Philips Reports Strong Q2 2024 Performance with Order Growth and Margin Improvement

Philips delivers strong order intake growth in the second quarter, margin improvement and sales growth; reiterates full-year outlook - Koninklijke Philips (NYSE:PHG)

July 29, 2024 Second-quarter highlights Group sales amounted to EUR 4.5 billion, with comparable sales growth of 2%Comparable order intake increased by 9%Income from operations EUR 816 million, including EUR 538 million insurance income*)Adjusted EBITA margin increased to 11.1% of salesOperating cash inflow of EUR 89 million, with a free cash outflow of EUR 64 million Roy Jakobs, CEO of Royal Philips: "I am encouraged by our return to order intake growth this quarter, primarily driven by North America. Within a challenging macro environment we achieved strong margin improvement, supported by our productivity program, solid operational cashflow due to improved working capital management and comparable sales growth in line with our plan. Performance improvement was driven by progress on our execution priorities and industry-leading innovations. These included FDA-cleared AI tools within our next-generation cardiovascular ultrasound platform to increase automation and productivity. We continue to focus on enhancing execution, improving end-to-end supply chain resilience and increasing agility and productivity through simplifying our operating model. Patient safety and quality remains our number one priority." Group and segment performance Group comparable sales increased 2%, on the back of strong growth in Q2 2023. Growth in mature and growth geographies was partly offset by the decline in China. Comparable order intake grew 9% in the quarter and 3% in the first half of 2024, reflecting quarterly unevenness in the order-intake pattern. China remains a fundamentally attractive growth market with strong underlying demand while the government's anti-corruption measures continued to impact short-term hospital order lead times. Adjusted EBITA margin for the group increased to 11.1% compared with 10.1% in Q2 2023, with improvement across all businesses. Free cash outflow was EUR 64 million and included payments of EUR 415 million in connection with the Respironics economic loss settlement in the US, partly offset by initial receipt from insurers of EUR 150 million. In the quarter S&P Global Ratings and Moody's Ratings upgraded their credit ratings outlook for Philips to stable. Philips now has stable outlooks for its strong credit ratings across all main global credit rating agencies. The relevant reports and additional credit ratings information can be found here. Diagnosis & Treatment comparable sales increased 4%, on the back of double-digit growth in Q2 2023, with growth across Image Guided Therapy and Precision Diagnosis. Adjusted EBITA margin improved to 12.2%, mainly driven by improved sales, pricing and productivity measures. Connected Care comparable sales increased 2%, driven by strong growth in Enterprise Informatics, while Monitoring comparable sales growth was flat on the back of strong double-digit growth in Q2 2023. Adjusted EBITA margin improved to 8.8%, mainly driven by productivity measures and pricing. Personal Health comparable sales increased 2% globally, driven by sales growth outside of China. Adjusted EBITA margin improved to 16.9%, mainly driven by operational improvements and productivity measures. Productivity Total productivity savings of EUR 195 million in the quarter: operating model savings of EUR 57 million, procurement savings of EUR 71 million, and other programs' savings of EUR 67 million. Outlook Philips reiterates its confidence in delivering the 2025 plan, acknowledging that uncertainties remain. For the full year 2024, Philips continues to expect 3-5% comparable sales growth, an Adjusted EBITA margin of 11-11.5%, and free cash flow of EUR 0.9-1.1 billion. The outlook excludes the potential impact of the ongoing Philips Respironics-related legal proceedings, including the investigation by the US Department of Justice. Customer, innovation and ESG highlights Philips signed multi-year partnerships for monitoring and image-guided therapy with several university hospitals in the Netherlands and will provide patient monitors for the new Grand Hôpital de Charleroi in Belgium, as well as roll out its ePatch and AI-driven analytics platform across 14 hospitals in Spain.Philips secured customer wins in the US including a major multi-year strategic partnership with Bon Secours Mercy Health, one of the country's largest health systems, standardizing innovative patient monitoring solutions across its 49 hospitals, driving better patient outcomes and reducing burdens on staff.Reinforcing its #1 global position in cardiovascular ultrasound, Philips is launching its next-generation AI-enabled cardiovascular ultrasound platform with new FDA-cleared AI tools integrated into the company's EPIQ CVx and Affiniti CVx ultrasound system to advance cardiovascular imaging and increase automation and productivity.Demonstrating its innovation leadership in minimally invasive treatments, Philips announced the first implant of the Duo Venous Stent System following pre-market approval from the US FDA. The system's flexible design allows clinicians to better treat patients with deep venous disease.Philips unveiled a series of consumer health innovations in the Greater China market, meeting key consumer needs across the region. This includes the launch of the first medical-grade Philips Lumea 8000 Series IPL hair removal device with cooling technology, the limited-edition Transformers-themed 5000, 7000 and 9000 series shavers, and the new Sonicare 5300 power toothbrush.S&P recognized Philips as a leader in ESG as one of the first 'Light green' scores in their newly launched Climate Transition Assessment. Philips was also included in the 'FTSE4Good' ESG index, and NGO Health Care Without