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Welcome to the Royal Philips Third Quarter 2026 Results Conference Call on Tuesday, November 3, 2026. During the call hosted by Mr. Roy Jakobs, CEO; and Ms. Charlotte Hanneman,CFO. [Operator Instructions] Please note, the results press release and presentation are available on the Investor Relations website. This call will be recorded, and the replay and full transcript of this webcast will be available on the website after this call concludes. We want to draw your attention to the Philips safe harbor statement on the screen and in the presentation. I'll now hand the conference over to Ms. Charlotte Hanneman. Please go ahead, ma'am.

Good morning, everyone, and thank you for joining us. Before we start, a quick update on our Investor Relations team. As you may have seen in our announcement earlier today, Dorin Danu is taking over as our Head of Investor Relations. Many of you will already know Dorin well, and his experience and strong relationships across our investor community will ensure continuity and an open, constructive dialogue. Durga Doraisamy is leaving Philips, and we thank her for her contribution and wish her all the best for the future. With that, Roy, over to you.

Good morning, everyone. Let me start with an overview of our Q3 performance. We delivered an excellent order intake growth of 8%, driven by sustained customer demand and further traction from our recently launched innovations, supporting near- and midterm sales delivery. Comparable sales grew approximately 3%, driven by strength in Personal Health and Connected Care. Diagnosis & Treatment was broadly flat, reflecting the phasing of certain ultrasound shipments and lower sales in China, as communicated in our Q2 release.

Our innovations and productivity measures drove significant margin expansion across all business segments. Adjusted EBITA margin increased by 70 basis points to 13%, ahead of our expectations. Free cash flow was a strong inflow of EUR 384 million. We continue to make progress on Respironics-related legal proceedings. The Respironics agreement in principle with the U.S. Department of Justice marks an important step in resolving the consequences of the Sleep & Respiratory Care recall. As a result, Philips recorded a provision of EUR 288 million.

Our year-to-date performance keeps us well on track for the full year. Order intake is up 4%. Comparable sales growth is within our full year range at 3.5%, and underlying margins have expanded by 30 basis points despite inflation and tariffs. This reinforces our confidence in delivering the first year of our plan and in the medium-term trajectory we outlined at Capital Markets Day. We reiterate our full year outlook for comparable sales growth, adjusted EBITDA margin, and free cash flow.

Let me expand on our orders. Equipment order intake grew 8%, building on an 8% increase in the prior year quarter, driven by very strong performance in Diagnosis & Treatment and growth across all regions. Our equipment order book has increased both sequentially and year-on-year, providing good visibility in future sales, including the near term. Turning first to Diagnosis & Treatment. Order intake growth approached 20%, with both Image-Guided Therapy and Precision Diagnosis delivering double-digit order growth, supported by broad-based growth across modalities and regions.

In Image-Guided Therapy, this double-digit growth came on top of an already solid comparable. North America was particularly strong as health systems consolidate, purchasing decisions remain primarily driven by clinical differentiation, productivity gains, and long-term strategic value rather than price alone. This is where our open integrated interventional platform, combining systems, devices, software, and AI across the clinical workflow gives us a distinct competitive advantage and sets the industry standard while helping customers to drive productivity and generate revenue reliably over the long term.

We secured vendor of choice positions at major U.S. health systems where competitors have established relationships for more than a decade, breaking through long-standing barriers to entry. This opens up significant new opportunity to capture market share by dislodging incumbents and expanding our installed base. Within Precision Diagnosis, the innovation pipeline we presented at Capital Markets Day continues to gain commercial traction, contributing to a very strong double-digit order intake growth in the quarter. Importantly, we have reached a turning point in rebuilding the Precision Diagnosis order book, which has now expanded for 3 consecutive quarters. Strong customer wins and sustained order momentum as we exit in Q3 reinforce our confidence in the growth trajectory of this business.

Looking at some of the key highlights from the quarter, we're particularly pleased with the strongly increasing customer demand for our CT portfolio. In the premium segment, we continue to scale our industry-leading Spectral CT portfolio, including CT 7500 and AI-enabled Verida, building on a foundation of over 1,250 clinical publications, providing strong clinical evidence for use of Spectral technology. The order book for the Spectral CT platforms grew double digits year-on-year, with Verida becoming an increasingly meaningful contributor.

In the Performance segment, our AI-enabled productivity workhorse, CT 5300, is also gaining traction with its order book nearly doubling year-on-year. We see opportunities to build on this momentum with existing customers, but also to reach new segments, including private and outpatient imaging centers. In MR, our helium-free BlueSeal systems delivered strong order growth in the quarter. Philips continues to lead the industry in its transition to helium-free MR. Around 70% of our MR systems shipped year-to-date were helium-free. And subject to regulatory approvals, we expect BlueSeal Horizon, the industry's first 3.0T helium-free MR platform, to begin contributing to taking order intake from 2027 onwards.

In ultrasound, demand for EPIQ CVx remains strong in cardiovascular imaging, and we are extending our cardiovascular excellence into other clinical settings. Flash is gaining traction in point-of-care ultrasound. And in general imaging, Alturion recently received FDA clearance and began securing its first orders in Q3. In Connected Care, order intake declined mid-single digit in Q3 against a particularly high prior year comparison of more than 20% last year. Customer engagements remain very strong as we continue to win major competitive deals by dislodging incumbents, reflected in our strong monitoring order book.

In monitoring, the larger agreements that shifted from Q2 were booked as expected. Longer negotiation and contracting cycles for some major enterprise-wide standardization agreements resulted in several other orders shifting into Q4 as well. In the quarter, we signed several long-term enterprise Monitoring as a Service agreements, including one with Avera Health in the U.S., supporting standardized patient monitoring across 24 hospitals. In Enterprise Informatics, Ontario Health selected the Philips Enterprise Imaging vendor-neutral archive to modernize province-wide imaging infrastructure, supporting the sharing of more than 20 million imaging studies annually across more than 150 hospitals and 50 imaging clinics.

Turning to Personal Health. We delivered another quarter of broad-based growth across businesses and regions, resulting in a strong 8% comparable sales growth. We continue to scale our proven growth model across core platforms such as Sonicare, High-end Shaving, OneBlade, Lumea IPL, and Avent.. Our category leadership, combined with innovation, premiumization, and strong commercial execution is driving consumer demand, helping us to secure more shelf space with key retail partners and expanding distribution. This momentum is reflected in sustained market share gains and strong sellout trends across all businesses, alongside category growth that we are driving for key retail partners. As we continue to innovate, we support our launches with investment in customer activation and consumer awareness to sustain this momentum and build long-term demand.

Innovation continues to strengthen our differentiation across the portfolio. In Image-Guided Therapy, we're investing EUR 50 million in AI, robotics, and advanced imaging in the Netherlands, alongside over EUR 100 million from the Dutch government and a further EUR 150 million in private financing. In the U.S., an ARPA-H award up to $34 million will support AI-enabled robotic stroke care on the Azurion platform. In MR, together with Imricor, we introduced the first commercially available cardiac interventional MR lab solution, enabling radiation-free MR-guided cardiac interventions. And in Personal Health, we launched the Lumea 9900 Pro, the first at-home IPL device with real-time audio feedback and motion guidance, which received a special mention on TIME's 2026 Best Inventions list.

These examples demonstrate how we are combining AI, clinical leadership, and differentiated technologies to extend our leadership positions and create new growth opportunities across the portfolio. Our disciplined execution starts with patient safety and quality, our highest priority. Strengthening our quality systems and embedding a patient safety-first culture is a multiyear journey, and we continue to make progress. We continue to improve the time lines in corrective and preventive actions and on-time medical device reporting. Our focus remains on taking appropriate actions to further strengthen end-to-end quality and regulatory discipline.

On supply chain, we continue to strengthen the reliability, resilience, and efficiency of our end-to-end supply chain. Despite continued geopolitical uncertainty and increasing demand for electronic components, including from AI infrastructure, service levels improved further year-on-year, helping us to deliver more reliably for our customers. We continue to strengthen supply chain resilience through double -- dual sourcing and by expanding our supplier network. We are also advancing our service excellence agenda while continuing to regionalize and selectively localize our supply chain and service footprint, bringing parts and capabilities closer to our customers. In Indonesia, for example, we opened a new parts distribution center in Jakarta, strengthening local service capability while leveraging our global network.

Looking at our regions, consumer sentiment remained resilient in North America, was positive in Europe, and also positive in selected international regions. In China, it was subdued and broadly unchanged. Hospital demand in Q3 was strong across North America and international regions. Let me share more color on the regional dynamics. In North America, we delivered order growth following strong double-digit growth in the prior year quarter. We expect this growth to continue. Healthy patient volumes, procedural growth, and sustained capital investment by large health systems continue to support demand. Customers increasingly want to standardize care through fewer, deeper strategic partnerships.

As market leaders in patient monitoring and image-guided therapy in North America, our platform-based portfolio, differentiated innovation, and deep long-standing customer relationships position us well to capture this demand. Our sustained order momentum and healthy pipeline reinforce our confidence in North America's role as core growth engine for Philips in '26 and over the midterm. Turning to Europe. Order intake was robust for another quarter. European health systems are investing in productivity, digitalization, and modernizing care delivery. Our differentiated portfolio and commercial execution continue to resonate well with customers. This gives us the confidence that Europe will remain an increasingly important contributor to our growth.

In China, order intake grew, supported by the timing of the renewal program and a weaker prior year comparison. We remain prudent in assessing the sustainability of this momentum as centralized procurement continues to expand. Our cautious view on the market in the near term, therefore, remains unchanged. For the full year, we continue to expect China sales to be broadly stable, with growth in Personal Health offsetting a decline in health system businesses. In remaining growth regions, we continue to see healthy demand, supported by investments in health care infrastructure and digitization. In Q3, demand was particularly strong across Latin America, India, and Asia Pacific. I will now hand over back to Charlotte.

Thank you, Roy. I will start with segment-level performance. In Diagnosis & Treatment, comparable sales were broadly flat in the third quarter as mid-single-digit growth in Image-Guided Therapy offset a mid-single-digit decline in Precision Diagnosis. Within Precision Diagnosis, the decline primarily reflected the 2 factors we highlighted during Q2 results, the phasing of ultrasound sales and lower China sales. Ultrasound was a larger headwind to D&T growth in Q3 as shipment delays related to manufacturing process improvement weighed on sales. Production has been ramping up since late Q3, and we expect the affected sales to come through in Q4 and early 2027. This extended timing is reflected in our updated full year segment outlook, which I will cover shortly.

Image-Guided Therapy continued to perform strongly, led by North America. This reflected conversion of the strong order book, particularly in Azurion, including the ongoing deployment of the SIHREN project in Indonesia as well as higher revenues from coronary intravascular ultrasound devices and services. Year-to-date order intake in D&T was strong across all modalities, further building our order book. Together with the expected phasing of ultrasound sales into Q4, this supports the expected acceleration in sales in the final quarter and midterm.

Adjusted EBITA margin in Diagnosis & Treatment increased by 50 basis points year-on-year to 12.3%, driven by higher gross margins and productivity measures more than offsetting cost inflation. Execution was strong across both businesses with continued sales growth and gross margin improvement in Image-Guided Therapy, supporting operating leverage, while Precision Diagnosis expanded gross margin, benefiting from the growing contribution of margin-accretive innovations, including Spectral CT and helium-free MR.

Moving to Connected Care. Comparable sales growth was 5%. Monitoring delivered mid-single-digit comparable sales growth, led by North America and Europe. Growth was supported by conversion of the strong order book with particular strength in IntelliVue hospital monitors and consumables. Our Enterprise Monitoring as a Service business model also continued to scale with revenues nearly doubling year-on-year, demonstrating steady progress in building more recurring and predictable revenue. Sleep & Respiratory Care sales growth accelerated to mid-single digits, driven by strong demand for sleep therapy devices in Japan and Europe.

Enterprise Informatics delivered high single-digit sales growth, led by North America and Europe, partially benefiting from the timing of larger implementations, reflecting the phased deployment of Enterprise Informatics agreements. Adjusted EBITA margin in Connected Care increased by 190 basis points year-on-year to 13.3%. The prior year margin included a 150 basis point gain from the remeasurement of a minority investment. Excluding this gain, margin expanded by 340 basis points year-on-year, driven by higher sales, higher gross margin, favorable mix effect and productivity measures, partially offset by cost inflation.

In Personal Health, comparable sales grew 8%, building on double-digit growth in the prior year. Growth was broad-based across all 3 businesses and all regions. Europe and growth geographies, including China, led the increase, while North America delivered further growth on top of a double-digit increase in the prior year quarter. Performance was driven by premium shavers, the OneBlade platform as well as Sonicare power toothbrushes and Philips Avent infant feeding solutions. Adjusted EBITA margin expanded by 60 basis points year-over-year to 17.7%, mainly driven by higher sales and productivity measures.

Advertising and promotion spend increased year-on-year to support sustained demand and recent launches. These investments are delivering as intended, contributing to higher sales growth. Finally, sales in segment Other were EUR 179 million, up EUR 39 million year-on-year, mainly reflecting divestment-related activities that are excluded from comparable sales growth. Adjusted EBITA was a loss of EUR 12 million compared with a loss of EUR 3 million last year. Now turning to the group results. Comparable sales growth was 3% with growth across all regions. We are pleased with our stronger-than-expected margin performance.

Group adjusted EBITA margin increased by 70 basis points year-on-year to 13%, with margin expansion across all 3 segments. This margin expansion was driven by higher sales, improved gross margin, including a growing contribution from higher-margin innovations and strong delivery on our productivity program with a modest benefit from more favorable tariff rates versus last year. Together, these factors more than offset higher cost inflation. Year-to-date underlying adjusted EBITA margin, excluding the U.S. tariff refund received in full in Q2, expanded by 30 basis points to 11.5% despite the annualization of tariffs and continued cost inflation.

Cost inflation remained a headwind in Q3 as expected. While input cost pressures have slightly increased, we continue to expect a full year impact in the high double-digit million euros at group level, consistent with our previous communication. Against this backdrop, we remain focused on what we can control and are responding with disciplined cost management, inflation mitigation and productivity measures while continuing to pursue profitable growth and strengthen our underlying margin. Our productivity program delivered EUR 170 million in savings in Q3, bringing year-to-date savings to EUR 427 million despite pressure from higher cost inflation.

We remain on track to achieve our EUR 1.5 billion target by the end of 2028. We are extending these efforts by embedding AI in operational workflows, customer service and R&D, reducing manual work and shortening cycle times. Adjusting items were EUR 353 million compared with EUR 122 million in the third quarter of last year. This includes a EUR 288 million provision related to a Respironics DOJ settlement. Excluding this provision, adjusting items declined to EUR 65 million, mainly due to phasing in the year. For the full year, our outlook for adjusting items remains in line with previous expectations, excluding the DOJ provision.

Net financial expenses were EUR 42 million in the quarter compared with EUR 57 million a year ago, reflecting higher interest income and fair value gains. We now expect full year net financial expenses of approximately EUR 230 million, down from EUR 240 million to EUR 260 million previously. Adjusted EPS increased more than 10% year-on-year to EUR 0.40 in the quarter, reflecting higher earnings. Free cash flow was an inflow of EUR 384 million, a significant increase from EUR 172 million in the third quarter of last year, mainly driven by higher cash earnings and lower working capital outflows.

Moving to the balance sheet. We closed Q3 with EUR 2.8 billion in cash and net debt of EUR 5.4 billion. Driven by higher earnings, our net debt to adjusted EBITA ratio declined further to 1.7x from 2.2x a year ago, giving us resilience to navigate an uncertain environment and flexibility to invest in long-term value creation. In August, we also issued a EUR 650 million EU Green Bond on competitive terms. It was the health care industry's first bond under the new European Green Bond Standard. The bond was 2.7x oversubscribed, reflecting robust investor demand. Turning to the outlook.

With 3 quarters behind us and continued solid execution, we have good visibility for the remainder of the year. We remain firmly on track to deliver the full year guidance that we set in February. As a reminder, we received the full U.S. tariff refund in Q2 and reflected the benefit in our updated outlook in our Q2 release. For the full year, we reiterate our comparable sales growth outlook of 3% to 4.5%. By segment, we expect Diagnosis & Treatment to deliver comparable sales growth at the upper end of the low single-digit range, Connected Care within the 3% to 4.5% range and Personal Health at the lower end of the high single-digit growth rate.

Our full year adjusted EBITA margin outlook remains unchanged at 13.5% to 14%, including a U.S. tariff refund benefit of approximately 1%. Our free cash flow outlook also remains unchanged at EUR 1.5 billion to EUR 1.7 billion, including a net U.S. tariff refund benefit of approximately EUR 200 million. Our outlook includes currently known tariffs and assumes payment of the U.S. DOJ settlement in the first quarter of 2027, which is subject to finalization of the relevant documentation. The outlook excludes other ongoing Philips Respironics related proceedings, including the investigation by the U.S. State Attorneys General. With that, I would like to hand it back to Roy for his closing remarks.

Thank you, Charlotte. Before we open the line for questions, let me leave you with 2 key messages. First, our year-to-date performance demonstrates continued progress in executing our plan with strong order momentum, sales growth and margin expansion within our outlook range despite a challenging environment. This reflects the commitment and disciplined execution of our teams across Philips and reinforces our confidence in delivering our full year 2026 commitments. We also made important progress this quarter on Respironics-related legal proceedings with Respironics reaching an agreement in principle with the U.S. Department of Justice.

Second, we remain fully focused on delivering what we said we would do. We are seeing a positive response from customers and consumers to our focus segment strategies and AI-enabled platform innovation. Together with our disciplined execution, this keeps us on track to achieve our Capital Markets Day ambitions, mid-single-digit comparable sales growth CAGR over '26 to '28 and a mid-teen adjusted EBITA margin by 2028. We look forward to seeing many of you at RSNA in December, where we will showcase the next wave of AI-enabled innovation, further supporting our growth ambitions.

[Operator Instructions] We will now move to our first question. And your first question comes from Hassan Al-Wakeel of Barclays.

Congrats on the strong update this morning. So firstly, on margins, great to see improving gross margins as you've laid out in the past, Charlotte. And whilst this reduces the ramp needed in Q4, it is still a ramp. It'd be great if you can talk to some of the building blocks for this. And particularly, as you look into next year, should we expect 2027 to be an improvement in profitability towards your 2028 targets given some of the headwinds in '27 around higher inflation and China pricing headwinds?

And then secondly, on order intake and the strength here, if you could help us unpack that, specifically within Precision Diagnosis and D&T and where you see share gains? And to what extent should this and the rest of the order book underpin good D&T growth next year? And I guess I ask because 2026 is turning out to be a softer year on the revenue front in D&T. So do you see any reason why 2027 growth in D&T shouldn't be in the medium-term target range for D&T?

Thank you, Hassan. Let me take the first question on margin. And let me start by saying that we are very pleased with the Q3 delivery. We reached adjusted EBITA margin of 13%, so up 70 basis points, and that exceeded our expectations. So where does that leave us year-to-date? Year-to-date, we've expanded our margins by 30 basis points. And if you think about our guide that we started the year with, excluding the U.S. tariff refund, it's an expansion of 20 to 70 basis points. So already squarely within -- within that guide.

And then if you think about Q4 and what it gives us confidence that we are reiterating that guide, it's essentially the same building blocks that we've seen throughout the year. First of all, Q4 is always a very strong quarter from a volume perspective. So that gives us strong operating leverage. You already highlighted the strength that we see from gross margin from innovation.

So we expect that to continue as well. That's sustainable. Then the third component I would call out is productivity. You've seen us do really well in productivity, and we continue doing that. Somewhat offsetting that will be cost inflation as we've seen, of course, throughout the year. And then lastly, we will see a modest impact from tariffs year-over-year as they're easing a bit from a year-over-year perspective. So overall, still firmly on track to deliver the margin outlook for the year.

Now let me maybe take the second one on orders, Hassan. So as you imagine, we were very pleased with a very strong 8% on top of 8% last year and particularly also because it's coming into D&T where we have the explicit aim to accelerate in order momentum and particularly, as you know, in PD. So let me maybe unpack a bit. So IGT by now has many, many quarters of very sustained order intake delivery, a strong absolute order book and therefore, also strong conversion into sales. And we are, as we also mentioned, winning significant landmark deals, continue to expand and therefore, kind of are on a very good trajectory.

The one that we signaled at Capital Markets Day that we are rebuilding is PD. And actually, therefore, we were very happy to see that in this year, as you know, we started Q1 with mid-single-digit order intake in PD, excluding China. Then in second quarter, we had mid-single digit, including China. And in the third quarter, we have now double-digit growth across the globe. And that's really on the back of, as we signaled, very strong new momentum in CT, where kind of we have very good momentum with Verida and Rembra, also continued strength in MR. And therefore, if you take that into also then future sales, that is actually where you can expect that this, of course, will start to turn into sales because what I also marked is actually that in Q3, we reached the turning point where the refilling of the absolute order book comes to a level that conversion starts to hit normalized levels because before we still had to absorb the decline and then actually added in the new.

Now actually, we are at a point that the new starts to really convert directly into sales, and you will see that coming back. The other point, of course, that will weigh into also '27 is that the ramp that we kind of currently are doing within ultrasound, of course, slowed our total ultrasound in the year, we will pick it up in Q4, and you'll see that, of course, support in Q4, but that will also further support 2027. So if you take that combination of continued strong order intake growth in IGT, the acceleration that we don't see to foresee to stop because also, as we mentioned, RSNA will be another very strong kind of launch of both in MR as well as CT, we will share the latest there that we kind of bring to market.

We're just coming out of the San Diego IGT conference where kind of we also showcased what kind of the new innovations can do for cardiac in particular. So there's a lot of momentum that we see that we will carry into underpinning next year. Now of course, we'll come up with specific guidance around that later, not now, but you can see from the trend lines that we keep building that accelerated momentum that we also have to underpin our mid-single-digit growth ambition in sales.

Very helpful. If I could just follow up on orders, Charlotte. I mean, you expected last quarter the slipped monitoring orders to come through this quarter. And obviously, Connected Care orders are down mid-single digit this quarter. I appreciate you have highlighted some monitoring deals. Is this purely timing? Or is there any change in underlying demand?

Yes. Thank you, Hassan. So I think, first of all, it's important to call out that the orders that slipped from Q2 into Q3, we actually saw them come through in the beginning of Q3. So that is the first point. And also good to know that actually the CC segment had an OI decline, but on the back of very strong comparable of over 20% growth last year. So what we're seeing now is actually the deals that we see within monitoring are getting bigger and bigger. And as a result, it takes more time to actually close those deals. What I can tell you is that we don't see us losing any deals. We're actually seeing us dislodging competition in some very big accounts also in North America. So no -- I have no concerns whatsoever when it comes to our Connected Care and particularly our monitoring business.

We will now take our next question from the line of Richard Felton of Goldman Sachs.

First one is on China. And in context of the increased focus and, I guess, breadth of centralized procurement. And the question is at this stage, do you have any visibility on the timing or the potential impact on pricing of more centralized procurement being rolled out? And then the second one is on Personal Health and the upgraded outlook. I suppose what's driving the change in your outlook? What's sort of running ahead of expectations? Are there any particular markets or segments that you would call out?

Thank you, Richard. Let me take the first one on China. So if you look at centralized procurement and pricing impact, and that also, of course, weighs into our total outlook on China, we have said that kind of we remain cautious on China because we see centralized procurement further expanding. And we also know that with that further expansion, pricing impact of that will grow because that is one of the consequence of centralized procurement. So that actually underpins the trajectory that we have for China. It actually doesn't differ a lot from what we had earlier. Actually, China is planning out as we forecast at the beginning of the year.

Therefore, it's also important that we see that ramp in order intake and growth outside of China. So we're very pleased with that. Whilst even in China Q3, we did actually see growth. And also, we did see good momentum with also there, for example, CT that's really gaining a good order intake in China. So we are playing our focused strategy where we play selectively in areas that we really have differentiation and superiority, whether it's in MR, whether it's in CT, whether it's in IGT and ultrasound, but we are remaining realistic that the market growth to be expected of China is slower, including the effect of both volume and value, but we are nicely compensating that in the impact of North America that was already gaining momentum.

But now also, we're really happy to see that international regions is really picking up. We had some great news from Latin America, even we shared kind of winning imaging deals in Venezuela picking up in Brazil, really good traction in India, Europe really picking up strongly, too. So actually, we see the growth diversifying also in the rest of the world, and that's, of course, supporting this compensation, whilst China remains our focus, and we remain kind of in that market too for innovation and for components. But just for contribution into the total sales number, we are moderated in terms of what it will do for the coming time.

Yes. Thanks, Richard. I'll take your question on PH. And if we look at PH, of course, we delivered already 8% CSG growth year-to-date Q3. So we really see broad-based growth in all businesses. And of course, that's also quite a demanding comparable. So if you think about what we said in Q2, we expected full year growth at the upper end of the 3% to 4.5% range because we said, well, the comparables are demanding and also consumer sentiment can change quite quickly. So those 2 factors we took into account. What is now exceeding our expectation is really the continued strength and breadth of performance across the board.

We -- our growth model is really working in platforms like Sonicare, Shaving, OneBlade, Lumea IPL and also Avent. So we're really driving growth across businesses and regions. And then on top of that, we see our category leadership, combined with the innovation I just mentioned as well as the increased drive for premiumization and the strong commercial execution by the teams is driving consumer demand. So we see market share gains across the board. We see really strong sellout trends as well, which really gives us confidence to now increase our guidance for the year for Personal Health to the lower end of the high single-digit range.

And your next question comes from the line of Graham Doyle from UBS.

Just a couple. Firstly, just on the -- the balance sheet and cash flow. So post the DOJ agreement and obviously, it's quite strong deleveraging. What are we thinking now about buybacks given it was something that Philips was quite -- quite committed to historically before the recall? And then just the second question, in terms of the quarter-to-quarter guidance, there seems to be quite a few things moving around, whether it's patient monitor orders or ultrasound orders. And then the margin for this quarter was obviously quite different to how you'd expect it to turn out.

I mean when you look at the visibility of the business, do you think it's worse or better than like a year ago? And is it things like inflation that are moving things around? It's just because when we look into 2026, there's quite a bit of margin expansion in consensus, and there are lots of things moving around. So it would be quite helpful to get your view on where you think the visibility is in the business today and how comfortable you are with expansion?

Yes. Thanks, Graham. Let me take your question first on the balance sheet. And indeed, we're happy with the deleveraging journey we're on. Just to put it into context, what we said at Capital Markets Day is we expect a leverage ratio of between 1.5 and 2. We're squarely in that range right now. So that is great. And then maybe a reminder of our capital allocation priorities. So we said, first, we go after organic growth because there's still a lot of growth to be had. And you can see that today also based on our 8% order intake growth. The second priority is dividend, where, as a reminder, we're also giving -- still giving scrip dividend.

The third one is M&A. And we have become a little bit more active in M&A, as you've seen with our SpectraWAVE acquisition at the very beginning of this year. And also, as we laid out at Capital Markets Day, we're increasingly looking at interventional and monitoring because those are the 2 priority areas we also highlighted at Capital Markets Day. And then our fourth priority is share buybacks, which we are evaluating periodically as well. But it's our fourth priority.

Then your second question around visibility, let me start with just simply laying out, we started our guidance in February, and we have stick to that guidance. We have not made any changes to that guidance from the beginning of the year, except, of course, adjusting for the tariff refund. So I would argue that our visibility has been very good throughout the year. So quarter after quarter, we're delivering on our promises. And in a world, of course, as you know, that is increasingly unstable.

So we had to deal with the inflation as it came through, as you also have seen, of course, at our peers. We didn't change our guide. We continued to deliver. And as I say every single quarter, we guide for what we see and then we work really hard to do better. And that's what we've done this year again and this quarter again. And at this point in time, year-to-date, very pleased with the margin expansion of 30 basis points, which sets us up really well for delivery of our margin guide, again, unchanged in the beginning of the year for the full year.

Okay. No, I appreciate that. So just as we -- there's so many moving parts. You've obviously had to pull a lot on -- well, the outside looking in, it feels like a lot on the cost lever, and that's presumably a finite resource. So I just kind of thinking about next year, how much more have you got left to go on that front versus just the ability to actually just generate better operating leverage to the business?

Yes. I appreciate that question. So what I would say there is we laid out, of course, our 2026 guide, but also our midterm guide in the beginning of the year of mid-teens adjusted EBITA margin, and we're very much on track on delivering on that margin. And the building blocks have stayed the same. We see volume. We also see and we spoke about it today as well, IGM, our gross margin line as a result of increased margin of our innovations and our new product introductions that are coming up. The other component is our productivity program. And we've delivered EUR 427 million year-to-date in 2026, and we're on track to deliver on the EUR 1.5 billion over the 3 years. So that's another lever. And of course, there's also cost inflation, but we're also taking that into account as well as tariff mitigation. So no change to our midterm guide that we laid out at the beginning of the year.

We will now take our next question from David Adlington of JPMorgan.

Maybe just firstly on Connected Care. The margins came in there against a tough comp, much better than we were thinking at least. Just wondering if there's any one-offs in there we should be thinking about and how we should be thinking about margins for the fourth quarter. And then just a follow-up on D&T orders. We've had a good trend in D&T orders for a while, but it's not really putting through into sales. Just wondered if there was any particular reason for that. And obviously, very strong order growth for this quarter. Should we expect to see that transition into better sales growth going forward?

Thanks, David. Let me start with your Connected Care margin question first. So we are very pleased with the Connected Care margin step-up of 190 basis points. So indeed, as you said, there was a prior year gain for the remeasurement of a minority interest. So excluding that, margin expanded by 340 basis points. There were no one-offs in there. A few elements that were driving that expansion. First of all, higher sales, particularly in monitoring and monitoring is a business that is very sensitive to operating leverage, and we've seen that come through and really -- really support the margin.

Higher gross margin as well. That was continued productivity, which we see across all of our businesses. And then, of course, part of that is offset by cost inflation. You might remember as well that, of course, at the end of 2025, we did the divestment of our emergency care business. We disclosed at the time as well that it was actually slightly not accretive to our margin. So that has slightly helped as well.

And let me take the question on the D&T order to sales. David, as also outlined, I think we have had, if you look through this year, a nice increasing trajectory of order momentum. And that was needed because you know that we had an absolute order book that still was actually hit by China sales that was actually going out, then you had to compensate with new orders. And then in addition, we had also the ultrasound phasing. So if I look at where we are to date -- year-to-date, and that's also what we signaled, we are at the point now that the absolute order book actually has been refilled so we can actually get into conversion.

China sales is weighing less on the D&T sales going forward. And the ultrasound phasing, we are ramping up in Q4, and we will see part of that coming back in '27 as well. So that's where we see kind of that sequential momentum building and then also turning into sales, that kind of we forecasted when we had the CMD when we said, okay, we need to really accelerate innovations. And I think the really encouraging part, of course, is we really see that customer engagement. I must say I'm on the road a lot. I'm engaging with customers a lot, and we have really great renewed discussions around how we can actually move forward with our imaging platform, our interventional platform. So D&T is really on a very positive momentum in the market, and that will come through in sales.

We will now take our next question from the line of Veronika Dubajova of Citi.

I will keep it to 2, please. I just want to circle back to the Connected Care margin and especially just curious if you can give us a little bit of flavor for how much progress you have made across the various subdivisional targets in terms of Enterprise Informatics versus monitoring? And maybe also just an update on where the Respironics profitability is so we can kind of level set as we think about 2027 and what the progress there might look like?

And then my second question is sort of a bigger picture one, thinking about 2027. Obviously, we're starting to hear a little bit of noise around supply chain and maybe lack of resilience for some of the components. Some of your peers are talking about inflationary pressures. You have obviously done a phenomenal job managing those headwinds this year. But just curious, as you look at 2027, what are some of the risks that you're thinking about on those fronts? And what mitigation strategies you have in place and any preliminary thoughts you have on how those might impact your financial performance next year?

Veronika, thank you for your questions. Let me start with your questions on the CC margin. And as I just said earlier, we are very, very pleased with the margin expansion. As I said as well, no one-offs in that margin expansion. But if you think about the building blocks, between monitoring, S&RC and EI, a lot of the margin expansion was driven by the monitoring businesses. And as I explained earlier, that is also a function of operating leverage. So we've seen strong conversion of the orders into sales, and that really helps drive margin as you've seen as well. So the monitoring business delivering in high teens plus margins. Enterprise Informatics was okay. And then specifically on your S&RC question, we continue to see double-digit margin in S&RC as well. So I feel good about that as well.

Then maybe following up to your 2027 question, and I'll let Roy also chime in later. So if you think about the building blocks of our margin in 2027, they're not different than in 2026. So we're not going to sit here and guide for 2027 today. But ultimately, our midterm guide of mid-teens margins by the end of 2028 still stands firmly. And the building blocks to get there between volume and sales growth and commercial execution and then productivity offset by cost inflation still stand as well. We know we have to fight a little harder given there's more cost inflation, but we have been very successful in offsetting those in 2026. And again, without wanting to guide on 2027, I'm confident on us landing at mid-teens by the end of 2028. Maybe you want to talk about product availability?

Yes. So good question. I think we have seen that over the years, of course, we have been investing a lot in strengthening the resilience of our supply chain. And actually, that is bearing fruit. So also this year, if you look to our service KPIs, actually, they have gone up versus last year. So we actually can fulfill. The only one that we called out was ultrasound. But beyond that, actually, we have really held our service levels at great levels. Now that is on the back of we have been diversifying our footprint. We have made good progress on strengthening footprint in the U.S., but also we have made good progress in further dual sourcing.

There is a cost as well to make sure that you are resilient and that you have the right service levels. So actually, we also are doing prebuys on components that in our planning, we see, for example, becoming short. But we also have the offset opportunity because we see the higher-margin innovations that actually are paying for that in combination with the continued productivity. So we are very clear that most important is that we can deliver to customers. So actually, we prioritize that, and that is actually what prioritized in the components, that's what we prioritize in inventory, but we manage it well.

And that's what you've seen both in terms of the cost mitigations, but also the balance sheet where kind of we still keep strict control. But we also know that, for example, PH is doing really well and has certain longer supply chains, for example, for the U.S., then we need to stock up more, which we are doing. So that actually we can really fulfill the customers. And that's also really appreciated because nowadays, reliability of supply is really valued a lot, that also weighs into new orders that you get because people want to have trusted partners. And that's something that we have been strengthening in.

Your next question comes from the line of Hugo Solvet of BNP Paribas.

First, on margin, quick clarification, please, Charlotte. With most of the efficiencies offset -- somewhat offset by inflation and inflation keep increasing, what's the level of confidence in the full range of the margin guide for this year that remains at play? And second, congrats on the DOJ settlement. If we take a step back in September, you finalized the recall. Now you settled with the DOJ. I'm curious to hear from you guys how these 2 milestones increase your level of confidence in getting back in the U.S. CPAP market? Or does it change anything in your discussions with the FDA relative to the consent decree?

Yes. Let me take the first question, Hugo. Thanks for that question. So maybe I start again with our year-to-date margin expansion of 30 basis points, which we feel really good about. So if you think about our full year guide, excluding the tariff refund, it's between 20 and 70 basis points. So I would say the full range is still in play. That's why we guide for the full range, actually quite a narrow range of 50 basis points. And maybe just to call out the drivers in Q4 that we see. So it's operating leverage on the back of what is always a very big sales quarter, continued gross margin expansion as a result of innovation and mix. And then, of course, continued productivity that is also typically very strong in Q4 and a modest impact from year-over-year tariff benefit, which will more than offset the incremental inflation that we're seeing.

So and then the second question in terms of confidence getting back to the U.S. market and also in relation to the DOJ. So in essence, these are 2 separate trajectory. We are very happy actually that we can make progress in S&RC. We have seen actually growth outside of U.S. really picking up with good growth of sleep devices. So we see that actually is resonating. But we also said before that we are not in control of any timing around the return to market. We keep working towards that so that actually we are ready, but ultimately it needs to be granted by the FDA, and we keep working with them.

What we have said as well is that our delivery of our targets is not dependent on this, right? So if it comes, it's a bonus, but it's hard to predict. So we stay away from that. We keep focusing on driving our orders, driving our sales, driving our margin across all businesses, including S&RC, where we can drive it, and you heard that actually nice profitability growth again back in it. Now of course, if we can get in the U.S., we'll be appreciated. But that's kind of -- if and when that happens, of course, we will inform you. So we remain laser-focused on driving the innovation momentum across, and that's where we really see that kind of we have great engagements with customers and in the market.

We will now take our next question from the line of Julien Dormois of Jefferies.

I have 2. One relates to the 232 investigation that's still going on in the U.S. We have seen, for example, Becton Dickinson announcing a deal with the U.S. administration. And this has led some investors to question whether more medtech companies could actually come up with deals. And I was just curious to hear your thoughts on that front because Becton Dickinson made it clear that they expect a new round of tariffs on the medtech sector to happen by the end of the year. So curious to hear your thoughts on that one. And second, I just noticed that there's been a pretty significant increase in inventory levels between the end of last year and end of Q3 of this year. So just curious what -- where that's coming from. Does that reflect the ultrasound disruption, the preparation for Q4 shipments or whatever would be useful on this side.

Yes. Thank you, Julien. Let me take the 232. So this, of course, is not yet known what this exactly will mean and when this will be announced. But as you know, we have been preempting kind of good practice in doing business in the U.S. by already announcing earlier that we are stepping up investments in Reedsville, in [ LATAM ], and we are really well on track to execute against that. We also know that's very well appreciated by the U.S. government. So we are diversifying across the world, but we're definitely investing in the U.S. It's known also to the U.S. government. So that's a way of how we are mitigating it. And further, it's too early kind of to further comment on 232 as kind of we haven't seen that in the market. But we feel well positioned to deal with consequences as we have been able to deal with it earlier as well when they came out with their first tariffs.

Thanks, Roy. Julien, let me take your second question on inventory. Indeed, inventory has gone up a little bit year-over-year. A couple of factors to call out there. First of all, of course, we're gearing up for a big quarter of growth also in Personal Health. And as a result, of course, that comes with increased inventory. The other smaller impact is, of course, we're doing some prebuys in face of this inflation impact that we're seeing, which is also impacting our inventory. At the same time, you will have also seen that actually our working capital, if you look at our working capital year-over-year, we've actually improved the cash position from our working capital year-over-year, also thanks to a better accounts payable position.

And our next question comes from the line of Aisyah Noor of Morgan Stanley.

Just one left from my side. And it's on the order development in Connected Care. What do you think is driving the longer conversion times here? And are there any common themes coming up in your customer conversations, whether it's CapEx uncertainty, AI? And I guess what's giving you confidence that you're not losing share or winning your fair share in the market?

Yes. Thank you for the question, and let me take that. So what we're seeing in monitoring, actually, there is a lot of kind of engagement around monitoring. Monitoring is a big theme for hospital systems as we experience, because they see and have learned that actually earlier measurement and measurement throughout the cycle is securing revenue for them because patient safety is better monitored. Also, they can lower their cost. So actually, we see them stepping up investments, and that's also building the momentum. At the same time, monitoring is a quite complex, especially IT-related play. So if you go into these big -- bigger deals, you see that actually the complexity and largest, we have been and are still also in discussion with really landmark hospitals that actually are turning to us. We have dislodging competition. We have actually been expanding our footprint in the U.S., for example, 15,000 more beds that we are servicing.

The other trend that we see in monitoring is also that the combination of CapEx and OpEx is growing. So we have doubled the EMaaS, which is Monitoring as a Service revenue this year. And actually, we see that trend continuing. So they are populating deals that are a combination of CapEx investments in hardware is a combination in software solutions because, for example, they want the Capsule solution that integrates data, surveillance solutions that watch over the patient. And therefore, this combination makes it a bit longer cycle to kind of conclude on, but also then there's a longer runway because actually these are long-term deals that actually secure revenue, recurring revenue as well as secure CapEx. So that's the trend that we are seeing.

We have very good momentum. Hopefully, also we see some further news on that coming forward in the coming weeks and months. So on monitoring, reveals very strong and also customer feedback is really well on this platform play because that's exactly what they want. Maybe the last comment, of course, cybersecurity is the topic of the day, and we are the most secure monitoring platform in the market. U.S. Army is our #1 customer in the U.S. We have defense grade cybersecurity. That is actually also playing in our favor. So that's maybe a last point, but really important point because, of course, our health care customers, unfortunately, are on our tech. So we need to help to keep them secure. That's what our monitoring platform does.

Our next question comes from the line of Julien Ouaddour from Bank of America.

The first one is just on D&T. So a follow-up about everything you just said. You just seem pretty confident about the momentum you see in this segment with, let's say, accelerating momentum, better order intake and probably now boosting the sales. So should I understand that D&T organic growth to accelerate next year, if I understand correctly? And the second question is on PH. I think that's a business we haven't really discussed much, strong growth, 8%. Can you just, I mean, explain us -- I think you mentioned consumer confidence in China being subdued. But according to my math, you probably grew in the double digit there. So how? And looking into next year, is there still fuel in the tank to sustain the high single-digit growth as the 2-year comparison become increasingly demanding?

So thank you for your question. Let me start with D&T. So indeed, what we see is this acceleration, and it's really a building story, right? We saw that kind of how we entered the year, very strong innovations that we launched, started to get the order momentum, then we will turn that into sales growth. So that indeed will drive acceleration into Q4 and then further into '27. And also, we see good order growth and order momentum in Q4, also for the full year. And as I said, we are kind of having a really exciting slate that we're going to also talk about at RSNA that will further support this in '27. So we see the buildup of that momentum, and that will also turn into sales as we had the turning point in Q3, as I mentioned, where we now really start to compensate the losses and therefore, generate net sales, and that builds up what you will see.

And it's across the board because in MR, of course, we have the 1.5T and the 3.0T coming in '27. We have the Spectral really adding in -- and then we have also in IGT really good momentum. And ultrasound, despite the sales kind of phased towards Q4 and '27, actually, we had good order growth in Q3. So also their momentum is strong. If you then look at PH, so 2 parts. One, the overall growth, we see also the innovation kind of pipeline that we have with kind of Personal Health sustaining the growth momentum. It's both sides. One, for example, oral care, we had the platform that we are kind of relaunching in the market that still has to be completed. But we also see the customer expansion. So we're getting more shelf space and the commercial momentum with customers is really gaining traction because we are also margin and category drivers.

Then if you look into the China part, China is a positive contributor. So that's also good, and that's also for PH, but it's not the biggest contributor. So it's similar to health systems. The biggest momentum of PH actually is North America, it's Europe and international region, but China is not kind of a decline. China is still positive, and we also see that continue. We have very good Grooming and Beauty share in China. We are consistently beating Flyco, the competition. So actually, we're showing that kind of we can, in an attractive manner also win there. But we're just, of course, in a market environment that is less fast growing than, for example, the neighboring kind of country of India, which is extremely fast growing, and we are double digit and hitting it out of the park.

But that's also a market momentum that's different, and we capture the momentum that we see in the different markets. But concluding, PH has very good momentum, will continue with good momentum. Now specific guidance, we will not give today, but that will follow. But you can rest assured that this engine is continuing to deliver and also we have good prospects for '27.

Due to the time, we have the last question coming from the line of Susannah Ludwig of Bernstein.

I just had one more follow-up on Personal Health, which obviously has been a strong spot. Can you talk about how growth compares versus the market? And to what extent your growth has been supported by pricing via premiumization versus to what extent you have been seeing unit share gains?

Yes. So if you look to the market, we are consistently outgrowing the market. Now that also ties to where we play. So actually, the segment that we appeal to is actually the more premium segment. And there, we are beating competition. So we're taking share. And actually, that's a very resilient market piece. So if you look to the pricing contribution, it's more or less flattish in terms of the growth is really what we can get from deeper penetration into the different segments with great innovation. And we have pricing ability with PH. So of course, we price also with inflation that we kind of can compensate, but that's not the driver of growth. The real driver of growth is that we see our innovations reaching more consumers, so in essence, volume-based. And actually, we are beating competition across various segments actually. And that's also where we see that we have the line of sight to continue to do so as we have strong innovations in the pipeline also in the Personal Health franchise.

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

Yes. Thank you all for a very engaged call, your questions. We remain very focused on delivering our commitments on closing the year very strong and in line with what we guided for. We look forward to speaking to you again soon, either this week later. And for sure, at RSNA, please visit our booth and come and have a look at our exciting innovations because, of course, they will spur the next wave of growth that we are all after. Thank you, and talk to you soon.

This concludes the Royal Philips Third Quarter 2026 Results Conference Call on Tuesday, November 3, 2026. Thank you for participating. You may now disconnect.

Good morning, everyone. I'm here with our CEO, Roy Jakobs; and our CFO, Charlotte Hanneman. Before we begin, I would like to acknowledge that due to an administrative error, Philips Second Quarter 2026 results were inadvertently published last evening ahead of our scheduled release. As a result, we brought this webcast forward by 2 hours. We apologize for any inconvenience this may have caused, and thank you for joining us on short notice. Our results press release and presentation are available on our Investor Relations website. The replay and full transcript of this webcast will be available on our website after this call concludes. I want to draw your attention to our safe harbor statement on the screen and in the presentation.

I will now hand over to Roy.

Good morning, everyone. Thank you for joining us. I will start with an overview of our Q2 results and outlook for the balance of the year. We delivered in line with our expectations in a dynamic external environment. We grew comparable sales by 4%, driven by growth across all segments. Adjusted EBITA margin increased to 16.4%, including a tariff refund benefit, which Charlotte will discuss in detail. Excluding that benefit, our underlying margin was 12.2%. This reflects the expected pressure from higher tariffs and cost inflation with productivity offsetting part of the impact.

Free cash flow was EUR 222 million, including a tariff refund benefit. Against this backdrop, we reiterate our full year comparable sales growth outlook range of 3% to 4.5% and our underlying adjusted EBITA margin outlook also remains unchanged. Excluding the tariff refund benefit, we continue to expect a full year adjusted EBITA margin of 12.5% to 13%. At the halfway point, we remain solidly on track for the full year. On a rolling 12-month basis, order intake grew 5%, demonstrating the resilience of our commercial momentum. Customer demand for our innovations remains healthy.

Europe delivered strong order growth, and North America has a healthy pipeline with large orders already secured in Q3. Comparable sales grew 4% in the first half. We also improved underlying profitability year-on-year through productivity savings, helping to largely offset tariffs and cost inflation. And we largely completed the U.S. tariff refund process during the quarter, demonstrating the agility of our teams in a changing environment. Together with the continued progress in innovation and execution, this gives us confidence in the balance of the year.

Turning to orders in Q2. Order intake declined 1% as certain larger Monitoring orders specifically moved to Q3. This followed 6 consecutive quarters of growth. Importantly, our equipment order book remained at record level, providing good visibility for the periods ahead. In Diagnosis & Treatment, orders grew low single digit, following double-digit growth last year. Strong performance in North America and Europe was partly offset by continued weakness in China. Within the segment, Image Guided Therapy delivered another quarter of strong growth in North America, while in the international region, Q2 last year included a multiyear nationwide agreement with Indonesia's Ministry of Health.

Precision Diagnosis delivered strong order growth, including double-digit growth outside of China, reflecting broad-based demand and traction from our recently launched innovations. In Connected Care, Enterprise Informatics delivered solid order growth in Q2, particularly in Europe. Monitoring orders declined, reflecting the timing of certain larger North American orders shifting into Q3. Importantly, this did not reflect the deterioration in underlying demand. Overall trends across our Health Systems segments support our confidence in the commercial momentum for the balance of the year. With good visibility into our pipeline, we expect solid order growth in Q3.

Let me now turn in how we are executing our strategy across our segments. D&T strengthened its leadership position in Q2. In IGT, North America continued to deliver an exceptionally strong win rate, supported by large customer orders. We signed an agreement with a leading U.S. nonprofit health care system to equip 14 catheterization laboratories. We also secured a long-term enterprise partnership covering over 300 health technology projects across 200 hospitals in Poland, spanning IGT, imaging, ultrasound and patient monitoring. This demonstrates the value of our broad portfolio and strong customer relationships.

In Precision Diagnosis, innovations presented at CMD are gaining strong customer traction. Spectral CT Verida, wide bore CT Rembra, helium-free MRI and point-of-care ultrasound were key contributors to the order growth in the quarter. Across D&T, we also expanded strategic collaborations to accelerate innovation. Our alliance with WellSpan Health combines a long-term commercial partnership with the co-development of AI-enabled health care technologies. We also announced a joint investment with the Dutch government to accelerate the next generation of AI and robotics-enabled image-guided therapy. These collaborations extend our innovation ecosystem and strengthen our long-term competitive position.

Earlier this month, a leading U.S. health system deepened its relationship with Philips, extending patient monitoring across its large hospital network. This follows strong commercial activity in H1. Another major health system broadened its Philips patient monitoring footprint across more than 50 hospitals. Several others, including NYU Langone Health, continue to standardize on Philips patient monitoring across their networks. We are seeing strong momentum also beyond the hospital walls. In Europe, Karolinska University Hospital selected a Philips-led consortium to support the whole region of Stockholm first region-wide hospital-at-home program. It will use advanced remote monitoring to extend hospital-level care into patients' homes, supporting up to 15,000 patients annually to start.

Together, these examples underscore that customers increasingly recognize the value of patient monitoring as an enterprise platform, integrated with software and clinical informatics. They also support extending care beyond the hospital. A notable Q2 win in Enterprise Informatics was a full cloud conversion under a new 10-year agreement with a leading U.S. health system. Once fully deployed, the platform will support around 1.7 million image studies a year in this health system alone.

The scale and duration of this order demonstrates the trust customers place in Philips as they transform their health systems and technology infrastructure. These enterprise cloud transformations are complex by nature and are implemented in carefully managed phases, aligned with customer readiness. Revenue, therefore, builds over time as implementation progress across sites and clinical teams.

Turning to Personal Health. The segment delivered another strong quarter. Broad-based momentum across categories was driven by strong commercial execution, innovation and expanded retail distribution. We gained market leadership in power toothbrushes in the United States with our newest launched Sonicare platforms. We also strengthened our position in mother and child care with Philips Avent products continuing to gain market share. In China, we launched the Compact S800 Shaver, powered by our new TurboMax motor. It ranked #1 in first day sales in its category on JD.com.

As part of a technology company, our Personal Health business is uniquely positioned to apply AI across its portfolio, creating smarter, more personalized consumer experiences. We are scaling cry interpretation in Avent baby monitors, AI-guided voice assistant in Lumea hair removal devices and SenseIQ technology in premium shavers. This demonstrates how we combine health technology expertise with consumer insights to create winning innovations.

Turning to innovation across our health systems. We are differentiating our portfolio by improving clinical outcomes and productivity. In Image-Guided Therapy, we introduced SmartIQ for our Azurion platform. It advances coronary image quality and dose management, using over 50% less x-ray dose than our current low-dose settings. In ultrasound, we are accelerating innovation and bring our best-in-class technology to general imaging, supported by the FDA clearance of Elevate Plus. In MR, we introduced the first multi-contrast 4D MR imaging solution for radiotherapy simulation. It allows patients to breathe normally during imaging while helping clinicians to better visualize moving tumors for treatment planning.

We also unveiled Titanion, our next-generation ultra-high-gradient 3-Tesla MRI platform. It is designed to provide more precise clinical insights and advance quantitative imaging. These innovations strengthen our differentiated portfolio and support our long-term growth. Disciplined execution is how we build a stronger, more resilient business. It starts with patient safety and quality remaining our highest priority. Product nonconformances remain on track for a fourth consecutive year of reduction. Corrective and preventive action performance reached its highest level since 2022.

We are also increasing the speed at which we bring innovations to customers. Building on a strong first quarter, we secured another 9 FDA 510(k) clearances and premarket approvals across key franchises in Q2, bringing the year-to-date total to 29. These include important clearances across ultrasound, CT and hospital patient monitoring. In China, regulatory approvals for Rembra, Areta and Verida position us to further expand the reach of our next-generation CT portfolio.

AI is also helping accelerate our regulatory processes, improving both speed and quality. It enables us to respond more quickly to local market needs. HealthTrust, one of the largest health group purchasing organizations in the United States, recognized Philips as its 2026 Capital Supplier of the Year. This award reflects our ability to understand and respond to HealthTrust's specific needs and of which large customers it serves as well as the value we bring to their health systems.

Now turning to our regions. Our regional growth profile reflects the priorities we outlined at our Capital Markets Day. North America and Europe continue to drive health systems growth, while consumer sentiment in personal health remains broadly unchanged relative to last quarter's trends. In North America, healthy patient volumes, procedural growth and sustained capital investment by larger health systems continue to support demand. Customers increasingly want to standardize care through fewer, deeper strategic partnerships. Our platform-based portfolio, differentiated innovation and strong customer engagement positions us very well to capture that demand in North America. A healthy order pipeline supports our confidence in the outlook for the region.

Turning to Europe. Europe delivered another quarter of strong and increasing performance, particularly in the D&T and Connected Care segments. European health systems are investing in productivity, digitization and in modernizing care delivery. Our differentiated portfolio and commercial execution continue to resonate with customers. This gives us confidence that Europe will remain an increasingly important contributor to our growth. In China, market conditions developed broadly in line with our expectations in Q2.

Personal Health remained relatively stable with health systems continued to face a challenging market environment. The expansion of centralized procurement and subdued hospital investment continued to weigh in on the health systems market overall. For the full year, we now expect China to be broadly stable overall with strength in Personal Health offsetting continued weakness in health systems. Demand remains, but purchasing behavior has become more timing-driven as hospitals adapt to evolving procurement and funding frameworks.

I will now hand over to Charlotte.

Thank you, Roy. I will start with segment-level performance. In Diagnosis & Treatment, comparable sales increased by 2.4% (sic) [ 2% ] . Image-Guided Therapy delivered high single-digit growth, continuing its strong track record for the 22nd consecutive quarter. Performance was strong in Europe and North America, led by the Azurion platform, Zenition Motorized mobile C-arms, higher service revenues and intravascular ultrasound. Precision Diagnosis comparable sales declined at a low single-digit rate, a slight improvement from Q1. Growth in Europe and several international regions, markets, particularly India and LatAm was more than offset by China.

