Koninklijke Philips N.v. · EURONEXT:PHIA
Koninklijke Philips — Koninklijke Philips N.V. NY Registry Shares — Q4 2023 Earnings Presentation
34 slides from Koninklijke Philips's earnings presentation, Jan 29, 2024
Slide 1: Fourth quarter and full-year 2023 results
Fourth quarter and full-year 2023 results January 29, 2024
Slide 2: Important information
Important information Forward-looking statements and other important information This document and the related oral presentation, including responses to questions following the presentation, contain certain forward-looking statements with respect to the financial condition, results of operations and
Slide 3: Table of content
Table of content Fourth quarter & full-year highlights and financial performance 4 Delivering value with sustainable impact 23 Financial appendix 29 3 © Koninklijke Philips N.V.
Slide 4: Key takeaways
Key takeaways • Strong sales growth, improved profitability, and very strong cash flow in 2023 through solid execution of our plan to create value with sustainable impact • Making progress on our three priorities: – Enhance patient safety & quality – Strengthen supply chain reliability – Establish a
Slide 5: Strong full-year 2023 results driven by solid execution of the plan
Strong full-year 2023 results driven by solid execution of the plan to create value with sustainable impact 2023 outlook 2023 Actuals as of January 30, 2023 • Solid execution and supply chain improvements Comparable Low-single-digit 7%* Sales Growth • Strong sales from equipment, as well as software
Slide 6: Improved operational performance across business segments
Improved operational performance across business segments 2023 actuals Diagnosis & Treatment Connected Care* Personal Health Comparable Sales Growth +11% +5% +3% Adj. EBITA (%) 11.6% 6.9% 16.6% Adj. EBITA (%) improvement +210 bps +480 bps +180 bps 6 *) Excluding provisions charged to sales of EUR 17
Slide 7: Confident in delivering the plan for 2023-2025
Confident in delivering the plan for 2023-2025, with further performance improvement in 2024 2024 outlook Medium-term 2025 2025+ Deliver on full potential Profitable growth acceleration of our segments Comparable Sales Growth 3 – 5% Mid-single-digit Mid-single-digit Adj. EBITA margin 11.0 – 11.5% Lo
Slide 8: Preferred strategic and innovation partner for customers
Preferred strategic and innovation partner for customers NYU Langone Health (USA) Bill & Melinda Gates Foundation • 8-year partnership valued at USD 115 million • USD 60 million funding for developing AI-powered ultrasound to expand access to maternal health • Unlock data for precision diagnosis and
Slide 9: Our innovation empowers clinicians with Artificial Intelligence
Our innovation empowers clinicians with Artificial Intelligence for deeper clinical insights, improved workflow and productivity HealthSuite Imaging ROCC32 & PerformanceBridge5 CT 5100 Incisive Next gen. EPIQ Elite & Affiniti MR SmartSpeed PACS1 over the cloud with Industry’s first multi-vendor, Ind
Slide 10: Delivered strong sales growth, improved profitability, and strong cash flow
Delivered strong sales growth, improved profitability, and strong cash flow Financial performance in millions of EUR unless otherwise stated Highlights Q4 Q4 FY FY • CSG driven by actions to improve supply chain reliability and 2022 2023 2022 2023 more effective operating model Sales 5,422 5,062 17,
Slide 11: Diagnosis & Treatment
Diagnosis & Treatment Financial performance in millions of EUR unless otherwise stated Q4 Q4 FY FY 2022 2023 2022 2023 Sales 2,550 2,497 8,290 8,818 Comparable Sales Growth 6% 5% (1)% 11% Adj. EBITA margin 12.2% 10.4% 9.5% 11.6% Adj. EBITDA margin 14.6% 12.4% 12.2% 14.1% Income from operations 186 1
Slide 12: Connected Care
Connected Care Financial performance in millions of EUR unless otherwise stated Q4 Q4 FY FY 2022 2023 2022 2023 Sales 1,622 1,353 5,268 5,138 Comparable Sales Growth 4% (11)% (9)% 1% Adj. EBITA margin 11.6% 15.0% 2.1% 7.2% Adj. EBITDA margin 15.1% 20.3% 7.5% 12.1% Income from operations (97) (332) (
Slide 13: Personal Health
Personal Health Financial performance in millions of EUR unless otherwise stated Q4 Q4 FY FY 2022 2023 2022 2023 Sales 1,056 1,069 3,626 3,602 Comparable Sales Growth (4)% 7% 0% 3% Adj. EBITA margin 17.0% 19.9% 14.8% 16.6% Adj. EBITDA margin 19.7% 22.7% 18.0% 19.4% Income from operations 173 208 515
Slide 14: Productivity initiatives delivered EUR 956 million in the year
Productivity initiatives delivered EUR 956 million in the year, with 271 million in the quarter Productivity initiatives savings1 in millions of EUR unless otherwise stated Q4 2023 FY 2023 • Simplified organization with reduction of workforce by ~8k roles, out of 10k roles in total planned by 2025 O
Slide 15: Adj. EBITA margin improvement driven by increased sales, pricing and productivity
Adj. EBITA margin improvement driven by increased sales, pricing and productivity measures Group Adj. EBITA margin1 in FY 2023 0.1% 0.7% 5.0% (2.6)% 10.5% 10.6% 7.4% Adj. EBITA Volume Cost headwinds Productivity Adj. EBITA Provison Adj. EBITA FY 2022 and pricing FY 2023* charged to sales FY 2023 1.
