Q2 2023 results

July 28, 2023

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 energy crisis in Europe, the expected recovery trajectory of China post COVID, component shortages, cost inflation, rapid technological change, competition in the general lighting market, development oflighting 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, ability to 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.
Market Abuse Regulation
This presentation contains information within the meaning of Article 7(1) of the EU Market Abuse Regulation.

2

ContentBusiness and operational performance - Eric Rondolat

Financial performance and highlights - Javier van Engelen
Outlook & closing remarks - Eric Rondolat
Q&A

3

Need to update
photoSecond quarter 2023 highlights

4•

Persistent weakness in the indoor professional, the consumer and OEM businesses•

Recovery of Chinese market slower than anticipated•

Positive traction in the outdoor professional and professional connected lighting businesses•Recovery of gross margin thanks to price discipline and effective COGS management•Digital Products most exposed, resilience in Digital Solutions

Signify reported Q2 23 sales of EUR 1.6 billion, CSG of -8.6% and an
adj. EBITA margin of 8.3%
Sales (in EURm) & comparable sales growth (in %)
CSG

5.1%

-8.6%

4.3%

-8.8%

-9.1%

1,836

1,644

1,912

1,978

1,678

Q2 22

Q2 23

Q3 22

Q4 22

Q1 23

Key observations for Q2 23•

119 million connected light points (Q1 23: 117 million)•LED-based sales were 84% of total sales•Nominal sales decline of 10.5% to EUR 1,644m•

Comparable sales decline of 8.6%•

Adjusted EBITA margin decline of 120 bps to 8.3%

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

59.5%

8.3%

10.4%

10.2%

8.9%

174

136

199

202

149

Q2 22

Q2 23

Q3 22

Q4 22

Q1 23

1Q2 2022 includes a gain and cash proceeds from the disposal of non-strategic real estate assets.

•Structural gross margin recovery•

Under-absorption of fixed costs, particularly
impacting Digital Products•

Net income of EUR 45m (Q2 22: EUR 248m1)•Free Cash Flow of EUR 88m (Q2 22: EUR 135m1)

Digital Solutions reported a CSG of -5.7% and an adj. EBITA margin of 10.0%
Sales (in EURm) & comparable sales growth (in %)
CSG

11.6%

-5.7%

12.0%

-5.8%

-8.7%

1,042974

1,103

1,105951

Q2 22

Q2 23

Q3 22

Q4 22

Q1 23

Key observations for Q2 23•

Comparable sales decline of 5.7%
•High base of comparison of 11.6%•Weak indoor professional business•Softness in horticulture lighting

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

69.5%

10.0%

11.2%

9.7%

Adjusted EBITA margin increased by 50 bps to 10.0%

8.7%•9897124

107

82

Q2 22

Q2 23

Q3 22

Q4 22

Q1 23

Gross margin improvements from lower COGS,
continued price discipline

Digital Solutions highlights
Upgrading the lighting on
two Scandlines ferries

Lighting up the Finanzauto
headquarters in Argandadel Rey, Spain

Supporting Dublin Port
Tunnel with a fast route toenergy efficiency

Installing new smart
lighting at Friends Arena inSolna, Sweden• Installed 3D-printed fixturesfrom the Philips GreenSpace
Downlight PerfectFit series,and Philips LuxSpace Accent
Compact Elbow on twoferries• The 3D-printed fixtures are
made from at least 55%
recycled polycarbonate• The lighter materials save
28% of CO2 emissions duringtransport• Installed among others
Philips and Modular LED
luminaires together with thePhilips Dynalite control
system• Philips Dynalite enables
comprehensive lightingcontrol• Energy savings of up to 62%• Retrofitted all 1,800 light
fixtures with new LED trays
and gear while reusing theold housing• Energy savings of 60%, andalso minimized carbon
footprint• The project is part of theIrish government’s energy
efficiency plans and waspartially funded through theEuropean Green Deal

