Q1 2019 results

April 26, 2019

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 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, establishment of corporate and brand identity, adverse tax consequences from the separation from Royal Philips and exposure tointernational tax laws. Please see “Risk Factors and Risk Management” in Chapter 12 of the Annual Report 2018 for discussion of material risks, uncertainties and other important factors which may have a material adverse effect on
the business, results of operations, financial condition and 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 Report2018. Additional risks 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, resultsof 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 forwardlooking 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 2018.
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 2018.
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2

Content
Business and operational performance by Eric Rondolat
Financial performance by Stéphane Rougeot

Outlook & conclusion by Eric Rondolat
Q&A3

Q1 19 sales of EUR 1.5bn, operational profitability of 7.8% and FCF of 55m
Sales (in EURm) & comparable sales growth (in %)
-3.4%

-3.5%

-3.3%

-3.2%
-7.3%

Sales

1,501

1,537

1,594

1,726

1,478

Q1 18

Q2 18

Q3 18

Q4 18

Q1 19

Key observations for Q1 19•

CSG decreased by 3.3%

•LED-based sales grew by 3.6%, accounting for 73% of sales•

Currency comparable adjusted indirect costs down EUR 39m,or 170 bps as % of sales•

Adjusted EBITA margin improved by 80 bps to 7.8%, despite-130 bps impact of FX•

Net income more than doubled from EUR 20m last year toEUR 44m•

Free cash flow of EUR 55m versus EUR -6m in Q1 18, including
EUR 17m positive impact from IFRS 16 in Q1 19

Adjusted EBITA (in EURm & as % of sales)

7.0%

412.0%

7.8%

12.4%

8.4%

106115130191

214Q1 18

Q1 19

Q2 18

Q3 18Q4 18

Growing profit engines: CSG of 1.1% and Adjusted EBITA margin
improvement of 210 bps

5vs LY (EURm)

Adjusted
EBITA %vs LY (bps)54+1111.9%+230-1.5%

32+15.3%+10Home24.4%-7+14-6.1%+1,700

Total

1.1%

79+266.7%

+210

Q1 19

CSG %

Adjusted EBITA

LED-0.2%

Professional(EURm)

LED Adjusted EBITA margin increased by 230 bps, mainly as a result ofprocurement savings and lower indirect costs
Sales (in EURm) & comparable sales growth (in %)

3.6%

0.0%

-1.9%

0.2%-0.2%444443444481449

Q1 18

Q2 18

Q3 18

Q4 18

Q1 19

Key observations for Q1 19•

CSG of -0.2%; LED lamps showed a solid performance
while growth in LED electronics slowed down in Europe•

Adjusted EBITA margin increased by 230 bps, mainly as aresult of procurement savings and lower indirect costs

Adjusted EBITA (in EURm & as % of sales)
11.9%

14.4%

9.6%
10.6%

6

12.0%

4354

475369

Q1 18

Q1 19

Q2 18

Q3 18

Q4 18

LED business highlights
Launching the TrueForceUrban G3 EuropeWinning private label
tenders

Launching ‘Edge’ system(driver & module) for
high-bay fixtures in US

Launching the world’s
smartest outdoor LED
driver•••••

7Creates pleasant andsafe atmosphere instreet lighting with LED
retrofit
Enhances the ease of
installation and instantupgrade of conventional
HID system with 80%
energy savings and < 2years payback••

We won 4 private label
tenders in Q1 19
Ongoing focus on cost
optimization to remaincompetitive
Offering tiering andwidth in portfolio (lamps& luminaires)•

Cost effective combisystem-pack of driverand LED modules forhigh-bay fixtures
Enables high efficiency
and operating
temperatures to caterfor maximum brightness
designed for industrial
applications••

Enables connect-readyand connected outdoor
lighting
Unique IntelliStart inrush
current limiter feature
for max number of lightpoles on a circuit breaker
Allowing high surge up
to 10KV for toughenvironmental
conditions

Professional Adjusted EBITA margin stable at 5.3%, despite lower level ofmarket activity in Europe and China
Sales (in EURm) & comparable sales growth (in %)
3.6%

3.2%

0.4%

Key observations for Q1 19•

CSG of -1.5%, due to a lower level of market activity inEurope and China, partly offset by a solid performancein the Americas•Adjusted EBITA margin remained stable at 5.3% ascontinued indirect cost savings more than offset thenegative impact of FX and mix

