Signify (LIGHT.AS) has announced its first-quarter results for 2024, with a mix of improvements and challenges across its various segments. While the U.S. professional, OEM, and consumer businesses showed positive dynamics, China's market was weak, and the European professional business did not meet expectations. Despite a decrease in nominal and comparable sales, the company's net income rose to €44 million.
Signify also reported an expansion of its connected light points and a high proportion of LED-based sales. The company is optimistic about future sales growth and margin improvements, following its recent reorganization and sustained focus on sustainability.
Key Takeaways
- Signify's nominal sales fell by 12.5% to €1.468 billion, with a negative currency impact of 2.6%.
- Comparable sales decreased by 10.1%, and the adjusted EBITDA margin dropped by 60 basis points to 8.3%.
- Net income improved to €44 million.
- The installed base of connected light points grew to 126 million, and LED-based sales made up 87% of total sales.
- The company has undergone an internal reorganization, which has not disrupted order fulfillment.
- Signify anticipates an improvement in adjusted EBITDA margin and positive sales growth in future quarters.
Company Outlook
- The company expects sales growth and margin improvements in the coming quarters.
- Signify foresees a rebound in the public business in Europe in Q2 and recovery in the horticultural business in Q3.
- Cost reduction efforts in the second semester are projected to strengthen the operating margin.
Bearish Highlights
- The European professional business underperformed, and the market in China remained weak.
- There has been a temporary slowdown in Europe's public business.
- A decline in sales was attributed to strong comparisons from the previous year and unexpected drops in the European professional segment.
Bullish Highlights
- The U.S. professional segment is performing stronger than Europe.
- Improvements are seen in the consumer and OEM businesses globally.
- Gross margin stood at 41.2% for the quarter and is expected to expand in the first half of 2024.
Misses
- Nominal and comparable sales have declined.
- Adjusted EBITDA margin has decreased slightly.
Q&A Highlights
- Cost-cutting measures will show effects in Q2, with more significant outcomes in Q3, aiming for the desired cost structure by Q4.
- The horticultural business is expected to bounce back in Q3, with order intake already growing substantially.
- Specific details on the size of the European indoor segment or other business segments were not disclosed.
Full transcript - None (PHPPY) Q1 2024:
Operator: Hello and welcome to the Signify First Quarter Results 2024. Throughout the call all participants will be in listen-only mode and afterwards there will be a question-and-answer session. [Operator Instructions] Today I am pleased to present Eric Rondolat, CEO; Željko Kosanović, CFO; and Thelke Gerdes, Head, IR. Please go ahead with your meeting.
Thelke Gerdes: Good morning everyone and welcome to Signify's earnings call for the first quarter 2024. With me today are Eric Rondolat, CEO of Signify and Željko Kosanović, CFO who has recently been appointed as Signify's CFO succeeding Javier van Engelen. During this call, Eric will first take you through the first quarter highlights after which Željko will present the company's financial performance. Erik will then come back to discuss the outlook for the remainder of the year and after that we will be happy to take your questions. Our press release and presentation were published at 7:00 this morning. Both documents are available for download from our Investor Relations website. The transcript of this conference call will be made available as soon as possible. And with that, I will hand over to Eric.
