Good afternoon and good morning, everyone, welcome to our Capital Markets Day 2023. My name is Eva Borowski. I'm the Senior Vice President of Investor Relations and Corporate Communications. Thank you all for being here today with us. Here at the Google campus in Zurich and of course, virtually from your devices around the globe. We would like to thank Google, who's spread out here through the room for hosting us today and of course, for your extraordinary partnership. This morning, we issued a press release and presentation, and you can find those documents on our website. Some of the information discussed today contains forward-looking information, and we ask you to interpret the information discussed today in the context of the disclaimer that you can see behind me or find on page two of the presentation. We also have some guest speakers today.
We have pre-recorded their messages in advance of the event, we'll share that later. Thank you again for joining us. We have about three and a half hours of event in front of us. About halfway through, we'll take a break, at the end, there will be plenty of time for your questions. Now it's my pleasure to introduce Werner Lieberherr, our Chief Executive Officer. Before he takes the stage, we'll take a quick look at what Landis+Gyr is all about. Good luck.
Welcome to our CMD day, thank you very much for being here. It means a lot to us. Before we dive a little bit into the presentation, I want to say two things. First of all, thank you to Google. We have Daniel Holz here from Google Cloud. Really, it's a phenomenal occasion. Thank you that we can be here, and I think it's also a testimony of our partnership. Secondly, you saw this morning a press release, very exciting about data management services, about SaaS, you know, that will also 500,000 meters. You can see, guys, we are building the backlog. Eh? I think very importantly, we thought just today, we will go through the presentation.
Before that, I wanted to say that, you know, when you think about our customers, it's clear that our customers are investing in green green energy. You're investing in technologies to actually enable the technology, the energy efficient. You, as investors and analysts, are investing in the greener future. Thank you for that. Around the world, we have 1,000 passionate employees you know, to empower people to preserve resources, decarbonize the grid, by innovating efficiency equal tomorrow. We are doing much more than that. You will see that in a glimpse here. You actually see the agenda, I think. It's very well laid out. I think you will like it. First we talk about financial, we talk about market strategy.
We actually go into the three big pillars, meaning smart metering, grid edge intelligence, and smart infrastructure. We will have a break in between to coffee net you, of course. Also very important. We also have, as Eva already said, we also have video clips from customers around the globe, which I think you will like. We also go into a Q&A session. We will actually have the presenters here. Feel free, any questions you may have, we highly value that. At the end of the day, we have solutions a glass of wine or champagne. You know, you can, what kind of solutions do we have? We structured our afternoon in five chapters, again, that we don't lose you in the presentation, know exactly where you are.
I think that's very important. Of course, you also have Eva as our master of ceremony who will actually guide you this afternoon. We are all investing in the future, we are doing that by envisioning a green future. You have come to the right place. Landis+Gyr is well positioned to do that. What are our key investment highlights? Clearly, there's an increased need for intelligent power grids. You see this more and more. Was pretty much known in the US, but you also see a much stronger need in Europe, you know, when we talk about potential power outages and so on. This is clearly further amplified by this current energy crisis.
In order to get efficient lead data, we also structured this afternoon not just about hardware, but pretty much about services, because that's something where we are in the process for the last 3.5 years actually to reposition Landis+Gyr. We are doing that with targeted investments, where we actually shift from a smart metering more into grid edge and more into smart infrastructure. Last but not least, I would like to say we are also recession resilient. What does that mean? You know, for us, a recession at this point in time, it's a good thing in the way that utilities are still rolling out. We see actually material costs, labor costs and so on normalizing. In the light of that, definitely something we are prepared for.
Again, we are in the sweet spot for the energy transition, and the trends clearly underpin that. That's what you see here, actually, when you look. Here, here, decarbonization, energy transition, geopolitical developments, consumer empowerment, electrification, digitalization, and external threats. These are all trends actually which underpin what we are doing as a company. Addressing industry trends through portfolio expansion and shift in R&D investments, what does that mean? You can see that on this chart. In 2019, we were pretty much a hardware-driven only company. We invested heavily in smart metering. At that point in time, not wrong. Then you see actually in 2021 and going into 2025, a much bigger emphasis into grid edge intelligence and smart infrastructure. Why is that? Look, we still need smart metering. That's the basis.
That's how we collect the data. That's how we process the data. It's very critical that actually we are in a position to actually really manage this data, prepare this data accordingly for the utilities, but also for the end consumer, and that's what you see here. As you also heard from me before, that we are investing in 2021 and 2022 11%, and then we are going back to 9%+ of revenue. Really important that we make this technology push exactly actually with initiative, initiatives like Google. Guidance 2023. I always said I would communicate with you very straightforward, very direct. I also said that I can see the guidance 2023 in a more normalized supply chain.
What we see, that the supply chain is normalizing, but not exactly with the speed we actually expected. With that, net revenue unchanged. Then you see adjusted EBITDA. We announced that last week in an ad hoc statement, 9%-11%. Free cash flow 60%-90%. That's really mainly driven by the strategic inventory investments which we're doing. You know, from an overall track as a company perspective, there's no change, as you're well-known. We are a dividend company. We are a strong cash generator, and we want to keep it like that. There's no question in our fundamentals what we want to achieve. I think you can also see that here in the midterm guidance, FY 2025, which relative to FY 2021. Why 2021?
Because these are the last certified numbers, therefore organic growth of mid to high single digit. That's really the strong backlog we have. We are rolling out, so I think very solid numbers. Adjusted EBITDA 12%-14%. We feel in a normalized supply chain, absolutely doable. That means in the U.S., we will see historical margin 17%-18%. We will see EMEA at 10%, and we will see APAC also at 10%, which brings us to this number. Dividend clearly progressive, as we said before. Last but not least, a strong focus on cash conversion, something we are watching. Again, we are a dividend company, and we want to maintain a very strong cash generation. Expanding for attractive shareholder returns, and that's actually what I want to hand over to you, Elodie. Thank you.
Thank you, Werner, good afternoon, everyone. I'd like to walk you through now our key financials for the company. We'll talk about our revenue growth and what the main drivers are. We'll look at our EBITDA evolution and our improvement initiatives, how we plan to optimize our manufacturing footprint, and linked to that, our capital allocation strategy. I'll dive into our balance sheet. We'll talk about dividend policy, and I will finalize with going back to our guidance for 2025, future projections for the group and for the regions. With that, let's dive right in. Let's look at our revenue first and the growth that we are planning. As you can see, from 2021 to 2025, we plan to grow our top line with a mid to high single-digit CAGR.
This growth is supported by a portfolio shift from smart metering to grid edge intelligence and smart infrastructure. As you can see, grid edge intelligence meters are becoming the technology of choice, and we at Landis+Gyr are very well equipped to serve that demand. This is evidenced by the successful market introduction of Revelo and its app ecosystem in the U.S., as well, the successful launch of the E360 in ML. With this, we have also released some new products, smart ultrasonic water, smart ultrasonic gas. This was part of our key strategic transformation drivers. These new products will drive growth also in our existing markets. Finally, leveraging on our acquisitions that we've done, particularly in the EV space, we are planning to expand sales of EV chargers and smart charging solutions. This will drive growth in our smart infrastructure segment.
As we grow our revenue in all of these markets, we are also looking to capture recurring revenue streams in software and services more consistently. Overall, grid edge intelligence and smart infrastructure will represent about 48% of our revenue by FY 2025. If we look now at our EBITDA and our profitability, as Werner just mentioned, we expect to be in the range 9%-11% of adjusted EBITDA by FY 2023. This is lower than we originally anticipated in our previous guidance, and yet this represents a significant improvement compared to FY 2022, where we expect to be between 5% and 8%. There are three elements here that I've been playing. First, supply chain. As you know, supply chain has had a significant impact on our financial results since 2020. There were three factors there.
First one has been component shortages, which are impacted at top line. Second, higher material prices. Third, higher transportation costs and increased lead times. We estimate the impact of this to be between 4%-5% of EBITDA in this current fiscal year compared to last year, this is in line with our guidance at the beginning of the year. What we are looking at for next year is some recovery as we start to see some of the easing of the supply chain, we have 1%-1.5% of EBITDA recovery coming from supply chain. Looking at another very important part of what we've done in our company is R&D and the investment in the transformation.
As you know, in the last couple of years, we invested about 2% in R&D, and this was done to support our portfolio shift and entry into new markets. As you will see later on in the presentation from our team here, these developments are well on the way, and we have exciting new products, software, and solutions. As we made these big developments, we expect to start to scale back our R&D spending back towards our 9% target that Werner showed you. This means that we expect about 1% of improvement in EBITDA coming from this in 2023. Last but not least, we continue to drive operational improvements up to 2% in FY 2022 and in FY 2023, with a particular focus on two things, actions and overall cost out.
If I look at our profitability, one of the key initiatives that we're driving is the optimization of our manufacturing footprint. Our supply chain footprint strategy is absolutely key for cost, but also for agility to the external market developments. We continue to rely on our EMS partners for PCBA production based on regional requirements, but we are at the same time also insourcing some production of box build components to leverage our internal production capabilities. Looking at the regional strategy of our plants. First in Americas, we'll continue to serve this market from our key plants in Reynosa in Mexico. Here we have completed this year capacity expansion to be able to accommodate the volume growth that we expect in the Americas region. In ML, we pursue focused approach on two key sites.
One is Greece in Corinth, where we have also increased our capacity to support the growth in the ML market, but also to now be able to produce our EV charging solutions. In ML, the second big plant is our acquisition in Luna in Turkey, where we are also looking to leverage this low-cost platform now for heat and water meter production that we will be transitioning from Nuremberg. Finally, in APAC, we came to the decision of closing our India manufacturing site and shifting our focus on operational efficiency in China and in Australia. All in all, this will optimize our cost position, and we will get economies of scale as we will focus on fewer production facilities.
We will occur one-time restructuring charge in the next fiscal year for all of these projects. We will start at the same time seeing the benefits, obviously, of these relocations in lower costs in the coming years. This strategy is well translated into our capital allocation. First, our EMS model and the manufacturing footprint optimization enables us to operate at a low CapEx. We expect to remain at approximately 2% of net sales, with disciplined investment in our key sites for excellence and optimal capacity. We are an asset-light company. Second, working capital, in particular, our inventory position, which is a critical element of cash, of our cash conversion cycle. As we announced last week, in FY 2022, we are carrying higher inventory position. We do this to satisfy our strong backlog and the anticipated revenue growth.
We are experiencing a volatile supply chain and with some component shortages and longer lead times. In here, we are holding more inventory than in an ordinary climate. Whilst we expect these effects will somewhat continue in 2023, we do expect the situation to normalize over time as the supply chain will ease. As you will have heard from Werner, cash generation has been and will continue to be a very strong focus in our company. Looking at our net debt and balance sheet. Our net debt to EBITDA ratio was approximately 0.6 at the end of September 2022. We have a strong balance sheet, and this is a very solid foundation and a great platform for future opportunities for growth.
Over the last two years, we performed some strategic acquisitions that are positioned ourselves in new markets, like EV charging, and also enabled our supply chain consolidation efforts and are giving us a low-cost platform with Luna. Earlier this year, we have also completed the sale of our share in IntelliHub, which has aligned our operation to our cost strategy and resulted in a very significant cash in position. While we transform the company, we are also committed to return profits to our shareholders, and you see here, our dividend payout ratio with a progressive dividend policy. Finally, let me tie it back to our midterm projection for FY 2025. As you saw, our guidance is a mid to high single-digit CAGR for net revenue, and in terms of adjusted EBITDA, a range between 12%-14%.
If we look at our regions, in Americas, this will be driven by focusing on the execution of our backlog for the major deployments, including the Revelo rollouts and expanding software and services revenue. In EMEA, we plan to scale our recent acquisition, focus on expanding EV solution and promoting Smart Water. We will, at the same time, continue to focus on streamlining and optimizing operations, and we are expecting to drive improving EBITDA margins in line with our midterm targets of 10%. APAC, we will grow in our key markets, Australia, Southeast Asia. We're expanding our offerings with new streams, Smart Water, Smart Gas and EV. We have strong revenue growth on the back of the delivery of our record backlog and also driven by the growth in our strategic initiatives that we've been driving in the past couple of years: Smart Gas, Smart Water, EV charging.
With this, we are driving strong margin improvements, operational leverage coming from the strong revenue, positive mix coming from our portfolio shift and operational improvement that we see in our manufacturing footprint. With that, I will hand it back over to you, Werner.
Thank you, Elodie. Now we will make out a few little grid edge and smart infrastructure visits. I think you will enjoy it. Anticipating customer needs, you know. I think, what do our customers need, and which role do we actually play in that? I think that's very important. The industry is changing rapidly. I think you have seen that. Frankly speaking, I lived a long time before I went to the U.S., in Switzerland. I never thought that we would actually talk about, you know, power outages and that kind of things, brownout, blackouts, you know? It just shows how important the data is and that we actually drive the grid as intelligently as we can because, as you know, there's not enough power generation coming online, and more people are coming.
Therefore, we need to do the best with the resources we have. Good. Having said this, you see here actually 68% of residential customers are very concerned about climate change and their personal carbon footprint. I think that's a positive. 52% of businesses are concerned about interruption to their electricity supply and also cybersecurity. What I think is also very important, 44% of consumer ask for apps providing energy consumption insight for proactive energy management. To become informed, end consumers and prosumers, you know? I think that's also, first of all, a real interest. How can I lower the carbon footprint? It's also cost, you know.
I was not too long ago at an investor conference in the U.K.. I said, "Hey, how much do you actually pay?" He said, "Well, I pay now between GBP 700- GBP 800 a month." That's a lot of money. That also drives, obviously, this behavior. Here you see actually, customer challenges, you know, four main drivers. You see changing end consumer behavior. Clearly, that's, you know, become prosumers with photovoltaic, for example, installation. We also see energy consumption. We see rise of EVs, heat pumps. All this creates a much more dynamic on household level. Second, as part of the renewable build out and integration, we see more distributed energy resources, DERs as we call it. You know, wind farms, battery storage, EV charging infrastructure and so on, which is taking place.
