Welcome to the Royal Philips' Third Quarter 2025 Results Conference Call on Tuesday, November 4, 2025. During the call hosted by Mr. Roy Jakobs, CEO; and Ms. Charlotte Hanneman, CFO, all participants will be in a listen-only mode. Please note that this call will be recorded, and a replay will be available on the Investor Relations website of Royal Philips. I will now hand the conference over to Ms. Durga Doraisamy, Head of Investor Relations. Please go ahead, madam.

Hello, everyone. Welcome to Philips' results webcast for the third quarter of 2025. I'm here with our CEO, Roy Jakobs; and our CFO, Charlotte Hanneman. The press release and investor presentation can be accessed on our Investor Relations website. The replay and full transcript of this webcast will be available on our website after this call concludes. I want to draw your attention to our safe harbor statement on the screen and in the presentation. I will now hand over to Roy.

Thanks, Durga. Good morning, everyone. Thank you for joining us today. We entered the third quarter with good momentum. We sustained it and delivered on plan for the quarter. Order intake grew 8%, marking the fourth consecutive quarter of improvement. It reflects the robust demand for our products and our disciplined execution. Comparable sales growth stepped up sequentially to 3% year-on-year. All businesses contributed to growth. Personal Health delivered particularly strong performance. Adjusted EBITDA margin expanded by 50 basis points to 12.3% in spite of the full quarter impact of currently imposed tariffs. It reflects solid gross margin delivery driven by innovation as well as the impact of our productivity and cost management. Overall, our performance in the first 9 months is tracking as expected, with momentum weighted towards the second half as orders and growth build through the year. We are delivering on our commitments, and we contain and sustain this momentum with disciplined execution into the fourth quarter to achieve our full year plan as we complete the year. We reiterate our full year comparable sales growth outlook in the range of 1% to 3%. We expect our 2025 adjusted EBITDA margin to be at the upper end of the 11.3% to 11.8% range, reflecting our confidence in our execution. We continue to expect full year free cash flow to be between EUR 0.2 billion and EUR 0.4 billion. These expectations assume current tariff levels remain unchanged with mitigation fully on track. Now let's look at our third quarter performance in more detail. Starting with orders. Equipment order intake grew 8%, maintaining the momentum we have built over the last 12 months, including the typical quarter-to-quarter unevenness in large orders. Year-to-date, our order book is up 6% compared to last year. Our strong order performance in Q3 was driven by a sustained double-digit growth in North America. Strong order growth in Connected Care was partly offset by a modest decline in D&T. Within D&T, order growth in Image-Guided Therapy and Ultrasound in Q3 was offset by a small decline in Diagnostic Imaging following 3 consecutive quarters of positive order intake growth. We are pleased with 6% year-to-date order growth in D&T, driven by solid performance, and we continue to focus on strengthening commercial execution in DI and expect improvement in Q4. In Image-Guided Therapy, where we lead in minimally invasive procedures for cardio, neuro and oncology interventions, demand for high-end Azurion 7 system remained strong. Growth in Ultrasound orders reflects robust demand for our further enhanced leading EPIQ CVx systems, which highlights Philips' leadership in cardiovascular care. These AI-powered solutions enhance precision, streamline workflows and boost clinical confidence. Turning to Diagnostic Imaging. The demand for our BlueSeal MR 5300 and CT 5300 remains strong. We also advanced CT and MR innovation in radiation therapy planning, which I will touch on shortly. These systems, together with our strong imaging informatics offer are resonating with customers for their precision diagnostics and AI-driven workflow productivity, positioning us well for renewed momentum ahead. In Connected Care, demand for our hospital patient monitoring solutions continued to gain momentum. North America remains a key growth driver with strong demand, supported by major partnerships and continued hospital standardization with strong cybersecurity demands. We are especially pleased with the traction of our latest IntelliVue MX patient monitors, the AI-powered PIC iX central monitoring systems and our X3 transport monitors equipment measurement modules. With collaborations and partnerships that span the industry from Edwards Life Sciences to Medtronic, Masimo and Getinge, we have created an efficient interoperable patient monitoring and real-time data platform that addresses the key customer priorities. It's the ecosystem platform of choice for patient monitoring. Building on the strong value proposition, we expanded our enterprise partnerships as reflected in some new ones that we announced this quarter. For example, our monitoring and service agreements with leading U.S. health systems, such as Hoag Health System in Orange County and Rady Children's Hospital in San Diego. They empower our customers to focus on what matters most, improving patient outcomes while we handle system complexity. Moving to Enterprise Informatics, which also contributed to Connected Care's order growth in the quarter. Migration to the cloud remains a strategic priority to unlock further value in this business. This quarter, we signed a multiyear agreement with a major U.S. health system to move its radiology imaging to the cloud. And it's using Philips IntelliSpace Radiology on Amazon Web Services for that, improving efficiency, scalability and security while enabling future AI innovation. Turning back to Personal Health. Growth was strong and broad-based across all three businesses: Grooming and Beauty, Oral Healthcare, and Mother and Child Care. Sell-out trends remained healthy across Europe and most growth geographies. China remains subdued amid cautious consumer