Earnings Call: Q3 2020

Oct 23, 2020

Ladies and gentlemen, welcome to the SignifAI Third Quarter Results 2020. 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. Please note that you are limited to one question and a follow-up per round. I would now like to give the floor to Rogier Derex. Please go ahead, sir. Good morning, everyone, and welcome to the SignifAI Earnings Call for the 3rd Quarter Results 20 With me are Eric Wongala, CEO of Siglify and Zane Vonscrove, the CFO. Javier Vanagle, who has been appointed as our new CFO and who will take over from Zanae consult after the extraordinary general meeting this week or next week is also joining us today. A moment, Eric will take you through the 3rd quarter business and operational performance and enable them to tell you more about the financial performance in the 3rd quarter and Eric will end today's present with the outlook. After that, we will be happy to answer your questions. CET this morning, and both documents are now available for download from our Investor Relations website. The full transcript of this conference call will be made available soon as possible on our Investor Relations website. And with that, I will now hand over to Eric. Thank you, Roc here. Good morning, everyone, and thank you for joining us today. So let's go to Slide 4 with the main elements of our performance in the third quarter. So the installed base of connected light points increased from 64,000,000 in Q2 to a $20,000,000 to $71,000,000 in the third quarter of this year. Total sales increased by 12.1% at 1,000,000,000 or minus 8.3 percent on a comparable basis. Our connected businesses at team of business performed better than our professional business. AD based sales represented 82% of total sales, compared with 81% last year on a pro form a basis, including Cooper lighting and kelite. We continued to make good progress on reducing our cost base by EUR 22,000,000, a reduction of 4.9%. Our adjusted EBITA margin increased by 50 basis points to 11.5% including the negative currency impact of 30 basis points. This was mainly driven by strong gross margin improvements adopted by rigorous pricing management. Our net income increased from 1,000,000 last year to 1,000,000 this quarter, mainly as a result of improved operational profitability. Our free cash flow of EUR 214,000,000 reflects solid profitability improvements strong working capital management and the consolidation of kelrite and Cooper lining. But last but not least, as steady progress has been made on the integration of Cooper lighting and also at KELITE. I propose now that we move to a slide number 5, where you can see a snapshot of the financial performance of our growing profit engines, digital solutions, and digital products. Superable sales growth of the growing profit engine declined by 7.9% due to measures taken against the spread of COVID-nineteen. And despite the decline in top line, the growing profit engine have improved the adjusted EBITA margin by 130 basis points. To 12.3%. Digital Products improved its profitability by 370 basis points, while the adjusted EBITDA margin of digital solutions remained stable year on year when including the pro form a kupolating financials in Q3 and 2019. Let me now provide you with more details for each of the divisions starting on Slide 6, with digital solutions. Nominal sales increased by 1.2% as a result of the consolidation of Cooper Lighting. Comparable sales declined by 11.2% and reflects a new difficult market environment, albeit an improved trend compared with Q2 and 2020. The most severely impact impacted markets were Latin America, Canada, India, Southeast Asia, Italy and France. LED based sales accounting for 92% of total sales and connected sales are representing 27% of total sales, a excluding Cooper Lighting. The adjusted EBITA margin on 11% remained stable year on year. We're including the pro form a Cooper lighting financials in Q3 2019. On the next slide, slide number 7, you can see some of the business highlights of this quarter for digital solutions. The first highlight I would like to mention illustrates our commitment to climate action, as we switch to LED 1300 luminaires in the port of Antwerp, reducing energy usage by 30%. Were receiving a higher light output than before. This higher light output in turn speaks to our commitment to safety and security as drivers in the port of Anwerp will have a better view on the roads. Additionally, the luminaries are connected to InterX City, driving further operational efficiencies and enabling the measurement of motion traffic and also noise. The partnership with the football club of RB Lightsek is very interesting as it includes the implementation of interact sports for the pitch, the mixed zone, the hospitality areas and interact landmark for the facade. We also equip the club's home of e sports with our FiliTU smart lighting to enhance the experience of visitors. This project also illustrates our focus on health and well-being as we will be installing our UVC disinfection at the air in the commercial buildings, the stadiums, and addressing rooms of the teams. And lastly, we're planning to install true by signifying the press room to ensure journalists and photographers can upload their articles and photos fast and secure further underlining our commitment to safety and security. And we also made progress on strategic partnership First of all, to support food availability by joining forces with scale AQ, we can accelerate the switch to sustainable fish farming across the world. Another partnership supports, safety and security as together with Eskom. We can accelerate the adoption of LIFY by Manufacturing companies in Europe. Let's move on now to digital products on Slide number 8. Nominal sales increased by 1.9 percent to 1,000,000, comparable sales declined by 2% and sales in the consumer channel showed a strong performance. Connected base sales represented 21% and sellout rates in Connected Home remain robust. Demand in the OEM and professional channels continue to be impacted by the COVID 19 situation. The most severely impacted markets with Canada, India, Southeast Asia and Indonesia. The adjusted EBITA margin improved by 3 seventy basis points, driven by positive mix impact from the Connected Home business, solid price management, continued COGS saving, and the ongoing successful integration of KLIGHT. There are a couple of business highlights