Hello, welcome to the Signify first quarter results 2023. Today's call is being recorded. Throughout the call, all participants will be in a 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'm 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 first quarter, 2023. With me today are Eric Rondolat, CEO of Signify, and Javier van Engelen, our CFO. During this call, Eric will first take you through the first quarter highlights, after which Javier will present the company's financial performance. Eric will then come back to discuss the outlook for the remainder of the year, 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 now hand over to Eric. Thank you, Thelke. Good morning, everyone, and thank you for joining us today. Let's start with some of the highlights for the first quarter of 2023 on Slide 4. Largely in line with our expectations, we continue to see persistent weakness in parts of our business in the consumer segment and in the indoor professional business. We also saw a continued slowdown in our OEM sales. At the same time, we made progress with our 2023 priorities, resulting in an improvement in our gross margin. As far as financials are concerned, comparable sales declined by 9.1%. The EBITDA margin of 8.9% was impacted by lower fixed cost as absorption as a result of the top line decline. Net income came in at EUR 28 million, and free cash flow was EUR 51 million. On the next Slide 5, we see Signify's overall Q1 performance. As you can see, we have increased the installed base of connected light points from EUR 114 million in the previous quarter to EUR 117 million at the end of Q1. LED-based sales were 82% of total sales, and nominal sales in Q1 were EUR 1.7 billion, translating into a nominal decline of 6.1% and a comparable sales decline of 9.1%. Similar to Q4, the Q1 performance was mainly impacted by the continued softness in the consumer segment, a slowdown in the OEM channel, lower sales in professional indoor lighting, as well as a strong comparison base in some areas. The adjusted EBITDA margin decreased by 160 basis points to 8.9% versus 10.5% in Q1 last year. We structurally improved our gross margin, benefiting from our continued price discipline as well as measures to reduce COGS. The lack of top line resulted in an under absorption of fixed costs, while we also had a temporary impact from the unwinding of our previous FX hedging policy. Net income came at EUR 28 million compared to EUR 87 million in Q1 last year. The year-on-year decrease is due to the lower income from operations and higher financial expenses. The latter, due to the combined effect of higher interest costs and a negative non-cash fair value adjustments of our virtual power purchase agreements. Free cash flow was EUR 51 million in the quarter. As said, a considerable improvement from the -EUR 189 million in Q1 2022, mainly due to a lower cash outflow from working capital. Let's move on to our division, and we are going to start with Digital Solutions on Slide 6. Nominal sales in Q4 were EUR 951 million, with comparable sales showing a decline of 8.7% against a high comparison base of 16.9% in Q1 2022. The outdoor segment, and especially the public segment, continue to grow, we saw a more challenging indoor professional business, particularly in Europe and the U.S., and softness in the agricultural lighting. The adjusted EBITDA margin was 8.7%, a decrease of 100 basis points from last year, mainly due to an absorption of fixed cost and an adverse year-over-year currency impact. This was partly offset by gross margin improvements from price increases and COGS discipline. On the next Slide 7, I would like to discuss a couple of business highlights of our Digital Solutions division. We have completed a large-scale smart city project in Huanggang City in China. For this project, we supplied nearly 200 BrightSites smart poles, over 2,000 Philips LED streetlights, and the Interact connected lighting system. It is the biggest smart pole project in China. The BrightSites, as smart poles, integrate security cameras, environmental sensors, Wi-Fi, and other devices to collect city data and enable remote management and data analysis, all within a secure network. The combination will reduce energy consumption by about 60% and operational costs by about 50%. Next, I would like to highlight the launch of our new Philips StoreFlow retail lighting, Interact Retail hybrid lighting controls, and a range of luminaires made of waste materials. Indeed, Philips StoreFlow is made of at least 68% bio-based plastic, reducing the CO2 footprint of the plastics by about 80%. Let's now move on to Digital Products on Slide 8. In the first quarter, the Digital Products division saw a comparable sales decline of 10.1%. This was mainly driven by continued weakness in the consumer connected segment and in our OEM business. The adjusted EBITDA margin was 8.3% compared to 12.8% in Q1 2022. The margin was impacted by lower fixed costs at absorption and due to the volume reduction. This was partly compensated by pricing and mix. Moving on to Slide 9 for the business highlights of Digital Products. We launched the Philips Hue Sync TV app for Samsung TVs. This app synchronizes Philips Hue smart lights with Samsung branded TVs. It allows users to experience immersive and seamless light syncing in their homes when watching TV or playing games without having the need for a sync box. It is compatible with all TV content and video formats, including native apps. From February 24th, the Restriction of Hazardous Substances Directive banned the placing of compact fluorescent non-integrated lamps on the European market. Linear fluorescent lamps T5 and T8 will be phased out as per August 24th. In order to help our customers with the switch to LED, we