6.1Our strategic focus

A strategy of focused organic growth, founded on clear choices in business and innovation, and improved execution

OverToday, most healthcare systems are struggling to keep up with the past 10 years, Philips has undergone a transformation to reshape its portfolio and become a focused health technology company. As a result, we are active in highly attractive segments that offer significant potential for growth and margin expansion.

These markets are attractive due to the underlying growth of demand for access to healthcare from an aging and growing population. This in turn fuels theever-rising need for, meaningful innovation to address the risingand cost of, healthcare, spending andwhile systemic staff shortages and makefinancial resource constraints increase the pressure. Climate change is impacting both environmental and human health, compounding the stress on our healthcare more efficientsystems and productive, while driving better outcomes.

influencing consumer behavior. At Philips, we view the provision and collection of data from patient monitors, imaging devices, and Electronic Medical Records as the foundation upon which Artificial Intelligence (AI) propositions can be built to turn clinical data into actionable insights for patients, providers, and consumers. In addition to providing clinical insights, the same system, informatics and service solutions also provide improved operational forecasting – something our customers have been requesting since COVID-19 to help them improve productivity.

When we perform all of the above for a particular health condition, such as cardiac disease, we establish domain expertise across various sites of care for that disease state. Our healthcare customers are asking for integrated innovations that enable them to care for patientstime, in both in the hospital and in outpatient settings. In parallel we continue to provide impactful consumer health propositions

Creating value with sustainable impact

2022 was a difficult year for Philips as its business and financial performance suffered due to challenges in execution, quality and supply, and a complex operating model. Going forward, Philips will address these operational challenges, improve performance, and drive progressive value creation through a strategy of a) focused organic growth, b) scalable patient- and people-centric innovation, and c) focus on reliable execution, prioritizing patient safety and quality, supply chain reliability, and a simplified operating model. All supported by a reinvigorated culture of accountability, empowerment and strengthened health technology talent and capabilities.

Focused organic growth

Having transformed to become a health technology company in recent years, we will now focus on extracting the full value of our strong portfolio with leading positions.

We will focus investments to accelerate growth and margin expansion in areas – Image Guided Therapy, Ultrasound, Monitoring, and Personal Health – where we have strong #1 or #2 positions. In 2022, approximately 70% of our sales were generated by businesses with such leadership positions in the hospital and the home. We will also scalehome, emerging technologies and AI are affecting our new Enterprise Informatics business, drive margin improvement in Diagnostic Imaging, and restore Sleep & Respiratory Care.lives like never before.

Scalable patient- and people-centric innovation

Philips’At Philips, our purpose –is to improve people’s health and well-being through meaningful innovation. As such, we see huge opportunities to make a difference through innovation, design, and sustainability – is at the centerpartnering with our healthcare customers to increase productivity and deliver better care for more people through our innovation platforms of everything we do. This core principle has never beenmonitoring, imaging, interventional and enterprise informatics. And empowering more relevant than it is in these challenging times. people to take care of their health and well-being through our personal health propositions.

Our plan to create value with sustainable impact 

As a leading health technology company, we believe that – viewedPhilips is committed to driving progressive value creation through the lensa strategy of customer needs –focused organic growth, scalable patient- and people-centric innovation, can improve people’s health and healthcare outcomes, as well as makingfocus on reliable execution.

Philips has significant strengths to build on. We have a portfolio of patient- and people-centric innovations in hardware, software, AI and services, supporting care more convenient and sustainable, both in the hospital and at home.

Given our global presence, strong enterprise informatics platforms, (ambulatory) monitoring and imaging data, as well as our capabilities to support care across settings, we believe Philips is well positioned to do this, and – leveraging our strong clinical, consumer and Environmental, Social & Governance (ESG) franchise, and our strong brand – do it in a convenient and sustainable way.

In the consumer domain, we develop innovative solutions that support healthier lifestyles, prevent disease, and help people to live well with chronic illness, also in the home and community settings.

In clinics and hospitals,home. And we are teaming up with healthcare providers to innovatethe preferred strategic and transforminnovation partner for many customers across the way care is delivered. globe.

A strategy of focused growth

We listen closely tooperate in growing market segments, where attractive margins provide a foundation for sustainable value creation. To deliver on our customers’ needs and togetherstrategy, we co-create solutions that help our customers improve outcomes, patient and staff experience and productivity.make clear portfolio choices. We are embedding AIconcentrating our resources on areas where we have strong positions and data science in our propositionscan accelerate growth and expand margins more quickly – for instance, applying the power of predictive data analyticsImage Guided Therapy, Monitoring, Ultrasound, and artificial intelligence at the point of care – to leverage the value of data in the clinical and operational domains, aiding clinical decision making and improving the quality and efficiency of healthcare services. Increasingly, we are working together with our health systems customers in novel business models, including outcome-oriented payment models, that align their interests and ours in long-term partnerships.

Going forward,Personal Health. In doing so, we will focus our innovation on where we see customer needs evolving. To improve outcomes, we willto support clinical workflows in areas where we have domain leadership, e.g.such as cardiology, and that build on our deep strength in the ICU. ToIntensive Care Unit (ICU) and Cath Lab.

In Diagnostic Imaging, our goal is to help healthcare providers who need to do more with less. We will do so by leveraging our differentiating, AI-enabled innovations to increase their imaging workflow productivity, departmental efficiency and financial sustainability and, by doing so, improve our margins and drive uptake of our services supporting care pathways.

We help our customers to unlock actionable insights from pools of medical imaging data, vital signs (patient monitoring) data and insights generated with the support of artificial intelligence (AI) to optimize care delivery across the patient journey. With the scaling of our end-to-end multi-vendor Enterprise Informatics business, we aim to grow our platforms such as radiology, pathology and remote care delivery across health systems and care settings, while building long-term customer relationships, generating recurring revenue and enabling the hardware business to maintain a competitive advantage.

Additionally, we remain committed to rebuilding our position in Sleep & Respiratory Care while continuing to resolve the effects of the Respironics recall.

Scalable patient- and people-centric innovation

At Philips, we’ve been innovating to improve lives for over 130 years. People’s needs are at the very heart of how we innovate and design for sustainable impact with a system having‘safety and quality first’ mindset.

Innovation is our core strength and will continue to contend with high patient volumes, staff shortagesbe our core differentiator. Recent industry trends have accelerated the adoption of technology within healthcare. We are embracing these trends and rising costs, we will enhance care pathways and operational workflows through integrated technology infrastructure, and we will leverageshifting our (enterprise) informatics and hardware innovation to lower costsa more patient- and reduce the burden on staff. To improve the delivery of care outside the hospital,people-centric model closer to our customers. This starts with asking: What do people – in our case, patients and clinicians, nurses and technicians, consumers – really need? And how can we will utilize our consumer/home experience and our strength in data and informatics to connect andbest support care for patients,healthcare professionals with better outcomes, across settings.their workflow?

In doing so, we will leverage leading technologies across our portfolio. To name just a handful, by way of example: our Ingenia Ambition MR system with BlueSeal magnet that offers helium-free-for-life operation; our Azurion suite of interventional cardiology solutions; our IntelliVue MX750 and MX850 patient monitors and MCOT ambulatory cardiac ePatch offering comprehensive monitoring capabilities across sites of care; and our multi-vendor, multi-modality, multi-site Radiology Operations Command Center virtualized imaging solution.

While we continue to invest significantly in innovation, we are making a number of important changes to increase the impact of our patient- and people-driven innovation and generate better returns. Moving forward, we will focus our resources on a smaller number of projects and products with greater potential for impact. We will scale and accelerate innovations, driven by the business and supported by rightsized Group research, with patient safety, quality and sustainability at the core of design. By bringing our central innovation activities into the heart of the businesses, we are bringingfocusing our systemefforts and software innovation closerresources on fewer projects offering greater scale and impact on patient outcomes and care providers’ clinical, operational and sustainability challenges. We do this by balancing new, breakthrough innovations and continuous optimized lifecycle management, through upgrades and services, of Philips products and systems already deployed in care settings. We bring together expertise across the product lifecycle, from research through serviceability, to ensure our customers.innovations drive maximum impact for our customers and consumers – delivering a superior experience and value, with minimum environmental impact.

Focus on improved

Execution as the value driver

Enabled by a culture of patient- and people-centricity, accountability and impact, supported by strong health technology capabilities, we see effective execution

The as the key value driver of our plan and a key driver for change. We are focusing on:

• Patient safety and quality – remains our performance improvement is improved execution grounded in three decisive actions:
  highest priority
  1. End-to-end supply chain resilience
  2. A simplified operating model with an agile way of working

First, patient safety and quality: putting thisquality is at the heart of (business) innovation,everything we do. We have stepped up accountability for patient safety and quality, for example, by elevating oversight to the function to Executive Committee level, and embedding itcreating a new organization, with stronger processes and more effective early warning systems in our culture, e.g. bythe businesses, as well as giving all employees dedicated patient safety and quality objectives;

6.3Double Materiality analysisAssessment

We identify the Environ­mental, Social and Governance topics which we believe have the greatest impact on our business and the greatest level of concern to stakeholders along our value chain, for instance patient safety and quality. We do this through a multi-stakeholder process. Please refer to Working with stakeholders and advocacy for more information. Assessing these topics enables us to prioritize and focus upon the most material topics and effectively address these in our policies, programs, targets and targets.actions. We do this with reference to the GRI standard and identify and assess impacts on an ongoing basis, for example through discussions with our customers, suppliers, investors, employees, peer companies, social partners, regulators, NGOs, and academics. We also conduct a benchmark exercise, carry out trend analysis and run media searches to provide input for our materiality analysis. GRI has not yet published a sector standard for the healthcare industry. Philips’ impact on society at large is covered through our Lives Improved metric and the Environmental Profit & Loss account, as well as a number of other KPIs addressed in Environmental, Social and Governance. The result of our impact materiality assessment you will find below.

Similar to 2021,2022, we used an evidence-based approach to materiality analysis,assessment, powered by a third-party AI-based application. The application allows automated sifting and analysis of millions of data points from publicly available sources, including corporate reports, mandatory regulations and voluntary initiatives, as well as news. In our 2022 materiality analysis, we identified a list of topics that are material to our businesses. With this data-driven approach to materiality analysisassessment we have incorporated a wider range of data and stakeholders than was ever possible before and managed to get an evidence-based perspective on regulatory, strategic and reputational risks and opportunities. Topics were prioritized through a survey sent to a large and diverse set of internal and external stakeholders, combined with input from the application.

Public health risks emerged as a new material topic in 2020, as a result of the COVID-19 pandemic, and it was assessed as a material topic in 2022 as well.

Changes in 20222023

On theboth external and internal importance axis, the most significant increases compared to 20212022 were Sustainable value creation, Geopolitical events, ResponsibleWaste management and Resilient Supply Chains, TalentSocial inclusion & development, and Energy efficiency.engagement. Innovation & research went down on both axes. On the internal importance axis, there werewas a significant increasesdecrease on Pollution, Governance, Access to (quality and affordable) care, Competition & market access, and Talent & development.Pollution.

Double materiality

After completing the regular impact materiality analysis,assessment, we completed a preliminary 'double materiality' analysis,assessment, in preparation for the upcoming requirements of the EU Corporate Sustainability Reporting Directive (CSRD). The double materiality analysisassessment addresses both financial materiality (the impact of society on Philips) as well as impact materiality (the impact of Philips on society): we only included the high and medium material topics listed above.from impact materiality and/or financial materiality. The data sources used for the financial materiality include corporate reports, mandatory regulations with sanctions, voluntary initiatives by e.g. central banks, and Sustainability Accounting Standards Board (SASB) accounting metrics. For impact materiality, we included sustainability data from corporate reports or sustainability reports, coverage in the news and voluntary initiatives and regulation. We calibrated the financial and impact materiality with a team of internal experts from Enterprise Risk Management, Group Control, Internal Audit, Insurance and Risk Management and Sustainability and aligned with our Enterprise Risk Management assessment. After this calibration the financial impact of Product responsibility & safety, Geopolitical events, and Big data, AI & Cybersecurity were increased. The results of the double materiality analysis are depicted below. 

From the financial materiality analysis,assessment, the topics that ranked highest were: (1) from the environmental topics, Circular economy, and Climate change; (2) from the social topics, Fair & inclusive workplace, Employee well-being, healthProduct responsibility & safety, and Responsible & resilient supply chains;(2) Geopolitical events, and (3) from the governance topics,Big data, AI & Cybersecurity, as well as Business ethics & General Business Principles, Big data & privacy, and Product responsibility & safety.business principles.

From the impact materiality analysis,assessment, the topics that ranked the highest were: (1) from the environmentalEnvironmental topics, Climate change, and Energy efficiency; (2) from the socialSocial topics, Public health risks and Employee well-being, health & safety, and FairAccess to (quality & inclusive workplace;affordable) care; and (3) from the governanceGovernance topics, Big data, AI & privacyCybersecurity, and InnovationCompetition & research.market access. These topics are all covered in more detail in the Annual Report 20222023 and monitored regularly. 

The outcome of the double materiality assessment did not result in any significant changes in the material topics identified.identified from impact materiality.

The results of our materiality assessment have been reviewed and approved by the Philips ESG CommitteeBoard of Management and will be used to prepare for the upcoming EU legislation.

6.4Our businessesbusiness structure

Our reporting structure in 2022

Koninklijke Philips N.V. (Royal Philips) is the parent company of the Philips Group. In 2022,As announced on January 30, 2023, Philips has changed its operating model to end-to-end businesses with single accountability in order to make the reportablecompany more agile in its drive to create value with sustainable impact. The segments were Diagnosis & Treatment, businesses, Connected Care businesses, and Personal Health businesses,are each having been responsible for the management of itstheir business worldwide.activity worldwide, and are made up of the six businesses shown below. Additionally, Royal Philips identifies the segment Other.

 

Our reporting structure in 2023 and beyond

As announced on January 30, 2023, Philips is changing its operating model to end-to-end businesses with single accountability. In 2023, the businesses will be as follows.

6.4.1Diagnosis & Treatment businesses in 2022segment

Our Diagnosis & Treatment businesses create value through their unique portfolio of innovative solutions – consisting of systems, smart devices, software and services, powered by AI-enabled informatics –solutions that support precision diagnosis and minimally invasive treatment in therapeutic areas such as cardiology, peripheral vascular, neurology, surgery, and oncology. With these solutions, we enable our customers to realize the full potential of the Quadruple Aim – better health outcomes, improved patient and staff experience, and lower cost of care.

Serving diagnostic enterprise imaging markets globally, weour goal is to improve customer performance in the radiology/imaging workflow. We see significant opportunity to enable precision diagnosis while at the same time supporting adjacent needs for care orchestration across care pathways and increasing departmental productivity. We do this through smart diagnostic systems, connected workflow solutions, and integrated AI-supported diagnostics and pathway informatics, drivinginformatics. These drive enterprise-wide operational efficiency and helpinghelp clinicians to provide an early and definitive diagnosis, enabling them to select tailored care pathways with predictable outcomes for every patient, both inside and outside the hospital.

We also provide integrated solutions combining imaging systems, and diagnostic monitoring data and therapeutic devices, which optimize interventional procedures to deliver more effective treatment, better outcomes and higher productivity. Building upon our leading-edge Image Guided Therapy System – Azurion system, we continue to innovate, optimizing clinical and operational lab performance through advances in workflow and integration for routine procedures, and expanding the role of image-guided interventions to treat new groups of patients such as those with complex diseases including various cardiovascular conditions, stroke and lung cancer and spine disorders.cancer. We are also innovating the way we engage with our customers, using new business models across different care settings, including out-of-hospital settings such as office-based labs and ambulatory surgical centers, which offer clear clinical, financial and operational benefits.

In 2022, Philips completed the acquisition of Vesper Medical Inc. a US-based medical technology company that develops minimally-invasive peripheral vascular devices. Vesper Medical will further expand Philips’ portfolio of diagnostic and therapeutic devices with an advanced venous stent portfolio for the treatment of deep venous disease.

