Landis+gyr Group (SIX Swiss: LAND) Q4 2026 Earnings Call

0:00 Welcome to the Landis and Gear Full Year twenty twenty five Results Presentation. Please note that this call will be recorded. During today's call, webcast participants will be in listen only mode while we conduct the question and answer session. If you wish to ask a question, we ask that you please use the raised hand function at the bottom of your Zoom screen. Further instructions will follow at the time of the Q and A. I'd now like to turn the call over to Christian Welty, Head of Investor Relations. Please go ahead. Thank you, moderator, and good afternoon, good evening, everyone. I'm Christian Welty, Head of Investor Relations and I'm joined today by Peter Mainz, our CEO and by Davinder Ottwal, our CFO.

0:47 As you know, earlier today Landis and Gear issued an ad hoc release and related presentation on the full year 2025 results, which are available on our website. This session will follow the structure of the presentation, so we encourage you to follow along. We'll conclude with Q and A where our moderator will provide further instructions and where you will be able to ask questions. Please take a moment to review the usual disclaimer on slide two of the presentation. After this short introduction, I'd like to hand the floor over to our CEO, Peter Mainz. Thank you, Christian. Good afternoon and good evening everyone.

1:33 I'm here with Davinder, our Chief Financial Officer and we are pleased to present our full year 2025 financial results. With that said, let's now start with a review of the achievements in 2025. Let's turn to Slide three. Financial year 2025 was a pivotal and demanding year for the teams at Landis and Gyr, marked by the successful execution of our strategic transformation. At the same time, we remained firmly focused on operational delivery and we met our targets. This highlights the strength and depth of our talent base, which continues to drive disciplined execution across multiple fronts.

2:22 We began the year focused on the process of divesting our EMEA business. In September 2025, we signed an agreement with a private equity buyer and in April 2026, we successfully closed the transaction. With the transaction, we have created a business with elevated EBITDA and cash profile with low capital intensity and an attractive financial profile going forward. Our 2025 revenue growth reflects our continued focus on execution and customer engagement. Strong customer demand is evidenced by solid order intake and a sustained high backlog. Profitability improved further with an EBITDA margin of 14.4%.

3:13 This performance enabled us to return approximately 70,000,000 to shareholders. For 2026, we intend to continue rewarding shareholders and propose an increased distribution of Swiss franc 1.20 per share. In addition, we are progressing with our share buyback program to return the net proceeds from the EMEA divestment, with approximately 140,000,000 remaining. Let's move to slide four on order intake and backlog. The sustained strength of our pipeline, the strongest pipeline I've seen, is clearly reflected in our order intake. We are pleased to report order intake of $1,100,000,000 in financial year 2025, highlighting the continued robustness of our pipeline.

4:06 In contrast to last year, order intake was broad based rather than driven by a few large contracts and included a significant contribution from new logos. This resulted in a book to bill ratio of around one, representing a solid performance. In the fourth quarter, we maintained a book to bill ratio of approximately one, while delivering revenue growth of 25%. Our entry into the gas metering market with ultrasonic technology paired with expanding our gas endpoint offering is clearly gaining momentum as a strong pipeline is translating into order intake. In Asia Pacific, our GridEdge offering is seeing increasing adoption, though from a smaller base but with lots of runway left.

4:59 Overall, we're seeing solid momentum across our global platforms. We are particularly pleased with our order backlog, which remains stable at close to $4,000,000,000 Approximately 43% of the backlog consists of software and software enabled services, typically recognized over a period of eight to ten years, providing a strong foundation and enhanced visibility for long term growth. And now, I will give the floor to Davinder, our CFO, and he will run us through the financials in more detail. Thank you, Peter. Good morning and good afternoon, everyone, and thank you for joining us today. Let me begin with our consolidated financial results on Slide five.

