Landis+Gyr Group AG (LAND) Earnings Call Transcript

Ladies and gentlemen, welcome to the Full Year 2019 results analyst call and live webcast. I am Shari, the Chorus Call operator. [Operator Instructions] At this time, it's my pleasure to hand over to Mr. Stan March, Head, Communications and Investor Relations. Please go ahead.

Thank you very much, Shari. Good morning, and thank you to all of you for joining us for today's call. As you know, about 2 hours ago, Landis+Gyr issued our unaudited financial year 2019 results press release and had an accompanying analyst presentation. Both those documents can be found on our website under the Investor Relations tab. And just as a note, we will be issuing our audited results for the fiscal year 2019 on May 28 as part of our annual report. Today's conference call will follow initially the analyst presentation. So we suggest that you have that on your screen, otherwise in hand or follow along on our webcast. With those short announcements made, I'd like to turn the call over to Werner Lieberherr, Landis+Gyr's Chief Executive Officer. Werner?

Good morning, and welcome to our full year results presentation. I'm here with Jonathan Elmer, our CFO, and we are very pleased you have been able to join us this morning. Let me start by saying that I'm extremely excited to be the company's new CEO during this critical period in Landis+Gyr history. Unfortunately, I can't meet all of you in person today, but there'll be plenty of time for those personal connections to be made in the future. In the meantime, I thought it might be helpful if I introduce myself. Most recently, I was CEO of MANN+HUMMEL, a $4.5 billion automotive supplier. Before that, I was CEO of B/E Aerospace, a publicly traded U.S. company with revenues of $3 billion that was subsequently merged into Rockwell Collins, which then was acquired by United Technologies. A whole of 30 years in business, I spent 16 in the energy sector with ABB and Alstom, so I understand the Landis+Gyr business. I know the customers. I know the markets. And I know the regulators. Not all of these years have been easy. I spent a lot of time managing businesses through periods of crisis, experience that will be useful over the next few months. My first 5 weeks with the company have been a bit unusual, as you can imagine. Despite social distancing, I've been able to meet most of my new colleagues via Microsoft Teams and have been able to build a clear picture of the business, its strengths, weaknesses, opportunities and threats. I've still got plenty to discover, but let me begin by sharing some of my first impressions. Behind the 120-year history and the formidable reputation lies a great company. I've been hugely impressed with the dedication, knowledge of the staff and leadership team. And I know we have all of the ingredients to drive top line growth, improve efficiency and grow the bottom line. However, it won't be an easy ride. COVID-19 presents a huge challenge to every business, and we are no exception. We need to become more agile. We need to aggressively chase opportunity, especially in the U.S. and EMEA. We need to be laser-focused on satisfying our customers. We need to drive innovation. And last but not least, we need to deliver results, growing revenues and improve profitability. Personally, I'm absolutely committed to this challenge. And later on, I'm going to take you through my priorities for the future. So let's jump right into the numbers. On Slide 3, you can see some of our key metrics. During the year, we made good progress in some areas, but it was uneven progress. Starting with the order intake, our book-to-bill ratio was 0.81, and that's simply not good enough. In previous years, we had a ratio of about 1, which I think demonstrates the lumpy nature of the project business we are in. Getting the ratio back up is going to be one of my top priorities. Our committed backlog fell 14.6% to roughly $2.2 billion. Americas and EMEA both contributed to the decrease. And I think it reflects a lack of large project wins during '19 on the back of a strong finish to the previous year. On the top line, we had net revenues of $1.7 billion. That's a decrease of 2% in constant currency. This result was impacted by the COVID-19 crisis, reducing sales by approximately 1% for the year. The balance of the shortfall against our guidance from our Capital Markets Day was due to some further weakness in demand in North America, which was down 7.7% compared to last year. On the other hand, we delivered revenue growth of 3.9% and 12.7% for EMEA and Asia Pacific, respectively. Adjusted EBITDA for the full year was $237.2 million for an EBITDA margin of 14%. This included a one-off gain from a Brazilian VAT court case. Excluding this gain, our adjusted EBITDA margin was 13.6%. Free cash flow, excluding M&A, was $120.4 million. One of the company's great strengths has always been its balance sheet. This remains very solid, ending the financial year with a net debt to adjusted EBITDA ratio of 0.1x. In a second, I'll give you a more detailed analysis of our results. But before that, I want to say a few words about dividend. We simply don't know how it will be affected by COVID-19 over the next few months. In the meantime, I think it's essential that we focus on protecting the long-term future of Landis+Gyr and managing for cash. Therefore, as a precautionary measure given the current global economic uncertainty, our Board of Directors has decided to postpone the decision on the proposed 2019 dividend for now and intends to revisit the situation in conjunction with the release of the results of the first half year ending September '20. In that context, the group executive management will take a 10% reduction in base salary for 6 months, and the members of the Board of Directors will likewise have their base and committee fees reduced by 10% for 6 months as well. Let's move to Slide 4, and I want to talk about the COVID-19 situation in a bit of detail and explain how we are handling the crisis. First and foremost, we are absolutely committed to ensuring the health and well-being of our employees. Our offices are effectively closed, and everyone is working from home. The money we've invested in laptops and collaboration tools like Microsoft Teams is paying off. I'm hugely impressed by how effectively we are able to communicate with our customers, our partners and with each other across the globe. Our customers' response to the crisis has varied by country. In the U.S., most AMI deployments are continuing. Also, the pace can vary a bit by utility. For example, one of our customers on the West Coast is in a virus hotspot. He suspended