Q3 2022results

CEO message

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Message from the CEO

“I am honored to have been given the responsibility to lead Philips, a great company with a strong brand, leading product portfolio, strong customer base and talented employees. However, we face multiple challenges and our Q3 2022 performance reflects this. Although Philips’ strategy and solutions resonate with our stakeholders, we have not lived up to their expectations in recent years.

My immediate priority is therefore to improve execution so that we can start rebuilding the trust of patients, consumers and customers, as well as shareholders and our other stakeholders. We will do this by first further strengthening our patient safety and quality management and addressing the various facets of the Philips Respironics recall; second, by urgently improving our supply chain operations so that we can deliver on our strong order book and improve performance; and third, by simplifying our way of working to improve productivity and increase agility. This includes the difficult, but necessary decision to immediately reduce our workforce by around 4,000 roles globally, which we do not take lightly and will implement with respect towards impacted colleagues. These initial actions are needed to start turning the company around in order to realize Philips’ profitable growth potential and create value for all our stakeholders.

While there is a lot to do in a fast-changing environment, our priorities are clear, and I am fully focused, together with our leadership team, on improving execution. I am committed to open and transparent communications with our stakeholders. We will elaborate further on our plans for Philips at our fourth quarter and annual results publication in January 2023.”

Roy Jakobs
Chief Executive Officer

Our strategy

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Our strategic focus

Driven by purpose

At Philips, our purpose to improve people’s health and well-being through meaningful innovation is at the center of everything we do. This core principle has never been more important than it is in these challenging times.

As a leading health technology company, we believe that – viewed through the lens of customer needs – innovation can improve people's health and healthcare outcomes, as well as making care more accessible, personal, connected and sustainable. In concrete terms, we aim to improve the lives of 2 billion people a year by 2025, including 300 million in underserved communities, rising to 2.5 billion and 400 million respectively by 2030.

Guided by this purpose, it is our strategy to lead with innovative solutions that combine products, systems, software and services and leverage clinical and operational data, to help our customers deliver on the Quadruple Aim (better health outcomes, improved patient experience, improved staff experience, lower cost of care) and help people take better care of their health at every stage of life.

We strive to deliver superior, long-term value to our customers and shareholders, while acting responsibly towards our planet and society, in partnership with our stakeholders.

We aim to grow Philips responsibly and sustainably. To this end, we have deployed a comprehensive set of commitments across all the Environmental, Social and Governance (ESG) dimensions that guide the execution of our strategy and support our contribution to UN Sustainable Development Goals 3 (Ensure healthy lives and promote well-being for all at all ages), 12 (Ensure sustainable consumption and production patterns) and 13 (Take urgent action to combat climate change and its impacts).

Our view on healthcare

Besides the healthcare sector's natural drivers of growth – aging populations, the rise of chronic diseases, increased spending on healthcare in emerging markets – we believe that health technology will be a major growth driver in the years to come.

At Philips, we see healthcare as a continuum – this puts people’s health journeys front and center and enables integrated care pathways. Believing that healthcare should be safe, seamless, efficient and effective, we strive to ‘connect the dots’ for our customers and consumers, supporting the flow of real-time data needed to provide precision diagnoses, treatment and chronic care for patients.

Going forward, we believe the digital transformation of healthcare and – accelerated by COVID-19 – the increasing adoption of virtual care or ‘telehealth’ will play a major role in helping people to live healthily and cope with disease, and in enabling care providers to meet people’s health needs, deliver better outcomes and improve productivity.

Helping our customers address their healthcare challenges

In the consumer domain, we develop innovative solutions that support healthier lifestyles, prevent disease, and help people to live well with chronic illness, also in the home and community settings.

In addition to leveraging retail trade partnerships and new business models, we are focused on accelerating growth through online channels, delivering products and services direct to consumers, and supporting longer-term relationships to maximize the benefit consumers can derive from our solutions.

In clinics and hospitals, we are teaming up with healthcare providers to innovate and transform the way care is delivered. We listen closely to our customers’ needs and together we co-create solutions that help our customers improve outcomes, patient and staff experience and productivity, and so deliver on the Quadruple Aim of value-based care.

Increasingly, we are working together with our health systems customers in novel business models, including outcome-oriented payment models, that align their interests and ours in long-term partnerships. The combination of compelling solutions and consultative partnership contracts, including a broad range of professional services, drives growth rates above the group average, as well as a higher proportion of recurring revenues.

We are embedding AI and data science in our propositions – for instance, applying the power of predictive data analytics and artificial intelligence at the point of care – to leverage the value of data in the clinical and operational domains, aiding clinical decision making and improving the quality and efficiency of healthcare services.

With our global reach, market leadership positions, deep clinical and technological insights, and customer-centric innovation capability, we are strongly placed to create further value in a changing healthcare world through our propositions in:

Diagnosis & Treatment

Patient- and staff-centered solutions that simplify workflow and deliver more precise diagnosis and clear pathways with predictable outcomes
Uniquely integrating best-in-class imaging with specialized devices to innovate procedures and improve lives

Connected Care

Patient care solutions, advanced analytics and patient and workflow optimization across all care settings
Therapies to support patients in their chronic care needs

Personal Health

Products and services to support healthier lifestyles and disease prevention

Our key strategic imperatives and value creation objectives

Our roadmap – with its three strategic imperatives – is our guide as we continue our transformation journey to attain HealthTech industry leadership and drive value creation.

