Q2 2022 results

July 29, 2022

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 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, in particular the impacts of theRussia-Ukraine conflict, the impacts of COVID-19, supply chain constraints, component shortages, cost inflation, 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, reputational and adverse effects on business due to activities in Environment, Health & Safety, compliance risks, abilityto attract and retain talented personnel, adverse currency effects, pension liabilities, and exposure to international tax laws.
Looking ahead to the second half of 2022, the Group's key concerns are about the further impact of the Russia-Ukraine conflict, the high level of inflation, the worsening global macro-economic conditions, the continued supply chain
constraints, and the uncertainties related to the resurgence of the COVID-19 pandemic in the global and domestic markets in which it operates. The main challenge remains the visibility on how these topics will develop. Additionalrisks currently not known to the Group or 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 the Group 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 furtherinformation on non-IFRS financial measures, see “Chapter 18 Reconciliation of non-IFRS measures” in the Annual Report 2021.
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 2021.
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2Content
Business and operational performance - Eric Rondolat
Financial performance and highlights - Javier van Engelen

Outlook & closing remarks - Eric Rondolat
Q&A

3

Need to updatephotoSecond quarter 2022 highlights

%4•
•
•

5.1% CSG driven by strong traction in professional segment
Signify’s growth profile improves, fueled by continuing shift towards connected lighting
Nominal sales increase of 14.1%•••

Adjusted EBITA margin of 9.5% as lower gross margin was partly offset by price increases
and indirect cost savings
Net income of EUR 248 million
Free cash flow of EUR 135 million••

Successfully closed acquisitions of Fluence and Pierlite
Divested non-strategic real estate assets

Signify reported Q2 22 sales of EUR 1.8 billion, CSG of 5.1% and an
adj. EBITA margin of 9.5%
Sales (in EURm) & comparable sales growth (in %)
CSG

14.1%

5.1%

-4.8%

4.5%

6.4%

1,609

1,836

1,643

2,008

1,788

Q2 21

Q2 22

Q3 21

Q4 21

Q1 22

Key observations for Q2 22•

103 million connected light points (Q1 22: 100 million)•LED-based sales were 84% of total sales•

Nominal sales growth of 14.1% to EUR 1,836m•

Comparable sales growth of 5.1%

•Adjusted EBITA margin decline of 140 bps to 9.5%

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

10.9%

9.5%

11.1%

13.2%

10.5%

•5175

174

182

265

187

Q2 21

Q2 22

Q3 21

Q4 21

Q1 22

Lower gross margin, partly offset by operating leverageand indirect cost savings•

Net income of EUR 248m (Q2 21: EUR 82m)

•Free Cash Flow of EUR 135m (Q2 21: EUR 104m)

Digital Solutions reported a CSG of 11.6% and an adj. EBITA margin of 9.5%
Sales (in EURm) & comparable sales growth (in %)
CSG

12.6%

11.6%

-7.3%

11.2%

16.9%

837

1,042848

1,045981

Q2 21

Q2 22

Q3 21

Q4 21

Q1 22

Key observations for Q2 22•

Comparable sales growth of 11.6%•Continued strong professional demand acrossmost markets•

Nominal sales growth of 24.4% including Fluenceand Pierlite

Adjusted EBITA (in EURm & as % of sales)%610.7%

9.5%

10.5%

14.1%

9.7%8998

89147

95

Q2 21

Q2 22

Q3 21

Q4 21

Q1 22•

Adjusted EBITA margin decreased by 120 bps to 9.5%
•Higher input costs and negative FX movements•Positive impact from price increases, sales mix
and operating leverage

Digital Solutions highlights
Installing BrightSites in theCity of Tampere

Lighting up the Stadio
Comunale Piero Torrini inSesto Fiorentino

Equipping Bad Dürkheim’s
public facilities with UV-Cdevices

Helping Kwekerij Loos
make the switch to full LED
horticulture lighting• Together with Edzcom,
Signify delivers wirelessconnectivity through existing
streetlight infrastructure• BrightSites provides superfast wireless communication
using high-quality LED
streetlights• Removes the need to dig
and lay fiber connections• Installation requires lesstime and costs• Philips OptiVision LED
gen3.5 luminaires improvethe visibility and experiencefor both athletes andspectators• Three different lightscenarios can be selected
depending on the type of
event, optimizing energy
consumption• Installing air disinfection
devices for a total of four
elementary schools, sevenday-care centers, two afterschool care centers andparts of the town hall
• By using the devices, thedistrict is making a long-term
investment in additional
protection against germs
and viruses• The strawberry andasparagus grower will equip
both of its cultivation sites
with 100% LED lighting for
its strawberries• Provides considerably more
light in its greenhouses,
more efficient plant growthand energy savings ofaround 40%• Follows a successful first
installation

