Q1 2022 results

April 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, 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, ability to attract
and retain talented personnel, adverse currency effects, pension liabilities, and exposure to international tax laws. Please see “Risk Factors and Risk Management” in Chapter 12 of the Annual Report 2021 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 Report 2021. 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, 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
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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 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 - Javier van Engelen

Outlook & closing remarks - Eric Rondolat
Q&A3

First quarter 2022 highlights• Top-line growth driven by continued strong momentum in the Digital Solutions
division• Challenging operating environment• Investments in Russia were stopped and all new business paused since February 25th
• Inflationary headwinds• Reinstatement of lockdowns in China• Continued implementation of price increases to offset inflation%
4• Strong double-digit Adjusted EBITA margin of 10.5%• Free cash flow temporarily impacted by higher inventories due to longer supplier leadtimes

Signify reported a Q1 22 sales of EUR 1.8 billion, CSG of 6.4% and anadj. EBITA margin of 10.5%
Sales (in EURm) & comparable sales growth (in %)
CSG

3.2%

6.4%

14.1%

-4.8%

4.5%

1,599

1,788

1,609

1,643

2,008

Q1 21

Q1 22

Q2 21

Q3 21

Q4 21

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

510.8%

10.5%

10.9%

11.1%

Key observations for Q1 22•

100 million connected light points (Q4 21: 96 million)•LED-based sales were 84% of total sales•

Nominal sales growth of 11.8% to EUR 1,788m•

Comparable sales growth of 6.4%•

Adjusted EBITA margin decline of 30 bps to 10.5%

13.2%

172

187

175

182

265

Q1 21

Q1 22

Q2 21

Q3 21

Q4 21

•

Price increases, positive sales mix and operating
leverage partly offsetting higher COGS and negative FX•

Second consecutive year of double-digit Adjusted EBITAmargin despite high comparison base•

Net income of EUR 87m (Q1 21: EUR 60m)

•Free Cash Flow of EUR -189m (Q1 21: EUR 168m)

Digital Solutions reported a CSG of 16.9% and an adj. EBITA margin of 9.7%
Sales (in EURm) & comparable sales growth (in %)
CSG

-1.8%

16.9%

12.6%

-7.3%

11.2%

793

981

837

848

1,045

Q1 21

Q1 22

Q2 21

Q3 21

Q4 21

Key observations for Q1 22•

Comparable sales growth of 16.9%•Continued good traction of the professional
segment, particularly the US•

Strong performance of horticulture lighting

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

69.0%

9.7%

10.7%

10.5%

14.1%

71958989147

Q1 21

Q1 22

Q2 21

Q3 21Q4 21•

Adjusted EBITA margin increased by 70 bps to 9.7%•

Operating leverage, price increases and positive
sales mix, offsetting higher COGS•

Strongest Q1 Adjusted EBITA margin so far

Digital Solutions highlights
Illuminating the world’s
largest winter sports event
in China

Equipping Belgian schools
with fast, secure andreliable LiFi connectivity

Signify LED lights power
Iceland’s first vertical farm

Installing solar lighting inthe Algarve• The site combines LEDs fromthe Philips SportStar andArenaVision series with
Interact Sports software
platform• Optimizes athlete, spectatorand viewer experience• Improves operational
efficiency and maintenance• Trulifi by Signify helps
Belgian schools accelerate
the digitalization ineducation• Belgian installations follow
successful installations inschools in Italy, Germany,
the US and the Netherlands• Provides students and staff
with fast and reliable accessto the latest online tools in ahighly secure way• Supplying horticulturallighting for VAXA, Iceland’s
first vertical farm
• The new facility on theoutskirts of Reykjavik isequipped with Philips
GreenPower LED production
modules• Provides flexibility andprecision to the crops’
lighting environment• Philips Sunstay solar
luminaires replace theelectricity grid with solar
energy and thus improveenergy efficiency• Motion sensors detect thepresence of people,
adjusting and reducing thelight intensity as needed, forgreater safety and comfort
for residents7Digital Products reported a CSG of 0.2% and an adj. EBITA margin of 12.8%
Sales (in EURm) & comparable sales growth (in %)
CSG

15.7%

0.2%

20.4%

2.5%

1.6%

575

601553588737

Q1 21

Q1 22

Q2 21

Q3 21

Q4 21

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

814.2%

12.8%

12.0%

13.0%

Key observations for Q1 22
•

•
15.5%

82776676114

Q1 21

Q1 22

Q2 21

Q3 21

Q4 21

Comparable sales growth of 0.2%•

Strong Q1 21 comparable base•Connected home sales maintained at good levels

Adjusted EBITA margin declined by 140 bps to 12.8%•

Strong Q1 21 comparison base•

Gross margin impacted by higher COGS•

Continued investments in marketing to support
future growthDigital Products highlights
Launching the Philips Ultra
Definition in North America

Making your home cozierwith new effects featuresin the Philips Hue app

Expanding the WiZ offeringin the Indian market

Launching new outdoor
luminaire range in Europe• Philips Ultra Definition is thenext level of EyeComfort
products• Successfully prelaunched inCanada• It provides a natural qualityof light with richer and morevibrant colors, and iscomfortable for the eyes

• Adding “Effects” to thePhilips Hue app, which
include the glowing ofcandlelight and theatmosphere of a fireplace• These atmospheric effects
are compatible with a rangeof existing Hue products,including the gradient light
tube, and the gradient Signetable or floor lamp

• Launching a localized rangeof WiZ connected productsin India• Product launches include
various downlights andceiling spots, a desk lamp
and light strips• These are most intuitive in
use with the WiZ app andallow users to create theright ambiance