MRI performed strongly, reflecting the strength of our differentiated portfolio, particularly the helium-free BlueSeal MR 5300 and the high-performance 3T MR 7700. Ultrasound performance was supported by momentum in our cardiovascular platforms, Affiniti Cardiovascular and premium EPIQ Cardiovascular. The new Flash 5100 also contributed, expanding our presence in point-of-care ultrasound. Our recently approved CT platform innovations, Rembra RT and Areta RT also began contributing to revenue. Adjusted EBITA margin increased by 40 basis points year-over-year to 13.9%, including the impact of the tariff refund, which I will discuss later.

Excluding the refund, margin declined by approximately 460 (sic) [ 420 ] basis points to 9.3% as productivity measures were more than offset by cost inflation, higher tariffs and currency effects. We expect margin progression towards the end of the year, driven by higher growth, innovation-led gross margin improvement, productivity and inflation mitigation actions alongside an easier year-on-year tariff comparison.

Moving to Connected Care. Comparable sales increased by 2.2% (sic) [ 2% ] . Monitoring delivered another quarter of strong mid-single-digit growth, led by North America and supported by Europe. Growth was driven by higher IntelliVue hospital monitors and ambulatory cardiac Monitoring sales, continued adoption of PIC iX and strong performance in Monitoring as a Service, reflecting customer investments across hardware, software and services. Sleep & Respiratory Care delivered low single-digit growth, led by Europe and Japan. Enterprise Informatics sales declined mid-single digit, mainly reflecting the timing of order conversion.

Growth in International region was offset by a decline in North America. Connected Care adjusted EBITA margin in Q2 expanded by 740 basis points year-on-year to 17.8%, including a tariff refund. Excluding this benefit, margin expanded by approximately 130 basis points to 11.7% as productivity measures more than offset the higher tariffs and cost inflation. In Personal Health, comparable sales grew 8.5% (sic) [ 8% ] in Q2 with all 3 businesses contributing. Growth was broad-based, led by North America, while China benefited from an easier comparison base. Demand remained strong for premium shavers, OneBlade Replaceable Blade and the recently renewed Sonicare 5000 to 7000 series.

In Q2, Personal Health adjusted EBITA margin expanded by approximately 780 basis points to 23%, including the impact of the tariff refund. Excluding this benefit, margin expanded by 280 basis points. Sales growth, productivity measures and a particularly favorable innovation-led product and market mix supported higher gross margin. These favorable impacts were partially offset by cost inflation. Finally, sales in segment Other increased by EUR 62 million to EUR 182 million, mainly due to higher royalty income and activities related to a divestment. Adjusted EBITA increased by EUR 11 million to EUR 7 million, driven by higher royalty income.

Now turning to the group results. Comparable sales increased by 4.1% (sic) [ 4% ] in Q2 with growth across all segments and most regions. Adjusted EBITA margin for the group increased by 400 basis points year-on-year to 16.4%, including a tariff refund. Excluding this benefit, margin declined as expected by approximately 20 basis points to 12.2%. Sales growth, favorable mix effect and productivity measures were more than offset by cost inflation and higher tariffs. In Q2, we received virtually all of the tariff amount claimed. This includes an approximately EUR 25 million impact for annual incentive accruals from the increase in our reported full year guidance, which includes the tariff refund benefit.

Consistent with the treatment of the original tariff cost, the majority of the refund was recognized as a reduction in cost of goods sold and was therefore included in adjusted EBITA. In Q2, we delivered EUR 132 million in productivity savings, bringing year-to-date delivery to EUR 258 million despite pressure from higher cost inflation. We are on track with good visibility to deliver our EUR 1.5 billion 3-year saving commitment. Progress in the quarter was supported by further operating model simplification, procurement and supply chain initiatives and footprint optimization. AI is strengthening these capabilities and helping us scale the benefits.

In Personal Health, our internally developed Illuminate AI platform combines consumer data and signals to generate innovation ideas, making concept development 50% faster. In engineering, we are scaling AI through initiatives such as NOVA, helping teams develop product requirements with greater precision and more quickly, reducing rework and supporting first-time-right development. Drafting time has been reduced by around 1/3 with further productivity benefits expected as adoption scales.

Adjusting items were EUR 20 million, significantly below EUR 86 million in the prior year. The reduction was primarily driven by portfolio actions in Enterprise Informatics, including a one-off gain related to the divestment of the electronic medical records business completed in Q2. Given the year-to-date performance, we now anticipate a full year impact of approximately 180 basis points compared with our previous outlook of approximately 200 basis points. Free cash flow in Q2 was an inflow of EUR 222 million, broadly in line with last year as higher working capital outflows were largely offset by the tariff refund.

Moving to the balance sheet. We ended Q2 with EUR 1.8 billion in cash. Net debt was EUR 5.7 billion at the end of Q2. The leverage ratio improved to 1.8x on a net debt to adjusted EBITA basis from 2.2x in Q2 2025, driven by higher earnings and lower debt. Our balance sheet provides resilience in an uncertain environment while giving us the flexibility to invest in long-term value creation.

Now turning to our outlook. Through the first half of the year, we delivered against the priorities and expectations we set out at the beginning of 2026. We delivered against a persistently uncertain macro and geopolitical environment. We remain focused on what we can control and are executing the actions needed to deliver our priorities. Against this backdrop, we reiterate our full year comparable sales growth outlook of 3% to 4.5%. For the full year, we continue to expect Connected Care and Personal Health to grow at the upper end of the range and Diagnosis & Treatment at the lower end.

For Q3, we expect comparable sales growth to be at the lower end of our full year range due to China and Ultrasound. Our full year outlook for underlying adjusted EBITA margin also remains unchanged. Excluding the tariff refund, we continue to expect a full year adjusted EBITA margin of between 12.5% and 13%, driven by sales growth, innovation and productivity, partially offset by annualized tariffs and input cost inflation. This corresponds to 13.5% to 14%, including the tariff refund recognized in Q2.

For Q3, we expect adjusted EBITA margin to be below the prior year level, primarily reflecting higher cost inflation and an unfavorable mix impact. In line with our Q1 view, we expect cost inflation to remain elevated with a greater impact in the second half as higher costs held in inventory are recognized in the P&L. At the same time, the benefits from our mitigation actions are expected to increase during the second half, together with continued contribution from the productivity program. We remain on track with good visibility on the actions required to deliver our full year underlying margin outlook.

Consistent with our approach over recent quarters, our outlook incorporates currently known tariffs, including those announced on July 23. We now expect reported free cash flow of between EUR 1.5 billion and EUR 1.7 billion, including the tariff refund. Our underlying free cash flow outlook remains unchanged at between EUR 1.3 billion and EUR 1.5 billion, excluding the tariff refund. As previously indicated, our outlook excludes ongoing Philips Respironics related proceedings, including the investigation by the U.S. Department of Justice and the State Attorneys General.

With that, I would like to hand it back to Roy for his closing remarks.

Thank you, Charlotte. Before we open the line for questions, let me leave you with 3 key messages. First, we delivered a solid first half in an uncertain environment, demonstrating the resilience of our business and our disciplined execution. Second, our first half performance, together with the momentum we are seeing across our customer relationships, technology collaborations and government engagements gives us confidence in the full year. We are, therefore, reiterating our comparable sales growth outlook and raising our adjusted EBITA margin and free cash flow outlook to reflect the tariff refund.

Finally, we remain fully focused on delivering what we said we would do. Through the execution of our focused segment strategies, continued platform innovation and disciplined operational delivery, we remain on track to achieve the ambitions we set out at our 2026 Capital Markets Day, mid-single-digit growth CAGR and mid-teens adjusted EBITA margin by 2028.

With that, operator, please open the line for questions.

[Operator Instructions] We will now go to the first question. The first question comes from the line of Hassan Al-Wakeel of Barclays.

I have 2, please. Firstly, if you can expand on the D&T margin performance, please, of 9.3% ex tariff, which is meaningfully below expectations. What's driving this? And how are gross margins in the business trending given your prior comments on innovation and mix here? Do you expect underlying D&T margins ex tariff to expand year-over-year in Q3 and Q4? And then what about the full year?

And then secondly, also on D&T and really your thoughts on centralized procurement in China and the extent to which this is already impacting your margin in Q2. Roy, when we met last month, you talked about differentiated offerings such as BlueSeal MR and Spectral CT being insulated from this. Is this still your view? Or is it changing? And do you expect further expansion of these initiatives in China?

Yes. Thank you, Hassan. Let me take the first question. Thanks for your question. So maybe take you one level back from a margin perspective. So I think it's important to note that overall, we delivered on our margin expectations exactly in line as we said at the beginning of the quarter. And that is actually 10 basis points of margin expansion in the first half of the year, excluding tariffs in a very dynamic environment. So we're actually pretty pleased with that, and it's exactly in line with our expectations.

Now if you then unpack that a little bit, it is fair to say that Personal Health did really well from a margin expansion perspective. Connected Care expanded margins. And indeed, as you mentioned, D&T had lower margins. Now there are a few things that are impacting the D&T margin. So as I said also just previously in my remarks, of course, there was cost inflation, which had a somewhat greater impact in D&T than in the other segments. And then also, we saw, as we also called out in the beginning of the quarter, we saw higher tariffs, of course, as Q2 was the last quarter where we didn't see those full tariffs.

Also, specifically in D&T, we saw a higher currency effect as well. And then the other driver there is that last year, we had a higher contribution from a one-off effect as well. Then the other element, and you already alluded to it in your second question, was China, where we did and we know PD has a somewhat higher exposure to the market in China. And as a result, that also impacted the margins in Q2 as well. But if I then take you back, overall, we are exactly in line with where we thought we would be for Q2. We are on track with 10 basis points of margin expansion for the first half. And we are reiterating our full year margin outlook for the year between 20 and 70 basis points.

Now to follow up on your last question, which is the gross margin from innovations and how that is developing. We do see that continuing to develop in the right direction, I'll give you a couple of examples. For instance, Rembra in CT in our Performance segment and also Verida in our premium segment in CT is really driving up gross margins underlying, excluding tariff, excluding cost inflation. And also in MR, and we spoke about that on the call last quarter, we have a lot of help from our service upgrade. Last quarter, you might remember us talking about SmartHeart and also about Precise, some of the software upgrades that we have, those are also driving underlying margins up.

So maybe with that, I'm going to hand it over to Roy for the centralized procurement.

Yes. So on the centralized procurement, you might have seen that now the China government expanded the centralized procurement policy across China. Now what that means is that you will have a further prolonged scope of implementation of a new policy. And as we learned earlier, this creates turmoil in the market because people are learning what this new process is. Of course, they're bringing them technology under that process. Still the point being, as we discussed earlier, Hassan, that unique technology still has a specific way finding a position in that centralized procurement.

But the other kind of segments like more value segment and kind of where you have less undifferentiated technology, you will go more into the procurement process as they have defined. Now therefore, as we said at Philips, we have a very selective go-to-market approach in China, where indeed for MR, we are banking heavily on the helium-free [indiscernible], and we are working with the Chinese government also on an accelerated path for the 3T helium-free in China, and that's actually well on track.

Secondly, on CT Spectral, actually, we have seen real good momentum and actually positive orders as well in China. And we got the Rembra and the Verida approved in China, and that will help us also competing with really unique innovation going forward. And then we have kind of the IGT franchise that remains strong in China as well. And then what we also said and maybe take you there as well, we have been planning on a China that will remain more cautious in terms of our outlook and inclusion. And what was important in combination with that was that we saw North America and Europe strengthening.

Now we are really pleased with the double-digit order growth in Europe, as I mentioned, because that is actually a good place to compensate next to ongoing momentum in North America. And in North America, yes, we had now this slip in CC, but you saw actually that D&T was doing really well. And actually, PD in the second quarter was double-digit growth outside of China, mid-single-digit growth, including China. And North America over a 12 months period has double-digit order growth. So we really see Q2 as a slip.

Now also even the reason for the slip, we are talking about a few orders that fell at the wrong side of the quarter. We knew it was going to be low single digit because we were coming off a very strong comparable sales growth -- comparable order growth last year with the Shereen deal and before that, the Bon Secours Mercy deal. And therefore, with a few falling into Q3, that therefore shifted the balance. But the reason is that especially in Monitoring, these big platform deals are multimillion, long-term and they are also breaking into new competition. So kind of concluding those also legally and administratively takes certain time, and therefore, it's less predictable than a standard renewal.

So these are good deals that will come in with good margins, but it's just that the phasing in this point made that falling into Q3 and therefore, Q3 will be stronger than we originally planned for because they will have some of these Q2 orders. And therefore, the combination of North America and China and even some other markets like India, where we're also doing really well is compensating also for the full year outlook on the China pressures, and we have a good visibility of order pipeline for a strong full year 2026.

That's really helpful. If I could just follow up, Charlotte. Can you quantify the added cost inflation you're seeing or expect this year? And if this stays, how are you thinking about the impact for '27 and beyond? Or do you think this is well covered in your macro uncertainty buffer in the bridge that you presented at CMD?

Yes. Thank you, Hassan. So what we said prior quarter is that we see high single-digit cost inflation for the full year 2026. Our view on that hasn't really changed. It has ticked up slightly, but not so much actually. And as a result, we're also upping our cost mitigation actions where we have really good line of sight to. So as I said last quarter as well, actually, our view on that remains unchanged. For 2027, of course, there will be an annualization of the cost inflation, although, of course, depending on how the macro environment will unfold, there will be some puts and takes there. We are taking that into account into our 2027 margin outlook.

And also, as you rightfully say, at CMD, we have been very clear about our EBITA margin bridge, where we put in roughly 200 basis points for FX and macro uncertainty. That still very much falls within the bucket. And you heard Roy say also earlier today, we have -- we are on track to achieve our ambitions we set out at Capital Markets Day in 2026. And one proof point that you have already there is if you look at the first half productivity that I just called out, this is EUR 258 million, and that actually includes that absorbs some of the additional inflation we're seeing. So I think those are good proof points to be aware of.

We will now go to the next question. Your next question comes from the line of Richard Felton of Goldman Sachs.

So 2 for me, please. The first one, I'd like to follow up on your assessment of global hospital demand. So on Slide 6 of your presentation, you're characterizing both North America and Europe as strong. I think actually on Europe, you've become a little bit more positive versus Q1. So 2 questions on that. One, what is driving the improvement that you're seeing in Europe? And secondly, when do you expect to see that strong demand translating into better D&T and Connected Care growth rates? That's the first one.

Second question is on Personal Health. Can you discuss the drivers of the strong performance in Personal Health over the last few quarters outside of the China comps effect? What have you been doing differently in terms of innovation, your go-to-market strategy? And how should we think about the durability of those drivers of better growth going forward?

Richard, thank you for your questions. Let me go first to the global hospital demand. And it's indeed good to take a step back. So if we look underlying at the trends, we see North America to continue to be strong. And it's strong, as I said before, not evenly spread, right? So not every single hospital in North America is in a strong position, but especially the bigger hospitals, academic, but also private and the ones that are going also in a combination of hospital and ambulatory, they are strengthening.

And those are the ones that we really cater for well with our platform-based innovations around kind of Monitoring, IGT, but also Imaging. And that's where we have seen a continued strong pipeline. As I mentioned, over 12-month period, we have double-digit order growth in North America. Yes, we had now a few slips in Q2, but actually, they come back and they are large contributors also to second half. And we have a strong outlook for order intake for full year 2026 in North America. And that also has been translating into strong sales growth, as you know, in North America and a strengthening contribution out of North America for the total group.

In Europe, we indeed see a step-up versus last year, right? So we see Europe investing more. That is actually across various parts of Europe. So in Nordics, we closed this great Karolinska deal, which is for me a stellar example of how you see they're investing in health care to take it also into the home. So this is a unique hospital-to-home program where we are the preferred partner to help them manage that system in a full province. And that's something that we see more broadly across Nordics. Then we also see strengthening in momentum in Central Europe.

Now we mentioned some U.K. deals where we had some big imaging informatics deals. Of course, U.K. is going through a challenging period from a health care perspective, but they are clearly having a determination to improve it and turn it around into better service delivery, and they're investing, especially digitally. So that's something that actually helps this. Then also, we mentioned that we had the CEE Poland deal, where actually this is a nationwide deal. We are supporting 200 hospitals to really upgrade their full infrastructure. So you see that there are in kind of programs.

And even in Germany, I was recently kind of last 2 weeks multiple systems we are discussing big projects with, both in terms of heart centers they are building as well as how they are digitizing more. So we see indeed that there's more money going into the upgrading of the infrastructure to serve patients better, and we are well catered to that. And therefore, the double-digit growth in orders in Q2 is really encouraging. And we also see a strong pipeline for orders in Europe for the full year.

That also then should translate into the CSG. So that's also where you are right to saying kind of CSG in North America was already strengthening because we saw earlier stronger order pickup there. Now of course, if you look into North America, that's very strong Monitoring and IGT. Europe will have a very positive impact also on D&T PD in particular, because that's where also there's more sizable uptick of the imaging one. And therefore, also what we said in the sales phasing where you saw that in PD, we are coming from turning this new innovation pipeline that we launched into orders, which we really have been seeing picking up.

And I mentioned to you the double-digit ex China and the mid-single digit, including China. We will now see that in the second half coming to positive sales growth, and then it goes into strengthening the full D&T because IGT has been remaining strong. So as we mentioned before, this will phase in. And then also on the margin point earlier, this will phase in at better margins. So this is also, therefore, and when you see the back-end loading kind of coming in, that is because you then see the new deals coming in with some better margin improvement. So that's on the global hospital demand.

Then turning to PH. I think PH is a dual story of structural strengthening. And actually, you have seen now that we have multiple quarters of very strong growth, beating competition, and that is driven by 2 facts. One, we really are launching innovations that resonate very well. And particularly, we see now a very strong contribution in '26 from our new Sonicare ranges. We range -- we kind of have been launching the 5,000 to 7,000 ranges in Sonicare. That actually took us back to market leadership in North America. Those had double-digit growth in oral health care in the second quarter.

So the kind of the Personal Care franchise was already doing really well. OneBlade was fueling that, the new shavers. We now have also really the oral care franchise joining that. And this has just launched. So these new ranges have a lot of runway because one platform is just in the market 1 year, another platform just launched this year. And what the positive innovations also kind of give us is more retail coverage. So we see that customers really want us either online and on the shelf.

So we had big wins in North America and big customers like Walmart, Costco, of course, that gives sustained kind of runway to kind of strengthen your franchise. We're also expanding very aggressively in pharma -- in pharmacies because in pharmacies, they kind of see mother and child care, but also oral care as an important part of contribution. And therefore, you see that the new ranges also drive good margin, right? And if you look at the Q2 margin increase, of course, that's also really driven and supported by strong innovation contribution of the new ranges.

We will now go to our next question. And your next question comes from David Adlington of JPMorgan.

A couple from my side. So just to follow up on the cost inflation question. Just wondering, presuming you still have some hedges in place for this year, just wondering as those roll off, the high single-digit cost inflation you're seeing for this year, I just want to get early thoughts in terms of where you're seeing cost inflation for next year? And the second one is just we've got some conflicting data points around U.S. procedural volumes so far this quarter. I'd just love to get your thoughts on what you're seeing in the end markets there?

Yes. Thank you, David. Let me take the first one. So as I said, on cost inflation, how we see high single-digit million euros since Q1, maybe slightly higher than that at this point in time. And as I would break it down into the different components that we are seeing, there are actually 3, right? First of all, there are the e-components that we've seen increase significantly. We don't have hedges in place for that. So that just rolls over into 2027. We have freight costs significantly increasing as a result of the Middle East tensions. And the third component, which is very, very small for us is energy. So where indeed, we have hedges in place.

So when you think about the hedges we have in energy, actually, and we also -- when we model that towards 2027, that will not have a significant impact. So where I -- where we stand today, also how we think about it today is, of course, the cost inflation will annualize, assuming that nothing will change in the world, of course. And what we will do, as we have always done, we will mitigate that with our cost actions where we have really good line of sight to go after further bill of material improvements, further AI boosting to also help us find savings on the back of AI and further also tariff mitigations.

So all of that is -- you should think about it as a package. Yes, we see cost inflation potentially annualizing, although the year is still long. Our hedges the way we are hedging actually won't make a big difference, and we have mitigation efforts in place where we have line of sight that, that will offset. And as Hassan also asked earlier, when we were at Capital Markets Day, the 200 basis points that we then called out for FX and macro uncertainty, that will cover us also for our midterm guide. And Roy...

Yes. Let me take the -- on the U.S. procedural volume. So David, we also saw some of that. Let me kind of give our color. So as I said, North America overall for us is really strong, and we see it continue to be strong. We gave -- and I gave one example of that. Actually, we have been voted the preferred supplier for HealthTrust. HealthTrust is one of the biggest kind of purchasing groups of very large health systems in North America.

We have some of the health systems where indeed they reported that procedural growth was less, but actually, their revenue growth has been strong. And if you look to our, for example, IGT business, that is an excellent proxy for procedural growth, we have now 22 consecutive quarters of growth. So that remains very strong and especially in North America, that keeps expanding and growing, both in devices as well in systems. Secondly, also what we see is that we still have ample penetration opportunity. So HealthTrust is a big group with very large kind of especially private hospitals.

We were also dislodging some competition. So that's another source of growth for us because by getting access to those, you can grow in a different way because you were just not there. But even on the procedural side, our IGT kind of is for us the best proxy and the pipeline is actually continued to be strong kind of going on. And that's also where you see the orders in the kind of D&T mix. Of course, we talked about strong PD and picking up and generating on the back of the latest kind of launches, strong traction. But don't forget IGT that has been consistently delivering in that mid-single-digit plus kind of order range, and that is predominantly also driven by a very strong North America.

We will now go to the next question. And your next question comes from Veronika Dubajova of Citi.

I'm going to keep it to 2 as well. I want to start on the full year guidance, Charlotte, and where sort of in the range on margins you feel most comfortable? I mean if I take your guidance for third quarter, you are going to have to deliver an absolutely massive Q4, especially to come in anywhere but at the lower end. I mean, on my math, we'd be looking at sort of margins in the fourth quarter that would be 16% to 17%, maybe even a little bit higher.

Your fourth quarter would account for 40% of the full year, which my Philips model goes pretty far back, but I can't find a single year where that was the case. Can you maybe talk through what gives you the confidence in that fourth quarter margin being as strong as is necessary for you to hit the guidance? And I guess for all of us sitting and looking at the business from the outside in, having such a back-end loaded year can become a little bit uncomfortable. So just help us understand how much visibility you have on that and what gives you the confidence and maybe comment in particular on D&T?

And then my second question, just to circle back on China, where I know you've addressed it a little bit, but it does seem like there is a more focus from the government on price. I think you have expressed this expectation of China returning to 3% to 5% growth rate in the midterm and you may be growing slightly less than that. In the context of the centralized procurement notice, how do you feel about those expectations that you put out at the CMD? And should we see further downside risk to those maybe now that we have visibility on that?

Thank you, Veronika. Let me take the first question. So let me start by saying that we remain and I remain very confident in our full year margin outlook. And also to take you through the shape of the year and remind you, we were actually delivering 10 basis points year-over-year improvement in the first half despite the world we live in, which is very dynamic, if we look at higher tariffs, also higher cost inflation, as we just also spoke about. Indeed, Q3, we expect the adjusted margin to be slightly below the prior-year level as a result of inflation that is, of course, still coming through as well as unfavorable mix.

And then exactly like you mentioned, in Q4, we do expect a meaningful step-up with the margin reaching the upper end of the mid-teens range. So I think your model and our models roughly correlate there. And what is supporting that? I think that's important to understand. So first of all, there's higher volumes. And as a result, and I think you know this, Veronika, that gives us a ton of operating leverage. Then -- and we spoke about it earlier, we have innovation-led gross margin improvement that is coming through, and we just spoke about some of the drivers there, some of the software, some of the CT, of course, PH is helping us significantly as well.

And then the stronger contribution from productivity and inflation mitigation actions. We said in May as well, we said this will build up over time. It takes time to find the additional mitigation actions that -- to offset the cost inflation. We have really good line of sight to those, but we need a bit of time before that actually translates into the P&L. And then the last thing that I would say that gives me confidence as well is that, that sequential margin step-up in Q4 is consistent with the normal seasonality we see.

And so I am fully confident in our Q4 margin acceleration and also the delivery of the full year outlook. And I remind you also, of course, a lot of this is volume related, and we have record order books in some of our high-margin businesses as well like IGT and Monitoring. And also, as Roy also mentioned, our PD orders, we see a strengthening margin profile as well.

Thank you. Let me then take the China one. So the China centralized procurement expanding, I already mentioned that, right? So -- and what does that do? That gives more control and therefore, kind of also timing-related delays towards the procurement process. We also know, and we said that before, that if it comes under the centralized procurement, there is margin pressure as a result, unless you have specific innovation that can warrant a specific value that people want to continue to pay for. And that's also something that we expect that kind of will continue to drive contribution out of China, including the new innovations that we have launched that we just mentioned we got also approval for in CT, the MR that is coming, IGT will remain.

As important and probably even as exciting is that actually the North America and Europe trends also as we had in the plan are accelerating probably even a bit faster than we expected. So we see that the mitigation from China, even if kind of this would go a bit slower than we all hoped for, we see that actually the double digit in Europe, and that will continue with a strong growth, also in the North America market. But I haven't talked about much yet India that actually is really picking up at double-digit contribution for us. We have a very strong footprint, and we are really excited and I had the engagement with Prime Minister Modi and its health ministry about how we can really both hospitals, but also outside of the hospital support in providing care and better care into India also with AI.

That's for me, a really exciting growth prospect that actually we have only started to untap. And as you know, India is the strongest GDP market at this point in the world as well. So we see ample opportunity in the globe to capture the kind of opportunities in health care, and that could offset if China unfortunately would further prolong, and we have seen that it takes longer, right? So we should also not be kind of too bullish about it. We have been very cautious, and that's also what we remain. And in this year's outlook, we really kind of took that fully into account and actually, the rest of the geos nicely cover for that.

Our next question comes from Julien Dormois of Jefferies.

So the first one actually relates to the pretty strong order intake that you guys have been delivering in the past 6 or 7 quarters. So maybe with the exception of this quarter, but you had a pretty healthy order book so far. And despite that, we still see limited growth in D&T and CC average probably in the low single-digit region. So still struggling to reconcile how that is and maybe also wondering when we could see this strong order momentum transforming into sustainable -- faster growth? So that would be the first question.

And the second question relates to Enterprise Informatics, which used to be a strong growth driver for the business. We have now 2 quarters in a row of sales decline. So just wondering whether this is still this transition to more of a SaaS model impacting here and here again, where we could see better trends in that line of business?

Yes. Thank you, Julien. Let me take the bridge from order intake. So indeed, we had 6, 7 quarters of strong order intake. Actually, we see that also continuing with Q3 onwards. So we believe we are on a good trajectory for strong demand of our products. And that actually was in CC. That was also in IGT. And of course, we see now PD strengthening and following in the mix. So that's kind of where you see the different phasing kicking in.

We also have said earlier that indeed, from a conversion perspective, we have seen some longer conversion times across modalities because on one hand, you see larger deals and therefore more complex implementation. You also just see that installation capacity is kind of more constrained in the market. So there is a longer range. What we have been showing actually is and that's also what you see with the 4% growth in the quarter 2, last year, we had 1% in quarter 2 of growth, right? This year, we have 4%. Yes, there's PH contribution, but also in Health Systems businesses, we have been consistently stepping up. And that's also what we kind of continue to do, and that's also what we have built in our plan, and that's also how we have built the forecast.

So if you look to kind of how we're going to the full year range, you will see a continued strong PH contribution. But quarter-by-quarter, you see also that kind of the contribution of the health systems businesses strengthened. And then indeed, you see that kind of the Connected Care mix has been and will be ahead of that. If you look into Enterprise Informatics, that is indeed exactly as you say, and we talked about it earlier. As we move into this cloud business, we are winding still down some of the on-prem that is changing. And those are big implementations.

So we are in this in-between period where we see actually order momentum picking up, and we have been sharing that since last year that we are winning in orders. but actually, they come 12 to 18 months later into real revenue. And then also you have your software kind of conversion, right, your SaaS model that is kicking in. So they're seeing the dual impact of that. We also will see strengthening of EI. So -- but it is slow. I just want to point that out because we are still in that kind of conversion perspective, but that doesn't hold back on CC. And on CC, kind of we also guided that it will be kind of in the range that we forecasted on sales with IGT and Monitoring with Monitoring very strong, all-time high. So that will continue to give.

Then we have Azurion C that we said was coming back into low single-digit growth in Q2 as well. So that also contributes in CC growth. And then we will see EI slowly but surely picking up and that mix actually gives us a nice step-up in CC in the quarters to come. And the full year range, right, for CC was the upper end of the growth range, right? So this is -- and that includes the EI part in it.

We will now go to the next question. And the next question comes from Hugo Solvet of BNP Paribas.

I have 2 as well, please. First on D&T underlying, so ex tariff. Charlotte, sorry if I missed that earlier, but can you expand a bit on the composition of the headwind in Q3 between mix, FX and inflation?

And second, Roy, you alluded to the strength in India. Do you see increasing competition there from Chinese player in the country and how your positioning and pricing plays out in this market?

Yes, Hugo, thanks for your questions. And just to confirm on D&T ex tariff, you mean Q2, not Q3, I guess, right?

Yes, Q2. Well, if you can give us Q3, that would be great as well.

So from a D&T perspective, so first of all, let us take us back to what we said last quarter. We said last quarter, we expect overall for Philips, a slight decline in margins versus last year, which is exactly where we came in. So we feel good about that. And we have expanded our margins by 10 basis points overall at the Philips level in the first half of the year versus last year. Now as we -- as I said previously, there's a little bit of a mix effect there. Connected Care did really well, expanded margins, excluding tariffs.

Personal Health expanded the margins, excluding tariffs. And D&T, indeed, we saw a decline. So a few different reasons for that. That is, first of all, we had cost inflation that was hitting us harder in D&T than it was hitting us in other segments. We, of course, have tariffs hitting us in Q2 for the full quarter that was also impacting D&T a little bit harder. And then we saw some additional negative currency effect there as well.

And then the other component is that China remained a headwind, and we've spoken about it. It is a bigger headwind in D&T, specifically in PD with specifically ultrasound being a high-margin modality. And then also good to know, if we look at Q2 of 2025, specifically for D&T, that was the highest margin quarter since 2021. So it was also a very high comparable base.

Let me take India just shortly because I think we also need to get to a conclusion. So India is an exciting opportunity. What we do see and actually that the growth is coming, and that's both consumer as well as health systems from the premium segments for us. So of course, it's a large market, and you see kind of they're looking for a mix of solutions. How we are winning is with really our quality solutions, our platform-based approach, both in health systems and then very high end also the innovations that are driving good growth.

And therefore, also the margin that comes in is actually contributing to total margin. So we are seeing a prospect in which we can develop and strengthen a further attractive business for us, both in terms of growth, but also with a margin that actually supports us strengthening in the future.

All right. Our last question today comes from Graham Doyle of UBS.

Just a couple of ones from me. So just firstly, on the Q3 guidance, did you always expect margins to be down in Q3? I'm just trying to work out how much extra work has to be done versus the original guidance in order to keep the full margin range for the full year intact?

And then, Roy, just on the second question around order intake. Obviously, you commented around some orders being pushed into Q3. Is it reasonable now to expect orders to be up something like mid-single digits plus as they have been for the last 6 quarters?

Yes. Thanks, Graham. Let me take your first question, and I can be very simple. Yes, the margin phasing as we see it throughout the year is exactly in line with our underlying plans. So it is exactly in line with how we saw the year play out. So nothing else to see there from that perspective.

And from the order intake, yes, you should expect that we return to this mid-single-digit range in Q3 and beyond.

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

Yes. Thank you for listening in. As we said at the beginning of the call, 3 core messages. One is we delivered first half in line with our plan in an uncertain environment, demonstrating growth, orders, sales and a step-up in margin. We are fully in line with our full year plan, and therefore, we reiterated with confidence our guidance on comparable sales growth range of 3% to 4.5%, and we raised our adjusted EBITA margin and free cash flow outlook to reflect the tariff refund.

So we are excited about the journey. We remain very disciplined and agile to operate in an uncertain environment, and we look forward to see you later on the road and to keep engaging on you on how the world trends.

Thank you.

[Presentation]

[Interpreted] Good morning, ladies and gentlemen. I'm pleased to welcome you. I hereby open the Annual General Meeting of Shareholders of Royal Philips N.V. Our annual meeting is an important occasion for us. And we are delighted to have you all here with us once again, and we greatly appreciate your commitment to our company. Well, that aligns with the next sentence. Global tensions and geopolitics have further intensified over the past year for a multinational such as Philips, with operations in over 70 countries, navigating this as a challenge in diverse economic, cultural and social conditions. And I'm going to mention a few of the challenges that we face.

The company is not immune to the ongoing geopolitical and macroeconomic uncertainties, including trade restrictions, import tariffs and volatility in commodity and energy markets as well as this volatility in fuel, and we're monitoring these developments closely and work with multiple scenarios to assess the potential impact on our supply chain margins and cash flow as carefully as possible and wherever possible to mitigate them.

We continued to strongly condemn Russia's military aggression against Ukraine and sympathize with the suffering it has caused. Other conflicts in the world, especially in the Middle East are also causing human tragedy and economic and political instability. And we are trying to navigate these as best we can.

In addition, globally, we see a shifting debate on the role and responsibility of businesses, including in sustainability, social engagement and long-term value creation. In this regard, we have seen cultural divisions and polarization increase over the years.

Philips' commitment and that of its employees to sustainability, ethical conduct and access to quality health care is not a temporary choice, but is inextricably linked to who we are and what we as Philips represent. These developments underscore that doing business in a global context requires care, diligence, a moral compass and flexibility. This also demands respect for different perspectives and willingness to engage in dialogue. Various parts of the world view these issues from different perspectives. And we believe that sustainable progress is achieved by working together and showing mutual understanding, and we see our responsibility as contributing to connection, stability and trust.

Our mission, improving people's health and well-being through meaningful innovation remains the continual guiding principle in our decision-making. And we deliver added value to billions of people in this world.

Very well. Now I'm going to introduce a few people to you. Seated next to me from your perspective from left to right, Herna Verhagen, Chair of the Remuneration Committee. Herna, welcome. Next to me is Marnix van Ginneken, our Chief ESG and our Chief Legal Officer. And of course, to my left from my perspective -- from your perspective, to my right, Roy Jakobs, our CEO. And next to him, Charlotte Hanneman, our CFO. And next to her, Liz Doherty, Chair of the Audit Committee.

Seated behind me are also several Supervisory Board members. From your perspective, from left to right, Sanjay Poonen; Indra Nooyi; Peter Löscher; Paul Stoffels, also Chair of the Q&R committee; Benoît Ribadeau-Dumas, Chua Sock Koong and Bob White. Marc Harrison, is unfortunately unable to attend the meeting in person, but is following the meeting remotely. Also present in the room is John DeFord, whom we have nominated -- where is John? Yes, I see you, whom we have nominated as a new member of the Supervisory Board. And of course, later on in this meeting, we will address this nomination. And I will briefly give him the floor.

Also present are [indiscernible] on behalf of our external auditor and insurance provider, PwC; the Company Secretary, [indiscernible] Let's see. Yes, there you are from De Brauw Blackstone Westbroek; and [indiscernible] next to him, the Secretary to the Supervisory Board.

Before I give the floor to Roy for his speech, I will make a few remarks regarding formalities and practical arrangements during this meeting. In preparing for this meeting, the notary has confirmed that the legal and statutory requirements have been met. The general meeting has, therefore, been lawfully convened and is authorized to take valid decisions on the items listed on the agenda. It's customary with us, Dutch is the official language. I assume that you're all proficient in Dutch. If not, we have interpretation available for you. Of course, you can listen to the English translation live via our webcast.

As usual, voting will take place electronically. However, unlike last year, you are given the opportunity to cast your vote throughout the entire meeting on all agenda items. After this, I will explain the voting procedure. Briefly after which, we will proceed to the substantive discussion.

To give everybody the opportunity to speak that -- this is an important point I'm about to make, to give everybody the opportunity to speak, please limit your questions to 2 or at most 3 questions. If it's difficult for you to count to 3, don't worry, I'll help you make sure you do not count beyond 3. In the next round, the second round, you'll have the opportunity to ask the next 3 questions. This is to avert certain people from dominating the entire meeting. Questions asked here in the room will, of course, be answered to the best of our knowledge by Roy Jakobs and his team, you will understand, however, that it's almost excluded, but it's possible that somebody doesn't know the answer immediately, and then the answer will be conveyed at a later point in time.

As mentioned, unlike last year and previous years, you may cast your vote electronically throughout the entire meeting. I will open the voting system following our CEO, Roy Jakobs' speech. And I will then state what proportion of the share capital authorized to vote is represented at the meeting with Marnix's assistance. The voting will be closed after agenda item 9.

As soon as the voting system is open, you may cast your vote on all agenda items. If you scroll through your voting handset, you'll see exactly which agenda item you can vote on. You may vote continuously on all agenda items. So if you say that you would like to vote before hearing the explanation, then that's up to you. Once you've heard the explanation, if you think, well, I'd like to change my vote. That's also possible. And then you can enter the same agenda item and cast your new vote, and you can do that endlessly until after agenda item 9. After that, I will share the outcome of the vote with you.

Upon arrival, you received a brief guide containing some personal details and a description of the voting procedure via your mobile phone, as I've just explained. Please follow these instructions. And the login code presented to you is obviously personal and corresponds with the number of shares you represent. In the voting interface when you have scrolled to the agenda item you choose, you may select whether you wish to vote in favor or against the proposal. If you wish to vote in favor of the proposal, please press for. If you wish to vote against the agenda item, please press against. If you wish to abstain from voting, please press abstain.

If you have any questions or encounter difficulties, please raise your hand so that one of the members of the Philips team can come to assist you. Once the voting system has been closed, once again, I will share the outcome of the vote with you.

Very well. If there are no additional comments or questions, I would like to invite Roy Jakobs to deliver his speech in English. And on the webcast, you can hear the simultaneous Dutch interpretation. Roy, you have the floor.

Thank you, Chairman. Ladies and gentlemen, welcome to the 2026 Annual General Meeting of Royal Philips. Thank you for joining us today. We are meeting at the time of significant change, shaped by geopolitical tensions and the transformative rise of AI, creating both uncertainty as well as unprecedented opportunity. In this context, I especially value the chance to connect with you and to reflect on our progress as Philips. It's a privilege to lead Philips together with the Board of Management, the Executive Committee and under the guidance of the Supervisory Board and our Chair, Feike Sijbesma.

Before I continue, I would like to acknowledge the proposal for my reappointment. Leading Philips is a responsibility that I carry with great care. It's a responsibility not only to our shareholders, but to the millions of people rely on our innovations every single day. I'm proud of the progress we have made and I'm encouraged by the momentum we are building, but also remain very aware that we have more work to do in executing our plan for the next phase.

Over the past years, we have taken important steps to strengthen Philips, delivering on our purpose and creating value for all our stakeholders. If reappointed, I will continue to lead with that same focus, the discipline and the passion, building on this foundation to further accelerate the value creation of Philips.

In 2025, amid continued global uncertainty, we focused on delivering better care for more people, creating value with sustainable impact. When we started our 3-year plan in 2023, we faced significant challenges. We committed to rebuilding our foundations, improving execution and making tough choices.

In 2025, the results of this work became increasingly visible. We delivered solid progress, continuing to bring meaningful innovation to the market and improving 2 billion lives all around the world. We improved order intake and returned to comparable sales growth, reflecting our stronger demand for innovations. We expanded our margins and generated solid cash flow through disciplined cost management, productivity improvements and simplification of how we work.

In an environment shaped by geopolitical developments and tariffs, we stayed focused and active decisively. We strengthened our supply chain resilience, and we are continuing to reduce complexity across the organization. With quality at the heart of our operations, we continue to strengthen our processes, controls and culture, and we improved early warning systems. We are fully committed to continue our close work with regulators, ensuring that our standards consistently meet the expectations of patients, customers and all stakeholders.

At the same time, we continue to deliver a culture where people feel empowered to speak up because this is essential to deliver safe and high-quality care. An example of this includes how we introduced the Blue Heart series for all employees of Philips. When I stepped into the role of CEO, I set out a clear direction, to innovate closer to our customers and focus on delivering greater impact. Today, I am pleased to see that this approach is yielding tangible results, delivering impact for patients, customers and consumers. And on top of that, also to society.

In 2025, we introduced several world's first innovations, underlying our AI-enabled innovation power. We unveiled our latest innovations in helium-free MRI, combining breakthroughs in hardware with AI-powered software to improve outcomes for both clinicians and patients. We introduced Verida, the world's first detector-based spectral CT also powered by AI, which advances diagnostic precision whilst improving clinical and operational performance. Together, these launches reflect how AI is now a foundational capability across our innovation portfolio.

In acquiring SpectraWAVE, we doubled down on image-guided therapy and expanded our portfolio in the coronary intervention segment, further advancing our leadership and ability to innovate in this critical area of care and for many patients.

We also introduced an innovative monitoring platform designed to help address critical challenge in cardiac care with a key component being the next-generation Telemetry Monitor 5500. These innovations are not only advancing clinical and operational performance, but they are also helping to address the ongoing growing pressure on health care systems where they just don't have enough clinicians, nurses and technicians to take care of the patients.

In the home, we continue to bring meaningful innovation to people in their daily lives from oral care to baby feeding to personal grooming. We launched Lumea in the U.S., extending the world's #1 IPL hair-removal brand to more people. And we expanded our OneBlade platform into an all body solution for consumers all over the world.

Our value partners are key to scaling this impact. A strong example of this is our long-term partnership with the Ministry of Health in Indonesia, where we are helping to expand access to critical care. Together, we are bringing life-saving cardiac and stroke care closer to communities in Indonesia. This is how we bring our purpose to life every day.

Executing our plan also meant becoming simpler, more agile and more resilient as a company. We continue to drive productivity and improve profitability, whilst strengthening our ability to respond to external developments, which is more needed than ever in this fast-changing world. In response to evolving tariff measures, we move quickly to mobilize additional savings, adapt our sourcing and manufacturing footprint and reroute supply flows, ensuring continuity for our customers whilst mitigating cost and supply chain impacts.

We also made very important progress in our culture. I see a company that is more open, more connected and more focused on impact. Engagement has increased significantly, rising from 70% in the first half of '23 to 79% in the second half of '25, reflecting the dedication, the resilience and the engagement of our team. This gives me full confidence that we are not only transforming our business, but also how we work together as team Philips. Moments like the opening of our new headquarters in Amsterdam reflect both our heritage and our culture, bringing our teams together in new ways. And at the same time, we are strengthening our global footprint, including the expansion of our operation in Reedsville, Pennsylvania as part of a more than $150 million investment in U.S. manufacturing capability for our AI powered health technology.

We continue to integrate sustainability as well into how we do business every day from improving access to care and supporting better health outcomes to reducing our environmental impact and maintaining strong governance. We are now entering the next phase with stronger foundations. We have improved execution, strengthened our balance sheet, reduced risk and built momentum. In parallel, we have consistently protected our investments in innovation, ensuring that our pipeline continues to advance.

Importantly, we are now shifting from stabilizing our business to accelerating profitable growth. We have launched our new next 3-year plan for 2026 to 2028, focused on driving profitable growth to deliver sustainable value. This is a truly exciting next phase where we will scale our AI-enabled innovations and unlock new opportunities. It builds on the progress we have made and are centered on 3 priorities. First, creating value through focused strategies. Secondly, innovation as a growth driver with platform-based solutions as our differentiator. And thirdly, continuing with disciplined execution across all of the company.

Platforms are at the core of how we accelerate innovation and deliver impact at scale to our customers, consumers and patients. Our unique strength lies in bringing together the best of hardware, software and AI into one integrated platform solution that delivers meaningful benefits for those patients, customers and consumers, and ultimately, value for Philips. We will continue to strengthen quality and compliance, increase our supply chain resilience, simplify how we operate and step up commercial excellence and service excellence. This includes accelerating the deployment of AI at scale across Philips, further embedding it across how we innovate, how we operate and how we collaborate.

We will scale our innovation in the hospital and the home and expand our leadership in AI-enabled healthcare and self-care. And at the same time, we remain very realistic about the complexity and the volatility of the world around us. And we're prepared to navigate it with agility and with discipline, focus on what we can control. With this plan, by the end of 2028, we aim to have achieved between 4% to 6% growth on average. We're expanding our margins towards mid-teens and we want to significantly grow our cash flow over the period.

In addition, we have launched our 2030 impact ambitions, reinforcing our commitment to improving 2.5 billion lives per year by 2030, whilst acting responsibly towards society and the environment. Reflecting the progress we've made and committed to dividend stability, we propose to maintain the dividend at EUR 0.85 per share with the option for the shareholder to receive it in shares or in cash.

Health care systems around the world remain under big pressure. Recent industry insights, including the latest Medtech report, [indiscernible], highlight both the scale of these challenges, as well as the critical role innovation must play in addressing them. Simultaneously, people want to take greater control of their own health and well-being. Philips is uniquely positioned to help meet these needs through our technology, our innovation and our partnerships because we believe in an open ecosystem approach, collaborating deeply with the best hospitals, universities, tech partners, [ suppliers ] and the governments to drive systemic change.

As I look ahead, I'm confident and energized by the opportunities before us. We have a clear plan, the right capabilities and a dedicated, passionate team united in purpose. We have demonstrated that we can execute through discipline and adapt in a changing environment in a world in motion, which is complex, unpredictable, but also full of opportunity to provide better and more care. Philips will lead and innovate to improve lives. That's what drives us.

I would like to thank our employees to their ongoing dedication and resilience in a very demanding environment, my colleagues of the Board of Management, the Executive Committee, and of course, the Supervisory Board for their guidance, their commitment and their very hard work.

I also want to thank our customers and our partners, our consumers for the collaboration and their trust in Philips. And to you, our shareholders, for your continued support. Finally, I want to thank my family for their love and care in helping me doing this every day.

At Philips, we have momentum, and we are determined to build on it, delivering better care for more people. Thank you.

Thank you very much, Roy. [indiscernible] of the progress Philips has made over the last year.

[Interpreted] Now I'll switch back to Dutch. You will have the opportunity at agenda item 3C, when we're addressing the financial statements to ask questions about Mr. Roy Jakobs' speech before. Moving on to the next agenda items. I would like to share a statement from our Chief Legal, Mr. Van Ginneken, as to who are present here at the meeting, 154 million rounded off. Excuse me. Well, we received a reply from the room of 154 million of the issued share capital, entitling 769 million votes, which amounts to 81% of the issued capital entitled to vote present or represented at this meeting, and this meeting has, therefore, been legally convened with the correct representation.

And that means that from this point onward, I am opening the voting system. So from now on, you can scroll down to the agenda items you would like to vote on, and you can vote for against or abstain on these items.

That takes us to agenda item 3. Agenda item 3 includes some minor elaborations briefly. And after that, I'll give you the opportunity to ask questions. Agenda item 3A is the explanation of the Dutch Corporate Governance Code in 2025, which was updated in March 2025. Our governance structure is described in detail in our annual report, which also describes to what extent these stipulations in the code are complied with by Philips. And the update to the code has not been cause for any substantial changes to our governance code.

Please note the new wording in the statement on risk management, which the Board of Management has included in -- on Page 253 of the annual report. This so-called for [ VOR ] comprises several statements and must be read in conjunction with the design and operation of internal risk management and control systems at Philips. Accountability for these systems, which are, of course, specifically tailored to Philips has been provided in the annual report. That was 3A.

Now as for 3B, the dividend. Mr. Jakobs already referred to this. The dividend proposal is EUR 0.85 per ordinary share that's proposed payable in shares or in cash at the shareholders' discretion, [indiscernible] profit for 2025. And for additional information, please see the explanatory notes to the agenda. And the dividend aligns with the company's current dividend policy.

And that takes us to remuneration, but I'm going to hold on to that for a bit because first, I'll see whether there are any questions about Item 3A to the speech by Roy Jakobs and the explanation concerning corporate governance, the reservation, dividend policy and the financial statements, and the dividend proposal. An explanation is not a proposal. The proposal of EUR 0.85 is a specific proposal, and that will take us to the remaining items in 3, including remuneration.

Who would like the floor regarding these initial agenda items? So 2, agenda item 2, agenda items 3A, 3B, 3C and 3D.

[Interpreted] Thank you, Mr. Chairman. I'm [indiscernible], and I represent the association of stockholders on behalf of over 25,000 retail investors in the Netherlands and presumably people who are not members. That was a remarkable start. We're running through this very quickly. I'm familiar with the restrictions that everybody is subject to. I thought that the introduction deviated from what I'd expected. It was a marketing pitch, and that was based on Philips. I was enthusiastic about how well everything is doing, even gratitude to family, which you don't often see when people are eligible for your appointment, but when they leave, so that was striking.

And quality monitoring was not very pronounced. It shouldn't be too tenacious. And both Mr. Jakobs and Mr. van Ginneken and the Board members of Philips potentially have interest that are at odds with Philips, specifically the sleep equipment and the [indiscernible] PE foam, which is a concern not only to us as investors but also to the patients and customers of Philips. And that concern persists for Jakobs as CEO, the treatment and settlement of disputes, especially concerning his personal actions as a business leader of the Connected Care division between early 2020, in October 2022, and for Mr. van Ginneken as a Board member and Chief ESG and Legal Officer of Philips. The treatment and settlement of disputes relate to his personal conduct and actions in 2014, first as a member of the Philips Executive Committee, and from 2017, as a member of the Board. And since 2017, Mr. van Ginneken has also been General Counsel and Corporate and Head of Legal.

The VEB had the following questions relating to the governance and current procedures on the Board and the Supervisory Board as well as the governance between the Board of Management and the Supervisory Board. First, which considerations within the Board of Management and the Supervisory Board were made to prevent Management Board members of Supervisory Board members with potential personal interest that is at odds with those of the company from participating in deliberations and decisions, specifically the [ apnea ] scandal and insurances and [indiscernible] and communications about those? Which concrete safeguards has Philips set up to avert conflicting interest from surfacing? And has legal counsel been obtained?

Second, has Philips contained in connection with the sleep apnea issue and the rising discussions to set up litigation committee or a separate independent structure? And third and lastly, and what measure has the Supervisory Board and its proposal to reappoint Roy Jakobs considered that there are various cases pending between -- against Philips and Jakobs, in which their personal conduct and liability may be subject to debate?

[Interpreted] Thank you, Mr. [indiscernible]. This relates to potential claims and lawsuits by the VEB and others that were filed against Philips. And I think it would be unwise in a public shareholders' meeting to address specific claims by one or more shareholders in detail. So I will not do that. And of course, wherever applicable, we will consider that there should be no conflicting interest, not on the part of Mr. Jakobs or on the part of Mr. van Ginneken. I do not believe that is the case at present. But if that is the case, we will certainly take that into consideration. And otherwise, in all other respects, I refer to the discussions that we will conduct with each other about these topics.

Did I leave anything out?

[Interpreted] No. That basically covers it. Mr. Sijbesma, your answer was too brief, unfortunately. I'll be happy to answer a greater length for you, right? There are no claims pending from the VEB. There is a court case scheduled for the docket at the enterprise chamber in 25 June, that's not an illusion. There is a firm lawsuit pending. And I'm not asking about what will be discussed then.

I'm asking about how in recent months and year in the coming 1.5 months you will be dealing with this problem, which is a problem for you. And I believe that the question is very justified. Which safeguards have been taken within Philips? You say at present, it is not an issue. I believe it is an issue. Have Misters Jakobs and van Ginneken explicitly refrained from decision-making because of this?

We're entitled to ask you those questions. And I believe that these questions require a more specific answer than simply a denial of it being an issue because it is an issue. We identified it very specifically, and it will be discussed in court. But how are you dealing with it at this moment?

[Interpreted] As I believe you know, we do have a Litigation Committee. And we examine all allegations or claims as well as investigations within the Litigation Committee and any proposals made. And on behalf of the Litigation Committee, we will discuss these. And I do not recall any specific abstentions. Marnix, do you?

[Interpreted] No. But I would like to add, if you permit me, Mr. Chairman that these questions from Mr. [indiscernible] have all been submitted by the VEB to the enterprise chamber in a motion spanning a few hundred pages. We have until 28th May to formulate our answer and then there will be a court hearing. And it is awkward and it's not -- this is not the right forum to rehash this. I understand your questions and you're entitled to submit them to the enterprise chamber. But to address all these questions when we're still working on our defense is not productive.

[Interpreted] And I have a remark about that. Mr. Sijbesma, the fact that you gave Mr. van Ginneken to answer this even though he will become a subject of investigation, that's exactly what we worry about. You mentioned the Litigation Committee that exists. That's new information to us. So we would like you to share the composition of the Litigation Committee with us.

[Interpreted] Yes, some of the Supervisory Board members serve on that and there are some advisers from the Board of Management, including Mr. Jakobs and Mr. van Ginneken. And I believe that Mrs. Hanneman is also a member of this committee. And we do not see that as a conflict of interest. And I do understand that you have a different view and you're entitled to that, but we do not and we're entitled as well.

[Interpreted] Mr. Chairman, may I add. For each Board session, we have an extensive private session with the Monitoring Committee of the Supervisory Board in which Roy and the management are specifically excluded from the discussion and each committee meeting has a private session in which the members of the Executive Committee are excluded. And the Supervisory Board is present and reaches its own conclusions, and these discussions are conducted outside the presence of the Executive Committee members. So this happens very consistently at each meeting, and we report this.

[Interpreted] I have a final comment. I have an extensive track record and you have to be crystal clear with an organization when people from the organization are subjects of investigation, quite honestly. Our appeal to the enterprise chamber is justified because we believe that if independent investigators need to conduct investigations that are very important for patients and investors. This caused massive damages. And it is very odd whether it's in a private session or not, it's very strange for those concerned in contributing to the problem at the time it was caused and who should have provided part of the solution in recent years, it's very odd to include them in preparing that investigation.

[Interpreted] One final question on my part. Well, wait a minute, that's a private session of the Supervisory Board without the Board of Management. I understand that. But you, yourself, said in the Litigation Committee, the members of the Board of Management are there. You mentioned advisory, but they are present. I think that's very odd. And based on my knowledge and experience, it would be a very good idea for the Supervisory Board to control this themselves. Persons are subject of investigation, at least we hope they will be, but the enterprise chamber has yet to rule on that. It would be a good idea to include those safeguards to avert conflicts of interest.

