Hello, and welcome to the Signify Third Quarter Results 2022. Throughout the call, all participants will be in listen-only mode, and afterwards there will be a question- and- answer session. Please note this is limited to one question plus one follow-up. Today, I am pleased to present Eric Rondolat, CEO, Javier van Engelen, CFO, and Thelke Gerdes, Head of IR. Please go ahead with your meeting. Good morning, everyone, and welcome to Signify's Earnings Call for the Third Quarter of 2022. With me today are Eric Rondolat, CEO of Signify, and Javier van Engelen, CFO. During this call, Eric will first take you through the business and operational performance, after which Javier will review the company's financial performance in the third quarter. Eric will then discuss the outlook. After that, we'll be happy to take your questions. Our press release and presentation were published at 7:00 A.M. this morning. Both documents are available for download from our Investor Relations website. The transcript of this conference call will be made available as soon as possible. With that, I will hand over to you, Eric. Thank you, Thelke. Good morning, everyone, and thank you for joining us today. Let's start with some of the highlights for the third quarter on slide four. We delivered a 4.3% comparable sales growth in an environment that is getting increasingly volatile. The sustained performance of our professional business continued to compensate a lower consumer demand and the slowdown in China. We managed to improve profitability compared to the second quarter, although pressures from currency movements and higher energy costs affected our P&L. The Adjusted EBITA came in at 10.4% as an adverse FX impact was partly offset by operating leverage and strengthened cost discipline. Net income increased to EUR 112 million. As expected, our free cash flow generation strengthened, driven by improved profitability and the stabilization of our working capital. On the next slide five, we see Signify's overall Q3 performance. We increased the number of connected light points from 103 million in Q2 to 109 million at the end of Q3. LED-based sales represented 83% of our total revenues. Nominal sales increased by 16.3% with comparable sales up by 4.3%. Adjusted EBITA increased to EUR 199 million in Q3 2022 compared to EUR 182 million last year. The Adjusted EBITA margin decreased by 70 basis points to 10.4%, mainly due to a strong negative currency effect of 220 basis points. This was the result both from the weakening of the euro versus the U.S. dollar and the Chinese yuan and a temporary headwind from FX hedging. Javier will talk more to this later, but excluding the temporary adverse hedging effect, the Adjusted EBITA margin was stable versus Q3 2021. Again, this quarter price increases more than offset higher input costs. Net income increased from EUR 94 million to EUR 112 million. Finally, free cash flow increased by EUR 50 million to EUR 135 million. Now, let's move to Digital Solutions on slide six. Top line performance remained strong with comparable sales growth of 12% and an Adjusted EBITA margin of 11.2%. Double-digit CSG growth was driven by continued strong adoption and strong traction in the professional segment across most markets, particularly the U.S. and Europe. As in previous quarters, the CSG growth was driven by a healthy combination of volume, price, and positive sales mix. The Adjusted EBITA margin improvement of 70 basis points was driven by price increases and operating leverage, which more than compensated the effect of higher input costs and an adverse FX impact. On the next slide seven, I would like to discuss a couple of business highlights of our Digital Solutions division. We have been appointed to design the supply and the lighting for all 69 Everlast Gyms across the U.K. Designing the gyms with LED lighting dramatically cuts the energy consumption by about 80% versus the traditional technologies that were deployed earlier. The Interact connected lighting system provides the centralized lighting control for all the gyms, ensuring a consistent look and feel, as well as providing increased visibility, flexibility, and control of the lights. The gyms also feature 3D printed luminaires, which are designed and developed to suit the exact needs of each individual location. These are made from 100% recyclable polycarbonate material. Another key highlight is an LED horticulture project that we did in South Korea. We have installed Philips GreenPower LED top lighting compacts at the 2.8 hectare Palmfarm tomato greenhouse. This solution accelerates plant growth, produces higher yields, enables higher crop quality production, and saves up to 50% in energy use compared to conventional light sources. Well, I also have to mention the fabulous side lighting of the Santa Maria Novella Church in Florence, as this is the city of my mom. Now, let's move on to Digital Products on slide eight. In the third quarter, the Digital Products division reported a comparable sales decline of 2.5%. The comparable sales growth performance was driven by strong demand from LED electronics, while