Eric Rondolat: Thank you, Thelke. Good morning, everyone and thank you for joining us today. Let's start with some of the highlights for the first quarter 2024 on Slide 4. In the first quarter, we saw improving dynamics in our U.S. professional, OEM and consumer businesses, while the market in China remained soft and the European professional business was substantially below our expectations. We increased the installed base of connected light points from 124 million in Q4 last year to 126 million at the end of Q1 this year. Led based sales were 87% of total sales compared to 82% one year ago. Nominal sales declined by 12.5% to €1.468 billion, including a negative currency effect of 2.6%. Comparable sales declined by 10.1%. Overall, the adjusted EBITDA margin decreased by 60 basis points to 8.3% due to the under-absorption of fixed cost, despite an improvement of the gross margin. Net income came at €44 million compared to €28 million in Q1 last year. The year-on-year improvement is mainly driven by lower financial expenses and higher income from operations. Finally, we delivered €80 million of free cash flow during the quarter as we continued to improve our working capital. During the first quarter, we successfully implemented our new organizational structure effective April 1. It has received strong support internally and externally as it brings an enhanced focus and accountability to our businesses from an end-to-end market perspective. In terms of our reporting this quarter, we will only report sales and comparable sales growth by business as during the first quarter, proceedings with our social partners were still pending. As of Q2 2024, we will report sales and adjusted EBITA by business. We will provide 2023 and Q1 2024 comparable financials for sales and profit by business by the end of June 2024. So let's move to Slide 5, starting with the professional business. Nominal sales in Q1 were at €943 million with comparable sales showing a decline of 7.6%, mainly due to weak professional sales in Europe, offsetting moderate growth in India and emerging markets. We saw a much more resilient performance in the U.S. market from a top line pricing and also bottom line perspectives. Moving on to the consumer business on Slide 6, nominal sales were at €299 million with comparable sales showing a decline of 5.7%. Overall, we saw a sequential improvement compared to previous quarters of our connected business. We also saw inventory levels of retailers return to normalized levels. Continuing with the OEM business on Slide 7, nominal sales in Q1 were €103 million with comparable sales showing a decline of 7.4%. On a sequential basis we are starting to see improvements as inventory levels of OEM are returning to normalized levels in the majority of our business. And finally the conventional business moving to Slide 8, nominal sales in Q1 were €119 million with comparable sales showing a decline of 34.1%, reflecting the full impact of the fluorescent bans in Europe, while in Q1 2023 we benefited from a pre-ban effect. Let's move to Slide 9 where I would like to discuss a couple of business highlights, starting off with two highlights of our professional business. So in Austria, we equipped the Vienna City hall with Color Kinetics connected LED lighting. We completely renovated the festive lighting and installed over 1100 Color Kinetics luminaires. The installation results in lower operating and maintenance costs while generating energy savings of up to 50%. We also introduced LumXpert, an industry first application for professional installers. The app simplifies and accelerates lighting projects. The in app design tool enables project management and professional lighting calculations. Users can buy all Signify brands directly from our distributors with competitive delivery times. We expanded the collaboration between Philips Hue and Samsung (KS:005930) SmartThings aimed at optimizing the interaction between the Philips using TV app, Samsung's TV and the SmartThings ecosystem. So the Philips Hue Sync TV app is available to consumers on a monthly subscription basis as a one-time purchase or as a one-time purchase. We have seen particularly good traction so far for subscription model. Next, we achieved two test victories for Philips Hue and WiZ in the German Stiftun Warentest. The test compared ten smart lamps, seven with the base station and three without. The Philips Hue White & Color ambience lamp with Hue Bridge was the overall test winner due to its lighting properties, smart functions and the interaction between the light bulb and the bridge. The WiZ Tunable White & Color E27 lamp won the category smart lamp without base station. In addition, the WiZ lamp was highlighted for its affordability and environmental properties. Next, I would like to discuss our sustainability performance on Slide 10. So we have now entered the fourth year of our Brighter Lives, Better World 2025 sustainability program and during the first quarter we were ahead of schedule to achieve our 2025 target to reduce emissions across the entire value chain by 40% against the 2019 baseline, doubling the pace required to the Paris Agreement 1.5 degree scenario. In addition, the company has received approval from the SBTI for its ambitious 2040 net zero target with a 90% absolute reduction of Scope 1, 2 and 3 emissions. Circular revenues increased to 34%, surpassing already the 2025 target of 32%. The main contribution was from serviceable luminaires with a strong performance from both consumer and professional. Brighter Lives revenues remained at 31%, on track to reach the 2025 target of 32%. This includes a strong contribution from consumer products that support health and wellbeing, mainly eye comfort. The percentage of women in leadership position decreased to 28%, 1% decrease versus the last quarter and slightly behind our target. Signify continues its actions to increase women representation through focused hiring practices for diversity across all levels and through retention and engagement actions to reduce attrition. In addition, we received several external recognitions. Signify was placed on the CDP climate A List for the 7th consecutive year. We were recognized on CDP's 2023 supplier engagement led aboard for our commitment to engagement in our supplier chain to decrease carbon emissions and we are also recognized on the Clean 200 list of companies putting sustainable investment at the heart of this strategy. With this, I am now very pleased to introduce Željko, who has just been appointed as Signify's new CEO. Željko Signify, take us through our financial performance in more details.
