Signify reports first quarter sales of EUR 1.4 billion, operational profitability of 7.9% and a free cash flow of EUR 112 million

Press Release

April 24, 2020

Signify reports first quarter sales of EUR 1.4 billion, operational profitability of 7.9% and a free cash flow of EUR 112 million

First quarter 2020¹

• Signify's installed base of connected light points increased from 56 million in Q4 19 to 60 million in Q1 20
• CSG growing profit engines -14.5%; CSG total Signify -15.3%
• Adj. indirect costs down EUR 56 million, or -11.1%, excl. currency effects and changes in scope
• Adj. EBITA margin improved by 10 bps to 7.9%, with a neutral effect from currencies
• Adj. EBITA margin of the growing profit engines increased by 100 bps to 7.7%
• Net income of EUR 27 million (Q1 19: EUR 44 million)
• Free cash flow doubled to EUR 112 million (Q1 19: EUR 55 million)
• Acquisition of Cooper Lighting completed; integration is well underway and achievement of synergies on track

COVID-19 update Q1

• Health & safety of employees was our highest priority
• Supported local partners and communities: donations of UV-C lamps and (solar) luminaires
• Our global manufacturing capacity was restored to more than 80%
• Broad range of mitigating actions to preserve profitability and free cash flow in place from start of Q1
• Liquidity remains strong, with a cash position of EUR 924 million at the end of Q1 20

Eindhoven, the Netherlands - Signify (Euronext: LIGHT), the world leader in lighting, today announced the company's first quarter 2020 results. "We were early to mobilize our teams worldwide and implement a broad range of actions to face the unprecedented situation caused by the COVID-19 pandemic. I am particularly satisfied with the successful measures we took to protect the health and safety of our employees and the people around us. We largely restored the performance of our supply chain to minimize the impact on our customers. We rapidly implemented a set of dedicated actions that enabled us to improve our operating margin and double our free cash flow despite a decline in demand," said CEO Eric Rondolat. "We are building on these achievements to manage our performance in the second quarter as we expect demand to be further impacted. In addition, we are taking extra measures to protect our profitability and cash flow. We have also started to explore new business opportunities arising from the situation whilst remaining very close to our customers. I believe that all these measures will help us to strengthen our market positions."

COVID-19 actions

From the start of the outbreak, we have been very agile and thorough in dealing with the challenges through global and local crisis response teams. We have implemented a variety of policies including a ban on domestic and international travel, access restrictions to our sites, homeworking and very stringent hygiene and health measures across our plants, logistic hubs and R&D centers. We provided protective equipment, such as hand sanitizers, masks and temperature measurement tools.

We also implemented a broad range of mitigating actions to preserve profitability. These measures include savings in, amongst others, selling expenses, travel costs and procurement costs. In addition, we have implemented a range of measures to safeguard cash flow, including rigorous working capital management, a curtailment of uncommitted and non-essential capital expenditure, and the withdrawal of the dividend proposal.

We are accelerating and extending mitigating measures, including:

• Supervisory Board and Leadership Team took a 20% salary reduction for Q2
• A significant part of our employees voluntarily supported a 20% worktime reduction and pro-rata pay adjustment for a period of 3 months
• A 6-month delay in merit increases, where possible
• An external hiring freeze

Outlook

Considering the uncertainty about the future course of the pandemic, and the length and depth of the impact on the global economy, Signify does not provide financial guidance at this point in time.

Successfully completed Cooper Lighting acquisition

On March 2, 2020, Signify completed the acquisition of Cooper Lighting Solutions from Eaton. Since the announcement of the transaction, Signify has worked intensively with the Cooper Lighting teams to finalize integration plans which enabled us to start the implementation from day one. As a result, key business systems have been successfully segregated from Eaton and Cooper Lighting is now operating as a business unit within Signify. The agents are committed to the go-to market approach and associated benefits of the acquisition. The integration teams are also well on track to achieve the anticipated cost savings in procurement, supply chain and sourcing optimization.

Financial review

	First quarter
in millions of EUR, except percentages	2019	2020	change
Comparable sales growth			-15.3%
Effects of currency movements			1.3%
Consolidation and other changes			10.6%
Sales	1,478	1,427	-3.5%
Adjusted gross margin	557	545	-2.1%
Adj. gross margin (as % of sales)	37.7%	38.2%
Adj. SG&A expenses	-395	-393
Adj. R&D expenses	-69	-67
Adj. indirect costs	-464	-460	1.0%
Adj. indirect costs (as % of sales)	31.4%	32.2%
Adjusted EBITA	115	112	-2.3%
Adjusted EBITA margin	7.8%	7.9%
Adjusted items	-22	-42
EBITA	93	70	-25.0%
Income from operations (EBIT)	69	43	-37.6%
Net financial income/expense	-9	-10
Income tax expense	-16	-6
Net income	44	27	-39.2%
Free cash flow	55	112
Basic EPS (€)	0.35	0.24
Employees (FTE)	28,689	38,446

First quarter

Sales amounted to EUR 1,427 million, a nominal decrease of 3.5%. Adjusted for 1.3% currency effects and 10.6% consolidation (mainly related to the acquisitions of Cooper Lighting and Klite) and other changes, comparable sales declined by 15.3%. LED-based sales represent 78% of total sales. The adjusted gross margin increased by 50 bps to 38.2%, including a negative currency effect of 10 bps. Adjusted indirect costs decreased by EUR 4 million. Excluding currency effects and changes in scope, indirect costs decreased by EUR 56 million, or 11.1%. Adjusted EBITA amounted to EUR 112 million compared with EUR 115 million in the same period last year. The Adjusted EBITA margin increased by 10 bps to 7.9%, with a neutral effect from currencies. Total restructuring costs were EUR 13 million, acquisition-related charges EUR 18 million and incidental items EUR 11 million. Net income decreased from EUR 44 million last year to EUR 27 million in Q1 20, mainly due to higher acquisition-related charges and other incidentals. Free cash flow doubled from EUR 55 million last year to EUR 112 million in Q1 20, mainly as a result of strong working capital management in the growing profit engines, and the consolidation of Cooper Lighting.