we continue to experience softness in the consumer channel and China. The Adjusted EBITA margin declined by 250 basis points to 10.5%, driven by a strong adverse FX impact and lower fixed cost absorption. Moving on to slide nine, for the business highlights of Digital Products. We launched an ultra-efficient A-class downlight and outdoor luminaires with wall and pedestals in Europe. These save more than 50% of energy compared with standard LED alternatives. We also launched SpaceSense, a new way of automating our WiZ lights using Wi-Fi sensing technology. SpaceSense can detect motion using Wi-Fi signals to automate the lights accordingly. As such, there is no need for additional and dedicated sensors and batteries. In the third quarter, we have also teamed up Philips Hue with Corsair to create the ultimate gaming setup. Corsair iCUE can be used to set scenes on Philips Hue light, synchronizing with Corsair RGB gaming peripherals to create the perfect gaming atmosphere. Let's move on now to slide 10 and Conventional Products. Comparable sales declined by 9.5% as continued volume declines were partly compensated by pricing. The Adjusted EBITA margin declined by 460 basis points to 14.2%, and this is explained by three factors. First, price increases and indirect cost savings fully offset inflationary cost increases. Second, lower volumes negatively affected fixed cost absorption. Finally, this division was disproportionately affected by the temporary headwind from FX hedging. Without this impact, the Adjusted EBITA margin would have been above 16%. Next, I would like to discuss our sustainability performance on slide 11. We continue to deliver on our Brighter Lives, Better World 2025 sustainability program commitments. The cumulative carbon reduction over our value chain is on track and is mainly driven by energy efficient and connected lighting in the use phase. Circular revenues were at 30%, mainly driven by serviceable and circular luminaires. Brighter Lives revenues increased by 28%, mainly due to our safety and security and consumer well-being portfolio. The percentage of women in leadership positions was 27%, stable with the second quarter. We continue to create action plans and to address this gap and accelerate our progress towards the end goal. This quarter, we also have published our first-ever Diversity, Equity, and Inclusion Report. Let me now hand over to Javier for the Q3 financial highlights. Thank you, Eric, and good morning to everyone on the call. Let me dive straight into the key financial highlights on slide 13, where we are displaying the Adjusted EBITA bridge for total Signify. Let me walk you through it in more detail. Adjusted EBITA increased from EUR 182 million to EUR 199 million or a +9% year-on-year. The increasingly positive impact of price increases worth EUR 91 million in Q3 more than offset the EUR 45 million negative impact of higher input costs. A minor negative volume effect was offset by a small positive on mix. A -EUR 23 million impact versus Q3 2021 was caused by a negative currency effect. This is a combined effect from the weakening of the euro versus both the U.S. dollar and the Chinese RMB and a temporary headwind for hedging. The temporary headwind for hedging is worth about 70 basis points and is caused by a high anticipated hedging position on the strengthened U.S. dollar. In total, our Adjusted EBITA margin declined by 70 basis points to 10.4%. However, excluding the temporary headwind from FX hedging, the margin was stable year-on-year. On slide 14, let me talk you through our Q3 working capital performance. While sequentially, working capital is stabilizing, compared to Q3 2021, our working capital increased by EUR 504 million to EUR 820 million, or from 4.7% to 10.7% of sales. Inventories were EUR 395 million higher year-on-year, impacted by acquisitions, cost price increases, FX, and continued longer supplier lead times. Sequentially, we see inventories have peaked and are starting to come down as lead times are beginning to ease. Receivables were EUR 196 million higher than Q3 2021, mainly due to the higher sales and FX effects. In fact, receivable days remained virtually unchanged versus a year ago. We do remain confident that we will return to previous mid- to low-single-digit levels of working capital as supply chain lead times continue reducing. On slide 15, you can see our net debt and leverage evolution. At the end of September, our net debt position was EUR 1,685 million, a reduction of EUR 64 million versus the end of June. The lower net debt is mostly driven by our free cash flow generation of EUR 135 million in Q3, which benefited from a strong EBITDA and a stabilization of working capital. Other had an impact of EUR 71 million and includes new lease liabilities, derivatives, and the FX impact on cash equivalents and debt. As a result of the lower net debt, our net debt to EBITDA multiple reduced from 1.7 to 1.5. With that, let me hand over to Eric for the outlook. Thank you, Javier. Let's conclude with the outlook on slide 17. Faced with an increasingly volatile environment, Signify now expects to