extended the range of energy-efficient alternatives. These LED alternatives provide energy savings between 45% and 70%. Moving on to Slide 10 and Conventional Products. Comparable sales declined by 8.5% as further pricing partially compensated the continued volume declines. The adjusted EBITDA margin recovered to 22.5%, an improvement of 650 basis points versus Q1 last year. In part, we have seen that the headwinds we saw in 2022 have turned into tailwinds, and namely, energy and transportation costs and effects. We have taken measures to restore the margin. We implemented strong price discipline to offset cost pressures. We have taken further action to control costs, such as additional factory restructuring. Finally, the division benefited from some one-time effects in the quarter, the largest being the reversal of a legal provision. As a result, Conventional Products' underlying profitability is back on its historical track. Next, I would like to discuss our sustainability performance on Slide 11. The cumulative carbon reduction across our value chain is on track to double the pace to the Paris Agreement. This is mainly driven by energy efficient and connected lighting, which drive emission reduction in the use phase. Circular revenues were 29%, stable versus the previous quarter, yet on track to reach the 2025 target. Circular revenues continue to be driven by serviceable and circular luminaires. Broadline revenues constitute 27% on track to reach our 2025 target of 32%. The main contribution continues to be the consumer wellbeing and safety and security portfolios. Women in leadership position was 29%, an increase versus the previous quarter and on track to reach also the 2025 target. The improvement was mainly driven by the new external hires and the internal promotion of women. I would now like to hand over to Javier, who will discuss our financial performance in more details. Thank you, Eric. Good morning to everyone on the call. Let me dive straight into the key financial highlights on Slide 13, where we're displaying the adjusted EBITDA bridge for total Signify. As you notice, we've decided to simplify our EBITDA bridge from absolute values to percentages, which we believe will better illustrate the actual effect of the different components on our EBITDA margin. As you can see, the adjusted EBITDA margin decreased by 160 basis points from a strong base of 10.5% in Q1 2022 to 8.9% this year. This was driven by a large volume effect, leading to a 300 basis points under absorption of fixed costs. We were able to largely offset this volume effect through price increases, which contributed to 220 basis points, cost of goods sold savings of 30 basis points, and a slightly positive mix effect of 10 basis points. In addition, adjusted indirect cost savings had a positive effect of 30 basis points. Currency still showed as a negative, being the combination of temporary cost of unwinding our previous FX hedging policy and the significant weakening of some emerging market currencies, mainly the Egyptian pound. Please note that this negative effect is being recovered through pricing taken in order to maintain gross margin amid strong currency devaluations. Other effects were a negative 50 basis points and included, amongst others, the impact from acquisitions and some other one-off impacts. On Slide 14, I'd like to zoom in on our working capital performance during the quarter. While sequentially, working capital continues to stabilize. Compared to Q1 2022, our working capital increased by EUR 58 million to EUR 617 million, or from 7.9% - 8.3% of sales. Inventories did decrease by EUR 198 million year-on-year, showing the continued progress we have made over the past quarters to reduce inventory. Through improved demand planning and stricter inventory discipline. Receivables were EUR 96 million lower than Q1 2022 due to our continued efforts to keep our receivables levels healthy, obviously on a lower sales year-on-year. Payables reduced by EUR 363 million, returned to more normalized levels. We do remain confident we will return our working capital to previous mid to low single-digit levels as supply chain lead times and delivery reliability continue improving. On Slide 15, you can see our net debt and leverage evolution. At the end of Q1 2023, our net debt position was EUR 1.3 billion, a reduction of EUR 25 million versus the end of 2022. The lower net debt is mostly driven by our free cash flow generation of EUR 51 million in Q1, which benefited, as said, from a lower outflow from working capital. Other had an impact of EUR 26 million and included the acquisition of Intelligent Lighting Controls in U.S., new lease liabilities, derivatives, and the effects impact on cash equivalents, and debt. Our net debt to EBITDA multiple increased slightly but remains at a comfortable level of 1.4x. I would like now to hand over back to Eric for wrapping up with the outlook and some closing remarks. Thanks, Javier. Let's conclude with the outlook on slide 17. Given the structural improvements in our gross margin and free cash flow generation as well as our intensified measures to reduce fixed costs, we confirm our guidance for the full year. While we expect the remainder of H1 2023 to remain challenging, we continue to see the potential for an improved second half. For the full year, we continue to expect an adjusted EBITDA margin in the range of 10.5%-11.5% and a free cash flow between 6%-8% of sales. With that, I would like to open the call for your questions which, you know, both Javier and I are happy to answer. Thank you. If you would like to ask a question on today's call, please press star one on your telephone keypad. That is star one for your questions today. Our first question comes from Daniela Costa of