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Ladies and gentlemen, hello and welcome to the Hexagon Q1 Report 2022. Throughout the call, all participants will be in a listen-only mode, and afterwards, there will be a question-and-answer session. Today, I am pleased to present Ola Roland. Please go ahead with your meetings.

Thank you very much. Good morning, good afternoon, and good evening, everyone, and welcome to this interim report presentation for the first quarter of And I suggest that we skip slides and go straight to slide four, overview for the first quarter of 2022. Sales increased by 19%, out of which 10% were organic, and currency added another 4%. We had very strong currency tailwind from primarily the Chinese renminbi and the US dollar. M&A, which we call structure, added another 5%. It is still a very challenging supply chain situation and the lack of silicon wafers in our supply chain hampered organic growth by 6% in the quarter. However, all divisions improved their results and despite seeing negative impacts from the war in Ukraine and all supply constraints that we've mentioned previously. We took the decision to freeze all business operations in Russia. We have sales, we have service and technical engineering in Russia, but we do not have production. That has impacted organic growth by minus 1% in the quarter. And for those of you who remember, Russia is 2% of group sales, which means that with a complete shutdown, the annualized impact will be minus 2% from this action. We record an EBIT of $335 million in the quarter, and that is an increase of 24%. And the adjusted operating margin was 28.8%, and our gross margin increased by almost 8% to 65.1%. Slide 5 is just a reminder that the first quarter is our seasonally weakest quarter, followed by Q3, and then Q2 and Q4 are stronger quarters. Slide 6, an overview of the P&L statement that we've just presented, and I'm not going to go into any details. You have it for your reference. Cash flow on the other way, I think it's fair to comment on. Cash flow from operations before changes in working capital is very strong and is actually increasing by 26% in the quarter. With the current strange situation we do have in supplies, we have to build up working capital, especially in the hardware-related businesses. So we built up 84 million in working capital. Otherwise, as I said, very strong cash conversion and cash flow. And on slide 8, you can still see that we are way below historic levels on working capital to save, 6.6%. Market development, slide 10. If we look at the sales mix, there are some shifts worthwhile commenting on. North America has a very strong demand situation, and North America is now 33% of Hexagon sales. We see a similar situation in South America that has expanded its share from 3% to 4%. On the other hand, we do have a strong demand situation in Western Europe, but not as strong as North and South America, why Western Europe is 28% of sales. In the rest of EMEA, we see this 1% stemming from the conflict between Ukraine and Russia. China is keeping its share at 15%, and Asia-Pacific. reduced by 1%. So in summary on slide 8, we have green arrows, i.e. growth, above 8% organic growth in most regions, North America, Western Europe, China, South America. We do have growth in Eastern Europe, Middle Eastern Africa, and Asia, ex-China, but it's not as strong. So it's a very, very strong demand situation for almost all industrial segments for Hexagon in the first quarter. And slide 12, the so-called arrow slide, is for your reference to study. And I suggest we move to slide 13 and discuss EMEA. Western Europe record 10% organic growth in the quarter, and the powerhouse in the quarter was Germany, where we saw very strong double-digit growth from primarily manufacturing industries such as auto and aero, but also infrastructure investments where geosystems exist. is benefited, but we also have strong orders for PPM in the quarter from the chemical industry in Germany. So recovery in aerospace, strong demand in automotive, manufacturing, but also power and energy markets. Excluding Western Europe, Russia declined by 32%, and that roughly represents the month of March for us. And it's all, of course, connected to the sanctions that were imposed by the European Union and the United States. Middle East and Africa, on the other hand, record strong growth, and we see increased activity for power and energy in Middle East and mining in Africa. Moving to America, slide 14. North America record 12% organic growth. Canada recorded strong single-digit growth on the back of its raw materials economy, i.e. mining and oil and gas. In the U.S., we see a broad-based growth that pass over all business divisions and segments. So a very, very strong demand situation in the United States. In South America, it's the continuous expansion in the Brazilian economy driven by activities such as mining, agriculture, and oil and gas. But we also see the Andean countries where in this quarter Chile was strong thanks to a large mining order in the quarter. Slide 15, moving to Asia. China record 11% organic growth in the quarter. It's driven by strong growth in general manufacturing and aerospace, automotive-related, EV-related activities. We had slightly weaker electronics market and demand in the first quarter, but that Only natural since Q1 is not a strong electronics quarter for China. China's growth was hampered by availability issues on the geosystem side, where we simply couldn't deliver orders to construction and infrastructure projects. And we also had a challenging oil and gas market in the first quarter. Japan and India record strong growth. India, broad-based recovery for all businesses and strong demand across the board. South Korea, on the other hand, had a somewhat weaker quarter where we saw weakness in power and energy in the quarter. Reporting segment. Slide 17, we start with geospatial enterprise solutions. Organic growth, 10%. Geosystems was bang on, 10%. Geosystems was the business division that suffered the most from lack of electronic components in the quarter. Safety infrastructure and geospatial, 4% organic growth. fueled by very strong growth in infrastructure, construction, and utilities, where we got a large order in the quarter from a telco. Autonomy and positioning, 21% organic growth, and all end