Harm confirmed that Philips meets its Climate Excellence Standard for Health Care Suppliers.Philips won 43 Red Dot design awards, including special recognition for LumiGuide, the company's 3D medical device guidance solution that's paving the way for radiation-free minimally invasive surgery. Capital allocation In the second quarter, Philips completed the EUR 1.5 billion share repurchase program for capital reduction purposes that was announced on July 26, 2021, and canceled the 4,437,164 shares acquired this year. Philips also distributed a dividend of EUR 0.85 per common share in the form of shares only, resulting in the issuance of 30,860,582 new common shares. Following the distribution of dividend and the cancellation of shares, the total number of issued shares amounts to 939,939,384 common shares. More information is available via this link. *) Related to Respironics product liability claim. Click here to view the release online For further information, please contact: Elco van Groningen Philips External Relations Tel.: +31 6 8103 9584 E-mail: elco.van.groningen@philips.com Ben Zwirs Philips External Relations Tel.: +31 6 1521 3446 E-mail: ben.zwirs@philips.com Dorin Danu Philips Investor Relations Tel.: +31 20 59 77055 E-mail: dorin.danu@philips.com About Royal Philips Royal Philips PHGPHIA)) is a leading health technology company focused on improving people's health and well-being through meaningful innovation. Philips' patient- and people-centric innovation leverages advanced technology and deep clinical and consumer insights to deliver personal health solutions for consumers and professional health solutions for healthcare providers and their patients in the hospital and the home. Headquartered in the Netherlands, the company is a leader in diagnostic imaging, ultrasound, image-guided therapy, monitoring and enterprise informatics, as well as in personal health. Philips generated 2023 sales of EUR 18.2 billion and employs approximately 68,700 employees with sales and services in more than 100 countries. News about Philips can be found at www.philips.com/newscenter. Forward-looking statements and other important information Forward-looking statements 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 business of Philips and certain of the plans and objectives of Philips with respect to these items. Examples of forward-looking statements include statements made about strategy, estimates of sales growth, future Adjusted EBITA*), future restructuring and acquisition related charges and other costs, future developments in Philips' organic business and the completion of acquisitions and divestments. Forward-looking statements can be identified generally as those containing words such as "anticipates", "assumes", "believes", "estimates", "expects", "should", "will", "will likely result", "forecast", "outlook", "projects", "may" or similar expressions. By their nature, these statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements. These factors include but are not limited to: Philips' ability to gain leadership in health informatics in response to developments in the health technology industry; Philips' ability to keep pace with the changing health technology environment; macroeconomic and geopolitical changes; integration of acquisitions and their delivery on business plans and value creation expectations; securing and maintaining Philips' intellectual property rights, and unauthorized use of third-party intellectual property rights; Philips' ability to meet expectations with respect to ESG-related matters; failure of products and services to meet quality or security standards, adversely affecting patient safety and customer operations; breaches of cybersecurity; challenges in simplifying our organization and our ways of working; the resilience of our supply chain; attracting and retaining personnel; challenges in driving operational excellence and speed in bringing innovations to market; compliance with regulations and standards including quality, product safety and (cyber) security; compliance with business conduct rules and regulations including privacy and upcoming ESG disclosure and due diligence requirements; treasury and financing risks; tax risks; reliability of internal controls, financial reporting and management process; and global inflation. As a result, Philips' actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see also the Risk management chapter included in the Annual Report 2023. Reference is also made to section Risk management in the Philips semi-annual report 2024. Third-party market share data Statements regarding market share contained in this document, including those regarding Philips' competitive position, are based on outside sources such as specialized research institutes, as well as industry and dealer panels, in combination with management estimates. Where information is not yet available to Philips, market share statements may also be based on estimates and projections prepared by management and/or based on outside sources of information. Management's estimates of rankings are based on order intake or sales, depending on the business. Market Abuse Regulation This press release contains inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation. Use of non-IFRS information In presenting and discussing the Philips Group's financial position, operating results and cash flows, management uses certain non-IFRS financial measures. These non-IFRS financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measure and should be used in conjunction with the most directly comparable IFRS measures. Non-IFRS financial measures do not have standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. A reconciliation of these non-IFRS measures to the most directly comparable IFRS measures is contained in this document. Further information on non-IFRS measures can be found in the Annual Report 