SIGNIFY N.V. (LIGHT) Q2 2026 Earnings Call Transcript

Welcome to the Signify's second quarter and half-year 2026 results conference call, hosted by Oz Tempelman, CEO, Soko Kosanovic, CFO, and Telka Gerdes, Head of Investor Relations. For the first part of this call, all participants will be in listen-only mode, and afterwards, there will be a question-and-answer session. If you wish to ask a question, please press pound key 5 or your telephone keypad. Please note that you're limited to one question and a follow-up per round. I would now like to give the floor to Selva Gerdes. Ms. Gerdes, please go ahead.

Good morning, everyone, and welcome to Signify's second quarter 2026 earnings call. Before we begin, I'd like to draw your attention to forward-looking statements, risk and uncertainties, and non-IFRS financial measures disclaimers on this slide. With me today are our CEO, Az Tempelmann, and our CFO, Selko Kosanovic. During this call, us will discuss the highlights of the quarter and key business developments. Selko will then walk you through the financial performance in more detail. Us will then come back to discuss the outlook and closing remarks. Our press release and presentation were published this morning at 7 o'clock on our Investor Relations website. A transcript for this call will be made available soon after the call. And with that I would like to hand over to us.

Thank you Jelke and good morning everyone and thank you again for joining us today. Our second quarter results reflect a mixed market environment and we have started to implement the strategy we introduced at Capital Markets Day in June. now looking first at our build portfolio professional projects continue to grow in the united states and rest of worlds where we are outperforming the market at the same time professional stock and flow the trade side of the business remained weak across most geographies particularly in europe now in our consumer business the connected lighting performance needs some explaining sell out so meaning the sales to consumers remained strong and was growing and that is also reflecting the strong underlying demand for our products however the retailer de-stocking continued to weigh on our sell-in as it did in the first quarter and this impacted both our top and bottom line on the positive side we delivered continued growth in India and luminaire's growth worldwide now then moving on to the harvest portfolio that is our our more commoditized upstream manufacturing activities including k-lite and oem continued to face demand challenges our lamps manufacturing company k-lite was affected also by component availability and cost inflation at the same time consumer lamp sales were resilient and our conventional business delivered a strong recovery in profitability and that is a good example of an effective execution of our strategy importantly the turnaround playbooks for underperforming areas are in full execution and we know what needs to be done we are seeing positive traction from pricing with further targeted increases underway alongside ongoing cost actions and operational improvements and together these actions support our confidence in delivering stronger profitability in the second half of the year finally an important also employee engagement and the response to our new strategy has been very positive which is critical as we begin to execute with greater focus and with discipline. Now, some examples of our strategy in action. You see it here on the slides. At Capital Markets Day, we shared that we would be making targeted investments in our professional business. And stadium lighting is one of the focus areas within our professional Europe business. And on this slide, and actually throughout the presentation, you see the newly renovated Stade Armand Césarie in Furiani in France. It is a great showcase of our integrated offering for stadiums, so dynamic lighting, smart controls, architectural highlights, and 3D printed fittings. And this connected lighting project was delivered in collaboration with our certified system integrator partner. Important that we are well connected in the ecosystem to help this project and bring it to life. Moving on to consumer, in line with our entertainment focus in the consumer business, we introduced a new way to enjoy match day at home. And that was particularly relevant, of course, during the World Cup. Our sports live feature for you and Philips Smart Lighting triggers real-time lighting effects that react instantly to big events in the game, such as goals or yellow cards, creating an interactive full room experience. And it's a great example of how we can use lighting to make homes more entertaining and fun. And we have a great community of highly engaged U customers. And this was reflected by the very high level of adoption during the World Cup tournament. Moving on to sustainability. This is actually the first progress report on our Brighter Lives Better World 2030 program, which we launched at the start of this year. and the program focuses on improving lives saving energy and preserving resources and on the slide you can see the four kpis and the progress against each of them towards the 2030 targets and basically we're off to a good start on track and just ahead of our h1 targets which puts us on the right path towards these longer term ambitions let me now hand over to selco who will discuss the financial performance selco thank you as and uh good morning everyone so yeah i will now walk you through the

