Q4 & Full Year 2020 results

January 29, 2020

Important information
Forward-looking statements
This release contains forward-looking statements that reflect the intentions, beliefs or current expectations and projections of Signify, including statements regarding strategy, estimates of sales growth and future operational results.
By their nature, these statements involve risks and uncertainties facing Signify, and a number of important factors could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking
statement as a result of risks and uncertainties. Such risks, uncertainties and other important factors include but are not limited to: adverse economic and political developments, the impacts of COVID-19, technological change,
competition in the general lighting market, development of lighting systems and services, successful implementation of cost-savings initiatives and business transformation programs, impact of acquisitions and other transactions,
reputational and adverse effects on business due to activities in Environment, Health & Safety, compliance risks, ability to attract and retain talented personnel, adverse currency effects, pension liabilities, and exposure tointernational tax laws. Signify undertakes no duty to and will not necessarily update any of the forward-looking statements in light of new information or future events, except to the extent required by applicable law.
Market and Industry Information
All references to market share, market data, industry statistics and industry forecasts in this document consist of estimates compiled by industry professionals, competitors, organizations or analysts, of publicly available information
or of the Group’s own assessment of its sales and markets. Rankings are based on sales unless otherwise stated.
Non-IFRS Financial Statements
Certain parts of this document contain non-IFRS financial measures and ratios, such as comparable sales growth, adjusted gross margin, EBITA, adjusted EBITA, EBITDA, adjusted EBITDA and free cash flow, and other related ratios,
which are not recognized measures of financial performance or liquidity under IFRS. The non-IFRS financial measures presented are measures used by management to monitor the underlying performance of the Group’s businessand operations and, accordingly, they have not been audited or reviewed. Not all companies calculate non-IFRS financial measures in the same manner or on a consistent basis and these measures and ratios may not be comparable
to measures used by other companies under the same or similar names. A reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures is contained in this document. For further
information on non-IFRS financial measures, see “Chapter 18 Reconciliation of non-IFRS measures” in the Annual Report 2019.

Presentation
All amounts are in millions of euros unless otherwise stated. Due to rounding, amounts may not add up to totals provided. All reported data are unaudited. Unless otherwise indicated, financial information has been prepared inaccordance with the accounting policies as stated in the Annual Report 2019 and the semi-annual report 2020.
Market Abuse Regulation
This presentation contains information within the meaning of Article 7(1) of the EU Market Abuse Regulation.

2

Content
Summary performance 2020 by Eric Rondolat
Financial performance for Q4 20 by Javier van Engelen

FY 20 highlights by Eric Rondolat
Outlook & conclusion by Eric Rondolat
Q&A3

Summary financial & business performance 2020

%

4

•

LED-based sales represented 80% of sales•

Signify’s installed base of connected light points increased from 56m at YE191 to 77m at YE20•

Adj. EBITA margin improved by 30 bps to 10.7%, despite a negative currency impact of 30 bps•

Adj. indirect costs decreased by EUR 166m, or 9.1%, excluding currency effects and scope changes•

FCF of EUR 817m (FY 19: EUR 529m); 12.6% of sales•

Proposal to pay extraordinary dividend payment of EUR 170 million (EUR 1.35 per share), as announced on
January 13, 2021•

Proposal to pay regular cash dividend of EUR 1.40 per share over 2020•

Reduced our debt by EUR 350 million, lowering our leverage from 2.7x to 1.7x•

Cooper Lighting Solutions and Klite integration and synergy delivery ahead of plan•

Overachieved all targets from Brighter Lives, Better World 2020 sustainability program and started working
on doubling our positive impact on the environment and society in 2025

12019 includes pro-forma Cooper Lighting and Wiz

Content
Summary performance 2020 by Eric Rondolat
Financial performance for Q4 20 by Javier van Engelen

FY 20 highlights by Eric Rondolat
Outlook & conclusion by Eric Rondolat
Q&A

5

Signify achieves Q4 20 sales of EUR 1,878m, an Adj. EBITA margin of 13.4%
and free cash flow of EUR 332m
Sales (in EURm) & comparable sales growth (in %)
-4.2%
-8.3%
-15.3%Key observations for Q4 20•