Business highlights

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Business highlights

Philips’ ongoing focus on innovation and partnerships resulted in the following key developments in the quarter.

New long-term strategic partnerships

Demonstrating the trust hospital leaders have in Philips’ ability to help them enhance health outcomes, lower the cost of care and improve patient and staff experience, the company signed multiple new long-term strategic partnerships across the world. This included a 10-year agreement with a large university hospital in Japan for the expansion of its eICU program for centralized, remote surveillance of high-risk ICU patients.

Imaging and image-guided therapy systems

Advancing patient care in China

Philips signed several agreements in China, including with private hospitals Suzhou Kowloon Hospital and Wuhan Asia Heart Hospital to provide advanced diagnostic imaging and image-guided therapy systems to advance patient care.

FDA clearance for new ultrasound system

Philips expanded its leading ultrasound portfolio with the FDA market clearance for its new Ultrasound 5000 Compact system to deliver cart-based premium image quality in compact form for point-of-care, cardiology, general imaging, and obstetrics and gynecology applications.

Find out more

Ambulatory cardiac patient monitoring

Philips continues to successfully expand into ambulatory care. Newly published research validated that Philips Mobile Cardiac Outpatient Telemetry (MCOT) is crucial in detecting arrhythmias and providing data that allows care teams to intervene quickly and decisively to provide the optimal patient treatment.

Find out more

OneBlade 360 launched in Europe

Building on its successful OneBlade platform, Philips introduced in Europe the new OneBlade 360, which leverages a new blade that adjusts to the curves of the face to enhance shaving comfort.

Environmental, Social and Governance highlights

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Making the world healthier and more sustainable

In Q3 2022, we made further advances in the focal areas of access to care, circular economy and climate action, taking us closer to our goal of improving the lives of 2.5 billion people a year by 2030, including 400 million in underserved communities.

Our products and solutions improved the lives of 1.79 billion people worldwide in Q3 2022, an increase of 127 million lives year-on-year. Reflecting our efforts to expand access to care, this figure includes 192 million lives improved in underserved communities, compared to 165 million in Q3 2021. Find out how Philips measures lives improved.
Circular revenues amounted to 18.3% of sales, up from 15.9% in Q3 2021.
At the COP26 UN Climate Change Conference in Glasgow in 2021, Philips announced an ambitious climate action to drive significant reduction of greenhouse gas emissions in our supply chain, aiming to have at least 50% of our suppliers (based on spend) committed to science-based targets for CO₂ reduction by 2025. By the end of Q3 2022, 38% of our suppliers (based on spend) had committed to such targets.
Leveraging Philips’ expertise in mobile ultrasound services, Philips Foundation and RAD-AID International announced a multi-year cross-continental partnership to increase access to diagnostic ultrasound services for 50 million people in 10 low- and middle-income countries.

Progress towards our goals

1.79

2.5

Lives improvedBased on Q3 2022 data

At Philips, we are striving to make the world healthier and more sustainable through innovation, with the goal of improving the lives of 2.5 billion people a year by 2030.

To ensure we remain on track to achieve this goal, we have developed a model, audited externally, that tells us how many lives have been improved by our products and solutions in a given year.

Download our methodology

192

400

Lives improved in underserved healthcare communitiesBased on Q3 2022 data

As part of our goal to improve the lives of 2.5 billion people a year by 2030, we have committed to improving access to care in underserved healthcare communities for 400 million people a year.

We are expanding access to care by:

working within an ecosystem of strong collaborators
driving digital and technological innovation across the health continuum
developing new business models
partnering to develop effective financing solutions.

Lives improved trend line

Lives improved

(in millions)

	Q3 2021	Q4 2021	Q1 2022	Q2 2022	Q3 2022
	1,661	1,670	1,740	1,748	1,789

Lives improved in underserved healthcare communities

(in millions)

	Q3 2021	Q4 2021	Q1 2022	Q2 2022	Q3 2022
	164	167	183	185	192

100% sales from green products and solutions ¹

66%

25% sales from circular products and solutions

18%

100% operations powered by renewable electricity

100%

95% circular materials management ²

91%

100% industrial sites sending zero waste to landfill

100%

5% reduction in water consumption from 2019 level

-2%

All data points refer to Q3 2022 continuing operations
¹We will design 100% of our products and services in line with EcoDesign requirements by 2025²Recycling, reuse and circular materials management of the total used materials

Sustainable use of materials and energy

Reflecting our commitment to SDG 12 (Sustainable consumption and production) and SDG 13 (Climate action), we have set specific targets – to be achieved by 2025 – to reduce our environmental impact and help fight climate change. Here you can see how we’re progressing towards our goals.

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Q3 2022 results

Amsterdam, October 24, 2022

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