(53)%EMEA 670 697(4)%(4)22 1439(8)%(8)%Mobile Networks net sales declined 25%on a reported basis and 24%on a constant currency basis.The net sales decline was primarily driven by a decrease in India reflecting the fact that Q2 2023 represented the peak of the India 5G deployments.Positively,on a sequential basis,all regions increased compared with Q1.Nokia also resolved its outstanding negotiation with AT&T,who decided to proceed with an alternative RAN vendor for commercial reasons.Nokia had RAN-related contracts with the customer and can confirm that negotiations have been concluded such that Nokia will still receive the value that had been agreed within those contracts.Part of the resolution led to the second quarter benefiting from EUR 150 million of accelerated revenue recognition.Based on current commitments,Nokia expects its sales in Mobile Networks to AT&T to remain largely stable year-on-year in 2024 and then approximately half in 2025.Nokia will continue to look to win new opportunities with AT&T that can improve this trajectory in Mobile Networks and AT&T remains a significant customer for Nokia.The second quarter saw a significant improvement in gross margin compared to the prior year.Approximately half of the improvement was driven by the accelerated recognition of net sales related to the conclusion of a customer negotiation,with the remainder due to a more favorable regional and product mix.Operating profit was lower year-on-year in Q2 2024 mainly reflecting lower net sales coverage of operating expenses,somewhat offset by improved other operating income.Operating margin improvement reflected the improved gross margin.Cloud and Network Services EUR millionQ224Q223YoY changeConstant currency YoY changeQ1-Q224Q1-Q223YoY changeConstant currency YoY changeNet sales 615 742(17)%(16)66 1501(16)%(15)%Gross profit 207 271(24)D1 521(15)%Gross margin3.76.5%(280)bps34.84.7bpsOperating profit/(loss)(25)16 (52)(4)Operating margin%(4.1)%2.2%(630)bps(4.1)%(0.3)%(380)bpsNet sales by regionAmericas 197 275(28)%(28)D0 580(24)%(23)%APAC 149 158(6)%(3)5 316(7)%(3)%EMEA 268 308(13)%(13)S1 605(12)%(12)%Cloud and Network Services net sales declined 17%on a reported basis,and 16%on a constant currency basis reflecting lower net sales in each of its businesses.The quarter was also impacted by the disposal of the Device Management and Service Management Platform businesses,which closed at the start of April.This disposal had a negative 3 percentage point impact on Cloud and Network Services net sales change on a constant currency basis.From a regional perspective,on a constant currency basis Cloud and Network Services saw strong declines in both the Americas region,particularly in North America,and in the EMEA region.Gross margin declined year-on-year mainly reflecting unfavorable mix,as well as the impact of the divestment of the Device Management and Service Management Platform businesses.Both operating profit and operating margin declined year-on-year.Lower net sales was somewhat offset by lower operating expenses and improved other operating income and expenses.18July 2024 7 Nokia Technologies EUR millionQ224Q223YoY changeConstant currency YoY changeQ1-Q224Q1-Q223YoY changeConstant currency YoY changeNet sales 356 334 7%513 576 93%Gross profit 356 334 713 576 93%Gross margin0.00.0ps100.00.0psOperating profit 258 236 96 385 138%Operating marginr.5p.70bps82.3f.850bpsNokia Technologies net sales increased 7%on a reported basis and 5%on a constant currency basis in the second quarter.Q2 2024 net sales increased as a result of the renewed license agreements with Oppo and Vivo.The quarter also benefited from higher net sales in automotive and consumer electronics including a modest amount of catch up net sales.In the same period a year ago,Nokia benefited from EUR 80 million of catch up net sales related to deals signed in the quarter.Nokia Technologies annual net sales run-rate remained approximately EUR 1.3 billion in the second quarter.Nokia Technologies continues to make good progress in its new growth areas and has now signed an agreement with a video streaming platform covering the use of Nokias multimedia technology in its streaming services.These are early steps in what can be a meaningful opportunity for Nokia in the future.The Operating profit increase mainly reflected the higher level of net sales in the quarter.Group Common and Other EUR millionQ224Q223YoY changeConstant currency YoY changeQ1-Q224Q1-Q223YoY changeConstant currency YoY changeNet sales 4 35 (89)%(89)& 84 (69)%(69)%Gross profit/(loss)(1)(1)(1)(8)Operating profit/(loss)(78)(91)(153)(222)Group Common and Other net sales declined 89%on both a reported and constant currency basis.This was due to reduced net sales from Radio Frequency Systems(RFS),mainly driven by the divested business carved out during both Q2 2024 and Q2 2023.The improvement in operating result was primarily driven by Nokias venture fund investments,which reflected a gain of approximately EUR 10 million in Q2 2024 compared to a loss of approximately EUR 10 million in Q2 2023.18July 2024 8Net sales by region EUR millionQ224Q223YoY changeConstant currency YoY changeQ1-Q224Q1-Q223YoY changeConstant currency YoY changeAmericas 1559 1523 2%263 3421(19)%(19)%Latin America 216 230(6)%(2)88 462(16)%(13)%North America 1343 1293 4%3#74 2959(20)%(20)%APAC 1068 1913(44)%(43) 15 3681(45)%(43)%Greater China 295 344(14)%(12)S7 680(21)%(18)%India 329 1043(68)%(69)Y4 1896(69)%(69)%Rest of APAC 445 527(16)%(12)4 1105(20)%(16)%EMEA 1839 2003(8)%(9)A33 3912 6%6%Europe 1366 1525(10)%(11)200 2998 7%7%Middle East&Africa 473 478(1)%(1)3 915 2%3%Total 4466 5438(18)%(18)10 11013(19)%(18)%The table above provides net sales information for the group based on three geographical areas and their sub-regions.Reported changes are disclosed in the table above.The regional commentary below focuses on constant currency results,to exclude the impact of foreign exchange rate fluctuations.The net sales performance in the Americas reflected growth in both Mobile Networks and Network Infrastructure,while Cloud and Network Services declined.Within the Americas,North America benefited from the resolution of the outstanding AT&T contract in Mobile Networks,while both IP Networks and Fixed Networks grew within Network Infrastructure.Net sales in APAC declined strongly in the second quarter,mainly due to Mobile Networks and Network Infrastructure.Within APAC,India net sales declined primarily reflecting the fact that Q2 2023 represented the peak of the India 5G deployments.Elsewhere in APAC,Rest of APAC and Greater China also declined.EMEA net sales declined in the second quarter,reflecting weakness across each of the networks businesses,while net sales in Nokia Technologies(which is entirely reported in Europe)grew.Excluding Nokia Technologies,EMEA net sales declined modestly in Mobile Networks,while Network Infrastructure witnessed weakness across each of its businesses.Within EMEA,net sales decreased slightly in Middle East&Africa,as growth in Mobile Networks was more than offset by weakness in Cloud and Network Services.Europe net sales declined across Network Infrastructure,Mobile Networks and Cloud and Network Services.Net sales by customer type EUR millionQ224Q223YoY changeConstant currency YoY changeQ1-Q224Q1-Q223YoY changeConstant currency YoY changeCommunications service providers(CSP)3591 4561(21)%(21)h16 9286(27)%(26)%Enterprise 516 510 1%19 1076(11)%(10)%Licensees 356 334 7%513 576 93%Other(1)3 32(91)%(92)# 75(69)%(70)%Total 4466 5438(18)%(18)10 11013(19)%(18)%(1)Includes net sales of Radio Frequency Systems(RFS),which is being managed as a separate entity,and certain other items,such as eliminations of inter-segment revenues.RFS net sales also include revenue from enterprise customers and communications service providers.Macroeconomic uncertainty continued to impact CSP spending in Q2 2024,which drove a net sales decline of 21%in both reported and constant currency when compared to Q2 2023.Enterprise net sales increased 1%in reported and constant currency in Q2 2024,as strong growth with webscale customers was nearly offset by declines with other enterprise customers.For a discussion on net sales to Licensees,please refer to the Nokia Technologies section of this report.The decline in Other net sales relates to a decrease in net sales in RFS.18July 2024 9Q2 2024 to Q2 2023 bridge for net sales and operating profit EUR million Q224Volume,price,mix and otherVenture fund valuationForeign exchange impactItems affecting comparabilityQ223Net sales 4466 (961)(11)5438 Operating profit 432 (189)19 (26)159 469 Operating margin%9.7%8.6%The table above shows the change in net sales and operating profit compared to the year-ago quarter.Net sales declined from an operational standpoint as described in the prior pages,with a slight negative impact from foreign exchange rate fluctuations.Operating profit saw a negative impact from both an operational standpoint and from foreign exchange rate fluctuations,offset by positive impacts from venture fund