Installed base of connected light points increased from
71m in Q3 20 to 77m in Q4 20•

LED-based sales represented 82% of total sales•

Sales of EUR 1,878m nominal sales growth of 18.0% and
CSG of -5.9%•

Adjusted indirect costs down EUR 18m, excluding FX effects,
changes in scope and provisions for the reimbursement of
employee contributions•

Adj. EBITA margin increased by 20 bps to 13.4%, mainly
driven by gross margin improvements•

Net income increased to EUR 137m (Q4 19: EUR 98m)•

Free Cash Flow increased to EUR 332m (Q4 19: EUR 308m)-5,9%-22.5%

1,750

1,4271

1,4691

1,72811.8781

Q4 19

Q1 20

Q2 20

Q3 20

Q4 20

Adjusted EBITA (in EURm & as % of sales)
13,4%

13.2%
11.5%
7.9%

6

232

1121

Q4 19

Q1 20

9.0%

1331

1991

2511

Q2 20

Q3 20

Q4 20

1Cooper Lighting has been consolidated from March 2nd, 2020

Digital Solutions delivers 27.3% nominal sales growth and continues to show
sequential CSG improvement
Sales (in EURm) & comparable sales growth (in %)Key observations for Q4 20•-1.5%-14.2%-11.2%-10,2%•-22.4%

720

6391

7811

9161

9171

Q4 19

Q1 20

Q2 20

Q3 20

Q4 20

Adjusted EBITA (in EURm & as % of sales)
•

12.7%
11.7%

11,5%

12,1%2•

9.6%

LED-based sales accounted for 89% of total sales andconnected-based sales represented 22%3 of total sales
Nominal sales increase of 27.3% as a result of theconsolidation of Cooper Lighting• CSG decline of 10.2%• Sequential CSG improvement since 2Q20 despite
continued weakness in the Americas, parts ofEurope and Southeast Asia

Strong EBITA performance despite the topline decline
and the high comparable base of 4Q19
Adj. EBITA margin of 11.5%, a decline of 60 bps including
Cooper Lighting financials

6.7%

7

92

431

751

1071

1051

Q4 19

Q1 20

Q2 20

Q3 20

Q4 20

1Cooper Lighting has been consolidated from March 2nd, 2020
2Adj. EBITA margin when including the pro-forma Cooper Lighting financials in Q4 19

3Excluding Cooper Lighting

Digital Solutions highlights
Expanding UV-C portfolio
for professionals in AsiaPacific & Middle East

Providing extra protection
layer to shoppers EDEKA
Clausen with UV-C

Improving occupant
experience throughHoneywell partnership

Harnessing power of thesun to improve roadsafety on Leipsoi island

•

•

•

•

Designed UV-C trolley todisinfect within 30 min. (1arm) or 15 min. (with 2arms) covering a 36m2
circular or 20m2 square area
360° wheels deliver flexible(re)placement, incl. safety
features as remote control
China, Indonesia, Malaysia,
Vietnam, Korea, Philippines,
Thailand, KSA

•

•

8

•

•

Installed 31 Philips UV-C
disinfection upper air and
one Philips BioShift UV-C
disinfection chamber
Disinfects in upper air
layers, while shopping
activity below continues
First supermarket chain inGermany to install UV-C
disinfection lighting•

Global partnership tofurther improve
productivity and wellbeing
in offices
Integrates our lighting
systems & software –including Interact Office,NatureConnect and UV-C
disinfection lighting – with
Honeywell’s Healthy
Buildings••

Installed 28 Philips
Sunstay luminaires
Built-in Passive Infrared
motion sensors increase
light levels automaticallywhen detecting motion,
or decrease to 30% when
not detecting motion
Provides road safety
based on clean energy

Digital Products Adj. EBITA margin improved by 230 bps, mainly driven byrobust gross margin improvement from higher connected home sales
Sales (in EURm) & comparable sales growth (in %)
0.1%

2,5%
-2.0%

Key observations for Q4 20•

Connected-based sales represented 30% of sales•

CSG increased by 2.5%
• Strong progression during the quarter driven by
consumer channel; particularly in the connected
home category•