our second quarter financial performance so total sales were 1 billion 333 32 million euro this quarter with a comparable sales decline of 3.6 as market conditions remain mixed pricing pressure continued to ease across the business, supporting the top line. We saw sequential improvement across both our build and harvest portfolios. Adjusted EBITDA was at 81 million euros, resulting in an adjusted EBITDA margin of 6.1%. The margin decline was mainly driven by a lower gross margin in consumer, where higher input costs outpaced price realization during the quarter, combined with lower fixed cost absorption on weaker volumes. Overall our indirect cost resizing program remains on track which will provide increasing support to our operating margin improvement through the second half. And finally free cash flow was broadly stable at 35 million euro compared with 36 million euro last year supported by continued working capital disciplines. Moving now to the professional business, so the professional business continued to demonstrate resilient profitability in a challenging market environment. Comparable sales declined by 2.5%, mainly reflecting continued softness in stock and flow across most geographies. At the same time, project activity remained resilient in the U.S. and the rest of the world, where we continue to outperform the market, partly offsetting weaker demand in Europe. Despite the lower volumes, the gross margin remains stable at around 40%, supported by disciplined pricing and ongoing cost management. As a result, the adjusted EBITDA margin was 7%, with the modest decline primarily reflecting lower operating leverage on reduced volumes. Looking ahead, our cost reduction program remains on track, and the turnaround actions we have initiated in Genlite are progressing well and are expected to provide increasing support to profitability. Moving on to consumer on slide 11, the business remained broadly resilient from a top-line perspective this quarter with a comparable sales down 0.2%. Connected continue to see strong consumer sellout, confirming healthy underlying demand for products. However, lower retail selling, driven by ongoing inventory normalization, continue to weigh on our reported sales. Outside of connected, we saw strong growth in our luminaires business and another very good quarter in India. These positive developments were partly offset by weaker performance in China and lower sales at K-Lite, which was impacted by components shortages, delaying the supply delivery of its order backlog. So let me now explain the development in profitability. The adjusted EBITDA margin declined to 3%, primarily for three reasons. First, the lower connected selling resulted in lower fixed cost under absorption and creating operating deal leverage. Second, we experienced higher bill of material and other input costs during the quarter. We implemented targeted price increases, which started to gain traction, but there is naturally a timing lag before these fully offset the higher cost. And finally, the K-Lite performance area facing stronger headwinds on its profitability, both in fixed cost absorption and in higher input cost. Looking ahead, we are implementing several actions across our different performance areas to sequentially improve the profitability of our consumer business, including additional price increases and further cost reduction measures. Turning to OEM business on slide 12. So OEM continued to operate in a very challenging market environment, particularly in Europe and in the US. Comparable sales declined by 12%, reflecting continued market softness across the business. At the same time, we continue to see encouraging dynamic on pricing with competitive pressure easing further compared with previous orders. Adjusted debita margin was 4.6% despite continued headwinds in volume and also input cost. The profitability continued to improve sequentially quarter over quarter as the execution of the turnaround is on track supported by the structural actions taken to significantly lower the fixed cost base. And finally the conventional business. Comparable sales declined by nine percent as the general lighting continued its structure of volume decline in line with the market. This was partly offset by positive pricing and also the continued growth in the specialty lighting. Adjusted EBITDA margin improved to 18.1 percent with the underlying profitability restored in line with our plants. This was supported by the normalization of manufacturing operations pricing and cost discipline with additional non-recurring positive effects looking ahead we remain focused on maintaining a strong level of profitability while continuing to carefully manage the structural decline of the business turning to profitability on slide 14 so the adjusted EBITDA bridge so the adjusted EBITDA margin declined by 170 basis points to 6.1 percent lower volume had a negative impact of 90 basis points reflecting reduced fixed cost absorption on the positive side price and mix combined contributed positively reflecting reflecting the traction of our price increases improved mix and easing pricing pressure across the business at the same time cost of goods sold became a higher a larger headwind in this quarter many reflecting the faster pace of input cost inflation particularly in consumer where there is usually a time lag before price increases fully offset these costs in total price mix and cogs had a negative contribution of 90 basis points broadly in line with the quarter one but with very different dynamics on both drivers indirect cost reduction provided a positive contribution of 40 basis points reflecting the continued benefits from our resizing action and ongoing cost discipline currency had a 50 basis point negative impact on the adjusted ebita margin in the quarter this was primarily driven by non-hedge currencies including the us dollar which was addressed and offset through pricing actions as for other cost inflation elements that said we have clear plans and operational efficiency initiative in place across all our businesses and performance areas and this is this gives us confidence in delivering a stronger profitability performance in the second half of the year finally let me conclude with our working capital performance slide 15 so compare with last year working capital improved by 107 million euros primarily driven by lower inventory inventories and trade receivables as a percentage of sales this translates into an improvement of by 120 basis points to 6.3 percent reflecting our continued focus on discipline working capital management with that let me hand back to us to conclude today's presentation thank you selco and indeed to conclude you know while market conditions remain mixed pluses and minuses we feel genuinely

