Landis+Gyr : Half Year Report 2023

Half Year Report 2023

Contents

Letter to Shareholders	3
H1 2023 at a Glance	5
Key Figures	6
Interim Consolidated Financial Statements (unaudited)	7
Supplemental Reconciliations and Definitions	28
Information for Shareholders	32

Letter to Shareholders

Dear Landis+Gyr Shareholders,

As an essential business offering mission-critical infrastructure equipment and services, we continue to be committed to our customers' success and we are pleased to say that the increasing momentum of the energy transition allows us to look into the future optimistically. Paired with steadily decreasing component cost, our strategic transformation positions us well to deliver sustained profitable growth going forward and we are convinced that we have the right strategic focus to continue to deliver shareholder value in the years to come. Positioned in the sweet spot of the energy transition, we were able to deliver a solid performance for the first half of financial year 2023 and continue to develop and deliver leading innovation as the demand for energy efficiency solutions continues to increase.

Empowering Customers & End Consumers

Energy efficiency and grid resiliency have become mainstream topics amongst rising energy prices and concerns about grid stability, especially as we are heading into winter. With an increasing number of renewable energy resources and global efforts to accelerate electrification initiatives to meet climate goals, we see an increased need for intelligence at the grid edge to cope with the changing requirements on the grid infrastructure. It is our mission to manage energy better, and as such, we are proud to enable utilities and end consumers with leading edge solutions to manage energy consumption more efficiently and enable the orchestration of energy demand and supply to achieve a sustainable balance. As a result, we enable grid resilience, empower customers and end consumers to drive energy efficiency, and offer critical solutions to decarbonize the grid.

The benefits of our solutions are recognized by our customers in the strongest possible way through continued high orders, which drives us to continue to innovate leading- edge energy efficiency and flexibility solutions, enabling our customers and end consumers to manage energy better. The current energy crisis further amplifies the need for smarter grids as governments, communities, and utilities across the world, and particularly in Europe, are facing unprecedented challenges to ensure safe, reliable, and sufficient supply and delivery of energy. Now more than ever, the smart management of power grids is crucial to ensure reliable power distribution, and we are proud to provide products, software, and services to alleviate these challenges. Our customers continue installations of critical infrastructure, reflected in our continued high backlog, and demonstrating the recession-resilient nature of Landis+Gyr.

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Our three strategic pillars Smart Infrastructure, Grid Edge Intelligence and Smart Metering are the foundation to drive profitable growth and our comprehensive portfolio of products and services uniquely positions us to empower utilities, end consumers, and whole communities by helping them to manage resources in a more informed and sustainable way and, as a result, reduce their CO2 footprint and conserve water. As we continue to transform our Company, we have further expanded our reach in Smart Infrastructure and Grid Edge Intelligence solutions. Just recently, the addition of Thundergrid, a turnkey service provider in the electric vehicle infrastructure market, further strengthens our position in this important segment. Further, the successful integration of previous acquisitions solidified our position in the EV infrastructure solutions and cybersecurity markets and allowed us to expand our core Smart Metering with a cost-competitive metering platform. In addition, our co-innovation partnership with Google Cloud enables us to expand our portfolio of data analytics software and services to drive energy efficiency and water conservation solutions. As a leader in resource efficiency management, we continue to push new opportunities including demand flexibility management and integrated EV solutions. Combined with data analytics in the Cloud, powered by Google's artificial intelligence (AI) and machine learning (ML) expertise, we enable intelligent grid systems, which play a critical role in the planning, management, and maintenance of power grids around the world. Uniquely positioned through our global leading portfolio and footprint, we offer innovative end-to-end solutions, which enable grid resiliency and energy efficiency benefits for our customers and end consumers alike.

First Half Financial Year 2023 Results

The results of the first half of financial year 2023 reflect both the innovation leadership as well as the easing of the supply chain constraints. Order intake of USD 958.1 million for the first half of FY 2023 increased by 22.5% in constant currency compared with the previous year, due to a sustained strong order intake driven by major contract wins in the Americas and EMEA regions, resulting in a continued high committed backlog of over USD 3.7 billion, and a book-to-bill ratio of 1.0. Net revenue increased by 32.1% in constant currency, to USD 970.5 million during the first half of financial year 2023 compared to the corresponding prior period. Adjusted EBITDA increased by 122.0% year-over-year to USD 108.1 million. The strong increase in Adjusted EBITDA was almost entirely attributable to significantly higher volume combined with slightly lower supply chain costs and partially offset by higher adjusted operating expenses, translating into an Adjusted EBITDA margin of 11.1%, an increase of 440 basis points from 6.7% in the first half of FY 2022.

