Earnings call transcript: Signify Q2 2025 shows sales decline amid market challenges

Signify NV (market cap: $3.27 billion), known for its lighting solutions, reported a decline in nominal sales by 4.4% to €1,480 million for the second quarter of 2025. Despite this, the company continues to gain market share in the connected and specialty lighting segments. The stock price decreased by 1.03% following the earnings release, reflecting investor concerns about the European market weakness and cautious outlook for the Chinese market. According to InvestingPro analysis, the company maintains a strong financial health score of 2.8 (GOOD), suggesting resilient fundamentals despite market challenges.

Key Takeaways

• Nominal sales fell by 4.4% to €1,480 million.
• Connected and specialty lighting now account for over one-third of total sales.
• The company completed a $200 million cost savings program.
• Strong performance noted in the U.S. professional business.
• Market share gains in connected and specialty lighting segments.

Company Performance

Signify’s overall performance in Q2 2025 was marked by a nominal sales decrease of 4.4%, with comparable sales declining by 1.4%. The company has been focusing on connected and specialty lighting, which now represents over a third of its total sales. This strategic focus has helped offset some of the challenges faced in traditional markets, particularly in Europe.

Financial Highlights

• Revenue: €1,480 million, down 4.4% year-over-year
• Adjusted EBITDA: €110 million, representing a 7.8% margin
• Net Income: €57 million
• Free Cash Flow: €36 million

Outlook & Guidance

Signify expects low single-digit comparable sales growth for the full year, with an EBITDA margin guidance of 9.6% to 9.9%. The company anticipates stronger performance in Q4 and projects free cash flow generation at 7-8% of sales. Future EPS forecasts for FY2025 and FY2026 stand at $3.15 and $3.28, respectively, while revenue forecasts are set at $6.805 billion for FY2025 and $6.765 billion for FY2026. With a current free cash flow yield of 15% and return on equity of 13%, InvestingPro data indicates strong cash generation capabilities and efficient capital management.

Executive Commentary

Željko Kosanović, CFO and Interim CEO, emphasized the company’s growth in connected and specialty lighting, stating, "Connected and specialty lighting now represent over a third of our total sales." He also highlighted the company’s agile resource allocation strategy and cost optimization efforts across various business segments.

Risks and Challenges

• Weak European market, particularly in trade channels, poses a risk to revenue growth.
• Cautious outlook for the Chinese market could impact future sales.
• Supply chain disruptions and macroeconomic pressures may affect operational efficiency.
• Market saturation in traditional lighting products could hinder growth.

Q&A

During the earnings call, analysts inquired about the impact of tariffs, which the company described as broadly neutral. Questions also focused on pricing strategies, cost management, and marketing investments, with executives providing insights into regional performance in the U.S., Europe, and China.

Full transcript - Signify NV (LIGHT) Q2 2025:

Conference Call Operator: Hello. Welcome to the Signify second quarter and half year 2025 results conference call hosted by Željko Kosanović, CFO and Interim CEO, and Thelke Gerdes, Head of Investor Relations. For the first part of this call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. If you wish to ask a question, please press Q on your telephone keypad. Please note that you are limited to one question and a follow-up per round. I would now like to give the floor to Thelke Gerdes. Ms. Gerdes, please go ahead.

Thelke Gerdes, Head of Investor Relations, Signify: Good morning everyone and welcome to Signify’s earnings call for the second quarter 2025. With me today is Željko Kosanović, Signify’s CFO and Interim CEO. During this call, Željko will take you through the second quarter highlights. After that he will present the company’s financial performance and finally he will discuss the outlook for the remainder of the year. After that we will be happy to take your questions. Our press release and presentation were published at 7:00 A.M. this morning. Both documents are available for download from our investor relations website. The transcript of this earnings call will be made available as soon as possible and with that I will now hand over to Željko.