You actually see large investments in cleaner, safer, more reliable and more modernized grids, you know. That needs to come along. Last but not least, increased demand for data and digital technologies. That's we are really in the sweet spot as a company because that's so important, you know. How does that look like in terms of market outlook? Let's talk a little bit about market outlook. You see that here. I will show you in the three segments: smart metering, grid edge, and then smart infrastructure. You see actually a CAGR of 7%. Not bad. When you think about it, you see smart electricity relatively flat.
Main reason for that is actually that the grid edge sensors, for example, like Revelo, they move actually from smart metering into grid edge, you know. A Revelo, which we have in the U.S., that's really a grid edge sensor who is a high computing, actually sensor who has a lot of capabilities. Just to give you an insight, you know, a Revelo meter is 14,600 times per second actually checking the sinus curve. That's a very high number, you know. You have constantly the perfect information as a utility or also as an end consumer, and you will hear more about that. You see actually smart gas. Smart gas is interesting because obviously it has a emergency shutdown that's coming more and more. Gas under pressure, smart gas, there's so many installation.
I think that's going strong. Then you see smart water. One of the reasons why we actually started really to invest in. We made a decision together with the board in 2020 to invest in smart water. It's really the gold of the 21st century. Then you see here, grid edge, strong growth rate, 16% between 2021 and 2026. These numbers are all actually from Frost & Sullivan, so these are not our numbers. These are validated official numbers. You see grid edge devices 46% between 2021 and 2025. Really that actually how that comes along when we look into the regions. You see services and software at 6%, and then you also see actually analytics with 15%. Also they are very strong.
you actually see here smart infrastructure. Here you see EV solutions. You know that's really a big driver obviously also together with heat pumps and so on. very strong, 25% actually from 2021 - 2025. when we think about that, you see here actually our three platforms again: smart metering, grid edge intelligence, smart infrastructure. The way you need to think is smart metering is really what happens in your household. You know what I mean? In terms of different application you have, maybe you have a solar panel, you have battery storage, you have EV heat pump, HVAC, and so on.
In an environment where as a utility you have a less reserve margin because you don't have enough power generation coming in, it's more important that you have pretty accurate information. That's really what smart metering is doing. Then grid edge intelligence is really households, community level, where you actually what are we now doing with this information that we get a very good picture, how does it look like? Then you have a smart infrastructure, which is very important, where you actually then collect all that and actually make the on a pro level, and of course, all this actually within the cloud. That's why the cloud is so important.
That's why we are on the way to become a cloud-based company, because you need this type of information to drive a grid or very efficiently also as an end consumer actually taking the right steps from a cost perspective or also from a volume perspective. Capturing a profitable growth. What does that mean? Let's talk about that. Here you actually see, this is smart devices market position. This is also again, public information, Frost & Sullivan, 2022. You see on the bottom left, you see actually 20 data, and then you see 2021. You see it actually split between residential electricity, smart gas, and ultrasonic heat, you know.
What I can say, that we are in a position where we are actually able to maintain and expand actually our leading market position. I think that's what you see here. Very importantly, we are able to do that in key markets. Key markets like, for example, U.S., U.K., Switzerland, Nordics, also Latin America. Number one in the U.K. in terms of gas or also ultrasonic heat in Germany. That's very important. We want to keep that. Again, we have 300 million meters out there, smart meters. 130 of them are connected. The more connectivity you have, the better actually, you are able to manage the grid as a overall. Here you'll see actually, you have. Most of you have seen this slide before. It's an updated slide.
You actually see there's a clear shift from left to right in the electricity environment. You know, from the early stage, growing first wave, growing second wave. You see U.S., Nordics really leading actually. You see a lot of the countries actually coming into the first wave. In the first wave, you already have a lot of information. To give you one example, Sharon Stone. Sharon Stone. Sorry. Sharon Johnson spoke to us, and, you know, clearly said that actually due to the fact that they invested in actually smart meters, actually were able to save 3.7% of electricity. Still powerful, huh? Very good. You see here the different markets.
Americas now, really going first adopters of actually this grid edge going into a second wave. These are also the big wins you have seen. I think we are very well-positioned in the U.S. when you think about National Grid, PSE&G, and so on. The win this morning, we can't give you the customer name, unfortunately, but also there is Revelo, and it's a testimony for the technology. You actually see, for example, Japan. Japan is a country where every 10 years they actually change the hardware and the software. I think that's also important to note. When we look into Europe, also in Europe, you see here on the top, from 2021 to 2027, 85 million. Actually, you see the penetration levels.
You see actually quite a lot of countries who now realize, okay, we definitely need more information. We need to be able to manage this grid more efficiently. Same goes for APAC. When you look APAC, 21 installed base, 16 million, going actually in 27 to 156 million. Massive rollouts which are taking place. You know that we are very well-positioned Australia, New Zealand, Hong Kong, we are also pushing into other regions and countries, for example, South, in Southeast Asia. Rapid electrification requires careful orchestration for continued grid stability. How can we help solve these challenges? I think very important. You see two main drivers. Two of them, global acceleration of transportation electrification, first one. You see actually power grid becoming decentralized and bidirectional.
You need actually information going both ways. I think that's very important, coming from the end consumer, but also going to the end consumer as part of this. That's why you need a lot of information, which is prepared in the right way. What does that mean for us? When you look actually at the stack, you know, in terms of energy efficiency solution, you see actually the devices. That's still very important. That's also what I tell to my employee. You know, if you work actually in smart metering, it remains very important because without smart metering, we don't have the data. You see actually connectivity services ensure that these data sets are transmitted, in some cases, as we discussed, Revelo real time.
You know, if you would have a Revelo at your home, you can, at any point in time, you can look actually on your iPhone how much power consumption do I have? How much is now for the pool? How much do I need actually for the heat pump? How much power maybe I get back from the solar panel and so on. I think that's very important. You see on top of that, the cloud platform. That's why Google is so important to us, that we have this relationship. That we together can actually really then prepare this information in the right way and prepare it for the utilities and for the end consumer.
Sometimes I'm asked, "Hey, what do you think in terms of data privacy with Google?" It's not an issue at all. You know? What we together with Google are doing is actually, analyzing the data, dissecting the data, preparing the data in the right way for the utility or for the end consumer. You know, the data belongs to utility and remains with the utility. There's no risk in that. Data is useless until it becomes information. We turn information into insights. You can see that here again, powered by a Google Cloud, and then you see on the left side, you see enabling our customers in terms of real-time insights, in terms of consumer engagement solutions. On the right side, is changing the way we work, which really means actually, you know, innovation, speed, integration.
We have with us, Daniel Holz, as Eva already said, you know. Daniel Holz is head of Google Cloud Europe, we will have a fireside chat. I think you will like it to hear a little bit his insights. He's the expert, obviously, in this environment. Decarbonizing for a sustainable world. We think we are uniquely positioned not only do the best thing, in terms of utility information and consumer information, but also in driving ESG forward. Here you can see actually ratings. You know, ESG is part of our DNA. That's how we feel about it. Over the last three years, we made very substantial improvements in terms of ratings. We also signed up to the Science Based Targets.
We are very proud of that we were able to achieve that, we want to drive this further. ESG, we have actually four segments, how we dissect these UN development goals. We have products and solutions, climate and environment, people wellbeing, and business ecosystem. Clearly, in the center is for us, at this point in time, the environmental component. Carbon footprint of production. These are Scope one and two between 17 and 21. Good progress has been achieved. Maybe you ask yourself, "Werner, why not everywhere the same?" It also depends, you know, is there actually green energy available or not? It really depends on the environment, but it's something we clearly want to drive forcefully forward. Here you see the carbon emission in the various scopes, Scope one, two, and three.
Interesting to note that Scope three is the largest one, 99%. Why is that? Well, because our meters are measuring day and night, you know. Therefore, obviously, also accumulate the largest footprint. You see Scope four. That's actually where we help our customers to avoid CO2 emissions. That's not something which we count for ourselves, but where we can actually help our customers. Here you see the Scope three breakdown. That's what we just said. Really because our meters are running day and night, 24/7. Very hard workers, I can tell you that. When you think about battery powered for 15 years and beyond, it's pretty amazing. This equipment keeps on going forever. Carbon footprint, you see here a status quo.
The dark green line, you see actually in signing up to the Science Based Targets initiative, clear difference, you know. 42% reduction for this scope, and that's pretty massive for Scope two, actually, and so one, two, and for Scope three. We drive that. This is the journey. We don't just want to say, "Well, you know, we will be carbon neutral in 2030, and then we will be carbon zero in 2050." That's easy. We want to have clear roadmaps. We also want report on it, obviously. That also will be very transparent, and you can also read about that. Scope four, we talked about it.
That's not something we actually take into account for ourselves, but we work together with our customers. Key takeaways. I hope I was able to really give you a clear glimpse about capturing profitable growth. I think that's very important. Also expanding for attractive shareholder returns. Also very important, very key, envisioning a greener future. With that, I hand over back to you, Eva.
Thank you, Werner. We have now added a little bit of color to our guidance, excuse me, for 2023 and shared the new midterm guidance for 2025. We've talked about strategy, we've talked about our product roadmaps and the markets, and we have also learned about our ESG investments and future plans. Now it is time to let our customers speak. Let's dive a little bit deeper into the technology and how that actually looks like deployed in the field. It is my pleasure to introduce our first guest speaker from the outside, which is Raf Bellers from Fluvius. Fluvius is a large DSO in Belgium, and they are working hard with Landis+Gyr on enabling the energy transition.
Once Raf has shared his view with us, Bodo Zeug, our EVP of EMEA, will dive a little bit deeper into how Landis+Gyr is supporting Fluvius, but also other customers in Europe to manage the energy transition.
Hello, Zurich. I hope you are doing well over there in the Google headquarters. My name is Raf Bellers, and I am the Director of Supply Chain and Grid Management for Fluvius. Fluvius is a Belgium-based DSO, a distribution system operator, active in Flanders. We are responsible for building, managing, and maintaining distribution grids for electricity and gas. We are also active in sewerage, district heating, cable TV and fiber, and public lighting. All together, as a multi-utility company, we operate over seven million connections. Just like many companies all over the world, our most important focus today is the energy and climate transition. Both Flemish and European ambitions aim for climate neutrality by 2050, and Fluvius is determined to help enable this shift.
We are currently adapting and reinforcing our electricity grid to be able to support a massive increase of locally produced green power from solar panels and wind turbines. Also to enable a fast-growing number of heat pumps, electric vehicles, and industrial applications. Fossil fuels will mainly be replaced by electricity, but we also focus on very promising energy systems like district heating and green gases. A key element in our strategy is digitalization. All over our grids, we are implementing smart applications to measure, monitor, and automate energy flows. This helps us to make smart network investments and aim for a cost-effective and efficient energy transition. Our customers also play a very important role in this strategy. They are evolving from passive to active energy users, and the most important tool is our smart energy meter. We have been rolling them out since July 2019.
Today, we have more than 2.2 million smart energy meters installed. We already see an important customer activation. Flemish families actively look to lower their energy consumption and spread it out over time. Smart meters also enable new energy services like sharing or selling surplus solar power. In 2023, we will start rolling out brand-new types of meters and data systems, focusing on a rollout deadline of mid-2029. By then, we will have replaced all 6.1 million energy meters. Several other utility companies, like the energy grid operators in Brussels and Wallonia, but also the three largest water companies of Flanders, are joining our project and technology. The way we read out and disclose the data from all of these meters is absolutely vital.
We opted for a Data-as-a-Service system, which ensures that the right set of data is delivered on time to the right utility company and customer. We really bank on the knowledge and experience of several key partners like Landis+Gyr and their subcontractors. Their long-lasting partnership is key to our success. I'm happy to see we already tackled our first project milestones and looking at a go live of the new meters and system this summer. I hope I was able to inspire you, and I absolutely look forward to keep on making important steps forward in the energy transition together with all our partners. For Flanders, for Belgium, for Europe and, of course, the world.
What a wonderful customer testimony from Fluvius, where we are running our biggest project in EMEA. The project with Fluvius is a perfect showcase where and how we deploy our scalable technology for the smart meter rollouts. We also help our customers on their next challenge, and this is the energy transition which we will believe happen in a low voltage grid. Let's first have a look at what Fluvius has to do. Fluvius put us, as you heard it from the video, our main objective is to automate their meter to cash process. Environment and installation needs to be easy and simple. Fluvius had already a service management platform in place, and our solution had to seamlessly integrate to it. They also want us to maximize remote meter readings and controls to save workers in the field.
All of that has to come with full compliance to data privacy and cybersecurity. This is not enough. The solution should also be future proven and provide flexibility. We just heard Raf, there's more use cases to come with the deployment of heat pumps, EV charging and alternative energy supplies. Of course, Fluvius is looking for a reliable partner throughout the whole sales period of 15 years. Lots of requirements. How did we fulfill them? Well, we are deploying our leading-edge scalable technology. Let's start with our intelligence sensors. We deploy 2.6 million grid edge meters, so-called EC60, as intelligent endpoints. Why have we chosen this technology? These meters support all mandatory metering functionalities, but more interestingly, they generate data and information about the operating conditions of the low voltage grid.
Information you can think about is voltage fluctuations and degradation of the power quality. These meters automatically push this information back to the grid, where decisions can be made by the grid operator. We connect those meters and the sensors with modern IoT infrastructure. Here we cooperate with Vodafone globally and make full use of their communication services. We leverage their expertise and competencies they have gained from their core businesses. Most importantly, we implement our metering platform as a fully Data-as-a-Service in the Google Cloud. This enables our customers to focus on their core processes, while Landis+Gyr maintains and operates the systems, ensuring timely delivery of not only metering data, but also information on the grid status. So far so good. What are the upcoming challenges the grid operators have?