positive about our strategy and the start of the execution of that strategy we are very clear about where the opportunities and the challenges are and we know what to do target price increases are gaining traction our cost initiatives remain on track the turnaround actions are in place in our underperforming areas and underway so as all these measures take effect you know we expect to deliver an improved profitability in the second half of the year as also mentioned by Zalco and accordingly we confirm our full year guidance of an adjusted EBITDA margin of seven and a half to eight and a half percent and a free cash flow generation of six and a half to seven and a half percent of sales. Now this I think concludes our prepared remarks and operator we are now ready to begin the Q&A session please.

Yes ladies and gentlemen we are now ready to take your questions. If you wish to ask the question please press pound key 5 on your telephone keypad. Remember that you are limited to one question and a follow-up per round. The first question comes from Daniela Costa from Goldman Sachs.

Please go ahead hi good morning i will ask the one question and the follow-up um first i guess can you talk a little bit what what you think is driving the retailers to the stock connected products if the actual sellout has been strong and i guess you've been talking about it being improving for um some months so why would why are they de-stocking in this type of environment yeah thanks daniela for the question indeed uh on the back of the q1 earnings i did mention that i expected that convergence to happen in q2 it it was slower than we expected so we do see the

convergence however stock levels are now uh at in based on our data in the range of uh of eight to to nine or ten weeks depending on the retailer so that is just i would say just on or below normalized level so we we see now that convergence happening and that's why we also feel more confident going into the third quarter what is exactly around you know behind what retailers do you know how retailers optimize their inventory positions you know they clearly came from a much higher coverage in terms of number of weeks and now now they are at these levels you got it thank you um and then just um can you talk a story you know i know aipa was was

uh very minimal this quarter you've mentioned to the gain is not substantial um you obviously had a sizable imbalance i guess you you with imports into the us do you expect it to become more substantial into the second half how shall we go about quantifying it what do you include in guidance.

Yeah, good morning, Daniela. So maybe what I can say on the IEPA is maybe more on the on the process, because we of course diligently, as you know, there are different phases. So the phase one, which was completed end of April, phase two end of June, and then the phase three expected end of July. So we are doing the filing, as you mentioned, this was indicated in our half-year report proceeds which were not material received and reflected in the first quarter. So look for now, of course, the amount and the timing remain uncertain. So we will be communicating, of course, in due time on all the implications and how it will translate into the financial. For now, to your question on the guidance.

So the guidance, as it's being confirmed, does not include any additional impact from that from that side that would eventually materialize in the second half of the year okay thank you very much the next question comes from max gates from morgan stanley please go ahead uh thank you good good morning i just firstly wanted to ask around the cost savings program um you know of the 180 million could you give us an an idea of how much you recognized in the quarter are we at the kind of normalized quarterly run rate which i guess would be low 20s million

if it was going to be saved over two years and maybe any color on just how to think about that 180 million phasing this year and next in terms of when the cost savings will be allocated from a p l perspective rather than a run rate perspective yeah well thank you for the question so on the first on the on the the progress so we are uh we are totally on track and even ahead of the plan and the phasing we had defined for the realization of the gross savings for the 180 million of course is related to the gross savings linked to the the resizing and the structuring action that we have taken so since we had um so it's a little bit more it's more concentrated on the second half of the year right and the reason for that is because we were of course uh conducting all the consultation uh process with the social partners which have been satisfactory and completed across the board. So hence, the majority of the savings will be captured in the second half of the year, but we saw an acceleration in the second quarter. So what we said is that the intent is to get the full benefit from a, let's say, run rate perspective leading to 2027. So that's the goal and that's the aim to get the run rate exit of 26, capturing the full benefit of the 180 million gross savings. of course the gross savings are partially netted by inflation, cost inflation and targeted investment that we are supplying specifically in our build portfolios. So well on track.

