Schneider Electric Sa

Welcome to the Schneider Electric's full year 2025 results with Oliver Bloom, Chief Executive Officer, Hilary Maxson, Chief Financial Officer, and Nathan Fast, Head of Investor Relations. Excuse me. Thank you for standing by. At this time, participants are in a listen-only mode until the dedicated question and answer session of today's conference. At any time, you may press star, then the number one on your phone to poll for a question. If you need to withdraw your question, press star and two. I'd like to inform all parties that today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now hand it over to you, Mr. Nathan Fast.

Good. Good morning, everyone, and welcome to our full year 2025 results presentation and webcast. I'm joined in Paris today by our CEO, Olivier, and our CFO, Hilary. For the agenda, you already have the slides available. We'll go through them now and then make sure to have enough time for Q&A. As always, I want to remind everyone about the disclaimer on page two. And with that, Olivier, I hand it over to you.

Thank you very much, Nathan. extremely happy to be with all of you today look uh more than 15 months in the job the the first time i'm doing really this earning call with you for the full year 25 and i'm extremely excited to be with you to report on what happened in 25 and even more important what we see for the future as you know with the management team we did spend a lot of time in 25 to define the next cycle we were with many of you during our capital market day And we launched the new mission of Schneider Electric, which is to be your energy technology partner, to be the company which will be at the convergence of electrification, automation, digitalization in every single industry to drive efficiency and sustainability for all. That's what we call at Schneider Electric, advancing energy tech to the next level. And of course, I'm going to come back on that. The point I want to make here, it has really received a very, very good feedback. We got a very good feedback from the market, from our business analysts, from our customers, from our employees, from our partners. So that's really exciting for us to enter 26 with this new positioning, which is giving a lot of inspiration for all our stakeholders. So now let's turn to the most important part, of course, of this call, which are our results. I'm pleased to report a very strong Q4 revenues growth at 10.7%, 11 billion. And even more important for me, it's really the acceleration of the two businesses, the acceleration of energy management, but the acceleration, again, in industrial automation in Q4 with a growth of 8%. If you go look at the full year results, that's an important milestone for Schneider Electric. For the first time, we have exceeded 40 billion euros in terms of revenue with a 9% organic growth. So that's, as you can imagine, an important milestone for a company. And even more important is the acceleration that we have seen in our two businesses. I was just talking about industrial automation. We told you with Hillary a year ago that we will turn positive for industrial automation in 25. We did it and we delivered 7% growth in H2, which as a result has helped us to achieve 3% growth for industrial automation. As you know, energy management has been really the driving force from a growth standpoint for the past year, and it continues again to be the case in 2025 with a growth slightly above 10%. So all in all, again, a great year from a top-line standpoint, both businesses driving good contribution to the growth of the company and an important milestone, €40 billion. When you go a bit deeper in all our achievements, we are pleased to report that we have achieved a margin expansion of 50 BIPs, which is in line with the target we set up for us at the beginning of the year, which runs at an adjusted EBITDA growth of 12.3%, which is again within our guidance of 10 to 15%. Extremely important milestone also for Schneider Electric. a free cash flow of €4.6 billion with a conversion rate slightly above 110%, which shows again the strong financial health of the company overall. We are pleased to report that we are going to distribute a dividend of €4.2 per share, again in line with our progressive dividend policy, which has been the case for the past 16 years. And our TSR has grown by 89% for the past three years. So all those financials show really the solidity of Shutter Electric's strategy, but even more the solidity of our execution. And as you know, it's equally important for me and the team that we always look at our financial, our digital metrics, sorry, which are translated inside the digital flywheel. You know, it has been an important step. transformation for Schneider Electric in the past cycle. It will continue in the future. And the digital flywheel is giving us really the illustration of the execution of our portfolio strategy transformation. So we've reached 25 billion of our turnover with digital flywheel, which represents 62% of our overall revenue. And please report that it has achieved a growth of 15% last year. We continue to grow very fast on all the aspects of the digital flywheel. But very excited to see that we are now close to 20% of our total portfolio