all deployment until the situation improves. In EMEA, the U.K., France and the Netherlands have also suspended installations, while other countries, including the Nordics and Switzerland, are still deploying. Turning to Asia. Industry locked down for several weeks, meaning 0 installation, whereas Hong Kong and Australia continue with their work in the field. Based on the WHO guidelines and government responses, we expect the picture to look pretty varied for the foreseeable future. Finally, the direct impact on our results for fiscal year '19, which ended on March 31, was about a 1% reduction in net revenues with the corresponding flow-through to adjusted EBITDA. Moving to Slide 5. For our own manufacturing, the bulk of our factories are still working. We've implemented strict social distancing and expanded the hygiene procedures in place. At the moment, only our plant in India is closed. There are currently no significant impacts to our supply chain, though some minor shortages do exist. Of course, this is a fluid situation which our teams are tracking daily. In the last few weeks, we've been aggressively tightening our expense controls. In addition to the executive pay reduction, we have furloughed many of our staff and implemented short-time work for office functions in several countries. Cash and liquidity, out of abundance of caution, we've drawn our revolving credit facilities and had about $320 million in cash at year-end. Let's move to Slide 6. We frequently get asked about our industry's position in post-COVID-19 world. As you know, I spent many years of my career in the electricity energy generation business. When I was at ABB, I was responsible for global power plant sales and project delivery, so I know how utilities and their regulators think and operate. Let me just say that we are a key part of an essential industry, and we're assisting the utilities on their necessary technological evolution. What that means is that our products, solution and services are driving improved efficiencies and better environmental outcomes, specifically lower CO2 levels. So from a structural point of view, we are well positioned to enable and benefit from the ongoing shift towards lower carbon emissions. And as you can see here, our products had a material impact on emissions reductions, around 8 million tons last year. So in a nutshell, we're a critical infrastructure provider with social benefits as well. I love how we are positioned, but this is something we can improve further. Now I want to talk in more detail about each region's highlight. I'll begin with the Americas on Slide 7. Looking at North America, I've got a few points to make. First, the top line. Prasanna and his team have worked hard, but they had tough year-on-year comparable with the rolling off of 2 large projects, which were running at full deployment speed in the U.S. during 2018. We also faced delays in regulatory approvals for some customer projects, which resulted in low net revenues in FY '19. Combined with the low book-to-bill ratio, it means that, to put it mildly, we didn't have a strong finish to the year in the Americas. On the other hand, I've had a chance to discuss the contract funnel with Prasanna, and we're looking at the very active pipeline. What we need to do is to convert these opportunities into contracts. I strongly believe we'll do this once our customers can resolve their regulatory issues. But we are not simply standing by and waiting. In February before the COVID-19 crisis, we initiated cost-reduction programs aimed at about $19 million in annual savings. We're also keeping full power on our R&D programs, notably for application partner efforts for grid edge capabilities. This is critical to ensure that our Revelo metering platform is the clear market leader in the region. On the right-hand side of the slide, in South America, the economic climate is currently limiting opportunities for large deployments, so we've undertaken cost initiatives to manage through this period. In Japan, our network has now enabled about 25 million endpoints, and its performance is far exceeding all of our SLA requirements. Our system scaling capability is the best in the industry and shows what we can do for the next-generation networks that are now being discussed in Tokyo. So installations are still continuing through the Americas region, but the pace has temporarily slowed. The impact on revenues is pretty uncertain, but it seems inevitable that there will be an impact. Let's talk about EMEA. In the U.K., our largest and most important market, nonemergency smart meter installations have been suspended due to COVID-19. With about 30% of the deployment completed, we know that ramping up installation will be critical to the implementation targets the government has set for 2024. We've already delivered our secured contracts for approximately 21 million smart meters. There's also the chance for us to win further incremental contract awards. What's critical for us is the restart of installation. That's only going to happen once the government and energy companies consider it safe. In France, link installations are also suspended. While the market has shaped up favorably for Landis+Gyr, now 1 of 3 remaining suppliers, we're anxious to see the project resume. The same is true in the Netherlands. At the risk of stating the obvious, if our customers aren't installing meters, then they don't need us to supply them. So thanks to COVID-19, we're likely to see a material impact on EMEA's net revenue in fiscal year 2020. Operationally, the efforts of Susanne and her team have delivered visible results in EMEA, net revenue growth of 3.9% and significant bottom line improvement. Turning to Asia Pacific on Slide 9. This is a bright spot in our results. With both the top and bottom line as well as our backlog, 2019 was a strong performance for Steve Jeston and his team. They have done a great job. The 12.7% constant currency net revenue growth and more than 500 basis points of adjusted EBITDA margin expansion speak of the successful hardware on sales opportunity and tight cost control. In Australia, we saw sales growth due to Power of Choice transition while in Southeast Asia, both CLP group and Hong Kong Electric continued their deployment of our Gridstream solution in Hong Kong. In India, we continued our Tata Power installations until the lockdown suspended deployment. Let me now hand the call over to Jonathan to give you a more detailed review of the financials. I'll come back afterwards and explain my priorities for the business as well as some thoughts about fiscal year 2020 before opening the call to questions. Jonathan, please.