And what was it in the quarter? I can't give you the exact amount in the quarter, I think we don't discuss the exact, but what I can say is that it's way on track with the plan that leads to the full capture by the end of the year, that's what I can say on Q2. okay and maybe my maybe my follow-up would just be if i look at the phasing of your ebit you know even to get to the low end of guidance you're going to have to do you know it'll be about 40 percent in the first half 60 in the second you've done that kind of once in five years you know the the the end market environment is difficult inflation is still happening so maybe if you could point us towards kind of the two or three things that really give you confidence in getting that kind of outsized second half of EBIT because obviously you know it looks like maybe there should have been a guidance reset today um you know there have obviously been multiple so i think people will be concerned that we have another guidance cut you know which has obviously followed on from quite a few years of disappointment so maybe kind of the two or three things that give you confidence in getting that kind of second half recovery in EBIT please thank you yeah thank you the question and totally fair question of course looking at where we're on the first half so look for the for the second half of the year i think three three main drivers and three three dynamics number one improved toplines both in nominal term because we do have of course and that's the normal

seasonality a stronger second half of the year compared to the first half in nominal and both in nominal and in comparable sales growth terms so there we do see as was mentioned earlier by us on the dynamic of in our build on harvest portfolio a sequential improvement on the top one so that's one second gross margin resilience of course as you mentioned but we've had those situation in the past increased uh price increase inflation on the on the input cost so there we do have also action so this is all about managing price mix and cost of good cost of goods sold in combination to manage the gross margin resilience which has been the case for the first half of the year in most businesses except consumer in q2 as we indicated so there we do have a clear plan for the gross margin resilience third the increased contribution from uh our cost resizing program so this is back to your previous question where the contribution and the benefits of the cost savings will be increased in the in the third part of the year now i would say in addition what is very important is across the board this improvement is that is expected is also linked to the the strategy execution in action that has referred to we have a very very clear plan across all the performance areas and with all the different playbooks that do apply if you for example look at the you know we have a clear turnaround playbook applicable for the oem business the oem business profitability has been sequentially improving quarter over quarter we expect that to continue in the second half of the year and a structural profitability improvement. We have performance areas where maintain high profitability applies so that's the example of conventional where we have restored the profitability and expect to maintain that in the second half of the year. It's also the case for consumer lands for example and we do have also a few performance areas where the operating leverage applies and that's the case of consumer connected professional projects and and india so we have a very clear plan for each of the performance area which are really supporting the development and the improvement which which is behind the confirmation of the guidance for the second half of the year that's really helpful thank you the next question comes from martin wilkie from city please go ahead yeah good morning

thank you it's martin from city the first question is just to come back to consumer and obviously i and hear what you're saying in terms of selling and sell out. But when we look at the sort of headline numbers, revenue is probably better than people were expecting, but the margin weaker. Is there a mixed effect inside that as well in terms of the non-connected business just having a sort of structured lower margin than connected?

Just to explain why optically the margin decreases probably more than you'd expect given the relatively muted decline you had on comparable sales growth. yeah no look i think there is there is an element of mix but i would say this the two the two biggest driver i mean if you really look at the the and this is basically 80 percent of of the erosion is first on the the or let's say manufacturing right the lance manufacturing business k light which which is also structurally on a much lower level of gross margin i think there we've been facing a combination of a very very tough combination of headwinds because you've had on one hand shortage on components which unable to you know did not able to unable to deliver on the backlog so that was a volume impact and then in that kind of manufacturing business the under coverage impact was very heavy we've seen also on the cost inflation side this is where the components cost inflation has been particularly heavy and faster and the timeline of addressing that surprise is obviously more difficult so that was a second in which so in combination that had a big impact although the size of that business for the total consumer is not that big but the the impact on the margin for that business has been quite significant on the other hand for the connected part I think there is intrinsically that sell-in sell-out gap which immediately translated on the under coverage. So I think these two components, I think they represent most of the impact and then we have smaller impacts on other elements and some negative one-offs. But broadly speaking, this is more about the intrinsic impact on those two businesses. I would say the connected part is transitory, clearly. On the K-Lite part, the upstream manufacturing there, it's more structural because there you really have that headwind on volumes you have that of course headwind on cost inflation that need to be addressed but we are very very clear so we understand exactly what the issues are on those two areas and we have very clear plan uh for the for the second half of the year so the mixed element to your question to be fair has been uh limited to explain the you know the uh the erosion uh of the of the consumer ebitda margin in q2 great that's that's really helpful and as a follow-on and also related to destocking in professional you've obviously talked about stock and flow again but just to be