Free Cash Flow (excl. M&A) was USD 5.1 million, an increase of USD 44.0 million, when compared to USD (38.9) million in the first half of FY 2022. We managed to maintain a solid balance sheet with low net debt to trailing twelve months Adjusted EBITDA ratio of 0.67x.

Net income attributable to shareholders was USD 41.2 million, resulting in a diluted earnings per share amount of USD 1.43.

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Outlook for FY 2023

We reconfirm our outlook for FY 2023, provided at the Capital Markets Day in Janu- ary 2023 and confirmed in May 2023, assuming broadly unchanged global economic conditions. As already communicated, we expect a continuation of the strong net revenue trend in FY 2023, resulting in a low double-digit growth compared to FY 2022. With an anticipated further improvement of the supply chain cost situation, we now expect the Adjusted EBITDA margin to come in around the upper end of the initially guided range of between 9% and 11% of net revenue. Free Cash Flow (excl. M&A) is forecasted to be between USD 60 million to USD 90 million as the elevated inventory situation is expected to partially normalize in the second half of FY 2023 but will remain above historical averages to fulfill customer orders of large contracts won. The progressive dividend policy is confirmed.

Enabling Sustainable Resource Management

We continue to elevate our efforts to decarbonize grids around the world and optimize our own operations to have a meaningful sustainable impact.

In FY 2022, Landis+Gyr's Smart Metering base ensured the avoidance of over 9.5 million tons of CO2, and we strive to further increase our positive impact on the environment through consistently high investments in innovative technologies and solutions. In addition, to drive measurable progress even further in our Environmental, Social and Governance areas, we continue to link 20% of our short-term incentive (STI) for all bonus-eligible employees to ESG targets, driving sustainable progress in support of the UN Sustainable Development Goals.

Furthermore, the Science Based Target initiative (SBTi) has assessed our near and long-term emission reduction targets against their rigorous criteria and has recently granted approval. As a Company committed to decarbonizing the grid, our targets are in line with the most ambitious pathway (1.5°C), the recommendations of the Paris Climate Accord. We have committed to reach net-zero greenhouse gas emissions across the value chain by 2050. Furthermore, we have committed to reduce scope 1 and 2 greenhouse gas (GHG) emissions by 42% until 2030 (versus 2021 base year) and to reduce scope 3 emissions also by 42% until 2030.

Landis+Gyr is now part of a group of over 3,000 globally leading companies with approved targets, who are taking action to combat climate change and move towards a greener, more sustainable future. As a leader in the decarbonization efforts, we are part of the first group of companies to receive approval for net-zero targets.

Passion & Commitment

Our teams around the world are motivated and driven by the ambition to provide leading energy efficiency solutions. We proudly serve our customers in partnership to empower people around the world to manage energy better.

Especially in light of the challenges presented by geopolitical tensions, our employees have demonstrated a high level of dedication and passion towards our customers' success and each other that deserves recognition. Therefore, we would like to thank our over 7,300 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.

We are excited about our transformational journey as we continue to execute on our strategy with a strong focus on offering leading energy efficiency technology to our customers, expanding our strong partnerships, driving profitable growth and, thus, contributing to sustainable global development.

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 that you have joined us in driving our mission to manage energy better - together.

Yours sincerely,

Andreas Umbach	Werner Lieberherr
Chair	Chief Executive Officer

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H1 2023 at a Glance

Net Revenue Split

9%

33%

58%

Americas		Americas
EMEA		EMEA	Regional HQ
APAC		APAC	R&D Centers / Manufacturing

Gold rating (top 5%)	ESG Risk Rating of	Company grade: B+	AA-rated since 2018	Prime rating (top decile)
	7.4 (Negligible Risk)

Key Figures

Committed Backlog	Net Revenue
3,730.5	970.5

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KEY FIGURES

		Six months ended September 30,		CHANGE
(in million USD,						Constant
unless otherwise indicated)	2023	2022		USD	Currency

in million USD				in million USD
																		970.5
															952.7
						3,748.6		3,730.5
				3,479.7
		3,388.6
3,235.6
			763.1
					728.7
				700.9
9-21	3-22	9-22		3-23	9-23	H1-21H2-21H1-22H2-22H1-23

Adjusted EBITDA	Free Cashflow
108.1	(excluding M&A)1
in million USD	5.1
	in million USD

