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Philips delivers on Q1 results, with ongoing order intake growth

1. PHG's Q1 2025 sales declined by 2% due to China's downturn. 2. Income from operations rose to EUR 154 million despite sales phasing. 3. Free cash outflow reached EUR 1,091 million, mainly from recall-related settlements. 4. Company expects slight positive cash flow and maintained sales growth outlook. 5. Philips recognized as a top innovator and launched new AI healthcare solutions.

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Why Bearish?

Sales decline and considerable cash outflow suggest operational challenges for PHG. Historical examples show similar free cash flow issues negatively impacted stock performance.

How important is it?

The article highlights operational difficulties and cash outflow, impacting investor sentiment and potential stock movement.

Why Short Term?

Near-term cash flow and sales challenges could pressure stock, while innovations may take time to boost performance.

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May 6, 2025Q1 2025 Group performance Group sales EUR 4.1 billion, reflecting a 2% decline in comparable sales growth mainly due to China; slightly ahead of company outlook due to Personal Health growth and royalty phasingComparable order intake increased 2% despite China declineIncome from operations increased to EUR 154 millionAdjusted EBITA margin declined 80 bps to 8.6% of sales, driven by sales phasingFree cash outflow of EUR 1,091 million included EUR 1,025 million payment for Philips Respironics recall-related medical monitoring and personal injury settlements in USUpdated full year 2025 outlook for Adjusted EBITA margin and free cash flow; sales outlook remains unchanged Roy Jakobs, CEO of Royal Philips:“We remain dedicated to serving our customers, driving profitable growth and delivering better care for more people. Our order intake growth continued with strong momentum particularly in the US, coupled with positive growth in personal health, providing an encouraging start to the year.In an uncertain macro environment that has intensified due to the potential impact of tariffs, we are focused on what we can control. We are improving our supply chain agility, taking decisive cost actions to mitigate financial impact where possible, and ensuring we can continue to serve our customers and consumers.Patients around the world rely on our medical technology and innovations every day. We are committed to ensuring access to care as we focus on execution, with patient safety and quality as our number one priority.”Group and segment performanceComparable order intake increased 2%, primarily driven by strong performance in North America, offsetting a decline in China.Group comparable sales decreased 2%, reflecting double-digit declines across all segments in China and a high comparison base in Diagnosis & Treatment globally. Comparable sales increased slightly outside of China, mainly driven by positive Personal Health growth in most other markets.Adjusted EBITA margin decreased 80 basis points to 8.6%, mainly due to the decline in sales, partly offset by higher gross margins from innovations and productivity measures. Income from operations increased to EUR 154 million. Free cash flow was an outflow of EUR 1,091 million, mainly due to the EUR 1,025 million payment relating to the Philips Respironics recall-related medical monitoring and personal injury settlements in the US.Diagnosis & Treatment comparable sales decreased by 4%, due to a double-digit decline in China and on the back of a high comparison base in prior years. Image-Guided Therapy continued its strong performance, reinforcing its position as a global leader in minimally invasive therapy. Adjusted EBITA margin improved, driven by productivity measures, mix effects and innovation, partly offset by lower fixed cost absorption due to lower sales.Connected Care comparable sales were broadly flat across businesses and Adjusted EBITA margin was 3.5%, mainly due to an unfavorable mix and cost phasing, partly offset by productivity measures and innovation.Personal Health comparable sales increased 1%. High-single-digit growth was largely offset by a double-digit decline in China. Adjusted EBITA margin remained in line with last year.Innovation highlights Philips was the leading applicant in medical technology at the European Patent Office (EPO) in 2024, and Clarivate recognized Philips as the top-ranked medical technology company in the Top 100 Global Innovators 2025.Philips introduced new AI technologies to accelerate precise imaging and enhance patient outcomes. In MRI systems, advanced AI algorithms are integrated through SmartSpeed Precise powered by Dual-AI engines. In ultrasound, innovative Elevate software in EPIQ Elite and Affiniti ultrasound systems is enhanced by AI, and AI-driven measurement capabilities for the Compact Ultrasound 5500CV is proven to reduce cardiac