Thanks, Werner. So looking back on financial year 2019. Of course, we are disappointed not to perform better on the order intake and revenue line. But looking through the numbers as a whole, it's clear that, through tight cost control, we kept adjusted EBITDA and free cash flow pretty much in line with last year's numbers. And of course, cash is a key issue for us as with every company at the moment, but our history of strong cash generation and low net debt puts us in good shape to see through the COVID-19 crisis. So let's turn to Slide 10 to give an overview of the financial year 2019 numbers. Werner has already taken you through most of these, so here's just a quick reminder. Order intake was down 34% in constant currency. This is after a strong year in financial 2019. But in FY '19, we saw weak bookings in both the Americas where regulatory delays on some key projects in the pipeline continue [ along with ] EMEA. Committed backlog fell by 14.6% and again was lower in both the Americas and EMEA. Net revenue fell by 2% in constant currency. I'll unpack the details when we walk through the regional numbers. Reported EBITDA fell from $251 million to $225 million, whereas adjusted EBITDA was flat with last year at $237.2 million. However, adjusted EBITDA margin was up on a percentage basis of 14% of sales, reflecting the tight cost controls we have in place. Free cash flow, excluding M&A, was $120.4 million for the year, down slightly from last year, but again, it's a tough comp. So overall, another strong year for cash generation. Let me walk you through the constant currency revenue bridge on Slide 11. Americas net revenue was down by $75.4 million, a 7.7% decline in constant currency, reflecting the rolling off of 2 major projects in the U.S., which are running in full deployment speed in financial year 2018. And to put this into perspective, the year-over-year impact of the decline in revenue from these 2 projects is about $100 million. So this is a vivid example of the lumpiness of our project business. Revenue in EMEA increased $23.5 million, 3.9% in constant currency for the year, driven by the U.K. rollout gaining momentum. Revenue in Asia Pacific was up by $18 million, 12.7% higher in constant currency compared to last year with higher sales in Australia and Hong Kong driving the improvement. Moving to the adjusted EBITDA bridge on Slide 12. If you look at the red block after FX, you can see that adjusted gross profit declined primarily because of lower revenue. And doing a bit of math, basically, the $16.4 million decline is the flow-through to gross profit from the lower revenue. Then we called out the VAT benefit, which we had in Brazil. That's the $5.6 million in the blue block. This amount related to a court award in our favor in relation to overpayments of VAT in Brazil. And finally, in the blue block on the right of the bridge, you can see that our operational focus has reduced adjusted operating expenses by $11.8 million. This is a result of tight cost control across the group, particularly in the Americas. And this further reduction in adjusted operating expenses reflects the progress we've made in this area. While keeping adjusted R&D expenses broadly flat at around $155 million over the last 4 years, SG&A expenses have come down year-over-year from around $250 million adjusted for the IPO to around $195 million in financial year 2019. And of course, it goes without saying that we're keeping very tight cost control in place during the COVID-19 crisis. So as a result, adjusted EBITDA was flat compared to last year, coming in at $237.2 million, an EBITDA margin of 14% or 13.6% without the Brazilian VAT benefit. On Slide 13, you see our adjustments to EBITDA. Let me give a bit of detail about these. Firstly, restructuring expenses were $6.7 million with the majority of these incurred in the Americas where we reduced our cost base by around $19 million per annum in the last quarter with more than 100 staff impacted, and we'll see the benefit of this in financial year 2020. On the normalized warranty expenses line, the positive amount of $13.1 million reflects the fact that we had higher warranty expenses in the income statement compared to the 3-year rolling average of actual costs incurred. And let me spend some time talking about provisions in place for legacy controlling issues as we had some movement in then during financial year 2019. In North America, we increased the provision for the legacy component issue, net of related insurance proceeds by $28.2 million during financial year 2019. In our H1 results, we had already taken a charge of $11 million. And in H2, we booked a further $17 million. During H2, we undertook further detailed engineering studies involving the world's leading expert on relevant technologies to help us understand better how this legacy issue is developing in the field. And the outcome of these studies results in the additional provision -- additional charge, I'm sorry, in H2. And the increase in the provision is attributable to an increase in the after-risk population of meters in the field. Finally, the adjustment related to timing differences on FX derivatives of $7.9 million. This adjustment has the effect of excluding from adjusted EBITDA unrealized gains of $7.9 million in respect to mark-to-market differences on FX hedges to the extent that the underlying hedge transaction had not taken place until the end of the financial year. The main FX exposure of the group remains in respect to the British pound, where we have placed hedges in respect to part of our exposure to hedge 24 months ahead. Turning to the cash flow slide on Slide 14. We generated free cash flow of $120.4 million in financial year 2019 compared to $123.5 million in the prior year. Working capital deteriorated somewhat year-over-year relative to sales. Energy rose mainly in the U.S. As expected, customer orders did not materialize. Let me spend a couple of minutes on the warranty cash outline. Overall, we cashed out $45 million in respect to warranty items in financial year 2019, the same as in the prior