achieve a comparable sales growth between 2% and 3% for the full year 2022. This is mainly driven by the uncertain near-term outlook, especially for the consumer segment and the Chinese market. Regarding the Adjusted EBITA margin and the free cash flow, we are targeting the lower end of the previously communicated guidance ranges. Signify has already shifted gears to adapt to a structurally weaker external environment in the coming quarters, when inflationary headwinds and volatility are likely to persist. We focus on measures to control cost and cash in line with our track record of delivering margin expansion and strong free cash flow generation in difficult environments. While some areas will be more affected by reduced demand, connected energy efficient lighting solutions which are ever more relevant and cost efficient as energy prices surges, will continue to benefit from a strong traction. With that, I would like to open the call for question with which both Javier and myself are gonna be happy to answer. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will take our first questions from George Featherstone. Your line now has been opened. Please go ahead. Morning, everyone. It's George Featherstone from Bank of America. I'd just like to start please, on the guidance and maybe some color you can give on October. Year-to-date, organic growth is quite a bit above your guidance for the year now. Aside from the tougher comparatives you have in the fourth quarter, is there any comment you can make on October's trading that can help contextualize this, and in terms of how you expect the remainder of the year to develop, particularly in your consumer exposure? Yes. Good morning, George. When we look at the year-to-date, we had 5.3% in terms of comparable sales growth. Now, when we look at Q4, we need to take into account the following. We're comparing our sales with a relatively strong base because we grew by between 4%-5% in Q4 last year. When we did our forecast and we went to a very high level of detail, we realized that there were three things that we may not have in Q4 this year that we had in Q4 last year. The first element is that in Q4 2021, you know, we also invoice some of the backlog or the order book that we had accumulated in Q3, where we had difficulties to deliver because of the component shortages. Second, we had a very strong horticulture business in Q4 last year. Our horticulture business is temporarily affected by the price of energy. You know, growers these days are having, you know, the P&L pretty much pressured by the higher price, you know, of gas and electricity. Third element, you may remember, but in Q4 last year, we had a very strong quarter on the consumer side, which we believe we're not gonna get this quarter, given the softness that we have experienced, you know, already, you know, at the end of Q2 and in Q3, which we've commented earlier, and we believe that trend will continue in Q4. So if you look at those fundamental, you know, three elements, when you compare Q4 last year to Q4 this year, this is why we have reviewed our guidance between 2%-3% of growth for the full year, which also translates to a negative performance in Q4 2022. Okay, thanks. Are you able to give us any color then on October and perhaps how the consumer has performed relative to those measures you were talking about just then on top of that, relative to how it performed last year? Or can you give us an indication of how much it's down? October is complicated because, you know, we need to wait until the very end of the month because this is where we do the full consolidation of the numbers, you know, and many things happening at the end of the month. You know, we would not specifically comment on October. The only thing you know, I can tell you specifically on the consumer business is that there were a lot of destocking in Q3. There were a lot of destocking from our retail customers. Some of them reached, at the end of Q3, a level of three weeks in terms of inventory, which is, you know, historically extremely low because normally they operate around the double of that. We believe that there is a need to rebuild the inventory of our consumer retailers and we believe that that's gonna happen. But that's all I can tell you right now. Okay, thanks. If I could just squeeze one more quick one in. On the switch of the strategy to be more defensive maybe in this environment, can you talk us through what areas you'll be targeting on the cost base and is there anything structurally you need to change? Also, does this compromise in your ability to capture the demand in the professional segment? Yeah. You know, we are commenting that on a regular basis. You know, we were waiting to know whether the markets would be you know, quickly building back up or not. We believe that what is happening today is gonna last a bit more than what we had originally forecast. Maybe, you know, some of the changes in the parameters we have to deal with may be more structural than transitory, so we are going to adapt to that. If you look at the company, you know, from a top-line perspective, we