-1.5%
-6.9%

593

652

675

715599

Q1 18

Q2 18

Q3 18

Q4 18

Q1 19

Adjusted EBITA (in EURm & as % of sales)

8

11.7%

12.0%

5.2%

5.3%

8.4%

313255

7985

Q1 18

Q1 19

Q2 18

Q3 18

Q4 18

Professional business highlightsUsing robotics to install
pitch lighting at Toyota
Stadium in Japan

Enabling Prime Delica togrow healthier and safer
cropsTransforming two
landmark bridges inIndonesia

Experiencing lighting
before you buy with VRapp•

•••

•

•

9

Robotics measurement
reduces installation time
Improves accuracy foraiming of floodlights,
horizontal illuminance,color temperature andrendering
Extra services include
syncing lighting withentertainment system••

Developed optimal lightrecipe to increase
vitamin levels andnutritional value oflettuce
Enables high-quality
lettuce varieties, spinachand coriander to grow all
year round
Reduces water
consumption•

Interact Landmark andColor Kinetics luminaires
transform bridges inTanjungpinang andSamarinda into tourist
attractions and give civic
pride
Enables remote controland management of thelights on the two bridges•

Retailers can sample
lighting designs and findright lighting for theirstore
Lets customers immersethemselves in a virtual
fashion store & see how
lighting can make stores
more appealingHome – strong rebound in CSG and substantial improvement in profitability
Sales (in EURm) & comparable sales growth (in %)Key observations for Q1 19•

CSG of 24.4%, on the back of a low comparison base inthe US while we experienced strong demand forconnected offers•Adjusted EBITA margin of -6.1% improved substantiallycompared with last year and includes a significant
negative impact of FX

24.4%
-2.6%

-1.4%

-6.4%

-5.9%

9289

110

176

115

Q1 18

Q2 18

Q3 18

Q4 18

Q1 19

Adjusted EBITA (in EURm & as % of sales)
8.9%
16-7-21-25-8-6.1%-27.9%-23.1%

10

Q1 18

-6.9%

Q1 19

Q2 18

Q3 18

Q4 18

Home business highlights
Winning iF DesignAwards for Philips Hue

Continuously increasinguser appreciation ofPhilips Hue products

Launching the Gentle
Sleep & Wake feature

Introducing two newranges of architecturaldownlights

•••

•

•

11

The redesigned Philips
Hue app 3.0 that enables
users to control andpersonalize their lighting
won an iF Design Award
Four Philips Hueconnected luminaires
also won iF DesignAwards•

In Q1 users gave anaverage 4.27 star ratingon Amazon to the 2018
range of new Philips Hueproduct introductions
This is an increase of0.37 stars versus newproducts launched in2017•In partnership withGoogle, the Gentle Sleep& Wake software featurewent live
Allows a Google Home
device to work in concert
with a Philips Hue light
setup to gently wake youup or go to sleep•

Modular launched two
new ranges of Thimble
and Minude minimalisticarchitectural downlights
Modular won a Red Dot
Design Award for its
Qbini downlights

Cash engine – Lamps Adjusted EBITA margin remained solid at 20.5%
Sales (in EURm) & comparable sales growth (in %)-11.1%-17.6%-16.4%-19.3%-17.9%

370351361345309

Q1 18

Q2 18

Q3 18

Q4 18

Q1 19

Key observations for Q1 19•

Comparable sales decreased by 17.9%•Continued market share gains•

Adjusted EBITA margin remained solid at 20.5% as aresult of ongoing indirect cost reductions

Adjusted EBITA (in EURm & as % of sales)

21.2%

20.5%
21.2%

1224.6%17.5%

786374

8960

Q1 18

Q1 19

Q2 18

Q3 18

Q4 18

Acquisition of WiZ Connected further expands our leadership in connected
lighting
Signify announced the acquisition of WiZ Connected:• Developers of the Wi-Fi based WiZ connected lighting ecosystem• Headquartered in Hong Kong
• WiZ Connected offers Wi-Fi-based connected products such as bulbs,luminaires, remote controls and an App

The smart consumer lighting market is very attractive:• Philips Hue is the global market leader in Zigbee-based smart lighting• A new technology platform, based on Wi-Fi, is emerging fast which
also offers attractive growth potential• We plan to capture growth from both technology platforms: Zigbeeand Wi-FiThrough the acquisition of WiZ Connected, we:• Expand our connected lighting offer• Reach a larger customer base
• Strengthen our leadership position in connected lighting13

ContentBusiness and operational performance by Eric Rondolat
Financial performance by Stéphane Rougeot