sentiment, and demand in the U.S. remains resilient. We saw strong demand for our premium products, including high-end shavers and IPL hair removal devices in Grooming and Beauty, but also for our Diamond Clean Series in Oral Health Care. Our continued investment in innovation fuels the momentum in orders we are delivering across the portfolio. In Q3, we expanded our pipeline with solutions designed to accelerate growth, enhance customer value and drive consumer engagement. We launched Transcend Plus in Ultrasound across our EPIC and Affiniti systems. It's featuring enhanced imaging and 26 FDA-cleared cardiovascular AI applications, the most in the industry, supporting faster, more consistent diagnostics. Similarly, in radiation therapy treatment planning, we continue to advance our innovation pipeline. At the American Society for Radiation Oncology, we introduced Rembra, Areta radiation therapy CT scanners and BlueSeal MR radiation therapy, which expanded our radiation oncology imaging portfolio and our sustainable MR leadership. Moving to consumers. We are also strongly driving our innovation pipeline in Personal Health. Last month, TIME named the Philips i9000 Prestige Ultra one of the Best Inventions of 2025, a clear example of how our SenseIQ Pro AI technology continues to drive leadership in premium grooming. Our latest launches continue to resonate, not only with consumers, but with high-performing retailers, too. Lumea IPL debuted in the U.S. exclusively on Amazon with strong early uptake, and the next-generation Sonicare 6000 and 6400 models launched exclusively with Walmart. We continue to execute our priorities; from enhancing patient safety and quality, to improving supply chain resilience, and simplifying our operations. Our multiyear program to strengthen quality systems and embed a patient safety-first culture is delivering steady progress. In 2025, we passed six out of nine FDA inspections with no observations. Between 2024 and 2025, our 15 FDA inspections resulted in a 43 issuance rate, nearly 60% lower than in '21 to '23 despite a comparable number of inspections. Against that background, the FDA warning letter issued last week is disappointing, and we are fully committed and in full remediation since Q2 to resolve all observations to the agency's satisfaction. We continue to work constructively with the regulatory agencies, also on new innovations. And we already received 27 FDA clearances through Q3, matching the total for 2024 and demonstrating an accelerating approval rate. We have also reduced global field actions by around 20% year-to-date, following a similar reduction last year, while we continue to improve complaint handling and strengthen corrective and preventive action processes. We remain fully focused on driving measurable lasting improvements in our business in collaboration with the global regulators and on reinforcing trust among patients, clinicians and investors. Moving to supply chain. We continue to make executional improvements. In Q2, we announced a multiyear nationwide agreement with the Indonesian Ministry of Health to expand access to therapy using our Azurion platform. Now we are already installing the first system, a clear proof point of our speed and agility and execution strength. This collaboration exemplifies the broader progress we are making across our supply chain, where we continue to deliver tangible operational impact and greater resilience in an uncertain supply chain environment. This is also demonstrated by the continued increase in service levels across health systems modalities, reaching 87% in the quarter, a new high and another sequential step-up. Finally, we continue to simplify how we work with a more connected organization that focuses talent and resources where growth is happening. This shift is fueling continued progress in productivity and in performance. Turning to the regions. The fundamentals of the markets we serve remain sound. Dynamics vary per region. And in some areas, uncertainty is increasing. In North America, hospital demand remains strong with continued customer pull for platforms that deliver productivity to serve more patients at lower costs and to achieve better outcomes, increasingly enabled by AI. That said, demand is unevenly spread across hospitals and regions of the U.S. As hospital resource constraints in people and costs increase, they seek smarter, more productive ways to manage higher workloads with fewer staff while serving more patients. So productivity has become a defining theme for our customers, one that sits at the heart of our innovation agenda. And this positions us well to capture growth, reflected in the sustained double-digit order intake growth over the past 12 months in the U.S. In China, tender activity has been gradually increasing throughout the year, although from a low base, fueled by stimulus measures. At the same time, centralized procurement kept expanding, which meant longer processing times and tougher competition, making it harder for bidding activity to translate into meaningful market growth. We continue to have a cautious view on the near-term outlook for China, but remain positive about the market's long-term growth potential. Capital spending remains stable in Europe and Latin America, while India and Saudi Arabia continue investing in healthcare and digitization, creating strong opportunities. In an uncertain environment, staying close to our customers and partners is more important than ever. We are also actively engaging with leading industry associations like AdvaMed in the U.S., and MedTech Europe as well as authorities in key markets. Our objective remains clear: to advocate for patients and ensure access to care. Every dollar, euro or RMB spent on tariffs is one not spent on innovation. We must ensure tariff measures and trade barriers do not hinder innovation, access or affordability of care. We remain closely attuned to evolving customer and consumer dynamics to stay agile and responsive. We innovate to deliver better and more care. Charlotte will now discuss our third quarter performance in more detail and our outlook for 2025.