In 2022,2023, the Diagnosis & Treatment segment consisted of the following areas of business:businesses:

• Precision Diagnosis, consisting of:
  • Diagnostic Imaging: Imaging:
    • Diagnostic X-ray business unit – systems with associated software to optimize diagnostic imaging quality and improve efficiency and productivity for the hospital  
    • Magnetic Resonance Imaging (MRI), withbusiness unit – helium-free-for-life operations, bundled with associated AI-enabled software to streamline workflows, optimize diagnostic quality, and improve patient experience; X-ray systems, together with associated software to streamline workflows and optimize diagnostic quality;experience
    • Computed Tomography AMI business unit – advanced and efficient Computed Tomography (CT) systems and software, including detector-based Spectral CT and molecular and hybrid imaging solutions for nuclear medicine
  • Ultrasound: business unit – echography solutions focused on diagnosis, treatment planning and guidance for cardiology, general imaging, obstetrics/gynecology, and point-of-care applications, as well as proprietary AI-enabled and intelligent software capabilities to enable early, advanced diagnostics and timely interventions, and remote capabilities to enable tele-ultrasound operations and training
    
    
  • Enterprise Diagnostic Informatics: a suite of integrated multivendor products and services that deliver a comprehensive platform designed to connect clinical data and optimize workflows around every step in the patient’s journey across a range of diagnostic (radiology, point-of-care, laboratory) and clinical (oncology, cardiology, neurology) service lines
• Image Guided Therapy:Therapy, consisting of:
  • Image Guided Therapy Systems business unit – integrated interventional systems that combine information from imaging systems, interventional devices, navigation tools, monitoring patient data and patient health records, supported by AI, to provide interventional staff with the control and information they need to perform procedures efficiently;efficiently
  • Image Guided Therapy Devices business unit – interventional diagnostic and therapeutic devices to treat coronary artery and peripheral vascular disease

Revenue is predominantly earned through the sale of products, leasing, customer services fees, recurring per-procedure fees for disposable devices, and software license fees. For certain offerings, per-study fees or outcome-based fees are earned over the contract term.  

Sales channels are a mix of a direct sales force, especially in all the larger markets, third-party distributors and an online sales portal. This varies by product, market and price segment. Our sales organizations have an intimate knowledge of technologies and clinical applications, as well as the solutions necessary to solve problems for our customers. 

Under normal circumstances, salesSales at Philips’ Diagnosis & Treatment businesses are generally higher in the second half of the year, largely due to the timing of customer spending patterns.

At year-end 2022,2023, Diagnosis & Treatment had around 33,00028,397 employees worldwide.

2022 business2023 highlights

At RSNA23, Philips received FDA clearance to marketannounced a raft of new innovations, including next-generation EPIQ Elite 10.0 and Affiniti ultrasound systems that increase diagnostic confidence and workflow efficiency, BlueSeal MRI Mobile, the world’s first and only mobile MRI system with helium-free operations, and new AI-enabled cloud solutions that enhance radiology efficiency and clinical confidence. 

Philips launched its new MR 7700 3.0T MR system, which features an enhanced gradient system for Philips’ highest image qualitydesigned to deliver outstanding imaging results and speed to support confident diagnosis for every patient.

Five top hospitals in Shanghai, with a precision diagnosis. Philips also received FDA clearance for its SmartSpeed MR acceleration software, adding AI data collection algorithms tototal of more than 10,000 beds, installed Philips’ existing Compressed SENSE MR engine for higher image resolution with three times faster scan times and virtually no loss in image quality.

By combining theadvanced Spectral CT 7500 scanner with the Azurion with FlexArm image-guided therapyimaging system, Philips has developed a fully integrated hybrid angio CT suite solution for single-room, single-sessionhelping physicians deliver first-time-right diagnosis and treatment in areas such as oncology, stroke, and trauma care.

In radiotherapy, the AI-enabled Philips MR for Calculating Attenuation (MRCAT) Head and Neck radiotherapy application expands the range of MR-only workflows for cancer patients, advancing comprehensive and personalized cancer care through precision oncology solutions.fast, low-dose X-ray scans.

Philips further expanded its leading ultrasound portfolio with the FDA market clearance for its newlaunch of the Ultrasound 5000 Compact system to deliver5500 CV, which delivers cart-based premium image quality in compact formultrasound exams for point-of-care, cardiology generaland vascular patients at the bedside. 

Philips IntraSight Mobile received approval from the Chinese regulatory authority, paving the way for its commercial introduction in the Chinese market. IntraSight Mobile combines imaging and obstetricsphysiology applications on a mobile system for peripheral and gynecology applications.coronary artery disease therapy.

Building on Philips’ leading position in interventional cardiology solutions,Philips expanded its image-guided therapy portfolio with the companylaunch of Philips Zenition 10, which provides a cost-effective imaging solution to guide high-volume routine surgery, as well as complex orthopedic and trauma procedures. Philips also launched the latest versionZenition 30 Image Guided Therapy Mobile C-arm. Its workflow-enhancing features and excellent image quality enable surgeons to deliver enhanced care to more patients, helping alleviate the staff shortages faced by many hospitals.

Through the WE-TRUST study, Philips is driving innovation in stroke treatment. The trial examines the impact of its EchoNavigator image-guidance tool, which integrates live ultrasound, interventional X-ray imagingthe direct-to-angio treatment pathway on clinical outcomes, facilitated by a helical scan in the angio suite developed by Philips to reduce time to treatment. With 16 leading stroke centers and advanced 3D heart modelshospitals around the world involved in the trial and 100 patients enrolled, the WE-TRUST study has already achieved the scale and momentum needed to help interventional teams treat structural heart disease with greater ease and efficiency.

To improve outcomesdeliver a reliable evidence base on the potential benefits of the Direct to Angio Suite pathway for patients undergoing endovascularsuspected of having a large vessel occlusion (LVO) ischemic stroke – a treatment physicians now have accesspathway that focuses squarely on addressing the fact that the faster a patient is treated, the more likely they are to advanced new 3D image-guidance capabilities through Philips’ Zenition mobile C-arm system, which offers enhanced clinical accuracy and efficiency.

Philips is successfully expanding into interventional oncology withrecover. Another significant milestone was the installationpublication of its innovative lung cancer diagnosis and treatment solution Lung Suite in hospitals in Belgium, France, Israel, and the UK. Based on Philips Azurion, this solution enhances the accuracy of biopsy procedures and provides a therapy option for immediate treatment of early-stage lung cancer patients.

Inferior Vena Cava (IVC) filters are used to treat patients with venous thromboembolism, in which blood clots formhealth economics analysis results in the deep veinsJournal of the leg and groin andNeuroInterventional Surgery, demonstrating that this new stroke care pathway can travel through the circulatory system, but research has shown that they may have long-term complications. In the United States, the first patients were successfully treated for Inferior Vena Cava (IVC) filter removal using Philips' CavaClear solution – the only FDA-cleared solution for advanced IVC filter removal.save over USD 3,000 per patient.

6.4.2Connected Care businessessegment

With technology constantly advancing and becoming increasingly pervasive in 2022

Thehealthcare, the Connected Care businesses aim to connect and elevate care for all. Philips connects patients and caregivers across care settings, delivering clinical, operational and therapeutic solutions that help our customers address the Quadruple Aim ofdeliver better health outcomes, improvedimprove the patient and staff experience, and lower the cost of care. Aftercare across care settings. In 2023, the years of the COVID pandemic, which has accelerated the digital transformation of healthcare, in 2022 the volatile global economic situation continued to put additional pressure on customer budgets and worsened trends such as staff shortages, as well as increasing the need for solutions that enable more effective, sustainable and convenient care in hospital, clinics and the home.home – especially enabled by strong informatics and AI.

Philips’The Sleep & Respiratory Care business in particular facedcontinued to face multiple operational regulatory and supply-chainregulatory challenges in 2022,2023, but action has been taken to address these throughimprove the decision to establishability of the Sleep & Respiratory Care as an organization with end-to-end accountability, spanning product creation through to customer fulfillment (pending the outcome of consultation with workers councils in a number of countries). Therecorrectly assess potential patient safety or quality issues. Philips has been a reset toreaffirmed its core activities, which put patient safety front and center in everything we do, and we believe that the implementation of a new simplified organization, which for Sleep & Respiratory Care began in 2022, will help to achieve this, as well as to improve productivity and increase agility. In the course of the year, Sleep & Respiratory Care gradually returned to the market for sleep therapy devices outside the US. For information about the Philips Respironics recall and related remediation effort, please refer to Quality & Regulatory and patient safety. 

With clinical depth and discovery, Philips Connected Care technologies help to cultivate a more accurate and complete view of the patient that drives better health and care. The combination of advanced technological solutions and a consultativeco-creation approach allows Philips to be an effective partner to its customers in their digital transformation, both across the enterprise and at the level of the individual clinician, nurse and patient. The roleWe help our customers to unlock actionable insights from pools of Connected Care is to collect, connect, analyzemedical imaging data, patient monitoring data, and communicate data to provide insights and clinical decision support that helpthrough the use of advanced AI, to improve outcomes and drive productivity.

To help enable care delivery across the health continuum and help our customers embrace healthcare’s digital transformation, the Connected Care businesses continue to step up platform investments that span three key domains:

• Acute Patient Management: in-hospital continuous monitoring and workflow solutions fueled by advanced interoperability and patient data insights
• Ambulatory Patient Care Management: ambulatory and home-based monitoring and diagnosis solutions and services supporting the patient journey
• Enterprise Informatics Management: turning data insights into decision support and productivity tools.

Philips’ open, interoperable platforms aggregate and leverage information from clinical devices, patient and historical data to support care providers in patient engagement, diagnostics, (ambulatory)and patient monitoring in the hospital, ambulatory and (clinical) therapy solutions.home settings.

In January 2022, Philips completed the acquisition of Cardiologs, a France-based medical technology company focused on transforming cardiac diagnostics using artificial intelligence (AI) and cloud technology. Cardiologs is already further strengthening Philips’ cardiac monitoring and diagnostics offering with innovative software technology, electrocardiogram (ECG) analysis and reporting services.

In 2022,2023, the Connected Care segment consisted of the following areas of business:businesses:

• Monitoring – in-hospital, ambulatory and home-based monitoring and diagnosis solutions and services supporting the patient journey; as well as continuous monitoring and workflow solutions fueled by advanced interoperability and patient data insights.
  • The Hospital Patient Monitoring: This business unit delivers acute patient management solutions to improve clinical and patient outcomes and achieve operational and economic efficiencies. Leveraging a strong presence in the operating theater and intensive care unit (ICU), Hospital Patient Monitoring solutions enhance customers’ experience and improve patient outcomes with seamless patient data pulled from over 1,000 vendor-neutral devices monitoring from admission to discharge, and by turning that patient data into clinical insights that are actionable at the right time and specific to targeted care settings.
  • The Ambulatory Monitoring & Diagnostics business unit provides patient care management in ambulatory and home care settings through a suite of cardiac diagnostic and monitoring solutions to identify heart rhythm disorders plus other disease states supported by AI algorithms that orchestrate workflows and services across care settings to provide care virtually anywhere.
  • The Emergency Care: Emergency Care business unit’s propositions play a critical role in connected acute care management, both inside and outside the hospital, including cardiac resuscitation (e.g. AEDs)Automated External Defibrillators) and emergency care solutions (devices, services, and digital/data solutions) for professional and consumer applications.

• Sleep & Respiratory Care: – Working closely with clinical partners and Durable/Home Medical Equipment providers, Philips Respironics provides sleep and respiratory solutions to customers, clinicians and patients. This extends from ambulatory patient care solutions for obstructive sleep apnea, to solutions encompassing diagnostics, people-centric therapy, cloud-based connected propositions and care management services for patients with COPD (Chronic Obstructive Pulmonary Disease) and respiratory conditions. Hospital Respiratory Care provides invasive and non-invasive ventilators for acute and sub-acute hospital environments; Home Respiratory Care supports chronic care management in the home.

• Connected Care Informatics:Enterprise Informatics Comprised of three core– By combining our informatics propositions into one end-to-end business units, thissegment, Philips can scale its software business, focuses on clinical analyticsproviding vendor-agnostic, integrated workflow solutions that provide actionable insightsconvert data from our imaging and monitoring systems into clinical and operational.
  • The Radiology Informatics business unit enables enterprise imaging across sites, specialties and technologies to optimizesimplify medical image management, facilitate effective collaboration and enhance patient data.
    
    care.
  • The fully integrated Electronic Medical RecordEMR & Care Management business enables centralized management of clinical, organizationalunit provides electronic medical record (EMR), acute care, and operational processes,TeleICU solutions to deliver intelligent informatics propositions to connect people, data, and virtualtechnology across care delivery propositions, including remote patient management and real-time monitoring in acute care. The Tele-ICU program continues to play a pivotal role, enabling clinicians and nursing staff to remotely monitor a scalable number of ICU beds from a central monitoring facility with predictive analytics, enabled by Philips’ HealthSuite Platform.
    
    settings.
  • The Clinical Data ServicesIntegration & Insights business – formerly Capsule Technologies, acquired by Philips in early 2021 –unit offers medical device and data integration across the enterprise for continuous, vendor-neutral data capture from more than 1,000 device models supported by insightful clinical decision support and analysis.
    
    Our Ambulatory Monitoring
  • The Cardiovascular Informatics business unit offers solutions that empower caregivers across the enterprise to make fast, informed clinical decisions to care for cardiac patients, providing support in managing increased volume and complexity of clinical and administrative data, wherever care is delivered.
  • The Clinical Insight & DiagnosticsInformatics business – comprisedunit delivers clinical decision support in the domains of BioTelemetry, which Philips acquired in 2021 – provides industry-leading patient caredigital pathology, advanced visualization and specific disease management in ambulatory and home care settings in North America and beyond through a suite of cardiac diagnostic and monitoring solutions to identify heart rhythm disorders supported by AI algorithms that orchestrate workflows and services across care settings. The acquisition of Cardiologs complements this capability with a vendor-neutral heart disorder screener and ECG analysis applications, based on machine learning algorithms.solutions.

In most of the Connected Care businesses, revenue is earned through the sale of products and solutions, customeras well as services fees and software license fees.licenses. Where bundled offerings result in solutions for our customers, or offerings are based on the number of people being monitored, we see more usage-based earnings models. In the area of patient care management businesses (Ambulatory Monitoring & Diagnostics business unit and Sleep & Respiratory Care)Care business), revenue is generated through clinical services, product sales and through rental models, whereby revenue is generated over time.

Sales channels include a mix of a direct salesforce,sales force, partly paired with an online sales portal and distributors (varying by product, market and price segment). Sales are mostly driven by a direct salesforcesales force with an intimate knowledge of the procedures that use our integrated solutions’ smart devices, systems, softwareclinical settings and services.patient-specific diagnosis and treatment. Philips workscollaborates with customers and partners to co-create solutions, drive commercial innovation and adapt to new models such as monitoring-as-a-service and software-as-a-service.

Sales at Philips’ Connected Care businesses are generally higher in the second half of the year, largely due to customer spending patterns. However, the Philips Respironics voluntary recall notification in the Sleep & Respiratory Care business in June 2021 had(as further discussed in Quality & Regulatory and patient safety) continued to have a negative impact on sales throughout 2022.2023.

At year-end 2022,2023, Connected Care had around 17,00017,549 employees worldwide.

2022 business2023 highlights

Philips' offerings improving clinical workflowPhilips signed a 10-year, EUR 100 million Enterprise Monitoring as a Service agreement with one of the largest health systems in the US, covering 20 hospitals with over 3,000 beds. The agreement provides the health system with constant access to the latest technology, including software and alarm management in critical care environments, as well as its contributions to a quieter healing environment in intensive care units, resonated well with customers.services, while lowering initial investments.