2023. Presentation All amounts are in millions of euros unless otherwise stated. Due to rounding, amounts may not add up precisely to totals provided. All reported data is unaudited. Financial reporting is in accordance with the accounting policies as stated in the Annual Report 2023. Prior-period amounts have been reclassified to conform to the current-period presentation; this includes immaterial organizational changes. Effective Q1 2024, Philips has revised the order intake policy to reflect the full contract value for software contracts that start generating revenue within an 18-month horizon, instead of only the next 18-months-to-revenue horizon. This change has been implemented to better align with the specific business model of our software businesses, simplify the order intake process, and better align with peers. Prior-period comparable order intake percentages have been restated accordingly. This revision has not resulted in any material changes to the order intake percentages for the periods presented. Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares in the second quarter of 2024 in connection with the 2023 share dividend. *) Non-IFRS financial measure. Refer to Reconciliation of non-IFRS information. Market News and Data brought to you by Benzinga APIs

Philips delivers strong order intake growth in the second quarter, margin improvement and sales growth; reiterates full-year outlook

Operating cash inflow of EUR 89 million, with a free cash outflow of EUR 64 million Roy Jakobs, CEO of Royal Philips: "I am encouraged by our return to order intake growth this quarter, primarily driven by North America. Within a challenging macro environment we achieved strong margin improvement, supported by our productivity program, solid operational cashflow due to improved working capital management and comparable sales growth in line with our plan. Performance improvement was driven by progress on our execution priorities and industry-leading innovations. These included FDA-cleared AI tools within our next-generation cardiovascular ultrasound platform to increase automation and productivity. We continue to focus on enhancing execution, improving end-to-end supply chain resilience and increasing agility and productivity through simplifying our operating model. Patient safety and quality remains our number one priority." Group and segment performance Group comparable sales increased 2%, on the back of strong growth in Q2 2023. Growth in mature and growth geographies was partly offset by the decline in China. Comparable order intake grew 9% in the quarter and 3% in the first half of 2024, reflecting quarterly unevenness in the order-intake pattern. China remains a fundamentally attractive growth market with strong underlying demand while the government's anti-corruption measures continued to impact short-term hospital order lead times. Adjusted EBITA margin for the group increased to 11.1% compared with 10.1% in Q2 2023, with improvement across all businesses. Free cash outflow was EUR 64 million and included payments of EUR 415 million in connection with the Respironics economic loss settlement in the US, partly offset by initial receipt from insurers of EUR 150 million. In the quarter S&P Global Ratings and Moody's Ratings upgraded their credit ratings outlook for Philips to stable. Philips now has stable outlooks for its strong credit ratings across all main global credit rating agencies. The relevant reports and additional credit ratings information can be found here. Diagnosis & Treatment comparable sales increased 4%, on the back of double-digit growth in Q2 2023, with growth across Image Guided Therapy and Precision Diagnosis. Adjusted EBITA margin improved to 12.2%, mainly driven by improved sales, pricing and productivity measures. Connected Care comparable sales increased 2%, driven by strong growth in Enterprise Informatics, while Monitoring comparable sales growth was flat on the back of strong double-digit growth in Q2 2023. Adjusted EBITA margin improved to 8.8%, mainly driven by productivity measures and pricing. Personal Health comparable sales increased 2% globally, driven by sales growth outside of China. Adjusted EBITA margin improved to 16.9%, mainly driven by operational improvements and productivity measures. Productivity Total productivity savings of EUR 195 million in the quarter: operating model savings of EUR 57 million, procurement savings of EUR 71 million, and other programs' savings of EUR 67 million. Outlook Philips reiterates its confidence in delivering the 2025 plan, acknowledging that uncertainties remain. For the full year 2024, Philips continues to expect 3-5% comparable sales growth, an Adjusted EBITA margin of 11-11.5%, and free cash flow of EUR 0.9-1.1 billion. The outlook excludes the potential impact of the ongoing Philips Respironics-related legal proceedings, including the investigation by the US Department of Justice. Customer, innovation and ESG highlights Capital allocation In the second quarter, Philips completed the EUR 1.5 billion share repurchase program for capital reduction purposes that was announced on July 26, 2021, and canceled the 4,437,164 shares acquired this year. Philips also distributed a dividend of EUR 0.85 per common share in the form of shares only, resulting in the issuance of 30,860,582 new common shares. Following the distribution of dividend and the cancellation of shares, the total number of issued shares amounts to 939,939,384 common shares. More information is available via this link. *) Related to Respironics product liability claim. Click here to view the release online For further information, please contact: Elco van Groningen Philips External Relations Tel.: +31 6 8103 9584 E-mail: elco.van.groningen@philips.com Ben Zwirs Philips External Relations Tel.: +31 6 1521 3446 E-mail: ben.zwirs@philips.com Dorin Danu Philips Investor Relations Tel.: +31 20 59 77055 