that we would like to bring to your attention and that on the next slide, this is Slide number 9. So illustrating our focus on health and well-being, we now launched the UVCD infection consumer desk plant to help disinfect viruses and bacteria from homes in different countries in Asia and the Middle East. The lamp are equipped with voice guidance and a built in sensor that shuts off the device when detecting movement to provide for an extra layer of protection while the initial launch has taken place in the country's use on the slide, we're also looking at the introduction in other geographies. We have also made further progress in smart lighting for consumers by introducing the new Philips Hu Play Great And Flight Street to provide TV viewers with an even more immersive viewing experienced than before. The light strip is specifically designed for this purpose and could be mounted behind any TV with included brackets for easy installation and an optimal design 45 degree light projection. It is also The first light stream that is pixelated, meaning that consumers can produce an almost unlimited combination of colors on one light stream that can seamlessly blend together and provide more new ones than ever before. We have also launched, 100 new WEEZ products in four continents that combine Bluetooth and Wi Fi technology. Further expanding, I will share in the smart lighting market. These products include a smart plug, a sensor remote and a wide range of, bulbs and spot in different color ranges. Let's now turn to Slide number 10, to discuss the performance of conventional products. Our comparable sales decreased by 11%. The business declined less than in previous quarters as we benefited from strong demand for consumer lamps, UBC lamps and Horticultural lighting. We believe that the decline in sales is lower than the market decline resulting in continued market share gains. At the same time, conventional products continue to generate high solid free cash flow. On the next slide, Slide 11, I would like to give you an update on the good progress we made on our sustainability targets. In the 1st 9 months of 2020, sustainable revenues represented 83.6% of the total revenues, exceeding our 2020 target of 80%. We sold 2,700,000,000 LED lands and luminaires in the period from 2015 till the 1st 9 months of 2020, well ahead of our commitment to deliver more than EUR 2,000,000,000 Alliance and Luminess at the end of this year. We are very pleased that we have achieved carbon neutrality already in September, ahead of our objective We have also decreased our waste to landfill by 92% compared with last year, and we are ahead of our targets related to a safe and healthy workplace and a sustainable supply chain. So while we are progressing towards our commitment for 2020, We will already end back on a new 5 year journey in which we focus on doubling our positive impact on the environment and also on society So that's what I wanted to extend with you. I will now hand over to Ronet, who will tell us more about the financial performance for the third quarter of 2020. Thank you, Eric. Let's go to Slide 13 where you see the adjusted EBITDA bridge The adjusted gross margin as a percentage of sales increased by 200 basis points in Q3 2020. Including a currency effect of minus 10 basis points. This improvement is mainly a result of continued strong pricing management, and ongoing bill of material savings. Pricing was well managed across the divisions. Horizon erosion in LED lamps and electronics continues to slow down while we have been able to selectively increase prices on parts of our portfolio. Our indirect cost base decreased by EUR 22,000,000 compared to Q3 2019 when excluding the impacts of ForEx and changes in scope as allments, excluding the acquisitions of Cooper in 2 free 2020, we will still have an improvement in the adjusted EBITDA margin year over year. The overall ForEx impact on the adjusted EBITDA margin was minus 1,000,000. Scope and other improves the effects of Cooper lighting and KOLED acquisitions. Let's now go to Slide 14. You can see the quarterly development our indirect cost base. We continue to make solid progress on reducing our indirect costs. At a very early stage of the COVID-nineteen outbreak, a broad range of mitigation actions were identified to preserve profitability. Furthermore, we benefited from the carryover effect from the many initiatives that were we have implemented last year, and in the first half of this year. As said, this has resulted in indirect cost savings of 1,000,000 in Q3, excluding the effect of currencies and changes in scope. We had a positive currency impact of 1,000,000, hence our adjusted indirect costs were 1,000,000 excluding the scope additions by adding 1,000,000 coming from scope effects related to the Cooper lighting and KOLED acquisitions, We ended with the total adjusted indirect cost of 1,000,000. We continue to work on initiatives that will further decrease the indirect cost base. We will stay on top of what's happening around us and our depth of cost base as soon as we see things changing. Let's now look at at working capital in the third quarter of 2020. On the next slide, Slide 15. When we include sales of Cooper lighting, and highlights on a 12 month pro form a basis. Working capital decreased by 300 basis points to 6.4% of sales in Q3 2020. The improvement was mainly driven by agile inventory management, and active monitoring of receivables and payables. Inventories as a percentage of sales reduced 210 basis points to 14.4% when including the sales of Cooper lighting and KLite on a 12 month pro form a basis. Let's now take a closer look at our debt position, net debt position, on the following slide, Slide 16. Following the debt repayment of EUR 350,000,000 to reduce our overall approach debt position, our cash position decreased by EUR 264,000,000 to EUR762,000,000 at the end of Q3 twenty twenty. Net debt decreased 1,000,000. Next to the profit we generated in the quarter, and the change in working capital I just mentioned, you can see the other items in the bridge that impacted cash and thus our net debt position. Net CapEx was 1,000,000 in the quarter. Next to that, We paid EUR 27,000,000 for tax and interests. Other include cash used for derivatives, acquisitions, new lease liabilities and foreign exchange effect on cash, cash equivalents and debt. In addition, we repurchased shares for a total