Koninklijke Philips N.V. Q2 FY2025 earnings call

• Order intake grew 6%, with broad-based growth across regions. Comparable sales increased 1% with strength in Personal Health. Margin expanded 130 basis points to 12.4%.
• Innovations in D&T: Multiyear deal with Indonesian Ministry of Health for image-guided therapy, Azurion Neuro Biplane R3 driving double-digit order growth. In Personal Health: Strong sell-out trends in Europe and growth geographies, supported by partnerships.
• Supply chain: Service levels reached an all-time high of 86% in Q2. Quality performance improved with a 20% reduction in field actions year-to-date.
• Productivity savings: EUR 344 million year-to-date in 2025, on track for EUR 800 million in 2025 through product simplification and SKU reduction.

Diagnosis & Treatment (D&T)

• Comparable sales decreased 1% in Q2, with Image-Guided Therapy seeing double-digit order growth across most regions, including a multiyear deal with the Indonesian Ministry of Health for image-guided therapy. Precision Diagnosis had strong year-on-year order intake growth in Diagnostic Imaging and Ultrasound. MR's helium-free BlueSeal system gained traction. Adjusted EBITA margin improved 130 basis points to 13.5%.

Connected Care

• Comparable sales declined 1% in Q2, mainly due to a low single-digit decline in Monitoring. However, Hospital Patient Monitoring had solid demand driven by large partnerships in North America. Adjusted EBITA margin improved 160 basis points to 10.4%.

Personal Health

• Delivered strong growth in Q2 across most geographies, but China declined due to inventory destocking, which was completed in Q2. Adjusted EBITA margin declined 170 basis points to 15.2% due to mix, cost inflation, and advertising/promotion spend. Strong demand for new innovations like AI-powered i9000 shaver and Sonicare toothbrushes.

Other Segment

• Sales in line with previous year, adjusted EBITA increased by EUR 24 million year-on-year mainly due to lower costs and higher royalty income

• Comparable sales growth outlook remains 1% to 3%, weighted towards the second half.
• 2025 adjusted EBITA margin range increased to 11.3% to 11.8% due to tariff developments.
• Full-year free cash flow expected between EUR 0.2 billion and EUR 0.4 billion.
• Tariff mitigation actions are well underway, with current tariff levels assumed for guidance.

• Tariff dynamics and their impact on margins.
• Varying consumer sentiment across regions, particularly in China.
• Respironics field-action and consent decree remediation costs.

Q: Can you talk about the improvement in D&T margins and the underlying expansion?

A: D&T margin expanded 130 basis points due to gross margin expansion from innovations like BlueSeal MR and Spectral CT 7500, productivity measures, and favorable mix.

Q: How far did the China destocking complete?

A: China destocking completed in the second quarter, with sellout strengthening quarter-over-quarter and good performance during the 18/6 festival.

Q: Where are you in the European market on the system side versus prior to the recall?

A: Rebuilding momentum, back in all markets but too early to call specific market share numbers, but customers are welcoming back.