Željko Kosanović, CFO and Interim CEO, Signify: Thank you. Good morning everyone and thank you for joining us today. Let’s start with some of the highlights for the second quarter of 2025. On Slide 4, we increased the installed base of connected lighting points to 156 million at the end of Q2 2025 from 136 million last year. Nominal sales decreased by 4.4% to €1,480,000,000, largely driven by a negative FX impact of 3%. The comparable sales decline of 1.4% reflects a top line growth of 0.8% excluding the conventional business. The momentum in our business continued through the second quarter with comparable sales growth in both the professional and the consumer business. Connected and specialty lighting now represent over a third of our total sales. Connected and specialty lighting grew in all the regions in all businesses, showing the importance and the impact of our strategy. Adjusted EBITDA decreased by €8 million to €110 million.

The adjusted EBITDA margin decreased by 10 basis points to 7.8% as the gross margin expansion was offset by a higher proportion of indirect costs. The net income decreased to €57 million, primarily due to lower operating income and higher adjusted items. Finally, the free cash flow generation was €36 million this quarter. I will now move to our four businesses, starting with the professional business on Slide 5. The business returned to growth in the second quarter led by a strong performance of our U.S. business. The weakness we had seen in Europe over the past quarters is starting to weigh a lot less on our overall performance. While the trade channel remains weak, the repositioning of our business to capture opportunities in faster growing areas has allowed us to grow in connected and specialty lighting in all geographies and all segments across Europe.

The nominal sales decreased by 2.9% to €931 million including a negative currency effect of 3.1%. Adjusted EBITDA decreased by €9 million to €69 million. The gross margin remained robust as a result of effect of price and cost management. The adjusted EBITDA margin decreased by 70 basis points to 7.4% as the fixed cost reductions were partly reinvested into mainly marketing and selling expenses to fuel our growth momentum. Moving on to the consumer business on Slide 6, nominal sales decreased by 0.5% to €296 million including a negative currency effect of 3.1%. Comparable sales grew by 2.6% reflecting the continued momentum in the consumer business. In most markets, Signify continued to see strong performance of its connected home products. The adjusted EBITDA margin improved by 30 basis points to 7.4%, largely driven by volume growth.

Continuing now with the OEM business on slide 7, nominal sales decreased by 14.5% to €90 million, including a negative currency effect of 2.9%. Comparable sales declined by 11.6% as we expected as we continue to face intense price pressure for the non-connected components. In addition, the effect of lower orders from two major customers as highlighted in the previous quarter continued to weigh on the business top line. Connected components, on the other hand, continue to grow in line with our strategy. The adjusted EBITDA margin decreased by 240 basis points to 8.5% as the gross margin was impacted by negative pricing, however, sequentially improving versus the last quarter. Given the pressure on the top line, the margin remained resilient, supported by action we had put in place to protect the bottom line.

For the second half of the year, we expect the OEM business to perform similarly to the first half with ongoing price pressure and the continued impact from the two key customers. As already observed in Q1 and in Q2 due to a shift in the timing of order fulfillment compared to last year, with deliveries moving from September to October, we anticipate a softer Q3 followed by a stronger comparable sales growth in Q4. This shift will alter the typical seasonality pattern and influence the profitability split between the two quarters for the full year. We are continuing to expect an adjusted EBITDA margin of mid to high single digits. Finally, the conventional business on slide 8, nominal sales decreased by 28.9% to €81 million, including a negative currency effect of 2.1%. Comparable sales were down 26.8% in line with our expectations.

Reflecting the structural decline of the business, the adjusted EBITDA margin improved by 290 basis points to 18.6%, mainly driven by gross margin expansion on the back of discipline in price and cost management. On the next slide, slide 9, I would like to discuss a couple of business highlights from Q2, starting off with the latest Corporate Knights ranking. We ranked sixth overall and first in the Netherlands in Corporate Knights Europe’s 50 Most Sustainable Corporations ranking. Our high placement reflects our strong performance across a number of sustainability indicators such as sustainable revenue and investment resource management and responsible innovation. Our professional business has helped the City of Gothenburg in Sweden to become safer, smarter, and more sustainable. In total, we installed 27,000 connected light points since 2018 that provide smart functionality such as dynamic control, fall detection, and enhanced safety through sensor-based lighting.

