Q3 2020 results

October 23, 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, impacts of COVID-19, the 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 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 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 Report2019. 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 InformationAll 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 and the semi-annual report 2020.
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2Content
Business and operational performance by Eric Rondolat

Financial performance by René van Schooten
Outlook and conclusion by Eric Rondolat
Q&A3

Q3 20 sales of EUR 1.7bn, operational profitability of 11.5% and FCF of 214m
Sales (in EURm) & comparable sales growth (in %)
-5.0%

-4.2%

Key observations for Q3 20•

Sales of EUR 1.7bn, nominal sales growth of 12.1% and CSG of-8.3%•LED-based sales represented 82% of total sales (Q3 19: 81%)•

Installed base of connected light points increased from 64m
in Q2 20 to 71m in Q3 20•

Adjusted indirect costs down EUR 22m, or -4.9% excl. FXeffects and changes in scope (Cooper Lighting and Klite)•

Adj. EBITA margin increased by 50 bps to 11.5%, incl. currency
impact of -30 bps•

Net income increased to EUR 90m (Q3 19: EUR 74m)

•FCF increased to EUR 214m (Q3 19: EUR 45m)

•Cooper Lighting integration and synergies ahead of plan

-8.3%
-15.3%-22.5%

1,542

1,750

1,427

1,469

1,7281

Q3 19

Q4 19

Q1 20

Q2 20

Q3 20

Adjusted EBITA (in EURm & as % of sales)
13.2%
11.5%

11.0%
7.9%

49.0%

1692321121331991

Q3 19

Q4 19

Q1 20

Q2 20

Q3 20

1Cooper Lighting has been consolidated from March 2nd, 2020

Growing profit engines: CSG of -7.9% and Adjusted EBITA margin
improvement of 130 bps

Q3 205CSG %Adjusted
EBITA (EURm)

vs LY (EURm)

Adjusted
EBITA %vs LY (bps)Digital Solutions-11.2%

107+2111.7%-60

Digital Products-2.0%

76+2313.1%+370

Total-7.9%

183+4412.3%+130

Adj. EBITA margin
remained stable
YoY whenincluding the proforma Cooper
Lighting financials
in Q3 19

Digital Solutions Adjusted EBITA margin remained stable year-on-year when
including the pro-forma Cooper Lighting financials in Q3 19
Sales (in EURm) & comparable sales growth (in %)1.7%

Key observations for Q3 20•-1.5%-11.2%-14.2%-22.4%

698

720

6391

7811

9161

Q3 19

Q4 19

Q1 20

Q2 20

Q3 20

•

••Nominal sales increase of 31.2% as a result of theconsolidation of Cooper LightingCSG declined by 11.2% and reflects a continued difficult
market environment, albeit an improved trend
compared with Q2 20
Most severely impacted markets were Latin America,Canada, India, Southeast Asia, Italy and France
LED-based sales accounted for 92% of total sales andconnected-based sales represented 27%3 of total sales

Adjusted EBITA (in EURm & as % of sales)
12.3%•12.7%
11.7%

11.7%2
9.6%

Adjusted EBITA margin of 11.7%; remained stable YoY
when including the pro-forma Cooper Lighting financials
in Q3 196.7%

68692431751

1071

Q3 19

Q4 19

Q1 20

Q2 20

Q3 20

1Cooper Lighting has been consolidated from March 2nd, 2020
2Adj. EBITA margin when including the pro-forma Cooper Lighting financials in Q3 19

3Excluding Cooper Lighting

Digital Solutions highlights
Equipped Port of Antwerp
with smart lighting
infrastructure

Signed partnership withRB Leipzig to create
stadium of the future

ScaleAQ partnershipaccelerates switch tosustainable fish farming

EDZCOM partnershipaccelerates LiFi adoption
in manufacturing industry•••••7Switching 1,300luminaires to LED reducesenergy usage by 30%
Luminaires are equippedwith two connectors, one
to connect to Interact City
to drive operational
efficiencies and a second
connector to enablemeasurement of motion,
traffic and noise••Includes upper air UV-C
disinfection for different
indoor spaces, including
dressing rooms
Trulifi to provide reliable,
secure and high-speed
connectivity in press room
Also includes Philips Huefor ‘Home of eSport’ andInteract Sports andInteract Landmark••

Global partnership helps
to expand sales ofaquaculture LEDs acrossthe world
Signify to provide the LEDlighting expertise, while
ScaleAQ will resell with an
initial focus on marine
based/seacage products
Accelerates switch tosustainable fish farming•

