Koninklijke Philips N.V. NY Registry Shares

Welcome to the Royal Philips second quarter and semi-annual 2024 results conference call on Monday, July 29th, 2024. During the call hosted by Mr. Roy Jacobs, CEO, and Mr. Abhijit Bhattacharya, CFO, all participants will be in a listen-only mode. After the introduction, there will be an opportunity to ask questions. Please note that this call will be recorded. And replay will be available on the investor relations website of Roy Phillips. I'll now hand the conference over to Mr. Leandro Mazzoni, head of investor relations. Please go ahead, sir.

Hi, everyone. Welcome to Phillips' second quarter and half year 2024 results webcast. I'm here with our CEO, Roy Jacobs, and our CFO, Abhijit Bhattacharya. The press release and investor deck were published on our investor relations website this morning. The replay and full transcript of this webcast will be made available on the website after the call as well. Before we start, I want to draw your attention to our safe harbor statement on screen. You will also find the statement in the presentation published on our investor relations website. Roy, over to you. Good morning, everyone, and welcome.

Great to be with you today. I want to start with the key highlights of this morning's release. We delivered strong order intake growth this quarter. When in a challenging macroeconomic environment, we achieved strong margin improvement supported by a productivity program, solid operational cash flow, and comparable sales growth in line with our plan. The improvements were across all business segments and a result of the ongoing actions to enhance execution supported by our innovations. We continue to make progress and see the effects of the focus on our three priorities. enhancing patient safety and quality, strengthening our supply chain reliability, and establishing a simplified, more agile operating model. Supported by key innovation launches and our ongoing actions, we are confident in our plan and reiterate our outlook for the full year 2024. On to the key financial highlights. Comparable sales growth was 2% in a quarter, on the back of high single-digit growth last year. This was driven by 4% growth in diagnosis and treatment and 2% growth in both the connected care and personal health segments. The adjusted EBITDA margin was 11.1% in a quarter, a strong improvement of 100 basis points compared to Q2 2023. Free cash flow outflow was 64 million, which included the payment in connection with the Respironics economic loss settlement in the US. we delivered a strong underlying operational cash flow improvement, which Abhijit will unpack later. I'm encouraged by the 9% order intake increase in the quarter. I'm confident that our innovative portfolio is well positioned to help hospitals worldwide address their staffing shortages, enhance productivity, and improve patient and staff experience. As our our leading innovations for consumers to take care of themselves. We continue to expect positive order intake growth in the second half and in the full year 2024. In China, orders declined as the industry-wide anti-corruption measures imposed by the government continue to impact orderly times by hospitals as their internal approval cycles have increased to ensure compliance. I actually just returned from China last week where I met many of our customers and partners, and it is clear that it remains an attractive healthcare market. We do not expect that the anti-corruption measures impact structural demand. Our order funnel is active in the country, and we expect China to gradually contribute to order growth in the coming quarters, obeyed from a low base. This will be supported by the recently announced government program for renewal of aged medical equipment. Let me now provide you with some of the customer and innovation milestones during the quarter. We continue to see strong customer pool for our solutions, and signed several long-term agreements across the world in this quarter. For example, we signed multi-year partnerships for monitoring MS-guided therapy and helium-free MR with several university hospitals in the Netherlands and Belgium. We also signed a major multi-year partnership with Bon Secours Mercy Health, one of the largest health systems in the US, standardizing innovative patient monitoring solutions across its 49 hospitals to drive better patient outcomes and reduce burden on staff. We launched our next generation AI-enabled cardiovascular ultrasound platform with new FDA-cleared AI tools integrated to advance cardiovascular imaging and increase automation and productivity of our customers. Demonstrating our innovation leadership in minimally invasive treatments, we announced the first implant of the dual venous stent system, following pre-market approval from the FDA. In personal health, we unveiled a series of innovations in China, including the launch of the first medical-grade Philips Lumia 8000 series IPL hair removal device with cooling technology. Looking ahead, we remain confident in our plans. acknowledging that uncertainties remain in a challenging macro environment. In 2024, we expect to deliver further performance improvement, with 3 to 5% comparable sales growth, building on a strong comparison base of last year, an adjusted EBITDA margin of 11 to 11.5%, and a free cash flow of 0.9 to 1.1 billion. I will now hand it over to Abhijit to take us through the Q2 financials in more detail. After which, I will come back on our execution priorities.