The replacement of all lighting infrastructure has also led to energy savings of 80%, reduced light pollution, and lowered operating cost, which supports further rollout of connected lighting across the city. The professional business also equipped the Tan Son Nhat Airport in Ho Chi Minh City in Vietnam with smart lighting. The equipment of the new T3 domestic terminal, Ho Chi Minh City Airport, is part of a number of projects we are delivering for the city. The smart lighting system enhances safety, comfort, and architectural aesthetics for up to 20 million passengers annually. The lighting system features motion sensors and glare-free illumination. This is in alignment with Vietnam’s net zero ambition and Signify’s sustainability commitment.

Moving on to the consumer business, we expanded the Philips Hue ecosystem with the Hue Play Wall Washer, which uses our exclusive color cast technology to deliver vibrant wide-angle gradients and lighting effects when being synced to games, movies, or music. The Play Wall Washer reacts in real time with rich full color gradients and immersive effects when not syncing. It also provides premium ambient light. Next, I would like to discuss our sustainability performance on Slide 10 during the second quarter. We continue to track ahead of schedule to achieve our 2025 target to reduce greenhouse gas emissions across our entire value chain by 40% against the 2019 baseline to double the pace required by the Paris Agreement. Circular revenues increased to 37%, up another 1% from Q1 and surpassing the 2025 target of 32%. The main contribution was from serviceable luminaires in the professional business in all regions.

Brighter lives revenues remained at 33% and beyond the 2025 target of 32%. This includes strong contribution from tunable professional products and specialty lighting that support health and well-being. The percentage of women in leadership positions remained at 27% this quarter, which is clearly not aligned with our 2025 ambitions. We continue our actions to increase representation through focus hiring practices for diversity across all levels and through retention and engagement action to reduce attrition. Let me now dive into the financial highlights on slide 12 where we are showing the adjusted EBITDA bridge for Total Sigma Fund. The adjusted EBITDA margin decreased by 10 basis points to 7.8% due to the following developments. The negative volume effect was 30 basis points, largely attributable to the decline of our conventional business.

As we saw positive volume growth in the professional and consumer businesses, the combined effect of price and mix was a negative 180 basis points. The effect of price erosion continued to stabilize or improve in most of our businesses. This effect is partially compensated by the decrease in our bill of material and other cost savings which had a positive effect of 140 basis points. I would like to highlight that the gross margin this quarter stood at a solid 4.4%, up 10 basis points from the high base of last year, reflecting our team’s disciplined price and cost management. Indirect costs improved by 50 basis points on adjusted EBITDA margin level, reflecting the capture of savings from our cost reduction program. As mentioned earlier, we have chosen to step up our investments, particularly into selling and marketing expenses to support the growth momentum.

Finally, currency had a negative effect of only 10 basis points. As we limited the effects of FX, we limited the effect of FX movements on our bottom line. On slide 13, I’d like to zoom in on our working capital performance during the quarter. Compared to the end of June 2024, working capital reduced by €47 million or by 40 basis points from 7.9% to 7.5% of sales. Inventories decreased by €77 million. Receivables reduced by €67 million. Payables were €108 million lower. Finally, other working capital items reduced by €12 million. Let’s now continue with the outlook on slide 15. Based on our performance in the first half of the year and the growing momentum in our business, we are on track to achieve our guidance of low single digit comparable sales growth excluding the conventional business for the full year.

We are adding a range of 9.6% to 9.9% to our EBITDA guidance, underpinned by continued top line momentum and the disciplined execution of our first plans. This reflects a somewhat different seasonality pattern this year compared to last year, as this year will be more back end loaded with a heavier Q4. Finally, we are continuing to expect the free cash flow generation in the range of 7% to 8% of sales, driven by strong cash conversion, particularly in the fourth quarter. Our share buyback program began in February and we already completed the share repurchase of €65 million of shares until the end of June. With that, I will now hand back to the operator for the Q and A.

