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Philips out with earnings this morning and joining me now to talk about all of that is Philips CEO, Roy Jacobs. Roy, really good to see you. Talk to me about this. You're in line with revenue at $4 billion. You got a great surprise beat on earnings per share. Talk to me about this quarter and what it means, you know, with this macro environment. We're hearing, of course, tariffs is top of mind for people. I know you addressed that. So, talk to me about how this quarter sets you up for the rest of the year.

Yeah, good morning and great to be back in your show. Um, it's a very encouraging start to the year, I must say. Um, we came in ahead of expectations for the quarter and especially pleased by seeing the increased momentum of orders and also growth in our consumer business. So, we see that the fundamental demand for our innovations is strengthening in a world that, of course, is also seeing more uncertainty. Um, and that actually confirms that, of course, the challenges in healthcare has not been changed by what's happening with, for example, tariffs. There's still a significant gap in the demand that needs to be, um, there to take care of the patients, the amount of staff that we have to take care of these patients, but also keep care affordable and accessible. And therefore, our innovations and AI really have an impact to make there. On the other hand, we also, uh, were clear that we do take a current new reality into account where the announced tariffs have an impact in the year, not on sales, so we kept our sales guidance untouched because of the strong demand that we have, but we do reflect potential impact of the tariffs into our profit and cash guidance. And that's what we guided for in terms of $250 to $300 million net impact after very substantial mitigation of a few hundreds of millions that we actually are actioning as we speak. We are adjusting our supply chain to build on the plan that we already are executing against last few years to further regionalize and now also to further strengthen and localize in the US, and at the same time take very stringent cost measures to also make sure that we don't have to offset this with price increases to our customers, but actually we can manage it within our own turf and make sure that we keep health care affordable and accessible.

Yeah, and that's because a lot of your customers are in fact hospitals. We know those margins tend to be kind of thin. Talking about the regionalization of manufacturing. I know you on the call were talking about America for America and Europe for Europe in terms of the supply chain. Talk to me about what needs to be done right now, how you're, you know, building up a sort of resilience against potential tariffs staying, considering that you're in the medical devices business, and that did not get the carve-out or did not get sort of protected from the initial round of tariffs. What is it that needs to be done in case these tariffs don't go away?

Yeah, so we have been actually already since COVID seeing that there is a world where we see a need to produce closer and deliver closer to where also the demand is. And that indeed goes towards US for US, EU for EU, and Asia for Asia. Still, the medical technology supply chain is a complex one. So, it doesn't mean that you can just source all components from one country. And therefore, what we have been doing is bringing more of the components, more of the manufacturing into these regions. And what we will accelerate is doing that also further into the US. Um, we have a strong footprint in the US. We have 46 locations. We also produce and manufacture in the US. We do that for the US. Actually, we also export out of the US. Um, and we will continue to do that more. We just announced a multi-million investment in Minnesota as an example for cardiac devices, but we're also producing our ultrasound in the US, our monitoring and part of our imaging, including the blue seal magnet, which is actually a world standard that we're also exporting around. So, we still strengthen the footprint in the US, but we also make sure that actually we bring more of the components that can support that. And therefore, the risk towards further trend of regionalization that even if maybe the tariffs change and get lower, we still expect that that trend will continue.

And then the best-case scenario, I know the industry is hoping for really getting a carve-out or getting some kind of relief. Right now, you're dealing with the very high China tariffs as well as the incrementals around Europe and the rest of the world. Talk to me about, you know, what it means for Philips to get that carve-out and sort of what areas of the business are really getting impacted or could get some relief?

Yeah, so if you look to the Philips business, 80% of Philips is healthcare. So, we are providing healthcare innovation. So, that is the part where exemptions, of course, would be highly beneficial to providing the care to the patients that they need without disruption. That's also what we are strongly advocating for. We actually are in active engagement with the different governments across the world, also in the US, in Europe and in China. And actually, we see also resonance for that argument. So, that's still being discussed. That's why we didn't want to preempt any outcome. And we said, "We take the current known tariffs into account as announced by the 2nd of April where you have indeed very elevated US-China tariffs. Then we have the 10% rest of world, and we also assume that after the pause, for the moment, we revert back to what was known as the tariffs that would take into effect by the 2nd of April. So, that's the case. That's the case that we've taken into our full-year outlook, and then offset with substantial mitigation in supply chain, cost measures, but also further driving our innovations to fulfill those demands that we see underlying continuing and actually strengthening into the year because I think that was where the encouragement came from in Q1 was not only a beat on what we had guided the market for, but actually how we come out is with momentum. Momentum on consumer side, where we saw personal health coming into growth, very strong growth, double-digit growth in the international region. And also, the healthcare order intake was strong, actually double-digit growth in North America, very strongly currently doing. And we expect that also to continue.