markets were very strong for autonomy and positioning in the quarter. Agriculture, aerospace, and defense. Sales amount to 583 million with an EBIT of 106. So this corresponds to an operating margin expansion of 0.5%. And it could have been greater had we been able to deliver on the top line for Geosystems, which is our most profitable division within Geospatial. Moving on to industrial enterprise solutions, also reporting an organic growth of 10%, where MI is recording 13% organic growth. And we do see strong demand across all key industries for MI, all regions, but also for our software solution. PPM reports 2% organic growth, and it's Growth stemming from our design and asset information management software and also continuous recovery in both EMEA and the Americas. The business is reporting $581 million in sales with an EBIT of $166 million. which corresponds to an EBIT margin of 28.5%, which is almost 2% better than this time last year. Slide 19, our gross margin is now at 65%, both for the quarter but for 12 months rolling as well, which is 1% better than this time last year. Our operating margin is at 29%, which also is 1% better than this time last year on slide 20. If we then talk about M&A orders and product releases, then we move to slide 22. In the quarter, we acquired Minnow Ware. which is an Australian-based company specializing in eliminating manual and labor-intensive unproductive processes in underground mines. And Minoware is going to be reported into Hexagon's mining division. Slide 23, we got an order for 3D-printed prefabricated homes from a US-based startup called Mighty Buildings. And they are using our design and engineering simulation solutions and software to perfect the design and material choice, as well as mechanical processes, before they start making these homes. Slide 24, optimizing legacy train components for additive manufacturing. This is a collaboration between Hexagon and Deutsche Bahn, where they use our generative design software to optimize conventional freight car component designs and prepare them for additive manufacturing. Slide 25, the European Southern Observatory, ESO. They have traditionally used something they called DLT, which stands for Very Large Telescope. They've now decided to move towards ELT, which stands for an Extremely Large Telescope. And this telescope has a 39-meter main mirror, and it's going to be based in Chile where the VLT currently is and they have chosen us for developing a specialized measurement system for this application. Slide 26. For those of you that watch Drive to Survive on Netflix, I'm happy to tell you that we sponsor Red Bull Racing. And you can find our logo next to the helmet of the driver when they're driving. And we are actually supporting most teams in the Formula One circuit. But to my mind... Oracle Red Bull Racing is the only one displaying our logo. Slide 27. H2U is a very interesting project where they create renewables. energy production like wind and solar panels in Australia to convert the electricity into hydrogen and then ship the hydrogen to Asia. And we are involved in this project. It's a huge project. The land mass that they use to build up these solar plants is enormous. But we are involved in creating operational digital twins, aligning standards and processes to produce hydrogen. And this is a business for the future, obviously. Slide 28, Hexagon Enable Fluxes to Fulfill Their Carbon-Neutral Journey. And it's a Belgium-based energy infrastructure group that has committed itself to become CO2-neutral. And they use our SDX software platform to do asset lifecycle information management, AIMs. and to make sure that they improve their processes so that they can reduce and finally eliminate CO2 emissions. Slide 29, Hexagon to help Daiyu to enable autonomous vehicles in China. Our partner Daiyu is going to bring high accuracy GNSS correction services in China. through our network called TerraStar. And this is so-called PPP, which stands for precise point positioning, where you have signals from ground-based towers combined with satellite-based positioning signals from GNSS networks. and this is going to support ADAS, i.e. Advanced Driver Assistance Systems, throughout China. Slide 30, providing real-time visualization and analysis for NATO. NCIA stands for NATO Communications and Informations Agency, and we've signed a contract where they are going to standardize and use our Lucian Lightspeed technology, to upgrade their simulation systems. Slide 31, we are heavily involved in the rebuild of public transportation in Singapore. The Singapore Land Transit Authority that is in charge of the subway system and rail system they've chose the Hexagonal On-Call Dispatch for its public safety portfolio to speed up response times. Finally, slide 32. We transform how professionals measure with total station. This is not the one-off. This is a long-term trend for our Leica total stations and rovers that we try to automate workflows as much as possible. And in this case, we launched the so-called autopole. That is the prism that you can tilt but still get unique target identifications. Slide 33, we launched BLK2Fly and BLKArc last quarter. But we've already received multiple awards for these two new products. And we're quite happy with that. Slide 34, we've been to Pompeii this quarter and scanned Pompeii using both BLK2Fly and BLKArc. And the whole idea with this project is to capture Pompeii in 3D and preserve it and maybe simulate what it actually looked like in 79 AD. Slide 35, we've signed a contract with Sephora to 3D model all their retail outlets. hundreds of stores because they're going to remodel them and refresh the concept. Slide 36, the first EAM win in China. So we use our Chinese organization to introduce EAM products. And that first order was booked with the Chengshu Coal Mining Machinery Group company. China. Finally I want to make some PR for Hexagon Live for the first time since 2019. We're going to host Hexagon Live again in Las Vegas on the 20th through the 23rd of June and don't miss this opportunity to to see all these technologies that I've just described in action. And if you want to participate, please contact our investor relations at ir.com, at hexagon.com. With that, we've concluded the presentation and we're ready to try to answer any questions there might be.