Conference Call Operator: Ladies and gentlemen, we are now ready to take your question. If you wish to ask a question, please press pound five on your telephone keypad. Please remember that you are limited to one question and a follow-up. Our first question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Hi, good morning. Hope you can hear me. I have one question and then I’ll use the follow-up opportunity if possible. First, I guess to follow up on your commentary that this year is going to be more towards Q4 and more back end loaded. I know you normally have a seasonality towards that, but given your comments also regarding Q3, can you elaborate on what gives you the confidence on that more stronger Q4? Is it sort of what volume assumptions do you have? What do you still have on carryover from the December 2023 savings? Perhaps just by business, why are you confident on that Q4 uptick?

Željko Kosanović, CFO and Interim CEO, Signify: Yeah. Good morning Daniela. To clarify, first of all on the full year, if we talk about the top line, we confirm the guidance so that we confirm the plan on the EBITDA. We also confirm our guidance of stable EBITDA for the full year. Now, the one element that has changed compared to the usual seasonality is that we always have a stronger H2 than H1. That’s always the case, and we always have a stronger Q4 in general. This year we expect a stronger pattern of seasonality in Q4. This is driven by different factors. First of all, on the top line, the momentum that we see building up will be stronger for consumers. This means that we expect a strong Q4 and a stronger weight of the consumer business overall. For Signify in Q4, we see the building of the momentum to continue in the professional business.

The reason for introducing or adding a range to our guidance in the EBITDA is fundamentally because of the positioning of sales and the conversion of projects execution that is stronger in the fourth quarter. This is all underpinned in our plan today to be delivered, albeit with a stronger seasonality in the last quarter.

Sorry, just the follow up on that. How much do you still have left of savings from the $200 million, and what are the tariff impacts that you factor into the guidance?

First on the cost savings specifically. We have to keep it simple. We have now realized the full savings, the gross savings of $200 million that were intended as a result of our restructuring program that was implemented. We see that full gross savings has come true. It’s fully realized to your question and it’s fully in for the full year. At the same time, we have of course the effect that part of those cost savings are offset by the effect of inflation, mainly salary inflation. We have kept and consciously reinvested and revised, redeployed resources, especially on selling and marketing expenses or R&D expenses. General and administration expenses have reduced. We see there the, let’s say, more impact of the savings.

On the selling and marketing, we are redeploying resources to ensure and to feed the momentum of growth, in particular in the execution of our strategy and specifically to support our growth momentum in the connected and specialty business where we’ve seen a very strong improvement in the last quarter. The full savings are in and we have some reinvestment that are being done. Of course, we will continue to adjust our costs where we have more headwinds in some parts of our business.

The tariffs, part tariffs.

Look, we had a very clear plan as we indicated in the previous quarter to deliver Q2 and to be prepared for H2. The plan, we are very pleased with the execution of the plan. The impact overall on our Q2 financial performance has been broadly neutral on top line and bottom line, in line with what we expected. We have the plan laid out to be able to continue to adapt for the second half of the year as we were expecting. We are very much on track for the parts we can control in the scenario of tariffs that are known today, well in line with what we had planned and expected, which is well embedded and confirmed within our guidance.

All right, thank you.

Conference Call Operator: Our next question comes from Martin Wilkie from Citi.

Good morning. Thank you. It’s Martin from Citi. The question was again just coming back to tariffs and obviously the tariff rates have been volatile so far in the quarter. We probably don’t quite know what they’re going to be for the full year. When you look at your pricing developments and obviously it was still negative in the quarter, the ability or even the assumptions that you have for the second half on pricing, how should we think about that? Obviously your gross margin was quite strong in the quarter and you’ve been able to offset some negative price for productivity. As you move into the second half, is that gross margin still protectable? How are you seeing the ability to pass on any required price increase and what’s the reaction to that from your customers? Thank you.