5:46 For the full year, net revenue was $1,000,000,166,200,000 representing 4.2% year over year growth, primarily driven by strong performance in the Americas region and continued adoption of our Revelo platform. Strong operating execution drove higher revenue and together with a deliberate mix shift towards software and software enabled services supported expansion in both gross margin and adjusted EBITDA margin year over year. Adjusted EBITDA margin for the year was 14.4%, coming in at the high end of our guidance range. Turning to Slide six, I'll walk through our fourth quarter results. New orders in the quarter kept pace with revenue, resulting in a book to bill ratio of one, reflecting sustained demand for our products and services as well as continued discipline across the sales organization.

6:35 Fourth quarter net revenue was $352,400,000 representing approximately 25% year over year growth, driven primarily by increased adoption of the Revelo platform and a continued mix shift towards software and software enabled services. Gross margin expanded by four sixty basis points year over year, reflecting the realization of operational efficiencies and the favorable impact from our evolving revenue mix. Moving to slide seven, let's look at full year performance in The Americas. Revenue in The Americas increased nearly 8% year over year, supported by strong demand for our Revelo platform, which continues to gain traction with customers across the region. We are also driving incremental growth through a strategic shift towards higher ASP software offerings.

7:20 Both gross margin and adjusted EBITDA margin expanded year over year, reflecting disciplined execution and a sharper focus on operating expense management. On Slide eight, I'll cover fourth quarter results for The Americas. Strength in new orders resulted in a book to bill ratio of one for the region. Fourth quarter net revenue was $322,800,000 representing approximately 32% year over year growth, driven by continued adoption of the Revelo platform and increasing contribution from software and software enabled services. Gross margin expanded by 660 basis points versus the prior year, reflecting operational discipline and the benefits of efficiency initiatives. Next, turn to slide nine. Let's review our APAC results. APAC revenue declined 19% year over year, primarily due to the completion of an AMI project in Hong Kong that contributed revenue in the prior year period.

8:14 Adjusted EBITDA margin in APAC was impacted by lower operating leverage and mix when viewed on a normalized basis, which excludes a onetime real estate gain recorded in the prior year. Finally, on slide 10, I'll review our liquidity position. As of the end of March twenty twenty six, net debt stood at $198,900,000. Key movements from the prior year end included $98,300,000 of operating cash flow, $69,800,000 returned to shareholders, including $41,200,000 in dividends and $28,600,000 in share repurchases under our ongoing buyback program, and $38,700,000 in capital expenditures focused on growth and efficiency initiatives. We closed the year with a net debt to adjusted EBITDA ratio of point nine, reflecting continued balance sheet strength while funding our capital allocation priorities.

9:08 That concludes my prepared remarks. Thank you for joining us today and thank you for your continued interest in Landis and Gear. Now I'll turn the call back to Peter. Peter? Thank you, Varvinder. Let's discuss our guidance for financial year 2026 and our mid term guidance next. Let's move to Slide 11. Let me start with net revenue for financial year twenty twenty six. Revenue next year will be impacted by the transition between two large scale contracts. We have a category defining Revelo contract, which completes deployment in the course of first half of financial year twenty twenty six. On the other hand, we have a $700,000,000 contract awarded to us in financial year twenty twenty four, which begins deployment and reaches scale in the fourth quarter of financial year twenty twenty six.

10:02 The transition between these two large scale deployments is expected to result in an estimated $60,000,000 revenue gap between project roll off and new deployment ramp up. While our backlog remains exceptionally strong, these transitions are not seamless and will become visible around the middle of financial year twenty six. We therefore expect net revenue in the range of $1,050,000,000 to $1,125,000,000 We expect adjusted EBITDA margin in turn to further improve to a range of 14.5% to 15.5%, continuing our trajectory of margin expansion despite slightly lower revenue.