know that there are some points of weakness in terms of growth traction. I'm gonna talk about Russia, I'm gonna talk about China, you know, which is quite an important market for us, and the consumer business. On the other hand, we believe that with connected lighting on the professional side and all the green switch moves that are happening, you know, around the world, not only in Europe, in the U.S., but we see now an extension also to the growth markets, there is potential, and we see that potential being very concrete. On the other hand, when you look at the dynamic to generate operating margin, while operating margin may come less from high growth and dilution of cost, but it will come from a bit of a rebuilding of the gross margin, because we also think that our cost in the bill of material are gonna be going down. We're gonna be able to negotiate. You know, we enter in a market where there is less traction, so we believe that our suppliers also see that, so that helps us to renegotiate prices, which, you know, we are doing extensively at this point in time. That will help us to rebuild the gross margin, while at the same time we believe we need also to act on our non-manufacturing costs, which means that we're gonna have an expansion of the operating margin coming from an expansion of the gross margin, but also the reduction of our indirect costs. Where are we gonna do this? Where are we looking at it? The principle that we have established before remains, which is that we wanna have a small, efficient, and a cost-effective holding. You know, we want to eventually further reduce the central part of the organization to the benefit of the operating part of Signify. You know, at the same time, there may be a few other adaptation that we need to think about, moving forward that can bring two things, probably, a bit of cost advantage, but also speed advantage. We're looking at all these aspects at this point in time, but that's, you know, how we're changing from a strategy of growth and dilution of fixed cost to an adaptation to the existing environment. Okay, thank you very much. Thank you. We will take our next questions from Daniela Costa. Your line now has been opened. Please go ahead. Thank you very much. If I may ask, on two things, I guess into pricing into Q4 and 2023, as you think, I guess, about your price lists for next year, obviously it's been sequentially going up. There's still some elements of inflation. Sorry, on labor and on energy, but raw materials is falling down and volumes might be falling down. How shall we think about it going forward as the comps are also getting tougher? The second thing, back to your own working capital and your point about sort of having peaked and I guess destocking yourself, how quickly can you come back to the mid-single digit levels that you used to have? How volatile should we expect working capital to be, going forward? That would be helpful to get your color on that. Thank you for taking the questions. Yes. Good morning, Daniela. I'll take the first question, and Javier will take the second one. Look, on pricing, when you look at what has happened during the whole crisis, pricing at the beginning was not fully compensating the increase that we have in COGS and in bill of material. When you see what's happening in the past two quarters, we are doing that. Basically we have priced according to the cost increase. If you look purely at where in all the geographies where we operate, we have priced up to compensate on the cost of goods. That has been done. When I look at us moving forward, there may be still some, you know, positive effect on price because, you know, price takes a bit of time to be put in place. You know, the last price increases that we've done, we've done in Q3, so they're maybe not completely seen in the numbers yet. There may be a little bit of positive impact there. Moving forward, I expect more that we're gonna be capable to increase the gross margin with a reduction of our bill of material. That's really the objective that we have because we know that we can, at this point, position the margin well at the prices where we are. The objective is not to price ourselves, you know, out of the market because we need to generate top line. We're measuring that, you know, as we speak and, you know, nearly on a daily basis in all the locations where we operate to make sure that we're making the right decisions. Some of the other costs that are maybe not in the cost of goods sold will have to be also compensated with lower non-manufacturing costs. That was my answer to George previously. I will let Javier answer to the second question about working. Yes. Good morning, Daniela. Thanks for your question. Look, to answer the question on working capital and where it's gonna be heading, let's quickly go back to where we came from. First of all, if you look at our working capital, our days receivable, our payables have been stable, well under control. If we talk about working capital evolution, we predominantly talk about inventory. If you look at what happened with inventory since last year, and you