consideration of 1,000,000 to cover obligations arising from long term incentive performance share plans and other other employee share plans. All in all, our net debt position amounted to 1000000000 at the end of Q3. This has resulted in a reduction of our net leverage ratio from 2.4 at the end of June to 2.2 at the end of September. Before I hand Over to Eric, I would like to inform you about our foreign exchange outlook. Based on the prevailing spot rate, at the end of September, 2020, the currency impact on the adjusted EBITDA margin for Q4 2020 is expected to be minus 10 basis points and around minus 30 basis points for the full year. Let me now hand back to Eric for the final part of this presentation. Thank you, Rene. Let me now go to the final slide of the presentation, which is Slide 21 and to discuss the outlook. So given the uncertainty, brought by the rising number of COVID-nineteen cases as SignifAI does not provide financial guidance for the full year 2020. We remain confident in the underlying resilience of our business in an operating model and that our liquidity needs well covered by the financial framework we have in place and during the virtual capital market day, toward 20, which is scheduled to take place on December 9, SignifAI will provide more detail on its expectations for the medium term. With that, I would like to open the call for questions, which Rune, and I are going to be very happy to answer. Ladies and gentlemen, we are now ready please remember that you are limited to one question and a follow-up per round. Our first question comes from the line of Martin Wilke of Citi. Please go ahead. Your line is now open. Thanks and good morning. It's Martin from Citi. So a question really around how you're seeing the the the business process normalize. And obviously, we've seen pent up demand, perhaps some some restocking effects, things like that. If you could talk just a little bit about the phasing in the quarter as to how you've seen the business progress some of these items that might begin to slow now. And also related to that from your own cost perspective, obviously, we know there were lots of cost actions taken the things that were stopped beforehand, like marketing or things like that need to restart now, just to get some sort of sense as to how things normalize from here in terms of your progress? Thanks. Yes, good morning, Martin. The thing is we are not in a situation of normalization yet. We thought at the beginning of the year that we would have a difficult Q2 and then that the situation will stabilize. You've seen as much as we see it ourselves. The rate of increase of infection cases has now been taking place, which is bringing uncertainty in the near term. So I will not talk about normalization on the market yet. We still see on the professional side, of the trade, but also to a given extent on the consumer side, but to a lesser extent that the level of the inventories are not at the levels at which they were before the crisis. And given the uncertainties that we have ahead, we still see our customers not willing to replenish the inventories at the historical levels. There is still across and user segments a lot of variety and still a market that is not fully redeployed. When we talk about the public, segment. This is probably the one which is still having a fair bit of traction because of investment in infrastructures, supporting by different types of stimuli. But when you look at the retail, professional customers, except probably food retail, the other part of that market is really down and it has not improved. We see a slight improvement recovery at this point in time on, the hospitality business, but it's not come back to its historical levels. Offices is down on the industry side, I think there's a lower traction for manufacturing plants, equipment. But on the other hand, we see a lot of on the warehouses. So we are still in a period of relative high level of uncertainty, and I don't think we are close to a normalized situation. From a cost perspective, so you would remember that we had savings of around 56,000,000 in Q1, eighty 6,000,000 in Q2, but in Q2, we had also the measures that we did with place in terms of solidarity, which were around $30,000,000 on the non manufacturing costs, the indirect costs that would bring them back compared to Q1 around 56. We have commented that it is 1,000,000 for Q3. But we also have to take into account as the differential between what happened in Q3 last year and Q3 this year. Last year, we had to release some provision. And this year, we accrued linked to the fact that we had a bit of a worse performance last year than we expected and probably a bit of a better one this year than expected, which would bring the delta in terms of cost much closer to, 15 to 20. So from a cost perspective, you know, what has been done all over the year is quite consistent and, of course, helping the performance. But your question is very important because moving forward, We're operating in a people are working from home. We're not traveling a lot. So we're looking at what should be our lending point in terms of cost, if the activity goes back up, meaning that we resume our normal way of doing business with the top line that may still be impacted at least in the shorter term. And we're working on it at this point in time. Martin, we're looking at what can be done in the most structural way in order to adapt the cost structure of the company to whatever we have in of us. So we remain very adaptable to the situation. Thank you. Our next question comes from the line of Lucy Karier of Morgan Stanley. Please go ahead. Your line is now open. Hi, good morning gentlemen and thanks for taking my question. My first one actually is around the renovation market. I was hoping you could give us maybe some indication in terms of within the portfolio, your share of nonresidential business versus resi. And if we think about the non resi exposures specifically, how much of that exposure is subjected or is is driven by what I would call substantial renovation project. And if you would have that indication for Europe considering the announcement on EU Green deal, that would be quite helpful. That's question number 1. So, much stronger traction in in the residential market, but I think, you know, it will you've seen the numbers in the in the U. S. That were very, very positive. But when we come to the non