Q2 2024 Koninklijke Philips NV Earnings Call

Yeah.

Operator: Welcome to the Royal Philips second quarter and semi-annual 2024 results conference call on Monday, July 29th, 2024. During the call hosted by Mr. Roy Jakobs, CEO, and Mr. Abhijit Bhattacharya, CFO, all participants will be in a listen-only mode.

Speaker Change: Welcome to the Royal for the second quarter and semi annual 'twenty 'twenty four results conference call on Monday July 29th 'twenty 'twenty four.

Speaker Change: During the call hosted by Mr. Raul Jacob C O I missed the other chip, but the chariot CFO all participants will be in a listen only mode. After the introduction there being poaching of teach you ask questions. Please note that this call will be recorded and a replay will be available on the investor Relations website.

Operator: After the introduction, there will be an opportunity to ask questions. Please note that this call will be recorded, and a replay will be available on the Investor Relations website of Royal Philips. I'll now hand the conference over to Mr. Leandro Mazzoni, Head of Investor Relations. Please go ahead, sir.

Speaker Change: Philips.

Speaker Change: I'll now hand, the conference over to Mr. Liang drummer Joni head of Investor Relations. Please go ahead Sir.

Leandro Mazzoni: Hi, everyone. Welcome to Philips' second quarter and half-year 2024 results webcast. I'm here with our CEO, Roy Jakobs, and our CFO, Abhijit Bhattacharya. The press release and investor deck were published on our investor relations website this morning. The replay and full transcript of this webcast will be made available on the website after the call as well.

Speaker Change: Hi, everyone welcome to Philips second quarter and half year 2024 results webcast I'm here with our CEO, Brian <unk> and our CFO Abhijit Bhattacharya.

Speaker Change: Yeah.

Speaker Change: The press release and Investor deck are published on our Investor Relations website. This morning, the replay and full transcript of this webcast will be made available on the website after the call as well.

Leandro Mazzoni: Before we start, I want to draw your attention to our Safe Harbor Statement on screen. You will also find the statement in the presentation published on our Investor Relations website. Roy, over to you.

Speaker Change: Before we start I want to draw your attention to our Safe Harbor statement on screen. You will also find the statement in the presentation published on our Investor Relations website.

Speaker Change: Over to you.

Roy Jakobs: Good morning, everyone, and welcome. Great to be with you today. I want to start with the key highlights of this morning's release. We delivered strong order intake growth this quarter. But in a challenging macro environment, we achieved strong margin, supported by a Productivity Program.

Speaker Change: Good morning, everyone and welcome great to be with you today.

Speaker Change: I want to start with the key highlights of this morning's release.

Speaker Change: We delivered strong order intake growth this quarter.

Speaker Change: But in a challenging macroeconomic environment, we achieved strong margin improvement supported by our productivity program.

Roy Jakobs: Solid Operational Cash Flow and Comparable Sales Growth in line with our plan. The improvements were across all business segments and a result of the ongoing actions to enhance execution, supported by our innovation. We continue to make progress and see the effects of the focus on our three priorities, Enhancing Patient Safety and Quality.

Speaker Change: Solid operational cash flow and comparable sales growth in line with our plan.

Speaker Change: The improvements were across all business segments, and a result of the ongoing actions to enhance execution supported by our innovations.

Speaker Change: We continue to make progress and see the effects of the focus on our three priorities.

And I'll think patient safety and quality.

Roy Jakobs: Strengthening our supply chain reliability and establishing a simplified, more agile operating system. Supported by key innovation launches and our ongoing actions, we are confident in our plan and reiterate our outlook for the full year 2024. Moving on to the key financial highlights, comparable sales growth was 2% in a quarter on the back of high single-digit growth last year.

Speaker Change: <unk>, our supply chain reliability, and establishing a simplified more agile operating model.

Speaker Change: Supported by key innovation launches and our ongoing actions we are confident in our plan and reiterate our outlook for the full year 2024.

Speaker Change: Onto the key financial highlights.

Speaker Change: Comparable sales growth was 2% in the quarter on the back of high single digit growth last year.

Roy Jakobs: This was driven by 4% growth in diagnosis and treatment and 2% growth in both the connected care and personal health sector. The adjusted EBITDA margin was 11.1% in a quarter, a strong improvement of 100 basis points compared to Q2 2021. Free Cashflow Outflow was $64 million, which included the payment in connection with the Respironix economic loss settlement in the U.S. We delivered a strong underlying operational cash flow improvement, which Abhijit will unpack later.

Speaker Change: This was driven by 4% growth in diagnosis and treatment and 2% growth in both the connected care and personal health segments.

Speaker Change: The adjusted EBITDA margin was 11, 1% in the quarter, a strong improvement of 100 basis points compared to Q2 2023.

Speaker Change: Free cash flow outflow.

Was $64 million, which included the payment in connection with the Respironic economic loss settlement in the U S.

We delivered a strong underlying operational cash flow improvement, which obviously it will unpack later.

Roy Jakobs: I'm encouraged by the 9% order intake increase in the quarter. I'm confident that our innovative portfolio is well-positioned to help hospitals worldwide address their staffing shortages, enhance productivity, and improve patient and staff experiences, as are our leading innovations for consumers to take care of themselves. We continue to expect positive order intake growth in the second half and in the full year 2020. In China, orders declined as the industry-wide anti-corruption measures imposed by the government continue to impact orderly times by whole states, as their internal approval cycles have increased to ensure compliance.

Speaker Change: I am encouraged by the 9% order intake increased in the quarter I'm confident that our innovative portfolio is well positioned to help hospitals worldwide address their staffing shortages and house productivity and improve patient and staff experience.

Speaker Change: As are our leading innovations for consumers to take care of themselves.

Speaker Change: We continue to expect positive order intake growth in the second half and full year 2024.

Speaker Change: And China orders declined as the industry wide anticorruption measures imposed by the government continue to impact order lead times by hospitals.

Speaker Change: Their internal approval cycles have increased to ensure compliance.

Roy Jakobs: I actually just returned from China last week, where I met many of our customers and partners, and it is clear that it remains an attractive healthcare market. However, we do not expect that the anti-corruption measures will impact structural demands.

Speaker Change: I actually just returned from China last week, where I met many of our customers and partners and it is clear that as it remains an attractive health care market we.

We do not expect that the anticorruption measures impact structural demand.

Roy Jakobs: Our order funnel is active in the country, and we expect China to gradually contribute to order growth in the coming quarters. This will be supported by the recently announced government program for renewal of aged medical equipment. Let me now provide you with some of the customer and innovation milestones during the quarter. We continue to see strong customer demand for our solutions and signed several long-term agreements across the world in this quarter.

Speaker Change: Our order funnel is active in the country and we expect China to gradually contribute to order growth in the coming quarters, albeit from a low base.

Speaker Change: This will be supported by the recently announced government program for renewal of medical equipment.

Roy Jakobs: For example, we signed multi-year partnerships for monitoring, image-guided therapy, and helium-free MR with several university hospitals in the Netherlands and Belgium. We also signed a major multi-year partnership with Bon Secours Mercy Health, one of the largest health systems in the US, standardizing innovative patient monitoring solutions across its 49 hospitals to drive better patient outcomes and reduce burden on staff. We launched our next-generation AI-enabled cardiovascular ultrasound platform with new FDA-cleared AI tools integrated to advance cardiovascular imaging and increase the automation and productivity of our customers.

Speaker Change: Let me now provide you with some of the customer and innovation milestones during the quarter.

Speaker Change: We continue to see strong customer pool for our solutions and signed several long term agreements across the world and this quarter for.

Speaker Change: For example, we signed multi year partnerships for monitoring image guided therapy and helium for EMR with several university hospitals in the Netherlands and Belgium.

Speaker Change: We also signed a multi.

Speaker Change: A major multi year partnership with Bosch decor Mercy health one of the largest health systems in the U S. Standardizing and of this patient monitoring solutions across its 49 hospitals to drive better patient outcomes and reduce burden on staff.

Speaker Change: We launched our next generation AI enabled cardiovascular ultrasound platform.

Speaker Change: New FDA cleared AI tools integrated to advanced cardiovascular imaging and increase automation and productivity of our customers.

Roy Jakobs: Demonstrating our innovation leadership in minimally invasive treatments, we announced the first implant of the Dual Venuous Stent System, following pre-market approval from the FDA. Personal Health unveiled a series of innovations in China, including the launch of the first medical-grade Philips Lumia 8000 series IPL hair removal device with cooling technology. Looking ahead, we remain confident in our plan, although acknowledging that uncertainties remain in a challenging macro environment. In 2024, we expect to deliver further performance improvements.

Speaker Change: Demonstrating our innovation leadership in minimally invasive treatments, we announced the first implant of the venues stent system following premarket approval from the FDA.

Speaker Change: In personal health, we unveiled a series of innovations in China, including launch of the first medical grade Philips Lumia 8000 series IPL hair removal device with coding technology.

Speaker Change: Looking ahead, we remain confident in our plan acknowledging that uncertainties remain in a challenging macro environment.

Speaker Change: In 2024, we expect to deliver further performance improvement with 3% to 5% comparable sales growth building on a strong comparison base of last year and adjusted EBITDA margin of 11 to 11, 5% and free cash flow of 9% to $1 1 billion.

Roy Jakobs: 3-5% comparable sales growth, building on a strong comparison base of last year, an adjusted EBITDA margin of 11-11.5%, and a free cash flow of 0.9-1.1 billion. I will now hand it over to Abhijit to take us through the Q2 financials in more detail, after which I will come back on our execution priorities. Thanks, Roy. Good morning, everyone.

Speaker Change: I will now hand, it over to <unk> to take us through the Q2 financials in more detail after which I will come back on our execution priorities.

Abhijit Bhattacharya: Let me start with our performance highlights. Comparable sales grew 2% in the quarter with 1% growth in mature jobs; comparable sales in growth geographies grew 3% despite a decline in China. In diagnosis and treatment, comparable sales increased by 4% with gross across Image-Guided Therapy and Precision Diagnosis. However, it's important to note that this was compared to strong double-digit growth in Q2 2021. The adjusted EBITDA margin improved by 160 basis points year-on-year to 12.2%.

<unk>: Thanks, Roy good morning, everyone.

<unk>: We start with our performance highlights.

<unk>: Parable sales grew 2% in the quarter with 1% growth in mature geographies.

Roy: Comparable sales.

Roy: Growth geographies grew 3% despite a decline in China.

In diagnosis <unk> treatment comparable sales increased by 4% with growth across.

Roy: Image guided therapy and position diagnosis, it's important to note that this was compared to strong double digit growth in Q2 2023.

Roy: The adjusted EBITA margin improved by 160 basis points year on year.

Roy: <unk>, 2%.

The increase was mainly driven by improved sales prices and productivity measures.

Abhijit Bhattacharya: The increase was mainly driven by improved sales, pricing, and productivity; connected care comparable sales increased 2% with double-digit growth in enterprise informatics and flat comparable sales growth in monitoring on the back of strong double-digit growth in Q2 2020. We saw strong performance in sleep systems and patient interface in markets outside of the U.S. Connected care's adjusted EBITDA margin improved by 130 basis points to 8.8%, driven by solid performance in monitoring and a strong step up in profitability in sleep and respiratory care, which is encouraging. Personal health delivered a 2% comparable sales increase driven by 5% growth outside of China. Overall consumer sentiment in the US and international markets is solid, while consumer sentiment in China remains substandard.

Roy: Collected give comparable sales increased 2% with double digit growth in enterprise informatics.

Roy: Comparable sales growth in monitoring on the back of strong double digit growth in Q2 2023.

Roy: We saw strong performance it slipped systems and patient interface in markets outside of the U S.

Roy: Connected care adjusted EBITA margin improved 100 improved by 130 basis points to eight 8% driven by solid performance in monitoring and a strong step up in profitability in sleep and respiratory care, which is encouraging.

Roy: Perceval has delivered 2% comparable sales increase driven by 5% growth outside of China.

Roy: Overall consumer sentiment in the U S.

Roy: <unk> markets is solid while consumer sentiment in China remains subdued.

Abhijit Bhattacharya: The adjusted EBITDA margin for the segment improved significantly to 16.9% this quarter, mainly due to operational improvements and productivity. Sales in segment other were 70 million lower than in the second quarter of 2022-2023 due to royalty revenue phasing as indicated in our Q1 call. This difference alone resulted in a negative impact of around 160 basis points on the growth of the group in the second quarter.

Roy: The adjusted EBITA margin for the segment improved significantly to 16, 9% this quarter, mainly due to operational improvements and productivity.

Roy: Sales in segment other was 17 million lower than in the second quarter of 'twenty, two 'twenty trading three due to royalty revenue facing as indicated in our Q1 call.

This difference alone resulted in a negative impact of around 160 basis points.

Roy: Both of the group in the second quarter.

Abhijit Bhattacharya: We have been very disciplined in cost management, and our productivity initiatives delivered savings of $195 million in the quarter, of which operating model savings were $57 million, procurement savings were $71 million, and other productivity programs delivered $67 million. The adjusted EBITDA margin for the group increased by 100 basis points to 11.1%. Despite the lower royalty revenue in the quarter, productivity and pricing actions, which contributed 320 basis points, were partly offset by wage and component price inflation of 200 basis points.

Roy: We've been very disciplined cost management, and our productivity initiatives delivered savings of $195 million in the quarter.

Roy: Of which operating model savings were 57 million procurement savings were $71 million and other productivity programs delivered $67 million.

Roy: The adjusted EBITA margin for the group increased by 100 basis points to 11, 1%. Despite the lower royalty revenue in the quarter.

Roy: Activity and pricing actions, which contributed 320 basis points, partly offset by wage and component price price inflation of 200 basis points.

Abhijit Bhattacharya: Earlier in the quarter, we also concluded an agreement with insurers to pay 538 million to cover the Respironics recall-related product liability claims. This income was recognized in Q2 2024, and the remaining payment is expected this year. Free cash was an outflow of 64 million euros in the quarter as it included a payment of 415 million euros in connection with the Respironics economic loss settlement in the US, partly offset by the initial receipt from insurers of 150 million euros.

Roy: Earlier in the quarter. We also concluded an agreement with insurers to pay $538 million to cover the rest products recall related product liability claims.

Roy: This income was recognized in Q2 2024, and the remaining payment is expected this year.

Roy: Free cash was an outflow of $64 million in the quarter as it included a payment of 415 million euros in connection with the rescue Onyx economic loss settlement in the U S. Partly offset by the initial received from insurers of 150 million euros.

Roy: <unk>.

Abhijit Bhattacharya: Therefore, excluding these two effects, free cash flow in the quarter was around 200 million, driven by higher earnings and continued progress in working capital management. Our leverage ratio improved from 2.8 times to 2.2 times compared to Q2 2023 on a net debt to adjusted EBITDA basis. It's also important to note that both S&P and Moody's upgraded our rating outlook to stable. We now have stable outlooks for our strong credit ratings across S&P, Moody's, and Fitch.

Roy: Therefore, excluding these two effects free cash flow.

Roy: In the quarter was around $200 million driven by higher earnings and continued progress in working capital management.

Roy: Our leverage ratio improved from 2.8 times to two two times compared to Q2 'twenty three.

Roy: Our net debt to adjusted EBITDA basis.

Roy: It also it's also important to note that both S&P and Moody's upgraded our rating.

Roy: Outlook to stable, we now have stable outlook for our strong credit ratings across S&P, Moody's and Fitch.

Abhijit Bhattacharya: The effective rate for the first half of 2024 was negatively impacted by the de-recognition of deferred tax assets on the Respironics litigation provision and carry forward losses in the US. As a result, the effective tax rate for the full year 2024 will be high, normalizing for these effects.

Roy: The effective rate for the first half of 'twenty 'twenty four was negatively impacted by the recognition of deferred tax assets on the restaurant ex litigation provision.

Roy: Carry forward losses in the U S. As a result, the effective tax rate for the full year 2024 will be high.

Abhijit Bhattacharya: However, the effective tax rate is expected to be between 17 and 19% this year, compared to our guidance of 24 to 26% for the period 2020 to 2025. Now, let's move to the dynamics of order intake. As mentioned earlier, we continue to see inherent unevenness in order growth between quarters. In the second quarter, order intake grew by a strong 9 percent, driven by improvements outside China, particularly in North America. This resulted in 3% order intake growth for the first half of the year.

Normalizing for these effects. However, the effective tax rate is expected to be between 17, and 19% this year compared to our guidance of 24% to 26% for the period 2023, good liquidity price.

Speaker Change: Now, let's move to the dynamics in order intake as mentioned earlier, we continued to see inherent unevenness in order growth between quarters.

Speaker Change: In the second quarter order intake grew by a strong 9% driven by improvements outside of China, particularly in North America.

Speaker Change: This resulted in 3% order intake growth for the first half of the year.

Abhijit Bhattacharya: And we continue to expect to deliver order intake growth in both the second half as well as the full year 2024, as mentioned by Roy. As a reminder, orders and order book account for 40% of our revenue; the remaining 60% comes mainly from recurring revenue streams such as services and consumables, from the book and bill business, and from personal health.

Speaker Change: We continue to expect to deliver order intake growth in both the second half as well as the full year 2024 as mentioned by Roy.

Speaker Change: As a reminder, order them order book account for 40% of our revenue the remaining 60% comes mainly from recurring revenue streams, such as services and consumables from the book.

Speaker Change: And bill business and for personal health.

Abhijit Bhattacharya: As mentioned in our previous earnings calls, we anticipate sales growth to be back end loaded in 2024, due to the higher comparison base in the first three quarters of the year, where we grew 9% in 2020. We expect sales growth in the third quarter to stay broadly in line with the first half of the year on the back of 11% growth in Q3 2023, which was driven by mid-teens growth in diagnosis and, For the full year 2024, we expect all business segments to be within the three to 5% sales growth range provided by the group or provided for the group with connected care expected to be closer to the upper end of the range and diagnosis and treatment and personal health expected to be closer to the lower end of, With that, I would like to hand it back to Roy. Thanks, Abhijit.

As mentioned in our previous earnings calls, we anticipate sales growth to be backend loaded in 2024 due to the higher comparison base in the first three quarters of the year, where we grew 9% in 2023.

Speaker Change: We expect sales growth in the third quarter to stay broadly in line with the first half of the year on the back of 11% growth in Q3, 2023, which was driven by mid teens growth in diagnosis and treatment.

Speaker Change: For the full year 2024, we expect all business segments to be within the 3% to 5% sales growth range provided by the group provided further group.

Speaker Change: Connected care are expected to be closer to the upper end of the range.

Speaker Change: Diagnosis and treatment in personal health expected to be closer to the lower end of the range.

Speaker Change: With that I would like to hand, it back to Roy.

Roy Jakobs: I would like to continue with the progress we have made on our execution priority, patient safety and quality. We again delivered a substantial improvement in CAPA closures in the quarter, driven by stronger processes, capabilities, and governance around it. We continue to drive significant simplification of the way we work, and further reduce... The number of quality management systems. We are well on track to achieve our target of 65% reduction in 2024.

Roy: Thanks I proceed I would like to continue with the progress we have made on our execution priorities.

Roy: On patient safety and quality.

Roy: We again delivered a substantial improvement in copper closures in the quarter, driven by stronger processes capabilities and governance around it.

Roy: We continue to drive significant simplification of the way we work.

Roy: Further reduced.

Roy: Number of quality management systems, we are well on track to achieve our target of 65% reduction in 2024.

Roy Jakobs: And we continue to invest in quality improvements across the portfolio and are acting fast on post-market surveillance signals. With respect to the supply chain, we now have lead times back to normal across all modalities. We will continue leveraging and regionalizing our end-to-end supply chain to further strengthen First Time Ride Deliveries and Service Levels. In China, we have reached around 90% local for our local supply chain. Finally, our new operating model with prime accountability in the businesses has been live for almost 18 months now, resulting in significant productivity improvements of 1.4 billion today.

Roy: And we continue to invest in quality improvements across the portfolio and are acting fast and post market surveillance signals.

Roy: With respect to the supply chain, we now have lead times back to normal across all modalities.