¹This press release contains certain non-IFRS financial measures and ratios, such as comparable sales growth, EBITA, adjusted EBITA and free cash flow, and related ratios, which are not recognized measures of financial performance or liquidity under IFRS. For a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures, see appendix B, Reconciliation of non-IFRS financial measures, of this press release.

For the full and original version of the press release click here.
For the presentation click here.


Conference call and audio webcast

Eric Rondolat.

Financial calendar 2020
May 19 Annual General Meeting of Shareholders
July 24 Second quarter and half year results 2020
October 23 Third quarter results 2020

For further information, please contact:

Signify Investor Relations
Rogier Dierckx
Tel: [phone]
E-mail: [e-mail]

Signify Corporate Communications
Elco van Groningen
Tel: [phone]
E-mail: [e-mail]

About Signify
Signifyproducts, Interactconnected lighting systems and data-enabled services, deliver business value and transform life in homes, buildings and public spaces. With 2019 sales of EUR 6.2 billion, we have approximately 38,000 employees and are present in over 70 countries. We unlock the extraordinary potential of light for brighter lives and a better world. We have been named Industry Leaderin the Dow Jones Sustainability Index for three years in a row. News from Signify is located at the Newsroom, Twitter, LinkedInand Instagram. Information for investors can be found on the Investor Relationspage.

Important Information

Forward-Looking Statements and Risks & Uncertainties
This document and the related oral presentation contain, and responses to questions following the presentation may contain, forward-looking statements that reflect the intentions, beliefs or current expectations and projections of Signify N.V. (the "Company", and together with its subsidiaries, the "Group"), including statements regarding strategy, estimates of sales growth and future operational results.

By their nature, these statements involve risks and uncertainties facing the Company and its Group Companies and a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement as a result of risks and uncertainties. Such risks, uncertainties and other important factors include but are not limited to: adverse economic and political developments, the impacts of COVID-19, rapid technological change, competition in the general lighting market, development of lighting systems and services, successful implementation of business transformation programs, impact of acquisitions and other transactions, reputational and adverse effects on business due to activities in Environment, Health & Safety, compliance risks, ability to attract and retain talented personnel, adverse currency effects, pension liabilities, and exposure to international tax laws. Please see "Risk Factors and Risk Management" in Chapter 12 of the Annual Report 2019 for discussion of material risks, uncertainties and other important factors which may have a material adverse effect on the business, results of operations, financial condition and prospects of the Group. Such risks, uncertainties and other important factors should be read in conjunction with the information included in the Company's Annual Report 2019.

Additional risks currently not known to the Group or that the Group has not considered material as of the date of this document could also prove to be important and may have a material adverse effect on the business, results of operations, financial condition and prospects of the Group or could cause the forward-looking events discussed in this document not to occur. The Group undertakes no duty to and will not necessarily update any of the forward-looking statements in light of new information or future events, except to the extent required by applicable law.

Market and Industry Information
All references to market share, market data, industry statistics and industry forecasts in this document consist of estimates compiled by industry professionals, competitors, organizations or analysts, of publicly available information or of the Group's own assessment of its sales and markets. Rankings are based on sales unless otherwise stated.

Non-IFRS Financial Measures
Certain parts of this document contain non-IFRS financial measures and ratios, such as comparable sales growth, adjusted gross margin, EBITA, Adjusted EBITA, and free cash flow, and other related ratios, which are not recognized measures of financial performance or liquidity under IFRS. The non-IFRS financial measures presented are measures used by management to monitor the underlying performance of the Group's business and operations and, accordingly, they have not been audited or reviewed. Not all companies calculate non-IFRS financial measures in the same manner or on a consistent basis and these measures and ratios may not be comparable to measures used by other companies under the same or similar names. A reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures is contained in this document. For further information on non-IFRS financial measures, see "Chapter 18 Reconciliation of non-IFRS measures" in the Annual Report 2019.

Presentation
All amounts are in millions of euros unless otherwise stated. Due to rounding, amounts may not add up to totals provided. All reported data are unaudited. Unless otherwise indicated, financial information has been prepared in accordance with the accounting policies as stated in the annual report 2019 but does not represent a formal IAS 34 interim financial reporting report.

Changes to financial reporting following announced organizational changes
On January 20, 2020, Signify announcedits intent to adapt its business structure to enable a stronger customer focus and enhanced specialization to further increase execution speed. To this end, the company intends to move from its current four business groups (BG) to three divisions: Digital Solutions, formerly known as BG Professional, Digital Products, which combines BG LED and BG Home, and Conventional Products, which is the current BG Lamps. As a consequence, Signify intends to adapt its segment reporting accordingly.

Market Abuse Regulation
This press release contains information within the meaning of Article 7(1) of the EU Market Abuse Regulation.