res, we estimate that about 40% of our turnover is depending on that market. So that 40% of your nonresidential exposure is exposed to renovation? It's 40% of our business, which is exposed to the construction nonetheless. Okay. But my question was more, how much of your nonresidential exposure do you think is exposed to renovation. So 40% is non res at the group level. But then within that, how much is renovation? And I mean, substantial renovation. Yes, I understand. I note numbers that I have top of my mind, but you need to see there's another important understanding here. Renovation for us is quite large. Basically, when the ceiling is being changed, for us, it's like a new project. So I would say that if you have normally, you know, 1 third is new and 2 third is renovation for us, it takes a different proportion because, when the ceiling is taken out, it's like if it was a new project for the lighting business. Look, we don't have the statistics that you mentioned here that we're not communicating specifically on that. What we said that the exposure of the overall company to construction non res is about 40%. Okay. Thank you for that. And my second question was around the UVC lighting sales. I was hoping you could help us understand how much that business was growing. And also it seems that it is both on the conventional side and on the digital product side. So whether you could maybe separate the 2 And I would just wanted to have an update on your capacity increase. You had said you were going to increase capacity by eight times by the end of 2020. So I was just curious whether that increase was already achieved or whether this is still to be completed. And if you are planning further increasing in capacity in this area and if so for which cost? So let's say, let's take it by part, Lucia, I think that's the right way to do it. Let's talk about conventional products. This is where we are increasing the capacity. Because we're increasing the capacity of light source and the light source is a conventional light source. We are on track to multiply by 8 our capacity at the beginning of 2021. At this point in time, for these products, for the conventional part of the business, we are on allocation, meaning that we cannot serve all the orders that we have at this point in time despite the capacity increase. So there's a clear, intake of business in UVC in the conventional part, which is also showing, not only UVC because we're also performing well on optical and on the consumer business, but this is why we show in the conventional part of the business, a lesser decline than the previous quarters at minus 11%. Now let's move to the other businesses. In digital products, we are going to, well, we've launched already on the market in Asia and Middle East to start with, to be expanded to other geographies, a disinfection desk clamp, for the home, which is equipped with, voice guidance and sensors in order to make that it shuts off if there is any presence in the room. And this is a product that is going to be, we believe, very successful, of course, completely complying with the safety requirements. But we also see traction And it's the beginning. So although we see already an impact on conventional products, it's still yet to be seen on digital solution, where we see the business starting to grow, we've talked about 12 families of products that we were bringing to the market. That is effective. And we're monitoring the deployment of these technologies worldwide because there is a need worldwide at this point in time. And we start to have interesting wins. We've talked about in Q3, the football club of, RB Lightsek, where base we're equipping with up added infection and the commercial part of the building in the stadium, but also the locker room. So we start to see, a conversion also of the technology into sales in the conversion part of the business. We need to understand that from a go to market we're learning, and it is also I think it's an advantage in the longer run. It is a complicated pitch to be done by salespeople. When they need to understand the technology, they need to understand the application. So it requires to have very well trained sales forces, which is what we are doing. At this point, it's making sure that we have capable people capable to understand the technology, the application of the customer, and to sell them with what they need. So we see the traction very clearly in conventional products, and it's growing in digital solutions. Sorry. And regarding whether you are looking to increase further capacity after the eight times that you have already planned? We have the possibility to do it on a very short term basis if needed. It's not planned at this point in time, but I have resolved that possibility to do it very quickly if ever we need it into 2021. Thank you. Our next question comes from the line of Mark Hisling of ING. Please go ahead. Your line is now open. Hi, good morning. Thanks. My first question is on at gross margins, you mentioned the, the mix being beneficial. Clearly from the Connected Home segment. Just talking more in general about gross margins, what are you seeing? I can remember from the previous call, that you say because of COVID-nineteen, there has been maybe a little bit less competitive pressure and therefore price erosion on the top line. And also the dynamics that you're seeing with the cost of goods sold, if I correct from the press release that is beneficial for you as well. Could you explain the dynamics and how you see that going forward? Yes, Mark. So first, the, the gross margin focus has been a very important focus for us since the beginning of the crisis. I think I've said that a few times, but at the end of January beginning of February, we gathered all the teams and explained what would be the trajectory or the expected trajectory for our gross margin, we have in order to do so accelerated, you know, the synergies with, with the acquisition that we had made. So Cooper on one, on one hand, also Kaylight on the other hand by in sourcing more, some of the, some of the production that we had at supplies in China, which is basically also improving our gross margin performance. We've seen in Q3, a positive mix impact, as you've mentioned it, from the connected offers, not only on the consumer side, but also on the professional side. And we have continued to apply a very rigorous pricing discipline. And, price