Thank you, Roy. The group achieved 3% comparable sales growth while our three business segments delivered 4.3%, underscoring the strength of our core operations. In Diagnosis & Treatment, comparable sales improved sequentially, in line with our expected phasing, increasing by 1% year-over-year. Image-Guided Therapy delivered solid growth, nearing the mid-single-digit range, marking consecutive multiyear expansion; a remarkable track record of consistent performance fueled by strong momentum in our flagship Azurion platform and strength in coronary intravascular ultrasound devices. Precision Diagnosis sales were broadly in line with last year. Strong growth in Ultrasound was driven by continued strength in cardiovascular, led by our EPIQ CVx systems. This was offset by a modest decline in Diagnostic Imaging, primarily due to the timing of orders. Our flagship products continue to perform well, particularly the CT 5300, which delivered a strong ramp-up in order conversions following its launch last year; the major contributor to a further improvement in gross margin within Diagnostic Imaging. Adjusted EBITDA margin decreased by 80 basis points to 11.8%, mainly due to the incremental headwinds from the currently imposed tariffs and cost inflation, partially offset by gross margin from recently launched innovations as well as productivity. Absent these headwinds, both gross and adjusted EBITDA margins improved year-on-year, highlighting the underlying strength and demonstrating robust operational execution. In Connected Care, comparable sales grew 5%, supported by strong growth in Monitoring. This was partially offset by lower Sleep & Respiratory Care sales, while Enterprise Informatics remained stable. Growth in Monitoring was driven by higher installation of the latest IntelliVue MX patient monitors, X3 transport patient monitors and AI-powered PIC iX central monitoring systems across most geographies with particular strength in North America. Adjusted EBITDA margin improved by 410 basis points to 11.4%, including a 150 basis point gain from the remeasurement of a minority investment. Excluding this gain, the margin improved by 260 basis points to 9.9%, driven by operational leverage in the Hospital Patient Monitoring business, favorable mix effects and productivity, partially offset by tariffs and cost inflation. In Personal Health, comparable sales increased by 11% in the quarter with broad-based growth across all regions and strong performance across the three businesses within the segment. This sustained strong performance reflects robust demand across most geographies, including a resilient customer sentiment in North America. Growth was also supported by an easier comparison base in China following the impact of inventory destocking last year, which concluded in the second quarter of 2025. Personal Health adjusted EBITA margins improved by 60 basis points to 17.1%, driven by increased sales and productivity, partially offset by tariffs. Impacts from advertising and promotion spend remained slightly elevated year-on-year, though lower than in Q2 to support sustained demand and recent launches. These investments are delivering as intended, contributing to higher sales growth and are underscored by strong demand for our premium products across all businesses. Finally, sales in Other decreased by EUR 41 million, primarily due to lower royalty income as we expected, resulting in a EUR 21 million reduction in adjusted EBITDA for the quarter. Turning to our group results and operating highlights for the third quarter. Comparable sales growth improved sequentially, aligned with our expected phasing, increasing 3% with broad-based growth across all three segments, partially offset by lower royalty income as expected. Comparable sales in mature geographies grew 3%, led by North America with contributions from all segments. Growth geographies increased 5%, driven by strength in Personal Health and Connected Care, while Diagnosis & Treatment was broadly flat. Adjusted EBITA margin increased by 50 basis points to 12.3%, driven by higher sales, favorable mix effects and productivity measures, which more than offset the impact from incremental tariffs and lower royalty income. With tariffs evolving, we continue to actively mitigate their impacts, strengthening our ability to execute with consistency and deliver sustained performance. The impact year-to-date is tracking in line with our expectations. For full year 2025, we continue to anticipate a net impact of EUR 150 million to EUR 200 million after substantial mitigation with no revisions since the outlook we provided in July. As planned, short-term tariff mitigation initiatives in the third quarter focused on inventory management, specialty programs, exemptions and cost discipline and helped reduce the tariff impact. We also advanced medium-term initiatives meaningfully, including our supplier network and commitment to manufacturing location optimization. In August, we announced a USD 150 million investment in the U.S., which will not only expand production, but also strengthen both cost efficiency and local supply continuity. We will continue progressing similar initiatives across the portfolio, carefully balancing regulatory, operational and customer considerations. In Q3, we delivered EUR 222 million in productivity savings, bringing the year-to-date total to EUR 566 million. We remain on track to achieve the EUR 800 million in productivity savings in 2025. Our disciplined approach to cost management and productivity initiatives has cumulatively delivered EUR 2.3 billion in savings since the start of our 3-year plan in 2023, exceeding our initial commitment to delivering EUR 2 billion by the end of 2025. As we build on this strong foundation, we are increasingly leveraging AI to unlock the next wave of productivity gains across the company. In Personal Health, since the second quarter, more than 80% of our marketing content has been created or enhanced using GenAI tools. This includes how we generate insights, we find creative content and even how we manage digital assets. These capabilities are already improving productivity and have delivered an increase in return on investment up to double-digit returns. In Enterprise Informatics, AI is accelerating R&D through greater use of AI-generated code, enhancing customer support with predictive AI agents and strengthening sales and marketing through AI automated content creation and real-time buyer analytics. For example, in customer support, our AI agents automatically perform remote system health checks and proactive maintenance, reducing support costs by 80%. In the quarter, adjusting items amounted to EUR 122 million, of which EUR 40 million were related to Respironics field action and consent decree remediation. This is below our Q3 2025 outlook of EUR 165 million, mainly driven by cost phasing within the year. Income tax expense increased by EUR 22 million, reflecting higher income before tax, while net income rose to EUR 187 million, mainly driven by higher earnings. Adjusted diluted EPS from continued operations was EUR 0.36 in the quarter, up 13% year-over-year, driven by positive contribution from growth. Despite significant volatility in major currencies, particularly the U.S. dollar, the impact on our adjusted EBITDA margin and EPS was broadly flat, reflecting disciplined hedging and optimized currency footprint and targeted commercial actions in markets most exposed to currency fluctuations. We delivered strong cash flow performance this quarter with free cash flow of EUR 172 million, representing EUR 150 million improvement year-over-year. Higher earnings drove this. Moving to the balance sheet. We ended the quarter with approximately EUR 1.9 billion of cash and net debt of approximately EUR 6.5 billion. We maintained our disciplined focus on working capital, delivering a solid year-over-year improvement in inventory as a percentage of sales despite ongoing tariff mitigation initiatives. Our leverage ratio remained in line with Q2 2025 and last year at 2.2x on a net debt to adjusted EBITDA basis. We remain committed to maintaining a strong investment-grade credit rating. Turning to the outlook. With 3 quarters behind us and continued strong execution, we have solid visibility for the remainder of the year. Our expectations for Q4 remain unchanged from the start of the year. We continue to expect sequential improvement in comparable sales growth, supported by sustained order conversion, sustained momentum in Personal Health sales and disciplined execution. For the full year, we continue to expect comparable sales growth in the 1% to 3% range with Connected Care growing within this range, Personal Health slightly above the mid-single-digit range and D&T delivering slight growth year-over-year. Year-to-date adjusted EBITDA margin improved to 11.2%, a 40 basis point increase despite higher tariffs, driven by strong execution and cost discipline. With continued momentum and even with the impact of tariffs, which is more pronounced in the second half of the year, we now expect full year adjusted EBITDA margin at the upper end of the 11.3% to 11.8% range. Turning to free cash flow. We continue to expect a full year range between EUR 0.2 billion and EUR 0.4 billion. As a reminder, this outlook includes the EUR 1 billion outflow related to the Respironics settlement paid in Q1. Our outlook excludes potential wider economic impact as well as ongoing Philips Respironics-related proceedings, including the Department of Justice investigation. With that, I would like to hand it back to Roy for his closing remarks.