We believe that the energy transition will happen in the low voltage grid. Challenges the utilities have are related to the following. There's an enormous energy consumption due to the increase of EV charging. Utilities need to connect as fast as possible solar panels to the low voltage grid. All of that comes with a question, is the grid capacity enough, and is the aged infrastructure reliable and resilient? Therefore, utilities need visibility and certainty about the grid status. That drives two objectives. Observability and controllability. On the residential side, with the energy prosumers, they need a very dynamic understanding of the network usage, the power quality, degradation, alarms, and events, all related to the grid reliability. On the substation side, where the transformers are, they need real-time monitoring and send this information directly to the control room to make grid decisions.
With that information, the operators define their control schemes and manage their low voltage grid. Peak shaving and congestion management, these are the main use cases for the utilities to manage their grid going forward. How is Landis+Gyr helping here? Our solutions enable the monitoring of the low voltage grid, detection of anomalies, and management of flexible loads. Let me make it simple. Our meters are the eyes and ears of the grid. With our meters, we literally embrace the complete low voltage grid and can observe at any time what is going on in terms of stability, power quality, and voltage fluctuations. This enables the monitoring of the low voltage grid without any additional hardware to save cost. Our applications, like the power quality, detect weaknesses in the grid and enable a faster implementation of new elements to the grid. We have a demo outside.
Please have a look at that later on. Our solutions from Landis+Gyr, just our smart metering solutions, they are proven at scale, like the Fluvius project shows and other major projects across the world. We address the needs of small and large customers, leveraging the scalability of the Google Cloud. Grid operators are preparing for the energy transition, which is happening in the low voltage grid. With our end-to-end solution portfolio, we help them to monitor, detect, and manage that low voltage grid. Last but not least, we are a trusted partner for the grid operators, and they can rely on our continuous innovation to tackle the challenges of the energy transition. Geraint.
Thank you, Bodo. That was great to hear from Raf and then for Bodo to dive a little bit deeper. We're staying for a little while longer in smart metering. We'll look at water next. Werner said it earlier, water is like the blue goals of the century, so it's crucial for us to preserve as much as we can and use what we have as smart as we possibly can. It's my pleasure now to introduce Lara Olsen from South East Water in Brisbane, Australia, who will share their vision and their experiences working with Landis+Gyr on preventing water losses through leaks. Steve Jeston , our EVP of Asia Pacific, will tell us a little bit more about the underlying technology that helped South East Water to achieve that.
Hi, I'm Lara Olsen, managing director of South East Water here in Melbourne, Australia. At South East Water, our purpose is to deliver healthy water for life for our customers, communities, and the environment. To make sure that we can do that into the future, we keep looking out at the challenges that come to us. There are three big challenges that we can see. The first is climate change. Over the last three years, we've seen bushfires, floods, and increased storms, all posing different challenges to water security. We've also seen a growing customer base. We serve 1.8 million customers currently, and we know that will increase over the next five, 10, and 20 years.
Finally, we've also seen a change and an increase in customer expectations about the information that they receive, and also our own employee information too, so that they can do a great job and optimize our network. For us, a key part is really delivering on the digital transformation so that we can address these challenges and take them head-on. There's two key components to that I want to discuss with you today. The first is around customers. To date, we've got 67,000 digital meters, and by the end of this financial year, we'll have 100,000. That's providing customers with real-time information, so they can make choices about how they use their water. It's also helping customers identify leaks. To date, with those 67,000 meters, we've already identified and saved 384 million liters of water for our customers.
Another exciting part is about putting vibration sensors, SOTO, in those meters. Of the 67,000 meters, 22,000 of them have that vibration sensor, SOTO. It gives us real-time information about how our network is performing and enables us to save leaks in our network. Customers want to do that, and our employees want to do that too. To date, with our pilot of 4,500 SOTO meters, we've seen that it could identify, in 88% of the cases, a leak or a burst four to five months before it happened. That means that customers save water, but we can too. Work well based on shared qualities. Like Landis+Gyr, innovation has always been important to South East Water. We work with a range of technologies and products, but sometimes we can't find the product or service that we need.
That's really the history behind SOTO, the vibration sensor. Our team wanted a better way to determine and find bursts and leaks before they happened. They didn't want the customer interruption of a leak or the safety implications either, or the lost water. They created SOTO to help us with leaks and bursts. The great part about the partnership with Landis+Gyr, working with Iota, our corporate subsidiary, means that that technology can now go around the world. One of the shared qualities that we both have, in addition to innovation, is making sure that our solutions work. We've had a third-party verification show that about 1% of non-revenue water can be saved through SOTO, and that's why we're really excited about this partnership and the water savings that it might mean both for us, but also others across the world.
Good morning, good afternoon, everyone. It's my great pleasure to be here today to talk to you a little bit about Landis+Gyr's Smart Water Initiative. You've just heard from Lara Olsen, our managing director of South East Water, about their digitalization journey. South East Water is one of our pioneering customers in Australia, and we're truly pleased to have this association. More so, pleased to can work with them on the commercialization of their vibration sensor technology, SOTO. Why am I up here talking to you about Smart Water? It's actually the Australia-New Zealand business within Landis+Gyr that's done the early work in this business segment. It's important, and it's part of Landis+Gyr's continuing transformation. Lara just talked about a number of drivers on her business, and I'll just reiterate some of them because they apply pretty much around the world.
We have both customer and regulatory pressure on water utilities around sustainability and affordability. This requires far greater information to manage those networks. We have the weather events impacting water scarcity, which is effectively the supply and the quality of the water that we need. Last not least, we have population growth. We have urbanization having an impact on our the aged infrastructure that most of the water utilities have. The aged structure is also prone to leaks. Everything is exacerbated with the aged infrastructure. This shows what we anticipate to be as investment in water digitalization over the next decade. They're big numbers. $340 billion anticipated investment in water industry digitalization. 40% of that will be on smart water metering and customer care systems.
Landis+Gyr has ultrasonic water measurement technology. We've had it for some time. We have expertise. We now want to train that expertise on the water industry. Behind me, you see market offering. To the left is our smart water meter. Across Australia-New Zealand, we have been working with a third party to have a fit-for-purpose product. We will release our own smart water meter family this year. More on that shortly. Communications offering, that we make sure that we can take the rich stream of data from our meter to our management platform. To date, we've been using cellular communications. We've also been leveraging the Vodafone relationship that Bodo talked about in terms of a connectivity service. Last but not least, water industry, this will play a key role.
Later this year, you'll hear from Amit later today, we will release our analytics package for the business that we are targeting. Our cloud-based and offered only as Software-as-a-Service. Just bear with me, and I will take you through a few of the customer benefits associated with. First, the smart water itself. Smart water meters deliver far better. That's important for detecting leaks. As I said earlier, we'll launch our own product family this year. Utilizes our expertise in sustainable design principles, ultrasonic metrology, of which we have deep knowledge, and our battery management capability. After all, these devices live in the fields, and it's very important that you manage the power supply to the device and its communications over that 15-year life by very clever battery management capabilities. Our meters are highly featured.
They deliver information on flow, pressure, temperature, and also can be fitted with the vibration sensor that Lara talked about a little bit earlier. A little bit more on that shortly. Our product is delivered in a small package. In fact, smaller than our current product and smaller than the products of our contemporaries. Why is small better? Because for installers, it needs to be fitted in quite small locations. Think water pipes sitting in pits. That actually is a benefit as well. All right, let's talk about the benefits cases. I mentioned that the ultrasonic water meter measures smaller flow rates than conventional mechanical meters. Obviously that coupled with regular granular timestamped information on consumption allows customers, or I should say consumers and our utility customers, to understand consumption patterns much, much better than today.
In particular, that allows them to investigate excess consumption or unexplained consumption on the customer side. Lara quoted some figures about how beneficial it has been to their consumer base during her talk. Here, there is a case in New Zealand where they found a primary school leaking huge amounts of water on their premises. That's probably easy to detect once you've got a smart water meter in place, and you realize that, hang on, it's the weekend, there's nobody here. Why do we have such high water consumption? That's the benefit of the digital technology. In Australia and New Zealand, we tend to get a water bill every one month or three months. Good to get it on a much more regular basis in terms of consumption. Look, that's an easy example.
The harder example is the fact that you could have a leaky tap or a small leak, a very small leak on your property, which is costing water and costing you money. That's also the big benefit of ultrasonic technology. Vibration sensor. This is the technology that South East Water took it upon themselves to develop, and it's the technology that we are helping them commercialize. It's available in our meter. In simple terms, it listens to noise in the water grid. Through analytics, the noise is triangulated to identify where a leak is coming from. I can't explain all the maths in the analytics, which is this chart behind me, the outcome of that is basically this red dot over here, which says, "You have a leak here.
Go and investigate." So far, in 80% of the cases, they've had true results or incredible results. Obviously, as the information, the analysis, and the analytics gets better, the success rate will increase as well. Non-revenue water has been mentioned a couple of times. It's an important point. In simple terms, it isn't just an Australian issue, it's a worldwide issue. There are estimates that say non-revenue water is costing us $40 billion a year. If you look at some of the flags up there, it's close by as well. This is a big issue for the water industry. I mentioned pressure sensors before. Pressure sensors simply help our utilities understand if they've got problems with their control systems. They can act ahead of there being a water burst. Last but not least, wrap up.
L&G will deliver 4% of its revenues in smart water in 2025. The drivers are there in terms of regulatory and consumer need. The intent to invest is there from our customers. Thank you very much. Back to you, Eva.
Thank you, Steve. That was great to hear from Lara, and it was great to hear from Steve. Wow, I was surprised myself on how much of a leakage issue we have in different countries. If you look at Sweden with 40% due to the cold there and burst pipes, that is just mind-blowing and a great opportunity for Landis+Gyr to tackle that. Now we will move on to Grid Edge Intelligence, and we will talk about computing at the edge. Werner had talked about Grid Edge Intelligence before, and it's now my pleasure to have first Carlos Nouel from National Grid talk to us a little bit about the journey of National Grid when it comes to the deployment of Revelo and some data insights.
Carlos, if you may remember, talked to us two years ago at our Capital Markets Day 2021, and we will now learn what's happened since then and how the deployment of the technology is going. Afterwards, Sean Cromie, our EVP Americas, will share a little bit more of the Landis+Gyr side behind the technology and what opportunities we see for other customers in the U.S. market to deploy grid edge intelligence that allows computing at the edge.
Hi, my name is Carlos Nouel, I'm with National Grid US. Thanks for the invitation to provide a few words on this important event for Landis+Gyr. Last year was a really exciting time for us. We, for the first time, deployed the Revelo meter in five customers. What was a dream at some point of creating a meter that would have grid edge intelligence, that would have the level of sampling of energy that we were looking for, felt like a dream when we began this journey. Now that journey is a reality. We have been able to use that year to run regular bills through all the systems that we have, like the NIN and the MDMS, and actually produce actual bills for the last six months for those customers that were in our early pilot program. It is really exciting to see how Good afternoon, everybody.
Firstly, I'd like to thank Carlos for sharing an update on the exciting journey that we're on as we progress together. We're excited about the milestones and of course, the regulatory approvals that we've received. Our technologies support our customers' decarbonization from several angles, beginning at the meter and EV charger and progressing all the way through utility operations. In 2021 alone, we measured over nine million tons of avoided carbon dioxide through our smart metering base alone. These greenhouse gas savings matter significantly to our over 320 utility customers who have a 100% carbon reduction targets and who in turn represent over 75% of our customer accounts. Our utilities and larger customers are pushing for cleaner, more efficient energy, and this trend will continue in the future.
In terms of legislation, over the last 18 months, U.S. Congress has provided and allocated unprecedented funding towards clean energy, electric vehicles, grid resilience, grid cybersecurity and associated smart grid topics. This opens significant new opportunities for both innovation and for partnership, while funding increased market and revenue growth within North America. Under the Infrastructure Investment and Jobs Act, new grants opened last year, with funds flowing through both federal government and through individual states. The CHIPS and Science Act address supply chain concerns by directing funds towards localized manufacturing, particularly for semiconductor production. The CHIPS Act also represented the largest five-year investment ever in public R&D funding, with multiple grid modernization applications. These initiatives will result in an increase in the requirement for cleaner, efficient energy for grid modernization, grid resilience and associated grid management.
The Inflation Reduction Act restructured a variety of taxes, with particular emphasis on clean energy and energy efficiency. The impacts of these related investments are anticipated to help the US reduce the greenhouse gas emissions by 40% below the 2005 levels by 2030. I'd like to move on to say hello to Revelo. Revelo reinvents the meter as an IoT grid sensor. It transforms the future of metrology and sets a new industry standard. Demands on the grid edge are changing. Our customers are evolving, and the consumers want more insight and control to manage their energy better. Enhanced reliability, safety, and the growing adoption of distributed energy resources requires more than traditional meter-to-cash capabilities from a meter.
Revelo is a true grid sensor, providing unprecedented insight and control through industry-leading waveform data technology and offer superior edge computing capabilities and a greater ability to sample, to process, to store, and to transmit data to the right place in real time. Due to these unprecedented capabilities, Revelo now provides both the homeowner and the utility the information on their usage, on their cost, and their associated carbon footprint. Landis+Gyr is proud to be the only AMI vendor that made it to the Guidehouse's list of top 10 AI vendors for DER integration. This provides independent validation of why we created the Revelo meter. This is a small example of due to the high resolution mentioned of the Revelo sampling rate compared to other meters, we're able to see individual devices in the home turn on, turn off, and associate anomalies with these devices.
This, in turn, allows performance monitoring of both the home and individual devices, which in turn facilitates remedial actions to be taken prior to device failure. Let's talk a little bit Edge Intelligence and Edge Intelligence Ecosystem. This ecosystem allows the ability to add apps and app-enabled tools by the utilities, by the consumer, and by third-party developers, and enhance performance of both the grid and of the home. This allows data coders to take advantage of existing applications or indeed to develop their own apps. Here we start off with the app studio. In this, we provide a developer toolkit, learn-to-code resources, and an anticipated online community web forum for developer collaboration to work together.