Goldman Sachs. Please go ahead. Hi. Good morning, all. Thank you for taking my questions. I wanted to ask mainly on two things. The first one, you obviously keep the guidance, despite this still being a tough quarter. We have had sort of multiple tailwinds and headwinds that we have heard for the market. Obviously, we have the IRAs in the back end of the year. We have lower shipping costs, but we also have, like, credit tightening and a lot of new flow on Resi. I was just wondering if you could guide us through how the cadence for the year and how your assumptions of like a stronger second half build up on the back of those items. My second question is just regarding maybe a subsect on that. Can you talk through, like, where the results now, especially in Digital Products, do you think it's the result of mainly distributor destocking for your retailers and wholesalers? Is that done? Sort of like how underlying trends versus maybe that element of destocking play out in the results? Thank you. Yes. Good morning, Daniela. On the guidance and on the performance for the quarter. We are at the end of the quarter, you know, very close to our own internal forecast. When we look at how the quarter played, there can be small differences here and there, but we are, you know, fairly close to what we expected. When we see the dynamic for the full year, we expect a Q2 that is gonna be, you know, somewhat close to Q1 in terms of performance. We have also to remind that Q1, you know, and Q2 last year were both, you know, high in terms of comparison from a bottom-line perspective and Q1 was, you know, high from a top-line perspective in terms of comparison base. What we see and, you know, you have seen the numbers last year, H2 has been much weaker in bottom line because of the gross margin deterioration that we start to see from Q2 last year and being very strong in Q3 and Q4. We had also in Q4 a very low, we're gonna have very low comparison base in terms of the top line. At the end of the day, the very important element in Q1 for us, which was, you know, expected, is the recovery first on the conventional business that had degraded substantially its performance. We are back to historical levels. I would say, you know, if you net, from some of the non-recurring impacts, we, you know, around, you know, the 20% that we used to achieve, you know, in general in terms of bottom line, we are there. The gross margin, for the whole group, you know, has recovered. You know, we are above 39%. It's an improvement on DDS. It's an improvement so strong improvement on DCP. It's not an improvement on DDP, for different reasons that we have briefly commented. That's the way we see the dynamic. Q2 pretty much in line with Q1 and then an improvement in H2. If there is a massive degradation in the end markets, maybe the situation could look different, but we don't see that at this point in time. We are working on the gross margin, and we are working on our cost, our cost structure. In order to achieve the guidance and in the forecast that we have done, you know, in the past two weeks, we reviewed all our markets and all our businesses, and we are confirming that we will be in the guidance that we have indicated. On DDP is mainly touched, I would say, by two negative impacts. The first one is the consumer market, which is continuing to be slow. I would say that, you know, it first started in some regions, expanded to others, but now we see a weak consumer market, nearly, you know, everywhere. We are also impacted by China. China for the whole group is also a negative contributor in Q1 and China, you know, given the population, is also a big contribution to the consumer market. China is also a detracting point in the consumer exposure. The other element that you have in DDP, which is probably a bit newer, is the OEM business. The OEM business has gone down for many different reasons. The first one is an end market on the professional side, especially indoor, which is weaker. The fact that our customers are destocking, so, you know, many of the OEMs when the shortage came, you know, in 2020 and 2021 and partially in the beginning of 2022, they did a, you know, they brought up, you know, the inventory. They built up inventory and now they are destocking. A third element in the OEM is that some of our big customers are insourcing more than what they did in the past. At the end of the day, this is another, you know, negative element to the performance. Clearly, destocking is one of the contributor, you know, for the OEM business, but that's not the only one. On the side of the consumer business, yeah, we haven't seen a restocking as we could have expected it. The inventory of our retailers, you know, whether they are online or offline retailers, is low and they are more on the destocking move than on the restocking move. Thank you. We're now moving on to our next questioner, which is George Featherstone of Bank of America. Please go ahead. Hey. Morning, everyone. Thanks for taking the questions. I'd just like to sort of come back a little bit on the Digital Products division. You talked for a while now about the weak consumer, and also cited that destocking effect from third quarter last year. Clearly mentioned at the same time you were looking to sort of change posture on cost and look at the cost base to mitigate some of the trends. Clearly, the Q1 margin deterioration is pretty significant. I just wondered, when do you expect the mitigating steps to start supporting the margin in that division? Or is it a case that volume needs to stabilize before margins start to recover for DP? That was the first one. Thanks. Yeah. Good morning, George. You have a few things in the DP. The DP is still comparing in Q1 to a very solid base, you know, in