Željko Kosanović, CFO and Interim CEO, Signify: Yes, good morning, Martin. So indeed, when we look at, first of all, we have, as we have indicated, different levers that we are activating to adapt to the tariffs. Of course, looking overall at how we manage the equation of price and cost and gross margin, we’ve been able to do so in general globally in Q2, but also specifically in the U.S. We have implemented price that we intended, that we needed to implement as part of those levels of mitigation. The price realization that we’ve achieved in Q2 was totally in line with our expectation. As we see for the remainder of the year, we also expect to be able to drive the price realization, but again, more in general, the gross margin management to be in control for the second half of the year as we expected.

As you said, we cannot speculate on any evolution of the tariffs. At least what we are very much in control of and driving with the right agility and anticipation is the deployment of all the plans and action that we had originally defined, which include price realization. Again, on price, on track with what we had planned for and expected, and we expect to be able to do so for the second half of the year.

Thank you. Just to follow up on that, in terms of any volume reaction, obviously one of the fears is that higher pricing could lead to lower demand, and I guess that’s probably more likely or feared about in consumer products than it might be in your professional business. Has there been any negative volume reaction to putting up pricing to offset tariffs, or is it just too early to tell how the reaction might be from customers to these higher prices?

What I can say for our U.S. business in general, overall, minimal. What we have seen is that our momentum on demand, especially on projects, has remained very strong, especially in the project on the professional business. If anything, we’ve seen on the stock and flow part a bit more of destocking than restocking. That was probably not so much of pre-buy patterns, maybe more on the contrary but not very material. Overall, let’s say the demand for us in the U.S. across all segments has been very strong intrinsic, so not really impact. Of course, we had on top of that a bit of contribution from price but on the demand side I think it has been very, very strong and not really impacted.

When you look at Q2, the level of uncertainty remains high, but from what we can see and of course supported by the pipeline of our project, I think we are confident on the momentum for the business to continue for the second half.

Great, thank you very much.

Conference Call Operator: Thank you. Our next question comes from Akash Gupta from JP Morgan. Please go ahead.

Hi, good morning and thanks for your time. I have two as well. The first one is a follow-up on your comment earlier on Daniela’s question. You were kind of indicating that Q4 you will have a bit stronger top line because of recovery in consumer and also the momentum that is building up in professional. I suppose that you may have some visibility on professional given the nature of the business. Can you comment on visibility you have in consumer because we have seen over time that you have been a bit optimistic in your assessment? I just want to gauge what could be the risk that we may not see a strong Q4 that you are anticipating. On the same topic, will there be any difference in cost allocation in Q4 compared to, let’s say, Q4 of last year and also for three quarterly run rate?

The high margin in Q4, is this all function of top line or will there be any change in cost? Maybe some of these marketing costs that you mentioned might go away in Q4.

Željko Kosanović, CFO and Interim CEO, Signify: That’s the first one. Yes. Good morning. Akash, few elements to try to address your question. First of all, on the consumer business, I think the momentum that we see in particular on the connected part of our business is giving us, I would say, across the different geographies, because this is really consistent across all our geographies, quite a good level of visibility. Of course, when we look at the different specific initiatives that we’ve been focusing on, I think from that point of view we have, I think, a rather solid visibility on the momentum on what is expected, of course, for that business. Q4 is always, and has always been the case, a very strong quarter. It was the case last year where we were able to deliver quite in line with our expectations.

I would say that the level of visibility there is quite good and quite solid for the consumer business from the top line perspective. Now, to your question on the parameters of cost. Of course, this is a quarter again which is very similar to what we see in general, which is helping quite significant or an improvement on the cost absorption mechanically. We have also the additional effect of a further cost adjustment that we are taking in some parts of our business. Like we are seeing parts of the business that are facing more headwinds, there we are making sure that we adapt and redeploy resources and at the same time keep investing for areas where we have a quite stronger or more predictable, let’s say, return on investment equation, which is particularly the case of the consumer business.

Linked to all those two phenomena, I think we would expect in Q4 a better contribution of the indirect cost absorption on the overall P&L of Signify for Q4.

Thank you.

My follow up question is on corporate or elimination line where I think in this quarter you had minus $4 million, which was less than half of roughly $10 million you had in the second quarter last year. Maybe if you can explain what is driving that and what shall we expect going forward on that corporate or elimination line.