Thank you, Charlotte. The third quarter progressed as expected, and we remain confident in delivering on our full year commitments. Looking ahead to our Capital Markets Day in February 2026, we will showcase the fundamental progress achieved under our 2023 to 2025 plan, establishing a strong foundation for the future. And we will share how we will and are evolving this into a next 3-year plan of consistent value creation and focused value acceleration. I'm incredibly proud of our passionate teams, staying close to customers, executing with discipline and keeping our momentum throughout the end of this year. Thank you, and we are now ready for your questions.

The first question comes from Mr. Julien Dormois from Jefferies.

I have two. The first one would relate to a general question around price hikes going forward. You are obviously out of a period of inflation and also the tariff impact. So just curious how you think about price increase going forward. We can remember that 2 or 3 years ago, the whole industry proceeded with price hikes at the end of the inflation crisis. So just curious whether you should expect some benefit from that in the next couple of years. That would be my first general question. And the second question relates to PH. Obviously, a super strong quarter on easy comps. So just curious whether there is any restocking effect in China and maybe help us understand what was actually the contribution of China in this quarter. And that's it.

Thank you, Julien. Let me take the first one and then maybe Charlotte can take the second. So on the pricing, so as you have seen also from our bridge, kind of we are driving our margin expansion on the back of two key drivers that we see taking effect. One is expansion of gross margin. And that actually is especially the new innovations generating more traction in the total percentage of orders and then flowing through to sales. And that's where we see actually that price increases do support our margin, as well as the productivity and cost discipline actions that we are taking. We expect in the coming period that there will be some pricing given the inflationary environment that we're in. But we also know that kind of actually the inherent value increase of our innovations and how we price them in combination with kind of productivity and cost will be the bigger driver of that. So we see pricing opportunity, but not to kind of a large extent that kind of we also would impede growth because growth is still of critical importance, and we will keep driving that whilst we expand the margin at the same time as you have seen.

Yes. And then thank you, Julien. Your second question on Personal Health. We are very pleased with our Personal Health sales in the quarter of 11% indeed. As I said also just earlier, partially that was helped by a low comparable base in China. But even excluding China, we saw broad-based growth across all businesses and geographies. So very pleasing. And on your question on the restocking in China, we don't see any restocking. In fact, as we said, we finalized the inventory destocking at the end of Q2 and continue to be very, very cautious on making sure that those inventory levels are in line with our expectations. So no restocking now.

The next question comes from Ed Ridley-Day from Rothschild & Co Redburn.

There has been a notable improvement in productivity this year despite the challenges you've encountered. How should we consider sustaining that momentum into 2026? Specifically regarding tariffs, you have nearly fully mitigated the tariff impact this quarter. Should we anticipate that you can completely offset the annualized tariff effect next year?

Thank you very much, Ed. Let me take that question. So first of all, we're very much focused on 2025 and delivering in line with our expectation, which is now at the higher end of the 11.3% to 11.8% range. And as you rightfully mentioned, we've been able to compensate a lot of the tariffs while we still have a net impact of EUR 150 million to EUR 200 million after substantial mitigation. And that gives us a lot of confidence. Now if I look ahead at 2026, of course, we have our Capital Markets Day on February 10, and we're looking forward to giving you a lot more details at that point in time. What I would tell you in broad strokes is we are happy with the momentum that we've seen from an order intake perspective, from a sequential sales step-up perspective, from a margin perspective. So we are very focused on continuing improving on all fronts, but more to come on February 10 from that perspective.