All applications and apps coming through must then pass a qualification test before it's qualified for publication on our app marketplace, regardless of whether the apps are developed by the utility or by a third-party developer. This qualification test includes source code review, runtime analysis performed by Landis+Gyr to assess whether the Edge application meets the cybersecurity requirements, meets the resource usage standard, and also confirms that it doesn't affect the functionality of the meter. Once an application is qualified through our process of testing, it's then available to a utility via the LNG's app marketplace. This is a global universe of all qualified apps available to a utility. Landis+Gyr will use this marketplace to catalog applications, to versioning them, and to ensure device compatibility is maintained. App manager data interface cloud platform is responsible for managing relevant applications in IoT device, including the Revelo meter.
Through this platform, utilities can install, can activate apps available in the marketplace and manage the IoT device accordingly. Some of the apps we're talking about. Here we have three grid-facing apps available in our platform, which occur as a direct consequence of its inherent edge intelligence capabilities. Grid location awareness is the first one. This provides a more accurate map of the grid, which is essential for the advanced analytics software that utilities use to safely and rapidly restore power following an outage. This application also supports renewable integration, the mass adoption of electrical vehicles to the grid, and also helps managing of peak load. The second app is Anomaly detection. This is used as the high-resolution data to detect the electrical signature of events like a tree branch touching the wires.
This will cause momentary power disruption in the near term and potential outages in the long term. Utilities can use this information to reduce cost, prioritize maintenance and vegetation management programs to prioritize improvements and improve operational performance metrics. Finally, intelligence voltage monitoring. This provides real-time visibility and feedback into voltage performance and the improvement of voltage delivery, resulting in a reduction of supply chain losses across the system and greater overall grid efficiency. As well as the grid apps for the utility, we also have consumer apps. Consumer apps provide analytics that reveal how and when consumers consume and use energy, as well as identify potentially unsafe electrical conditions in the home. Revelo meter comes with the following built-in consumer apps. Home analytics. This provides appliance-level energy usage details.
This empowers customers to make better decisions on how and when they're gonna utilize these appliances and use the energy accordingly, resulting in lower bills. High usage alerts. Real-time high usage alerts inform consumers that they may exceed a predetermined energy usage threshold based on the type of apps they're currently running and the appliances they have in use at the moment. This app helps utilities to implement rates that reward consumers, determining the time when they use energy so that it's less expensive. It also helps consumers implement strategies to better time appliance usage to save money and reduce their bills accordingly. Finally, power meters. This offer real-time aggregated energy usage, streaming by the hour, the day of the week, et cetera, to support enhanced consumer engagement and awareness of energy usage patterns as they develop. Starting with Revelo at the edge.
Revelo, as we talked about, its unprecedented sensing, its edge compute, and its IoT communication capabilities, provides an orchestration platform for distributed energy resources. Specific capabilities include collaboration, Wi-Fi communication, autonomous decision-making, edge data enrichment, and standard wide area network communication. All in all, Revelo can serve as the eyes of the utility at the edge, offering visibility, access, and unprecedented control capabilities to the utility. The takeaway slide. Strong momentum and demand exists in the North American market. We have a strong backlog of over $2.6 billion, and significant opportunities exist to further increase this backlog. With the release of Revelo, we now have a capability for efficient orchestration of a variety of uses at the meter.
We've developed both the innovation and the technology to support flexibility management, distributed energy resource integration, and effective home energy management, underpinned by a Revelo scalable app ecosystem. Lastly, these opportunities are supported by federal government funding that understands and recognizes the need for grid innovation, for grid security, for grid resilience, and in grid with the context of increased market and consumer and customer demands. We're well-positioned to deliver these needs with leadership and the ability to deliver profitable growth within a robust . Thank you for your time, and I'll hand back over to Eva.
Thank you, Sean. That was great to see how our journey with National Grid is progressing, and we're staying with grid edge intelligence for a little bit. We're not only computing at the edge, we're not only enabling the energy transition, we are also guarding critical infrastructure. That is crucial for our customers as you can all imagine what would happen if all of a sudden we would have a successful cyberattack on one of our power grids. It'd be pretty dark. Todd is the specialist that we have at Landis+Gyr, our Chief Information Security Officer, who will tell us a little bit more about Landis+Gyr's efforts to keep critical infrastructure safe. Todd, over to you.
Thank you very much. Hello, everybody. I'm really excited to be here today, partly 'cause we get to talk about security and partly because I'm a lonely CISO guy that gets to talk in front of our investors about cybersecurity, which is a very important topic for us. Today, I'm gonna run you through some areas around market trends and some opportunities that we see with this. I'm gonna talk about customer challenges that we see in this space. Then I'm gonna talk a little bit about what we do at Landis+Gyr from a security perspective and areas that we see going to increase in this market. Let's first discuss the global market outlook. The critical infrastructure security market estimate, as shown in the previous slide, is at 15% CAGR over the through 2025.
There's a couple of big areas that we see driving this market. I would like to talk to you about them today. The first one is around smart infrastructure. Smart infrastructure is really putting intelligence at the grid edge. In the past, the intelligence that we've had at the grid edge was really focused around smart meters. We did a good job at protecting and defending smart meters. As this area changes and we see things like energy creation, energy storage, energy manipulation, and usage in the smart edge, we need to like relook at how we secure this environment. There's a lot more devices that we see in this space.
From a threat perspective, we see a larger attack surface, and because there's more impact that can be seen by a threat in this space, then there's gonna be more focus from a threat perspective to target this space and cause damage. The other area that I want to talk about today in this space is regulatory. The government knows these risks, and so they are looking at ways to mitigate these risks. One of the ways they're doing this is looking at bringing in regulatory requirements in this space. In EMEA, we've already seen regulatory requirements being put in place, and in the U.S., there's draft requirements that are already being looked at. The good news around regulatory is the governments know that this also costs money.
As Sean mentioned in his slides, there are funding that is being looked at that are gonna be available to our utility customers to help us in building new solutions and extending current solutions to protect this space. Let's talk a little bit about customer challenges. It's funny, but the opportunities that we see in the market are also the challenges that our customers are gonna have to deal with every day. Having all these new devices on the grid edge, devices that they control and devices that they don't control, are gonna be problematic when it comes to ensuring that the grid is safe, secure, and always available. Included in this is regulatory. The areas of regulatory are new in this space. It used to be that the transmission space had a lot of regulatory, but the distribution space did not. This is changing.
The regulatory that we're looking at is going into the distribution space. This is a new place for our utility customers to have to deal with, and it's gonna be a challenge for them to understand this and make sure that they comply with this going forward. Sorry. I'm gonna switch gears, and I'm gonna talk a little bit about what Landis+Gyr does today around security. We have a very robust security program. We secure our employees, we secure our company. We also focus a lot in operational technology space. This is the same space that we see our utility customers have to secure as well. Things like software and firmware. We write software and firmware.
We ensure that software and firmware is secure, and if we see issues with that firmware or software, that we can fix them quickly and appropriately. We also focus on securing our manufacturing sites and our supply chain. We develop meters or we manufacture meters, we manufacture equipment in this space, and all that has to be done securely. Finally, we secure our SaaS environment. This is the environment where hundreds of our customers rely on Landis+Gyr to protect their AMI, load management, and analytics solutions. These are all the things that we do today that align to us in helping with our customers also secure their environments. Let's talk a little bit about some solutions that we can bring to the market. The first solution is really focused around smart infrastructure.
As these new devices come into play, we really need to find new solutions, as well as extend current solutions in the space to cover the entire need of this space. Not only do we have to cover the edge, but we also have to protect the solutions that manage all the edge devices, called the headend. We do that today for hundreds of our customers, and this is something that we think we can extend into as well going forward. From an OT security perspective, this is really the space that goes from the or from the end of the transmission space to the edge. A couple years ago, we had an acquisition of Rhebo, who play in this space.
We're gonna continue to focus in this space with Rhebo and also extend this area, as well as look to cloud-enable this area. Lastly, smart infrastructure compliance. We have done this for hundreds of our customers. As we have to protect and defend their systems, we also have to comply with it. Taking that knowledge and helping our customers out is something that we want to look into. Bottom line, cybersecurity will continue to be a challenge in this space. Governments and customers are gonna rely on us to help them secure, defend, and protect this space. We want to become a smart infrastructure security partner for them. Thank you.
Thank you, Todd. Todd and his team are keeping critical infrastructure run nice and smooth. There's another very important topic that keeps things running nice and smooth, and that is getting some coffee, a little snack, and maybe stretching your legs. We will see you back here at 4:00 P.M. sharp, European Central Time. That gives you a good 20 minutes to have a little bit of something of a refreshment. Then we see you here again in 20 minutes. Thank you.
You might think, "What if I fall?" Well, what if you don't? What if you fly?
Okay, everybody. We are in Switzerland, and we're running up here on 4:00 P.M. The stragglers, please join us back in the room.
Our boss always says when we're on time, then we're actually too late. We are celebrating that here today as well. All right. Welcome back. I hope you were able to enjoy the break and got some refreshments. We will now continue with the last strategic pillar, smart infrastructure, and we'll talk about driving EV expansion. First, we have Julien Touati from Meridiam Allego joining us to talk about charge point operator challenges and how Landis+Gyr might be able to help solve those. We're starting our head of strategy. We'll talk a little bit more about wonders, what Landis+Gyr can do for EV expansion, but also for flexibility management solutions to ensure that we have a balanced grid at all times.
You can imagine with added EVs and some of the other distributed energy resources that Werner and some of the other speakers talked about earlier, there are massive challenges that our utility customers are facing, and we can combine the capabilities perfectly with EV to make sure that we have balance. With that, we will start. Julien, testimony, please.
Hello, Zuri. Thank you for having me. I'm excited to tell you more about Allego, our story, vision, and ambitions. Allego has actually a very simple ambition, developing our position as number one fast public charging network in Europe. Allego is a successful Pan-European story, born in the Netherlands and rapidly spreading with the support of its shareholders, and I'm proud to include Landis+Gyr among those, across Europe with more than 15 countries covered to date. Our goal is to build the largest and most reliable public charging network to support the transition towards electric vehicles. Of course, the completing of the IPO itself was an important milestone, but I believe actual financial and industrial achievements matter much more.
Since IPO of Allego, I would mention on that front, for instance, Allego entering into long-term green power purchase agreements to offer e-drivers a strong visibility on the cost of electricity, the massive rollout of our charging stations network. I think we are currently opening stations literally every day, and the constant over performance in terms of utilization rates, traffic of our chargers, validating our site selection strategy. This is made possible only thanks to the support of a strong ecosystem. In particular, Landis+Gyr as a key player of the much needed strengthening of the distribution networks is a wonderful partner for Allego, helping our company to maintain an edge in the slow AC charging segments on top of our fast charge focus. The next big thing of our industry, happening faster than expected, is probably the electrification of trucks.
With an increasing number of electric trucks and also buses, we see a strong enabler for decarbonization, and at the same time, it will probably create challenges for grid operators. During the pandemic, emissions from trucks and buses temporarily declined, but since that pandemic, they have rebounded. We need solutions to rapidly decrease emissions over the next decade. This mean that we need to reduce by 15% by 2030 the emissions from the freight segment relative to the current level. How can we support this? On the one hand, we need the right charging infrastructure to ensure reliable and readily available free charging solutions. In order to ensure the scalability of such infrastructure, such services, we need to provide interoperable, high power charging infrastructure.
On the other hand, we need to make sure that we balance the utilization of these charges and the generation of power to maintain grid stability. This requires extensive upgrades to the grid infrastructure, but also a further build-out of renewable energy sources to enable the decarbonization of the grid and electrification of transportation. This is where our joint expertise comes in. Allego, as a leading charge point operator, CPO, is committed to fast-forward the transition. We believe that anyone with an electric vehicle should be able to charge whenever and wherever they need it. This is why we and our partners are working towards providing simple, reliable, and affordable charging solutions.
We offer smart charging solutions for electric cars, motorcycles, buses, and trucks, as we discussed, for consumers, businesses and cities. Our end-to-end charging solutions make it easier for businesses and cities to deliver the infrastructure we need as EV drivers. We are scalable, a key word. By building our high-power charging infrastructure, we not only support drivers like you and us, but also enable the electrification of Europe. The high-power charging solutions that we develop are the perfect solution for high-traffic locations like fuel stations, retail parkings. Basically, with these solutions, you can add up to 350 km, sorry, in just 15 minutes. After a quick stop and charge, EV drivers can be on their way, which is vital to enable the electrification of vehicles. Our high-power charging stations are compatible with all electric vehicles, which can of course absorb a DC fast charging solution.
As a result, we are well-positioned to drive these efforts forward. Of course, we also offer slow charging, which is one of the reasons why Landis+Gyr is an excellent partner. The growing charging infrastructure in place can add additional peak demands and therefore requires a flexible grid. That's why utilities, distribution system operators are key stakeholders in the journey of mass rollouts of EV charging infrastructure. This is an ecosystem Landis+Gyr knows extremely well. Complementing our expertise, Landis+Gyr will help developing critical infrastructure with leading technology that includes both EV solutions and intelligence at the edge. Through demand flexibility managements and grid orchestration solutions, a sector in which we as Meridiam also heavily invest into, utilities, communities, and businesses are empowered to drive the electrification of transportation forward with a balanced grid. That's a necessary condition for sure.
The combination of these powerful capabilities is what is needed to achieve carbon emission reductions through electrification of transportation. We are excited about the future and the opportunities ahead, also with Landis+Gyr as a partner. Thank you for having me. Have a great day, and keep driving forward.
Good afternoon, everyone. Are you caffeinated enough? This section is extremely important to me for two reasons. Number one, all of us in this room, collectively, single-handedly, can change the game of our carbon footprint. Electrification of transportation is the biggest thing that's about to happen, and the journey has already started. Secondly, companies like Landis+Gyr have extreme business opportunities, and as they say, rising tide lifts all boats. This opportunity is for all companies in all spaces because it touches every aspect of what we do. I sincerely thank Julien for a couple reasons. We have an invested partnership with Julien and his company, and they've been extreme supporters of Landis+Gyr and what we do around the grid.