E-mail: dorin.danu@philips.com About Royal Philips Royal Philips (NYSE: PHG, AEX: PHIA) is a leading health technology company focused on improving people's health and well-being through meaningful innovation. Philips' patient- and people-centric innovation leverages advanced technology and deep clinical and consumer insights to deliver personal health solutions for consumers and professional health solutions for healthcare providers and their patients in the hospital and the home. Headquartered in the Netherlands, the company is a leader in diagnostic imaging, ultrasound, image-guided therapy, monitoring and enterprise informatics, as well as in personal health. Philips generated 2023 sales of EUR 18.2 billion and employs approximately 68,700 employees with sales and services in more than 100 countries. News about Philips can be found at www.philips.com/newscenter. Forward-looking statements and other important information Forward-looking statements 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 business of Philips and certain of the plans and objectives of Philips with respect to these items. Examples of forward-looking statements include statements made about strategy, estimates of sales growth, future Adjusted EBITA*), future restructuring and acquisition related charges and other costs, future developments in Philips' organic business and the completion of acquisitions and divestments. Forward-looking statements can be identified generally as those containing words such as "anticipates", "assumes", "believes", "estimates", "expects", "should", "will", "will likely result", "forecast", "outlook", "projects", "may" or similar expressions. By their nature, these statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements. These factors include but are not limited to: Philips' ability to gain leadership in health informatics in response to developments in the health technology industry; Philips' ability to keep pace with the changing health technology environment; macroeconomic and geopolitical changes; integration of acquisitions and their delivery on business plans and value creation expectations; securing and maintaining Philips' intellectual property rights, and unauthorized use of third-party intellectual property rights; Philips' ability to meet expectations with respect to ESG-related matters; failure of products and services to meet quality or security standards, adversely affecting patient safety and customer operations; breaches of cybersecurity; challenges in simplifying our organization and our ways of working; the resilience of our supply chain; attracting and retaining personnel; challenges in driving operational excellence and speed in bringing innovations to market; compliance with regulations and standards including quality, product safety and (cyber) security; compliance with business conduct rules and regulations including privacy and upcoming ESG disclosure and due diligence requirements; treasury and financing risks; tax risks; reliability of internal controls, financial reporting and management process; and global inflation. As a result, Philips' actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see also the Risk management chapter included in the Annual Report 2023. Reference is also made to section Risk management in the Philips semi-annual report 2024. Third-party market share data Statements regarding market share contained in this document, including those regarding Philips' competitive position, are based on outside sources such as specialized research institutes, as well as industry and dealer panels, in combination with management estimates. Where information is not yet available to Philips, market share statements may also be based on estimates and projections prepared by management and/or based on outside sources of information. Management's estimates of rankings are based on order intake or sales, depending on the business. Market Abuse Regulation This press release contains inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation. Use of non-IFRS information In presenting and discussing the Philips Group's financial position, operating results and cash flows, management uses certain non-IFRS financial measures. These non-IFRS financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measure and should be used in conjunction with the most directly comparable IFRS measures. Non-IFRS financial measures do not have standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. A reconciliation of these non-IFRS measures to the most directly comparable IFRS measures is contained in this document. Further information on non-IFRS measures can be found in the Annual Report 2023. Presentation All amounts are in millions of euros unless otherwise stated. Due to rounding, amounts may not add up precisely to totals provided. All reported data is unaudited. Financial reporting is in accordance with the accounting policies as stated in the Annual Report 2023. Prior-period amounts have been reclassified to conform to the current-period presentation; this includes immaterial organizational changes. Effective Q1 2024, Philips has revised the order intake policy to reflect the full contract value for software contracts that start generating revenue within an 18-month horizon, instead of only the next 18-months-to-revenue horizon. This change has been implemented to better align with the specific business model of our software businesses, simplify the order intake process, and better align with peers. Prior-period comparable order intake percentages have been restated accordingly. This revision has not resulted in any material changes to the order intake percentages for the periods presented. Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares in the second quarter of 2024 in connection with the 2023 share dividend. *) Non-IFRS financial measure. Refer to Reconciliation of non-IFRS information.