Roy: We will continue leveraging and regionalized, our end to end supply chain to further strengthen.

Roy: First time, right deliveries and service levels.

Roy: In China, we have reached around 90% local for local supply chain.

Roy: Finally, our new operating model with Prime accountability in the businesses has been live for almost 18 months now, resulting in significant productivity improvements of $1 4 billion to date.

Roy Jakobs: We have already reduced close to 9,000 posts. And at the same time, we continue the culture journey to drive impact with care and attract more than 700 talents with health tech backgrounds this year alone. As announced earlier this year, Abhijit will retire from Philips after a long and illustrious career with us.

Roy: We have already reduced close to 9000 roles.

Roy: And at the same time, we continue to closer journey to drive impact with care and attracted more than 700 talents with health Tech background. This year alone.

Roy: As announced earlier this year.

Speaker Change: <unk> will retire from Philips after a long and illustrious career with us.

Roy Jakobs: I want to thank him for his significant contribution to the company, especially during his time as CFO. Abhijit's leadership, passion, and education have helped shape the transformation of Philips over the last decade and guided the company through global uncertainty in recent years. We will certainly miss him for his drive, counsel, and his sense of humor.

Speaker Change: I want to thank him for his significant contribution to the company.

Speaker Change: Especially during his time as CFO.

Speaker Change: <unk> leadership passion and education has helped shape the transformation of Philips of the last decade and guided the company through global uncertainty in recent years.

Speaker Change: We will certainly Miss opposite forces drive counsel and his sense of humor.

Roy Jakobs: This last day will be September 30th, so you will have the opportunity to engage with him during the roadshow and investors events over the next couple of days. Our incoming CFO, Charlotte Hanneman, joined us last month and will move into the CFO role on October 1st. Abhijit and Charlotte are working diligently to ensure a smooth and seamless transition. As you know, Charlotte brings over 20 years of experience in the medtech and pharmaceutical industries, most recently at global medical technology company Stryker. Before I wrap up, I want to take the opportunity to extend a warm invitation to our show and tell event for investors and analysts in September. It will be a great face-to-face event in the Netherlands.

Speaker Change: His last day will be on September 30, So you will have the opportunity to engage with him during the roadshow and investors events over the next couple of months.

Speaker Change: Our incoming CFO Shannon autonomous <unk> joined US last month and will move into the CFO role on October one.

Speaker Change: <unk> are working diligently to ensure a smooth and seamless transition.

Shannon: As you know shallow brings over 20 years experience in med Tech and pharmaceutical industries. Most recently at global Medical Technology Company Stryker.

Shannon: Before I wrap up I want to take the opportunity to extend a warm invitation for our show and tell event for investors and analysts in September.

Shannon: It will be a great face to face event in the Netherlands, We will take you into a deep dive into our businesses and highlight some of our most important products and innovations.

Roy Jakobs: We will take you on a deep dive into our other businesses and highlight some of our most important products and innovations. You will have the opportunity to directly discuss the latest trends in the health tech segments with our management and our business partners. Our investor relations website contains more information on the event and how to register.

Shannon: The opportunity to directly discuss the latest trends in the <unk> segments, where our management and our business teams.

Shannon: Our Investor Relations website contains more information on the event and how to register.

Roy Jakobs: We look forward to seeing you here. Let me close by repeating the key messages of today's announcement. We deliver strong orders and margin improvement, solid operational cash flow, and comparable sales growth in line with our plan. In a challenging macro environment.

Shannon: We look forward to see you here.

Shannon: Let me close out by repeating the key messages of today's announcements.

Shannon: We delivered strong orders and margin improvement.

Shannon: Solid operational cash flow and comparable sales growth in line, but our plan within a challenging macro environment.

Operator: This was due to progress on our execution and our industry-leading innovation. Supported by our Key Innovation Lounges and our ongoing actions, we are confident in our plan and reiterate our outlook for the full year 2024. I would like to thank you for joining the call, and we will now take your questions. Thank you, sir. If any participant would like to ask a question, please press the star followed by two times one on your telephone.

Shannon: This was a result of progress on our execution and our industry leading innovations.

Shannon: Supported by key innovation launches and our ongoing actions we are confident in our plan and reiterate our outlook for the full year 2024.

Speaker Change: I would like to thank you for joining the call and we will now take your questions.

Speaker Change: Thank you Sir.

Speaker Change: If any for the spin would like to ask a question. Please press the star followed by two times to one on your telephone.

Operator: Due to time constraints, please limit yourselves to one question. This will give more people the opportunity to ask questions. There will be a short pause while participants register for questions.

Speaker Change: Due to the time, please limit yourself to one question. This will give more people the opportunity to ask questions.

Speaker Change: There will be a shortfall small participants register for questions.

Operator: We will now go to the first question. Our first question comes from the line of Hassan Al-Wakil from Barclays. Please ask your question. Hi, good morning, and thank you for taking my questions. I have three, please.

Speaker Change: We will now go to the first question. Our first question comes from the line of Hudson I'll Walk you from Barclays. Please ask your question.

Hassan Al: Firstly, on orders, can you talk about the strength you're seeing in North America and to what extent is it a catch-up on supply issues around MR or indeed share gains in other modalities as well? Secondly, can you talk about the personal health business in China, which looks to be down around 10% in the quarter? What are your expectations here for the second half?

Hi, Good morning, and thank you for taking my questions I have three please firstly on on orders can you talk about the strength, you're seeing in North America and to what extent is it a catch up on supply issues around Ma or indeed share gained in other modalities as well.

Speaker Change: Secondly, can you talk about the personal health business in China, which looks to be down around 10% in the quarter. What are your expectations here for the second half and can you talk about the building blocks and the assumed acceleration in the broader ph business over the next two quarters and then finally, you had an impressive margin.

Hassan Al: And can you talk about the building blocks and the assumed acceleration in the broader pH business over the next two quarters? And then, finally, you had an impressive margin delivery in the first half, and with the seasonally strong second half that you typically enjoy, coupled with connected care margins building from here, why haven't you raised guidance? Is this a continuation of the conservatism that we've seen from you, Roy?

Speaker Change: Delivery in the first half and with the seasonally strong second half that you typically enjoy coupled with connected care margins building from here.

Speaker Change: Why haven't you raised guidance is this a continuation of the conservatism that we've seen from your ROI or is there something we should be aware of incrementally driving caution into the second half. Thank you.

Roy Jakobs: Or is there something we should be aware of gradually driving caution into the second half? Thank you. Thank you, Hassan. Great questions.

Roy Jakobs: Let me start with the first one, orders and the strength in North America. So actually, we have seen an improvement in our order book across different businesses, building on the strength in the market first place because North America clearly is the strongest market in the world, where we have seen our customers strengthening their, actually, P&L, their income through more patients that are being served. But also, we see further consolidation trends in the market that actually we benefit from as they are choosing key partners that they trust for longer-term technology partnerships.

Speaker Change: Thank you.

Speaker Change: Great questions, let me start with the first one orders and the strength in North America, So actually we have seen.

Speaker Change: Improvement of our order book across different businesses.

Speaker Change: Building on the strength in the market first base, because North America clearly is the strongest market in the world, where we have seen our customer strengthening dear actually P&L their income through more patients that are being served but also we see further consolidation trends in the market that actually benefit from as they are.

Speaker Change: Using.

Speaker Change: Key partners that they trust and for longer term technology partnerships and actually we have seen that across our portfolio, whether thats on monitoring whether it is on imaging intervention and also you have seen in.

Roy Jakobs: And actually, we have seen that across our portfolio, whether that's on monitoring, whether that's on imaging, and interventional. And also, you have seen and heard us talk about a very strong enterprise informatics growth, because you see that, especially software and AI, are used very much to improve productivity and also to reach across different sites, whether it's different hospital sites, but also into ambulatory and sometimes even into home.

Speaker Change: Let's talk about a very strong enterprise informatics growth because you see that especially software and AI is used very much to improve productivity and also to reach across different sites, whether it's different hospital sites, but also into ambulatory and sometimes even.

Roy Jakobs: So that the portfolio that we have is responding well with our North American customers. So that's also what we see in the order intake. So also, therefore, we don't expect that this is a one-off. We will expect the order intake to continue to be strong in North America. Then a second question on pH.

Speaker Change: So that actually portfolio that we have is resonating well with our north American customers. So that is also what we see in the order intake. So also therefore, we don't expect it that this is a one off we will expect actually the order intake continues to be strong in North America.

Speaker Change: Then a second question on ph.

Roy Jakobs: China was indeed down. I think that was a market and industry kind of phenomena. Consumers are spending less in China than we were used to.

Speaker Change: China was indeed down I think that wasn't market and industry kind of phenomena.

Speaker Change: Consumers are spending less in China than we were.

Speaker Change: We're used to.

Roy Jakobs: We also expect that to actually continue in the second half. So whilst we expect some strengthening, we don't expect too much from the Chinese market. But what you have seen, and also in terms of our guidance, we do see that actually growth in other parts of the world is stronger, and actually will also strengthen in the second half of the world. North America is part of that.

Speaker Change: We also expect that actually to continue in the second half so whilst we expect some strengthening we don't expect too much from China market, but what you have seen and also in terms of our guidance, we do see that actually the growth in other parts of the world is stronger and actually will also strengthen in the second half of the world nor.

Speaker Change: America is part of that we already saw stronger growth in Europe, and some of the Asian markets already in the first half and that combination actually will also help us deliver at the full year guidance as we have laid out on the other hand thought you also saw in patients that we are driving strongly the profitability we have.

Roy Jakobs: We already saw stronger growth in Europe and some of the Asian markets in the first half, and that combination will actually help us deliver the four-year guidance we have laid out. On the other hand, what you also saw on pH is that we are driving strongly profitability. We have been taking strong action on further productivity initiatives, but also some support from pricing. So the overall mix is playing out well and supporting pH to step up in profitability levels.

Speaker Change: <unk> been taking strong action on further productivity initiatives, but also some support from pricing. So the overall mix is playing out well and supporting ph to step up in profitability levels.

Roy Jakobs: Then the third question, on margin delivery in the first half, I think, yes, we are satisfied that we continue to see the margin improvements, of course, backed by a very strong productivity drive on the one hand, the return to sales, and also stronger underlying margins. So in that sense, we expect that momentum also to continue into the second half. But at the same time, we didn't want to raise our targets mid-year.

Speaker Change: And then the third question on the margin delivery in the first half.

I think yes, we are satisfied that we continue to see the margin improvements of course backed part of very strong productivity drive on one hand, the return to sales and also stronger underlying margins. So in that sense, we expect that momentum also to continue.

Speaker Change: For the second half at the same time that we didn't want to raise mid year, we feel that kind of it's better to stay.

Roy Jakobs: We feel that it's better to stay confident about the full year, deliver quarter over quarter our improvements, and by doing so, make sure we deliver the full year. So we stick to our plan, the three priorities that we have, building on the innovations that we can get out there, and by doing so, working towards that delivery for the future. Maybe to add a bit, Hassan, if you look at the improvement in the first half, we are in the guided range of 40 to 90 bits. So, therefore, there's no need, at this stage, like Roy said, to again further improve it because we are also in the guided range of profit improvement also for the first half. Thank you both.

Speaker Change: Kind of confident on the full year deliver quarter over quarter our improvements.

Speaker Change: And by doing so making sure we delivered a full year. So we stick to our plan three priorities that we have building an innovation that we can get out there and by doing so working towards the delivery for the full year.

Speaker Change: Excellent. Thank you.

Speaker Change: Hasan if you look at the improvement in the first half we are in the guided range of 40 to 90 bps.

Hasan: So therefore, there's no need at this stage like voice to again further improve it because we are in the guided range of profit improvement also for the first half of it.

Beth: Thank you Beth.

Richard Felton: Thank you. The next question comes from Richard Felton from Goldman Sachs. Please state your question, Richard. Thank you. Good morning.

Beth: Thank you.

Speaker Change: Our next question comes from Richard Felton from Goldman Sachs. Please state your question Richard.

Richard Felton: Thank you good morning key for me please.

Richard Felton: So first of all, on some of the recently launched innovation, I think you've mentioned new products across CT, IGT, and ultrasound, all fairly recently. So in context of those launches, how do you see your current market share trends across those key modalities? That's question one. My second question is on enterprise informatics.

Speaker Change: So first of all on some of the recently launched innovation I think you meant.

Speaker Change: New products across Cte IGT and ultrasound.

Speaker Change: Recently.

Richard Felton: Today's launches how do you see your current market share trends across these key modalities Thats question. One and then my second one is on enterprise informatics is there any color or detail you can share to help us think about profitability for that division as the business scales. Thank you.

Roy Jakobs: Is there any color or detail you can share to help us think about profitability for that division as the business scales? Thank you. Thank you, Richard, for these questions. Good questions again.

Roy Jakobs: If you look at the MPIs and how they support market share, I think what you can see from the order intake growth, [inaudible] delivery to date, and the same for some of the new launches of Azure and the CT 5300. Because we had the first launch of these, I think you will see, and we also believe to see that back in our market share in the coming months and even in 2025, whilst we get this to full strength. So we have seen, of course, strengthening our position in the market. We also see very good resonance.

Speaker Change: Thank you Richard for for these questions good questions again.

Speaker Change: You look at the <unk>.

Speaker Change: And how they support market share I think what you can see from the order intake growth.

Speaker Change: 9% in the second quarter, 3% first half that actually supports a stir.

Speaker Change: <unk> performance in the market. Some of these new innovations. We just recently launched like for example, the ultrasound and new platform with AI. That's actually I think very exciting now we expect the benefits to come from that platform that has not yet been kind of built into delivery to date. The same for some of the new launch.

Speaker Change: Zero.

Speaker Change: <unk> five 300.

Speaker Change: We have the first launches of these I think you will see and we also believe to see that back in our market share in the coming months.

Speaker Change: Even in 2025, whilst we got this to full strength.

Speaker Change: So we have seen of course strengthen our positioning in the market. We also see very good residents, we had multiple deals across the world. How you saw not only in North America that we closed big technology partnerships, but also in Europe.

Roy Jakobs: We have multiple deals across the world. You saw that not only in North America that we closed big technology partnerships but also in Europe, various ones, and also in Asia. So actually, you see that we have kind of, I think, increased momentum based on our innovations. The other achievement that we highlighted, which is important also for competitiveness, is that we're now fully back on track with supply chain lead times. So we had MR, which was the last one to kind of really fall in line.

Speaker Change: <unk> and also in Asia. So actually you see that that we have gone up I think increased momentum based on our innovations the order I think achieve.

Speaker Change: Achievement that we highlighted which is important also for competitiveness is that we now fully back on track with supply chain lead times. So we had <unk>, which was the last one to kind of really fall in line will also have debt now back.

Roy Jakobs: We also have that now back. We have seen that kind of reflected in MR momentum, and we expect that to support wave 4. And on the second question on EI, I think what we have seen is that there's strong order intake that also, of course, drives then conversion. And we also have seen that contributing to profitability. And that's something that we are kind of happy with. So we saw that coming into a positive contribution.

Speaker Change: Also have seen that kind of reflected in MRM momentum and we expect that to support also our way forward.

And on the second question on <unk>.

Speaker Change: I think what we have seen indeed is that there is strong order intake that also of course drives conversion and we also have seen that contributing to profitability.

Speaker Change: And that's something that has gone up.

We are happy with so we saw that coming into positive contribution and.

Roy Jakobs: And what we said for the long term, this 1.5 billion sales and moving towards double-digit margins is something we are driving full force towards. Of course, step by step, quarter by quarter. But it's clear that that portfolio is gaining momentum, and that then also translates into improved. Great, thank you very much.

Speaker Change: What we said for the long term this $1 5 billion sales and moving towards double digit margin is something we are driving full force towards.

Speaker Change: Of course step by step quarter by quarter, but it's clear that that portfolio is gaining momentum and then also translate into improved contribution.

Speaker Change: Great. Thank you very much.

Speaker Change: Thank you.

David James Adlington: Thank you. Our next question comes from the line of David Adlington from J.P. Morgan. Please state your question, David. Good morning.

Our next question comes from the line of David Adlington from Jpmorgan. Please state your question David.

David James Adlington: Thanks, guys. Maybe just a question around pricing. Of the 2% growth in sales you saw this quarter, how much of that was down to price? And then following on from that, how do you see the pricing environment evolving? Are you seeing positive trends, flat pricing, or are we seeing some pressure on pricing at this point? Thank you.

David James Adlington: Good morning, Thanks, guys, maybe just a question around pricing of the 2% growth on sales you saw this quarter how much of that was down to price and then following on from that how do you see the pricing environment <unk> seen positive trends flat pricing are we seeing some pressure on pricing at this point okay.

Speaker Change: Okay.

Abhijit Bhattacharya: Yeah, I think if you look, we saw some pricing benefits in health systems, and that's what we've been saying for the last couple of years, David, that, you know, we saw it in our order book, and now we see it translating back into the P&L. In terms of pH, you don't really see further pricing upsides now because you see how the consumer sentiment is, and less so in person. Thanks Abhijit, maybe just to follow up there, on the orders that you're getting there, how's the pricing on the orders? So far, still okay, but we will have to see how it goes in the coming quarters and see how competitive it is.

Yes.

Speaker Change: If you look and we saw some pricing benefit in health systems, and that's what we've been saying for the last couple of years David.

Speaker Change: We saw it in our order book and now you see translating back into the P&L.

Speaker Change: In terms of <unk> don't really see further.

David: Pricing upsides now because you see how the consumer sentiment visits.

David: Quite subdued so pushing pricing at this time is not helping now of course, we are working on.

David: Productivity as well as the operational improvements that we had put in be it in supply chain, we do know factories et cetera, and that youll see contributing nicely back in the module. So net net.

Speaker Change: Uhm Health systems, I think the pricing impact was close to zero, but in health systems, We got a positive impact.

Speaker Change: So in personal health.

Okay. Thanks, and maybe just to follow up on the orders that you're getting that how the pricing on the orders.

Speaker Change: Thank you Josh.

Speaker Change: Okay.

Speaker Change: We will have to see how it goes.

Speaker Change: In the coming quarters.

Speaker Change: See the competitiveness, but so far we are still holding and we are making good progress with our material price reduction so that's helping lift through the profitability looking forward.

Abhijit Bhattacharya: But so far, we are still holding, and we are making good progress with our material price reduction. So that's helping, let's say, profitability looking forward. Great stuff.

Speaker Change: Great stuff. Thank you.

Speaker Change: Thank you.

David James Adlington: Thank you. Thank you. Our next question comes from the line of Veronika Dubajova from Connecticut. Please state your question, Veronika.

Speaker Change: Our next question comes from the line of Veronica DUBA Joseph from Citi. Please state your question Veronica.

Hey, guys. Good morning, and thank you for taking my questions I have two please if I can.

Veronika Dubajova: The first one is just to follow up, Abhijit, on your comment that you're expecting DMT growth for the foliatric trend at the lower end of the 3% to 5%. Can you maybe just elaborate on what it is that's making you somewhat more cautious here in the second half of the year? I guess we're at 4% year to date, so I'm just curious what drives the slowdown in the back half of the year, especially given the easier comps. That's my first question.

Speaker Change: The first one is just a follow up call.

Thank you expect D&C cost portfolio to trend below 25% can you maybe just elaborate what it is thats, making you somewhat more cautious here about the second half in the second half of the year I guess, we're at 4% year to date. So I'm just curious what drives the slow down in the back half of the year, especially given the easier comps.

Veronika Dubajova: My second question is just a follow-up on your margin guidance for the year. If I look at the first half of the year, you've delivered 90 basis points of improvement. The comps in the back half get easier.

Speaker Change: Second question My second question.

Just a follow up on your margin guidance for the year, if I look at the first half of the year, you've delivered 90 basis points of improvement in comps in the back half get easier sale.

Abhijit Bhattacharya: Yeah, I think Hassan asked the question about the conservatism and the guidance, but just, maybe reiterate that there is nothing specific that worries you about the margin development in the second half of the year, that there are no specific headwinds you want to flag as to why the margin improvement in the back half should be at best similar to the first half or potentially worse. And then my final question is for you, Roy, on China.