First thing, when we started this journey into the one of the things that we had to understand was we needed a partner, that's where Allego came into play. Julien mentioned three things that's very important for us to understand. First, he talked about electrification of transportation, which is accelerating in the EU. Second, large EV charging acceleration is happening also in the EU. The last thing he mentioned was LNG's critical expertise. We understand electric grids better than anyone else. We've been in this business. We have the expertise. We have a deep understanding of how electricity grids work in this space. Earlier, Werner talked about two things that's very important for us to hear one more time. First, he told us our customers and our investors are investing in green energy.
Three, Landis+Gyr's energy transition is something that he has committed to the business. On April 1, Werner announced two important acquisitions. One was Etrel, a pure EV charging solutions company. It not only has hardware, but a better software that I'll cover. The other is True Energy makes charging simpler, easier, cleaner. Eva mentioned flexibility management will be the thing that utilities will have to deal with, and we're ready to do that with True Energy. These two opportunities provide us a key area for growth, and we're ready to embrace it. You can talk about it. Boro spoke about it in depth. There's clear EV target commitments from the global. If you look all the government institutions around the world, including utilities, there is a firm commitment to meet these targets that are being established between now and 2035.
To give you an example, in the EU, it is anticipated by the time 2030 rolls around, somewhere north of 80% will own electric EV cars. In the U.S., a very similar trend than the EU. The bottom line is governments have stepped it up. They're providing subsidies, tax rebates, where I come from, has already started. There is a healthy amount of government spending and involvement in making these commitments happen. I'm not sure if you did the math when Sean presented in that slide around the path to decarbonization by the Biden government. If you add it up, it's north of $400 billion.
You can slice it any way you want, there's clear big pockets of money for infrastructure, for EVs, for EV charging, and all the other network improvements that have to be made, let alone the massive investment that have to happen around the world on distribution grids. We strongly believe we have a good portfolio that I will discuss with. We're very well-positioned to handle this change, Landis+Gyr has the depth and expertise to support the change that's about to happen. This market size, done by us internally as well as using some information from research reports, is rather conservative. Any which way you look at this reporting, we've aligned it to the way our regional CEOs go to market. If you look at the biggest market, which is Europe, significant commitments have been made in EMEA with a 30% CAGR.
This market is about $7 billion. North America is not far behind. The change where I come from has already happened. Big commitments are being made. We see another big market in North America evolving and this business to be about $5 billion with north of 52% CAGR coming up in the next few years. The numbers in Australia and New Zealand, albeit small, couple reasons for it. We've excluded China and we excluded India. We wanna focus on the markets where Steve is from and where he sees profitability and growth. Any which way you look at it's still a $600 million business growing rapidly north of 55%. The key takeaway for Landis+Gyr is these are large addressable markets. If you add them up, it's somewhere north of $13 billion.
It's very conservative, but we'd rather much rather start at a conservative base, which is rather big, and take the portfolio, and we're very well-positioned to win in this market. We have R&D teams, go-to-market teams, all established very well, and with the portfolio we're, you're about to see, we're very excited about this change. I keep mentioning portfolio. I tell you, I'm very, very excited about what our portfolio is. I'll tell you why, because we have great results to go with it. Left to right, if you look at our portfolio, it ranges from hardware, software through our Ocean platform. We have fantastic apps, and we can actually load manage between chargers, how we actually control these chargers from a given building or in a parking lot or if you're a CPO or operator.
Our Ocean software supports EV charging, monitoring, and control, and it enables load management for demand response. I mean, going back to EV will be the single biggest load on the grid going forward. Our super friendly app puts everything in the palm of your hand. Everything. Simplicity, ease of use is how we built it. You can find, you can choose, you can book, and pay with transparent pricing. I saw a bunch of you huddled around the Etrel demo. I hope you got that feeling from there. They've given you flexibility, choice, agnostic into how the platform operates from as well as OCPP compliant, which is a fancy word for saying, "Hey, we're interoperable." I am really proud of the way that the research and development teams have built this product. Our solution orchestrates charging management and load management. Key thing is these are already installed.
It's reliable, it's scalable, it's user-friendly, and I think we're very well-positioned to capitalize on this market. You may say, "Show me results, Prasanna." Yes, we have them. You know what I'm really proud about? We've only been in business for a short period of time. It's really fascinating. Short period of time. What have we done? We've sold it to over 40 countries and to over 100 customers. 100 customers, short period of time. Our cumulative install base is greater than 50,000 chargers all over the world. This supports roaming. We can do various service options for us, for our charge point operators, and hopefully before you get to go home, spend some time at these booths. You will see that we have a lot of research and development talent supporting this in all the global centers that the regions operate from.
We are well-positioned to capitalize this and further grow. Our customer base falls into four broad categories. It could be charge point operators, and you can including Allego. You can think about that as a good example. We also support utilities, which is our strong base. We understand utilities better than no one else, and we're actually ready to support them because they're looking to transfer and go into new areas of business. The other areas we see a lot of interest from is oil and gas companies that are coming to us and saying, "Hey, help us transform our business. We want to get into this change," because they clearly see that this wave is about to happen. I think most of you have noticed Shell alone has made so many announcements in this space. It's quite exhaustive what they're trying to do.
Last but not the least, we also work with car companies. For example, Toyota Europe, we're establishing EV charging networks for. Very simply, we're ready for this change. It is next big strategic transformation that's happening within Landis+Gyr, Werner has well-positioned us, the entire teams, to go in this direction. We're ready to go. That was a lot, but we're not done. We strongly believe that as we keep adding EV loads, there comes a problem for all of us. Are the networks ready to handle such a traffic? Are the different operators, especially our utilities, ready this change? In order to match all this huge growth, the government targets, the investments that are coming into the space, I showed a portfolio, we're ready for this change. One other critical thing has to happen with this.
Integrating renewables and a dramatic increase in EV loads is something that all of us have to be worried about. In April, as I mentioned, Werner and I spoke about together the next option is True. True will help us drive demand flexibility management, such that loads are managed and delivered to our customers in the appropriate way. You might be asking, what is demand flexibility management? Demand flexibility management is simply put as supply and demand balanced by either shifting, pausing, or in some cases, stopping the demand that's coming from the system to balance the load. 'Cause think about it, the utilities cannot keep building plants anymore, so they have to manage with the resources that they already have. Why is this important to utilities? Werner comes from power plant, and he constantly reminds us it costs I'll drop the adjective, the adjective that he uses.
It costs a lot of money to build a power plant. It is absolutely imperative for us to keep this in balance, and we need to manage this load going forward. In order to do that, we see this as an opportunity for Landis+Gyr. Under the name of grid services, very simply foot-foot, managing supply and demand in a very controlled fashion is what flexibility management is. Landis+Gyr sees an opportunity here as well. Conservatively, we see at least $5 billion-$10 billion going forward. Very small numbers that we estimated using the portfolio that we have. Where do we see this? We see this in three areas. Number one, it's managing the energy itself. If you want to manage load, one of the things that the system has to do is a concept called demand response, the ability to aggregate loads and manage it.
We've been doing this in a different way called load control through our existing portfolio. We know how to do this business in a different way under the new acquisition. The second thing is energy design and modeling. When Sean presented, there was a slide where he orchestrates all the Revelo meter and the points it touches, and the fact that it's all real-time, disaggregated. We strongly feel with what Revelo sees and with the platform that we have with True, we can bring these together and add more value to our utility customers. That's an example of how to put that. The third one is, even today, True provides ancillary services in Denmark. What is ancillary services? It's very much the same concept. You work with utilities and customers, I'll walk you through an example.
You, you enroll customers, you work with utilities, and you tell them that you will manage and provide a fixed load of relief to utilities, and that service is already being provided today and making money for us. We strongly believe that these three areas and utilities need a trusted partner to do this, and that's where Landis+Gyr comes into play. How does the portfolio look for us? The way we look at demand flexibility management, we're building it into two broad categories. On the left is a concept of utility solutions and use cases that we're building. Here we're gonna continue to work with our customers and make sure that we provide the services in terms of smart grid and AMI that they already have.
We'll further provide services around grid-to-vehicle charging as a service, that the team will explain to you that we already do, and a lot of fleet electrification services. If you really think about where the future is going, you put aside passenger cars. The next biggest loads that utilities are worried about is these pockets of load, including their own fleet that gets electrified. You heard in the Allego presentation about electrification of buses and transportation. Those are massive loads. You might wonder, why is that important to utilities? Just imagine in a given day, you need 20 MW to balance the grid. One quick area to go and get that 20 MW is this fleet electrification, and Landis+Gyr is looking at all the use cases to do that. On the consumer side, people talked about consumers getting more complex. Why?
We not only consume electricity, but we also produce it now going forward. I conceivably think in five years, better than 90% of this room will have an EV. I conceivably also think that in 10 years' time, conservatively, that we'll be producing electricity in our homes. I do today. Small amount, but I do. What do you need to do to survive that? You need to store it. All of these gives increasing complexity in buildings and getting consumers engaged going forward. We see a whole bunch of use cases in smart EV charging, which we already do today. For example, True will actually tell you when to charge it. You set a bunch of profiles, and I'll walk you through it. You can do smart charging today with Landis+Gyr. Fleet charging is something that users will also participate in, and we can engage them.
We see also in the building side of business, there'll also be fleet electrification services. We're really well-positioned. We got a whole bunch of use cases that we're already putting in our system today and writing and developing the system for the future. The next two examples, one of them, I think you probably have already been to the Manchester demo. If I can quickly talk about it. How does a utility operator work today? The day in the life of a utility operator is they wake up in the morning, everybody starts firing up their stuff, the load keeps creeping up. What happens today is that load is supported by the grid, either through conventional generation, but conceivably going forward, you'll have also renewables supporting that load going forward.
What does happen in a given system, if you just focus on the drop in consumption going forward, in the evenings, the sun doesn't shine, the wind stops blowing, renewables drops. Where do they go for to find this load? That's why they go find the batteries around the city that they have deployed, find the large scale batteries that's been stored with electricity to supply the peak demand that happens when people get back into their homes at 5:00 P.M. and start firing up everything again. That's what you see going forward. The future will be supported by all these renewables that are stored across the city and not necessarily, as Werner would put it, building peaker plants to support it. That's exactly what we have built at our Manchester facility.
Think of it as a very small implementation of what goes on in a big city, but we've actually put that in a building. When Tom is presenting to you probably heard that the facility is outfitted with solar, it's got storage, and it's got inverters. The parking lot it's all chargers that we've provided for our employees as well as visitors. We're building this ecosystem for two reasons. Why? Because as we build out the use cases that I talked about, we need our own test facility. We strongly believe as we do in our AMI business today, the best way to test and deliver to our customers is actually eat our own dog food, and that's what we're doing.
This gives us a good opportunity for us to develop products in the future, but it also gives us a good platform to test other things as we build. Very similarly, this is another use case in the Nordics. We've implemented a profile for about 14 different partners of ours, working with 14 different partners in the Nordics. Nordics has a very high penetration of electricity. We strongly believe that True Energy supports the same kind of theories that we talked about by working with our utilities and our partners and reducing what's needed going forward. This is a Shark Tank moment. You can all see palpably, I'm very excited about this. I truly am. In fiscal year 2021, we actually delivered $20 million of profitable growth to Landis+Gyr.
I actually would say we probably belong in a very small cluster of people doing this business that actually makes money in this space. The second thing is, by 2025, we will grow this business five-fold to $100 million profitable again. We're scaling this business. We're making global... Globally, we're developing teams, putting teams in place, and we're offering solutions to provide grid reliability and support our customers through their journey. Our commitment is always to manage energy better together with them. Thank you.
Thank you, PV. That was great. I'm also very excited personally about the opportunities that we see with our e-business. Now, we don't stop there. We go one step further, we are empowering cloud-based insights. Who would be better to talk about that than our client? Again, thank you for having me. Very excited to be here in this beautiful facility. It's now my pleasure to introduce Daniel Holz, Head of Google Europe, and our very own Chief Executive Officer to talk a little more about the partnership between Landis+Gyr and Google.
Hey. Hi. Great.
Welcome, Daniel. Thank you for joining us.
Thank you.
Hi, Werner.
Hello, Eva. Very good.
All right. About two years ago, we announced that we have signed a seven-year strategic partnership with Google, and a lot has happened since then. We've achieved some tangible results. We have a huge pipeline of opportunities, and the first customers are live. Werner, can you give us an update and let us know on where we are in this journey?
Definitely. I think, as you already heard, very excited about the seven-year partnership. I think the part which probably excites us the most is the co-innovation we are doing together with Google. We are developing analytic grid platforms. You have seen now, you understand much better why it's so important that we actually are doing that together in terms of analytics and so on. The second, the second pillar we have, that's cloud. It's not necessarily less expensive, but it's much more secure. Even you think about the headend system where you collect all this very relevant information, we do it in four steps. We already done the first step actually of pushing this headend into the cloud.
We already have the first customers where we test it and so on, and then we will actually see that in 2023 and 2024, the next steps. I think that's probably last but least also that we are pushing IT, OT into the cloud, because also there, it's efficiency, it's safety, security more than cost.
Thank you. I mean, we're really excited about the journey and the collaboration, like Werner said, the co-innovation with Google is a crucial part of that journey. Google is an innovation powerhouse. You're a leader in data analytics, and we're excited to have that part in being able to tap into that. Daniel, you have a bunch of strategic partnerships, and can you tell us a little bit more about how you approach this, but also maybe speak about why energy and why the partnership with Landis+Gyr?
Happy to do so. Actually, climate change and the energy transition are now moving the markets, and it's at the forefront of the discussion, right, in politics and also in society. For Google, this has been a topic for a long, long time. In fact, already in 2007, Google was the first major company which became climate neutral. Climate neutral, not by purchasing certificates, but by purchasing new carbon-free energy to matching our own consumption. We didn't stop here. We continue. We have a clear and demanding agenda to be carbon-free by 2030. With all of our campuses, with all of our data centers, we are going to be carbon-free. If we achieve this not only by...
I mean, if you look today into a data center, it is twice as efficient as it would be looking into a data center on average. As today, we have five times the compute power that we used to have, five years ago, consuming the same energy. With the same energy, we are doing five times the computation. This is not only possible with improvements of hardware, but also very much with the power of technology, with the power of AI and of algorithms, and this is exactly what we are offering to our customers out there in the market. One example which I could share with you right now is EKZ.
