In financial year 2023, we continued to see a rising demand for our energy efficiency solutions. With an ever-increasing adoption of renewable energy sources, and especially due to the vast global efforts for electrification to drive the decarbonization of the grid, our end-to-end solutions portfolio continues to position us as a leader in the market. To orchestrate the increasingly more volatile generation of energy and the rapidly increasing demand, our flexibility management solutions offering delivers efficiencies and emission avoidance as well as state-of-the-art cybersecurity for critical infrastructure and, ultimately, a resilient grid. As a result, the demand for our energy efficiency solutions continues to thrive, reflected in our record backlog of nearly USD 3.8 billion.

The recent developments validate our strategic vision, which continues to be driven by innovation delivering energy efficiency solutions and unrivaled customer service, built on trust, partnership, and delivering on our commitments. Offering innovative solutions is vital to embrace change in an ever-evolving environment and, thus, Landis+Gyr continued to reinvent itself, providing leading technology to our customers, stability to our employees, and sustainable returns to our shareholders.

Innovating the Future of Energy

Motivated by our customers’ success, we continue to follow our vision for the future of energy management, and pride ourselves in offering the most comprehensive portfolio of solutions in the industry.

We are pleased to report strong results for FY 2023, delivering above our guided ranges for the full year, and demonstrating our ability to deliver continued strong growth and margin expansion. The return to largely normalized market conditions and a strong focus on backlog execution drove growth and allowed us to serve customer demand even better throughout the year. Continued strong order intake and a new record backlog show the trust our customers have in our solutions and underpin the resilient nature of our Company.

While the rapid push for electrification increases the demand for energy efficiency and grid resiliency solutions, our strategic transformation provides a solid foundation for sustained profitable growth and positions us in the sweet spot of the energy transition as we enable our customers to manage energy better and drive the decarbonization of the grid. Additionally, we are excited about new strategic investments and partnerships with SPAN and Brusa, which allow us to further strengthen our portfolio to equip our customers with integrated end-to-end Flexibility Management solutions. In a rapidly changing industry landscape, we have taken extensive steps to equip our teams with the needed skills to solidify and strengthen our leading position around the globe. Partnering closely with our customers, together, we are moving from AMI 2.0 towards true ecosystem solutions to deliver grid resilience through future-proof innovation. Next to tackling foundational aspects like customer affordability of energy and the reliability of the grid that distributes energy to customers, we have partnered with utilities for more than a century to solve these challenges and will continue to partner with them in the future to address new trends and needs. Today, utilities are faced with a new energy supply and demand equation due to consumer engagement expectations at unprecedented levels, energy transition towards more renewable and distributed generation, and a huge demand due to transportation electrification, investments in grid modernization with regulatory and government support, and increased need for data and digital technologies to manage these developments.

As the grid becomes more intelligent at a rapid pace, we need to deliver solutions that provide actionable insights through effective data analytics. The challenge for utilities lies in leveraging new digital solutions to secure, process, and manage this data, and extract true value from it. We are proud to provide integrated end-to-end solutions to address these challenges and provide an offering that exceeds our historical core competencies and current portfolio of AMI (advanced metering infrastructure), Distribution Automation, Meter Data Management, EV (electric vehicle), and Load Management, which positions us well to partner with our utility customers to optimize their grid operations as DER (distributed energy resources) integrations happen at scale.

Our leading cloud-based Software as a Service (SaaS) delivery models, further position us well to grow and provide tangible benefits to our customers and end consumers, including real-time data analytics, industry-leading cybersecurity features, and capabilities that allow utilities to run their grid infrastructure in the most efficient way and, thus, decarbonize the grid. Innovation being ingrained in our DNA, we have made significant investments to transform our portfolio to a fully integrated “Edge to Cloud” ecosystem that provides flexibility and choice to our customers from intelligent devices they want to manage at the edge, through various connectivity options based on the market needs, integrated into digital solutions enabled by the best-in-class Google Cloud platform.

As a result, we have expanded into higher growth adjacencies, which strengthen our competitiveness and allow us to grow our higher value software and services business. Integrating EV solutions into the ecosystem and applying powerful AI (artificial intelligence) and ML (machine learning) analytics to the vast amounts of data our large installed base of intelligent connected devices generates, empowers not only utilities around the globe to drive energy efficiency, but also end consumers as part of our Smart Infrastructure offering. Now, we are bringing all of these solutions together, offering an end-to-end solutions portfolio to support customers with leading innovation and as a trusted partner, ready to solve any challenge together for a greener tomorrow.

A pioneer in energy efficiency solutions, with a successful track record that spans more than 128 years, Landis+Gyr continues to reinvent itself and scores at the top of the leaderboard. The Company is highly recognized in all countries it serves and has been offering leading technologies across the globe for energy, gas, and water utilities for more than a century. Leveraging the newest technologies, we remain a true innovator. Consequently, Landis+Gyr will continue to build a profitable, successful business, partnering with our customers and providing attractive returns for our shareholders – by managing energy better – together.

Investments in Strategic Partners and Acquisition

Recently, we made two minority investments in strategic partners in Brusa Elektronik and SPAN.io. With these investments, Landis+Gyr expands its end-to-end solution offering to enable grid resilience and further support electrification and decarbonization efforts. Brusa Elektronik is a leading provider of power electronics and the combined offering of the two companies will include Inductive and DC Charging solutions. SPAN.io is a leading provider of smart panel technology and together the two companies will provide a multi-asset virtual power plant, solving electrification and demand flexibility through a grid edge platform solution. In October 2023, we had acquired Thundergrid with the strategic aim to accelerate the expansion of our Electric Vehicle (EV) solutions business into Australia and New Zealand.