The next question comes from Hugo Solvet from BNP Paribas Exane.

Congrats on the results. I have two, please. First, can you expand a bit on the order timing in D&T? And how would you expect Diagnostic Imaging sales to evolve going forward? And second, Roy, happy to get your thoughts on Section 232. How do you think this could impact Imaging and Connected Care business? And where do you stand exactly on reshoring of manufacturing in the U.S. in particular?

Thank you, Hugo. Regarding the timing of orders, we are pleased with the 6% growth year-to-date in D&T. However, it is not yet evenly distributed. Q2 was particularly strong for D&T, while Q3 is expected to be robust for Connected Care. As we build our order momentum, we're seeing large deals come in, and we anticipate D&T will continue to grow in Q4, as reflected in our sales funnel. Although there is some inconsistency, the underlying improvement is clear, and we are also seeing a rise in sales. While the order conversion timelines are longer, we expect an improvement in Q4, which is also evident in DI. Our strategy focuses on two areas: growth businesses with higher margins that we drive explicitly for growth, and margin expansion businesses, both of which are performing well. We have expanded margins in DI, EI, and SRC in Q3 and are driving strong growth across other growth businesses. We aim for both margin and growth expansion from all segments, and we're progressing according to our strategy. We will continue to strengthen our D&T trajectory into Q4 and beyond, coinciding with the launch of new innovations like the radiation therapy suite and upcoming announcements at RSNA. Concerning Section 232 and tariffs, there is significant fluctuation, so we are concentrating on what we can control to mitigate any impacts. We successfully offset tariff impacts in Q3 and aim to maintain strong margins in Q4 as well. We are actively engaged in discussions to lower tariffs to minimize their effects on patient care. Additionally, we've strengthened our presence in the U.S. with a EUR 150 million investment in Reedsville to expand our ultrasound and broader facilities. We're also optimizing our other facilities to meet localization needs. This aligns with our supply chain trajectory, where we have enhanced our delivery and agility to face challenges such as tariffs or supply chain disruptions. We are committed to improving our service levels and ensuring resilience amid surrounding uncertainties.

A couple for me. Firstly, a follow-up on D&T, please. Last quarter, Roy, you talked about your win rate improving in China, particularly in CT on the back of spectral. How is that faring today? And do you think your softer China order commentary is a function of market growth or share losses or both? And then secondly, just if you can expand on the warning letter in ultrasound and informatics and what gives you confidence that this will not result in regulatory action, and that your more recent quality improvement measures are yielding company-wide change?

Thank you, Hassan. Regarding D&T, we have indeed observed increased traction for the 5300, CT, and MR, and this is reflected in our sales funnel. Additionally, ultrasound has shown significant growth, which helps alleviate some concerns related to the warning letter. We have been actively increasing order intake and sales for ultrasound while simultaneously addressing the remediation efforts since Q2. This issue is not new; we received the warning letter at the end of Q1 and began our remediation in Q2 and Q3, which hasn't impacted our results. We are confident this won't affect our outcomes, as the focus is on process remediation rather than product or patient safety issues. In China, the situation is mixed. I would describe the market momentum for health systems as subdued, with overall growth not returning as expected. We see an increase in tenders, but they are not converting into order growth due to longer processing times and disputes, which is a challenge for the entire industry. On a positive note, ultrasound's contribution to our performance has increased, and IGT is showing improvement. We experienced some slowdown in DI, which was stronger last quarter, and we are making efforts to strengthen that area as we look to Q4. The outlook for China is uncertain, but we anticipate improvement, albeit we remain cautious. It's important to note that the D&T segment in China is larger than the CC part, which weighs more heavily on the overall portfolio. Furthermore, in North America, DI orders have grown by 16% year-to-date. While we are growing, we are starting from a smaller base, but there is momentum. We continue to engage strongly with our customers, hosting many for co-creation sessions, and I believe we are positioning ourselves well for the coming year, building momentum through each quarter.

Roy, if I could just quickly follow up. In your prepared remarks, you talked about tougher competition on the ground in China as well as some of the market issues that you just talked about. Where is that manifesting itself?

Yes. I think what I mean with the tough competition is that in, of course, the centralized procurement, you have a much more regulated process around competition. And that makes that we see, and I think everybody is facing that, that you kind of much more guided in that process. There are more disputes coming out. So when you have one, people are rebottling it. So that's, I think, where you see on the ground that it's becoming tougher because it's not only clinical preference, there's also more process in the mix. I think that is a fair depiction of the China situation, and that's something that we all are dealing with, I think, all parties. And you saw it also, I think, in some commentary of others. I think we are working through that. I think on the other side, we also mentioned that kind of we are working to offset. And that's not only short term, but also longer term. The strong momentum of double-digit orders in North America, of course, is also a big part of mitigation for that. And there also, we could still deliver 8% total order growth despite that China is not back where it is. And of course, there, we are firing also on the strongholds that we have. And CC was particularly strong this quarter, but also we continue to build on the rest. So as we are shifting to get where the demand is coming more contribution, that's North America, but also Europe, you also see that kind of we will be building that into our sales of the various underlying segments.