valuations and from items affecting comparability as further described below.The negative impact to operating profit seen from foreign exchange rate fluctuations is mainly related to our hedging program.Reconciliation of reported operating profit to comparable operating profitEUR millionQ224Q223YoY changeQ1-Q224Q1-Q223YoY changeReported operating profit 432 469(8)6 890(6)%Divestment of businesses and associated companies(253)4 (253)(22)Restructuring and associated charges 150 53 253 81 Amortization of acquired intangible assets 78 85 156 171 Impairment and write-off of assets,net of reversals 11 1 25 (1)Change in provisions related to past acquisitions 20 20 Costs associated with country exit (13)(48)Other,net 5 5 (1)Comparable operating profit 423 619(32)23 1090(6)%The comparable operating profit that Nokia discloses is intended to provide meaningful supplemental information to both management and investors regarding Nokias underlying business performance by excluding certain items of income and expenses that may not be indicative of Nokias business operating results.Comparable operating profit is used also in determining management remuneration.In Q2 2024,the main adjustments related to the divestment of businesses and associated companies,the restructuring charges which are part of the on-going restructuring program(discussed later in this interim report),the amortization of acquired intangible assets which is primarily related to purchase price allocation of the Alcatel-Lucent acquisition and the impairment and write-off of assets.18July 2024 10Cash and cash flow in Q2 2024EUR billionEUR million,at end of periodQ224Q124QoQ changeQ423YTD changeTotal cash and interest-bearing financial investments 9154 8907 314 8%Net cash and interest-bearing financial investments(1)5475 5137 7C23 27%(1)Net cash and interest-bearing financial investments does not include lease liabilities.For details,please refer to the Performance measures section in this report.The cash flow descriptions below include cash flows from both continuing and discontinued operations.Free cash flowDuring Q2 2024,Nokias free cash flow was positive EUR 394 million,mainly driven by operating profit and cash inflows related to net working capital.These were somewhat offset by capital expenditures,restructuring and income taxes.Net cash from operating activitiesNet cash from operating activities was driven by:Nokias adjusted profit of EUR 625 million.The cash outflow related to net working capital in the quarter was approximately EUR 30 million.This included approximately EUR 140 million of restructuring and associated cash outflows,related to our current and previous cost savings programs.The remaining EUR 110 million can be broken down as follows:The decrease in receivables was approximately EUR 430 million primarily driven by cash inflows related to 5G deployments in India,somewhat offset by a decrease in the balance sheet impact related to the sale of receivables in the quarter.The decrease in inventories was approximately EUR 10 million.The decrease in liabilities was approximately EUR 330 million,primarily related to 2023 performance-related employee variable pay,as well as a decrease in contract liabilities.An outflow related to cash taxes of approximately EUR 110 million.Net cash from investing activities Net cash from investing activities was related primarily to capital expenditures of approximately EUR 100 million,more than offset by net cash inflows related to the disposal of shares in associated companies of EUR 180 million,the disposal of businesses of approximately EUR 100 million and the sale of assets of approximately EUR 30 million.Net cash from financing activities Net cash used in financing activities was related primarily to dividend payments of approximately EUR 230 million,the acquisition of treasury shares of approximately EUR 90 million and lease payments of approximately EUR 50 million.Change in total cash and net cashIn Q2 2024,the approximately EUR 90 million difference between the change in total cash and net cash was primarily due the repayment of debt and changes in the carrying amounts of certain issued bonds,as a result of interest rate and foreign exchange rate fluctuations.Foreign exchange rates had an approximately EUR 30 million positive impact on net cash.Adjusted free cash flow by business groupIn the quarter Nokias free cash flow was positive EUR 394 million.Adjusting for cash taxes and interest,Nokias adjusted free cash flow was EUR 500 million,which can be broken down by business group as follows(approximate figures rounded to the nearest EUR 10 million):Network Infrastructure-EUR-210 million:In Q2,Network Infrastructure core cash flow(excluding ASN)was EUR-180 million and saw a modest increase in working capital,along with the impact of employee variable pay payments.Cash flow related to ASN was EUR-30 million.Mobile Networks-EUR 690 million:In the quarter,Mobile Networks saw a significant improvement in working capital as the build up seen in 2023 normalizes.Cloud and Network Services-EUR 10 million:The cash flow in this business was aligned to the operating profit with a small positive working capital move.Nokia Technologies-EUR 130 million:Nokia received some prepayments in 2023 in Nokia Technologies which is impacting cash conversion in 2024.It is expected to align more closely with operating profit from 2025 onwards.Group Common and Other-EUR-120 million:The cash flow in Group Common and Other largely represented the operating result in the quarter,along with the impact of employee variable pay payments.18July 2024 11January-June 2024 compared to January-June 2023Net salesIn the first half of 2024,net sales decreased 19%on a reported basis and were negatively impacted by foreign exchange rate fluctuations along with the following drivers.On a constant currency basis,net sales decreased 18%year-on-year reflecting declines across Mobile Networks,Network Infrastructure and Cloud and Network Services,somewhat offset by growth in Nokia Technologies.Gross marginBoth reported and comparable gross margin improved year-on-year in the first half of 2024.Reported gross margin increased 740 basis points to 46.5%and comparable gross margin increased 800 basis points to 47.6%.The gross margin increase was primarily driven by increased contribution from Mobile Networks which benefited from supportive regional mix and the accelerated recognition of net sales in Q2 2024.Operating profit and marginReported operating profit in the first half of 2024 was EUR 836 million,or 9.4%of net sales,a decrease from EUR 890 million or 8.1%in the first half of 2023.Comparable operating profit decreased to EUR 1023 million from EUR 1090 million year-on-year,while comparable operating margin increased 160 basis points year-on-year to 11.5%.The decrease in comparable operating profit was mainly driven by lower net sales.Operating expenses were flat year-on-year,although the first half of 2023 benefited from lower variable pay accruals.Excluding this impact,operating expenses would have declined year-on-year.This was somewhat offset by EUR 400 million of catch-up net sales in Nokia Technologies,the accelerated recognition of net sales in Mobile Networks and higher other operating income,mainly related to the positive fluctuation in loss allowances on certain trade receivables.The impact of hedging in the first half of 2024 was positive EUR 25 million,compared to a positive impact of EUR 48 million in the first half of 2023.Nokias venture fund investments generated a gain of approximately EUR 10 million in the first half of 2024 compared to a loss of EUR 40 million in the first half of 2023.In the first half of 2024,the difference between reported and comparable operating profit was primarily related to restructuring and associated charges,the divestment of businesses and associated companies,the amortization of acquired intangible assets and the impairment and write off of assets.In the first half of 2023,the difference between reported and comparable operating profit was primarily related to the amortization of acquired intangible assets,restructuring and associated charges,a provision associated with a country exit and a change in provision related to past acquisitions.Profit from continuing operationsReported profit from continuing operations in the first half of 2024 was EUR 821 million,compared to profit of EUR 570 million in the first half of 2023.Comparable profit from continuing operations in the first half of 2024 was EUR 840 million,compared to EUR 741 million in the first half of 2023.The increase in comparable profit from continuing operations when compared to the first half of 2023 was mainly driven by a net positive fluctuation in financial income and expenses,reflecting favorable foreign exchange rates and higher interest income,which more than offset the decrease in comparable operating profit.Apart from the items affecting comparability included in operating profit(and their associated tax effects),the difference between reported and comparable profit