imaging time by 50%.Philips signed partnerships to improve patient monitoring and modernize workflows with Citadelle Hopital in Belgium, the region of Norrbotten in Sweden, and Hospital Israelita Albert Einstein in Brazil.Philips’ Dynamic Coronary Roadmap reduces contrast media use by 28.8% during an Image-Guided Therapy procedure to open blocked coronary arteries, called percutaneous coronary intervention (PCI), according to findings from the DCR4Contrast trial. A secondary analysis highlighted further benefits for complex conditions.HealthSuite’s innovative cloud services launched in Europe, managed by Philips and hosted on AWS. In the US, approximately 12 million medical imaging studies will be migrated to the cloud for Rochester Regional Health in New York, and in Massachusetts, a partnership with Mass General Brigham will integrate device data via the vendor-agnostic Capsule Medical Device Information Platform. ProductivityProductivity initiatives delivered savings of EUR 147 million in Q1: operating model savings of EUR 42 million, procurement savings of EUR 46 million, and other programs savings of EUR 59 million; Philips is on track to deliver savings of EUR 800 million in 2025. Since 2023, productivity initiatives have delivered savings of more than EUR 1.9 billion.OutlookIn an uncertain macro environment, Philips’ outlook for full year 2025 is updated to include the assumed impact of currently announced tariffs. This includes current bilateral US-China and rest of world tariffs, the resumption of the paused US tariffs on July 9 and excludes potential wider economic impact. Philips’ outlook for comparable sales growth remains unchanged at 1%-3%Adjusted EBITA margin range to be 10.8%-11.3%, including an estimated net tariff impact of EUR 250-300 million after substantial tariff mitigations, a 100 bps reduction versus previous outlook, based on the above-referenced assumptionsAs a result, free cash flow to be slightly positive for the full year, after the payout of EUR 1,025 million Philips Respironics recall-related medical monitoring and personal injury settlements in the USThe company continues to anticipate 2025 performance will be skewed toward the latter part of the year, with Q2 showing modest improvement from Q1. This outlook excludes ongoing Philips Respironics-related proceedings, including the investigation by the US Department of Justice.Click here to view the release onlineFor further information, please contact:Michael FuchsPhilips Global External RelationsTel.: +31 6 1486 9261E-mail: michael.fuchs@philips.comDorin DanuPhilips Investor RelationsTel.: +31 20 59 77055E-mail: dorin.danu@philips.comAbout Royal PhilipsRoyal 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 2024 sales of EUR 18 billion and employs approximately 67,200 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 informationForward-looking statementsThis 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, macro-economic and geopolitical changes – including the war in Ukraine and ongoing conflicts in Israel and the Middle East – as well as measures such as announced and proposed tariffs and trade actions introduced in response to rising global tensions; Philips’ ability to keep pace with the changing health technology environment; Philips’ ability to gain leadership in health informatics and artificial intelligence in response to developments in the health technology industry; integration of acquisitions and their delivery on business plans and value creation expectations; ability to meet expectations with respect to ESG-related matters; securing and maintaining Philips’ intellectual property rights, and unauthorized use of third-party intellectual property rights; failure of products and services to meet quality or security standards, adversely affecting patient safety and customer operations; the resilience of our supply chain; challenges in simplifying our organization and our ways of working; attracting and retaining personnel; breach of cybersecurity; challenges in driving operational excellence and speed in bringing innovations to market; treasury and financing risks; tax risks; reliability of internal controls; compliance with regulations and standards involving quality, product safety, (cyber) security and artificial intelligence; and compliance with business conduct rules and regulations including privacy, existing and upcoming ESG disclosure and due diligence requirements. 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 2024.Third-party market share dataStatements 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 RegulationThis press release contains inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation.Use of non-IFRS informationIn 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 2024.PresentationAll 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 2024. 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.

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