Financial Year 2023 Results

As a leading provider of energy efficiency solutions, we are very pleased with our order intake of almost USD 2.0 billion in FY 2023 and our record backlog of close to USD 3.8 billion, which highlights the trust our customers have in our longstanding partnerships and technological leadership.

The results of the 2023 financial year reflect the steady recovery of the supply chain situation. Our net revenue rose by 15.6% in constant currency to a new record of USD 1,963.0 million. The strong net revenue growth was driven by component availability improvement and catch-up on pent-up demand of approximately USD 120 million. Growth was led by our Americas region, which increased net revenue by 27.4% to USD 1,131.3 million, breaking the USD 1 billion mark for the first time.

Profitability measured as Adjusted EBITDA increased strongly by 60.0% in FY 2023 to USD 223.9 million and the Adjusted EBITDA margin surged 310 basis points to 11.4%. The strong increase in Adjusted EBITDA was mainly attributable to significantly higher volume resulting in operating leverage combined with operational efficiencies and steady recovery of supply chain cost and partially offset by higher adjusted operating expenses. Also, Free Cash Flow (excl. M&A) recovered strongly to USD 91.1 million, an improvement of USD 113.1 million, when compared to negative the Free Cashflow of USD (22.0) million in FY 2022, which was impacted by strategic investments in inventory. Our balance sheet remains strong with low net debt of USD 131.3 million and a ratio of net debt to Adjusted EBITDA of 0.59 times.

Net income attributable to Landis+Gyr Group shareholders for FY 2023 was USD 110.0 million and earnings per share (diluted EPS) amounted to USD 3.78. When excluding the one-off gain in FY 2022 from the divestment of the minority stake in Intellihub, like-for-like EPS for FY 2023 increased by 112.4%.

In line with our progressive dividend policy, the Board of Directors proposes a distribution of CHF 2.25 per share to the Annual General Meeting in June 2024. The proposal represents an increase of 5 cents compared to last year’s distribution and will be paid out entirely from statutory capital reserves.

Outlook for Financial Year 2024

After the strong topline growth in FY 2023, we expect in FY 2024 a normalization with low single-digit net revenue growth. With an anticipated further recovery of supply chain costs and due to the operational efficiency measures taken, we expect the Adjusted EBITDA margin to be between 11% and 13% of net revenue. We will continue to actively manage operating working capital with a strong focus on cash conversion.

Our mid-term targets through FY 2025, with net revenue growth of mid to high single digit CAGR relative to FY 2021, and Adjusted EBITDA margin between 12% and 14% of net revenues, and a strong focus on cash conversion, remain unchanged. When it comes to distributions to shareholders, we will continue our progressive dividend policy approach.

Decarbonizing the Grid

With leading energy efficiency solutions, Landis+Gyr is enabling the energy transition and actively contributes to global sustainable development, not just through technologies empowering utilities and consumers, but also by actively driving green initiatives in our own operations. Ingrained in the Company’s DNA, sustainability is a key driver and motivator for our employees, manifested in 20% of short-term incentives for all bonus eligible employees being tied to ESG targets.

In addition, we are proud that the Science Based Targets initiative (SBTi) has assessed our near- and long-term emission reduction targets against their rigorous criteria and has approved these targets in FY 2023. As a Company committed to decarbonizing the grid, our targets are in line with the most ambitious pathway (1.5°C), as defined by the Paris Climate Accord. We have committed to reach net-zero greenhouse gas emissions across the value chain by 2050 and to reduce Scope 1 and 2 greenhouse gas (GHG) emissions by 42% until 2030 (versus 2021 base year) as well as to reduce Scope 3 emissions by 42% until 2030. As a leader in the decarbonization efforts, we are part of the first group of companies to receive approval for net-zero targets. In addition, in FY 2023, we were able to help avoid more than 8.9 million tons of CO2 through our large installed smart metering base and strive to further increase our positive impact on the environment through consistently high investments in innovative technologies and solutions.

Further, in line with the recommendations of the Taskforce on Climate related Financial Disclosures (TCFD) frame-work, we have considered two Intergovernmental Panel on Climate Change (IPCC) scenarios to assess the climate resilience of its strategy and, as a result, we are pleased to report that we are ahead of the Swiss legal requirements by a full year.

Passion and Commitment

Our teams around the world continue to drive leading-edge innovation, the strategic transformation of our portfolio, and the expansion of our offering in integrated energy management solutions. Therefore, we would like to thank our 6,900 employees around the globe for their continued dedication, passion, and entrepreneurial spirit to solidify our leading position and ensure continuous leading-edge innovation, customer satisfaction, and speed to market.

Our customers’ ambitious goals to serve communities around the globe with safe and reliable energy and to decarbonize the grid inspire us every day and we would like to thank our customers and partners for their continued trust and partnership.

Motivated by our record backlog and a continued strong pipeline, we are excited about our transformational journey and continue to focus on offering leading, integrated end-to-end solutions to our customers, expanding our strong partnerships, driving profitable growth and, thus, delivering sustainable value to our shareholders.

On behalf of all of us at ­Landis+Gyr, we thank you, our shareholders, for your continued support of and ownership in ­Landis+Gyr, and for joining us in driving our mission to manage energy better – together.

Yours sincerely,