We will now take the next question from Mr. David Adlington from JPMorgan.

Firstly, maybe just would be good to get your thoughts on GE's decision. Can you hear me?

Yes.

Yes. Regarding GE's decision to sell its Chinese business, do you think there is potential to gain market share? Also, what are your thoughts on their reasons for wanting to exit China? Additionally, as the hedges on foreign exchange expire, what kind of impact do you anticipate that will have on margins for next year?

Okay. So on GE, of course, I cannot speak on behalf of GE and what they're doing. What I do see is actually that indeed on the ground, we are dialing up our competitive positioning around innovations that we've been launching. And as I said, kind of we see that also is resonating. We saw the Ultrasound pickup. We see also that there is kind of more activity, but kind of we need to materialize that. And I think overall, globally, you see that we have good order momentum, and kind of that is because of the customer preference for our platforms. I think the approach of innovation that we are taking where we're really looking into the broader productivity and workflow support supported with a combination of products and AI, and Informatics is something that is resonating. So I would say that's kind of our competitive differentiation and where we have three strong platforms that we're pulling from, that customers can build upon, and they are interoperable and open so that kind of we can play with partnerships in the industry as well to strengthen the delivery towards customers. I think that's on the first part. And maybe you can take the second on FX, Charlotte.

Yes, absolutely. Thanks, David. So your question on FX. And of course, we're very pleased we're not seeing any impact from an FX perspective in Q3. Now if you go and also look at Q4, that's where we do expect some currency headwinds to come in, which also will impact our margin, and that's fully included in the guide of the higher end of the 11.3% to 11.8%. And where we will get that out in February, we'll also take the currency impact into account in our guide there. But what I would tell you overall that we've been doing very well in terms of offsetting any currency impacts, as you have seen also in Q3.

We will now take the next question from Mr. Graham Doyle from UBS.

Just two for me. Just firstly, on the tariff side of things. Just conceptually, when we think of the order book growth you've had, which probably would support, say, mid-single-digit growth next year, you think of the cost savings and the mitigation you've got in there. Just to be fair, is it reasonable to assume margins can expand next year with tariffs where they are at the moment? Just to get some clarity on that. We're not asking for a level, but just to assume that they can expand. And then just on China, we're hearing quite a bit about VBP within the CT and Ultrasound segments. And I know a couple of your peers have seen it, but mainly because they play in the sort of lower end of mid-level hospitals. Is this something that's affecting your business? Or do you just not play in those categories?

Thank you, Graham. Let me take the first question on tariffs. So as you know, so for this year, tariffs after substantial mitigations are impacting us to an extent of EUR 150 million to EUR 200 million. And despite that, we're expanding our margins at this point in time at the higher end of the 11.3% to 11.8% margin, so by 30 basis points. You said it, of course, the tariffs are annualizing next year, so that will be a little bit of a bigger impact. But the way we are looking at it is we know every year we need to improve, including the new reality around us. And one of the big new realities around us is tariffs. So without wanting to go into any specifics at this point in time because we'll do that on February 10, what I can tell you is that we're very much focused on improvement, improvement from a sales perspective, improvement from a margin perspective and also improvement from a cash flow perspective.

On the CT and Ultrasound question regarding VBP in China, the procurement rollout is quite extensive, and we are also feeling its effects. We perceive this as a market phenomenon contributing to some of the slowness we are experiencing. This situation leads to longer processing times and a more coordinated approach to purchasing, which continues to impact market growth in China. We have observed this trend in our results as well. On a positive note, we have seen growth in Ultrasound due to some of our new launches. We are also developing the pipeline for the CT segment and are witnessing tender activity, but it hasn't yet reached completion. Therefore, we remain somewhat cautious about how this situation evolves, as it is still unpredictable when activity will translate into orders and subsequently into sales.

The next question comes from the line of Veronika Dubajova from Citi.

I am going to ask two, please, and a very quick third one, if you forgive me, just because that's one word, hopefully one. But I just want to circle back to the downgrade to the guidance, to the sales guidance for D&T. And obviously, Roy you've talked a lot about China, but can you sort of confirm that the downgrade is entirely just China related? Or is there anything else that you're seeing in other regions that's worrying you there? And I guess, how you feel about that kind of D&T growth momentum exiting this year underpinning this roughly 5% growth rate that consensus has for next year? If you can talk to that, that would be my first question. My second question is the low single-digit growth rate in IGT, quite a deviation from the trend that we've seen through the last couple of years. So curious if you have some thoughts on that. And again, if you can elaborate on what's driving that? And my third very, very quick, yes or no question is, do you expect the warning letter to have any impact on your ability to return to the CPAP market through the next 6 to 12 months?