Thank you, ladies and gentlemen. If you wish to ask a question, please press 01 on your telephone keypad. First question from Magnus Kubler from UBS. Sir, please go ahead.

Hi, Ola. I'm from UBS. A couple of questions from me. First, could you give us a bit of color on how the growth progressed through the quarters in particular geosystems? And if you can give us something on April as well that started in the context of supply chain issues. I think you mentioned that the components would ease from Q2. That would be great. Thank you.

Yeah. No, the growth... March was a good month. February was weaker. So you could say growth accelerated through the quarter. We haven't seen much change in April really from Q1. And what's happened since Q4 is that demand has accelerated. And you see that on our organic growth that was 7% in Q4 and is now 10% in Q1. So we can't say that the component situation has eased off because we are facing higher demand than we did three to six months ago.

Okay, and in terms of how that component situation is panning out, difficult to comment, but I know you took some internal actions as well, which you might have better visibility on.

We think that it might ease off for certain divisions, but we also think that we might face a tougher situation in Q2 for other divisions. So net on net, I think, unfortunately, it's going to be a similar situation in the second quarter.

Got it. Thank you so much. And secondly, specifically to China, I know you mentioned some drag on growth from the local construction market. But have you seen any other implication from that with the component shortages coming out of China to your production?

No, I mean, we are not dependent on components coming out of China. You read a lot about this lockdown in Shanghai, which hasn't impacted us. Where it impacts us is really geosystems built products in Switzerland that we export to China because we simply can't find components for some of our high-end products to China.

Got it. Thank you. And then finally, can you comment a bit on the backlog in PPMs or how that's developed year over year or any other color around that?