Philips expanded its Advanced Life Support activities across international markets and Greater China.NYU Langone Health announced an 8-year strategic partnership valued up to USD 115 million and aimed at enhancing patient care through further innovation. The partnership includes digital pathology, clinical informatics, and innovative AI-enabled diagnostics, with an Enterprise Monitoring as a Service model. With these new technologies, NYU Langone clinicians can collaborate in real time, sharing pathology, imaging studies or patient data to support diagnostic confidence and tailor individualized care plans.

In Greater China, Philips partnered to drive localizationHighlighting the strength of its EMR Tasy offering in order to be locally relevant for the China market.

Philips continues to successfully expand into ambulatory care. Newly published research validated that Philips Mobile Cardiac Outpatient Telemetry (MCOT) is crucial in detecting arrhythmias and providing data that allows care teams to intervene quickly and decisively to provide the optimal patient treatment.

Underlining the clinical and economic value of remote cardiaccomprehensive patient monitoring offering, Philips announced a multi-year partnership with Northwell Health to standardize and centralize patient monitoring across the hospital, allowing caregivers to see what is happening at each bedside.

Philips announced new research demonstrating increased atrial fibrillation detectioninteroperability capabilities that offer a comprehensive view of patient health for improved monitoring and significant cost savings using Philips’ mobile cardiac outpatient telemetry monitoring.care coordination. This is realized through the interoperability of Philips Capsule Medical Device Information Platform (MDIP) with Philips Patient Information Center iX (PIC iX) with streaming, vendor-neutral data that supports care delivery and collaboration.

Philips expandedintroduced the cloud-based Philips HealthSuite Imaging PACS on Amazon Web Services. This cloud-based enterprise imaging solution, which includes advanced AI-enabled applications, has been designed to enhance image access speed, reliability, and data orchestration for clinicians across the imaging workflow, while reducing costs for healthcare organizations.

Philips launched its remote cardiacambulatory monitoring portfoliooffering in Japan, combining Philips ePatch Holter monitors with a patch-based, clinical-grade ECG analysis through AI and advanced algorithms. This innovative approach aims to reduce clinician workload and improve the patient recruitment, compliance and retention for clinical trials.experience.

6.4.3Personal Health businesses in 2022segment

Our Personal Health businesses playbusiness plays an important role serving people's needs in the areas ofenabling healthy living, preventionindividual care routines with technology and home care – delivering compelling value propositions to enable people to live a healthy lifesolutions that support people’s long-term health and proactively manage their own health.well-being.

We aim to drive profitable growth through a focus on innovation across three key areas:

• Reaching more people through consumer-driven product and solutions innovation 
• Accelerating online growthEnsuring the highest quality of consumer experience from pre-purchase consideration through to purchase and engaging more people through an end-to-end digital approachunboxing, all the way to end-of-use recycling
• Expanding our ecosystem through partnerships with leading retailers and scaling new business models, such as try-and-buy and subscription services

The Personal Health segment consists of the Personal Health business, which comprises the following areas of business:business units:

• Oral Healthcare: business unit – power toothbrushes for a range of price segments, from entry-level battery-operated toothbrushes for a young audience to premium intuitive power toothbrushes connected to the Sonicare app with in-app coaching; brush heads, which are also available as a subscription service; products for interdental cleaning and for teeth whitening
• Mother & Child Care: business unit – products to support parents and babies in the first 1,000 days, including infant feeding (breast pumps, baby bottles and sterilizers), connected baby monitors and digital parental and women’s health solutions (Pregnancy+ and Baby+ apps)
• Personal Care: business unit – grooming and beauty products ranging from entry-level to premium. The grooming portfolio includes shavers, OneBlade, groomers, trimmers and hair clippers, as well as premium solutions with SkinIQ technology, in-app coaching for a personalized shave, and blade subscriptions. The beauty portfolio includes devices to support skin care, hair care and hair removal, including Lumea premium IPL hair removal devices and solutions with the latest SenseIQ technology that sense and adapt for personalized care; also available through subscription models.

Through our Personal Health businesses,business, we offer a broad range of solutions in various consumer price segments to support people in proactively managing their health and well-being. Depending on the market, we offer an additional portfolio of locally relevant innovations and adjust our range to increase accessibility. A notable aspect of our commercial strategy is driving increased direct-to-consumer relationships and sales through our consumer communities and online store. About half of our Personal Health sales worldwide now take place online.

We are leveraging connectivity to offer new business models, partnering with other players in the health ecosystem, e.g. insurance companies and healthcare professionals, with the goal of extending opportunities for people to live healthily and prevent or manage disease. We are engaging consumers in their health journey in new and impactful ways through social media and digital innovation.  

In Personal Health, improving lives also means caring for the world, with a key focus on environmental sustainability. For example, in 2023 we strongly believelaunched an initiative in Germany, Philips Refurb Editions, to give products a second life, with the connection between good oral care and good overall health –same two-year guarantee as a belief underpinned by the World Health Organization (WHO), which in 2021 adopted a stronger resolution on oral healthcare asnew product. This is part of the drive towards universal health coverage. Good oral care is important for everyone. And since everyone is different, oral healthcare should also be personalizedPersonal Health’s commitment to each userdriving a more circular economy, and we believe we need to garner the best health outcome. Philips Sonicare, which celebrated its 30^th anniversary in 2022, offers a wide range of solutions for complete oral care: from intelligent and intuitive power toothbrusheskeep finding innovative ways to interdental cleaning solutions and apps that help userssupport consumers with greater choices to manage their complete oral care on a daily basis and give the option to share brushing data with their dental practitioners, putting personalized guidance at their fingertips.live sustainably. 

We also offer mobile solutions to support parents and parents-to-be for a more informed, more connected and healthier journey to parenthood. The Pregnancy+ app and Baby+ app offer parents supportive content at every stage of their first 1,000-day journey. Pregnancy+ also offers state-of-the-art, photo-realistic and interactive 3D fetal models to make the experience even more exciting, with new, personalized content for each day of the pregnancy. As of year-end 2022, theThe Philips Pregnancy+ app and Baby+ app combined have more than 68 million downloads,was ranked among the best pregnancy apps of 2023 by Forbes^*). It has more than 1.5 million daily active users and areis available in 22 languages.

The company’s wide portfolio of connected consumer health platforms leverages Philips HealthSuite Platform, a cloud-enabled connected health ecosystem of devices, apps and digital tools that support personalized health and continuous care. 

The revenue model is mainly based on product sale at the point in time the products are delivered to retailers and online platforms. We continue to increase revenue model diversity by expanding our new business models, including direct-to-consumer, subscriptions, try-and-buy offerings and services. 

The Personal Health businesses experiencebusiness experiences seasonality, with higher sales around key national and international events and holidays. 

At year-end 2022,2023, Personal Health employed around 9,0009,085 people worldwide.

2022 business2023 highlights

BuildingPhilips successfully launched the Sonicare DiamondClean 7900 Series electric toothbrush in China on major online shopping channels Alibaba and JD.com. Highlighting increasing customer demand, it claimed the successful strengtheningnumber-one position in the high-end toothbrush category on Alibaba’s Tmall.

In partnership with JD.com, Philips launched the premium 7 Series Shaver in China, debuting as the #1 shaver on this major online shopping channel. Additionally, Philips’ DiamondClean 9000 premium electric toothbrush has become the best-selling high-end oral healthcare product on Alibaba.

To improve oral care habits among children, Philips introduced Sonicare for Kids 'Design a Pet Edition' with an entry price point designed to give more parents access to an electric toothbrush for their children.

Philips OneBlade packaging was named the 2023 Red Dot Communication Design Best of the company’s innovative power toothbrushes portfolio, ranging from entry-level to premium propositions, as well as targeted advertising and promotion campaigns, Philips Oral Healthcare recorded continued market share gainsBest in North America.

Philips' locally developed China power interdental cleaning innovation launched in Q1 contributed to our leadership position in overall market share (source: GfK).

Building on its successful OneBlade platform, Philips introduced in Europe the new OneBlade 360, which leverages a new blade that adjusts to the curves of the face to enhance shaving comfort. The global roll-out is expected to start in 2023.

Philips completed the global introductionrecognition of its new Philips Shaver S9000paper-based model, illustrating how the use of less material, fewer parts, and less volume can go hand in hand with SkinIQ with its launch in Japan, resulting in accelerated sales growth for this categoryiconic presence and a 4.9 (out of 5) consumer rating and review score within the first month.best user experience.

Philips continues the integration of SkinIQ technology by expanding into the S5000-S7000 ranges, increasing access to Philips proprietary technology that senses pressure and movement to adapt and guides the users for a more efficient shave.

In China, Philips launched its first premium portable shaver, which garnered 4.7-star ratings/reviews (source: Taobao) within'Better than New' campaign in Germany, repositioning refurbished innovations and underscoring the first month.company's commitment to circularity and sustainability. The campaign led to a significant year-on-year increase in sales revenue of refurbished Lumea and refurbished shaving products.

Philips announced Babybell Maternal & Child Supplies as the exclusive distributor for Philips Avent OneFeeding in China; the partnership aims to accelerate growth of the Philips Avent brand in the Chinese maternal health industry. The partnership combines the power of Philips’ latest innovations with Babybell's rich understanding of the local market and robust retail network to deliver on a faster innovation pace and expand market share.

6.4.4Segment Other

In our external reporting on Other we report on the items Innovation & Strategy, IP Royalties, Central costs, and other small items. At year-end 2022, around 18,0002023, 14,626 people worldwide were working in these areas.

About segment Other

Innovation & Strategy

Innovation & Strategy supports all businesses and markets withinAt Philips, in developing anwe have set up our innovation roadmap and strategiesteams to deliver on our customers’ needs and achieve our growth and profitability ambitions. 

We innovatebe as close to help our customers and consumers overcome clinical challenges,as possible. The majority of our Research & Development (R&D) experts work in one of our business units, which allows them to directly hear customer and consumer needs and work closely with other stakeholders to improve healthcare. We helpturn innovations into actual products. Innovation at Philips is organized to encourage innovation anywhere along the value chain and not just at the product ideation stage.

The remaining R&D experts are part of our businesses to enable and accelerate innovation by providing deeply specialized expertise. This starts with strategy and entails cooperation between research, development, design, medical affairs, professional services, marketing and businesses in a multi-disciplinary fashion, from early exploration to first-of-a-kind offerings.

We do so in the following ways:

• We actively participate in open innovation through relationships with academic, clinical, industrial partners and start-ups, as well as via public-private partnerships. We do so to increase innovation speed and improve agility, to capture and generate new ideas, and in some cases to leverage third-party capabilities.

• We drive continuous improvement in the Philips product and solution portfolios.central Innovation & Strategy improves the efficiency and effectivenessorganization. The main job of innovation through Centers of Excellence, such as Platform Modularity & Re-use, Data Science, Artificial Intelligence (AI) and Internet of Things.

• We strive for breakthrough innovations that can help drive fundamental shift in the healthcare industry, thereby supporting businessesthese experts is to focus on selected must-win battles.

• We drive adoptionindustry-shifting ideas that advance a core product to fulfill the needs of digital architecturea broad new customer segment. Innovation & Strategy focuses on enabling and platforms, movingaccelerating innovation across our business units in different ways:

  Strategy supports the business units in shaping their strategy to cloud-based Software-as-a-Servicecreate a competitive advantage. The Enterprise Strategy team focuses on overall corporate strategy, and the Market Analysis & Forecasting team analyzes customer segments and market growth trends. Strategy also partners closely with the Mergers & Acquisitions and Finance teams to ensure our M&A activity is aligned with the business units and our enterprise strategic direction.

  Research helps to define the future of healthcare by unlocking opportunities that have the potential to disrupt the healthcare industry. Breakthrough Innovation Teams (BRITE) and Exploratory Innovations Teams (XITE) are two ways Philips nurtures long-term ‘big bets’ in innovation and enables the growth of an overarching entrepreneurial mindset across all of Philips.

  Experience Design plays an important role in making sure that the voice of the customer is heard and included in innovation. This means linking product development from inception with a patient and consumer view and ensuring that the highest product and experience performance requirements are embedded throughout all innovation projects. In 2023, the Philips brand won 160 awards for informatics offerings,design excellence.

  Innovation Engineering teams bring innovations to life by providing Philips business units with a central team of experienced, talented individuals with capabilities in software, hardware engineering, and excellenceAI. Innovation Engineering teams also enable business units to scale through shared platforms.

  Innovation Excellence helps our business units to be the best they can in Data Scienceinnovation by offering them an outside-in view and AI, as well as software engineering. Industry best practices include creating and maintaining application-level software, modular and configurable system design and model-based system engineering.

• We drive our HealthSuite Architecture to help unlock the power ofdeveloping competencies, processes, data and enable healthcare professionals, patientstools they need to excel at innovation.

  Innovation Effectiveness teams help to measure the return on innovation investments and consumers. Its modular set of re-usable digital capabilities liberate, integrate and enable actionable insights on dataguide enterprise-wide innovation initiatives.

  Innovation & Strategy works from disparate systems within a secure environment.

• We help secure patient safety and quality by participating in stage gate reviews from the start of the idea-to-market (I2M) process. This is intended to ensure that patient safety and quality aspects of Philips products and solutions match the expectations and criteria of the end-users in the field. We engage with professional medical societies during regular and ad hoc advisory boards to help us understand the criteria on patient safety and quality related to medical devices. Together with the Regulatory function, we contribute to clinical evaluation during pre-market risk assessments, post-market surveillance, and support any health hazards evaluations with expert advice.

• We leverage the knowledge and expertise of our community of medical professionals. Activities include strategic guidance built on clinical and scientific knowledge, building and nurturing customer partnerships and growth opportunities, fostering peer-to-peer relationships in relevant medical communities, driving co-innovation with customers, liaising with medical regulatory bodies, and supporting clinical and economic evidence development.

• We deploy our engineering capabilities to realize innovations that deliver on our customers’ needs, advancing the Quadruple Aim of better health outcomes, improved patient and staff experience, and lower cost of care.

• We drivefour main innovation effectiveness and enable locally relevant solution creation at four established innovation hubs:sites – Eindhoven (Netherlands), Cambridge (USA), Bangalore (India) and Shanghai (China). These four hubs form a global network, together with the other – and smaller innovation and research sites in their respective regions,the Regions. Our global footprint enables us to provide accessunderstand, anticipate and react to each other’s capabilities to serve businesses,local markets and customers globally.

• We ensure that the user experiences of our innovations are inspiring, meaningful, people-focused, and locally relevant. A key enabler for this is an engaging and differentiating design language system (DLS) that is embedded in software, hardware, and services across our businesses. In 2022, Philips received a total of 171 awards for design excellence.

During 2022, Innovation & Strategy started to refocus R&D to deliver a greater return on investments by being selective in our choice of innovations in which to invest. We stopped projects and reduced the workforce by 5%. As part of the strategy to create value with sustainable impact, resources will shift to the businesses to innovate closer to, and with, customers.needs.

IP Royalties

Philips Intellectual Property & Standards (IP&S) proactively pursues the creation of new Intellectual Property (IP) in close co-operation with Philips’ operating businesses and Innovation & Strategy. IP&S is a leading industrial IP organization providing world-class IP solutions to Philips’ businesses to support their growth, competitiveness and profitability.

Royal Philips’ IP portfolio currently consists of 56,000approximately 53,000 patent rights, 33,00031,500 trademarks, 114,000135,000 design rights and 3,2003,300 domain names. Philips filed 920795 new patents in 2022,2023, with a strong focus on the growth areas in health technology services and solutions. 

Philips earns substantial annual income from license fees and royalties.

Philips believes its business as a whole is not materially dependent on any particular third-party patent or license, or any particular group of third-party patents and licenses.

Central costsCosts

We recharge the directly attributable part of the functional costs to the businesses. The remaining part is accounted for as 'central costs', and includes costs related to the Executive Committee and Group functionsFunctions such as Strategy, Legal and Audit fees.