year. There were 2 large components in this line. Firstly, we made the final payment of around $20 million under a litigation settlement with a customer in EMEA. The settlement predates the IPO, and there are no further payments due under the settlement agreement. So we will have a $20 million tailwind on warranty cash-outs going into financial year 2020. Secondly, the legacy component issue in North America. This makes up the majority of the remaining $25 million of warranty cash-outs. And notwithstanding the increased charge of $28 million, which we took in financial year 2019, when we look ahead, we do not expect that the increased provision will result in any increase in the run rate of cash-outs for this specific warranty issue. And our CapEx, compared to last year's $40 million spend, we saw a significant reduction to $29 million, reflecting the company's asset-light approach. And we expect around this level of CapEx to be sustainable into the future. And finally, cash taxes were flat at around $31 million in financial year 2019 compared to $32.6 million in financial year 2018. Turning to net debt on Slide 15. Net debt ended the year at $32.6 million, up from $17.2 million compared to the prior year-end. The strong free cash flow for the year was offset by $94 million to make the dividend payment in July 2019 and $38.9 million for the shares repurchased both inside and outside the buyback program. And as announced a few weeks ago, the share buyback program is now suspended. So overall, our leverage ratio remained at 0.1x adjusted EBITDA. As a precaution, given the uncertainty associated with the COVID-19 crisis, we drew down on our revolving credit facilities before year-end. This means we closed the year-end with $319 million cash at hand. The sizable cash balance and our low net debt puts us in a good place to see out this COVID-19 crisis. I would also add that we continue to evaluate our debt capital structure to ensure that we have maximum flexibility as we come through the other side of the COVID-19 crisis. Now turning to the regional performance on Slide 16. In the Americas, we continue to see weakness in our North American business. Backlog declined by 15.6% as order intake was down by 39.6%. And we closed fewer significant deals in North America compared to the very strong year which we had in financial year 2018. That said, as Werner mentioned, the pipeline remains strong, and we expect to show a strong performance on order intake in financial year 2020. In constant currency terms, our Americas revenue declined by 7.7% compared to financial year 2018. As I mentioned earlier, this decline is due to a couple of major projects, which are running in full speed and financial year 2018 rolling off. As I said, the rolloff of these 2 products alone caused revenue in the Americas to decline by around $100 million. While we have seen continued regulatory delays, in some cases, it is delayed to some of our projects which are expected to help offset the decline caused by the 2 projects rolling off. Turning to Japan. As you may recall, Japan is booked to the Americas region as all technology, which we deploy in the TEPCO projects, comes from our Americas business. Overall, our revenues in Japan declined slightly as the deployment phase of project with TEPCO comes towards its end. The gross profit margin decline of 38% reflects primarily the loss of operational leverage on lower volumes. Expenses were well controlled, falling by $11 million, excluding the one-off gain of $5.6 million in respect to the Brazilian VAT court case. As I mentioned, we undertook a significant restructuring in our North American business just before year-end, so we will have a cost base going forward which is lower by around $19 million. Overall, we saw our adjusted EBITDA margin of 18% or 17.4%, excluding the one-off gain from the Brazilian case. Turning to Slide 17. For the EMEA region, net revenue grew by 3.9% in constant currency terms, driven again by strong sales in the U.K. I should comment we've not yet seen any of the expected destocking due to Brexit by our U.K. customers. Adjusted gross profit margin increased by 210 basis points, and this is on top of the 470 basis points improvement in financial year 2018. This increase in margin is a result of the full year effect of critical stands and also continued benefits from our Lightfoot supply chain restructuring program. We now have over $20 million in annual savings coming through from Project Lightfoot. Overall, we saw good progress towards the 10% adjusted EBITDA target for EMEA, driven by the 680 basis point improvement in gross profit percentage over the last couple of years. That said, of course, we still have some way to go to achieve the 10%. And clearly, COVID-19 may have a major impact on our ability to deliver this in financial year 2020. So based on sales growth and operational improvements, EMEA delivered adjusted EBITDA of $40.1 million, up from $19.7 million the previous year. Moving to Asia Pacific on Slide 18. Order intake started financial year by 13 -- financial year 2019 by 13% after really strong bookings in the prior year, but the book-to-bill ratio was still around 1, which led to a small increase in committed backlog of 0.7%. Net revenue increased 12.7% in constant currency terms. We saw stronger sales in Australia with good growth coming through from sales to our intelliHUB JV and also in Hong Kong. And of course, we're very pleased to announce the new contract with HK, which means that we now have smart metering solution contracts with both utilities in Hong Kong. Adjusted operating expenses came down by $2 million with some full year effects from the reductions made last year, which meant that, overall, adjusted EBITDA increased to $9.9 million. So in summary for the group as a whole, although order intake and revenues came in lower than expected, we worked hard to maintain profitability and to generate cash. And combined with a solid balance sheet, we're in a good position to get through the COVID-19 crisis. So I'll stop there and turn the call back to Werner.