You don't have a backlog, but you have a booking situation, and bookings were good, and we believe that gradually we should see accelerated growth over the year in PPNM.

Perfect. Thank you so much, Ola.

Thank you. Next question from Stacey Pollard from J.P. Morgan. Madam, please go ahead.

Thank you very much. Just two or three for me. From a product perspective, what would you say are the most relevant growth drivers for you right now? And then do we expect, you know, often you'll have big product release years and then less big release years, I guess is the way to say it. Should we be expecting something very, very exciting at the Hexagon Live this June? And then second question is really related to wage inflation. talent retention and attraction, any comments there, and to the degree that you're able to pass on price uplift to customers, so your pricing situation as well as cost, I guess.

Wow. Growth drivers, I think right now it's a very complex situation where we're coming out of a global pandemic, so there is pent-up demand for everything. And that is obviously a growth driver for us at the moment. But then more long-term trends, of course, this transition to a carbon-free economy where there is a lot of investment initiatives into renewable storage and so on, where we can sell our products. That is another growth driver. It's a combination of a lot of things at the moment creating this almost perfect storm of demand that we face right now. And then moving to what we're going to present at Hexagon Live. What do you expect? I'm a salesman, so obviously it's going to be very exciting like always. I can't really comment on nitty-gritty details what we're going to launch. And pricing power, I think we've proven so far both in Q4 and Q1 that we can expand our margins in spite of this inflationary pressure. And that's the best testament to pricing power you can have, that you can actually prove in numbers that your margin is expanding.

Okay, fair enough. Good, thanks. Thank you. Next question from Alexander Virgo from Bank of America. So please go ahead.

Thanks very much. Good afternoon, Ola. I trust you're well. Thanks for taking the question. I wanted to dig a little bit into the different divisions, if I could. The first one was a question on the margin implications of plus two in PPM versus this much stronger performance in MI. I guess I'm noting the difference, the strength of margins in Jio as well. You've got a 30% number there, which I think is impressive given most of the software is in IES, of course. So that's the first question. Can you talk a little bit about the dynamics there? Second question would be just on China and Q2. And thinking about what happened in Q1 2020 and also back in 2019 when around this sort of time, your smartphone business came under severe pressure and the impact that that then had on organic growth. I'm just trying to, I guess, square the two most recent hits to your China business with what we might see in Q2 2020. with the growth that you've already reported in Q1? I guess that's the second question. And third, I'll squeeze one in, if I may, once you've answered those two. Thank you.

Okay, thank you. If we talk about PPM versus MI, first of all, MI is earlier in the business cycle. So we've already seen increased activity from the auto guys in terms of designing new products. Aerospace is gearing up and so forth. PPNM, we believe that demand for new oil producing and gas producing units is going to grow. It's a consequence of the macro situation with the war in Ukraine. where countries like Europe and America are going to source from new supplies and suppliers than the old traditional ones, and that is going to give PPM a boost in its growth in the quarters to come. I don't know if that answers the difference between MI and PPM.

A little bit, yeah, thank you. I guess in follow-up to that, the margin impact on IES because of PPM being lower, is that still a fair comment, i.e. Nix is weighing on that margin?

To some extent, yes, but we've also seen great improvements in the EBIT margin in the quarter for MI. And I think the biggest... The biggest lever we can hope for is actually the improved incremental margin in MI going forward, because MI is so much bigger than PPM.

Yeah, okay. And then on China?

On China, it's true that smartphones have been important historically, but it's typically a Q2 story, Q2, Q3 story. so i think the verdict is still out on what electronics will do in china this year but we have a cautiously optimistic view on the second quarter for china and we are doing great our management team and our sales teams are really innovative and we find constantly new applications for our products so They're almost like a bumblebee. They shouldn't be able to fly, but they do.

Okay. So we should take the momentum that you're still seeing in China as a positive indication for the second quarter then?

I think so.

