Signify Nv Ord

Hello and welcome to the Signify Burt Quarter Results 2024. Throughout the call, all participants will be in listen-only mode, and afterwards, there will be a question-and-answer session. Please note, this is limited to one question plus one follow-up. Today, I am pleased to present Eric Rondelot, CEO, Zeljko Kosanovic, CFO, and Talke Gerdes. Head of Investor Relations. Please go ahead with your meeting.

Good morning, everyone, and welcome to Signify's earnings call for the third quarter 2024. With me today are Eric Rondola, CEO of Signify, and Zeljko Kosanovic, the CFO. During this call, Eric will first take you through the third quarter highlights, after which Zeljko will present the company's third quarter financial performance. Eric will then come back to discuss the outlook for the remainder of the year. And after that, we'll 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. And with that, I hand over to Eric.

Thank you, Telco. Good morning, everyone, and thank you for joining us today. Let's start with some highlights from the third quarter of 2024 on slide four. So we grew our installed base of connected lighting points to 139 million and our LED-based sales reached 90% of total sales compared to 85% one year ago. As anticipated, our top line improved sequentially in the quarter with a comparable sales decline of 5.2%. Our teams effectively managed the rapid decline of our conventional business and the ongoing headwinds in the Chinese market. Without this, Two challenges, our decline would have been limited to 1.3%. Given the decreasing contribution of our conventional business to EBITDA, our bottom line showed good resilience. Our cost reduction program began to yield the expected benefits resulting in an adjusted EBITDA margin of 10.5% for the whole quarter. We considerably lowered our adjusted items thanks to consistently reducing restructuring costs Along with the sizable one-off tax benefits, this resulted in robust net income growth of 30%. Additionally, our ongoing focus on cash conversion led to strong free cash flow generation for the quarter. I will now move to the performance of our four businesses. Let's start with the professional business on slide five. Nominal sales. were 995 million euros with comparable sales showing a decline of 4.1%. We saw the expected recovery of our agricultural business and continued growth for connected lighting. Our business in China, as well as in Europe, remained weak. Southern and Eastern Europe, along with the distribution channel, retail and hospitality sectors were soft, while we saw a strong performance from the Nordics. An expansion of our gross margin was driven by the positive sales mix, bill of material savings and concept savings, which more than compensated for price pressure in some parts of the business. A professional business achieved an adjusted margin improvement of 20 basis points to 10.8%, primarily due to gross margin improvement and cost reductions, as the benefits of our cost reduction program began to materialize. Our performance in the third quarter illustrates the operating leverage this business is capable of, even as top-line pressure persists in some markets. Let's move to the consumer business on slide 6. Comparable sales decreased by 1.8% to 304 million euros. Excluding China, our consumer business delivered a comparable sales growth of 2.6%, reflecting the recovery across all other regions. Our K-Lite business, which is mostly an export business, showed a strong performance during the quarter. The adjusted air margin decreased by 120 basis points to 7.6%, mostly due to China and higher transportation costs. Continuing with the OEM business on slide seven. Our OEM business delivered a strong performance in Q3, particularly in Europe. The growth in Q3 came despite the impact of the customers in sourcing in the US, This illustrates further the rebound of this business in 2024. Comparable sales increased by 0.2%. The adjusted EBITDA margin increased by 300 basis points to 15.2%, including a one-time effect of around 200 basis points. EBITDA also benefited from the expansion of our gross margin through bill of material savings and productivity gains. Finally, the business achieved overall reductions in line with our cost reduction program. And finally, the conventional business on slide 8. Compatible sales showed a decline of 29.4%, still affected by the fluorescent bands in Europe that came into effect last year. In addition, some US states, including California, have announced sales bound to be implemented starting January 1st. They adjusted a margin decline by 160 basis points to 19.3%, as the negative volume effect was partly compensated by cost savings. On the next slide, which is slide 9, I would like to discuss a couple of business highlights, starting with the Atlantis resort in Dubai. The lighting system that we have implemented enables seamless control of lighting and other third-party applications. It enhances guest experience with circadian lighting that supports guests' well-being during their stay. We also expanded our partnership with Great Lakes Greenhouses, installing our Green Power LED solution integrated with our GrowWise controlled system. The integration maximizes crop production and energy efficiency by up to 40%, enhancing crop quality, while simplifying greenhouse management. In the consumer business, we launched the highly anticipated second-generation Philips Hue 8K Sync Box. The upgraded device allows users to sync and stream the highest quality content with no latency at ultra-fast refresh rates and with very high resolution, offering an enhanced experience for gamers. Following its launch, we have seen some excellent reviews and feedback from the media and consumers who are praising the performance and enhanced features. Finally, in the OEM business, we entered a partnership with Finnish design company Setco Design, integrating our Philips Core LED lamp into Secto's design acrylic wooden luminaires. This allows consumers to adjust the color temperature of the lighting fixture via a switch integrated into the body of the lamp. Next, I would like to discuss our sustainability performance on slide 10. In the third quarter of the year, we continue to advance on our Brighter Labs Better World 2025 sustainability program commitments. We are on schedule first to achieve our 2025 target to reduce greenhouse gas emissions. Circular revenues increased to 36.7%. The main contribution coming from professional serviceable luminaires in the Americas. Brighter Labs revenues remain at 31%. with a strong contribution from consumer products, mainly eye comforts, that support health and well-being. And finally, the percentage of women in leadership positions remained at 29%. We continue our efforts to increase the overall representation of women in our business through focused hiring practices for diversity across all levels. Let me now hand over to Géricault, who will take you through our Q3 financial performance and also the highlights for the first half of the year.