Thank you, Jonathan. Now here on Slide 19, I'd like to briefly discuss my top priorities as CEO. First, manage for cash. A solid balance sheet is a great asset, but it won't stay solid unless we continuously focus on cash generation and liquidity during the COVID-19 crisis. We have a strong cash generation business. Still, we need to pay very strict attention to our cash collections and uses. We treat the company's cash as if it's our own. However, one area where we can't compromise is R&D, and I intend to leave those investments untouched. Second, convert opportunities pipeline. We're very lucky to be in markets where utility decision-makers are soliciting proposals for a number of large projects. It's vital that we convert these opportunities into bookings, backlog and ultimately top line growth. Number three, foster redesigned global R&D setup. Innovation is the backbone of any technology company. So one of my first tasks as CEO was to completely reorganize our R&D organization. I felt it was essential to improve the balance between global and regional responsibilities. The global technology offices focus on technology strategies, global platforms and processes and tools, while the regions focus on customer intimacy and speed to market. Jyoti has decided to leave the company, and we've appointed Jeff Seabloom to replace her. Jeff has a wealth of experience from his years at Oracle, HP and other global tech companies. Fourth, drive efficiencies. We provide our customers with proven and future-ready energy solutions to realize the full potential of the smart grid industry transformation. Competitive product cost and organizational structure are an integral part of this value proposition. And finally, ensure continued customer satisfaction and readiness. Landis+Gyr has a reputation as a trusted partner, and we're committed to serving our customers around the world. This crisis will fade at some point, and I want to make sure that we are fully prepared and the lights turn green. I'm convinced that this readiness is very important as a supplier of critical infrastructure equipment. Underlying all of this is the sincere, real and determined effort to ensure the safety of our clients, partners and employees. Okay. Turning to Slide 20. Let's talk about 2020. The COVID-19 pandemic has created an unprecedented situation. To mitigate the risks, we have taken a series of precautionary measures. We've introduced business continuity procedures for our production sites that optimize safety, output and limit potential impacts to our operations. We also maintain regular contact with all of our strategic suppliers to identify any potential adverse effects from the pandemic. Nevertheless, now is not a time of clarity as we look at the 2020 revenue picture. What you can see is the potential for a material impact, but the size of the impact remains unclear. And therefore, we won't be providing any guidance for the time being. On the positive side, most North American customers continue to deploy meters, so the pace varies by utility. On the other side, several key customers in EMEA have suspended or reduced installations. We haven't experienced any major project cancellation. Our software and service contracts remain on track. The share buyback program remains suspended. Finally, as I said earlier, our Board of Directors has decided to postpone any decision on the proposed fiscal year 2019 dividend. They will revisit the issue at the time of our half year results. At this point, let me open the call for questions.