Okay. Well, that's good to hear. And then my final question, just on the squeeze one, if I could. You've typically talked about new product growth. adding a couple of hundred basis points to the overall level at the group. I just wondered if you could give us an idea for what that might be or might have been, I'm sorry, in Q1, given the draft of new products you have already announced.

It looks fairly low because of the component scarcity. And these new products are using an awful lot of silicon wafers. we were simply constrained in delivering. So it could have been a high number had we had endless supply of components, but we didn't. So it wasn't something to brag about.

Okay, great. Thank you very much. Thanks.

Thank you. Next question from Sven Smerkt from Berkley. Sir, please go ahead.

Great. Good afternoon. Thanks for taking my question. Maybe first, could you quantify how much you raise prices in Q1 for inflation and maybe by business segment? That would be very helpful. And then secondly, it seems like that with your working capital investments, you are building up inventory to avoid delays and maybe even beat price rises. And I was wondering, to what extent do you believe your clients are doing the same? Is there a way to assess this?

Yeah, the first question I simply won't answer. We don't comment on prices, but we started increasing prices in October and we've taken steps in all businesses to increase prices over the next coming year. And I believe it's not the end of it. I think we will continue to work with price as a means to protect and expand our margins. And that's the best question you can get. When it comes to inventories, it's fairly easy. I mean, we stock very little with our customers. Our customers are typically end users and we have a pretty good view on what they do. So it's not that, I mean, we're not selling groceries or clothes where you have retailers stocking stuff. We're selling quite expensive things that end users are buying directly from us in most of the cases.

Yeah, of course. But then these things are often business critical. So I'm wondering, is there not a case where you see some clients maybe bringing orders forward at all?

No, because we have booked orders, so the missed revenue of 6% is orders that are paid. Some people have paid 20% to receive and they were scheduled for delivery in Q1.

Okay, great. And then maybe just one final question. Would it be possible to quantify the 2% Russia exposure by the five sub-segments. Is there any kind of sub-segment that maybe has a higher weighting to Russia?

GEF has a much higher exposure to Russia, and it's primarily geo-systems. That is our biggest business in Russia.

Okay, great. Thank you.

Thanks. Thank you. Next question from Mohamed Moawalaf from Goldman Sachs, surface overhead.

Great. Thank you. Hi, Ola. A couple from me as well. Firstly, just in terms of the dynamic you saw in the first quarter, was there an element of perhaps some slip business from sort of Q4? And as you look into sort of Q2, did I hear you correctly saying that you expect to have some of these sort of supply chain issues resolved, but it's the demand environment which is kind of stronger, which is kind of offsetting any kind of additional headwinds you get from the ongoing supply issues? And then secondly, could you break up for us the hardware versus the software? I know we get a divisional, but just to kind of get a sense of the resiliency or the strength on the pure software side, even though optically the hardware side look quite strong.

Thank you. So the first question, no, we didn't have You know, this is a rolling and it's an ever-evolving situation. We built backlog in Q4. We built backlog in Q1. I can't say that net on net we pushed orders from Q4 into Q1. Unfortunately, this situation is worsening between the two quarters. So we have a greater backlog end in Q1 than we had in Q4. But I think there is a combination of two factors because demand seems to have increased in Q1 compared to Q4, even though Q1 is a week and a quarter. So it's a very fluid situation, and you can't say that we benefited from Q4 deliveries when we built backlog and demand. We're working very hard on satisfying our customers and delivering to them. When it comes to hardware-software split, it is roughly what it was at the year end, 60% software and services, 35% pure software, 40% recurring revenues. SAS is roughly... before consolidation of ETQ, 6% of sales, but growing very fast.

Got it, got it. And if I could just follow up, given the sort of dynamics you're seeing right now, is there any reason to believe that as we think about growth kind of beyond 2022, would be any different to the kind of the sort of high single digit organics that you're sort of targeting?

Now, our long-term target is to grow 5% to 7% organic growth. And apart from that, we don't give any forecast. But over the years, sometimes you're going to exceed it, and sometimes you're going to be below it. But in average, our guidance is 5% to 7%.

