Siemens Ag Spons Adr

Good morning, ladies and gentlemen, and welcome to the Siemens 2024 fourth quarter conference call. As a reminder, this call has been recorded. Before we begin, I would like to draw your attention to the safe harbor statement on page two of the Siemens presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Tobias Atzler, head of Siemens Investor Relations. Please go ahead, sir.

Ladies and gentlemen, and welcome to our Q4 conference call. All Q4 documents were released this morning and can be found on our IR website. I'm here today with our president and CEO, Roland Busch, and our CFO, Rolf Thomas, who will review the Q4 and full fiscal 24 results, followed by the outlook for fiscal 2025. We will also elaborate on our long-term direction for Siemens to act as one tech company. After the presentation, we will then have ample time for Q&A. The call is scheduled for up to 90 minutes. Since there is a lot on the agenda, with that, I hand it over to Roland.

Thank you, Tobias, and good morning, everyone, and thank you for joining us to discuss our strong fourth quarter and full year 2024 performance. We will look ahead into our ambition for fiscal year 2025 as well. Four years ago, we started executing our strategy to combine the real and the digital worlds, and we have achieved impressive results. Now, it is time to take Siemens to the next level as one tech company. We started this program to accelerate transformation, to make a step up and unlock our full potential. Later, I will talk about the key building blocks to achieve even stronger customer focus, fast innovation and higher profitable growth and ultimately value creation. But before that, let's start with fiscal year 2024. We delivered a successful fiscal year and created substantial value for all our stakeholders during a challenging period. The world experienced a year with ongoing geopolitical tensions and macroeconomic uncertainties. Again, wars, risk and inflation from new tariffs, and intensifying unilateral approaches held back global trade, private spending and production. Export-driven Europe and Germany in particular were impacted primarily. Ongoing destocking and overcapacities, especially in China, weight on global manufacturing as well. However, the further rise of digitalization and AI, increasing demand for high resilience and steps towards an all-electric and decarbonized world offered tremendous opportunities for all our offerings, be it software electrification, automation, sustainable infrastructure, or mobility. My thanks go to our global team Siemens for a great contribution in successfully managing this complex environment together with our customers and partners. As a technology leader, Siemens seized significant market opportunities. Orders topped 84 billion euros and were 4% below prior year's tough comps, while revenue grew by 3%. A healthy book-to-bill of 1.11 and strong backlog of 113 billion euros give us confidence for fiscal 2025. Industrial business profit and margin were level with our strong prior year. We demonstrated again that our strategy as a leading technology company powered by a resilient operating model delivers. All this despite the fact that our core industrial automation business faced material headwinds. Our strong operational performance also compared to competition, is most notably confirmed by continuously excellent free cash flow. Our industrial business delivered another record year with almost 11 billion euros of free cash flow, which led to an impressive 9.5 billion euros for the group. Operational strength is fully reflected in our record high earnings per share pre-PPA and excluding Siemens Energy. of €11.45, up 6%, and well within the guidance range we issued one year ago. All three businesses met their latest fiscal year guidance. Digital Industries' revenue declined by 8% on a comparable basis at the lower end of the guided range due to challenging conditions for our automation business. Profit margin reached 18.9%, where a very positive development in the software business was overcompensated by missing volume and related progression effects in the automation business. Smart infrastructure grew by 9% and achieved record profitability of 17.3%, even exceeding this year's guidance. I'm very pleased that the data center business revenue grew more than 50%, now exceeding 2 billion euros, a clearly significant and clearly winning market share. Smart infrastructure remains on a very consistent improvement path, which is highlighted by an impressive 16 consecutive quarters of year-over-year margin expansion. And the team will aim higher as they will show at their capital market event in Zug in December. I am very pleased. The supervisory board extended the contract of Matthias Rebellius according to his wish until end of fiscal year 2026. With his strong leadership, passion for customers and deep knowledge about technology markets and regions, he will further shape the outstanding successful journey of the smart infrastructure business and support us in the transformation of Siemens. Mobility again delivered healthy revenue growth by achieving 9% on stringent backlog execution well within the guided level. Annual order intake reached 15.8 billion euros with a book-to-bill close to 1.4, reflecting the competitiveness of our portfolio. The team achieved industry-leading profitability and free cash flow again, managing risks and opportunities in a prudent way. Siemens has been a global company from the very beginning. It is in our DNA to continuously develop our well-balanced global footprint, improve resilience, and make investments where our biggest opportunities lie. In fiscal year 2024, among our large countries, the US contributed 12% revenue growth, while India was up 16%, whereas Germany and China were lower on soft industrial demand. Looking ahead, we see opportunities in all geographies, and we are deeply rooted in local societies and will continuously drive our local for local strategies. Now, let me outline some key operational highlights for the fourth quarter. Our customers continued to invest in activification, digitalization, and sustainability, and this led to strong organic top-line performance. Book-to-bill reached 1.1. on strong auto growth momentum of 47% in mobility and significant auto growth at smart infrastructure driven by large orders. Orders in digital industries came in, as expected, below prior year. Our automation business was moderately up on prior year's trough level. Economic activity was still muted and investment sentiment weak in core industries such as automotive, motive and machine building and