Željko Kosanović: Thank you, Eric and good morning to everyone on the call. It is my pleasure to present our first quarter 2024 results this morning. So let me dive straight into the financial highlights on the Slide 12 where we are showing the adjusted EBITDA bridge for the total Signify. The adjusted EBITDA margin decreased by 60 basis points from 8.9% in Q1 2023 to 8.3% in Q1 this year, as the strong 190 basis points gross margin improvement was more than offset by the negative impact from volume decline. Looking at the bridge in more detail, first, the negative volume effect was 270 basis points. On the other hand, the combined effect of price and mix was a negative 120 basis points as the price erosion in some parts of our business was offset by a positive sales mix. Cost of goods sold improvements contributed with 200 basis points. Adjusted indirect cost savings had a positive effect of 80 basis points. However, we are not able to keep pace with the volume decline. Currency overall had a positive effect of 70 basis points, mainly helped by the evolution of the Chinese Yuan currency. Finally, other effects contributed a negative 20 basis points. Now moving on to Slide 13, I would like to zoom in on our working capital performance during the quarter. Compared to the end of March 2023, working capital reduced by €144 million or by 100 basis points from 8.3% to 7.3% of sales on a twelve-month sales basis. The level of inventories decreased by €273 million, mainly as a result of our improving supply chain lead times. Receivables reduced by €95 million due to both our efforts to further minimize overuse and also due to the lower year-on-year sales level. Payables were €224 million lower, which is a logical consequence of driving down our inventories, while structural payment terms remained largely unchanged. As lead times continue to normalize, we see further potential to reduce our working capital back to the historical levels of low to mid-single digit percentage of sales. And with that I would like to hand back to Eric to wrap up with the outlook and closing remarks.
Eric Rondolat: Thanks Željko. Let's conclude with the outlook on Slide 15. So for the full year we continue to expect an adjusted EBITDA margin improvement of up to 50 basis points, including the first benefits from the announced restructuring program, free cash flow of 6% to 7% of sales, including an incremental and nonrecurring negative impact of around €150 million related to the restructuring program and the reduction of our U.S. pension liabilities. And as the year progresses, we anticipate a sequential comparable sales growth improvement driven by improving dynamics in the Americas and the OEM and consumer businesses. The continuous effort to manage the gross margin combined with the implementation of our cost reduction program will deliver positive effect on our operating margin in the quarters ahead in line with our guidance for the full year. And with all that, I will hand back to the operator for the Q&A.
Operator: Thank you. [Operator Instructions] So we'll take the first question from Akash Gupta from JP Morgan. Your line is open now.
Akash Gupta: Yes. Hi, good morning and thanks for your time. My first one is on organic sales decline which came in a bit ahead of what people were expecting. And the question I have is that did this internal reorganization that you are currently undergoing through, has that played any role in terms of your ability to fulfill some commitments or orders and wondering if you can comment about your growth versus the end market growth in the first quarter?