from continuing operations in the first half of 2024 was mainly due to the divestment of businesses and the changes in the recognition of deferred tax assets.In the first half of 2023,the difference between reported and comparable profit from continuing operations was related to the divestment of business and the change in financial liability to acquire Nokia Shanghai Bell non-controlling interest.Profit/loss from discontinued operationsReported loss from discontinued operations in the first half of 2024 was EUR 525 million,compared to a profit of EUR 8 million in the first half of 2023.The loss from discontinued operations in the first half of 2024 reflects the accounting for Submarine Networks being moved into discontinued operations.The loss is mainly related to an impairment charge of EUR 514 million in connection with Submarine Networks.Earnings per shareReported diluted EPS from continuing operations was EUR 0.15 in the first half of 2024,compared to EUR 0.10 in the first half of 2023.Comparable diluted EPS from continuing operations was EUR 0.15 in the first half of 2024,compared to EUR 0.13 in the first half of 2023.Reported diluted EPS from discontinued operations was negative EUR 0.09 in the first half of 2024,compared to zero in the first half of 2023.Reported diluted EPS was EUR 0.05 in the first half of 2024,compared to EUR 0.10 in the first half of 2023.Comparable diluted EPS was EUR 0.15 in the first half of 2024 compared to EUR 0.13 in the first half of 2023.Cash performanceDuring the first half of 2024,Nokias net cash increased EUR 1 152 million,resulting in an end-of-period net cash balance of EUR 5475 million.Total cash increased EUR 640 million,resulting in total cash balance of EUR 9154 million.Free cash flow was positive EUR 1349 million in the first half of 2024.18July 2024 12SustainabilityOur strategy and prioritiesDeveloping ESG into a competitive advantage is one of the pillars of Nokias corporate strategy.Below are some of our key sustainability achievements in the second quarter of 2024.Environment In June,Nokia was featured by Time magazine as one of the top 500 sustainable companies in the world.Data firm Statista and Time have measured the worlds most sustainable companies for 2024.The evaluation considered factors such as revenue,market capitalization,public prominence and more than 20 key performance indicators related to sustainability.We are honored that Nokias efforts have been recognized.At the Nokia Midsummer launch,we showcased the latest product and technology innovations.Our new next-generation compact outdoor baseband units,Tuuli 24 and Tuuli 26e,support twice as much cell capacity while reducing power consumption by up to 40 percent compared to the existing product generation.We also announced that our AirScale RAN portfolio is expanding with a new Habrok 32 energy-efficient Massive MIMO.Industrial digitalization Worker safety is amongst the highest priority of any industrial business.Nokia announced real-time Visual Position and Object Detection(VPOD),an AI-powered application designed for worker safety and industrial automation.This technology enhances situational awareness with real-time safety monitoring and asset positioning to improve operational efficiencies.The Nokia 2024 Industrial Digitalization report and related survey conducted by GlobalData reveal enterprises are scaling private wireless for additional use cases and industrial sites.The report,based on research among 100 early adopters,highlights several key benefits for enterprises deploying private wireless networks.65%of respondents stated over 10%improvement in worker safety and 79%reported 10%or more reduction in their emissions.Nokia and Claro successfully completed the first stage of Colombias largest 5G deployment,covering over 1,000 sites nationwide.Deployment is set to revolutionize digital connectivity and supports the countrys key industries such as transport,energy and mining.Security and privacySecurity and privacy are fundamental pillars of Nokias product strategy,underscoring our commitment to protecting our customers.This is exemplified by Nokias NetGuard Cybersecurity Dome software that was recognized for the third year in a row on GigaOms report on the security software market.Nokias position in the ranking was upgraded to an Outperformer leader in the industry resulting from its extensive experience in the telecom sector and comprehensive approach to security.To meet the increasing demands of CSPs and large digital enterprises,and to address the rise in the frequency of DDoS(distributed denial-of-service)attacks,Nokia unveiled an expanded set of DDoS mitigation capabilities of its Defender Mitigation System.Bridging the digital divideWorking with Global Fiber Peru,we announced the deployment of a new subaquatic Optical,IP and fiber broadband network in the Amazon rainforest.The network connects 500,000 users across 400 communities to multi-gigabit broadband access which is critical in todays digital economy.Underscoring Nokias commitment to providing Broadband Equity,Access and Deployment(BEAD)applicants with broadband technology needed for critical infrastructure projects to help close the digital divide,the first Buy America-compliant Nokia products-optical line terminal(OLT)cards-rolled off the Sanmina manufacturing line,which help connect users to fast,reliable gigabit data services.Our Smartpur project in India implemented in partnership with the Digital Empowerment Foundation-was recognized as an award winner at the International Telecommunication Unions World Summit on the Information Society(WSIS).Smartpur is a digital village ecosystem project aimed at integrating technology into the daily lives of people living in remote villages to empower local entrepreneurs and provide facilities to make services accessible at the village level through Smartpur centers.Responsible businessAt Nokia,our approach to sustainability is built on our companys purpose:to create technology that helps the world act together.We are proud to once again be recognized among the top 1%of companies assessed by EcoVadis for sustainability performance.With the overall score of 82/100,we are recognized to be in the highest possible,Platinum level.In June,Nokia published its 2023 Conflict Mineral Report which outlines efforts to trace materials used in our products.We are determined to tackle this complex topic,and work to ensure minerals are responsibly sourced and validated as conflict-free.18July 2024 13Additional informationCost Savings ProgramOn 19 October 2023,Nokia announced actions being taken across business groups to address the challenging market environment that the company faced.The company will reduce its cost base and increase operational efficiency while protecting its R&D capacity and commitment to technology leadership.Nokia targets to lower its cost base on a gross basis(i.e.before inflation)by between EUR 800 million and EUR 1 200 million by the end of 2026 compared to 2023,assuming on-target variable pay in both periods.This represents a 10-15%reduction in personnel expenses.The program is expected to lead to a 72 000 77 000*employee organization compared to the 86 000 employees Nokia had when the program was announced.The program is expected to deliver savings on a net basis but the magnitude will depend on inflation.The cost savings are expected to primarily be achieved in Mobile Networks,Cloud and Network Services and Nokias corporate functions.One-time restructuring charges and cash outflows of the program are expected to be similar to the annual cost savings achieved.The table below provides further detail on the current plans Nokia has in place in relation to the 2024-2026 restructuring program.The current plan envisages achieving gross cost savings of EUR 1 000 million within the 2024-2026 program although this remains subject to change depending on the evolution of end market demand.This includes the expected gross cost savings along with the associated restructuring charges and cash outflows for the program.Nokia expects approximately 70%of the savings to be achieved within operating expenses and 30%within cost of sales.By business group,approximately 60%of the savings are expected to be achieved within Mobile Networks,30%within Cloud and Network Services and the remaining 10tween Network Infrastructure and corporate center.The table also outlines expected savings and cash outflows related to the previous 2021-2023 program that is now essentially completed.In EUR million,rounded to the nearest EUR 50 millionActualExpected amounts forCumulative expected amounts for 2024 and beyond2023202420252026Beyond 20262021-2023 Program 2024-2026 ProgramTotalRecurring gross cost savings 150 500 350 150 100 100 1000 1100 Restructuring and associated charges related to cost savings programs 350 400 200 200 800 800 Restructuring and associated cash outflows 300 550 250 150 150 150 950 1100*These figures represent the originally planned headcount targets and do not take into consideration currently planned divestments