macroeconomic indicators and company news point to a late recovery in our key region, Europe. Demand in China is still held back from ongoing stocking in the distribution chain, albeit we see some green shoots supported by government stimulus. Our software business recorded several large orders, yet below the extraordinary high level of large EDA contract wins in prior year. Overall revenue growth reached 2%. The largest growth contribution came from mobility up 15%, while smart infrastructure grew by 9%. The software business in digital industries grew moderately on a very tough comps, whereas automation was substantially lower due to fading support from order backlog and soft demand from short cycle book and bill orders. I am particularly proud of our electrification and electrical products team, both achieving revenue growth in the low teens, managing fast output growth by ramping up our own resources and managing the entire supply chain very well. What really matters is value creating growth. And we execute it in a very stringent way. A strong profit of 3.1 billion euros in the industrial business and, as an outstanding highlight, 5 billion euros of free cash flow all in. Our digital business was a major growth driver in fiscal year 2024, up by 22% and reaching revenue of 9 billion euros. This now equals around 12% of total revenue. We continue to launch innovative offerings on our digital business platform Siemens Accelerator across all businesses and drive the expansion of our partner ecosystem. The SaaS transition in digital industries is fully on track, delivering annual recurring revenue growth of 14% in Q4. Two weeks ago, we announced a crucial strategic move to reinforce our leadership in industrial software and AI with the acquisition of Altair Engineering. And we continue to sharpen our portfolio by optimizing our portfolio with targeted smaller investments and disposals. An important milestone was the closing of the Enumotix divestment on October 1st, as well as the announced sale of airport logistics. The underlying strengths of our company, combined with focus on attractive shareholder return, is reflected in our dividend proposal of €5.20, up by 50 cents. Looking ahead into fiscal year 2025, we will react flexibly on market developments, balancing growth and innovation investments with productivity and cost measures tailored to the individual business requirements. From what we see today, with a backdrop of diverging trends of ongoing challenges in the industry sector, alongside strengths in infrastructure markets such as electrification and mobility, We expect further value-creating growth in 2025, and Ralph will give you the details and our assumptions. Now, let me shed some more light on our One Tech Company program. As I mentioned, we achieved a lot over the past four years, driving profitable growth, record performance, and strengthened technological leadership. We are perceived as a technology company and have built a strong foundation for future success. From a strategic perspective, our portfolio is very well positioned along secular demand trends, driven by electrification, automation, digitalization, and sustainability, solving the most pressing challenges of our customers and society. But today we are at a pivotal moment. Rapid changes in technology, such as the intensified use of AI and software digitalization and the shifts in markets through writing competition like in China, provide both. risks, and opportunities. We have defined our long-term direction for Siemens to act as one tech company, a company characterized by stronger customer focus, faster innovation, and higher profitable growth. We are currently working on three main pillars to drive change faster and more rigorously. The first pillar we have is foundational tracks targeted to reshape the fabric of our company, laying the foundation for one tech company. We will optimize processes, structures, systems, and ultimately change behaviors towards an organization that can scale faster and is geared towards collaboration. For example, through foundational technologies that are used across the company, eliminating internal redundancies, delivering the best technology once and productizing it and providing seamless functionality for our customers. We will accelerate the development of sales of scalable vertical offerings along digital threads across businesses. And we will accelerate through a more intense use of our partner ecosystem and the huge amount of data we can access. As a result, we will deliver greater value to our customers. AI will be built in all our offerings based on a coherent data strategy. This brings me to the second pillar, investments. Our capital allocation approach will be even more rigorously geared towards growth fields, both organically and through acquisitions. Our plan to acquire Altair is a milestone in strengthening our industrial software offering with an attractive, highly complementary portfolio. A core area of our investment tracks covers investments in R&D as well as in growth regions such as India or certain verticals like data center. Third pillar is focused on productivity. For fiscal 2025, we will further invest in our own digital transformation by implementing new IT tools to optimize operations. In addition, we will leverage AI and data driven insights to drive efficiency across all functions and improve competitiveness. For example, broad based use of AI tools in coding will require substantial reskilling and shifts in our workforce. We will continue to provide updates on our progress over the coming month and are on the road to share a comprehensive perspective on Siemens as one tech company at a capital market day late in calendar year 2025. A key area of investment providing valuable scalable offerings is our digital business platform Siemens Accelerator. One year ago, we announced our game-changing collaboration with Microsoft by launching the Siemens Industrial Co-Pilot. Together, we have made significant progress. Over 100 companies are using the co-pilot and our co-creation partner ThyssenKrupp Automation Engineering is the first to plan a global rollout. It is also great to see that more than 120,000 engineers who are using our engineering platform TIA Portal can now enhance their work with this ChenAI-powered assistant. At this week's SPC Fair, we have launched the latest innovation from our partnership with NVIDIA, Scaling AI. An industrial AI suite that runs on a new line of industrial PCs powered by NVIDIA's GPUs is accelerating AI execution 25 times. This makes complex AI tasks in advanced automation broadly available and boosts