Eric Rondolat: Yes. Good morning, Akash. Look, we looked at this subject precisely. We don't believe so. I mean, they could be given the realization, a little bit of some adjustments needed. But what needs to be understood is, we are not in that reorganization fundamentally touching our front offices, meaning that the teams that were in front of the customers yesterday are the same teams being in front of the customer today. In our previous organizations, every market had Mister or Mrs. professional, Mister or Mrs. OEM or Mister or Mrs. consumer. So that connection to our customers has not changed. So that's one thing. That's what happens in Q1, and it will happen also to a lesser extent in the upcoming quarters is the big base of comparison challenge that we had on the conventional part of the business. If you remember, last year we had the first time, the last time buy from our customer which positioned our conventional business in a very strong growth compared to what it was doing normally we had minus 4.6 if I remember well in Q1 last year. So we experienced a very strong decline of the conventional on a comparable basis which is basically close to 300 basis points of negative drag on the whole top line. These are answers to your question. Now what we did not forecast in Q1 was a substantial stronger decline in the professional business in Europe than what we had originally expected and that takes place at two different levels, first on the trade side. So we've seen that our sales to trade were really substantially lower than what we expected in Q1 and we need to study that a bit more what we believe it's more structural and it's not only the lighting industry, it's a bit more global. Germany being probably one of the countries which has a complicated economical situation at this point in time and it has probably also spread to other countries in Europe. We've seen also but we believe it's a bit, it's more a temporary thing. Slowness on our public business in Europe which was very strong Q1 last year and so, strong base of comparison, a bit weaker in Q1, but we have seen in Q2 that our order intake is going back quite strongly, so that should be a temporary effect. So that's what would explain the delta between what was expected and what we have seen. Our growth versus the end markets, the end markets you get always the information one quarter later. But what we see, if we go back to Q4, I think we’ve performed very well at that point in time in U.S. and in Europe, and we compare with sales to our peers that are listed companies, and we have performed better from a top line perspective. So we were pretty much well positioned, given the market dynamics in Q3. We don't think it has dramatically changed in Q1. It's just a surprise we had on the distributing market in Europe, but I believe it's something that would have surprised other companies. But we have to wait for people to publish their results in order to confirm that. But from an end market perspective, we think that we were well positioned in Q4, and there's no reason that this would have dramatically changed in Q1.
Akash Gupta: Thank you. And my follow-up question is, in the backlog driven professional businesses, can you tell us how does it compare against last couple of quarters, and is there any soft indication of Q2 organic growth where we might land? Thank you.
Eric Rondolat: Yes, our backlog is today a bit weaker than what we have experienced previously on the professional business. So your question is a good one. We effectively enter in the quarter with a percentage of order backlog which is lower than what we would normally experience for that business. On the contrary, it is very strong for OEM. It is very good for conventional and very well positioned for consumer. So, yes, entering the quarter, we see a bit of softness on the order book on professional.
Akash Gupta: Thank you.
Operator: We'll take the next question from Martin Wilkie from Citi. Your line is open now.
Martin Wilkie: Yes, thank you. Good morning. It's Martin from Citi. My first question was just around the stocking levels you've highlighted in both OEM and in consumer, the distributed stocking levels have normalized, I think completely or perhaps to some degree during Q1. If you could just let us know is the destocking now completely come to an end there? And also, just in terms of when we think about how big a drag that has been, obviously we'll get the restated numbers for those divisions in June, but if we look last year, do you have some sort of sense as to what the difference was between the sell-ins and the sellouts in those divisions, just so we can get some understanding as to sort of how big a drag that destocking has been both in consumer and in OEM? Thank you.
Željko Kosanović: Yes, good morning, Martin. So let's take it by part. So on the OEM side effectively inventories have gone back to healthy levels. And we have seen that quite quickly because we're experiencing now a clear increase of our order book with OEMs, so that's very positive. Look, if you take some distance and we take a specific geography, like the Americas, it went up to twenty one weeks at the peak and went down to six weeks. So at the end of the day, we didn't calculate exactly what was resulting impact on the selling-in versus the selling-out, but you can imagine that they had to bring the inventory to more decent levels, understanding also that the market was not particularly having a good traction. So you get the two negative effects, a market which is not extremely dynamic, while at the same time an inventory that needs to be reduced. If we talk about Europe, it went from 15 to five weeks. So that had a material impact on the OEM business that we believe we're going to see rebounding in the coming quarters. On the consumer side, it has been probably less extreme because the stocking levels were adjusted while the economy was performing, so we've seen regular and gradual adjustments. Now we are at very healthy levels. I would say not everywhere, but I would say in the vast majority of our retailers and we have seen it already. We see already the trend that is about having a more direct rejection between selling in and selling out, so these are good news. We have seen that some of our consumer business and especially the connected business now taking another direction in terms of growth, which we believe is also a prediction of that. So complicated, given that the market is also fluctuating to give a number on how much the selling-in was hampered but you get an understanding between 21 to six weeks, between 15 to five weeks. So that had important consequences on the top line and we see that changing.