is about, method, price is about being consistent on the market, making sure that we can segment our offers meaning that if you have a given offer, you could have different way to sell that need with different offers that are segmented from lower price to higher price. And that's, goes also into the protection or even the improvement of the gross margin. So what you see in terms of operating margin improvement is gross margin led. On rigorous pricing management, but also a link to, a good performance in cost of goods sold. We've always performed quite well in cost of goods sold over the past years because we had to decline the cost of the products quite substantially. We continue to do that. And I would say that, the acquisition of Calytes and even more the acquisition of Cooper, have been very important for us to be able to achieve further reduction in cost of goods sold because we are taking an even bigger volume and it gives us a big advantage when we need to negotiate with the with suppliers. So it's been a combination of taking decisions very quickly and then executing very rigorously on the price side, executing very vigorously on the COGS side and a mix impact that has helped also in Q3. Because of the connected offices. Okay, that's clear. And second question is on the on the digital product side. And so the connected home typically the fourth quarter was is the key quarter there being very large compared to the rest of the year. Given that you already had a very strong third quarter, do you think this is something that will accelerate going into into the fourth quarter? Or is it also something that maybe it's it's put forward a bit, it would be very interested in your view there? No, it's not really put forward, Mark. I think the fourth quarter is always a very important quarter for all the consumer business, and we think it's still going to be the case this year. Thank you. Our next question comes from the line of Daniela Costa of Goldman Sachs. Please go ahead. Your line is now open. Hi, good morning. Thanks for taking my questions. The first one I wanted to just ask follow-up on pricing on your commentary of the erosions in LED decreasing, which contrasts, I guess, with sort of some of your peers who are using more or said to use more tactical pricing. Can you comment sort of like on the market that you do you see this price erosion has more of your own efforts stay disciplined or do you see sort of a risk going forward from the commentary of your peers? How would you plan for that if they get a bit more aggressive. And then I have a follow-up on cash, but I can ask later. Yes, good morning, Daniel. Look, when it comes to pricing and you may remember, since the IPO, we've always said that pricing is a discipline and we don't use it tactically, to gain share and maybe a very specific situation where we can be aggressive, but I would say it's going to be much more on projects where the competitive landscape change. But when it comes to product, we rigorous, we not, we not tactical. We would, reply to aggressivity on the pricing with the strategy. So let me give you an example when There were some price erosion on the market. We decided to bring, in the markets where it was necessary a B brand. Meaning that, for a given segment of the offer, you would have the B brand at a lower price, then you would have A1, A2, A3, no 3 different products answering the same need, but with different types of functionality and different prices, And I think that's, the way that we implement, we didn't signify in order to, to face aggressivity or aggressiveness in pricing from a competition. What is very clear to us is that our brand has also a price elasticity, which is not infinite. So whenever the prices are too low, We don't address that market with our main brands. We use a B brand. So this is the way we answer not by moving price up and down tactically. And I think that the strategy which has been rigorous, stable, consistent. It was also very important in front of our customers, we expect themselves to have us coming with with a strategic pricing approach. But that's the way we do it, Daniella. Thank you. And then on cash, normally like Q4 cash, seasonality is quite favorable. You had a very strong Q3, anyway, Should we expect a reversal in Q4 or still the normal Q4 seasonality, being much better than other quarters? Thank you very much, Daniel, for that question. I think over the first half year, and also in the second half year, we have done a lot to improve the phasing of our working capital movements, making sure that the cash comes in more evenly We have a history of strong cash flow, as you quoted, in the second half of the year, particularly in Q4. And we remain very confident but also our cash flow will be solid in the fourth quarter. I add, of course, that our working capital is at a very healthy level, and we also are confident that we can sustain Thank you. Our next question comes from the line of George Fetastone of Bank of America. Please go ahead. Your line is now come back to free cash flow, I think in your regional guidance expectations were for free cash flow percentage of sales to be at least 6%. For the full year. And year to date, I think you're running at just over 10% of sales. Given the performance you've had so far, is there any reason not to reinstate the guidance for the full year? Good morning, George. Look, the truth is given the uncertainty that we saw in the market at that point in time, We didn't really think about, a better positioning the guidance. Do you see where the performance is today? We're confident in our capacity to continue to generate the free cash flow in, in Q4. So let's take it where it is. Is it going to be better than 6%? Yes, we maintain that guidance for full year and we're not expanding it at this point in time. Okay. Thanks for that. And maybe one follow-up to on on the UVC side of things. It seems as though obviously in conventional, you've had quite a pickup relative to your historic organic sales decline. How should we think about the normal run rate of this business going forward given the contribution from UBC? Yes, that's, look, nothing is normal at this point in time. This is the other issue that we're facing because we have markets that are going down markets that are going up consumer business moving a bit faster this quarter than the rest. So the situation is still extremely