[Operator Instructions] The first question comes from the line of Andreas Willi, JPMorgan.

I wanted to follow up first on the dividend decision. Obviously, it's a Board decision, but maybe you could elaborate a bit on the thinking there, given you have a very strong balance sheet, your business is generally cash generative, and also, the dividend is very important to the investment case. So why this delay in terms of the decision? And what are the parameters that you will look like in October when you make -- or when the Board makes that decision? And is this about basically just waiting to be sure that the crisis is basically under control by then? Or is this also a broader review in terms of whether the level of dividend should be looked at and not just waiting for the all clear on the crisis?

Yes. Andreas, thank you very much for your questions. It's not a matter of level. It's really, do we feel comfortable? And let me give some color to that. When you look at the different markets, U.S., I said, okay, they do installation, but at a slower pace. But then we have markets like the U.K., France, Netherlands, where really, the installation stopped. And we want to understand the full extent of this crisis, and that's why actually I think the Board rightly so made the decision that we actually want to postpone it and then revisit when we think we have a better handle on the situation.

And my follow-up question, in terms of the priorities of when the CEO change was announced, it was also talked about in terms of a different phase for the company now in terms of having fixed some of the profitability execution issues, more growth focus, including M&A. Is that still a priority now the next 12 months? Or has that all changed in terms of the focus on the crisis in terms of also potentially using the good balance sheets for moves in the industry and so on at a later stage? What's your view on inorganic growth?