[Interpreted] So you're asking whether we do that? Yes, we do. But the Board of Management members have extensive knowledge and we use that for advisory purposes. And at the start of the discussion, after that, we go into private session, and we share our views on that.

[Interpreted] I understand that they have extensive knowledge, but this is exactly why such an inquiry investigation is necessary so that in addition to hearing what the people with that knowledge are willing to say, but you also investigate everything that is there. And it's not possible within the forum that you've set up.

Now my final question, is the Board of Management and the Supervisory Board convinced that the quality management, risk control and compliance and governance within the Philips Group is adequately structured? And what is the foundation for your conviction?

[Interpreted] We believe it is. And since 2001, a great deal of effort has been invested in quality, patient safety, I mean procedures, systems, reporting, culture, and Philips has shown massive improvement in those respects. And we also see this based on the responses from the regulators all over the world who indicate that we have made a quantum leap. So you can never say it with 100% certainty. But to the extent that we can be certain, we have systems and procedures and reporting and a culture that safeguards that as much as possible.

[Interpreted] Thank you. In the annual report, we read otherwise to our serious disappointment. We see that in the past year, there were 10 FDA inspections with Philips, in which there were 14 observations, and Philips mentioned one new FDA warning later, [ 1, 2 class, ] 1 recalls and [ 38 class, ] 2 recalls, concerning the quality monitoring. So that's not such a good performance. I'll leave that as it is. I'm going to ask about last year's performance as well. We need to discuss that as well. It's not all [indiscernible] and the situation in the United States that you mentioned in your intro relating to the Connected Care and the [ VOR ] statement on risk management. So I'll leave that aside for now.

[Interpreted] Thank you for your comments and questions, and the fact that there are still investigations, that is likely to remain so internally in this branch of industry. And I'll try to answer to the best of my ability. [ Mr. Spanjer ].

[Interpreted] Good morning. I see I have some fans at the table to start for the minutes. I'm [ Mr. Spanjer, ] and let me start with a question about what Mr. Jakobs, who just delivered a presentation. May I ask a question about that because he said that the software that Philips uses is processed based on AI. But we all know that AI is vulnerable to cybercrime. How do you safeguard? I didn't see it in the annual report, unless it's in one tiny word that I may have missed. But how have you safeguarded all applications with the cyber consequences of the patients who use this at home relating to AI? Should I continue my list of questions?

Yes, please continue.

[Interpreted] Okay. On to my second question, the Director of Philips Mexico has been arrested in Mexico City. Philips confirms the arrest of an employee and asserts that it's doing everything possible to get him released as quickly as possible. This is what [indiscernible] wrote on 23 May 2025. This was in the 2025 financial year. So it's relevant, and it was written at 10:43 a.m., and the most recent update at 12:14 continuing according to Mexican media.

The management member, of course, my Mexican is not wonderful. Duocastella Campos is believed to be suspected of involvement in selling defect respiratory equipment during the pandemic. But Philips denied this apparently, Philips denies everything according to the company. There is no link to Philips equipment. Well, why was he arrested? I'll guess you'll tell me in a moment. And the spokesperson for Philips emphasizes that no lawsuit is imminent against the company in Mexico. Well, how is that possible? Because, of course, that can't possibly be right, but I'll tell you that in a moment. Our employee is being held in a civil suit relating to a commercial dispute and not relating to our respiratory equipment, explains the spokesman.

What the spokesman doesn't elaborate, so I have a question about that as well. The rest was said to have taken place on May 20. Is that true? That's also a question. Philips asserts that this dispute was settled last year, but the annual report mentions nothing about this dispute or it's settlement or solution. That's also very odd. We believe that this lawsuit was resolved. So the arrest was unjustified. How is it possible that he was arrested on April 20, and then on 23 April, 72 hours later, this was written. And then you say it's been resolved. I simply don't believe a word of this.

And then Philips in the United States is involved in various lawsuits concerning the problem with the anti-apnea equipment. And the company that's based in Amsterdam, this cost the company in Amsterdam a lot of money, and it will cost a lot more money. So my question about this is, please be clear, why is this not in the annual report? Why does it say that there is no lawsuit pending whereas in one state because this [indiscernible], who's a journalist has not been sued by you. So he must be writing the truth. Why did you deny his account? I'd like you to tell me that. And it was written within 72 hours. And then how can you possibly say that it was resolved in 2025? I don't see any of this in the annual report. So this is hogwash from you.

So I want to know why this gentleman was sued because in Dutch law, if it's an employee, then Article 107 stipulates that the boss of the employee is in charge. So in this case, Philips is responsible for this employee because Philips is a Dutch organization and is subject to Dutch law. So this is one of your employees, and you're not disclosing this. So you're in violation of the law. Yes, indeed. Otherwise, I'll get back to this at another point in time you're in violation of the law. So I would like to know what's the story here?

[Interpreted] [ Mr. Spanier, ] thank you for your two questions.

[Interpreted] Well, I have more, I have more. I'll be back in the second round. So I would like answers to each question I asked about this issue.

[Interpreted] Thank you. Let me try, you started with a question about AI and its use in software and solutions. Well, that's an excellent and justified.

[Interpreted] I always ask good questions.

[Interpreted] This was a very good question. Well, like any other terminology, you need -- and technology, you need to test and validate it very well. The regulation stipulate that if you market a product, it needs to pass all the tests, and we do the same with AI. And as said, we have our own responsibility, and we have our own code of conduct that we subject AI to so that if we use it, we need to be certain that it does what it's supposed to do. In addition, you mentioned cybersecurity. That's also an excellent point. We're continuously alert to what AI can do in cybersecurity as a large enigmatic company. We also face regular cyber attacks, and we need to be well on against that.

So AI has many facets, and we see this is an opportunity to improve health care and to offer better solutions for patients and to assist doctors with operations. But based on excellent testing, we also know the effects. And if you look at this quarter, there are some new solutions that were just released by the FDA that, in our view, will have an excellent impact on patients, and they've also been tested and validated. In addition, we scrutinize AI developments and what they can do for cybersecurity for us as well as for our customers. So it certainly has our attention.

As to Mexico. Yes, that is indeed a commercial dispute. It's not material. That's why it's not included in the annual report. Yes, an employee was involved and we take serious responsibility for our employees and joined immediately to do everything possible to protect him in this commercial dispute. And we did that in this case as well.

Marnix, do you have anything else you would like to contribute about that?

[Interpreted] Well, it's an incredibly unfortunate situation in Mexico, it's very awkward. This is truly a commercial dispute, and we parted ways with a certain party that was not grateful about this. Well, that's one possibility. But one of the things that's happening is that an employee was arrested there and was released immediately. He was not charged and all the allegations were dismissed. But that dispute is ongoing.

You're asking me why is that not in the annual report. Well, we do have detailed procedures concerning materiality, what's in the annual port and what is not. We're familiar with what's happening in Mexico, but it does not have the materiality that justifies including it in the annual report.

[Interpreted] I disagree with you because Philips' name is mentioned there, and this concerns an employee. So it's a worthless excuse. And they mentioned that it happened on May 20, and Philips is asserting that there is no dispute and that it was resolved last year. That's impossible because if on 20 April, he was handcuffed and arrested. And if it were resolved last year, then we're talking about 2024. If that's the case, then I should get a refund on my tuition because I don't get it. And you should also get a refund on your tuition because then you're in the wrong position because it's strange for a Philips spokesperson to state that without any inspection by an organization within Philips. That's disastrous.

And if they then say, well, it's already been resolved. No, it has not been resolved yet because the opinions concerning a lawsuit. Apparently, there is one because he was arrested and it wasn't for a pound of sugar that he didn't pay for at the supermarket. So more as a miss. And when I asked the question, you replied that we did part ways with a certain organization, which organization did you part with? I'd like you to state the name and why? Those are the two questions that I'm asking based on Mr. van Ginneken's comments.

[Interpreted] So you're saying that -- yes, there was a dispute and there was a settlement. But unfortunately, that settlement was then another issue that may be what led to the confusion. And it is a commercial dispute. It's not a criminal prosecution. And the employee was immediately released again. And the consequence, which we regret as well is that it has not been resolved yet. It's very unfortunate and very awkward and sensitive. And that's why I'm very cautious and reticent about that as I am with any pending case. But we're doing everything we possibly can to resolve it, and we're trying to do this through various channels. But it's a very difficult setting to operate. But as you rightly pointed out, since it has not yet been resolved, I would like to be reticent about that.

[Interpreted] Well, I can understand you saying it has not yet been resolved. Can you give me a time frame within which it will be resolved? And next, if a Philips spokesperson says on Philips' behalf that it's not really a legal dispute, and that it was actually last year the spokeperson speaking in this article on behalf of Philips, will that person be suspended or be held accountable because then that individual is basically spouting nonsense because otherwise, I wouldn't need to ask questions about this because otherwise, it would have been clear. But at this point, the account has 25,000 loose ends that raise questions.

[Interpreted] Yes, it is a complex situation, and it had been resolved. That's no longer the case. It's still pending. And regarding the dates and the spokesperson, I'll take a careful look and I'll certainly talk with that employee.

[Interpreted] Very good. I'll show you the article after the meeting, yes. Okay. I'll get back to the next one later on.

[Interpreted] Very well, that means that not all have to claim their tuition fees back immediately, and we can move on. Thank you, Marnix. Yes, please.

[Interpreted] Thank you that I have my own turn at all.

Regarding the executive suit and the Board in the back, and of course, to all Philips employees. My name is Denise Reike, and I represent the Dutch Association of Investors for Sustainable Development, or as we say in Dutch, [Foreign Language]. Since 30 years, we represent institutional and individual investors that are dedicated to making the Dutch capital market more sustainable. Like Philips, we are a frontrunner on sustainability. One of our aims is to engage companies on topics that may only become important [indiscernible], if you might say, 5 to 10 years from now.

Think of fair taxation, biodiversity or living wages. Philips has picked up on all of these topics. And as a first thing, we would like to congratulate you again today for achieving to pay all the employees in your operations a living wage. We applaud this.

Philips has the ambition that its suppliers also pay living wages to their employees. Therefore, this was integrated in the Sustainability Supplier Declaration. And we would like to know, how do you translate this ambition into practice? How is this monitored? Is this part of the Beyond Auditing program or other assessments? Can you share any insights on this with us? And how do you support your willing suppliers? This was only one question in the spirit of the man who asked questions before.

So the VBDO has also chosen a new topic for engagement this year in its spirit as a frontrunner as I was mentioning earlier. That's pollution. With this, we mean mostly chemical pollution, think of additives and hazardous substances. They represent a challenge in relation to one of Philip's key strategies, creation of circular value.

Philips did, unfortunately, not meet the target to fully close the loop on its medical appliances by 2025. We see a direct risk for Philips' long-term ambitions through the use of such heavy pollutants in the manufacturing of medical devices. Even if this happens mainly at other value chain steps, and even if this happens and that I have to point out to shareholders that may not know, this happens for safety reasons. So paradoxically, we do need certain amounts of what can be hazardous chemicals in order to create safe appliances. But they are very bad for closing the material loop and they can pose a hindrance to achieving such targets.

We would like to know, has Philip considered setting public targets for the use of hazardous substances that exceed the legal requirements to push innovation on this subject further? Also here, we would like to know how you handle this topic with suppliers. You stated in the Supplier Sustainability Declaration that suppliers are expected to minimize emissions and minimize discharges, waste and to conserve natural resources. But how do you monitor this in practice? Is this part of the [ deep dive ] assessments? And are there suppliers you have agreed with that they need to exceed the legal requirements in order to push them forward? We would also like to have some insights here.

My final question regards the CSRD, so that's the sustainability reporting legislation. Philips has, in the past, obtained reasonable assurance on several sustainability subjects. The investors that we represent highly valued this. Now recently in March, the so-called Omnibus package has entered into force. And it is expected that some companies will reduce their ambitions on reporting as a result of that streamlining. We would like to know how Philips is going to handle this? How will Omnibus affect your reporting? Will you continue to report more than is required? And will you stick to the ambition to gain reasonable assurance on more topics? Or are you going to reduce your investment into sustainability assurance?

All right. Roy?

Thank you for the questions. Also, thank you for the compliments. As you know, as Philips, we take a sustainable approach to doing business very serious, and we have our own objectives that we also work together with our partners and supply chain.

Let me start with the first one. We spoke about the living wage. I think, indeed, we are happy that we have it across Philips, but we're also working very hard with suppliers. As you mentioned, we have it in supplier declaration. We then follow up in our audits, but also in our individual discussions with suppliers to see if they adhere, and if not, what the consequences will be because we want them over time to come to this. That's also been part of Philips and requires that we expect them.

So that's the continuous improvement that we see in our supply base and how we kind of engage with them. So it's not only in the declaration. It's also been followed up, audited and then actioned. I think that's on the living wage approach. And I would also say that, in general, this is very well received by our suppliers. They understand that. They also want to work with this. So we see this as moving in the right direction.

Then on the second one on pollution. There, we have a clear ambition to transition to a circular economy. Actually, in 2025, we exceeded our example for circular revenues. We had 28% versus the target of 25%. We also delivered on our zero waste to landfill target. On specific hazardous [ services ] that you call out, we have in our new impact ambitions included and target to reduce the use of classified substances, and actually doing that by 30% compared to our 2026 baseline. So we're also taking very concrete and specific action on that in our new ambitions that we just launched. So we also take this very serious. Indeed, as you say, there are safety involved. And we also see there's good business practice to act on it. So that's embedded. And then we also look through ISO certification, whether we have qualified for it. So actually, we embedded further in our management and quality management systems.

On the third element, the CSRD. Now as you also know that kind of we have been a very strong supporter of transparent reporting. I think we even got some prices for that. There is evolution in the discussion around that where we also actively take part. We are actually part of the advisory group to the European Commission to strike the right balance. And also, we plan to continue to provide the insightful information.

The Omnibus package is still in discussion, as you know, still not finalized. So it's too early to say exactly how we kind of need to respond to that. But we are looking into how we can fulfill. In 2025, we increased the number of disclosures with reasonable assurances. We expect the commission to only publish the new ESRS in June. So then after that, we can also see kind of where we are in the reasonable assurances towards that.

Thank you very much for these insights. We are very happy to hear about the target on hazardous substances. I think there you also set a new bar, and not many companies are doing that yet. I'm wondering, regarding the insights on living wages and suppliers and how far they adhere to that, is this a subject area that Philips considers to report on in the future? Or are there reasons that would speak against that from your perspective?

Good question. I've not kind of given that explicit deliberation. So maybe Marnix.

No, sure. Thank you for those questions. And look, I think, as you can also see, and as we have discussed many times, we are quite proud of our Supplier Sustainability Program. And I would like to add also there for example, on environmental, we have far reaching targets in the supply chain. So for example, we had the target for 2025 to reduce carbon emissions, 50% in spend of our suppliers reduced carbon emissions, we achieved 52%.

Living wage, as Roy said, is part of the Beyond Auditing program. The pollution, as you say, the hazardous substances are part of the Beyond Auditing program, and we take them into that whole cycle where we indeed believe it's not just checking, but also helping suppliers to improve. We are actually quite transparent already. Some of the things are moving targets. We need to make sure that we can really report accurately on those measures. For example, Roy mentioned the one on hazardous substances is for 2030. We just introduced it. But of course, we are always looking to be transparent on what we are doing.

At the same time, I would like to say, Roy also mentioned, you mentioned CSRD and Omnibus. We continued reasonable assurance beyond what is necessary. We actually included a bit on reasonable assurance, but we also see the proportionality of all of this. So we also need to see what is the risk reward or the benefit, let's say, of all the investments because sometimes, these reporting, this requires a lot of investment for a very small, let's say, benefit. But in general, I hope you will acknowledge. We are trying to be as transparent as possible, and we will continue to do so.

[Interpreted]. Then we turn to [indiscernible].

[Interpreted] Thank you, Mr. Chairman. My name is [indiscernible]. I work for PGGM, and I'm here today on behalf of the pension fund [indiscernible] and some in d members. I have two questions. The first question is about dependence on U.S. software. In the light of the risk of deteriorating Transatlantic relations, the question about dependence on U.S. software, cloud services, AI services, and the potential continuity risks is on the table. How does Philips prepare for this? Does the Board -- has the Board identified critical systems and are you working on alternatives for them?

And then a question about AI and cybersecurity. Now that advanced AI systems such as [ Mythos ] are quickly revealing vulnerabilities, opening the door to abuse. What measures is Philips to do to strengthen its cyber resilience? How does the Board make sure there is sufficient expertise about this quickly developing risks?

[Interpreted] Indeed, thank you. Let me start with the first question. How dependent are we on U.S. software. Our software has been set up in such a way that we cooperate with several partners from around the world, including U.S. partners. And obviously, we look at the best quality, but also best security that can be provided by partners. When we look at suppliers who provide us, we see that currently, very few alternatives are available in the European contact. We follow this very closely. We also have an open system, meaning we are not dependent upon one supplier. We make sure we have several of them in terms of cloud services or AI models or large language models. And these fields, we work with a variety of partners, including Mistral in Europe or AI from the U.S. And we're even active in China. So in the Chinese contact, we try and see what we can use in China and what ecosystem is there. We are working on this in a focused and conscious way to make sure that, indeed, we have no excessive exposure or dependence on one supplier.

Then [ Mythos ]. This is a very relevant development, and we have started testing it right away. And we are part of the group of companies that have access to it to try and see what vulnerabilities can be identified. It's very powerful software. We can confirm that. And we are looking at this very closely at this moment. And based on this, we are amending our own cybersecurity to be ready to face this.

[Interpreted] Next question.

[Interpreted] Thank you, Chairman. This is not a question, but rather a matter of order. You, yourself, are not easily audible in the court room. So please approach the microphone.

[Interpreted] I'm using the microphone, but I'll speak up. Some support there. Well, a question maybe also to the technicians. Maybe the amplification of my microphone can be increased because I can't turn it up. It goes up and down. Sometimes you seem not to speak into the microphone and sometimes you do.

Okay. So as a Chair. Very clear. I'll take stock of that. [indiscernible]

[Interpreted] I think we've come to the second round, if you permit. U.S. software has been covered. But there is more happening in U.S. For instance, we have the tariffs. So I would like to turn to this, because tariffs are putting pressure on the margins of Philips well in the future. Then we have a cost inflation. We have a tricky supply chain. All of them also leave their mark on the results. And this external environment is getting more volatile, harder to manage.

And that brings me to my question. What part of the productivity program of EUR 1.5 billion can or will be brought forward? I think you need to do this to make sure that the results in the Q2 2026 can be supported. And this include a clawback of the illegally imposed tariffs, as Heineken has intended or declared its intention to do. Can you make such a statement here before us as well?

Then 2025 last year, the U.S. Ministry of Trade announced an investigation to the import of medical imaging equipment. The authorities want to know what the impact on the [indiscernible] is the Section 232 investigation or inquiry? This also leads to uncertainty to which extent is the supply chain of Philips is positioned and where to face this 232 investigation? Should they move to more local sourcing in the U.S. That's what the U.S. want. We are not so much delighted by this. But what is Philips doing in the light of this? The annual report speaks of further strengthening the supply chain. What does it mean?

Well, Philips wants to have 2 sites, Reedsville and Plymouth to cover the sourcing problems. The quality sufficiently on par there because there has been a [indiscernible] date 9th September last year that exactly was about Reedville and we, investors, are not quite comfortable about this. And then if you -- I have a question about Connected Care. Would you rather cover these questions and then give me a further opportunity?

[Interpreted] Now, this is the Chair. Please, the third question.

[Interpreted] Philips has not included a return to the feedback market in the U.S. in its outlook for 2028 to [indiscernible]. But according to Mr. Jakobs, Philips is working on a return preparation and a return to the U.S. market. Obviously, it will be mainly determined by the FDA and not by Philips itself. But can you give us an update on the state of play? What conditions of the decree need to be fulfilled allowing Philips to come back to the U.S., particularly with the CPAP new equipment? What restrictions are there? What requirements still need to be fulfilled? And what findings has Philips to share about this?

I already mentioned quite a few FDA investigations, also some remarks or observations from the FDA, but there has been a warning letter from the FDA that's concerned 3 produced [indiscernible] in Reedsville where the quality system were insufficiently operating and also FDA said that on some sites, there was adulterated documentation because production processes did not meet the criteria. So the quality systems and the organization needed to be amended in a far fetching way according to the FDA.

You say, and you're right that patient safety and quality are the #1 priority. So how does the Board of Management explain the issuing of yet another warning letter for 3 sites, including Eindhoven itself? What does this say about the quality control systems across the board? What measures have been taken to prevent new surprises? Because Mr. Jakobs, when you entered the job, that was your #1 priority. And our conclusions are not so positive.

And now nearly -- and a final question. What investments are you making in the U.S. in terms of distribution channels, operational infrastructure? But also what investments are you making in the pricing strategy to allow you at the end of the day to return market share in the U.S.? What is your target for market share? And what is your conviction about the possibility to reclaim market share? And has the Supervisory Board ruled on the question to which extent the return to the U.S. market is reconcilable with the [indiscernible]? You'll have on the FDA approval and the constant decree that needs to be issued still. That is my list so far. And then I will have a question later about the auditor.

[Interpreted] Thank you. Great. Thank you for your questions. Let me start with the tariffs. Tariffs indeed have a significant impact on operations in several ways. Our primary interest is to provide our clients with products, and that means an organization of the supply chain to make this possible. We are working on that.

As I said earlier, when looking at the world post COVID, we see structural changes, more attention to local sourcing. And therefore, we don't expect that the instruments to compel this will go away because the U.S. and China and other main countries want to simply develop their own production capacities.

So we've done 2 things. First of all, we said that this means that to the extent necessary, we will have to bring capacities to the U.S. as we did to China in the past. So we have set up the facility in Reedsville as we are doing. And obviously, we're doing this with the necessary safeguards for security, for safety to enter the market in a proper way, EUR 150 million in investments has been announced that are currently being implemented as we speak.

And then we have a cost reduction program. That is an important part of our mitigation strategy and every plan -- over the past plan, we have saved EUR 2.5 billion. And on the Capital Markets Day, we have said that we are working on advancing some of the costs. So this is not a back-end loaded plan. We had a good start this year with EUR 160 million in savings in the first quarter. And we are speeding things up for the rest of the year to make sure that additional cost mitigation measures are taken for retail and for cost inflation because of the tariffs and the cost inflation because inflation is another crisis we have to deal with.

Then about the clawback. Well, we have submitted a claim for repayment. We did this on day 1. It became possible. We'll be well prepared. And the only thing I want to say is that for the time being, it's not clear whether a refund will come and to which extent. And therefore, it has not been reflected in our current plan. So we are not accounting money before we have it. But we have certainly submitted a claim with U.S. authorities on day 1. And at the same time, as you said, 232 is still in progress. We think that this will lead to either new tariffs or similar measures, meaning that later this year, we will come back to the situation we had before the Supreme Court declared or stops the tariffs based on the legislation in force.

So again, we don't have 2 positive expectations. We think that this is going to be a recurrent phenomenon. That concludes what I wanted to say about the tariffs.

Then quality systems. As Feike already indicated, and as we have been consistently stating, we are working very hard on improving quality. And we are seeing material substantive progress in this field. You see this in a number of quality programs or initiatives that have been introduced and completed, and the matrices. It's true that we had a significant number of inspections last year, and 6 of them were without any remark. So we are making progress. But it is not the case for all we have work to do. We agree.

Looking at the industry average, you shouldn't say that we are now different from the industry average in the results of inspections, but obviously, we want to be better than the 6 out of 10. So we'll work on this in different ways. An important point is the engagement survey, which reflects that our staff see safety and quality as really important. And the important initiatives keeps growing, then we want to reduce the complexity of systems. We see great progress there last year. And this helps us to improve execution. And we are also engaged in direct dialogue with the regulator, FDA and the regulators to share our progress because to move from that to the CPAP is next up, and we are working with FDA about the consent process.

You are asking about the milestones that have been achieved. And I can tell you that at this point in time, in all points that we needed to work on that needed for third-party inspection have been inspected by FDA, and not much comments have come about this. So we're on par mitigating the task that we had to do and the [ circuit ] in the process.

However, there is no list of boxes to tick, meaning that if you do this and that you'll be admitted back into the market. This is a discretionary power of the FDA, which makes it very hard for us to say what is required. Even if we do everything, the conclusion still may be that something else needs to be done. So we are modest in terms of our expectations or plans for a reentry of the U.S. At the same time, we try and make sure that we can return as soon as access is granted, that we have the products, that we have, the market partners. So we are working on preparing it with them. And this has the full attention of the Board of Management and the Supervisory Board. Yesterday at the meeting of Supervisory Board and the Q&R Committee here. We discussed this, maybe Board can take this because they look at this and they give a very close check on potential progress. And it's discussed at every meeting of Supervisory Board and Q&R Committee. The relevant investments are obviously here.

Proportional to what's happening in the market right now, we are taking steps. But we are not working in anticipation towards a specific point in time. Therefore, we can't predict the market share. We have the intention to come back in strength in the U.S. market. We had a strong position and in other markets, we are growing once again in terms of apnea and respiratory devices. So we are full of confidence that if and when we return, we can make an impact on the U.S. market. But it's too early to state when this will be and what it will mean or how it will affect our results.

[Interpreted] Thank you, Roy. Paul, can you add something to this?

[Interpreted] Well, I can only add that the Supervisory Board is very actively supervising what happens to the Q&R Committee, and we can also report good progress in all fields, staff, commitment, quality results, the [indiscernible] reduction. But also progress in attracting skilled staff for the devices. And together with the ExCo, we decided to have the Safety Officer and Head of Quality in the Executive Committee, allowing them to independently report to the Board and the committees independently from the business. And this gives immense transparency. This really allows us to have active supervision.

We're a complex business, we're under the enhanced scrutiny of the FDA. This is improving. The discussion with the FDA is nowadays very open, very constructive. And the ongoing inspections do lead from remarks from time to time to warnings. And we will respond to this in the appropriate and proactive way to make sure that we have the perfect system at the end of the day.

But a running business always has it has its oversight and it requires corrections to work on with the appropriate answers. So we see good progress and we are full of confidence in the production, but also in quality controls.

[Interpreted] A brief reflection if you allow me. The quality culture seen from quite a few of investors, and that leads is something where the bar is always too low. You want to regain confidence and the surprises we see time and again in terms of finding, in terms of delays, and Mr. Jakobs' answer was very clear, but still leads to concern. A return to the U.S. market is important, but then the ambition to get quality in place needs to be [indiscernible] in your culture. I heard a very positive reflection, but still there are disappointments that we see in the press, that we see in reports. We regret this.

A brief question, and then later, I want to have a question about the annual report. One brief question. Now reclaiming the paid tariffs. It can be done in 2 ways. There's a web page somewhere in the U.S. where you can report saying that you're part of the deal. That's obviously that the Americans are going to ignore for the coming 2.5 years. Or if you really want to move, would you claim it through court, to face the U.S. court system showing that [indiscernible] here was illegal and that you want to use the legal system of the U.S. to claim back the money? Are you passive or active?

[Interpreted] We want to be productive. We will follow the most productive path. And currently, we're exploring the options. We have heard our rights. We have claimed our rights. We'll see what the answer is, and that will take the next step. My advisers do it proactively. Other companies switch as Philips are doing this because the pressure needs to be put there where it belongs. The Americans need to make different decisions. We can help them do that.

[Interpreted] Well, then I'll go for my second round as well. I am still [ Mr. Spanier. ] On the Capital Markets Day, I heard nothing about the agreement that the EU reached with India and with South America. What lies ahead with the outlook because it doesn't say anything for 2028 about what we saw? How do you envisage that agreement? Do you expect it to yield financial benefits for Philips. That's my first question, and my second round.

And my second question in this round, I was surprised you, Mr. Sijbesma, you mentioned the Litigation Committee. Can you list the names? Because I didn't find that in the annual report, either who are the members of that committee.

And my third question is that you been P.I. 58 Amsterdam. How do you like being in P.I. 58 Amsterdam?

[Interpreted] well, the last question was really nice. It's wonderful in our new premises. The premises are very transparent. Of course, it's an old international school that was sustainably rebuilt. Yes. It was rebuilt into office space. Well, yes, they added a layer, didn't they? Yes, we added a layer on top and expanded it a bit. But it's very open. And it's great for connecting and it matches Philips today, and so the employees are delighted because it makes for a better working relationship. And that's why we did it, how can we connect people better. And it also exudes positive energy. So it's a wonderful building and we receive customers there, it represents us very well, and we're very satisfied with the premises and the location.

Now about the agreements with India and South America. Our primary position as we continuously convey in America, in the EU and in the rest of the world. We believe that open trade is the best policy, especially for customers, patients and health care. So if there are trade agreements that facilitate certain elements, which the one in India does, we welcome that. There was already a good foundation agreement, and we were doing good business in India previously. And Philips is greatly appreciated in India as it's seen as the brand for India. And one nice piece of trivia was when at this EU summit, Prime Minister Modi mentioned that Philips was the only medical company of the 30 companies seated at the table. So we're asked to provide medical solutions for a very large country. Our consumer products do well in India as well. So we see India as a growth market. The same holds true for South America. We have done well in Brazil and have operated there for a long time as well. So the more impediments are removed, the better for us.

Feike, would you like to take that other comment about the Supervisory Board?

[Interpreted] Yes, the Litigation Committee. It's not an official committee. That's why you didn't find anything about that in the annual report. It's a structural committee. We don't hope that there will be an ongoing need for that. So it's an ad hoc committee. And when an issue arises, it gathers. And the composition may vary depending on the issue. But generally, the members are the chairs of various subcommittees such as the Audit Committee, such as myself, and the Q&R committee, and so on with an advisory vote from Mr. Jakobs and Ms. Hanneman and Mr. van Ginneken.

[Interpreted] Now for my final round. We haven't heard anything from Mrs. Hanneman, and we'll need to because she's our [indiscernible] and our guiding light for financials. And we haven't heard from Mr. [indiscernible] from PwC either. So I have a question for each of them.

[Interpreted] Mr. [indiscernible] will be speaking. Do you want me to wait until he completes his presentation?

[Interpreted] Yes, that would be very congenial to him. I'll let Mr. [indiscernible] speak first. Now as for the annual report, I have a question about the statement on risk management, the VOR. Quality and risk management is, of course, essential for Philips. So how did the introduction of the VOR last year. This is the first year that you need to report on that. How did that specifically change assessing the risk framework with respect to previous years and what has become more rigid or more formal?

And Philips said in its Board report that the Board reports sufficiently discloses any major failings, as they're called, in the functioning of internal risk management and control systems. Of course, our question is, which major failings were they in the view of the Board of Management? And does the content of the FDA letter applied to major failings? Or does it apply to the risk management and control framework that the VOR provides for? So if the -- can the Board effectively manage risk and compliance issues, even though the FDA noted deficiencies in processes relating to security and safety?

[Interpreted] Thank you for your question, [indiscernible] Yes, in 2025, we first reported on the VOR statement on risk management. We started very early because at the end of 2024, we formed a working group to see about after the implementation on the VOR and related to our risk management and control framework.

So we took a very careful look at that and ultimately concluded that it need not necessitate major changes. From my perspective, we made things more transparent and took a careful look. Of course, it's always important to continue looking at it carefully. One matter that we addressed, but it's basically independent of the VOR concerns the internal controls and sustainability, which you undoubtedly noted in the annual report. We are fine-tuning those as we look at them. So that was -- it was good that we took a look at that. So from that perspective, it was a very good thing.

[Interpreted] And what about those major failings? That was a very specific question. Which are those? And is the FDA warning about that?

[Interpreted] No major failings arose.

[Interpreted] Very well. So that is not part of that?

[Interpreted] No.

[Interpreted] Is it part of risk management, internal control framework at Philips?

[Interpreted] Well, within risk control and the internal framework. We look at sustainability, operational. And yes, it all applies to that. And of course, we cannot give you 100% iron clad certainty. What we can do, we can say that the -- our internal controls are satisfactory. We cannot say that what we did was not sufficient. So we can do that for you.

[Interpreted] So there's some tension between the external review of the FDA and the internal framework. Perhaps you might reconsider that as an external party that's a significant one as they can impede access to the U.S. and perhaps rightly so because if those findings exist, they should be taken very seriously.

[Interpreted] Well, yes, we do that, and Mr. Jakobs spoke about that as well. We reviewed the FDA warning letter very carefully. And of course, in our quality framework, we also look at it. And we take it very seriously. Indeed, we are achieving progress that also came up. And we know that we need to stay on top of that continuously.

[Interpreted] Now if there are no additional questions about agenda item 2 and agenda items 3A through D, then I would like to proceed to agenda item 3E, and that's remuneration policy. Once again, this year, an advisory vote will be held and is included in the 2025 annual report. And I'll give the floor to Mrs. Herna Verhagen, the Chair of the Remuneration Report, who will elaborate on the remuneration policy and will address the intent for the current remuneration policy of the Board of Management to be evaluated in 2026.

We believe it is important to continue to offer a remuneration package that aligns with market standards to the Board of Management members and to attract and retain executive talent of the highest quality. Of course, we have consulted our shareholders, and Mrs. Verhagen will discuss the communication with shareholders in 2026 and report on this with some recommendations at the 2027 AGM. Herna, you have the floor.

Thank you, Feike. Good morning. I'm pleased to elaborate on the remuneration report from 2025 for the Board of Management and the Supervisory Board. Philips achieved solid results in 2025 despite volatile geopolitical and economic environments as explained this morning by Roy. There was consistent revenue growth and margin improvement and clear progress has been achieved on our strategic priorities, including patient safety, quality and innovation. This is reflected in the incentive payments to the Board of Management.

For the long-term incentives awarded in 2023, the company's performance resulted in a result above target for the relative TSR and adjusted EPS metrics. Performance also exceeded the target for the sustainability objectives. For the annual incentive relating to 2025, performance was on target for the adjusted EBITDA measure and above target for free cash flow and comparable sales growth. Individual performance for all 3 members of the Board of Management were above target.

The remuneration policy for the Board of Management, which was approved in 2024, offers the opportunity to increase target levels of the annual incentive in the event of favorable developments in operating results. Following the favorable performance we saw in 2024 and 2025, the Supervisory Board has decided to maintain the target levels for the -- to increase the target levels for the annual incentives from 2026. This means that for the CEO, the target percentage rises from 100% to 120%, and for the CFO and CLO from 80 to 100%. This positions the annual incentives around the median level of the peer market with which we benchmark.

Now I'll briefly comment on a remark by Feike, which I also addressed in my remuneration brief to the remuneration report, which is that we think it's important that the remuneration policy for our Board of Management remains competitive. We note that the gap with our quantum peer group is growing, and that's a good reason in 2026 to examine our remuneration structure and to see how we can keep aligning it with market standards. The most important reason is to retain our talent and to ensure that we have the opportunity to recruit new talents.

The evaluation will, of course, be far broader in scope than only remuneration levels, we will also consult our stakeholders proactively. That process may lead to a proposal to revise the remuneration policy for the Board of Management, which may be presented to the shareholders in 2027.

This concludes my explanatory remarks. Thank you. I'll hand the floor back to Feike.

Thank you, Herna. Questions about the remuneration policy? [ Mr. Spanier. ]

Yes, Mr. Sijbesma. I have one question. We, as Dutch shareholders, have never seen any compensation for the loss that we suffered, the considerable loss we suffered in our shares. And 3 years ago, I asked the same question. I never saw any proposal from you. But in the committee that Mrs. Verhagen chairs will be offering the Board of Management a fee that's basically paid at our cost, but we never saw anything. And I don't know how many lawsuits will follow the apnea case, which Mr. Jakobs was involved in as well as were some other people. And why are those people being rewarded from 100% to 120% from 80% to 100%? Whereas we, as Dutch shareholders, have never received any proposal. I'd like you to answer that right now. See, I already have a fan club here, not very numerous.

Well, I can't say that. I heard only a few claps. And I believe it's justified that there are only a few.

Well, that's nonsense.

I don't know about that.

Well, I do.

Very well. There's a huge difference between shareholders and employees within an organization. The employees and in the interest of the shareholders as well will need to be remunerated as well as possible, including the Board of Management. We do that and Mrs. Verhagen and her committee from the Supervisory Board ensures that, too. Investing in a company entails risks.

You don't need to tell me that. But once again, you're trying to take the wrong term rather than moving ahead. What matters is that in 2013 and 2014, we didn't know based on the annual reports that the apnea device was problematic. We only heard that a few years ago. We didn't hear it when it was launched on the market. And then that apnea situation arose that we still face. And everybody in the United States, one crew after another is receiving compensation.

At the moment they speak, but the Dutch shareholders, you're simply leaving us in the lurch, and you're not doing it for us. And I have the same question 3 years ago. And now I want to know how you're going to compensate the Dutch shareholders.

The U.S. shareholders are not receiving any different compensation from the Dutch shareholders. Legally, it's conceivable, but that's not the case at present. What we did in the United States at this point is that other groups that submitted claims such as patient lobbies, we reached agreements with them. And when Dutch or other shareholders submit claims, then we'll take a look at those as well. And as you know, some people do that, and we do consider those.

But I certainly distinguish between staff remuneration, employee remuneration, including the Board of Management. I distinguish them from shareholders, claims or claims from other groups.

But that's not the case. No, because the shareholders have lost millions from the recall action. And the other amounts that you paid to patient lobbies and the like, all that comes out of the shareholders' pockets. And the Board simply allowed that to evaporate.

Let's be honest. Well, let's be honest, we didn't allow that to evaporate, all those billions that it cost to recall the equipment because it had not been properly inspected when it was manufactured. All those devices needed to be recalled and all those costs are paid by the shareholders. And we, as shareholders, we don't make those devices. We were presented with the bill. We have to pay the bill. But we're not being compensated.

Yes, but there's a huge difference between being compensated as a shareholder or pending lawsuits because there are claims that the firm was unable to settle.

Yes, but what's being settled now, those settlements were by people being given the prospect of higher bonuses. They're part and parcel of the damages. And I think it's wrong to increase their bonus. Well, whatever they do in the United States and in China, and I don't care about that remuneration system. What matters to me now is that the people who are receiving a higher bonus in 2026 and 2027 were largely to blame for the apnea problem. But the increase from 100% to 120% was approved in the 2024 shareholders' meeting. So it was previously approved. Why are you recalling that now?

Because we're introducing that as of January 1, 2026, based on good financial results in 2024 and 2025. That's the agreement that we reached with the shareholders back then, and that's why we're explicitly stating this again. It was already approved at the 2024 Shareholders Meeting.

Yes, but I'm raising this now and you're getting -- you're telling me that it was approved in 2024 only in response to me. When you have the floor, you didn't tell me that we already did this in 2024.

In my presentation, I literally said that the remuneration of the Board of Management that was approved in 2024, after that, I approved what was approved and what we will now be introducing.

Well, we can talk about this until the [indiscernible] come home, but I disagree. And perhaps, Mrs. Verhagen incorrectly assumed that shareholders remember what they approved at previous shareholders' meetings.

Mr. [indiscernible]?

Thank you, Mr. Chairman. Your comment that it was not wonderfully welcome applause misstated [ Mr. Spanjer, ] but I have quite a few questions remaining, and I believe other shareholders do. On the other hand, we'll simply have to buy our time until the independent investigation has taken place. I recommend that everybody read the investigation motion that we issued on 31 December of last year, which raises a lot of realistic questions that had been asked not only by the VEB, but also by many shareholders. And I believe that there metaphorically should have been cause for applause.

I have another procedural question before I respond to Mrs. Verhagen's remuneration report. Perhaps we missed the auditor. Where is it on the agenda?

At the next 2-point items.

Okay, I made a mistake, we'll do it at the next item. Next, remuneration report. We're also always -- we always have criticism that remuneration, not only [ Mr. Spanjer, ] the VEB does as well, especially when it's allocated for nonfinancial criteria. And we see that Philips is generously remunerating without objective criteria or in any case, they're not being shared with us. And we read that in exactly the fields that we believe did not work out so well. And Philips, their generous remuneration, patient safety and quality managed legal issues, litigation strategy, potential liabilities. So those are the Respironics related charges.

So exactly in those fields that the VEB asserts that Misters Jakobs and van Ginneken might have an interest. Enough said.

Next, the outcome of the calculations. We don't know how exactly they were calculated, but Mr. Jakobs already received a considerable variable remuneration last year despite the consent degree in the FDA warning letter and that astonishes us and that patient safety and quality. You see that there has been overall improvement in process controls and culture. Well, Philips mentions that the FDA inspection resulted in a warning letter and that resolving the matter remains crucial. How can we reconcile these contradictory messages? Apparently, the bar was not set very high there.

Next question is, which safeguards has the Supervisory Board introduced to every Board of Management members with a potential interest in the apnea matter, having the wrong incentives. For Mr. van Ginneken, fo 2026, there are managed legal issues concerning how far litigation strategy is developed about potential liabilities are managed, which legal issues and potential liabilities does this relate to a question to the Supervisory Board? Are these apnea related claims, settlements, insurance issues, indemnifications, communication about these. I'm curious to hear your answer.

Herna, could you take that one?

Definitely. If we're talking about the short-term incentive, then 70% of that depends on financial targets. And 30% on nonfinancial targets. And I'm explicitly stating this to indicate, you say that the majority is nonfinancial. That's not true. 70% is financial. 30% is nonfinancial. In the nonfinancial targets, which are focused on patient safety, customer strategy and execution and ESG, we also try to include as many quantitative elements in those nonfinancial targets because at the Supervisory Board, which, of course, we do in close consultation with the organization, we try not only to judge what we think happened in a year, but we tried to see exactly what did happen, in fact.

Now as for whether this is ambitious enough whether the bar is sufficiently high. Each year, we tried to set ambitious targets in financial criteria and on the nonfinancial criteria. Regarding your question, as to whether we consider personal interest sufficiently, I believe that you might be getting ahead of a question that you asked, the enterprise chambers about conducting an investigation, the answer has not yet been forthcoming as to whether the investigation will happen. And if there is, then there will be an outcome in the short term. So that means that we have sufficient safeguards on our Supervisory Board to determine objectively what our judgment is.

And based on that assessment, we do not anticipate potential investigations that we are -- that have not been decided yet whether they will take place. The same answer regarding Mr. van Ginneken. The nonfinancial targets relate not only to the litigation. And if we're talking about litigation, then you also see that in the statement we issued about 2025, we consider all forms of litigation that exists within Philips, which is more than only the matter that keeps coming up here.

A minor adjustment for the minutes. I didn't say that remuneration was no broader than financial. I do understand it's about financial performance, but the nonfinancial criteria were generously remunerated that for the record. And a final request because it would make the discussion much simpler if the objectified quantitative criteria are known on our part so that then we know how the Executive Board members are incentivized. And because afterwards, it's very easy to say, well, the Board of Management did wonderfully, the Remuneration Committee reviewed it. And I'm not sure. Now I have to believe your blue eyes that you're doing it with care, but I'd like it to be more objective, especially the nonfinancial criteria. I believe that in sustainability, we'd like to brainstorm about how it is formulated and that will enhance our insight.

I have 2 answers. We don't believe it's generous. We believe that we were sufficiently justified and there's enough substantiation to reach these outcomes in your comment about the nonfinancial criteria is excellent input for the evaluation that will -- performing the remuneration policy in 2026.

Yes, I'll take your word for that.

Okay. Any other questions about remuneration policy?

I have one more comment on my own behalf, which is that you have said a few times now that Misters Jakobs and van Ginneken have a conflict of interest or a personal interest regarding lawsuits concerning the sleep apnea problem. The Supervisory Board does not agree with that. Mr. Stoffels has already explained how we organized it so that if such thing occurs that it need not be a problem, but we do not believe that Misters van Ginneken and Jakobs have any conflict of interest in that respect.

You believe otherwise, you're entitled to your opinion, and we disagree. We're entitled to do that. And ultimately, it's up to the court and the enterprise chamber to rule on that and we'll hear that when the time comes.

Okay. That said, also for the minutes. We will now move on to the next 2 agenda items, which are the discharge and that takes me back to PwC. The financial statements for 2025 were audited by PwC, our external auditor. And on behalf of PwC, Mr. [indiscernible] is present in this room who is responsible for the audit.

Mr. [indiscernible] will briefly elaborate on the audit performed by PwC and the statements as included in the annual report. And you may ask him any questions you have Mr. [indiscernible]

Thank you, Mr. Chair. Great. Good morning. It's a pleasure. As said, my name is [indiscernible] and it's a pleasure to address you on behalf of PwC at your AGM, our first audit of Royal Philips. I'm happy to give comments and to answer any possible questions.

On 9th of February, we issued 2 reports from Philips' annual report, one on the financial statements and one on the sustainability statement. On the very same day, we also issued a report on our integrated audit of the financial statements, including the effectiveness of the internal controls over financial reporting. And this in line with the rules for foreign companies listed in the U.S. in line with the agenda item for this meeting. My remarks today focus on our audit of the financial statements prepared in accordance with Dutch regulations and on the sustainability statement.

Both report are unqualified for financial statements. This means that, in our opinion, they give a true and fair view in accordance with Dutch legislation with regards to the sustainability statement. This means, on the one hand, that nothing has come to our attention that leads us to suspect the sustainability statement has not been prepared in all material respects in accordance with the ESRS reporting requirements. And on the other hand, that specific KPIs selected by Philips have been reported in accordance with the applicable reporting criteria.

We have also concluded that the information in the management report contains the required information, and it is consistent with the results of our own audits. The report details have been available to you. I would like to highlight some important elements of the reports and of our activities to you.

First of all, 2025 was the first audit year for PwC. A transition to a new auditor is an intense period, both for us and for the finance department of the company. During this period, we deepened our understanding of the company's strategy, its operations, its IT systems and its internal control mechanisms. And also, we focused on the way this translates into the financial statements. We established a process for information exchange between Philips and PwC, implemented tools to support automated data analysis and testing. We made inquiries with the previous auditor, reviewed their audit files and discussed and considered the outcome of their work.

Also, we attended some crucial meetings in respect of the 2024 annual report. These procedures serve as input for our risk assessment, our audit strategy and our audit plan, which we discussed with the Board of Management and the Audit Committee of the Supervisory Board.

Let me give you an impression of the scope and the extent of the audit. We conduct a highly centralized audit with a core team based here in the Netherlands. This means that we audit items that do not arise routinely due to their judgmental nature, such as revenue recognition, provisions and valuations as a group team here in Amsterdam. The scoping paragraph and our auditors report describes the scope of the group audit. In total, we have sent instructions to auditors from the PwC network in 7 countries to audit Philips Group entities. And this ensures adequate coverage in the audit.

The paragraph shows among the things that important group entities in the U.S., India and China were visited in our role as group auditor to verify locally that work was being carried out in accordance with our instructions. In this light, we also concluded that the local auditors were independent and competent.

As part of our audit, we engage specialists in the field of IT, forensic, investigations, valuation, taxation and sustainability, all working with PwC. In total, the audit in its first year included more than 105,000 hours covered by over 300 colleagues. About 40% of this time was dedicated to the first year order transition. Our scope of work covered more than 90% of the consolidated revenue and the consolidated assets. The components, therefore, outside our scope individually represent less than 3% of these ratios.

In the course of the year, my team and myself spoke with a wide range of people within Philips. We discussed the progress of the audit on a quarterly basis with management and the Audit Committee of the Supervisory Board. In the cooperation with Philips during our first year, we've experienced active engagement in the sense that our insights are taken seriously by the company.

Now fraud and continuity, as you could read in our report, we report in accordance with the guidelines of our Dutch professional body on the audit approach adopted with regard to fraud and continuity. The fraud risks identified relates to the reporting fraud risk assumed on the professional regulations as a result of breaches of internal control by management and in relation to revenue recognition.

In addition, we carried out work on the risk of corruption due to Philips' presence in countries with a higher risk of corruption and the use of distributors, particularly in China. And I can confirm that no fraud of any material importance has been found.

Now the key audit matters. These are the items that in our professional judgment were most significant for the audit of the financial statements. In our report, you'll find 3 key audit matters. With regard to goodwill, we note that this is a material item for which the company carries out an impairment test on an annual basis. And we focused, in particular, on goodwill in the Connected Care segment. Also, we have a key audit matter concerning the apnea equipment case, focusing particularly on comments in the annual accounts, and risks [indiscernible] represented in the balance sheet.

Finally, we have a key audit matter for revenue recognition in Connected Care and Diagnosis & Treatment segments. During our audit, we devoted significant time to determining whether revenues were recognized at the correct time and for the correct amounts. And in our restatements, you can see what work has been conducted in respect of these 3 key audit matters.

Let me now turn to the second report, which is the sustainability statement or report. This is a combined assignment with limited assurance in respect of the full sustainability statement. The sustainability statement in English, that has been prepared and aligned with the European CSRD rules, the EU [ taxonomy ]. In addition, we provide a reasonable level of assurance on a number of specific KPIs that have been included by Philips and covered in our report.

As concerns the limited assurance engagement, the auditors were mainly focused on assessing the possibility of the indicators and limited substantive checks. So this was about gathering information from managers' analysis of figures. The level of assurance obtained, therefore, significantly lower than that of an audit. We paid specific attention to the process of assessing double materiality within Philips and translating this into the information to be reported in accordance with the EU standards for sustainability reporting. And for the comments concerning reasonable assurance, we have also worked on additional data acquired. Also, we specifically looked into the most important assessments using methodology or the methodology that is used for some metrics such as lives improved, environmental P&L and Scope 3 emissions.

In conclusion, I'm happy to look ahead. Currently, we are planning the audit and assurance engagements for 2026. We discussed our draft order plan this week with management and with the audit committee. We are also working together with Philips on the further deployment of audit intelligence tools, including for testing work on financial statements and items and internal control documentation.

In addition, we anticipate in the future an increase in the controlled use of AI in our audits. For example, when analyzing contracts and making audit documentation entries. Currently, we expect the audit approach to be largely consistent with that of 2025, obviously, with adjustment to take stock of changes in the global and business environment, such as the geopolitical developments already mentioned today and the impact of trade barriers and then also of inflation.

That concludes my general comments.

Excellent. Thank you very much. Any questions to the external auditor, [indiscernible].

Thank you, Mr. Chair. Thank you, [indiscernible]. You are doing this in our interest we are among the most important stakeholders. So we're always very happy to have auditors whose eyes are on the figures on everything happening and then reporting about this. Our gratitude for this. We have a striking feature this year, and that is goodwill under Connected Care with Philips. And EY had not defined it as a key audit matter and you have. So our question is, what concrete circumstances let PwC to conclude that goodwill for Connected Care is a key audit matter?

You refer to ongoing challenging market circumstances, challenging geopolitical circumstances. Well, that leads to difficulties for assessing the input variables in the terms of an auditor. My question is this. What is the available headroom before an impairment would be required? And what assumptions of Philips in the impairment test are the most uncertain or maybe too ambitious or have the highest level of assessment in security? Some insights into the underlying layers of the impairment test.

Thank you for your question. Indeed, we decided to define this as a key audit matter. And as I said, in our statements, we have reported lease and gave insight in the considerations that match this conclusion, we've commented on the work conducted as well. As concerns the rationale, I think 2 points are most relevant. The materiality of goodwill as an item in respect of the balance sheet total. I think that's a very obvious point. And then in the light of developments, worldwide developments that have been discussed at length already at this AGM came to the assessment that the uncertainties that are inherently part of any financial planning, such as planning success of businesses when you have new business models such as AI, that such uncertainties in a quickly changing world have increased, and that was the reason the rationale for making this a key audit matter, particularly focusing on the Connected Care segment because we see that this is a segment where the impact of new technologies and therefore, uncertainties is the highest.

What is the headroom question, that's the most relevant question for us. I think this is a detail that we will not share in this meeting. The headroom in general terms, is larger in segments we are dealing with less uncertainty. Those segments where Philips has market positions that will make a major contribution to results, headroom in general terms, concerns mainly segments or business units that are stronger than others.

Would that be an argument in favor of defining it as a key audit matter next year again? Or is the headroom sufficient to skip a year?

It needs a permanent attention of the auditor, obviously. But we are following a company that investigates headroom every quarter and hasn't [indiscernible] every year. So these analyses are guiding for us. And based on this, we will decide whether we will redefine it as a key audit matter for the audit of 2026.

And if we would have to assess input variables, what should we mainly focus on what variables might lead to problems? In general, input of variables, first of all, concerned the financial forecasting. What graph do we see? What steepness do we see in top line? So what about the financial results for a specific element?

But we'll also look at the analysis that Philips is conducting, particularly concerning market growth potential. So in the impairment assessment, we have internal and external analysis, and we cover that from a distance, so to speak.

So you have to trust the internal assessments and ambitions? Or should we adjust them downwards because you're an independent auditor? Or is Philips rational in its assessment as a role?

Well, the assessments of Philips'. We have as a role to challenge them to charge them, we do. Earlier, I said that we have experts engaged on valuation to make sure that the expertise we have as auditors can be used elsewhere in the market to challenge management on the assumptions they are using.

[ Mr. Spanja. ]

Mr. Sijbesma, [ Spanja ] is my name for the minutes. Obviously, I have also read through your pages of stories twice. I have also looked at the other financial data. If we turn to Page 108, second column, for 2025 will read Pw network has charged this amount where EY in 2024 charged only 5.5. In other words, PwC network was 0.7%, more expensive. Your report from Page 255 and following shows no information as to why, how your hourly rate is higher than that of EY? Although just now, you have explained how much U.S. auditors leave to AI, meaning the bill should be lower because you know that your colleague is in an argument with [ KPMG ] [indiscernible] about the bill.

So my question is this. First question, I would like to have an itemized substantiation of why, you, PwC network are 0.7% more expensive in 2025 than the auditor in 2024? I want to have a qualified answer. And therefore, later, I will come back to the CFO, asking for his stake this.

And then as an auditor, how much of your work has been left to AI? What is this about? Is it about Column 125 on Page 108 of the annual report? What percentage has been subcontracted to AI in Column 2 from PwC network?

And then my third question, how or in what way have you tested the work of PwC network. Because you just told us that only in 7 countries, you have managed your auditors. But Philips is in more than 7 countries. So have you been using other auditors in other countries? Have you given them assignments? And how did you check their work? That's not clear to me either. And then what instructions have you given to your PwC network? How are you going to prevent that in '26, the cost of PwC network will once again be higher than in 2025? That's my third question.

