Signify Nv Ord

Hello and welcome to the Signify second quarter and half-year results 2024. Throughout the call, all participants will be in listen-only mode. After the presentation, there will be a question and answer session. Please note that this is limited to one question plus one follow-up. Today, I am pleased to present Eric Wondola, CEO, Zeljko Kozanovic, CFO, and Thelka Terdes, Head of IR. Please go ahead with your meetings.

Good morning, everyone, and welcome to Signify's earnings call for the second quarter 2024. With me today are Eric Gondola, CEO of Signify, and Zeljko Kozanovic, CFO. During this call, Eric will first take you through the second quarter highlights, after which Zeljko will present the company's second quarter financial performance and highlights for the first half of the year. Eric will then come back to discuss the outlook for the remainder of the year. After that, we will be happy to take your questions. Our press release and presentation were published at 7 o'clock this morning. Both documents are available for download from our investor relations website. The transcript of this conference call will be made available as soon as possible. With that, I will hand over to Eric.

Thank you, Talitha. Good morning to everyone, and thank you for joining us today. So let's start immediately with some of the highlights for the second quarter of 2024 on slide four. So as you can see, we increased the install base of connected light points to 136 million. At the end of the quarter, LED-based sales were 86% of total sales compared to 84% one year ago. Comparative sales declined by 8.4%, impacted by the accelerated sales decline of conventional, which is weighing around 2 percentage points, and the continued soft market conditions in the European professional business and in China. At the same time, we saw a return to growth in the consumer business outside of China and our OEM business. The adjusted EBITDA margin decreased by 40 basis points to 7.9% as gross margin expansion was upset by absorption of fixed costs. Net income came at 63 million euros compared to 45 million in Q2 last year. The year-on-year improvement is mainly driven by lower adjustment items, lower non-cash losses on virtual power purchase agreements and higher financial income finally free cash flow was 51 million euro as higher income from operations was offset by a higher restructuring payout and a higher cash outflow from working capital now let's move to slide five uh starting with the professional business and nominal sales in q2 were 959 million euros, with comparable sales showing a decline of 8.3%, mainly due to the continued softness in Europe and China, while agricultural lighting showed sequential improvements, and the Americas remain strong. In Europe, the weakness was mainly driven by indoor professional lighting, as the public segment rebounded after a temporary weakness in Q1. As you can see, the adjusted margin declined by 30 basis points to 8.1%, mainly due to an absorption of fixed costs, as negative pricing was compensated by bump savings and positive sales mix. Let's move now to the consumer business on slide 6. Nominal sales in Q2 were 297 million euros, with comparable sales showing a decline of 2.4%, mainly due to lower sales in China while connected offers were back to growth. The average daily air margin increased by 160 basis points to 7.1%, driven by both cost of goods sold savings, positive sales mix, and a positive currency effect. Continuing with the OEM business on slide seven, nominal sales in Q2 were at 106 million euro with comparable sales showing a slight increase of 0.1%, a continuous sequential improvement following normalization of inventory levels at our OEMs. The adjusted EBITDA margin increased by 370 basis points to 13.9%, mainly driven by cost of goods sold savings. And finally, the conventional business on slide 8, nominal sales in Q2 2020, were at €114 million, with comparable sales showing a decline of 27.6% impacted by the fluorescent bands in Europe last year. The adjusted EBITDA margin declined by 420 basis points to 15.7%, mainly due to an underabsorption of fixed costs following the accelerated sales decline and a one-off charge related to environmental provisions. If we do exclude the effect of one of charges, the adjusted margin would be around the historical 18 to 19% level. So let's look at the next slide, slide nine, where I would like to discuss a couple of business highlights, starting off with a highlight on a recent partnership. So we announced a partnership with Mercedes-AMG Petronas Formula One team driven by a shared passion for responsible innovation. Our innovation in lighting can support the team ambition to become one of the world's most sustainable in sports, advancing sustainability, enhancing performance, and elevating experience for fans, trackside, and also at home. In our professional business, we expanded the ultra-efficient range with new panels, recessed luminaires and downlights, and expanded the Philips My Creation range of 3D-printed products. In the consumer business, we launched the Philips U-Twilight sleep and wake-up light, designed to support the circadian rhythm, and launched the new Wizz Music Sync fixture, allowing users to change the brightness and color of their Wizz lights with the reason of music next i would like to discuss our sustainability performance on slide 10. so in the second quarter of the year we continue to advance on our brighter lives better worlds 2025 sustainability program commitments we are ahead of schedule to achieve our 2025 target to reduce greenhouse gas emissions at the same time circular revenues increased to 35 percent up one percent on last quarter and ahead of our 25 targets of 32%. The main contribution came from LED serviceable luminaires. Brighter large revenues remained at 31% on track to reach the 2025 target of 32%. This includes a strong contribution from consumer products that support health and well-being, mainly eye comfort, and professional luminaires that are dark sky compliant, reducing the impact on biodiversity. The percentage of women in leadership position increased to 29%, a 1% improvement over last quarter, slightly behind our 2025 targets of 34%. We continue our efforts to increase representation through focused hiring practices for diversity at all levels and through retention and engagement activities to reduce attrition. So additionally, we launched our climate transition plan, which sets our climate strategy in line with our SVTI-validated 2040 net zero targets. With that, we are part of a very limited number of companies that have a detailed plan linked to science-based targets. We are targeting net zero greenhouse gas emissions across our entire value chain by 2040 and aim for an absolute reduction of scope one, two, and three greenhouse gas emissions of 50% by 2030 and 90% by 2040 against a 2019 baseline. Let me now head over to Zelko, who will take you through our Q2 financial performance and highlight for the first half of the year.