Welcome to the Philips' Fourth Quarter and Full Year 2025 Results Conference Call on Tuesday, February 10, 2026. During the call hosted by Mr. Roy Jakobs, CEO; and Ms. Charlotte Hanneman, CFO, all participants will be in a listen-only mode. [Operator Instructions]. Please note that this call will be recorded, and the replay will be available on the Investor Relations website of Royal Philips. I will now hand the conference over to Ms. Durga Doraisamy, Head of Investor Relations. Please go ahead, madam.

Thank you. Good morning from London, everyone. Today, we will start by reviewing our fourth quarter and full year 2025 results, followed by a short Q&A session. Then at 11 a.m., our Capital Markets Day webcast will begin and run until 4:00 p.m. You will hear from Roy, Charlotte and our Chief Business Leaders as they share how we're driving profitable growth to deliver sustainable value. The program continues with a North America-based Philips customer panel, providing real-world customer insights. Roy will wrap up the day with closing remarks and key takeaways. The press release for both events was published on our website this morning. The replay and full-time script of the webcast along with the presentation and transcript for our Capital Markets Day will be posted within the next 24 hours. As always, I want to draw your attention to our safe harbor statement on screen. With that, over to you, Roy.

Thanks, Durga, and good morning, everyone. Thank you for joining us today. We have consistently delivered on our commitments in every quarter this year, including a strong fourth quarter, and we are entering 2026 with momentum. This reflects the impact we are making for our customers and consumers, delivered through disciplined execution by our passionate teams. I want to start with the key highlights for Q4. Order intake was strong, up 7%, reflecting sustained improvement over the past year as we continue to expand and grow our order book, strengthening visibility into 2026 and beyond. Comparable sales growth of 7% year-on-year and was broad-based across all businesses and geographies and strong contributions from Personal Health and Connected Care businesses continued. Adjusted EBITDA margin improved by 160 basis points to 15.1% despite the impact from tariffs. For the full year, we delivered strong order intake of 6%. Comparable sales growth as per outlook and adjusted EBITDA margin of 12.3%, exceeding our outlook, and that's despite the impact of incremental tariffs. These results reflect margin accretive innovation, productivity gains and disciplined execution, translating into strong operational performance and cash generation delivered through a performance culture and highly engaged team. As we enter 2026, we are moving from a strengthened foundation and margin improvement focus into the next phase for Philips, one of profitable growth acceleration with a clear path to mid-single-digit sales CAGR and mid-teens margins by 2028. Now let's look at our fourth quarter and full year 2025 performance in more detail. Starting with orders. Equipment order intake grew 7%, reflecting sustained momentum over the past year. Growth was broad-based across D&T and Connected Care, driven by sustained double-digit growth in North America. We achieved a solid full year performance with D&T order intake up 5% and Connected Care up 7%.…

Thank you, Roy. I will start with segment level performance. In Diagnosis & Treatment, comparable sales improved sequentially, in line with our expected phasing, increasing 4% year-on-year in the fourth quarter and remaining flat for the year. Within the segment, Image-Guided Therapy continued to perform particularly well, delivering double-digit growth in the quarter. Performance was driven by continued momentum in our flagship Azurion platform and strength in coronary intravascular ultrasound. Precision Diagnosis sales were stable. Adjusted EBITDA margin in Diagnosis & Treatment declined by 30 basis points to 11.8% in the fourth quarter. This reflects incremental headwinds from tariffs, which were partially offset by improved gross margin from innovation and productivity measures. For the full year, adjusted EBITDA margin increased by 10 basis points to 11.7%, reflecting solid margin performance despite the impact of tariffs, supported by improved gross margin from innovation and productivity measures. Connected Care closed the year with strong momentum, delivering comparable sales growth of 7% in the fourth quarter and 3% for the full year. Fourth quarter performance was driven by double-digit growth in Monitoring and mid-single-digit growth in Enterprise Informatics, driven by robust order book conversion in North America. Adjusted EBITDA margin in Connected Care expanded 150 basis points to 16.5% in the fourth quarter, driven by operating leverage, improved gross margin and productivity measures, partially offset by higher tariffs. For the full year, adjusted EBITDA margin increased by 110 basis points, crossing the double-digit mark to 10.7%. As part of our ongoing portfolio simplification and focus on scalable, higher-margin platforms, we completed the sale of the Emergency Care business in Q4, in line with the time line previously communicated. In Personal Health, comparable sales growth improved sequentially, growing 14% in the fourth quarter and 8% for the full year, with all 3 businesses contributing.…