Thank you. I think you’re referring to the others, right, which is where we also. In the other, one important element here as we have mentioned and highlighted, this is where we see some of our ventures or early stage growth platforms and pilot projects that are not yet integrated in one of our four businesses. When those ventures become mature and more scalable, then they are transferred into one of our global businesses. It was, for example, the case several years ago with the agricultural lighting. We have a venture jointly invested with an industry leader in China to develop consumer connected solution. This is more on the connected space in the Sabi Chinese IoT ecosystem. This has been quite successful in the first half of the year, in particular in Q2. This was led to different factors.

There we have a very good momentum, which is probably a bit more on the positioning and the successful execution of our strategy in that specific venture, which has been helping and which is reported under this order. That’s the main factor and the main explanation to what you see translated also in the profit. Because beyond those ventures, you have some of our central costs that are reported, early stage research, global cost. The main parameter to your question is fundamentally the performance and the contribution of the growth of this specific venture.

Thank you.

Conference Call Operator: The next question comes from Marc Hesselink from ING. Please go ahead.

Yes, thank you. Could you discuss the measures that you’ve taken on marketing and sales, which have accelerated the growth a bit and what kind of things did you do and is this a temporary effect? This is the sort of lever that you can pull to increase the growth a bit, but at a higher cost. Just explaining a bit what happened there, please.

Željko Kosanović, CFO and Interim CEO, Signify: Yes, good morning, Marc. I think maybe the way to look at it is how it’s of course supporting the execution of our strategy. As I had mentioned earlier, what is very important for us because this is really where we see strategy working, especially on connected and specialty, where we’ve seen growth in all our businesses, in all our segments, and in all our geographies, even in the context of, let’s say, an overall market demand that has not been necessarily significantly improving. There, the way we’ve also been able to do that, to give you an example, of course in the consumer business, there is a very key element of how we are driving the ROI of demand activation. There we’ve been making sure for several quarters that we do that and we are seeing the returns coming through.

On the professional business, there also our ability in particular in Europe. If you talk about the professional Europe business, there we have engaged for a few quarters, redeployment of our resources to be able to capture growth opportunities in segments where we saw opportunity. This has borne fruit. I think there it’s really about repositioning ourselves in parts of the business that have a better growth momentum and fully in line with our strategy. This is really where we’ve been specifically and selectively redeploying our resources. This is something which of course we will continue to do. It will in the end contribute from, let’s say, the cost absorption improvement as soon as the growth comes back. At the same time, we are also clearly readjusting and adapting in parts of the business which are facing more headwinds.

For example, we’ve seen in the first quarter stronger headwinds in the OEM business. We have taken steps there to adjust the cost, which is also what explains the improvement of our profitability from Q1 to Q2 in that business. In other parts where we see more challenges, we are going to continue to optimize and redeploy. Fundamentally, it’s really about really looking at the sales and marketing investment that we can continue to feed to support the continuum of our growth momentum, which we have seen confirmed and strengthening in the rest of the color. With that, we expect to see and to continue to strengthen the second half of the year.

Great, that’s clear. My second question is on China. Also, in the first quarter, China was already improving a bit better than expected. Especially, I think from the second quarter onwards, you have a much easier comparable base. Can you maybe talk a bit about the dynamics that you’re seeing there?

Yeah, indeed in China, we would, I think, with similar view that we indicated previously. I think Q2 was again growing in both the consumer and professional business. We do not see fundamental changes or improvement, let’s say, in the structural market dynamics. This is, I would say, much more the outcome of actions and refocusing our strategy that has again been delivering results in line with our expectation, and we will remain, I would say, cautiously optimistic for the remainder of the year. For the mid to longer term, I think we know that there are great opportunities that will continue to be there. We have a small market share, we have a very clear model and a clear strategy to capture opportunities. In the shorter term, I would say it is to continue to focus on the actions that we have selected.