terms of margin, because that business was, you know, very strong in 2021 and the beginning of 2022. That's one of the first elements. From a cost base standpoint, we have given now a team mandate to the teams, you know, to be more frugal. We haven't launched no massive restructuring plans yet. You know, we still want to see where the volume is gonna lead us, because if the volume stabilizes, as you have mentioned, and if we can get a bit of positive traction, because we know, you know, in a nutshell, and if you try to simplify the theme, our consumers now are spending money, traveling, you know, which they haven't been able to do during the pandemic. They're investing, you know, in different types of leisure investment, but not so much in goods. That will come back. We don't know when, but it will come back at one stage. We hope today that the volume will stabilize and that we have cost actions that are gonna be able to compensate, you know, in order to rebuild some of the operational margin that we have lost. We have to understand that we were comparing ourselves also to a very high base, you know, for that for that business. When I look at it structurally, everything is in place and we need surely top line, you know, to be able to increase further bottom line. In the meantime, we're doing some corrective actions. There is probably also in that business, if you look purely at the consumer market, for us, a mixed impact. We've seen quite a strong impact on the connected offers, you know, that have been declining a bit more than the rest, and that also has a negative mixed impact on our gross margin and our profit. Okay. Thank you very much. I'd just like to explore the FX hedging or the FX movements in a little bit more detail. It'd be good to have some more color on the movements and whether you can talk about So clear reasons why you've got an FX tailwind to revenues and a headwind to profit, and then what the new hedging policy ultimately entails and the isolated impact that had to Q1 of switching that policy. Hi, George. Good morning. I know it's a bit of a complex topic, let's try to make it as simple as possible. Let's break it up as what you said. From a pure currency movement, if you forget any kind of hedging from a pure currency movement, the impact is about nil between the US dollar, which quarter-on-quarter still strengthened versus last year, the CNY that weakened versus last year Q1, and the hedging we have in place against the CNY. If you take that all together, currency movements and our regular hedging is about a zero-sum game. What you're left with is what we talked last time. We have changed our hedging policy because our hedging policy was covering kind of 15- months, up to 15- months forward in an environment which is very volatile, and we've kind of shortened that, and therefore we have broken some of the hedges that we had taken. That basically, that hedging, the closing of those existing previous hedges is in Q1, still giving us a negative, which is, I would say about 40 - 50 basis points. Now, as we unwind those hedges throughout the year because we had them on 12, 15- months, that negative will turn to full year positive. That's something we know because we closed the hedges. We know exactly at which price we closed the hedges, but it's just the unwinding that takes us throughout the year. That negative impact that we see on FX from hedging, the previous policy negative in Q1 will decrease in Q2, and will turn positive and completely offsetting the negative of Q1 in the rest of the year. The other part of the 90 basis points that you see in the bridge is mainly driven by the very strong devaluation of Egyptian pound. The Egyptian pound I think devaluated about 80% versus last year. That gives us an exposure. Now, in the bridge, it shows as a negative on the FX side, it does have a positive offset within pricing because in those markets where we normally face stronger devaluations, we manage our pricing on gross margin, and that gross margin in those countries has been maintained. There's an offset in pricing. Long story short, that negative has two components, a devaluation component on emerging markets, which will be compensated by pricing. It's got this one-time temporary effect of FH hedging unwinding that will turn positive in the second half of the year. I hope it helps you understand better. Yeah, it does. I just want, if I can, just to come back to that comment you made about the hedging becoming positive for the full year. What kind of contribution do you have to your year-on-year margin guidance for the full year from the hedging? On a full year basis, it will just be a slight positive. It's not gonna be big, it's gonna be mainly compensating the negative of the first half to a positive in the second half. You're gonna have a second half benefit of what we've lost in the first half. On a full year basis, it's not unwinding of the hedges will not have a significant impact on a full year basis. Okay. Thank you very much. Thank you. Up next we have Andre Kukhnin of Credit Suisse. Please go ahead. Good morning. Thank you very much for taking my questions. Can I just follow up on demand, first and on the areas that you highlighted, in the OEM business and consumer. How is the cadence through the Q1, and how does April compare to that? I presume from your comments on Q2 being similar, you've kind of found the level and the trending at that, but I just wanted to double check that, please. Yeah, Andre, we're not specifically talking about, you know, April, but that's how we've built, you know, our cadence for the year. Seeing Q1 and Q2 fairly similar in terms of traction and performance, and then, an improvement due to a lower base of comparison in H2. That's how we've built