Koninklijke Philips N.v. · EURONEXT:PHIA
Koninklijke Philips — Koninklijke Philips N.V. NY Registry Shares — Q3 2023 Earnings Presentation
28 slides from Koninklijke Philips's earnings presentation, Oct 23, 2023
Slide 1: Third quarter 2023 results
Third quarter 2023 results October 23, 2023
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 Third quarter highlights and financial performance 4 Delivering value with sustainable impact 17 Financial appendix 23 3 © Koninklijke Philips N.V.
Slide 4: Key takeaways
Key takeaways • Delivered strong sales growth, profitability and cash flow; improvements across all Business Segments and regions • Making progress on our three priorities: ‒ Enhance patient safety & quality ‒ Strengthen supply chain reliability ‒ Establish a simplified, agile operating model • Comp
Slide 5: Delivered strong sales growth, profitability and cash flow
Delivered strong sales growth, profitability and cash flow; Order book remains strong, and we are taking actions to improve OIT Financial performance Highlights in millions of EUR unless otherwise stated Q3 2022 Q3 2023 • Strong CSG with contribution from all business segments and geographies Sales
Slide 6: Preferred strategic and innovation partner for customers
Preferred strategic and innovation partner for customers Agreement with one of the largest health systems in the USA CoxHealth (Missouri, USA) • 10-year, EUR 100 million Enterprise Monitoring as a Service • Co-designed first-of-its-kind virtual care solution to increase agreement covering hardware,
Slide 7: Highlights by business segment in Q3 2023
Highlights by business segment in Q3 2023 Diagnosis and Treatment +14% CSG Connected Care +10% CSG Personal Health +7% CSG • Double-digit sales growth across all businesses • Double-digit sales growth in Monitoring and mid- • Sales growth driven by high-single-digit growth in single digit growth in
Slide 8: Diagnosis & Treatment
Diagnosis & Treatment Financial performance in millions of EUR unless otherwise stated Q3 2022 Q3 2023 Sales 2,071 2,201 Comparable Sales Growth (3)% 14% Adj. EBITA margin 10.4% 12.7% Adj. EBITDA margin 13.0% 15.5% Income from operations 125 251 Q3 2023 highlights • Double-digit CSG across Diagnosti
Slide 9: Connected Care
Connected Care Financial performance in millions of EUR unless otherwise stated Q3 2022 Q3 2023 Sales 1,199 1,232 Comparable Sales Growth (12)% 10% Adj. EBITA margin (7.5)% 3.7% Adj. EBITDA margin (0.8)% 8.9% Income from operations (1,709) (111) Q3 2023 highlights • Double-digit CSG in Monitoring an
Slide 10: Personal Health
Personal Health Financial performance in millions of EUR unless otherwise stated Q3 2022 Q3 2023 Sales 902 898 Comparable Sales Growth 4% 7% Adj. EBITA margin 14.1% 18.7% Adj. EBITDA margin 17.2% 21.4% Income from operations 120 142 Q3 2023 highlights • CSG driven by high-single-digit growth in Pers
Slide 11: Adj. EBITA margin improvement driven by sales, pricing and productivity
Adj. EBITA margin improvement driven by increased sales, pricing and productivity measures Group Adj. EBITA margin1 0.1% 5.4% 2.4% (2.5%) 10.2% 4.8% Adj. EBITA Volume Cost headwinds Productivity and pricing Other Adj. EBITA Q3 2022 Q3 2023 11 1. Excluding restructuring costs, acquisition-related cha
Slide 12: Productivity initiatives delivered EUR 258 million in the quarter
Productivity initiatives delivered EUR 258 million in the quarter and EUR 685 million year to date Productivity initiatives1 (in millions of EUR unless otherwise stated) 2023 -2025 target Q3 2023 actuals • Simplified organization with reduction of workforce by ~7.5k roles, out of 10k roles in total
Slide 13: Order book remains strong and will continue to support growth
Order book remains strong and will continue to support growth; Accounts for 40% of Group sales Indexed order book1,2 development + ~20% • Order book ~20% higher than Q3 2021, when global supply chain crisis started, despite very strong order-to-sales conversion in the last twelve months Q3 2021 Q3 2
Slide 14: 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 chain constrains Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2019 2019 2020 2020 202