6.5Our geographiesgeographic structure

6.5.1Our MarketsRegions

We address North America, Western Europe and other mature geographies, as well as Greater China and other growth geographies, viaGeographically, our business is organized in three market groups –Regions: North America, Greater China and International Markets – which are active in more than 100 countries worldwide.

The Markets’ core objectiveRegion (the latter made up of Europe and Growth groupings). Within our Regions, we further organize the business by Zones and Countries. Their primary accountability is to understandmanage customer intimacy, relationships and understanding of their needs, (strategic) account management, service delivery, and indirect partner management. They are also accountable for government relations, local market/customer needs,infrastructure needed to createsupport Philips’ presence in a country (license to operate) and activate the local marketing plans,for statutory, fiscal & compliance duties, safety, sustainability and labor relations to develop and manage the relationship with existing and new customers, and to deliver orders. They act as the voice of the customersecure compliant operations in the creationRegion/Zone/Country.

For financial reporting purposes, we recognize four geographic areas: Western Europe, North America, Other mature geographies, and Growth geographies. Western Europe, North America and Other mature geographies are collectively recognized as Mature geographies in reporting on sales. This reflects the grouping of the suite of solutions strategy, bring relevant products and solutions to market, and ensure local (solution) delivery and service execution, as well as managing the (integral) go-to-market approaches to our key customers and indirect channels – all with the aim of maximizing long-term customer value and gaining market share.countries based on similar economic characteristics.

6.5.2Macro-economic landscape in 2022

In 2022, global economic activity slowed down compared to 2021, when the global economy rebounded strongly from a COVID-induced recession. Several factors were at play. Firstly, the re-opening of the economy for most of the world in 2021 has disrupted global supply chains. Secondly, previous loose monetary policy, combined with supply chain issues, resulted in strong inflationary pressures commencing towards the end of 2021. Thirdly, to combat high inflation, central banks around the globe have embarked on aggressive monetary policy tightening cycles. Consequently, global real GDP is estimated to have grown by 3.0% in 2022, compared with the 6.0% estimated in 2021 for 2022. Looking ahead, Oxford Economics expects mild recessions for advanced economies in 2023 with full-year global real GDP growth expected at just 1.3%.

6.6Supply chain and procurement

6.6.26.7Supplier sustainability

Philips is present in 75 countries globally and has its corporate headquarters in Amsterdam, Netherlands. Our real estate locations are spread around the globe, with key manufacturing and R&D sites in Europe, the Americas and Asia.

In 2023, we consolidated five different R&D locations into a new R&D Hub in Bangalore, India, which will host some 5,000 employees. We continued our right-sizing program through our Future of Work concepts to support hybrid working. The project to move Philips’ purposeheadquarters to improve people’s lives applies throughouta new location in Amsterdam in 2025 is progressing as planned.

We also continue to optimize our value chain. An important areareal estate portfolio in line with our Environmental ESG commitments towards 2025. Having met our goal of focus for the Integrated Supply Chain is sustainability,bringing our site-related CO₂ emissions under 35 kilotons per year in 2020, we further reduced our CO₂ emissions to 22 kilotons in 2023. In addition, we reached 78% renewable energy in 2023, already exceeding our target of 75% by 2025. Energy consumption decreased by 7.8% compared to 2022.

Over 75% of our locations are leased properties, and we manage vacancy closely to ensure the right level of space efficiency and flexibility to support our business dynamic. Our current facilities are actively working on this together withadequate to meet the requirements of our partners, whether these be component suppliers or energy or logistics providers. Close cooperation with our suppliers not only helps us deliver health technology innovations, it also supports new approaches that help us minimize our environmental impactpresent and maximize the social and economic value we create.  

Since 2003, our sustainability strategy has included dedicated supplier sustainability programs. We have a direct (tier 1) business relationship with approximately 5,300 product and component suppliers and 17,100 service providers. In many cases, social issues deeperforeseeable future operations. As expected, occupancy rates in our supply chain require usoffices continued to intervene beyond tier 1stabilize in the first half of the chain. 

2023. We wantcontinue to make a difference through sustainable supply managementevaluate options to right-size our office footprint, to further adopt task-based working principles, and responsible sourcing. This is more than just managing compliance – it is about collaborating with our supply partners to make a positivecater for meaningful presence in inspiring layout and lasting impact. Therefore, the sustainability performanceworkplace solutions. The net book value of our suppliers is fully embeddedland and buildings as of December 31, 2023, represented EUR 1,282 million; construction in our procurement strategy and way of working. 

In 2022, we focused on further maximizing our positive impact deeper in the supply chain, strengthening our maturity-based approach to drive continuous improvement. Through the Supplier Sustainability Performance program, we improved the lives of approximately 459,000 workers in our supply chain (2021: 430,000). We also launched new ways to engage our suppliers, performing deep-dives at second-tier suppliers and actively supporting our strategic partners to become more effective in their own supply chain engagement approaches. 

In addition, our improvement program has been adopted by the Responsible Business Alliance under the name Responsible Factory Initiative. This program enables other companies to work on continuously improving their suppliers’ sustainability performance through the same methodology as Philips. 

Managing our large and diverse supply chain in a socially and environmentally responsible way requires a structured and innovative approach, while being transparent and engaging with a wide variety of stakeholders. In 2022, our programs focused specifically on improving suppliers’ sustainability performance, responsible sourcing of minerals, and reducing the environmental footprint of our supply base by driving the adoption of Science Based Targets.progress represented EUR 32 million.

7.1Performance review

The year 2023

• Sales amounted to EUR 18.2 billion, an increase of 2% on a nominal basis. On a comparable basis^*), sales increased 6%, driven by supply chain improvements. Comparable sales^*) showed 11% growth in the Diagnosis & Treatment segment, 1% growth in the Connected Care segment, and 3% growth in the Personal Health segment.
• Net income amounted to a loss of EUR 463 million, driven by higher earnings offset by a EUR 575 million Respironics litigation provision. Net income for 2022 was a loss of 1.6 billion, which included a charge of EUR 1.5 billion related to goodwill and R&D impairments. 
• As of December 31, 2023, over 99% of the sleep therapy device registrations that are actionable had been remediated, while the remediation of the ventilator devices remains ongoing. In October 2023, Philips Respironics received preliminary court approval for the class action settlement that would resolve all or nearly all private economic loss claims in the US.
• Adjusted EBITA^*) amounted to EUR 1,921 million, or 10.6% of sales, compared to 7.4% of sales in 2022. All segments showed an increase in Adjusted EBITA^*) margin, mainly driven by increased sales and pricing & productivity measures, partly offset by cost inflation.
• Supported by significant change management efforts, by year-end 2023 Philips had reduced its workforce by approximately 8,000 roles, out of 10,000 roles in total planned by 2025.
• Net cash flows from operating activities amounted to EUR 2,136 million; free cash flow^*) amounted to EUR 1,582 million.
• Philips cancelled approximately 15.1 million shares acquired under its 2021 share buyback program for capital reduction purposes.
• In 2023, Philips issued EUR 500 million of fixed-rate notes under the company’s EMTN program which mature in 2031 and used the proceeds for general corporate purposes, including the repayment of EUR 500 million that was outstanding under the credit facility entered into in the fourth quarter of 2022. 

The year 2022

• Sales amounted to EUR 17.8 billion, an increase of 4% on a nominal basis. On a comparable basis^*), sales declined 3%, due to operational and supply challenges, the COVID situation in China, the consequences of the Respironics field action,recall, and the Russia-Ukraine war. Comparable sales^*) showed a 1% decline in the Diagnosis & Treatment businesses, an 11%9% decline in the Connected Care businesses, and flat growth in the Personal Health businesses.
• Net income amounted to a loss of EUR 1,605 million in 2022, a decrease of EUR 4.9 billion compared to 2021, mainly due to a charge of EUR 1.5 billion related to goodwill and R&D impairments in 2022 and the EUR 2.5 billion gain on the sale of Domestic Appliances in 2021.
• In 2021, our subsidiary, Philips Respironics, initiated a voluntary recall notification in the United States and field safety notice outside the United States for certain sleep and respiratory care products. In 2022, as we took steps to accelerate the remediation program, we recorded an additional provision of EUR 250 million. By year-end 2022, around 90% ofmillion for remediation related to the production required for the delivery of replacement devices to patients had been completed.Respironics recall.
• Due to revisions to the financial forecast of Philips Respironics, Philips recorded a EUR 1.3 billion non-cash charge in the third quarter for the impairment of goodwill of this business.
• Adjusted EBITA^*) amounted to EUR 1,318 million, or 7.4% of sales, compared to 12.0% of sales in 2021. The Diagnosis & Treatment, Connected Care and Personal Health businesses showed a decline in Adjusted EBITA^*) margin, mainly due to the sales decline and cost inflation, partly offset by pricing and productivity measures.
• Philips has initiated several productivity actions, including simplifying the organization to streamline ways of working, increase agility and reduceNet cash provided by operating expenses. Additionally, Philips is implementing several actions to enhance performance and productivity in the supply chain, R&D and quality. 
• Operating cash flowactivities amounted to an outflow of EUR 173 million; free cash flow^*) amounted to an outflow of EUR 961 million.
• To further strengthen its liquidity position and optimize its debt maturity profile, Philips secured a EUR 1 billion credit facility and conducted a liability management exercise, which reduced the debt repayment profile for the period 2023 to 2025 from EUR 3.2 to 2.0 billion and increased the average maturity on bonds by 1.3 years to 7.9 years. 

The year 2021

• 2021 saw strong growth in orders and sales in the Diagnosis & Treatment and Personal Health segments, with a decline in Connected Care following the extraordinary growth in 2020 and the impact of the Philips Respironics voluntary recall notification. Increases in component and transportation costs, along with shortages of key components due to capacity constraints and delays in transport routes, impacted Philips' sales and profitability.
• Sales amounted to EUR 17.2 billion, a decline of 1% on a nominal and comparable basis. Comparable sales growth^*) in the Diagnosis & Treatment businesses was 8% and in the Personal Health businesses 9% on a comparable basis. However, this was more than offset by a 23% decline in the Connected Care businesses. This was largely due to the Respironics recall but also the high comparable base in 2020. Nevertheless, we ended the year with our highest-ever order book, 18% above 2020.
• In Q3 2021, Philips completed the divestment of Domestic Appliances as planned, resulting in a EUR 2.5 billion gain after tax and transaction-related costs; reported in Discontinued Operations.
• Net income amounted to EUR 3.3 billion, an increase of EUR 2.1 billion compared to 2020, mainly driven by the gain on the sale of the Domestic Appliances business. Net income is not allocated to segments, as certain income and expense line items are recorded on a centralized basis.
• Adjusted EBITA^*) amounted to EUR 2.1 billion, or 12.0% of sales. Productivity programs delivered annual savings of approximately EUR 279 million. This included approximately EUR 140 million procurement savings, led by the Design for Excellence (DfX) program, and approximately EUR 139 million savings from other productivity programs. While the Diagnosis & Treatment and Personal Health businesses delivered improved profit expansion, the Connected Care businesses showed a decline in Adjusted EBITA^*) margin, primarily due to the decline in sales and the impact of the Philips Respironics voluntary recall notification in the Sleep & Respiratory Care business.
• Operating cash flow amounted to EUR 1.6 billion, and Free cash flow^*) amounted to EUR 0.9 billion.

7.1.17.2Factors impacting performance

In 2022,The introduction of a simplified operating model, workforce reduction, an improved global economic activity slowed down comparedsupply chain, and the geopolitical environment contributed to 2021, when the global economy rebounded strongly from a COVID-induced recession. Global real GDP is estimated to have grown by 3.0% in 2022, compared with the 6.0% estimated in 2021 for 2022.

The company’s business and results in 2022 were impacted by global and industry-wide challenges, including global supply chain constraints, COVID lockdown measures in China, inflationary pressures and the Russia-Ukraine war.2023. Where relevant, the impact of these factors and the resulting uncertainties on the company’s results, balance sheet and cash flows have been considered and are reflected in amounts reported. Comparable sales^*) declined

Macro-economic landscape 2023

In 2023, global economic growth is estimated to have slowed compared to 2022, marked by 3%, mainly due to operationaleasing price pressures and supply chain challenges,stress while major central banks were tightening their respective monetary policies. Global real GDP is estimated to have grown by 2.7% in 2023, compared with 3.1% in 2022. On the consumer side, households were dipping into their savings accumulated during the COVID situationperiod to maintain their spending levels and to cushion against the inflation surge since late 2021. However, consumer spending momentum is not expected to sustain due to the depletion of savings and expected labor market softening because of tighter financial conditions. The delayed effect of higher benchmark interest rates is expected to manifest further in China and2024, leading to a further slowdown in global economic growth. Oxford Economics expects world real GDP growth of 2.3% in 2024.

In 2022, global economic activity slowed down compared to 2021, when the Russia-Ukraine war. We aim to offsetglobal economy had rebounded strongly from a COVID-induced recession. Several factors were at play. Firstly, the operational andre-opening of the economy for most of the world in 2021 had disrupted global supply challengeschains. Secondly, previous loose monetary policy, combined with specific programs to increase supply chain resilience, improveissues, resulted in strong inflationary pressures commencing towards the end of 2021. Thirdly, to combat high inflation, central banks around the globe embarked on aggressive monetary policy tightening cycles. 

Simplified operating model

On January 30, 2023, Philips announced its plan to create value with sustainable impact, which is based on focused organic growth to deliver patient- and people-driven innovation at scale, with improved execution as a key value driver, prioritizing patient safety and quality, supply chain reliability and a simplified operating model. The simplified operating model aims to simplify the organization to increase agility and structurally lower the cost base.base by giving end-to-end accountability to the segments. Operating model productivity savings, procurement savings and other productivity programs contributed positively to the results of operations.

Global

Workforce reduction

In addition to the reduction of its workforce by 4,000 roles announced in October 2022, in 2023 Philips announced plans to reduce its workforce by an additional 6,000 roles globally by 2025, in line with relevant local regulations and processes. These reductions are focused on Corporate and Functions optimization and non-core activities, and amounted to approximately 8,000 roles by year-end 2023. Workforce-related restructuring charges were EUR 196 million in 2023 and EUR 136 million in 2022.

Supply chain resilience

In 2023, following significant actions to increase supply chain constraintsresilience and mitigate the impact of disruptions, our sales benefited from improved material availability and resolved shortages in components.

Limited availability and delays in the supply of certain components and products internationally – partly a consequence of the COVID pandemic and the Russia-Ukraine war – impacted the company’sour results in 2022. In addition, the supply chain constraints resulted in an increase in overall working capital, balances, in particular inventories. Inventories increased compared to 2021, as work-in-process inventories could not be converted into finished goods available for sale due to the scarcity of certain components. Improved component supplies contributed to a comparable sales^*) increase in the fourth quarter of 2022.

Geopolitical environment

In response, we continue to drive significant actions to increase supply chain resilience and mitigate the impact of disruptions. We are: engaging with senior government officials, strategic suppliers and foundries to prioritize healthcare supplies; directly working on component issues across all tiers of suppliers; diversifying sourcing of high-risk components, with almost 400 alternate components certified to date. Lastly, we are also redesigning our printed circuit boards to qualify alternate sources of supply.

COVID situation in China

COVID continued to affect the company’s results, balance sheet and cash flows presented in these consolidated financial statements, in particular due to the lockdowns in China. Production in several of our factories, as well as those of our suppliers in China, was suspended periodically, which exacerbated the global supply chain and cost challenges. The China lockdowns impacted the results of operations due to lower sales and factory under-utilization.

COVID did not result in any material adjustments to the carrying amounts of assets and liabilities during 2022. In addition, there were no material changes to treasury and other financial risks directly related to the pandemic. 