Thank you, Charlotte. Before we move to a brief Q&A session, just a quick request. Please keep questions focused on our Q4 and full year 2025 results and our 2026 outlook. We will be discussing our midterm plans and outlook in more detail at our Capital Markets Day later today. Operator, we are now ready for questions.

[Operator Instructions] We will now go to our first question. And our first question today comes from the line of Hassan Al-Wakeel from Barclays.

I have a couple, please. So firstly, Charlotte, for the last couple of quarters, you've been vocal on the gross margin improvement in the business and specifically D&T, owing to a better mix in the order book converting. Can you help us understand how this unfolded in Q4 and how much of a driver you view the mix benefit as a tailwind to your 2026 margin profile? Secondly, order intake for the full year for D&T was 5%. It would be great if you can help us understand how this differs by modality in Q4 and how you can reconcile this with the expected slower revenue performance for 2026 and whether this could be an element of conservatism in your guide?

Thank you, Hassan. Let me take your first question on our gross margin improvement. We are indeed -- and I indeed have been vocal about that for many quarters, we are very happy with the way our gross margin is developing across Philips. We really see an increase across the board driven also by innovations and productivity as well. And let's keep in mind that gross margin, of course, that's also where our tariffs hit, so that is impacting that as well. So we have been very disciplined in executing across the board. So if I look at 2026, what I think will -- what we see from a 2026 perspective also in D&T, we see continued margin expansion despite the tariff impact. So that gives you a good sense of that. We also think that underlying gross margin strength will continue to be strong. So there are a few factors in the bridge for 2026 to think about. First of all, of course, we have the annualizing tariffs. That's a headwind. Then we have continued productivity, and I will talk more about that later. And then the third component, as you say, is also the gross margin of innovation impact. So all 3 factors contribute. And then for the second question, maybe over to Roy.

So if you look to the D&T profile, Hassan, and of course, we were happy with the 5% order intake and the acceleration that we saw towards that 5%. We also see actually order intake momentum continuing. As we said, that's on the back of a very strong North American market that is actually continuing to grow for us double digit in orders. Then we see that if you look to underlying which are the contributors, of course, we have very strong IGT contribution in that mix. We see an acceleration in MR and also ultrasound was a good contributor because we have launched some great new innovations there that have really started to yield very well, including in China. So if you look at the kind of the contribution, you had IGT double digit, then you had the PD business we saw the acceleration as well, but at a lower pace. Now that's something that then also when you look into the sales contributes into your sales conversion. Now, as you know, of course, these are businesses with a bit longer conversion cycles than some of the orders that we have in Connected Care, which were also very strong, but you have more book and bill in that business. So that's kind of where you see that phasing coming into sales a bit slower. Now that builds into 2026, we will continue to see strong order momentum, and that will also underpin the build of sales into the year. So we will see -- and that's what guided and also what Charlotte guided for and that we will start a bit at the lower end of the range, and we see that strengthening in due course of the year as the order intake momentum that we have also been building up to 2025 really lands well into the rest of the year.

Very helpful. And if I can just follow up on the '26 guide, but also beyond. Roy, looking back to 2023, your '25 range was conservative and wide, and you've clearly landed at the top end of this and meaningfully outperformed this year's guidance. What buffers have you built into the guide for '26 and also beyond that, particularly on the margin, given the journey from here is going to be a lot harder than the journey from 7.5% in 2022?