clear is that also sell-in versus sell-out is the stock and flow levels of inventory at your distributors normalized or so this is just really about the end market or how should we think about what's driving that weakness there well on the that that again is a mix so the the destocking effect is is not so uh evident as it is on the consumer side martin what we see on the stock and flow is that you still have some price erosion although we see that easing and then we've just seen also a lower lower demand in those channels right so that's both the price effective as well

as the volume effect uh that we have not we've seen the sales in stock and flow coming down uh and we on the on the other side on projects of course that has been much more resilient great thank you the next question comes from akash gupta from jp morgan please go ahead yes hi good morning and some of my question has already been asked but maybe just a follow-up on a consumer margins development in second half so if you listen to what you have said so far there are quite a number of moving parts here and it looks like some of the headwinds that we have seen in past half will turn into tailwind particularly from the channel inventory point of view but overall when we uh like you know add everything together what's your conviction on second half margin versus last year i mean we saw significant erosion in uh h1 could we see more of a flattish margin for consumer overall in second half or that would be too ambitious that's the first one Look, I think for, you know, as you said, there are different moving parts within the consumer business with different performance areas.

You have, you know, the upstream manufacturing part. So there it's fair to say that, you know, as I said, you know, you have a structural pressure both coming from volume. And that's obviously directly impacting the margin and cost inflation. And we do have, of course, levers to offset, but you're in an upstream manufacturing place. So this is a bit more challenging. So this, I would say, would be probably the most challenging part. And then on the other hand, we see connected is all about leverage, right? So it plays both ways. So we had an operating deleverage unfavorable impact in the first half of the year, driven by this stocking. But then when it goes back into the normalization and the convergence of selling sellout, then you are back into the operating leverage. And this is a business that has a much higher seasonality in the second half of the year. so i think there we are we are clearly seeing that it should you know go back to the levels expected uh price power to offset cost inflation is of course of a different nature we do have also on the lamps uh business right which is more a harvest portfolio within our consumer business where there we see uh strong profitability so very resilient profitability which we do expect to maintain in the in the second half of the year and then we also have luminaires business there we are applying it's one of our built portfolio which has been growing strongly so there we are really uh and this is a pure you know operating leverage uh you know uh

performance area again so i think very different dynamics but to your question i think we expect clearly that we are uh normalizing let's say the level of margin in the second of the second half of the year for the consumer business after what was clearly a challenging uh first half with different moving pieces yeah if i would have to simplify it i mean positive india positive luminaires and lamp sales uh then challenging in q1 was k-lite and connected on the operating leverage and then we had china online which was a challenge and going forward this uh bit price price management you know we see margins improving we will also see inflationary bomb bubble material so that needs to be offset but typically we see much higher sales and connected

in the second half and it will give us that operating leverage and that margin updates thank you and my follow-up question is on exchange rate in the bridge and so when we look at in your pnl um fx headwind on revenues have gone down quite materially in q2 versus q1 but headwind on margins was saying 50 basis points in the bridge can you tell us about what shall we think how should we think about this exchange rate impact in second half is there any chance that it might turn positive in in h2 thank you yeah thank you for the question as you know it's

always a bit difficult to uh problem over at least what we can say because of course we have uh very clear hedging mechanisms in place right so for the for the hedge currency i think uh put simply they've they've worked very well in the in the first half of the year and they they are they are going to continue to play their part now when you look at the non-hedge currency i think you do have movements and there if you have uh you know between the sales currency and the cox currency right we have quite a large part of our supply which is uh china uh based so when you look at the dynamics of the the rmb versus the dynamic of the us dollar for example you have to so this is basically another element of cost inflation that we are fully incorporating as such so it's really looked at if you like the the effects movement as one other flavor of cost inflation dynamic or cost deflation depending on how currencies go which are embedded in the way we manage the margin so how to tell you specifically on that element of the bridge how it would look like but that is what i can say is that for the hedge part under control and fully managed and for the non-hedge currencies it's back to gross margin management discipline thank you the next question comes from rajash okay from barclays please go ahead yes good morning i've got a question on the cost base i mean i think you said the cost savings will

have a lot more meaningful impact in the second half do you expect the exit run rate for uh indirect costs as a percentage of sales to reach a 30 target by the end of this year So as I said, the cost, so yeah, full capture of the gross savings expected as entry into 2027.