things and so far, you know, what we have seen in Q1 was pretty much in line with our expectations. Got it. Thank you. My second question is on pricing. Could you talk about the pricing trends if we net out the effects of price increases to compensate for these currency devaluations, like you mentioned, the Egyptian pound. Also specifically related to that, how's pricing evolved for the new products that you launched recently? I think you had the kind of EUR 9.99 new level efficiency bulb. We've seen some, a little bit of discounting, I think into end of last year then it came back up. Just wanted to check how pricing's holding up across the LED portfolio and also specifically for the latest product. You know what you're mentioning on the ultra efficiency is more, you know, tactical pricing, you know, and punctual promotion. Look, when you look at pricing, we have effectuated a lot of pricing on conventional. Conventional is also the business that was the most impacted by the increase of cost, namely energy and transportation. What you see in the numbers when it comes to conventional is a strong contribution of price in the numbers that we're indicating, which is minus 8%, you know, decline. The decline in volume is much bigger than that. There's a lesser contribution of price on DDS and even lesser contribution of price. You know, on DDP, but, you know, if you look at the volume decline, the volume decline is higher than what we indicate here because there's a bit of pricing, you know, in the three divisions. The order of magnitude going down, you know, from DCP to DDS, you know, and to DDP. From a pricing perspective on the digital divisions, what we wanted to do from the very beginning, it was only to price for what we thought was the structural, you know, inflation or the structural impact of the inflation. I think that that strategy was right because we can now rebuild on our gross margin as you see it, while, you know, we maintain a competitivity and competitiveness from a pricing perspective. The strategy was slightly different, you know, across the portfolio. We believe it's the right one since we're rebuilding now a gross margin. That's very helpful. Thank you. If I may, just a last one on the on the unconventional, on that fluorescent product categories, phase out by in Europe. Could you give us an idea on the size of that of those product categories for your business? Yeah. On the fluorescent non-integrated, which is the first ban in February, that has a very limited impact on our top line. When it comes to fluorescent T5 and T8, you know, in Europe, you know, it's more important because that's one of the big technology we have in that business, the big remaining one. Totally manageable. You know, what we have done in the meantime, we have started to when we've announced restructuring on our manufacturing plans. This is what explains also that our restructuring costs are quite high, you know, for the quarter. And they are at least for a bit more than half, you know, linked to the conventional business. At the end of the day, we are doing what's necessary in order to to compensate for that for that volume decline. Great. Thank you for your time. Thank you. Now we're moving on to a question from Akash Gupta of J.P. Morgan. Please go ahead. Yes. Hi. Good morning, everybody. Thanks for your time. My first one is on the market share development in the last couple of quarters. If I take pricing out, basically in both Q4 and Q1, your volumes are likely down low double digit. Maybe can you make a comment on whether you believe you have gained or lost market share? When we talk about competition versus Chinese, have you seen any increase in Chinese competition, especially after China reopening? Good morning, Akash. Basically when you look at competition and you listen to the announcements for the listed companies, they've all indicated that if there is growth, it's mostly coming from pricing. If you try to match from that, we looked at the situation. We believe that over the past year... Now, it's complicated to do quarter by quarter, because of the comparison base, you know, which can be very different depending on the company. If we look at what has happened in the past year and we looked at that, you know, in, in very detail, we believe that we haven't lost... We haven't gained, haven't lost market share in the U.S. We believe that we may have gained share in Europe when it comes to the professional business. On the consumer business, we believe that market share was not lost. It's a market which is, you know, going down, and we've seen other companies also suffering from the low level of traction, you know, of the market. When it comes to the OEM business that we need to look at the numbers because, you know, they're quite recent and we only look at market share, you know, one quarter, you know, after the event. The fact that some customers may be doing a bit more insourcing, you know, may mean, you know, a loss of market share on our side, although we've been very active, you know, trying to get other customers because we knew that this would happen. We don't have sufficient information for me to tell you. No loss of market share in what we see, you know, in DDP in general, and I would say DDS as a whole across geographies. From a Chinese competitor's perspective, I think, you may have seen that Chinese competitors have suffered a lot, you know, from what has happened in China, at least for the listed companies where we can see the numbers. We have seen a lot of small Chinese companies closing because of the overall situation. We've seen in the past quarter a regained, you know, energy on the side of the Chinese companies in order to bring very competitive prices to the market. Without doing crazy