Overall, we do not foresee a significant improvement of the market environment. The indication there would be very similar to what we said, but on the back of a Q2 that is giving us a stronger confidence on our execution capability. Again, reminding that this is with a very strong profitability and cash generation model, which gives us a lot of agility also to redeploy resources with the right agility to gain momentum where there are opportunities. It is better, more optimistic, let’s say, compared to a quarter ago, but on the market itself, similar and cautiously cautious still on the market demand side.

Great, thank you.

Conference Call Operator: Ladies and gentlemen, just a reminder, you can press pound 5 on your telephone keypad at any time to ask a question. Our next question comes from Sven Pier from U.S.C. Please go ahead.

Yeah, morning guys. Thanks for taking my questions and doing the call. My first question is also a little bit alluding to what you already said in terms of your cost agility. You know, and I mean of course as we can all see, the market is not going to get any better anytime soon, also into next year. I think the leading indicators are not super promising, and the effects of your big cost saving program are all in the back. My question really is what is the scope for you that you can do another big program like this? I mean, is there still potential to make significant further cuts, or would the next step also be to think about maybe also discontinuing business in some regions where margins are just not sufficient enough? That’s the first question. Thank you.

Željko Kosanović, CFO and Interim CEO, Signify: Good morning, Sven. First of all, the big or large enterprise level kind of cost resizing program we implemented was very much needed to adapt, let’s say, to the reality of the demand. It was also done at the time where we were redesigning our operating model with a much more customer-centric and by design much more agile model to run on the specific businesses. I would say to your question, I think two parts. First, making sure that we have that agility and this is really what we’ve been focusing on, the agility on the allocation of resources to support successful execution of our strategy and the successful execution of our strategy whether the market demand is more favorable or not. I think clearly that’s what we’ve been able to do in the last quarter. Connected and specialty now represent over a third of our business.

We’ve been growing across the board in connected and in some places, you know, with a strong double digit despite a market environment that is not necessarily significantly improved. We’ve seen also our analysis indicates that we in most parts gained market share. I think the one part which is very important is making sure that we apply the right agility and anticipation to invest and fuel the growth momentum and the execution of our strategy. On the other hand, we will continue to keep doing and probably a bit more specifically in each of the businesses to adjust and to optimize our cost base which could include indeed in some cases where we do not have the right return or value creation line of sights to readjust and to redeploy to parts where we do have a better output.

I think the big difference, Sven, to the way we had kind of engaged our cost resizing is I think we’ve done a lot on the central part of the organization and now it’s probably much more agile and much more adapted to each and every specific businesses and of course then at the level, each and every specific. Yes, we will continue to do optimization of cost, but probably not in a major, and certainly not in a major cost resizing program like the one that we have successfully deployed in the last 18 months.

The second question I had was just, and maybe it’s a bit early to ask, but you know, the expectation on the new CEO, I was just wondering in terms of his mandate from the board, is it to keep the status quo in terms of the company, the structure, or will he have kind of full flexibility to do whatever he thinks is the right thing to do.

Look, I mean, Sven will be on board effective first of September, so very, very shortly I think you’ll have the opportunity to have a firsthand view on the outlook. I think we are preparing, of course, and making sure that it is a very smooth transition onboarding, but I would say it’s going to be all about leading and continuing on driving the success of the company with a clear strategy and all the adjustment that will be needed that he will be able to read. I think he will probably be in a better position to give you a firsthand answer to your question. Stay tuned. Very, very soon you will be able to hear firsthand from us.

Sounds good. Thank you, Željko.

Thank you.

Conference Call Operator: The next question comes from Chase Coughlan. Kathleen from Van Lede Kempen, please go ahead.

Hi, good morning all and thank you for taking my questions. I have two, both on the professional business. Firstly, you’ve obviously commented that you saw some strong demand in the U.S. across Q2. I’m curious, did you see any sort of pull forward effect pre-tariffs or any pre-buying sort of benefits? I think you appear in the U.S. also spoke to that. I’m curious on what you’re seeing from customers there.