Now, to your question, what we have indicated is, and this is what we mentioned during Capital Markets Day, our goal is to bring the overall indirect cost ratio to 30% or below by 2029. So I think looking, of course, at the dynamic of the top line, so we will and we are sequentially improving, but this is not going to lead for 2027 yet to reach the 30% that we have indicated as the objective for by 2029.

And the follow-up is a slightly different cost bucket.

The shipping costs which were at 6.2% of sales last year, can you comment on where you stand for the first half and what have you assume to uh get to the margin guidance thank you yes on the shipping cost that's where we've seen of course uh much earlier in the year right the effect of cost inflation because that also to a great extent link to the uh to the conflict in the middle east so we've seen that transport transportation cost increasing so as a percentage of sales we see an increase uh in the first in the first half but which is of course mitigated and addressed through uh pricing action so i think When we look at the transportation rate, of course, it's a very volatile market. In any given week, you can see different movements, but we do not expect, I think the pressure is already high in the first half. So I think the ramp-up would be more limited, but we have factored that in, of course, in our ergonom, but starting from a relatively high level already in the current cost for the first half of the year.

Great. Thank you very much.

The following question comes from Chase Coughlin from Verlanz Ruttkamp. Please go ahead.

Yes, thank you operator and good morning everyone. Two questions from my end. Firstly, you mentioned that the conventional volume decline from the general market was of course offset by a strong specialty performance and some pricing benefit. Could you remind me how much of that conventional business is specialty today, even approximately?

Good morning, Chase. That is about one-third, just below. One-fourth, yeah, five to thirty percent, yeah. Okay, amazing.

And then my follow-up would be just on the pricing impacts of the year. You've, of course, mentioned you've already taken some pricing action and there should be more to come in the second half.

Could you give an estimate on sort of how much, let's say, the pricing impact on a sales level should be for the full year 26? yeah so if we if we if we look at what happens in the in the in the quarter so the price mix was about neutral for all signify so we clearly see you know an improvement versus the pricing erosion that we saw in the last two calendar years 24 25 so where we where we push up prices in areas where we have higher differentiation and more concentration and of course we are careful doing that in areas where it's more fragmented and more commoditized but but if you would look at it by by business the price mix that professional was more or less flat uh year on year and then consumer the pricing has been lagging and uh versus cost increases in the first first half and that should should catch up in the second half oem continues to have pressures to then negative price mix effect and conventional was a positive price mix effect so it's really a mixed bag in portfolio um and it depends on the mix uh it depends on where we have differentiation and concentration power so it's it's really a bit hard to predict you know to ever set out on the on the second half of the year but it's been uh be more or less neutral effect in the first half and uh we uh yeah that for now that continues okay taking decisive action you know where we

can to of course offset inflationary effects yeah understood great thank you the next question comes from mark has a link from ing please go ahead great uh thanks uh first question is actually uh on on the price increases uh and i think if i read it correct or listen correctly then a significant impact is on k light where you have to increase the prices to protect the margin. But that's also probably an area where it's more difficult to raise prices without impacting volume. So can you maybe talk about the trade-off there and what you then expect for volumes in this business for the second half? Specifically for K-Lite, Mark? Yeah, maybe in general. But I guess K-Lite is an area where it's a difficult market at the moment and where I think it's quite difficult to raise prices without impacting the volumes.

Yeah, well, K-Lite, of course, is really our manufacturing of lamps position in China. That was facing quite a bit of headwinds in the first half because of the shortage of these components, which were very specific also to concentrate to K-Lite. And then we saw lower volumes and undercoverage. So that has been the dynamic of K-Lite. That should improve in the second half. Lamp sales, however, we're pretty resilient in the first half. And it's also a position where we have strong brand power. So we think that we can also take price actions as required on that part of the business.