fluid. What my conviction is that we should have a positive impact of, conventional EUVC on the overall performance of our work conventional business, but not only UVC, I think Horticulture also should have a positive contribution to that business moving forward now. When are things going to normalize and at which level? I think it's very, very early to say it, but, the only thing I can tell you is that I see a positive contribution of those businesses to the overall conventional business. Thank you. Our next question comes from the line of Rajesh Singhra of Societe Generale. Please go ahead. Your line is now open. It seems that the connected lighting business is doing pretty well for you and probably, aiding margins as well. So how do you see this business growing, forward? And Also, how are you planning to monetize this connected data, which you probably are getting from these connected lighting sources? That is the first question. I will ask my second question afterward, if that's fine. Yes, sure. On the collective item, you have 2 parts, actually, sure. One is what we do in the consumer space. And that has been a longer term investment on Philip's view. We've invested a lot over the past 6 to 7 years to create a platform, which is very complete from the app to all the different connected products that are, compatible with that ecosystem. We're not talking only about bulbs. We're talking about luminess, about light streets. We're talking about entertainment. And all is around use cases, you know, with the control devices, smart plugs, smart sensors, and so on. So we offer a complete ecosystem, and that was the strategy from the very beginning. It's not about product. It's about the system that is connecting everything together. We have both And we have made the acquisition of Wiz a bit more than a year ago, and I'm extremely satisfied with the performance of that business, which has been growing, slightly more than the aggressive growth that we had in the business plan. And that part of the consumer smart home lighting is complimentary to you. We talk about Wi Fi and Bluetooth. On the side of hue, we talk about Zigbee and Bluetooth. So at the end of the day, we're covering that market, fairly well. And we are creating data and I'm going to come back to that. Now we've seen also very good traction on the professional side of the business where we have FI, as we commented, you know, a few quarters ago, with more customer centricity, more specialization. So now we have teams that can do the quotation the sales, the delivery, the installation, the commissioning of those professional systems within the same team. And we see very positive results in terms of funnel growth and also in terms of sales expansion. And this is totally in line with our strategy. We believe that after the transition to LED, the market will be transitioning to Connected. You rightly said that we're generating data when we connect. I have to tell you that at this point in time, we have service business, data enabled service business, it is, at this point in time, small. We see that not many customers are going for it at this point in time. It's going to be very much depending on some segments. We see that the industry segment, this is where the customers are the most likely to go for it. So we're working on it, which in the market is not totally ready for this. But it will be in the future. I think we'll give some more indication about all these during the Capital Market Day that we intend to and to, not that we intend that we will, conduct in December 9. Okay. Thanks for that. My next question, would be on the US market. If you could share your insights and what is happening in the US market with respect to price and volume. On the U. S. Market, we had a very positive traction on the consumer business. You see also that at the level of the U. S. Market, we see a very positive traction on digital and e commerce, which we have also benefited from the residential investments in U. S. Are still quite strong. So here, we see a very positive development on both sides. When it comes to the professional part of the business, it really depends on the segments as I've commented earlier. We don't see, a great pressure on price. We see yeah, degradation of some of some end markets. Are you still have, as we commented earlier, some companies on the market, maybe practicing lower prices, For us, we are stable in our positioning when it comes to price with very segmented offers. But it's really you know, what we face on the on the U. S. Market like in many very different directions depending on the end markets. Thank you. Our next question comes from the line of Akash Gupta of JP Morgan. Please go ahead. Your line is now open. My first question is related to ESG. I mean, simplifies the leader in the sector when it comes to ESG. Even you started putting efforts way ahead of everyone else. The question I have is that, is there any risk to dividend this year on social grounds giving you help to ask your employees to take 20% salary cut in early part of the year? Let me try to understand the question a bit better. Is there a risk coming on social grounds? Look, clear to the policy this year because I have to ask your employees to sacrifice 20 percent of their pay cut early in the year. Yeah. So let me reposition the what we did this year. So we went to our employee base because we realized very early on, and that was in February, March, that Q2 will be a would be a very impacted quarter from a top line perspective. We said to our people worldwide, Given the situation that the economies are in and given the situation that the society is in, we want to refrain from, laying people off. And that was a very strong willingness that I had at the time because, you know, if you lay off in the situation in which the the balance was at that point in time, you bring more problems to the society. And certainly, the people that are losing their job have very little chances to find a new job in the market, which which was, very much the bad shape. So the commitment that we take was to say to the people on a voluntary basis, to contribute to working one day less and by working one day less to have an adjustment for Qatar to their salary. And we did that only for Q2 because that was the quarter that, we had to, we had to tackle a bit differently. We took also a commitment, Akash, which is a very important one, but we