Slide 16: Adj. EBITA margin improvement driven by increased sales, pricing and productivity
Adj. EBITA margin improvement driven by increased sales, pricing and productivity measures Group Adj. EBITA margin1 in Q4 2023 0.4% (1.0)% 3.9% (2.4)% 12.5% 12.9% 12.0% Adj. EBITA Volume Cost headwinds Productivity Adj. EBITA Provison Adj. EBITA Q4 2022 and pricing Q4 2023* charged to sales Q4 2023
Slide 17: Higher earnings and strong free cash flow improved leverage
Higher earnings and strong free cash flow resulted in significant improvement of leverage Free cash flow drivers Net Debt to Adj. EBITDA ratio • Higher earnings and improved working capital 3x • Inventory reduced sequentially by 200 bps as a % of sales in Q4 and by 360 bps year-over-year • Lower Acc
Slide 18: Order book remains strong and will continue to support growth
Order book remains strong and will continue to support growth planned for 2024 Indexed order book1 development Sales split as a % of Group sales +15% Personal Health ~20% Order book ~40% Software, services, ~40% consumables, and book-to-bill pre-supply chain crisis businesses Q3 2021 Q4 2021 Q4 2022
Slide 19: Recent normalization of orders/sales ratio
Recent normalization of orders/sales ratio driven by strong sales conversion following severe supply chain constraints in 2021 – 2022 Absolute levels of order intake remain healthy Order intake to sales ratio Severe global supply • Order intake was 3% lower in Q4, with a sequential chain constrains
Slide 20: Continued improvement in operational performance in 2024
Continued improvement in operational performance in 2024, whilst acknowledging that uncertainties remain Comparable Sales Growth • All segments within the range 3 – 5% • Segment Other sales of EUR 550 – 580m Adj. EBITA margin • Margin improvement across all segments 11.0 – 11.5% • Segment Other Adj.
Slide 21: Restructuring, acquisition-related charges and Other items in 2024
Restructuring, acquisition-related charges and Other items in 2024 • 1K roles reduction part of the 10K roles reduction program resulting from operating Restructuring costs model simplification, of which 8K implemented by end of 2023 ~100 bps • S&RC rightsizing and assets impairment Acquisition-rela
Slide 22: Philips agrees with FDA on main terms of consent decree
Philips agrees with FDA on main terms of consent decree • The consent decree is now being finalized and will be submitted to the relevant US court for approval • Mainly focused on Philips Respironics business operations in the US • Will provide a roadmap of defined actions, milestones, and deliverab
Slide 23: Execution with decisive action as key value driver
Execution with decisive action as key value driver Patient safety and quality Reliable end-to-end Simplified as highest priority supply chain operating model Culture, accountability, End-to-end value chain by business End-to-end, competencies P&L-accountable business Patient safety and quality at he
Slide 24: Patient safety and quality as highest priority
Patient safety and quality as highest priority Examples of our progress in 2023 Elevated Patient Safety and Quality to the Executive Committee; driving cultural change Patient safety ~50% reduction in the number of Quality Management Systems since inception of program and quality as highest priority
Slide 25: Towards a reliable end-to-end supply chain
Towards a reliable end-to-end supply chain Examples of our progress in 2023 Moved to customer centric end-to-end supply chain teams aligned to the businesses Reliable end-to-end ~75% PCBAs redesigns completed supply chain 2,100+ reduced risk for high-risk components vs 700+ year-end 2022 De-risked a
Slide 26: Simplified, more agile operating model
Simplified, more agile operating model Examples of our progress in 2023 New operating model live for 9 months, completed re-alignment of workforce, roles and reporting lines; enabled more effective ways of working across the company Simplified Reduced workforce by ~8K, ahead of 7K planned and on tra
Slide 27: Execution with decisive action as key value driver: 2024 focus areas
Execution with decisive action as key value driver 2024 focus areas Patient safety and quality Reliable end-to-end Simplified as highest priority supply chain operating model Continued focus on cultural shift Leverage our regional end-to-end supply Leverage effective ways of working and improving co
Slide 28: Key takeaways
Key takeaways • Strong sales growth, improved profitability, and very strong cash flow in 2023 through solid execution of our plan to create value with sustainable impact • Making progress on our three priorities: – Enhance patient safety & quality – Strengthen supply chain reliability – Establish a
Slide 29: Financial appendix
Financial appendix © Koninklijke Philips N.V.
Slide 30: Working capital and inventories
Working capital and inventories Group working capital1 in millions of EUR unless otherwise stated Group inventories in millions of EUR unless otherwise stated as % of LTM sales2 as % of LTM sales2 17.6% 22.7% 23.1% 22.3% 22.1% 3,000 15.7% 15.7% 14.9% 20.0% 4,500 19.1% 25% 2,500 10.0% 15.0% 20% 3,500
Slide 31: Debt maturity profile and liability management
Debt maturity profile and liability management Long term debt profile and liability management Debt maturity profile as per 31 December, 2023 (in billions of EUR unless otherwise stated) Long-term debt1 • Net debt position decreased from EUR 7.0 to 5.8 1.6 Short-term debt2 billion 1.4 Unutilized sta
Slide 32: Capital expenditures, Depreciation and Amortization
Capital expenditures, Depreciation and Amortization in millions of EUR Q4 2022 Q4 2023 FY 2022 FY 2023 Capital expenditures on property, plant and equipment 164 105 444 345 Capitalization of development costs 77 68 363 281 Depreciation 178 173 711 683 Amortization of acquired intangible assets 104 7
Slide 33: Restructuring, acquisition-related charges and Other items
Restructuring, acquisition-related charges and Other items 1. R&D project impairments | 2. Provision for a legal matter | 3. Quality remediation actions | 4. Respironics field-action running remediations costs | 5. Respironics fields-action connected to the anticipated consent decree | 6. Portfolio
Slide 34: Slide 34
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