or acquisitions.18July 2024 14Significant eventsJanuary June 2024 On 25 January 2024,Nokia announced that its Board of Directors is initiating a share buyback program to return up to EUR 600 million of cash to shareholders in tranches over a period of two years.The repurchases under the first phase of the program commenced on 20 March 2024.On 8 February 2024,Nokia announced it had signed its last remaining major smartphone patent license agreement that remained under negotiation and concluded its smartphone patent license renewal cycle which began in 2021.In addition to license agreements signed with Apple and Samsung in 2023,and Huawei in December 2022,Nokia Technologies announced agreements with Honor,OPPO and vivo,among others at the beginning of 2024.Nokia Technologies has now entered a period of stability with no major smartphone license agreements expiring for a number of years.Refer to the Segment details section in this report for more information on the financial impact of completion of the patent license renewal cycle.On 28 March 2024,Nokia announced that its Chief People Officer,Amy Hanlon-Rodemich will leave and step down from its Group Leadership Team.A recruitment process began immediately for her successor.On 3 April 2024,Nokia held its Annual General Meeting(AGM)in Helsinki.Shareholders were also able to follow the AGM through a webcast.Approximately 78 000 shareholders representing approximately 3 305 million shares and votes were represented at the meeting.The AGM approved all the proposals of the Board of Directors to the AGM.Among others,the following resolutions were made:The financial statements were adopted,and the Board of Directors and President and CEO were discharged from liability for the financial year 2023.The AGM decided that no dividend is distributed by a resolution of the AGM and authorized the Board to decide on the distribution of an aggregate maximum of EUR 0.13 per share as dividend from the retained earnings and/or as assets from the reserve for invested unrestricted equity.Timo Ahopelto,Sari Baldauf,Elizabeth Crain,Thomas Dannenfeldt,Lisa Hook,Thomas Saueressig,Sren Skou,Carla Smits-Nusteling and Kai istm were re-elected as members of the Board for a term ending at the close of the next AGM.In addition,the AGM resolved to elect Michael McNamara as a new member of the Board for the same term.In its assembly meeting that took place after the AGM,the Board re-elected Sari Baldauf as Chair of the Board and Sren Skou as Vice Chair of the Board.The Remuneration Report of the companys governing bodies was adopted and the Remuneration Policy of the companys governing bodies was supported,both in advisory resolutions.Deloitte Oy was re-elected as the auditor for Nokia for the financial year 2025 with Authorized Public Accountant Jukka Vattulainen as the auditor in charge.Deloitte Oy was elected as the sustainability reporting assurer for the financial years 20242025.The Board was authorized to resolve to repurchase a maximum of 530 million Nokia shares and to issue a maximum of 530 million shares through issuance of shares or special rights entitling to shares in one or more issues.The authorizations are effective until 2 October 2025 and they terminated the corresponding authorizations granted by the AGM on 4 April 2023.The AGM resolved to amend the Articles of Association of the Company by updating the object of the company(Article 2),updating the government authority that approves auditors and adding the obligation to elect a sustainability reporting assurer(Article 7),updating the general meeting formats to include also the virtual general meeting(Article 9)and updating the matters that the Annual General Meeting decides on(Article 12).On 13 June 2024,Nokia announced the appointment of Lorna Gibb as Chief People Officer and member of the Group Leadership Team.Gibb joined Nokia in 2020 and has been Nokias Interim Chief People Officer since March 2024.In addition,it was announced that Ricky Corker,who served as Nokias Chief Customer Experience Officer since 2021 would leave and step down from Nokias Group Leadership Team.On 27 June 2024,Nokia announced it has entered into a put option agreement to sell Alcatel Submarine Networks(ASN),a leading submarine networks business,to the French State for an enterprise value of EUR 350 million,subject to informing and consulting with the relevant employee representatives at ASN and Nokia.Nokia will retain a 20%shareholding with board representation to ensure a smooth transition until targeted exit,at which point the French State would acquire Nokias remaining interest.The sale is expected to close at the end of 2024 or beginning of 2025,subject to customary closing conditions and regulatory approvals.On 27 June 2024,Nokia and Infinera,a global supplier of innovative open optical networking solutions and advanced optical semiconductors,announced a definitive agreement under which Nokia will acquire Infinera,in a transaction valuing the company at$6.65 per share or an enterprise value of US$2.3 billion.At least 70%of the consideration will be paid in cash and Infineras shareholders can elect to receive up to 30%of the aggregate consideration in the form of Nokia ADSs.In conjunction with this transaction,Nokias Board of Directors has committed to increasing and accelerating Nokias on-going share buyback program to mitigate any dilution from the equity component of the acquisition.Nokia and Infinera see a significant opportunity in merging to improve scale and profitability,enabling the combined business to accelerate the development of new products and solutions to benefit customers.SharesThe total number of Nokia shares on 30 June 2024,equaled 5 613 496 565.On 30 June 2024,Nokia and its subsidiary companies held 115 511 381 Nokia shares,representing approximately 2.1%of the total number of Nokia shares and voting rights.18July 2024 15Risk FactorsNokia and its businesses are exposed to a number of risks and uncertainties which include but are not limited to:Competitive intensity,which is expected to continue at a high level as some competitors seek to take share;Changes in customer network investments related to their ability to monetize the network;Our ability to ensure competitiveness of our product roadmaps and costs through additional R&D investments;Our ability to procure certain standard components and the costs thereof,such as semiconductors;Disturbance in the global supply chain;Impact of inflation,increased global macro-uncertainty,major currency fluctuations and higher interest rates;Potential economic impact and disruption of global pandemics;War or other geopolitical conflicts,disruptions and potential costs thereof;Other macroeconomic,industry and competitive developments;Timing and value of new,renewed and existing patent licensing agreements with licensees;Results in brand and technology licensing;costs to protect and enforce our intellectual property rights;on-going litigation with respect to licensing and regulatory landscape for patent licensing;The outcomes of on-going and potential disputes and litigation;Our ability to execute,complete and realize the expected benefits from our ongoing transactions;Timing of completions and acceptances of certain projects;Our product and regional mix;Uncertainty in forecasting income tax expenses and cash outflows,over the long-term,as they are also subject to possible changes due to business mix,the timing of patent licensing cash flow and changes in tax legislation,including potential tax reforms in various countries and OECD initiatives;Our ability to utilize our Finnish deferred tax assets and their recognition on our balance sheet;Our ability to meet our sustainability and other ESG targets,including our targets relating to greenhouse gas emissions;as well the risk factors specified under Forward-looking statements of this report,and our 2023 annual report on Form 20-F published on 29 February 2024 under Operating and financial review and prospects-Risk factors.Forward-looking statementsCertain statements herein that are not historical facts are forward-looking statements.These forward-looking statements reflect Nokias current expectations and views of future developments and include statements regarding:A)expectations,plans,benefits or outlook related to our strategies,projects,programs,product launches,growth management,licenses,sustainability and other ESG targets,operational key performance indicators and decisions on market exits;B)expectations,plans or benefits related to future performance of our businesses(including the expected impact,timing and duration of potential global pandemics,geopolitical conflicts and the general or regional macroeconomic conditions on our businesses,our supply chain,the timing of market changes or turning points in demand and our customers businesses)and any future dividends and other distributions of profit;C)expectations and targets regarding financial performance and results of operations,including market share,prices,net sales,income,margins,cash flows,cost