Yes, I think John asked a question about the San Francisco from the guidance, but just.

Eric: We reiterate that there is nothing specific that worries you about the margin development in the second half of the year Eric.

Specific headwinds you want to flag.

Speaker Change: Why the margin improvement in the back half.

Speaker Change: Similar to the first half or potentially worse.

Abhijit Bhattacharya: Having just visited there this past week, it would be great to get an update on how you feel the behavior on the ground is. And I guess, as you think about your sales in China and your orders in China in the back half of the year, what are your expectations for each of those when it comes to returning to growth and the timing of that? Thank you guys so much. Hi Veronika, let me take the first couple of questions.

Speaker Change: And then my final question is for you on China, Jeff.

Speaker Change: Yes, I think you said that this past week be great to get an update on.

Jeff: How do you feel the behavior on the ground is and I guess as you think about your sales in China and your orders in China.

Speaker Change: Back half of the what are your expectations for each of you guys. When it comes to return to close and the timing of that thank you guys. So much.

Roy Jakobs: I think if you look at Q3, we had really dramatic growth last year. I think even in the mid-team, that makes the comparable stuff for the third quarter, which is why we expect to be at the lower end of the guidance. Now, we will see how China plays out and the speed at which the orders come in. So we will have to match both of those.

Speaker Change: Let me take the first couple of questions.

Speaker Change: If you look at that.

Speaker Change: For Q3, we had really dramatic growth last year I think even in the mid teens that makes the comparable stuff for the third quarter.

Which is why we expect to be at the lower end of the guidance that we will see also how China plays out and the speed at which the orders come in so we will have to.

Speaker Change: Both of those so for now that's how we're looking at our forecast for the rest of the year.

Roy Jakobs: So for now, that's how we are looking at our forecast for the rest of the year. Yeah, I think Roy answered the question on full-year margin, right? We are 90 bps up, that's in line with our guidance. There's still a second half to go.

Speaker Change: Yes, I think I answered the question.

Speaker Change: Full year margin rate, we have 90 bps up that's in line with our guidance. There is still a second half to go we're not going to change guidance every quarter. So for now we reiterate our confidence to be in the guided range maybe at the upper end, but we will not change guidance at this stage.

Roy Jakobs: We are not going to change guidance every quarter. So for now, we reiterate our confidence to be in the guided range, maybe in the upper end, but we will not change guidance. Third question: Yeah, on China.

Speaker Change: The third question on China. So let me. So indeed it was good to be in China again.

Roy Jakobs: So let me tell you, it was indeed good to be in China again. Staying close to the pulse of the market is important at this stage. I spoke to customers, partners, and, of course, to our own team. Now, I think what you do see is that, on the one hand, there is still impact that is flowing through from the measures that have been taken. I think we are not yet out of the woods, but we do see improvement coming into the activities. And that's also something that I saw and discussed with customers. I saw it in the activity of the order funnel; I saw it also in our own discussions.

Speaker Change: Because.

Speaker Change: Staying close to the polls of the market is important.

Speaker Change: At this stage I spoke to customers partners and of course to our own team.

Speaker Change: I think what you do see is that on one hand.

Speaker Change: There is still impact that is flowing through.

Speaker Change: The measures that have been taking I think we are not yet out of the woods, but we do see improvement coming into the activities and that's also something that.

Speaker Change: So and discussed with customers I saw it in the activity of the order funnel.

Speaker Change: So it also in discussion with our own teams. That's also what we expect to showcase in due course of the second half.

Roy Jakobs: Now, that's also what we expect to showcase in due course of the second half. Then, of course, normally, orders go ahead of sales. So that's a logic you would also expect in this recovery pattern. The exact timing is hard to gauge because we have seen it all in the last month and even over a year.

Speaker Change: Of course normally orders go head of sales.

Speaker Change: Logic you would also expect in this recovery pattern.

Speaker Change: The exact timing is hard to gouge, because yes, we have seen at all in the last months and even over a year that is not exact to pinpoint.

Roy Jakobs: That is not exact to pinpoint how it will evolve, but we said earlier this year that the second half will be better than the first half. We still expect that.

Speaker Change: How it will how it will evolve.

Speaker Change: We set early this year that kind of second half will be better than the first half. We still expect that we also have seen sequential improvement in Q2, and we actually expect that to accelerate into the second half. So I think that is.

Roy Jakobs: We also have seen sequential improvement in Q2, and we actually expect that to accelerate into the second half. So I think that is what I have to say to China. And then, next to the fact that, fundamentally, this is a very strong market and holds, of course, a lot of patience to be taken care of for the future as well. Thanks, and can I just follow up any thoughts at this stage that you have about the stimulus and how meaningful that could be? I appreciate you don't have a sense of timing yet.

Speaker Change: What I have to say to China, and then actually the fact that fundamentally this is a very strong market.

Of course, a lot of patients to be taken care of for the future as well.

Speaker Change: <unk> been adjusting our local for local footprint innovations so that when the demand comes we're ready to capture it and then kind of.

Speaker Change: It's waiting about executive element of it.

Veronika Dubajova: But just conceptually, as you look at China over the next 123 years, do you think the stimulus could be meaningful in terms of driving order and sales growth in China or not? Now, I've said before, how I look at it, I see it as a kind of bonus program that the Chinese government has put in place. I think the Chinese market has fundamental underlying growth that we should count on. And then this will be on top of so that this will accelerate to a certain extent, for sure, because there's extra money that will flow into the market that actually probably will kind of speed up some of the replacements in the market go faster than they would normally do. And we also expect that that will contribute, and we will benefit from it. But the Chinese government did not give specific amounts that they will ultimately release. B Unfortunately, we don't know the exact timing.

Speaker Change: Thanks, Brian can I just follow up any thoughts at this stage that you have that the stimulus and how meaningful that could be I. Appreciate you don't have a sense of timing yet.

Speaker Change: Conceptually as you look at China over the next one to three years do you think the stimulus could be meaningful in terms of driving order and sales growth with China or not.

Speaker Change: No I have said before.

Speaker Change: Look at it I see it as a kind of bonus program that the China government has put in place I think the China market has fundamental underlying growth that we should count on and that this will be on top off so that this will accelerate to a certain extent for sure right because theres extra money that will flow into the market that actually probably will garner.

Speaker Change: Speed up some of the replacement in a market to go faster than they would normally do.

Speaker Change: And we also expect that that will contribute and we will benefit from it but the China government did not give specific amounts.

Speaker Change: Ultimately, we'll release B, we don't know exact timing and therefore, it's kind of.

Roy Jakobs: And therefore, it's kind of, I would say, too early to kind of really put numbers on top of this. And that kind of will come forward. And for me, this is part of the overall recovery and improvement trajectory that will come, where I expect more of just underlying structural demand kind of to drive the improvement and the stimulus, but the stimulus will be a part of it. Okay. Thank you, guys.

Speaker Change: Too early to kind of really put numbers on top of this debt.

Speaker Change: That kind of come forward and for me. This is part of the overall recovery and improvement trajectory that that will come where I expect more of just underlying structural demand.

To drive the improvement and the stimulus, but the stimulus will be part of it.

Speaker Change: Understood. Thank you guys.

Speaker Change: Thank you.

Hugo Solvet: Thank you. Our next question comes from the line of Hugo Solvet from BNP Paribas Exein. Please go ahead, Hugo.

Speaker Change: Our next question comes from the line of Hugo Silva from BNP Paribas Exane. Please go ahead Hugo.

Hugo Solvet: Hi, guys. Thanks for taking my questions and congrats on the print. I have three, please.

Hugo Solvet: First, clarification on China, Roy, if you can. Do you see a risk that customers or acceleration or the recovery will be pulled off in H2 as they will be waiting for the stimulus? Second, on connected care and sleep and respiratory care, sorry. Can you quantify for us the margin step up in that business? You're on your own, but also, are you seeing a sequential margin improvement? Even I think that you are already working on in Q1.

Hugo Silva: Hi, guys. Thanks for taking my questions and congrats on the print.

Speaker Change: Three please.

Speaker Change: On China.

Speaker Change: Can you still reach the customers.

While the acceleration of the recovery be.

Speaker Change: Although in H two.

Speaker Change: We'll be waiting for those communities.

Speaker Change: So going on.

Speaker Change: Connected care.

Speaker Change: Keep in respect to EPS. So can you quantify for us the margins.

In that business.

Speaker Change: Year on year, but also are you seeing the sequential margin improvement, even I think thats, where were you breakeven in Q1 and.

Roy Jakobs: And lastly, on pH. Obviously, TNT is strong, clinical care is gaining momentum, and the settlement is not behind.

And lastly on th so abused the strong 20 key care is gaining momentum the settlement behind just once you get a feel of your level of commitment to Els.

Speaker Change: Yes.

Roy Jakobs: Just want to get a feel for your level of commitment to the personal health business. Thank you. All right. Thank you, Hugo.

Speaker Change: Alright, Thank you Hugo also.

Speaker Change: So great question. So let me start with the first one on China.

Speaker Change: So I don't actually X.

Roy Jakobs: Also, great questions. Let me start with the first one on China. So I don't actually expect that Chinese customers will hold back a replacement order because they're waiting for stimulus. As I said, there are two parts of demand. The most important is the underlying demand for replacement of the installed base or even for new investment.

Speaker Change #100: I expect that the China customers will hold back or the pace of orders because they are waiting for stimulus as I said there are two parts of demand. The most important is the underlying demand for replacement of installed base or even for new investments.

Roy Jakobs: There's also some pent-up demand from the period when order lead times were under pressure, so I expect that will drive the improvement itself. Then, at stimulus, they will have to wait until that becomes clear.

Speaker Change #100: Also some pent up demand from the period Thats kind of the order lead times were under pressure. So I expect that will drive the improvement itself then stimulus they will have to wait until that becomes clear. So that is the weighting, but thats more on top of.

Roy Jakobs: So that is the waiting, but that's more on top of it. That's also where I said kind of it's hard to gauge when it exactly will come to market, but I don't think this will hold up at the full improvement in China in the second half that we projected. Then on Connected Care, indeed, we are happy to see, as we see, regaining momentum, although it started, of course, with sales momentum outside of

Speaker Change #100: That's also where I said kind of its hard to judge when that exactly will come to market, but I don't think this will hold up at full improvement of China in the second half that we project.

Speaker Change #100: Then on connected care and.

Speaker Change #101: Indeed, we are happy to see as receipt regaining momentum started of course with the sales momentum outside of the US Then also of course for the remaining part of the business that we have in the U S. We also see actually good momentum and we have been right sizing the business based upon the clarity that we got so we took also then the productivity measures now.

Roy Jakobs: Then also, of course, for the remaining part of the business that we have in the US, we also see good momentum, and we have been right-sizing the business based upon the clarity that we have gained. So we also took then the productivity measures. Now that brought Sleep and Respiratory Care back into the positive. We already mentioned that in the first quarter, and we actually see that contribution strengthening. Now, I'm not going to call out exactly how that looks because we don't do that for any business.

Speaker Change #101: That brought sleep and respiratory care.

Speaker Change #101: Back into the positive we already mentioned that in the first quarter and we actually see that contribution is strengthening now I'm not going to call on exactly how that looks like because we don't do that for any business, but I can confirm that we have seen further strengthening of the profitability profile also in the second quarter and Thats actually what we will continue to build on it.

Roy Jakobs: But I can confirm that we have seen further strengthening of the profitability profile also in the second quarter. And that's actually what we will continue to build on in the third and fourth quarters, as some of these further measures that we have been taking will come into effect. And then, on pH. I think we are very excited about our pH portfolio, as we mentioned before. We have some exciting innovation launches that are coming out.

Speaker Change #102: So in the fourth quarter and also some of these footer.

Speaker Change #102: So that we have been taking will come into effect and then a third one on <unk>.

Speaker Change #102: H.

Speaker Change #102: I think we are very excited about our portfolio as we mentioned before we have some exciting innovation launches that are coming out you sort of strong profitability step up.

Roy Jakobs: You saw the strong profitability step up. So this business is also still very attractive from a profile of cash contribution and profitability contribution. We are also a good owner because we have market-leading positions. We are number one and two in all the segments that we play, whether it's oral care, personal care, or MCC.

Speaker Change #102: This business is also still very attractive from a profile of cash contribution and profitability contribution. We are also the good owner because we have market leading positions. We are number one or two in all the segments that we play whether it's in oral care whether it's in.

Speaker Change #102: Personal care, whereas in MCC.

Roy Jakobs: And we see also that over time, care will move more to the home. So actually having a strategic position in the home, being active there ourselves, does also give us, currently, already a differentiating position in the healthcare market. Because customers that are looking, hospital systems that are looking how to better serve in an ambulatory setting or in a home setting, also value our insights, also value our brand even in terms of what it does. So full commitment, excited about that part of the portfolio as much as about the rest, and also seeing kind of a good. Thank you very much.

Speaker Change #102: And we see also overtime that care will move more to the home so actually having a strategic position in the home being actively ourselves just also give us currently already and differentiating position in the healthcare market because customers that are looking hospital systems that are looking how to better serve in an ambulatory setting or in home setting also value.

Speaker Change #102: Our insights also value our brand even in terms of what it does signal so far.

Speaker Change #102: Full commitment.

Speaker Change #103: And about that part of the portfolio as much as about arrest and also seeing kind of a good future for it.

Speaker Change #104: Thank you very much.

Speaker Change #110: Thank you.

Julien Ouaddour: Thank you. Our next question comes from the line of Julien Ouaddour from Bank of America. Please go ahead, Julien. Thank you very much. And good morning, everyone.

Speaker Change #104: Our next question comes from the line of Julian <unk> from Bank of America. Please go ahead Julien.

Julien Ouaddour: The first one in D&T, so in your prepared remarks, you mentioned growth in IGT and precision diagnosis, but I mean, what about ultrasound this quarter? And I think we've seen data from China, which suggests that you lost an important market share in ultrasound for the country during the first six months of the year. So any particular reason for that?

Julian: Thank you very much and good morning, everyone.

Julian: First one in <unk> prepared remarks, you mentioned growth in IGT presume diagnosis.

Speaker Change #106: Addressed some this quarter.

Speaker Change #107: And I think we've seen data from China, which suggests that you I mean, you launched important market share in <unk> for the country. During the first six months of the year so any.

Julien Ouaddour: The second question concerns, let's say, respironics. We've also seen some European class actions for respironics emerging this summer. Could you maybe just update us on the situation and let us know what the potential outcomes are in your view? Any, let's say, increase in terms of provisions like for the litigation process? Thank you.

Speaker Change #108: Particular reason for that.

Speaker Change #109: The second question on mid cycle and risk products. So we've also seen some like Europe and class action for risks.

Speaker Change #111: Emerging dissimilar could you maybe just update us on the situation and the like.

Speaker Change #113: And I can let us know what's the potential outcomes are in your view.

Speaker Change #112: The increase in terms of provisions for the litigation going Thank you.

Abhijit Bhattacharya: Hi Julien, let me clarify on ultrasound. You know, we had tremendous growth last year in the first half of the year; it was above 30% growth. So based on that, basically, we don't have growth in the first half of this year because we are getting out of the whole supply chain situation. So if your question was on ultrasound, that I think that tells you I, so therefore, I don't know where you have this information on market share loss.

Speaker Change #112: Hi, Julian let me clarify on.

Speaker Change #114: We had tremendous growth last year in the first half of the year.

Julian: It was above 30% growth so based on that.

Speaker Change #112: Basically we are we.

Julian: We don't have growth in the first half of this year, because we were getting out of their own.

Julian: Supply chain situation.

Speaker Change #115: If your question was on ultrasound I think that.

Julian: Yeah.

Speaker Change #116: So therefore, I don't know where you have this information on market share loss, but I think probably also has told you about our new product launches, which we are excited about so we expect to continue to strengthen.

Abhijit Bhattacharya: But I think Roy also told you about our new product launches, which we are excited about, so we expect to continue to strengthen in that area. Your second question?

Speaker Change #116: In that area.

Speaker Change #117: Your second question, let me take that one I think on the <unk>.

Roy Jakobs: Let me take that one, that's on the SOC, so indeed last time we were very happy to kind of announce that we got the North American settlement with finality. We also mentioned at that time that there are cases ongoing outside of the United States. You saw the European class action recently kind of announced.

Speaker Change #117: Last time, we were very happy to kind of announce that we got the north American settlements with finality.

Speaker Change #117: We also mentioned at that time that there are cases ongoing outside of United States.

Speaker Change #117: You saw the European class action recently announced actually we have so far very limited information has not been served with the complaint.

Roy Jakobs: Actually, we have so far very limited information, and we have not been served with the complaint. We expect it will be in the same vein as what was kind of put forward in the US. There's nothing currently that we can say about it to the extent that we will defend ourselves in this. We will build on the testing that we have also used in the North America case, and therefore we will address it in a rigorous manner with the best team on it, but there is currently nothing... If, then the actual consequences would be of a different scale than to be expected in the non-American.

Speaker Change #117:

Speaker Change #117: We expect it will be in the same vein as what <unk> put forward in the U S.

Speaker Change #117: There's nothing currently that we can say about it next time that we will defend ourselves in this.

Speaker Change #117: We will build on the testing that we have also.

Speaker Change #117: Used in the North America case, and therefore, we will address it in a rigorous manner with the best team on it.

Speaker Change #117: But there's nothing currently.

Speaker Change #117: Two we set about it. That's also why you have not seen any kind of implications of it is very early days.

Speaker Change #117: It's one of the cases that we will take forward as part of dealing with the.

The cases outside of auto.

Speaker Change #117: Part of the U S may be lost.

Speaker Change #117: Comment of course is in a very different legal system than in the U S.

Also in terms of.

Speaker Change #117: Even if then actually consequences would be a different scale and to be expected in a non American case.

Roy Jakobs: But as I said, it's even too early to go there because we don't even know if there's any... Perfect, perfect. Thanks. Thanks a lot. And a very quick follow-up on auto intake. Could you maybe give us a bit more color about the breakdown by modality for this quarter? No, actually, that's Julien. We would love to, and we used to, but our competitors don't, and therefore, for us to now give that makes it a bit too sensitive for us. But overall, I think Roy mentioned that, outside of China, we've done well, with particular strength in North America. Perfect. Thank you very much.

Speaker Change #117: But as I said, it's even too early to go there because we don't even know if there is anything of meaning.

Speaker Change #118: Perfect perfect. Thanks, Thanks for that and a very quick follow up.

Speaker Change #122: Order intake could you maybe give us a bit more color about the breakdown by by modality for this quarter.

Julie: So actually that Julie.

Julie: Julien, we would love to and we used to but.

Speaker Change #120: Competitors don't and therefore for us to know give that makes it a bit too sensitive for us to give.

Speaker Change #120: But overall I think as I mentioned that outside of China, We've done well with particular strength in North America.

Speaker Change #121: Perfect. Thank you very much.

Speaker Change #123: Thank you.

Julien Ouaddour: Thank you. The next question comes from the line of Robert Davies from Morgan Stanley. Please ask your question, Robert. Yes, morning. Thanks for taking my questions. I had a couple.

Speaker Change #124: Our next question comes from the line of Robert Davies from Morgan Stanley. Please ask your question Robert.

Robert John Davies: One was just on the competitive environment in D&T, whether you're seeing any changes there. You mentioned, I think, in your earlier comments about progress in North America. I know you didn't want to sort of call out specific modalities, but just if you could give us a little bit more color in terms of areas of relative strength and weakness in the quarter where you're making particular progress with clients, that would be helpful.

Robert John Davies: Yes. Good morning, Thanks for taking my questions I had a couple.

Robert John Davies: One was just on the competitive environment and DNT, whether youre seeing any changes that you'd mentioned I think in your earlier comments about progress in North America, and I know you didn't want to sort of correlate specific modalities, but just if you could give us a little bit more color in terms of areas of relative strength and weakness in the quarter, where you're making particular progress with them.

Speaker Change #127: With clients that would be helpful. And then the other one was just around the free cash flow guide given where we are year to date.