in services and software. And last but not least, it has been an important focus for us in the past year, not only the acquisition of Aveva, but the transformation of Aveva, the acquisition of OSI. And last year, we have achieved an outstanding performance with 12% growth in AR for Aveva. It's also important to mention that 25 was the last year of our sustainability program, the one we launched five years ago. You know that we have this culture at Schneider since 20 years to launch every three to five years a new program where we set up an ambition on where we want to take the company. And we are pleased to report that we have achieved overall our goal. I'm not going to go through all the metrics, but that's very, very important. And I'll talk later about when we speak about 26. The only thing I'd like to mention is when you look at all these metrics, if I just highlight some of them, extremely pleased to say that With the portfolio of Schneider, we have had to save and avoid 862 million tons of CO2, which is tremendous since we created that initiative in 2018. You will see later that we'll keep going in the next chapter. But that shows how the impact of the business of Schneider Electric. can support all our customers everywhere in the world. And we have embarked not only our customers, but our partners, our suppliers. Our suppliers have also achieved their goals. So we've divided by two the CO2 emissions of our suppliers that were part of that program. And we continue to have a very strong focus on access to green, clean energy to many people who don't have access to energy in the world. And we have achieved this milestone, which was super important for us. 50 million plus, actually, we have exceeded. reaching $61 million. And of course, all those achievements have been recognized multiple times in the past year. It's always great to be a leader in that domain. So if we wrap up 25 in short, as I said, record year in terms of revenue crossing $40 billion. All-time high level in terms of backlog. We'll come back to that with Hillary. Extremely strong performance in adjusted net income and free cash flow. And acceleration of the demand and profitability in H2, which is what we told you with Hillary when we were together in July. What is very important for me, and we told you that during our Capital Market Day, we are accelerating the transformation of the company. We have a plan. We are accelerating the transformation of the portfolio, making Schneider Electric the company which will advance energy tech to the next level. We are going to the next level of our digital portfolio, leveraging AI and bringing energy and industrial intelligence. We have reinforced our multi-hub strategy in a world which is very fragmented. We do believe that our regional model brings a lot of advantage. We have reinforced in particular in India for the international market with the acquisition of LMT last year, the completion, I should say, of the acquisition. And last but not the least, we spent a lot of time with the team last year to simplify the operating model to make sure we can generate more efficiency and create even faster execution. So now if I turn to 26, I'm not going to talk about the long term today. It was done during the CMD. But if I recap what we told you in London in December, we have three megatrends in front of us that have been the main driver of Schneider Electric growth in the past year. The evolution of the new energy landscape, electrification of usage everywhere in the world, digitalization going to the next level with AI, and of course, a world which is more and more multipolar, and we don't believe it's going to stop. So, for us, what is very important is to make sure we can leverage and accelerate everything we do at Schneider Electric to make the most of those three trends. And, of course, what we see, and I'm sure you see it as well, all those three trends are accelerating at the same time at a speed which is unprecedented, which impacts, of course, all our end market. Speaking about the end market, it's fairly positive for Schneider Electric. And we like always to go back to those end market growth and to tell you how we see the market. We continue to see a double digit opportunity plus in data center and network. Solid growth on buildings and industry. And we'll say a little bit more with Hilary also on that one. And we continue to see infrastructure growing fairly fast between 5% and 7%. What do you see? As a result of the past cycle, we continue to be a very, very balanced company in terms of exposure. We'll talk about geography, but balance in terms of a market. I think our three largest markets contributing all to one third of the revenue of Schneider Electric. And infrastructure, step by step, going also to the next level with close to 15% of our revenue. So, what's next for 26? We are basically going to execute our plan, our strategy plan, the one we present to you, which is really to advance energy tech to the next level of intelligence. We are going always to follow those three important transformations, which we have launched internally. We call that inside Schneider our company program. This is a vehicle we are using to align all the entities of Schneider Electric everywhere