Yes. So 2 part of answer, Hassan. Of course, we will go in full detail, right, at the C&D into kind of our plan underpinning '26 to '28. So you'll have extensive views on that later today. The short answer for today is what we learned in the first plan was that indeed, we are living in a dynamic world. So the dynamic world requires that you need to be, on one hand, very diligent in executing your own plan, focus on what you can control. Therefore, productivity is another important contributor. But as we really started to drive innovation and we have that strong foundation now that we can build on, growth will be a big contributor as well to margin, bigger than in the first period. So actually, that will start to kind of really kick in. And then we keep an eye on an uncertain or dynamic environment where tariffs, for example, in '26 is something that, a, we still will have the full year impact of what is currently known, but you also don't know what could happen next, right? But we have adopted and adapted our organization to a much more agile and leaner one where kind of we are building resilience we adopt fast or we adapt fast if we see something happening. And that's also on the growth side, right? When we see growth happening in a certain part of the world, we can faster route to that piece so that we capture that opportunity. And if we see actually an event popping up somewhere, we can also address that faster. So I think that is where we kind of will share a bit more later today and this afternoon. But we are kind of taking an outlook that takes the world into account.

Your next question today comes from the line of Richard Felton from Goldman Sachs.

Two, please. The first one, within D&T, I think Precision Diagnostics was flat in the quarter. I suppose given better order intake across MRI and CT earlier this year, I was surprised it was a little bit stronger than that. So any color on Precision Diagnostics in the quarter and how to think about momentum into 2026, especially as you're bringing new products and new innovation to market? And then the second one, you referenced that Q1 is going to be at the lower end of the full year '26 growth guidance range. I suppose despite the easier comp, any sort of other phasing or things to be aware of on that Q1 comment specifically?

Richard, thanks for your question. So first on your PD question within D&T. So what we've seen play out in Q4 was in line with expectations. Orders returned to growth in Precision Diagnosis. And then from a sales perspective, we improved sequentially. And let's not forget, of course, from a sales perspective, we have a higher exposure to China, which is also impacting the sales in the fourth quarter. And if I then take a step back from a PD perspective, as you know, we have really rebuilt the foundation from a quality, from a leadership perspective, we reduced SKUs. You will hear from Jay, our business leader, later today on, well, what we've done and also very importantly, the plan going forward. So then from a PD perspective, from a margin perspective, you will have seen the progression. We went from mid-single digit to high single digit. And later today, we'll explain that there is much more to come. And also the innovation that we spoke about and that Hassan asked about earlier is accretive and now turning into a tailwind, particularly related to the RSNA innovations that Roy mentioned on the call earlier. That, in combination with stronger commercial and service execution makes us feel very good about 2026 and will also drive a stronger funnel and order intake in 2026. So that is on your first question. Your second question was on the Q1 phasing that you asked if there were any impacts there. So as I said in my prepared remarks, our growth phasing is much, much more balanced than in 2025. We have a very balanced progression in 2025. And actually, all quarters are in the 3% to 4.5% range, which is a significant improvement from where we were last year. So we're pleased about that. Now Q1, indeed, as you said, starts at the lower end, a couple of reasons, nothing out of the ordinary there. On the one hand, it's just seasonality. Q1 is typically our lowest quarter, as you know. And then, of course, we had a strong finish in Q4 as well. So that's from a sales perspective. From a margin perspective, as I also said in the prepared remarks, look, the tariffs continues to be a significant headwind, and that is particularly impacting us in Q1 because the operating leverage from stronger sales really only kicks in at the end of the year primarily. So Q1 from that perspective is a little bit lighter, and that's where our tariff kicks in strong. But as I said on the prepared remarks as well, we are very committed to margin expansion. Our guide also includes a margin expansion of 20 to 70 basis points. So we go very hard at driving that.

Your next question today comes from the line of Julien Dormois from Jefferies.

Congratulations on a strong quarter and a very nice landing to '28. I have 2 questions, if I may, as well. The first one relates to Personal Health, which obviously was super strong in Q4 and accelerating sequentially. And this is despite tough comps in the quarter. So just curious whether there is any kind of stocking effect into that? Or is it just the very strong demand you highlighted for Europe and elsewhere? And the second question is more broad. It's just whether you have an update and a stance on the Section 232 investigation that's been running by the U.S. government? Any thoughts you might want to share on that side, please, would be helpful.