Signify to offer LiFi
connectivity to European
manufacturing companies,
which currently rely oncongested radio spectrum
EDZCOM brings
technological knowledge
and commercial
experience in designingand operating private
wireless solutions

Digital Products Adj. EBITA margin improved by 370 bps, mainly as a result ofa strong performance in connected home and solid price management
Sales (in EURm) & comparable sales growth (in %)
0.1%

0.1%

Key observations for Q3 20•

Nominal sales increased by 1.9%; CSG of -2.0%• Connected-based sales represented 21% of sales• Sales in the consumer channel showed a strong
performance, particularly in the connected homecategory• Demand in the OEM and professional channels
continued to be impacted by the COVID-19 measurestaken by governments and customers• Most severely impacted markets were Canada, India,
Southeast Asia and Indonesia•

Adjusted EBITA margin improved by 370 bps, driven by:• Positive mix impact from connected home
• Solid price management and continued COGS savings• Ongoing successful integration of Klite-2.0%-14.8%-21.1%

565

731

529

473

575

Q3 19

Q4 19

Q1 20

Q2 20

Q3 20

Adjusted EBITA (in EURm & as % of sales)
15.7%
13.1%
9.4%

88.9%

9.3%

53115

474476

Q3 19

Q4 19

Q1 20

Q2 20

Q3 20

Digital Products highlights
Launched UV-C
disinfection desk lamp forhomes in Asia & ME

Launched new innovativedual-zone ceiling range
for China

Introduced Hue Play
gradient lightstrip to stepup immersive experience

Extended smart lighting
accessibility with newWiZ products

••••

•

•

9

Effectively disinfects
viruses & bacteria
Voice guidance & built-in
sensor that shuts off
device when detecting
movement provides extra
protection layer
China, Vietnam, Thailand,
Singapore, UAE, Malaysia,
Indonesia, Hong Kong &Philippines•

Innovative modular designconcept inspired by theleaf of the Lotus flower,
distinguishing fromtraditional ceiling lights
Terraced multi-zone withsuperior light effects and360-degree light emission
Personalized ambiancecreation powered by dualzone technology••

Specifically designed solightstrip can be mounted
behind any TV
Pixelated lightstrip
produces almost
unlimited combination ofcolors that can seamlessly
blend together andprovide more nuance
Creates truly immersiveexperience••

Launched 100 new
products that are easy to
set-up with Bluetooth andexisting WiFi network
Includes smart plug,sensor, remote and wide
range of bulbs and spots
in different colors
Further extends
accessibility of smart
home lighting

Conventional Products Adjusted EBITA margin remained robust at 17.9%
Sales (in EURm) & comparable sales growth (in %)-11.0%-18.3%-17.8%Key observations for Q3 20•

Comparable sales decreased by 11.0%•Benefited from strong demand for consumer lamps, UV-Cand horticulture lighting; continued market share gains•

Solid FCF•

Adjusted EBITA margin remained robust at 17.9%-25.2%-25.5%
274

290

257

211

233

Q3 19

Q4 19

Q1 20

Q2 20

Q3 20

Adjusted EBITA (in EURm & as % of sales)
19.4%

1017.3%

17.6%

17.5%

17.9%

5350

45

3742

Q3 19

Q4 19

Q1 20

Q2 20

Q3 20

Signify achieves carbon neutrality and sets course to double itspositive impact on the environment and society

Sustainable operations

Sustainablerevenues

Year-to-date result

11

Sustainable revenues

83.6%

LED lamps &luminaires delivered

2.734 billion

Achievement

2020 target

Increasing energy
efficiency of portfolio

137% of our commitment(cumulative from 2015) completed

80%>2 billion

Carbon footprint
Gross/Net (YTD)

Net 0 kt CO2

Signify is carbon neutral!

Carbon neutral

Waste to landfill% of sites zero waste (In Q)

16 tonnes
97%

92% decrease vsQ3 2019100% of sites zerowaste

Safe & healthy workplace

Total recordablecases rate = 0.20

43% decreased
TRC vs Q3 2019

TRC = 0.35

Sustainable supply chain

99%99% of risk suppliers
passed the audit

We achieved the highest
score in the CDP climate
disclosure: A-List

We are named DJSI
Industry Leader for 3
consecutive years

90% performancerate

We received the EcoVadis
Platinum Medal and are in thetop 1% of companies assessedContent
Business and operational performance by Eric Rondolat