things because, you know, the environment is not conducive for this to happen. No, we haven't seen today, you know, Chinese competition because of the reopening of the market being very, very aggressive. I think they have a lot of issues on their PNL, and they have to fix that. Thank you. My follow-up is on cash flow and drivers for working capital. I think, Javier, you mentioned you aim to bring back to the previous working capital ratios when supply chain improves. Can you provide a snapshot on where are the supply chains at the end of the quarter and how much progress we still need to make further in order to go back to those previous working capital levels? Thank you. Yeah, guys, thank you. Look, if you take a high level view again on total working capital, it mainly comes down to inventories and the payables evolution year-on-year. If I take you back about nine months, you know that our inventory was about EUR 1.7 billion, and that was built up at the end of 2021 and the start of 2022. That inventory was also paid for largely in 2022. If we see where the situation is today, we ended last year at EUR 1.3 billion. We're still at EUR 1.3 billion. We still believe there's some room to go further down throughout the year. As you said, it does depend on what happens on global supply chain. On the global supply chain, we have seen throughout last year an improvement of reliability, of replenishment lead times. Interesting though is that, especially in Q1, we've seen a little bit more stretch on replenishment lead times. Replenishment lead times have gone slightly up. That's why we also see that the continuous decline of inventory is kind of a bit stalled now because our goods in transit have slightly go up again. Again, I think that's only temporary because in general, the environment starts being much better in terms of lead times and reliability. Therefore, we are clearly focusing on getting our inventory further down throughout the year to a level which is more historical. We think it's gonna further regularize throughout the year and hopefully by the end of the year we'll be in a still better position than where we are today. Thank you. Thank you. We're now moving on to Marc Hesselink of ING. Please go ahead. Yeah, thank you. First question is on the moving parts on growth. I think the easier comparable basis is straightforward, but what you mentioned the potential for the second half of the year, what can be tailwinds in that respect? Yes. Good morning, Marc. I think the comparison base we're gonna have on the GP on the consumer business in the second half is gonna be much lower than what we have in Q1 and to a lesser extent in Q2. I think that's the case also for, you know, the professional market because we had seen, you know, at the time the indoor part of the professional market also starting to show signs of weaknesses, starting in Q3, but even more in Q4. At the end of the day, when you look at the compare, even if the market doesn't grow substantially, the compare will be much more favorable, you know, in the second half than the first half. That's why we talk about the specific potential. There is another market which is the public professional market. Sometimes we can say also the outdoor professional market, where we see a good level of traction linked to the different incentives that are being, you know, put on the table today by not only Europe and U.S., but also in many other markets we see incentives for, you know, energy efficient solutions. We can bring many to the table with a very fast retail investment, you know, even more with now the new ultra-efficient technology, which is not only built for the consumer, but we extending that technology to our professional offers. At the end of the day, there's a continued traction here on the professional, you know, outdoor public business. So these are the different growth trend and potential that we see in Q2 and in H2. Okay, so clear. it's mostly comparable base and then maybe in public maybe some more. and then another item may be linked to this China reopening. Is that anything where you expect some teamwork in the second half of the year for you? Yeah, that's a very good question. You know, I was in, I finally went back to China for a full week, you know, a few weeks ago. The situation is the following one. The market is clearly reopening, we see that the potential is there. Now, the cost of, you know, the zero COVID policy has weighed a lot, you know, on the finances of municipalities, you know, and regions and provinces. I mean, they need to bring back some cash and reinvest. The projects are there is clearly an ambition to launch very important projects on many different fronts, you know, including infrastructures. We see, you know, a lot of projects being at this point in time brought to the table. What we don't know exactly is when this is going to happen. Is it going to be already Q2? Not too sure because they need to rebuild the finances. We see certainly a positive traction in H2 at this point in time. We think that, you know, it's a big economy, but it's a big economy that can go very, very fast down or up. All the signals, you know, at this point in time is for an as fast a recovery as possible, you know, in China. At least this is a clear mandate in the country, it's going to happen. Maybe we're going to see early signs in Q2, we certainly expect H2 to be to be better. Just to note also that for us, China has been a double-digit decline in 2022. It is our second biggest market. At the end of the day, it has a clear impact. It had a negative impact. It should have a positive impact in the second half of the year. Okay. Thank you. Thank you. We're now moving on to a question from Joseph Zhou of Redburn. Please go