Adjusted EBITA margin improved by 230 bps to 18.0%,
driven by:• Positive impact of cost dilution from CSG growth• Positive mix impact from higher connected homesales
• Gross margin expansion, driven by solid pricemanagement and continued procurement savings-14.8%-21.1%
731

529

473

575

711

Q4 19

Q1 20

Q2 20

Q3 20

Q4 20

Adjusted EBITA (in EURm & as % of sales)
18,0%
15.7%
13.1%

9

8.9%

9.3%

115

47

44

76

128

Q4 19

Q1 20

Q2 20

Q3 20

Q4 20

Digital Products highlights
Offering consumers more
ways of protection with
UV-C disinfection lighting

Providing customers inIndia with more LED shapesby launching Radial Lamp

Answering customer
needs with retractableceiling fan light

Supporting OEMs in Asia
by expanding Electronic
Outdoor Drivers portfolio

•

•

•

•

•

•

10

Launched UV-C
disinfection box in China
and Indonesia
Disinfects viruses &bacteria from small
objects
Expanded availability of
UV-C disinfection desk
lamp in Asia, Europe &
LatAm

•

•

This higher ASP productprovides a higher efficacy of2100 lumen at 20 Watt,making it suitable for wall &ceiling applications
Launched on Amazon andreached a 5-star rating
shortly after launch andnow features in Top 100
Appreciated by retailers
with multiple repeat orders••

Convertible DC motor
technology reduces noiseby 20% and provides 70%
additional energy savings
Includes reverse
operation feature toeffectively support
cooling/heating system
Launched in China withplan to extend to othermarkets••

Expands fast-growing
range of robust andwater-resistant Electronic
Outdoor Drivers
Adds application flexibility
thanks to programmability
features with patented
NFC technology
Enables OEMs to apply
these drivers for domestic
use & global export

Conventional Products delivers robust Q4 Adj. EBITA performance andcontinued market share gains
Sales (in EURm) & comparable sales growth (in %)-11.0%-18.3%-11,6%Key observations for Q4 20•

Market share gains driven by successful continuation of“last company standing” strategy•

CSG decreased by 11.6%•

Strong demand for UV-C and horticulture lighting•

Adjusted EBITA margin increased by 160 bps to 18.9%
driven by adjusted indirect cost savings and higher
productivity and lower topline decline-17.8%-25.2%

290

257

211

233

242

Q4 19

Q1 20

Q2 20

Q3 20

Q4 20

Adjusted EBITA (in EURm & as % of sales)

11

18,9%

17.3%

17.6%

17.5%

17.9%

50

45

37

42

46

Q4 19

Q1 20

Q2 20

Q3 20

Q4 20

Adj. EBITA growth and margin expansion driven by procurement savings andproductivity gains offsetting the effect of lower volume and price erosion
Adjusted EBITA (in EURm)as %of sales

13.2%

232

13.4%

+20 bps

(25)

48

3

(12)

CoGS

Indirect Costs

Currency

29

251

Scope/ Other

Q4 2020(23)

Q4 2019

12

Volume / Mix

Price

Working Capital improved by 130 bps, reflecting structural changes inreceivables, other working capital items and payables
Working capital1 (in EURm & as % of sales)

Trade and other receivables (in EURm & as % of sales)
15,3%3

6.1%3

6.3%3

15,2%3

16,6%3

16,9%4

6.4%3

4,7%4

-220 bps
470

452

443

313

Q1 20

Q2 20

Q3 20

Q4 20

9.3%

-130 bps

1.173

1.096

1.155

1.140

Q1 20

Q2 20

Q3 20

Q4 20

19,4%

19,2%

19,5%

19,1%2

9.4%
8.0%
6,0%2

587

503

588

388

1.231

1.203

1.213

1.223

Q1 19

Q2 19

Q3 19

Q4 19

Q1 19

Q2 19

Q3 19

Q4 19

1 Working capital includes inventories, trade and other receivables, trade and other payables, other working capital items