Okay, that's great. Thank you.

Thanks. Thank you. Next question from Horace Schaller from Deutsche Bank. So please go ahead.

Yeah, thanks for taking my question and congratulations on the good results. Just wanted to come back to the component shortages. You obviously had working capital drag and inventories going up. But at the same time, then you're talking about component shortages. How should we square those two things? Is it mostly semi-finished goods that you're stocking there or should we think about this in a different way? And then the second question, just on the redesign efforts on the semiconductor side, Ola, that you mentioned in the last quarter, just how are these progressing? And maybe you can give us one or two examples where you have successfully redesigned products to use less specific semiconductors. Thank you.

Yeah. Thank you. No, the component shortages in relation to inventory levels you should regard in a historic perspective. We have a slide on working capital to sales. We are still at very, very low historic levels on working capital to sales. So this build-up is just a necessity to survive the next few months. But as I said, working capital to sales, if I'm not wrong 6.6 percent so it's very low so that's how you should regard that when it comes to redesign yes we are redesigning certain circuit boards in within geo systems and we think we're going to see a good impact from that work in the second quarter on the other hand the shortage situation has moved to other areas of the hexagon group and we're now facing shortages in the second quarter in areas where we were not facing shortages in the first quarter. So it's an ever moving target.

So what, maybe can you give us an example of an area where things got significantly worse now going into Q2?

I don't want to eat up my words, so I won't disclose that today. We might do it later, but there is no benefit for Hexagon disclosing that.

Understood. Thank you, Ola.

Thank you. Next question from Joaquin Gunel from ZMB Markets. Sir, please go ahead.

Thank you. Good afternoon, Ola. So a very, I mean, a final question from me. Since you capture so much of the gross margin expansion here also on an operating profit level and trading so close to your 2026 targets already, can you please help us understand some of the underlying drivers here going forward where you believe the gross margins could be by 2026, given the shift in revenue mix?

Well, we'll see. I don't know. What is it? It's four years until 26. So it's a bit early to speculate on that. But I do think the same growth drivers that we've seen for margin expansions are going to kick in in the coming four years. And that is an ever-improving mix and also new product development. Those are the two key areas. Thank you. Thank you.

Thank you. Next question from Daniel Druckberg from Andres Benken. So just go ahead.

Thank you, operator, and thank you for the question and congratulations to a strong set of numbers in Q1. My first question is a little bit hypothetical perhaps, but you do conduct business all over the world, including in markets with very high inflation and high interest rates. And I was wondering if you can have any internal lesson learned that you could spare with us, i.e. how sensitive Hexagonal Business is to higher internal product rates, if it's possible to answer that.

Well, yeah. I think a lesson learned is that keep an eye on the ball. We started increasing prices already in early October. where other people might not have started looking at that, which gave us a great start of 2022. And now we need to continue doing that, working very hard. I also think that you have to look hard into your business model, how you conduct your business. Can you sell in another way? Could you do, I don't know, recurring revenue out of a... capital sale where you have a huge upfront payment could you shop it up in pieces and offer it as a service rather than than than selling it discreetly so we're working on many fronts trying to improve and and really do do things we do currently much better for the future

Perfect. And I may ask you also what you think about the M&A environment. We have seen, obviously, the valuation levels ease off quite dramatically in the last three months, at least. What is your view? Is the potential buff or funnel, or what you say, increasing on back of this for you?

I think the EBIT multiple on Twitter was quite high, and that's the most recent public transaction we've seen. But joking apart, what we've seen, all of us, is obviously the correction in the public market. That hasn't hit the private market yet. There is a lot of money in the market looking for growth. So there is still a lot of competition around the assets that we are looking at. But If this continues, obviously there is going to be a correction in the private market as well for prices.

Perfect. And if I may, the mandatory question on the smart build, a great concept, et cetera, it's in the process power marine, and you have invested in the BIM to have more software and so on. Can you give any more proof of concept on this? Development.

