Q1 2020 results

April 24, 2020

Important information
Forward-Looking Statements and Risks & Uncertainties
This document and the related oral presentation contain, and responses to questions following the presentation may contain, forward-looking statements that reflect the intentions, beliefs or current expectations and projections ofSignify N.V. (the “Company”, and together with its subsidiaries, the “Group”), including statements regarding strategy, estimates of sales growth and future operational results.
By their nature, these statements involve risks and uncertainties facing the Company and its Group Companies and a number of important factors could cause actual results or outcomes to differ materially from those expressed inany 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, rapid
technological change, competition in the general lighting market, development of lighting systems and services, successful implementation of business transformation programs, impact of acquisitions and other transactions, impactof the Group’s operation as a separate publicly listed company, pension liabilities and costs, adverse tax consequences from the separation from Royal Philips and exposure to international tax laws. Please see “Risk Factors and RiskManagement” in Chapter 12 of the Annual Report 2019 for discussion of material risks, uncertainties and other important factors which may have a material adverse effect on the business, results of operations, financial conditionand prospects of the Group. Such risks, uncertainties and other important factors should be read in conjunction with the information included in the Company’s Annual Report 2019. Additional risks currently not known to the Groupor that the Group has not considered material as of the date of this document could also prove to be important and may have a material adverse effect on the business, results of operations, financial condition and prospects of theGroup or could cause the forward-looking events discussed in this document not to occur. The Group 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.
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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 by René van Schooten
Outlook & conclusion by Eric Rondolat
Q&A3

Q1 20 sales of EUR 1.4bn, operational profitability of 7.9% and FCF of 112m
Sales (in EURm) & comparable sales growth (in %)
-3.3%
-6.1%

-5.0%

1,478

1,477

1,542

1,750

1,4271

Q1 19

Q2 19

Q3 19

Q4 19

Q1 20

Adj. EBITA (in EURm & as % of sales)

13.2%
7.8%

4 1

7.9%19.0%

11.0%

1151121

133

169

232

Q1 19

Q1 20

Q2 19Q3 19

Q4 19

Includes 1-month of contribution from Cooper Lighting•

Installed base of connected light points increased from 56m in
Q4 19 to 60m in Q1 20•

CSG decreased by 15.3%•

Adj. indirect costs decreased by EUR 56m, or -11.1%, on acurrency & scope comparable basis•

Adj. EBITA margin improved by 10 bps to 7.9%, with a neutral
effect from currencies•

Net income of EUR 27m•

FCF doubled to EUR 112m•

Acquisition of Cooper Lighting completed; integration is wellunderway and achievement of synergies on track-4.2%-15.3%

SalesKey observations for Q1 20

COVID-19 update Q1 and actions•

Health & safety of employees our highest priority•

Supported local partners and communities: donations of UV-C lamps and (solar)
luminaires•

Global manufacturing capacity restored to more than 80%•

Broad range of mitigating actions to preserve profitability and cash flow:• Reduction of selling expenses, travel costs, procurement costs• Rigorous working capital management• Curtailment of uncommitted and non-essential capex• Withdrawal of dividend proposal•

Accelerating and extending mitigating measures, incl:• SB and Leadership Team took a 20% salary reduction for Q2• A significant part of our employees voluntarily supports a 20% worktime
reduction and pro-rata pay adjustment for a period of 3 months• A 6-month delay in merit increases, where possible• An external hiring freeze•

Liquidity remains strong, with a cash position of EUR 924m at the end of Q1 205Chinese employees donating UV-C lamps at hospitalGrowing profit engines: Adj. EBITA margin improved by 100 bps to 7.7%

6vs LY (EURm)

Adj.
EBITA %vs LY (bps)46-810.9%-100-14.2%

43+116.7%+140

Home-8.0%

1+80.9%+700

Total-14.5%

90+117.7%+100Q1 20

CSG %Adj. EBITA

LED-16.2%

Professional(EURm)

LED Adj. EBITA margin declined by 100 bps, mainly due to lower sales volumes
Sales (in EURm) & comparable sales growth (in %)
-0.2%

-1.8%

0.9%

Key observations for Q1 20•-2.9%CSG of -16.2%:• Both LED lamps and LED electronics were impacted by

the COVID-19 pandemic-16.2%• Initially the impact was mainly on the supply side449445457541426

Q1 19

Q2 19

Q3 19

Q4 19

Q1 20

• Impact subsequently exacerbated due to a decline indemand as a result of the countermeasures taken bygovernments and customers

Adj. EBITA (in EURm & as % of sales)•
11.9%

714.3%

10.9%
12.0%

12.3%

544653

56

77

Q1 19

Q1 20

Q2 19

Q3 19

Q4 19

Adj. EBITA margin declined by 100 bps to 10.9%, mainly
due to lower sales volumes

LED business highlights
Launched double-ended
LEDtube in GrowthMarkets & Greater China

Introduced the External
Slim Downlight in Latin
America

Launched next
generation of highvolume panel drivers

Launched Fortimo Cyan
Enhanced Spectrum LED
boards for humancentric lighting in offices