efficiency. We continuously upgrade our offerings across all businesses. At the InnoTransfer, we launched SignalingX, leading rail signaling and control systems into the digital future. Both mainline and mass transit signaling applications and systems can be seamlessly controlled and operated from one centralized signaling data center. This and open interfaces to train planning systems enable rail operators to optimize operational efficiency by up to 20%. Bringing Siemens Accelerator and vertical know-how together is essential to scale offerings and drive sustainability. Together with Merck, we will work as a preferred partner on their smart manufacturing concept of the future. We are supplying cutting-edge software and hardware solutions across their three business sectors. Modular production is reducing time to market, lowering investment costs, and cutting CO2 emissions. Smart applications can also be transferred to hospitals. Soon to be open, Kantonspital Baden in Switzerland will optimize operations and improve patient experience with a customized IoT platform. Thousands of asset tags and sensors will feed into an app-based navigation system. This enables the operators of the hospital to identify and locate critical assets through real-time location-based services. Our comprehensive smart buildings portfolio is also used by the hospital. In the Netherlands, we partner with Alliander, a large distribution grid operator serving 3.5 million customers. With our new software, GridScaleX, we tackle critical challenges of the energy transition, such as capacity constraints. Its implementation aims to extend grid utilization by up to 30%. And finally, A great example for cross-company collaboration from our mobility business. Singapore Land Transportation Authority awarded the Siemens-led consortium to provide the power supply system for the cross-island line. Smart infrastructure is supplying the medium voltage switchgear. In combination with the early award of the signaling system, more sustainable and cost-effective operations can be achieved. As I mentioned, a core strategic lever for the value creation is our goal to grow the digital business. FISCLEAR 2024 was a step up, also benefiting from large software license deals and very successful SaaS transition. We achieved a compounded annual growth rate of 14% to 9 billion euros over the last four years. All our businesses. allocate significant resources to expand and promote Siemens Accelerator software and digital service portfolio. And the planned integration of Altair Engineering will boost our share of digital revenue even further. A successful transition of a significant part of our DI software business towards software as a service is crucial in driving our digital business. Over the past three years, we have delivered impressive results and we will keep the momentum up. ARR growth reached a very healthy level of 14% over prior year in Q4. And our plan to sustain ARR growth in the low teens in fiscal year 2025 in line with our target of more than 10%. The cloud portion stands at 1.8 billion euros, equaling 42% of ARR, exceeding our target of 40% one year ahead of schedule. The team is now targeting to approach the 50% mark by the end of fiscal 2025. All indicators, number of total customers, share of small and medium enterprises, and customer transformation rates continue to develop in the right direction. As indicated, after surpassing the belly of the fish in the SaaS transition from the PLM and part of the EDA business, we will continue to see gradually higher profitable growth contribution. More than 90% of our business enables positive sustainability outcomes for our customers. Two recent examples are joining the Global Battery Alliance and using green steel for control cabinets. A very important step was that our updated ambitious near and long-term emission reduction targets have been confirmed by the science-based targets initiative. We are fully committed to drive towards a low carbon future. A key lever for future success is further accelerating our innovation speed. In fiscal year 2024, we invested around 6.3 billion euros to further upgrade our strong connected hardware base and intensify investment in our software and digital portfolio. For fiscal year 2025, we plan to keep the intensity at least on the 8.3% of revenue level, potentially even a notch higher, with further growth in absolute terms. To unlock our potential as one tech company, we must scale our software business fast. As an important step towards this ambition, we pulled development resources relevant for certain cross-business software technologies and applications together in a foundational technologies unit. Their mission is to build common cross-business software services for a frictionless customer experience, no matter where they use our portfolio. These services will be used across the company. This will enable us to accelerate innovation, productize software services, core software services more effectively and efficiently, eliminate internal redundancies and harmonize the Siemens accelerator end user experience. In addition, our foundation technology team is closely collaborating with all businesses to maximize the impact of investing in 11 company core technologies. As you can see from the examples on the slide, all businesses will drive their innovation leadership along key offerings in connected products and systems, automation, domain-specific software applications and services, as well as sustainability offerings. Now I want to briefly touch on our planned strategic acquisition of Altia Engineering, which will decisively strengthen our industrial software business. We have been building our leading software portfolio since 2007 based on a visionary and a well-executed strategy. Acquiring Altair is an important cornerstone of our ambition as one tech company and will expand our comprehensive digital twin with a full suite simulation and AI portfolio. We are driving portfolio optimization as an ongoing process to continuously become stronger and sharpen focus. Recently, we announced two bolt-on acquisitions to complement our smart infrastructure portfolio with Traya switchgear and Danfoss fire safety products. With the announcement, With the announced sale of airport logistics to Funderlande, we will very successfully close the chapter of our portfolio companies. And there's a clear path ahead of listing Siemens Energy India in 2025 with subsequent steps for us to return to a shareholding of 75% in Siemens Limited India. by exiting the energy-related activities in three to four years from now. And with that, over to you, Ralf.