savings,the timing of receivables,operating expenses,provisions,impairments,taxes,currency exchange rates,hedging,investment funds,inflation,product cost reductions,competitiveness,revenue generation in any specific region,and licensing income and payments;D)ability to execute,expectations,plans or benefits related to our ongoing transactions and changes in organizational structure and operating model;E)impact on revenue with respect to litigation/renewal discussions;and F)any statements preceded by or including“continue”,“believe”,“commit”,“envisage”,”estimate”,“expect”,“aim”,“will”,“target”,“likely”,“intend”,“may”,“could”,“would”,see,forecast,“plan”or similar expressions.These forward-looking statements are subject to a number of risks and uncertainties,many of which are beyond our control,which could cause our actual results to differ materially from such statements.These statements are based on managements best assumptions and beliefs in light of the information currently available to them.These forward-looking statements are only predictions based upon our current expectations and views of future events and developments and are subject to risks and uncertainties that are difficult to predict because they relate to events and depend on circumstances that will occur in the future.Factors,including risks and uncertainties that could cause these differences,include those risks and uncertainties identified in the Risk Factors above.18July 2024 16Financial statement informationConsolidated income statement(condensed)EUR millionReportedComparableNoteQ224Q223Q1-Q224Q1-Q223Q224Q223Q1-Q224Q1-Q223Net sales 2,4 4466 5438 8910 11013 4466 5438 8910 11013 Cost of sales(2530)(3290)(4764)(6704)(2468)(3254)(4666)(6657)Gross profit 2 1936 2148 4146 4308 1998 2184 4244 4356 Research and development expenses(1134)(1034)(2259)(2130)(1064)(1015)(2140)(2096)Selling,general and administrative expenses(715)(690)(1408)(1407)(610)(607)(1194)(1239)Other operating income and expenses 345 45 358 118 99 56 113 68 Operating profit2 432 469 836 890 423 619 1023 1090 Share of results of associates and joint ventures 3 (13)3 (19)3 (13)3 (19)Financial income and expenses 27 (54)84 (77)20 (51)67 (64)Profit before tax 461 402 924 794 445 555 1093 1007 Income tax expense6 (92)(115)(103)(224)(117)(146)(253)(266)Profit from continuing operations 370 287 821 570 328 409 840 741(Loss)/profit from discontinued operations(512)2 (525)8 (Loss)/Profit for the period(142)289 296 578 328 409 840 741 Attributable toEquity holders of the parent(146)290 288 569 325 410 832 732 Non-controlling interests 3 (1)8 9 3 (1)8 9 Earnings per share attributable to equity holders of the parentBasic earnings per share,EURContinuing operations 0.07 0.05 0.15 0.10 0.06 0.07 0.15 0.13 Discontinued operations(0.09)0.00 (0.10)0.00 Profit for the period(0.03)0.05 0.05 0.10 0.06 0.07 0.15 0.13 Average number of shares(000 shares)5509849 5558878 5517802 5568389 5509849 5558878 5517802 5568389 Diluted earnings per share,EURContinuing operations 0.07 0.05 0.15 0.10 0.06 0.07 0.15 0.13 Discontinued operations(0.09)0.00 (0.09)0.00 Profit for the period(0.03)0.05 0.05 0.10 0.06 0.07 0.15 0.13 Average number of shares(000 shares)5562292 5616185 5563542 5623523 5562292 5616185 5563542 5623523 Beginning from the second quarter of 2024 Nokia has presented its Submarine Networks business as discontinued operation.The comparative information has been recast accordingly.The above condensed consolidated income statement should be read in conjunction with accompanying notes.18July 2024 17Consolidated statement of comprehensive income(condensed)EUR millionReportedQ224Q223Q1-Q224Q1-Q223(Loss)/Profit for the period(142)289 296 578 Other comprehensive incomeItems that will not be reclassified to profit or lossRemeasurements of defined benefit plans 136 (225)264 (146)Income tax related to items that will not be reclassified to profit or loss(38)56 (73)37 Items that may be reclassified to profit or lossTranslation differences 89 (32)266 (313)Net investment hedges(9)36 (16)111 Cash flow and other hedges 5 (16)25 (15)Financial assets at fair value through other comprehensive income 5 (14)13 (37)Other changes,net(3)3 1 Income tax related to items that may be reclassified subsequently to profit or loss 1 4 4 (10)Other comprehensive income/(loss),net of tax 186 (188)484 (373)Total comprehensive income for the period 44 101 780 205 Attributable to:Equity holders of the parent 40 105 772 200 Non-controlling interests 4 (4)8 5 Total comprehensive income/expense attributable to equity holders of the parent arises from:Continuing operations 548 96 1277 201 Discontinued operations(508)9 (505)(1)The above condensed consolidated statement of comprehensive income should be read in conjunction with accompanying notes.18July 2024 18Consolidated statement of financial position(condensed)EUR millionNote30 June 202430 June 202331December 2023ASSETSGoodwill 5601 5591 5504 Other intangible assets 961 1136 1086 Property,plant and equipment 1361 1962 1951 Right-of-use assets 815 927 906 Investments in associated companies and joint ventures 89 170 88 Non-current interest-bearing financial investments 7 438 865 715 Other non-current financial assets 7 1104 1047 1100 Defined benefit pension assets5 6590 6575 6258 Deferred tax assets6 3691 3777 3873 Other non-current receivables 196 236 213 Total non-current assets 20844 22287 21694 Inventories 2479 3317 2719 Trade receivables7 3572 5354 4921 Contract assets 782 1103 1136 Current income tax assets 344 351 307 Other current receivables 933 855 764 Current interest-bearing financial investments 7 1863 1860 1565 Other current financial and firm commitment assets 7 362 513 441 Cash and cash equivalents 7 6853 5106 6234 Total current assets 17186 18459 18087 Assets held for sale 828 79 Total assets 38859 40747 39860 SHAREHOLDERS EQUITY AND LIABILITIESShare capital 246 246 246 Share premium 733 590 628 Treasury shares(449)(515)(352)Translation differences 13 (46)(249)Fair value and other reserves 3826 3745 3605 Reserve for invested unrestricted equity 15249 15489 15255 Retained earnings 1305 1671 1404 Total shareholders equity 20924 21180 20537 Non-controlling interests 94 96 91 Total equity 21018 21276 20628 Long-term interest-bearing liabilities 7,8 2747 3584 3637 Long-term lease liabilities 719 839 799 Defined benefit pension and post-employment liabilities 5 2127 2395 2299 Deferred tax liabilities 664 343 725 Contract liabilities 234 127 210 Other non-current liabilities 106 94 111 Provisions 9 534 581 518 Total non-current liabilities 7131 7964 8299 Short-term interest-bearing liabilities7,8 932 587 554 Short-term lease liabilities 209 193 198 Other financial and firm commitment liabilities7 756 899 830 Contract liabilities 1851 1916 2157 Current income tax liabilities 169 194 203 Trade payables7 2901 4257 3423 Other current liabilities7 2415 2770 2824 Provisions 9 676 690 744 Total current liabilities 9909 11507 10933 Liabilities associated with assets held for sale3 801 Total shareholders equity and liabilities 38859 40747 39860 Shareholders equity per share,EUR 3.81 3.82 3.72 Number of shares(1 000 shares,excluding treasury shares)5497985 5547782 5525601 The above condensed consolidated statement of financial position should be read in conjunction with accompanying notes.18July 2024 19Consolidated statement of cash flows(condensed)EUR millionQ224Q223Q1-Q224Q1-Q223Cash flow from operating activities (Loss)/Profit for the period(142)289 296 578 Adjustments 767 532 1121 988 Impairment charges 527 (1)544 (4)Depreciation and amortization 268 272 529 538(Gain)/loss on sale of businesses and associated companies(252)8 (252)(18)Restructuring charges 140 56 222 75 Financial income and expenses(30)55 (81)73 Income tax expense 91 116 104 228 Other 23 26 55 96 Cash flows from operations before changes in net working capital 625 821 1417 1566 Change in net working capital(26)(953)401 (1459)Decrease in receivables 427 48 1192 81 Decrease/(increase)in inventories 12 (51)44 (124)Decrease in non-interest-bearing liabilities(465)(950)(835)(1416)Cash flows from/(used in)operations 599 (132)1818 107 Interest received 58 51 112 81 Interest paid(56)(55)(140)(106)Income taxes paid,net(112)(197)(234)(332)Net cash flows from/(used in)operating activities 489 (333)1556 (250)Cash flow from investing activitiesPurchase of property,plant and equipment and intangible assets(95)(127)(207)(359)Proceeds from sale of property,plant and equipment and intangible assets 31 84 56 98 Acquisition of businesses,net of cash acquired(6)(6)Proceeds from disposal of businesses,net of cash disposed 100 (5)100 17 Proceeds from disposal of shares in associated companies 183 183 4 Purchase of interest-bearing financial investments(257)(320)(655)(1335)Proceeds from interest-bearing financial investments 314 1384 658 2397 Purchase of other non-current financial assets(27)(25)(35)(41)Proceeds from other non-current financial assets 20 21 50 25 Foreign exchange hedging of cash and cash equivalents 12 51 30 29 Other 4 3 5 4 Net cash flows from investing