Thank you very much, Julien. And let me take your first question on Personal Health. We were indeed very pleased with our strong Personal Health performance in the quarter, 14% in Q4, actually not on a very tough comp, though. So what has been driving this strong growth, a few different things. First of all, we saw market share gains really across all businesses. Second of all, and this is very pleasing to see, we see very healthy sell-out trends across most geographies and also a very resilient demand in North America. And that is where the combination of our innovations that Roy also mentioned, combined with our strong commercial execution really, really saw great momentum in Q4. And then particularly on your stocking question, I also said it in the prepared remarks, we have, as we promised we would do, derisked the China trade inventory. And it is now roughly at 3 months, whereas a year ago, it was at 6 months. So that means we're now in line with market averages on that. So nothing further to add there.

Let me take the second question on the 232. So actually, the 232 investigation has not been concluded nor any outcome shared. How we look at it is that, in essence, it's equal to tariffs, but a different way of going after it, right? So I think this is a potential measure that could replace tariffs. So we don't think this will worse the situation. It could potentially actually improve the situation, but we don't speculate on that. How we look at it is that in essence, they've got to hit the high court who's going to take a different tariff stand. They have a different mean of kind of still securing or putting from some tariffs on imports into the U.S. So we are, of course, actively engaged. We also are part of the discussion. We also know they are looking into measures that potentially could be beneficial. But as I said, we don't want to speculate on any outcome.

Your next question today comes from the line of Veronika Dubajova from Citi.

Excellent. I'll keep it to 2 and also short term. First, I just want to get your flavor for China. Obviously, we've had you guide to flat China in '26. Healthineers has done the same. GE Healthcare, arguably whose mix is closer to yours, have expressed some more cautiousness. They expect China revenues to decline in '26. So just if you can more build -- talk a little bit to the building blocks of that assumption and what you're seeing in that market at the moment. That would be my first one. And then, Charlotte, if I can come back on that PH margin in the fourth quarter. So I've followed your stock for a very long time. I went back through the history. And I think the best margin you ever achieved in PH in the fourth quarter was 21%. So the 23%, especially with tariffs, is highly unusual. Can you maybe talk to some of the structural changes that have happened in the business that are enabling you to drive this substantially better margin dynamic that we have seen in PH versus what we have seen in PH in the past?

Thank you, Veronika. Let me take the first one on China. So on China, so we see the following, and as I also highlighted in my remarks. So actually, we see China stabilizing in 2026. So of course, it was a headwind in the last plan period and also in 2025, with stabilizing. So actually, we expect contribution from China, but we are remaining cautious on it. We see 2 different trends. One in PH, where actually we have seen step-by-step some improvement in the sell-out, and we expect that will also kind of result in improvement in sell-in and therefore, sales in the China market. Now on the health systems side, we remain more cautious because the outlook on tenders and how they convert into real orders is still less predictable. And therefore, kind of we are counting for a growth, especially on the health system side, much more on a very strong North America and also the other parts of the world. So that's kind of where we remain cautious overall. We still remain committed to it. We see a slightly differentiated picture between PH and D&T, but we do see kind of China contributing to growth, although to a lesser extent than any other region.

Yes. Thanks, Veronika. Let me take your second question on the PH margin in Q4. Of course, we are very pleased with that strong margin. And in Q4, particularly also driven by the operating leverage on the back of 14% sales. But if you think about the more structural drivers, I would call out a few and also Deeptha will explain more later today. So that is something to look forward to as well. But the key drivers, first of all, innovation. I mean, Roy spoke about the innovations. We have, for instance, the new platform for Sonicare. We have OneBlade that is doing extremely well. Those innovations, they come at a higher margin, and they also drive premiumization, which also helps to drive higher margin and also drive higher prices. The second component is really around commercial execution, which has been very, very strong in Personal Health. We, of course, win with the winners, the Amazons of the world and the JDs of the world, and that continues to be a very strong force for us as well. And then thirdly, and this goes for all of Philips, we really focus on productivity, on disciplined execution, on controlling the controllables. And all those 3 factors really, really helped us also in Q4 2025. And as I said, Deeptha will explain later how we are confident that we will also further improve over the next 3 years.