Speaker Change #126: Sort of underpins your confidence of getting into that 900 to $1 1 billion range for the full year. Thank you.

Speaker Change #128: So thank you Robert let me take the first one.

Robert John Davies: And then the other one was just around the free cash flow guide, given where we are year to date. What sort of underpins your confidence in getting into that 900 to 1.1 billion range over the full year? Thank you.

Roy Jakobs: Competitive environment in D&T. I think what you have heard us say, and actually you also see it in some of the deals we closed, is that you see, and that's why we're excited about the contribution, that actually all businesses are contributing in order to growth and also kind of how we position in the market. And you saw that also back then, ultimately, converted into sales. The North American market has particular dynamics in terms of certain strongholds that we hold in monitoring and in, kind of, IGT and ultrasound, so that's known.

Speaker Change #129: Private and DMT.

Speaker Change #130: You have heard us say and actually you also see it in some of the deals. We close is actually that Youll see and Thats why were excited about the contribution that actually all businesses are contributing.

Speaker Change #130: In.

Speaker Change #131: Or kind of.

Speaker Change #131: Growth and also kind of how we position in the market and you saw that also back of course, then ultimately converted into sales.

Speaker Change #131: The North American market.

Has particular dynamics in terms of certain stronghold that we hold in monitoring.

Speaker Change #131: Kind of.

Speaker Change #131: IGT and ultrasound so thats known so of course, there based upon the strength that we have we take on average more from the market. We also kind of bouncing back and imaging based upon the lead times improvement that you have seen the launches that we're doing and we also have been working on our team so thats something thats gone up.

Roy Jakobs: So, of course, there, based on the strength that we have, we take, on average, more from the market. We are also, kind of, bouncing back in imaging based on the lead times improvement that you have seen, and the launches that we are doing. We also have been working on our team, so that's something that, kind of, we are also excited about, on top of the enterprise informatics side, is something that really resonates very well in the North American market and also supports our D&T portfolio. Because you see, of course, that tax, that's on top of imaging. You see that digital pathology goes in the same vein.

Speaker Change #131: We are also excited about on top of the enterprise Informatics side is something that really resonates very well in the North American market and also supports our D. C portfolio because you see of course that tax that's on top of imaging you see that digital pathology.

Speaker Change #131: It goes in the same vein you see that kind of some of the solutions that we're now deploying in ultrasound a very AI driven so actually that interplay between software AI Informatics and then also the <unk> portfolio is something that differentiates us in the market.

Roy Jakobs: You see that, kind of, some of the solutions that we're now deploying in ultrasound are very AI-driven, so, actually, that interplay between software, AI, informatics, and then also the D&T portfolio is something that differentiates us in the market and, therefore, helps us to be productive in North America. Yeah, on the free cash flow, if you look, we had this payout for the economic loss settlement, which actually makes the numbers a bit skewed because the insurance money will come in the second half, but the payment happened in the first half. We will just normalize it for that.

Speaker Change #131: And therefore helps us too.

Speaker Change #131: To be productive in North America.

Speaker Change #131: Yes.

Luca: Free cash flow if you Luca we add this.

Speaker Change #133: The payout for the economic loss settlement, which actually makes the numbers a bit skewed because the insurance money will come in the second half the payment has happened in the first half if you just normalize for that.

Abhijit Bhattacharya: Our cash flow for the first half of this year is maybe $150 million behind last year. So it's not hugely behind. Last year, we delivered a cash flow of 1.6 billion. This year, we are planning 0.9 to 1.1. And you know, Q4 is a big cash flow quarter for us, so confidence is very high with the improved earnings and working capital management that we will get to our guidance on free cash. Very clear. Maybe just one quick follow-up on personal health.

Speaker Change #133: Our cash flow for the first half of this year is.

Speaker Change #133: Maybe $150 million behind last year, so it's not a.

Speaker Change #133: Hugely behind and last year, we delivered cash flow of 1.6 billion. This year, we are planning <unk> nine to $1. One and you know Q4 is a big cash flow quarter for us so confidence is actually very high.

Speaker Change #133: Earnings and working capital management that we will get to our.

Speaker Change #133: Guidance on free cash flow.

Speaker Change #134: Very clear maybe just one quick follow up around personal health I know you called out the weakness in China, but maybe could you just provide a little more color on what youre seeing in the North American market in personal health. Thank you.

Robert John Davies: I know you called out the weakness in China, but maybe could you provide a little more color on what you're seeing in the North American market for personal health? Thank you. Yeah, I think in North America overall, we seem to be gaining share now.

Speaker Change #135: I think North America overall.

Speaker Change #136: We seem to be gaining share now the consumer confidence is not buoyant, but it still remains solid as we have said.

Abhijit Bhattacharya: Consumer confidence is not buoyant, but it still remains solid. As we have said, we have been gaining share. The sellout has been good, given the current market situation. And then, based on the product launches that we are planning in the second half of the year, we expect to have reasonable growth in North America. Great. Thank you both.

Speaker Change #137: We have been gaining share.

Speaker Change #138: Sell out has been good.

Speaker Change #138: Given the current market situation and then.

Speaker Change #138: Based on the product launches that we're planning in the second half of the year, we expect to have reasonable growth in North America.

Speaker Change #139: That's great. Thank you both.

Speaker Change #138: Thanks.

Sezgi Ozener: Thank you. Our next question comes from a line from Sezgi Ozener from HSBC. Please state your question.

Speaker Change #140: Thank you.

Speaker Change #141: Our next question comes from the line of SaaS key Athena from HSBC. Please state your question.

Sezgi Ozener: Thanks for taking my questions. On the legal front, do you have any update on the GDOJ case and on the rest of the European cases and elsewhere? Can you give a highlight of what we might be looking into in terms of timelines and sizes? Second question, on the connected care segment, what does the portfolio look like post all the pruning on respiratory care and ventilation segments? Do you expect it to be?

Speaker Change #142: Hi, Thanks for taking my questions and I will have two please first of all.

Speaker Change #142: On.

Speaker Change #143: On the legal front.

Speaker Change #144: Have any update on the Doj case and on the rest of your peak cases and elsewhere can you give a highlight of what we can we might be looking into in terms of timelines and sizes.

Speaker Change #144: Second question on the clinic care segment, what does the portfolio look like post all the pruning on respiratory care and <unk> segments.

Speaker Change #144: Do you expect.

B.

Sezgi Ozener: Present again on a considerable scale on ventilators and respiratory care. And the last one is on the reimbursement front. Do you see any changes in your DME market and outlook? Do you see more?

Speaker Change #144: Present again on a comfortable scale on mid to later is at Mitsubishi care.

Speaker Change #145: And the last one is on reimbursement front do you see any changes in your market.

Mark: Mark do.

Do you.

Mark: See more.

Sezgi Ozener: Inclusion in reimbursements in Connected Care that is affecting your margins. I mean, we've heard from some peers that, usually, front DME margins tend to be higher than DME margins. So, I think it's important for us to be aware of that. I mean, we've heard from some peers that, usually, the front DME margins tend to be higher than the DME margins. So, I think it's important for us to be aware of that. [inaudible] Thank you, Sezgi. Let me start off with the first question on legal cases.

Speaker Change #147: Inclusion in reimbursements in connected care and that is affecting your margins I mean, it's heard from some periods that usually on this phone <unk> margins tend to be much stronger than compared to one product.

Speaker Change #148: <unk> in the Pbms pay.

Speaker Change #149: Payment scheme. So do you expect do you see any changing dynamics from that front.

Roy Jakobs: So on the DOJ. There's no further update. Otherwise, indeed, you would have heard we have been further collaborating with the DOJ. But there's no position on that to be shared. There's also no news from the investigation.

Speaker Change #150: Thank you <unk>, let me start off with the first question on the legal cases, so on the Doj Theres no further updates otherwise you would have heard we have been collaborating with the Doj.

Speaker Change #151: But theres no position on debt to be sure No news also from the investigation is ongoing.

Roy Jakobs: It's ongoing. And we were collaborating with the DOJ on that. Similar for the rest of the EU cases, actually, we are in the various cases in the dialogues that need to happen, but there's no insight into the outcome nor in the need for any provision or EU support. So, in that sense, there's no news on the front of litigation beyond what we have also disclosed in the half-year report, so that's the first.

Speaker Change #151: And we work collaboratively with the Doj on its similar for the rest of the EU cases actually.

Speaker Change #151: We are in.

Speaker Change #151: The kind of the various cases in the dialogues that need to happen, but theres no.

Speaker Change #151: Inside an outcome nor in the need for kind of any provision or kind of even any preclusion on impact. So in that sense. There is no news on the.

Speaker Change #151: On the front of litigation beyond what we have also disclosed in your report.

Speaker Change #152: So that's the first and second in connected care.

Roy Jakobs: Then on the second, in connected care, yes, we have been pruning. But actually, you also see that the remaining part of the portfolio is working. We see growth returning, and we see profitability returning. Yes, as a result of pruning, there will be a less broad portfolio, but we are still relevant. We have the core products that have been kind of the biggest volume drivers for sleep and respiratory care, both in sleep as well as in respiratory, and we remain active on both sides, so that's something that remains part of the plan.

Speaker Change #153: Yes, we have been pruning actually you also see that the remaining part of the portfolio is working we see the growth returning we see profitability returning.

Speaker Change #153: Yes, as a result of pruning there will be less broad portfolio.

Speaker Change #153: But we still are relevant we have to core products.

Speaker Change #153: They have been in kind of the biggest volume drivers for sleep and respiratory care, both in sleep as well as respiratory and we keep active in both sides. So that's something that that remains part of the plan.

Speaker Change #153: It's also what we get back from our customers that really LIBOR innovations also garner, particularly orchestrated it combines both themselves. Both so it's not only the devices, but also the software.

Roy Jakobs: It's also what we get back from our customers that really like our innovations, also kind of with the care orchestrator that combines both and serves both. Not only the devices but also the software, and then the third one, reimbursement DME. To our knowledge, there is no specific change or strengthening of that. What we have seen is that actually That demand is out there. The patient is. Kind of that are on address out there.

Speaker Change #154: And then the third one reimbursement D me Pam to our knowledge. There is no specific change a strengthening of that.

We have seen is that actually.

Speaker Change #154: Demand is out there the patient.

Roy Jakobs: They're coming into it. They're also reimbursed, and that's something that drives the respiratory and sleep market, as it has done before. So we have not seen any specific orders.

Speaker Change #155: Got it that are unaddressed are out there they are coming into it. They are also reimbursed.

Speaker Change #155: That's something that drives the.

Speaker Change #155: The respiratory and sweet market as it has been doing it before.

Speaker Change #155: We have not seen any specific or changing dynamics that we would.

Roy Jakobs: Changing dynamics, like to report on, um, I think, uh, gaining momentum and that's what we're seeing and that's what we are very excited about and that's especially in terms of outside the US and sales and across the portfolio with profitability, [inaudible] I see. So, just under the 20% range, it seems. Okay, thank you very much.

Speaker Change #155: I'd like to report on.

Speaker Change #156: Think src is regaining momentum and Thats, what were seeing and Thats. What we are very excited about and that's especially in terms of outside U S sales and across the portfolio with profitability contribution.

Speaker Change #156: Thanks, and maybe as a quick follow up.

Speaker Change #156: Post the pruning and posed to ex U S expansion in sleep care, where.

Speaker Change #157: Where should we consider it.

Speaker Change #158: <unk> connected care from sleep and respiratory care is it closer to the 20% range with seen in 'twenty three or.

Speaker Change #159: Is it closer to almost.

Speaker Change #160: It used to be half of the connected care sales thats, probably towards the target, but where should we see it.

Speaker Change #161: So again I think what we have said before this seems to be a $3 billion business. We have resized. It now to a billion euro business. So thats. The sizes are taken then let's say from there from next year onwards, you will start seeing growth in the connected care guidance range of 3% to 5% I think that's how you should model it.

Speaker Change #162: Oh I see so.

Speaker Change #163: Just on the 20% range. It seems okay. Thank you very much.

Speaker Change #163: Thank you.

Falko Friedrichs: Thank you. Our next question comes from Alina Falko Friedrichs from Deutsche Bank. Please state your question. Thank you and good morning.

Speaker Change #164: Next question comes from the line of Falko Friedrichs from Deutsche Bank. Please state your question.

Falko Friedrichs: My first question is on your good 9% order intake growth in Q2. Is there any reason that this growth number should be lower in Q3 and Q4, considering the improvements in North America and then also potentially in China? Maybe you could briefly remind us of the columns as well for orders in the second half. And then my second question, putting together your comments on China's stimulus, did I sort of understand it correctly that you should start to see a positive impact on orders in the second half and then a positive impact on sales probably not before 2025? Thank you. Yeah, let me take the first one on order intake.

Thank you and good morning.

Falko Friedrichs: My first question is on your good 9% order intake growth in Q2.

Falko Friedrichs: Is there any reason that does this.

Speaker Change #166: Growth number should be lower in Q3, and Q4, considering the improvements in North America, and then also potentially in China, maybe you could briefly remind us of the answer as well for the orders in the second half and then my second question and piecing together your comments on China stimulus did I sort of understand.

Speaker Change #167: Thats correct that you should start to see a positive impact in orders in the second half.

Speaker Change #168: And then a positive impact and say, it's probably not before 2025.

Speaker Change #169: Thank you.

Speaker Change #170: Yeah, Let me take the first one on.

Speaker Change #171: Order intake.

Speaker Change #170:

Roy Jakobs: So, as I mentioned in my opening remarks, right, don't extrapolate the 9% because order intake has been extremely lumpy; that will not make a big difference. I think the strength in North America will continue, the strength in international markets will continue, and then the only unknown piece in the puzzle is how China recovers. That's how it is. Look at the order intake for sales. The next question was... Yeah, again, very difficult to say whether it will contribute a bit, but it's not likely to be major in the second half. So yes, the bigger contribution will be in 2025. The speed at which we get the orders will depend on how much they contribute this year. But that's something we still have to watch in the coming years.

Speaker Change #172: So as I mentioned and also in my opening remarks, right don't extrapolate the 9% because order intake has been extremely lumpy. Therefore, we are at 3% for the first half year.

Speaker Change #172: We expect to have growth in the second half we don't know.

Speaker Change #172: The exact amount because it also depends on how the whole.

Speaker Change #172: Recovery in China happens.

Speaker Change #172: So I think Thats, how you should look at not extrapolate the 9% comps of last year were also similarly negative for the second half of the first half so that will make a big difference I think the strength in North America will continue the strength in international markets will continue.

Speaker Change #172: The only unknown piece in the puzzle is how China recovers.

Speaker Change #172: Look at the order intake for the second half.

Speaker Change #174: The next question was.

Speaker Change #173: Uh huh.

Speaker Change #175: Yeah, again, very difficult to say, whether it will contribute a bit but it is not likely to be a major in the second half. So yes, the bigger contribution will be pretty gratified the speed at which we get the orders will depend on how much contributes to this year, but that's something we still have to work in the coming months.

Speaker Change #176: Okay. Thank you thank.

Thank you.

Speaker Change #177: Thank you.

Roy Jakobs: Okay, thank you. Thank you. The last question comes from the line of Ed Ridley Day from Redburn. Please go ahead.

Edward Nicholas Ridley: The last question comes from the line of Ed <unk> from Redburn. Please go ahead.

Edward Nicholas Ridley: Hi, good morning. Thank you. I have to follow up first on ultrasound. Thank you for your earlier comments. But can you give us a little bit more color about the growth outside China in that business? That would be helpful.

Edward Nicholas Ridley: Hi, Good morning. Thank you just a follow up firstly on ultrasound.

Speaker Change #179: Thank you for your earlier comments, but can you give us a little bit more.

Speaker Change #180: Color about the.

Speaker Change #181: Growth ex China in that business.

Speaker Change #181: Be helpful and also in image guided therapy.

Edward Nicholas Ridley: And also in image guided therapy, can we construe double-digit growth in that business as a whole in terms of revenue growth for IGT? Or if you can provide any further color on that business as well, I'd be grateful. Yeah, I need to check my numbers on ultrasound growth, excluding China. But again, like I mentioned, for the first half of last year, we had 30% plus growth. So I don't expect us to have any significant growth outside of China; it will also be a decline outside China because last year, we were getting past the whole supply chain.

Speaker Change #182: Can be construe double digit growth in that business from in terms of the revenue growth.

Speaker Change #181: IGT.

Speaker Change #181: Sure.

Speaker Change #183: If you could provide any further color on that business as well I'd be grateful.

Yes, I need to.

Speaker Change #184: Check my numbers on the ultrasound growth.

Speaker Change #185: Excluding China, but again like I mentioned for the first half of last year, we had 30% plus growth. So I don't expect us to have any significant growth.

Speaker Change #185: Outside of China. It will also be a decline outside of China, because last year, we were getting past the whole supply chain issue. So actually that we had massive supplies in the first half of last year.

Edward Nicholas Ridley: So actually, we had massive supplies in the first half of last year. Regarding IGT, we are seeing a slow recovery. This quarter was good, but I don't think this year, as being in the double-digit territory, it will probably be lower than that. But that's included, let's say, in our overall guidance for D&D. Okay, no, fair enough.

Speaker Change #185: Regarding.

Key.

Speaker Change #185: We are seeing a slow recovery this quarter was good.

Speaker Change #185: But I don't see this year as being in the double digits.

Speaker Change #185: And thirdly, it will probably be lower than that.

Speaker Change #185: But that's included let's say in our overall guidance for DMD.

Speaker Change #186: Okay fair enough. Thank you very much.

Speaker Change #187: Thank you.

Thank you.

Speaker Change #188: Gentlemen, there was the last question. Please continue yes.

Speaker Change #189: Yes, maybe.

Speaker Change #190: First of all let me thank everybody for joining the call since this going to be my last analyst call in last quarter. After 50 quarters of doing this borders.

Speaker Change #191: As the CFO just wanted to say a big thank you to all of you for.

Speaker Change #192: Putting up with me.

Speaker Change #192: Yes.

Speaker Change #192: We've had some difficult times with a lot of very good times and I look forward to that look forward to seeing you.

Speaker Change #192: On the road show later this week for those who I will meet later in the year in our short term event, but since there will be a lot on this call who I will not probably meet in my current capacity a big Thank you and again, thank you for joining the call.

Bridget: Thank you Bridget.

Bridget: Thanks for all the contribution as I said before memorable times so.

And happy to see you also kind of positioning well.

Let me close out this call by repeating I think the key message of today.

Speaker Change #194: Firstly, we deliver strong orders and margin improvement and solid operational cash flow and comparable sales growth in line with our plan and that would in a challenging macroeconomic environment.

Speaker Change #194: This was the result of progress on our execution and our industry, leading innovations, which we keep focusing on.

Speaker Change #194: And supported by our key innovation launches and our ongoing actions, we therefore confident in our plan.

Speaker Change #194: And also reiterate the outlook for the full year 2024.

Speaker Change #195: I would like to.

Speaker Change #196: Thank you for joining the call.

Speaker Change #197: And I wish you a great summer. Thank you so much.

Speaker Change #198: This concludes the Royal Philips second quarter and semi annual 'twenty 'twenty four results conference call on Monday, 29th July 2024.

Speaker Change #199: You for participating you may now disconnect.

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Abhijit Bhattacharya: Thank you very much. Okay, thank you. Thank you. Gentlemen, that was the last question. Please continue. Thank you, Abhijit.

Speaker Change #199: Okay.

Speaker Change #200: Hi, everyone welcome to Philips second quarter and half year 2024 results webcast I'm here with our CEO, Brian <unk> and our CFO Abhijit Bhattacharya.

Speaker Change #201: Press release, and Investor deck, we published on our Investor Relations website. This morning.

Speaker Change #201: The replay and full transcript of this webcast will be made available on the website after the call as well.

Speaker Change #202: Before we start I want to draw your attention to our Safe Harbor statement on screen. You will also find the statement in the presentation published on our Investor Relations website ROI over to you.