Okay. Let me start with the D&T. So on the sales momentum, yes, there is some China impact in that. But the other portion that we have seen is also some longer conversion cycles of orders. There's no particular kind of other reason that we see in other regions. I said kind of especially in DI side, of course, we have a different footprint in terms of more weighted towards Europe and China and a bit less in North America, where we are building. But I also mentioned to you that we are actually building that with double-digit order growth. So actually, we are stepping that up, and we expect that also to continue. So yes, whilst the overall mix is a bit changing in the year, we remain with 1% to 3%. I haven't heard too many people talking about CC. It was quite extraordinary this quarter how they delivered in terms of the demand that there is as well as kind of supported in hospital-based monitoring and in kind of EI. So of course, we're tapping the opportunity and also growing and leveraging the strength of our portfolio in fullest. And that also holds true actually for IGT. So in IGT, the CSG has been high, especially if you look also then in terms of the compare from a 2-year comps in Q3, and that was also supply chain related. You see that kind of explains some of the low single-digit growth. But actually, we keep very much leading in IGT. The new launches are contributing to that. People are really excited about not only what we have been launching, but also the piping with Azurion and other innovations that we have. So actually, we remain very excited about the interventional opportunity that's out there and that we also keep pursuing. Then on the warning letter, no, I don't expect any impact to the CPAP market because these are two separate topics. The CPAP has its own kind of SRC-related demand. As I mentioned earlier, we're fully on track in kind of working through those. This is a separate warning letter we need to address, and we are in full remediation of it. And as I said earlier, we don't expect any commercial impact of it. So in that sense, yes, it's a disappointment, and we are kind of acting it with very strong discipline follow-through, but we don't expect that to have any further operational impact.

We will now take the next question from Mr. Richard Felton from Goldman Sachs.

Two for me, please, both on Connected Care. So first of all, I suppose just a follow-up on the strong order performance in Connected Care. Could you maybe add a little bit more color on what was driving that? And how much benefit was there from the longer-term partnerships that you signed in the quarter? And then secondly, on Enterprise Informatics specifically, I think it's roughly a year on since you extended your partnership with AWS to advance cloud services. How has that partnership impacted your Enterprise Informatics business from both a top and bottom line perspective?

Yes. Great questions, Richard. So let me start with Hospital Patient Monitoring and CC development there. I think we have been seeing strong demand on the patient monitoring side. And in combination with, I would say, really unique ecosystem that we have been building, we see us really winning. And that's not only kind of building on the momentum in the market, but also then kind of really taking positions also of competition. That is built also with partnerships. Now we mentioned two in the quarter, but it's not only of that, it's quite broad-based and also across regions. You know that we play mostly outside of China. So of course, CC doesn't have that China impact, but it's really kind of driving a very strong North America contribution. They're investing in patient monitoring, standardization, but also patient safety is important there to watch over their patients as well as the cybersecurity part. And we have been really also driving the partnership approach as you have been seeing. So we kind of offer a full open modular approach, and that's really working for the market and for our customers. So I think a winning formula there that we expect to continue to deliver results. And that not only has been driving order sales, but you saw also strong margin contribution because, as you know, the Hospital Patient Monitoring business is also a strong margin business. Then on EI, we also mentioned strong contribution from EI in the quarter. As I said, we drive, of course, EI for margin. So we saw margin improvement, but we also were very pleased with the order improvement. And that indeed is really also in combination with that offer that we have with AWS. The cloud migration is a big topic. Not only the cloud migration, we do also AI and some language model collaboration with them. So we see that really kind of supporting the engine. They're also doing some marketing and sales efforts because they, in essence, co-sell our solutions as well as that we, of course, support their cloud services when we go out to customers together. And that is a formula that also works within the market and with customers.

We will now take the next question from the line of Wim Gille from ABN AMRO ODDO BHF.

I have two questions actually. First, you reported 8% order intake growth in Q3, predominantly driven by CC this quarter. You also gave some color during this earnings call on the funnel for Q4, but I missed that answer. So can you reiterate it, basically giving a bit of granularity on how you see the sales funnel and the order intake develop into Q4 for both D&T as well as CC? The second question is related to E&I, Enterprise Informatics. As I understand it, order intake was pretty okay, but sales have been flat also in Q3 and was also quite disappointing or relatively low in the previous quarters. which reads a bit disappointing vis-a-vis market growth there. So what has been holding you back in the last couple of quarters? And when would you expect the order intake in E&I to come and convert into sales growth here?

Yes. Let me maybe take the first one in terms of the order momentum. So we said kind of when we look to the year, we expect a strong full year delivery of orders where we continue on the track that we have been building. So a positive order intake also into Q4, probably a bit more evenly based with CC and D&T. As I've said, kind of has been a bit lumpy through the quarters. But in Q4, we expect it to be more evenly based. Then depending on kind of what big orders will fall, you will see kind of this will have potentially some impact in Q4 or we see it next year back, but a strong finish in orders. Then on sales, also there, kind of we have said before, we are stepping up and also we will step up in Q4. And that will be across the different segments. So we will expect contribution from everybody in that step-up. So PH continue to be strong. We see CC continuing and also D&T stepping up. So in that sense, I think we maintain the momentum as we also signaled, and that's built up on the funnel. Now of course, still 2 months to go. So working hard to kind of get it over the finish line with our teams, but all kind of geared towards delivering upon what we also have guided for. And I think that's, of course, a reiteration of what we have been planning for and saying all year long.

Yes. And then maybe your question on Enterprise Informatics. Indeed, as you pointed out, our order intake has been very strong in Q3 for Enterprise Informatics, and we're very pleased with that. You probably also know that the order conversion cycle from order to sales in Enterprise Informatics is pretty long. So it will take quite a while for order intake growth to convert into sales. And Roy just spoke about AWS and our AWS partnership as well, which will also help contribute as we move customers to the cloud will also help drive sales growth there over time.