7

Digital Products reported a CSG of 2.6% and an adj. EBITA margin of 10.6%
Sales (in EURm) & comparable sales growth (in %)CSG

20.4%2.6%

2.5%

1.6%

0.2%

553598

588

737

601

Q2 21

Q2 22

Q3 21

Q4 21

Q1 22

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

812.0%

10.6%

13.0%

15.5%

Key observations for Q2 22•

•
12.8%

66

6376

114

77

Q2 21

Q2 22

Q3 21

Q4 21

Q1 22

Comparable sales growth of 2.6%
•Solid professional demand in LED Electronics•Unfavorable sales mix

Adjusted EBITA margin declined by 140 bps to 10.6%•Higher input costs and unfavorable sales mix due tolower connected home sales•

Positive impact from price increases and indirect costsavings

Digital Products highlights
Expanding the Philips Hue
portfolio with newproducts and features

Launching the Ultra
Efficiency TLED Class A

Introducing the Ozziet
Ceiling family

Integrating LED Lamps in
the MasterConnect system• New products launched,including the Philips Hue
Signe gradient in oak, thePhilips Hue Xamento black
bathroom range and thePhilips Hue Tap dial switch• Enhancement of daily wellbeing with the new Sunrise
wake-up style• Experience Philips Hue withthe new Demo mode
implementation• Extends the Ultra Efficiency
family with the mostefficient LED tube in ourportfolio• Innovation breakthroughwith unmet performance:
210 lumen per watt and
100,000 hours lifetime• Helps achieve energy savingsin demanding applications• Launched in Europe• Layered light effects help
create an enjoyable
atmosphere• SceneSwitch dual zone
technology enables scene
setting for gathering,activities and relaxation• Stylish and minimalist design
to fit modern home interiors• Launched in Europe andChina

•

9•

•

Updated the MasterConnect
app to version 1.9
Allows for sensor- andswitch-based wirelesscontrol of the newMasterConnect LEDtubesand LEDspots
Opens up theMasterConnect app to new
applications and projects

Conventional Products reported a CSG of -13.8% and an adj. EBITA of 15.5%
Sales (in EURm) & comparable sales growth (in %)
CSG

4.7%

-13.8%-13.2%-11.4%-15.1%

213

193

202

219

201

Q2 21

Q2 22

Q3 21

Q4 21

Q1 22

Key observations for Q2 22•

Comparable sales decline of 13.8%•Adjusted EBITA margin decreased by 310 bps to 15.5%

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

1018.6%

15.5%

18.8%

16.9%

16.0%

4030383732

Q2 21

Q2 22

Q3 21

Q4 21

Q1 22

•

Higher input, supply chain and energy costs•Positive impact from price increases and indirect costsavings

Brighter Lives, Better World 2025 - Q2 2022 results

Brighter Lives

Better World

Doubling our positive impact on the environment and society

2019
Baseline

Q2 2022
Result2025
TargetClimate action

Carbon reduction over value chain
against Paris Agreement

0On track

324 MT

Circular economy

Circular revenues

16%

31%

32%

Food availability
Safety & security
Health & well-being

Brighter lives revenues

16%

26%

32%Great place to work

Women in leadership positions

17%27%

34%

A list for climate andsupply chain

DJSI World Index and
top 1% in our industry

EcoVadis Platinum
Medal and top 1%On track
Off trackSuccessfully completed the acquisitions of Fluence and Pierlite
Fluence•Strengthens global Agriculture lighting growth platform•

Extends our position in the attractive North American horticulture lighting market•

Generated sales of USD 141m from October 2020 to September 2021•

Fluence will operate as an entity within the Agricultural lighting business in Digital Solutions

Pierlite•Strengthens our position in the Australian and New Zealand lighting markets•Combines Pierlite’s indoor portfolio with Signify’s Philips brand of indoor and outdoor
lighting portfolios•Adds Pierlite’s access to the wholesale channel in the Pacific12Content
Business and operational performance - Eric Rondolat
Financial performance and highlights - Javier van Engelen

Outlook & closing remarks - Eric Rondolat
Q&A

13

Need to update
photoAdjusted EBITA margin decreased to 9.5%, mostly due to a negative currency
effect and cost inflation, while price increases compensated higher input cost
In EURm / as % of sales-140 bps

10.9%

86

9.5%-83

175

Q2 21

14-2

2VolumeMix

2

EUR +5mPrice

COGS

Indirect Costs

174-92Currency

Other

Q2 22

Working capital continues to be impacted by higher inventories due tolonger supplier lead times, and higher receivables
In EURm / as % of sales

10.5%1+650 bps

4.0%
135-95783-42515

269

Q2 21

15Inventories

Trade & other receivables

1Includes sales of Fluence and Pierlite on a 12-month pro-forma basis.