activities 279 1066 179 839 Cash flow from financing activitiesAcquisition of treasury shares(90)(82)(98)(163)Proceeds from long-term borrowings 1 496 Repayment of long-term borrowings(84)(85)(459)(798)(Repayment of)/proceeds from short-term borrowings(4)(19)(40)(5)Payment of principal portion of lease liabilities(54)(60)(107)(127)Dividends paid (225)(167)(391)(279)Net cash flows used in financing activities(457)(412)(1095)(876)Translation differences 9 (42)7 (74)Net increase/(decrease)in cash and cash equivalents 320 279 647 (361)Cash and cash equivalents at beginning of period 6561 4827 6234 5467 Cash and cash equivalents at end of period(1)6881 5106 6881 5106(1)Cash and cash equivalents at the end of Q224 includes EUR 28 million presented as assets held for sale in the statement of financial position.Consolidated statement of cash flows combines cash flows from both the continuing and the discontinued operations.The above condensed consolidated statement of cash flows should be read in conjunction with accompanying notes.18July 2024 20 Consolidated statement of changes in shareholders equity(condensed)EUR millionShare capitalShare premiumTreasury sharesTranslation differencesFair value and other reservesReserve for invested unrestricted equityRetained earningsTotal shareholders equityNon-controlling interestsTotal equity 1 January 2023 246 503 (352)169 3905 15487 1375 21333 93 21426 Profit for the period 569 569 9 578 Other comprehensive loss (215)(160)6 (369)(4)(373)Total comprehensive income (215)(160)575 200 5 205 Share-based payments 93 93 93 Settlement of share-based payments (6)4 (2)(2)Acquisition of treasury shares(1)(163)(2)(165)(165)Disposal of subsidiaries (2)(2)Dividends (279)(279)(279)Total transactions with owners 87 (163)2 (279)(353)(2)(355)30 June 2023 246 590 (515)(46)3745 15489 1671 21180 96 21276 1 January 2024 246 628 (352)(249)3605 15255 1404 20537 91 20628 Profit for the period 288 288 8 296 Other comprehensive income 262 221 484 484 Total comprehensive income 262 221 288 772 8 780 Share-based payments 115 115 115 Settlement of share-based payments (10)6 (4)(4)Acquisition of treasury shares(1)(97)(12)(109)(109)Dividends (386)(386)(5)(391)Total transactions with owners 105 (97)(6)(386)(384)(5)(389)30 June 2024 246 733 (449)13 3826 15249 1305 20924 94 21018(1)Treasury shares acquired during 2024 are acquired as part of the share buyback program announced on 25 January 2024.The repurchases started on 20 March 2024.The purpose of the repurchases is to optimize Nokias capital structure through the reduction of capital.The repurchased shares will be cancelled.Treasurysharesacquired during 2023 were acquired as part of the share buyback program announced on 3 February 2022.The repurchased shares were cancelled on 30 November 2023.Therepurchasesarefundedusingfundsinthe reserve for invested unrestricted equity and the repurchases will reduce total unrestricted equity.The above condensed consolidated statement of changes in shareholders equity should be read in conjunction with accompanying notes.18July 2024 21Notes to Financial statements1.GENERAL INFORMATIONThis unaudited and condensed consolidated financial statement information of Nokia has been prepared in accordance with IAS 34,Interim Financial Reporting,and it should be read in conjunction with the annual consolidated financial statements for 2023 prepared in accordance with IFRS Accounting Standards as published by the IASB and adopted by the EU.The same accounting policies,methods of computation and applications of judgment are followed in this financial statement information as was followed in the annual consolidated financial statements for 2023 except for the following:Starting from the first quarter of 2024 Nokia provides regional net sales information for the Nokia group and its reportable segments based on three geographical areas:1)Americas,2)APAC,and 3)EMEA.Net sales information for the group is further divided into sub-regions as follows:Americas consists of North America and Latin America,APAC consists of Greater China,India and Rest of APAC(formerly reported as Asia Pacific region),and EMEA consists of Europe and Middle East&Africa.The purpose of the change is to increase transparency of net sales information for the reportable segments.In the second quarter of 2024 Nokia entered into a put option agreement to sell Alcatel Submarine Networks(ASN)to the French State,represented by the Agence des participations de lEtat(APE),subject to informing and consulting with the relevant employee representatives at ASN and Nokia along with other customary closing conditions and regulatory approvals.Beginning from the second quarter of 2024,the Submarine Networks business,which was previously reported as part of Network Infrastructure operating segment,is presented as discontinued operation.Comparative financial information presented in the consolidated income statement and disclosed in the relevant notes has been recast accordingly.For more information on the discontinued operations,refer to Note 3.Discontinued operations and disposal groups held for sale.Percentages and figures presented herein may include rounding differences and therefore may not add up precisely to the totals presented and may vary from previously published financial information.This financial report was authorized for issue by the Board of Directors on 18July 2024.Net sales and operating profit of the Nokia group,particularly in Network Infrastructure,Mobile Networks and Cloud and Network Services segments,are subject to seasonal fluctuations being generally highest in the fourth quarter and lowest in the first quarter of the year.This is mainly due to the seasonality in the spending cycles of communications service providers.Nokia Shanghai BellIn 2017,Nokia and China Huaxin Post&Telecommunication Economy Development Center(China Huaxin)commenced operations of the joint venture Nokia Shanghai Bell(NSB).The contractual arrangement provides China Huaxin with the right to fully transfer its ownership interest in NSB to Nokia and Nokia with the right to purchase China Huaxins ownership interest in NSB in exchange for a future cash settlement.To reflect this,Nokia derecognized the non-controlling interest balance related to NSB and recognized a financial liability based on the estimated future cash settlement to acquire China Huaxins ownership interest.Any changes in the estimated future cash settlement are recorded in financial income and expense.In the second quarter of 2024 the contractual arrangement set to expire on 30 June 2024 was extended until 30 September 2024.If the arrangement expires unexercised,Nokia will derecognize the financial liability and record non-controlling interest equal to its share of NSBs net assets with any difference recorded within shareholders equity.TD TechNokia holds a 51%ownership interest in TD Tech Holding Limited(“TD Tech HK”),a Hong Kong based joint venture holding company which Nokia has accounted for as an investment in associated companies and joint ventures.In the second quarter of 2024,TD Tech HK completed the divestment of the entire business of the joint venture through the sale of its operating subsidiaries to a consortium consisting of Huawei Technologies,Chengdu High-tech Investment Group and other buyers.Following the divestment,Nokia is in the process of exiting from its shareholding in the parent company TD Tech HK.Nokia considers the transactions as a sale of associated companies and joint ventures and has recorded a gain of EUR 186 million related to the sale and received a cash consideration of EUR 173 million from the sale in the quarter.Device Management and Service Management Platform businessesIn the second quarter of 2024 Nokia closed the sale of its Device Management and Service Management Platform businesses,which were part of Cloud and Network Services,to Lumine Group Inc.Nokia recorded a gain of EUR 68 million related to the sale and received a cash consideration of EUR 105 million from the sale.Comparable and constant currency measuresNokia presents financial information on a reported,comparable and constant currency basis.Comparable measures presented in this document exclude intangible asset amortization and other purchase price fair value adjustments,goodwill impairments,restructuring related charges and certain other items affecting comparability.In order to allow full visibility on determining comparable results,information on items affecting comparability is presented separately for each of the components of profit or loss.Constant currency reporting provides additional information on change in financial measures on a constant currency basis in order to better reflect the underlying business performance.Therefore,change in financial measures at constant currency excludes the impact of changes in exchange rates in comparison to euro,our reporting currency.As comparable or constant currency financial measures are not defined in IFRS they may not be directly comparable with similarly titled measures used by other companies,including