Cost inflation

Global inflation and cost headwinds, including higher energy prices, resulted in an increase in cost levels and negatively impacted gross margin in 2022. 

In response, we have been raising pricing by low- to mid-single-digits since the beginning of 2022. In the Personal Health businesses, the higher sales prices contributed to a gross increase in sales of around 3% compared to 2021. In the Diagnosis & Treatment and Connected Care businesses, due to the longer equipment order book cycles, the price increases take longer to be fully realized in the profit and loss account.

Russia-Ukraine war

Since February 2022, Philips hasHaving substantially reduced its activitiesour operations in Russia. This includes stopping shipments of our consumer health products toRussia in 2022, the country (except for certain child care products), the suspension of marketing activities, and winding down of R&D activities. We are focusing our remaining activities in Russiawere focused on the delivery of medical systems, devices, and spare parts to healthcare providers to the extent possible underproviders. In 2023, increased sanctions and export controls and sanctions. Philips'led to a further reduction in sales activity. Philips’ operations in Russia and Ukraine on a combined basis represented less than 2% of group sales in both 20212022 and 2022.2023. The asset value of the activities in Russia and Ukraine, mainly working capital, was less than 1% of the consolidated total assets as of December 31, 20212022 and 2022. There have been no significant asset write-downs to date, but we continue to closely monitor developments in this regard.2023. The Russia-Ukraine war continues to put severe pressure on the global commodity landscape and supply chains, and has contributedcontribute to higher levels of cost inflation.

The company’s global operations are exposed to geopolitical and macroeconomic changes (refer to Risk management and internal control). The current situation in the sharp riseMiddle East further increases economic and political uncertainty. Philips is present in energyIsrael with several subsidiaries, mainly in Diagnosis & Treatment and food pricesConnected Care, that are primarily involved in manufacturing and high cost inflation, as further discussed above.research and development activities.

Climate-related matters

In preparing the consolidated financial statements, management has considered the impact of climate change, specifically the financial impact of Philips meeting its internal and external climate-related aims, the potential impact of climate-related risks, and the costs incurred to pro-actively manage such risks. These considerations did not have a material impact on the financial reporting judgments, estimates or assumptions. The financial impacts considered include specific climate mitigation measures, such as the use of lower carbonlower-carbon energy sources, the cost of developing more sustainable product offerings, and expenses incurred to mitigate against the impact of extreme weather conditions. To meet its long-term Science Based Targets and reduce its full value chain emissions in line with a 1.5 °C1.5°C global warming scenario, Philips has entered into a number of power purchase agreements. Some of these contracts have a fixed price structure, which in 2022 helped to mitigate the impact of increased electricity prices.

Actions in response

In 2022, Philips took several actions to enhance performance and productivity in the supply chain (e.g. dual sourcing, supplier consolidation, warehouse footprint rationalization), R&D (e.g. shifting the focus to fewer, high-impact projects in the innovation pipeline) and quality (e.g. enhancing processes, increasing capabilities and product management). As a result, Philips recorded non-cash portfolio realignment impairments and charges of EUR 282 million in 2022, consisting of R&D project impairments of EUR 134 million, Connected Care portfolio realignment charges of EUR 109 million and asset impairments in Sleep & Respiratory Care of EUR 39 million.

As announced in October 2022, Philips has initiated general productivity actions, including simplifying the organization to streamline the way of working and reduce operating expenses. This includes an immediate reduction of around 4,000 positions globally across the organization, subject to consultation with the relevant workers councils and social partners, with severance and termination-related costs of EUR 80 million incurred in 2022 and an additional EUR 50 million expected in 2023.

On January 30, 2023, Philips announced plans to create value with sustainable impact, which is based on focused organic growth to deliver patient- and people-driven innovation at scale, with improved execution as a key value driver, prioritizing patient safety and quality, supply chain reliability and a simplified operating model. In addition to the reduction of its workforce by 4,000 roles announced in October 2022, Philips plans to reduce its workforce by an additional 6,000 roles globally by 2025, of which 3,000 will be implemented in 2023, in line with relevant local regulations and processes. These reductions are focused on Corporate and Functions optimization and non-core activities, for which charges in 2023 are expected to be approximately EUR 470 million.

7.1.27.3Results of operations

Sales

Sales

The composition of sales growth in percentage terms in 2022,2023, compared to 20212022 and 2020,2021, is presented in the following table.

Group sales in 2023 amounted to EUR 18,169 million, 1.9% higher than in 2022 on a nominal basis. Considering a 4.1% negative currency effect and consolidation impact, comparable sales growth^*) was 6.0%. The negative currency effect was mainly due to depreciation of currencies against the euro, and affected all segments. In addition, provisions charged to sales of EUR 174 million, mainly in connection with the proposed Respironics consent decree, had a negative impact of 1%. 

Comparable order intake decreased 5% in 2023, compared to a 3% decline in 2022. The order book (which covers around 40% of Group sales) remains strong, and we are taking the necessary actions to improve order intake by shortening lead times from order to delivery and building on the positive impact we are making with our innovations, for example in predictive data analytics and artificial intelligence across our portfolio, to help improve the quality and efficiency of care delivery. The order book remains strong and is expected to continue to support growth.

Group sales amounted to EUR 17,827 million in 2022, 3.9% higher than in 2021 on a nominal basis. Considering a 6.7% positive effect from currency and consolidation, comparable sales^*) decreased by 2.8%. This was driven by a positive currency effect, mainly due to appreciation of currencies against the euro, and affected all segments.

The order book at year-end 2022 was 10% higher than at the end of 2021, ensuring a higher coverage for sales in 2023. The increase mainly relates to the Diagnosis & Treatment businesses driven by Diagnostic Imaging. Comparable order intake decreased 3%, compared to 4% growth in 2021. 

Diagnosis & Treatment

In the fourth quarter of 2022, lower demand for COVID-19-related products compared to 2021 and company actions to improve the order book margin profile contributed to this decrease.

Group2023, sales amounted to EUR 17,1568,818 million, in 2021, 0.9% lower6.4% higher than in 20202022 on a nominal basis. Considering a 0.3% positive4.7% negative currency effect from currency and consolidation impact, comparable sales^*) decreasedincreased by 1.2%11.1%. While the currency effectThis was negative, mainly due to depreciation of currencies against the euro,double-digit growth in Ultrasound and affected all business segments, this was more than offset by a positive consolidation impact from new acquisitions.Image-Guided Therapy and high-single-digit growth in Diagnostic Imaging, due to supply chain improvements. 

Diagnosis & Treatment businesses

In 2022, sales amounted to EUR 9,1688,290 million, 6.2%5.9% higher than in 2021 on a nominal basis. Considering a 6.9%6.7% positive currency effect and consolidation impact, comparable sales^*) decreased by 0.7%0.8%. This was due to mid-single-digit growth in Image-Guided Therapy and low-single-digit growth in Enterprise Diagnostic Informatics, which was more than offset by a decline in Ultrasound and in Diagnostic Imaging due to specific electronic component shortages.

Connected Care

In 2021,2023, sales amounted to EUR 8,6355,138 million, 5.6% higher2.5% lower than in 20202022 on a nominal basis. Considering a 2.5%3.6% negative currency effect and consolidation impact, comparable sales^*) increased by 8.1%1.1%. This growth was mainly driven by double-digit growth in Image-Guided Therapy and mid-single-digit growthMonitoring, partly offset by a decline in Diagnostic Imaging and Ultrasound, reflecting demand for Philips' portfolio and positive market conditions.

ConnectedSleep & Respiratory Care businesses

In 2022, sales amounted to EUR 4,4035,268 million, 3.7%1.9% lower than in 2021 on a nominal basis. Considering a 7.1%7.2% positive currency effect and consolidation impact, comparable sales^*) decreased by 10.8%9.1%. This was mainly due to the consequences of the Respironics field actionrecall and the impact of supply chain headwinds.

Personal Health

In 2021,2023, sales amounted to EUR 4,5733,602 million, 17.5%0.7% lower than in 20202022 on a nominal basis. Considering a 5.1% positive3.9% negative currency effect and consolidation impact, comparable sales^*) decreasedincreased by 22.6%, following the high COVID-19-generated demand3.2%. This was mainly driven by high-single-digit growth in 2020 and the impact of the Respironics recallPersonal Care, partly offset by a decline in 2021.Oral Healthcare. 

Personal Health businesses

In 2022, sales amounted to EUR 3,626 million, 5.7% higher than in 2021 on a nominal basis. Considering a 5.6% positive currency effect and consolidation impact, comparable sales^*) increased by 0.1%, consisting of a global increase of 2.5%, offset by a 2.4% decline in sales attributable to Russia due to the war with Ukraine. Oral Healthcare and Mother & Child Care recorded mid-single-digit growth, which was offset by a mid-single-digit decline in Personal Care.

Other

In 2021,2023, sales amounted to EUR 3,429612 million, 7.2% higher thancompared to EUR 643 million in 2020 on a nominal basis. Considering a 1.6% negative currency effect and consolidation impact, comparable sales^*) increased by 8.8%. This2022. The decrease was driven by robust customer demand for new product introductions acrossmainly due to the world.discontinuation of innovation consultancy activities provided to other companies until 2023.

Other

In 2022, sales amounted to EUR 629643 million, compared to EUR 519530 million in 2021. The increase was mainly due to additional royalty income and supplies to the divested Domestic Appliances business.

In 2021, sales amounted to EUR 519 million, compared to EUR 396 million in 2020. The increase was mainly driven by supplies to a divested business and higher royalty income. 

Performance by geographic area

Sales in Mature geographies in 2023 were 1% higher than in 2022 on a nominal basis and 4% higher on a comparable basis^*). Sales in Western Europe were 6% higher year-on-year on a nominal basis and 7% higher on a comparable basis^*), with double-digit growth in the Diagnosis & Treatment segment, mid-single-digit growth in the Personal Health segment, and low-single-digit decline in the Connected Care segment. Sales in North America were flat year-on-year on a nominal basis and 3% higher on a comparable basis^*), as high-single-digit growth in the Diagnosis & Treatment segment was offset by a low-single-digit decline in the Personal Health segment. Sales in Other mature geographies decreased by 1% on a nominal basis and increased by 7% on a comparable basis^*), with high-single-digit comparable sales growth^*) in the Connected Care segment and mid-single-digit growth in the Diagnosis & Treatment and Personal Health segments.

Sales in mature geographies in 2022 were 6% higher than in 2021 on a nominal basis and 1% lower on a comparable basis^*). Sales in Western Europe were 1% lower year-on-year on a nominal basis and 3% lower on a comparable basis^*), with a double-digit decline in the Connected Care businesses, a low-single-digit decline in the Diagnosis & Treatment businesses, and flat growth in the Personal Health businesses. Sales in North America were 12% higher year-on-year on a nominal basis and were flat on a comparable basis^*), as double-digit growth in the Personal Health businesses and low-single-digit growth in the Diagnosis & Treatment businesses were offset by a mid-single-digit decline in the Connected Care businesses, mainly due to the Sleep & Respiratory Care business. Sales in other mature geographies decreased by 3% on a nominal basis and 1% on a comparable basis^*), with high-single-digit comparable sales growth^*) in the Personal Health businesses more than offset by a high-single-digit decline in the Connected Care businesses and a low-single-digit decline in the Diagnosis & Treatment businesses.

Sales in matureGrowth geographies in 2021 were 2% lower than in 20202023 increased by 3% on a nominal basis and 3% lower on a comparable basis^*). Sales in Western Europe were 2% lower year-on-year on a nominal basis and 3% lower10% on a comparable basis^*), with a double-digit decline in the Connected Care businesses, partly offset by high-single-digit growth in the Diagnosis & Treatment businesses and mid-single-digit growth in the Personal Health businesses. Sales in North America were 1% lower year-on-year on a nominal basis and decreased 3% on a comparable basis^*), as double-digit growth in the Diagnosis & Treatment businessesand Connected Care segments and low-single-digit growth in the Personal Health businesses were largely offset by asegment. The double-digit declinegrowth in the Connected Care businesses. Sales in other mature geographies decreased by 3% on a nominal basis and were in line with 2020 on a comparable basis^*). High-single-digit comparable sales growth^*) in the Personal Health businesseswas driven by China, Middle East & Turkey and mid-single-digit comparable sales growth^*) in the Diagnosis & Treatment businesses was partly offset by a double-digit decline in the Connected Care businesses.Latin America.

Sales in growth geographies in 2022 decreased by 1% on a nominal basis and 7% on a comparable basis^*), with a double-digit decline in the Connected Care and Personal Health businesses and a low-single-digit decline in the Diagnosis & Treatment businesses. The high-single-digit decline in comparable sales growth^*) was due to a double-digit decline in China and Russia & Central Asia, partly offset by double-digit growth in Middle East, Turkey & Africa.

Sales in growth geographies in 2021 increased by 1% on a nominal basis and 3% on a comparable basis^*), with double-digit growth in the Personal Health businesses and high-single-digit growth in the

Diagnosis & Treatment businesses, partly offset by a double-digit decline in the Connected Care businesses. The low-single-digit comparable sales growth^*) was driven by double-digit growth in India, high-single-digit growth in Russia & Central Asia, and mid-single-digit growth in Central & Eastern Europe and Latin America.

Diagnosis & Treatment businesses

Sales in Growth geographies increased by 6% on a nominal basis in 2023, and on a comparable basis^*) showed double-digit growth, which was mainly driven by China and Middle East & Turkey. Sales in Mature geographies increased by 7% on a nominal basis and showed double-digit growth on a comparable basis^*), which was driven by double-digit growth in Western Europe and high-single-digit growth in North America.

Sales in growth geographies increased by 6% on a nominal basis in 2022, and on a comparable basis^*) showed a low-single-digit decline, which was mainly due to China. Sales in mature geographies increased by 6% on a nominal basis and were flat year-on-year on a comparable basis^*). 

Sales in growth geographies increased by 5% on a nominal basis in 2021, and on a comparable basis^*) showed high-single-digit growth, driven by double-digit growth in Latin America, India and Central & Eastern Europe and mid-single-digit growth in China. Sales in mature geographies increased by 6% on a nominal basis and showed high-single-digit growth on a comparable basis^*). Comparable sales^*) increased, with double-digit growth in North America and high-single-digit growth in Western Europe.

Connected Care businesses

Sales in Growth geographies increased by 1% on a nominal basis in 2023, and on a comparable basis^*) grew 7%, which was driven by Latin America and China. Sales in Mature geographies decreased by 3% on a nominal basis and were flat year-on-year on a comparable basis^*), as growth in Other mature geographies was offset by Western Europe. In addition, provisions charged to sales of EUR 174 million, mainly in connection with the proposed Respironics consent decree, had a negative impact of 3.4%. 

Sales in growth geographies decreased by 22%17% on a nominal basis in 2022, and on a comparable basis^*) showed a double-digit decline, with a double-digit decline across most regions, mainly due to the consequences of the Respironics field action and the COVID situation in China.China. Sales in mature geographies decreasedincreased by 1% on a nominal basis and showed a high-single-digit decline on a comparable basis^*), with a double-digit decline in Western Europe and a mid-single-digit decline in North America.

Sales in growth geographies decreased by 28% on a nominal basis in 2021, and on a comparable basis^*) showed a double-digit decline, with a double-digit decline across most regions. Sales in mature geographies decreased by 16% on a nominal basis and showed a double-digit decline on a comparable basis^*), with a double-digit decline in Western Europe and North America and a mid-single-digit decline in Japan.

Personal Health businesses

Sales in Growth geographies decreased by 1% on a nominal basis in 2023, and on a comparable basis^*) showed mid-single-digit growth, which was mainly driven by Middle-East & Turkey and China, partly offset by a decline in Russia & Central Asia. Sales in Mature geographies were flat on a nominal basis, and on a comparable basis^*) showed low-single-digit growth, driven by Western Europe.