look at the increase, fundamentally, you can look at four components which have led to the increase in the absolute number of inventory: FX movements, price increases, increasing supply chain lead times, and then forecast reliability of forecast visibility in a very volatile environment. FX effects in pricing as a percent of working capital or percent of sales, inventory don't really matter here. We really talk about lead times and forecast visibility. Now, what you need to understand is between FX effects, pricing, lead times, you explain about half of the increase. Visibility and market volatility is the other half of the increase we've had. How are we gonna see the dynamic going forward? Lead time and forecast visibility link back together. On the one hand, we do see a stabilization of our inventory. At this point in time, we start seeing a decline of lead times. It's still not very significant, but at least we see that the lead times have been plateaued and are slightly going down, which should indeed give them a better adjustment to our goods in transit, which is an important part of the inventory. Number two, with that comes also the ability to again forecast on a slightly lower timeframe, which means instead of having to look six, nine months forward and sometimes 12 months forward, being able to forecast on a shorter period of time will also allow us to have a bit more visibility, reliability on the forecast going forward. All in all, these dynamics should have a positive impact throughout next year. The one unknown is still the speed at which lead times will further come down. The improvement back to original levels will be probably roughly correlated to the lead time decreases. While at the same time, of course, volatility of the market is something that we'll try to anticipate by being also a bit more conservative on what we think in terms of forward volumes in a recessionary environment. Fundamentally, I think we're gonna see decline across next year, and then the final twitch to getting back to the lower levels will be when lead times get back to normal levels. Thank you. Thank you. We will take our next questions from Martin Wilkie. Your line now has been opened. Please go ahead. Thank you. Good morning. It's Martin from Citi. My first question is just coming back to pricing, and it looks as you say that pricing got better into Q3. Just when we look at your commentary on the slides for Digital Solutions and conventional, you mentioned it on digital products, you haven't called out pricing, and obviously we've now got the consumer part that is softening. Some of that is obviously comps as well as the sequential development. Can you comment on pricing specifically within consumer? Are we seeing whether it's a reversal of discounting or weakened by demand, is that an area where pricing has already rolled over? It'd be just good to get some underlying sense on that. Thank you. Yes, good morning, Martin. Look, in that, we have a lot of different businesses. All businesses have been priced up during the crisis that we experienced in the past quarters. Probably that we have priced up much less on the consumer connected offers. We can still, you know, enjoy a good level of margins and higher level of margin than the average. At the end of the day, what is really impacting is the demand, probably because of a softness in the market and also in Q3, the reduction of the inventory at our consumer retailers. Those are the two main things that explain the performance. Great. Thank you. If I could have a follow-up just coming back to the point on working capital and cash flow. I mean, it seems like you're at sort of either at or just past sort of peak inventory, and obviously you're not gonna talk about 2023 at this stage. In terms of how we think about unwinding and a rebound of free cash, will your sort of working capital outlook and how we think about free cash, will that go back to how it was in the past? Or are you thinking because of the experience of bottlenecks and perhaps reshoring and other items, do you have to have a structurally higher level of working capital than perhaps you've gone with in the past? Just to understand how you think about that over the long run. Thank you. Look, I'll try to give a shot at Martin without giving too much away for what the future that we cannot predict. As I just explained to Daniela, if you look at how working capital has been built up over the past, again, we've always had a very healthy balance of inventory, payables and receivables. As I said, payables and receivables, they are where they have historically been, where strong inventory is you see the biggest deviation. We do expect that we can go back to historical levels. There will be some pros and cons if you think about regionalization, yes or no, but it will also have some positives and negatives on your structural inventory. But I think they can offset each other. It goes back to what I said before, it's a question of lead times. As you can understand, in the last year, we've been forced to forecast sales evolutions with kind of a nine to 12 months visibility