13

2 Includes sales of Klite on a 12-month pro-forma basis
3 Includes sales of both Cooper Lighting and Klite on a 12-month pro-forma basis
4 Includes sales of Cooper Lighting on a 12-month pro-forma basis

Reduction of leverage ratio from 2.2x in Q3 to 1.7x in Q4 driven by strong
free cash flow generation of EUR 332m
In EURm
1,589

-241

1,275
-119

27

-16

29

-13

19

FCF: EUR +332m

Net debt
end of Q3 20
Net leverageof 2.2x14

EBITDA

Change inworking capital

Net capex

Change inprovisions

Interest & Tax Other FCF items

Other1

Net debt
end of Q4 20
Net leverageof 1.7x1Other includes cash used for derivatives, acquisitions, new lease liabilities, dividends to minority shareholders and FX effect on cash, cash equivalents and debt

Content
Summary performance 2020 by Eric Rondolat
Financial performance for Q4 20 by Javier van Engelen

FY 20 highlights by Eric Rondolat
Outlook & conclusion by Eric Rondolat
Q&A

15

Digital Solutions and Digital Products significantly increased theirprofitability and Free Cash Flow contribution
Adj. EBITA margin (%)

Adj. EBITA contribution (in EUR m)

Free Cash Flow (in EUR m)

Digital Solutions & Digital Products
10,4%+90 bps

11,3%

295

260

70%1

79%1

265

330

406
240
319

2019

2020

• Operational profitability improvedby 90 bps supported by bothdivisions

82%1
72%1

436

222

170

222

188

-100

-100

-252

-213

2019
Conventional Products

2020
Digital Solutions

Digital Products

Other

2019
Conventional Products
Digital Products

2020
Digital Solutions
Other• Digital Solutions and Digital
Products represent 79% of
Adj. EBITA (excl. other), versus 70%
in 2019• Digital Solutions and Digital Products strongly
increased FCF from EUR 559m to EUR 842m,• FCF growth of Digital Solutions and Digital
Products more than offsets the FCF decline inConventional Products

16
1 Calculated as the sum of Digital Solutions and Digital Products divided by the sum of Digital Solutions, Digital Products and Conventional Products.

Adj. EBITA margin improvement despite COVID-19 impact on topline
Digital Solutions CSG& Adj. EBITA margin (%)
CSG

-1.7%

-14.4%

Digital Products CSG& Adj. EBITA margin (%)
CSG

1.4%

-8.3%

Conventional Products CSG & FCF (in% and EUR m)
CSG-20.5%-16.5%

222
188

12,9%
10,0%

10,2%

2019

2020

• The Adjusted EBITA margin
improved by 20 bps to 10.2%• Positive impact from Cooper
Lighting consolidation andsynergy realization

17

10,8%

2019

2020

• The Adjusted EBITA margin
improved by 210 bps to 12.9%,
driven by connected homesales
• Strong sales in the consumer
channel

2019

2020

• Free Cash Flow as % of sales
remained solid at 19.9%

Adj. indirect costs excl. currency/scope effect decreased by EUR 166 million
in FY20
Key observations

Adj. indirect cost savings (in EUR m & as % of sales)+150 bps

29.0%

30.5%
1,982

1,813

361
-166
-26

Adj. indirect
costs FY 19

18

Indirectcost savings

Currency
impact1,621

Adj. indirect
costs FY 20
excl. scope

Changesin scope1

Adj. indirect
costs FY 20
incl. scope• EUR 166m saved in FY20; down 9.1%,

excl. FX and scope changes

Signify overachieved its 2020 Sustainability targets

Sustainable operations

Sustainable
revenues

Q4 2020 result

19

Achievement

2020 target

Sustainable revenues

84.1%

Overachieved

LED lamps &luminaires delivered

2.923 billion

146% of our commitmentcompleted>2 billion(cumulative from 2015)