10:50 For the first full year without EMEA, we further expect our cash flow to improve significantly. Let's have a look at our mid term expectations on slide 12. Our previous guidance cycle concluded with the fiscal year twenty twenty five results. With our new structure now in place, we believe it is appropriate to provide updated mid term guidance. For the next three years, through fiscal year twenty twenty eight, we expect organic revenue compound annual growth rates in the mid single digits. This implies a return to meaningful growth in fiscal twenty twenty seven and fiscal twenty twenty eight, supported by our strong backlog.

11:37 The previously referenced large contract is expected to be fully ramped by fourth quarter fiscal twenty twenty six and continues through fiscal twenty twenty eight, contributing approximately 5% to growth. In addition, a major grid edge deployment in Australia is expected to add an additional 2% growth contribution. As we continue to execute, we expect to benefit from operating leverage and higher margin software and software enabled services, resulting in EBITDA expansion and growing at approximately twice the rate of revenue. Let me close on Slide 13 with a preview on our next highlight, our Capital Markets Day in New York on June 1.

12:28 The successful divestment of our EMEA business has created a more focused Landis and Gyr. At our Capital Markets Day in New York, we will share an update on strategy, highlight our core markets and present our technology roadmap for GridEdge Intelligence. On the financials, we will detail our capital allocation priorities and financial framework and introduce a new business segmentation as we move from a regional to a product focused structure. I'd love to see you all there. And now, we'll open the call for questions. Moderator, please. A session.

13:37 Our first question will come from Akash Gupta with JPMorgan. Please unmute your line and go ahead. Yes. Hi, good evening and thanks for your time. And thanks for also addressing the guidance moving parts. The question I have is that, again, I mean, you giving us some indication on 2728. But when we look at your backlog at the end of March and when we look at like how much typical revenues you get in those years, like what's the degree of confidence on this high growth that you are expecting in twenty twenty seven, twenty eight from existing backlog? Or is it contingent to commercial activity in the next twelve months?

14:24 And maybe you can also talk about the pipeline for projects and orders. If I hear you right, you said the pipeline is strongest that you have ever seen. Maybe if you can elaborate more on that. Yeah. Thank you, Akash. So a couple of things. Let's let's be clear. The growth we see on '27 and '28 is in our backlog today, and that's really what we tried to articulate. In '26, you see the transition from a, I would say, a category defining contract with, I think, the customer up in the Northeast. We can talk about the name National Grid. We put GridEdge AMI two dot o on the map with that contract and successful winning the contract. And now by the contract ramping down, it's another success story that the deployment was a success as well. The contract that is coming right after is a contract that we have in the backlog that is ramping up.

15:21 We always say in some of those large contracts, it takes somewhere around fifteen to eighteen months between the signing and really starting the contract. And here, we're talking about ramping it up. Exit quarter, that contract, we expect to operate and be delivering at the pay at at full pace. That is a starting point into '27, '28, and actually beyond. And then the second element is there in Australia. That's a contract that we also we have announced. That's a grid edge contract putting us on the map in Australia with grid edge, a new offering. We have that on hand. We don't need to win that. We need to execute that. That gives us confidence. And also the strong win rate that we had and the wins we had in the final quarter of 25%. Let's not forget, we were growing our revenue by 25% and still in that quarter delivered a book to bill to 1%. That is helping us to deliver the 2728% growth, also growth that is in the backlog as we speak today. And then across the year, we see the overall trend, software software enabled services, grid intelligence, as we will start to call it, is really driven by the installed base of Revelo, and that is really increasing every day. So the short answer is the growth is really in the backlog as we have it today, close to $4,000,000,000 on hands.

16:42 And it's just the revenue transition pattern that we have tried to lay out and give confidence that this backlog actually contains the growth for 'twenty seven and 'twenty eight today. The pipeline overall Thank you. Sorry. No. No. I was asking on pipeline and book to bill expectations. Thank you. So pipeline, the next thing pipeline, probably the strongest pipeline. If we're looking at the pipeline, the strongest pipeline certainly I have seen, in particular, obviously, in Americas where we are focusing today. The more interesting and the more important part for this group is how is pipeline translating into order intake. Q four was a good indication for us that we are very successful in bringing the pipeline into order intake.