Then question four. As you know, the [ AX-listed ] funds, and that is related to your professional organization, need to have auditors looking over their shoulders. So what auditor within your organization has been looking over your shoulder? And what points of improvement have they shared with you? Curious to hear that. And then what have you told the Board in your management letter? For instance, about hedging? And yes, I also have a headroom. You, as auditor, have you found the headroom? Or was it the PwC network that made remarks about the headrooms available? That covers my question so far.

And that brings us to 3 questions of [ Mr. Spanier ] about this point. I count it one more. But if you think it's 3, that's fine. As long as they're answered. Mr. [indiscernible]

I also counter differently. So I hope someone is taking notes. I have no pen unfortunately, to take their questions. As for the remuneration of the auditors. As we have commented in the annual report, I would like to ask you certainly when it's about our predecessors to raise that question with management because we have agreed our wages with management.

Fair enough. I will then raise the question with the CFO, if the Chair approves. No problem.

Then as to the use of AI, I already in my presentation that in the future, we intend to use it. This is not a form of down-sourcing work. On the contrary, this is about the use of technology in a way that will make our audits more effective in terms of quality and hopefully also more efficient. We do this in-house. We do this in a controlled environment to make sure that we only use controlled input so that the outcomes can be subjected to critical self reviews, making sure that we can lean on the information. We can trust the information that is AI generated. And all of this, obviously, within the control mechanism of the PwC house structure.

Then as to the use of the PwC network, the PwC network has been active from the start of the financial year 2025. Many of the countries where Philips is active particularly for the statutory audits that are required by law in many jurisdictions, the 7 countries that you refer to, the 7 countries about which we report in our statement are countries where we use teams for the group audit. So these are countries where Philips has the most important representation or activity.

Obviously, this is the U.S., this is about China, consists also of Germany and Japan. But it's also about the countries where the processes are situated, for instance, India and Poland. And the colleagues in these 7 countries have worked together with the team here in the Netherlands, covering over 90% of all the figures that find our way into the annual report.

Okay. So what instructions did you give to your network?

We work in the following way. We indeed right instructions, very detailed instructions that there are about many aspects of quality as we use them in the Netherlands in auditing as exist worldwide in auditing quality systems, training, monitoring, the implementation and the quality checks as applied on a national, local level. Periodically, we are in touch with our colleague auditors on the progress of theit work. We received written reports that we assess, and wherever we deem it necessary, we conduct country visits to look over their shoulder, something we have indeed done once again this year.

So PwC network means it's not only your PwC offices but also other audit firms. We have not used other audit firms in our audits than companies or firms have belong to the worldwide PwC network.

And what was in the management letter as concerns hedging?

Apologies, what is the question?

What did you write in the management letter as concerns hedging in your letter to management because currencies are volatile softly speaking. So what did you put in the management letter?

We report to management, particularly on internal control mechanisms and their effectiveness. And when we conclude any shortcomings, we report to management when there are significant shortcomings, we also communicate them to the Supervisory Board. And when we see material weaknesses, this will have an official statement. There has been no such situation. Let me highlight that. We have reported on financial reporting and we have issued a qualified auditor's opinion.

So may I conclude that for the management letter for '26, you will tell them to get the internal controls better to improve them?

Well, that is a summary that I would really leave to account.

So what did you put in your management letter?

As I just pointed out, we have reported on shortcomings that we have concluded in the reporting mechanisms in such a way that the shortcomings can be addressed by the company, allowing us to tackle their follow-up.

Chairman, may I then address my first question to the CFO because the PwC network has come 0.7% more expensive than the EY. How did you interpret this? Was this something you are aware of beforehand when you received the price growth? How did you interpret this? And how will you deal with this for the future?

Thank you, [ Mr. Spanier. ] We have a holistic outview. We look at holistic fees. And you have seen doubtlessly, that is the case in the report. We paid [ EUR 7.2 million ] and the total fees for auditors EUR 14 million for PwC. So we see a significant reduction that is driven, as Mr. [indiscernible] just told you by further simplification, the further use of AI.

Now you're absolutely right in saying that the mix and the composition of the fees has changed. So we see a slight increase in PwC -- fees towards the PwC network, and less to the Dutch operations of PwC. We have looked into this. We have discussed this, but this is a factor related to several issues, first of all. The fact that we have [ competence ] centers worldwide, for instance, in India, which took -- required a bit more work of PwC than from EY and more work has been dedicated to the statutory audit. But we take a holistic view towards the fees, and we discussed it with Mr. [indiscernible] and his team, and the audit committee, obviously also has to sign it off and approve it.

But how is the cooperation between yourself and the audit committee because if the audit committee says everything is well, will you then blindly accept it? Or will you tell the audit committee that some rates are too high, it doesn't work this way? How does that cooperation work?

[Interpreted] I think that's a very valid question. It's the other way around. It works as follows. First of all, we have a detailed discussion of this matter with Ms. [indiscernible] and his team discuss how to safeguard quality. That's important. But also, we discuss how the price quality ratio can be correct. And then when Ms. [indiscernible] and his team and myself and my team come to agreement, it will be submitted to the Audit Committee and its Chair.

Well, there's this breakdown that we see on Page 108. A breakdown by networks. And that means that you can say that it's holistic, that it's lower, but still, you made a breakdown yourself.

[Interpreted] Very well. Do we have any other questions to Mr. [indiscernible], our external auditor? If not, we turn to questions about agenda Item 3, F and G, the discharge of members of the Board of Management and discharge of the members of the Supervisory Board. Any questions about these agenda items? Yes, please.

[Interpreted] Thank you. [indiscernible] on behalf of the VEB. 3F, 3G, let me be clear, the VEB is voting against the discharge for the members of the Board of Management and this is mainly about the facts around the sleep apnea case settlement of claims. The claims have come up and the [indiscernible] and the information provided. And this is about last year. And hence, we cannot support this point. I think that these items once again were insufficiently clarified during the meeting. So it is not without a reason that it's before the enterprise section of the Amsterdam Court of Appeal, and we were expecting that still a discharge decision. As far as we are concerned, cannot be seen as complete impairment or liberation of responsibility because that's before the Amsterdam Court of Appeal then supervisors. So Mr. Stoffels being appointed for a third term of office is a concern. That's injury time. It's allowed but only as an exception with good [indiscernible]. And Mr. Stoffels within Philips who was the Chair of the Quality and Regulatory Committee. And we, therefore, have some misgiving some doubts. We would like to hear the view of the Supervisory Board. We wonder whether Mr. Stoffels sufficiently executed supervision when there were warning letters, recalls, 34 such letters, I mean that's not nothing. We're happy with Mr. [indiscernible] and I hope that comes through in translation because he is being nominated because of this expertise in the field of regulatory and quality. And this is a source of gladness.

And then a question to Mr. Sijbesma. The Supervisory Board acknowledge that there has been a shortcoming in supervision and that structural problems that exist really cool for more intensive supervision. I mean we understand it this way.

So 2 questions. Mr. Stoffels, was that enough. And the appointment of the quarter is that a sign of enhanced attention to supervision. Thank you, Chair.

[Interpreted] Well, how can I put this correctly. It nonetheless bothers me a bit that each time that so-called conflict of interest on the part of the Board of Management. Specifically, Mr. van Ginneken and Jakobs is raised. I understand that you're entitled to your opinion. But nonetheless, I'm allowed to say that it -- it's irritating. And the Board of Management, especially in that sleep case has made huge progress in addressing the and resolving it and wrapping up and settling those claims and litigations properly.

Nonetheless, I heard what you said about the discharge for the members of the Board of Management. Regarding Mr. Stoffels. Mr. Stoffels chaired the Remuneration Committee. He did excellent work. And last year, started to chair the Q&R committee, and he did excellent work there as well and the fact that we still need Mr. Stoffel's expertise has led us to ask him to serve a third term for the 2-year duration with us, and we're delighted that he agreed. And I certainly cannot say that he's the reason why we but he is certainly not the reason behind any potential comments from the FDA.

Is there a shortcoming deficiency? No. Is that caused to appoint Mr. [indiscernible]? No. Does the Supervisory Board believe that we need to keep adding reinforcements and quality, regulatory, patient safety and so on as a company? Yes. And all the options that we see, we welcome and have welcomed, and we also appreciate your support for his appointment. That was my response.

[Interpreted] Very briefly -- a very brief reflection, you're depicting me as emphasizing conflicting interest in a personal interest is our opinion with respect to the legal case. But the FDA has certainly sounded the alert and it also sent a strong message to Mr. Jakobs by personally involving him in the consent agreement 23 and 24. So it's not only the opinion of the VEB, but it's been broadly shared by the independent regulator. And I believe that the Supervisory Board has too few safeguards at an urgent point within Philips and that justifies our refusal to approve a discharge for the Board of Management, but we also believe that the Supervisory Board could have managed this more wise. So we're voting against the discharge of the Supervisory Board for exactly the same reason as we're voting against the discharge for the Board of Management.

[Interpreted] Thank you. Any other remarks about the discharges? That takes us to agenda item 4, composition of the Board of Management. And that relates primarily to Mr. Jakobs. Mr. Jakobs, has served on the Board of Management since 2022. His reappointment is recommended in view of the progress achieved during his first term. He has the full confidence of the Supervisory Board as Philips enters the next phase. Roy Jakobs demonstrates clear leadership, decisive management and truly focuses on strengthening Philips in an uncertain macro environment. Moreover, he has laid a sound foundation for the coming years with great financial resilience, focused on the -- an impact-driven culture. The proposed term of appointment for Mr. Jakobs is 4 years. This means that his term of office will expire at the end of the Annual General Meeting in 2030. The contract agreed with Mr. Jakobs has been published on our website. And please refer to that for additional substantiation regarding this agenda item. See the notes to the agenda for this meeting.

Who would like to speak on the proposed reappointment of Mr. Jakobs? Yes.

[Interpreted] Mr. [indiscernible]. Well, before we break for lunch, this is an essential issue this reappointment, we had enough exchanges today and that strong alert on our part and by others about Mr. Jakobs, I hope that did not fall on deaf ears. We would like to see Philips introduce clear safeguards for the future to avert conflicting interests. You say that's not an issue. Well, we'll see whether the court has an opinion on that. But we also have reservations about the role of Mr. Jakobs in the past and in the past 4 years, his role in the apnea case and this settlement, it didn't happen properly. It wasn't fast enough. I think it worked out all right for the patients and as investors, we believe that they come first. But after that, it's our turn. And over 16 billion in shareholders' value has been dissipated through the intervention of former board members as well as incumbent Board members. That's no small potatoes. That's 1 of the most serious amounts of damages in the history of Dutch corporate industry, you see that others feel differently and everybody is doing his or her level best. Well, you can -- we can agree to disagree, but the role of Mr. Jakobs in this case and in the past does not merit reappointment and everybody is entitled to his own opinion. 4 years ago, we gave them the benefit of the doubt. But as far as quality control and resolving highly urgent cases were impossible for the CEO to make a difference there. So it's an awkward message because we had wished them the best, but these past years did not justify the benefit of the doubt on our part toward is reported.

[Interpreted] Well, we'll see, we as the Supervisory Board has expressed all support from Mr. Jakobs and we believe that in the past year, excellent progress has been achieved. But of course, we can agree to disagree. And ultimately, all shareholders will collectively express their opinion when they cast their vote.

Now on to agenda Item 5, reappointment or appointment of Supervisory Board members. Let me start with Mr. Stoffels. Mr. Stoffels has been a member of the Supervisory Board since 2018 and his reappointment is proposed in recognition of his contributions to the Supervisory Board over the past 8 years. As stated, he has keen judgment and is an independent as the Vice Chairman of the Supervisory Board and former Chair of the renovation Committee, member of the Corporate Governance Committee and now Chair of the Quality and Regulatory Committee which attest to the huge effort delivered by Mr. Stoffels today continues to deliver to Philips. In keeping with best practices for corporate governance, Mr. Stoffels is being nominated for a 2-year term. Supervisory believes that Mr. Stoffels' background and experience will remain valuable for the company and will enhance continuity in the '26 to '28 period, including focusing on innovation and additional enhancement of patient safety. As explained in the notes to the agenda.

Who would like the floor about the reappointment of Mr. Stoffels? Mr. [ Spanier ]?

[Interpreted] Mr. Chairman, I'm Mr. [ Spanier ] for the minutes. 2 years fly by what will you do when the 2 years are over because they do fly by. Do you already have on your drawing board, somebody who would step in to replace him on the Supervisory Board. Have you approached a headhunter that will conduct a surge. Are you exploring your own network? How we do this -- or will that Mr. [indiscernible] that we would be appointing in a moment, a step into issues because the Supervisory Board will it be expanded temporarily or permanently how will you crystallize the succession of Mr. Stoffels?

[Interpreted] That's a good question, but I'm sure you believe that all your questions are good ones. That's correct. Okay. We almost entirely agree on that. And the Supervisory Board will not be expanded because Mr. Harrison will be stepping down after 8 years on the Supervisory Board. And we believe that in those 2 years that Mr. Stoffels is still with us either internally or externally, perhaps internally, we will have the right individuals. And you mentioned one, perhaps we will have been able to find such a person to take over excuse me, Mr. Stoffels duties. Thank you for your reply.

Now if we're done with asking questions about Mr. Stoffels on to Mrs. Verhagen, who has been a member of the Supervisory Board since 2022 and is being nominated for reappointment and recognition of our valuable contributions to the Supervisory Board over the past 4 years and the manner in which she has served as Chair of the Remuneration Committee and member of the Audit Committee.

During her first term, she demonstrated that she was a committed and constructive member of the Supervisory Board and its committees and to show and sound judgment and a strong sense of independent. The Supervisory Board expects that she will continue to contribute to effective functioning of the Supervisory Board and to maintaining an appropriate balance of skills, experience and diversity within the Supervisory Board. The proposed term of an for Mrs. Verhagen is also 4 years, not also -- it is 4 years. And I will also refer to further substantiation in the explanatory notes to this agenda item.

Who would like the floor rather -- who would like the floor regarding the reappointment of Mrs. Verhagen? Nobody?

Then I will move on to Agenda Item 5C, the reappointment of Mr. Sanjay Poonen. Mr. Sanjay Poonen has also been a member of the Supervisory Board since 2022 and is being nominated for a 4-year reappointment. Also thanks to the way he serves as a member of the Remuneration Committee. And during his first term, he contributed his expertise and extensive experience in information technology and digital transformation. His knowledge is particularly relevant for the company's strategic focus as well as the growing importance of digitalization, artificial intelligence, data management and cybersecurity has previously stated at this meeting, the proposed term of appointment is 4 years. And regarding Mr. Poonen, the same holds true. Additional substantiation appears in the explanatory notes to the agenda.

Would anybody like to comment on the proposed reappointment of Mr. Sanjay Poonen? Nobody?

Then I will move on to agenda Item 5D, the appointment of Mr. John DeFord. John DeFord is being nominated for appointment as a Supervisory Board member based on his extensive experience in the medical device industry, the med tech industry as senior technology manager with considerable expertise in regulation and quality systems, particularly in the United States. The our most important market and his strong track record in innovation and product development, the proposed term of office for Mr. DeFord's appointment is 4 years. And once again, additional substantiation appears in the explanatory notes to the agenda. I would like to give John the opportunity to introduce himself briefly. John?

Thank you very much. It's really my pleasure to address you today. The first thing you'll likely notice is that I've shaved. The technology that Philips provides is excellent. I can attest to that. I've been given the message to be very quick. So I will be -- it's an honor to be nominated to the Supervisory Board. Philips has an amazing and long history of innovation and impacting the lives of patients around the world. I have seen that personally and the goal of impacting 2.5 billion patients per year is laudable and frankly, amazing.

Now it's not lost on me that Philips is going through some challenging times as is the world. We have a tough global economic situation. We have some quality issues that the company continues to work through and make progress on. But I'm confident that the strategy is sound, the execution is strong and I've worked my entire career kind of at the crossroads of medtech, innovation, quality, regulatory and clinical environments with patient safety always at the forefront. With your support, I commit to you that I will work collaboratively with the leadership team of the organization, but also with strong oversight working with my colleagues on the Supervisory Board. and with your support, look forward to helping move this company forward for the impact to patients, to customers, to shareholders and all stakeholders. Thank you.

[Interpreted] Thank you, John. Who would like the floor regarding the appointment of Mr. John DeFord? Nobody?

Okay, then I'd like to express thanks to Mark Harrison. As I said, after this meeting, Mark Harrison will step down from the Supervisory Board after having served for 8 years. And we are very grateful to mark for the excellent working relationship and his input on the Supervisory Board, Roy, do you have anything to say to Mark?

[Interpreted] Yes, I believe we're very grateful to Mark for his contribution and advice and his active role in the Supervisory Board as well as a personal adviser. He was -- had delivered a special contribution in the quality regulatory committee and his clinical insights. We're very enriching. So thank you very much, Mark, and we will ensure an appropriate fare well. That's what I had to share, Mr. Chairman.

[Interpreted] Thank you. Then on to agenda Item 6, that's the remuneration of the Supervisory Board. The current remuneration policy for the Supervisory Board dates back to 2024. We indicated previously that the policy is in principle reviewed every 2 years, and that has resulted in the proposal on which you may cast your vote, although last year at the AGM, we explained what we will do and we have divided that into 2 sections. The proposal has been carefully drafted as is customary. We consulted several stakeholders and received predominantly positive feedback. The Supervisory Board attributes great importance to the views shared by the stakeholders and expresses its appreciation. The remuneration policy for the Supervisory Board is designed to attract and retain Supervisory Board members, the highest caliber with the right expertise and experience internationally as a health technology company, we operate in complex technological fields, and that requires knowledge and experience which we expect to be able to do justice to with this remanagement policy. Approval of the proposal will raise remuneration levels towards the median within our quantum peer group. The increase will take place in 2, 7% steps. As I mentioned, the first this year in 2026. And the second 1 will take effect next year in 2027. In addition, we propose increasing the attendance allowance. Insofar as international and intercontinental travel is required. The new allowances are explained in detail in the tables included in the remuneration policy available on our website. Would anybody like to speak about the Supervisory Board remuneration policy.

If nobody would like to speak, then I will move on to agenda item Items 7, 8 and 9. And agenda Item 7 concerns the authorization of the Board of Management to issue shares or grant rights to acquire them and to restrict or exclude preemptive rights.

Agenda Item 8 is the authorization of the Board of Management to repurchase own shares.

And Item 9 is the cancellation of shares. And you can vote independently on Items 7, 8 and 9. But I would like your questions in concerning these 3 items in a single block. Does anybody have any questions about agenda item 7, 8 or 9? Nobody?

Then you may cast your vote.

Excuse me. It works. I don't have a question. I just have a remark to you, Mr. Chairman. I wanted to say that looking left and right here, we see to women on the screen. And today, you overlooked me. You didn't see me while I was standing here for 5 minutes you saw Mr. Spanier first and gave him the word first. [indiscernible] this can happen, as we say in Dutch, but then you also only complemented the men for their questions. So I just want to say to you today, if you see me again next year, maybe give me some compliments as well on my excellent questions.

Thank you very much. And people who know me know that I will not wait till next year, but I will do that right now. Thank you for your remark already. And it has nothing to do with male or female. On the contrary, I really appreciate your remarks, and you get all credits from me now already. And I ask but to remind me that I don't make that mistake next year and that I will start giving you a complement in the assumption that you will join again next year.

Perfect. Let's agree on that.

[Interpreted] Okay. Good. Okay, that covers Item 9 as well. And as I said previously, Item 9 is the last voting item. So if you have not cast your vote yet, please do so in the next few seconds.

You have had nearly 2 or 3 hours to vote, which is far longer than the previous time. So I assume that you have now cast your vote. If not, then you will give you another 10 seconds to vote on these agenda items. And afterwards, I will close the vote. And Bart or Marnix will tell us the results of the vote, and I'll share those with you.

Before we disclose those votes. Any other business? That's agenda Item 10. Would anybody like the floor during any other business? Have I overlooked anybody? All right. Very well on to the voting results.

For all agenda items, 3C through 9. 3C, 99% voted in favor that concern the financial statements. They have been adopted.

3D, the proposal to adopt the dividend also 99% of in favor. So that's also been adopted.

3E, remuneration policy, 97%, nearly 98% voted in favor. That has also been adopted.

3F, there it is. Proposal to discharge the Board of Management members. Nearly 96% has voted in favor.

3G, proposal to discharge the Supervisory Board members. Over 90% has voted in favor. That has also been adopted.

Item 4, proposal to reappoint Mr. Jakobs. Nearly 99% voted in favor. That has also been adopted. Congratulations, Roy. Wait a minute. Where are we now?

5A, excuse me. Appointment of Mr. Stoffels, nearly 95% voted in favor. That has also been adopted.

5B, Mrs. Verhagen, nearly 98% is in favor, also adopted.

5C, reappointment of Mr. Poonen, 99% has voted in favor. That has also been adopted. And my compliments to Mr. Stoffels, Mrs. Verhagen, on your reappointments -- congratulations on your reappointments. And also to Mr. Poonen.

That takes us to 5D, Mr. DeFord. 98% in favor. Welcome among us as the new Supervisory Board member, John.

Proposal for the remuneration policy for the Supervisory Board. 99% has voted in favor. That's been adopted a authorization to issue shares. 99% has voted in favor, also adopted.

7B, authorization of the Board of Management to restrict or exclude preemptive right? 98% is also voted in favor, that's been adopted as well.

Agenda item 8, also adopted with 98% in favor.

And finally, agenda item 9, cancellation of shares, 99% has voted in favor.

That means that all resolutions and proposals have been adopted. And Bart, we will be publishing those in a press release after the end of this meeting.

[Interpreted] I would like to add something to this meeting this morning. I was at hearing at the Council of State ordinarily, this meeting is always in the afternoon, and that's how I scheduled and indicated that to the council of state that I was only available in the morning and then all of a sudden, Philips had its shareholders' meeting in the morning. And there are people who come all the way from the north or the south of the country. So in the future, could you have the meeting start at 2:00 p.m. or as with the Supervisory Board, arrange hotel rooms because this is very poorly scheduled, and I would like to call the Board of Management to this and security also blocked my entrance even though I registered at 9:00 a.m. in my voting handset was ready. And I would like that unfortunate security staff to be held accountable, and my neighbor had problems with them at the head office. So don't repeat that one. You need to do it better next year, start at 2:00 p.m. I don't care what your reason was but you need to arrange that properly not at 10 a.m. in the morning, think -- come up with something else. And apparently, authors agree with me.

[Interpreted] From at least 1 person, but I'll consult with Bart and Marnix why we started at 10 a.m. quite honestly. I don't know. We did always had this meeting in the afternoon. I don't know if it's because of Friday afternoon traffic that we wanted to help you out.

[Interpreted] Remark off mic interpreter apologizes. Remark is inaudible, interpreted apologizes.

[Interpreted] You know that's now true. Friday morning traffic is no worse than in the afternoon. But we'll look into this and your remark is loud and clear. So we'll see what we can do to accommodate you.

[Interpreted] remark off mic continues, interpreter apologizes. Yes, by the way, I'm also from [indiscernible]. Remarks off mic continue.

That's all very well. I am not going to give security a hard time because they do a good job, but we will look into it. I'm glad you got through, by the way, and also that you had the opportunity to make this remark, but we'll see how we can improve on that.

Now if there are no additional comments, I'll close this meeting and then outside, lunch is served for those of you who are willing and able to stay. And we have managed to have this meeting in 3 hours. Thank you for your interest, and thank you for coming. And at the very least, I look forward to seeing you next year, but possibly before that. Thank you.

Welcome to the Philips First Quarter 2026 Results Conference Call on Wednesday, 6 of May 2026. During the call hosted by Mr. Roy Jakobs, CEO; and Ms. Charlotte Hanneman, CFO. [Operator Instructions].

Please note that this call will be recorded, and replay will be available on the Investor Relations website of Royal Philips.

I'll now hand the conference over to Mr. Durga Doraisamy, Head of Investor Relations. Please go ahead, ma'am.

Hello, everyone, and welcome to Philips' First Quarter 2026 Results Webcast. I'm here with our CEO, Roy Jakobs, and our CFO, Charlotte Hanneman. Our results press release and presentation are available on our Investor Relations website. The replay and full transcript of this webcast will be available on our website after this call concludes. I want to draw your attention to our safe harbor statement on the screen and in the presentation.

I will now hand over to Roy.

Thanks, Durga, and good morning, everyone. Thank you for joining us today. I will start with an overview of our Q1 results and our outlook for the balance of the year. Charlotte will take you through the quarter and our guidance in more detail. We started '26 with a clear proof that our strategy is delivering, growth, margin expansion and strong order momentum despite the volatile environment. At the same time, we remain closely connected to our customers and employees.

This includes those impacted by the situation in the Middle East. We continue to prioritize their safety, support and continuity of care. Against this current backdrop, we reiterate our full year guidance. Looking at Q1. Order intake grew 6%, reflecting continued momentum. Comparable sales increased 4% with growth across all business segments, led by personal health. We also expanded margins. Adjusted EBITDA margin improved by 40 basis points to 9%, despite higher tariffs. This marks our sixth consecutive quarter of delivering on our commitments, even as we operate in an uncertain and dynamic environment. Disciplined execution and focus on what we can control underpins our progress. We are on track to deliver the full year outlook we set in February, which includes currently known information within an uncertain macro environment.

Our strategy remains anchored in three pillars: focused value creation, innovation-driven growth and disciplined execution. Let me take you through the first quarter in that context. Starting with our first pillar, focused value creation. We execute specific strategies by segment. And we invest with discipline, focusing on interventional monitoring to drive growth. We also drive growth geographically with North America as the key engine. You can also see this in our Q1 results. Equipment order intake grew 6% and with solid growth across D&T and Connected Care. North America led the growth, building on strong prior year comparison.

Europe also performed strongly across several modalities. Looking at D&T, Order intake increased in the mid-single digits. Growth was driven by sustained momentum in image-guided therapy as our market-leading Azure platform continues to drive strong demand. Precision Diagnosis delivered solid order growth outside China. Globally, MR order intake was solid, with increasing interest in our healing free systems.

Last year, 75% of our MR systems shipped were Helium free. For our customers, resilience and MRI is being tested more than ever. Helium supply is tightening geopolitical developments in the Middle East are adding further pressure to that. Costs continue to rise. As a result, health systems are seeking uninterrupted imaging and reliable service in everyday clinical practice.

Philips is leading the shift to helium-free imaging with our high-performance BlueSeal technology, we are setting the new industry standard in MRI resilience, enabling uninterrupted operations and reducing dependence on scarce helium. We have installed more than 2,200 systems globally, saving over 6 million liters of helium. Building on this, we also unveiled the industry's first helium-free 3.0T MR systems. We expect regulatory clearance in 2027, positioning us to transition to a fully helium-free MR portfolio and extend our lead over competitors. In CT, we are seeing a strong funnel for our spectral technology. In the quarter, Verida, the industry's first AI-enabled detector-based spectral CT gained traction following its launch at RSNA last December, with initial orders secured in Europe.

The first system installed in Q1 is already delivering results. At Nuestra Senora de Rosario University Hospital in Madrid, it is demonstrating seamless workflow integration and clinically relevant insights and importantly, without added operational complexity.

Turning to Connected Care. Order intake grew in high single digits, mainly driven by monitoring and supported by enterprise Informatics. Demand was broad-based across all regions with particular strength in North America and Europe building on a strong prior year comparison. We continue to expand enterprise partnerships with large integrated delivery networks.

These customers are investing in enterprise patient intelligence medical device integration and cybersecurity. They are increasingly adopting our enterprise monitoring as a service model to improve clinical, operational and economic outcomes. This reinforces our position as a partner of choice for enterprise-wide data-driven care delivery. Moving to Personal Health. This segment delivered another quarter of broad-based growth, driven by strong consumer sellout and continued market share gains. We drove this through active expansion and diversification of our channel footprint, adding more than 3,000 distribution points in Europe.

At the same time, we strengthened our presence with key global retail partners through increased listings and expand placement. This included IPL expansion broader distribution of interdental products and more than doubling on bay distribution in the U.S. Our second pillar, innovation, is another key driver of both momentum and growth. Across modalities and products, we are accelerating innovation towards scalable AI-enabled hardware and software platforms. And that is already translating into stronger regulatory momentum for approvals of new product introductions.

In Q1, we received 20 510(k) clearances and premarket approvals, more than doubling year-on-year. In MRI, we received FDA 510(k) clearance for SmartHeart our AI-powered cardiac MR solution. Just like SmartSpeed is a clinical application that extends software and AI-led innovation across the installed base. SmartHeart automates complex planning workflows in 1 click and does that under 30 seconds, simplifying operations and boosting productivity. It also reduces patient breaths by up to 75%, improving patient experience in a big way. NCP, we received FDA 510(k) clearance for both spectral CT Verida and our Rembra Wide-bore CT. Launched at the 2026 European Congress of Radiology this platform features an industry-leading 85-centimeter bore. It is designed for high throughput environment with an AI-enabled workflow and improve diagnostic confidence. In Image Guided Therapy, we received clearance for DeviceGuide, an AI-driven solution, fully integrated with our Azurion platform. It enables real-time automated detection and visualization of mitral valve repair devices during minimally invasive procedures.

We also launched IntraSight plus ,integrating intravascular imaging and physiology into a single system to simplify workflows and improve efficiency in the cath lab. Looking beyond product innovations to our future transformative interventional platform introduced at our CMD in February. We made progress in advancing clinical validation. Building on our ecosystem of more than 100 clinical partnerships, we added a share of our Research Consortium in Q1. Seven clinical studies are now underway to demonstrate the benefits of AI and robotics assisted workflows and minimally invasive treatments for brain aneurysms and liver tumors.

In Personal Health, AI is embedded in our propositions. For example, the Philips High-end Shaver 9000 Prestige Ultra. It uses intelligent sensing and AI-driven adaptation to respond to each user skin and hair type. Delivering a more personalized shave every time. This innovative proposition not only won the TIME's invention of the year for the groundbreaking features, with also significantly increased sales and margin demonstrating our leadership in this domain.

Since creating the hybrid shaving category, we have sold more than 50 million OneBlade handles and 100 million blades. This growing installed base supports profitable recurring revenue from consumables with strong replacement blade performance in the quarter. In Oral Healthcare, we infused new Philips Sonicare 5700 to 7300 series models in the U.S., featuring next-generation Sonicare technology. In China, we launched Sonicare 7000 at the South China Dental Show, reinforcing our position as a professional or care leader and strengthening momentum with the dental community. Across Philips innovation continues at scale throughout our portfolio. We remain the largest medtech applicant as the European Patent Office in 2025, a strong proof point of the depth of our innovation engine. And this is not just about today. This leadership is fueling the next generation of innovations coming through our pipeline and positioning us well to drive accelerated growth.

In our third pillar, disciplined execution, it all starts with patient safety and quality, our top priority. It ensures we bring innovation to market with the high standards of patient safety and well-being. We're making strong and steady progress building on the improvements delivered over the past 3 years. And importantly, we are now benefiting from the work we have done to make Philips simpler, leaner and more agile, strengthening the foundation of our execution. Field actions were reduced by about 20% year-to-date.

This is on top of a reduction of around 40% in 2025, reflecting increased discipline and process effectiveness. Importantly, these improvements in our quality processes are also enabling the innovation momentum I highlighted earlier. We also maintained close and constructive engagement with global regulatory authorities including ongoing leadership level dialogues with FDA and other regulatory bodies worldwide. This underscores our commitment to quality, compliance and continuous improvement in serving our customers. It carries through to our supply chain, a critical enabler of execution. Over the past 3 years, we have simplified, regionalized and localized our operations to be closer to our customers.

Our focus is clear: deliver on consistently superior customer experience through a high-performing supply chain, day in, day out. During the quarter, developments in the Middle East increased volatility across logistics and input costs, including materials and components. Through active management of our logistics network, we maintained stable supply chain operations while stepping up cost mitigation activities, which Charlotte will further discuss. Importantly, customer service levels remain strong and in line with previous quarter and we remain vigilant in managing ongoing developments in supply and cost.

And as we look ahead, we will continue to deepen the simplicity, agility and resilience as these are critical capabilities for navigating the increasingly turbulent environment.

Turning to commercial and service excellence. In Connected Care, we saw further traction in our enterprise monitoring as a service. As health systems adopt enterprise monitoring, demand for enterprise informatics solutions is also increasing. These solutions now represent a growing share of both our order book and sales across various periods. In the quarter, we saw strong demand for capsule device integration and clinical surveillance across care settings driven by effective cross-selling across our enterprise informatics and monitoring platforms. In Diagnostic Imaging, we expanded our partnership with AdventHealth through a 5-year enterprise service agreement. It enables our full service model across modalities, while supporting a long-term imaging infrastructure focused on quality and performance.

Turning to the regions. Fundamentals remain supportive across our markets, particularly in North America where demand remains strong and the landscape continues to segment. We continue to see stable activity levels across hospital systems with no signs of disruption among larger systems. Cost pressures and workforce shortages persist, driving further consolidation among larger health systems. Demand for secure productivity and cybersecure enhancing platforms is increasing. This reinforces our expectation that North America will remain a key growth engine in 2026 and over the medium term. In Europe, capital spending remained broadly stable with an improvement in some markets during the quarter. Demand conditions remain stable, supporting our execution in the region. Select international regions continue to increase investments in health care and digitalization as reflected with strong wins in India and Brazil.

In China, centralized procurement continued to increase in Q1. particularly in modalities such as ultrasound and CT, which have shorter lead times. This is driving longer decision cycles and a more price-focused environment. As a result, we are seeing lower order conversion consistent with recent trends. These dynamics continued in the quarter, contributing to ongoing pressure on equipment demand. At the same time, underlying health care demand remains intact, particularly in procedure-driven segments.

We remain focused on maintaining competitiveness, selectively driving our portfolio and executing with discipline in this more price-sensitive environment. In Personal Health, consumer demand remains healthy in North America, and momentum continues across several markets globally, even as geopolitical developments create uncertainty. We are managing these dynamics with agility while maintaining a strong focus on execution.

Charlotte will now discuss our first quarter performance in more detail and our outlook for 2026.

Thank you, Roy. I will start with segment level performance. In Diagnosis & Treatment, comparable sales increased by 2%. Image Guided Therapy delivered high single-digit growth, continuing its multiyear momentum and building on a strong prior year comparison. Performance was broad-based across all regions with particular strength in North America, led by the premium configurations of our Azurion platform, higher service revenues and coronary intravascular ultrasound.

We are reinforcing this momentum by leveraging AI to automate product testing, reduce release cycle times by 25% and accelerating time to market for new innovations. Precision Diagnosis sales declined in the low single digits in Q1, as expected, mainly due to order book rebuilding and the segment's higher exposure to China. Innovations, including EPIQ CV, point-of-care ultrasound, BlueSeal MR and CT 5300 continued to drive growth with solid uptake in markets such as Western Europe and Latin America, reflecting their scalability. Adjusted EBITDA margin rose 30 basis points year-on-year to 9.8%, driven by sales growth, underlying gross margin from recently launched innovations productivity measures and favorable mix effect. These favorable impacts were partially offset by higher tariffs, cost inflation and currency effects.

Now moving to Connected Care. Comparable sales increased by 3%. Monitoring delivered mid-single-digit growth with particular strength in North America and Europe. Growth was driven by higher installations of IntelliVue patient monitors and continued traction in enterprise monitoring as a service.

Sleep & Respiratory Care grew in the low single digits with the obstructive sleep apnea portfolio, delivering strong double-digit growth outside the U.S. led by particular strength in Japan, our second largest market. Enterprise Informatics sales declined slightly, reflecting inherent quarterly unevenness and lower implementation and deployment cycles. Adjusted EBITDA margin declined by 60 basis points to 2.9% as sales growth and productivity measures were more than offset by higher tariffs, cost inflation, lower cost absorption and currency effect. In Personal Health, comparable sales increased by 9% in Q1 with all 3 business contributing. Growth was broad-based, led by double-digit growth in North America and a strong contribution from international regions. China contributed modestly, benefiting from an easier comparison base.

Sellout remains strong globally with channel inventory maintained at appropriate levels. This momentum was supported by strong demand for recently launched innovations, including the high-end i9000 shaver with AI-powered SenseIQ technology and the Sonicare 5000 to 7000 series. Adjusted EBITDA margin expanded by 60 basis points to 15.8% as growth and productivity measures more than offset the higher tariffs, cost inflation and currency effect. Advertising and promotion spend increased year-on-year, consistent with our commitment to continue investing in the business to drive consumer recruitment and sustain long-term demand for our recently launched innovations.

We are also leveraging AI to strengthen consumer engagement, embedding it across 94% of digital assets and generating over 27.8 billion searchable data points, 100x increase. This enables more personalized consumer interactions, improves content reuse efficiency and enhances our ability to drive future sales through more targeted and effective marketing.

Finally, sales in segment Other of EUR 177 million increased by EUR 37 million compared with the first quarter of 2025, mainly reflecting activities related to a divestment. These activities are excluded from comparable sales growth and contribute only an insignificant amount to adjusted EBITDA. Adjusted EBITDA for the segment increased by EUR 7 million to EUR 11 million, mainly driven by lower costs.

Now turning to group results. Comparable sales increased by 3.7% in the first quarter with growth across all segments and regions, led by North America and Western Europe. Adjusted EBITDA margin increased by 40 basis points year-on-year to 9%. Margin expansion was driven by sales growth, favorable mix effects and productivity measures, partially offset by higher tariffs and cost inflation. Product productivity delivery in 2026 is off to a solid start with Q1 delivery of EUR 126 million, on track to deliver our EUR 1.5 billion 3-year savings commitment.

Execution is progressing at pace, underpinned by plans already in place. Actions in Q1 were led by operating model simplification, including streamlining central functions and reducing organizational layers as well as procurement initiatives such as SKU rationalization and supplier consolidation. We are also seeing early contributions from footprint optimization and AI-enabled efficiencies. Service productivity was another contributor, including through more remote troubleshooting and fewer on-site visits with benefits most visible in ITT and across Europe.

In parallel, we continue to execute tariff mitigation actions. Overall, we remain on track with good visibility to deliver our 2026 productivity objectives. Against the backdrop of rising input cost inflation, we are accelerating mitigation actions, further sharpening our focus on productivity, cost discipline and structural efficiencies. Adjusting items came in at EUR 61 million, less than half of last year's EUR 143 million. This significant improvement reflects our continued focus on structurally reducing adjusting items. A one-off gain in Diagnosis & Treatment from the reversal of an acquisition-related provision and cost phasing also contributed to the year-over-year reduction. Income tax expense increased by EUR 17 million in the quarter, primarily due to higher income before tax.

Financial income and expenses were EUR 47 million, broadly in line with the prior year. And net income rose to EUR 146 million, primarily due to higher earnings. Adjusted diluted earnings per share from continuing operations were EUR 0.23 in the quarter. compared with EUR 0.25 last year, primarily reflecting the adverse currency effect on nominal earnings and a higher diluted share count. Free cash flow in Q1 was an inflow of EUR 28 million.

Excluding the impact of the prior year U.S. Respironics settlement payout, free cash flow improved by EUR 94 million year-on-year. This improvement was driven by higher earnings, improved working capital and lower adjusted items. Moving to the balance sheet. We ended the first quarter with EUR 2.6 billion in cash after a $265 million payment for the SpectraWAVE acquisition announced late last year.

This acquisition reflects the disciplined, value-focused M&A strategy we outlined at our CMD, including a disproportionate resource allocation to our interventional platform to reinforce our coronary leadership. Integration is progressing well with the core foundations in place and commercial momentum building as planned, positioning the business to scale and capture growth in coronary interventions. Net debt was EUR 5.5 billion at the end of Q1. The leverage ratio improved to 1.8x on a net debt to adjusted EBITDA basis from 2.2x in Q1 2025, driven by higher earnings and reflecting our disciplined capital allocation.

Now turning to our outlook. Amidst continued macro uncertainty, we remain focused on disciplined execution of our plan. Based on the current status, developments in the Middle East are expected to impact sales in the remainder of 2026, though not materially at the group level.

At the same time, supply chain and logistic constraints are expected to drive cost inflation. Against this backdrop and based on our Q1 performance, our outlook for the full year remains unchanged. We expect comparable sales growth of 3% to 4.5%, with growth in each quarter within this range led by North America and the international region. We continue to expect comparable sales in China to be stable this year with growth in Personal Health, offsetting a slight decline in health systems against the backdrop of subdued near-term market conditions.

Across segments for the full year, we continue to expect growth within this range with Connected Care and Personal Health at the upper end and diagnosis and treatment at the lower end. We are encouraged by the better-than-expected adjusted EBITDA margin performance in Q1, driven by innovation, productivity and cost discipline with some benefit from lower-than-anticipated tariff impact. Consistent with last year's approach, our full year 2026 outlook includes currently known tariffs, which are marginally more favorable than assumed in our February outlook. However, uncertainty remains. Also, while we are pursuing tariff refunds related to the International Emergency Economic Powers Act, our 2026 outlook does not include any potential benefits from these refunds. We are also seeing input cost headwinds, including freight, electronic components and plastics as well as other inputs affected by higher energy costs.

We are actively mitigating these pressures. Over the course of the year, we expect to offset these pressures through supply chain optimization, productivity and selective pricing actions. At the same time, we continue to closely monitor cost developments across our supply chain. For the balance of 2026, we expect some near-term pressure on margins consistent with our plan, reflecting the annualized impact of tariffs, higher inflation and foreign exchange. As a reminder, last year, the higher tariffs did not impact our adjusted EBITDA meaningfully until Q3 due to the natural lag between inventory and a flow-through to the P&L. Accordingly, we reiterate our full year adjusted EBITDA margin guidance range of between 12.5% and 13%. Our full year free cash flow outlook also remains unchanged at between EUR 1.3 billion and EUR 1.5 billion. As previously indicated, our outlook excludes the ongoing Philips Respironics-related proceedings including the Department of Justice investigation.

With that, I would like to hand it back to Roy for his closing remarks.

Thanks, Charlotte. To close. We delivered a solid start to the year and order intake momentum continues. In April, we signed a long-term strategic partnership with WellSpan Health in the U.S. It expands our role as the preferred provider across all imaging modalities and advances a system-wide approach to imaging and diagnostic technologies. Importantly, this partnership is also a strong validation of our innovation and platform strategy, bringing together our capabilities to deliver integrated long-term value for customers. It underscores strong customer trust and our value proposition and long-term partnerships. These relationships matter even more in the current operating environment.

Our strategy is clear, and we remain focused on advancing our strategic priorities, driving innovation and strengthening our differentiation and competitiveness. At the same time, we are executing with discipline, staying focused on what we can control and closely monitor the evolving macro environment. Against this backdrop, we reiterate our full year outlook, which includes currently known information, but an uncertain macro environment.

Thank you, and we will now open the line for questions.

We will now open the line for questions.

[Operator Instructions].

Your first question comes from Hassan Al-Wakeel of Barclays.

Roy, Charlotte, a couple, please. Firstly, if you could please talk to the building blocks of the mid-single-digit order growth in D&T for the quarter. the sustainability of U.S. market strength based on your customer conversations? as well as the softness in China precision diagnosis given centralized procurement and how your share is progressing here across the different modalities and related to this, I wonder if your thinking has evolved for China order and revenue stability this year across D&T.

And then secondly, Charlotte, another strong quarter on margins, and you've been consistently talking about gross margin benefits from innovations. It'd be great if you could help break up the quarter's EBITA performance across productivity, mix and innovation and how sustainable you think each of these are. And also what you're seeing from cost inflation, specifically around freight and memory chips and what's assumed in guidance?

Let me go to the first one. The mid-single-digit D&T growth. So if you look to the buildup of that, actually, that is a continued very strong order intake in IGT which actually is trending at high single digits and above. So very, very strong and that, of course, over multiple quarters. Then you see that we also had mid-single-digit PD order intake outside of China. But then, of course, China is affecting the PD order book as well. But we see a very strong overall mix, and we see increased demand, and particularly also for MR. We called out, of course, the helium-free, but also we have seen just a broad-based interest in the MR solution really growing also as a modality in itself. And that also gives us confidence for the further conversion in due course of the year into the latter part of the year from a sales perspective. Then U.S. is a strong contributor to that, has remained very strong. And actually, also from our customer dialogues, see that strength continuing.

Actually, we see a very healthy market where patient volume is strong, the procedures are growing. But as we also said before, it's not evenly spread across all health systems. So the bigger systems are winning more. And that's also we are well positioned with our platform-based solutions. So that's actually where we see that we kind of are continuing to close these long-term partnerships. You also saw that in the quarter with Advent, with WellSpan so we had more. So that's really working out, and we see that U.S. actually will continue to be a strong contributor for us. Then Europe actually was also strong. So I think I want to call that out that Europe was doing well and is picking up, but then China at the other hand, is showing continued cautious development.

Q1 was in line with our performance expectations. So it's not that it's unexpected that it's not performing that strongly. We do see differentiated performance by modality. So IGT and MR are solid. CT and ultrasound are the most exposed to centralized procurement and therefore, they have the biggest impact. And then on the consumer side, you saw that actually PH grew but was on easier comps but we do see some sales sellout momentum in PH. And that's also what we expect for the rest of the year, and essence of similar trend of subdued kind of medtech portfolio that PH contributing and therefore, actually, the full year China sales are expected to be stable, and that's also as we have planned it. So in that sense, kind of this is tracking alongside what we plan for, where the biggest growth has to come from North America, Europe and international region. China is contributing as the market gives the opportunity.

So we are not relying on the China recovery in the rest of the year. We are actually counting on strong momentum in North America and Europe, in particular, to do that. And in that perspective, actually, we see that where we have been focusing our strategy, it's really coming also to fruition because North America, IGT, extreme Stronghold. Monitoring is doing really well as well there. We see the other momentum going up. So I think we're well positioned to execute our plan as we have built it for the year on the growth side. And maybe that's a nice bridge to Charlotte to then also talk to the margins. As, of course, we have revolving developments there.

Thank you very much, Roy. And hello, Hassan. So indeed, as you said, we were pleased with how the margin has developed with a 40 bps expansion in Q1 despite the impact of tariffs. So if I break that down for you in a little bit more detail. Yes, we saw a positive impact coming from volume, from the business mix. But indeed, as you mentioned, also from higher gross margin from innovations. So CT 5300, I called it out before, is helping us from a gross margin perspective. We also see point-of-care ultrasound, which we recently launched also at a higher gross margin, also helped lift our margin. And then we see the continued momentum also from our MR BlueSeal at a higher margin as well. So that is certainly helping us.

Of course, we continue to do our productivity work. We are pleased with our EUR 126 million of productivity in Q1. You've seen it last year. We finalized our EUR 2.5 billion program last year. It's a real strong muscle we have built and that we are now expanding spending on, which is really creating self-help in what is a turbulent situation.

So with this productivity, we're nicely on track there. Of course, offsetting that is tariff and also a little bit of input cost inflation. One thing that's good to mention is that the tariff impact was a little bit lower than anticipated initially, also after, of course, the Supreme Board struck some of the tariffs.

So if I then look forward, Hassan, based on your question, what does that mean for the outlook. So a few different components here. Of course, we started well in Q1 which is helping us we are seeing inflation and to your point, also in freight, in components and in plastics. But offsetting that is us really leaning in to mitigating that with supercharging AI, further reducing our bill of material cost and also doing selective pricing. And then the other component is also tariffs being a very modest tailwind for us versus our expectations as well for 2026.

Your next question comes from Richard Felton of Goldman Sachs.

Two questions for me, please. First one is on China. You called out central procurement for ultrasound and CT. How much exposure does Philips have to those modalities in China now? And what level of price adjustments are you seeing perhaps linked to that, how much of the low single-digit decline that you called out in precision diagnostics was due to China?

That's the first one. Second question is sort of slightly sort of longer-term question, I suppose, on the sleep business. ex U.S. in kind of broad terms, how has performance been as Philips has returned to the market OUS in terms of growth market share? Could you also perhaps talk a little bit about your innovation strategy in sleep?

Yes. Thank you, Richard. So on China, we have seen indeed that kind of the centralized procurement is being applied mostly on ultrasound and CT. That is because the specifications are being seen as more generic and therefore, they put them under the centralized procurement to a bigger extent. We have seen that, that also has significant margin implications in terms of the pricing pressure that you see in those segments. So volumes are actually holding, but you see that the value is decreasing, and that is putting the downward pressure. Actually, in our IGT and MR business, we see that they are for biggest majority outside of centralized procurement because they are so specific and also don't have the alternatives that they don't put them into the centralized procurement. So that's something in the centralized procurement approach in China that we see currently as they expand that across the country.

In terms of the devices, kind of, you see that it's a very small part of it. So actually, there's not a big hit. But the biggest hit is indeed in PD with the ultrasound and CT on. So that's kind of also, therefore, hitting the performance in the first quarter, and we can expect that also to pressure the rest of the year, which means that actually the dialing up in the other parts of the world will be really crucial. And as you know, that's also working. Now if you look to the BI China part, as we said earlier, kind of, that is around 15% of global. And in the mix, you see that kind of MR is 50% of that. So that's better protected. The bigger pressure is indeed on the CT and the ultrasound part. And then you have IGT percentage in China is slightly bigger than the 15%, but it has, of course, a strong contribution also from the other parts, and it's better protected from centralized procurement. So that's a bit of what I can say about the mix.

And maybe lastly, it also really calls that we have the right strategy chosen for China because we said we want to compete in segments that we find we can differentiate. And still where we find we can differentiate is the MR BlueSeal for sure, and we see also that actually they are kept that out of the CT for biggest part. It's our IGT franchise, which is really differentiating. There's no kind of alternative in the market. We see ultrasound cardiac actually also being better performing. But of course, that's a smaller part of the cardiac -- of the ultrasound market in China. That's why you see that in the other ultrasound parts, there's bigger pressure.

Then n sleep, I think if you look at sleep outside of U.S., we see strong double-digit growth that's led by Japan, but also it's coming from the markets where we are coming back. That's offset by the ongoing respiratory pruning effect. So that's kind of where you see the mix effect coming in. where the comparison is normalizing towards end of the year. So that also should improve towards the end of the year. And from an innovation perspective, actually, we have seen good resonance also driving that double-digit growth by the new masks portfolio that we have been introducing together with the device, the software updates we are dialing in. And that actually the ecosystem is still very strong. Actually, people are still waiting also in certain markets really for us to get back and to get back on our platform because they really appreciate the patient interface that we have built. And that's given us also a strong way back into the market.

Maybe the other part on SoC, of course, we are working strongly on the mitigation of the regulatory part. So that's something that we're also making good progress on. We said kind of we cannot comment on what it will exactly mean, but we are still hitting every single mark in terms of milestone with the FDA and that's actually forging ahead also as planned.

Your next question comes from David Adlington of JPMorgan.

So maybe on cost, I think you may have addressed some of this. But obviously, GE, called out cost inflation, most notably on memory chips. I just wondered if you could sort of help give some further color there and maybe quantify the exposure?

And then secondly, obviously, another great quarter for Personal Health care in terms of growth. I'm not sure if you quantify the contribution of price or not, that will be useful. And as we get into the second half and more difficult comps, how you're thinking about the growth profile in PH.

David, let me take the first one. So from a cost inflation perspective, and maybe a few things. So as I said earlier, we do see cost inflation impacts. We do see that, and we've taken that into account in our guidance. And we -- the expectation we have is that the elevated levels that we see today in freight, electronic components, plastic, we will see that come through for the remainder of the year. But at the same time, we've included mitigation actions that we are taking, including, for instance, reducing our bill of material cost even further, going hard after AI-enabled savings and also selectively increasing our prices. And we have a lot of confidence based on the muscle we've been building over the past few years and also what we're seeing again transpire in Q1 from a productivity perspective. On top of that, some of the tariff tailwinds that we're seeing after February are also helping us.

So there is a little bit on that. And then your second question on Personal Health and the effect of pricing. So we had another stellar quarter in Personal Health in Q1 with particularly North America doing very well with double-digit growth in North America. Of course, we were a bit helped by China, but only relatively little. Pricing from a pricing perspective, it is relatively flat. We saw a slightly positive pricing, which is probably mostly attributable to the innovations that we've been seeing like the 9000 shaver, like the new Sonicare range that we've introduced. So that has helped pricing a little bit. If I look to the remainder of the year or the full year, I should say, so we have reiterated our guidance from 3% to 4.5%. And we've also said that PH will be at the higher end of the guidance, and we're reiterating that today because, as you said, the comps are getting a little bit more difficult as we get through the remainder of the year. At the same time, we see very good momentum in Personal Health as well.

And maybe one addition. What is also helping it, David, is, we have been re-expanding our retail distribution. So actually, we have been getting listings and placements in the web shelf and particularly of big retailers. And that actually we gives us additional sustainable growth opportunity for the quarters to come. So it's the combination of really great innovation, but also now having a better access event the consumers that actually gives us confidence that this is a sustained growth path and that we are in line with the guidance that Charlotte just provided.

Your next question comes from Veronika Dubajova of Citi.

I will keep it to two, please. One is kind of big pick your question on patient monitoring. Obviously, one of your sort of competitors suppliers of changing ownership. I'm just curious on how you're thinking about what impact that might have on your business and whether this is strategically positive and negative and net neutral is this an asset that would have made sense in the context of Philips, if you can kind of share your thoughts on that, that would be super, super helpful.

And then my second question, is just circling back to some of the inflation commentary. Maybe Charlotte, can you give us a flavor for why you think you are in a better position to mitigate some of the headwinds than GE Healthcare. Would just love to understand what you think you have in your back pocket that's obviously enabling you to maintain your margin. And if you very briefly could comment on your Q2 margin expectations, that might also be helpful.

Yes. Thank you, Veronika. Let me take the first one. So on the patient monitoring. So you saw that actually the strong momentum continues, strong order intake. Actually, we are playing a platform play there that actually really resonates well with our customers. And as part of that, actually, we have strong partnerships. Masimo is part of that. We don't think that actually there will be any change. That's also not what kind of has been signaled because we have the biggest access to customers globally in terms of monitoring base. So there's a real intrinsic interest to actually connect with us to the customer. And there's also mutually interest from us to actually be providing in a vendor-neutral way consumable solutions that are out there in the market. And that has been benefiting the partnership with Masimo in past years, and we believe that will be also going forward. So we see it as at least net neutral.

And I think we are excited to work also with any new owner there to kind of grow the franchise and make it work for our customers. And to differentiate also first competition because this is one of the strongholds the combination that we have a very strong cybersecure platform with the broadest data reach with the medical device integration and the consumables actually makes it very appealing in a very complex environment for our customers to do business with us, and that has been driving all these long-term partnerships and also the share gains in monitoring along the way.