in the world. For me, what is very important is not only to define the North Star, advancing energy tech, defining those strategic priorities, but equally and even more important is how we align our teams everywhere in the world to make sure we execute faster the strategy of Schneider Electric. So, talking about energy and industrial intelligence, we want to reinforce our energy, our technology leadership. We've presented in detail our strategy in December, but I want to really recap what we told you. We have built a huge portfolio in the past, which is extremely differentiated, starting by our legacy product business, but going to the next level of age, control, starting to do more and more in digital and software and digital services everywhere in our portfolio. What makes Schneider Electric very, very different at the end of the day? We are combining a unique expertise in different domains. Those domains are the building domain, the power and IT domain, and the industrial automation domain. What we want, we don't want those domains to innovate in a parallel universe. We want to create a unified customer experience for our customers. Let's make it simple. Every time we sell solutions to our customer, we want to keep it simple for our customer to commission the asset, to be able to leverage all the software, to create a unique user experience. It means that, for instance, you need to have digital platforms which are the same. We need to create hubs which are the same. It's not only about creating the largest portfolio in our industry in those domains. It's to make sure we make it simple, easy for our customers to use all those offers of Schneider Electric. And what we want to do even more in the next cycle is to do it through their full life cycle. Schneider was known 10, 15 years ago as a company which was more at the capped stage when we built Schneider. We've moved big time in the past five years to make sure we are also at the design level. We can help our customer to design, to simulate, to create digital twin for their asset. And of course, when we have installed our solution, what we want to do even more through digital is how we can help them to operate efficiently, how we can help them to maintain efficiently, to extract data that will help them to manage the obsolescence of their asset, for instance. So all in all, this is what you see on this slide, which is a strategy of Shredder, I think. And what are we doing differently in this cycle? Now we've reached a level where most of our assets are connected. Again, keep in mind the digital flywheel, going step by step to 70% of the digital flywheel. So it's about extracting all those data. at all level layer of our digital stack, extracting external data, federating, structuring those data in the data cube to make sure thanks to AI we can amplify what we give to our customer and deliver more intelligence. So it's about building the foundational model in AI in energy and industry that will create more value for our customer in the future. And it's not something that we are dreaming to do in five, ten years from now. It's something we do already. If you take just one example of the data center, which is a place where we have invested, as you know, a lot in the past years, we are, of course, in the middle, as you can see, present at the build stage historically. We have reinforced our portfolio, for instance, with the acquisition of Motivea and Liquid Cooling. But what is equally important is being able to work with NVIDIA, with our customer, the large hyperscaler, on how you can design and simulate, how you can work in the universe of NVIDIA, on how we'll behave digital and electrical infrastructure in the future based on the next generation of GPU that NVIDIA will launch in the future. And then we can move to a stage where we are working with our customer to design their own AI factory, we can build, we can execute with them, and we can also extract data at the end of the cycle to make sure we give more to those customers. So that's really a typical illustration of what we mean going to the next level of energy intelligence, unique customer experience, leveraging all the portfolio of Schneider and being able to do it through the portfolio, through the full life cycle of our customer. Now, we have multiple proof points and other examples we are doing. We are launching for instance, EcoStruxure Foresight operation, which is basically the convergence of power and building management in one software, amplified with AI, that can give a lot of opportunity for our customer to improve the efficiency of our building. And I'm not going to cover all the experts, but we have also what we presented to you in December, what we are doing in industrial automation with EAE, EcoStruxure Automation Expert, which is taking automation to the next level. So all in all, just as a recap, we are investing a lot in R&D. We are growing progressively to the next level of our journey in R&D with 7% approximately of our turnover, and having always in mind those end targets, which is keeping on increasing the part of our portfolio which will be more digital, more than 70% at 2030, accelerating everything we do in software and services, so going step-by-step to 