That's very helpful, Charlotte. And if I can maybe just quickly follow up. I think originally, at the third quarter, you talked about sort of high single-digit growth in PH. It's obviously come in almost at twice the pace that I think many of us expected. Anything you'd call out? Is there a specific region or a specific category that helped drive this meaningful surprise on the revenues?

Yes. Thank you, Veronika. I would say it's pretty broad-based overall, both from a business and a geographical perspective. We just saw very good momentum across the board as there's really a lot of demand for our products. So we saw a really good performance in grooming, where -- and I spoke about the OneBlade platform just now. We see very, very good traction across the board. And just as a reminder, in Q4, we, of course, benefited from the lower comparable due to China because last year, we were still in full destocking mode. So that has helped absolutely as well. So -- but also, excluding China, the numbers are still very, very strong.

We will now take our final question for today. And the final question comes from the line of Hugo Solvet from BNP Paribas.

Congrats on the [ prints ]. Two, please. First, on the drivers for D&T and CC, Connected Care demand. Patient volumes in the U.S. was not mentioned in the Q3 slide deck. So just wondering what magnitude of pickup you're seeing and how sustainable do you think it is? And on the Q1 margin comment, you expect to decline slightly. Is the decline that we've seen in Q1 2025 would be a good proxy for Q1 2026? Just trying to think about where we should land.

Yes, thank you. Let me take the first one in terms of strong demand in terms of the U.S. We see a few drivers, especially big investment in infrastructure in health care systems in the U.S. is driving significant uptake and demand for platforms. So if you look some of the CapEx spend and even if you look kind of the demand forecast on CapEx really highlights that they are strengthening monitoring, they're strengthening cybersecurity as a big priority, which, of course, also plays to our informatics business, both in imaging and again, in monitoring. And therefore, we have seen significant kind of momentum in North America on the Connected Care side. We expect that also to continue into 2025. Now that, of course, is also driven by strengthening of the financial health of the health care systems in the U.S., not all, as we know. So the stronger systems are getting stronger. They are consolidating and actually absorbing some of the smaller systems. But again, that then plays to our platform play because that actually is why they like us because we can provide the core infrastructure for interventional, for cardiac, for monitoring. So those are really key drivers for us that actually have been helping us in 2025. And actually, we see prolonged strong demand on that in '26 and beyond. And actually, I think what will be very helpful today is the customer panel as well because they will talk exactly about their needs to drive more reliability in their operations. So therefore, investing behind that because with the staff shortages, they need to make sure that they have actually systems that support the staff in the best possible way so that they can deal with patients because patient volume is actually strong and good. Also procedures are expanding, what we did also with SpectraWAVE, bolstering our cardiology play is because we see that procedure momentum in cardiology and the patient volume in cardiology especially continuing to grow. And that actually we are very well positioned to capture that across our portfolio with also the imaging part, the monitoring part and the interventional suite.

Thank you, Roy. Let me take your second question on the Q1 margin, Hugo. I would say it's not a bad proxy to say to take the decline that we saw in Q1 2025. So that's roughly right.

That was the last question. Mr. Jakobs, please continue.

Yes. Thank you all. Let me close. We delivered our outlook in 2025 consistently across all 4 quarters. Order intake was healthy. Sales growth improved sequentially, margins expanded and cash generation was strong despite ongoing tariffs. These results demonstrate our strengthened foundation, improved resilience and disciplined execution in a challenging macro environment. This is how we deliver our innovations to consumers and customers across the globe where we see demand for them strengthening. Above all, I also really want to thank all our employees globally for very hard work, delivering these strong results whilst making a meaningful difference through our impact with care culture and delivering better care for more people. With sustained order momentum, robust innovation pipeline, clear focus on accelerating profitable growth and the continued dedication of our teams worldwide, Philips is well positioned to meet our outlook for 2026 and beyond. We look forward to sharing many more details at today's Capital Markets Day starting at 11 a.m. I really invite you to be there. Thank you so much. Looking forward.

Thank you. This concludes the Royal Philips' Fourth Quarter and Full Year 2025 Results Conference Call on Tuesday, February 10, 2026. Thank you for participating. You may now disconnect.