Martin Wilkie: Thanks, that's helpful. And just a follow-up. Was all that impact just really through the volume and/or does the industry, when you go through destocking, see some sort of price discounting or some price headwind as a result of that? Just when we think about the buckets in your earnings bridge between your pricing and volume effects, would you say that that destocking, in terms of how it impacted you, was mainly seen through the volume side? You didn't have the discounts or anything like that to clear those channels?
Željko Kosanović: No, the destocking was mostly volume.
Martin Wilkie: Great. Thank you very much.
Operator: We'll take now the next question from Tim Ehlers from Kepler. Your line is open now.
Tim Ehlers: Yes. Good morning, everyone. Thanks for taking my question. The first one is about conventional, so I guess a bit weaker than everybody has expected it to be. You always stated that you were over performing the market for conventional and you were making some market share gains in a declining market. Was that still the case or did you now see your conventional sales decline below what the market has seen?
Željko Kosanović: Good morning, Tim. Look, in terms of market share gains, we'd only be able to talk about Q1 in Q2 because we have a lag of about a quarter to be able to analyze the numbers. The sales decline on conventional is pretty much linked to the good performance of conventional last year. So when we had, it was in, I think, June and September to go through ban of some technologies in conventional, our customers do the last buys. So you get on the year of the ban, increased sales on the side of conventional, because they know that we are not going to be able to produce anymore, so they buy their last inventory. The consequence of this is that our numbers in 2023 in the conventional business, from a growth perspective, were increased by that phenomenon. That's the case for Q1 to a given extent in Q2, to a lesser extent in Q3, and much less in Q4. So we know that in the first quarters of the year, we have a high compare when it comes to the conventional business. And this is why we have a decline, which is about 34% in Q1 this year. As you can see also, we maintain a very healthy level in terms of a bottom line. And we believe that given this peculiarity in 2023 last buys, we should be continuing to gain on our market share. Just remember that in that business, we produce not only for us, but we produce also for many other companies that are still especially active in that business. But we're going to be more precise on market share gains in Q2. But we believe that what we see in terms of market decline today is very circumstantial, given everything that I explained.
Tim Ehlers: Okay, clear. Thanks for that. Then maybe one follow-up question on that, a short one. You don't disclose the margins per division, but I think then it's probably fair to assume that in conventional, you also seen some margin deterioration due to the lower activity levels, right?
Eric Rondolat: Not really. We know how to adapt the structure to the volume in that business. So no, we haven't really seen that. Now, the fact that we don't disclose maybe just let me take the opportunity of the question to go a little bit broader. We finally finished the proceedings with the people who represent our employees at the end of March. So basically, we had very little time to re-affect the cost, especially in the geographies to the right businesses, in order and to be able to give a comprehensive set of information. This doesn't mean that we don't have preliminary results. So we have preliminary results, but they are not final and that's why we're not showing them. What they tell us? They tell us that there's no degradation on the side of the conventional business and the three other business are more or less around the group average. But we will give more details and more precise details before the Q2 results in order for you to get a clear understanding of the performance of those businesses from a full P&L standpoint and also being able to compare them to what has happened in the past.
Tim Ehlers: Okay, that's very useful. Thank you. And then one last question before I pass on to the next colleague. You mentioned that you've seen consumer and OEM in the U.S. showing some sequential improvements. Is that a trend you also see in Europe, or is it to somewhat lesser degree in Europe the case?