25% of our total revenue, and all of that helping you to multiply by two our recurring revenue as part of the turnover of Schneider. The second chapter, which is very, very important for me, and I'm passionate by technology. I strongly believe in innovation. I strongly believe that's what will make Schoenal Electric very different. But I'm equally passionate on how we are going to differentiate in front of our customer. You know it, but we have decided to go to the next level of the regionalization of Schneider Electric. So it's basically how we structure the company in terms of innovation, in terms of supply, but also in terms of sales, and making sure that we are creating four regional loops. in North America, Europe, China, East Asia, and South East Asia and international to create agility and speed. So what does this mean in simple terms? You identify needs in one of those regions. You can speak to R&D people who are very, very close to you. You can speak to the supply chain people. And you can execute projects very, very, very fast. And you don't need always to go back to the top of the company. Now, it doesn't mean that we want to catch Schneider Electric in four pieces. All of that is supported by a global governance where we define very clearly where we want to go in terms of R&D. For instance, what are the platforms we want to develop, what are the choices we want to make in terms of electronics. Also, the way we want to design our supply chain. But when this global framework has been defined, we want to empower our four regions to go much faster. And what we are doing also in terms of operating model evolution is how we go to the next level of engagement with our global customer, which, as you know, will represent a growing part of ourselves. When we go, for instance, to cloud and service providers, to utilities in all the segments, we are going to the next level also of engagement with our global customer. So on this slide, you have a couple, again, of proof points of what we are doing to make it happen. I'm just doing... To give you a few examples, you know we want to have 90% of our sales to be manufactured in each region. Manufacture means both what we buy from outside, but also the cost, the labor cost that we have for manufacturing. So for us, it's important that we keep investing in all the region. I said it, we've completed the acquisition of Lewis & Nixon in India, which create a very, very strong India hub to support the international market. We continue to invest in the US, in North America, for North America, especially to support the growth of our data center business, both in low voltage UPS, but also in liquid cooling with the acquisition of Motiver. Talking about Motiver, we have decided to open a new factory in India. Actually, we announced last week to accelerate the expansion of MotivAir outside of North America. And we continue to leverage, for instance, China as one very important hub for us in terms of power electronics, but also localizing offer like GVXL to make sure we are more competitive in the Chinese market. And we continue also to invest in Europe. New factory we are launching in Macon and taking our John Venture Schneider E-Start to the next level for electrical vehicle. So, the last pillar of that transformation is operational excellence. Also, extremely important for me, we've been very, very vocal with Ilari and the management team in December that we want to innovate in technology, we want to accelerate the growth of the company, but all of that has to translate in a very strong operating margin, strong return for our shareholders, and that's why we decided we need to accelerate all our plans when it comes to cost competitiveness and scalability. Cost competitiveness on one side because I want to make sure we always stay competitive in everything we do. The design of our product, the cost of our product, the cost of our solution for our customer. How we do a better job to collaborate with our supplier to deliver innovation, cost and time to market, which is very important for me. And having a very strong machine where we deliver strong industrial productivity every year. At the same time, I want Schneider Electric to be extremely scalable. We just sell it, 40 billion, huge milestone. For a person like me who joined the company more than 32 years, which was, I think, 5 billion at that point of time, I mean, it's just an impressive milestone. But if we want to go to the next level of our ambition, 7-10% growth every year, that's super important that we always work on the fundamental of the company. our IT system, our supply chain, and so on and so forth. And I do believe we have a huge opportunity to leverage AI to keep really a strong level of scalability, but also efficiency at the same time. And I said it, I will go very, very fast. We are also working a lot with the management team on how we keep simplifying Schneider Electric year after year to make it easier for our people to execute. Here again, a certain number of proof points on how we want to collaborate more with partners, suppliers, companies like Infineon for instance. I mentioned going to the next level of flexibility in capacity also, working strongly with companies like Samsung and