	91.2	108.1	41.6	47.4
70.8	76.2
	48.7			17.0
				5.1
H1-21H2-21H1-22H2-22H1-23	H1-21H2-21H1-22H2-22H1-23

Order Intake	958.1
Committed Backlog	3,730.5
Net revenue		970.5
Reported EBITDA		99.8
Adjusted EBITDA	108.1
Adjusted EBITDA
as % of net revenue		11.1%
Operating income	64.2
Net income attributable to
Landis+Gyr Group AG
Shareholders	41.2
Earnings per share -
basic (USD)	1.43
Earnings per share -
diluted (USD)		1.43
Free Cash Flow excluding M&A1	5.1
Cash provided by operating
and investing activities	5.1
Net Debt	134.2
NET REVENUE TO EXTERNAL CUSTOMERS
Americas		564.8
EMEA		321.6
Asia Pacific		84.1
Total	970.5
ADJUSTED EBITDA
Americas	89.9
EMEA		6.7
Asia Pacific		8.6
Corporate unallocated		2.9
Total	108.1

773.2	23.9%	22.5%
3,479.7	7.2%	5.4%
728.7	33.2%	32.1%

51.095.7%

48.7122.0%

6.7%-

10.5511.4%

186.5(77.9%)

6.58(78.3%)

6.57(78.2%)

(38.9)-

143.1-

79.369.2%

391.7		44.2%		44.3%
248.0		29.7%		24.9%
89.0		(5.5%)		(1.7%)
728.7	33.2%	32.1%

47.788.5%

(9.4)-

6.826.5%

3.6(19.4%)

48.7 122.0%

-38.9

1 Net cash provided by operating activities, minus net cash used in investing activities, excluding merger & acquisition activities.

Due to rounding, numbers presented may not add to the totals provided.

Interim Consolidated	7
Financial Statements (unaudited)

Interim Consolidated Statements of Operations	8
Interim Consolidated Statements of Comprehensive Income	8
Interim Consolidated Balance Sheets	9
Interim Consolidated Statements of Changes in
Shareholders Equity	10
Interim Consolidated Statements of Cash Flows	11
Notes to Interim Consolidated Financial Statements	12

Interim Consolidated Statements of Operations (unaudited)

SIX MONTHS ENDED SEPTEMBER 30,

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Interim Consolidated

Statements of Comprehensive

Income (unaudited)

SIX MONTHS ENDED SEPTEMBER 30,

USD in thousands, except per share data

Net revenue

Cost of revenue

Gross profit

Operating expenses

Research and development

Sales and marketing

General and administrative

Amortization of intangible assets

Operating income

Other income (expense), net

Income before income tax expense

Income tax expense

Net income (loss) before noncontrolling interests and equity method investments

Net income from equity investments

Net income before noncontrolling interests

Net loss attributable to noncontrolling interests

Net income attributable to

Landis+Gyr Group AG Shareholders

Earnings per share:

Basic

Diluted

Weighted average number of shares used in computing earnings per share:

Basic

Diluted

2023

970,466

676,617

293,849

94,758

38,985

78,062

17,866

64,178

(12,487)

51,691

(11,171)

40,520

-

40,520

(718)

41,238

1.43

1.43

28,868,796

28,936,263

2022

728,711

510,851

217,860

84,409

35,963

67,099

19,848

10,541

18,348

28,889

(72,375)

(43,486)

229,717

186,231

(248)

186,479

6.58

6.57

28,837,007

28,846,280

USD in thousands	2023	2022
Net income before noncontrolling interests	40,520	186,231
Other comprehensive (loss) income:
Foreign currency translation adjustments,
net of income tax expense	(6,372)	(54,345)
Pension plan benefits liability adjustments,
net of income tax expense		(6,606)		4,154
Comprehensive income		27,542		136,040
Net loss attributable to noncontrolling interests, net of tax	718	248
Foreign currency translation adjustments
attributable to the noncontrolling interests	84	258
Comprehensive income attributable to
Landis+Gyr Group AG Shareholders		28,344		136,546

The accompanying notes are an integral part of these Interim Consolidated Financial Statements.

The accompanying notes are an integral part of these Interim Consolidated Financial Statements.