Eric Rondolat: So what? Okay, I should maybe rephrase what I've said. We've seen that the professional business in the U.S. was stronger than Europe. We believe that when we look at the number in the past quarters that we have taken share in the U.S. What we said about the consumer and the OEM business, we see globally, worldwide an improvement. So clearly on the OEM side, but also on the consumer business, even if there are some nuances depending on the regions, but we see positive, upcoming traction on those two businesses.
Tim Ehlers: Okay, got it. Thanks a lot. That's it from my side.
Operator: We'll take now the next question from Marc Hesselink from ING. Your line is open now.
Marc Hesselink: Yes, thank you. First question is on the gross margin, pretty good at the 41%. Looking ahead, traditionally you had more like 39% to 40%. And you also said, like, if gross margin is moving up, but you can also use that a bit to the lower prices a bit and get some extra growth. How are you thinking about that and how it's going to evolve in the coming quarters?
Eric Rondolat: Yes. Good morning, Marc. What we have said when it comes to 2024, it's an expansion of the gross margin and a solid gross margin in H1 as the consequence of the numerous price increases that we have done, but also the price decreases. Sorry, the cost decreases that we have been able to manage specifically in 2023, when we increased our gross margin by about 210 basis points, if I remember well. So we're continuing on that trend, which is a price which is well positioned, but the continuation of extraction of cost. Now, what we see in Q1, it varies across the businesses, but we see some price deflation, which is also pretty much linked to two things, the previous inflation, but also the fact that we can extract additional cost from the bill of material, which is translating to a solid gross margin, and still an expanding gross margin. So if I look at it from a business perspective, we see still a positive effect of price on the conventional business. This is the business also where we have increased the price the most. We at this point are stable on the consumer business, and we are experiencing some negative price pressure on the OEM business and also on the professional business. But all this is happening with still a gross margin, which is expanding and at 41.2% for the quarter. What we think is as much as the first semester will be gross margin led, when it comes to delivery of operating margin, it's going to be different in the second semester of the year. Well, it will not be so much gross margin expansion, but it will be the realization of our cost program that should help us to reduce cost and strengthen the operating margin. So that's what we said at the time, and it is also what we see happening these days. Are we are reducing price to grow? I know this is a very interesting approach that we have to the subject in a market which is declining, bring the price down, doesn't help to make more volume. So it's really when the market is expanding quickly, that by reducing price, we can increase our top line. So, look, but we're very dedicated with an approach by market, with feet on the ground, adapting the markets to the reality of the economical dynamics. So that's what we're doing in all the geographies where we operate.
Marc Hesselink: Very clear. Thanks. And my second question is on consumer connected. I think you just said that it's clearly improving, as we recall from previous calls, that maybe it's a bit more competition also in the U.S., can we maybe talk about those dynamics. How do you see the market recovering and you're growing with the market or you're recouping some of that competitive pressure?
Eric Rondolat: I think that business has been improving a lot in the two first years after the COVID started, which is basically 2020 and 2021. Then there was a correction in 2022, 2023, also with competition coming, but the fact that competition comes, it's normal because that market expands, it expands quickly. And when you have a market expanding and you have a very high market share, it's normal that there are new entrants. If I look at it, I look at it more from a macro perspective. Two great years, two years of stability, and we see now that it seems that we have reached the bottom and we are in a position to start to grow again on the connected part of the business.
Marc Hesselink: Okay, great, thanks.
Operator: We'll take now the next question from [indiscernible] from Goldman Sachs (NYSE:GS). Your line is open now.
Daniela Costa: Hi, good morning. It's actually Daniela here. Thank you for taking our questions. Just two quick follow ups left. On your commentary early, regarding the U.S. professional market having some signs of improvement, can you perhaps give us a little bit more color by segments? Is this offices retail or something else or is it just maybe that the inventories got so low that the wholesalers are seeing some destocking, some restocking? Sorry. And then second point on your fixed costs, on the self-help actions, so is it fair to assume that, like all the action implementation has now taken place and the agreements were reached and we will start to see from next quarters onwards the cadence of the savings that how does it take us to get to full run rate, basically? Thank you.
