Koninklijke Philips N.V. (NYSE:PHG) Q2 2023 Earnings Call Transcript

Roy Jakobs: No. I’ve not. So that’s also why we did not put a timeline in. So — and I also don’t want to further speculate on it. I think it’s important to stress that also there, there is no specific reason that I would call out or any specific concern that this is indicating something. I think it only indicates that this is being worked through very diligently. And at the same time as I said earlier, there’s a lot happening across the plate of both the FDA but also on our side. So I think in both parties, we are putting all efforts into it to bring this to the best possible conclusion. The moment we will get any update on timing or conclusion, of course, we will come forward with it. But it’s hard to put a specific timeline on it. Also when I said earlier in the year, I would hope for first half indeed, that was my hope. But I also said it’s not in our control. There’s a lot to be worked through and that’s kind of what, yeah, we have seen materializing now.

Veronika Dubajova: Understood. Thank you guys so much.

Operator: Thank you. We will now move to our next question and the question comes from the line of Richard Felton from Goldman Sachs. Please go ahead.

Richard Felton: Good morning. Thanks for taking my questions. My first one is on Connected Care. So the strong performance on the margin which drove the beat at group level in Q2. But could you provide a little bit more color on the margin drivers within the division please? Specifically interested to know the impact from monitoring versus sleep and respiratory care. And then were there any one-offs which drove strong performance in the quarter for monitoring? That’s my first one. And then my follow-up also on Connected Care. Look, it looks like sleep and respiratory care still had a fairly material revenue decline in Q2 given the system sales were, I think, already zero last year. Could you provide a little bit of color on where those incremental declines are coming from, please? Thank you.

Abhijit Bhattacharya: Yeah. So, hi, Richard, this is Abhijit. On Connected Care, as we mentioned also in the commentary upfront is coming mainly for monitoring. We’ve had a — it’s a very profitable business and monitoring as you would remember year was really hit by the component situation. I think we have had a 20-plus-percent growth in the second quarter and then when you get operating leverage, of course, you get a big impact. Besides that, in sleep and respiratory care also we had started in Q1 taking cost actions. So therefore there the profitability starts to improve. So I think overall, it’s pretty much organic, so there are no real one-offs.

Roy Jakobs: Maybe I can take the second one on the SRC side. So if you look to the SRC mix, actually you see that ventilation side was where we saw the decline. We’re also still working through remediation on that. So actually that is connected. But at the same time if I look to masks, actually we have seen masks coming back stronger and that was a positive development in the quarter. So it is a mix issue where the ventilation is actually driving the decline while mask is offsetting some of that, whilst we, of course, have the ongoing effect of sleep remediation in the sleep devices part of the business.

Richard Felton: Great. Thanks very much.

Operator: Thank you. We will now go to our next question. And your next question comes from the line of David Adlington from JPMorgan. Please go ahead.

David Adlington: Good morning, guys. Thanks for the questions. Firstly, just on orders. You said you face a tough comp, but I think it was only 1% last year and the year before that was down 15%. So I just want to [indiscernible], these were either by notable weakness either by product category or by region. Secondly, just on your one-off charges, it looks like you’ve shifted 100 basis points from restructuring to other quality related charges in Connected Care. I just wonder what the reason for that change was, please?