We have been working with EKZ only on a pilot, giving them our algorithms and using their data to optimize an advanced fleet routing system to make sure that the planes are being routed always in the most effective way. Already out of this short pilot, we have tremendous success, which led into EKZ saving 1.5 million CHF on the pilot, and which is maybe even more important, 7,500 tons of carbon dioxide which have been saved. This is a nice example how we can help customers with our technology to improve energy efficiency. This is exactly why we are so much interested in working together with Landis+Gyr, because we would like to share this and enable Landis+Gyr's mission statement to decarbonize the grid with our solutions.
Specifically, we are working with Landis+Gyr on software solutions which are going to enable the customers of Landis+Gyr to better predict both the consumption, but also the supply of a balanced grid, which is going to be powered with as much green energy as possible. That's what we are working and striving for.
Yeah, no, for sure. That's a good point, right? I mean, we are all about decarbonizing the grid, but that's just one part of it. Werner, can you maybe tell us a little bit more about how Landis+Gyr has evolved throughout this journey?
Yeah, I think, look, for us, it's extremely refreshing. I think there are two corporate cultures actually coming together. Obviously, Google thinks very differently. Google is all about software. And for us, I think it's a very healthy path forward, you know. I think it starts at the top, how you and I, Daniel, how we work together, and it goes through the organization. You know, we are really transforming in terms of corporate culture, skill sets, working into the cloud. You know, we have large data analytics and innovation teams actually from Google side, from our side, which we are driving together. We have employees who are now certified as Google Cloud practitioners. I think that's super cool for our people.
I really think Google and also you in particular, Daniel, tremendously helped us in our journey to become a cloud-based company.
Okay. No, very good. Daniel, would you agree with that? How do you see some of those next steps?
No, of course, I agree. It's such a great question. I would say... No, seriously, I would say the release of the headend system, together with the data analytics platform, which you can also see here outside at the booth, have been quite good starting points. They are going to build the foundation of what's going to come next. What's going to be next is that we continue to develop the solutions which Landis+Gyr is offering to customers. In a strategic partnership like the one that we are having here, we are combining the engineering teams from Landis+Gyr with the experts from Google. They are coming from the industry solutions teams. We are bringing in colleagues from Google X, which bring in the 10X thinking and disruptive innovation part. We are also leveraging the whole of Alphabet Group.
In this case, we have also looking at a partnership with the Nest home appliances, which are nicely expanding and extending the reach of the Landis+Gyr solutions. net-net, we are working together with the experts to leverage digital solutions and technology to solve real world problems for the future of energy efficiency.
That's a really good point. It's really about real-world problems, right? In the heart of all of this, at the heart of this are our customers. Can you tell us a little bit more about how those solutions and ideas benefit our customers?
Yeah, look, you heard throughout these presentations, obviously, the utility customers, but also end consumer realize that we need to change. As I said before, we didn't think that in Europe, middle of Europe, we would think about, you know, energy crisis and all that. That demands different thinking. That demands how can we use this data much better? Also our customers to think about machine learning, artificial intelligence, you know, I think Google is in that sense, a perfect partner. It doesn't have to be always a Google. If you have a customer who says, "Hey, I want to have, for example, a private cloud, or I want to have a hybrid cloud or a public cloud," obviously, we always find solutions. I think that's really important.
From my perspective, you know, as you know, it's a regulated industry, but a tremendous shift in thinking that actually the utilities, but not only the utilities, also the end consumers are thinking very different. You know, who would have had actually interest actually in energy cost and energy data a few years ago? It was just not costly enough actually to drive a lot of interest. That changed a lot, you know, when you see the energy pricing. Trust me, when we think the energy crisis is over in the winter of 2022, 2023, I don't think so. You know, I think we have a relatively mild winter, but who knows how the next winter looks like.
We will have similar challenges, and therefore that, we need this, machine learning, artificial intelligence capabilities to get the data in the best form possible.
All right. Now we know what we can do for our customers, but can you tell us a little bit more about how we're doing it and talk about the underlying technology?
Sure. Let's take a little view, a peek under the hood of the partnership. What we are doing is based basically on three pillars. We call them the data cloud. We have the open infrastructure cloud, and we have the trusted cloud. These are the three pillars on which we are building our partnership. Let me very quickly double-click on each of those three. First of all, the data cloud. Data cloud by Google is providing everything that Landis+Gyr needs to analyze data to connect, first of all, data sources which are disparate across the company, external and internal, structured, unstructured data, and put it all together into one powerful array of information that Landis+Gyr can base solutions on.
Next thing is the open infrastructure cloud, which is providing an open standards-based, high-performance, and highly scalable solution to make sure that we have global support for the Landis+Gyr solutions. It's also catering for what Werner just mentioned. It is based on open standards. Google has a multi-cloud policy, which means that customers have the freedom to choose, right? If for some reason they need to, they can decide where the data should reside in, they can decide where the cloud native app should run on. It is all the choice of the customer and choice of Landis+Gyr. That's the beauty of the multi-cloud strategy of Google. Finally, we have the trusted cloud. Security has been an ongoing theme during the presentations we had today.
Google is one of the key targets of cyberattacks, so everything that we are doing at Google is centered around security. Security for data, security for the applications, and security for the systems. We make the concepts which we invented, for example, like Zero Trust, which is one of the more famous ones in the market. This and many more are at the core of every solution which we are building. We are offering these solutions to our clients to make sure that they can use the same level or experience the same level of security when working within their markets and with their customers. We also not forgetting to mention, we have just been augmenting our portfolio by the acquisition of a company called Luna, which are experts in cybercrime, incident, and also incident response, and also in prevention systems.
It's rounding up our portfolio of what we can offer to support our clients and to ensure that our customers are really experience the most secure environment that you can have possibly today.
I think that's a really good point. We've touched on this earlier a little bit already, that we are critical infrastructure providers, and keeping that critical infrastructure safe and secure and reliable is one of our key action points. Having Google as a partner is definitely a huge asset to make sure that we can also fulfill that promise to our customers and that commitment in the future. Switching gears here for a little bit, Werner, for you personally, what's the most special or important thing about the partnership with Google?
I think Google is a very refreshing company in many ways, you know. The way you think, the way you drive things. I visited the headquarter more recently, Mountain View, in the US, you know, and just when you see the people, how they work, how they think, and the values they drive, I think it's very exciting. It's very impressive. I think there's a lot of cross-fertilization which we have together, you know. My view is that will lead to great results. There's no question. I think, you know, two great leaders are coming together.
I think you are a very strong leader in cloud management, you know, and we are a strong leader in energy management, and I think it's a perfect fit.
No, I couldn't agree more, Werner. Just let me just say thank you. We are very proud to be able to work with Landis+Gyr and jointly work on your mission to decarbonize the grid.
Very good.
Thank you very much, both of you. I think that probably says it all. I think we have a good path forward. We have tangible results that we can show you already today that our customers are benefiting from today. We have customers live in the cloud. We've already heard from you guys, and we'll hear that from Amit in a second as well, of what the pipeline looks like when it comes to co-innovation. We really are co-innovating the future. I thank both of you for your time and your insights today, sharing that with the group. Thank you very much.
Thank you very much.
Thank you.
Thank you very much, Eva.
Thank you, Daniel.
Thank you, Eva.
Thank you very much. Thanks a lot. Thank you. Very good.
Yeah. Okay.
All right. Now, it is time to introduce our Chief Technology Officer, like I just teased already, Amit Kotha, who will tell us a little bit more about how we are empowering, cloud-based insights and how we are driving cloud-based innovation forward. Over to you, Amit.
Thank you, Eva. Good afternoon, everyone here as well as on the call. I'm pleased to be here and present to you about what we're doing with the Google partnership. Earlier today, you heard from Werner about energy and utility industries evolving. What does that mean, right? I wanna take you through that journey. I think you heard a lot of the terms which you see on the screen here, but I wanna really help you understand why we are positioned to take that journey and actually drive revenue for our company and growth for our company. Historically, utilities always worry about generating energy, transmitting, and then distributing in a reliable way and making sure customers have affordability. That has changed. That equation has changed. You heard from Prasanna, you heard from Werner.
Supply and demand balance and the equation around supply and demand is completely different. What does that mean, right? Today, we help utilities every step of the way to manage their grid, provide reliable and resilient services from a grid perspective, and ensure customers have consumability of energy. If supply and demand changes, how would we position ourselves to help utilities? Over the last few years, what we have seen is that equation, the way it has transpired is, number one, there is rapid transportation electrification. You heard that. What that means is each one of us is gonna start consuming more energy, probably double, if not more energy we consume today in our houses. Number two, we're going to start putting solar panels on our roof, public batteries.
If I'm a company, I probably will do large scale. Number three, we are sort of the natives. We are adapted into a lot of digital capabilities, our expectations also from utilities is gonna be different. We want them to engage to ensure that we can charge our cars whenever we want. We can switch between the grid and battery or solar whenever we want. There's quite a few things, behavioral changes which have happened that utilities will find very difficult and challenging problems. For them, it's gonna require a lot of new thinking, new skill sets, and new solutions. Now, where do they start, right? I think you heard from Werner about data. Data powers everything. What does that mean?
What that means is, number one, as assets are coming into the grid, you're gonna see a lot more data being generated. Everything you touch with respect to an EV has data. The EV electric car generates a lot of telematics data. There's gonna be charging data. There's gonna be different types of data being created. Number two, all this data is gonna be created a lot faster. I think you heard about what John talked about. Why are we worried about grid edge instruments and higher sample rate? The data as you get the higher sample rate, you can understand what issues could exist or service your customers better. A lot of these data points may be heightened. Utilities will have Which they are already starting to see, they don't know where to put it. They don't know where to process it.
They don't know what to make out of it, and they don't know value they can get out of it. We have repeatedly seen a lot of our customers ask us, "Hey, Landis+Gyr, you understand the grid. You are giving us capabilities to generate a lot of this data and get more insights. Can you help us through this journey and moving forward?" One, hearing from our customers. Number two, we've been hearing the same thing from a lot of technology analysts who cover utility industry, that there is a wave coming with respect to digital capabilities needed to really process this data and understand it. We see this market to be about $1.5 billion by 2025, with a healthy CAGR from 2021- 2025, about 15%.
We see the value. We have confirmation that customers are asking for it. We know analysts who cover the industry have said there is growth and there is a need for digital capabilities. What does that mean for us? We are really positioned well to attack this market because we play in the AMI market. We generate data at the edge. We process the data on behalf of the utilities with our meter data management solutions. We create bills for consumers, so we know how consumer needs to be engaged. Now you heard from Prasanna about EV and load management. We have these solutions which are gonna generate even more data, so we understand that. I think it positions us very well to partner with utility customers to really optimize their grid operations as well as how they can integrate distributed energy resources.
Number two, we also are starting to hear a lot of the utilities are thinking about consuming these digital solutions in a Software-as-a-Service model or a cloud delivery model. This is a big shift. Utilities have been historically thinking they would like on-premise solutions as well as a mix of hybrid cloud solutions. This paradigm shift is good for us. You heard about Werner and Dr. Holz talk about cloud and our ability to deliver solutions in different delivery models. This also positions us very well with respect to tackling this market. You heard what the problem is we're going after. You heard what the market is. How do we approach this? What we have figured out is this: these are tough challenges and tough problems to solve.
No single company can try to take and solve this at a scale, at a global scale, or try to deliver to customers locally. Number two, focus on security. Number three, be innovative about it. One of the things we have done is we have partnered with the best in the world across every area, starting with Google. They have the best technology, best AI and ML capabilities and cloud capabilities. Connectivity solutions, you heard from Steve, you heard from Bodo about enabling connectivity for grid edge assets coming into the cloud. We partner with Vodafone, which gives us coverage globally, and we also partner with Cisco in Americas to drive a lot of field network. This really sets us up perfect to help utilities address these challenges. Now, okay, we understood how we will address these challenges. How are we set up?
You heard a lot of what we position. Our portfolio is strong. What does this portfolio mean from a grid edge perspective, smart infrastructure perspective? I wanna kinda walk you through a journey of what this means for us, right? Number one, when you start bringing all the things you heard from my peers this morning or this afternoon, what we have transformed our portfolio is truly into a edge to cloud ecosystem. You could put any type of devices at the edge, those devices could have intelligence, generates a lot of capabilities with respect to making decisions at the edge or generating data. How do you transform and transfer tremendous amount of data through various communication channels? Every country and every region is unique with respect to how they would like to and every utility is.
Then how do you bring that to one place at scale, and how do you get value out of it? That's where we have created the digital solutions. A lot of the things you heard today fit into these ecosystems where we're creating edge intelligence as part of our grid edge intelligence pillar. Smart infrastructure, where we're creating new digital solutions to support new type of e-edge sensors with foundational to smart metering as well as connectivity services. We see this as a powerful platform for us going into the market, because this platform builds on cloud for scalability, builds on the ability to integrate any type of sensors, gives us ability to expand in any market with different type of solutions, and that's why we're excited about the EV and flexibility solutions Prasanna is talking about.
Let me deep dive a little bit more on a couple of solutions, right? I think you said, okay, you have a platform. How are you making it happen, and where are you with this platform? You heard from Werner and Holtz about the two different solutions we have enabled as part of our partnership, one being Emerge. Emerge is a unified headend system truly built on a cloud IoT platform. What this gives us is this has the ability to scale unlimited. We have the ability to scale to the largest utility globally, if not more. Number two, it gives them deployment choice. They want to deploy in their premise, in a hybrid cloud, in a public cloud of their choice, or consume it as a SaaS from us, which is hosted on Google Cloud.
Number three, we have designed it security-wise from ground up. Security is embedded into every component what we have built as part of this. It meets every regulatory standard and international security standards, so we can tackle any market we go into. Number four is flexibility innovation. Here, what we have done is this has the ability to start processing data from any type of edge device. We are starting with our Americas customers, with Americas meters. Next, we will integrate EMEA meters. Next, we will do Asia-Pacific. We can also start integrating other sensors. The way the platform flexibility has been built is it's easy to extend to different type of edge devices. Finally, we believe this platform and this type of edge to cloud ecosystem sets us up for future as well.