•

•

••

•
•

8

Plug-and-play features
enable easy retrofit formagnetic ballast-based
luminaires
Provides a wide lightspreadPerfectly fits on T8 size•
•Super slim design forversatile installations
Ensures easy
maintenance after fitting
Robust construction
provides a longer
lifetime••

Dual-current featureenables simplified
logistics with less SKUs
Low ripple light output iscomfortable for eyes andfriendly for cameras
Increased efficiency
helps to save moreenergy than previousgeneration•Stimulate people’sbiorhythm like daylightdoes
As part of human-centric
lighting in offices thisenables productive daysat the office and good
sleep at nightProfessional Adj. EBITA margin improved by 140 bps to 6.7%, mainly driven
by an improvement in gross margin and indirect cost savings
Sales (in EURm) & comparable sales growth (in %)
1.7%
-1.5%

-5.6%

Key observations for Q1 20•-1.5%-14.2%

599

6326987206391

Q1 19

Q2 19

Q3 19

Q4 19

Q1 20

•

Nominal sales increase of 6.7% reflects consolidation ofCooper Lighting
CSG of -14.2%, largely as a consequence of the COVID19 outbreak

Adj. EBITA (in EURm & as % of sales)•6.7%15.3%

912.3%

12.7%

8.8%

32431

55

8692

Q1 19

Q1 20

Q2 19

Q3 19

Q4 19

1Includes 1-month of contribution from Cooper Lighting

Adj. EBITA margin improved by 140 bps to 6.7%, mainly
driven by an improvement in gross margin and indirectcost savings

Professional business highlights
Launched Interact Retailmultisite managementwith Marks & Spencer

Expanded collaboration
with Planet Farms toprovide horticulture LED

Expanded solar lighting
potential to northerncountries

Helped Cologne tobecome smart city withInteract City•

••••

•

10

Centralizes retailers’lighting management for
multiple stores from asingle dashboard
Provides insights into
energy savings and lightfailures
Creates a network ofconnected stores andreduces operational
costs•Philips GreenPower LED
production module
boosts quality and yieldof crops at Europe’s
largest vertical farm all
year roundSignify will also provide
horticulture LEDs toadditional five vertical
farms Planet Farms isplanning to build••Philips Combo Charge
Controller enables
streetlights to switch
between solar power
and mains grid
Boosts output to 24,000
lumens and supports
wireless remotemonitoring
Opens up new markets
for solar lighting••

Connecting 85,000 lightpoints to Interact City
improves safety andquality of life
Increases energy
efficiency and reduces
costs
RheinEnergie, which isresponsible for the city’slighting, will replace all
the light points within 15years

Home – Adj. EBITA margin improved by 700 bps supported by gross margin
improvements and cost measures taken in 2019
Sales (in EURm) & comparable sales growth (in %)
24.4%

••

19.0%
191

115

107

9.5%

108
-3.1%

Q1 19

Q2 19

Q3 19

Key observations for Q1 20103•

CSG of -8.0%
Home started with a solid performance at the beginningof Q1
Demand started to deteriorate in March due to weakermarket activity in Europe and the US-8.0%

Q4 19

Q1 20

Adj. EBITA (in EURm & as % of sales)
19.8%

1-7-6.1%11

Q1 19-30.9%-8-7.8%

-2.6%

Q1 20

Q2 19

Q3 1938

Q4 19•

Adj. EBITA margin improved by 700 bps to 0.9%
supported by gross margin improvements and costmeasures taken in 2019

Home business highlights
Philips Hue #21 in top
100 greatest designs ofmodern times

Expanded Zones control
in latest Philips Hue app
updatePhilips Hue products win
five Red Dot designawards

Modular Lighting
launched Hollow &Shellby

Hollow

Shellby••

12Fortune magazine ranks
Philips Hue 21st in top
100 greatest designs ofmodern times
States that Hue “madelighting our homes aspersonal as the music welisten to”••

Allows users to control
the Zones they create in
the Hue app with theiraccessories, including
motion sensors anddimmer switches
Enables easy check ofbattery levels ofaccessories in the app•

Philips Hue wins Red Dot
design awards with its
Discover Floodlight,
Impress range, Outdoor
Sensor, Smart button
and White and Color
Ambiance GU10 perfectfit••

Hollow uses one single
LED to create a backlit
and spot effect; serves aswall and downlightluminaire in one; won IF
Design awardShellby uses glass anddim-to-warm technology
to be both a general andan ambient light object

Cash engine – Lamps Adj. EBITA margin remained solid at 17.6%
Sales (in EURm) & comparable sales growth (in %)-17.9%-18.3%-17.8%-20.3%Key observations for Q1 20•

Comparable sales decreased by 17.8%•Continue to deliver on ‘last company standing’ strategy
resulting in further market share gains•Adj. EBITA margin remained solid at 17.6%-25.5%

309

286

274

290

257

Q1 19

Q2 19

Q3 19

Q4 19

Q1 20Adj. EBITA (in EURm & as % of sales)