17:31 And that is also the task for '26 and beyond. And anytime outside a large contract, the task is the book to bill to be at around one. And then with the large contracts that we're pursuing, the timing is always not certain quarter by quarter that will move us above one. But strongest pipeline that I've seen, and we have seen a tremendous success with our offering to move the pipeline into order intake and then put it in the backlog supporting the growth. Our next question will come from Patrick Rafaisz with UBS. Yes, great. Thanks, hi, everybody.

18:18 Thanks for all these explanations, especially around the guidance and all the clarity. But I have one follow-up on the midterm and two other questions. Starting with the midterm. A bit more clarity would be helpful here. So is the these components that you outlined with the 5% plus 3% plus 2% per annum, that assumes that the base business is sort of flat over that period. Is that the correct assumption? What I try to understand is the upward or downward sensitivity of this CAGR. So this on this page, we are articulating the growth in the year of 2027 and '28, which mathematically needs to be close to 10%. And what we try to articulate here that these growth rates are basically in our backlog as of today. And I would say that's that's a growth. That business is part of the base. That's what we do. So I'm not Okay. Thank you. We'll go to our next question. No. Can I sorry? Can I yeah?

19:39 Ask Yeah. The other two questions would be, first, on the the shift towards higher ASP software that you alluded to for Americas. Can you add a bit more color what you mean by that? And is it possible to segment maybe your current software exposure into these maybe lower and higher ASP parts? And what those are exactly will be interesting. So I mentioned higher margin. And here we're getting the territory that we want to cover in the Capital Markets Day. But it's fair to say what we call grid intelligence or software and software enabled services already today has a gross margin level that is above the average margin level of the business. And also, if we break it down and look at growth rates for that segment, whereas the device or platform part of our business has growth rates above and beyond what we see on the platform side. So that mix shift has two element. Growth rate is a bit faster than we see above the average than we see for the business, the mid single digits. It's growing much faster.

20:51 And then the profitability is also nicer and higher. Obviously, that stands for nicer. And with that shift also helps us to move the profitability over that period up. The more concrete breakout, we certainly want to take advantage of the Capital Markets Day to provide the detail that you're looking for here. But that's how we view that part of the business, and that's how we see it in the midterm. Great. Super. Yes. So looking forward to those explanations. And then the last question maybe for Devinder. You talked about the cash flow, and you mentioned a significant improvement now with EMEA out. Can you maybe help us understand how you expect that to translate into free cash flow? Is it possible to provide a bit more of a guidance around what you expect there?

21:47 Hey, Patrick. Good to hear from you. Absolutely. So with the new business profile, we are targeting around 80% conversion of EBITDA to free cash flow, which is significantly better than we ever saw previously. Sean Milligan with Needham and Co. Please unmute your line and go ahead. Thank you for taking the questions. Just curious, two questions. One, in North America, you mentioned a really strong pipeline there. I'm curious if there's anything in the market, whether that's regulatory policy or funding that might kind of cause fluctuations in being able to win awards by timing quarter to quarter or any push outs?

22:47 And then the second question was along, Revelo. Just could you remind us where you are, in terms of, like, Revelo penetration against the existing installed base of legacy products that you had? Okay. The first one and thank you, Luisa. When we talk about Revelo and Grid Intelligence on the installed base, I think in its when we talk about North America, where we further advanced in the penetration compared to Australia, where I would say mid single digits of the full available base, which is 160,000,000,165,000,000 endpoints. So still a substantial amount of runway left for that transition to Revelo or GridEdge technology.