Outlook & conclusion by Eric Rondolat
Q&A

14

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

7.0%

7.8%

+80 bps

39

15

106

(6)

(57)

53

Q1 18

Volume / Mix

PriceCoGSIndirect Costs(18)

Currency(2)

115

OtherQ1 19

Adjusted currency comparable indirect costs decreased by 8%
as % of sales
In EURm-180 bps

33.2%

31.4%

• Indirect cost reduction of EUR 39m

498
-39

Adj. R&D

Adj. SG&A

81464
669417395

Adjusted indirect
costs Q1 18

16Key observations

Indirectcost savings

Currency impact Adjusted indirect
costs Q1 19• Negative currency impact of EUR 6m• Continue to execute initiatives to further

reduce the indirect cost base

Working capital as % of sales improved by 20 bps y-o-y, excluding FXWorking capital1 (in EURm & as % of sales)
10.5%

10.1%
8.4%

Inventories (in EURm & as % of sales)
9.3%

15.3%

15.2%

1.009

994

878

943

Q2 18

Q3 18

Q4 18

Q1 19

15.3%

16.2%
13.3%

14.1%

694659

536

587

Q2 18

Q3 18

Q4 18

Q1 19

+30 bps

12.5%
11.2%

17

8.6%

9.0%

13.8%

14.9%

789

879

597

612

1.082

1.137

924

957

Q2 17

Q3 17

Q4 17

Q1 18

Q2 17

Q3 17

Q4 17

Q1 18

1 Working capital includes inventories, receivables, accounts and notes payable, other current assets & liabilities,

derivative financial assets & liabilities, and accrued liabilities+ 80 bps

Net debt, excl. the impact from IFRS 16, improved by EUR 59m
In EURm848
789

1392592910162353589

FCF: EUR +55m

Net debt
end of Q4 18

ImpactIFRS 16

Net debt
post IFRS 16

EBITDA

Change inworking
capital*Other includes cash used for derivatives, FX effect on cash, cash equivalents and debt

18

Net capex

Change in Interest & Tax
Otherprovisions
FCF items

Other*Net debt
end of Q1 19

ContentBusiness and operational performance by Eric Rondolat
Financial performance by Stéphane RougeotOutlook & conclusion by Eric Rondolat
Q&A19

2019 Outlook confirmed• Our growing profit engines (LED, Professional and Home combined), are expected todeliver a CSG in the range of 2 to 5%• Our cash engine, Lamps, is expected to decline at a slower pace than the market in
the range of -21 to -24% on a comparable basis.

%• For total Signify, we aim to reach an Adjusted EBITA margin within the range of 11-13%(as set at the time of the IPO in May 2016)• We expect free cash flow, excluding the positive impact from IFRS 16, to be above
5% of sales

20

Q&A

21

Currency movements positively impacted sales and negatively impacted
Adjusted EBITA
Q1 19 Sales FX Footprint (% of total)

EUR
30%

OtherCurrencies
37%

CNY
8%

22

USD
25%

Key observations•

Positive FX effect on sales of +1.1%, largely driven by
US dollar appreciation•

Negative FX effect on Adjusted EBITA of EUR -18m,
and -130 bps on the Adjusted EBITA margin, mainly
from emerging market currencies, Chinese renminbiand US dollar•Our policy is to hedge 100% of committed FXtransactions and anticipated transactions up to 80%in layers over the next 15 months

Net income improved to EUR 44m, mainly as a result of improved
operational profitability and lower restructuring
Key observations

From Adjusted EBITA to net income (in EURm)

123

Q1 18

Q1 19

Adjusted EBITA

106

115

- Restructuring-39-20- Acquisition related charges

00- Other incidental items

-4-2

EBITA

62

93

Amortization-23-24

EBIT

3969

Net financial income / expenses-9-9

Income tax expense-10-16Results from investments in associates

01Net income

2044

1

Income tax expense increased by EUR 6m mainly due
to higher taxable earnings in Q1 19

Free Cash Flow of EUR 55m
Key observations

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

24Q1 183958
54-59-41-5-35-21
3-6-0.4%

Q1 196970
41-57-29-4-19-10-555
3.7%•Free cash flow of EUR 55m as a result of improved
operational profitability, lower restructuring cash-outand lower income tax paid

•Free cash flow in Q1 19 included a positive impact ofEUR 17m related to IFRS 16 and restructuring cash-outof EUR 25m (Q1 18: EUR 31m)