Philips : Q2 2022 results and performance update presentation

Second quarter 2022 results & 2025 performance trajectory

July 25, 2022

	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 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 our 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 transform its business model to health technology
	solutions and services; 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; Philips' ability to execute and deliver on programs on business transformation and IT system changes and continuity; the effectiveness of our supply chain; attracting and
	retaining personnel; COVID-19 and other pandemics; challenges to drive 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; treasury and financing risks; tax risks; reliability of internal controls, financial reporting and management process. 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 2021.
	Philips has recognized a provision related to the voluntary recall notification in the US/field safety notice outside the US for certain sleep and respiratory care products, based on Philips' best estimate for the expected field actions.
	Future developments are subject to significant uncertainties, which require management to make estimates and assumptions about items such as quantities and the portion to be replaced or repaired. Actual outcomes in future
	periods may differ from these estimates and affect the company's results of operations, financial position and cash flows.
	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, 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.
	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 2021.
	Use of fair-value measurements
	In presenting the Philips Group's financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available,
	and are obtained from sources that are deemed to be reliable. Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When quoted prices or observable market data
	are not readily available, fair values are estimated using appropriate valuation models and unobservable inputs. Such fair value estimates require management to make significant assumptions with respect to future developments,
	which are inherently uncertain and may therefore deviate from actual developments. Critical assumptions used are disclosed in the Annual Report 2021. In certain cases independent valuations are obtained to support
	management's determination of fair values.
	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 2021 except for the adoption of new standards and amendments to standards which are also expected to be reflected in the company's consolidated IFRS financial statements as at and for the year
	ending December 31, 2022. Prior-period amounts have been reclassified to conform to the current-period presentation; this includes immaterial organizational changes
2	© Koninklijke Philips N.V.
	* Non-IFRS financial measure. Refer to reconciliation of non-IFRS information

Table of Content

	Financial performance in the quarter and full-year outlook	4
	Taking actions to improve performance	10
	Progress update: Respironics field action and Quality	15
	Driving growth through innovative solutions and customer partnerships	38
	Performance trajectory through 2025	65
	Financial appendix	69
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	© Koninklijke Philips N.V.

Financial performance in the quarter and full-year outlook

© Koninklijke Philips N.V.

Q2 2022 performance summary

		Sales	Comparable	Adj. EBITA	Adj. EBITDA
		EUR million	growth	margin	margin
Diagnosis & Treatment	2,157	(4)%	6.2%	9.4%
Connected Care	1,060	(13)%	1.1%	6.9%
Personal Health	831	(5)%	12.3%	15.6%
Other	128
Philips	4,177	(7)%	5.2%	11.0%
Philips (excl. China)	3,714	(3)%

• Sales of EUR 4.2 billion, a 7% comparable decline, on the back of 9% growth in Q2 2021; 3% decline excluding China
• Significant impact from China lockdowns: sales and order intake down by ~30% in China, production in some of our factories and those of our suppliers suspended for two months
• Solid demand for our innovations: order intake grew 1%; excluding China, order intake grew 6%
• Adjusted EBITA of 5.2% of sales, compared to 12.6% in Q2 2021, caused mainly by lower volumes and inflation
• Operating cash outflow of EUR 306 million, mainly due to temporarily higher inventories

5	© Koninklijke Philips N.V.