ahead. Hi, Eric. Hi, Javier. Thank you for taking my questions. My first question is on your end markets. It's how are you seeing the end market governments, versus, say, two to three months ago, perhaps by region? Obviously there are a lot of concerns, about U.S. commercial construction given the current regional banks crisis. What are you seeing in reality in your orders and conversation with customers? Thank you. Yes, good morning, Joseph. Look, at the end of the day, we cannot say that in the past three months, we have seen the situation improving. When you look at new residential construction and the residential construction, you know, at the end of it, we don't see renewed traction. Probably that we have seen in the U.S. a further degradation. We talked to it, you know, and we called what, you know, the indoor lighting market, you know, in the U.S. where we have seen low attraction in Q4 last year. It's continuing to be the case, you know, in Q1, which is linked to the resistive environment where we see customers, you know, waiting to invest, not investing. Most of the time, as we used to say, the projects are there. There could be a need to invest, but you see what is happening also on the U.S. market and you see companies retrenching at this point in time, quite substantially. That environment is not conducive for that market to get a positive traction. On the consumer side, we see the consumers market being shy, and that has been, you know, the case in the past three quarters and a half, we always say the same thing, but it's still the truth. Also the behavior of our retailers, you know, is indicating that. The only traction that we see in U.S., traction that we see in Europe, the traction that we see in the other markets is on infrastructure. It's also, I would say, on the, still on the industrial part of the professional market, which is more manufacturing plants, and warehouses when we still see, you know, a positive traction. If you were looking at our performance in Europe, in Q1, you know, in professional, it's a positive performance. We have been able to perform, you know, quite well on the base of comparison, which is not extremely high, but which is decent. We see a continued traction, which is also really pushed by the incentives that in the European Green Deal in Europe is providing to us. That's a reality. We see it happening. As you can imagine, no real improvement in the past three months, an environment which is still quite volatile. You know, some geographies may be technically in recession, maybe not saying it, you know, very clearly, but the recession is there somewhere and we have to deal with it. Yeah. Thank you. That's very clear. Just on the European fluorescent ban on... well, which happened in February, but there's a bigger ban later on in the year in August, September. Can you maybe talk a little bit about the impact on your LED business? Obviously, the fluorescent install base is pretty large in Europe and but then at the same time, the, you know, today's products are also pretty durable compared to incandescent, halogen, et cetera. Do you expect some boost in your LED business or do you expect kind of a much slower replacement cycle for the existing fluorescent installed base? Thank you. We see, and we have already started to see and we will see, you know, the last buys first on the conventional business, which is going to improve the top line of the conventional business. It has already happened for CFL-ni, but it will also happen for fluorescent, you know, in the coming quarter because the ban is happening later, you know, in the year. That's the impact on conventional. We see already a positive impact on LED. If I was looking at DDP, the LED lamps and luminaire business is having a positive traction, which is indicating that while customers are going more and our distributors are going more for LED, anticipating the ban. We have developed, as I was saying in my introduction, specific technologies to replace specific products, you know, LED products to replace the products that are going to be banned. We see a good and positive traction on the LED side, given this. Here we're talking more, you know, when we talk about fluorescent tubes, it's more on the professional side of the market than on the consumer side of the market. The other positive element for us is that we have been able to also adapt the Ultra Efficient technology to fluorescent tube, which is going to give an additional incentive for customers to go for it, given the additional, you know, energy efficiency that this is bringing. A positive impact, you know, before the ban on conventional, but also a positive impact on LED as customers now are transferring, you know, faster to LED given the ban. Thank you. Thank you. Our next question now comes from Wim Gille of ODDO BHF. Please go ahead. Yes. Good morning. Can you hear me? Yes, we can. Very good. I actually have two questions. First, you mentioned during the Q&A that the impact, the one-off impact that you mentioned on the adjusted EBITDA of the hedging, was about 40-50 basis points in Q1. Is it fair to say that the impacts or excluding this impact, your adjusted EBITDA would have been EUR 8 million higher in Q1? Can you give us a bit of feeling in absolute terms what the trajectory will be throughout the rest of the year as you recoup those of that impact? The second is a bit of a follow-up on the fluorescent lamps and the halogen pins that are going to be banned in August and September. You mentioned a positive impact on the Conventional business. I assume this is related to the fact that your clients are stocking ahead of the ban, being able to basically supply their end customers for still, or more further. Can you quantify that forward buying for us, in