into the future. As you remember, as we started the year, we were all far more optimistic on where basically from a pessimistic to a better optimistic scenario that has come down throughout the year, which of course, from a forecasting inventory build up has impacted inventory build up throughout the year. That's been paid for. Now with visibility that we have, or at least the more conservative visibility we take for the next year, we should be able to manage that inventory back down. The uncertainty that we have or the less visibility is lead times really depends on what happens with lead times. We see them currently going down. We'll see how it goes, further down. On the if you break down the inventory, one important point inventory is if you look at e-components, basically there we don't have big inventories. Over the future, I don't think that will again be a big issue that we face. I think structurally, there's no reason why we shouldn't be able to get back to historical levels. Great. Thank you very much. Thank you. We will take our next question from Will. Sorry, from Wim Gille. Your line now has been opened. Please go ahead. Yes, good morning. Wim Gille from ABN AMRO. I got a question on M&A and let's say how that is developing in current markets. Obviously, valuations in public markets have deteriorated materially. In the past couple of quarters, your balance sheet is strong, so that you know, potentially provides opportunities. Can you give us a bit of feeling on price expectations on the private side, on the sell side at this point in time? What kind of discussions do you have with potential targets? How do you look at the pipeline? And is there anything we can expect in the coming, let's say, six quarters, taking into account a favorable environment for companies with strong balance sheets? Thanks. Yes, good morning, Wim. You know, we always have an ongoing list of potential M&A, and we look at opportunities to increase our market share, I would say mostly in the luminaire business, in the professional business, in geographies where, you know, we are not sufficiently strong. We eventually also look at the possibility to acquire company that would bring technology to us for our connected offers or a service capability. We also look eventually at companies that can help us to deliver on our digital roadmap. So basically, this is what we're looking at. Look, at this point in time, you know, we would not do M&A because of the opportunity of a lower market level. We really do it if it is fundamentally strategic for us, and we also do it if we have the bandwidth to integrate these acquisitions. You know, lately we've done some acquisitions that we are integrating you know at this point in time. We have also a market which is extremely complicated to navigate in at this point in time. Probably that you know M&A in the coming weeks are not gonna be our priority. Of course, if we face something that we cannot miss we will do it. You know, otherwise we have a lot on our hands you know to finalize the integration of some past acquisition, but also to adapt the company to the current situation. Very helpful. Can you give us a bit more, let's say, color on what the expectations are on the private side, on the sell side regarding valuation? Have they already come down, in your discussions that you have with potential targets, to, let's say, realistic levels where public markets are trading at this point in time? Yeah, Wim, I'll take this one. Look, there's nothing we cannot comment on anything specific we're looking at, but you also see what's happening on the market. I think what's currently happening is we see what the market is doing. There's been a correction, depending what the next three, six, nine months will look like. I don't think it's not gonna be unpredictable that some companies will face tougher times than other ones in a crisis situation. I think valuations will be probably volatile in the next six to 12 months, depending what the outlook of different companies are. We'll keep an eye on that. Again, as Eric said, we'll not jump into things which are not strategic. If we've got some ideas about where we could add value or some shareholder point of view, we keep a close eye on those. In general, I think that the next six to 12 months will create a bit of a difference between those companies who cope well with the economic situation, those who might be suffering more. Opportunities will probably arise on the market, but again, we're not gonna jump into something which is not strategic, which either we cannot absorb or where we cannot really build value over time. Thank you. Thank you. We will take our next questions from Joseph Zhou. Your line now has been opened. Please go ahead. Hi. Good morning, Eric and Javier. Thank you for taking my questions. My first question is on Q4 really, because for your updated guidance, you imply a margin that is something like 13.3%, which is broadly flat or even slightly up compared to last year. Given that the margin has been declining quite materially year-on-year for the first, you know, three quarters, I wonder what