Yes. Thank you, Roy. Let me take your second question, Veronika on inflation. And if I think about where we are in the year, let's first start with, in Q1, we had a very solid Q1 with margin expansion ahead of our expectations. So that gives us confidence that, again, we are able to not only compensate some of the headwinds we're seeing, but even expanding our margins despite that. Then, of course, we're seeing cost inflation. We're seeing it in freight, and we see it in electronic components and in plastics, but we have already started taking mitigation actions. Those will -- we started building them. Those are a little bit back-end loaded, and they will start coming in the second half of the year.

And to take you through what we're doing. First of all, we're doubling down on bill of material productivity. We've always said there's more to go after, and we're now doing that with increased feed. We're going after our AI-enabled efficiencies, where we've seen some early progress already in Q1, and we continue to see that as well. And then as well, we're doing selective pricing as well. So the other element is really the tariff tailwind that we're seeing a little bit that we -- we're seeing also in Q1, and we'll see that versus our expectations being a little bit better going forward. Now you also know that we've been a little bit prudent in the way we've put our full year guidance out as well. So that, of course, has given us a little bit of buffer as well.

So now to your question on Q2 specifically and Q2. So if we think about Q2, a couple of things that I think are important to realize, of course, Q2 is the last quarter where we still didn't have the full impact of our tariffs in 2025. So -- and you know, we've spoken about it a lot of times the way the tariff impact flows into our P&L, which first goes into inventory, and then it flows into our P&L. So we have, again, a tough comparable from a tariff perspective. And then also, we see the cost inflation, of course, starting to hit us. We have already taken the mitigation actions, but it will take a little bit of time before that starts positively impacting our P&L. So we, therefore, expect our mitigation impact to be a little bit more back-end loaded.

Your next question comes from Julien Dormois of Jefferies.

The first one relates to the mitigation initiatives that you are taking, and you mentioned selective pricing initiatives. So could you just walk us through what are the segments where you have the more leeway and at what speed we could see those pricing initiatives contribute to margin?

And the second question is more specific on Enterprise Informatics. You indicated that sales were down low single digits in Q1, and you mentioned the usual unevenness in revenue generation. But if you could shed more light on why that happened specifically and then what we should expect for the remainder of the year and maybe also in the midterm, that would be helpful.

Julien, let me take your first question on pricing. So yes, we've called out also last year, you might remember, selective pricing as well, and we've already put some of that in place last year. We, of course, focus there where we have leading positions, and that's where we increased our prices. So I'll give you a few examples. We're increasing our prices in Image Guided Therapy. We're doing that in hospital patient monitoring. We're doing that in some of our service contracts. We're doing that in some of our time and materials. So we have a very granular plan in place to increase prices where we can. As you rightfully mentioned, some of that will flow through in 2026 and some of that will take a little bit longer as it needs some time to flow through the order book and will then benefit us in 2027.

But I think it's fair to say that we've learned from COVID. And also there, we've been able to build up a much stronger muscle when it comes to price increases and price discipline, which is now helping us implementing that with a little bit more speed.

Let me then go to EI. So in EI, we see a couple of trends as we also alluded to when we had the Capital Markets Day. One is actually, we see continued order uptake. We saw that picking up strongly in the second half of last year. We also saw it again in the first quarter, and we have a very good funnel. So we see that there's healthy demand that's also on the back of the cloud migration and the cloud offering that we have, but also the integrated diagnostics trend that we see coming out in the market is really generating increased interest.

If you then look at the sales trend, this is indeed more patchy. Sales drills orders quite a bit in EI. Furthermore, you see that if customers migrate in or out, those give quite big hiccups because actually that's the lumpiness that's kind of inherent to that business. The other part is that you also see that the orders that we are taking now more and more also go into a SaaS model, where you see that kind of the revenue flows in over a longer period of time. And that actually gives you more recurring attractive revenue stream for the longer run, but of course, it gives a bit of a hiccup in these quarters. So we see positive interest. We see the integrated diagnostics story really picking up with customers and of course, fueled by AI and the data play, and we are really working how we can tap into that. And we see the funnel growing also supported with what we're doing with Amazon.

And then lastly, you also saw that kind of on the monitoring side, the Capsule and HPM combination is already working. So you see also this kind of combination play really driving impact. So we are kind of positive on that notion as well that, that will come through in due course of the year.

Your next question comes from Hugo Solvet of BNP Paribas.

I have 2, please, quick ones on margins. First, short term. Charlotte, on the Q2 margin, could you maybe just clarify your earlier comments? Is there a scenario where margin in Q2 be within the full year guidance range?

And second, a bit more long term, when we think about the full year 2028 targets, you have around 600 to 700 bps of buffer for wage input cost, tariff macro and so on. What's the level of confidence that this buffer can accommodate for higher input costs given where they are at the moment?

Yes. Thank you very much, Hugo. So let me start with your first question on Q2 margin. So based on what I just said, first of all, the incremental tariffs weren't in effect in Q2 2025. as well as the cost inflation that we're seeing with the mitigation timing being back-end loaded, I expect the Q2 margins to be lower year-on-year in Q2. I also feel very confident that in the back end of the year, we will be able to get those mitigation factors in because we have very, very strong plans in place and very granular plans in place to start offsetting that. But Q2 in that sense will be a little bit of a lower quarter from a margin perspective.

Now to your second question on the longer-term margin outlook, as we said in February, we -- of course, as we stood there in February, we knew that the world was a turbulent place. We didn't quite know how turbulent it would get, but we absolutely did take into account that there would be something that we would be seeing. So as a result, and we were also very transparent about the buffer that we took at that point in time, especially given the ability we have to also step up from a mitigation perspective, I don't -- I feel equally confident as I was in February that we'll be able to get to the mid-teens adjusted EBITDA margin by the end of 2028 based on what we know today.

Thank you very much and congrats on EBIT.

And your next question comes from Aisyah Noor of Morgan Stanley.

My question is just on D&T and your competitive outlook in Europe following the launch of an ultrasound by United Imaging in this space. And as well on the recent launch of Verida for you, just how that's progressing and how we should be thinking about the sales contribution for 2026?

Yes. Thank you, Aisyah. And I already called out Europe actually picking up and performing well in Q1. And that's also in particularly for D&T, where we see actually that -- and then within D&T also PD actually is doing really well in Europe. So we see a few trends. One, MR already was picking up strong. So we see that continued. And also if you look to the BlueSeal penetration now, actually, that's really kind of going well, and we see a good funnel. on the MR side. Then also with the new Verida launch, actually, we see very strong interest in Spectral and how that now with a better workflow is really helping to support high-volume throughput at high-quality imaging. We've secured the first order already. We have an installation ongoing. So actually, very good reference as well, very strong clinical support. So actually, we have a kind of good expectation that Verida will be doing really well in Europe, and we see the first proof points of that coming through.

Then lastly, ultrasound. Ultrasound actually is also doing well. Indeed, we had some competitors as well in this space, but actually ultrasound in Europe has been already starting last year, picking up very strongly after we kind of came out with our latest EPIQ launch and also the Flash. We have good order momentum of ultrasound in Europe, strong positioning. So actually, we are quite excited about the momentum in Europe, how that is increasing and especially also how our AI-based, but also, I would say, high productivity and performance solutions really hit the mark in a market that needs to be also kind of conscious of the spend in the environment that we are in, but that seems to work well.

Due to the time, the last question today comes from Graham Doyle of UBS.

Just 2, please. Just the first one, just on inflation again. Just to get some context on this. Obviously, you guided in Feb, and there's been obviously volatility. But is there any -- how meaningful is the incremental headwind? So is it something that was comfortably within your buffer? Or are you doing other things to sort of mitigate? And then, Roy, just on China, you mentioned a few times at the CMD and then today about kind of playing to win in certain segments. Is there any way within reason that you kind of identified to us the areas where you understand that perhaps you can't win and therefore, you've built it into your guidance that you kind of know that there's areas where you're probably deprioritizing. Is that possible to maybe contextualize that for us?

Graham, thanks. Let me take your first question on the inflation. So indeed, yes, we guided in February only 3 months ago, although a lot has happened. So as I said before, we are seeing an incremental headwind in plastics, in also freight. It's good to know as well that energy, we have hedged for 2026. So we will not see any impact from higher energy -- direct highly energy prices. There are a few components here, right? It's -- first of all, we did already better in Q1 than we thought. So we are a little bit ahead of where we thought we would be, which is giving us confidence.

The second component is we are -- after the Supreme Court struck some of the tariffs in February, we're seeing some tailwinds as a result of that, that we are that we are taking into account as well, which is offsetting some of the inflation. And then the third component is we have launched already additional mitigation activities, including bill of material price reductions, including also optimize the way we look at freight and where we use air freight versus boat in order to also optimize the spend there and also leaning in even harder in what we know and do very, very well, which is driving further cost discipline.

We've also -- we've always said there's more to go after. So we're doing that now with double speed as well. And putting that also in the context of what I said earlier that we have put a prudent guide out, all of that actually comes to a place where we can reiterate our guidance of 12.5% to 13% for the full year.

And then on China, indeed, I think the differentiated play is becoming more important. And to give you some examples where we see that actually, we have really the right to play and to win is, I called out MR. Actually, we have one of the biggest installed base of the helium-free already in China. And we just go also the notion that we have a green part support from the regulatory body and PMA to kind of get an accelerated approval for the 3T because they're so excited about the new innovation that this will bring to China. So that's a good example on MR. IGT is also really doing well, and we have a kind of good momentum, and we see that also well in demand in the market. And also sound, I called out there's different dynamics.

You see that the cardiovascular, we are still unique, but it's, of course, a smaller segment in totality and you see quite brutal competition on GI. The same with CT spectral, Actually, we have, again, one of the stronger installed bases of CT Spectral in China. But if you look to the more generic CT, that's really very strong competition. So that's kind of where we said that's not our game play. And then we exited DXR because we said that's so commoditized.

That's not our game in China. We also exited the value play in China, which is the lowest price segment because that will be very strongly locally favored and also at price points that are not attractive to us. So -- so we made distinct choices. Actually, within those segments, we also see that we are really trending with market or even kind of doing well within the market momentum. But yes, there is just a subdued overall market environment that we have to operate in. But I think we have been making the right choices. We're sticking to that. It's also in line with the plan. And also, as we showed in the results, it's also in line with the results that we have in Q1 and also for the full year expectation.

So, in that sense, I think we derisked China in our plan. We're playing there to tap the opportunity that we have. And last but not least, China is not only a demand market, of course, there's also innovation happening in China that we want to stay close to, including AI innovation that's going very rapid. Robotics is developing very rapidly in China. And then, of course, there's also still components and sourcing that we get from China. So that China for us is a wider market than demand only, and that's why we kind of keep a strong footprint there, but in line with demand, we have kind of opted for a more selective go-to-market.

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

Yes. Thank you all for attending the call, as you saw, we have a strong start to the year with growth orders and sales and margin expansion despite a very turbulent environment we operate in. We have the confidence reiterated our full year guidance. Of course, a lot of work to be done, but we have the actions in place, the plan in place and the team that is working it. So thank you for your attention again. Have a further great day.

This concludes the Royal Philips First Quarter 2026 Results Conference Call on Wednesday, 6th of May 2026. Thank you for participating. You may now disconnect.

Good morning, everyone, and welcome to Philips' Capital Markets Day. I'm Durga Doraisamy, Head of Investor Relations. On behalf of the company and the Investor Relations team, thank you very much for being here today, and also to those of you who have joined the live stream. We have a very exciting agenda for you. Let me walk you through it briefly.

Roy Jakobs, our CEO, will start with how we are driving profitable growth to deliver sustainable value. Charlotte Hanneman, our CFO, will then discuss our financial framework and how we approach capital allocation. We will then follow with a Q&A session before the lunch break. In the afternoon, when we reconvene, we will move deeper into business perspectives across Diagnosis & Treatment, Connected Care and Personal Health led by our business unit leaders. After a short break, we will reconvene again for a Q&A session, followed by a moderated panel discussion featuring 3 Philips' customers based in North America. Roy will then close the day with a few final remarks. We hope those of you who are here in person will join us for a networking reception afterwards.

Before we begin, a few important points. As you would expect, today's presentation includes forward-looking statements that are subject to risks and uncertainties which could cause actual results to differ materially. Please refer to the safe harbor language on the screen and in the presentation materials, including non-GAAP reconciliations and our public filings for further details. And finally, the sessions are being recorded and live webcast.

With that, I'm delighted to kick off Philips' Capital Markets Day 2026. Thank you.

[Presentation]

Welcome. Thank you for joining us today at Philips' Capital Markets Day. I'm really excited to be here with all of you. And it's great to see so many of you in the room, but also virtually, a very warm welcome. Thank you for taking the time to be with us. We'll promise we have a lot of relevant information to share today that hopefully excites you about the journey of Philips and our exciting future ahead. It's a chance to step back, look at what we achieved and look forward. For more than 130 years, Philips has been innovating to improve people's lives, shaping everyday experiences and supporting people's health and well-being in hospitals and in the home.

Today marks the beginning of a next phase for Philips. We have stabilized the company, significantly improved our culture, our team and the fundamentals of our business. And with bigger innovation and better performance, we are now focused on driving profitable growth to deliver sustainable value. On a personal note, I've, of course, also looking forward to continue my journey, and I'm pleased that the Supervisory Board has proposed to nominate me for reappointment at the forthcoming AGM. Together with all my colleagues and the leadership, we are fully energized by the opportunity to fully unlock Philips' potential and to deliver better care for more people.

As we enter this next phase, we are significantly stronger. We have strengthened Philips at its core, our fundamentals, our resilience and our execution agility. We have strengthened our impact with care culture led by an expert leadership team empowered by engaged colleagues. And we have changed how we innovate, focusing on getting the right innovation to market in the right way. Today, we are faster, leaner, more resilient and agile. We are more competitive. And from here, we will accelerate growth and do it in a profitable manner, building on our leading AI-powered innovations and our scalable platform advantage, powered by our strengthened and strong execution capabilities, with an extra focus on commercial excellence in the period to come.

At Philips, we are guided by a clear purpose and vision and by our culture of impact with care. That's why people join us. From the very beginning, Philips has remained relevant by delivering innovation for over 130 years. Today, we direct all of this innovation power towards better health and self-care with a clear focus to deliver better care for more people. Better care means better outcomes and better experiences. For more people means greater access for the benefit of all across the world. In 2025, our innovations improved the lives of 2 billion people. And our ambition is to improve 2.5 billion lives by the year 2030.

Delivering sustainable value ultimately comes down to our people. And let me, therefore, start by thanking our 65,000 colleagues across more than 100 countries for their commitment and for what they deliver every single day. I hear from customers all the time how much they love our people. Our people make the difference.

I also want to thank my leadership team. We have built a team with deep domain expertise and with confidence to lead Philips in its next phase of growth acceleration. Since '23, more than half of my executive team has been renewed, and we have refreshed leadership at all levels across Philips. We strengthened capabilities, deepened experience and raised execution discipline.

Later today, you will hear directly from a few members of my executive committee. Together, they reflect the depth and the breadth of the leadership we have built at Philips. Each of them brings decades of deep experience in their domains, and we have a shared commitment to our purpose. Charlotte has led in MedTech and finance including at Stryker. Deeptha has built consumer brands at global scale, including at J&J and P&G. Jie has driven imaging products and services for all her lifetime, including at GE Healthcare. And Julia has led in informatics and patient monitoring, including at Medtronic. While Bert has built Philips' outright leadership in image-guided therapy.

As a leadership team, we have made tough choices along the way and we changed what needed to be changed: to respond to the expectations of our customers, our consumers and our stakeholders, and we will continue to evolve, to learn and to grow. And just as importantly, we have been driving a real shift in our culture, focus on performance, innovation and now growth. We empowered our people with very clear accountabilities. And the successful execution of our plan depends on that new talent with deeper med tech capabilities, but also on the engagement that we have increased by more than 10% towards 80% high-performance norm in 2025. And as we look ahead, we do see the confidence and determination of our teams. With the capabilities and the culture we have built, Philips is ready to enter into its next phase of profitable growth acceleration.

Today, Philips is a focused health technology company. We are organized around 3 segments. They all have strong leadership positions across health care and self-care needs. Diagnosis & Treatment helps clinicians to diagnose and treat patients more precisely using intelligent imaging and minimally invasive solutions, improving both clinical and operational productivity. Connected Care supports care teams across hospitals and beyond with continuous monitoring and digital solutions that help detect issues earlier and extend care safely beyond hospital, including into ambulatory and home settings. And Personal Health helps to take care of people's everyday health through a strong brand and a trusted consumer innovation franchise that supports self-care routine and health and well being at a global scale.

Over the past 3 years, we set out to strengthen the foundation and our performance. And as you can see here, we did just that. We strengthened the company's resilience and delivered on our commitments, and we delivered within an uncertain macro environment that we navigated well.

We exited 2025 with growth momentum, strong margin expansion, and we did that despite the headwind of tariffs, and we generated a solid cash amount by the end of the year. We more than that ended the year with a robust pipeline of product launches across all 3 segments, which each segment have a clear focus and the right plan to drive sustainable growth. None of this happened by chance. We executed on our plan which focused on strengthening our foundation, but also on innovation and disciplined execution across Philips.

And since launching our plan in '23, we have radically shifted how we innovate. Our innovation is now business-led and closer to the customers and consumer segments that we serve. We set very clear and tough thresholds for new innovations. We stopped projects that did not scale. We doubled the speed of innovation in ultrasound. We launched world first in imaging and we doubled down our neurology beyond cardiology and a stronghold in interventional. You will hear cardiology coming back in presentations all across today because we are the leader in cardiology across all our platforms.

Strengthening our focus on fundamentals starts with putting the patient and patient safety and quality first. We have made significant progress in resolving the consequences of the Respironics recall, including the personal injury and medical monitoring litigation in the U.S. Our focus remains on the diligent implementation of the consent decree requirements and to resolve the remaining litigation.

We also simplified and strengthened our quality systems. We have significantly reduced the number of age and open complaints and act fast when needed. We reduced overlapping quality management systems by more than 75%, improving visibility, creating simplification and efficiency. And in parallel, we strengthened our supply chain resilience and agility. We improved customer fill rates by more than 20% to around approximately 90% today. We brought our lead times back to fully competitive levels. We are making things simpler and stepping up an impact. We simplified the portfolio by reducing low-performing SKUs. And we demonstrated that we can deal with tariffs quickly and effectively, and this work continues.

All of this was supported by a sharper operating model. We simplified how Philips operates and move decision-making closer to the businesses that we serve and the segments that we serve. This was a big and critical change. We shifted to a more business-led and a more decentralized model. We became simpler, leaner, faster and better organization. Over the past years, this also contributed to the EUR 2.5 billion in productivity savings that we delivered.

As we look ahead, the opportunity before us is attractive. It's sizable and it's growing because the demand for health care continues to increase strongly, driven by rapidly aging population, higher chronic disease prevalence and higher expectations of patients to get better quality and more access to care. This is particularly evident in the demand for cardio, neuro and oncology services. And at the same time, health systems are constrained. They're constrained by workforce shortages, capacity limits. They are pressured.

The World Health Organization estimates a global shortfall of more than 10 million health workers by 2030 across the world, including even high-income markets like the U.S. And what we see in parallel is that people taking more charge of their own health. There's a rapid growth in self-care, preventative health and consumer health experiences, all accelerated by digital connectivity. This widening gap between supply for care and demand for care, it's where the innovation opportunity is. That's where we will rise to the challenge of this exciting EUR 90 billion to EUR 100 billion market, which on average is growing 3% to 5% a year.

For many years, health care was seen as a slow adopter of digital technology. Today, that has changed. Health care is on a tremendous pressure, and that pressure is acting as a catalyst, a catalyst for health care to use the forefront of data and AI to improve their operation. And we are moving towards the future of an integrated AI-driven continuous workflow. For example, where our AI agents assist clinicians to make decisions better and faster. In fact, I see everyone experimenting, from clinicians to nurses, to the C-suite. In health care, AI is augmenting instead of replacing people. And that's where the difference is. It's not a threat, it's the opportunity to deliver better and more care.

I hear from health care leaders all across the globe about the urgency, the challenge and the opportunity they see in front of them, and they need innovations to deal with it. And this opportunity will only increase as data is collected and continues to scale, as AI continues to mature, as agents come into the mix. And that's where our platform-based innovation will come into play as a unique differentiator. But let me be clear, AI alone doesn't determine who wins. In health care, value is created where data, workflows and trust already exist in the systems that the clinicians use today and the experiences that people rely on in their everyday life. And that's where the next phase of growth will be decided. And that's where Philips is strongest, with our infrastructure that supports the health care systems as well as the consumers in the home.

Philips' global footprint includes an installed base of more than 2.5 million systems across the globe, supporting health care across different care settings. We are reaching 80% of top hospitals globally. It's our most powerful access point to tons of data, workflow and real world use. Very few companies can combine such a large scale installed base with such a strong brand to turn it into innovation. Our platforms are where our innovations connect hardware, software, data, AI and human intelligence. And this conversions of the installed base connections and the data orchestration will drive compounding value over the lifetime, and it will leverage data for health and self-care.

This brings us to our financial targets. We are moving to the next phase of profitable growth. We have a clear path getting to mid-single-digit CAGR and mid-teens margins in 2028, with strong cash generation of EUR 4.5 billion to EUR 5 billion over the plan period. And today, we will outline how we will deliver on these commitments as Philips and within each segment.

Our strategy is built on 3 pillars: number one, focused value creation. We have specific strategies to maximize the full potential of each segment. We will create consistent value across the portfolio and deliver sustainable growth through focused segment strategies. Segment strategies that cater to different markets, different customers and different technologies that require different approaches. This clarity allows us to allocate capital more effectively, focused investment where it creates the most value, both organically and inorganically, with disproportionate focus on our attractive monitoring and interventional businesses. We use the same clarity and rigor to maximize growth geographically, for example, in our high-growth North American region. I will explain in more detail our geographical strategy later on.

Bringing me to the second pillar of our strategy: innovation growth, the heart of who we are. We will scale data, AI and innovations to unlock our unique, highly differentiated platform advantage. Our innovation power is a core strength that we will leverage to increase the speed of innovation and direct translation of these innovations into impact for customers and consumers. We will do this in close collaboration with clinicians, with health care partners, but also with consumers, co-innovating solutions that address real workflow challenges, specific clinical needs such as in cardio and self-care routines such as in oral care.

And that brings me to the #3: disciplined execution. This was the core of our '23 to '25 plan, and this focus is here to stay. We will continue to drive quality, simplify our way of working, but also significantly step up in commercial excellence. Across our portfolio, we have been very deliberate about how we drive value. Over the past 3 years, we executed against what we described and shared with you earlier as a 70-30 strategy, and that strategy has delivered.

Around 70% of our businesses, which were already operating in higher-margin territory, we were targeting for growth, and they delivered a sales CAGR of around 5% in the planned period '23 to '25. Those were businesses like IGT, ultrasound and PH. We have been driven growth there, whilst continue also to expand margins, making them a strong contributor to group performance. And the other 30%, our focus of the portfolio was on margin acceleration, and we expanded margin by 500 basis points between '23 and '25, coming from imaging, SRC and EI. Enterprise Informatics firmly established us as a software leader in health care. I will discuss how we actually take [ AI ] to the next stage later as we move for more stand-alone to integrated software, data and AI approach in our imaging and monitoring platforms.

Looking ahead, our portfolio is no longer about 70-30. It's about very clear differentiated strategies for each segment because we see growth and margin opportunities in every single one of them, specific to the market they serve, and we can accelerate growth, in particular, but also continue on our strong margin expansion trajectory. As I said, this will allow us to allocate capital more clearly, with focused investments where the returns are best, where it creates the most value for Philips and the shareholders and maximizes growth and returns segment by segment.

Let me start by Diagnosis & Treatment. It's a key growth engine for Philips. It sits at the heart of challenges our customers face today, where there's high demand for imaging and interventional procedures and constrained supply. There's an urgent need for productivity and efficiency in this, and that's where our platform strategy truly matters. We are a global leader in image-guided therapy, and that's built on a unique platform that integrates systems, software and devices. We have around 45% global market share and the largest installed base in interventional systems. We have 10 years of leadership in this space, and we are defining this market. Customers are with us to co-create the next generation of interventional procedures. So the question is, what will be next? And today, we will be announcing the future of Azurion. I cannot wait for you to see it, but you will have to wait for Bert to present later today.

Next is precision diagnosis, where our foundation in the period has been significantly strengthened. We had to start with strong operations, and those delivered improved margins. But we also, at the end, started to restart our innovation engine, as you have seen at our recent launches at RSNA, where we came out with the world's first in 3D, helium-free MR, the ultrasound Flash and the CT Verida.

Going beyond products is important in imaging. That's where our open imaging platforms brings together systems, Enterprise Informatics and PACS, data and AI to create a unified diagnostic environment across modalities, across sites and across care settings. And with a stronger innovation portfolio and our strong operations and disciplined execution, this will actually start to step-by-step accelerate growth. We have a clear strategy for D&T. We are well positioned to drive customer impact and to deliver sustainable growth for Philips.

That brings me to Connected Care. Connected Care builds on our outright leadership and patient monitoring. We operate the industry's leading real-time patient data and insights platform, a platform that extends monitoring from ambulatory to home, and actually that supports half of all patients globally with our monitoring. We're deployed in 90% of all top 100 hospitals, and we fully interoperable and open through our capsule capacity in Enterprise Informatics. In Enterprise Informatics, we created a focused home for stand-alone software solutions. Our priority was making data liquid through software and cloud. Today, that ambition has evolved even further as AI reshapes health care delivery. The entire portfolio is cloud-ready and AI is embedded across workflows.

Looking ahead, Enterprise Informatics will support growth and value creation embedded across all our portfolios and platforms. In fact, at RSNA, we showcased more than 40 AI-enabled innovations. One exciting opportunity in here is the opportunity of integrated diagnostics. What we hear from customers is that they want us to integrate the data. And as the #1 in PACS, we are best positioned to do so to further integrate, for example, with digital pathology to bring over time, real-time data into this. So that together, it delivers on the need for integrated diagnostics to support the different clinical areas.

We also have sleep and respiratory care in Connected Care. This remains an attractive growing market, and we are very committed to this space. We are still the #2. We continue to build the business outside of the U.S. and we expanded profitability in the last period and started to restart our innovation engine to get ready for reentry with disciplined execution and including commercial excellence. This is where we see a clear upside when we reenter the U.S. market for sleep systems. But I want to be clear that the timing of this return is not in our control. It's obviously subject to regulatory approvals. We are working diligently to meet all of these requirements so that we get the injunction lifted, but we have not included that in our plan.

Personal Health contributes meaningfully to growth, margins and cash generation, and it does so at scale. This is a business with reach and resilience. PH leverages and supports our brand. By understanding consumer needs over time, we move from onetime products to platforms that deliver lifetime experiences people rely on. Once you start using Sonicare, you don't want to get back. If you start using our OneBlade, you don't want to get back and you will continue to use it for your life. That is the platform strategy we're using in Personal Health.

Let me also talk about the role of personal health in our portfolio. Personal Health is a well-performing and attractive business, is subject to regular and rigorous review as part of our disciplined capital allocation strategy. It delivers high-quality earnings, cash flow and reinforces our purpose and brand, both in health care and self-care. And we also see strong and growing network effects with Philips for PH and our other segments.

As a health-technology company at the forefront of platforms, data and AI, having consumer innovation in your portfolio helps to deliver world-class experiences to patients as well. And as part of a med tech company, it's very clear to have these experiences across our care settings does differentiate us. And for Personal Health, having access to leading-edge software AI and data capabilities as well as the regulated capabilities for more personalization in self-care is a unique asset.

Across the globe, we are balanced and agile in how we follow growth, leaning into regions where we see the momentum, adjusting where conditions are more challenging and allocating resources with discipline. North America is a clear growth engine across D&T, Connected Care and PH. We see a strong growth with large-scale health systems that need platforms to standardize care, drive productivity, ensure security and support their staff and patients. We are 90% of top U.S. hospitals, and we are serving them with colleagues in every single U.S. state. Later today, you will hear directly from some of our North American customers who will share with us why they partner with us and why this market remains such a compelling opportunity. Every quarter in 2025, we saw double-digit growth in North America. The North America growth story is one of success, with more to come.

In our international region, we see moderate growth in European market. There, we built on strong presence in our leading segments of D&T and Connected Care, and we see actually very strong growth in Personal Health. In our growth markets, we see solid growth and exciting opportunities search, for example, the SIHREN deal that we closed in interventional last year in Indonesia. We continue to tap into strategic opportunities that we see, whereas Indonesia, India is doing very well, Saudi Arabia, and also some opportunities in LatAm. And we see very good, strong growth momentum for PH in the international region.

China remains a long-term addressable market opportunity, particularly for us, for D&T and Personal Health. And we are long-term committed to this market, but we are also realistic about the near-term environment and disciplined in how we allocate capital to it. We continue not only to see China as a market, but also as a source of innovation and a source for manufacturing.

Between 2023 and 2025, we started in full motion our innovation engine, and we radically shifted the way how we innovate, which is now business led and very much close to customers and consumers. This allows us to build and scale platforms across all 3 segments. In this plan, innovation will drive 70 to 100 bps of growth acceleration as part of our 2023 to 2025 launches, as well as some really exciting new platforms that we will launch in this period, including a breakthrough in image-guided therapy, the launch of a new care intelligence platform and monitoring and of course, unveiling the 3D BlueSeal and imaging. You will hear about these innovations in the segments later today in much more detail.

Beyond 2028, we see a future where people care for more people and that scales to a different level. We see AI native interventional platforms that augment caregivers to innovate and execute the procedure in a completely new way, removing barriers to procedures across the world, where autonomous imaging means that you have self-scanning by patients across care settings, where agentic AI-driven care intelligence [ scales ] and engages directly with patients. And where self-care truly becomes personalized and premiumized. And this is only the beginning of the scaling and the impact of platform-enabled innovations that will drive where people and agents are served customers, consumers and patients.

I want to explain in a bit more what I mean by a platform, as I have talked a lot about it. Let me illustrate this with an example for monitoring. Data is generated from sensors and monitors from patients across our installed base globally. Philips monitors are embedded across ICUs, step-down units, wards, ambulatory sites and homes. They collect vast amounts of continuous, high-quality, real-time data. This data needs to be securely stored, integrated and orchestrated. That's exactly what our PIC iX system does. Together with Capsule, we connected with many more inputs from other devices, also non-Philips devices, to bring it all into an open patient information and single clinical workflow. The valuable compound of that as data moves from isolated silos to one single view of the patient.

Once you have the single view of the patient and this data collected, we apply intelligence to it. What do I mean? A single view of the patient is augmented with AI to support better clinical decisions. Think about powerful clinical decision support tools, early warning scores, advanced algorithms to identify patients in need, predict patient deterioration, understand heart rhythm failures, prevent heart attacks with the support of AI algorithms. This is the impact our platform delivers today through intelligence. And that same platform will extend beyond hospital, with monitoring continuing at home through connected consumer devices. This is just one example of the Philips' platform play end-to-end. From data generation to data orchestration, to intelligence and impact for the ones that we serve.

Partnerships are a force multiplier in this. They allow us to move faster, scale smarter and deliver greater impact than we could do alone. We do this through strong clinical partnerships, technical partnerships and customer partnerships. Our world-class clinical partnerships help us accelerate innovation and drive the impact where it needs to happen. You see many examples behind me.

Another example which I'm very excited about is our research collaboration with Mayo Clinic, where we're applying AI to cardiac MRI technology to help shorten exam times and streamline workflows and improve patient experience. We have taken exam time together from 60 to 20 minutes with our smart heart technology, and we're driving it towards 10 minutes. That is what I mean with real impact.

Our leading technology partners help us integrate best-in-class technology. This approach gives us speed, scale, cost competitiveness, whilst also keeping our platforms open, secure and future-ready. Our expanded partnership with Amazon Web Services is advancing cloud-enabled diagnostics, including radiology, cardiology and digital pathology. It unifies workflows, improves access to key insights and help clinicians to deliver better care.

With our partnership with NVIDIA, we are building a foundational AI model for MRI, pioneering a new frontier in medical imaging. We also have real, very strong partnerships with many of our stakeholders, including with our people and with the planet. We are introducing today realistic grounded 2030 impact ambitions. This is an evolution from our traditional ESG commitments ambitions that are fully embedded in our business strategy now, and that drive -- and that we will drive with performance management. This is not only the right thing to do, but it also creates sustainable value and growth.

We are already delivering impact today focused on 3 clear categories that reinforce our value creation and build on the areas we have been leading in for long. These ambitions guide us how we innovate, how we invest and how we measure success. You can see this in action already in our portfolio. LumiGuide improves lives by enabling safer, more precise interventions. BlueSeal reduces environmental impact by eliminating the need for helium, lowering energy use, simplifying operations, but also setting MR-free. So therefore, also improving customer economics.

We know that innovation drives impact when it's executed well. We have strengthened our execution capability, and we continue to push very hard to drive this further every day. The biggest next step change will be in commercial excellence. This will deliver a contribution of 40 to 70 bps to growth acceleration in the plan period. And on the commercial side, our teams now operate with one shared view of our customers, their installed base and the pipeline. Our visibility has significantly increased. We also put very clear priorities and a cadence on deal discipline. This is already translating into better conversion rates and an improved mix, particularly in our biggest market like in the North American market.

On the service side, we have introduced remote resolution. We have better uptime and response time. We increased contract penetration, and we expanded software and services attachment rates across our installed base. I want to be clear how important services for our customers and for us. Customers expect reliable operations, and for us it's a real opportunity to drive attachment rate, loyalty but also margins.

What excites me is the progress we have made already because what we are doing from '23 onwards is translating into a step-by-step improvement and increasing momentum. And the part we are now showing is clearly indicating how we continue to do that and how it will evolve. Because taking this together, we will get to mid-single-digit sales CAGR, mid-teens margin in 2028 as strong cash generation. From 2026 onwards, expect further improvement, reflecting continued progress in innovation and execution. And we will sustain that trajectory in '27 and '28 to deliver what we promised to deliver.

Charlotte and the business leaders will take you through drivers of growth acceleration, but also of margin expansion in more detail. This is the profile of a business that is ready to scale, a business that is innovating with purpose and executing with discipline. It has a strong team powering this next phase of growth acceleration.

We are moving from foundational work to acceleration of growth and margins. We recognize that there will be challenges ahead, some within our control, others not within our control. But we remain focused, realistic on the world around us and determined as we continue our journey. Our compass is clearly set and we share it today. We will stay the course, no matter how turbulent the world will be.

Let me close by coming back to what gives me real confidence in the future of Philips. As I shared, we have built a much stronger foundation. We have a clear competitive advantage with our platforms. And together, that puts us in a very strong position to deliver better care for more people, whilst driving profitable growth and create sustainable value.

The 2025 results showed that we are on the right track. The outcome that we are working towards is very clear, mid-single-digit sales, mid-teens margins. This is grounded in the progress that we made, the momentum that we see today and a clear compelling plan which we will execute with discipline.

I am truly excited about what Philips will achieve in the next years. And as you will hear today, we have the team, the innovations and the capabilities to deliver on our plan. And finally, again, I want to thank our teams and employees for their ongoing dedication to deliver on this. For customers that partner with us, and for our shareholders and stakeholders for their continued trust.

Thank you. And let me now hand over to Charlotte for all financial details. Thank you so much.

Good afternoon. Very nice to be here. I am very happy to be joining you for what is my first Capital Markets Day at Philips. Over the past 1.5 years, I have seen firsthand the depth of Philips' capabilities and the huge opportunities that lie ahead. We have made clear progress, and there is much more to go after. These opportunities will grow as we get better at consistently executing, sharpening our focus and strengthening financial discipline.

Let me explain what financial discipline means to me. It starts with a rigorous resource and capital allocation, with a rewired performance management culture, holding people accountable, focusing on what matters most, all to accelerate profitable growth to deliver sustainable value. Today, I will show you how.

As Roy mentioned just a few minutes ago, we have a clear path to deliver on our financial commitments. The plan is designed to continue to deliver consistent progress year after year. Starting with growth. We have shown we can return to growth, delivering a sales CAGR of around 3% in the past 3 years. From here, we plan to step up to 3% to 4.5% growth in 2026 and deliver mid-single-digit sales CAGR over the plan period. With a strong innovation pipeline, sharper commercial execution and focused resource allocation as key drivers underpinned by strong order intake momentum, we have full confidence in the trajectory.

On profitability, the direction is clear. Over the past 3 years, we have expanded our margins by almost 500 basis points to over 12%. With the additional initiatives and operating leverage I'll take you through, this gives us confidence to expand to mid-teens over the next 3 years.

Then cash flow. After delivering EUR 3 billion cumulatively over the past 3 years, we are targeting EUR 1.3 billion to EUR 1.5 billion in 2026 and EUR 4.5 billion to EUR 5 billion cumulatively over the plan period. We have already significantly deleveraged from 3x in 2022 to 1.7x in 2025. Supported by earnings and free cash flow, we intend to keep leverage in a range that's consistent with our solid investment-grade rating throughout the plan period.

And finally, returned. Organic ROIC moved from mid-single digit to low teens over the prior plan period, and we are confident we can reach mid-teens in 2028, driven by focused investments and continued operational discipline. Of course, we still live in an uncertain macro environment. Our plan includes currently known tariffs and excludes any potential impact from the ongoing Philips Respironics related proceedings.

We start the next phase from a position of strength. Over the past 3 years, we've made a lot of progress, meaningfully strengthening the foundation for the next phase of acceleration in sales, margin expansion and cash, all with a strengthened balance sheet.

Let me double-click into cash flow generation. We delivered EUR 3 billion of cumulative free cash flow over the last 3 years despite significant cash outs related to Respironics. Importantly, we released around EUR 1 billion of cash from working capital driven by inventory reduction, the result of structural improvements in the supply chain. We have proven we can execute, but we also know there is much more to do and to go after. The last 3 years have built resilience and a stronger foundation, and that is what gives us confidence as we step into the next phase.

Today's full year results show the Philips' flywheel is spinning. It can and it will go faster. Let's start with how the finance priorities are enabling this momentum. Disciplined and focused capital and resource allocation is already visible in the choices we're making, so that every euro goes to the highest return opportunity.

On organic investments, that means fewer, bigger and better initiatives including in R&D, where clear investment cases and clear return expectations across the organization, including funding our high-growth leadership businesses, such as interventional and monitoring that Roy has highlighted. And on inorganic growth, it means staying focused on deals with measurable value accretion and applying full cycle rigor from evaluation to integration to deliver the value we committed to.

We have changed the pace of the organization and the performance management culture with more clarity, simplicity and a stronger [ fact ] based. The sense of urgency is real. We now operate in a rhythm of days and weeks, not months and quarters. Transparency and accountability have improved, enabled by our simpler business-led operating model, making performance more visible, ownership clear and decision-making faster. Businesses are in the lead with regions and function supporting. This is now deeply embedded in our culture.

We understand and are focused on exercising the levers that have improved execution. We have sharpened our incentive plans to more strongly reward profitable growth and hold businesses accountable for consistency and predictability as a major part of our performance culture. We are also driving focused improvement initiatives. Two key focus areas have been targeting: fundamental reduction in adjusted items and rigorously prioritizing R&D investments with clear business cases, milestones and accountability. This flywheel, which provides the discipline around prioritization and execution, is fundamental to the performance improvement we are confident in delivering to achieve our planned targets.

To bring this flywheel to life, let me start with the first leg, accelerating sales growth to mid-single-digit CAGR over the plan period. Three levers will get us there. First, innovation, the largest contributor, almost half of the acceleration, focused on growth-enabling platforms where we have clear clinical relevance, differentiation and attractive returns. You heard examples from Roy, and you'll hear much more from the businesses, but think of next-generation IGT and monitoring systems, the world's first helium-free 3T MR or our renewed Sonicare platform.

Second, commercial execution. We are doubling down on this. We will convert innovation and demand into growth more consistently, with better visibility, tighter funnel and win rate management and more focused resource allocation. We already have proof points in Europe. A region-wide focus on visibility and stronger funnel discipline has contributed to outgrowing the equipment market over 5 quarters. This approach is helping us win partnerships across other geographies and businesses. For instance, in North America, strategic accounts, where a more targeted deployment of commercial capacity is driving stronger performance, including higher services contract penetration. Throughout 2025, we signed multiple partnerships there, most recently with AdventHealth, which Roy highlighted earlier this morning as part of our Q4 highlights. We see the same playbook working in PH, where strengthened top customer relations are resulting in strong category growth and continued market share gains.

Third, market mix. While we remain cautious on China in the near term, we expect stabilization versus headwinds in the last 3 years when we saw a significant market decline. More broadly, we see 3% to 5% global market expansion with higher growth in the areas we are prioritizing such as image-guided therapy and monitoring.

Put together, these 3 levers: innovation, stronger commercial execution and market mix, underpin our confidence in delivering mid-single-digit growth through 2028 in a way that builds sequentially and supports the rest of the flywheel, margins, cash and disciplined capital allocation.

Innovation, our biggest growth driver, is focused on developing scalable solutions that will drive profitable growth. We are maintaining industry-leading R&D investment at around 9% of sales. But the real shift is how we deploy that spend. We continue to move to a more structured systematic resource allocation. Again, in simple terms, fewer, bigger and better. That means being very deliberate about what we fund, scaling what works and stopping what doesn't.

And we are doing this with a clear operating model, full ownership and accountability in the businesses combined with strong central coordination to ensure consistency, standards and the right portfolio choices across the group. We are focusing on fewer innovations, but those where we have a clear differentiation and high return potential. You can see that in the platform choices we're making. For example, Azurion in interventional or IntelliVue in monitoring, both of which are significant revenue, but also margin generators. We are doubling the average investment of our top 10 new product versus 2022, while anticipated sales from these are up by more than 60%.

Together with significantly higher anticipated net present values, this reinforces that the pipeline is getting bigger in impact and stronger in returns. The pipeline is designed to deliver more scalable wins and not just for growth, but also for margin quality. We are also structurally improving R&D effectiveness and R&D capabilities. Stronger governance, we're driving tighter business cases, clear milestones and stronger execution discipline. We are already seeing progress. In ultrasound, for example, we doubled innovation releases in 2025 versus the prior year and significantly shortened the time to market by streamlining the development process.

What also gives us confidence in our growth outlook is the momentum we built through 2025, coming from multiple reinforcing sources. First, our order intake. That is the clearest signal. We delivered 6% order intake growth in 2025. It is broad-based across segments and most geographies, led by double-digit growth in North America, which has been achieved throughout all quarters of last year. Outside of North America, we're also seeing major wins like the landmark SIHREN project in Indonesia, where we're already deploying our image-guided therapy systems across the world's fourth most populous country.

Second, services, software and consumables. We are driving higher service attach rates, a step-change in remote serviceability and connectivity and expanding in areas where we can monetize the installed base more effectively. At the same time, this will also drive an outsized increase in services margins during the plan period. Another example is SmartSpeed in MR, an upgrade that can speed up imaging of an existing equipment up to 3x, improving throughput for customers and strengthening our services pull-through. In IGT, we're growing above average through device expansion and the recently announced SpectraWAVE acquisition will support that direction. In monitoring, we're scaling consumables, both organically and through partnerships, alongside deeper penetration of our enterprise monitoring as a service offering.

Third, Personal Health. It performed very strongly in 2025, winning market share. We are building on that momentum. As an example, more than 6 million consumers worldwide have chosen a medical-grade Lumea IPL. Such innovation leadership, combined with the strength of the Philips' brand and commercial execution is helping us outperform the market with a pipeline that supports continued profitable growth.

Let me now talk about what is really changing in our margin story. Previously, productivity was the main engine of margin expansion. That successfully got us to 12%. The next phase has a stronger contribution from growth, while productivity remains an important driver. As growth accelerates, operating leverage begins to kick in. At the same time, we continue to drive better business mix as fast-growing and higher-margin businesses like IGT and monitoring become more prominent. And the innovation I've just taken you through is what is enabling that mix shift. That combination, growth, innovation and mix is what drives the first leg of margin expansion.

The second leg is productivity. It's an ongoing work to simplify how we operate, fewer complexities, cleaner processes and a more efficient footprint. In the current environment, that also means being deliberate about where we manufacture, particularly in North America, to manage both cost and risk. Importantly, this productivity is net of the investments we're making to support growth and improve margins, especially in North America and in scaling platforms like IGT and monitoring.

We're also realistic about the headwinds we face. Cost inflation hasn't disappeared even though it's moderating. Tariffs add pressure in the near term and mitigation takes time to fully flow through. That is why margin expansion in 2026 is more measured on the back of strong improvement in 2025 and why it accelerates again after that. Finally, because this is a volatile environment, we've built in an adjustment for macro uncertainty and FX. So the path to mid-teens is not dependent on one single lever. It is a balanced, executable road map, growth doing more over time, productivity staying disciplined and risk managed along the way.

We control the controllables. In our model, productivity is the key enabler that lets us keep investing in growth while structurally expanding margins. Over the past 3 years, we have delivered EUR 2.5 billion of productivity savings, ahead of plan. We have a proven productivity engine. Importantly, we still see meaningful opportunity to further improve our cost competitiveness. That is why we're launching an additional EUR 1.5 billion productivity program for the next 3 years, focused on 3 areas.

First, cost competitiveness. Simplifying what we build and how we build it. We have reduced our low-performing catalog items by 35% and will reduce by another 35% in 2026. And have improved margins by reducing the number of platforms, for example, in CT, from 7 to 3, as Roy already mentioned. We are not done yet, and we can and will scale further across Philips. We also see further opportunity to bring our bill of materials cost to benchmark.

Second, lean central functions. We have made progress to simplify our central functions as well, and there is more to go after in that area. We are bringing all of our central functions cost to first quartile benchmark level, resulting in an overall 15% to 20% reduction compared to when we started. This will increase speed and effectiveness and further drive accountability into the businesses.

AI is a real lever. Roy spoke about AI and our innovations, but we're also applying it internally to make our own operations more efficient. For example, in PH, 80% of marketing content is created or enhanced with Gen AI. In Enterprise Informatics, R&D is accelerated through greater use of AI-generated codes. And in customer support, AI agents help reduce support cost by 80%.

For currently known tariffs, our plan assumes full mitigation by 2028. We are accelerating regionalization and optimizing supplier and manufacturing networks. The $150 million total investment we announced recently to expand our North American footprint, starting with local ultrasound manufacturing expansion in Reedsville demonstrates the strategy in action.

The levers for further expansion are clear, they're in our control, and they are already working. The progress we have delivered over the past 3 years demonstrate that both in gross margin expansion as well as in lower operating costs. Further, gross margin expansion will be supported by growth, innovation and cost efficiency to offset the tariff impact. And our continued simplification efforts will keep operating costs under control and support operating leverage. 2026 is an important building block, with margin progression coming again from both higher gross margin and lower operating expenses, and we will continue to build on these levers through to 2028.

We are stepping up cash conversion and aim to deliver EUR 4.5 billion to EUR 5 billion cumulatively over the next 3 years. Two key drivers: earnings improvement through growth and margin expansion, and a significant reduction in adjusting items, which I will explain in a minute. We have significantly optimized working capital, inventories are now in line with industry levels, and on-time and full delivery performance is back at industry benchmarks. We will keep improving and still expect working capital to be a source of cash over the next 3 years. However, after the exceptional release driven by supply chain normalization in the prior plan period, the inflow will be lower. Given the higher tariff environment, we are stepping up capital expenditure to speed up regionalization to fund both growth and innovation.

Improving the quality and predictability of our earnings has been one of my key focus areas. Adjusting items have been too high in recent years. And while we are seeing a clear step down from 2023 to 2025, it continues to be a focus, and there is still work to do. What gives us confidence in the direction is that we're addressing the root causes, not just the symptoms, continued quality-related operational improvement, simplification of the operating model and stronger governance with more transparency and tighter performance management. In parallel, a number of legacy one-off items, including the Respironics recall-related costs, are tapering off over time. In 2026, we expect around 200 basis points of impact, mainly related to Respironics recall-related quality actions and restructuring. From there, we will continue to make progress with the target to reach industry levels by the end of the plan period.

Our disciplined capital allocation underpins balance sheet strength. A strong investment-grade rating gives us resilience and flexibility in a volatile world. We are committed to retain it. Our capital allocation priorities for 2026 to 2028 are clear. First, invest for organic growth. This is where the majority of capital is allocated through R&D and CapEx with a sharp focus on returns. It links directly to the prioritization of highest return opportunities and funding of our high-growth leadership businesses as well as the push on R&D effectiveness that I spoke about earlier.

Second, dividend stability. We remain committed to a stable dividend in line with our policy, continuing to target a payout ratio of 40% to 50%.

Third, M&A. selective and value focused. We apply the same discipline on M&A as elsewhere in the business and have a clear framework with return expectations. We have been active in portfolio shaping, 13 divestments completed over the past 3 years, with proceeds exceeding what we deployed in bolt-on M&As, and we will continue to sharpen the portfolio.

Fourth, share buybacks. We will evaluate these periodically and only pursue them when they make economic sense and align with our priorities. Underpinning all of this is ROIC growth. Progress here demonstrates our value creation path.

Our plan is built bottom up, with clear segment-specific strategies to deliver profitable growth across the portfolio. You will hear more from the business leaders later. The growth and margin levers differ by business. That is what makes our portfolio both resilient and balanced. But the direction is consistent. We expect improvement in all businesses.

In Diagnosis & Treatment, growth will be supported by AI-enabled platform-based innovation. Margins will expand through scale, mix, margin accretive innovation and productivity. In image guided therapy, we will further extend our leadership with next-generation interventional platform launches. In precision diagnosis, we will build our momentum through a more focused portfolio, industry-leading innovation and sharper commercial execution.

For Connected Care, we expect broadly similar growth rates across the segment, with monitoring as the primary growth and margin driver given its roughly 60% share of the business. Following the step-up in Connected Care margins from single digits to low teens, we see a clear path to mid-teens, supported by operating leverage in monitoring and cloud migration and scale in Enterprise Informatics. In Sleep & Respiratory Care, margins have already improved meaningfully as we returned to markets outside of the U.S., with further progress to come.

In Personal Health, Growth will be driven by innovation, increased adoption and broader channel diversification. This will support margin expansion through innovation-led mix, while selective reinvestment underpins continued adoption and channel expansion.

In summary, we have a portfolio that combines highly profitable AI-driven platforms. We have businesses where margin expansion is delivered through growth and productivity. And we have focused areas where we are deliberately reinvesting to create long-term value. That is why we run distinct strategies by segment. And why, even in the face of tariffs, our margin progression at the group level has been so consistent with further expansion, both achievable and sustainable.

Bringing this all together, the foundation of our value creation is disciplined financial execution, translating strategy into measurable execution, clear accountability, focused resource and capital allocation. Our finance priorities will make the flywheel turn faster, disciplined and focused capital and resource allocation, data-driven performance management and consistent, predictable execution. We have clearly demonstrated strong delivery over the past 3 years. We will build on that momentum. I am absolutely certain of that.

Now we are happy to take your questions, but first, let me invite Roy back on stage.

It's Hassan Al-Wakeel from Barclays. Two questions, please. Firstly, as you look out to 2028 and the margin bridge, what drives the acceleration in 2027 and '28? And the range -- it ranges from 60 to 160 basis points per year based on your outlook. And then more broadly, how do you see the relative importance of a, the mix shift from some of your high-growth, higher-margin businesses, such as IGT; and b, improving margins in some of your lower profitable businesses?

And then secondly, on capital allocation. Do you expect to do more M&A in this strategic period given an improved earnings but also leverage profile? And where do you see the key areas of white space? And then related to this, as you scan your portfolio, do you think there are any more meaningful divestments to be done?

Thank you, Hassan. A lot of questions in one there. But let me know if I missed anything. Let me start with your margin question. So as I said just now, we expect gradual improvement of our margins over the 3 years, right? In 2026, as we said also this morning on the call, our tariffs will annualize, which actually holds back our margin acceleration a little bit. Hence, we guided for the 20 to 70 bps expansion.

If when we move into 2027 and 2028, the impact of our tariff mitigation will start kicking in, which will give us an additional kicker. On top of that, we, of course, have growth that will continue to accelerate based on the innovations that Roy took you through and also the business leaders will talk about. That is another big driver also of margin expansion because it will drive operating leverage, and also the innovations are margin accretive. So those would be 2 things that I would call out there, specifically.

And then on the segment level, because that was your other question. On a segment level, we've given segment-specific guidance there on -- that I just spoke through. And what is very important to remember is we are asking all of our business to contribute both in sales and in margin expansion. We are letting no one off the hook. And that is very important. So we are -- we have stepped away from the 70-30 to really go into the segment-specific strategies, where each of our business leaders together, in a bottom-up plan, we have developed strategies where everybody will improve.

Maybe I'll take the second one and just one more point. The other thing that we, of course, have been driving very hard, is productivity. And actually, we like that discipline in actually going after costing out. It makes us more competitive, but it also makes us leaner and faster. So actually, you've seen the EUR 1.5 billion that will remain to be there. And that, of course, will not come in 1 year, that will come as a continuous feed into margin expansion. But of course, you also see some of that we invest back.

And on the second piece in terms of capital and M&A, we have been very disciplined. Of course, the first period, we strengthened our financial resilience substantially. So moving forward, we will be more open also to M&A. But the most important is that our portfolio, as we have today, carries this plan. We have a huge organic opportunity that we're excited about. But if we see the right opportunities in M&A, we can also go after now.

We mentioned that we see a disproportionate resource allocation to monitoring and interventional because, of course, those are strongholds where we also have strong margins. SpectraWAVE was the first one where you saw that kind of if we see a real, very attractive targets, we will kind of strike. Now we actually already closed that, and we're really excited about that, how it will fuel our cardiology play. And our clinicians are really excited about that one. So we will do it when it's relevant, but also as Charlotte outlined, we are very clear on the return profile we expect. So we will be disciplined. But if there's an opportunity, of course, we can also now go after it in a better manner than before.

Hugo Solvet from BNP Paribas. I have 2. First, on -- a follow-up on capital allocation. Given the strong free cash flow guidance, how are you thinking about incremental shareholder return, share buyback or anything else?