20.5%

1317.6%
19.5%

19.4%

17.3%

634556

5350

Q1 19

Q1 20

Q2 19

Q3 19

Q4 19

Integration Cooper Lighting well underway, on track to achieve cost synergies
Cooper Lighting acquisition successfully completed on March 2, 2020
• Strengthens Signify’s market position• Better positions us to capture growth in the North American lighting market• Together, we’ll drive innovation and advance in connected lighting and systems,
creating significant value for our customers
Integration is well underway• The teams have worked intensively to finalize integration plans• Key business systems have been successfully segregated from Eaton and operational from day 1• Cooper Lighting now operates as a business unit within Signify• Agents are committed to the go-to-market approach and associated benefits of the acquisition
Integration teams are well on track to achieve synergies• Procurement savings ahead of plan
• Plans implemented to realize savings in transportation and storage costs• Realized significant cost avoidance by leveraging existing shared service centers in a.o. HR, Finance, IT• Identified additional revenue synergies in product/market combinations

ContentBusiness and operational performance by Eric Rondolat

Financial performance by René van Schooten
Outlook & conclusion by Eric Rondolat
Q&A

15

Signify Adj. EBITA margin: improvement driven by ongoing cost reductions
Adj. EBITA (in EURm)
as %of sales

7.8%

115(66)(49)

Q1 1916

7.9%+10 bpsVolume / Mix

Price56

1

Indirect Costs

Currency

14112

Scope/ Other

Q1 2042

CoGSComparable indirect costs decreased by 11%, adjusted for currencies andchanges in scope
as % of sales

31.4%In EURm

464

Adj. R&D

69+80 bps

32.2%

Key observations• Underlying indirect cost reduction of EUR 56m

460-5667546• Negative currency impact of EUR 5m• Impact from changes in scope of EUR 46m• Continue to execute initiatives to further

reduce the indirect cost base
395
Adj. SG&A

393

Adj.
indirectcosts Q1 1917

Indirectcost savings

1 Consolidation effects from Cooper Lighting and Klite

Currency
impactChangesin scope1

Adj.
indirectcosts Q1 20

WoCa decreased by 320 bps as % of sales, mainly due to solid inventorymanagement, lower receivables and higher payables
Working capital1 (in EURm & as % of sales)

Inventories (in EURm & as % of sales)
15.9%

9.4%

16.5%

8.0%
6.0%2

6.1%3503

588

388

470

Q2 19

Q3 19

Q4 19

Q1 20

10.5%

10.1%
8.4%

-320 bps

13.3%3999

1.030

874

1.019

Q2 19

Q3 19

Q4 19

Q1 20

15.3%

15.2%

9.3%

13.8%

14.9%

694

659

536

587

1.009

994

878

943

Q2 18

Q3 18

Q4 18

Q1 19

Q2 18

Q3 18

Q4 18

Q1 19

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

1813.6%2

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-160 bps

Net debt increased by EUR 1.2bn due to purchase of Cooper Lighting partly
offset by improved cash position
In EURm

1,810
33618
121

52

19173812

1,270

OtherFCF items

Purchase
CooperLighting1

FCF: EUR+112m

Net debt
end of 2019

EBITDA

Change inworkingcapital

Net capex

1 USD 1.4 billion bridge loan facility to finance the acquisition of Cooper Lighting

19

2 Other mainly reflects additions of lease liabilities

Change inprovisions

Interest & Tax

Other2Net debt
end of Q1 20

Content
Business and operational performance by Eric Rondolat

Financial performance by René van Schooten
Outlook & conclusion by Eric Rondolat
Q&A20

Outlook
Considering the uncertainty about the future course ofthe pandemic, and the length and depth of the impact
on the global economy, Signify does not provide
financial guidance at this point in time.

21

Q&A22Currency movements positively impacted sales and Adj. EBITA
Q1 20 sales FX footprint (% of total)

EUR
30%

OtherCurrencies
36%

CNY
8%

23

Key observations

USD
25%

•

Positive FX effect on sales of +1.3%, largely driven byappreciation US dollar•

Positive FX effect on Adj. EBITA of EUR +1m, andneutral effect on the Adj. EBITA margin•

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

Net income decreased to EUR 27m, largely due to higher acquisitionrelated charges and other incidentals
Key observations

From Adj. EBITA to net income (in EURm)

12324

Q1 19

Q1 20

Adj. EBITA

115

112

- Restructuring-20-13- Acquisition related charges

0-18

1

Related to Cooper Lighting and Klite- Other incidental items

-2-11

2

EBITA

93

70

Recurring by nature and relate to the separation, company
name change, transformation and real estate gains

Amortization-24-27

EBIT

69

43

Net financial income / expenses-9-10

Income tax expense-16-6Results from investments in associates

10Net income44273

Income tax expense decreased by EUR 10m mainly due tolower taxable earnings in Q1 20

Free Cash Flow of EUR 112m
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

25

Q1 19
6970
41-57
-29-4-19-10-555
3.7%

Q1 204378
33-52
52-10-28-1712112
7.9%•Free cash flow doubled to EUR 112m, mainly as a resultof strong working capital management in our growing
profit engines, and the consolidation of Cooper Lighting•Free cash flow in Q1 20 included restructuring cash-outof EUR 18m (Q1 19: EUR 25m)