the margin drivers are for Q4, and obviously it's not from top- line leverage because your top- line guidance implies a decline of -4% to -5%. Is it more from looking at your operation, is it more from FX being less of a headwind or net pricing versus costs being more favorable or a combination of both? Which is the main driver, basically? Thanks, Joseph. I'll take that one. You're absolutely right on the numbers. If you look indeed at our Q4 projection, or at least our full year guidance and then the projection, then you look indeed at Q4, which roughly will be in line with last year. Let's take it from two angles. First of all, if you look at it sequentially, Q2, Q3, Q4, as you've seen, we've narrowed the gap on Q2. On Q2 we were on the EBITA level 140 basis points below last year, now we're in - 70. If you look at the components, and we've explained those also in Q2, if you look at the key components between two. Q2 and Q3, you have been seeing a slightly worse impact on the costs, but we have lower obsolescence, and we also see our logistic costs coming down, and that's only partly compensated by energy costs. If you take FX out, then you clearly see that we've had an improvement in the pricing versus cost relationship, and that is, as I said, mainly driven also by our logistic costs going down. If you look sequentially Q3 then versus Q4, we expect more dynamics to continue. With obsolescence under control, we do expect logistic costs, and we see that currently in the market, that we see container prices going down. We see still that we're gonna see some benefits on materials, on logistic costs. Energy costs at this point in time, they're roughly at the same level or difficult to predict. We would expect a continued improvement there to see on raw material costs, and therefore there's a slight improvement expected on gross margin. On the sequential basis, if you look again versus Q3, we do have a leverage on our top line because Q4 still remains the highest selling quarter. From a sequential improvement, you would still expect also our total dilution of costs still to happen. If you compare versus year ago, roughly in line with last year's profit margin in Q4. We see the same dynamic as we've seen in the course of the year. We see still pressure on gross margin, but that being compensated still by a lower percentage of NMC, which is the path we still see to be in line on profitability versus last year. Yeah. Thank you, Javier. That's very clear. My second question is on labor inflation. A lot of companies talk about salary reviews and some change their review kind of when the review happens. I just wonder what is your kind of outlook for when you do the next salary review? Also, can you kind of indicate what kind of a labor inflation are we looking at? Are we talking about 3%, 4%, 2%, et cetera? Thank you. Well, good morning, Joseph. Look, it happens in all the different countries sometimes, you know, at different times. I think that probably today the level is gonna be probably between 2.5%-5%. You know, we don't know exactly what it is going to be, you know, at the end of the day. Now, we're looking at our costs as a whole, so including the labor inflation, and that's what we need to make sure is adjusted and to the business that we have in front of us. That's the way we look at it. You know, inflation is part of what we have to do. We do it, and the consequence of that is, you know, sometimes further or additional adjustments that we may have to do. Yeah, probably between 2.5% and 5%, depending on the locations. This is gonna be. I would say mostly it will be in 2023. That's the normal cadence to look at salary and wages increases. There may be some isolated cases where that could be done a bit earlier, you know, for specific reasons that would be linked to a very high level of local inflation, you know, pretty much, you know, above what you see elsewhere. We do that, you know, on a regular basis. Thank you. Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one. We will take our next questions from Marc Hesselink. Your line now has been opened. Please go ahead. Yes. Thank you. Marc from ING. First question is to get a bit of a feel for the growth for next year. You have a longer term target of between 0% and 5%. Taking the macro backdrop, taking that what you call out, the energy efficient solution, strong demand for that, and also maybe some backlog that roll over from 2022 to 2023. Is that a realistic range still for next year? Yeah, that's a very good question, Marc. You know, I've been exchanging recently with a lot of other companies to get also their feelings on 2023. What I can tell you right now is what we see. We see the macro situation changing every quarter. We're gonna have to finish Q4, finish the year, see where we are, and see where the environment is because a lot of that is driven by the external environment. Look, at this point in time, of course, we are looking at our plans and we have, you know, market forecast, but those market forecasts have been changing, you know, all year long, and they've been brought down, you know, by, you