Željko Kosanović, CFO and Interim CEO, Signify: Yes, good morning. I think I briefly mentioned that earlier, but just to come back, I think in general what we saw in Q2, broadly speaking, no positive pre-buy contribution on the demand side. If anything, we’ve rather seen, I mean, neutral, let’s say, on the project side of the business, but on the stock and flow we’ve seen probably a bit more of wait and see, hence a bit more destocking than stocking actually in the second quarter. In overall, not really material. I think it’s not been, let’s say, a positive accelerator of our growth performance in the second quarter linked to this rebuy effect. At least that’s not what we’ve seen, by the way, both in professional and in consumer.

Okay, very clear. My second question, I think in Q1 you spoke quite clearly about a weak European professional business and how that weighed on the margin. I assume the situation is still the same, but I didn’t see any particular commentary about it in the press release. I’m curious, is there still quite a margin drag there in Q2 from the weak European market?

Here maybe what I can say on the professional Europe, actually we’ve seen a sequential improvement in the second quarter from our analysis, indicates that we gain market share. What’s important is that we actually saw growth in connected and specialty in all the segments, indoor, outdoor, and in all the geographies in the second quarter. Positive growth in office and industry, retail, hospitality, also back to growth in public. I think it’s been a positive momentum. At the same time, we’ve continued to see softness on the trade part and particularly offline trade, stock and flow part of the business in Europe across the board. I think it’s a bit more contrasted and a better, let’s say, an improved sequential dynamic specifically linked to the execution of our strategy.

This is very important because it’s the outcome also of actions we’ve taken to reposition ourselves, which are starting to bear fruits and gives us confidence. I think it’s more contrasted and hence the effect on the drag on profitability, as you rightly pointed, was still strong in Q1 because we had a high comparison base, has been less of an impact in the second quarter as we expected. This is going to stabilize. It has stabilized in Q2 and will stabilize for the remainder of the year. This is indeed, as you pointed, not as much of a drag on the profitability equation coming from the professional Europe business as it was in previous quarters.

All right, perfect.

That’s very helpful, thank you.

Conference Call Operator: The next question comes from Adam Parr from Rothschild & Co.

Good morning.

Thanks for taking my question. Just the one for me, thanks. Could you please talk a little bit about pricing in connected versus non connected, what you’re seeing there in the quarter, and how you expect that to develop going forward.

Please.

Željko Kosanović, CFO and Interim CEO, Signify: Good morning. What I can say is the pricing trend, first of all, overall has continued to be stable and even improving. Of course, the execution of our strategy in connected and specialty is supportive to that dynamic. There we talk about, of course, price and mix combined, if you like. There clearly is a link in what we see on the dynamic of price in general with the execution of our strategy and the growth momentum we see in the connected and specialty part of the business.

Perhaps just a quick follow-up if I can, particularly on connected, do you see sort of in line with increased marketing spend going into the bigger seasonal quarters for sales, 3Q and 4Q, particularly in the consumer business? Really, I’m wondering here, do you sort of envision having to perhaps cut costs in the connected business, sorry, cut prices in the connected business in addition to the typical marketing spend you’d see just to sort of support volumes there, or is that not something you might see at the moment?

I think again in general, I think that’s what we’ve been able to demonstrate over the last few quarters. We manage the gross margin as a whole. I think we really look at all those parameters in combination in a way that is consistent and cohesive. I think all those parameters, and we typically, in the consumer behavior business, have a playbook and a model to be able to do that successfully. We expect to continue to do that. Of course, it’s always a bit more of a holistic equation that the teams have to manage. There we have the proof points, which has been the case in the high season as we saw last year, strong delivery on sales with the return on investment and the translation of that into the profitability expansion. This is what we are expecting to replicate and enhance further this year.

Okay, thank you very much.

Conference Call Operator: Thank you. With that, I will now hand the call back over to Thelke Gerdes for any closing remarks.

Thelke Gerdes, Head of Investor Relations, Signify: Ladies and gentlemen, thank you very much for joining our earnings call today. If you have any additional questions, please do not hesitate to contact us. Again, thank you very much and enjoy the rest of your day.

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