And on respiratory, you excluded a return on the U.S. [ CPA ] market from the 2028 guide, which I think is fair. But you also mentioned that you started to reinvest in that business. So just curious -- or you think -- or likely you think you'll be able to return to the U.S. market within the time frame of the plan? Probably give us a bit more details on the last step quality metrics that the FDA is asking you about? And you mentioned Roy that the U.S. -- the retail on the U.S. market is value upside. Just want to clarify, is that only sales but also -- and also profitability?

Let me start with the first one, and then I'll hand over to Roy for the second one. So the first one on capital allocation. I mean we've been clear today on the capital allocation priorities. We see a lot of organic upside in this business. That is what we laid out today. So our first capital allocation priority is organic value creation.

And then the second one is dividend. And as we've announced also today, we will go back to a scrip dividend without a cap over 2025. So we moved the cap given our better cash profile. But we also know that there's still more to do also from a legal overhang perspective. So that is also where, of course, that what we need to take into account.

And then third, and Roy laid it out, we have already done the SpectraWAVE acquisition. We remain very disciplined, and we have a really good framework in place. But of course, there's -- we're looking at M&A as well.

I mean to take -- as our CSO, just on SRC, as I said, a few things: a, attractive market. We still see the sleep market growing in attractiveness. There's also a very nice overlap between sleep and cardiac. And as the #1 in cardiac, actually, we see a lot of diagnosis that we get from sleep that actually also flows into cardiac and vice versa.

Secondly, in the first plan, we have been doing 2 things. One, we have been really bringing this business back to good financial health. So we significantly expanded our margins and came back into very good profitability because we want to continue to reinvest in that business.

Secondly, we're also driving it where we can drive it, meaning that we are investing in patient interface. We're investing in growing outside of the U.S. Yes, we are also pruning our portfolio, right? So we really make choices where we want to play, very clear on sleep and respiratory in the home.

And then the last part is we have been very diligent on working through all the consent decree requirements, and we remain on that.

As I mentioned before, we are still on track with the requirements that are laid out. So actually, we will remain on that and -- in close collaboration with the regulator. We will learn when they feel this is good enough for them to kind of give us an injunction lift. We just don't want to preempt that and don't want kind of to speculate on timing. That's why we said, let's be on the safe side, let's park this as a value upside. Value upside is, of course, coming back to sell and then it will also generate margin because we know sleep market is a good and attractive margin business too. So that's kind of how you should look at the plan. Of course, as we did last time, we'll keep you abreast on any kind of further progress on it, but we also don't want to kind of build a plan on it because, actually, we can deliver all that you have seen without it. And that's, I think, the prudent approach that we wanted to take on this plan.

Excellent. A couple of questions on the midterm targets. First, Charlotte, I want to understand, the 150 to 200 basis points that you've included in the margin bridge as a headwind from FX. How much of that do you expect to occur in '26? And what have you kind of kept in your pocket for '27 and '28, just to give us a bit of sense for that safety margin that you have.

And then actually -- Roy, apologies, my second question is going to be for Charlotte again. Free cash flow, obviously, if I look at what you generated this year versus the cumulative that you're expecting for '26 to '28 in spite of better earnings on an absolute basis, we're not seeing any uplift. I know you touched upon some of the things that are explaining that. But just curious why there is not more of an acceleration in the free cash flow generation. And I guess, in particular, I'm thinking '27 and '28 don't seem to be stepping up at all from the guidance that you've given for 2026.

Yes. Thank you, [ Veronika ]. So let me start with the first question on the margin. So in that bridge, you saw indeed a column with FX other, and that also includes our risk adjustment, right? Because as we said, we know it's a volatile world at this point. So we want to make sure that we build in some buffers for the things that we do not know about today, but some things that will invariably happen.

So as you have seen, we've built for 2026, we are giving a guidance of 20 to 70 basis points of margin expansion, which is including the full annualization of tariffs and is including all the things that we mentioned in the bridge, so there's going to be growth. We guided to 3% to 4.5% growth. So that is a growth uplift which will drive margins. There is productivity. So part of that EUR 1.5 billion plan that we outlined today will be in there. And then there's the uplift improved commercial execution.

So those 3 elements are all in, in 2026 already, but the reality is that 2026 is the year where tariffs annualize. So yes, that is going to just hit us a little bit harder in '26. And then as we go into 2027 and our tariff mitigation plans will start to kick in, and you have seen that we're investing for it, which is also a little bit of a bridge to your cash flow question, but I'll get to that in a second. But that is when it starts kicking in, in '27, '28, and that is when you see the margin lifting. So that is on your margin question.

On your cash flow question, a few things there. We are very focused on free cash flow because it's very important to us, because it really drives ultimately our capital allocation priorities. A few things that are important to keep in mind. We have a significant margin uplift that we've just spoken about, a reduction in adjusting items, which we know we need to focus on. So that is driving cash flow. At the same time, what we've seen in the last 3 years is a significant release of working capital and just the cash upside. For instance, as we've been working through inventory and inventory reduction, which has led to a release of EUR 1 billion in the past 3 years. Look, that was exceptional. We will not be able to do that again because if you think about where we are, for instance, from an inventory level, we still have more work to do, but a little bit more work to do, not a lot more work to do. So that is one component.

The other component is around capital expenditures. We will be very disciplined in how we spend our capital expenditures, but at the same time, we know that the world is regionalizing. And because the world is regionalizing, we need to invest a little differently. And that is why we also announced $150 million investment in the U.S. in manufacturing facilities, where we now have the ultrasound manufacturing already in Reedsville, there will be a little more coming there, but we know that we need to invest a little bit closer to the customer. We're going to be disciplined about it. We're going to have good business cases, but it's just the reality we wanted to take into account.

[ Marc ], ING. I think you -- a few times you mentioned benchmarking versus other companies in your space. And I think if you look at your Personal Health business, clearly, you're performing very well compared to other companies. In the rest of the business, even with the improvement, you're still a bit below some of your peers. How can you bring that up closer to maybe be even beyond the current program towards the level of your peers? Do you need significantly more volume, more of your -- things that are in your control, cost cutting and maybe there -- what's still the difference between those companies?

Yes, maybe I can start. So I think if you look into segment-specific areas, of course, you see different profiles. And that's also why we said we are going to go after very specific segment-based strategies. Because if you look at the interventional space, we are actually leading in growth and in margin. So actually, there, we see further upside in growth and in margin by actually expanding the franchise, right?

If we look 10 years back, we doubled our franchise. When we started in 2015, we started to build interventional. We said we would have 1.7 by around '21, '22. We are now at 3.5 billion in that franchise, and that has continued to accelerate to growth with higher margins. So that actually will be a growth driver and a margin driver in the period. That's also why I say we continue to disproportionately focus on it because we have such a strong leadership position. It's also not only systems but devices and now also software and AI is kicking in more. So that's an important space.

If you look into monitoring, we are the leader -- outright leader in monitoring. Actually, we also have good margin, and we can accelerate growth. [ Traditional ], and I think that's very exciting about monitoring. Monitoring before COVID was maybe a low single-digit growth area. As I mentioned, if you now look into CapEx plans and what we see also in the order intake coming into monitoring, the level of awareness that you need to actually measure your patients much more diligently to provide better patient care and up your security levels in your infrastructure and up the insights that you want to kind of get from it with cloud and AI actually makes this space, one that actually is accelerating in growth, also has margin expansion, but it's already, of course, then also the mix that kicks in because these 2, of course, also in the mix contribute.

The obvious one in our portfolio where we have been driving for margin expansion, and we delivered significantly in the first plan period is the PD business. Now there, we have been doing the first [ leg ]. We still see further opportunity to kind of expand that. Jie will also talk about that in terms of how we plan to do it. That is a mix of how we go after further cost and productivity and operational improvement. But now we also see the growth coming in because we did not have the growth acceleration in the first plan period. That actually, with the innovations we have now lined up, will contribute to growth in that segment. That will catch up first competition. Yes, there's a volume difference with competition. So we don't -- will have direct comparable margins, but we also don't need it for a plan, right? We have distinct margin kind of targets that contribute to it.

Then if you look to PH, of course, very strong contributor to margin and also has further room to grow and to expand margins. There, of course, is also very attractive, both mix contributor because given their significant strong margin, any additional growth there will really help you in the mix. Also, from a cash perspective, of course, very attractive because of the cash efficiency that, that business has. So there, you see that we have different levels.

Another important one that we invested in was Enterprise Informatics, right? Enterprise Informatics has brought us really software leadership. And in the world that's accelerating on data and AI, has proven to be the right investment, but it was an investment business. Also there, we have been stepping up margin. And we see it now accelerating. You saw the Q4 order intake of Enterprise Informatics was far beyond group and it's really doing well. Also turning it into the cloud makes it more attractive. So we have levers in all different pieces of the business.

And then, of course, we have SOC, which we brought back to profitability. We see further expansion. But of course, the bigger lift will come there in that business once we get the return to market in the U.S. So I think we have quite a few margin levers that we feel comfortable about. That's also why we have shown we are in command of margin, but we have more to do. And that will come on our mix of product -- of growth from the innovations, the productivity that we continue to drive, but also kind of tuning it segment by segment, what we can get out of it.

David Adlington, JPMorgan. Every Capital Markets Day since 2016 has pointed towards acceleration to 4% to 6% top line growth, and you've only hit that 3 in the last 12 years, I think. Margins have consistently been pointed towards expansion, 15% was targeted by 2020. Obviously, how much of that either. Just wondered what fundamentally has changed in the business or end markets that means there's going to be less risk to this new target as we say here today?

Of course, great to point to history. I would point to the last 3-year history. We came from minus 2% growth. We ended last year plus 2%, and we're now putting that plan back up to go to the mid-single digits. And we're stepping up into the range 3% to 4.5% into '26, and then we kind of build from there. Why should you believe? 6% order intake growth coming into 2025 coming from before, right, low order intake growth. So you have the leading indicators that show you where the growth will come through in health systems, Personal Health, regained momentum, share gains, very strong positioning, so there you can trust that actually it will continue to deliver the sales growth.

On the margin mix, we came from 7.4% margin. We are above 12% margin. We increased 500 bps in the plan period. We have very specific plans to continue to expand. So why should you believe? We have been really working on a foundation, structural improvement of how we operate our business, very exciting innovations that are here and are driving the order intake and the consumer uptake, and therefore, we believe we have a very credible part also for the next few years. And that will start, of course, with [ delivering ] in 2026.

And maybe if I can add to that, we have become much more disciplined over the past 1.5 years, and I said it earlier today, we are holding people very much accountable week by week, month by month, quarter by quarter. We have sharpened also our incentive plans to ensure exactly that. And that is a real shift in the way we do things. So that is another driver that really gives me personally confidence that we're going to deliver on those targets.

All right. I think it's time now to break for lunch. So we will reconvene in an hour back here. So please, there's lunch right outside, and...

More time for Q&A later, right?

Yes, there will be a second session.

Yes, absolutely. Don't worry, yes.

Thank you.

[Break]

Okay. Well, welcome back. I hope you enjoyed your lunch. And good afternoon. My name is Bert van Meurs. I'm the Chief Business Leader for image guided therapy. And together with my colleague, the Jie Xue, the co-lead, Diagnosis & Treatment, and I'm very excited to start our business presentations first with Diagnosis & Treatment.

And I'm very excited to start our business presentations first with Diagnosis & Treatment. Now as Roy already mentioned, D&T, the Elevate imaging, diagnosis and intervention through differentiated AI-powered systems and platforms. And we have proven leadership positions like we are the global #1 in image cryotherapy. We are #1 in cardiovascular ultrasound. And we are among the top 3 in diagnostic imaging, including the world's first helium-free MR. And Diagnosis & Treatment represents EUR 8.5 billion of sales with 11.7% adjusted EBITDA margins. While we have a strong plan to accelerate our growth to mid-single digit with mid-teens adjusted EBITDA margins by 2028.

So let's have a look at the bridge, how to get there. We already exited 2025 with solid order intake and margin momentum, and we expect to continue on this trajectory. And then our path to mid-single-digit growth has 3 main levers. First, margin-accretive innovation. And as Jay and I will discuss later, we have a strong innovation pipeline with multiple world first, supporting growth in the planned period and beyond.

Now second, commercial and service execution. And here, we are improving visibility and win rates, leveraging the strength of our installed base and expanding service attachment. And third, a renewed market mix strategy. And while we remain cautious on China in the near term, we expect stabilization versus the headwinds in the last 3 years. And we will leverage our strong position in North America of our IGT business and ultrasound business. And together, growth, productivity and tariff mitigation are expected to drive us to mid-teens margins, this expansion coming from both image cryotherapy and precision diagnosis.

So now over to image-guided therapy. And what I want you to take away is simple. We are the global leader in this space, and we didn't get here by chance. We have been shaping this market for decades. -- through a consistent strategy of procedure innovation, deep clinical partnerships and disciplined execution and thus helping our customers to treat patients better. And today, we are already building the interventional platform of the future. As Roy already mentioned, we are building an AI native workflow that improve outcomes and productivity.

So in 2025, in IGT, we delivered EUR 3.5 billion in revenue, which is divided over EUR 2.4 billion from systems and software and EUR 1.1 billion from our devices business. And we've held the #1 position in systems for over a decade. And we operate at scale, we have over 20,000 systems in more than 80 countries. And this installed base is not just a footprint. It's the engine that let us deploy innovation fast and drive impact at scale. And here is where we are truly unique. We are the only company integrating systems, software and devices into 1 interventional platform.

And did you know that every second -- every second, the patient somewhere in the world is being treated on a Philips interventional system. So over the past decade, we've more than doubled our revenue to EUR 3.5 billion and we gained share driven by a clear and consistent strategy, platform leadership, disciplined M&A and long-term partnerships. And that's building on the compounded effect of the synergy between systems and devices. And we also shape entire markets like our partnership with the government of Indonesia, where we are delivering hundreds of labs across the entire nation.

Now looking ahead, we aim to continue on our strong growth trajectory of mid- to high single-digit revenue growth, of which 50% is from recurring revenue. And this enables us to target a low 20s EBITDA margin by 2028. And we already executed targeted acquisitions like Volcano and Spectranetics. And now we continue to reinforce our coronary leadership with the acquisition of SpectraWAVE. And we will further accelerate our growth with inorganic and organic investments like the AI innovation with Azure and I that I will explain later much more.

So image-guided therapy remains a very attractive market with strong structural drivers. The addressable market is around EUR 12 billion in 2025 and is growing at around 7% to 2028. And demand is driven by a number of key value drivers. An aging population and large growing patient volumes that still remain underserved. And at the same time, hospital face staff shortages and positivity pressure -- so workflow efficiency is now a strategic imperative. And we address this with clinically proven innovation, enabling more complex procedures and supporting guidelines and reimbursement. And that combination is accelerating the shift towards AI-supported interventions. And this is exactly where we are the strongest. And image-guided therapy spends many different disease-specific applications. And all of these have large patient pools and also strong procedure growth with even double-digit growth in areas like structural heart or stroke in neurovascular.

But the bigger point here is the unmet need. Many patients who could benefit from these interventional procedures still remain untreated. And our approach is to innovate the procedure with disease-specific applications, but all built on a single integrated platform. So hospitals can scale capabilities across service lines and improve outcomes and treat more patients. And at the heart of that strategy is our Philips interventional platform based on the Azurion. And here, we integrate interventional imaging with multimodal image fusion and AI. And an integrated device console that is seamlessly connecting our diagnostic and therapeutic devices. And this is not just a collection of products. It's a cross-system workflow that's based on market-leading platform. So also integrating our ultrasound and monitoring platforms.

Now why is this important? Because it delivers measurable value. reduced preceded time, reduce variation and a smoother experience for the entire team. The largest installed base gives us a unique advantage and our 1 commercial team drives adoption with deep clinical support and customer intimacy. So over the last 3 years, we already delivered growth by focused innovation. And we have refreshed our Azurion platform, and we are starting to scale now the world's first LumiGuide for radiation 3D guidance. And we did many, many more. But looking ahead, we have a strong road map focused on further improving workflow efficiency and radiation reduction, like an upgraded fully integrated IntraSight plus device control, our next-gen digital is -- and that comes with AI interpretation and the integration of our SpectraWAVE portfolio.

And we are already proving the model of co-creation at scale with DeviceGuide. The DeviceGuide is codeveloped with Edwards Life Sciences and it integrates Ultrasound and X-ray into a single AI-powered guidance solution for mitral valve repair. And that is a concrete example of how we make emerging complex therapies easier to adopt and scale and enabling treatment for patients that could not even be treated before.

On top of that, we will progressively release our AI-enabled future platform, the Azurion systems. And this will revolutionize the way -- are done. And will also be the foundation for our robotic procedure automation in the future. So let's now have a look at the largest value pool in interventions, coronary artery disease. Coronary artery disease is still the global leading cause of death with over 250 million patients worldwide and more than 25 million interventions. And it has been clinically proven that next to an geography, the use of intravascular imaging and physiology improves patient outcomes. And here, we are leading with our Azurion systems integrated with our intravascular auto sound or digital is and this physiology assessment with our OmniWire. But now with the acquisition of Spectrum, we are even expanding our leadership position. because SpectraWAVE has ultra-high-resolution enhanced vascular imaging and plaque characterization, which is really a leapfrog solution for complex procedures, and that's a segment that's growing at more than 40% per year. And likewise, SpectraWAVE's AI-enabled image-based physiology is a great complement to our OmniWire, it's enabling fast, noninvasive insights in physiology. And that's a segment that's growing more than 20% per year. So together with SpectraWAVE, we offer the most advanced and complete portfolio to address the largest interventional value pool. And besides that, SpectraWAVE brings a very strong culture of AI and clinical capabilities. And it's a perfect match with Philips and it's really an acquisition. I'm very excited about.

But don't just take my work with. Let's hear from 2 leading interventional cardiologists, Dr. Ziad Ali and Dr. Evan Shlofmitz from the St. Francis Hospital in New York. And they're using Spectra doing a life patient procedure at the OPCI conference.

Guys, welcome to St. Francis. Today, we've got something exciting for you. It's the newest SpectraWAVE catheter. This is a hyper view Starlit system. HyperView system. Starlight is the catheter. The interesting thing about the Starlit system is that it's a combined OCT near catheter. It's a deep OCT system. What that means is that it has a really high resolution. All I'm going to do here is a little flush to see if we can clear the artery and I inject and it's going to automatically pull back. And that's how easy it is to do with SpectraWAVE. Then you see the lesion and you'll see an area that's yellow, and that's the area that's got a high lipid content. So a lipid content greater than 32.5%.

And this is one of the things that you're not used to seeing from some of the alternative OCT imaging software. And this basically incorporates the dual imaging modality part of the catheter where it uses nears or near infrared to detect where there's lipid. And for OPCI planning, I find the lipid detection is so important because we want to avoid landing to stand edge in a lipidic plaque. So very, very helpful in determining exactly where we want to have or tend edge.

Inject? And so you can see, again, it's a very, very quick pullback. Looks pretty good. I think that's gold guys. And then I'm done here.

So that's the clinical reality. You see faster insights, better decision-making and a workflow that supports the team. And it brings me to the next step and Roy already mentioned, where we are announcing our platform strategy, building the cat lab of the future with Azurion. Today, we already have the platform with the leading workflow. But we are not stopping there. And we have asked ourselves how can we bring the next breakthrough in optimizing workflow and drastically change operational efficiency in the catalog. And our answer is Azurion. Azurion is an industry-first AI-powered software platform to drive procedural and operational efficiency and optimize outcomes. So let's have look at the next video showing our vision.

[Presentation]

In today's interventional lab, complexity is rising, procedures are more demanding. And hospital leaders are expected to deliver more procedure volumes with better outcomes despite tighter cost pressure. Our customers are clear. They need a smarter system to make procedures safer. Faster and more consistent. Now imagine an interventional platform that could sense what's happening in real time, where signals across imaging, hemodynamics where automation would reduce friction and anticipate next steps, so clinicians can focus on what matters most, the patient. This is the Azurion eye vision, an AI-driven software platform seamlessly integrated into the Azurion ecosystem an ambient copilot supporting the care team, orchestrating workflows and streamlining reporting.

Built to scale and fueled by a growing portfolio of AI capabilities the Azurion platform will be co-created with clinical institutions and industry partners to continuously innovate the procedure for hospitals. This would mean measurable improvements in efficiency, consistency and outcomes. -- for clinicians, it would democratize their clinical skill sets, broadening access to care, so more patients can be treated is how we lead. This is how we care. This is Azurion Eye.

So this is how we see the future. But we are building this already today. And we're not doing this alone. We are working with the clinical consortium of leading institutes like Stanford, UCSF, Amsterdam Museum and Baptist Health South Florida to codevelop AI propositions to solve real clinical and operational bottlenecks. And together with industry partners, such as NVIDIA and address life sciences, we are building the foundation for AI in the Catlin. This for us is also a significant growth opportunity with adjacent high-growth software and it's deployable across our existing and future installed base and accelerated leadership in AI and data-enabled interventions. And we will release modules progressively over the next 3 years.

Now I'd like to reinforce what I've said before. We drive disciplined execution for profitable growth. So let me highlight just a few critical points. First, patient impact and quality remain our highest priority. Second, operationally, we are improving resilience through selective localization to address the current geopolitical changes. And finally, we are already accelerating commercial and service excellence by improving our visibility and win rate and driving share gain. We are expanding our devices footprint, and we improve service efficiency through remote diagnosability.

So let me summarize. We are the global leader in image-guide therapy. With the largest installed base and a uniquely integrated interventional platform, system software and devices seamlessly working together. We serve underpenetrated high-growth therapy areas and have the most complete portfolio in the largest value pools in interventional care. And we are accelerating the next chapter of procedure innovation, expanding coronary leadership inspective and building the catalog of the future with Azurion Eye. And this positions us to deliver mid- to high single-digit revenue growth and adjusted EBITDA above 20% by 2028. So we are very proud of the leadership that we've built over the last decade and even more excited about the next phase of innovation.

And with that, let me introduce Jay who will now present precision diagnosis.

Thank you very much, Bart. Good afternoon, everyone. This is my first Capital Markets Day at Philips, great to meet our view. I joined the Philips just over a year ago after more than 2 decades in the imaging industry because I saw real opportunities here. Precision Diagnosis is a business with tremendous strength to be unlocked.

Having brought many groundbreaking first to the world Philips has shaped imaging for over 100 years, and we continue to do that today. Imaging serves as the eyes of the clinicians. Enabling earlier, more confident diagnosis decisions to better care for patients.

Today, I will walk you through how we have strengthened this business, how we unlock these potentials to be the sharpest eyes for the clinicians and how this positions us for growth and value creation in the coming years.

Precision Diagnosis is a EUR 5 billion business with roughly Oxford coming from ultrasound and 2/3 from Diagnostic Imaging. We hold leadership positions in key technologies across the portfolio. In Ultrasound, we are #1 in cardiovascular. We also lead in premium systems and customer services. In imaging, we lead in helium-free MR and spectral multi-energy CT. All this is powered by enterprise informatics, where we are #1 impacts. Enterprise Informatics enables integrated diagnostics across imaging and pathology for all care areas. Let me briefly step back and summarize the transformation. Precision Diagnosis has undergone over the past 3 years, where I would describe as a strengthening phase.

Through the pandemic years, execution was in our own way. We struggled with supply fulfillment and other operational items. From 2023 to 2025, we deliberately refocused the organization on what matters most, patient impact and quality. Strengthening execution rigor, stabilizing supply and restoring delivery reliability. Quality improvement is a multiyear journey. We continue to put quality front and center remain vigilant in the discipline. We have made a massive improvement. The vast majority of the work is done.

In parallel, we made clear strategic choices on where to play. We exited the value segment, reduced the platform and skill complexity and simplify the portfolio to sharpen our focus on performance in the premium segments. We also energized our innovation pipeline, launching major innovations across all modalities with a much stronger emphasis on quality and differentiation. And throughout the process, we also renewed the leadership team.

With that came a strong cultural shift, a stronger focus on performance management, accountability and the rigor in execution driven deep down into the organization. As a result, we delivered on our earlier strategy expanding margins from mid-single digit to high single digit. Precision diagnosis today is fundamentally stronger, more focused and leaner, ready for move into the next phase, which is about growth, profitable growth.

Now to explain how we plan to grow this business, it's important to start with the problems we are solving for our customers. Demand for imaging and precision diagnosis continue to rise, while house care systems operate under increasing pressure. Radiology departments face capacity and workforce constraints rapidly growing data volumes and the rising expectations for speed and quality. We see these challenges as clear opportunities to help our customers improve outcomes increase productivity and manage cost sustainably, not just with more systems, but with smarter, more integrated solutions. This is what we mean when we talk about smarter, more integrated solutions.

Imaging is no longer about individual systems. It must be organized around the ecosystem focused on productivity and workflow. Imaging is moving closer to where the patient is. In additions like our helium-free MR remove location constraints. Images also needs to be read where the clinician is with our open vendor-agnostic enterprise informatics, images flow across modalities in sites, allowing radiologists to access and interpret studies wherever they are real time.

And finally, AI closes the loop by supporting interpretation, generate insights and helping clinicians manage growing volumes and the data complexity. This is how we remove friction across the diagnostic process, connecting system, data and intelligence in one continuous ecosystem that helps health care providers care for more patients.

Let me show you how our imaging platform approach comes to life across the patient diagnostic journey, delivering tangible benefits for both patients and the care teams. It starts with preparation. AI helps simplify patient study set up and reduce variability, making exams easier to perform and a more consistent across operators. During skin and image generation, AI is embedded directly into our systems, this enables better image quality, shorter exams, helping care teams work faster without compromising clinical outcomes.

As we move into post-processing, reading and reporting, our informatics and workflow solutions streamline how images are managed, shared and interpreted. This reduces administrative burden and a nonreading time, allowing conditions to focus on diagnosis. Imaging volumes continue to grow we support radiologists with a broad and expanding set of AI-powered clinical applications that help prioritize cases, support interpretation and improve diagnostic confidence. This is how advanced the technology translates into everyday clinical practice, improving efficiency across the diagnostic journey.

Let me now give you a view of our innovation road map and how it propels us into a clear growth base over the coming 3 years. On the left, our products we have launched over the last 2 to 3 years. These innovations are now scaling globally already contributing to revenue and gross margin expansion. In the middle, our products we recently announced. They are the primary growth engines for 2026 to 2028, extending strong existing franchises, into new use cases and new settings while also delivering a higher margin profile.

In ultrasound, we are extending cardiovascular leadership into point-of-care settings. In MR, -- we're expanding our helium-free platform to higher fuel strength. In CT, we're embedding AI into special imaging to simplify workflow and speed diagnosis. We continue to invest in future innovations for the long run, increasing automation and reducing complexity.

Services and provide this road map, higher service attachment software upgrades and life cycle offerings increased recurring revenue and boost margin, which further strengthens the quality and the resilience of growth. We are driving a step change in commercial execution to scale what's already available and announcing the market. We will start to see the order book impact in 2026 and more substantially in 2027 and beyond as we obtain regulatory clearances in major markets.

With that context, let me now go deeper into Ultrasound MR and CT starting with Ultrasound. Ultrasound is a higher growth, strictly higher-margin business, an important contributor to precision diagnosis image-guided therapy and our cardiology leadership position. There are 3 clear growth drivers for us.

First, leadership. We hold #1 position in cardiovascular ultrasound. Supported by differentiated transducers and a broad clinical proven AI portfolio that improves consistency and diagnostic confidence. Second, expand access to care. While cardiovascular repins our anchor, our growth increasingly comes from general imaging and a point of care. By embedding AI in a simplifying use, we're extending ultrasound to more users, more patients, animal settings, including previously underserved populations.

For example, baby is born with congenital heart disease can now be diagnosed with our industry-leading 3D TEE transducer as we have miniaturized the transfusion in size. Third, autonomy. We are deliberately driving ultrasound toward greater automation, reducing operator dependency and workload, which is critical in environment facing ongoing workforce constraints. Supported by a step-up in innovation speed, these levers position our ultrasound business to continue to grow and sustain attractive margins.

Let me now turn to another strength in our portfolio, I would like to start with a video that shows how we are redefining high-performance imaging with the combination of helium-free technology and AI.

[Presentation]

The high-rise location you just saw at the end of the video is inspired by one of our systems installed in the middle of Hong Kong. Isn't that amazing? And only a few miles away from here in Wood Green London at Philips MR is working hard in a community diagnostic center inside our shopping mall. By going helium-free, we are not only preserving a nonrenewable resource doing the right thing for our planet. We're also fundamentally changing where MR can be deployed. It's no longer confined to basements, giving providers the freedom to play scanners anywhere even on mobile trucks. We are the industry leader in helium-free MR. It's proven, scaled and attested in demanding clinical environments up to 100 exams a day. That's industry-leading throughput.

With the recent announcement of 3-Tesla, we are on track to be the first to have 100% helium-free MR portfolio. We deliberately combined this hardware breakthrough with AI-powered automation because MR remains one of the most complex imaging modalities. AI enables faster, more consistent skins with high image quality, making advanced more accessible across a broader range of skill levels, including cancer screenings and health checks at scale.

Our strategy is already translating into commercial momentum. In Europe, we have gained share for 5 consecutive quarters. reflecting strong customer adoption. This also supports margin expansion as we structurally reduce, eliminate helium related costs across manufacturing, logistics, installation and service. Looking ahead, the combination of helium-free technology and AI also forms the foundation for our vision of autonomous MR, addressing complexity, workforce constraints and the throughput challenges.

Let me now turn to CT. Philips was the first to introduce detector-based always-on Spectral CT with over 800 systems in everyday clinical use right now. This broad adoption has allowed us to help define how spectral information is used in routine clinical practice without adding complexity to workflow. Building on this, we have announced Verida, our AI-embedded spectral city by embedding AI directly into the image chain and the spectral workflow, starting from the detector Verida delivers sharper images and a faster reconstruction for demanding clinical needs, including acute and ultra-high throughput environments, supporting up to 270 exams a day.

This same spectrum foundation prepares us for what comes next. Spectral photon-counting CT. Photon counting is spectral by design, and our deep expertise in special acquisition, interpretation and workflow supports us to bring this technology into everyday clinical practice anywhere. Altogether, we are well positioned to build on a proven spectral base, drive broader adoption, gain share in premium segments and support margin expansion.

Now execution is the critical driver of how innovation turns into impact. With a strengthened foundation in place and a continuous cultural shift toward higher performance, rigor and accountability we operate today with much greater clarity and confidence. Our highest priority remains patient impact and quality, improving diagnostic outcomes by reducing variability and the delays supported by a simplified high-quality product portfolio.

We continue to strengthen operational resilience. Future-proofing manufacturing and the supply chains to operate efficiently and reliably in a more uncertain world. In parallel, we're driving productivity and speed through a platform-driven approach, reducing complexity, lowering costs and freeing up R&D capacity. We are putting particular focus on commercial and service excellence to ensure our differentiation translates into value. We are tightening pricing discipline and portfolio mix, working closely with clinicians, key opinion leaders and are building deep clinical and technology partnerships. We're also continuously improving customer experiences by upgrading our large installed base with AI-powered software, allowing customers to benefit from our latest innovations without replacing hardware and using AI to proactively improve system reliability, often identifying issues before they are visible to customers. This gives us clear confidence that the strategy you have seen today will be delivered consistently, commercially and at scale.

Let me close with a few key takeaways. Serving as the eyes of the clinicians. Imaging sits at the center of health care. Demand is rising, systems are under pressure and expectation for quality, productivity and integration continue to rise. We are built for this challenge. We have made clear choices in our platform and where we invest in innovation and in how we execute. And these choices are translating into real momentum across the business. With a differentiated aging platform, a focused road map in performance and the premium segments and the disciplined commercial and service execution we are confident in both our direction and our ability to deliver.

This underpins a clear outlook for precision diagnosis. Low to mid-single-digit revenue growth from 2026 to 2028 and the low teens adjusted EBITDA margin in 2028. Thank you very much. Let me now welcome Julia to the stage, and I share about our Connected Care business.

Good afternoon. I'm excited to be here with you today. At the heart of Connected Care is about connecting life longitudinally. From hospital to home and everywhere in between. Connected Care is a key growth driver for Phillips and plays a central role in delivering to our mission, better care for more people. We deliver better care by building platforms that ground us in data, intelligence and trust. And we reach more people by expanding our installed base of devices, software and services. This combination of platform scale plus intelligence is what makes Connected Care, a strategic part of the health care ecosystem.

Connected Care has 3 businesses: monitoring, enterprise informatics and sleep and respiratory care, all with a common foundation of care intelligence. Monitoring remains the key growth engine, representing 60% of this portfolio. Monitoring is the leader across hospital and ambulatory settings through real-time data platform, patient monitoring devices and diagnostics.

Enterprise Informatics is the leader in device integration and imaging informatics, monitoring and enterprise informatics together form the world's largest monitoring ecosystem. Earlier, Roy spoke in detail about the sleep and respiratory care business. Our strategy is twofold: One is executing on our remediation plan to return back to the U.S.; and two, accelerating growth in international markets. Connected Care is well positioned for profitable growth.

Over the past 3 years, our growth has been temporarily constrained by post-COVID normalization and monitoring supply chain disruptions and the sleep and Respiratory Care portfolio, Sleep & Respiratory Care recall. Those headwinds are largely behind us. We have built a robust order book that underpins our mid-single-digit growth.

Innovation drives our growth by winning competitive accounts. Our continued hospital and home software releases strengthen our enterprise value. And our hardware innovation across monitors and consumables secures and expands our installed base. Commercial execution also adds to our growth. We'll continue to grow our monitoring as a service model and other commercial innovations. For example, Hoag Health, one of California's largest health systems signed a 10-year partnership with Philips. This partnership includes our hospital platform, our suite of IntelliVue monitors and our capsule medical device integration. Hog adds to a growing list of our large global as-a-service customers.

Each business across Connected Care will contribute to our growth. On profitability, we've already made meaningful progress, and we see a clear path to mid-teens margins led by mix and operation -- operating leverage. Overall, Connected Care has strong fundamentals and momentum. Our enterprise value proposition is highly aligned to key market forces. Financial pressures are accelerating for health systems costs have nearly doubled over the last 5 years.

At the same time, health care data, health care is generating a tremendous amount of data. The average hospital produces 50 petabytes of data every year and is growing at an increasing rate of 47% per year. To create this financial relief film, our customers are looking to AI and care intelligence. And that is why 90% of health systems today have already deployed at least one AI use case. But to enable AI at scale, both Philips and our customers must focus on cybersecurity.

I've already had many conversations with health system CEOs that say a cyber risk is bigger, a bigger issue than the pandemic. costing them approximately $10 million per incident. Health care is being reshaped by these market forces, and that's how new markets are being created. Today, we operate in a EUR 23 billion market growing at 4%. By addressing these challenges, drives faster drive expansion into faster-growing adjacencies with several billions of incremental opportunity.

Now I'm going to take a deep dive into monitoring in partnership and in partnership with enterprise informatics is positioned to unlock this opportunity. Monitoring is at an inflection point. What started as individual bedside devices has evolved into something much more care intelligence. Care Intelligence transforms continuous patient data into action and insight supporting earlier interventions, reduce complexity for clinicians and improved patient outcomes.

Monitoring is no longer just about observing patients. It's about the data fueling performance across the health system. To bring to life our portfolio, I'd like to introduce you to Philips Monitoring.

[Presentation]

Monitoring is growing faster than the market and expanding margins, driven by durable reinforcing advantages. First, our industry-leading installed base is our competitive moat. Most likely, you will enter a hospital sometime this year. And there is over a 50% chance that you will see the Philips monitoring brand. We expand this advantage in 3 dimensions: number one, as hospitals consolidate and standardize Philips becomes the default monitoring platform for newly acquired hospitals and networks; two, monitoring is expanding beyond high acuity areas like the ICU and the OR to lower acuity settings like the GenCare floor. And three, health systems are extending their use of monitoring outside of the hospital to the home. Our platform and our innovation is how we win new business and dislodge competitors.

Philips operates one of the largest real-time data and insights platform in health care, processing billions of high-fidelity clinical data points every day. Together with enterprise informatics, we form the largest open and interoperable ecosystem in a single monitoring platform. And this is accelerated, but it accelerates our AI innovation and is enabled by our ESG and hospital marketplaces where we can deploy both Philips and partner algorithms.

Monitoring is fortifying its place as a top strategic partner for health systems today. We have built a scalable infrastructure and an enterprise value proposition that drove significant share gains in monitoring. Monitoring relies on enterprise informatics to integrate the world's largest installed base of patient monitoring devices, and the world's largest ecosystem of partner devices with more than 1,000 third-party medical devices and health information systems, including EMRs.

Intelligence is delivered in 4 critical locations at the bedside in central monitoring units, on mobile devices for clinicians and in remote facilities for care at home. Our platform scales to every bed and connectivity node. And we will continue to deliver this intelligence across many of our health systems. We are serving multiple health systems today with our portfolio. And in fact, we serve 90% of the top 100 systems globally today. Bon Secours and Inova are creating a standardization and default on Philips using our Care Intelligence platform across their enterprise.

And because of our global reach, we are impacting some of the most innovative health systems, again, across the globe. Our customers are seeing measurable impact by giving more time back to clinicians, lowering per patient costs and saving lives. This is an X-ray of our product architecture. Philips builds our platform architecture not by disparate applications, but a unified and seamless experience across devices and users.

We drive this continuity with responsible practices, focusing on data privacy, cybersecurity and ethical AI, all with trustworthy technology at the heart of our architecture. Again, we bring in our world's largest installed base of patient monitoring devices, married with the world's largest ecosystem, ecosystem of technology and partner devices to make sure that we deliver across the entire platform. Innovation is our growth engine. Over the last strategic period, we delivered and scaled our hospital software platform through continuous SaaS-like software releases.

In addition, we delivered hardware innovation, which drives continued growth between '26 and '28. In the short term and midterm, we're going to create catalysts, which continue across software, services, consumables and AI. While at the same time, we're investing in transformative AI-enabled platforms built with [ intelligence ] at its core. Our next-generation platform represents billions of opportunities from both expanding and securing our installed base. Our innovation is our foundation, and we will drive faster growth and sustained leadership. I'd love to show you our next generation.

[Presentation]

Looking ahead, we're focused on disciplined execution in two key areas: one, patient impact in safety; and two, commercial excellence. Our patient impact and safety focuses on how we secure both our health systems and the patients that they serve. And then two, in commercial excellence, we focus on AI-enabled advanced analytics to support predictability, customer relevance and win rates.

Health care is undergoing a fundamental transformation towards real-time care intelligence. And this is where Philips is uniquely patient. Data and AI convert our installed base into leverage and that leverage has already translated to results. This positions us for durable value creation over a strategic period of time. Phillips will power the intelligent health system and deliver better care for more people. Thank you. I'm thrilled [indiscernible] come up.

Good afternoon, everyone. My name is Deeptha Khanna. It has been my privilege to lead the Postal Head Segment for Philips over the last 5 years. And I'm truly proud of the fundamentally stronger engine we've been building, improving both our innovation and execution capabilities backed by a fundamentally stronger end-to-end team that is clearly accelerated results versus competition.

I'm excited to give you more insights today into what we're building and more importantly, to share all the potential that lies ahead of us. Now when you think about personal health at the end of 2025, we have EUR 3.7 billion revenue and 18% in EBITDA, some of the strongest performance across our industry. This revenue is 60% in Grooming and Beauty products that we report as post care, 30% in Oral Health Care products and services and 10% in Mother & Child Care. What's important is we have leading positions across multiple product categories and segments in all of these three divisions. And as Roy reminded us, what's exciting is across this portfolio, we are on a mission to truly elevate under of self-care for consumers at home, leveraging the power of our technology and innovation, the phenomenal Philips brand and operational excellence in all that we do.

What do I mean by that? Let me give you an example in Shaving. The category standard for men is moving away for young men as well as many of you in this room for this to clean shave to actually wanting and desiring more versatility and how you express yourself. Our OneBlade platform sets the category standard for versatility and performance that is unmatched. And as Roy said, once you start with this platform, you will be a fan for life. Or take our IPL intends for [indiscernible] devices. This is permanent hair removal that is offer natural [indiscernible] to consumers only in a high-end spa or salon. And these are products that are medically regulated in many of our markets.

We bring the Philips medical safety standards to bring IPL devices into the homes of consumers to access this care. Take oral health care. There is increasing evidence that better oral hygiene and habits are important not just for your cosmetics, but actually for your overall health. We have a beautiful portfolio of power devices with the Sonicare brand. And with a Philips heritage, we are able to enroll dental professionals around the world to partner with us in democratizing better oral health care and bringing this to consumers through their recommendations.

And last but not least, in our Mother and Child Care portfolio, we have a beautiful Philips Avent brand as well as a pregnancy plus our platform, which is highly preferred by mothers around the world. And we are able to recruit consumers and families at a very sensitive time in their family care journey into a variety of products and services, both in electronics and feeding into the trusted Philips Avent brand.

What's exciting is the fundamental consumer trends we do see, especially among those we need to recruit young parents, young Gen Z are very favorable to all that we bring in personal health. The products that I described to you are personal. These are products, a lot of consumers will all use on their own bodies. As a result, these are categories in which consumers really value and prefer trusted brands. These categories have massive penetration opportunity, something that's unique, frankly, in the consumer segment today. Whether you think about power toothbrushes or power shavers, even in mature geographies, the penetration is only 20% to 30%, giving us massive runway for growth and [indiscernible] so when you then think about emerging markets.

And then when you think about how Gen Z shops and makes their decisions. Where they demand and expect more personalization and for you to know them and serve them where they are, where they really want to live the -- live longer. And there they truly want and value brands that are ethical. These are all favorable to how Philips does business. So we look at this category, there is a $19 billion category opportunity to go after. And the underlying trends make us confident that there is a sustained 4% growth to look for in these categories we compete in.

And we expect, as Philips Postal Health that we will continue to outperform the category. So what you see here, we exit now 2025, looking back 3 years with an average 3.6% growth that was delivered albeit with volatility in China, which I will reference to as I talk of the market mix that we expect in the future. And we expect in the coming period to accelerate this to mid-single-digit. We also expect why we've reached an 18% EBITDA margin that are continued efficiency and success with our success models will help us to drive the gains more productively and to expand into the high-teens margins even further.

And the key building blocks that get us there at the core or innovation that strengthens and premiumizes the core categories that are recruitment engines for us. Second, you will hear me describe a lot more how we are systematically and with excitement going after opportunities to expand our access and discovery by partnering with billing customers and top partners around the world. And you will also see that we have a more favorable market mix going into this period. China that was a headwind for us in the past will become a tailwind. We do expect modest growth in this market and we do expect more broad-based growth across North America, Europe and select emerging markets.

So let me share with you under the hood a little more about this engine that I'm so proud that we've been building. which routes on these three key vectors. First and foremost, consumer-centric experiences in innovating both the proposition and how we show up in our marketing. Second, how we create win-win partnerships with our top customers, where we bring a truly unique valuable lens coming to customers with a story that's about category growth, which is good for them and good for us. and also improved discipline and productivity in everything we do from an operational perspective. So what do I mean when I talk about superior consumer experiences.

This shows up both in our product propositions and also in how we attract consumers through our demand mechanisms. Let me give you an example of our high-end toothbrush. We solve real problems for consumers. When we think of our next generation Sonicare Sonic care, we want to encourage consumers to more intuitively get a perfect brushing routine 2 minutes a day -- 2 times a day, 2 minutes each time without fail. And we are pleased to put more cues into the handle of the toothbrush that actually signals to consumers that it's time to move on to another part of their mouth and signals to them and they finish their 2 minutes.

Equally, when you think about a proposition like our hands-free breast pumps, we are so proud to support mothers who want to continue to offer their babies the value of breast milk but also to give them back time and flexibility by not having to be tied up to an electric device. I'm equally proud of how we are executing. Our campaigns and creativity are truly getting to be something special. I'll be pleased to show you some advertising in a little while now. And importantly, we are modernizing how we do our marketing with 80% of our media on digital forms, including social.

And as Charlotte mentioned, 80% of our content already enhanced or improved through the use of AI. It's also worth emphasizing how much opportunity our execution still has in the retail presence that we enjoy. A great example is electric shaving as a category has very often been relegated to the electronic change when you walk into a store. We've been very disciplined in demonstrating to our customer partners that when you put us close to the manual shavers, you will find consumers will upgrade their habits. It's great for consumers. It's great for category growth. It's great for us. Now I also want to double-click a little more into the Philips DNA that truly powers up our approach to innovation, leveraging technology, design and sustainability in all that we do.

Our AI fluent CS Philips is a true advantage to us in Personal Health. A couple of examples here. We've just launched in 2025, an upgraded version of our premium 9,000 shavers with AI-powered sensors that ensure that you have the perfect pressure and a perfect shape each time. In fact, unmatched performance was so well regarded the Time magazine awarded this product, one of its top 100 inventions of last year. Or consider our high-end video monitors.

With these monitors, you won't just know if your baby is crying. We have cry interpretation software that will actually tell you why. Imagine how life changing that is for anyone who's a young parent, and what's amazing, of course, is these high-end propositions, elevate the standard of care for the categories and they also premiumize the mix, and we see those benefits back in our P&L. I'm also really proud to talk about how sustainability is increasingly the consumer-facing agenda we have.

We celebrated in our advertising, and we show up at private consumers shop. For instance, the Climate Pledge Friendly Certificate from Amazon is a [indiscernible] that we recently had. Now I'd like to take you a little deeper into how we are driving with discipline, the discovery opportunity for our portfolio. As I already mentioned, whether it's brick-and-mortar players or electronic retail or quick commerce or dental professionals, our customer plus really value our partnership with them because we come to them with a pitch that is about category thought leadership.

We innovate the standard of care through innovation. We premiumize, we recruit consumers into more lower-end manual habits into [ acute ] power, and this creates tremendous value for the shopper, for the consumer, for the customer and for us. So this is truly a win-win approach that we've been systematically building up. And at the bottom of the slide, you see a few of the many examples of how we are expanding access. Our IPA devices are now FDA certified and available and launched in the North America market. When you look at our baby bottles and also our Power Toothbrushes, we have been systematically building more capabilities to access and win the food drug and pharmacy channel, which is a new muscle for us, and we continue to expand distribution here.

They're also going after more occasions. We've launched Travel Shavers, which started off as a trend in Asia for people that are on long commutes and would like to shave while they're on their commute. But it seems -- it's a [indiscernible] there globally. And this is a product that we are scaling rapidly. And we're also proud to expand our amazing OneBlade franchise into not just facial care, but in intimate grooming where it has been very successful. Let me, in fact, show you a little bit about this beautiful Champion platform we have in OneBlade, so you appreciate how delightful it is to discover it.

[Presentation]

You had the reaction many of our consumers do, but it's really true. There is so much discovery yet to be had in some of our key chances that are continuing to accelerate grow. So I hope I have shown you what we have been doing these past few years that has been showing up in 3 years of sequential competitive market share gains.

We have been fundamentally strengthening the core of our portfolio with innovation that elevates performance and premiumizes the core. And we have been fundamentally strengthening our execution competencies, be it in marketing or in activating shopper retail, and we've been improving our operational discipline as we do this. On the back of this foundation, we're therefore very confident of our ability to expand our games and continue to win versus competition in the coming period.

So you see us lean into the proven model of innovation-led growth, strong customer partnerships and with a more favorable market mix behind us. I want to also now mention the discipline with which we are improving our capabilities, so we have productivity and efficiency in all that we do. At the core, we will remain consumer-centric, winning with consumers with high-quality products with strong reviews and ratings is our license to operate. And we will continue to do this by innovating with more efficiency with the power of R&D and enhancements to PI.

In our operations, we've been improving steadily, leaning out our inventory, building more value-based procurement models and also working very hard to have agility to offset our tariff [ intact ] by 2028. I already mentioned in a lot of our marketing efforts, we are getting very fluent and embracing AI and all we do. In addition to content and media, it's worth calling out in aspects of consumer care. Our costs are already down 20%.

And as we look forward at our execution agenda, we will continue to work with top customers, expand our channel presence and ensure commercial excellence in all that we do, while also premiumizing and delivering value through our innovation. So in conclusion, I stand here with you very confident that we are supposed to health and Philips are true global leaders in the categories we compete in. We have been building and strengthening a proven and modern success model that there is a lot of opportunity to continue to scale.

We will remain disciplined on the core of driving our growth through innovation and strong customer partnerships, while getting more and more fluent and productive through the use of AI. And as a consequence, we are very confident that we can go from our current performance to even further acceleration into mid-single-digit growth and continued progress into the high teens EBITDA. Let me now conclude and leave you with a video, after which Durga join you.

[Presentation]

All right. So with that, we will take a very short break so we can get the stage ready to have our second Q&A session with Roy, Charlotte and our business leaders. So just a quick 5- to 10-minute break, and we'll reconvene again. Thank you.

[Break]

Okay. So I think I'll start on this side of the room, and we'll start over here with Graham.

Yes. It's Graham from UBS. My [indiscernible] clearly worked. Just two questions for me. So one, just on China more generally. And then one specifically for Jie on [ photon counting ] versus spectral and just where the gap in the market is.

So just on China, in terms of the guidance you've given for health systems, what are you thinking your development looking like in the next sort of 3 to 5 years? And which products do you think will succeed best in China? And then on spectral versus Photon counting roughly, what's the price rental today? So which part of the market do you think you play in?

Let me start with China. So if you look at China and the plan we have for China, we are very clear on where we have value add to offer, which is in specific segments where innovation makes a difference. Now we are strongly playing in D&T and PH in China. If you look in D&T, we see interventional is still growing in terms of the procedures, the patients and also the footprint as an outright leader interventional, they really appreciate also innovation and brand, we actually have a good inroad to make further into the next years. So that's a very good stronghold for us in China.

Secondly, in the PD space, we have ultrasound which has deep penetration in China. Actually, what was really exciting to see on the back of the new Epic launch, we are back in growing share in China, in ultrasound cardiac. So we have a very strong specific position. And whilst the others are coming into Olson as well, you actually see they cannot have the accuracy of what it needs to do cardiac examinations at the level that we have. So actually come more in general imaging, not at on the cardiac space. So cardiac ultrasound is a very good space for us.

Then we have in MR [indiscernible] which is resonating well. And actually, we see also now as we unveiled the 3T is coming already people are really excited about coming and bringing that to the market. You saw the Hong Kong example where we have also the high-rise at 1.5T. So 1.5T is already finding its penetration. And also Spectral and maybe also Jay can allude to that, Spectral is having one of the best penetrations in China because they need engines that do high volume. And actually, what you see is that our precision diagnosis proposition is very much geared with high quality, but we can process real volume, right, especially our blue see candidate, which others cannot some launch it, but they cannot do that have volumes, so you disqualify in China.

And then actually in the CT, you also see that Spectral can do that at the highest level. But also the CT50 that we launched really is making a road you see those are very distinct choices that we are making. We accessed the value segment. So we kind of play -- we exit the DXR so we really play where we see that innovation will be having a future there. And we have also that demand. We are very close to the market, and we also develop together.

So the second on PH, actually, we see that also we have locally relevant innovation, that's resonating. Now in China, you need to be very close to the demand. So you need to be able to actually kind of respond to how the market is trending. Now expectation is that the market will slowly strengthen also on the consumer side, and we have seen the sellout growing. We also have a very strong partnership. So actually JV Ali really like us. Actually, JV is now coming to Europe. They just bought MediaMart and actually, they're asking us to help them how they also land in Europe as an e-commerce player. So we have in China.

And we are grooming good example also from winning against Fly Co., the local Chinese competition. So we're also showing that actually with our innovations, we are beating them in the market. We're actually gaining share and actually doing it with protecting our margin. Oral Care, actually, we have been under pressure, but the new platforms are really coming back. And actually, we also saw that under the consumer pressure in the market, many of the competitors actually fall out. So we had many new entrants that coming, right? We had more than 30 small new local brands. Majority of that sees business because they could not sustain in the current environment because it's a high resource market, if you want to play big.

So actually there, we see sales going back. So we have distinct every and those are the two areas and personnel. So I think it's a combination of clear portfolio choices playing through your strength and where you see the market need is and also making sure you do it in a locally relevant way. Because for health sessions you need, of course, to be fully locally local manufacturing. And actually, that's what we have been ramping up. But we also use it for vision. So actually, we have innovation centers in China for China, but we also use some of the innovation for our side and especially where you see that U.S. they are developing AI more horizontally.

China is going very deeply vertical. So actually, if you look to vertical AI applications, the as and we use some of that kind of knowledge also to use them across the globe. Spectral.

Yes. Thank you for your question. So when we talk about photon-counting or spec CT and all that, I'd like to just ask you to take a step back and think about what problems we are solving, right? So with CT is a Swiss Army Knife when it comes to imaging than when a patient goes into an emergency room with a stroke or heart attack that's CT that's at play. So that's the imaging product that speed matters so much, right? And so when we think about [indiscernible] that brings a lot of potential down the road and all that, it's not yet ready for that kind of high throughput and high demand clinical environment yet.

But it will come, and that's why I would say that we are very experienced in spectral imaging, which Photon counting is also spectral value design. And we are working towards all the different angles when that comes, that's why I say the Spectral Photon Counting is next. When that's ready, we will go do it. However, Photon counting is a very powerful technology. There's another massively powerful technology in the world today: AI. So that's why with all our experience with respect to all these years, we put AI into the image chain, starting from the detector, every step along the image construction.

Now we are making the difference. I mean you probably took notice on the page I showed we're reducing 80% in image noise, reducing dosage. We're improving the detectability in the images. So when this AI-powered spectral product that comes out is named [ Verita ] it actually has CE marked the very first installation is happening right now in Madrid. And we will have -- we are seeking 510(k) clearance. We will get into other markets later this year. We think we have the solution today for today's clinical needs in CT.

And so I think you also asked a question on price difference, right? So the Verita it's a premium CT product. It's in the range of about $1 million to $2 million-ish let's just say midpoint in different markets, different price points and all this, let's say, roughly about $1.5 million in the middle. I think Photon company, I think, doubles that. right? So when it comes to providing what every customer needs in every clinical practice and not crashing down their pax machines and they can access the information, go straight to the diagnostic answer on their workstations and at a cost competitive point, I think we have the right solution.

Okay I'm going to the other side of the room. Richard?

Richard Felton from Goldman Sachs. First question, I guess the theme of some of the presentations has been improving commercial execution and how being a driver of the acceleration in growth. If I could push you for a few more specific examples of what that means? What are your sales teams doing differently, how incentives changed? Just help add some color to that as a driver for the improvement in organic growth?