We will now take the next question from Mr. Falko Friedrichs from Deutsche Bank.

My first question is, how did the Respironics business perform in Q3? And are you seeing the momentum build as you reenter European markets? My second question is there has been a very large number of earnings adjustments again in the third quarter. Is that something you plan to significantly reduce going into 2026?

Yes. Let me take the first one, Falko. So on SRC, I think two parts. One, as I said before, of course, we have been driving very strong margin improvement. We have seen very strong margin realization in Q3 of SRC also that also contributed to the strong CC margin step-up. So that part of the strategy is fully working. Also, we have seen really the OSA portfolio, so the sleep apnea portfolio stepping up. So we see actually as we're returning into the market, actually, that's something that is delivering growth to us. Where we see it being offset is with ventilation. There actually, we have improving portfolio and also been taking out. So that actually is going at the cost of the sleep momentum. So therefore, in the mix, you see that there is a slight pressure on the sales because of that ventilation reset. But we are very encouraged and excited by the fact that in sleep, both on the devices, but also the masks we see it stepping up. And that, of course, with the reentry that we have been doing across the various countries now in due course of this year.

Yes. And then Falko, I'll take your second question on the adjusting items. And although adjusting items came in significantly lower than we had guided for, I absolutely acknowledge that they're still high. And the moving pieces are, on the one hand, we continue to have costs related to the consent decree, Respironics consent decree, that will reduce over time. The other element is that we continue to have restructuring costs as we're continuing to simplify our operating model and to simplify Philips as a company. Now having said all of that, we are very much focused on, and it is a priority of mine to reduce adjusting items over time. So that is what we're fully focused on. There's a lot on the table there, a lot of strengthening of processes that we're doing. So over time, I see the reduction in adjusting items. And what I would also tell you is that adjusting items have already come down versus 2024 and 2025. So this is a journey and a trajectory we're on.

The last question comes from the line of Mr. Oliver Reinberg from Kepler Cheuvreux.

I have two questions. First, I want to discuss the margin impact from the reduction of innovative SKUs. I believe this is an ongoing effort, but could you provide some insight on when you expect this measure to peak? Will it likely be next year as you work through the order backlog, or do you anticipate the margin contribution will be similar to what we see in 2025? Additionally, when you adjust your product portfolio, what has been the challenge regarding comparable sales growth? My understanding is that you are not factoring that in. My second question is about the Americas. You mentioned increased uncertainty in certain regions. Does this also apply to the Americas, where we've noted varying dynamics by region? I'd like to understand how confident you are that growth in North America will persist into next year.

Thank you, Oliver. I'll address the first question regarding the margin impact from the SKU reduction, which we refer to as Project Synchronizer. Looking at our margin improvement trajectory, part of this improvement is tied to gross margin enhancements for various reasons. We see an uptick in gross margin due to innovations that are delivering higher margins. Additionally, the SKU reduction has played a significant role, for example, we have significantly reduced the number of transducers in ultrasound, leading to lower research and development costs, lower quality costs, and reduced supply chain costs. All these factors contribute to margin improvement, which we observed in the third quarter. For instance, our gross margin in Diagnostic Imaging has improved year-over-year despite the tariffs, which highlights the positive impact of our innovations, such as the CT 5300 and MR BlueSeal, on gross margin expansion alongside the effects of Project Synchronizer's SKU reduction. In terms of how to view this year-over-year, this is an ongoing journey. We’ve started to see some impact in 2025 and expect further effects in 2026 and beyond. Regarding the sales impact, there isn't a significant issue that I can highlight at this moment. There hasn’t been a major influence on CSG as I perceive it now. Our focus is firmly on our innovative products and intensifying efforts to sell those effectively.

Yes, maybe conclude on North America. So actually, indeed, we see kind of winners and losers in the U.S. So we see some smaller hospitals really being pressured. They're also more dependent on Medicare and Medicaid patients. So some of those also in urban areas. So there, actually, we see there's a lot of pressure. We are working with them on productivity solutions more. And then we see the ones that are strong are expanding, and we're also very strongly winning with them. So therefore, actually, you have seen sustained momentum in North America, also our double-digit order intake growth. We actually expect that to continue. We have no signs yet that kind of this market from the needs that we are serving is cooling down. And that's, I think, good news. So we actually expect continued strength in North America. That's also why we have kept investing in winning in America with the further footprint, the specific customer relations and partnerships that we are concluding there, and we are excited about the opportunity there.

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

Thank you all for your questions. In summary, we fulfilled our commitments in Q3 with an 8% growth in order intake. We experienced a positive increase in sales growth to 3% and expanded our margins despite tariffs. We are now fully focused on delivering results in Q4 and are reiterating our sales range of 1% to 3%. We aim to achieve the upper end of our margin and ensure strong cash flow, which should position us well for 2026. We look forward to engaging with you at the CMD. Thank you for your attention and your questions, and have a wonderful day.

This concludes the Royal Philips Third Quarter 2025 Results Conference Call on Tuesday, November 4, 2025. Thank you for participating. You may now disconnect.