23:37 On the regulatory front, also it's important to understand that it's not the same in in every state, and we don't certainly, affordability is is a theme in the industry, and then sometimes it spills into the the regulatory process with PUCs as well. But overall, we don't see a dramatic change from where we've seen before. And it's also fair to say that a lot of the discussion for the approval of the capital projects that we provide to our utilities, When utilities have good relationships with the PUC, that's really not an issue that lands with the PUC. So we have a good mixture that I would still say it's unchanged from the complexity dealing with POCs that has been part of the industry for an extended period of time. So a long winded way of saying not really any substantial change.

24:45 Okay. Thank you. We'll go back to Louis Billon, see if you can unmute your line. One second. Thank you. Hi, good afternoon. Can you hear me? Yes. Yes. So thank you for taking my questions. My question is concerning the 700,000,000 contract. How confident are you with the calendar? And what are the reasons that could delay this ramp up beyond one quarter to another? So that's my first question. So to be clear, contract is in our backlog, that moved to our backlog in fiscal twenty twenty four. And I would say that that is 100% on the execution side and that is, I would say, in our hands today. And we have the confidence that we'll deliver their Rebello product to the customer up in the the Eastern Part Of Canada.

25:48 Okay. So Thank you, Landis. And maybe another question on Asia Pacific region for full year 2026. What do you expect in term of order intake? We're not really guiding for order intake per se, and I continue to stay the same outside of those large contracts like one we have just mentioned. The target is always be a book to bill of one. And obviously, any contract of the magnitude of $700,000,000 will tilt order intake and the book to bill substantially above one. It's difficult to articulate it quarter by quarter, but that's the ambition that we continue to drive in that business.

26:39 Okay. That's very clear. Thank you. We've just had one another follow-up from Akash Gupta from JPMorgan. You may now unmute your line and ask your question. Thank you. Yes. Hi, thank you. I have a follow-up on this revenue shortfall. The question first one is that you've given us the impact on revenues, which is I think around $60 odd million. But can you quantify what will be the impact on margin? Like if we haven't had this revenue shortfall, what would have been the margin guidance? Because when I look at the drop through of these revenues with 35% gross margin that north of 35 gross margin that you make in North America, then it kind of indicates to me that if you haven't had this, then the margins could have been quite higher. So first one on impact on margin from this revenue shortfall.

27:41 And the second one is that you have this situation where you have a lower load for a few months. How realistically it is possible that you can ask customer for this $700,000,000 contract that how about starting ramp maybe a couple of months early because you have capacity? Like could this be a possibility, or that is that is not really we should be looking for? Thank you. So let me I leave the gross margin to to Darwin. Let me tackle the timing. You know, as I as I said, we've this is a contract that's been in our backlog for since the end of fiscal year 'twenty four. And those are fairly complex contracts as it relates to the deployment with the customer and the rollout and embedding it in the business processes of the utility.

28:33 So we have taken advantage of substantial planning on our side and on our customers' side. And I feel fairly comfortable that the exit quarter is the one quarter where we'll be ramping and deploying it at full scale. But where we stand on the planning today, there are too many dependables that I don't see that this is a plan that can be accelerated substantially just because we have capacity. This is a firm plan that requires so many elements so that what we have depicted here is a good depiction of our revenue profile in 2426. And on the margin profile, obviously, when you miss $60,000,000 of revenue, it has an impact, but Davinder can describe that a bit better. Kash. Happy to take that one. So I think of the gross margin level, you can assume kind of our normal, let's say, 35%.

29:22 So if you take about a third of that at twenty million dollars. But if that flows down, you know, none of the OpEx would have really been affected by that. So what you would have seen at that point is a margin uplift on adjusted EBITDA that kind of moved pretty close to 15.5%, 16%. So that's where that really does hurt us. Thank you. Well, that was our final question. So that does conclude the Q and A session. I'll now hand back to management for closing remarks. Yes. Thank you for joining us today. Appreciate your time and interest in Landis' gear. And I look forward to meeting all of you soon, either virtually or in person, in particular, during the Capital Markets Day.

30:08 Have a great one, and goodbye.