And then second question, Jie, I'd like to hear more about what having Helium 3 Tesla means for the overall MRI portfolio and growth. How big is that segment? How fast is it growing? What does it mean for margins?

Thank you, Richard, and let's maybe take an example from monitoring on commercial excellence because I think one of the things that we have been seeing, how we actually have dialed up commercial excellence effectively is very much in the monitoring space. As I said before, traditionally monitoring was growing low single digit. We actually have been significantly putting it up.

Now of course, that's based upon the needs that we fulfill, you see that customers have different expectations now what a platform does for them. but also has done or was together with commercial excellence. So maybe, Julia, you can share a bit of what you did in the monitoring space to kind of develop commercial excellence.

So first, market is changing over time. Our customers are looking for a standardized and enterprise approaches, and our portfolio delivers exactly to that value proposition. So that's number one. Number two is their expectation is that it's safe, reliable and cyber secure. And given that value proposition that we bring into the marketplace, it allows us to deeply penetrate that needs our entire customer base. In addition, we have done a full redesign from an organizational design standpoint to make sure that we're bringing that value proposition to market with strike and force, and it starts from way upstream to the -- what I call the last month.

So way upstream is really understanding our customer at our core, the segment, how we're targeting territory management, all the way down to predictable funnel dynamics, as I was saying, we're using AI for high-level predictability of our orders to order book to revenue conversion all the way down to the last mile and how we continue to serve our customers at a given touchpoint and cadence that allows us to seamlessly deliver our as-a-service model, continually to our customer base.

the question on [indiscernible]. I'm a MR person for more than a decade. I was super, super, super excited by this breakthrough technology, right? But I would like to just request your -- like have temporary excitement when it comes to the financial, in our numbers. Because we said like we said that, that product is announced. We are still working on getting it to the market. And then we will also get to clearance and all that.

So -- so it will actually probably help us in terms of orders and revenue toward the latter part of the planning period and MR is an expensive equipment. So they will actually even there from order to sales cycle is a long one as well. But I would say that we have so many excited customers. They are queuing up when they have a new hospital build, when they realize that they don't need to worry about putting the ventilation pipe, they can place the scanner next to where the clinical area is, like it totally changed the ballgame.

So we have just a lot of customer excitement, but I'm also tempering their excitement just like what I'm doing here now. And -- but we are super, super excited. And once we complete that step, we will -- because our entire 1.5 customer product is already [indiscernible]. And now once we move that step and move entirely 3 Tesla to helium free, we can get rid of all those expensive Helium related things in our factories and every step along way in the manufacturing all this will tremendously boost the margin.

And from a size perspective, like 3P is a very sizable segment, especially if you [indiscernible] professional systems. So one of the -- is that because that's kind of in terms of sizing. So 3P is actually a very strong segment in terms of volume as well. So one of T is finding its way into specific segments where how volume is important, but also in every day clinical use. But you see the 3T, especially also when you're having the growth in the new MR examinations with the latest imaging needs, you actually see that, that's a core backbone of professional hospitals.

So the segment size is actually is bigger if you look to addressable from 1T. So actually, in totality, we will think it will cover 80% of the market. And therefore, also as said earlier, we will be helium free, therefore, just after the plan period in totality of our portfolio. So that actually will make us a very play and stronghold because that is where the industry is going, and we set the industry standard in that space.

It's Aisyah Noor from Morgan Stanley. Two questions from me. The first one is for NT as well, specifically the precision diagnosis guidance of low to mid-single-digit growth for the midterm. I noticed this is quite conservative in spite of the very full pipeline and some of the product launches you talked about in MR and CT I think you partly answered the question with the helium-free or 3T, but could you maybe talk more broadly about what buffers you've put in or what downside risks you built in for perhaps competition, pricing erosion in China, et cetera.

My second question is on Personal Health, the margin guidance of high teens over the midterm. You've just finished the year at 18% margin. So already pretty much there. So would you call this a conservative guidance? And if indeed, most of the uplift comes from premiumization, could you share how much of your market opportunity today is premium and how much conversion opportunity there is?

Yes. Thank you. Let me start, and then I'll hand it off to Jay and afterwards to Dieter. So let me start with your question on D&T sales CAGR, which is leading up from low single digit to mid-single digit. And indeed, Jay already dutifully answered that earlier. If you look at our pipeline, we are very excited about the innovations that are in our pipeline at this point in time.

We have the 3 TMR. We have [ Frida ] have ultrasound innovations. We also have, of course, Azure and I. But those will come into the sales a little bit later in the period.

So as you know, the order to sales conversion cycle is actually quite long in some of our products, as you know. So that will take a little bit of time. So we are super excited about the innovation pipeline we have.

You just heard both Jay and [indiscernible] but it will just take time to convert that sales and that, in combination with our strong commercial excellence and well, Julia highlighted an amazing example in monitoring in D&T. And we are also very much focused on visibility, and how that can increase win rates. And that is also very much helping already to increase the sales conversion and that will do so more over time. So maybe, Jie, I don't want -- if you want to add anything to that?

Yes, thank you very much, Charlotte. I mean, like I explained, it's a long-cycle business when it comes to product development, right? Then after that, it's getting regulatory clearance in the major markets 1 by 1 and they all take time.

And once we get had that and the customer -- I mean these are million-dollar equipment. So the budget cycle, it's not like there's all these -- that's why I think it's -- there's a long lead time. And in addition to what Charlotte mentioned from orders to sales, the conversion is 9 to 12 months. So that's why I'd love to want to see it sooner, too, right?

Thank you, Jie. And then on your question on Personal Health, we are obviously very pleased with our margins for Personal Health in 2025 in Q4, particularly significant margin expansion. And I remind you again, despite tariffs. Now what I said this morning holds true for Personal Health as well. We want every business to continue do better, including personal health.

Now Personal Health, what are the key drivers there? Of course, first, their sales growth and the related operating leverage. There is, and Deeptha maybe comment to that a little bit more, the continued premiumization of the portfolio, that is also helping drive both top and bottom line growth. There is continued productivity which spoke about for instance, the GI-generated marketing content, I think you saw a video of that actually today as well, also driving productivity. And then there is, of course, continued tariff and productivity just in general.

So Deeptha, do you want to add anything?

As Charlotte mentioned, we do believe with our 18% margin, we are already some of the strongest in the industry and yet have opportunity to grow. And that is a pretty broad-based opportunity. Our NPIs allow us to have better price realization. We are also investing to grow the premium part of our portfolio mix more deliberately. We'll also see some favorability from our market mix as developed markets like North America and Europe continue to be quite resilient in our mix. And we continue to have productivity gains in how we do everything from R&D to operations to A&P.

Having said that, we also want to make sure that we're very disciplined in our first task of continuing to drive recruitment. And that does mean we will continue to invest in advertising and distribution gains to bring more consumers in and keep the flywheel going both on the top line and at the bottom.

Maybe last point just in terms of our planning philosophy. So I think you know us by now that we want to be realistic in terms of what we put out so that we deliver on it. What you heard very clearly is that we are set out to continue to deliver our improvement path. .

So we don't count ourselves rich. So if we don't have regulatory approval, we put in their clarity in terms of, okay, this will take some time. If we have uplift somewhere else, we will take it as it comes. We also learned from the first plan period that the world is not a very predictable place. We have two more wars since I started. We have kind of a lot of turmoil, we have tariffs.

So we want to be also having some room that actually we can absorb what comes in a world that we cannot predict for the next years. So we are set out and the plans underpin very clearly what we have showed you, we will be able to deliver with a portfolio of innovations that we have launched in 3 and 5 -- there are new innovations coming that we showed you that we're extremely excited about, like Zurn, like 3, but we don't count that they start to contribute from 26 onwards, right? So we have taken a measured approach in terms of when they start to kick in. and then, of course, start to first kick in with orders and then to sales. So I think that's just also to continue on our part of staying on our feet, being realistic and deliver what we say we would do.

Ed, I think you had a question. So if you raise your hand. Please?

Thank you, Ed Ridely-Day. With you, Ross Colin. ITT continues to grow very strongly. If we could just go to a bit more detail. Firstly, on ibis, it's become a very important technology for interventional cardiology. If you could give us a bit more color framing the opportunity and the size of that business for you and the growth, that would be helpful.

And secondly, a more holistic question. I mean, you highlighted working with Edwards on the new eye. How much benefit is there -- I mean clearly is benefit. Can you sort of give us a bit of a guide on other companies you're working with and the benefit to the longer-term business profile from that? So working with the leading international companies?

Yes. Yes. Great question, Ed. First, on is Iris has been around for a long time already, but adoption always has been slow. And that's specifically in ICT, this market is driven by clinical evidence from clinical studies that we also now do with our devices business that drives the reimbursement.

So Ives has been proven that it has a significant impact on outcomes. And now you see that the adoption rate in the U.S. for instance, has almost doubled. So that is growing, also driven by stronger reimbursement. And we will -- we expect that this continue to grow. Now the aspect [indiscernible] it is that for coronary procedures, you see that these procedures become more among complex. As you saw also from Dr. Ali that they want to know what kind of plaque is there and how can I better treat this patient.

And that's why different intravascular imaging components come in, like we now do with deep OCT and with NEOS. And that's where Spectra is such a great addition to what we already have with digital is, which is still the most ease of use and therefore, market leading, but complemented with for complex procedures, deep OCT and near that you have even a better outcomes for these patients.

So that's where we expected this very strong growth component of our Devices business. Now I forgot your second question partners on ads. Yes. So Again, these procedures are becoming more and more complex. So what we do, for instance, with AdWords and that's that -- and how AI is coming in, that it is helping to even democratize the skill level of physicians. The 2 physicians you saw here in the video are probably 1 of the best skills and the most well-trained physicians in the world.

But more and more access to care is needed for every interventional cardiologists. And with AI, like we do with device guide, we can now detect whether this is the awards pills are mitral clip and then we can visualize that MitraClip in the ultrasound image, which you normally don't see. And therefore, we can calculate exactly the right path to position at MitraClip on the mitral valve and now you can treat that patient much, much easier and much -- with much more accuracy and consistency also for, let's say, the average interventional cardiologist. So that's the impact that it has and you can only do that if you partner with leading companies like Adwords and some of the others in this space. .

And maybe one addition on the partnership proton because I think it's such an important component from our platform play. We become stronger with partners. Why do partners want to work with us. We have the biggest platforms. If you want to be in the interventional space, you better partner with Bird and team because we are the biggest penetrated kind of football and systems.

So it's a razor was play model. If you're a device company, you better be with birth because that's your biggest installed base you can hook into. If you were monitoring, you better are like [indiscernible] orders with Julia because we are the biggest monitoring installed base, right? That's the platform play that we have. If you are the infrastructure backbone and you're open as an architecture, everybody actually can join us makes us stronger, makes them stronger, most importantly, makes a customer benefit because they only have one infrastructure that they have to care about.

They don't have to have all these different integrations they need to do themselves. We can actually take care of that for the customers. That is where the power of the platform comes in.

Do you then overlay that with what AI and software can do, then you'll really get a catalyst of the added value of playing together, right? That's where you see us in interventional in monitoring in imaging, really trying to kind of connect the system that actually is not connected today.

And that's where a lot of efficiency has to be gained to make it more seamless for the clinicians foreign nurses, for the technicians, take their time into where they want to spend the time, also take cost out and therefore, actually give benefits back to the health system and to the patients. So that's a really deliberate choice that we have made with this platform plan of the future is so important.

All right. So I think with that, I'm very conscious that we have 3 guests who have graciously come a long way to participate on the panel. So I think I'd like to invite the North America panel up to the stage, please. So thank you very much, leaders.

Well, okay. I don't know about you, but I feel like that was a pretty inspiring day, right? Now I love my peers talking about our strategy. But honestly, I think we saved the best for last because we're going to have our customers being the one speaking during this closing session.

Today, we're going to hear right next to me, from 3 leaders that are literally world renowned in their ability to transform health care delivery, leaders who put patient and clinician-centric innovation at the heart of everything they do. It's part of their mission every single day. Now who's this guy talking.

I'm Jeff DiLullo, I'm Chief Region leader for Philips North America, the largest and fastest-growing health care market in the world. And I'm joined on my panel today by Shez Partovi our Chief Innovation Officer and Chief Business Leader for Enterprise Informatics, also a very good friend. So Shez, welcome. Now the challenges in health care are quite real.

They are pressing on health systems everywhere. I often refer to this when I'm speaking with health systems as the triple threat -- we have an aging population where many people need care longer and more care and often more complex care, and we need to bring it closer to home.

Number two, staffing shortages, we know will persist every forecast will say it will continue to get more challenging and costs are exorbitant and they continue to sort. So this place is incredible pressure on our health systems. And I think you have heard about it all day about how we're trying to drive it.

Now additional balance in the U.S. is that we deal with a very complex reimbursement policy that actually amplifies the effect of that triple threat. So the headwinds are significant for sure, no doubt. And yet, we have massive opportunity to make tangible and meaningful difference with innovation that we bring to market.

We also know we can't do that alone. Innovation must serve clinicians. It must be embedded in the workflow that our health systems deliver for their patients. And this is where innovative partnerships are an increasingly growing and meaningful path forward for the industry.

So I introduce our panelists. We are joined today by 3 health system leaders who bring incredible innovation to their clinicians and to their patients every single day. These leaders are literally jumping the curve on delivering better care for more people.

I'd like to introduce Jody Paul, Chief Nursing Officer at [ BonteCors ] Mercy Health; I'd like to introduce Dr. Neil Patel, Chief Information Officer at Vanderbilt University Medical Center; and Nader Maravi, Chief Digital and Information Officer at NYU Langone Health. Thank you all for being here. We're absolutely honored by your presence.

I also know this room really wants to hear from you. So I think we should get started. Let's -- maybe we'll start with the first question on how you've seen the industry evolve. Maybe Jody will start with you. So how have you seen it evolve maybe since the pandemic?

Yes. Thanks, Jeff. So really, in North America, we're at a critical inflection point -- and I think you heard a lot from Roy and the team this morning already that talked about the aging population, the reimbursement changes.

And I want to emphasize that and go a little deeper. We are at significant shortages not only in nursing, but caregivers across America. And Secondly, the aging population guys, we're seeing sicker patients coming into our facilities. We are seeing the comorbidities are incredible. So all this put together have been a nurse for 35 years and nurses take the burden of a lot of this.

So the challenges are real. It is their folks. But the good news is we are seeing that we're willing to make changes. We want care delivery changes. We want a partnership that will help us get to those care delivery changes.

That's great, Jody. Thank you. Neil, how about you? Your thoughts?

Well, everybody knows that the cost of health care, especially in North America, is exorbinantly high for a variety of reasons. They were all talked about previously. But as Jeff said, the other compounding factor for us is that we provide are cotton advice whereas the vendors can raise their prices when their costs go up, our cost per labor go up, our cost for supplies and drugs go up, but reimbursement space flat.

And so we're in that compression, so now more than ever, we have to deal with how we leverage our labor in the best possible manner, not just because of the shortage, but also we can't hire any more and afford it. The second part, how do we make best utilization of our drugs and our supplies to lower the cost per encounter.

Right now, more than ever, health systems are relooking at technology not as an adjunct, but as an imperative to really address the cost issues within health care and allow our folks that are at the bed side to do what they do best and take away as much burden as we can while delivering high-quality care.

[indiscernible], you have thoughts -- just as Cole said, there's a lot of challenges in health care delivery in North America. On the other hand, painting a rosy picture. We deliver exceptional care. The quality is quite good, especially episodic. We do quite well. On the other hand, all care is also changing.

A lot of it is moving from the hospital setting to ambulatory the home. So there's enormous opportunity about how we can use underlying technology, including AI to improve care delivery in that setting. And I'm just very excited about how we can really improve care and reduce the cost and provide -- continues to make the best improvement. And longevity improved.

If you look at the past 3 years, -- it's an amazing story to tell about how we improve the quality of care, the treatments and the longevity, both men and women in the North America. So like you think firsthand directly from health systems, the pressure that they're under to deliver more care, deliver high-quality, better care while there's not enough staff shortages everywhere and under financial pressures.

So maybe, Jody, a question for you, which is, so you have to do more with less. I mean it's the common theme actually everywhere in the world, but certainly, this is the life you love. So maybe you can give us an example of how you've been able to do more with less.

Sure. So I'll talk about Project Voyager. It's probably my clearest example, and you guys don't know what that means, and I'll tell you about it in a little bit. But I'm going to take you back to 2019 when Bonar and Mercy Health merged, they came together. And as nursing, we realized that we had different monitoring across 49 sites of care. Now why is that important? Because I have 100 nurses at the system level that go to all 49 sites of care. .

I have nurses in the market that hit 8 different hospitals. We're creative with that staffing. So we wanted to standardize our monitoring. So what we do, we went to our frontline staff, which monitor do you guys want. We brought all different kinds of monitors in. We let them touch them, feel them, what's user-friendly to them. And as you saw today, who is your #1 in monitoring Philips, who did miners choose Philips.

So we started our partnership back then. We started buying hardware. So every year, we buy hardware for different hospitals. We realized that we needed software, too. And then we needed data. We needed intelligence. We needed all of this. So [ Present Weider ] came to be about with a 10-year partnership. So we signed a 10-year partnership with Philips. The first 3 years are just outfitting our facilities with the latest and greatest equipment. And we've standardized workflows. We've standardized configurations. We standardized alarms.

You go into every one of our hospitals, the alarms are the same. So that standardization allowed for optimization, which allows us to scale quickly. No pilots, we scale. So we're in [indiscernible] 1.5 years into this 3-year with the 10-year partnership.

Terrific example of doing more with less is the idea of standardizing on a platform, monitoring as an example, looking at workflows across multiple sites of care to be able to improve quality and reduce resource need.

And so the focus on platform may well come to you here because platforms, we hear about bespoke selection versus platform structure, [indiscernible] abstention you probably have this question all the time of bespoke selection versus plateau approach. Maybe you could share with us your thoughts on how you go about doing -- going between those 2?

Sure. So [indiscernible] Health in New York City the metropolitan New York, and it's a highly competitive market. consumers and patients have a choice. There's a lot of other great health care systems. And our real strategy is really provide the best quality care efficient care with low integrate patient experience.

So for that, it's really a platform, we are a platform player because we think that's the best way to make care efficient and high quality -- and as well as one of the platform partners, we have each partnership around both patient monitoring, cath lab, digital pathology, ultrasound and a few other things that I'm sure I've forgotten. But the strategy about really using these platform play and partners to really create a system that is highly integrated data flows, which we'll talk about later about how that's important and then she could provide the best quality and then reduce all the legacy systems costs.

So when we buy a hospital practice, we really replace all the system with the platform systems, all highly integrated, and that delivers the best practice of medicine on top of that platform, and it provides the best outcome for our patients. So it's really important to build it up like legacy and then you can then spend the money and time with a partner on innovation and innovate on that platform because you can scale.

So this is good to have nursing in the bed set, this is platform face critical patient care. And then you have sort of running the back office back running the entire infrastructure from Deep Digital Officer perspective same platforms import.

So no matter who the person is, I want to come to you because as CIOs go there also a physician, maybe get your thoughts on this platform approach as well.

Well, it's interesting, you used the word bespoke. That's a very fancy term for basically shiny toy. So at Vanderbilt, as an academic medical center, we had a collection of many, many shiny toys, and we could afford it back then, but we can't do it anymore. And we had to begin to consolidate around core platforms, mainly for the reasons that were already said, leverage our resources in the most optimal way and scale because a lot of times what happens is when you have the spoke solutions -- they work in their niche areas, but then you cannot scale them at all.

And the resources to continually implement individual little solutions is just too heavy for a health system. There's a soft place to my heart for fellows, the critical care physician and I've relied on Philips monitoring from the past 35 years. And it was important for me to see that for the longest time, the data state trapped in the monitors and or the central station.

But as I got into informatics and really expanding the use of data across the health system, working with Philips, we're beginning to leverage this data in ways so that individuals are no longer at the bedside still need access to data.

You can't just rely on being physically present to the bedside or on the nurse station or you want to be anywhere. And as the video showed, that's how the world is becoming. And what we want to be able to do is leverage these platforms so we deliver the right data to the right person with the right insights to make the best decision possible.

What a terrific 3 parts of the story. So clinical side platform scales, clinical operations, back-end operations, if you will, the infrastructure operations, platforms helps to then use a keyword scale. For having insights at scale that helps deliver better care across the organization, platform, again, plays a role in that approach. I do what I want to come back to -- maybe give us specific details and examples of where Philips has actually helped.

Absolutely. So as you guys know, monitoring is so important in our facilities. And the alarms have to go to the right person at the right time. So part of Project Voyager, Philips team came in clinical team and looked at our workflows, looked at our processes and helped us make meaningful recommendations across all of our facilities.

So you guys may know, metric-wise, leads off and Battery Dead as the #1 and #2 serious safety events that occur and cause harm to our patients. So that piece around quality and cost. The second piece I'd say, around cost, Philips came in, we went from 10 domains, down to -- or 50 domains down to 10 domains. So we're saving our IT footprint, decreasing that. We decentralized our monitoring. So like Neil talked about the alarm is going to the right person at the right time that they can do something about it in the right moment.

So back since 2022, we have decreased our serious safety events. This is quality for our patients by 39% and -- and since we went live with Project Voyager in those facilities, we are at 0 serious safety events. That's where the real work is done, guys. This is all about our patients. It's all about ensuring the high quality of care.

So I mean I can't let you off the hook. I will come back to you one more time, maybe your assessment of some metrics and measures you were tracking where the platform approach with Philips helped improve.

I can't -- it's all about the patient. But as a physician, it's also all about the clinician and making my life easier as really important. Let's talk about these platforms and how technology really needs to impact current workflow. And I'll use an example from the consumer world. I recently took my car to be repaired and they gave me a loaner car and lo and behold, it was the latest brand-new BMW.

And one of the things that I noted as soon as I got into that car is that car had bells and whistles around it that responded to the situation and made me a better driver and that was amazing. And I think that's hopefully what you saw a sense of with the technology that was displayed today, it's no longer that the clinicians should have to use the technology or forced to use the technology or have to fight with the technology.

It should be that they are surrounded and wrapped by the technology to make them a better clinician as they go and give them the confidence to deliver the best care possible. And what we're finding is that the more technology advantage that we infuse into the workflow and have people begin to see that their work life is better that their burden is decreased and they're not as frustrated any longer.

Those are the keys. And so really, as we continue to focus on these platform plays, it's important not just to put in a platform but it has to wrap around the clinical workflow to deliver the best patient care and ultimately best outcomes for our patients.

Okay. So this is a lot to unpack here. So what I've heard is shiny toys are fun and interesting, but unhelpful. To clinical teams that are really trying to do meaningful work. So point solutions to a degree, just don't work. It's about enterprise platforms. It's about simplifying how I collect data and AI and analytics and technology, how -- and Neil, you said it best, I think right now, how do I integrate that into the workflow and it make it serve the workflow, not make the clinicians have to adapt. I think that's powerful.

I also heard in her interoperability made. We talked about interoperability, being able to integrate that data across departments so that you create meaningful insights and action orientation on that patient journey. And what I know to be true is you were doing this from hospital all the way to home so at scale.

And now you have the ability to harmonize that data and actually make it actionable. And that's exactly what we're trying to get with our long-term strategic partnerships. That's why we're so heavily vested here because what matters is that we help you unlock this hidden productivity around your staff workflow and, therefore, patient outcomes.

We believe better workflow equals better outcomes, better outcomes for patients, better outcomes for clinicians and better outcomes for health systems that are trying to do more of what they love to do.

I take out of this last section also requires partnerships. You can't do it all along, right? So let's talk about partnerships for a second. I hear a lot, deep partnerships matter. We're going to talk -- we're talking about that in terms of our strategic partnerships. And yet at the same time, it's not only a trend, but it's a necessity to standardize those platforms, you've got to make choices.

So maybe I'll start with you, Jody, Interesting to hear your perspective on, say, since the pandemic, how have you seen the partnerships evolve?

Yes, they've changed a lot. We have -- we're moving at a faster pace. We know we have to fail fast. And our partner needs to co-own those outcomes with us. They got to be partners. And so we want fewer partnerships, but we want deeper partnerships. So I think Julie said it best. So we went at the data, the intelligence and trust. We've got to remain in that trust and have that deep, deep partnership.

So Philips has always been great for me. They understand my goals. They understand my company's mission and they understand and give me meaningful recommendations.

That's fantastic. So again, you got to -- being able to be in deeper partnerships, you can open it up and not waste resource on many things you focus on a few big ones and go deep. That's good. And so I also know partnerships just like everything else has to evolve over time. It has to be different.

And so Neil, maybe I'll ask you your thoughts on the partnership with Philips and how that's evolved in your tenure.

Well, as you know, Vanderbilt had a long-standing partnership and imaging for a long time. But obviously, lots of Philips products are used at Vanderbilt. And I think Roy probably wins is it the first time he met me. He was not in this position yet, and I laid down some frustrations that we had and basically, the issue was Philips wasn't listening.

It was very hard to get their attention. All they were doing was trying to push product instead of actually listening to what was needed at the bed side. And that's what I've seen evolve over the past 5 years. It's been amazing to see the cultural transformation to not only listen to the customers and not just tell us how great their product was and that we should be grateful to use it.

Beyond that, they're listening to not just what the needs were, but how to work with us and take that feedback. The other part is, as you work with us, let's do it together and not just make it a customer client -- sorry, a vendor-client relationship.

Let's work it because our core mission here is not only to make health care better but it's to save lives. And at the end of the day, when we're focused on that, then it's about using the right tool in the right way. And that also involves the fact that Philips is opening up before they didn't work very well with other vendors.

And so you were stuck with CG systems that we would have to figure out how to intercept by ourselves. And now they're completely opening up in a way that we can integrate them more seamlessly, and that gives us a great amount of excitement.

So this transformation has been extremely welcome for Vanderbilt, and we are truly excited to see where we can go.

All right. So that's -- so I hear a few or deeper. I hear trust being a big thing coming alongside clinicians to really understand the workflow, interoperability is a theme. And in the end, as much as we all love to partner, you need to drive impact. And so later, maybe I'll ask a question to you, we'll go click it a little deeper. The relationship is important. The partnership matters, and then how do you see Philips driving impact for you, whether that's clinical, operational or maybe financial.

So as I mentioned before, our partnership with Philips around both it's quite vast monitoring digital pathology, cat lab and so on. Just one example around digital pathology. So how do you define ROI in a health care organization where we are a teaching health system. It's really about value. So value is really about quality, safety and inefficiency to make sure it takes better. So when you look at digital pathology, for the past 100-plus years, pathologists microscope to actually read slide of samples. And that hasn't changed.

Now we have hard time recruiting shorter pathologists. We are to recruiting and making new resident excited about to go to the field of digital field or pathology and then it wasn't efficient. And also, there was a quality and safe feature that related to there's -- we do about 1.3 million specimens a year. So it's a high volume throughput -- so with digital pathology, it's really given an opportunity to home in on all the venues of value.

One is making the care safe by using AI once we digitize all the pathology the span of 18 months, removed out that microscope and everybody can be digitally just like radiology. That's high value. Now we can use AI and then marry that data with electronic imaging type data to really provide a lot of value in our scientists. We love the rich data ecosystem that they can do really medical science.

Second is we can have a very fast and around time to deliver the samples, so to make the care better and safe. Thirdly, it really allows us our pathologists were shortish to be able to run word cloud balance to read 1 day now from home remotely, that allowed us for retention.

And now we can also hire pathologies around the country to in REIT for us and be credential. And then just to feel the pathology, we've made a much more attractive for a new generation to actually go in to field a pathology because it's definitely new, it's much more digital. So all these values come together to attach hardware as and that's where we are with the Philips as a platform, again, to really do that. So that's how we look at things.

Right. So what I'm taking from this, it's really a remarkable transformation that we've seen you do as you've created the platform that speeds diagnostics for better patient outcomes, much better clinical well-being and quality of living, recruiting tool, in fact, for the next generation of pathologists and building AI stacks on top of that, either of you -- any other ones the idea of this is a platform in the partnership where you see it building.

I do think that combining data that Philips has with data that has been other parts of our ecosystem together to create a common view, and I think Roy spoke about it well. At the end of the day, clinicians, nurses, everybody wants to know what's going on with the patient.

They don't want to know just what's on the monitor or what's in the or what is somewhere on a piece of paper. The more we have a way to integrate those solutions, the better -- I think that's where the journey is. And really what Julie spoke about with Connected Care is now more imperative than ever.

And from my perspective, we started with Project Voyager. We now have -- we like to call our projects Project Marvel, which is our imaging, so a 10-year partnership with imaging. We're now looking at fetal monitoring. We're looking at ECG. So it's that trusted partnership where we can keep building on improving and increasing those.

Yes. Great.

So when we sort of listened back here, we're talking about platforms first and then we talk about partnerships. It's a really important context because platforms to us is not made in a lab and thrown over the fence at our health system partners that are sitting here.

We build it together with them and what he's hearing is it's important for us come, listen and we do and to work backwards from the bedside. You heard Burt talk about Azurion, and he listed all the icons of the organizations with which we are partnering to build Azurion.

It's not that we build it in open and then see who wants it. is that we build it together, and that platform is designed so that it fits hand in glove to the pain point that's being experienced to automated procedure to automate the Azurion lab, the cath lab that you talked about. So this is an important point that we talk about platforms, but it's done in partnerships together with health systems.

So now we've sat here for a good 20 minutes in the word AI is only come up by twice. So we got to double-click on that a little bit. So Neil, I want to come to you and maybe talk about as you look at -- there's a lot of expert I'm sure you've got experiments.

I'm sure everybody hears our experiments with artificial intelligence over the past year. And how have you been able to extract value with AI in your organization and how you navigate -- the first thing is automatically to lead an e-mail from a vendor that says AU and that's result in an extreme value but seriously, -- we all know everybody says that AI is going to do its magic, and it's going to solve health care and make all of our lives better. But the question is how -- what does it depend upon?

Because if you don't know the mechanism with how you're going to get there, then you're really in trouble, you may be just doing more experiments and trying things and seeing what sticks to the wall, but you won't get anywhere. And right now, we don't have those resources to waste. We don't have those dollars to waste. And so 1 of the foundational things we need for AI to work is that it has to work on good data. And it has to work on data that is easily available. And part of the trouble in health care is a lot of times data is either in different systems that is not easy to get to or it's quired away and completely impenetrable.

What we focus with Philips on is to gather that real-time data and as was shown in Julia's presentation, how do you take that real-time data with all the work that's already been done with electronic health records. So now you have all the charted data and the historical data of the person patient and bring that together in a way that the clinician is not just getting an alert on what's happening right now, but it's actually an alert with context of what is important about the patient.

So yes, sometimes a normal value is normal, sometimes a normal value is abnormal, especially in pediatrics. And so to be able to have context of each individual patient so that we make the right decision for this patient versus that patient instead of just applying a standard approach to everybody and hope 75% of the patients do well is just not okay.

And so what we hope is to bring as much data together with the focus of then every encounter, every decision being personalized in context to that situation and to that patient of enter build. And that holistic view of getting it back into the workflow is where we're going to have the impact on the promise of AI.

There's a -- thank you. This is such an important point. Every presentation you've seen today starting from rows in the morning, and he showed you one slide where there was the imaging interventional and monitoring box and hardware on the bottom and then he went to a data platform for data orchestration that they went to AI and you went to workflow and patient impact. .

You just walk that journey and whether it's in monitoring. You saw J's presentations going from before patients enter as a department where then they sit on the cities line with CT scanner and the AI helps to put them in the scanner to the MR and then to afterwards postomat processing, all the same journey, data, even in the Azurion platform, going from data of the patient to go into insight having honored the procedure.

This is the mission that we're on to go from interoperable data to data orchestration to AI and top that, as you said, is meaningful.

All right.

Sure, if I could follow up on that. I mean, we went to in [indiscernible] to hear all the propaganda. And we were actually blown away with what Bert's team was doing with the image-guided therapy. And even though it may just look like slick videos as a clinician to see the tool you can anticipate how it's going to improve your workflow, where if you're guiding a wire through a vessel in real time and the system overlays the image of the organ that was completely from a different time period, but shows it to you in real time so that it can help you guide your vessel.

That is magic. And that level of confidence to be able to make everybody that much better interventionalist helps all of us. because not all of us are going to be able to go to New York City to have the best. Okay. Some of us .

That's an inside -- an outside joke. Okay, Jody. Thank you, you deployed a lot of technology over the years. So what makes something scale and something fade away?

Yes, it's so important for clinical folks to be sitting at the table as IT decisions are made. And we're looking at those workflows, those processes -- and then in regards to sustainability, which alarms are making sense, we have a warm committee, a system alarms committee, and the measures will say, we're getting too many alarms at this point. We'll pull the data because now we have all this data coming in, and we can make changes in some of those alarms, the configurations. So having those clinical folks partnering with IT and closely connected, I can't say enough about how that works really well.

You grew quite.Your thoughts on this. .

And think about how the best scale takes in New York City as [indiscernible] fancy. So Look, we've been digitizing health in the past 20 years. And I think that we have accumulated so much data on every interaction and how as we generate so much data. So we think about all the industries how as one of the beneficiary of AI evolution. There's no mistake about that.

But on the other hand, a lot of AI pilot sales because people don't have their data together. And that's why this cost platform is very important because if you don't have good data, you can use AI models. And the other piece of my colleagues saying, AI miles has to be used on good data, operating good data, deliver timing insight as part of the workflow for clinicians and if a patient experience for that matter.

So that it matters. So that's very important. So we're adding new data together, just the way we're doing with digital pathology, for example, to work with Philips and Amazon AWS pushed the data into Amazon [indiscernible]. So it's available and we can use that in a timely fashion.

The process is very [indiscernible] successful AI program in health care. But we are very is about AI. We really think that partnering with all the key partners in the platform that really enable us to really leverage the evolution of health care.

You mentioned AWS just wanted to maybe add 1 point that we, at Philips also partner with technology companies. You saw Roy talk about that and in some of the presentations, AWS NVIDIA. And so in order for us to be able to leverage the best AI out there the whether it's frontier companies, whether it's infrastructure companies, but to be able to deliver value to you at the fastest pace, we also don't reinvent the wheel.

We will leverage partners who then serve Philips so that we then partner with you to then serve patients. So that is a sort of daisy chain that goes along.

Jody, I'm going to come back to you. So Platforms, partnerships. Actually, we go to Neil first. I'll go to Neil first because then I want to end with you because I start with you. [indiscernible] is a partnership. So as you're a CIO, you have to pick word invest. So how do you navigate understanding the imports of our road map to the way you invest.

So I think one of the most important things that has to happen is for you to anticipate what's coming and how you as an institution to be ready because -- no longer is it that you just buy something off the shelf, come home in your hospital and just plug it in and it works.

It might work, but it may not scale. And so understanding where a vendor is going with their road map allows you to know what adjustments you have to make or what choices you may have to make in your underlying infrastructure or in the type of talent you may need to recruit go forward.

I think having that opportunity to look at a road map and be able to then share in it and potentially influence it. There's a lot of times that we may know something that is truly needed that is not known I spoke about going to in oven earlier in the magic that we saw.

But what was most exciting for me is how interested the team there was on what our thoughts were of where their tool to go could go -- and I think that sort of relationship so that you can truly meet the moment is essential. We need these tools not to be single threaded. Everybody is trying to get out of silos. Now it's more important than ever with medical device is just the same.

And so having whether the data flows in connected care or the devices all work together between vendors into a seamless workflow for the clinician. This is where we need to go, and I've been waiting for it for a long time. I think I only have about 10 years left of my career. So let's get going.

Jody, we're going to come back to you and finish with you .

I probably have about 10 years left, too. So I was so fortunate to be able to take an interdisciplinary team to Cambridge and wow, did we get to see the innovation folks with Philips and they got to meet our folks -- what was really good about it is we got to see what's on the horizon. But more importantly, they've got to understand what bothers us every day.

Don't solve for a problem that's not bothering me, saw for what is bothering me day in and day out. help make my nurses smarter, give them a copilot, give them the AI that's showing them, here's the labs, here's the rhythm. This is what you should be looking at. That's what we need. So again, don't need to partner, but helps me solve the problems that are every day.

And we will end with that later, what you heard today was the ground truth of the pain point of health systems and how they are asked to deliver better care, deliver more care with limited resources with financial constraints, and they rise up to that challenge every single day.

And the way we want to help them deliver better care for more people is by building platforms and monitoring, imaging intervention that's supported by incredible software assets and services so that you can do the work you do. And the way we do that is by focusing to partner with them, to listen to the patient physician interaction to the patient nurse interaction to the IT and digital leaders of what they need in order to be able to deliver high-quality care that's tied to scale, and that's the mechanism which Philips uses to innovate going from the bedside backward with partners.

And with that, I want to thank each of you for the work you do for the patients you care for and for joining us today, traveling all this way to be here. Thank you so much. Thank you for listening. And I'm going to ask you or to come up and close this out. All right.

It has been a long day. I hope you're still full of excitement and energy as we are as we could share the story of where filers has come from what we worked on in the last 3 years, which was building this strong foundation reenergizing our innovation engine, but also now accompanied with the culture and the execution power to really bring this to life with our customers to make a true impact in delivering better care for more people.

As we see today, as you hope we saw from the team this afternoon, we have a very clearly underpinned plan. We know what we are after. Mid-single-digit growth, mid-teens margins, strong cash generation and consequential improvement through Philips by delivering on what we said we will do.

We have 65,000 more colleagues who are extremely passionate to deliver on that mission every day. So I stand here with pride and confidence that the plan that we have, the future ahead is an exciting one, where we can truly make an impact for patients for our customers for consumers, but also for the ones that believe in us and invest in us, our shareholders.

So thank you for your attention, for your time spent today with us. I know it's precious time I hope we made it worse. Of course, we have still some opportunity now to engage, but thank you again for coming over and enjoying our Capital Markets Day. Have a great afternoon.

Welcome to the Philips' Fourth Quarter and Full Year 2025 Results Conference Call on Tuesday, February 10, 2026. During the call hosted by Mr. Roy Jakobs, CEO; and Ms. Charlotte Hanneman, CFO, all participants will be in a listen-only mode. [Operator Instructions]. Please note that this call will be recorded, and the replay will be available on the Investor Relations website of Royal Philips.

I will now hand the conference over to Ms. Durga Doraisamy, Head of Investor Relations. Please go ahead, madam.

Thank you. Good morning from London, everyone. Today, we will start by reviewing our fourth quarter and full year 2025 results, followed by a short Q&A session. Then at 11 a.m., our Capital Markets Day webcast will begin and run until 4:00 p.m. You will hear from Roy, Charlotte and our Chief Business Leaders as they share how we're driving profitable growth to deliver sustainable value. The program continues with a North America-based Philips customer panel, providing real-world customer insights. Roy will wrap up the day with closing remarks and key takeaways.

The press release for both events was published on our website this morning. The replay and full-time script of the webcast along with the presentation and transcript for our Capital Markets Day will be posted within the next 24 hours. As always, I want to draw your attention to our safe harbor statement on screen.

With that, over to you, Roy.

Thanks, Durga, and good morning, everyone. Thank you for joining us today. We have consistently delivered on our commitments in every quarter this year, including a strong fourth quarter, and we are entering 2026 with momentum. This reflects the impact we are making for our customers and consumers, delivered through disciplined execution by our passionate teams.

I want to start with the key highlights for Q4. Order intake was strong, up 7%, reflecting sustained improvement over the past year as we continue to expand and grow our order book, strengthening visibility into 2026 and beyond.

Comparable sales growth of 7% year-on-year and was broad-based across all businesses and geographies and strong contributions from Personal Health and Connected Care businesses continued.

Adjusted EBITDA margin improved by 160 basis points to 15.1% despite the impact from tariffs. For the full year, we delivered strong order intake of 6%. Comparable sales growth as per outlook and adjusted EBITDA margin of 12.3%, exceeding our outlook, and that's despite the impact of incremental tariffs. These results reflect margin accretive innovation, productivity gains and disciplined execution, translating into strong operational performance and cash generation delivered through a performance culture and highly engaged team.

As we enter 2026, we are moving from a strengthened foundation and margin improvement focus into the next phase for Philips, one of profitable growth acceleration with a clear path to mid-single-digit sales CAGR and mid-teens margins by 2028.

Now let's look at our fourth quarter and full year 2025 performance in more detail. Starting with orders. Equipment order intake grew 7%, reflecting sustained momentum over the past year. Growth was broad-based across D&T and Connected Care, driven by sustained double-digit growth in North America.

We achieved a solid full year performance with D&T order intake up 5% and Connected Care up 7%. Order book grew 5% year-on-year with inherent quarterly unevenness.

Within D&T, Image-Guided Therapy achieved strong order intake growth and Precision Diagnosis returned back to growth. Results were driven by strong demand for our high end Azurion 7 interventional platform, the EPIQ CVx ultrasound for cardiovascular imaging and continued successful ramp-up of our CT 5300.

In Image-Guided Therapy, we expanded our relationship with Bon Secours Mercy Health, one of the largest U.S. health systems into a 10-year collaboration, spanning 80-plus interventional labs and reinforcing our role as a long-term partner in cardiac care delivery. You will hear more about this during our North America customer panel discussion at our CMD this afternoon.

Turning to Connected Care. Demand for our monitoring and enterprise informatics solutions was strong. North America remained our strongest growth driver. Integrated delivery networks and large health systems continue to invest in enterprise patient intelligence and cybersecurity, increasingly through our enterprise monitoring as a service model in order to improve the clinical, operational and economic outcomes.

During the quarter, we signed multiple strategic partnerships with leading U.S. health systems, including Atrium Health and UNC Rex. In Enterprise Informatics, we secured a landmark radiology partnership with a large health system in the U.S., standardizing our cloud-based imaging informatics platform hosted on Amazon Web Services across 27 hospitals. This will support more than 4 million imaging studies annually and enable scalable, efficient diagnostic workflows.

Turning to Personal Health. We delivered another quarter of sustained broad-based growth across geographies and businesses. Importantly, this growth was driven by healthy sales trends across markets, supported by underlying category growth, resulting in continued market share gains. Demand was particularly strong for our OneBlade shavers and premium portfolio, including high-end shavers and IPL hair removal devices in Grooming and Beauty as well as the DiamondClean series in oral health care.

In 2025, we accelerated execution of a multiyear road map centered on AI-enabled, patient-centric and scalable innovation platforms across our portfolio. In Q4, this momentum was [Technical Difficulty]. In December, we launched the world's helium-free 3T MRI.

Verida, the world's first AI detector-based always-on spectral CT system; and LumiGuide, the first real-time AI-enabled light-based 3D navigation solution integrated with Azurion. These innovations are expected to support demand, improve mix and contribute to gross margin expansion over time.

In Image-Guided Therapy, we closed the acquisition of SpectraWAVE in January, and I want to welcome the SpectraWAVE team to Philips. Their expertise and leadership in high-definition intravascular imaging and angio-based physiological assessment strengthens our innovation leadership in cardiology interventions, the largest value pool in interventional procedures.

For consumers, at the China International Import Expo, Philips debuted new oral care, grooming and health care innovations, including the Sonicare Prestige 9900 and Norelco i9000 Prestige, reinforcing our commitment to meaningful locally relevant innovation in China. As a result, we enter 2026 well-positioned with strong innovations to drive profitable growth over the next 3 years, supported by a stronger pipeline and innovation platforms designed for scale. We will go into more detail during today's Capital Markets Day.

This year, we continue to make a lot of progress also on our execution priorities, enhancing patient impact and quality, strengthening supply chain resilience and simplifying our operations. Patient impact and quality remains our highest priority, embedded across our businesses, innovation and culture. We delivered tangible improvements in quality performance, including CAPA time lines, significant progress in managing corrections and removals, and we continued year-on-year reductions in nonconformances, complaints and field call rates.

We also continue to address the consequences of the Respironics recall and relentlessly work towards resolution of the FDA warning letter issued last October. We integrally designed new innovations and act fast and comprehensively when improvement opportunities arise. At the same time, we advanced innovation through close regulatory engagement, more than doubling our 510(k) clearances over the past 2 years. Together, this reflects simpler, more standardized quality system that embeds patient impact and quality at design stage, enabling high-quality innovation to support patients at scale.

Turning to our supply chain. We delivered a step change in execution in 2025, building on the stability achieved over the last 2 years. Service levels are at all-time highs and lead times are back to competitive levels despite a significantly more complex global trade environment.

Through decisive disciplined actions, our teams more than offset the impact of incremental tariffs by leveraging productivity improvements, cost discipline and active mitigation measures in the supply chain. With cross-functional teams fully engaged, we continue to strengthen our footprint in North America, our supplier network, but also drive productivity and pricing initiatives as we look ahead to 2026. We are focused on driving disciplined commercial execution with a strong innovation portfolio increasingly oriented towards attractive performance and premium segments, strengthening the order book and accelerating growth over time.

Turning to the regions. We continue to see healthy supportive fundamentals across the markets we serve, particularly in North America, where hospital demand remains strong, but the landscape increasingly is segmented. Rising costs and workforce shortages are reinforcing consolidation among larger health systems. This, in turn, is driving the demand for secure, productivity-enhancing platforms as hospitals face constraints on people and costs, rising data volumes and increasing care complexity. This positions Philips well to continue to capture growth, reflected in sustained double-digit order intake growth in 2025, following double-digit growth in 2024, and we expect North America to remain a key growth engine in 2026 and into the midterm.

In China, tender activity gradually increased throughout the last year, albeit from a low base, supported by stimulus measures. At the same time, the continued expansion of centralized procurement has led to longer processing times and tougher competition, negatively impacting the translation of higher bidder activity into meaningful market growth. As a result, we remain cautious on the near-term outlook for China, while continuing to see attractive long-term growth potential, also in innovation and in sourcing.

As a result, we remain cautious -- sorry, going to Europe. In Europe, capital spending remains stable, while select international regions continue to increase investment in health care and digitization as reflected in strong wins in Indonesia and India.

In Personal Health, sellout dynamics in 2025 remains strong across Europe and most growth geographies. Demand in U.S. proved resilient. In China, cautious consumer sentiment persisted and demand was subdued, although slightly improved from the prior year. As we move into 2026, we will continue to closely monitor consumer sentiment and market conditions across all regions. Overall, we expect comparable sales growth between the 3% to 4.5% range in 2026, led by North America and international regions. China sales growth is expected to be stable.

Charlotte will now discuss our fourth quarter performance in more detail and also our outlook for 2026.

Thank you, Roy. I will start with segment level performance. In Diagnosis & Treatment, comparable sales improved sequentially, in line with our expected phasing, increasing 4% year-on-year in the fourth quarter and remaining flat for the year.

Within the segment, Image-Guided Therapy continued to perform particularly well, delivering double-digit growth in the quarter. Performance was driven by continued momentum in our flagship Azurion platform and strength in coronary intravascular ultrasound. Precision Diagnosis sales were stable.

Adjusted EBITDA margin in Diagnosis & Treatment declined by 30 basis points to 11.8% in the fourth quarter. This reflects incremental headwinds from tariffs, which were partially offset by improved gross margin from innovation and productivity measures. For the full year, adjusted EBITDA margin increased by 10 basis points to 11.7%, reflecting solid margin performance despite the impact of tariffs, supported by improved gross margin from innovation and productivity measures.

Connected Care closed the year with strong momentum, delivering comparable sales growth of 7% in the fourth quarter and 3% for the full year. Fourth quarter performance was driven by double-digit growth in Monitoring and mid-single-digit growth in Enterprise Informatics, driven by robust order book conversion in North America.

Adjusted EBITDA margin in Connected Care expanded 150 basis points to 16.5% in the fourth quarter, driven by operating leverage, improved gross margin and productivity measures, partially offset by higher tariffs. For the full year, adjusted EBITDA margin increased by 110 basis points, crossing the double-digit mark to 10.7%. As part of our ongoing portfolio simplification and focus on scalable, higher-margin platforms, we completed the sale of the Emergency Care business in Q4, in line with the time line previously communicated.

In Personal Health, comparable sales growth improved sequentially, growing 14% in the fourth quarter and 8% for the full year, with all 3 businesses contributing. Growth was broad-based across geographies. China benefited from an easier comparison base following the impact of inventory destocking last year, which concluded in the second quarter of 2025, with channel inventory at appropriate levels at the end of 2025. Adjusted EBITDA margin in Personal Health improved 500 basis points to 23% in the fourth quarter, driven by sales growth and productivity measures, partially offset by tariffs and cost inflation. For the full year, adjusted EBITDA margin increased by 130 basis points to 18%.

Now turning to our group results. Comparable sales growth accelerated to 7% in the fourth quarter, with broad-based growth across business segments and geographies, led by strong performance from North America. For the full year, comparable sales growth of 2.3% was in line with our outlook.

In the fourth quarter, adjusted EBITDA margin expanded 160 basis points year-on-year to 15.1% and for the full year, increased 80 basis points to 12.3%. We are particularly pleased with the continued strength of our margin performance this year, driven by sales growth, gross margin improvement from innovation, favorable mix effect and productivity. This performance more than offset incremental tariff headwinds, which came in slightly better than our expected EUR 150 million to EUR 200 million range after substantial mitigation.

As planned, our proactive and extensive mitigation actions delivered results with measures such as inventory management, specialty programs, supplier network optimization and selective regionalization efforts reducing the tariff impact. We continue to actively work on further mitigating measures, including further targeted localization, and we are confident in our ability to fully mitigate these headwinds through disciplined execution by 2028.

In Q4, we delivered EUR 248 million in productivity savings, bringing total savings to EUR 815 million for the year, in line with our outlook. Since 2023, our cost management and productivity initiatives delivered more than EUR 2.5 billion, exceeding our original outlook of EUR 2 billion by the end of 2025. There is more we can and will go after.

Adjusting items were EUR 179 million in the quarter compared with EUR 286 million in Q4 of last year and EUR 531 million for the full year, in line with our 300 basis points outlook. This compares to approximately 640 basis points last year or 410 basis points, excluding litigation provision net of insurance income, reflecting our strong commitment to reducing adjusting items over time.

Income tax expense declined by EUR 376 million in the quarter, mainly driven by the comparative impact of the derecognition of deferred tax assets in the U.S. in Q4 2024 and the recognition of deferred tax assets in other jurisdictions in Q4 2025, partially offset by higher income before tax in Q4 2025.

Net income increased to EUR 397 million in the quarter, primarily reflecting improved income from operations and lower tax charges. Adjusted diluted earnings per share from continuing operations were EUR 0.60 in the quarter, representing a year-over-year increase of 20% and up 15% for the full year.

Despite significant volatility in major currencies, particularly the U.S. dollar, the impact on our adjusted EBITDA margin and EPS was flat, reflecting disciplined hedging and optimized currency footprint and targeted commercial actions in markets most exposed to currency fluctuations.

We generated EUR 1.2 billion of free cash flow this quarter. This was EUR 85 million lower year-over-year, reflecting a tougher comparison base as Q4 2024 included a EUR 367 million Respironics insurance receipt. For the full year, free cash flow was ahead of our outlook, driven by higher earnings, reaching EUR 512 million after the payment of approximately EUR 1 billion in cash related to U.S. medical monitoring and personal injury settlements in the first quarter of 2025. We maintained a disciplined focus on working capital, delivering a strong year-over-year improvement in inventory as a percentage of sales despite ongoing tariff mitigation initiatives.

Moving to the balance sheet. We ended the quarter with approximately EUR 2.8 billion in cash and net debt of approximately EUR 5.3 billion. Our leverage ratio improved to 1.7x on a net debt to adjusted EBITDA basis from 2.2x in Q3 and 1.8x in Q4 2024, driven by higher earnings and stronger cash balances. We remain firmly committed to maintaining a strong investment-grade credit rating. Our balance sheet remains strong, and we are pleased to offer shareholders the option to receive dividends in shares or cash while continuing to invest in profitable growth.

Now turning to the outlook. We entered 2026 from a position of strength with sustained order intake momentum, improved execution and structural margin, cash and balance sheet improvements, we are well positioned to accelerate profitable growth in 2026 and beyond. We expect comparable sales growth to accelerate to 3% to 4.5%, driven by order intake momentum, innovation and improved commercial execution with all businesses contributing to 2026 growth.

Adjusted EBITDA margin is expected to improve to 12.5% to 13% despite the impact from currently known tariffs and building on the strong margin expansion delivered in 2025. The margin improvement will be driven by growth, continued operational improvements and further productivity, partially offset by the incremental impact of tariffs.

In 2026, tariff costs will be fully annualized, resulting in a net impact of EUR 250 million to EUR 300 million, net of substantial mitigations. This assumes that the current tariff levels remain in place throughout 2026.

On quarterly phasing, we expect a relatively balanced growth profile in 2026. As a result, all 4 quarters are expected to be within our full year comparable sales growth range of 3% to 4.5%, with Q1 at the lower end, consistent with normal seasonality and following a very strong finish to 2025.

Adjusted EBITDA margin is expected to slightly decline in Q1 2026 as operational improvements are more than offset by the incremental tariff headwinds, which were not in effect in the first quarter of the prior year.

Building on the EUR 2.5 billion productivity program successfully delivered in the last 3 years and continuing to focus on what we can control, we are launching an additional EUR 1.5 billion productivity program for the 2026 to 2028 period.

Adjusting items are expected to be around 200 basis points in 2026, down from 300 basis points in 2025, and we remain committed to further reducing them over time. Restructuring costs are expected to be roughly 80 basis points and relate to initiatives to drive cost competitiveness, unlock R&D capacity, enhance supply chain agility and enable central functions to operate at best-in-class cost benchmarks. Other charges estimated at around 120 basis points, mainly related to the Respironics consent decree, field actions, other quality-related and acquisition-related charges.

We expect free cash flow in the range of EUR 1.3 billion to EUR 1.5 billion, driven by higher earnings and lower adjusting items. This is expected to be partially offset by a disciplined increase in capital expenditure, supporting growth and regionalization and higher income tax payments associated with improved profitability.

This outlook reflects an uncertain macro environment and incorporates currently known tariffs. It excludes any effects of the ongoing Philips Respironics-related proceedings, including the investigation by the U.S. Department of Justice.

Now over to Durga.