Okay, great. That's clear. And then the second question is on the margin development, maybe a little bit per quarter. I'm not asking like guidance per quarter, but I've seen over the last few years, typically the third quarter was relatively strong uh already relative to the to the first half of the year and then obviously the the fourth quarter being the strongest i mean how do you expect that that cadence then this year because you still have a quite a difficult comparable base in the third quarter um yeah maybe your thoughts there yeah look at as you say of course uh the the the blended answer will be difficult because you have different different dynamics at play across across the different businesses.

I think this year compared to previous year, I think the pacing of offsetting cost inflation through price, of course, will have an effect, right? Because it will not be applied in the same way across all the performance areas or at the same pace across all the performance areas. So I think there may be a bit of a different pattern, let's say Q3, Q4, compared to what we've seen in the previous year. But the dynamic, back to what I was saying earlier, you know of sequential improved top line gross margin resilience improvements and increased contribution of our costs we will continue to apply from Q2 to Q3 and then of course from Q3 to Q4 so it's then fair to assume that this year will be even more for fourth quarter geared than usual that's fair to assume that yes indeed okay great thanks our final question comes from Adam Parr from Rothschild & Co. Please go ahead.

Hi, good morning. Thanks for taking my question. Could you please help us a little bit more with the split of price mix? Because I know you sort of conflate it. So how much was true price increases versus mix? Given one, you mentioned targeted price increases, but as well it sounds like there's some negative mix coming from the de-stocking in connected. So I just wanted to ask, was overall pricing at the group level positive?

Well, we look at price mix always. And there I indicated it's been a neutral across H1. And we are putting up prices, right, where we see a higher cost input and higher input costs. And we are more careful, you know, in areas that are more commoditized. And then that mix plays out as neutral. That's where we are.

Okay, is there time for a follow-up, if I may? I'll try it anyway. So I just wanted to ask on OEM, is there anything else we should be aware of why it sort of re-deteriorated in the quarter in terms of organic sales growth? Thanks.

OEM, yeah, it's a bit changing. It is a bit volatile quarter to quarter, I have to say. The second quarter, we saw weaker demand and lower sales in europe and the us asia pack actually sales was quite good and now the team is extremely agile applying the playbook as selco indicated earlier really taking out the cost and taking the pricing actions and therefore um you know the we see better results bottom line um you know but there's q3 right i mean will have its own dynamics so i don't necessarily see this this is a trend that needs to continue, like we saw in Q2.

Okay, perfect. Thanks very much. Appreciate that.

We have time for one more question, which will be from Martin Verbeek from the IDEA. Please go ahead.

Good morning. It's Martin Verbeek of the IDEA. What has not been presented in this current press release is the connected light points, which tends to give some indication about your performance in this area. So could you disclose that amount of connected light points?

No, thanks for the question, and indeed we normally put that in, we left it out this time to focus on the strategy, but the latest that I've seen, we stand at 175 million points. We still track it very well.

Okay, thanks.

And secondly, your dividend will be based on your adjusted net income going forward. um so actually what i also missed in this press release was an adjusted net income for signify in the first half just to get a better feel what we could expect for dividend to be paid by signify start of next year yeah so i think you're right so we mentioned it's on the continuing net income so the the way uh has been applied in the past because the the dividend policy as has been communicated is similar, is the same as what was applied previously for Signify, so 40% to 50% of the continued income. So I think the main element of adjustment would be relating to restructuring, so I think you would, so it's a fair point that we perhaps could make that even more visible, but basically if you look at what has been reported, the proxy would be your adjusted, I mean, the net income, restated of the impact of the restructuring. So, but that's something which we can make a bit more visible in the disclosure for sure.

If that's visible, obviously there will also be tax impact, which is not that visible, at least for me.

No, point is taken. I think we can give that visibility and add that into the the school district. Great, thanks.

Just helping us to the end, yeah?

No, I would just like to turn the call back over to Telke Gerdes for any closing remarks.

Yes, ladies and gentlemen, thank you very much for joining our earnings call today and apologies for the technical disruption at the start of the call. So if you have any additional questions, please feel free to reach out to us. And thank you very much again and enjoy the rest of your day.