Q2 2021 results

July 23, 2021

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.
Looking ahead to the second half of 2021, the Group's key concerns are about both the supply chain constraints and shortage of certain components, and the uncertainties related to the COVID-19 pandemic in the global anddomestic markets in which it operates. The main challenge remains the visibility on how quickly the general lighting market may recover to (pre-COVID-19) 2019 levels. This is relevant to the Group as a large part of its business
relates to the professional market which has been, and continues to be, significantly impacted by government lockdowns. Signify undertakes no duty to and will not necessarily update any of the forward-looking statements in lightof 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 2020.
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 2020.
Market Abuse Regulation
This presentation contains information within the meaning of Article 7(1) of the EU Market Abuse Regulation.

2

Content
Business and operational performance by Eric Rondolat

Financial performance and highlights by Javier van Engelen
2021 outlook by Eric Rondolat

Q&A

3

Signify achieved Q2 21 comparable sales growth of 14.1%, an Adj. EBITA
margin improvement of 190 bps to 10.9% and a free cash flow of EUR 104m
Sales (in EURm) & comparable sales growth (in %)CSG-22.5%

14.1%

-8.3%

-5.9%

3.2%

1,469

1,609

1,728

1,878

1,599

Q2 20

Q2 21

Q3 20

Q4 20

Q1 21

Key observations for Q2 21•

Installed base of connected light points increased from83m in Q1 21 to 861m•

LED-based sales represented 82% of total sales•

Nominal sales growth of 9.6% to EUR 1,609m•

Comparable sales growth of 14.1%•

Adjusted EBITA margin improved by 190 bps to 10.9%•

Adjusted indirect costs as percentage of sales decreased by
130 bps to 30.6% supported by operating leverage•

Net income increased to EUR 82m (Q2 20: EUR 81m)

•Free Cash Flow of EUR 104m (Q2 20: EUR 158m)

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

4

9.0%

10.9%

11.5%

13.4%

10.8%

133

175

199

251

172

Q2 20

Q2 21

Q3 20

Q4 20

Q1 21

1 Excluding 2 million connected light points for Telensa, as acquisition closed on July 1, 2021

Digital Solutions delivered a CSG of 12.6% and an Adj. EBITA margin
improvement of 110 bps to 10.7%
Sales (in EURm) & comparable sales growth (in %)CSG-22.4%

12.6%-11.2%-10.2%

-1.8%

781

837

916

917

793

Q2 20

Q2 21

Q3 20

Q4 20

Q1 21

Key observations for Q2 21•

Nominal sales growth 7.2%

•Comparable sales growth of 12.6%•Sequential improvement driven by market
recovery•Partly offset by extended lockdowns in India andCanada and supply constraints

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

9.6%

10.7%

11.7%

11.5%

9.0%

•Adjusted EBITA margin improved by 110 bps to 10.7%•5758910710571

Q2 20

Q2 21Q3 20Q4 20

Q1 21

Supported by operating leverage andprocurement savings

Digital Solutions highlights
Helping companies in theNordics to boost cropyields with horti LEDs

Boosting fan experienceat four of Europe’s majorsoccer stadiums

Providing our customers
with additional layer ofprotection through UV-C

Beautifying the Grand
Mosque of Istiqlal inJakarta, Indonesia

•••

•

•
•

6Philips GreenPower LED &GrowWise control systemprovide companies withcontrol over lightspectrum and light levels
Helps to steer crop quality
and boost yields
Also helps to predict
growth levels andoptimize production tomatch seasonal demand••

Philips LED & Interact help
to entertain fans with andprovide TV viewers better
viewing experience
Also makes it easier for
operators to remotely
control and monitor
lighting in different areas
Includes largest stadiumsin Budapest, Rome and St.
Petersburg••

Philips UV-C disinfection
luminaires disinfect theair, objects and surfaces
Helps theaters towelcome back guests,
artists and employeeswith peace of mind
Disinfects the air atschools while classes cancontinue withoutinterruption••3,375 light fixtures
highlight mosque’s beauty& boost pride of pilgrims
UniStrip LED creates
illusion of praying underan open sky in mainpraying hallColor Kinetics withIntelliHue can create
dynamic light effects on
main dome’s façade

Digital Products delivered a CSG of 20.4% and an Adj. EBITA margin
improvement of 270 bps to 12.0%, driven by the consumer segment
Sales (in EURm) & comparable sales growth (in %)CSG-21.1%

