Q1 2022results

CEO message

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Message from the CEO

“Our customers confirm the relevance of our strategy and portfolio, as evidenced by the further growth of our all-time-high order book. Comparable order intake growth for the Group amounted to 5%, driven by good growth across the Diagnosis & Treatment businesses, as well as Hospital Patient Monitoring and Connected Care Informatics. In addition, we partnered with 12 more hospitals to help them transform the delivery of care, further building on the 80 new long-term strategic partnerships signed in 2021. In China, we signed an agreement with Shanghai East Hospital to provide its hospitals in the Shandong and Hainan provinces with a broad range of advanced imaging and critical care solutions. I am also pleased with the 8% comparable sales growth for our Personal Health businesses, which demonstrates continued strong consumer demand for our propositions enabling people to take care of their health and well-being.

Thanks to the hard work of our people, we recorded better than expected sales of EUR 3.9 billion in very challenging circumstances, with significant supply chain headwinds as well as the consequences of the Respironics field action. Adjusted EBITA margin for the Group was 6.2% in the quarter.

The strong customer demand and order book, coupled with our first-quarter sales performance, support the growth and margin expansion range for the full year as communicated in January 2022. At the same time, it is important we recognize the increasing risks related to the COVID-19 situation in China, the Russia-Ukraine war, supply chain challenges and inflationary pressures, which may potentially impact our ability to convert our strong order book to sales and achieve our margin target if conditions deteriorate further. Our teams are fully focused on everyday execution, delivering on the customer demand and strong order book, and addressing the supply chain risks. We are implementing additional cost measures, as well as price increases, to mitigate the inflationary headwinds.”

Frans van Houten
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

Precision Diagnosis – providing smart, connected systems, optimized workflows, and integrated diagnostic insights, leading to clear care pathways and predictable outcomes
Image Guided Therapy – innovating minimally invasive procedures in a growing number of therapeutic areas, with significantly better outcomes and productivity, while patients have a much better experience and can return home faster

Connected Care

Driving better care management by providing a wealth of actionable data about patients' condition and hospital operations, and seamlessly connecting patients and caregivers in any care setting from the hospital to the home

Personal Health

Delivering propositions that help people enjoy healthier lifestyles and enhance personal hygiene

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.

Underpinned by these strategic imperatives, Philips’ targets for accelerated growth, higher profitability and improved cash flow for the 2021–2025 period are:

An acceleration of the average annual Group comparable sales growth^{*^*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to *.} to 5 to 6%. In 2022, Philips targets to deliver 3 to 5% comparable sales growth^{*^*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to *.} for the Group.
An average Adjusted EBITA^{*^*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to *.} margin improvement of 60 to 80 basis points annually over the 2021-2025 period, reaching high-teens for the Group. In 2022, Philips targets to deliver a 40 to 90 basis-points improvement in Adjusted EBITA^{*^*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to *.} margin for the Group.
Free cash flow^{*^*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to *.} above EUR 2 billion by 2025.
Organic Return on Invested Capital (ROIC)^{*^*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to *.} of mid-to-high teens by 2025.

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

Philips signed 12 new long-term strategic partnerships in the quarter, including a 10-year agreement with Oulu University Hospital in Finland to deliver the latest Philips Azurion image-guided therapy solutions, as well as maintenance, consultancy and financing services.

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Expansion of capabilities on handheld ultrasound

Philips expanded its leading ultrasound portfolio with advanced hemodynamic measurement capabilities on its handheld ultrasound Lumify, enabling clinicians to quantify blood flow in a wide range of point-of-care diagnostic applications, including cardiology and obstetrics & gynecology.

New partnerships for Radiology Operations Command Center

Philips entered into partnerships with healthcare providers in the UK and Germany to deliver its vendor-neutral Radiology Operations Command Center, which enables remote collaboration between technologists, radiologists and imaging operations teams across multiple sites, to help increase productivity and expand access to MR- and CT-based diagnosis.

Continued success for MR portfolio

Building on the market share gain in 2021, Philips MR delivered strong double-digit order intake growth in the quarter, driven by all major product families. Further highlighting the success of its unique helium-free operating MR portfolio, since its launch Philips has installed more than 500 of its Ingenia Ambition MRI systems, which deliver superb image quality and perform MRI exams up to 50% faster.

Successful expansion into interventional oncology

Philips is successfully expanding into interventional oncology with the installation of its innovative lung cancer diagnosis and treatment solution Lung Suite in hospitals in Belgium, France, Israel, and the UK. Based on Philips Azurion, this solution enhances the accuracy of biopsy procedures and provides a therapy option to immediately treat early-stage lung cancer patients.

Research highlights benefits of remote cardiac monitoring

Underlining the clinical and economic value of remote cardiac patient monitoring, Philips announced new research demonstrating increased atrial fibrillation detection and significant cost savings using Philips’ mobile cardiac outpatient telemetry monitoring. In addition, Philips expanded its remote cardiac monitoring portfolio with a patch-based, clinical-grade ECG to improve patient recruitment, compliance and retention for clinical trials.

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Completion of global roll-out of innovative shaver

Philips completed the global introduction of its new Philips Shaver S9000 with SkinIQ with its launch in Japan, resulting in accelerated sales growth for this category, and a 4.9 (out of 5) consumer rating and review score within the first month.

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Strong momentum for oral healthcare innovations

Following the successful refresh of its entry-range electric toothbrushes, the launch of the Sonicare 9900 Prestige premium range, and the launch of innovative interdental cleaning devices in 2021, Philips Oral Healthcare recorded strong double-digit comparable sales growth in the quarter, driven by North America and China.

Environmental, Social and Governance highlights

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Making the world healthier and more sustainable

In Q1 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 1.69 billion people worldwide in Q1 2022, an increase of 50 million lives year-on-year. Reflecting our efforts to expand access to care, this figure includes 170 million lives improved in underserved communities, compared to 160 million in Q1 2021. Find out how Philips measures lives improved.
At COP 26, 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 Q1 2022, 31% of suppliers (based on spend) had committed to such targets.
Philips scored highest of all Dutch companies in the 2022 Global RepTrak 100, the annual global RepTrak ranking of companies with the best reputation, taking 14th place.
Our circular system portfolio has been renamed Philips Circular Edition systems, emphasizing our state-of-the-art refurbishment and remanufacturing innovations in transforming pre-owned medical equipment into high-quality circular systems.

Progress towards our goals

1.69

2.5

Lives improvedBased on Q1 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

170

400

Lives improved in underserved healthcare communitiesBased on Q1 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)

	Q1 2021	Q2 2021	Q3 2021	Q4 2021	Q1 2022
	1,636	1,652	1,661	1,670	1,688

Lives improved in underserved healthcare communities

(in millions)

	Q1 2021	Q2 2021	Q3 2021	Q4 2021	Q1 2022
	160	164	164	167	170

100% sales from green products and solutions ¹

67%

25% sales from circular products and solutions

15%

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

14%

All data points refer to Q1 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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Q1 2022 results

Amsterdam, April 25, 2022

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