Financial performance by René van Schooten
Outlook and conclusion by Eric Rondolat
Q&A12Signify Adj. EBITA margin improved by 50 bps as a result of solid pricing
management, continued COGS and indirect cost savings
Adjusted EBITA (in EURm)
as %of sales

11.0%

169

11.5%

+50 bps(47)

22(10)

Indirect CostsCurrency

42199

Scope/ Other

Q3 202053(30)

Q3 2019

13

Volume / Mix

PriceCoGSComparable indirect costs reduced by EUR 22m, adjusted for currencies andchanges in scope
as % of sales

28.7%

30.1%

+140 bps

520

In EURm
Adj. R&D

442

77-2265• Indirect cost reduction of EUR 22m• Positive currency impact of EUR 12m• Impact from changes in scope of EUR 112m408-12

Key observations

112• Continue to execute initiatives to further

reduce the indirect cost base
443
Adj. SG&A377

Adj.
Indirectindirectcost
costs Q3 19 savings

14Currency
impact1Consolidation effects from Cooper Lighting and Klite

Adj.
ChangesAdj.
indirect in scope1 indirect
costs Q3 20
costs Q3 20
excl. scopeincl. scope

WoCa decreased by 300 bps as % of sales, reflecting solid inventory andreceivables management
Working capital1 (in EURm & as % of sales)

Inventories (in EURm & as % of sales)

6.0%2

6.1%36.3%36.4%3388

470

452

443

Q4 19

Q1 20

Q2 20

Q3 20

8.4%

9.3%

-300 bps

14.4%31.019

1.032

1.000

Q1 20

Q2 20

Q3 20

15.9%

16.5%

13.3%3874

Q4 19

9.4%

13.8%

14.9%

8.0%

536

587

503

588

878

943

999

1.030

Q4 18

Q1 19

Q2 19

Q3 19

Q4 18

Q1 19

Q2 19

Q3 19

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

1514.3%313.6%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-210 bps

Net debt decreased by EUR 117m
In EURm
1,706

1,589-21366-4626027-932

Other
FCF items

Sharerepurchase

FCF: EUR +214m

Net debt
end of Q2 20

EBITDA

Change inworking capital

Net capex

Change inprovisions

Interest & Tax

Net leverageof 2.4x
161Other includes cash used for derivatives, acquisitions, new lease liabilities, and FX effect on cash, cash equivalents and debt

Other1Net debt
end of Q3 20
Net leverageof 2.2x

ContentBusiness and operational performance by Eric Rondolat

Financial performance by René van Schooten
Outlook and conclusion by Eric Rondolat
Q&A17

Outlook•••

18

Given recent developments of the pandemic, Signify does notprovide financial guidance for full year 2020
Signify remains confident in the underlying resilience of its
businesses and operating model, and that its liquidity needs arewell covered by the financial framework it has in place
During the virtual Capital Markets Day 2020, which is scheduledon December 9, Signify will provide more details on its
expectations for the medium-term

Q&A

19

Currency movements negatively impacted sales and Adjusted EBITA
Q3 20 Sales FX Footprint (% of total)•Negative FX effect on sales of -3.6%, largely driven by
US dollar depreciation and emerging market
currencies•

Negative FX effect on Adjusted EBITA of EUR -14m,
and -30 bps on the Adjusted EBITA margin,•

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

EUR
25%

OtherCurrencies
30%CNY
8%USD
36%

20Key observations

Net income increased by EUR 16m to EUR 90m, mainly as a result ofhigher operational profitability
Key observations

From Adjusted EBITA to net income (in EURm)
Q3 19

Q3 20

Adjusted EBITA

169

199

- Restructuring-24-25

1 - Acquisition related charges

-1-14

1

2 - Other incidental items
EBITA

-6

12138

161

Amortization-25-31

Related to Cooper Lighting and Klite
Recurring by nature and relate to the separation, company
name change, environmental provision for inactive sites anddiscounting effect of long-term provisions

EBIT114131

Net financial income / expenses-11-16

Income tax expense-28-25

1--

Income tax expense decreased by EUR 3m mainly due to a
non-cash tax benefit from a decrease in tax liabilities

7490

1Results from investments in associates
Net income21

Free Cash Flow of EUR 214m
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

22

Q3 191147444-67-69-3-25-8-1445
2.9%

Q3 20
1318240-4046-4-23-26
9214
12.4%

•Free cash flow of EUR 214m versus EUR 45m last year•

Reflects higher profitability, strong working capitalmanagement and the consolidation of Cooper Lighting•Restructuring pay-out of EUR 11m (Q3 19: EUR 20m)