Signify (Euronext: LIGHT.AS) released Q3 2022 results on 28 October, reporting revenue of $1.89B (EUR 1.91B) – an increase in sales growth over the same Q last year of 4.3%. Profit declined slightly to 10.4% EBITA compared to 11.1% in Q3 2021. The decline in EBITA (which excludes depreciation expenses) was attributed to a strong negative currency effect: a result of the weakening Euro versus the US dollar and the Chinese yuan along with a temporary adverse FX hedging effect.
CEO Eric Rondolat reflected on the increasingly volatile environment in his opening comments on the earnings webcast noting that the company’s 4.3% comparable sales growth (CSG) in Q3 2022 was delivered along with improved profitability over the second quarter despite currency pressures and higher energy costs. Rondalat attributed the sales growth to the performance of Signify’s professional business which compensated for lower consumer demand paired with the slowdown in China.
| Signify Sales | Q3 2022 Sales
|
Comparable Sales Growth % (CSG) over Q3 2021 | Q3 2022 Earnings % (EBITA) | Q3 2021 Earnings % (EBITA) |
| Digital Solutions | $1.1B USD
(EUR 1.103B) |
+12.0% | 11.2% | 10.5% |
| Digital Products | $606M USD
(EUR 609M) |
-2.5% | 10.5% | 13.0% |
| Conventional Products | $194M USD
(EUR 195M) |
-9.5% | 14.2% | 18.8% |
|
Total Q3 FY2022 |
$1.89B USD
(EUR 1.912B) |
+4.3% | 10.4% | 11.1% |
Digital Solutions, Signify’s largest sales division, did the heavy lifting on comparable sales growth(CSG) in Q3 2022. CEO Rondalat indicated the double-digit CSG was driven in the professional segment with continued strong action and strong traction across markets, especially the US and Europe. Digital Solutions was the only sales division with increased profitability over the prior year Q3; the margin improvement was attributed to price increases and operating leverage that more than compensated for the impacts of higher costs and FX.
Signify’s leadership consistently highlights connected lighting solutions as the ongoing focus for continued growth amid a structurally weaker environment where inflation and volatility are likely to persist in the coming quarters. For the past several quarters, the company has reported an additional 3 to 4% in the number of connected light points per quarter in their installed base; in Q3 2022 the tally jumped almost 6% to 109 million connected light points from 103 million at the end of Q2 2022.
CFO Javier van Engelen discussed the working capital increase (coming in at 10.7% in Q3 2022 versus 4.7% in Q3 2021) stating that it was impacted by higher inventories (due to acquisition impacts, cost increases, FX and continued longer supplier leadtimes). Van Engelen noted that inventories have peaked and are starting to come down as lead times begin to improve. Receivables were also higher than in Q3 2021, which van Engelen attributed to higher sales and FX impact, with receivable days virtually unchanged versus Q3 2021. He restated Signify’s commitment to return to previous mid-to-low single-digit levels of working capital as supply chain lead times continue to shorten. Signify was able to lower net debt to decrease its leverage ratio, with net debt-to-EBITA reduced sequentially from 1.7x in Q2 2022 to 1.5x in Q3 2022.
Under Environmental, Social and Governance (ESG) results for Q3 2022, Signify highlights its first Diversity, Equity and Inclusion Report, published in Q3, explaining Signify’s approach to DE&I, commitments and progress. See link below to download.
Pressed during the Q&A session of the Q3 2022 earnings call on the possibility of M&A activity, CEO Rondolat made it clear that while they always have a pipeline of potential acquisitions (especially related to the professional business, fitting into the connected and digital roadmap, and in geographies where Signify is not strong), the focus for the next 6-12 months is on adapting Signify’s business to this challenging, extremely complicated market, and on completing the integrations already underway.
CEO Rondolat’s guidance for the remaining Q4 of FY2022 highlighted the uncertain near-term outlook, anticipating continued softness in the consumer segment and the Chinese market. Signify pulled back on its outlook for comparable sales growth guidance from the 3-6% range given at the end of Q2 2022, and instead now expects to achieve comparable sales growth between 2% and 3% for the full year 2022. Margin guidance for the full year 2022 remained at the target range given at the end of Q2 2022: 11.0-11.4% adjusted EBITA. Fiscal Q4 is typically Signify’s highest sales quarter.
Go Deeper:
Signify Q3 2022 Results Report:
Signify Q3 2022 Presentation:
Signify Q3 2022 YouTube Highlights Video:
Signify’s First-ever Diversity, Equity, and Inclusion Report (July 2022):