Thank you, Charlotte. Before we move to a brief Q&A session, just a quick request. Please keep questions focused on our Q4 and full year 2025 results and our 2026 outlook. We will be discussing our midterm plans and outlook in more detail at our Capital Markets Day later today.

Operator, we are now ready for questions.

[Operator Instructions] We will now go to our first question. And our first question today comes from the line of Hassan Al-Wakeel from Barclays.

I have a couple, please. So firstly, Charlotte, for the last couple of quarters, you've been vocal on the gross margin improvement in the business and specifically D&T, owing to a better mix in the order book converting. Can you help us understand how this unfolded in Q4 and how much of a driver you view the mix benefit as a tailwind to your 2026 margin profile?

Secondly, order intake for the full year for D&T was 5%. It would be great if you can help us understand how this differs by modality in Q4 and how you can reconcile this with the expected slower revenue performance for 2026 and whether this could be an element of conservatism in your guide?

Thank you, Hassan. Let me take your first question on our gross margin improvement. We are indeed -- and I indeed have been vocal about that for many quarters, we are very happy with the way our gross margin is developing across Philips. We really see an increase across the board driven also by innovations and productivity as well. And let's keep in mind that gross margin, of course, that's also where our tariffs hit, so that is impacting that as well. So we have been very disciplined in executing across the board.

So if I look at 2026, what I think will -- what we see from a 2026 perspective also in D&T, we see continued margin expansion despite the tariff impact. So that gives you a good sense of that. We also think that underlying gross margin strength will continue to be strong. So there are a few factors in the bridge for 2026 to think about. First of all, of course, we have the annualizing tariffs. That's a headwind. Then we have continued productivity, and I will talk more about that later. And then the third component, as you say, is also the gross margin of innovation impact. So all 3 factors contribute.

And then for the second question, maybe over to Roy.

So if you look to the D&T profile, Hassan, and of course, we were happy with the 5% order intake and the acceleration that we saw towards that 5%. We also see actually order intake momentum continuing. As we said, that's on the back of a very strong North American market that is actually continuing to grow for us double digit in orders. Then we see that if you look to underlying which are the contributors, of course, we have very strong IGT contribution in that mix. We see an acceleration in MR and also ultrasound was a good contributor because we have launched some great new innovations there that have really started to yield very well, including in China.

So if you look at the kind of the contribution, you had IGT double digit, then you had the PD business we saw the acceleration as well, but at a lower pace. Now that's something that then also when you look into the sales contributes into your sales conversion. Now, as you know, of course, these are businesses with a bit longer conversion cycles than some of the orders that we have in Connected Care, which were also very strong, but you have more book and bill in that business. So that's kind of where you see that phasing coming into sales a bit slower.

Now that builds into 2026, we will continue to see strong order momentum, and that will also underpin the build of sales into the year. So we will see -- and that's what guided and also what Charlotte guided for and that we will start a bit at the lower end of the range, and we see that strengthening in due course of the year as the order intake momentum that we have also been building up to 2025 really lands well into the rest of the year.

Very helpful. And if I can just follow up on the '26 guide, but also beyond. Roy, looking back to 2023, your '25 range was conservative and wide, and you've clearly landed at the top end of this and meaningfully outperformed this year's guidance. What buffers have you built into the guide for '26 and also beyond that, particularly on the margin, given the journey from here is going to be a lot harder than the journey from 7.5% in 2022?

Yes. So 2 part of answer, Hassan. Of course, we will go in full detail, right, at the C&D into kind of our plan underpinning '26 to '28. So you'll have extensive views on that later today. The short answer for today is what we learned in the first plan was that indeed, we are living in a dynamic world. So the dynamic world requires that you need to be, on one hand, very diligent in executing your own plan, focus on what you can control. Therefore, productivity is another important contributor. But as we really started to drive innovation and we have that strong foundation now that we can build on, growth will be a big contributor as well to margin, bigger than in the first period. So actually, that will start to kind of really kick in.

And then we keep an eye on an uncertain or dynamic environment where tariffs, for example, in '26 is something that, a, we still will have the full year impact of what is currently known, but you also don't know what could happen next, right? But we have adopted and adapted our organization to a much more agile and leaner one where kind of we are building resilience we adopt fast or we adapt fast if we see something happening. And that's also on the growth side, right? When we see growth happening in a certain part of the world, we can faster route to that piece so that we capture that opportunity. And if we see actually an event popping up somewhere, we can also address that faster. So I think that is where we kind of will share a bit more later today and this afternoon. But we are kind of taking an outlook that takes the world into account.

Your next question today comes from the line of Richard Felton from Goldman Sachs.

Two, please. The first one, within D&T, I think Precision Diagnostics was flat in the quarter. I suppose given better order intake across MRI and CT earlier this year, I was surprised it was a little bit stronger than that. So any color on Precision Diagnostics in the quarter and how to think about momentum into 2026, especially as you're bringing new products and new innovation to market?

And then the second one, you referenced that Q1 is going to be at the lower end of the full year '26 growth guidance range. I suppose despite the easier comp, any sort of other phasing or things to be aware of on that Q1 comment specifically?

Richard, thanks for your question. So first on your PD question within D&T. So what we've seen play out in Q4 was in line with expectations. Orders returned to growth in Precision Diagnosis. And then from a sales perspective, we improved sequentially. And let's not forget, of course, from a sales perspective, we have a higher exposure to China, which is also impacting the sales in the fourth quarter.

And if I then take a step back from a PD perspective, as you know, we have really rebuilt the foundation from a quality, from a leadership perspective, we reduced SKUs. You will hear from Jay, our business leader, later today on, well, what we've done and also very importantly, the plan going forward. So then from a PD perspective, from a margin perspective, you will have seen the progression. We went from mid-single digit to high single digit. And later today, we'll explain that there is much more to come.

And also the innovation that we spoke about and that Hassan asked about earlier is accretive and now turning into a tailwind, particularly related to the RSNA innovations that Roy mentioned on the call earlier. That, in combination with stronger commercial and service execution makes us feel very good about 2026 and will also drive a stronger funnel and order intake in 2026. So that is on your first question.

Your second question was on the Q1 phasing that you asked if there were any impacts there. So as I said in my prepared remarks, our growth phasing is much, much more balanced than in 2025. We have a very balanced progression in 2025. And actually, all quarters are in the 3% to 4.5% range, which is a significant improvement from where we were last year. So we're pleased about that.

Now Q1, indeed, as you said, starts at the lower end, a couple of reasons, nothing out of the ordinary there. On the one hand, it's just seasonality. Q1 is typically our lowest quarter, as you know. And then, of course, we had a strong finish in Q4 as well. So that's from a sales perspective.

From a margin perspective, as I also said in the prepared remarks, look, the tariffs continues to be a significant headwind, and that is particularly impacting us in Q1 because the operating leverage from stronger sales really only kicks in at the end of the year primarily. So Q1 from that perspective is a little bit lighter, and that's where our tariff kicks in strong. But as I said on the prepared remarks as well, we are very committed to margin expansion. Our guide also includes a margin expansion of 20 to 70 basis points. So we go very hard at driving that.

Your next question today comes from the line of Julien Dormois from Jefferies.

Congratulations on a strong quarter and a very nice landing to '28. I have 2 questions, if I may, as well. The first one relates to Personal Health, which obviously was super strong in Q4 and accelerating sequentially. And this is despite tough comps in the quarter. So just curious whether there is any kind of stocking effect into that? Or is it just the very strong demand you highlighted for Europe and elsewhere?

And the second question is more broad. It's just whether you have an update and a stance on the Section 232 investigation that's been running by the U.S. government? Any thoughts you might want to share on that side, please, would be helpful.

Thank you very much, Julien. And let me take your first question on Personal Health. We were indeed very pleased with our strong Personal Health performance in the quarter, 14% in Q4, actually not on a very tough comp, though. So what has been driving this strong growth, a few different things. First of all, we saw market share gains really across all businesses. Second of all, and this is very pleasing to see, we see very healthy sell-out trends across most geographies and also a very resilient demand in North America. And that is where the combination of our innovations that Roy also mentioned, combined with our strong commercial execution really, really saw great momentum in Q4.

And then particularly on your stocking question, I also said it in the prepared remarks, we have, as we promised we would do, derisked the China trade inventory. And it is now roughly at 3 months, whereas a year ago, it was at 6 months. So that means we're now in line with market averages on that. So nothing further to add there.

Let me take the second question on the 232. So actually, the 232 investigation has not been concluded nor any outcome shared. How we look at it is that, in essence, it's equal to tariffs, but a different way of going after it, right? So I think this is a potential measure that could replace tariffs. So we don't think this will worse the situation. It could potentially actually improve the situation, but we don't speculate on that. How we look at it is that in essence, they've got to hit the high court who's going to take a different tariff stand. They have a different mean of kind of still securing or putting from some tariffs on imports into the U.S. So we are, of course, actively engaged. We also are part of the discussion. We also know they are looking into measures that potentially could be beneficial. But as I said, we don't want to speculate on any outcome.

Your next question today comes from the line of Veronika Dubajova from Citi.

Excellent. I'll keep it to 2 and also short term. First, I just want to get your flavor for China. Obviously, we've had you guide to flat China in '26. Healthineers has done the same. GE Healthcare, arguably whose mix is closer to yours, have expressed some more cautiousness. They expect China revenues to decline in '26. So just if you can more build -- talk a little bit to the building blocks of that assumption and what you're seeing in that market at the moment. That would be my first one.

And then, Charlotte, if I can come back on that PH margin in the fourth quarter. So I've followed your stock for a very long time. I went back through the history. And I think the best margin you ever achieved in PH in the fourth quarter was 21%. So the 23%, especially with tariffs, is highly unusual. Can you maybe talk to some of the structural changes that have happened in the business that are enabling you to drive this substantially better margin dynamic that we have seen in PH versus what we have seen in PH in the past?

Thank you, Veronika. Let me take the first one on China. So on China, so we see the following, and as I also highlighted in my remarks. So actually, we see China stabilizing in 2026. So of course, it was a headwind in the last plan period and also in 2025, with stabilizing. So actually, we expect contribution from China, but we are remaining cautious on it. We see 2 different trends. One in PH, where actually we have seen step-by-step some improvement in the sell-out, and we expect that will also kind of result in improvement in sell-in and therefore, sales in the China market.

Now on the health systems side, we remain more cautious because the outlook on tenders and how they convert into real orders is still less predictable. And therefore, kind of we are counting for a growth, especially on the health system side, much more on a very strong North America and also the other parts of the world. So that's kind of where we remain cautious overall. We still remain committed to it. We see a slightly differentiated picture between PH and D&T, but we do see kind of China contributing to growth, although to a lesser extent than any other region.

Yes. Thanks, Veronika. Let me take your second question on the PH margin in Q4. Of course, we are very pleased with that strong margin. And in Q4, particularly also driven by the operating leverage on the back of 14% sales. But if you think about the more structural drivers, I would call out a few and also Deeptha will explain more later today. So that is something to look forward to as well. But the key drivers, first of all, innovation. I mean, Roy spoke about the innovations. We have, for instance, the new platform for Sonicare. We have OneBlade that is doing extremely well. Those innovations, they come at a higher margin, and they also drive premiumization, which also helps to drive higher margin and also drive higher prices.

The second component is really around commercial execution, which has been very, very strong in Personal Health. We, of course, win with the winners, the Amazons of the world and the JDs of the world, and that continues to be a very strong force for us as well.

And then thirdly, and this goes for all of Philips, we really focus on productivity, on disciplined execution, on controlling the controllables. And all those 3 factors really, really helped us also in Q4 2025. And as I said, Deeptha will explain later how we are confident that we will also further improve over the next 3 years.

That's very helpful, Charlotte. And if I can maybe just quickly follow up. I think originally, at the third quarter, you talked about sort of high single-digit growth in PH. It's obviously come in almost at twice the pace that I think many of us expected. Anything you'd call out? Is there a specific region or a specific category that helped drive this meaningful surprise on the revenues?

Yes. Thank you, Veronika. I would say it's pretty broad-based overall, both from a business and a geographical perspective. We just saw very good momentum across the board as there's really a lot of demand for our products. So we saw a really good performance in grooming, where -- and I spoke about the OneBlade platform just now. We see very, very good traction across the board. And just as a reminder, in Q4, we, of course, benefited from the lower comparable due to China because last year, we were still in full destocking mode. So that has helped absolutely as well. So -- but also, excluding China, the numbers are still very, very strong.

We will now take our final question for today. And the final question comes from the line of Hugo Solvet from BNP Paribas.

Congrats on the [ prints ]. Two, please. First, on the drivers for D&T and CC, Connected Care demand. Patient volumes in the U.S. was not mentioned in the Q3 slide deck. So just wondering what magnitude of pickup you're seeing and how sustainable do you think it is? And on the Q1 margin comment, you expect to decline slightly. Is the decline that we've seen in Q1 2025 would be a good proxy for Q1 2026? Just trying to think about where we should land.

Yes, thank you. Let me take the first one in terms of strong demand in terms of the U.S. We see a few drivers, especially big investment in infrastructure in health care systems in the U.S. is driving significant uptake and demand for platforms. So if you look some of the CapEx spend and even if you look kind of the demand forecast on CapEx really highlights that they are strengthening monitoring, they're strengthening cybersecurity as a big priority, which, of course, also plays to our informatics business, both in imaging and again, in monitoring. And therefore, we have seen significant kind of momentum in North America on the Connected Care side. We expect that also to continue into 2025.

Now that, of course, is also driven by strengthening of the financial health of the health care systems in the U.S., not all, as we know. So the stronger systems are getting stronger. They are consolidating and actually absorbing some of the smaller systems. But again, that then plays to our platform play because that actually is why they like us because we can provide the core infrastructure for interventional, for cardiac, for monitoring. So those are really key drivers for us that actually have been helping us in 2025. And actually, we see prolonged strong demand on that in '26 and beyond.

And actually, I think what will be very helpful today is the customer panel as well because they will talk exactly about their needs to drive more reliability in their operations. So therefore, investing behind that because with the staff shortages, they need to make sure that they have actually systems that support the staff in the best possible way so that they can deal with patients because patient volume is actually strong and good. Also procedures are expanding, what we did also with SpectraWAVE, bolstering our cardiology play is because we see that procedure momentum in cardiology and the patient volume in cardiology especially continuing to grow. And that actually we are very well positioned to capture that across our portfolio with also the imaging part, the monitoring part and the interventional suite.

Thank you, Roy. Let me take your second question on the Q1 margin, Hugo. I would say it's not a bad proxy to say to take the decline that we saw in Q1 2025. So that's roughly right.

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

Yes. Thank you all. Let me close. We delivered our outlook in 2025 consistently across all 4 quarters. Order intake was healthy. Sales growth improved sequentially, margins expanded and cash generation was strong despite ongoing tariffs. These results demonstrate our strengthened foundation, improved resilience and disciplined execution in a challenging macro environment. This is how we deliver our innovations to consumers and customers across the globe where we see demand for them strengthening.

Above all, I also really want to thank all our employees globally for very hard work, delivering these strong results whilst making a meaningful difference through our impact with care culture and delivering better care for more people. With sustained order momentum, robust innovation pipeline, clear focus on accelerating profitable growth and the continued dedication of our teams worldwide, Philips is well positioned to meet our outlook for 2026 and beyond.

We look forward to sharing many more details at today's Capital Markets Day starting at 11 a.m. I really invite you to be there. Thank you so much. Looking forward.

Thank you. This concludes the Royal Philips' Fourth Quarter and Full Year 2025 Results Conference Call on Tuesday, February 10, 2026. Thank you for participating. You may now disconnect.

Welcome to the Royal Philips' Third Quarter 2025 Results Conference Call on Tuesday, November 4, 2025. During the call hosted by Mr. Roy Jakobs, CEO; and Ms. Charlotte Hanneman, CFO, all participants will be in a listen-only mode. [Operator Instructions] Please note that this call will be recorded, and a replay will be available on the Investor Relations website of Royal Philips.

I will now hand the conference over to Ms. Durga Doraisamy, Head of Investor Relations. Please go ahead, madam.

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

I will now hand over to Roy.

Thanks, Durga. Good morning, everyone. Thank you for joining us today. We entered the third quarter with good momentum. We sustained it and delivered on plan for the quarter. Order intake grew 8%, marking the fourth consecutive quarter of improvement. It reflects the robust demand for our products and our disciplined execution. Comparable sales growth stepped up sequentially to 3% year-on-year. All businesses contributed to growth. Personal Health delivered particularly strong performance. Adjusted EBITDA margin expanded by 50 basis points to 12.3% in spite of the full quarter impact of currently imposed tariffs. It reflects solid gross margin delivery driven by innovation as well as the impact of our productivity and cost management.

Overall, our performance in the first 9 months is tracking as expected, with momentum weighted towards the second half as orders and growth build through the year. We are delivering on our commitments, and we contain and sustain this momentum with disciplined execution into the fourth quarter to achieve our full year plan as we complete the year. We reiterate our full year comparable sales growth outlook in the range of 1% to 3%. We expect our 2025 adjusted EBITDA margin to be at the upper end of 11.3% to 11.8% range, reflecting our confidence in our execution. We continue to expect full year free cash flow to be between EUR 0.2 billion and EUR 0.4 billion. These expectations assume current tariff levels remain unchanged with mitigation fully on track.

Now let's look at our third quarter performance in more detail. Starting with orders. Equipment order intake grew 8%, maintaining the momentum we have built over the last 12 months, including the typical quarter-to-quarter unevenness in large orders. Year-to-date, our order book is up 6% compared to last year. Our strong order performance in Q3 was driven by a sustained double-digit growth in North America. Strong order growth in Connected Care was partly offset by a modest decline in D&T. Within D&T, order growth in Image-Guided Therapy and Ultrasound in Q3 was offset by a small decline in Diagnostic Imaging following 3 consecutive quarters of positive order intake growth.

We are pleased with 6% year-to-date order growth in D&T, driven by solid performance, and we continue to focus on strengthening commercial execution in DI and expect improvement in Q4. In Image-Guided Therapy, where we lead in minimally invasive procedures for cardio, neuro and oncology interventions, demand for high-end Azurion 7 system remained strong. Growth in Ultrasound orders reflect robust demand for our further enhanced leading EPIQ CVx systems, which highlights Philips' leadership in cardiovascular care. These AI-powered solutions enhance precision, streamline workflows and boost clinical confidence.

Turning to Diagnostic Imaging. The demand for our BlueSeal MR 5300 and CT 5300 remains strong. We also advanced CT and MR innovation in radiation therapy planning, which I will touch on shortly. These systems, together with our strong imaging informatics offer are resonating with customers for their precision diagnostics and AI-driven workflow productivity, positioning us well for renewed momentum ahead.

In Connected Care, demand for our hospital patient monitoring solutions continued to gain momentum. North America remains a key growth driver with strong demand, supported by major partnerships and continued hospital standardization with strong cybersecurity demands. We are especially pleased with the traction of our latest IntelliVue MX patient monitors, the AI-powered PIC iX central monitoring systems and our X3 transport monitors equipment measurement modules. With collaborations and partnerships that span the industry from Edwards Life Sciences to Medtronic, Masimo and Getinge, we have created an efficient interoperable patient monitoring and real-time data platform that addresses the key customer priorities. It's the ecosystem platform of choice for patient monitoring.

Building on the strong value proposition, we expanded our enterprise partnerships as reflected in some new ones that we announced this quarter. For example, our monitoring and service agreements with leading U.S. health systems, such as Hoag Health System in Orange County and Rady Children's Hospital in San Diego. They empower our customers to focus on what matters most, improving patient outcomes while we handle system complexity.

Moving to Enterprise Informatics, which also contributed to Connected Care's order growth in the quarter. Migration to the cloud remains a strategic priority to unlock further value in this business. This quarter, we signed a multiyear agreement with a major U.S. health system to move its radiology imaging to the cloud. And it's using Philips IntelliSpace Radiology on Amazon Web Services for that, improving efficiency, scalability and security while enabling future AI innovation.

Turning back to Personal Health. Growth was strong and broad-based across all three businesses: Grooming and Beauty, Oral Healthcare, and Mother and Child Care. Sell-out trends remained healthy across Europe and most growth geographies. China remains subdued amid cautious consumer sentiment, and demand in the U.S. remains resilient. We saw strong demand for our premium products, including high-end shavers and IPL hair removal devices in Grooming and Beauty, but also for our Diamond Clean Series in Oral Health Care.

Our continued investment in innovation fuels the momentum in orders we are delivering across the portfolio. In Q3, we expanded our pipeline with solutions designed to accelerate growth, enhance customer value and drive consumer engagement. We launched Transcend Plus in Ultrasound across our EPIC and Affiniti systems. It's featuring enhanced imaging and 26 FDA-cleared cardiovascular AI applications, the most in the industry, supporting faster, more consistent diagnostics.

Similarly, in radiation therapy treatment planning, we continue to advance our innovation pipeline. At the American Society for Radiation Oncology, we introduced Rembra, Areta radiation therapy CT scanners and BlueSeal MR radiation therapy, which expanded our radiation oncology imaging portfolio and our sustainable MR leadership.

Moving to consumers. We are also strongly driving our innovation pipeline in Personal Health. Last month, TIME named the Philips i9000 Prestige Ultra, one of the Best Inventions of 2025, a clear example of how our SenseIQ Pro AI technology continues to drive leadership in premium grooming. Our latest launches continue to resonate, not only with consumers, but with high-performing retailers, too. Lumea IPL debuted in the U.S. exclusively on Amazon with strong early uptake, and the next-generation Sonicare 6000 and 6400 models launched exclusively with Walmart. We continue to execute our priorities; from enhancing patient safety and quality, to improving supply chain resilience, and simplifying our operations.

Our multiyear program to strengthen quality systems and embed a patient safety-first culture is delivering steady progress. In 2025, we passed six out of nine FDA inspections with no observations. Between 2024 and 2025, our 15 FDA inspections resulted in a 43 issuance rate, nearly 60% lower than in '21 to '23 despite a comparable number of inspections. Against that background, the FDA warning letter issued last week is disappointing, and we are fully committed and in full remediation since Q2 to resolve all observations to the agency satisfaction.

We continue to work constructively with the regulatory agencies, also on new innovations. And we already received 27 FDA clearances through Q3, matching the total for 2024 and demonstrating an accelerating approval rate. We have also reduced global field actions by around 20% year-to-date, following a similar reduction last year, while we continue to improve complaint handling and strengthen corrective and preventive action processes. We remain fully focused on driving measurable lasting improvements in our business in collaboration with the global regulators and on reinforcing trust among patients, clinicians and investors.

Moving to supply chain. We continue to make executional improvements. In Q2, we announced a multiyear nationwide agreement with Indonesian Ministry of Health to expand access to therapy using our Azurion platform. Now we are already installing the first system, a clear proof point of our speed and agility and execution strength. This collaboration exemplifies the broader progress we are making across our supply chain, where we continue to deliver tangible operational impact and greater resilience in an uncertain supply chain environment. This is also demonstrated by the continued increase in service levels across health systems modalities, reaching 87% in the quarter, a new high and another sequential step-up. Finally, we continue to simplify how we work with a more connected organization that focuses talent and resources where growth is happening. This shift is fueling continued progress in productivity and in performance.

Turning to the regions. The fundamentals of the markets we serve remain sound. Dynamics vary per region. And in some areas, uncertainty is increasing. In North America, hospital demand remains strong with continued customer pull for platforms that deliver productivity to serve more patients at lower costs and to achieve better outcomes, increasingly enabled by AI. That said, demand is unevenly spread across hospitals and regions of the U.S.

As hospital resource constraints in people and costs increase, they seek smarter, more productive ways to manage higher workloads with less people while serving more patients. So productivity has become a defining theme for our customers, one that sits at the heart of our innovation agenda. And this positions us well to capture growth, reflected in the sustained double-digit order intake growth over the past 12 months in the U.S.

In China, tender activity has been gradually increasing throughout the year, although from a low base, fueled by stimulus measures. At the same time, centralized procurement kept expanding, which meant longer processing times and tougher competition, making it harder for bidding activity to translate into meaningful market growth. We continue to have a cautious view on the near-term outlook for China, but remain positive about the market's long-term growth potential. Capital spending remains stable in Europe and Latin America, while India and Saudi Arabia continue investing in health care and digitization, creating strong opportunities.

In an uncertain environment, staying close to our customers and partners is more important than ever. We are also actively engaging with leading industry associations like AdvaMed in U.S., and MedTech Europe as well as authorities in key markets. Our objective remains clear: to advocate for patients and ensure access to care. Every dollar, euro or RMB spent on tariffs is one not spent on innovation. We must ensure tariff measures and trade barriers do not hinder innovation, access or affordability of care. We remain closely attuned to evolving customer and consumer dynamics to stay agile and responsive. We innovate to deliver better and more care.

Charlotte will now discuss our third quarter performance in more detail and our outlook for 2025.

Thank you, Roy. The group achieved 3% comparable sales growth while our three business segments delivered 4.3%, underscoring the strength of our core operations. In Diagnosis & Treatment, comparable sales improved sequentially, in line with our expected phasing, increasing by 1% year-over-year. Image-Guided Therapy delivered solid growth, nearing the mid-single-digit range, marking consecutive multiyear expansion; a remarkable track record of consistent performance fueled by strong momentum in our flagship Azurion platform and strength in coronary intravascular ultrasound devices.

Precision Diagnosis sales were broadly in line with last year. Strong growth in Ultrasound was driven by continued strength in cardiovascular, led by our EPIQ CVx systems. This was offset by a modest decline in Diagnostic Imaging, primarily due to the timing of orders. Our flagship products continue to perform well, particularly the CT 5300, which delivered a strong ramp-up in order conversions following its launch last year; the major contributor to a further improvement in gross margin within Diagnostic Imaging.

Adjusted EBITDA margin decreased by 80 basis points to 11.8%, mainly due to the incremental headwinds from the currently imposed tariffs and cost inflation, partially offset by gross margin from recently launched innovations as well as productivity. Absent these headwinds, both gross and adjusted EBITDA margins improved year-on-year, highlighting the underlying strength and demonstrating robust operational execution.

In Connected Care, comparable sales grew 5%, supported by strong growth in Monitoring. This was partially offset by lower Sleep & Respiratory Care sales, while Enterprise Informatics remained stable. Growth in Monitoring was driven by higher installation of latest IntelliVue MX patient monitors, X3 transport patient monitors and AI-powered PIC iX central monitoring systems across most geographies with particular strength in North America.

Adjusted EBITDA margin improved by 410 basis points to 11.4%, including a 150 basis point gain from the remeasurement of a minority investment. Excluding this gain, the margin improved by 260 basis points to 9.9%, driven by operational leverage in the Hospital Patient Monitoring business, favorable mix effects and productivity, partially offset by tariffs and cost inflation. In Personal Health, comparable sales increased by 11% in the quarter with broad-based growth across all regions and strong performance across the three businesses within the segment. This sustained strong performance reflects robust demand across most geographies, including a resilient customer sentiment in North America. Growth was also supported by an easier comparison base in China following the impact of inventory destocking last year, which concluded in the second quarter of 2025.

Personal Health adjusted EBITA margins improved by 60 basis points to 17.1%, driven by increased sales and productivity, partially offset by tariffs. Impacts from advertising and promotion spend remained slightly elevated year-on-year, though lower than in Q2 to support sustained demand and recent launches. These investments are delivering as intended, contributing to higher sales growth and are underscored by strong demand for our premium products across all businesses. Finally, sales in Other decreased by EUR 41 million, primarily due to lower royalty income as we expected, resulting in a EUR 21 million reduction in adjusted EBITDA for the quarter.

Turning to our group results and operating highlights for the third quarter. Comparable sales growth improved sequentially, aligned with our expected phasing, increasing 3% with broad-based growth across all three segments, partially offset by lower royalty income as expected. Comparable sales in mature geographies grew 3%, led by North America with contributions from all segments. Growth geographies increased 5%, driven by strength in Personal Health and Connected Care, while Diagnosis & Treatment was broadly flat.

Adjusted EBITA margin increased by 50 basis points to 12.3%, driven by higher sales, favorable mix effects and productivity measures, which more than offset the impact from incremental tariffs and lower royalty income. With tariffs evolving, we continue to actively mitigate their impacts, strengthening our ability to execute with consistency and deliver sustained performance. The impact year-to-date is tracking in line with our expectations. For full year 2025, we continue to anticipate a net impact of EUR 150 million to EUR 200 million after substantial mitigation with no revisions since the outlook we provided in July. As planned, short-term tariff mitigation initiatives in the third quarter focused on inventory management, specialty programs, exemptions and cost discipline and helped reduce the tariff impact.

We also advanced medium-term initiatives meaningfully, including our supplier network and commitment to manufacturing location optimization. In August, we announced USD 150 million investment in the U.S., which will not only expand production, but also strengthen both cost efficiency and local supply continuity. We will continue progressing similar initiatives across the portfolio, carefully balancing regulatory, operational and customer considerations.

In Q3, we delivered EUR 222 million in productivity savings, bringing the year-to-date total to EUR 566 million. We remain on track to achieve the EUR 800 million in productivity savings in 2025. Our disciplined approach to cost management and productivity initiatives has cumulatively delivered EUR 2.3 billion in savings since the start of our 3-year plan in 2023, exceeding our initial commitment to delivering EUR 2 billion by the end of 2025. As we build on this strong foundation, we are increasingly leveraging AI to unlock the next wave of productivity gains across the company.

In Personal Health, since the second quarter, more than 80% of our marketing content has been created or enhanced using GenAI tools. This includes how we generate insights, we find creative content and even how we manage digital assets. These capabilities are already improving productivity and have delivered an increase in return on investment up to double-digit returns.

In Enterprise Informatics, AI is accelerating R&D through greater use of AI-generated code, enhancing customer support with predictive AI agents and strengthening sales and marketing through AI automated content creation and real-time buyer analytics. For example, in customer support, our AI agents automatically perform remote system health checks and proactive maintenance, reducing support costs by 80%.

In the quarter, adjusting items amounted to EUR 122 million, of which EUR 40 million were related to Respironics field action and consent decree remediation. This is below our Q3 2025 outlook of EUR 165 million, mainly driven by cost phasing within the year. Income tax expense increased by EUR 22 million, reflecting higher income before tax, while net income rose to EUR 187 million, mainly driven by higher earnings. Adjusted diluted EPS from continued operations was EUR 0.36 in the quarter, up 13% year-over-year, driven by positive contribution from growth.

Despite significant volatility in major currencies, particularly the U.S. dollar, the impact on our adjusted EBITDA margin and EPS was broadly flat, reflecting disciplined hedging and optimized currency footprint and targeted commercial actions in markets most exposed to currency fluctuations. We delivered strong cash flow performance this quarter with free cash flow of EUR 172 million, representing EUR 150 million improvement year-over-year. Higher earnings drove this.

Moving to the balance sheet. We ended the quarter with approximately EUR 1.9 billion of cash and net debt of approximately EUR 6.5 billion. We maintained our disciplined focus on working capital, delivering a solid year-over-year improvement in inventory as a percentage of sales despite ongoing tariff mitigation initiatives. Our leverage ratio remained in line with Q2 2025 and last year at 2.2x on a net debt to adjusted EBITDA basis. We remain committed to maintaining a strong investment-grade credit rating.

Turning to the outlook. With 3 quarters behind us and continued strong execution, we have solid visibility for the remainder of the year. Our expectations for Q4 remain unchanged from the start of the year. We continue to expect sequential improvement in comparable sales growth, supported by sustained order conversion, sustained momentum in Personal Health sales and disciplined execution. For the full year, we continue to expect comparable sales growth in the 1% to 3% range with Connected Care growing within this range, Personal Health slightly above the mid-single-digit range and D&T delivering slight growth year-over-year.

Year-to-date adjusted EBITDA margin improved to 11.2%, a 40 basis point increase despite higher tariffs, driven by strong execution and cost discipline. With continued momentum and even with the impact of tariffs, which is more pronounced in the second half of the year, we now expect full year adjusted EBITDA margin at the upper end of the 11.3% to 11.8% range.

Turning to free cash flow. We continue to expect a full year range between EUR 0.2 billion and EUR 0.4 billion. As a reminder, this outlook includes the EUR 1 billion outflow related to the Respironics settlement paid in Q1. Our outlook excludes potential wider economic impact as well as ongoing Philips Respironics-related proceedings, including the Department of Justice investigation.

With that, I would like to hand it back to Roy for his closing remarks.

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

Thank you, and we are now ready for your questions.

[Operator Instructions] The first question comes from Mr. Julien Dormois from Jefferies.

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

Thank you, Julien. Let me take the first one and then maybe Charlotte can take the second. So on the pricing, so as you have seen also from our bridge, kind of we are driving our margin expansion on the back of two key drivers that we see taking effect. One is expansion of gross margin. And that actually is especially the new innovations generating more traction in the total percentage of orders and then flowing through to sales. And that's where we see actually that price increases do support our margin, as well as the productivity and cost discipline actions that we are taking.

We expect in the coming period that there will be some pricing given the inflationary environment that we're in. But we also know that kind of actually the inherent value increase of our innovations and how we price them in combination with kind of productivity and cost will be the bigger driver of that. So we see pricing opportunity, but not to kind of a large extent that kind of we also would impede growth because growth is still of critical importance, and we will keep driving that whilst we expand the margin at the same time as you have seen.

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

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

Really a strong improvement in productivity this year despite some of the challenges you faced. How should we think about maintaining that momentum into '26? And particularly on -- related to tariffs, you've almost fully offset the tariff headwind this quarter. Should we be perhaps assuming that you can fully offset the annualized tariff impact next year?

Thank you very much, Ed. Let me take that question. So first of all, we're very much focused on 2025 and delivering in line with our expectation, which is now at the higher end of the 11.3% to 11.8% range. And as you rightfully mentioned, we've been able to compensate a lot of the tariffs while we still have a net impact of EUR 150 million to EUR 200 million after substantial mitigation. And that gives us a lot of confidence.

Now if I look ahead at 2026, of course, we have our Capital Markets Day on February 10, and we're looking forward to giving you a lot more details at that point in time. What I would tell you in broad strokes is we are happy with the momentum that we've seen from an order intake perspective, from a sequential sales step-up perspective, from a margin perspective. So we are very focused on continuing improving on all fronts, but more to come on February 10 from that perspective.

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

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

Thank you, Hugo. So on the order timing, and I think it's good indeed to -- if you look at the order buildup of D&T, as said, we are happy with the 6% year-to-date. You also say -- saw that is not yet fully evenly balanced, right? Q2 was really the quarter of D&T, Q3 is the quarter of CC, right? So we kind of -- as we have built up our order momentum, we're also getting some of these large deals. And Q2 was really a very strong D&T quarter. Q3 is a very strong CC quarter. Actually, in Q4, we expect D&T also to further step up. Also, we see that in our funnel.

So actually, whilst there are certain lumpiness, the underlying improvement is visible, and you also see that coming through. The same is for the realization of sales. We also have seen the step-up in sales. Although also there, of course, it goes with the order conversion. And there, we see that some time lines are longer, but also we expect there an improvement in Q4, which also in DI is coming through. On top, I think it's also good to say that, as you know, from our strategy, we had in how we drive our businesses two different parts. One was we have growth businesses at higher margins that we explicitly drive for growth. And we have margin expansion businesses, and those are exactly doing what they should be doing. So we have been expanding DI margin, we have been expanding EI margin, we have been expanding SRC margin also in the third quarter. And we have been really driving growth strongly across the other growth businesses.

Now of course, we want to have both margin and growth expansion from all segments, but actually, we're also driving them within the strategy. So in that sense, I think you have seen that we will kind of step up. And that's also what Charlotte mentioned in Q4, we also are launching, of course, new innovations like the radiation therapy suite that will support that as well, of course, we have the RSNA upcoming with some exciting news there as well. So that's kind of how we look at to continue to D&T trajectory into Q4, but also, of course, in the period to come next year.

The 232, so we see that -- and I think there, we look at this in conjunction with tariffs. There's a lot of fluctuation out there. And we are focusing very strongly on the controllables to see how we can mitigate that. And I think we are happy that actually in Q3, we showed that we are able to offset in full the tariff impact. Now that's how it work because it's still substantial. We also have the same plan for Q4, where we want to deliver a strong margin quarter, that also helps us to kind of give the higher end of the range. We are, of course, following the 232 and are engaged because we're engaged in Europe and U.S. and China in advocating strongly that actually we can lower tariffs and actually forgo further impact on patient care. So in that sense, kind of, a, we are actively engaging in a dialogue; b, we are preparing ourselves to focus on the controllable so that we can deal with any consequences.

On that last point also, we have further strengthened our footprint in the U.S. So we invested EUR 150 million in Reedsville, expanding our ultrasound but also wider facility there. We're also looking at our other facility to actually be even better prepared for the localization needs. And that's in line with kind of the trajectory we have been having across our supply chain. I mentioned that we've really strengthened our supply chain delivery and also the agility to kind of address challenges. And whether the challenges with tariffs or Nexperia, we are better prepared. And actually, we are upping our service levels and upping orders and sales. So we make sure that we stay resilient while we deal with uncertainties around us.

The next question comes from the line of Mr. Hassan Al-Wakeel from Barclays.

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

Yes. Thank you, Hassan. So on D&T, we have seen indeed, and that's also what was called out, further traction on the 5300 and CT as well as MR. And actually, that is building in the funnel. Next to that, we saw ultrasound really picking up. And actually, that in part also address maybe some concern from the warning letter. Actually, Ultrasound, we have been dialing up order intake momentum and sales momentum whilst we actually have been working in parallel the remediation since Q2 because it's not new, right?

For us, we got the 43 at the end of Q1. We started to remediate in Q3 -- in Q2 and in Q3, and you have seen no impact on results. That's also why we can be quite confident on that this will not have impact on results. We are remediating the process part of it, and we are in full kind of remediation and take it very seriously, of course. But we also know that this is no product issue, not a patient safety issue, this is process remediation. And we have been working that whilst absorbing it and stepping up our products.

Then on China, I think in China, you see that it's a mixed picture. Overall, the market momentum, I would still call out for health systems as subdued, right? We still don't see the market growth coming back as we all hope, and that's really a market phenomena. We see tenders increasing, but it's not turning to order growth because we see that they are not landing yet. Processing time are longer, they are being disputed, and that's something that actually we are facing as industry.

On the other hand, we have seen that Ultrasound, for example, has been up in our mix, and we saw IGT also picking up. We saw some slowness in DI, where actually last quarter it was stronger. So actually, we're working also to kind of see how we can strengthen it again in Q4. So it's not that linear over the quarters. But in general, I think we are all waiting for further strengthening of China. Now we do expect it to come, but it's just not clear when. So therefore, we remain cautious. And of course, you know that the China part of D&T is just bigger than also the CC part. So you see that weighs a bit stronger on the portfolio.

Maybe another data point what is important. If you look at DI in North America, we have been growing orders by 16% year-to-date. So whilst we are growing, of course, we're coming from a smaller base and that weighs upon us. But it's not we don't have momentum there, but of course, we are rebuilding from a smaller base. So those are a few, I think, data points on the D&T momentum. So we keep building it. We also have strong engagement with customers. We have been receiving many of them actually here for co-creation sessions and have been individually also part of that. So I see it coming also towards the next year, but we are sequentially building it through the quarters.

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

Yes. I think what I mean with the tough competition is that in, of course, the centralized procurement, you have a much more regulated process around competition. And that makes that we see, and I think everybody is facing that, that you kind of much more guided in that process. There are more disputes coming out. So when you have one, people are rebottling it. So that's, I think, where you see on the ground that it's becoming tougher because it's not only clinical preference, there's also more process in the mix. I think that is a fair, I think, depiction of the China situation, and that's something that we all are dealing with, I think, all parties. And you saw it also, I think, in some commentary of others. I think we are working through that.

I think on the other side, on the positive side, we also mentioned that kind of we are working to offset. And that's not only short term, but also longer term. The strong momentum of double-digit orders in North America, of course, is also a big part of mitigation for that. And there also, we could still deliver 8% total order growth despite that China is not back where it is. And of course, there, we are firing also on the strongholds that we have. And CC was particularly strong this quarter, but also we continue to build on the rest. So as we are shifting to get where the demand is coming more contribution, that's North America, but also Europe, you also see that kind of we will be building that into our sales of the various underlying segments.

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

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

Yes.

Yes. So just on the GE's decision to sell the Chinese business. Just wondered if you thought there was potential to pick up share, but also good to get your thoughts in terms of why they might be looking to exit China? And then secondly, just wondered if -- as the hedges rolled off on the foreign exchange, just wondered what sort of headwind that will be to margin for next year?

Okay. So on GE, of course, I cannot speak on behalf of GE and what they're doing. What I do see is actually that indeed on the ground, we are dialing up our competitive positioning around innovations that we've been launching. And as I said, kind of we see that, that also is resonating. We saw the Ultrasound pickup. We see also that there is kind of more activity, but kind of we need to materialize that. And I think overall, globally, you see that we have good order momentum, and kind of that is because of the customer preference for our platforms.

I think the approach of innovation that we are taking where we're really looking into the broader productivity and workflow support supported with a combination of products and AI, and Informatics is something that is resonating. So I would say that's kind of our competitive differentiation and where we have three strong platforms that we're pulling from, that customers can build upon, and they are interoperable and open so that kind of we can play with partnerships in the industry as well to strengthen the delivery towards customers. I think that's on the first part. And maybe you can take the second on FX, Charlotte.

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

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

Just two for me. Just firstly, on the tariff side of things. Just conceptually, when we think of the order book growth you've had, which probably would support, say, mid-single-digit growth next year, you think of the cost savings and the mitigation you've got in there. Just to be fair, is it reasonable to assume margins can expand next year with tariffs where they are at the moment? Just to get some clarity on that. We're not asking for a level, but just to assume that they can expand.

And then just on China, we're hearing quite a bit about VBP within the CT and Ultrasound segments. And I know a couple of your peers have seen it, but mainly because they play in the sort of lower end of mid-level hospitals. Is this something that's affecting your business? Or do you just not play in those categories?

Thank you, Graham. Let me take the first question on tariffs. So as you know, so for this year, tariffs after substantial mitigations are impacting us to an extent of EUR 150 million to EUR 200 million. And despite that, we're expanding our margins at this point in time at the higher end of the 11.3% to 11.8% margin, so by 30 basis points. You said it, of course, the tariffs are annualizing next year, so that will be a little bit of a bigger impact. But the way we are looking at it is we know every year we need to improve, including the new reality around us. And one of the big new realities around us is tariffs.

So without wanting to go into any specifics at this point in time because we'll do that on February 10, what I can tell you is that we're very much focused on improvement, improvement from a sales perspective, improvement from a margin perspective and also improvement from a cash flow perspective.

On the CT, Ultrasound question, VBP in China, I think the procurement rollout is quite broad-based. So we are also affected by that. So we see that as well in part of kind of the portfolio where we play. So that's, I think, a market phenomena. That's also where I was earlier alluding to that actually is causing some of the slowness that we see because actually that really causes longer processing times as well as a more orchestrated approach towards buying. And that has an impact -- continued impact on market growth in China. So therefore, we did see that as well for us.

I think on the positive side, as I already mentioned, we saw really in Ultrasound positive growth coming in because also of some of the new launches that we have. Now we are also building the pipeline for the CT part, so we see that there is tender activity. But as I also mentioned, it's not yet kind of concluded. And therefore, kind of we remain a bit cautious on how this evolves because it's not very predictable yet when activity turns into orders and then turns into sales.

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

I am going to ask two, please, and a very quick third one, if you forgive me, just because that's one word, hopefully one. But I just want to circle back to the downgrade to the guidance, to the sales guidance for D&T. And obviously, Roy you've talked a lot about China, but can you sort of confirm that the downgrade is entirely just China related? Or is there anything else that you're seeing in other regions that's worrying you there? And I guess, how you feel about that kind of D&T growth momentum exiting this year underpinning this roughly 5% growth rate that consensus has for next year? If you can talk to that, that would be my first question.

My second question is the low single-digit growth rate in IGT, quite a deviation from the trend that we've seen through the last couple of years. So curious if you have some thoughts on that. And again, if you can elaborate on what's driving that? And my third very, very quick, yes or no question is, do you expect the warning letter to have any impact on your ability to return to the CPAP market through the next 6 to 12 months?

Okay. Let me start with the D&T. So on the sales momentum, yes, there is some China impact in that. But the other portion that we have seen is also some longer conversion cycles of orders. There's no particular kind of other reason that we see in other regions. I said kind of especially in DI side, of course, we have a different footprint in terms of more weighted towards Europe and China and a bit less in North America, where we are building. But I also mentioned to you that we are actually building that with double-digit order growth. So actually, we are stepping that up, and we expect that also to continue.

So yes, whilst the overall mix is a bit changing in the year, we remain with 1% to 3%. I haven't heard too many people talking about CC. It was quite extraordinary this quarter how they delivered in terms of the demand that there is as well as kind of supported in hospital-based monitoring and in kind of EI. So of course, we're tapping the opportunity and also growing and leveraging the strength of our portfolio in fullest. And that also holds true actually for IGT.

So in IGT, the CSG has been high, especially if you look also then in terms of the compare from a 2 years comps in Q3, and that was also supply chain related. You see that kind of explains some of the LSD. But actually, we keep very much leading in IGT. The new launches are contributing to that. People are really excited about not only what we have been launching, but also the piping with Azurion and other innovations that we have. So actually, we remain very excited about the interventional opportunity that's out there and that we also keep pursuing.

Then on the warning letter, no, I don't expect any impact to the CC because these are two separate topics. The CC has its own kind of SRC-related demand. As I mentioned earlier, we're fully on track in kind of working through those. This is a separate warning letter we need to address, and we are in full remediation of it. And as I said earlier, we don't expect any commercial impact of it. So in that sense, yes, it's a disappointment, and we are kind of acting it with very strong discipline follow-through, but we don't expect that to have any further operational impact.

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

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

Yes. Great questions, Richard. So let me start with Hospital Patient Monitoring and CC development there. I think we have been seeing strong demand on the patient monitoring side. And in combination with, I would say, really unique ecosystem that we have been building, we see us really winning. And that's not only kind of building on the momentum in the market, but also then kind of really taking positions also of competition. That is built also with partnerships. Now we mentioned two in the quarter, but it's not only of that, it's quite broad-based and also across regions.

You know that we play mostly outside of China. So of course, CC doesn't have that China impact, but it's really kind of driving a very strong North America contribution. They're investing in patient monitoring, standardization, but also patient safety is important there to watch over their patients as well as the cybersecurity part. And we have been really also driving the partnership approach as you have been seeing. So we kind of offer a full open modular approach, and that's really working for the market and for our customers. So I think a winning formula there that we expect to continue to deliver results. And that not only has been driving order sales, but you saw also strong margin contribution because, as you know, the Hospital Patient Monitoring business is also a strong margin business.

Then on EI, we also mentioned strong contribution from EI in the quarter. As I said, we drive, of course, EI for margin. So we saw margin improvement, but we also were very pleased with the order improvement. And that indeed is really also in combination with that offer that we have with AWS. The cloud migration is a big topic. Not only the cloud migration, we do also AI and some language model collaboration with them. So we see that really kind of supporting the engine. They're also doing some marketing and sales efforts because they, in essence, co-sell our solutions as well as that we, of course, support their cloud services when we go out to customers together. And that is a formula that also works within the market and with customers. So we see that kind of strengthening our approach, and that's indeed building the funnel and now also building the conversion since we started that collaboration with AWS.

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

I have two questions actually. First, you reported 8% order intake growth in Q3, predominantly driven by CC this quarter. You also gave some color during this earnings call on the funnel for Q4, but I missed that answer. So can you reiterate it, basically giving a bit of granularity on how you see the sales funnel and the order intake develop into Q4 for both D&T as well as CC?

The second question is related to E&I, Enterprise Informatics. As I understand it, order intake was pretty okay, but sales has been flat also in Q3 and was also quite disappointing or relatively low in the previous quarters. which reads a bit disappointing vis-a-vis market growth there. So what has been holding you back in the last couple of quarters? And when would you expect the order intake in E&I to come and convert into sales growth here?

Yes. Let me maybe take the first one in terms of the order momentum. So we said kind of when we look to the year, we expect a strong full year delivery of orders where we continue on the track that we have been building. So a positive order intake also into Q4, probably a bit more evenly based with CC and D&T. As I've said, kind of has been a bit lumpy through the quarters. But in Q4, we expect it to be more evenly based. Then depending on kind of what big orders will fall, you will see kind of this will have potentially some impact in Q4 or we see it next year back, but a strong finish in orders.

Then on sales, also there, kind of we have said before, we are stepping up and also we will step up in Q4. And that will be across the different segments. So we will expect contribution from everybody in that step-up. So PH continue to be strong. We see CC continuing and also D&T stepping up. So in that sense, I think we maintain the momentum as we also signaled, and that's built up on the funnel. Now of course, still 2 months to go. So working hard to kind of get it over the finish line with our teams, but all kind of geared towards delivering upon what we also have guided for. And I think that's, of course, a reiteration of what we have been planning for and saying all year long.

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

And in that transition where you are moving your clients to -- from on-prem to cloud, have you any indication -- can you give any indication where you are in that process? Is it like a quarter is done? Are you halfway there? Or are we now at the end of the conversion?

Yes. It's difficult to say, and it also depends really customer by customer. So we've done a number of successful conversions from on-prem to the cloud. But ultimately, the thing to keep in mind is that this will take time to fully execute on because it really touches also the hospitals and the hospital operations very, very deeply. So this will take time. But we've done a few that have been very successful.

[Operator Instructions] We will now take the next question from Mr. Falko Friedrichs from Deutsche Bank.

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

Yes. Let me take the first one, Falko. So on SRC, I think two parts. One, as I said before, of course, we have been driving very strong margin improvement. We have seen very strong margin realization in Q3 of SRC also that also contributed to the strong CC margin step-up. So that part of the strategy fully working. Also, we have seen really the OSA portfolio, so the sleep apnea portfolio stepping up. So we see actually as we're returning into the market, actually, that's something that is delivering growth to us.

Where we see it being offset is with ventilation. There actually, we have improving portfolio and also been taking out. So that actually is going at the cost of the sleep momentum. So therefore, in the mix, you see that there is a slight pressure on the sales because of that ventilation reset. But we are very encouraged and excited by the fact that in sleep, both on the devices, but also the masks we see it stepping up. And that, of course, with the reentry that we have been doing across the various countries now in due course of this year.

Yes. And then Falko, I'll take your second question on the adjusting items. And although adjusting items came in significantly lower than we had guided for, I absolutely acknowledge that they're still high. And the moving pieces are, on the one hand, we continue to have costs related to the consent decree, Respironics consent decree, that will reduce over time. The other element is that we continue to have restructuring costs as we're continuing to simplify our operating model and to simplify Philips as a company.

Now having said all of that, we are very much focused on, and it is a priority of mine to reduce adjusting items over time. So that is what we're fully focused on. There's a lot on the table there, a lot of strengthening of processes that we're doing. So over time, I see the reduction in adjusting items. And what I would also tell you is that adjusting items have already come down versus 2024 and 2025. So this is a journey and a trajectory we're on.

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

Two questions also from my side. Firstly, I just want to discuss the margin impact from innovation SKU reduction. I mean, I guess this is a kind of continuous effort. But can you just give us any kind of flavor in which year do you expect this kind of measures to peak? Will this probably be next year as the kind of order backlog is being worked through? Or would you expect the kind of margin contribution to be similar compared to 2025? And also, can you give us a flavor when you're pruning your kind of product portfolio, what was actually the headwind to comparable sales growth? Because my understanding is that you're not adjusting for that.

And then the second question, if I may, just on Americas. I mean, you talked about different -- more uncertainty in some kind of regions. I was just wondering if this also relates to Americas where we pointed to different dynamics by region. So just try to get a kind of flavor how confident are you that this kind of growth in North America will continue into next year?

Yes. Thank you, Oliver. Let me take the first question on the margin impact from the SKU reduction, which we internally call Project Synchronizer. So what I would tell you, and if I take a step back on our margin improvement trajectory, we have consistently said that part of our margin improvement trajectory is related to gross margin improvement, and there are a couple of different reasons for that. On the one hand, we see improvement from gross margin driven by innovations and our innovations driving higher margins. So there's an aspect there.

The other component, as you rightfully call out, is the SKU reduction where, for instance, we have pruned the number of transducers in ultrasound significantly, which leads to lower R&D costs, lower quality costs and lower supply chain costs. So all of that helps to drive improvement of margins, which is also again seen in Q3. So for instance, I'll give you one other data point there. Our gross margin in Diagnostic Imaging, where we've done also a lot of product pruning SKU reductions has improved year-over-year despite the tariffs. So that gives you a good sense of, on the one hand, we have the innovations like CT 5300, like MR BlueSeal driving gross margin expansion. On the other hand, there's also the impact from Project Synchronizer SKU reduction. Now if you then talk about how should we think about that year-over-year, this is a journey. So we've seen some impact in 2025. We'll see some impact in 2026 and the years to come.

And then your last sub-question in your question was around the sales impact that we see from that. There's nothing really that I can call out there that stands out. There's not a major impact on CSG as I would see it now. It's really to focus on the great innovations that we have and doubling down on selling those with -- so that's what we're focused on. And then your second.

Yes, maybe conclude on North America. So actually, indeed, we see kind of winners and losers in the U.S. So we see some smaller hospitals really being pressured. They're also more dependent on Medicare, Medicaid patients. So some of those also in urban areas. So there, actually, we see there's a lot of pressure. We are working with them on productivity solutions more. And then we see the ones that are strong are expanding, and we're also very strongly winning with them. So therefore, actually, you have seen sustained momentum in North America, also our double-digit order intake growth. We actually expect that to continue.

We have no signs yet that kind of this market from the needs that we are serving is cooling down. And that's, I think, good news. So we actually expect continued strength in North America. That's also why we have kept investing in winning in America with the further footprint, the specific customer relations and partnerships that we are concluding there, and we are excited about the opportunity there.

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

So thank you all for your questions. I think concluding, we delivered on our promise in Q3. Strong order intake growth, 8%. We had a positive step-up in sales growth to 3% and a margin expansion despite tariffs. Now we are fully focused on continuing to deliver in Q4 and therefore, concluding this year with in -- the reiteration of the sales range of 1% to 3%, we said that we would do upper end of our margin and strong cash delivery. And that will hopefully set us up for a good 2026, and we look forward to also kind of engage with you at the CMD.

So thank you so much for your attention and your questions, and have a great further day.

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