This is a very critical application for us. We have a lot of existing customers we are planning to move. I'll give you an update on how many customers are already in this platform. We will also enable this platform for all the new customers we sign up across different regions. The next one is analytics. There's a lot of things you heard. Before I even start, I would ask if you have a chance, please stop by the analytics booth we have outside. You will see some phenomenal information. One thing what we have done is, I think you heard, EV will be the biggest load you will see in the grid at a residential level or a commercial level.
What we have done is without having any insight whether EV is in the grid or not, we took an AMI data, partnered with some customers and Google, and we can determine with 98.5%-99.5% accuracy if a EV is behind a meter, if an EV got connected to a grid. That is the power of AI, the partnership Werner and Dr. Holz were talking about. What we have done is we have created a platform which has the ability to integrate, learn from the data it gets access to, and define some patterns and detect me and solves real use cases for utilities.
A lot of things you see is there's more technology capabilities of the platform, but truly our focus is how do we give utilities ability, like I said earlier, ability to take that data, store it in a secure way, process it, access if they want, and then from a value proposition, we have started to build use cases. Some of the use cases we've built is power quality, EV detection, voltage performance, and AMI-based AI and ML learning engine. You can build a lot of use cases on top of it. These four are foundational things we have built. I'll talk to you more about what we're going to do going forward, with respect to analytics. We see this as a platform which every utility and every...
Even a retailer who may not be a utility is looking for, 'cause they wanna get value out of their data and understand where they're going. How did this journey transpire? You heard we signed Google partnership December 2020. It took a lot of effort for us to, like Werner said, we had to become one culture. They brought a different culture than us, and we had to bring up our people from a skill sets perspective. It took us a little bit of time to establish that foundation for future, and I think we're ready. Some of the milestones we'll talk about what we have done is that has led to fruition. In third quarter of last year, we released our Emerge, the IoT headend system platform, first release of four releases.
It's a big milestone for us. Our customers are excited. They see a lot of value building on top of it. Number two, we have released our analytics, first release in December of 2022. That's a big milestone for us. Number three, we actually have moved all our internal business, core business operations on the Google Cloud. We run our core business in the cloud. For us, these three were vital foundational steps, 'cause you have to get a product out. Now as an organization, we think more like a cloud company, and we are using cloud. We are a cloud-based company, as Werner says. This sets us a future course of actually enabling a lot more exciting things. Number one, we will continue to evolve the IoT platform.
Number two, as you are seeing some of the use cases, we have tremendous amount of use cases we're gonna solve for our utility customers. One beautiful thing is this is one platform which helps support globally. For us, you build once, you are helping utilities across the globe. Every region has the ability to change to their regional leads. I think we are positioned to be very fast to market in delivering some of these use cases. That is exciting for us because we see as a big growth ahead. Now some of the biggest accomplishments we have had, I think I talked about core business. What have we done since the release? We have migrated actual real customers. We migrated six customers to date, and we're learning a lot.
We're learning a lot how customers need the system and how they would actually also use the system. There's two things. One, this also helps us, how do we optimize to drive better profitability on these products for us? Number two, how do we also scale and potentially even drive more revenues for us to offer additional services on top of what we do today? That is one thing we're very excited about. Like I said, we actually have done pilots with customers, and we have demonstrated the capabilities of our analytics, and we just have confirmation that we're working with a customer on a revenue generation, and we will continue to build on that. Finally, bringing all this together, right? What does this mean? What is the takeaway for you today?
Number one, we are very strongly positioned to grow our software and services business by 25% by 2025. How would we do that? We have the partnerships as a foundation. We have the portfolio, ecosystem foundation we have set up, and we have the digital solutions we have built on top of it, and we have a clear path of building additional digital solutions like demand flexibility, EV, based solutions.
The Emerge Cloud is a Software-as-a-Service, it drives a better annual recurring revenue model, as Elodie called this morning. It has a lot more predictability in our growth. We will start thinking and acting like more a software company by doing so. Thank you, and thanks, Eva. Over to you.
Thank you, Amit. We are actually moving nicely along our five chapter roadmap here, and we are coming to the end. Before we start with the Q&A in just a little bit, I would like to hand over the stage back to Quick, we'll give you some instructions on the Q&A.
Exactly. Thank you, Eva. Just to sum up. We would go into Q&A session, where we actually have here the leadership, look forward to answering your question. Delivering on commitments, I think that remains for us is so important topic. We really want to focus on that. I think we have the right strategy in place. Really now, doing what we say and saying what we do. As for the term guidance, you know, I hope we were able to show you actually profitably going forward. For FY 2025, we see solid growth and healthy margin improvements. I think there's quite some work involved. We feel confident to do that. We are clearly proud of being able to share, you know, this with you today.
Also, I thank you for your continued trust and support. I will not go through the key investment. I like Eva went through that, but I hope we were able to give you a pretty comprehensive overview of our strategy, about our product roadmaps, also software roadmaps, where we are and where we are going. I think as I said before, I feel we are very strongly positioned to support our customers and also the energy transition. We are actually really positioned in the sweet spot. I hope it came through that we are very excited about our future and would now actually then really look forward to your questions. In a nutshell, it's just I think nicely summarized here.
We are a recession-resilient energy efficiency company positioned right in the sweet spot, you know, of the energy transition, further amplified by the current energy crisis while playing an active role in decarbonizing the grid. Thank you already for joining us today. Again, I give now back to Eva, and then we would go into the Q&A session. Huh, Eva?
Thank you. You're welcome for that very special Easter egg that we built in the guidance slide that you may might or might have not noticed just a moment ago. That had something to do with being able to share information with Google and not being able to share other information in advance. It's all in your booklet and on the website and obviously in the beginning of the presentation. Now we very much look forward to engaging with you. We will do this the Google way. I have a microphone cube over here, so I hope you're all very good at throwing things and catching things because that's gonna be vital to pose questions today. We will now in a moment know if I'm good at throwing things and see who catches the cube first.
For all of our remote joiners today, I have a laptop sitting up here, so if you have a question, please raise your hand, and then we will ask you to unmute yourself after I announce your name, and then you can ask your questions as well. Now that the leadership team is lining up here to prepare for your questions, does anybody already have an arm raised? I hope it's not too... Thank you. I thought it would be, like, all the way up there. That would have ended in a complete disaster. Thank you.
Very, very good, Patrick. Breaking the ice.
Yeah. Thanks. Good throw, Eva. Well done. I have two questions if that's okay.
Please, yeah.
The first one would be just I have to, you know, on the guidance.
Sure.
The base is 10% at the midpoint, as you showed on the slide. We will add another percentage point from the R&D normalization. There's still plenty of supply chain costs to normalize.
Yeah. Yeah.
Right? Even if we add in some remnant structural costs, that will add one, two percentage points easily. We're already in the range. Today we've heard all these great things going on, right? Software recurring, revenues are growing, shifting towards grid edge, smart infrastructure. You're taking out costs. You're generating leverage by growing. I'm going on and on. I'm just wondering what's not going that well, right? What's offsetting these benefits? Is it wage inflation? Is it maybe structural pressure in the classical smart electricity meter business? Just trying to understand the moving parts.
You know, Patrick, I think it's a very fair question. You know, we clearly see a runway, as you said, to this, 25 guidance. As in everything, I think there are some headwinds, I'm sure. It could be some of the competition. It could be what we experienced actually since I'm in charge of Landis+Gyr. If someone would have told me at the beginning that all of us sit at home for months, you know, because of COVID or what we experienced in the supply chain. I mean, just to give you a glimpse, you know, in 2021 we have $30 million more costs, and in 2022, where we are presently, we have another $60 million on top of it. I think that will clearly come down. I think a lot of chip production capacity will be added.
Nevertheless, I think there will be one or the other things which probably doesn't go perfect, Patrick, but I do believe, I strongly believe that the 2025 guidance is doable. Absolutely.
Okay, thanks. The other question is on... We had that testimonial from National Grid, I think.
Yeah.
It was interesting to hear that they're developing their use cases in-house. Then you showed the slide with the.
Yeah.
Platform and the Grid Edge platform. I'm just wondering, what's the typical go-to-market? Is it more use cases you are pushing? Is it more in-house use cases, or is it actually sort of.
Yeah, maybe Sean, if you take that.
Yeah. It's a combination. We speak with the customer, we understand their requirements and their customers, and their own needs coming from our internal resources and capabilities. Typically it's a balanced act. Those six applications that are apps that we've developed are in conjunction with National Grid. Normally it's with the customer to determine their individual and also generic use cases that we can then bring to other customers where we see a reuse on a capability.
Just to give you an idea, these are not simple use cases only. For example, National Grid, we had around 60 use cases, which we developed together with the utility and then actually make the case to the regulator. The regulator needs to see, does it not only make sense for the utility, but also does it make sense for the end consumer. Maybe Bodo, Fluvius is a good example in terms of use cases, if you want to talk, say a few sentences to that.
We are de-developing the use cases within Fluvius, but what you see also outside on the power quality and grid flex control solutions. These are also the solutions we can sell standalone to customers, and we do that across Europe. Predominantly here in Switzerland, also in Austria, Germany, U.K.. These are markets which are very important locations you can see outside.
Very good.
Do I throw this now or?
Yes, please.
Yeah. You can throw it to Michael there. Michael looks pretty strong. Nice, Michael.
My question is more on Google, actually.
Yeah.
I mean, I see the attractiveness of it. Oh, Julia. Just to understand a little bit, what exactly is Google getting out of it?
Good. Why don't I give this question to Amit? Where is Amit?
Over here.
Here. Perfect. Yeah. By the way, we also have Google representatives here. Feel free to also chime in then, eh?
You, you heard from Werner and Horst, right? Part of it is we are taking a decarbonization journey, and they wanna do as well. There are synergies at a high level and strategic viewpoints where we're going. Number one, our partnership as we build solutions on Google Cloud, you ask the question, "Hey, what is Google getting and what are we getting?" We're solving real problems for our utilities, and rightfully so, we're gonna monetize that, and that's our revenue, number one. Number two, also doing it scale drives some efficiency, so it'll help us over a period of time to be accretive on margin side. From a Google perspective, we're consuming their cloud, so for them, that's revenue. That's one of the things for drivers for them.
For us, we're getting a platform which gives us the scale, flexibility, and speed to market.
It's really probably the biggest driver is consumption.
Yep.
You know? There is, there's Amazon, there is, Microsoft, there's Google. Google is rapidly actually gaining momentum, gaining speed, and it's about consumption to a large degree. Maybe Marijn, if you would like to add something from your side or Sasha? No. Did we answer it on, on point, eh? Very good.
Is that, for example, that would tie in with the customer feedback, I guess. What is the customer feedback like on Google, so to speak? I mean, are they expecting that your customers will peg on to that and go to Google?
Far we have very positive feedback.
Okay.
With the customers we did. I think it's very positive. For example, if a customer says, "Michael, I want to stay on my private cloud," or, "I want to stay on my hybrid cloud or public cloud," they can do that. You know what I mean? We still work our models actually then through Google, which also drives consumption. I think it's really win-win. There, yeah, to your right. It's an easy shot, huh?
Thanks for taking the question. Claire from Morgan Stanley. I have two questions. First is on hardware, on Smart Water, actually. It looks like within hardware, Smart Water is going to drive. It's gonna be the growth driver for the next couple of years. Question is, in terms of demand, compared to the outlook you gave two years ago, you know, what is different this time?
Mm-hmm.
For you to see that accelerated growth? Are you seeing a meaningful push from regulatory side? Then my second question is on free cash flow, maybe for Elodie.
Mm-hmm.
I understand there's a lot of moving parts here, anything you can quantify, any comment on CapEx?
Mm-hmm.
Working capital would be appreciated.
Very good. First question, I think goes to Steve from Australia. That's why we tease him sometimes and we call, "Steve, why don't you talk about water?
Yes. Okay. Yes, whilst the meter is a foundational piece of our Smart Water economy, of course, we have connectivity services, data platform, and analytics is all part of that offering. Look, maybe I didn't articulate it well enough. There are regulatory and consumer drivers around sustainability in the water industry. Actually, what I will say to you, if I compare my early exposure to the water industry compared to my much earlier exposure to the electricity industry, the sustainability drive is actually heightened. I would say it's stronger. There's a great push, and when you look at the statistics around water loss, non-revenue water, that is a huge driver in itself.
Yeah.
I would say we're on a good trajectory.
Yeah.
Yes.
The right time to invest from our perspective.
Yep.
Maybe adding to that, I mean, if you think about the news reports in last summer that we had droughts, you know, in wide areas of Europe as well, it's really becoming an issue right here where we live as well. We need to make sure that we preserve as much water as we can, to really make sure that there, you know, whenever there's less water available, less rain in the hot summer month, that we can compensate that somehow. That's, you know, leakage detection and leakage prevention is a good tool to do that.
No, absolutely. Maybe Bodo from your side also or Bodo comment from Europe?
Exactly. Adding to what both Prasanna and Eva just said, in Europe there is a regulatory change, by 2027 all meters have to be communicating. Now if you have a mechanical water meter that does not communicate, you can put something on top and add. If you have to introduce electronics in that water meter, with an ultrasonic technology you are in a leading position in respect to that. That's why we see now acceleration here.
Maybe last but not least, you know, for me, water is also extremely exciting from a margin perspective. You know what I mean? I mean, electricity meter has good margins, but when you compare water, they tend to be higher. That's also a very interesting driver actually to really push water, huh? To your second question, Elodie, why don't you talk about cash flow?
Sure. In terms of cash flow, as I mentioned briefly, we do carry more inventory this year than what we have done in the past. We do this because we have a very high backlog that we want to satisfy, and we see a lot of increasing revenue. That's one element on the demand side and on the supply side we continue to have supply chain volatility. We continue to have some component shortages and also we are facing increased lead times. The combination of these two elements brings us to carry more inventory in our FY 2022, which then has an impact on our working capital and on our cash flow. We do see some of that supply chain situation easing next year, and that should help us also to improve the situation.