terms of absolute numbers? Also, what is the size of the business, particularly on the fluorescent tubes? Thanks. Yeah, I'll take it. Hi. Good morning. I'll take that. The numbers are slightly lower than what the impact of the hedge unwinding in Q1 is between EUR 4 million and EUR 5 million. Again, as I said, we probably still gonna see a slight negative in Q2, but then completely offset in the second half of the year. A swing from half one to half two will probably be from a kind of from a minus EUR 6 million-EUR 7 million to probably a plus EUR 7 million-EUR 8 million in the second half. That's kind of the order of magnitude that we're talking about to Q1, Q2, what happened the second half of the year. On your second question, Wim. Yes, you're right. You know, ahead of the ban, and that's what happens in general, when there is a ban. In terms of absolute size, especially on the fuel side, it's clearly more than on the non-integrated, fluorescent technology. Look, we don't give, you know, absolute numbers, but you need to know it's totally manageable, you know, within the environment that we're in. We know how to manage these bans and these reductions. It's already all is planned, not only for the last buys of our customers, but for the ramping down of the factories that we need to effectuate, you know, in order to adapt our costs. All is done and launched as we normally do it. Thank you. Thank you. Our last question for today comes from Sven Weier of UBS. Please go ahead. Yes, good morning, and thanks for taking my questions. The first one is on the IRA. I was just wondering, Eric, is there anything more you need to do in terms of moving maybe assembly or production to the U.S. to qualify for the credits? That's the first one. Thank you. There are many different incentives that we see in the U.S. Let me tell you the one that we see impacting us pretty much directly and probably fast is the Infrastructure Investment and Jobs Act, the IIJA. Here we see a funnel being built up, so it's more infrastructure, you know, investment. That's one element. On the IRA, you know, it's been there for a longer time. It's not as obvious, you know, how we're gonna benefit from that, really maybe more on the consumer side, that there is a potential for us to do something there, and we are contemplating possibilities. There is the build, you know, in America objectives. We are sizing the opportunity at this point in time. You may know that recently this has been put on the back burner because the conditions to be able to comply with what was, you know, firstly, you know, addicted was very complicated for the actors on the market. I think this is being revised, you know, at this point in time. We have plans, you know, in some of our factories for indoor and outdoor business on how to comply and we believe that we are better placed than most because we still have, you know, substantial part of our, you know, industrial base, which is in the U.S. We have selected the plants that would be, you know, eligible for the Build in America. We're doing everything, you know, as as we speak. Frankly speaking, I see it as a positive element for us and an opportunity if we do the right things and we're working on it. Second question I had, Eric, was on the impact of the volatility in electricity prices, because obviously last year been moving up a lot, providing an incentive to move from conventional to LED. Now it's the opposite. I mean, what's the impact? Is that causing irritation, especially among your energy intensive client on horticulture? Is that also having maybe not so good effect on the top line momentum at the moment? If you talk specifically about horticulture, it has been a big issue for us. First of all, you know, our customers, well, stopped investing because the price of electricity and the price of energy in general was such that those business could not be run profitably. We have even some extreme situations, but they are quite numerous, where some of our customers had a contract that was partially variable and partially fixed, so 50% variable and 50% fixed, you know, in how they were buying energy. They basically stopped 50% of their production, and they continued only with the 50% where they had fixed prices. We've seen also some other customers in the horticulture segment that stopped producing the goods, whether it was, you know, flowers or vegetables, and used the fixed price that they had on the energy purchases to resell that energy to others. You know, they preferred to make that business rather than the traditional one. What we see in the market at this point in time, the price of energy and the cost of electricity has gone down to levels that would ensure to these customers that they can run their business profitably. The volatility that we have seen in the past quarters is leading them to be very cautious. The projects are there, the projects are lined up, I think that at this point in time, there's still a cautiousness in investment. We see agriculture, at least in Q1, being again, you know, a quite substantial detractor in our professional business. We'll see what the future brings. In the midterm to long term, that business will go back up. You know, we need to find a substitute, you know, to ensure food security. There's absolutely no issue, you know, directionally when it comes to that business being a strategic one. In the meantime, we have seen customers hesitating a lot and not investing given the volatility of the energy prices, you know, in the past quarters. Thank you, Eric. Thank you. That concludes today's Q&A session. I'd now like to hand the call back for any additional comments or closing remarks. 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. Thank you. That concludes today's call.