know, analysts all over the world. You know, we're following that trend. Talking about 2023 at this point in time is a bit premature. We will see, I know what we come up with, probably when we announce the full year results. We're gonna see things a bit clearer, but at this point in time we really focus on Q4 and some of the adaptive measures that we believe we need to start in Q4 for the upcoming quarters. On the top line side, you know, this is a bit what you're describing, probably one part of the market that can still be affected on the side of the consumers, still opportunities on the professional side, but we'll see clearer when we announce our results for the full year. Okay. That's clear. Maybe diving a little bit deeper on what you call out yourself the energy efficient solutions. How do you see that traction? Intuitively it sounds logical that people would start to look at these kind of solutions, but how are you seeing that in your demand? We see a good level of traction at different levels. First of all, we are bringing to the market a lot of product with the new technologies when it comes from the LED light source. You've seen we call that the ultra energy efficient. Basically, these light sources are saving up to 60% versus an existing LED solution. We have done that with bulbs, you know, on the consumer front. We've done that also for light sources on the professional part of the market. This technology will help to do additional savings. With the price of energy today, if you can save 50%, the return on the investment for this solution is much faster than ever before. We get traction which is purely to this new technology, not only compared to conventional, but compared also to existing LED socket base. On the other hand, where we see traction is on connected lighting systems for our professional customers. For instance, infrastructure, which is street lighting and connected street lighting, we see a very strong traction, I would say, worldwide. We see also in retail spaces an increased demand from our customer that we provide a system which would help them to monitor, dim, and switch off the lights of many different shops or supermarkets. That's a reality and customers are today in a bit of a hurry because they want us to implement as quickly as possible in order to get the savings also as quickly as possible. We see also that trend in the office space and in industry applications, where everybody, you know, has an objective to try and reduce, you know, energy costs. That trend is real and is happening. You know, we have already counted for Q3 a substantial amount of projects and turnover coming from what we have called the green switches both in Europe, in the U.S., now extended to the rest of the world. I think that this trend is even more increased by the price of energy because the return on investments are now getting much shorter. Yes, it's a reality from a technology standpoint, and it's a reality also from an energy efficient lighting system standpoint. Okay. Thank you. Thank you. We will take our next questions from Rajesh Singla. Your line now has been opened. Please go ahead. Hi, this is Rajesh Singla from Société Générale. Thanks for taking my question. This is regarding like if you can share some insights into the dealer's channel inventory across your product portfolio, maybe across the business segments, that will be helpful. Yes, Rajesh. Just a few elements. As I've said previously on the consumer side, we have seen in Europe and in U.S. the inventory going down. I've said, you know, some of the big customers that we have were at three weeks inventory, you know, at the end of Q3. That's very low compared to historical levels. That's on the consumer channel. If we go on the professional channel, the biggest part of what we do goes through distribution. Our distributors are effectively maintaining, you know, an inventory. We have seen that inventory also reducing during the period, not as much as what we have seen happening on the consumer side versus the historical base. We have also seen, and I would say in Europe and in the U.S., our customers on the professional side, our distribution customers are reducing their inventory in Q3. Any insight on the level of inventory on a relative basis? That's a bit more complicated because it's a much more diverse channels, and there's a lot of disparity, you know, across the points of sale. I don't have an average that I can tell you because we haven't calculated that way. What we know is that the inventory has reduced also, although not as much as in the consumer channel, as I've said before. Thank you. Thank you. It appears there are no further question at this time. I'd like to turn the conference back to your host for any additional or closing remarks. Please go ahead, Thelke. Ladies and gentlemen, thank you very much for joining our earnings call today. If you have any additional questions, please do not hesitate to contact Philip or myself. Again, thank you very much and enjoy the rest of your day. This concludes today's call. Thank you for your participations. You may now disconnect.