20.4%

-2.0%

2.5%

15.7%

473

553575711575

Q2 20

Q2 21

Q3 20

Q4 20

Q1 21

Key observations for Q2 21•

Comparable sales growth of 20.4%•Strong consumer demand for connected homeproducts•

Partly offset by supply constraints

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

9.3%

12.0%

13.1%

18.0%

14.2%

•7

Adjusted EBITA margin improved by 270 bps to 12.0%•Gross margin expansion•

Higher contribution of connected home lighting

4466

76

12882

•

Price and cost management

Q2 20

Q2 21

Q3 20

Q4 20

Q1 21

•

Operating leverage

Digital Products highlightsAdopting new standard‘Matter’ for seamlesssmart home interaction

Expanding UV-C productrange with Philips UV-C
mini disinfection box

Introducing a premium
tunable white wirelesssystem for high-end retail

Offering a quick and easy
HID replacement with
Trueforce LED highbay

•

•

•

•

•

•

8Philips Hue Bridge will be
automatically enrichedwith industry-unifying
standard Matter
All Philips Hue products
and new WiZ products will
be compatible with newstandard
The new standard is
expected to be available
as per Q4 2021••

Disinfects viruses,bacteria, mold and sporesin just eight minutes fromsmall everyday items suchas smartphones, keys,
money or watches
Small size makes it easy tostore or take on-the-go
USB-C port enables easy
way of charging, forinstance via power bank••Features color
temperature control anddimming with wirelessswitch or end-user app
Makes it easy for retailers
to adapt light color todifferent fashioncollections
Extendable with gateway,that enables central cloudcontrol•••

Marks first universal HID
replacement product
Provides installers with afast, easy and hassle-freeinstallation
Offers energy savings ofup to 65%
Germany-based Ipsen
installed Trueforce LED
highbay at its production
facility in Kleve

Conventional Products delivered a CSG of 4.7% and an Adj. EBITA
improvement of 110 bps to 18.6%
Sales (in EURm) & comparable sales growth (in %)CSG-25.2%

4.7%-11.0%-11.6%

-6.1%

211

213

233

242

227

Q2 20

Q2 21

Q3 20

Q4 20

Q1 21

Key observations for Q2 21•

Comparable sales growth 4.7%
•Broad-based growth driven by market recovery andtraction across most segments•Strong horticulture growth

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

17.5%

18.6%

17.9%

18.9%

20.6%

•93740

4246

47

Q2 20

Q2 21

Q3 20

Q4 20

Q1 21

Adjusted EBITA margin improved by 110 bps to 18.6%•Price discipline•

Operational efficiencies

Overview of UV-C applications
Air disinfection
Solutions
Air disinfection

Solutions

SolutionsObjectObjectdisinfection
disinfectionSolutions
10Solutions

HVAC
cooling coil

Closed air

Battens

Surface
Surface disinfection
disinfectionSolutions

Target segments

Upper air(with sensors)

Trolleys

Controlunits

Consumerlamps

Office, Healthcare,
Food Service,
Retail, Sports

Industry,
Healthcare,Dormitories
Trolleys: Office,Healthcare, Industry
Consumer lamps:
Homes

Professional
chambers

All professional
indoor applications

Consumerboxes

Homes

Brighter Lives, Better World 2025 Q2 2021 results

Brighter Lives

Better World

Doubling our positive impact on the environment and society

112019Baseline

Q2 2021
Result2025
TargetClimate action

Carbon reduction over value chain
against Paris Agreement

033 MT

340 MT

Circular economy

Circular revenues

16%

24%

32%

Food availability
Safety & security
Health & wellbeing

Brighter lives revenues

16%

25%

32%

Women in leadership positions

17%25%

34%

Great place to work

A list for climate andsupply chain#1 in our industry andtop 5% of ESG RiskRatings Universe

EcoVadis Platinum
Medal and top 1%On track
Off track

Content
Business and operational performance by Eric Rondolat

Financial performance and highlights by Javier van Engelen
2021 outlook by Eric Rondolat

Q&A

12

Adj. EBITA growth and margin improvement driven by volume, mix
and carefully balancing pricing vs. cost
In EURm / as % of sales

9.0%

10.9%

+190 bps-1718-42
175

92-8-2Currency

Scope / Other133

Q2 20

13

Volume / Mix

PriceCoGS

Indirect Costs

Q2 21

Lower year-on-year working capital with improved payables and receivables
more than offsetting inventory for growth
In EURm / as % of sales

6.3%1452-40

88

4.0%
-276
269
46

Q2 20

14

Inventories

Trade & otherreceivables

1Includes sales of both Cooper Lighting and Klite on a 12-month pro-forma basis.