Eric Rondolat: Yes. Good morning, Daniela. The U.S. has been much stronger in terms of performance for us than Europe. So where do we see that? Substantially in indoor and especially Cooper has been performing extremely well and Cooper is pretty much indoor focused. We have also outdoor activity, but it's very indoor focused. So we've seen projects very small size, medium size, and some projects of a bigger size being effectively pushed forward. We're successful also positioning ourselves from a price standpoint, expanding also the gross margin and the profit margin there quite substantially. So, yes, it has been a good story, and I would say pretty much indoor for us on the outdoor part of the market, this is more bigger projects, street lighting. These projects have been somehow delayed sometimes also depending on the money being made available by the incentive program, which is not as fluid as we thought it would be in the U.S. so it’s both. From a segment standpoint, to answer more precisely to your question then it's going to be industry segment, office segment, then education, healthcare, and probably last the retail, that has been the less dynamic segment over the past year and it still continues. The actions on the cost, we will see them quite a bit in Q2, more in Q3, and we should be at the run rate in Q4.
Daniela Costa: Great. Thank you.
Operator: We'll take now the next question from Adam Parr from Redburn Atlantic. Your line is open now.
Adam Parr: Hi, everyone. Good morning, and thanks for taking my question. It's actually just a question on horticultural as a key growth driver. What are you seeing in horticultural orders in the first quarter and perhaps so far in April, and how quickly do you think this could recover and contribute to growth?
Eric Rondolat: Yes. Good morning, Adam. Q1 is a very small quarter for horticulture. It's a very seasonal business. So our order intake has been really growing substantially and we see the recuperation of what we have lost last year, and we've lost substantially because of the price of energy at the back end of 2020 and beginning of 2023. So basically, horticulture market works in such a way that you have the commitments in Q1 and you deliver a big part of it in Q3. And we see that happening. So, well Q3 will be a big quarter for us on the horticulture business and also participating to the overall growth of the company. That's why we see an improvement on the upcoming quarters, which is going to be horticulture on one side, but also the consumer business, also the OEM business, and the continuation of a relatively good performance in U.S. professional. But yes, horticulture, we see it happening and it's going to be taking place mostly in Q3.
Adam Parr: Great. Thanks very much. Just the one from me, thank you.
Operator: Thank you. [Operator Instructions] We've got one more question from Akash Gupta from JPMorgan (NYSE:JPM). Your line is open now.
Akash Gupta: Yes. Hi, good morning. Thanks for the followup. The question I have is that when we look at your professional segment, can you give us some indication that how big is European indoor roughly, which is contracting and how big are other businesses where you are more upbeat when it comes to the growth profile in the coming quarters? Thank you.
Eric Rondolat: Akash, we are giving quite a bit of information. We don't go at that level of detail, but probably just to give you a hint, yes U.S. is going to be, and America is going to be the biggest subsegment we have in professional, and then it will be Europe. So Europe, and Europe indoor is quite substantial in the overall number. If Europe, as we experienced in Q1 has an impact on its top line, it does impact that business quite substantially. It impacts that business at two levels, at the level of the top line, but also at the level of the bottom line, because we enjoy also on these segments, a good level of profit. So, sorry, but at this point in time, we're not disclosing the sub segments, but I've given you a bit of a hierarchy on how they are and how they look like.
Akash Gupta: Thank you.
Operator: We've got no further questions, so I will hand back to you, Thelke Gerdes to conclude today's conference. Thank you.
Thelke Gerdes: Ladies and gentlemen, thank you very much for joining our earnings call today. If you have any additional questions, please do not hesitate to contact us. Again, thank you very much and enjoy the rest of your day.
Operator: Thank you for your interest in today’s call. You may now disconnect.
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