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Interim Consolidated

Balance Sheets (unaudited)

USD in thousands, except share data		September 30, 2023
ASSETS
Current assets
Cash and cash equivalents	106,227
Accounts receivable, net of allowance for doubtful accounts
of USD 4.0 million and USD 7.4 million		313,106
Inventories, net	284,848
Prepaid expenses and other current assets	122,490
Total current assets		826,671
Property, plant and equipment, net		122,126
Intangible assets, net		195,967
Goodwill		1,047,501
Deferred tax assets	45,139
Other long-term assets	160,026
TOTAL ASSETS	2,397,430
LIABILITIES AND EQUITY
Current liabilities
Trade accounts payable	204,255

March 31, 2023

117,370

351,379

242,340

109,018

820,107

117,215

216,312

1,048,508

43,789

178,291

2,424,222

214,822

USD in thousands, except share data		September 30, 2023
Redeemable noncontrolling interests	5,092
Commitments and contingencies - Note 15
Shareholders' equity
Landis+Gyr Group AG shareholders' equity
Registered ordinary shares (28,908,944 and 28,908,944 issued
shares at September 30, 2023, and March 31, 2023, respectively)		302,756
Additional paid-in capital		1,028,979
Retained earnings		217,119
Accumulated other comprehensive loss	(65,312)
Treasury shares, at cost
(25,496 and 54,764 shares at September 30, 2023,
and March 31, 2023, respectively)		(2,151)
Total Landis+Gyr Group AG shareholders' equity		1,481,391
Noncontrolling interests	1,609
Total shareholders' equity	1,483,000
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		2,397,430

March 31, 2023

6,358

302,756

1,100,179

176,105

(52,418)

(5,069)

1,521,553

1,283

1,522,836

2,424,222

Accrued liabilities	60,159
Warranty provision - current	28,219
Payroll and benefits payable	50,034
Loans payable	235,493
Operating lease liabilities - current		14,518
Other current liabilities		84,145
Total current liabilities	676,823
Warranty provision - noncurrent	14,038
Pension and other employee liabilities	22,894
Deferred tax liabilities	36,348
Tax provision		25,306
Operating lease liabilities - noncurrent		77,146
Other long-term liabilities	56,783
Total liabilities	909,338

47,638

30,862

66,076

180,661

13,504

102,037

655,600

15,404

24,729

37,465

23,747

82,088

55,995

895,028

The accompanying notes are an integral part of these Interim Consolidated Financial Statements.

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Interim Consolidated Statements of

Changes in Shareholders Equity (unaudited)

		Registered ordinary shares				Retained						Total				Total
					Additional		earnings		Accumulated				Landis+Gyr		Noncontrolling
						(Accumulated		other compre­		Treasury		Group AG			shareholders'
USD in thousands except for shares		Shares	Amount		paid-in capital		deficit)		hensive loss		shares		equity		interests		equity
Balance at March 31, 2022	28,908,944	302,756	1,156,312	(31,829)	(36,596)	(6,413)	1,384,230	1,357	1,385,587
Net income (loss)	-	-		-	186,479		-		-	186,479	(248)	186,231
Foreign currency translation adjustments, net of income tax expense	-	-		-		-	(54,087)		-	(54,087)	(258)	(54,345)
Pension plan benefits liability adjustments, net of income tax expense	-	-		-		-	4,154		-	4,154		-	4,154
Net loss allocated to redeemable noncontrolling interests		-	-		-		-		-		-		-		239		239
Current period mark to redemption value of redeemable noncontrolling interest		-	-		3,178		-		-		-		3,178		-		3,178
Dividends paid (CHF 2.15 per share)	-	-	(64,700)				-		-	(64,700)		-	(64,700)
Share based compensation			1,856						-	1,856		-	1,856
Delivery of shares	-	-	(241)		-		-	241		-		-		-
Balance at September 30, 2022		28,908,944	302,756		1,096,405		154,650		(86,529)		(6,172)		1,461,110		1,090		1,462,200
Balance at March 31, 2023		28,908,944	302,756		1,100,179		176,105		(52,418)		(5,069)		1,521,553		1,283		1,522,836
Net income (loss)		-	-		-		41,238		-		-		41,238		(718)		40,520
Foreign currency translation adjustments, net of income tax expense	-	-		-		-	(6,288)		-	(6,288)	(84)	(6,372)
Pension plan benefits liability adjustments, net of income tax expense	-	-		-		-	(6,606)		-	(6,606)		-	(6,606)
Net loss allocated to redeemable noncontrolling interests	-	-		-		-		-		-		-	1,128	1,128
Adoption of ASU 2016-13	-	-		-	(224)		-		-	(224)		-	(224)
Dividends paid (CHF 2.20 per share)		-	-		(70,780)				-		-		(70,780)				(70,780)
Share based compensation		-	-		2,498		-		-		-		2,498		-		2,498
Delivery of shares		-	-		(2,918)		-		-		2,918		-		-		-
Balance at September 30, 2023	28,908,944	302,756	1,028,979	217,119	(65,312)	(2,151)	1,481,391	1,609	1,483,000

The accompanying notes are an integral part of these Interim Consolidated Financial Statements.