would not lay off if that was happening. And from a societal standpoint, I think that what we've done is great because we didn't bring more problem to the society. We didn't lay off people putting them in complicated situation. We have opened the possibility of people to do it on a voluntary basis, And I can tell you that the employee net promoter score, which is a measure that we conduct on a quarterly basis after this measure has reached its highest ever level, within SignifAI at 29. So at the end of the day, let's we need to understand very well, you know, what we did and why we did it. But there was a very big societal, thinking and a lot of clear principles behind what we did at point in time. I think we are all quite proud of what we did and how we globally reacted. By the way, until now, We haven't done any layoff. We find other ways to adjust our, the cost of the company. And this is also another testimony of our strong commitment to the decisions we made in Q2. Thank you, Eric. So maybe just a follow-up on the same topic. This means that you don't need to compensate your employees before considering the dividend. Am I right? Sorry, I didn't hear you well. We don't need to compensate the employees and then I need to Competited for because, I mean, you took this temporary measure in Q2, but performance has improved subsequently in Q3. I mean, Q4, we still need to see, but the question I have is that, is there any case that you may need to compensate your employees for the contribution they made in Q2 before you consider dividend? Look, at this point in time, I think it's a good question. Look, the year is not finished. Unfortunately, after what has happened in during the summer, we have an increased uncertainty entering Q4. There's more uncertainty in the near term than before. So let's finish the year, which is an important milestone for us in order to see where the company is and what we're going to do globally. We have different mechanisms, you know, in terms of compensation, that can that we can use in the company in terms of bonus that we call annual incentives based on performance criteria. So this is not a simple answer. It's a global answer because as you rightly say, everybody contributed in, in Q2. It's the Supervisory Board. It's the leadership team, It's also the, the shareholders with a dividend and it's the employee with the voluntary contribution. So yes, we have an equation that we need but to understand a bit better, but for this, we need to go until the end of the year and see really where the performance lies at the back end of December. Thank you, Eric, for your comprehensive answer. Our next question comes from the line of Sven Vaya of UBS. Please go ahead. Your line is now open. Yes, good morning from my side. Thanks for taking the questions. The first one is a follow-up on the European green deal. And obviously, we now got some more details released by Brussels, but the document is still a little bit light in terms of what specifically is going to be promoted. I mean, in previous documents, we could see insulation, solar and things like that, but light lighting has not been mentioned as an area. So do you have any further insights, how lighting could be specifically promoted in this in the coming years? That's the first one. Thank you. Yes, Susan, there are 3 areas and that the Greenhill is targeting where we can contribute So the first one is, everything we did around climate change and clean energy. This is about connected energy efficient lighting, but also, solar powered lighting. The second is about food security. This comprehensive approach in the green deal when it comes to this. And here, we can contribute with, you know, optical churn animal lighting. And the last one we can certainly contribute to is Circularity with the offers that we have put on the market and especially the deployment of a 3 d printing devices that we have started to implement 3.5 years ago, and we are with the most advanced lighting company when it comes to this. So at the end of the day, we are pretty much contributing. What we're doing at this point in time, we're doing that essentially at the level of Europe, but also in all the different countries where we operate, we connect back to the local governments in order to go from what you rightly call so far a light approach to something which is a bit more pragmatic, a bit more practical. And basically, we are bringing to Europe, but we're bringing also to the countries where we operate and we operate in nearly all the countries in Europe. We bring to them examples of what can be done. What would be the wise investments, yielding an important and a fast return and invest in the in lighting. So we get a positive traction. People listen. Now we always want this to go a bit faster than the actual, than the actual spin. Look, we're very involved. I was myself involved also with the vice president of the European Commission in order to explain how we could help and how we could contribute. At the level of the green deal, but also, which is very important for us, helping Europe to be a carbon neutral into a 50 because we believe that there's a clear possibility that we could do so. So we are very, very much engaged and we believe we can contribute But there's a process in that program. We try to speed up as much as we can locally and also centrally at the level of yoga. Okay. Understood, Eric. Thanks for that. And second question is just coming back, on the non resi bit of your exposure. And I just wonder if you could share just more granularity on what it is specifically like the office and how fatality breakdown because I mean, if you look at the U. S. Non resi starts, obviously down very, very heavily so far this year, but huge deviations in that between the segments. And I guess security was sounding a bit cautious on the outlook there. So yes, I was really wondering if you could share some more details on your specific exposure there and because I think that would help us to frame our expectations on the business in the next 12 months. Yes. So that's, look, we looked into it because the situation has been extremely volatile this year. And, you know, we were in general talking about numbers, but these numbers have varied, because of the crisis, as we have seen, a different mix in terms of technology, a different mix in terms of geography, but also a different mix in terms of customer and