Sales in growth geographies decreased by 7% on a nominal basis in 2022, and on a comparable basis^*) showed a double-digit decline, which was mainly attributable to China. Sales in mature geographies increased by 14% on a nominal basis, and on a comparable basis^*) showed high-single-digit growth, driven by double-digit growth in North America.

Sales in growth geographies increased by 15% on a nominal basis in 2021, and on a comparable basis^*) showed double-digit growth, which was attributable to double-digit growth in Central & Eastern Europe, Russia & Central Asia and Latin America and mid-single-digit growth in China. Sales in mature geographies increased by 2% on a nominal basis, and on a comparable basis^*) showed mid-single-digit growth, driven by mid-single-digit growth in Western Europe and low-single-digit growth in North America.

Cost of sales

Cost of sales includes only expenses directly or indirectly attributable to the production process,sale of products or services, such as cost of materials used, salaries and wages, depreciation and amortization of assets used in manufacturing, and other manufacturing costs (such as repair and maintenance costs related to production, expenses incurred for shipping and handling of internal movements of goods, and other expenses related to manufacturing).

Philips’ cost of sales increased by EUR 88 million to EUR 10,721 million in 2023, and decreased as a percentage of sales, compared to EUR 10,633 million in 2022, mainly due to an increase in Cost of materials used by EUR 306 million in 2023, mainly due to increased sales volume and cost inflation, partly offset by productivity measures and a favorable foreign currency impact. Other key factors influencing cost of sales were as follows:

• Salaries and wages decreased by EUR 81 million, driven by productivity measures and a favorable foreign currency impact, partly offset by cost inflation.
• Depreciation and amortization decreased by EUR 74 million in 2023, mainly due to a favorable foreign currency impact.
• Other manufacturing costs decreased by EUR 64 million in 2023, driven by productivity measures and a favorable foreign currency impact, partly offset by cost inflation.

Philips’ cost of sales increased by EUR 645 million to EUR 10,633 million in 2022, compared to EUR 9,988 million in 2021, mainly due to increased expenses of EUR 217 million in salaries and wages, driven by an unfavorable foreign currency impact and wage inflation, partly offset by productivity measures. Other key factors influencing cost of sales were as follows:

• Cost of materials used increased by EUR 178 million in 2022, mainly due to an unfavorable foreign currency impact and cost inflation, partly offset by the reduced field action provision and productivity measures.
• Depreciation and amortization increased by EUR 56 million in 2022, mainly due to an unfavorable foreign currency impact.
• Other manufacturing costs increased by EUR 193 million in 2022, mainly driven by an unfavorable foreign currency impact and cost inflation, partly offset by the lower field action provision and productivity measures.

Gross margin

In 2023, Philips’ costgross margin was EUR 7,448 million, or 41.0% of sales, compared to EUR 7,194 million, or 40.4% of sales, in 2022. Gross margin increased by EUR 495254 million to EUR 9,988 million in 2021, compared to EUR 9,493 million in 2020, mainly due to the field action provision of EUR 719 million in connection with the Philips Respironics voluntary recall notification in the Sleep & Respiratory Care business reflected in other manufacturing costs. Other key factors influencing cost of sales were as follows:

• Costs of materials used decreased by EUR 79 million in 2021, mainlyyear-on-year, driven by increased sales and price & productivity savings and a positivemeasures, partly offset by cost inflation, an unfavorable foreign currency impact, partly offset by the impact of increases in procurement and supply chain costs.
• Salarieshigher restructuring, acquisition-related and wages decreased by EUR 71 million in 2021, driven by productivity and restructuring savings, partly offset by acquisitions.
• Depreciation and amortization decreased by EUR 112 million in 2021, mainly due to lower impairments of technology assets of EUR 55 million compared to EUR 92 million in 2020.

Gross margin

In 2022, Philips’ gross margin was EUR 7,194 million, or 40.4% of sales, compared to EUR 7,168 million, or 41.8% of sales, in 2021. Gross margin was flat year-on-year due to cost inflation and a decrease in sales, which was offset by a favorable foreign currency impact, a decrease in restructuring, acquisition-related and other charges, and productivity and pricing measures.

In 2021, Philips’ gross margin was EUR 7,168 million, or 41.8% of sales, compared to EUR 7,822 million, or 45.2% of sales, in 2020. The year-on-year decrease in gross margin was mainly driven by the field action provision of EUR 719 million (representing 4.2% of sales) in connection with the Philips Respironics voluntary recall notification in the Sleep & Respiratory Care business.

Selling expenses

Selling expenses amounted to EUR 4,6094,524 million, or 24.9% of sales, in 2023, compared to EUR 4,621 million, or 25.9% of sales, in 2022. The year-on-year decrease in selling expenses of EUR 97 million was mainly driven by a favorable foreign currency impact, partly offset by higher restructuring, acquisition-related and other charges. 

Selling expenses amounted to EUR 4,621 million, or 25.9% of sales, in 2022, compared to EUR 4,258 million, or 24.8% of sales, in 2021. The year-on-year increase in selling expenses of EUR 351363 million was mainly due to an unfavorable foreign currency impact and an increase in restructuring, acquisition-related and other charges.

General and administrative expenses

SellingGeneral and administrative expenses amounted to EUR 4,258608 million, or 24.8%3.3% of sales, in 2021,2023, compared to EUR 4,056671 million, or 23.4%3.8% of sales, in 2020.2022. The year-on-year increase in selling expensesdecrease of EUR 20463 million was mainly driven by the acquisitions of BioTelemetry and Capsule Technologies and higher investments in advertising and promotion, partly offset by a positivefavorable foreign currency impact and lower restructuring, costs. Selling expenses include restructuring, acquisition-related and other charges of EUR 140 million in 2021, compared to EUR 133 million in 2020.charges.

General and administrative expenses

General and administrative expenses amounted to EUR 671 million, or 3.8% of sales, in 2022, compared to EUR 599 million, or 3.5% of sales, in 2021. The year-on-year increase of EUR 72 million was mainly driven by higher restructuring, acquisition-related and other charges.

General

Research and administrativedevelopment expenses amounted to

Research and development costs were EUR 5991,890 million, or 3.5%10.4% of sales, in 2021,2023, compared to EUR 6302,091 million, or 3.6%11.7% of sales, in 2020.2022. The year-on-year decrease of EUR 31201 million in general and administrative expenses was mainly driven by lower restructuring, acquisition-related and other charges. 

Researchcharges and development expenses

Research and development costs were EUR 2,1032,091 million, or 11.8%11.7% of sales, in 2022, compared to EUR 1,806 million, or 10.5% of sales, in 2021. The year-on-year increase of EUR 297285 million was mainly driven by higher restructuring, acquisition-related and other charges in relation to R&D project impairments and an unfavorable foreign currency impact. 

Research and development costs were EUR 1,806 million, or 10.5% of sales, in 2021, compared to EUR 1,822 million, or 10.5% of sales, in 2020. The year-on-year decrease of EUR 16 million was mainly driven by lower restructuring, acquisition-related and other charges. 2021 includes EUR 101 million of restructuring, acquisition-related and other charges, compared to EUR 131 million in 2020.

Impairment of goodwill

In addition to the annual goodwill-impairment tests for Philips, trigger-based impairment tests were performed during the years 2023, 2022 2021 and 2020.2021. As a result of the tests, recorded goodwill impairments were recorded of EUR 1,357 million in 2022, and EUR 15 million in 2021, and EUR 144 million in 2020.2021. The goodwill impairment of EUR 1,331 million in 2022 was recorded in the Sleep & Respiratory Care business and was due to revisions to the expected future cash flows. In addition, in 2023 a EUR 8 million goodwill impairment was recognized for a business held for sale, whereas in 2022 a EUR 27 million goodwill impairment was recognized in the Precision Diagnosis Solutions business.

During 2022, EUR 1,331 million of goodwillGoodwill impairment charges were recordedEUR 8 million in the Sleep & Respiratory Care business, due to revisions to the expected future cash flows. In addition, a2023 and EUR 271,357 million goodwill impairment was recognized in the Precision Diagnosis Solutions business.2022. For further information refer to Goodwill.

Net income, Income from operations (EBIT) and Adjusted EBITA^*)

Net income amounted to a loss of EUR 463 million in 2023, an improvement of EUR 1.1 billion compared to 2022, which included a charge of EUR 1.5 billion related to goodwill and R&D impairments. Higher earnings in 2023 were offset by a EUR 575 million litigation provision in connection with the Respironics recall. Net income in 2022 included a charge of EUR 1.5 billion related to goodwill and R&D impairments. Net income is not allocated to segments, as certain income and expense line items are monitored on a centralized basis, resulting in them being shown on a Philips Group level only.

The following overview shows Income from operations and Adjusted EBITA^*) by segment.

Income from operations amounted to a loss of EUR 115 million, or (0.6)% of sales, in 2023, compared to a loss of EUR 1,529 million, or (8.6)% of sales, in 2022, which included a charge of EUR 1.5 billion related to goodwill and R&D impairments. Higher earnings in 2023 were offset by a EUR 575 million Respironics litigation provision. Adjusted EBITA^*) increased to EUR 1,921 million and the margin improved to 10.6%, compared to EUR 1,318 million and a margin of 7.4% in 2022, mainly driven by increased sales and pricing & productivity measures.

Amortization and goodwill impairment charges were EUR 298 million in 2023. This includes amortization charges of EUR 290 million and goodwill impairment charges of EUR 8 million. Amortization and goodwill impairment charges in 2022 were EUR 1,720 million. This included a charge of EUR 1,331 million related to an impairment of goodwill in the Sleep & Respiratory Care business, EUR 363 million amortization charges and a EUR 27 million goodwill impairment in the Precision Diagnosis Solutions business.

Restructuring, acquisition-related and other charges were EUR 1,739 million in 2023. This includes: a EUR 575 million Respironics litigation provision, EUR 363 million in connection with the proposed Respironics consent decree, and EUR 224 million Respironics field-action running remediation costs. In addition, it includes EUR 285 million restructuring charges, mainly related to workforce reduction, and charges in relation to quality remediation actions of EUR 175 million. 2022 charges were EUR 1,127 million and included: restructuring charges of EUR 185 million; EUR 148 million portfolio realignment impairments and charges; R&D project impairment charges of EUR 134 million; EUR 250 million for the Respironics field-action provision; EUR 210 million Respironics field-action running remediation costs; an approximately EUR 60 million provision for public investigations into tender irregularities; and EUR 59 million for provisions for quality actions in Connected Care.

Income from continuing operations attributable to shareholders per common share (in EUR) - diluted, was EUR (0.50) in 2023, compared to EUR (1.76) in 2022. Adjusted income from continuing operations attributable to shareholders per common share (in EUR) - diluted^*) was EUR 1.25, compared to EUR 0.92 in 2022.

Net income amounted to a loss of EUR 1,605 million in 2022, a decrease of EUR 4.9 billion compared to 2021, mainly due to a charge of EUR 1.5 billion related to goodwill and R&D impairments in 2022 and a gain of EUR 2.5 billion on the sale of the Domestic Appliances business in 2021. Net income is not allocated to segments, as certain income and expense line items are monitored on a centralized basis, resulting in them being shown on a Philips Group level only.

The following overview shows Income from operations and Adjusted EBITA^*) by segment.

Income from operations in 2022 amounted to a loss of EUR 1,529 million, or (8.6)% of sales, compared to EUR 553 million, or 3.2% of sales, in 2021, mainly impacted by a charge of EUR 1.5 billion related to goodwill and R&D impairments. Adjusted EBITA^*) in 2022 was EUR 1,318 million and the margin amounted to 7.4%, compared to EUR 2,054 million and a margin of 12.0% in 2021, primarily due to the sales decline and cost inflation, partly offset by pricing and productivity measures.

Amortization and goodwill impairment charges in 2022 were EUR 1,720 million. This includes a charge of EUR 1,331 million related to an impairment of goodwill in the Sleep & Respiratory Care business, a EUR 27 million goodwill impairment in the Precision Diagnosis Solutions business, and amortization charges of EUR 22 million related to an impairment of a technology asset. In 2021, amortization and goodwill impairment charges were EUR 337 million and included a charge of EUR 13 million related to an impairment of goodwill and amortization charges of EUR 55 million related to an impairment of a technology asset.

Restructuring, acquisition-related and other charges in 2022 were EUR 1,127 million. This includes: restructuring charges of EUR 185 million; EUR 282 million portfolio realignment impairments and charges; EUR 250 million for the Respironics field-action provision; EUR 210 million Respironics field-action running remediation costs; a EUR 60 million provision for public investigations tender irregularities; and EUR 59 million for provisions for quality actions in Connected Care. 2021 charges were EUR 1,164 million and included: a field action provision of EUR 719 million in connection with the Philips Respironics voluntary recall notification; provisions for quality actions of EUR 94 million and other matters of EUR 53 million in Connected Care; restructuring charges of EUR 80 million; acquisition-related charges of EUR 102 million partly offset by a EUR 87 million gain related to the re-measurement of contingent consideration liabilities; a loss of EUR 76 million related to a divestment; and separation costs of EUR 64 million related to the Domestic Appliances business. 2021 also included a release of a legal provision of EUR 38 million, a gain of EUR 33 million related to a minority participation, and a benefit from the re-measurement of environmental liabilities of EUR 22 million. 

Income from continuing operations attributable to shareholders per common share (in EUR) - diluted, was EUR (1.84) in 2022, compared to EUR 0.67 in 2021. Adjusted income from continuing operations attributable to shareholders per common share (in EUR) - diluted^*) was EUR 0.96 in 2022, compared to EUR 1.65 in 2021.

Diagnosis & Treatment

Net incomeIncome from operations increased to EUR 720 million in 2021 increased by EUR 2.1 billion2023, compared to 2020,EUR 538 million in 2022. This was mainly driven by the gain on the sale of the Domestic Appliances business,increased sales and pricing & productivity measures, partly offset by the EUR 719 million field action provision.

Income from operationscost inflation. These factors also resulted in 2021 amounted to EUR 553 million, or 3.2% of sales, compared to EUR 1,264 million, or 7.3% of sales,an increase in 2020, mainly impacted by the EUR 719 million field action provision. Adjusted EBITA^*) to 11.6% of sales in 2021 was EUR 2,054 million and the margin amounted to 12.0%, compared to EUR 2,277 million and a margin of 13.2%, due to a decline in sales and the impact of supply chain headwinds, partly offset by productivity measures.

2023.

Amortization and goodwill impairment charges in 20212023 were EUR 337 million. This includes a charge of98 million and include EUR 1389 million related to an impairment of goodwill and amortization charges and EUR 8 million goodwill impairment charges. 2022 charges were EUR 115 million and included EUR 22 million of EUR 55 millioncharges related to an impairment of a technology asset. In 2020, amortization and goodwill impairment charges were EUR 521 million and included a charge of EUR 144 million related to an impairment of goodwillasset in the Connected Care segment, as well as amortization charges of EUR 92 million related to an impairment of a technology asset.

Image-Guided Therapy.

Restructuring, acquisition-related and other charges in 20212023 were EUR 1,164 million. This includes a field action provision of EUR 719 million in connection with the Philips Respironics voluntary recall notification, provisions for quality actions of EUR 94210 million and other matters ofinclude EUR 5381 million charges in the Connected Care businesses,relation to quality remediation actions and EUR 73 million restructuring charges, mainly related to workforce reduction. 2022 charges amounted to EUR 136 million and included R&D project impairment charges of EUR 8073 million acquisition-related charges of EUR 102 million partly offset byand a EUR 87 million gain related to the re-measurement of contingent consideration liabilities, a loss of EUR 76 million related to a divestment, and separation costs of EUR 64 million related to the Domestic Appliances business. 2021 also includes a release of a legal provision of approximately EUR 3860 million a gain of EUR 33 million related to a minority participation, and a benefit from the re-measurement of environmental liabilities of EUR 22 million. 2020 charges were EUR 494 million and included EUR 200 million of restructuring charges, EUR 95 million of acquisition-related charges offset by a EUR 101 million gain related to the re-measurement of a contingent consideration liability, EUR 31 million related to impairments of capitalized development costs, EUR 43 million of charges due to changes in ventilator demand, EUR 42 million of separation costs related to the Domestic Appliances business, a EUR 38 million provision related to legal matters, and EUR 21 million related to pension liability de-risking in the US.for public investigations into tender irregularities. 