Yes. Look, my view is that the strategy from the Board has -- is unchanged, and I think the Board and I are exactly on the same page. I would say, at this point in time, I think most important, as you can imagine, is really manage for cash during this COVID-19 crisis and then also push the opportunity pipeline massively because, as you could see, we have a weak order intake. But having said this, we do have a strong balance sheet. And if we opportunistically see opportunities, we have the firepower to do so. And I think that's a great position to be in.

The next question comes from the line of Fabian Haecki, UBS.

Yes. I come with one after the other. So starting with a follow-up on the dividend question. Do you have short-time work in Switzerland? And does the decision to defer the dividend have any relation to that topic?

Yes, we do have short-time work. We have about 34% just on furlough in Switzerland, but it was really a broader issue. As a global company, the way we looked at it as we said, "Hey, are we actually in a position now to do a dividend, or should we not protect actually the balance sheet and understand where we go in the future?" And I think that's how -- what drove the decision, which the company took. But again, given what I think is important, it's a postponement of the decision and nothing more.

Okay. My second question is on the U.S. regulatory delays. At the Capital Markets Day in January, the Head of Americas was saying, he expects decision by public energy commissions in about 6 months. So July, now you're writing due to COVID-19. This is delayed. Is there any new timing you expect that these commissions come together and decide? This is my first question on the U.S. market. And secondly, just in general, if your assumption of a smart meter kind of renewal rate every 10 years, this is a bit too aggressive because since you started to implement or plan to implement second-generation smart meter in the U.S., the Public Energy Commission start to oppose against it and apparently don't see a beneficiary kind of cost benefit for the electricity consumers. Can you elaborate a bit on that why you're still so positive that this will all go through?

Yes. No, sure. So in the U.S. regulatory delays, you know what you see is, obviously, these delays are driven by public responses. And as soon as you do a rate upgrade, obviously, there needs to be a real business case behind. But my view is that it's a timing issue. It's not -- and this question is really a rent question. And as you can imagine, the COVID-19 crisis didn't help. But I would say that's my top priority together with the U.S. team to bring actually these opportunities into fruition. I think that's very, very important for us. And we stay very close. I already started discussions with the customers, and I think we established a really good understanding. In terms of the 10 years, what I would say there, when you look at the grid edge, obviously, when I compare -- when I was in the industry, the grid edge obviously becomes much more dynamic. Why is that? You have electric vehicles. You have distributed power, which actually is feeding into the grid or taking from the grid. And so you need actually really smart meters. You need -- especially on the last mile, I think it's very critical. So actually, our view is unchanged. We think there will be these changes. For 10 years, it's a good number. Obviously, not in every year with the same pace, but we feel comfortable that, that type of technology is needed more than ever due to the complexities to integrate.

So do you think you have to convince the -- to regulate more on the benefits of smart meter? Or are you trying altogether with the customer to reduce the cost? Because, I mean, every 10 years, it's just super expensive programs out there. So is there more kind of you can do on the benefit on the cost side to convince the regulator?

I think for example, when you look into the U.S., it's really both. Obviously, the end customer want -- you can take also Australia for that effect. The end customer wants to see a real benefit of these type of investments. As you said, it's not small money. It's significant money. So the regulators need to make sure that the business case is there, and actually that -- also in the public hearing that answer all the questions that these projects go forward. But I think when I look at the U.S. in particular, the business case is there, and it's a matter of time, a little bit slowed down due to COVID-19, but I feel confident that we will bring this project home.

Then my last question is on EMEA. Can you give us the revenue share of U.K., France and the Netherlands together, just that we got a bit of feeling about the potential impact this year from COVID-19?

Yes. I mean generally speaking, I don't want to go below regional level, but I think it has -- some of these numbers have been given in the past. And I think when you look in the U.K., obviously, for EMEA, it's a very important part. The U.K. is about 7% -- no...

Let me help out as well. I think I mean, Fabian, as we said before, the U.K. is over 1/3 of our business in EMEA. And clearly, we've had a very strong year in EMEA that's even picked up a little bit from that. The -- France and Netherlands are much, much smaller than that. So I think really in terms of thinking about the COVID-19 crisis in EMEA, it's really the position in the U.K., which is, by far, the most important for us.