those in the same industry.The primary rationale for presenting these measures is that the management uses these measures in assessing the financial performance of Nokia and believes that these measures provide meaningful supplemental information on the underlying business performance of Nokia.These financial measures should not be considered in isolation from,or as a substitute for,financial information presented in compliance with IFRS.For further details on performance measures used by Nokia and reconciliations to the closest IFRS-defined measures,refer to the Performance measures section accompanying this consolidated financial statement information.18July 2024 22Foreign exchange rates Nokias net sales are derived from various countries and invoiced in various currencies.Therefore,our business and results from operations are exposed to changes in foreign exchange rates between the euro,our reporting currency,and other currencies,such as the US dollar,the Indian rupee and the Chinese yuan.To mitigate the impact of changes in exchange rates on our results,we hedge operative forecasted net foreign exchange exposures,typically within a 12-month horizon,and apply hedge accounting in the majority of cases.The below table shows the exposure of Nokias continuing and discontinued operations to different currencies for net sales and total costs.Q224Q223Q124Net salesTotal costsNet salesTotal costsNet salesTotal costsEUR250% 5%USD55EPP%INR0%5%5%5%0%5%CNY5%5%5%5%5%5%Other15%Total10000000%End of Q224 balance sheet rate 1 EUR=1.07 USD,end of Q223 balance sheet rate 1 EUR=1.09 USD and end of Q124 balance sheet rate 1 EUR=1.08 USDNew and amended standards and interpretationsNew standards and amendments to existing standards that became effective on 1 January 2024,did not have a material impact on Nokias consolidated financial statements.New standards and amendments to existing standards issued by the IASB that are not yet effective are not expected to have a material impact on Nokias consolidated financial statements when adopted,except for IFRS 18 Presentation and Disclosure in Financial Statements which was published in April 2024.IFRS 18 sets out the requirements for presentation and disclosures in financial statements and it will replace IAS 1 Presentation of Financial Statements.The new standard is effective for annual reporting periods beginning on or after 1 January 2027,with earlier application permitted.IFRS 18 is yet to be endorsed by the EU.Nokia is assessing the impact of IFRS 18 on its consolidated financial statements but as its not changing the recognition and measurement requirements it is not expected to have significant impact other than on the presentation of financial information.2.SEGMENT INFORMATIONNokia has four operating and reportable segments for the financial reporting purposes:(1)Network Infrastructure,(2)Mobile Networks,(3)Cloud and Network Services and(4)Nokia Technologies.Nokia also presents segment-level information for Group Common and Other.In addition,Nokia provides net sales disclosure for the following business divisions within the Network Infrastructure segment:(i)IP Networks,(ii)Optical Networks and(iii)Fixed Networks.For detailed segment descriptions,please refer to Note 2.2.Segment Information,in the annual consolidated financial statements for 2023.Beginning from the second quarter of 2024,Nokia has presented its Submarine Networks business,which was previously reported as part of Network Infrastructure operating segment,as discontinued operation.Comparative information for Network Infrastructure segment has been revised accordingly.Accounting policies of the segments are the same as those for the group,except that items affecting comparability are not allocated to the segments.For more information on comparable measures and items affecting comparability,refer to Note 1.General information,and to the Performance Measures section accompanying this consolidated financial statement information.Inter-segment revenues and transfers are accounted for as if the revenues were to third parties,that is,at current market prices.Q224Network Infrastructure(1)Mobile NetworksCloud and Network ServicesNokia TechnologiesGroup Common and Other Eliminations and unallocated itemsNokia GroupEUR millionNet sales 1522 1970 615 356 4 (1)4466 of which to other segments 1 (1)Gross profit/(loss)585 851 207 356 (1)(62)1936 Gross margin8.4C.23.70.0%(25.0)C.3%Research and development expenses (300)(537)(140)(60)(26)(70)(1134)Selling,general and administrative expenses (207)(183)(113)(41)(67)(105)(715)Other operating income and expenses 19 41 21 3 15 246 345 Operating profit/(loss)97 171 (25)258 (78)9 432 Operating margin%6.4%8.7%(4.1)r.5%(1 950.0)%9.7%Share of results of associates and joint ventures 2 0 3 Financial income and expenses 27 Profit before tax 461 Depreciation and amortization(41)(98)(18)(9)(4)(98)(268)(1)Includes IP Networks net sales of EUR 586 million,Optical Networks net sales of EUR 405 million and Fixed Networks net sales of EUR 532 million.18July 2024 23Q223Network Infrastructure(1)Mobile NetworksCloud and Network ServicesNokia TechnologiesGroup Common and Other Eliminations and unallocated itemsNokia GroupEUR millionNet sales 1706 2623 742 334 35 (2)5438 of which to other segments 1 2 (2)Gross profit/(loss)702 877 271 334 (1)(36)2148 Gross marginA.13.46.50.0%(2.9)9.5%Research and development expenses (285)(501)(138)(56)(34)(18)(1034)Selling,general and administrative expenses (193)(200)(123)(37)(53)(82)(690)Other operating income and expenses 28 30 6 (6)(2)(11)45 Operating profit/(loss)252 206 16 236 (91)(150)469 Operating margin.8%7.9%2.2p.7%(260.0)%8.6%Share of results of associates and joint ventures (12)2 (2)(13)Financial income and expenses(54)Profit before tax 402 Depreciation and amortization(42)(88)(21)(10)(7)(104)(272)(1)Includes IP Networks net sales of EUR 618 million,Optical Networks net sales of EUR 492 million and Fixed Networks net sales of EUR 596 million.Q1-Q224Network Infrastructure(1)Mobile NetworksCloud and Network ServicesNokia TechnologiesGroup Common and Other Eliminations and unallocated itemsNokia GroupEUR millionNet sales 2961 3547 1266 1113 26 (3)8910 of which to other segments 2 1 1 (3)Gross profit/(loss)1172 1520 441 1113 (1)(98)4146 Gross margin9.6B.94.80.0%(3.8)F.5%Research and development expenses (602)(1080)(282)(121)(55)(119)(2259)Selling,general and administrative expenses (410)(356)(232)(76)(119)(214)(1408)Other operating income and expenses 22 45 22 1 23 245 358 Operating profit/(loss)183 129 (52)916 (153)(187)836 Operating margin%6.2%3.6%(4.1).3%(588.5)%9.4%Share of results of associates and joint ventures 3 3 Financial income and expenses 84 Profit before tax 924 Depreciation and amortization(84)(187)(37)(17)(8)(196)(529)(1)Includes IP Networks net sales of EUR 1179 million,Optical Networks net sales of EUR 749 million and Fixed Networks net sales of EUR 1032 million.Q1-Q223Network Infrastructure(1)Mobile NetworksCloud and Network ServicesNokia TechnologiesGroup Common and Other Eliminations and unallocated itemsNokia GroupEUR millionNet sales 3670 5190 1501 576 84 (8)11013 of which to other segments 1 3 4 (8)Gross profit/(loss)1523 1744 521 576 (8)(48)4308 Gross marginA.53.64.70.0%(9.5)9.1%Research and development expenses (591)(1036)(290)(113)(66)(34)(2130)Selling,general and administrative expenses (389)(410)(253)(70)(116)(168)(1407)Other operating income and expenses 45 44 19 (9)(31)50 118 Operating profit/(loss)588 342 (4)385 (222)(201)890 Operating margin.0%6.6%(0.3)f.8%(264.3)%8.1%Share of results of associates and joint ventures (30)3 9 0 (19)Financial income and expenses(77)Profit before tax 794 Depreciation and amortization(84)(176)(44)(19)(9)(206)(538)(1)Includes IP Networks net sales of EUR 1400 million,Optical Networks net sales of EUR 1025 million and Fixed Networks net sales of EUR 1246 million.18July 2024 24Material reconciling items between the group operating profit and total segment operating profitEUR millionQ224Q223Q1-Q224Q1-Q223Operating profit for the group 432 469 836 890 Divestment of businesses and associated companies(253)4 (253)(22)Restructuring and associated charges 150 53 253 81 Amortization of acquired intangible assets 78 85 156 171 Impairment and write-off of assets,net of reversals 11 1 25 (1)Change in provisions related to past acquisitions 20 20 Costs associated with country exit (13)(48)Other,net 5 5 (1)Total segment operating profit 423 619 1023 1090 3.DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALEIn the second quarter of 2024,Nokia entered into a put option agreement to sell Alcatel Submarine Networks(ASN)to the French State,represented by the Agence des participations de lEtat(APE),subject to informing and consulting with the relevant employee representatives at ASN and Nokia along with other customary closing conditions and regulatory approvals.The put option agreement contemplates the sale of ASN for an enterprise value of EUR 350 million,while the final proceeds will depend on the working capital and net debt