Roy Jakobs: And indeed, thanks for all the contribution, as I said before, memorable times. So I'm happy to see you also kind of transitioning well. Let me close this call by repeating, I think, the key message of today. Firstly, we deliver strong orders and margin improvement, a solid operational cash flow, and comparable sales growth in line with our plan. And that within a challenging macroeconomic environment.

Roy Jakobs: This was the result of progress on our execution and our industry-leading innovations, which we keep focusing on. And supported by our key innovation launches and our ongoing actions, we are therefore confident in our plan. And we also iterate the outlook for the full year 2024. I would like to thank you for joining the call, and I wish you a great summer. Thank you so much.

Speaker Change #203: Good morning, everyone and welcome great to be with you today.

Operator: This concludes the Royal Solid Second Quarter and Semi-Annual 2024 Results Conference Call on Monday, 29th July 2024. Thank you for participating. You may now disconnect.

Speaker Change #204: I want to start with the key highlights of this morning's release.

We delivered strong order intake growth this quarter.

Speaker Change #204: But in a challenging macroeconomic environment, we achieved strong margin improvement supported by our productivity program.

Speaker Change #204: Solid operational cash flow and comparable sales growth in line with our plan.

Speaker Change #204: The improvements were across all business segments, and the result of the ongoing actions to enhance execution supported by our innovations.

Speaker Change #204: We continue to make progress and see the effects of the focus on our three priorities.

Speaker Change #204: And also patient safety and quality.

Speaker Change #205: <unk>, our supply chain reliability, and establishing a simplified more agile operating model.

Speaker Change #205: Supported by key innovation launches and our ongoing actions we are confident in our plan and reiterate our outlook for the full year 2024.

Leandro Mazzoni: [inaudible] Welcome to Philips' second quarter and half-year 2024 results webcast. I'm here with our CEO, Roy Jakobs, and our CFO, Abhijit Bhattacharya. The press release and investor deck were published on our investor relations website this morning. The replay and full transcript of this webcast will be made available on the website after the call as well.

Speaker Change #206: Onto the key financial highlights.

Speaker Change #206: Comparable sales growth was 2% in the quarter on the back of high single digit growth last year.

Speaker Change #206: This was driven by 4% growth in diagnosis, <unk> treatment and 2% growth in both the connected care and personal health segments.

Speaker Change #206: The adjusted EBITDA margin was 11, 1% in the quarter, a strong improvement of 100 basis points compared to Q2 2023.

Speaker Change #206: Free cash flow outflow.

Speaker Change #206: Was $64 million, which included the payment in connection with the Respironic economic loss settlement in the U S.

Speaker Change #207: We delivered a strong underlying operational cash flow improvement, which <unk> will unpack later.

I am encouraged by the 9% order intake increased in the quarter I'm confident that our innovative portfolio is well positioned to help hospitals worldwide address their staffing shortages and house productivity and improve patient and staff experience.

Speaker Change #207: As are our leading innovations for consumers to take care of themselves.

Speaker Change #207: We continue to expect positive order intake growth in the second half and full year 2024.

Speaker Change #207: And China orders declined as the industry wide anticorruption measures imposed by the government continue to impact order lead times by hospitals.

Speaker Change #207: Their internal approval cycles have increased to ensure compliance.

Speaker Change #207: I actually just returned from China last week, where I met many of our customers and partners and it is clear that as it remains an attractive health care market we.

Speaker Change #207: We do not expect that the anticorruption measures impact structural demand.

Speaker Change #207: Our order funnel is active in the country and we expect China to gradually contribute to order growth in the coming quarters, albeit from a low base.

Speaker Change #207: This will be supported by the recently announced government program for renewal of medical equipment.

Speaker Change #208: Let me now provide you with some of the customer and innovation milestones during the quarter.

Speaker Change #208: We continue to see strong customer pool for our solutions and signed several long term agreements across the world in this quarter for.

Speaker Change #208: For example, we signed multi year partnerships for monitoring image guided therapy and helium for EMR with several university hospitals in the Netherlands and Belgium.

Speaker Change #208: We also signed a multi.

Speaker Change #208: A major multi year partnership with Bon Secours Mercy health, one of the largest health systems in the U S. Standardizing and of this patient monitoring solutions across its 49 hospitals to drive better patient outcomes and reduce burden on staff.

Speaker Change #208: We launched our next generation AI enabled cardiovascular ultrasound platform.

Speaker Change #208: New FDA cleared AI tools integrated to advanced cardiovascular imaging and increase automation and productivity of our customers.

Speaker Change #208: Demonstrating our innovation leadership in minimally invasive treatments, we announced the first implant of the venues stent system following premarket approval from the FDA.

Speaker Change #208: In personal health, we unveiled a series of innovations in China, including launch of the first medical grade Philips Lumia 8000 series IPL hair removal device with cooling technology.

Speaker Change #208: Looking ahead, we remain confident in our plan acknowledging that uncertainties remain in a challenging macro environment.

Speaker Change #208: In 2024, we expect to deliver further performance improvement with 3% to 5% comparable sales growth building on a strong comparison base of last year and adjusted EBITDA margin of 11 to 11, 5% and free cash flow of 9% to $1 1 billion.

Abhijit: I will now hand, it over to Abhijit to take us through the Q2 financials in more detail after which I will come back on our execution priorities.

Leandro Mazzoni: Before we start, I want to draw your attention to our Safe Harbor Statement on screen. You will also find the statement in the presentation published on our Investor Relations website. Roy, over to you.

Abhijit: Thanks, Roy good morning, everyone.

Roy Jakobs: Good morning everyone and welcome. Great to be with you today. I want to start with the key highlights of this morning's release. We delivered strong order intake growth this quarter. But in a challenging macro environment, we achieved strong margin, supported by a Productivity Program.

Abhijit: We start with our performance highlights.

Roy Jakobs: Solid Operational Cash Flow and Comparable Sales Growth in line with our plan. The improvements were across all business segments and a result of the ongoing actions to enhance execution, supported by our innovation. We continue to make progress and see the effects of the focus on our three priorities, Enhancing Patient Safety and Quality.

Abhijit: <unk> sales grew 2% in the quarter with 1% growth in mature geographies.

Roy Jakobs: Strengthening our supply chain reliability and establishing a simplified, more agile operating system. Supported by key innovation launches and our ongoing actions, we are confident in our plan and reiterate our outlook for the full year 2024. On to the key financial highlights. Comparable sales growth was 2% in a quarter, on the back of high single-digit growth last year.

Speaker Change #210: Comparable sales.

Abhijit: Growth geographies grew 3% despite a decline in China.

Roy Jakobs: This was driven by 4% growth in diagnosis and treatment and 2% growth in both the connected care and personal health sector. The adjusted EBITDA margin was 11.1% in a quarter, a strong improvement of 100 basis points compared to Q2 2021. Free Cashflow Outflow was $64 million, which included the payment in connection with the Respironix economic loss settlement in the U.S. We delivered a strong underlying operational cash flow improvement, which Abhijit will unpack later.

In diagnosis <unk> treatment comparable sales increased by 4% with growth across.

Roy Jakobs: I'm encouraged by the 9% order intake increase in the quarter. I'm confident that our innovative portfolio is well-positioned to help hospitals worldwide address their staffing shortages, enhance productivity, and improve patient and staff experiences, as are our leading innovations for consumers to take care of themselves. We continue to expect positive order intake growth in the second half and in the full year 2020. In China, orders declined as the industry-wide anti-corruption measures imposed by the government continued to impact order lead times by whole states, as their internal approval cycles have increased to ensure compliance.

Abhijit: Image guided therapy and position diagnosis, it's important to note that this was compared to strong double digit growth in Q2 2023.

Abhijit: The adjusted EBITA margin improved by 160 basis points year on year to 12, 2%.

Abhijit: The increase was mainly driven by improved sales prices and productivity measures.

Abhijit: Collected give comparable sales increased 2% with double digit growth in enterprise informatics and flat comparable sales growth and monitoring of the back of strong double digit growth in Q2 'twenty three.

Abhijit: We saw strong performance in sleep systems and patient interface in markets outside of the U S.

Abhijit: Connected care adjusted EBITA margin improved 100 improved by 130 basis points to eight 8% driven by solid performance in monitoring and a strong step up in profitability in sleep and respiratory care, which is encouraging.

Abhijit: Perceval has delivered 2% comparable sales increase driven by a 5% growth outside of China.

Overall consumer sentiment in the U S.

Abhijit: The vessel market is solid while consumer sentiment in China remains subdued.

Roy Jakobs: I actually just returned from China last week, where I met many of our customers and partners, and it is clear that it remains an attractive healthcare market. However, we do not expect that the anti-corruption measures will impact structural demands.

Abhijit: The adjusted EBITA margin for the segment improved significantly to 16, 9% this quarter, mainly due to operational improvements and productivity.

Speaker Change #211: Sales in segment other was 70 million lower than in the second quarter of 'twenty granted to penetrating three due to royalty revenue facing as indicated in our Q1 call.

Speaker Change #211: This difference alone resulted in a negative impact of around 160 basis points on the group.

Speaker Change #211: <unk> of the group in the second quarter.

Speaker Change #211: We've been very disciplined cost management and productivity initiatives delivered savings of $195 million in the quarter.

Speaker Change #211: Rich operating model savings were $57 million procurement savings were $71 million and other productivity programs delivered $67 million.

Speaker Change #211: The adjusted EBITA margin for the group increased by 100 basis points to 11, 1%. Despite the lower royalty revenue in the quarter.

Speaker Change #211: Activity and pricing actions, which contributed 320 basis points, partly offset by wage and component price price inflation of 200 basis points.

Speaker Change #211: Earlier in the quarter. We also concluded an agreement with insurers to pay $538 million to cover the rest products recall related product liability claims.

Speaker Change #211: This income was recognized in Q2 2024, and the remaining payment is expected this year.

Speaker Change #211: Free cash was an outflow of 64 million in the quarter as it included a payment of 415 million euros in connection with the Respironic economic loss settlement in the U S. Partly offset by the initial received from insurers of 150 million euros.

Speaker Change #211: <unk>.

Speaker Change #211: Therefore, excluding these two effects free cash flow in the quarter was around $200 million driven by higher earnings and continued progress in working capital management.

Speaker Change #211: Our leverage ratio improved from 2.8 times to two two times compared to Q2 'twenty three.

Speaker Change #211: Net debt to adjusted EBITDA basis.

Speaker Change #211: It also it's also important to note that both S&P and Moody's upgraded our rating.

Speaker Change #211: Outlook to stable, we now have stable outlook for our strong credit ratings across S&P, Moody's and Fitch.

Speaker Change #212: The effective rate for the first half of 'twenty 'twenty four was negatively impacted by the de recognition of deferred tax assets on the restaurant ex litigation provision and carry forward losses in the U S. As a result, the effective tax rate for the full year 2024 will be high.

Speaker Change #212: Normalizing for these effects however.

Speaker Change #212: Effective tax rate is expected to be between 17, and 19% this year compared to our guidance of 24% to 26% for the period Brexit regulatory good liquidity price.

Roy Jakobs: Our order funnel is active in the country, and we expect China to gradually contribute to order growth in the coming quarters. However, it did so from a low base. This will be supported by the recently announced government program for renewal of aged medical equipment. Let me now provide you with some of the customer and innovation milestones during the quarter. We continue to see strong customer demand for our solutions and signed several long-term agreements across the world in this quarter.

Now, let's move to the dynamics in order intake as mentioned earlier, we continued to see inherent unevenness in order growth between quarters.

Roy Jakobs: For example, we signed multi-year partnerships for monitoring, image-guided therapy, and helium-free MR with several university hospitals in the Netherlands and Belgium. We also signed a major multi-year partnership with Bon Secours Mercy Health, one of the largest health systems in the US, standardizing innovative patient monitoring solutions across its 49 hospitals to drive better patient outcomes and reduce burden on staff. We launched our next-generation AI-enabled cardiovascular ultrasound platform with new FDA-cleared AI tools integrated to advance cardiovascular imaging and increase the automation and productivity of our customers.

Roy Jakobs: Demonstrating our innovation leadership in minimally invasive treatments, we announced the first implant of the Dual Venous Stent System following pre-market approval from the FDA. For personal health, we unveiled a series of innovations in China, including the launch of the first medical-grade Philips Lumia 8000 series IPL hair removal device with cooling technology. Looking ahead, we remain confident in our plan, although acknowledging that uncertainties remain in a challenging macro environment. In 2024, we expect to deliver further performance improvements.

Speaker Change #212: The second quarter order intake grew by a strong 9% driven by improvements outside of China, particularly in North America.

Speaker Change #212: This resulted in 3% order intake growth for the first half of the year.

Speaker Change #212: Continue to expect to deliver order intake growth in both the second half as well as the full year 'twenty 'twenty four as mentioned by Roy.

Speaker Change #213: As a reminder, order them order book account for 40% of our revenue. The remaining 60% comes mainly from recurring revenue streams, such as services and consumables from the book and Bill.

And bill business and for personal health.

Speaker Change #214: As mentioned in our previous earnings calls, we anticipate sales growth to be backend loaded in 2024 due to the higher comparison base in the first three quarters of the year, where we grew 9% in 2023.

Speaker Change #214: We expect sales growth in the third quarter to stay broadly in line with the first half of the year on the back of 11% growth in Q3, 2023, which was driven by mid teens growth in diagnosis and treatment.

Speaker Change #214: For the full year 2024, we expect all business segments to be within the 3% to 5% sales growth range provided by the group provided further group.

Speaker Change #214: Connected care are expected to be closer to the upper end of the range.

Speaker Change #214: Diagnosis and treatment in personal health expected to be closer to the lower end of the range.

Speaker Change #215: With that I would.

Like to hand, it back to Roy.

Roy Jakobs: 3-5% comparable sales growth, building on a strong comparison base of last year, an adjusted EBITDA margin of 11-11.5%, and a free cash flow of 0.9-1.1 billion. I will now hand it over to Abhijit to take us through the Q2 financials in more detail, after which I will come back on our execution priorities. Thanks Roy, good morning everyone.

Roy: Thanks I proceed I would like to continue with the progress we have made on our execution priorities.

Abhijit Bhattacharya: Let me start with our performance highlights. Comparable sales grew 2% in the quarter with 1% growth in mature jobs. Comparable sales in growth geographies grew 3% despite a decline in China. In diagnosis and treatment, comparable sales increased by 4% with growth across Image-Guided Therapy and Precision Diagnosis. However, it's important to note that this was compared to strong double-digit growth in Q2 2020. The adjusted EBITDA margin improved by 160 basis points year-on-year to 12.2%.

Roy: On patient safety and quality.

Abhijit Bhattacharya: The increase was mainly driven by improved sales, pricing, and productivity; connected care comparable sales increased 2% with double-digit growth in enterprise informatics and flat comparable sales growth in monitoring on the back of strong double-digit growth in Q2 2020. We saw strong performance in sleep systems and patient interface in markets outside of the U.S. Connected care's adjusted EBITDA margin improved by 130 basis points to 8.8% driven by solid performance in monitoring and a strong step-up in profitability in sleep and respiratory care, which is encouraging. Personal Health delivered a 2% comparable sales increase driven by 5% growth outside of China. Overall consumer sentiment in the US and international markets is solid, while consumer sentiment in China remains subdued.

Abhijit Bhattacharya: The adjusted EBITDA margin for the segment improved significantly to 16.9% this quarter, mainly due to operational improvements and productivity. Sales in segment other were 70 million lower than in the second quarter of 2022-2023 due to royalty revenue phasing as indicated in our Q1 call. This difference alone resulted in a negative impact of around 160 basis points on the growth of the group in the second quarter.

Roy: We again delivered a substantial improvement in copper closures in the quarter, driven by stronger processes capabilities and governance around it.

Abhijit Bhattacharya: We have been very disciplined in cost management, and our productivity initiatives delivered savings of $195 million in the quarter, of which operating model savings were $57 million, procurement savings were $71 million, and other productivity programs delivered $67 million. The adjusted EBITDA margin for the group increased by 100 basis points to 11.1%. Despite the lower royalty revenue in the quarter, productivity and pricing actions, which contributed 320 basis points, were partly offset by wage and component price inflation of 200 basis points.

Abhijit Bhattacharya: Earlier in the quarter, we also concluded an agreement with insurers to pay 538 million to cover the Respironics recall-related product liability claims. This income was recognized in Q2 2024, and the remaining payment is expected this year. Free cash was an outflow of 64 million euros in the quarter as it included a payment of 415 million euros in connection with the Respironics economic loss settlement in the US, partly offset by the initial receipt from insurers of 150 million euros.

Roy: We continue to drive significant simplification of the way, we work and further reduced.

Roy: The number of quality management systems, we are well on track to achieve our target of 65% reduction in 2024.

Roy: And we continue to invest in quality improvements across the portfolio and are acting fast and post market surveillance signals.

Roy: With respect to the supply chain, we now have lead times back to normal across all modalities.

Roy: We'll continue leveraging and regionalized, our end to end supply chain to further strengthen.

Roy: First time, right deliveries and service levels.

Roy: In China, we have reached around 90% local for local supply chain.

Abhijit Bhattacharya: Therefore, excluding these two effects, free cash flow in the quarter was around 200 million, driven by higher earnings and continued progress in working capital management. Our leverage ratio improved from 2.8 times to 2.2 times compared to Q2 2023 on a net debt to adjusted EBITDA basis. It's also important to note that both S&P and Moody's upgraded our rating outlook to stable. We now have stable outlooks for our strong credit ratings across S&P, Moody's, and FIT.

Roy: Finally, our new operating model with Prime accountability in the businesses has been live for almost 18 months now, resulting in significant productivity improvements of $1 4 billion to date.

Abhijit Bhattacharya: The effective rate for the first half of 2024 was negatively impacted by the derecognition of deferred tax assets on the Respironics litigation provision and carry forward losses in the US. As a result, the effective tax rate for the full year 2024 will be high, normalizing for these effects.

Abhijit Bhattacharya: However, the effective tax rate is expected to be between 17 and 19% this year, compared to our guidance of 24 to 26% for the period 2020 to 2025. Now let's move to the dynamics of order intake. As mentioned earlier, we continue to see inherent unevenness in order growth between quarters. In the second quarter, order intake grew by a strong 9 percent, driven by improvements outside China, particularly in North America.

Abhijit Bhattacharya: This resulted in 3% order intake growth for the first half of the year, and we continue to expect to deliver order intake growth in both the second half as well as the full year 2024, as mentioned by Roy. As a reminder, orders and the order book account for 40% of our revenue; the remaining 60% comes mainly from recurring revenue streams, such as services and consumables from the book and bill business and from personal health.

Abhijit Bhattacharya: As mentioned in our previous earnings calls, we anticipate sales growth to be back-end loaded in 2024 due to the higher comparison base in the first three quarters of the year, where we grew 9% in 2020. We expect sales growth in the third quarter to stay broadly in line with the first half of the year, on the back of 11% growth in Q3 2023, which was driven by mid-teens growth in diagnosis and treatment.

Roy: We have already reduced close to 9000 roles.

Roy: And at the same time, we continue to closer journey to drive impact with care and attracted more than 700 talents with health Tech background. This year alone.

Abhijit Bhattacharya: For the full year 2024, we expect all business segments to be within the three to 5% sales growth range provided by the group or provided for the group, with connected care expected to be closer to the upper end of the range, and diagnosis and treatment and personal health expected to be closer to the lower end. With that, I would like to hand it back to Roy. Thanks, Abhijit.

Roy: As announced earlier this year.

Speaker Change #216: <unk> will retire from Philips after a long and illustrious career with us.

Speaker Change #217: I want to thank him for his significant contribution to the company.

Speaker Change #217: Especially during his time as CFO.

Speaker Change #218: <unk> leadership passion and education has helped shape the transformation of Philips of the last decade and guided the company through global uncertainty in recent years.

Speaker Change #219: We will certainly Miss opposite forces drive counsel and his sense of humor.

Speaker Change #220: His last day will be on September 30, So you will have the opportunity to engage with him during the roadshow and investors events over the next couple of months.

Speaker Change #221: Our incoming CFO Shannon autonomous <unk> joined US last month and will move into the CFO role on October one.