On the other side, what I explained on the CapEx side, I think it was part of your question, Claire. We do see a pretty similar spending in terms of CapEx, which is in the range of $30 million-$40 million a year. For a company like ours, actually we operate a very asset-light model because we do leverage a lot on what we do with our EMSs and what we do internally. We see this fairly stable and maintain asset light.
Very good.
Very quick follow-up.
Sure, sure.
Can you provide a target for 25 on free cash flow?
As we explained today, we are very strongly cash generating company, and we will continue to focus on that. We'll continue to focus on very strong cash flow generation in line with what we generate as a, as an EBITDA and then, past performance.
Thank you very much.
That was a nice answer. You know what we found out? It's really funny actually. We as one of the only very few company, we actually provide the cash flow guidance. I think we looked midterm, and we looked short-term and said, "actually almost nobody does it." That's why we thought maybe we go with the crowd. That's actually. Don't worry. For us, cash, you know, heard me say that many time, cash is king. We really will drive that as we did up to now, including dividend, you know. Important. Good. I would like to see a long shot, somehow. If we can do it. Up there. Oh my God, can you do that? Maybe Michael seems to be very strong.
Michael, do you see that there? Nice shot. That was a good shot actually. Very good.
Hey, I think today we heard a lot about transformation.
Yeah.
If I simplify that a little bit, you have been in hardware company and now you're adding software. I'm wondering how your business model is changing and in your midterm target, so how big is the share of software revenues you can generate? That's the first question. Because it's only three years.
Yeah.
What is your real ambition?
As we definitely want to grow software and services, there's no question about that. What we do see is, when you look actually at the midterm guidance, we grow quite a bit on the top line. You know? At the moment we have around 20%, and while we grow software and services, we actually also grow quite a bit of top line. That's why from a percentage basis you don't see that much impact. I can tell you, it's something we are driving also in these large contracts which you actually heard and just the most recent one today. There's about 20%-30% software, that's a positive. They will help us actually from a 20% move more towards 25% and beyond.
But.
When you are making this transition towards more cloud-based solutions, et cetera, why is that not reflecting in a higher share of software revenues? Is that because.
Because we are growing software and services, but at the same time, you also saw that our top line grows between mid and high digit.
Digit, yeah.
That's the issue with it. You know what I mean? It actually grows with it. As the top line maybe comes down a little bit, in later years, it could be that. We definitely push in a direction of 25 and beyond, I can tell you that. For us, that's a very important target, you know, because software and services inherently tends to be more profitable, and we want to, we want to capture on that. Yeah. Very good. Good. The question is, here a mid-distance shot.
Oh, that's an easy one.
Yeah. This will go well. very nice. Daniel, this was a good catch. Not easy. Huh? Yeah.
I have two simple questions.
Okay.
I looked on slide 19, and I looked at the Asian bar. If I compare this with my glasses from 21 to 25, Asia looks almost the same. Is this an Excel mistake, or is Asia less grid intelligence heavy? What is the reason why the European bar and the America bar grow much stronger than the Asian bar?
Yeah. Also, the Maybe I start with American first. American grows the fastest, so that actually then dilutes a little bit, what you see. Secondly, it's more qualitative, so I'm not sure that it's properly reflected. What I can say, to Steve, we are really happy what he's doing in Asia. Asia is for us an important growth market. During the corona crisis, actually, Steve was actually not losing revenue, was actually still growing revenues, and keeps doing that. Steve, huh?
Yeah. I, and I guess we've got a pretty strong focus on operating margins.
Yeah.
W hich is really important. That probably makes our business more selective than in North America, for example.
Is it?
Sorry, Sean.
Is it less heavy in grid intelligence than elsewhere?
Look, it's The Asian market is in its infancy with regard to, you know, advanced metering infrastructure or smart electricity. We don't yet see the same demands for a Revelo type product. It's really in the early phases of smart metering rollout.
You see more commoditization in Asia. What we also see is, for example, China is pushing quite a bit. The Japanese pushing quite a bit. We are pretty proud that actually that Steve will be able actually not only grow the region but also get to 10%. You know, in an environment like this, it's very cost sensitive, but we feel that we can get there. Was also one of the reasons why we stepped out of India. India, it's a nice market, it's a growing market but from a profitability perspective, there's not much there.
My second question would be, I remember an interview you gave with the markets where you expressed your ambition in terms of acquisitions. Is that less of a focus because if you have all the organic growth or is that still an issue and still on the table and you just didn't have time to prepare a slide on it?
Yeah. It's a good question, actually, yeah. We are still very hungry, I can tell you. I mean, in my previous company, I think I told you, we made 25 acquisitions in aerospace, I'm very hungry. From a acquisition perspective, we want to make a large acquisition, preferably in the U.S. It should also be margin accretive. We have firing power somewhere between $500 million-$700 million, we have one shot. We are relatively selective. We also see, if you look into grid edge, if you look into smart infrastructure, multiples are still pretty high. That's actually a subject which we have on our radar screen actually every week. PV is under pressure by me that you find the right acquisition PV, huh?
You can talk about it.
We continue to look at the three pillars that we talked about. Probably what you're noticing is we bought five companies in the last 18 months. We've integrated those companies. As you saw from the presentations, we put them forward in terms of execution and getting to the commitments that we made to the market. The market also took a break in the last nine months. You know, all the things that have happened, high interest rates, name it. As Werner Lieberherr said, prices are still pretty steep. We are very disciplined in our approach, focused on the three pillars, especially grid edge intelligence and smart infrastructure.
Very good. Maybe question. Do we have someone from the online, Eva?
Maybe a quick reminder. If you have a question and you have dialed in online, please raise your hand so that I know that we should announce you. Here we go.
Here we go.
All right. Okay, Justin Bergner, if you could please unmute yourself and ask your question.
Hi, good afternoon. Over in Zurich, from the eastern part of the U.S..
Good to see you.
Given the guidance you provided last week for fiscal year 2023, and I guess it drew out some of the lingering supply chain headwinds, could you maybe categorize which supply chain headwinds are most constraining the company in 2023? Is it still chips? Is it the broader electronic component supply chain? Is it other factors? Just some detail there would be helpful.
Sure. Yeah. Good morning, Justin. It's really actually the chips. You know, we compete in the same area like automotive, like consumer industry. We see the availability improving, which is great. We see also from a cost perspective, we see movement in the positive direction. However, we not yet actually see what we exactly would like to see, and therefore that drives this. It's really electronic components, chips, pricing, we're in that area. The rest, I would say when you look at metals and plastics and so on, it's a more favorable environment.
Okay, great. My second question is, you know, from a U.S. investor's perspective, you know, we see the companies competing here in the U.S. market for water metering, and it's a few companies. I mean, Help us understand sort of the medium-term strategy for your water metering business. Is it built on taking your international presence and hopefully finding a meaningful entry point in the U.S. market? Or is it based on not focusing on the U.S. market as much, but finding, you know, good international markets to grow in and become a sizable player there?
Yeah. Sean?
I think in the North American market, where we're starting off as water communication modules, we've already got a market presence. We'll continue to improve and increase our capabilities within the communication module market. In terms of the full op water meter, our initial focus is on EMEA and the rest of the world, because the requirements for North America are a little bit more specific, a little bit different. We will build on the success from the other markets over time or play in that space alternatively. At the moment, it's the communication module, purely the North American market, and the meter is not yet fit for purpose 'cause of different requirements.
Exactly. Justin Bergner, we have, when you think about Neptune Technology Group, Xylem Inc., Badger Meter, strong companies in terms of water, so that's an area we don't touch in the first place. I think the technology we have is very good, but really pushing in Asia at the moment, what you heard with Lara Olsen and then also in Europe. Then, over time, we will see. We see, in comparison on the gas side, we see, much more opportunities in the U.S., and we want to actually leverage that.
Thank you.
Thank you very much, Justin. Thank you.
All right. Okay.
Oh, there.
Oh, okay.
This is Daniel. Good. Yeah. Nick, very good.
Helvetic Trust. Can you a little bit elaborate on your pricing strategy? Have you still quite strong pricing power? When is the next price increase of your products?
Yeah. in terms of pricing, I would say the following: We don't have the same latitude, for example, like consumer industry or automotive, you know. When you think about automotive last year, and I was in automotive, they produced 10% less cars, and that's a stellar year. We do not have that. We are in a regulated industry. We think in three buckets. We have a bucket number one, which is short flow orders. That means we actually get, we get an order, we can deliver quickly, we have the right pricing. That's about 30% of the time. That's very interesting. That's the best option. We have contracts in the other 70%.
We have contracts where we have indices, where we actually are able to adjust, based on supplier indexes, but we also have contracts where we can't. That's why you saw actually, when you looked at our company, you saw margin compression, namely in 2022. That will actually then ease as we go forward going into 2023, 2024. That's positive, you know, that we actually with, for example, all these chip suppliers actually adding capacity, that's a good thing. That helps actually our pricing position, and then also allows us actually to leverage more.
When you think about in general, it's clear that in the US, we have a critical infrastructure provider, which, for example, the Chinese or the Russians don't have. These are more differentiated products, so that allows us actually from a margin perspective, we clearly have, due to these factors, we have, clearly the best margins. You see Europe, more commoditized, but now also come up more differentiated. Asia, also a little bit behind Europe, but also actually then going in that direction.
A question for Elodie. Regarding ethics, are you hedging? 'cause you have a lot of U.S. turnover and EBIT.
Yeah.
Opportunity?
Actually, we are hedging. We are hedging more our Euro-based business because we're reporting in US dollar. This is our currency. We have hedged the major European currencies and as well some of the Asian currencies, and we hedge on our 12-month volumes.
This is our strategy. We did see obviously an impact now in this year with the ups and downs of the euros. Again, this is part of our strategy of hedging.
Mm-hmm.
Thank you.
Very good. We have a shot up there. Very good. Bingo. Guys.
I have one question regarding the reduction in R&D spend. I understand this is a relative reduction, so probably not the absolute amount.
Yeah.
Why is it coming at this time? I understand you have so many opportunities and.
Yeah.
It's a young field, basically. Time is also an issue.
Sure.
You know, to, to be.
Yeah.
Quick and first to place your bets. Why are you reducing R&D spend as a relative-?
Yeah. Amit is our head of technologies.
Sure. I think you heard Werner this morning, right? When we started in 2019, we committed 2% increase to 11% specifically on bringing water, gas software solutions. I think we have established that foundation. Like you said, it's percentage, so it's not an actual number. We still will continue to invest, but from the foundation on, but now it's more status quo. That's why we're able to bring it down to 9%.
Mm-hmm. Yeah.
Yeah.
Yeah. Very good.
Yes. Marc Forst, from VVaG. I would have an understanding question concerning the war of talent or war for talent. Since you're becoming more of a software company, everybody's chasing the same skill sets. Do you find enough people, capable people, or do you have vacancies, and how do you solve them?
We do have some vacancies. It's not always easy. You know, for example, last year our salary and wages total is $260 million. On average, we gave 4%. That's a lot. We can't do this too many times, but it's really important that we are actually able to retain and attract the right talent. In the current environment, what we see, we see the big guys, the Amazons, the Googles, and also Microsofts, you know, they are laying off. We are not unhappy about that, don't get me wrong, but it gives a certain balance in the whole system. Do you know what I mean? Which is really important for us because so I think that should also help us.
So far, we were able to really keep the critical talent.
Can I just add another question concerning the market share developments?
Yeah.
You're fighting in attractive markets that others see as well. We see VVW financing the infrastructure build-up for fast-charging stations in the US. You're not in the field of fast chargers, but still that, I mean, how would you see your market share developments over the course of the next five to 10 years, maybe?
In terms of EV now or in general?
EV as such. The strategy, Etrel, is mainly in Europe so far.
Yeah, yeah.
Not yet in the U.S.
Yeah, yeah.
The go-to-market has to happen there.
Yeah.
Could you describe that journey?
Sure. In general, we can say it's a very fragmented market. You know, and we feel that we have the right technology. We also, you know, Etrel is in Slovenia. We have in Corinth, we have a large manufacturing platform that also gives us actually operational leverage. In the U.S., PV, it's clear that there are some big boys there already. Why don't you talk about how we want to go after that?
There's a lot of niche players in the U.S. That means that is also true in the rest of the markets. We're very focused on the portfolio that we have. Everything that I spoke about is what we have today. We're also looking at how we can take this portfolio into other markets. Sean's looking at it. Steve's looking at it. We have a very focused approach to the market rather than trying to go helter skelter and try to, you know, attack every aspect of charging, which, as you say, is gonna be extremely difficult.
Mm-hmm. Mm-hmm.
The bundle will be decisive, and there you can offer the smart intelligence, not just the chargers as such. That's the value proposition.
Exactly.
That is a differentiator.
Yep. Exactly.
Yeah.
Behind you.
very good. Yeah.
My question refers a little bit to the pricing question that was asked earlier. Can you talk a little bit about the competitive environment in the US, particularly as you roll out the smart meters, the Revelo second weight meters? Are you seeing stronger competitive bidding processes? You know, you'll try and fight one another and miss more opportunities.
Mm-hmm. Yeah. Very good. Sean.
I think Revelo is a different product than the competition. I think as we said, it's a standard, a new industry standard going forward. It offers different capabilities, so it's not exactly the exact same product and exact same price point. Of course, over time, we have to grow this market and grow the value creation from this and grow our price accordingly. I think at the moment, we're playing a little bit in a unique position, and we can leverage that and increase pricing and reduce costing going forward.
Mm-hmm. Yep. Good. Eva, do we have someone on the?
No, I do not see anything.
I just want to say from my side, first of all, thank you for being here. Really means a lot to us. If you have a little bit of time, please interact with us. We have wine out there. We also have champagne out there. I already had someone coming to me during the break and say, "Hey, Werner, I actually saw Basic Instinct last night," you can talk about anything. We are here, we look forward to your discussions. Thank you very much and really look forward to seeing you all very soon again. I thank you.
Thank you.
Thank you.