• The new lighting systemenables the programming ofdifferent light shows at
Sweden’s largest arena• The lighting upgrade consistsof 256 Philips ArenaVision
LED gen3.5 luminaires,
which are controlled
through DMX• Energy savings of 25-30%

7Digital Products reported a CSG of -12.1% and an adj. EBITA margin of 6.9%
Sales (in EURm) & comparable sales growth (in %)
CSG

2.6%

-12.1%-2.5%-12.9%-10.1%

598

505609661537

Q2 22

Q2 23

Q3 22

Q4 22

Q1 23

Key observations for Q2 23•

Comparable sales decline of 12.1%•Continued weakness in the consumer connectedand OEM businesses, as well as Klite•

Partly compensated by higher sales of LED lamps& luminaires

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

810.6%

6.9%

10.5%

14.1%

Adjusted EBITA margin decreased by 370 bps to 6.9%

8.3%6335649344

Q2 22

Q2 23

Q3 22

Q4 22

Q1 23

•

Under-absorption of fixed costs resulting from lowersales volume•

Stable gross margin

Digital Products highlights
Launching new WiZ homemonitoring technology

Launching new Philips Hue
products and app features

Winning eight Red Dot
awards and eight iF Designawards

Introducing new
UltraEfficient A-Class
Philips LED outdoor lights• Combining lighting andsecurity in an integrated
approach• The new smart homemonitoring WiZ indoor
camera is the first of manyhome monitoring products
to complement the portfolio• WiZ uses the power of lightand motion to prevent anddeter intruders• Introduced the new Philips
Hue luster E14 bulb andexpanded the Philips Huepanels with new shapes• Added new and enhancedfeatures to the Hue app,such as the brightnessbalancer and enriched thefunctionalities of the Philips
Hue motion sensors• Won Red Dot awards forInnovative Product andProduct Design, and iF
Design awards for User
Interface and Product Design• Among the winning products
are the Philips MyCreation
Coastal breeze and Philips
Hue Perifo• Offering a durable andenergy-efficientperformance• A-Class LED outdoor lights
include easy-to-install walllights, posts and pedestals
with UltraEfficienttechnology in both plug-inand solar applications• Energy savings of up to 50%

9Conventional Products reported a CSG of -15.0% and an adj. EBITA margin of
20.5%
Sales (in EURm) & comparable sales growth (in %)CSG-13.8%-15.0%-9.5%-11.4%-8.5%

Key observations for Q2 23•

Comparable sales decline of 15.0%
•193

160

195

203

186

Q2 22

Q2 23

Q3 22

Q4 22

Q1 23

Volume decline in line with expectation, partly
offset by strong price discipline

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

1015.5%

20.5%

14.2%

12.9%

Adjusted EBITA margin increased by 500 bps to 20.5%

22.5%

3033282642Q2 22

Q2 23

Q3 22

Q4 22

Q1 23

•

Strong price discipline•Reversal of 2022 headwinds: energy, logistics, FX

Brighter Lives, Better World 2025 – Q2 2023 results

Brighter Lives

Better World

Doubling our positive impact on the environment and society

Q2 2023
Result2025
TargetClimate action

Carbon reduction over value chain
against Paris Agreement

0On track

324 MT

Circular economy

Circular revenues

16%

29%

32%

Food availability
Safety & security
Health & well-being

Brighter lives revenues

16%

28%

32%

Great place to work

Women in leadership positions

17%30%

34%

A list for climate andsupply chain leader
112019Baseline

DJSI World Index

EcoVadis Platinum
Medal and top 1%

On track
Off trackPowering our European operations
with clean electricity•

Signify, HEINEKEN, Nobian and Philips secured a renewableelectricity guarantee from the new Mutkalampi wind farm inFinland•

Owned and operated by Neoen, the new facility is the largest
operating wind farm in Finland•The 10-year agreement will deliver 330 GWh of renewableelectricity per year to the consortium, the equivalent electricity
to power 40,000 households•It helps avoid over 230,000 tons of CO2 emissions per year•

The facility powers Signify’s operational electricity use in the EU,excluding Poland, for which there already is an existing
agreement in place