80%

Carbon footprint
Gross/Net (FY)260 / 0 kt CO2

Signify is carbon neutral
since Q3 2020

Carbon neutral% of sites sending zerowaste to landfill

100%

All our sites sending
0 waste to landfill

100% of sites zerowaste

Safe & healthy workplace

TRC = 0.22

31% decreased
TRC vs Q4 2019

Sustainable supply chain

99%99% of risk suppliers
passed the audit

90% performancerate#1 in electronics
industry

Platinum - top 1%

A-list for climate
and supply chain

World Index 4
consecutive years

Leader ‘AA’ rating

TRC = 0.35

Signify proposes 2020 dividend of EUR 1.40 plus an extraordinary
dividend of EUR 1.35 to be paid in cash in 20211
Key observations•••

Dividend per share since IPO (in EUR)

The proposed extraordinary dividend1 of EUR 1.35 per share(EUR 170m), announced on January 13, 2021, is in line withthe dividend proposal for 2019, which was withdrawn toensure the company’s resilience during the COVID-19 crisis

1,40
1,35

The proposed dividend1 of EUR 1.40 per share (EUR 176m)
represents a dividend yield of 4.1%

In line with our commitments to an investment grade rating,Signify announced its intention to repay a minimum of EUR
350 million of debt in 2021

1,30
1,25

1,10

Capital allocation policy•

Pay an increasing annual dividend per share in cash yearon-year•

Deleveraging and achieve < 1x net debt/EBITDA by 2022•

Continue to invest in R&D and other organic growth
opportunities, while pursuing selective M&A opportunities
in line with strategic priorities

20
1 Both dividend proposals will be subject to approval at the AGM to be held on May 18, 2021.

FY16

FY17

FY18

Ext. Div

FY20

Content
Summary performance 2020 by Eric Rondolat
Financial performance for Q4 20 by Javier van Engelen

FY 20 highlights by Eric Rondolat
Outlook & conclusion by Eric Rondolat
Q&A

21

Outlook 2021%

• Signify expects positive comparable sales growth, the level of which will depend on the recovery
pattern in its markets• Progress towards its medium-term adjusted EBITA margin objective• Free Cash Flow, is expected to exceed 8% of sales

22

Q&A

23

Currency movements had a negative impact on sales and Adj. EBITA
Q4 20 Sales FX Footprint (% of total)

Other Currencies;
31%

EUR; 28%

CNY; 8%USD; 33%

24

Key observations•

Currency movements negatively impacted sales andAdjusted EBITA•

Sales impact of -4.8%, mainly from US dollar
depreciation.

•

Adjusted EBITA impact of EUR -15m, and -10 bps on
the Adjusted EBITA margin, mainly coming from US
dollar depreciation.

•

Our policy is to hedge 100% of committed FXtransactions and anticipated transactions up to 80% inlayers over the next 15 months

Net income increased by EUR 39m to EUR 137m, mainly as a result ofhigher operational profitability and lower income tax expense
Key observations

From Adjusted EBITA to net income (in EURm)
Q4 19

Q4 20

Adjusted EBITA

232

251

- Restructuring

-42

-43

1 - Acquisition related charges

-11

-16

2 - Other incidental items
EBITA

-15

-6

164

185

Amortization

-26

-30

EBIT

138

155

Net financial income / expenses

-11

-12

-29

-6

-

-

98

137

3 Income tax expense
Results from investments in associates
Net income

25

1

Related to Cooper Lighting and Klite

2

Non-recurring by nature and relate to the separation,company name change, environmental provision forinactive sites and discounting effect of long-term
provisions

3

Income tax expense decreased by EUR 23m, mainly
due to a one-time non-cash tax benefit resulting fromthe revaluation of deferred tax assets, triggered by thefact that the Netherlands did not decrease the tax rate

Free Cash Flow of EUR 332m
Key observations

Free cash flow (in EURm)
Income from operations
Depreciation and amortization
Additions to (releases of) provisions
Utilizations of provisions
Change in working capital
Net interest and financing costs paid
Income taxes paid
Net capex
Other
Free cash flow
As % of sales

26

4Q19
138
77
65
-69
152
-4
-26
-26
1
308
17.6%

4Q20
155
86
75
-59
119
-6
-23
-27
13
332
17.7%

•

Free cash flow of EUR 332m versus EUR 308m last year•

Reflects higher income from operations and structural
working capital improvement•

Restructuring pay-out of EUR 10m (Q4 19: EUR 25m)