Income from continuing operations attributable to shareholders per common share (in EUR) - diluted, was EUR 0.67 in 2021, compared to EUR 1.08 in 2020. Adjusted income from continuing operations attributable to shareholders per common share (in EUR) - diluted^*) was EUR 1.65 in 2021, compared to EUR 1.74 in 2020.

Diagnosis & Treatment businesses

Income from operations in 2022 decreased to EUR 404 million, compared to EUR 941 million in 2021. This was mainly due to cost inflation, partly offset by productivity measures. These factors also resulted in a decrease in Adjusted EBITA^*) to 8.4% of sales in 2022.

Amortization and goodwill impairment charges in 2022 were EUR 170115 million and includeincluded EUR 22 million of charges related to an impairment of a technology asset in Image-Guided Therapy and a goodwill impairment of EUR 27 million in Precision Diagnosis Solutions.Therapy. 2021 charges were EUR 155144 million and included EUR 55 million of charges related to an impairment of a technology asset in Image-Guided Therapy.

Restructuring, acquisition-related and other charges in 2022 were EUR 201 million and include EUR 120 million portfolio realignment impairments and charges and a provision of EUR 60 million for public investigations tender irregularities. 2021 charges amounted to a gain of EUR 25 million and included: restructuring charges of EUR 44 million; acquisition-related charges of EUR 48 million offset by a EUR 85 million gain related to the re-measurement of contingent consideration liabilities; and the release of a legal provision of EUR 38 million.

Connected Care

Income from operations in 2021 increased to EUR 941(1,199) million in 2023, compared to EUR 497(2,347) million in 2020. This2022, which included a charge of EUR 1.3 billion related to goodwill impairment. 2023 was primarily due tomainly impacted by the consequences of the Respironics field action, in particular the EUR 575 million provision in connection with the Respironics litigation, partly offset by increased sales growth and productivity measures. These factors also resulted in an increased Adjusted EBITA^*), which was 12.4% improved to 7.2% of sales in 2021.

and was also impacted by cost inflation.

Amortization and goodwill impairment charges in 20212023 were EUR 155178 million and include EUR 55178 million of charges related to an impairment of a technology asset in Image-Guided Therapy. 2020amortization charges. 2022 charges were EUR 2091,583 million and included EUR 921,331 million impairment of chargesgoodwill related to anthe Sleep & Respiratory Care business and a goodwill impairment of a technology assetEUR 27 million in Image-Guided Therapy.

Precision Diagnosis Solutions.

Restructuring, acquisition-related and other charges in 2021 amounted to a gain of2023 were EUR 251,390 million and include restructuringinclude: charges of EUR 44575 million acquisition-relatedRespironics litigation provision, EUR 363 million in connection with the proposed Respironics consent decree, and EUR 224 million Respironics field-action running remediation costs. In addition, it includes EUR 64 million restructuring charges, mainly related to workforce reduction, and charges in relation to quality remediation actions of EUR 48 million offset by a EUR 85 million gain related to the re-measurement of contingent consideration liabilities, and a release of a legal provision of EUR 3894 million. 20202022 charges were EUR 112875 million and includedincluded: EUR 57250 million of restructuring charges,for the Respironics field action provision; EUR 73210 million of acquisition-related charges offset by aRespironics running remediation costs; EUR 101148 million gain related to the re-measurement of a contingent consideration liability,portfolio realignment impairments and charges; and EUR 3859 million related to legal matters, and a EUR 31 million impairment of capitalized development costs.

provisions for quality actions in Connected Care businesses

Income from operations in 2022 decreased to EUR (2,246) million, compared to EUR (722) million in 2021. This was mainly due to the EUR 1.3 billion goodwill impairment, the sales decline, the consequences of the Respironics field action and cost inflation. Adjusted EBITA^*) was 2.2% of sales in 2022 and was also impacted by the sales decline and cost inflation, partly offset by productivity measures.

Amortization and goodwill impairment charges in 2022 were EUR 1,530 million and include EUR 1,331 million impairment of goodwill related to the Sleep & Respiratory Care business.business and a goodwill impairment of EUR 27 million in Precision Diagnosis Solutions. 2021 charges were EUR 161 million and included a EUR 13 million impairment of goodwill related to the divested Personal Emergency Response Services (PERS) and Senior Living business.

Restructuring, acquisition-related and other charges in 2022 were EUR 811 million and include: EUR 250 million for the Respironics field action provision; EUR 210 million Respironics running remediation costs; EUR 160 million portfolio realignment impairments and charges; and EUR 59 million provisions for quality actions in Connected Care. 2021 charges were EUR 1,058 million and included: a field action provision of EUR 719 million in connection with the Philips Respironics voluntary recall notification; EUR 93 million of restructuring and acquisition-related charges; provisions for quality actions of EUR 94 million and other matters of EUR 53 million; and a gain of EUR 33 million related to a minority participation.

Personal Health

Income from operations in 2021 decreasedincreased to EUR (722)552 million in 2023, compared to EUR 704515 million in 2020.2022. This was mainly due to the decline indriven by increased sales and the impact of the Respironics recall on the Sleeppricing & Respiratory Care business.productivity measures. These factors also impactedresulted in an increase in Adjusted EBITA^*), which was 10.9% to 16.6% of sales in 2021.sales.

Amortization and goodwill impairment charges in 20212023 were EUR 16114 million and include EUR 13 million impairment of goodwillamortization charges related to the divested Personal Emergency Response Services (PERS) and Senior Living business. 2020intangible assets in Mother & Child Care. 2022 charges were EUR 27815 million and included a EUR 144 million impairment of goodwillamortization charges related to the Population Health Management business.intangible assets in Mother & Child Care.

Restructuring, acquisition-related and other charges in 20212023 were EUR 1,05831 million and include a field action provisionEUR 23 million investment re-measurement loss and restructuring costs mainly related to workforce reduction of EUR 719 million in connection with the Philips Respironics voluntary recall notification, EUR 93 million of restructuring and acquisition-related charges, provisions for quality actions of EUR 94 million and other matters of EUR 53 million, and a gain of EUR 33 million related to a minority participation. 20209 million. 2022 charges were EUR 209 million and included restructuring charges of EUR 76 million, acquisition-related charges of EUR 22 million, and charges of EUR 43 million due to changes in ventilator demand.not material.

Personal Health businesses

Income from operations in 2022 decreased to EUR 515 million, compared to EUR 576 million in 2021. This was mainly driven by cost inflation and an adverse foreign currency impact, partly offset by pricing and productivity measures. These factors also resulted in a decrease in Adjusted EBITA^*) to 14.8% of sales.

Amortization charges in 2022 were EUR 15 million and include amortization charges related to intangible assets in Mother & Child Care. 2021 charges were EUR 15 million and included amortization charges related to intangible assets in Mother & Child Care. 

Restructuring, acquisition-related and other charges in 2022 and 2021 were not material.

Income from operations in 2021 increased to EUR 576 million, compared to EUR 362 million in 2020. This was mainly driven by sales growth and productivity measures, partly offset by higher investments in advertising & promotion. These factors also resulted in an increased Adjusted EBITA^*), which was 17.2% of sales.

Amortization charges in 2021 were EUR 15 million and include amortization charges related to intangible assets in Mother & Child Care. 2020 charges were EUR 16 million and included amortization charges related to intangible assets in Mother & Child Care.

Restructuring, acquisition-related and other charges in 2021 were not material. 2020 charges were EUR 55 million and included restructuring charges of EUR 31 million.

Other

In Other we report on the items Innovation & Strategy, IP Royalties, Central costs and Other.

Income from operations amounted to a loss of EUR 188 million in 2023, compared to a loss of EUR 235 million in 2022. Adjusted EBITA^*) amounted to a loss of EUR 71 million, compared to a loss of EUR 119 million in 2022. The increase in Adjusted EBITA^*) was mainly due to cost savings, partly offset by lower royalty income. 

Restructuring, acquisition-related and other charges in 2023 were EUR 108 million and include EUR 139 million restructuring charges mainly related to workforce reduction and a gain of EUR 35 million due to a divestment. 2022 charges were EUR 108 million and included restructuring charges of EUR 61 million and a EUR 21 million impairment of intangible assets.

Income from operations in 2022 amounted to a loss of EUR 202 million, compared to a loss of EUR 242 million in 2021. Adjusted EBITA^*)EBITA* in 2022 amounted to a loss of EUR 89 million, compared to a loss of EUR 105 million in 2021. Adjusted EBITA^*) increased, mainly due to higher royalty income, partly offset by an adverse currency impact and investment in Quality & Regulatory.

Restructuring, acquisition-related and other charges in 2022 were EUR 107 million and include restructuring charges of EUR 61 million and a EUR 21 million impairment of intangible assets. 2021 charges were EUR 131 million and included a loss of EUR 76 million related to a divestment and EUR 64 million of separation costs related to the Domestic Appliances business, partly offset by a benefit from the re-measurement of environmental liabilities of EUR 22 million.

Income from operations in 2021 was EUR (242) million, compared to EUR (300) million in 2020. Adjusted EBITA^*) in 2021 was EUR (105) million, compared to EUR (165) million in 2020. Income from operations and Adjusted EBITA^*) increased, mainly due to higher royalty income and lower charges related to environmental provisions, partly offset by investments, mainly in IT and Quality & Regulatory affairs.

Restructuring, acquisition-related and other charges in 2021 were EUR 131 million and include a loss of EUR 76 million related to a divestment and EUR 64 million of separation costs related to the Domestic Appliances business, partly offset by a benefit from the re-measurement of environmental liabilities of EUR 22 million. 2020 charges were EUR 118 million and included restructuring charges of EUR 37 million, EUR 42 million of separation costs related to the Domestic Appliances business, and EUR 21 million related to pension liability de-risking in the US.

Financial income and expenses

A breakdown of financial income and expenses is presented in the following table.

Financial income and expenses resulted in a net expense of EUR 314 million in 2023, compared to a net expense of EUR 200 million in 2022. 2023 includes higher interest expense, fair value losses on minority investments and net foreign exchange losses compared to 2022. For further information, refer to Financial income and expenses.

Financial income and expenses resulted in a net expense of EUR 200 million, compared to a net expense of EUR 39 million in 2021. 2022 includes lower gains on the value of Philips' minority participations and higher interest expense, primarily due to financial charges related to early redemption of EUR and USD bonds and issuance of new EUR bonds in April 2022, compared to 2021. For further information, refer to Financial income and expenses.

Income taxes

FinancialIncome tax expense increased by EUR 40 million year-on-year. The income tax benefit in 2023 is mainly driven by the negative income before tax, recognition of tax credits and expenses resulted in a net expense of EUR 39 million in 2021, compared to a net expense of EUR 44 million in 2020. 2021 includes gainstax incentives, partly offset by the tax effect on the value of Philips' minority participationseconomic loss class-action settlement provision relating to the Respironics recall. The income tax benefit in 2022 was mainly driven by the negative income before tax and higher net interest income. For further information, refer to Financial income and expenses.tax incentives, partly offset by non-tax-deductible goodwill impairment. 

Income taxes

Income tax expense decreased by EUR 10 million year-on-year,in 2022 compared to 2021, mainly due to lower income, partly offset by a non-deductible goodwill impairment in the Sleep & Respiratory Care business in 2022 and a one-off benefit relating to the recognition of tax assets due to a business transfer in 2021.

Investments in associates

Income taxes amountedResults related to investments in associates declined from a loss of EUR 2 million in 2022 to a benefitloss of EUR 10398 million in 2021. The effective income tax rate in 2021 was (20.0)%, compared to 17.6% in 2020, mainly due to the impact from the recognition2023. 2023 includes impairments of tax assetsEUR 58 million and other tax benefits as a resultshare of a business transfer during the year.results of associates of EUR 40 million. 

Investments in associates

Results related to investments in associates improved from a loss of EUR 4 million in 2021 to a loss of EUR 2 million in 2022. In 2022, Philips recorded an impairment of EUR 66 million in relation to its interest in Candid Care Co. As part of the acquisition of Affera, Inc. by Medtronic plc in August 2022, the company sold its investment in Affera to Medtronic and recorded a gain of EUR 84 million on the sale.

Results related to investments in associates improved from a loss of EUR 9 million in 2020 to a loss of EUR 4 million in 2021. The number of associates increased compared to 2020. Although gains were recorded in a number of investments in associates, these were more than offset by losses in the remainder.

Discontinued operations

In 2023 and 2022, Discontinued operations consisted primarily of the Domestic Appliances business and certain other divestments that were reported as discontinued operations. In 2021, the sale of the Domestic Appliance business resulted in an after-tax gain of EUR 2.5 billion.

For further information, refer to Discontinued operations and assets classified as held for sale.

Non-controlling interests

Net income attributable to non-controlling interests decreased from EUR 3 million in 2022 to EUR 2 million in 2023.

Net income attributable to non-controlling interests decreased from EUR 4 million in 2021 to EUR 3 million in 2022.

Net income attributable to non-controlling interests decreased from EUR 8 million in 2020 to EUR 4 million in 2021.

7.1.37.4Restructuring and acquisition-related charges

In 2023, Philips continued general productivity actions aimed at simplifying the organization to streamline ways of working and reduce operating expenses. This included a further reduction to 8,000 roles to date, out of the planned reduction of 10,000 roles globally across the organization by 2025, for which a restructuring charge of EUR 140 million was recorded in 2023. In addition, restructuring projects were executed during the year, of which the most significant impacted the Diagnosis & Treatment and Connected Care segments and mainly took place in the US and Netherlands. 

In 2022, Philips initiated general productivity actions aimed at simplifying the organization to streamline ways of working and reduce operating expenses. This included an immediate reduction of around 4,000 positions globally across the organization, for which a restructuring charge of EUR 80 million was recorded. In addition, restructuring projects were executed during the year, of which the most significant impacted the Diagnosis & Treatment and Connected Care segments and mainly took place in the US and Netherlands. The restructuring mainly comprised product portfolio rationalization and the reorganization of global support functions. 

In 2021, the most significant restructuring projects impacted the Diagnosis & Treatment and Connected Care segments and mainly took place in the US and Netherlands. The restructuring mainly comprised product portfolio rationalization and the reorganization of global support functions.

In 2020, the most significant restructuring projects impacted the Connected Care and Diagnosis & Treatment segments and mainly took place in the Netherlands, US and Germany. The restructuring mainly comprised product portfolio rationalization and the reorganization of global support functions.

For further information on restructuring, refer to Provisions.

In 2023, acquisition-related charges amounted to EUR 96 million. The Diagnosis & Treatment segment recorded charges of EUR 45 million, mainly related to the acquisition of Spectranetics, due to post-acquisition integration costs. The Connected Care segment recorded charges of EUR 51 million, mainly related to the acquisition of BioTelemetry and Capsule Technologies, due to post-acquisition integration costs. 

In 2022, acquisition-related charges amounted to EUR 17 million. The Connected Care segment recorded charges of EUR 6570 million related to the acquisitions of BioTelemetry and Capsule Technologies, due to post-acquisition integration costs. The Diagnosis & Treatment businessessegment recorded a net gain of EUR 4854 million, mainly related to a gain of EUR 92 million from the re-measurement of contingent consideration liabilities, partly offset by charges related to the acquisition of Spectranetics.