12

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 8.3%, mainly due to under-absorption of
fixed costs offsetting structural gross margin recovery
As % of sales-120 bps

9.5%8.3%+250 bps
1.0%
-2.5%

-0.9%

-0.2%

-0.2%

1.1%
0.4%

Q2 22

14

VolumeMixPrice

COGS

Indirect Costs

Currency

Other

Q2 23

Working capital decreased year on year, mainly driven by a reduction ofinventories and lower receivables, partly offset by lower payables
In EURm / as % of sales-160 bps

10.5%18.9%

783
640-347-29
422-189

Q2 22

15

Inventories

Trade & other receivables

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

Trade & other payables

Other workingcapital items

Q2 23In H1 2023, the free cash flow generation is back to positive, while theAdjusted EBITA margin is impacted by under-absorption of fixed costs
Sales & comparable sales
growthFree Cash Flow

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

5.8%
-8.9%

10.8%

10.0%

8.6%

272

139

H1 23 performance

16

3,209

3,624

3,322

347

361

285

H1 21

H1 22

H1 23

H1 21

H1 22

H1 23

Comparable sales declined on theback of two strong years• Weakness in indoor professional
lighting, consumer and OEM• Continued strength in outdoor
professional lighting

The Adjusted EBITA margin was
mainly impacted by underabsorption of fixed costs• Under-absorption of fixed costs• Gross margin improvement,
driven by price discipline andeffective COGS management

H1 21-54
H1 22

H1 23

Free cash flow generation back topositive• Mainly due to lower cash outflow
from payables and lower
inventories• Despite proceeds from the sale ofreal estate in H1 22

Content
Business and operational performance - Eric Rondolat

Financial performance and highlights - Javier van Engelen
Outlook & closing remarks - Eric Rondolat
Q&A

17

Need to update
photoOutlook%

18•

The continued economic softness has led us to apply caution in our outlook for the fullyear and adjust our Adjusted EBITA margin guidance to 9.5-10.5%.

•On the other hand, our free cash flow generation has and will continue to benefit fromsupply chain lead time improvements and effective working capital measures. We
therefore expect our free cash flow generation to be at the higher end of the 6-8% range.

Q&A
Need to update
photoCurrency movements had a negative impact on sales and the Adjusted EBITAmargin
Q2 23 Sales FX Footprint (% of total)

Key observations•20

Overall currency impact on the Adjusted EBITA marginof -20 bps•

Benefit on main currencies largely offset byhedging•

Negative FX impact due to devaluation of EGP, TRY,ARS and PKR, yet largely offset through pricing tomaintain gross margin

Net income decreased to EUR 45m, mainly due to lower EBIT and higher
financial expenses, partly offset by lower income tax expense
Key observations

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

Q2 22174

Q2 23136- Restructuring-7-9- Acquisition-related charges-5-3177-16

EBITA

340

108

Amortization-34-20

EBIT

306

88

11-31-68-1200248

45

1 2 - Other incidental items

3 Net financial income / expenses

Income tax expense
Results from investments in associates
Net income

21

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

2In Q2 22, other incidental items included a EUR 184m
gain from the disposal of non-strategic real estate

3In Q2 22, net financial income / expenses includes abenefit from a non-cash fair value adjustment of theVirtual Power Purchase Agreements (VPPAs)

Free cash flow was EUR 88m, as a lower income from operations was partly
offset by a lower cash outflow from working capitalKey observations

Free cash flow (in EURm)
Q2 22306

Q2 2388

Depreciation and amortization

7967

Additions to (releases of) provisions

3436

Utilizations of provisions

-45

-41

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

-171

-9

-31

-32

-22

-15

Net capex163-21Other-178

13

Free cash flow

135

88

As % of sales

7.4%

5.3%

Income from operations

22

•

•

Free cash flow of EUR 88m•

Lower income from operations•Lower cash outflow from working capital, which
benefited from an improving supply chain andstrict inventory discipline

Restructuring pay-out of EUR 12m (Q2 22: EUR 14m)