segment. Look, Zven, let me not do it here, but with the team, we're going to work on it. And come back with something which is going to be a bit more comprehensive, but end user segments, during the Capital Market Day, in order to give a bit more clarity of our exposure. Yes, thank you for that, Eric. But what you said that the Cooper acquisition has met you a bit more expensive? Or I mean, more exposed to the segments that are, yes, more defensive or just directionally any, any major change to the exposure that you had before Cooper? No, I think I think the Cooper is bringing us a fantastic access to the market where we can bring our technology and bring our differentiated innovations So on the contrary, I think this acquisition make us maybe probably more aggressive on the market and capable to take not only market share, but a much bigger overall share when you combine the 2 front offices that we have. One of them, you know, Cooper, which is probably a bit more, versus towards indoor applications. And if I look at any other historical general part of the business, probably a bit more versed towards the outdoor part of the business. So in that sense, it was so pretty much, complementary. So no, at this point in time, that didn't induce any type of defensive position in all the country. We feel that we have a much, much better handle on the market with that acquisition and it's been so far very positive for us. Okay. Thank you, Eric. Looking forward for this summer then. Thank you. We are now approaching the end of the call. We will now take our last question from the line of Joseph Zoo of Redburn. Please go ahead. Your line is open. Hi. Thank you for squeezing me in for for this one. I have two questions And first, just to quickly follow-up on UVC. And where are you with the production expansion? And now can you be a bit more precise your plan is to increase it by effect of 8 by earlier next year, but where are you now? And also on UVC, And what do you see in terms of the market dynamics for traditional UVC technology versus the LED technology. My understanding is that in the end, you will transit towards LED, but are you seeing that happening faster now? Or is UVC still a traditional student development technology? And then there's no change that is in that? Hey, good morning, Dosef. So look, we had an expansion of capacity at we had 3 different programs when it comes to the increase of capacity. And so program 1 was the expansion of an existing capacity at, some, at one of our supplier. That has been effective. The second one was the repurpose of, an oven a glass oven that we have in Poland, where we have a big industrial complex, that one is also done. And the last one, which will be finished until the end before the end of the year, is a new oven that we also been leading in Poland to tackle with that, capacity So I would say that at this point in time, we've done nearly between half, but twothree of the capacity increase that we wanted to do. And we confirm that we're going to finalize it according to plan by the end of the year, multiplying it by effect 8 between the 1st Jan to 'twenty and the 1st Jan 'twenty one. When it comes to LED, It is very early days, at this point in time, to generate the same type of energy and particles that we need to kill viruses, the LED technology would require us to put so many LEDs that it is not at this point in time, a suitable solution with that technology, to date. I think it's going to take a long time before it is becoming an alternative to conventional UDC. Yes. Thank you. And my second question is on your digital products business. Within that Obviously, you had the LED and the home divisions, which you're not disclosing. I guess, part of the strength in the quarter was driven by strong Phillips sales and margin. And can you give us some color on that I guess it must be a good double digit growth for the home, the old home division in the quarter and also maybe quite a huge double digit margin for Philip CFO of Home as well. Can you maybe give us a bit of a color on what kind of a margin level are we seeing now for the home part of the business? So when you talk about digital products, you have different businesses within the Digital Products division. So you have professional part and a consumer part. So the professional part is made of the OEM business and the professional lands. And we've seen this business having the same type of performance as the rest of our professional business, which is digital solution. Pretty much impacted by the crisis, depending on the geographies, but a very similar type of trend. Then on the consumer business, you have also 2 different types of business, you know, the LED non connected, and that has been performing quite well worldwide. But what has been performing even better is, so the Phillips you offer, which was out of home, both on the land and the Luminess and also the Wizz offer. That's an acquisition that we did more than a year ago that has been performing extremely well since we did the acquisition and that has also been contributing substantially in Q3. So that part of the business has grown even more, we're not disclosing the growth rate at this point in time, Joseph, but, let me put it this way. In the countries where we will strong. We got we have an even stronger. So we see that the established system that we have put in place, which allows you to have a platform and an architecture to which you connect a lot of different products is something that is working because consumers are connecting more and more product to our web platforms. So That's what I would say about digital products, you know, many different things in the same division, but all in all, on the professional side, similar to the other part of our professional business on the consumer connected, good performance and on the consumer connected, very, very strong Yes. Okay. Thank you, Eric. Thank you very much. And I would now like to return the conference call to the speakers for any further remarks. Ladies and gentlemen, thank you very much for attending today's earnings call and for taking part in the discussion about our results. If you have any additional questions, please do not hesitate contact Serena or myself. We're more than happy to answer your questions. And again, thank you very much and enjoy the rest of your day. This now concludes our conference call. Thank you all for attending.