Speaker Change #221: <unk> are working diligently to ensure a smooth and seamless transition.

Shannon: As you know shallow brings over 20 years experience in med Tech and pharmaceutical industries. Most recently at global Medical Technology Company Stryker.

Shannon: Before I wrap up I want to take the opportunity to extend a warm invitation for our show and tell event for investors and analysts in September.

Shannon: It will be a great face to face event in the Netherlands, We will take you into a deep dive into our businesses and highlight some of our most important products and innovations.

The opportunity to directly discuss the latest trends in the health Tech segments, where our management and our business teams.

Shannon: Our Investor Relations website contains more information on the event and how to register.

We look forward to see you here.

Shannon: Let me close out by repeating the key messages of today's announcements.

Shannon: We delivered strong orders and margin improvement.

Shannon: Solid operational cash flow and comparable sales growth in line, but our plan within a challenging macro environment.

Shannon: This was a result of progress on our execution and our industry leading innovations.

Shannon: Supported by key innovation launches and our ongoing actions we are confident in our plan and reiterate our outlook for the full year 2024.

Roy Jakobs: I would like to continue with the progress we have made on our execution priority, patient safety and quality. We again delivered a substantial improvement in CAPA closures in the quarter, driven by stronger processes, capabilities, and governance around it. We continue to drive significant simplification of the way we work, and further reduce... The number of quality management systems. We are well on track to achieve our target of 65% reduction in 2024.

Speaker Change #222: I would like to thank you for joining the call and we will now take your questions.

Roy Jakobs: And we continue to invest in quality improvements across the portfolio and are acting fast on post-market surveillance signals. With respect to the supply chain, we now have lead times back to normal across all modalities. We will continue leveraging and regionalizing our end-to-end supply chain to further strengthen First Time Ride Deliveries and Service Levels. In China, we have reached around 90% local for local supply chain. Finally, our new operating model with prime accountability in the businesses has been live for almost 18 months now, resulting in significant productivity improvements of 1.4 billion today.

Roy Jakobs: We have already reduced close to 9,000 roles. And at the same time, we continue the culture journey to drive impact with care and attract more than 700 talents with health tech backgrounds this year alone. As announced earlier this year, Abhijit will retire from Philips after a long and illustrious career with us.

Roy Jakobs: I want to thank him for his significant contribution to the company, especially during his time as CEO. Abhijit's leadership, passion, and education have helped shape the transformation of Philips over the last decade and guided the company through global uncertainty in recent years. We will certainly miss him for his drive, counsel, and his sense of humor.

Roy Jakobs: This last day will be September 30th, so you will have the opportunity to engage with him during the roadshow and investors events over the next couple of days. Our incoming CFO, Charlotte Hanneman, joined us last month and will move into the CFO role on October 1st. Abhijit and Charlotte are working diligently to ensure a smooth and seamless transition. As you know, Charlotte brings over 20 years of experience in medtech and the pharmaceutical industry, most recently at the global medical technology company Stryker. Before I wrap up, I want to take the opportunity to extend a warm invitation to our show and tell event for investors and analysts in September. It will be a great face-to-face event in the Netherlands.

Roy Jakobs: We will take you on a deep dive into our other businesses and highlight some of our most important products and innovations. You will have the opportunity to directly discuss the latest trends in the health tech segments with our management and our business partners. Our Investor Relations website contains more information on the event and how to register.

Roy Jakobs: This was due to progress on our execution and our industry-leading innovation, supported by Key Innovation Lounges and our ongoing actions. We are confident in our plan and reiterate our outlook for the full year 2024. I would like to thank you for joining the call, and we will now take your questions. Thank you, sir. If any participant would like to ask a question, please press the star followed by two times one on your telephone.

Roy Jakobs: We look forward to seeing you here. Let me close by repeating the key messages of today's announcement. We deliver strong orders and margin improvement, solid operational cash flow, and comparable sales growth in line with our plan. In a challenging macro environment.

Thank you Sir.

Speaker Change #223: If any for the spin would like to ask a question. Please press the star followed by two times one on your telephone.

Operator: Due to time constraints, please limit yourselves to one question. This will give more people the opportunity to ask questions. There will be a short pause while participants register for questions.

Speaker Change #224: Due to the time, please limit yourself to one question. This will give more people the opportunity to ask questions.

Speaker Change #225: There will be a shortfall small participants register for questions.

Speaker Change #225: Yes.

Operator: We will now go to the first question. Our first question comes from the line of Hassan Al-Wakil from Barclays. Please ask your question. Hi, good morning, and thank you for taking my questions. I have three, please.

Speaker Change #226: We will now go to the first question. Our first question comes from the line of Hudson I'll Walk you from Barclays. Please ask your question.

Hassan Al: Firstly, on orders, can you talk about the strength you're seeing in North America and to what extent is it a catch-up on supply issues around MR or indeed share gained in other modalities as well? Secondly, can you talk about the personal health business in China, which looks to be down around 10% in the quarter? What are your expectations here for the second half?

Speaker Change #227: Hi, Good morning, and thank you for taking my questions I have three please firstly on on orders can you talk about the strength, you're seeing in North America and to what extent is it a catch up on supply issues around <unk> or indeed share gained in other modalities as well.

Speaker Change #228: Secondly, can you talk about the personal health business in China, which looks to be down around 10% in the quarter. What are your expectations here for the second half and can you talk about the building blocks and the assumed acceleration in the broader ph business over the next two quarters and then finally, you had an impressive margin.

Hassan Al: And can you talk about the building blocks and the assumed acceleration in the broader pH business over the next two quarters? And then, finally, you had an impressive margin delivery in the first half, and with the seasonally strong second half that you typically enjoy, coupled with connected care margins building from here, why haven't you raised guidance? Is this a continuation of the conservatism that we've seen from you, Roy?

Speaker Change #229: Delivery in the first half and with the seasonally strong second half that you typically enjoy coupled with connected care margins building from here.

Speaker Change #230: Why haven't you raised guidance is this a continuation of the conservatism that we've seen from your ROI or is there something we should be aware of incrementally driving caution into the second half. Thank you.

Roy Jakobs: Or is there something we should be aware of gradually driving caution into the second half? Thank you. Thank you, Hassan. Great questions.

Roy Jakobs: Let me start with the first one, orders and the strength in North America. So actually, we have seen an improvement in our order book across different businesses, building on the strength in the market first place because North America clearly is the strongest market in the world, where we have seen our customers strengthening their, actually, P&L, their income through more patients that are being served. But also, we see further consolidation trends in the market that actually we benefit from as they are choosing key partners that they trust for longer-term technology partnerships.

Speaker Change #231: Thank you.

Speaker Change #232: Great question. So let me start with the first one orders and the strength in North America. So actually we have seen.

Speaker Change #232: Improvement of our order book across different businesses.

Speaker Change #232: Building on the strength in the market first base, because North America clearly is the strongest market in the world, where we have seen our customers strengthening dear actually P&L their income through more patients that are being served but also we see further consolidation trends in the market that actually benefit from as they are.

Speaker Change #232: Using.

Speaker Change #232: Key partners that they trust and for longer term technology partnerships and actually we have seen that across our portfolio, whether thats on monitoring whether it is on imaging intervention and also you have seen.

Roy Jakobs: And actually, we have seen that across our portfolio, whether that's on monitoring, whether that's on imaging, and interventional. And also, you have seen and heard us talk about a very strong enterprise informatics growth, because you see that, especially software and AI, are used very much to improve productivity and also to reach across different sites, whether it's different hospital sites, but also into ambulatory and sometimes even into home.

Speaker Change #233: <unk> heard us talk about a very strong enterprise informatics growth because you see that especially software and AI is used very much to improve productivity and also to reach across different sites, whether it's different hospital sites, but also into ambulatory and sometimes even.

Roy Jakobs: So that the portfolio that we have is responding well with our North American customers. So that's also what we see in the order intake. So also, therefore, we don't expect that this is a one-off. We will expect, actually, the order intake to continue to be strong in North America. Then a second question on pH.

Speaker Change #233: So that actually portfolio that we have is resonating well with our north American customers. So that is also what we see in the order intake. So also therefore, we don't expect it that this is a one off we will expect actually the order intake continues to be strong in North America.

Speaker Change #234: Then a second question on ph.

Roy Jakobs: China was indeed down. I think that was a market and industry kind of phenomena. Consumers are spending less in China than we were used to.

Speaker Change #235: China was indeed down I think that wasn't market and industry kind of phenomena.

Consumers are spending less in China than we're used to.

Roy Jakobs: We also expect that to actually continue in the second half. So whilst we expect some strengthening, we don't expect too much from the Chinese market. But what you have seen, and also in terms of our guidance, we do see that actually growth in other parts of the world is stronger and will actually also strengthen in the second half of the world. North America is part of that.

Speaker Change #235: We also expect that actually to continue in the second half so whilst we expect some strengthening we don't expect too much from China market, but what you have seen and also in terms of our guidance, we do see that actually the growth in other parts of the world is stronger and actually will also strengthen in the second half of the world nor.

Speaker Change #235: America is part of that we already saw stronger growth in Europe, and some of the Asian markets already in the first half and that combination actually will also help us deliver at the full year guidance as we have laid out on the other hand, plus you also saw in Phs that we're driving strongly the profitability we have.

Roy Jakobs: We already saw stronger growth in Europe and some of the Asian markets in the first half, and that combination will actually help us deliver the four-year guidance we have laid out. On the other hand, what you also saw on pH is that we are driving strongly profitability. We have been taking strong action on further productivity initiatives, but also some support from pricing. So the overall mix is playing out well and supporting pH to step up in profitability levels.

Speaker Change #235: <unk> been taking strong action on further productivity initiatives, but also some support from pricing. So the overall mix is playing out well and supporting ph to step up in profitability levels.

Roy Jakobs: Then the third question, on margin delivery in the first half, I think, yes, we are satisfied that we continue to see margin improvements. Of course, backed by a very strong productivity drive on the one hand, the return to sales, and also stronger underlying margins. So in that sense, we expect that momentum also to continue into the second half. But at the same time, we didn't want to raise our targets mid-year.

Speaker Change #236: And then the third question on the margin delivery in the first half.

Speaker Change #236: I think yes, we are satisfied that we continue to see the margin improvements of course backed board a very strong productivity drive on one hand, the return to sales and also stronger underlying margins. So in that sense, we expect that momentum also to continue.

Speaker Change #236: For the second half at the same time that we didn't want to raise mid year, we feel that it's better to stay.

Roy Jakobs: We feel that it's better to stay kind of confident about the full year, deliver a quarter of a quarter, our improvements, and by doing so, make sure we deliver the full year. So we stick to our plan, the three priorities that we have, building on the innovations that we can get out there, and by doing so, working towards that delivery. Maybe to add a bit, Hassan, if you look at the improvement in the first half, we are in the guided range of 40 to 90 bits. So, therefore, there's no need, at this stage, like Roy said, to again further improve it because we are in the guided range of profit improvement also for the first half. Thank you both.

Speaker Change #236: Kind of confident on the full year deliver quarter over quarter our improvements.

Speaker Change #236: And by doing so making sure we delivered a full year. So we stick to our plan three priorities that we have building on the innovation that we can get out there and by doing so working towards the delivery for the full year.

Speaker Change #237: Excellent. Thank you.

Hasan if you look at the improvement in the first half we are in the guided range of 40 to 90 bps.

Hasan: So therefore, there is no need at this stage like voice to again further improve it because we are in the guided range of profit improvement also for the first half of the.

Beth: Thank you Beth.

Richard Felton: Thank you. The next question comes from Richard Felton from Goldman Sachs. Please state your question, Richard. Thank you. Good morning.

Beth: Thank you.

Speaker Change #238: Our next question comes from Richard Felton from Goldman Sachs. Please state your question Richard.

Thank you good morning key for me please.

Richard Felton: So first of all, on some of the recently launched innovation, I think you've mentioned new products across CT, IGT, and ultrasound, all fairly recently. So in context of those launches, how do you see your current market share trends across those key modalities? That's question one. My second question is on enterprise informatics.

Speaker Change #239: So first of all on some of the recently launched innovation I think you meant.

Speaker Change #240: New products across Cte IGT and ultrasound.

Richard Felton: Fatty recently and some context to these launches how do you see your current market share trends across those key modalities.

Question, One and then my second one is on enterprise Informatics is there any color or detail you can share to help us think about profitability for that division as the business scales. Thank you.

Roy Jakobs: Is there any color or detail you can share to help us think about profitability for that division as the business scales? Thank you. Thank you, Richard, for these questions. Good questions again.

Roy Jakobs: If you look at the MPIs and how they support market share, I think what you can see from the order intake growth, 9% in the second quarter, 3% in the first half. That actually supports a strong performance in the market. Some of these new innovations we just recently launched, like for example, the ultrasound, a new platform with AI that's actually, I think, very exciting. Now, we expect benefits to come from that platform that have not yet been built. delivery to date, the same for some of the new launches of Azure and the CT 5300.

Speaker Change #241: Thank you Richard for for these questions. Good questions again, if you look at the <unk>.

Speaker Change #242: And how they support.

Speaker Change #243: Our market share I think what you can see from the order intake growth.

Speaker Change #243: 9% in the second quarter, 3% first half that actually supports a strong performance in the market.

Some of these new innovations we just recently launched like for example, the ultrasound and new platform with AI. That's actually I think very exciting now we expect the benefits to come from that platform that has not yet been kind of built into delivery to date. The same for some of the new launches of <unk> and <unk>.

Speaker Change #244: Five 300.

Roy Jakobs: Because we had the first launch of these, I think you will see, and we also believe to see that back in our market share in the coming months and even in 2025, whilst we get this to full strength. So we have seen, of course, strengthening our position in the market. We also see very good resonance.

Speaker Change #244: Because we had the first launches of these I think you will see and we also believe to see that back in our market share in the coming months and even in 2025, whilst we get this to full strength.

Speaker Change #244: So we have seen of course strengthen our positioning in the market. We also see very good residents, we had multiple deals across the world. How you saw not only in North America that we closed big technology partnerships, but also in Europe various ones and also in Asia. So actually you see that that we have gone up I think increase.

Roy Jakobs: We have multiple deals across the world. You saw that not only in North America that we closed big technology partnerships but also in Europe, various ones, and also in Asia. So actually, you see that we have kind of, I think, increased momentum based on our innovations. The other achievement that we highlighted, which is important also for competitiveness, is that we're now fully back on track with supply chain lead times. So we had MR, which was the last one to kind of really fall in line.

Speaker Change #244: Momentum based on our innovations the order I think.

Speaker Change #244: Achievement that we highlighted which is important also for competitiveness is that we now fully back on track with supply chain lead times. So we had <unk>, which was the last one to kind of really fall in line. We also have debt now back.

Roy Jakobs: We also have that now back. We have seen that kind of reflected in our momentum, and we expect that to support a way forward. And on the second question on EI, I think what we have seen is that there's strong order intake that also, of course, drives then conversion. And we also have seen that contributing to profitability. And that's something that we are kind of happy with. So we saw that coming into a positive contribution. And what we said for the long term, this 1.5 billion sales and moving towards double-digit margins is something we are driving full force towards. Of course, step by step, quarter by quarter.

Speaker Change #244: We have seen that kind of reflected in MRM momentum and we expect that to support also our way forward.

Speaker Change #244: And on the second question on AI.

Speaker Change #244: I think what we have seen indeed is that there is strong order intake that also of course drives conversion and we also have seen that contributing to profitability.

Speaker Change #244: And that's something that has gone up.

Speaker Change #244: We're happy with so we saw that coming into positive contribution and.

Speaker Change #244: What we said for the long term this $1 5 billion sales and moving towards double digit margin is something we are driving full force towards.

David James Adlington: But it's clear that that portfolio is gaining momentum, and that then also translates into improved performance. Great, thank you very much.

<unk> step by step quarter by quarter, but it's clear that that portfolio is gaining momentum and then also translate into improved contribution.

Speaker Change #245: Great. Thank you very much.

Speaker Change #245: Thank you.

David James Adlington: Thank you. Our next question comes from the line of David Adlington from JP Morgan. Please state your question, David. Good morning.

Speaker Change #246: Our next question comes from the line of David Adlington from Jpmorgan. Please state your question David.

David James Adlington: Thanks, guys. Maybe just a question around pricing. Of the 2% growth in sales you saw this quarter, how much of that was down to price? And then following on from that, how do you see the pricing environment evolving? Are you seeing positive trends, flat pricing, or are we seeing some pressure on pricing at this point? Thank you.

David James Adlington: Good morning, Thanks, guys, maybe just a question around pricing of the 2% growth on sales you saw this quarter how much of that was down to price and then following on from that how do you see the pricing environment <unk> seen positive trends flat pricing are we seeing some pressure on pricing.

Speaker Change #247: Thank you.

Abhijit Bhattacharya: Yeah, I think if you look, we saw some pricing benefits in health systems, and that's what we've been saying for the last couple of years, David, that, you know, we saw it in our order book, and now we see it translating back into the P&L. In terms of pH, you don't really see further pricing upsides now because you see how the consumer sentiment is. Thanks, Abhijit.

Speaker Change #247: Yes.

Speaker Change #248: If you look and we saw some pricing benefit in health systems, and that's what we've been saying for the last couple of years David.

Speaker Change #249: We saw it in our order book and now you see it translating back into the P&L.

Speaker Change #251: In terms of <unk> don't really see further.

Speaker Change #250: Pricing upsides now because you see how the consumer sentiment visits quite subdued so pushing pricing at this time is not helping now of course, we are working on.

Speaker Change #250: The productivity as well as the operational improvements that we have put in.

Speaker Change #250: In supply chain, we do know factories et cetera, and that youll see contributing nicely back in the market. So.

Speaker Change #250: Net net.

Speaker Change #252: Between PHN health systems, I think the pricing impact was close to zero, but.

Speaker Change #252: In health systems, we got a positive impact and less so in personal health.

Abhijit Bhattacharya: And maybe just to follow up there, on the orders that you're getting there, how's the pricing on the orders? So far, still okay, but we will have to see how it goes in the coming quarters and see how competitive it is. But so far, we are still holding, and we are making good progress with our material price reduction. So that's helping, let's say, profitability looking forward. Great stuff.

Speaker Change #253: Okay. Thanks, and maybe just to follow up on the orders that you're getting that how the pricing on the orders.

Speaker Change #257: So far the steam okay.

Speaker Change #260: We will have to see how it goes in the coming quarters.

Speaker Change #258: Competitiveness, but so far we are still holding and we are making good progress with our material price reduction so that's helping lift through the profitability looking forward.

Speaker Change #254: Great stuff. Thank you.

Speaker Change #253: Okay.

Speaker Change #255: Thank you.

David James Adlington: Thank you. Thank you. Our next question comes from the line of Veronika Dubajova from CT. Please state your question, Veronika. Hey guys, good morning, and thank you for taking my questions. I have three, please, if I can.

Speaker Change #256: Our next question comes from the line of Veronica Dubai Joseph from Citi. Please state your question Veronica.

Veronika Dubajova: The first one is just to follow up, Abhijit, on your comment that you're expecting DNT growth for the foliage trend at the lower end of the three to five percent. Can you maybe just elaborate on what it is that's making you somewhat more cautious here about the second half, in the second half of the year? I guess we're, you know, four percent year to date, so I'm just curious what drives the slowdown in the back half of the year, especially given the easier comps.

Speaker Change #259: Hey, guys. Good morning, and thank you for taking my questions I have two please if I can.

Speaker Change #263: First one is just a follow up.

Speaker Change #261: A comment that you're expecting D&C cost portfolio to trend below around the 3% to 5% can you maybe just elaborate what it is that's making you somewhat more cautious here about the second half in the second half of the year I guess, we're at 4% year to date. So I'm just curious what drives the slow down in the back half of the year, especially given the easier comps.

Veronika Dubajova: That's my first question. My second question is just a follow-up on your margin guidance for the year. If I look at the first half of the year, you delivered 90 basis points of improvement. The comps in the back half get easier, so

Speaker Change #262: My first question My second question.

Speaker Change #264: <unk> is just a follow up on your margin guidance for the year, if I look at the first half of the year.