Trade & other payables

Other working
capital items

Q2 21

Decrease of leverage ratio from 2.4x in Q2 2020 to 1.7x in Q2 2021, but
increase from Q1 2021 due to dividend payment and treasury share purchase
In EURm
1,706

1,375
46

1,141292-187
31930

38-7

FCF: EUR +104m

Net debt
Net debt
end of Q2 20 end of Q1 21
Net
leverage: 2.4x
1.4x
15

EBITDA

Change inworking
capital

Net capex

Change in Interest & Tax
Otherprovisions
FCF items

Dividend

Other1

1Other includes cash used for the purchase of treasury shares, derivatives, acquisitions, new lease liabilities, dividends to minority shareholders and FX effect on cash, cash equivalents and debt

Net debt
end of Q2 21
1.7xStrong H1 2021 with comparable sales growth of 8.4% and adj. EBITA marginexpansion of 230 bps to 10.8%
Sales & comparable sales
growthAdjusted EBITAFree Cash Flow(in EURm and % of sales)(in EURm)(in EURm and %)
10.8%

8.4%

270

272

H1 20

H1 21

-4.7%
8.4%

-19.1%

8.5%
175

H1 21 performance

16

2,955

2,896

3,209

247

245347

H1 19

H1 20

H1 21

H1 19

H1 20

H1 21

Back to growth on the back of astrong decline in H1 20• Strong consumer traction• Resilience in conventional• Despite continued COVID-19
measures and supply constraints

Solid year-on-year Adj. EBITA margin
improvement• Strong gross margin• Operating leverage

H1 19Free cash flow slightly higher thanlast year• Higher profitability• Offset by lower, albeit continued,
inflow from working capital andhigher net capexContent
Business and operational performance by Eric Rondolat

Financial performance and highlights by Javier van Engelen
2021 outlook by Eric Rondolat

Q&A17

Outlook 2021
• Continued COVID-19 uncertainty with increasing cases and new variants potentially leading tocontinued lockdowns and measures being reinstated• Supply constraints likely to persist in the second half of 2021%

• Signify continues to expect comparable sales growth between 3% and 6% for the full year 2021

• Signify continues to expect an Adjusted EBITA margin of 11.5% to 12.5% and free cash flow toexceed 8% of sales
18

Q&A

19

Currency movements had a negative impact on sales and Adjusted EBITA
Q2 21 Sales FX Footprint (% of total)

Other Currencies,28%

EUR, 26%

CNY, 9%USD, 37%

20

Key observations•Currency movements negatively impacted sales andAdjusted EBITA•

Sales impact of -4.5%, mainly from US dollar
depreciation.

•Adjusted EBITA impact of EUR -8m, and -10 bps on theAdjusted 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 to EUR 82m, as higher profitability was offset by
the impact of a significant one-time tax benefit in the previous yearKey observations

From Adjusted EBITA to net income (in EURm)
Adjusted EBITA- Restructuring
1 - Acquisition related charges
2 - Other incidental items
EBITAAmortization
EBIT
Net financial income / expenses
3 Income tax expense
Results from investments in associates
Net income

21

Q2 20
133-2-15
4
119-32
87-16
100
81

Q2 21
175-9-13-16
136-30106-7-17082

1

Mainly related to Cooper Lighting

2Non-recurring by nature and mainly related toenvironmental provisions for inactive sites andtransformation costs

3

Last year the income tax expense benefited from onetime non-cash tax benefits from changes in theorganizational structure

Free Cash Flow of EUR 104m
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

22

Q2 20
8786
24-47
22-130-53
158
10.8%

Q2 21
106
81
29-48-3-28-10-30
7104
6.5%

•Free cash flow of EUR 104m

•Reflecting an increased investment in growth•Higher income from operations, offset by higher net
capex, financing costs, an outflow from working capitaland higher taxes paid•

Restructuring pay-out of EUR 20m (Q2 20: EUR 12m)