balances of ASN at closing.Upon entering into the agreement Nokia classified the assets and liabilities of ASN as held for sale and recorded an impairment loss of EUR 514 million on the measurement of ASNs net assets to fair value less costs to sell(categorized in fair value hierarchy level 3).Beginning from the second quarter of 2024 the Submarine Networks business,which was previously reported as part of Network Infrastructure operating segment,is presented as discontinued operation.Results of discontinued operations ReportedEUR million Q224Q223Q1-Q224Q1-Q223Net sales 237 272 460 556 Expenses(238)(268)(466)(548)Operating(loss)/profit(1)4 (7)9 Financial income and expenses 3 (1)(3)4 Impairment loss recognized on the remeasurement to fair value less costs to sell (514)(514)(Loss)/profit from discontinued operations before tax(512)3 (524)12 Income tax expense (1)(1)(4)(Loss)/profit from discontinued operations(1)(512)2 (525)8(1)Loss/profit from discontinued operations is attributable to the equity holders of the parent in its entirety.Cash flows from discontinued operations EUR million Q224Q223Q1-Q224Q1-Q223Net cash flows(used in)/from operating activities(16)(48)3 (218)Net cash flows used in investing activities(13)(11)(21)(19)Net cash flows used in financing activities (4)(4)(8)(9)Net cash flow used in discontinued operations(33)(63)(26)(246)18July 2024 25Assets and liabilities of disposal group classified as held for saleEUR million 30 June 2024ASSETSProperty,plant and equipment 65 Deferred tax assets 81 Inventories 181 Trade receivables 103 Contract assets 242 Other current financial and firm commitment assets(1)77 Other assets 51 Cash and cash equivalents 28 Assets held for sale(2)828 LIABILITIESLease liabilities 30 Provisions 45 Other financial and firm commitment liabilities(1)83 Trade payables 80 Contract liabilities 272 Accrued expenses related to customer projects 166 Other liabilities 126 Liabilities associated with assets held for sale 801(1)Other current financial assets include EUR 26 million of derivative assets and other financial liabilities include EUR 68 million of derivative liabilities.(2)The comparative amount for assets held for sale at 31 December 2023 of EUR 79 million relates to the the carrying amount of Nokias investment in TD Tech Holding Limited and the assets of Device Management and Service Management Platform businesses which were both disposed of in the second quarter of 2024.4.NET SALESManagement has determined that Nokias geographic areas are considered as the primary determinants to depict how the nature,amount,timing and uncertainty of revenue and cash flows are affected by economic factors.Nokias primary customer base consists of companies that operate on a country-specific or a regional basis.Although Nokias technology cycle is similar around the world,different countries and regions are inherently in a different stage of that cycle,often influenced by macroeconomic conditions specific to those countries and regions.In addition to net sales to external customers by region,the chief operating decision maker reviews segment net sales by aggregated regions and net sales by customer type disclosed below.Each reportable segment,as described in Note 2.Segment information,consists of customers that operate in all geographic areas.No reportable segment has a specific revenue concentration in any geographic area other than Nokia Technologies,which is included within Europe.Group net sales by regionEUR millionQ224Q223YoY changeQ1-Q224Q1-Q223YoY changeAmericas 1559 1523 263 3421(19)%Latin America 216 230(6)88 462(16)%North America 1343 1293 4#74 2959(20)%APAC 1068 1913(44) 15 3681(45)%Greater China 295 344(14)S7 680(21)%India 329 1043(68)Y4 1896(69)%Rest of APAC 445 527(16)4 1105(20)%EMEA 1839 2003(8)A33 3912 6%Europe 1366 1525(10)200 2998 7%Middle East&Africa 473 478(1)3 915 2%Total 4466 5438(18)10 11013(19)July 2024 26Segment net sales by regionEUR million Q224Q223YoY changeQ1-Q224Q1-Q223YoY changeNetwork Infrastructure 1522 1706(11)61 3670(19)%Americas 662 653 107 1517(20)%APAC 314 405(22)1 890(32)%EMEA 546 649(16)54 1263(9)%Mobile Networks 1970 2623(25)547 5190(32)%Americas 698 582 2014 1286(13)%APAC 602 1344(55)11 2464(55)%EMEA 670 697(4)22 1439(8)%Cloud and Network Services 615 742(17)66 1501(16)%Americas 197 275(28)D0 580(24)%APAC 149 158(6)5 316(7)%EMEA 268 308(13)S1 605(12)%Nokia Technologies 356 334 713 576 93%Group Common and Other(1)3 33(91)# 76(69)%Total 4466 5438(18)10 11013(19)%(1)Includes eliminations of inter-segment revenues.Net sales by customer typeEUR millionQ224Q223YoY changeQ1-Q224Q1-Q223YoY changeCommunications service providers(CSP)3591 4561(21)h16 9286(27)%Enterprise 516 510 19 1076(11)%Licensees 356 334 713 576 93%Other(1)3 32(91)# 75(69)%Total 4466 5438(18)10 11013(19)%(1)Includes net sales of Radio Frequency Systems(RFS),which is being managed as a separate entity,and certain other items,such as eliminations of inter-segment revenues.RFS net sales also include revenue from communications service providers and enterprise customers.18July 2024 275.PENSIONS AND OTHER POST-EMPLOYMENT BENEFITSNokia operates several post-employment plans in various countries including both defined contribution and defined benefit plans.Defined benefit plans include pension plans and other post-employment benefit plans,providing retirement healthcare benefits and life insurance coverage.Nokia remeasured95%of its defined benefit obligations and 98%of the plan assets at 30 June 2024.Nokias pension and other post-employment plans in the United States have been remeasured using updated valuations from an external actuary,and the main pension plans outside of the United States have been remeasured based on updated asset valuations and changes in the discount rates during the reporting period.The impact of not remeasuring other pension and post-employment obligations is considered not material.At 30 June 2024,the weighted average discount rates used in remeasurement of the most significant plans were as follows(comparatives at 31December 2023):US Pension 5.20%(4.67%),US OPEB 5.20%(4.68%),Germany 3.60%(3.17%)and UK 5.13%(4.51%).The funded status of Nokias defined benefit plans(before the effect of the asset ceiling)increased from 126.1%,or EUR 4332 million,at 31 March 2024 to 128.1%or EUR 4548 million,at 30 June 2024.During the quarter the global defined benefit plan asset portfolio was invested approximately 72%in fixed income,6%in equities and 22%in other asset classes,mainly private equity and real estate.Changes in pension and post-employment net asset/(liability)30 June 202430 June 202331December 2023EUR millionPensions(1)US OPEBTotalPensions(1)US OPEBTotalPensions(1)US OPEBTotalNet asset/(liability)recognized 1 January 4755 (796)3959 5273 (978)4295 5273 (978)4295 Recognized in income statement 22 (19)3 32 (23)9 77 (46)31 Recognized in other comprehensive income 152 120 272 (195)49 (146)(409)66 (343)Contributions and benefits paid 82 82 103 6 109 136 7 143 Exchange differences and other movements(2)177 (30)147 (99)12 (87)(322)155 (167)Net asset/(liability)recognized at the end of the period 5188 (725)4463 5114 (934)4180 4755 (796)3959(1)Includes pensions,retirement indemnities and other post-employment plans.(2)Includes Section 420 transfers,medicare subsidies and other transfers,including a reclassification of EUR 17 million defined benefit obligation to liabilities associated with assets held for sale in the second quarter of 2024.Funded statusEUR million30 June 202431 March 202431 December 202330 September 202330 June 2023Defined benefit obligation(16202)(16590)(16868)(16632)(17712)Fair value of plan assets 20750 20922 20914 20818 21993 Funded status 4548 4332 4046 4186 4281 Effect of asset ceiling(85)(82)(87)(91)(101)Net asset recognized at the end of the period 4463 4250 3959 4095 4180 6.DEFERRED TAXESDeferred tax assets are recognized to the extent it is probable that future taxable profit will be available against which the unused tax losses,unused tax credits and deductible temporary differences can be utilized in the relevant jurisdictions.At 30 June 2024,Nokia has recognized deferred tax assets of EUR 3.7 billion(EUR 3.9 billion at 31December 2023).In addition,at 30 June 2024 assets held for sale include EUR 81 million of deferred tax assets related to disposal group held for sale.In addition,at 30 June 2024,Nokia has unrecognized deferred tax assets of approximately EUR 5 billion(EUR 5 billion at 31December 2023),the majority of which relate to France(approximately EUR 4 billion).These deferred tax assets have not been recognized due to uncertainty regarding their utilization.A significant portion of the French unrecognized deferred tax assets are indefinite in nature and available against future French tax liabilities,subject to a limitation of 50%of annual taxable profits.Nokia continually evaluates the probability of utilizing its deferred tax assets and considers both positive and negative evidence in its assessment.18July 2024 287.FAIR
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