Thank you. Yeah, we've just done an analysis on our China campus building, and we saved a lot of money, and it was on time and on budget. And they used smart build and bricks from design to completion. And just to correct you for future reference, we now moved SmartBuild and Bricsys from PPM to Geosystems. So it moves from industrial to geospatial. Sorry for that. Yeah, for the future, I think that is important because now it's all about launching these products into the market and Geosystems has to better coverage in the AEC market.

Yeah, you should bring it to Stockholm as well because we need it. Thank you, and good luck in Q2.

Thank you. Next question from Nathan from Berenberg. So please go ahead.

Hi, good afternoon, Olle. Thank you for taking my questions. If I may, could I start with the PPM segment, please? So it recorded 2% organic growth, and that's obviously we're expecting a bit of recovery given these structural trends that we're seeing in end markets. So putting that 2% organic growth in context with the low comp we had last year, I get a bit more color on what your expectations are for the recovery in PPM segment, and how should we think about the shape of the recovery for the rest of

Yeah. No, I think the underlying trend in PPNM was quite favorable. We saw the so-called project business, which is the largest segment growing at strong single-digit levels. And project business is typically when we sell software to EPCs that in turn are are trying to design or are involved in designing new projects. And that should actually increase going forward. It was a weak quarter for owner-operators, which is a more stable segment where we sell maintenance solutions, asset lifecycle solutions to already existing plants. And I think that wasn't a trend. It was just this quarter where it just happened to be weak. And then in cyber, we see good prospects for growth and in also all the other new segments like EAM. EAM grew by 42% in its SaaS revenue. So no, there are a lot of areas that are growing very rapidly.

Thank you. That's helpful. I suppose a mid-single digit or a high single digit growth, organic growth for the PP&M business, the outlook in terms of outlook, would you say that's achievable?

I mean, technically, you do have an impact that will kick in in the second half. EAM is not recorded as organic growth in the first quarter simply because we didn't own EAM in Q1 of 21. But as soon as EAM is a part of the organic growth story, you're going to see an acceleration in this division's organic growth.

Thank you. That's helpful. And one more question, if I may. You've already covered it. I just wanted to check that I have understood it correctly. You know, despite the lockdowns, the supply chain issues we're seeing in China, for the Q2 outlook, you are cautiously positive. Is that correct, firstly, to check? And secondly... specifically for the MI segment, if I've got the numbers correct, I think it's got a decently large exposure in China, but obviously it had a very solid 13% growth in Q1. So could you help me bridge that gap between everything that's going on in China, despite the fact that MI had a pretty solid quarter this quarter?

No, we are cautiously optimistic about China. So We believe in growth in the second quarter as well. And MI is our oldest business in China. It was the original business when we transformed Hexagon back in 2001. And we have a very innovative team of sales engineers and management people. they just quarter after quarter, they manage to find new applications, new end markets to sell to. And we haven't seen a slowdown in the ideas and the projects they come up with. So we do believe that MI, in spite of the very tough situation in China, will continue to grow.

It's very encouraging to hear. Thank you very much, Ola. Thank you.

Thank you. Last question from Magnus Krubler from UBS. So please go ahead.

Thanks a lot for taking my follow-up. I just wanted to ask if you could comment a bit on the contribution margin of EAM in the quarter. Is it still around 40%?

Yes, it's above 40%.

Perfect. And then following Russia's invasion of Ukraine, have you seen any increasing demand for the defense offering. And if you could give us an update a bit on the U.S. market with respect to the recent changes there, that would be very helpful.

To quote a Bond movie, I could give you an update, but then I have to kill you.

I would think you do, I guess.

Yeah, no, it's classified, so we don't comment on what we do.

That makes sense. Thanks so much, Ola.

Thank you.

Thank you, Mr. Roland. There is no question. Nice one.

Thank you. And thank you for listening in. And we'll do this again next quarter. Have a good weekend, everyone. Bye.

Thank you, ladies and gentlemen. This concludes the conference call. Thank you all for your participation. You may now disconnect.