Foxconn for instance, where we believe it will give us an opportunity to accelerate really our capacity everywhere in the world, accelerate our competitiveness. And an absolute obsession on at-cost by design in order to contribute to a very strong improvement of our gross margin. So a couple of examples that you have on that slide, but I remind you on the right-hand side of the slide, those operational metrics we've defined with Ilari during the Capital Market Day, which are absolutely essential for us. Well, we want to grow very fast. We want to stay very, very healthy at the gross margin level. Always focus on the efficiency of the company. And last but not least, always working also on our portfolio to make our portfolio more efficient. So these are really the three main chapters that we presented to you on which we will give you an update every year, every half year on how we are progressing. But of course, I would not be complete if I would not speak about what makes Schneider, I think, extremely different in the market. people and sustainability-centric company. I said it, we've completed successfully the past cycle when it comes to our sustainability achievement. We presented that to you already, so I'm not going to go one by one, but we have launched our new program when it comes to what are the next with transformation we want to deliver, with a very, very strong belief that as a company we can have a lot of impact, but we believe that advancing energy tech will bring progress to all everywhere in the world. So there are a couple of metrics that we have kept from the past program. Again, saved and avoided emission, going to the next level. I told you 800 million tons plus we want to achieve 1.5 gigatons by the end of 2030. But new metrics we are building right now on how we can build train more electricians in the world to support that big trend on electrification. And of course, always covering all the aspects of ESG and trying to impact our entire ecosystem, including suppliers, partners, everywhere in the world. When it comes to people, we continue to invest a lot. Super important for me that, one, we keep our employees engaged in the transformation of Schneider. We are moving very, very fast, so we want to keep our employees along with us to keep the management, and we want to make sure they are motivated and engaged to work with Schneider Electric. And at the same time, what is super important for me, we are moving really to this tech world, which require new competencies. So training our people in digital, in AI, in those new energy landscape technology is extremely important. And last but not the least, the second metric for us in terms of engagement is always offering the possibility of our employees to become shareholders of Schneider Electric. I'm extremely pleased to tell you that 63% of our employees have invested in our worldwide plan last year, with some countries going above 80% of employees. So you imagine that's a demonstration of the commitment of our employees. And we've been this multi-model, going to the next level of regionalization. You know, we have a unique model of management where we want to have a very decentralized leadership, not only for the regional team, but also for the global people who are managing China Electric. Why? Because I believe that in a world which is going to be more and more fragmented, that will make China Electric much more agile and much faster to make the right decision. So to wrap up on the priority for me as a CEO of the company in 26, definitely first and foremost, delivering a very strong performance. We'll come back to that with Hilarie in a couple of minutes. But again, accelerating everything we do on the technology leadership side. being the absolute leader in the new energy landscape. We are the worldwide leader in electrification. We know the energy landscape is changing. It's bringing even more electrification, more change in our industry. We want to keep and reinforce that leadership, going to the next level, leveraging NI and creating energy and industrial intelligence for our customers. And of course, with the data center market, which is growing fast, Keeping an absolute leadership and making the most of this growth opportunity. Going to next level of regionalization to satisfy even more our customer, local, regional and global. We see strong demand everywhere in the market. Most of the geography, all key geography will contribute positively in 26. So let's make the most of the growth everywhere in the world. And of course, executing seamlessly the record high backlog that we delivered last year. Last but not the least, I said it, huge focus on operational excellence, gross margin improvement means strong focus on cost, productivity, pricing, margin obsession. This is very high in my agenda, very high in the agenda of the management team. And, of course, we want to continue to bring the next level of scalability for Schneider Electric and, in particular, levering AI. So this is about really what we plan to do in 26. But before going more in detail on how it translates in terms of financial ambition, I would like to hand over to Hilary, our chief financial officer, to tell you more about our 25 financial performance.