Speaker Change #264: Robert 90 basis points of improvement in comps in the back half get easier sale.

Veronika Dubajova: Yeah, I think Hassan asked the question about the conservatism and the guidance, but just, maybe we can iterate that there is nothing specific that worries you about the margin development in the second half of the year, that there are no specific headwinds you want to flag as to why the margin improvement in the back half should be at best similar to the first half or potentially worse. And then my final question is for you, Roy, on China.

Speaker Change #264: Yes, I think John asked a question about the San Francisco from the guidance, but just.

Speaker Change #265: Maybe we iterate that theres nothing specific that worries you about the margin development in the second half of the year.

Speaker Change #265: Kathryn do you want to flag.

Kathryn: The margin improvement in the back half should be up.

Kathryn: Similar to the first half or potentially worse.

Veronika Dubajova: Having just visited there this past week, it would be great to get an update on how you feel the behavior on the ground is. And I guess, as you think about your sales in China and your orders in China in the back half of the year, what are your expectations for each of those when it comes to returning to growth and the timing of that? Thank you guys so much. Hi Veronika, let me take the first couple of questions.

Speaker Change #267: And then my final question is for you on China.

Speaker Change #268: Yes, I think you said there this past week be great to get an update on it.

Speaker Change #269: How do you feel the behavior on the ground is and I guess as you think about your sales in China and your orders in China.

Speaker Change #270: Back half of the what are your expectations for each of you guys. When it comes to return to close and the timing of that thank you guys. Good luck.

Abhijit Bhattacharya: I think if you look at Q3, we had really dramatic growth last year. I think even in the mid-team, that makes the comparable stuff for the third quarter, which is why we expect to be at the lower end of the guidance. Now, we will see how China plays out and the speed at which the orders come in. So we will have to match both of those.

Speaker Change #271: Let me take the first couple of questions I think if you look at that.

Speaker Change #272: For Q3, we had really dramatic growth last year.

Speaker Change #272: Even in the mid teens that makes the comparable stuff for the third quarter.

Speaker Change #273: Which is why we expect to be at the lower end of the guidance that we will see also how China plays out and the speed at which the orders come in so we will have to.

Speaker Change #274: Both of those so for now that's how we're looking at our forecast for the rest of the year, Yeah, I think Rob answered. The question on full year margin rate. We have 90 bps up that's in line with our guidance. There is still a second half to go we're not going to change guidance every quarter. So for now we read.

Abhijit Bhattacharya: So for now, that's how we are looking at our forecast for the rest of the year. Yeah, I think Roy answered the question on full-year margin, right? We are 90 bps up, that's in line with our guidance. There's still a second half to go.

Roy Jakobs: We are not going to change guidance every quarter. So for now, we reiterate our confidence to be in the guided range, maybe the upper end, but we will not change guidance. So let me tell you, it was indeed good to be in China again. Staying close to the poles of the market is important at this stage. I spoke to customers, partners, and, of course, to our own team. Now, I think what you do see is that, on the one hand, there is still impact that is flowing through from the measures that have been taken.

Our confidence to be in the guided range, maybe at the upper end, but we will not change guidance at this stage.

Speaker Change #275: The third question on China. So let me. So indeed it was good to be in China again.

Speaker Change #276: Because staying close to the polls of the market is important.

Speaker Change #276: At this stage I spoke to customers partners and of course to our own team.

Speaker Change #276: Now I think what you do see is that on one hand.

Speaker Change #276: There is still impact that is flowing through.

Speaker Change #276: From the measures that have been taking I think we are not yet out of the woods, but we do see improvement coming into the activities and that's also something that.

Roy Jakobs: I think we are not yet out of the woods, but we do see improvement coming into the activities. And that's also something that I saw and discussed with customers. I saw it in the activity of the order funnel.

Speaker Change #276: So and discussed with customers I saw it in the activity of the order funnel.

Roy Jakobs: I saw it also in discussions with our own. Now, that's also what we expect to showcase in due course of the second half. Then, of course, normally, orders go ahead of sales.

Speaker Change #276: So it also in discussion with our own teams. That's also what we expect to showcase in due course of the second half.

Speaker Change #276: Then of course normally orders go head of sales.

Roy Jakobs: So that's a logic you would also expect in this recovery pattern. The exact timing is hard to gauge because we have seen it all in the last month and even over a year. It is not exact to pinpoint how it will evolve. But we said earlier this year that the second half will be better than the first half. We still expect that.

Speaker Change #276: Thats a logic you would also expect in this recovery pattern.

Speaker Change #276: The exact timing is hard to gouge, because yes, we have seen at all in the last months and even over a year that is not exact to pinpoint one.

Speaker Change #276: How it will how it will evolve reset.

Speaker Change #277: We set early this year that kind of second half will be better than the first half. We still expect that we also have seen sequential improvement in Q2, and we actually expect that to accelerate into the second half. So I think that is.

Roy Jakobs: We also have seen sequential improvement in Q2, and we actually expect that to accelerate into the second half. So I think that is what I have to say to China. And then, next to the fact that fundamentally, this is a very strong market and holds, of course, a lot of patience to be taken care of for the future as well. Thanks for it. Can I just follow up any thoughts at this stage that you have about the stimulus and how meaningful that could be? I appreciate you don't have a sense of timing yet.

Speaker Change #277: What I have to say to China, and then actually the fact that fundamentally this is a very strong market and.

Speaker Change #277: Of course, a lot of patients to be taken care of for the future as well.

Speaker Change #278: We have been adjusting our local for local footprint innovations so that when the demand comes we are ready to capture it now and then.

Speaker Change #279: It's waiting about executive element of it.

Veronika Dubajova: But just conceptually, as you look at China over the next 123 years, do you think the stimulus could be meaningful in terms of driving order and sales growth in China or not? No, I've said before, I look at it, and I see it as a kind of bonus program that the Chinese government has put in place. I think the Chinese market has fundamental underlying growth that we should count on. And then this will be on top of so that this will accelerate to a certain extent, for sure, because there's extra money that will flow into the market that actually probably will kind of speed up some of the replacements in the market go faster than they would normally do. And we also expect that that will contribute, and we will benefit from it. But A, the Chinese government did not give specific amounts that they will ultimately release. B, we don't know the exact timing.

Speaker Change #279: Thanks, Greg can I just follow up any thoughts at this stage that you have that the stimulus and how meaningful that could be I. Appreciate you don't have a sense of timing yet.

Speaker Change #280: It's actually as you know over the next one to three years do you think the stimulus could be meaningful in terms of driving order and sales growth with China or not.

Roy Jakobs: And therefore, it's kind of, I would say too early to kind of really put numbers on top of it. And that kind will come forward. And for me, this is part of the overall recovery and improvement trajectory that will come, where I expect more of just underlying structural demand to drive the improvement and the stimulus, but the stimulus will be part of it. Thank you, guys. Thank you. Our next question comes from the line of Hugo Solvet from BNP Paribas Exein. Please go ahead, Hugo. Hi, guys, thanks for taking my questions and congrats on the print. I have three, please.

Speaker Change #281: I've said before.

Speaker Change #282: Look at it I see it as a kind of bonus program that the China government has put in place I think the China market has fundamental underlying growth that we should count on and then this will be on top off so that this will accelerate to a certain extent for sure right because there's extra money that will flow into the market that actually probably will garner.

Speaker Change #282: Some of the replacement in the market to go faster than they would normally do.

Speaker Change #282: We also expect that that will contribute and we will benefit from it but eight the China government did not give specific amounts.

They ultimately will release B, we don't know exact timing and therefore, it's kind of I would say too early to kind of really numbers on top of it.

Speaker Change #282: Carnival come forward and for me. This is part of the overall recovery and improvement trajectory that that will come where I expect more of just underlying structural demand.

Speaker Change #282: To drive the improvement than the stimulus, but the stimulus will be part of it.

Speaker Change #283: Understood. Thank you guys.

Speaker Change #284: Thank you.

Speaker Change #284: Our next question comes from the line of Hugo <unk> from BNP Paribas Exane. Please go ahead Hugo.

Hugo Silva: Hi, guys. Thanks for taking my questions and congrats on the print.

Speaker Change #285: Three please the first communication on China.

Hugo Solvet: First, clarification on China, Roy, if you can. Do you see a risk that customers or acceleration of the recovery will be pulled off in H2 as they will be waiting for the stimulus? Second, on connected care and sleep and respiratory care, sorry. Can you quantify for us the margin step up in that business? You're on your own, but also, are you seeing a sequential margin improvement? Even I think that you are already breaking into one.

Hugo Silva: Can you see a risk that customers.

Speaker Change #286: While the acceleration of the recovery be.

Speaker Change #286: Although in H two.

Speaker Change #287: We'll be waiting for these communities.

Speaker Change #287: So going into on.

Speaker Change #287: Connected care.

Speaker Change #288: You can restart the weekend. So can you quantify for us the margins.

Speaker Change #288: In that business.

Speaker Change #289: Year on year, but also are you seeing the sequential margin improvement, even I think thats, where were you breakeven in Q1.

Hugo Solvet: And lastly, on pH. So obviously, DNC strong, clinical care is gaining momentum, and the settlement is not behind.

Speaker Change #289: And lastly on th. So obviously <unk> strong 20 acute care is gaining momentum the settlement behind just want to get a feel of your level of commitment.

Hugo Solvet: Just want to get a feel for your level of commitment to the personal health business. Thank you. All right, thank you Hugo. Also, great questions. Let me start with the first one on China.

Speaker Change #290: Thank you.

Roy Jakobs: So I don't actually expect that Chinese customers will hold back a replacement order because they're waiting for stimulus. As I said, there are two parts of demand. The most important is the underlying demand for replacement of the installed base or even for new investment.

Speaker Change #291: Alright, Thank you Hugo.

Speaker Change #292: So great questions, let me start with the first one on <unk>.

China, So I don't actually.

Speaker Change #293: Expect that to China customers will hold back of placing orders because they are waiting for stimulus as I said there are two parts of demand. The most important is the underlying <unk>.

Demand for replacement of installed base or even for new investments.

Roy Jakobs: There's also some pent-up demand from the period when order lead times were under pressure. So I expect that will drive the improvement itself. Then, at stimulus, they will have to wait until that becomes clear.

Speaker Change #293: There is also some pent up demand from the period, that's kind of the order lead times were under pressure. So I expect that will drive the improvement itself then at stimulus. They will have to wait until that becomes clear. So that is the weighting, but that's more on top of it.

Roy Jakobs: So that is the waiting, but that's more on top of it. That's also where I said kind of it's hard to gauge when it exactly will come to market, but I don't think this will hold up at the full improvement in China in the second half that we projected. Then on Connected Care, indeed, we are happy to see, as we see, regaining momentum, although it started, of course, with sales momentum outside of

Speaker Change #293: That's also where I said kind of its hard to judge when that exactly will come to market, but I don't think this will hold up at full improvement of China in the second half that we project.

Speaker Change #294: And then on connected care and.

Speaker Change #295: Indeed, we are happy to see as receipt regaining momentum started of course with our sales momentum outside of the US Then also of course for the remaining part of the business that we have in the U S. We also see actually good momentum and we have been right sizing the business based upon the clarity that we got so we took also then the productivity measures now.

Roy Jakobs: Then also, of course, for the remaining part of the business that we have in the US, we also see good momentum. And we have been right-sizing the business based upon the clarity that we got. So we took also the productivity measures. Now, that brought Sleep and Respiratory Care back into the positive. We already mentioned that in the first quarter.

Speaker Change #295: That brought sleep and respiratory care back into the positive we already mentioned that in the first quarter and we actually see that contribution is strengthening now I'm not going to call on exactly how that looks like because we don't do that for any business, but I can confirm that we have seen further strengthening of the profitability profile also in the second.

Roy Jakobs: And we actually see that contribution strengthening. Now, I'm not going to call out exactly how that looks, because we don't do that for any business. But I can confirm that we have seen further strengthening of the profitability profile also in the second quarter. And that's actually what we will continue to build on in the third and fourth quarters, as some of these further measures that we have been taking will come into effect.

Speaker Change #295: Warner and Thats actually what we will continue to build on in the third and fourth quarter is also some of these footer.

Speaker Change #295: Measures that we have been taking will come into effect and then a third one on <unk>.

Roy Jakobs: And then, on pH. I think we are very excited about our pH portfolio, as we mentioned before. We have some exciting innovation launches that are coming out. You saw the strong profitability step up. So this business is also still very attractive from a profile of cash contribution and profitability. We are also a good owner because we have market-leading positions. We are number one and two in all the segments that we play in, whether it's oral care, personal care, or MCC.

Speaker Change #295: I think we are very excited about our portfolio as we mentioned before we have some exciting innovation launches that are coming out you sort of strong profitability step up.

Speaker Change #296: So it is business is also still very attractive from a profile of cash contribution and profitability contribution. We are also the good owner because we have market leading positions. We are number one or two in all the segments that we play whether it's in oral care whether it's in.

Speaker Change #296: Personal care, whereas in MCC.

Roy Jakobs: And we see also that over time, care will move more to the home. So actually having a strategic position in the home, being active there ourselves, does also give us, currently, already a differentiating position in the healthcare market. Because customers that are looking, hospital systems that are looking how to better serve in an ambulatory setting or in a home setting, also value our insights and also value our brand, even in terms of what it does.

Speaker Change #296: And we see also over time that care will move more to the home so actually having a strategic position in the home being actively ourselves just also give us currently already and differentiating position in the health care market because customers that are looking hospital systems that are looking how to better serve in an ambulatory setting or in a home setting also value.

Speaker Change #296: Our insights also value our brand even in terms of what it does.

Roy Jakobs: So full commitment, I'm excited about that part of the portfolio as much as about the rest and also seeing kind of a good future. Thank you very much. Thank you. Our next question comes from the line of Julien Ouaddour from Bank of America. Please go ahead, Julien. Thank you very much. And good morning, everyone.

Speaker Change #296: So full commitment.

Speaker Change #296: And about that part of the portfolio as much as about the rest and also seeing kind of a good future for it.

Speaker Change #299: Thank you very much.

Speaker Change #297: Thank you.

Speaker Change #297: Our next question comes from the line of Julian <unk> from Bank of America. Please go ahead Julien.

Julien Ouaddour: So in your prepared remarks, you mentioned growth in IGT and precision diagnosis. But I mean, what about ultrasound this quarter? And I think we've seen data from China, which suggests that you lost an important market share in ultrasound for the country during the first six months of the year. So any particular reason for that?

Julian: Thank you very much and good morning, everyone.

Julian: The first one in <unk>. So in your prepared remarks, you mentioned growth in IGT presume diagnosis.

Speaker Change #298: Addressed some this quarter.

Speaker Change #300: And I think we've seen data from China, which suggests that you I mean, you launched important market share in <unk> for the country. During the first six months of the year so any.

Speaker Change #301: Particular reason for that.

Speaker Change #301: The second question on mid cycle and risk pruning. So we've also seen some European class action for risks.

Julien Ouaddour: The second question is on respironics. So we've, we've also seen some, like European class actions for respironics emerging this summer. Could you maybe just update us on the situation? And like, like, let us know what the potential outcomes are in your view?

Speaker Change #302: Emerging dissimilar could you maybe just update us on the situation.

Speaker Change #303: And I can let us know what's the potential outcomes are in your view.

Speaker Change #304: Any increase in terms of provisions for the litigation going Thank you.

Abhijit Bhattacharya: Any, let's say, increase in terms of provisions, like for the litigation going on? Thank you. Hi Julien, let me clarify on ultrasound. You know, we had tremendous growth last year in the first half of the year; it was above 30% growth. So based on that, basically, we don't have growth in the first half of this year because we are getting out of the whole supply chain situation. So if your question was on ultrasound, that I think that tells you I, so therefore, I don't know, where you have this information on market share loss, but I think Roy also told you about our new product launches, which we are excited about. So we expect to continue to strengthen in that age Your second question? Let me take that one.

Speaker Change #304: Hi, Julian let me clarify on.

Speaker Change #305: Ultrasound, we had tremendous growth last year in the first half of the year. It was above 30% growth so based on that.

Speaker Change #305: Basically we are.

Speaker Change #306: We don't have growth in the first half of this year, because we were getting out of their own.

Speaker Change #306: Supply chain situation.

Speaker Change #306: If your question was on ultrasound I think Thats fair.

Speaker Change #307: As do I.

Speaker Change #307: So therefore, I don't know where you have this information on market share loss, but I think probably also has told you about our new product launches, which we are excited about so we expect to continue to strengthen.

Speaker Change #308: That area.

Speaker Change #309: Your second question I'll, let me take that one I think on the SFC. So indeed.

Abhijit Bhattacharya: I think on the SOC. So indeed, last time we were very happy to kind of announce that we got the North American settlement with finality. We also mentioned at that time that there are cases ongoing outside of the United States. You saw the European class action recently kind of announced. Actually, we have so far very limited information. I've not been served with a complaint.

Speaker Change #309: Last time, we were very happy to kind of announce that we got.

North American sentiments with finality.

Speaker Change #309: We also mentioned at that time that there are cases ongoing outside of United States.

Speaker Change #309: You saw the European class action recently announced actually we have so far very limited information has not been served with the complaint.

Speaker Change #309:

Roy Jakobs: We expect it will be in the same vein as what was kind of put forward in the US. There's nothing currently that we can say about it to the extent that we will defend ourselves in this. [inaudible] If, then the consequences would be of a different scale than to be expected in non-American countries.

Speaker Change #309: We expect it will be in the same vein as what <unk> put forward in the U S.

Speaker Change #309: There's nothing currently that we can say about it next time that we will defend ourselves in this.

Speaker Change #309: We will build on the testing that we have also.

Speaker Change #309: Used in the North America case, and therefore, we will address it in a rigorous manner with the best team on it.

Speaker Change #309: But there's nothing currently.

Speaker Change #309: Two we set about it thats also why ethanol seen any kind of implications of it is very early days and it's one of the cases that we will take four to as part of dealing with the.

Speaker Change #309: The cases outside of outside of the U S may be lost.

Speaker Change #310: Comment of course is in a very different legal system than in the U S.

Speaker Change #310: Also in terms of.

Speaker Change #310: Even if then actually consequence would be a different scale than we expected in the North American case, but as I said, it's even too early to go there because we don't even know if there is anything of meeting.

Roy Jakobs: But as I said, it's even too early to go there because we don't even know if there's any... Perfect, perfect. Thanks. Thanks a lot. And a very quick follow up in the auto intake.

Julien Ouaddour: Could you maybe give us a bit more color about the breakdown by modality for this quarter? No, actually, that's, Julien, we would love to and we used to, but our competitors don't, and therefore, for us to now give that makes it a bit too sensitive for us. But overall, I think Roy mentioned that outside of China, we've done well, with particular strength in North America. Perfect.

Speaker Change #311: Perfect perfect. Thanks.

Speaker Change #312: Thanks for that.

Speaker Change #313: Quick follow up.

Speaker Change #314: Order intake could you maybe give us a bit more color about the breakdown.

Speaker Change #315: By modality for this quarter.

Julien: So actually that Julien.

Julien: Julien, we would love to and we used to but.

Speaker Change #317: Competitors don't and therefore for us to know give that makes it a bit too sensitive for us to give.

But overall I think as I mentioned that outside of China, We've done well with particular strength in North America.

Speaker Change #318: Perfect. Thank you very much.

Speaker Change #319: Thank you.

Robert John Davies: Thank you very much. Thank you. Our next question comes from the line of Robert Davies from Morgan Stanley. Please ask your question, Robert. Yes, morning. Thanks for taking my questions. I had a couple.

Our next question comes from the line of Robert Davies from Morgan Stanley. Please ask your question Robert.

Robert John Davies: One was just on the competitive environment in D&T, whether you're seeing any changes there. You mentioned, I think, in your earlier comments about progress in North America. I know you didn't want to sort of call out specific modalities, but just if you could give us a little bit more color in terms of areas of relative strength and weakness in the quarter where you're making particular progress with clients, that would be helpful. And then the other one was just around the free cash flow guide, given where we are year to date.