Slide 15: Actions to improve order intake by shortening lead times
Actions to improve order intake by shortening lead times from order to delivery, and leveraging our innovations Diagnosis & Treatment Comparable Order Intake growth 6% 17% • OIT low double-digit below last year, due to long order lead 2% times, high comps, and substantially lower orders in China -9%
Slide 16: Further raising the outlook for 2023
Further raising the outlook for 2023, although recognizing that uncertainties remain Provided on January 30, 2023 Revised on October 23, 2023 Low-single-digit 6 – 7% • Diagnosis & Treatment: Mid-single-digit • High-single-digit to double-digit Comparable Sales Growth • Connected Care: Mid-single-dig
Slide 17: Resolving the recall for patients remains our highest priority
Resolving the recall for patients remains our highest priority 2023 YTD 2023 2023-2025 Finalize recall of sleep therapy devices Remediation of >99% of sleep therapy Finalize recall and testing devices complete2; ventilators ongoing Agree details of further testing FDA feedback received on testing wi
Slide 18: Execution with decisive action as key value driver
Execution with decisive action as key value driver Enabled by culture of accountability and strong HealthTech capabilities Patient safety and quality Reliable end-to-end Simplified as highest priority supply chain operating model Culture, accountability, End-to-end value chain End-to-end, Competenci
Slide 19: Patient safety and quality as highest priority
Patient safety and quality as highest priority Examples of our progress in Q3 2023 Kicked-off company-wide Timeout for Patient Safety and Quality, as part of strengthening our culture Patient safety Launch of one of the largest EMC1 labs in Europe specialized in testing health technology and quality
Slide 20: Towards a reliable end-to-end supply chain
Towards a reliable end-to-end supply chain Examples of our progress in Q3 2023 ~70% of planned PCBAs redesigns completed Reliable end-to-end 1,800+ reduced risk for high-risk components vs 700+ year-end 2022 supply chain On track to zero high risk components by end of 2023 ~17% increase in service l
Slide 21: Simplified, more agile operating model
Simplified, more agile operating model Examples of our progress in Q3 2023 Completed re-alignment of workforce, roles and reporting lines under new operating model Simplified Reduced workforce by ~7.5K roles, out of 10k roles in total planned by 2025 operating model Continue to inject healthtech tal
Slide 22: Key takeaways
Key takeaways • Delivered strong sales growth, profitability and cash flow; improvements across all Business Segments and regions • Making progress on our three priorities: ‒ Enhance patient safety & quality ‒ Strengthen supply chain reliability ‒ Establish a simplified, agile operating model • Comp
Slide 23: Financial appendix
Financial appendix © Koninklijke Philips N.V.
Slide 24: Working capital and inventories
Working capital and inventories Group working capital1 Group inventories (in millions of EUR unless otherwise stated) as % of LTM sales2 (in millions of EUR unless otherwise stated) as % of LTM sales2 18.3% 17.6% 26.5% 3,000 15.7% 15.7% 14.9% 20.0% 5,500 28% 2,500 15.0% 4,500 22.3% 22.1% 26% 22.7% 2
Slide 25: Debt maturity profile and liability management
Debt maturity profile and liability management Long term debt profile and liability management Debt maturity profile as per 30 September 2023 (in billions of EUR unless otherwise stated) Long-term debt 1 1.6 • Total net debt position decreased to EUR 7.0 billion; no financial Short-term debt2 covena
Slide 26: Capital expenditures, Depreciation and Amortization
Capital expenditures, Depreciation and Amortization 1) 26 1. Includes impairments © Koninklijke Philips N.V.
Slide 27: Restructuring, acquisition-related charges and other items
Restructuring, acquisition-related charges and other items 1. Related to the discontinuation of certain R&D projects | 2. Provision for a legal matter | 3. Provision related to Respironics field action; Running remediation costs in Respironics | 4. Quality action-related charges| 5. Product portfoli
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