In 2021, acquisition-related charges amounted to EUR 14 million. The Connected Care segment recorded charges of EUR 5167 million related to the acquisitions of BioTelemetry and Capsule Technologies. The Diagnosis & Treatment businesses recorded a net gain of EUR 3753 million, mainly related to a gain of EUR 85 million from the re-measurement of contingent consideration liabilities, partly offset by charges related to the acquisitions of Spectranetics and the Healthcare Information Systems business of Carestream Health.

In 2020, acquisition-related charges amounted to a gain of EUR 6 million. The Diagnosis & Treatment businesses recorded a gain of EUR 28 million, mainly related to a gain of EUR 101 million from the re-measurement of a contingent consideration liability, partly offset by charges related to the acquisitions of Spectranetics and the Healthcare Information Systems business of Carestream Health.

7.1.47.5Acquisitions and divestments

Acquisitions

In 2023, Philips completed one acquisition involving a total net cash outflow of EUR 53 million (total equity price and settlement of debt). The acquisition is subject to final purchase price allocation procedures, which are expected to be finalized in the second quarter of 2024.

In 2022, Philips completed three acquisitions. The acquisition of Vesper Medical Inc., completed on January 11, 2022, was the most notable. Acquisitions in 2022 and prior years led to acquisition and post-merger integration charges of EUR 6570 million in the Connected Care businesses.segment.

In 2021, Philips completed two acquisitions: BioTelemetry, which was completed on February 9, 2021, and Capsule Technologies, which was completed on March 4, 2021. Acquisitions in 2021 and prior years led to acquisition and post-merger integration charges of EUR 51 million in the Connected Care businesses.

Divestments

In 2020,2023, Philips completed three acquisitions, with Intact Vascular being the most notable. Acquisitions in 2020 and prior years led to acquisition and post-merger integration charges resulting insix divestments for a gaincash consideration of EUR 2880 million, notably Philips Pharma Solutions in the Diagnosis & Treatment businesses and charges of EUR 22 million in the Connected Care businesses.US.

Divestments

In 2022, Philips completed one divestment, which was not material.

Inn 2021, Philips completed three divestments. On September 1, 2021, Philips sold its Domestic Appliances business to a global investment firm, Hillhouse Investment, resulting in a EUR 2.5 billion gain after tax and transaction-related costs; reported in Discontinued Operations.

In addition, Philips completed the divestment of the Personal Emergency Response Services (PERS) and Senior Living business on June 30, 2021, and September 17, 2021, respectively, as well as completing the divestment of a small business in segment Other. As part of the PERS divestment, Philips acquired shares in the buyer, Connect America Investment Holdings, LLC, with a value of EUR 40 million. The investment is classified as a financial asset measured at Fair Value through Other Comprehensive Income (FVTOCI) and is reported as part of Other non-current financial assets. The divestment resulted in a loss of EUR 76 million, which is included in Other business expenses in our Consolidated statements of income.

Philips did not complete any divestments in 2020.

For details, please refer to Acquisitions and divestments.

7.1.57.6Cash flows

The movements in cash and cash equivalents balance for the years ended December 31, 2020, 2021, 2022 and 20222023 are presented and explained in the following table.

Net cash flows from operating activities

Net cash flows from operating activities amounted to an inflow of EUR 2,136 million in 2023, compared to an outflow of EUR 173 million in 2022. This increase is mainly due to higher cash earnings and lower working capital, and includes a EUR 141 million payment related to the previously announced resolution of the economic loss class action in the US. Free cash flow^*) amounted to a cash inflow of EUR 1,582 million in 2023, compared to an outflow of EUR 961 million in 2022.

Net cash flows from operating activities amounted to an outflow of EUR 173 million in 2022, compared to an inflow of EUR 1,629 million in 2021. This decrease is mainly due to lower cash earnings, increased working capital and cash costs related to the Philips Respironics field action. Free cash flow^*flow*) amounted to a cash outflow of EUR 961 million in 2022, compared to an inflow of EUR 900 million in 2021.

In 2021, net cash flows from operating activities amounted to EUR 1,629 million, compared to EUR 2,511 million in 2020. This decrease is mainly due to increased working capital and consumption of provisions, partly offset by lower income tax paid. Free cash flow^*flow*) amounted to EUR 900 million in 2021, compared to EUR 1,635 million in 2020.

In 2020, net cash flows from operating activities amounted to EUR 2,511 million, and Free cash flow^*) amounted to EUR 1,635 million.

Net cash flows from investing activities

Net cash flows from investing activities consist of net capital expenditures and other cash flows from investing activities.

In 2023, other cash flows from investing activities amounted to a cash outflow of EUR 82 million, mainly due to a new business acquisition and minority investments, partly offset by divestment proceeds.

In 2022, other cash flows from investing activities amounted to a cash outflow of EUR 698 million, mainly due to the acquisitions of Vesper Medical and Cardiologs, amounting to EUR 414 million, and new minority investments.

In 2021, other cash flows from investing activities amounted to a cash outflow of EUR 2,943 million, mainly due to the acquisitions of BioTelemetry and Capsule Technologies amounting to EUR 2.8 billion. 

In 2020, other cash flows from investing activities amounted to a cash outflow of EUR 391 million, mainly due to the acquisition of Intact Vascular for EUR 241 million and investments in other non-current financial assets. 

Net cash flows from financing activities

Net cash flows from financing activities consist of treasury shares transactions, changes in debt, dividend paid and other cash flow items. 

In 2023, treasury shares transactions mainly included the share buyback activities, which resulted in EUR 662 million net cash outflow. Changes in debt mainly includes new bonds issued of EUR 500 million and loan repayments amounting to EUR 500 million. The dividend was distributed fully in shares.

In 2022, treasury shares transactions mainly included the share buyback activities, which resulted in EUR 174 million net cash outflow. Changes in debt mainly includesincluded new bonds issued of EUR 2 billion and a new term loan issued of EUR 500 million, partly offset by bond repayments of EUR 1.2 billion. Philips’ shareholders received a total dividend of EUR 741 million, including costs, of which the cash portion amounted to EUR 412 million.

In 2021, treasury shares transactions mainly included the share buyback activities, which resulted in EUR 1,613 million net cash outflow. Changes in debt mainly relates to short-term debt and lease repayments. Philips’ shareholders received a total dividend of EUR 773 million, including costs, of which the cash portion amounted to EUR 482 million.

In 2020, treasury shares transactions mainly included the share buyback activities, which resulted in EUR 297 million net cash outflow. Changes in debt included EUR 991 million cash inflow from the issuance of two new bonds under the EMTN program, partly offset by outflows related to lease payments. The 2019 dividend was distributed fully in shares in July 2020.

Net cash flows from discontinued operations

In 2023, net cash provided by discontinued operations was EUR 123 million, mainly related to a refund received of one-off advance tax payments of a previously disposed business.

In 2022, net cash used for discontinued operations was EUR 12 million, mainly related to previously disposed businesses.

In 2021, net cash provided by discontinued operations was EUR 3,403 million and consisted primarily of the net cash inflow of EUR 3,319 million from the sale of the Domestic Appliances business on September 1, 2021.

In 2020, net cash provided by discontinued operations mainly related to the Domestic Appliances business, partly offset by advance income tax payments amounting to EUR 78 million. 

7.1.67.7Financing

Condensed consolidated balance sheets for the years 2020,as of December 31, 2021, 2022 and 20222023 are presented in the following table:

7.1.77.8Debt position

Total debt outstanding at the end of 20222023 was EUR 8,2017,689 million, compared with EUR 6,9808,201 million at the end of 2021.2022.

In 2022,2023, total debt increaseddecreased by EUR 1,221512 million compared to 2021.2022. The increasedecrease mainly comes from maturing forward contracts related to the issuanceshare buyback program and long-term incentive and employee stock purchase plans, and repayments of EUR 2 billion Notes in April 2022,long-term debt including leases, partly offset by new borrowings. In 2023, Philips issued EUR 500 million of fixed rate notes under the early redemption of approximately EUR 1.2 billion Notes originally duecompany’s EMTN program that mature in 2023, 2024, 20252031 and 2026 and byused the utilizationproceeds for general corporate purposes, including the repayment of EUR 500 million that was outstanding under the credit facility entered into in Octoberthe fourth quarter of 2022. Changes in payment obligations from forward contracts are related to the maturity in 20222023 of EUR 83481 million of share buyback forwards (as announced in July 2021) and EUR 57125 million of forwards relating to long-term incentive and employee stock purchase plans (as announced in January 2020)March 2020 and May 2021), partially offset by EUR 63138 million of forwards entered into relating to long-term incentive and employee stock purchase plans (as announced in June 2022)2023).

In April 2022, Philips announced a series of Liability Management transactions to optimize its debt maturity profile. The transactions included the issuance of three series of Notes under its EMTN program for a total of EUR 2 billion with maturities in 2027, 2029 and 2033. Part of the proceeds were used to tender certain of Philips’ outstanding US Dollar denominated bonds due 2025 and 2026 and Euro-denominated bonds due 2023, 2024 and 2025, as well as make-whole and fully redeem the Euro-denominated bonds due 2023 and 2024 that were not purchased as part of the Euro tender offer. Philips issued Commercial Paper of EUR 200 million in September 2022 and EUR 101 million in October 2022. These tranches were repaid throughout the fourth quarter of 2022. In addition, in October 2022 Philips entered into a EUR 1 billion credit facility that cancould be used for general corporate purposes. The credit facility matureswas fully repaid in October 2023 and has a 12-month extension option at Philips discretion.2023. Per year-end 2022, EUR 500 million was utilized and outstanding under the credit facility.

In 2021, total debt increased by EUR 46 million compared to 2020. The increase mainly comes from currency effects and consolidation changes, partly offset by net lease repayments and forward settlements. Repayments of long-term debt amounted to EUR 302 million. In February 2021, Philips entered into two bilateral loans amounting to a total of EUR 500 million that were repaid in September 2021. In addition, Philips issued commercial paper of EUR 300 million in May 2021 and EUR 150 million in July 2021 that was repaid in September 2021. Changes in payment obligations from forward contracts are mainly related to the forward contracts entered into of EUR 731 million relating to the EUR 1.5 billion share buyback program announced on July 26, 2021, and EUR 90 million relating to the long-term incentive and employee stock purchase plans announced on May 19,2021.19, 2021. In addition, a total amount of EUR 745 million of forward contracts matured in 2021, which completed the settlement of the EUR 1.5 billion share buyback program announced on January 29, 2019, and a total amount of EUR 123 million of forward contracts matured in 2021 relating to the long-term incentive and employee stock purchase plans announced on October 22, 2018 and January 29, 2020. These payment obligations are recorded as financial liabilities under long-term debt. Other changes, mainly resulting from currency effects, led to an increase of EUR 175 million.

In 2020,At the end of 2023, long-term debt as a proportion of the total debt increased by EUR 1,487 millionstood at 91.5% with an average remaining term (including current portion) of 6.0 years, compared to 2019. New borrowings88.6% and 6.1 years respectively at the end of long-term debt included the net proceeds of EUR 991 million from the issuance of two new bonds under the EMTN program in 2020. Repayments of long-term debt amounted to EUR 298 million, mainly due to the repayment of leases. Changes in payment obligations from forward contracts mainly related to the forward contracts entered into of EUR 745 million to complete the remainder of the EUR 1.5 billion share buyback program announced on January 29, 2019. In addition, Philips entered into forward contracts for a total amount of EUR 174 million in 2020 related to the long-term incentive and employee stock purchase plans announced on January 29, 2020, and a total amount of EUR 126 million of forward contracts matured relating to the company's long-term incentive and employee stock purchase plans announced on October 22, 2018. These payment obligations are recorded as financial liabilities under long-term debt. Other changes, mainly resulting from currency effects, led to a decrease of EUR 221 million.2022. 

At the end of 2022, long-term debt as a proportion of the total debt stood at 88.6% with an average remaining term (including current portion) of 6.1 years, compared to 92.7% and 6.0 years respectively at the end of 2021.

At the end of 2021, long-term debt as a proportion of the total debt stood at 92.7% with an average remaining term (including current portion) of 6.0 years, compared to 82.3% and 6.3 years respectively at the end of 2020.

At the end of 2020, long-term debt as a proportion of the total debt stood at 82.3% with an average remaining term (including current portion) of 6.3 years, compared to 91% and 8.0 years respectively at the end of 2019.

For further information, please refer to Debt.

7.1.87.9Liquidity position

As of December 31, 2023, including the cash position (cash and cash equivalents), as well as its EUR 1 billion committed revolving credit facility, the Philips Group had access to available liquidity of EUR 2,883 million, compared with gross debt (including short and long-term) of EUR 7,689 million. 

As of December 31, 2022, including the cash position (cash and cash equivalents), as well as its EUR 1 billion committed revolving credit facility and the EUR 500 million undrawn portion of the credit facility entered into in October 2022, the Philips Group had access to available liquidity of EUR 2,704 million, compared with gross debt (including short and long-term) of EUR 8,201 million.

As of December 31, 2021, including the cash position (cash and cash equivalents), as well as its EUR 1 billion committed revolving credit facility, the Philips Group had access to available liquidity of EUR 3,370 million, compared with debt (including short and long-term) of EUR 6,980 million.

As of December 31, 2020, including the cash position (cash and cash equivalents), as well as its EUR 1 billion committed revolving credit facility, the Philips Group had access to available liquidity of EUR 4,243 million, compared with gross debt (including short and long-term) of EUR 6,934 million.

Philips has a EUR 1 billion committed revolving credit facility which was signed in April 2017 and refinanced in March 2022,  which will expire in March 2027. In 2023, Philips extended the maturity of the facility to 2028 and has one 1-year extension option remaining. The facility can be used for general group purposes, such as a backstop of its Commercial Paper Program. In addition, Philips entered into a EUR 1 billion credit facility in October 2022 which can be used for general corporate purposes, of which EUR 500 million is undrawn by year-end 2022.

Philips' Commercial Paper Program amounts to USD 2.5 billion, under which commercial paper can be issued up to 364 days in tenor, both in the US and in Europe, in any major freely convertible currency. As of December 31, 2022,2023, Philips had no commercial paper outstanding. During the year 2020, Philips established a Euro Medium Term Note (EMTN) program which facilitates the issuance of notes for a total amount of up to EUR 10.0 billion. In 20222023, Philips issued three new tranchesEUR 500 million fixed rate notes due 2031 under the programprogram. The proceeds were used for a totalgeneral corporate purposes, including the repayment of EUR 2 billion, while also early redeeming its500 million that was outstanding 2023 and 2024 Notes and completing a tender offer onunder the outstanding 2025 and 2026 Notes.credit facility entered into in the fourth quarter of 2022. 

In terms of liquidity, the company has access to various sources. The company’s liquidity risk management procedures have not changed significantly during 2022.2023. The access to existing lines of credit remains intact. These lines of credit, along with other financial risks to which Philips is exposed, are disclosed in Details of treasury and other financial risks. Further, with respect to potential claims related to the Respironics field action,recall, please refer to Contingencies. The management continues to monitor the risks associated with such potential claims and its impact on liquidity position, if any.

Philips’ existing long-term debt is rated A-BBB+ (with stable outlook) by Fitch, Baa1 (with negative outlook) by Moody’s, and BBB+ (with negative outlook) by Standard & Poor’s. As part of our capital allocation policy, our net debt^*) position is managed with the intention of retaining our strong investment grade credit rating. Ratings are subject to change at any time and there is no assurance that Philips will be able to achieve this goal. Philips' aim when managing the net debt^*) position is dividend stability and a pay-out ratio of 40% to 50% of adjusted income from continuing operations attributable to shareholders^*). Philips’ outstanding long-term debt and credit facilities do not contain financial covenants. Adverse changes in the company’s ratings will not trigger automatic withdrawal of committed credit facilities or any acceleration in the outstanding long-term debt (provided that the USD-denominated bonds issued by Philips in March 2008 and 2012 contain a ‘Change of Control Triggering Event’ and the EUR-denominated bonds contain a ‘Change of Control Put Event’). A description of Philips’ credit facilities can be found in Debt.