Yes. Good morning, Thanks for taking my questions I had a couple.

Robert John Davies: One was just on the competitive environment and DMT, whether youre seeing any changes that you've mentioned I think in your earlier comments about progress in North America. I know you didn't want to sort of correlate specific modalities, but just if you could give us a little bit more color in terms of areas of relative strength and weakness in the quarter, where you're making particular progress with them.

Speaker Change #320: With clients that would be helpful. And then the other one was just around the free cash flow guide given where we are year to date.

Roy Jakobs: What sort of underpins your confidence in getting into that 900 to 1.1 billion range over the full year? Thank you. So thank you, Robert. Let me take the first one.

Speaker Change #321: Sort of underpins your confidence of getting into that 900 to $1 1 billion range for the full year. Thank you.

Speaker Change #322: So thank you Robert let me take the first one.

Roy Jakobs: Competitive environment in D&T. I think what you have heard us say, and actually you also see it in some of the deals we closed, is that you see, and that's why we're excited about the contribution, that actually all businesses are contributing in order to growth and also kind of how we position in the market. And you saw that also back then, ultimately, converted into sales. The North American market has particular dynamics in terms of certain strongholds that we hold in monitoring and in, kind of, IGT and ultrasound, that's known.

Speaker Change #323: Private and DMT.

Speaker Change #323: Sure.

Speaker Change #324: You have heard us say and actually you also see it in some of the deals. We close is actually that you see and that's why we're excited about the contribution that actually all businesses are contributing.

Speaker Change #324:

Speaker Change #324: Or kind of.

Speaker Change #324: Growth and also kind of how we position in the market and you saw that also back of course, then ultimately converted into sales.

Speaker Change #324: The North American market.

Speaker Change #324: It has particular dynamics in terms of certain stronghold that we hold in monitoring and.

Speaker Change #324: <unk>.

Speaker Change #324: IGT and ultrasound, so thats known and so of course, there based upon the strength that we have we take on average more from the market. We are also kind of bouncing back and imaging based upon the lead times improvement that you have seen the launches that we're doing and we also have been working on our team. So that's something that's gone up.

Roy Jakobs: So, of course, there, based on the strength that we have, we take, on average, more from the market. We are also, kind of, bouncing back in imaging based on the lead times improvement that you have seen, and the launches that we are doing. We also have been working on our team. So that's something that, kind of, we are also excited about, on top of the enterprise informatics side, is something that really resonates very well in the North American market and also supports our D&T portfolio, because you see, of course, that Pax is, that's on top of imaging. Digital pathology goes in the same vein. You see that, kind of, some of the solutions that we're now deploying in ultrasound are very AI-driven.

Speaker Change #324: We are also excited about on top of the enterprise Informatics side is something that really resonates very well in the North American market and also supports our D&C portfolio because you see of course the tax that's on top of imaging you would see that digital pathology.

Speaker Change #324: It goes in the same vein you see that kind of some of the solutions that we're now deploying in ultrasound a very AI driven so actually that interplay between software AI Informatics and then also the <unk> portfolio is something that differentiates us in the market.

Abhijit Bhattacharya: So, actually, that interplay between software, AI, informatics, and then also the D&T portfolio is something that differentiates us in the market and, therefore, helps us to be productive in North America. Yeah, on the free cash flow, if you look, we had this payout for the economic loss settlement, which actually makes the numbers a bit skewed because the insurance money will come in the second half, but the payment happened in the first half.

Speaker Change #324: And therefore helps us too.

Speaker Change #324: And to be productive in North America.

Speaker Change #324: Yes.

Speaker Change #325: Cash flow if you look at this.

Speaker Change #326: The payout for the economic loss settlement, which actually makes the numbers a bit skewed because the insurance money will come in the second half the payment has happened in the first half.

Abhijit Bhattacharya: If you just normalize for that, our cash flow for the first half of this year is maybe $150 million behind last year, so it's not hugely behind, and last year we delivered a cash flow of 1.6 billion; this year we are planning 0.9 to 1.1, and you know Q4 is a big cash flow quarter for us, so confidence is actually very high with the improved earnings and working capital management that we will get to our guidance on free cash. Very clear. Maybe just one quick follow-up on personal health.

Normalized for that.

Speaker Change #325: Cash flow for the first half of this year is.

Speaker Change #325: Maybe $150 million behind last year, so it's not a.

Hugely behind them last year, we delivered a cash flow of $1 six.

Speaker Change #325: $6 billion. This year, we are planning <unk> nine to $1. One and you know Q4 is a big cash flow quarter for us. So confidence is actually very high with the improved earnings and working capital management that we will get to a.

Speaker Change #325: Guidance on free cash flow.

Robert John Davies: I know you called out the weakness in China, but maybe you could provide a little more color on what you're seeing in the North American market for personal health. Thank you. Yeah, I think North America overall, we seem to be gaining share now. Consumer confidence is not buoyant, but it still remains solid.

Speaker Change #327: Very clear maybe just one quick follow up around personal health I know you called out the weakness in China, but maybe could you just provide a little more color on what youre seeing in the North American market in personal health. Thank you.

Yes, I think North America overall.

Speaker Change #328: We seem to be gaining share now the consumer confidence is not buoyant, but it still remains solid as we have said.

Speaker Change #329: We have been gaining share.

Speaker Change #328: Sell out has been good.

Speaker Change #328: Given the current market situation and then based on the product launches that we're planning in the second half of the year, we expect to have reasonable growth in North America.

Speaker Change #330: That's great. Thank you both.

Speaker Change #328: Yeah.

Abhijit Bhattacharya: As we have said, we have been gaining share. The sellout has been good, given the current market situation. And then, based on the product launches that we are planning in the second half of the year, we expect to have reasonable growth in North America. Great, thank you both. Thank you. Our next question comes from a line from Sezgi Ozener from HSBC. Please state your question.

Thank you.

Speaker Change #331: Next question comes from the line of SaaS key Athena from HSBC. Please state your question.

Sezgi Ozener: Thanks for taking my questions. On the legal front, do you have any update on the DOJ case and on the rest of the European cases and elsewhere? Can you give a highlight of what we might be looking into in terms of timelines and sizes? Second question, on the connected care segment, what does the portfolio look like post all the pruning on respiratory care and ventilation segments? Do you expect to be present again on a considerable scale on ventilators and respiratory care?

Speaker Change #332: Hi, Thanks.

Speaker Change #333: Thanks for taking my questions and I will have two please first available.

Speaker Change #332: On.

Speaker Change #334: On the legal front.

Speaker Change #335: Have any update on the Doj case and on the rest of your peak cases and elsewhere can you give a highlight of what we might be looking into in terms of timelines and sizes.

Speaker Change #335: Second question on the connected care segment, what does the portfolio look like post all the pruning.

Speaker Change #335: Take care and <unk> segments.

Speaker Change #335: Bank.

Speaker Change #335: To be.

Speaker Change #335: Present again on a comfortable scale on mid to late <unk> and respiratory care.

Speaker Change #335: And the last one is on reimbursement front do you see any changes in your <unk>.

Speaker Change #335: Mark.

Mark: Do you.

Mark: See more.

Speaker Change #336: Inclusion in reimbursements.

Speaker Change #337: And that is affecting our margins I mean deteriorate from some periods that usually on this phone <unk> margins tend to be much stronger than compared to one product.

Speaker Change #337: Included in the Pbms pay.

Speaker Change #338: <unk> scheme, so Dx do you see any changing dynamics from that front.

Speaker Change #337: Thanks.

Sezgi Ozener: And the last one is on the reimbursement front. Do you see any changes in your DME market and outlook? Do you see more inclusion in reimbursements in connected care that is affecting your margins? I mean, we've heard from some peers that usually on the front DME margins. [inaudible] Thank you, Sezgi. Let me start off with the first question on the legal cases.

Speaker Change #339: Thank you <unk>, let me start off with the first question on the legal cases, so on the Doj.

Roy Jakobs: So on the DOJ. There's no further update. Otherwise, indeed, you would have heard we have been further collaborating with the DOJ. But there's no position on that to be shared. There's also no news from the investigation.

Speaker Change #340: There is no further updates otherwise you would have heard we have been collaborating with the Doj.

But theres no position on debt to be sure No news also from the investigation is ongoing.

Roy Jakobs: It's ongoing, And we worked collaboratively with the DOJ. Similar for the rest of the EU cases, actually, we are in the various cases in the dialogues that need to happen, but there's no insight into the outcome nor in the need for any provision or EU support on impact. So, in that sense, there's no news on the front of litigation beyond what we have also disclosed in the half-year report. So, that's the first. Then on the second, in connected care, yes, we have been pruning. But actually, you also see that the remaining part of the portfolio is working.

Speaker Change #340: And we work collaboratively with the Doj on its similar for the rest of the EU cases actually.

Speaker Change #340: And in.

Speaker Change #340: The various cases in the dialogues that need to happen, but theres no inside an outcome nor in the need for kind of any provision or kind of even any preclusion on impact. So in that sense. There is no news on the.

On the front of litigation beyond what we have also disclosed in of your report.

So that's the first and second in connected care.

Speaker Change #341: Yes, we have been pruning actually you also see that the remaining portfolio is working we see the growth returning we see profitability returning.

Roy Jakobs: We see growth returning, and we see profitability returning. Yes, as a result of pruning, there will be a less broad portfolio, but we are still relevant. We have the core products that have been kind of the biggest volume drivers for sleep and respiratory care, both in sleep as well as in respiratory, and we keep active on both sides, so that's something that remains part of the plan. It's also what we get back from our customers who really like our innovations, also kind of with the care orchestrator that combines both and serves both. Not only the devices but also the software and then the third one, reimbursement DME.

Speaker Change #342: Yes, as a result of pruning there will be a less broad portfolio.

But we still are relevant we have to core products.

Speaker Change #342: Have been the biggest volume drivers for us leading respiratory care, both in sleep as well as respiratory and we keep active in both sides. So that's something that that remains part of the plan.

It's also what we get back from our customers that really LIBOR innovations also garner, particularly orchestrated it combines both and serves both so it's not only the devices, but also the software.

Speaker Change #343: And then the third one reimbursement D me.

Roy Jakobs: To our knowledge, there's been no specific change or strengthening of that. What we have seen is that. I'd like to report on, I think, gaining momentum and that's what we're seeing and that's what we are very excited about and that's especially in terms of outside the US and sales and across the portfolio with profitability. Thanks. And maybe, as a quick follow-up, post the pruning and post the non-US expansion in sleep care, where should we consider the contribution to connected care from sleep and respiratory care? Is it closer to the 20% range we've seen in 2023, or is it closer to almost... [inaudible] I see, so. Just under the 20% range, it seems.

To our knowledge there is no specific change a strengthening of that than what we have seen is that actually the.

Speaker Change #343: Demand is out there the patients.

Speaker Change #343: Gone up that are unaddressed are out there they're coming into it. They are also reimbursed.

Speaker Change #343: That's something that's a driver.

Speaker Change #343: The respiratory and sweet market as it has been doing it before so we have not seen any specific order.

Speaker Change #343: Changing dynamics that we would.

Speaker Change #344: Like to report on I think Src is regaining momentum and Thats, what were seeing and Thats. What we are very excited about and that's especially in terms of outside U S sales and across the portfolio with profitability contribution.

Speaker Change #345: Thanks, and maybe as a quick follow up.

Speaker Change #346: Post the pruning and posed to ex U S expansion in sleep care, where.

Speaker Change #347: Where should we consider it.

Speaker Change #348: <unk> connected care from sleep and respiratory care is it closer to the 20% range with seen in 'twenty three or.

Speaker Change #349: Is it closer to almost.

Speaker Change #350: It used to be half of the connected care sales thats, probably towards the target, but where should we see it.

Speaker Change #351: So yes, I think what we've said before this seems to be a $3 billion business. We have resized it now to a billion euro business.

Speaker Change #351: That's the sizes are taken then let's say from there from next year onwards, you will start seeing growth in the connected care guidance range of 3% to 5% I think that's how you should model it.

Speaker Change #352: Oh I see so.

Speaker Change #353: Just under the 20% range. It seems okay. Thank you very much.

Speaker Change #353: Thank you.

Falko Friedrichs: Okay, thank you very much. Thank you. Our next question comes from Alina Falko Friedrichs from Deutsche Bank. Please state your question.

Speaker Change #354: Our next question comes from the line of Falko Friedrichs from Deutsche Bank. Please state your question.

Falko Friedrichs: Thank you and good morning. My first question is on your good 9% order intake growth in Q2. Is there any reason that this growth number should be lower in Q3 and Q4, considering the improvements in North America and then also potentially in China? Maybe you could briefly remind us of the columns as well for orders in the second half.

Falko Friedrichs: Thank you and good morning.

Falko Friedrichs: My first question is on your good 9% order intake growth in Q2.

Falko Friedrichs: Is there any reason that does this.

Speaker Change #355: This growth number should be lower in Q3 and Q4, considering the improvements in North America, and then also potentially in China, maybe you could briefly remind us of the answer as well for the orders in the second half and then my second question and piecing together your comments on China stimulus did I sort of.

Speaker Change #356: And it's correct that you should start to see a positive impact in orders in the second half.

Speaker Change #358: And then a positive impact and say, it's probably not before 2025.

Speaker Change #357: Thank you.

Roy Jakobs: And then my second question, piecing together your comments on China's stimulus, did I sort of understand it correctly that you should start to see a positive impact on orders in the second half and then a positive impact on sales, probably not before 2025? Thank you. Okay, let me take the first one on order intake.

Speaker Change #359: Yeah, Let me take the first one on.

Speaker Change #360: Order intake.

Roy Jakobs: So, as I mentioned in my opening remarks, right, don't extrapolate the 9% because order intake has been extremely lumpy, that will not make a big difference. I think the strength in North America will continue, the strength in international markets will continue, and then the only unknown piece in the puzzle is how China recovers. Look at the order intake for the. The next question was... Yeah, again, very difficult to say whether it will contribute a bit So, yes, the bigger contribution will be in 2025. The speed at which we get the orders will depend on how much everyone contributes this year. But that's something we still have to watch in the coming years.

Speaker Change #360: So.

Speaker Change #361: As I mentioned and also in my opening remarks, right don't extrapolate the 9% because order intake has been extremely lumpy. Therefore, we are at 3% for the first half year.

Speaker Change #361: We expect to have growth in the second half.

We don't know the exact amount because it also depends on how the whole recover.

Speaker Change #361: Recovery in China happens, but.

Speaker Change #361: So I think Thats, how you should look at not extrapolate the 9% comps of last year will also similarly negative for the second half of the first half so that will make a big difference I think the strength in North America will continue the strength in international markets will continue and then the only other.

Speaker Change #361: One piece in the puzzle is how China recovers.

Look at the order intake for the second half.

Speaker Change #362: The next question was.

Uh huh.

Speaker Change #363: Yeah, again, very difficult to say, whether it will contribute a bit but it is not likely to be a major in the second half. So yes, the bigger contribution would be 'twenty 'twenty five the speed at which we get the orders will depend on how much contributes to this year, but that's something we still have to work in the coming months.

Speaker Change #364: Okay. Thank you. Thank you.

Speaker Change #364: Thank you.

Falko Friedrichs: Okay, thank you. Thank you. The last question comes from the line of Ed Wrigley-Day from Redburn, please go ahead. Hi, good morning. Thank you. I have to follow up first with an ultrasound.

The last question comes from the line of <unk> from Redburn. Please go ahead.

<unk>: Hi, Good morning. Thank you just a follow up firstly on ultrasound.

Edward Nicholas Ridley: Thank you for your earlier comments. But can you give us a little bit more color about the growth ex-China in that business? That would be helpful. And also, in image guided therapy, can we construe double-digit growth in that business from terms of revenue growth for IGT? Or if you can provide any further color on that business as well, I'd be grateful.

Speaker Change #365: Thank you.

Speaker Change #366: But can you give us a little bit more.

Speaker Change #367: Caller about the.

Speaker Change #368: Growth ex China in that business.

Speaker Change #368: Would be helpful and also in image guided therapy.

Speaker Change #369: Can be construe double digit growth in that business from in terms of the revenue growth.

Speaker Change #368: IGT.

Speaker Change #368: <unk>.

Speaker Change #370: If you could provide any further color on that business as well I'd be grateful.

Edward Nicholas Ridley: Yeah, I need to check my numbers on ultrasound growth, excluding China. But again, like I mentioned, for the first half of last year, we had 30% plus growth. So I don't expect us to have any significant growth outside of China; it will also be a decline outside of China because last year, we were getting past the whole supply chain. So actually, we had massive supplies in the first half of last year. Regarding IGT, we are seeing a slow recovery. This quarter was good, but I don't think this year, as being in the double-digit territory, it will probably be lower than that.

Speaker Change #371: Yes, I need to check.

Speaker Change #371: Check my numbers on the ultrasound growth.

Speaker Change #372: Excluding China, but again like I mentioned for the first half of last year, we had 30% plus growth. So I don't expect us to have any significant growth outside of China. It will also be a decline outside of China, because last year, we were getting past the whole supply chain issue. So actually that we had massive support.

Speaker Change #372: In the first half of last year.

Speaker Change #372: Regarding.

Speaker Change #372: Key.

Speaker Change #372: We are seeing a slow recovery this quarter was good.

Speaker Change #372: But I don't see this year as being in the double digits.

Speaker Change #372: <unk> will probably be lower than that.

Abhijit Bhattacharya: But that's included, let's say, in our overall guidance for D&D. Okay, no, fair enough. Thank you very much. Okay, thank you. Thank you. Gentlemen, that was the last question. Please continue. On the road show later this week for those who I will meet and later in the year at our show and tell event.

Speaker Change #372: But that's included let's say in our overall guidance for DMD.

Okay fair enough. Thank you very much okay. Thank you.

Speaker Change #372: Thank you.

Speaker Change #374: Gentlemen, there was the last question. Please continue.

Speaker Change #373: Yes, maybe.

First of all let me thank everybody for joining the call. So is this going to be my last analyst call in last quarter. After 50 quarters of doing this borders.

Speaker Change #373: As the CFO just wanted to say a big thank you to all of you for.

Speaker Change #373: Putting up with me.

Speaker Change #373: Yes.

Speaker Change #373: We've had some difficult times, but a lot of very good times and I look forward to that and look forward to seeing you.

Roy Jakobs: But since there will be a lot on this call who I will probably not probably meet in my current capacity, a big thank you. And again, thank you for joining the call. Thank you, Abhijit. And indeed, thanks for all the contribution. As I said before, memorable times. So I'm happy to see you also kind of transitioning well.

Speaker Change #373: On the road show later this week for those who I will meet later in the year in a short term event, but since there will be a lot on this call who I will not probably media in my current capacity a big Thank you and again, thank you for joining the call.

Bridget: Thank you Bridget.

Speaker Change #375: Thanks for all the contribution as I said before memorable times so.

Speaker Change #376: Happy to see you also kind of positioning well let.

Roy Jakobs: Let me close this call by repeating what I think is the key message of today. Firstly, we deliver strong orders and margin improvement, a solid operational cash flow, and comparable sales growth in line with our plan. And that within a challenging macroeconomic environment. This was the result of progress on our execution and our industry-leading innovations, which we keep focusing on. And supported by our key innovation launches and our ongoing actions, we are therefore confident in our plan. And we also iterate the outlook for the full year 2024. I would like to thank you for joining the call, and I wish you a great summer. Thank you so much.

Speaker Change #376: Let me close out this call by repeating I think the key message of today.

Speaker Change #377: Firstly, we deliver strong orders and margin improvement and solid operational cash flow and comparable sales growth in line with our plan and that would in a challenging macroeconomic environment.

Speaker Change #377: This was the result of progress on our execution and our industry, leading innovations, which we keep focusing on.

Speaker Change #377: And supported by our key innovation launches and our ongoing actions, we therefore confident in our plan.

Speaker Change #377: And also reiterate the outlook for the full year 2024.

Speaker Change #378: I would like to.

Speaker Change #380: Thank you for joining the call.

Speaker Change #379: And I wish you a great summer. Thank you so much.