•

9•
•

•

The new Splay family
outdoor luminaire offers
bright and comfortable light,
with a large and uniform
lighting surface
Integrated sensor switches
light on and offautomatically
Stylish curved design with
LED integrated technology
Full range offer with walllight, pedestal and post

Conventional Products reported a CSG of -15.1% and an adj. EBITA of 16.0%
Sales (in EURm) & comparable sales growth (in %)
CSG

-6.1%

-15.1%

4.7%-13.2%-11.4%

227201

213

202219

Q1 21

Q1 22

Q2 21

Q3 21

Q4 21

Key observations for Q1 22•

Comparable sales growth of -15.1%•Adjusted EBITA margin decreased by 460 bps to 16.0%

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

1020.6%

16.0%

18.6%

18.8%

16.9%

4732403837

Q1 21

Q1 22Q2 21

Q3 21

Q4 21

•

Strong exposure to energy cost inflation•Higher impact from transportation cost increases•Further price increases are being implemented

Brighter Lives, Better World 2025 Q1 2022 results

Brighter Lives

Better World

Doubling our positive impact on the environment and society

112019Baseline

Q1 2022
Result2025
TargetClimate action

Carbon reduction over value chain
against Paris Agreement

0On track

324 MT

Circular economy

Circular revenues

16%

30%

32%

Food availability
Safety & security
Health & well-being

Brighter lives revenues

16%

27%

32%

Great place to work

Women in leadership positions

17%

26%

34%

A list for climate andsupply chain

DJSI World Index andtop 1% in our industry

EcoVadis Platinum
Medal and top 1%

On track

Off track

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

Outlook & closing remarks - Eric Rondolat
Q&A

12Adjusted EBITA margin remaining strong at 10.5%, as higher COGS werepartially compensated by price increases and operating leverage
In EURm / as % of sales-30 bps

10.8%

63

10.5%

-42-7172

14-13

187-4

4
EUR +25m

Q1 2113VolumeMixPrice

COGS

Indirect Costs

Currency

Other

Q1 22

Working capital mostly impacted by higher inventory levels due to longer
supplier lead times, partly offset by higher payables
In EURm / as % of sales+440 bps

3.5%

54

7.9%-289
559

589-29236

Q1 21

14Inventories

Trade & other receivables

Trade & other payables

Other working
capital items

Q1 22

Leverage ratio increased to 1.6x due to negative free cash flow and therepurchase of shares for long-term incentives
In EURm

1,3782424-932

Change inprovisions

Interest & Tax

Other
FCF items

Other 127
1,141

1,156315-191
FCF: EUR -189m

Net debt
end of Q1 21
Net
1.4x
leverage
15Net debt
end of Q4 21

EBITDA

Change inworking capital

Net capex

1.4x

1Other includes cash used for the purchase of treasury shares (for long-term incentives), new lease liabilities, derivatives, and FX effect on cash, cash equivalents and debt.

Net debt
end of Q1 22
1.6x

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

Outlook & closing remarks - Eric Rondolat
Q&A16

EU Green Deal projects
gaining traction•

The project pipeline of EU
Green Deal related projects isgrowing•

Installing energy efficient
LED Road & Streetluminaires in Homburg•

Increasing energy prices create
an even stronger incentive togenerate energy savings•

Improving energy efficiency
in Bad Salzuflen through ourCityTouch system•

Modernizing the public
lighting of Kutno withInteract City lighting controls•Installing 4,220 LED lights in230 streets and 5 municipalparks in Alcázar de San Juan•

Replacing 9,000 street lightpoints in 7 municipalities in
the region of Ciudad Real17

Outlook%• Signify maintains its outlook for 2022. This assumes that the Chinese market andglobal supply chain dynamics do not deteriorate further• Comparable sales growth in the range of 3-6%
• Continued Adjusted EBITA margin improvement of up to 50 bps• Free cash flow in excess of 8% of sales

18

Q&A

Currency movements had a positive impact on sales and a negative impacton Adjusted EBITA
Q1 22 Sales FX Footprint (% of total)

Key observations•EUR, 26%

Other Currencies,30%•••

CNY, 7%

USD, 37%
EUR20USDCNY

Other Currencies

Currency movements negatively impacted Adjusted
EBITA and positively impacted Sales
Sales impact of +5.2%, mainly from US dollar
appreciation.
Adjusted EBITA impact of EUR -13m, and -130 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 87m, mainly driven by higher EBIT, partly
reduced by impairments related to our operations in Russia and Ukraine
Key observations

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

Q1 21
172

Q1 22
187

- Restructuring

-47

-4

- Acquisition-related charges

-14-7

4-29

EBITA

115

146

Amortization

-30

-31

EBIT

85

115

Net financial income / expenses-10-6

Income tax expense

-15

-22

Results from investments in associates

00

Net income

6087

1 - Other incidental items

21

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

Free cash flow was EUR -189m, mostly due to a strong outflow from working
capital, as payables reduced as a result of the settlement of payments
Key observations

Free cash flow (in EURm)
Q1 2185

Q1 22115

Depreciation and amortization

7776

Additions to (releases of) provisions

60

19Utilizations of provisions

-50

-43

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

30-315-10-21-24

Net capex-16-27

39

Free cash flow

168-189

As % of sales

10.5%-10.6%

Income from operations

Other22••

Free cash flow of EUR -189m•

Lower payables, due to the settlement ofpayments related to the inventory buildup•Higher inventories due to longer supplier leadtimes

Restructuring pay-out of EUR 14m (Q1 21: EUR 13m)