Trade & other payables

Other workingcapital items

Q2 22Leverage ratio slightly increased to 1.7x due to acquisitions and the payment
of dividend, partly offset by proceeds from the sale of real estate
In EURm
1,749
183
1,375

1,37828

31-194

26297

FCF: EUR 135m

Net debt
end of Q2 21Net
1.7x
leverage 1

Net debt
end of Q1 22
1.6x

Cash fromoperating
activities

Gross capex

Proceeds
non-strategic
real estate

Other includes new lease liabilities, derivatives, and FX effect on cash, cash equivalents and debt.

Purchase ofbusinesses

Dividend

Other 1Net debtend of Q2 22
1.7x

Second year of solid growth and a double-digit Adjusted EBITA margin in thefirst half of the year, while free cash flow was impacted by longer lead times
Sales & comparable sales
growthFree Cash Flow

Adjusted EBITA(in EURm)(in EURm and % of sales)(in EURm and %)
8.4%

5.8%

10.8%
8.5%

-19.1%

10.0%

2,896

3,209

3,624

245

347361

H1 20

H1 21

H1 22

H1 20

H1 21

H1 22270272

H1 20

H1 21-54

H1 22 performance

17

Continued solid growth in the firsthalf of the year
• Strong traction in theprofessional segment• Consumer impacted by lower
demand, while cycling a highbase of comparison

Second year of double-digit
Adjusted EBITA margin• Cost inflation was more thanoffset by price increases andindirect cost savings• Negative currency effect fromthe appreciation of the CNY

H1 22

Free cash flow turned negative due
to working capital• Inventories were impacted bylonger supplier lead times• Settlement of payments related
to last year’s inventory buildup• Positive impact from the disposalof non-strategic real estate assets

Content
Business and operational performance - Eric Rondolat
Financial performance and highlights - Javier van Engelen

Outlook & closing remarks - Eric Rondolat
Q&A

18

Need to update
photoOutlook• Signify maintains its CSG guidance of 3-6% for the year, driven by continued
momentum in the professional segment and its solid order book.

%• The company revises its Adjusted EBITA margin guidance for the full year to 11.011.4%, reflecting the lower margin performance in Q2 2022.
• Signify also revises its 2022 free cash flow guidance to 5-7% of sales, including
the proceeds from real estate divestments.
• Signify expects to return to the target of over 8% as soon as supplier lead times
ease and no longer require the company to carry higher inventory.

19

Q&A
Need to update
photoCurrency movements had a positive impact on sales and a negative impact
on Adjusted EBITA
Q2 22 Sales FX Footprint (% of total)

21

Key observations•

Currency movements negatively impacted Adjusted
EBITA and positively impacted Sales•

Sales impact of +6.6%, mainly from US dollar
appreciation.

•Adjusted EBITA impact of EUR -9m, and -110 bps on
the Adjusted EBITA margin, mainly coming from CNY
appreciation.

•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 248m, mainly driven by the sale of nonstrategic real estate assets
Key observations

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

Q2 21
175

Q2 22
174

- Restructuring-9-7- Acquisition-related charges-13-5-16

177

EBITA

136

340

Amortization-30-34EBIT

106306-7

11-17-68

Results from investments in associates

00Net income

82248

1 - Other incidental items

2 Net financial income / expenses

Income tax expense

22

1Non-recurring by nature and relate to:• Net real estate gains• Impairment and other non-cash charges related tooperations in Russia and Ukraine• Separation• Transformation• Environmental provision for inactive sites• The discounting effect of long-term provisions

2Net financial income / expenses includes non-cash
financial income from the revaluation of Virtual Power
Purchase Agreements (VPPAs)

Free cash flow of EUR 135m benefited from the sale of real estate, yet
continued to be negatively impacted by working capitalKey observations

Free cash flow (in EURm)
Q2 21106

Q2 22306

Depreciation and amortization

81

79

Additions to (releases of) provisions

29

34

Utilizations of provisions-48-45

Change in working capital
Net interest and financing costs
received (paid)
Income taxes paid

-3-171-28-31-10-22

Net capex

-30

163

7-178

Free cash flow

104

135

As % of sales

6.5%

7.4%

Income from operations

Other23••

Free cash flow of EUR 135m•

Positive impact from the disposal of non-strategic
real estate assets•

Inventories continue to be impacted by longsupplier lead times•

Buildup of receivables

Restructuring pay-out of EUR 14m (Q2 21: EUR 20m)