Hexagon AB (publ)

Thank you. And welcome, everyone, to this third quarter interim report. And if we start on slide number four, overview for the third quarter, we record sales, a sales increase of 23% in this quarter, and 7% are coming from structure, i.e., M&A activity. 9% is coming from currency tailwind, and 7% is organic growth. And we saw broad-based demand across all geographies and industries in the third quarter. As you might have seen from the gross margin, our product mix continued to improve, strengthening both EBIT and gross margins. And we expect a resolution of the supply chain pressure by the end of the year. We report an EBIT of 386 million, which is 24% stronger than the corresponding period of 2021. If we move to slide five, just a reminder that Q1 and Q3 are typically our weakest quarters in the year, followed by strong second quarters and fourth quarters. Slide six gives you an overview of the P&L statement. I won't dwell over it. I can only just state that we record 1320 million in sales, and that that corresponds to an EBIT margin of 29.3%, which is 0.5% stronger than the corresponding period last year. I think we'll skip slide seven. You got the year-to-date numbers there, and move straight to cash flow. where cash flow from operations amounted to 385 million, a bit more than 100 million more than the corresponding quarter of last year. And this corresponds to a cash conversion of 78%, which is quite normal for a third quarter. We had 79% cash conversion last year. Moving to slide nine, over the years we've reported on our working capital to sales ratio, where we're now back on the trend line at 5.9% working capital to sales. Market development, if we move to slide 11, that slide will give you an overview of the sales mix. for the hexagon group in the third quarter where we see North America continue to expand. The Americas is now 40% of group sales. We see a slight contraction in Western Europe in terms of mix and also in EMEA. EMEA, rest of EMEA excluding Western Europe is obviously driven by the reduction of sales to Russia. Slide 12, just a quick overview of the various markets and how they fare. We have strong growth in Asia excluding China. We have strong growth in South America. We have good growth in the more mature markets of North America and Western Europe and China. And we see a decline in Eastern Europe, Middle East and Africa where the war is obviously the culprit to negative growth. Slide 13 is for your reference. It gives you an overview of what we saw in the third quarter per segment and per geographic region. But moving to slide 14, Emilia, Western Europe recorded 6% organic growth. We saw solid demand for both surveying and positioning solutions, as well as strong demand from the manufacturing industries across the continent. Power and energy also recorded strong business development in the quarter. If we exclude Western Europe, Russia is obviously the headline with significantly declining sales, minus 55% in the quarter. And EMEA excluding Russia is actually quite strong, where we see strong growth from the Middle Eastern region. Slide 15, Americas. North America recorded 8% organic growth. South America recorded double-digit organic growth, where the North American market saw solid demand across most industries. Compared to Western Europe, it was significantly stronger demand in North America. South America is driven primarily by expansion in agriculture, but also the mining industry. and power and energy sectors. Moving to Asia, slide 16. China records 5% organic growth, and this is in a market that is quite tough with lockdowns and weak construction markets. It was primarily driven by general manufacturing and automotive. We did see some weakness in the infrastructure and construction markets in our Chinese business. Japan, Southeast Asia, and India all record strong double-digit growth. It's supported by strong demand for both surveying and manufacturing solutions, so both infrastructure and the manufacturing sector is expanding. Mining Solutions recorded a very strong quarter in Australia. Reporting segments, if we start with geospatial enterprise solutions on slide 18, organic growth for this segment was 5%. Geosystems reports 4% organic growth on the back of a quarter this time last year where growth was 15%. So it's a very strong quarter in spite of the slowdown in organic growth. SIG reports 5% organic growth, and it's primarily driven by demand from defense. Autonomy and positioning saw 9% organic growth, and it's a combination of strong demand for defense solutions with autonomous driving solutions and The sales amounted to 642 million, and the EBIT margin was 30.7%, a slight reduction compared to the corresponding quarter last year, where we reported 31.3%. Now, if we move to industrial enterprise solutions, slide 19. Industrial enterprise solutions report an organic growth of 9%. Both divisions, MI, that grew by 8%, and asset lifecycle intelligence, that grew by 12%, saw strong demand in the quarter. We saw strong demand from all manufacturing industries, but we also saw growing interest in starting to invest in energy solution for ALI. Sales amounted to 678 million, and the EBIT margin improved by more than 2% to 29.2% in the quarter. Slide 20, our growth margin. Our growth margin for the past 12 months is 1% stronger than this time last year. We report 65%. And if we look at the corresponding EBIT margin on slide 21, we report 29.5% EBIT margin versus 28.7% this time last year. And with this, I want to hand over to our current COO and our incoming CEO, Paolo Gugelmini. and he will present what's happened in the quarter operationally. So, Paolo.

Thank you, Ola. Some highlights from the business development activities in Q3, starting with the acquisition of iConstruct that we announced just a couple of weeks back. The company was founded in 2009 in Perth, Australia. It's a great solution for the commercial infrastructure and industrial construction sectors. It's going to create opportunities across the customer base in geosystems and in ALI particularly. At the core, what iConstruct does very well is an automation tool that is utilized to pull and integrate information that is held within different BIM models into a single 3D model that really enhances accessibility control of the design and the construction pace. This solution strengthens our smart build suite of solutions for the AEC sector, just as well as what we have announced a couple of weeks back on slide 24, us joining forces with Avere. Avere, based out of New York City, the 50 employees team, very specialized in building platforms that leverage on-site reality capture data from a variety of sources. It could be scans, it could be images. That data ends up enriching and updating BIM models and therefore improving project workflows, schedule tracking, installation issue detection through analytics. And this is really us helping customers creating a constantly updated BIM through as-built conditions. If we move on to the major commercial wins from the divisions in slide 25, if we start from ALI, we see continued traction for our portfolio in those industries. We've had a very successful project with one of the largest global mining operators based out of Brazil. They provide iron ore, copper, silver, other natural resources, and they have standardized on smart land suite as the backbone for their engineering information management system to manage drawings and data documents all the way across the life cycle from projects to operations. The second commercial highlight on the slide refers to a win with one of the largest public transit agencies in the US. They are moving aggressively towards a zero emission fleet of vehicles, adopting electric buses, and they have adopted 30 different enterprise asset management EAM applications to drive operational performance, support auditing, compliance, and tracking. The third case In the last year, we signed with an EPC operating in 49 countries globally. This is going to become one of our largest SDX SaaS commitments to date, a large multi-year commitment that is showing continued momentum in the SaaS transition for the ALI portfolio. Moving on to slide 26 to our geosystems portfolio. In Q3, we have successfully installed an autonomous deformation detection system in Greenland. As you can imagine, this area sees tidal waves bringing instability to slopes, creating landslides, creating risks to the local population. This is a complex installation, of course, in harsh conditions, a system that is powered by solar and fuel cells. We have developed in this instance a collaboration with ETH, developed advanced analytics jointly. We're using sensor data from cameras, from geophones. And of course, we stream all of that data for processing through satellites. And if we move to railways in slide 27, we have announced a deepening of our partnership with Chorus. Cores is a French-based dynamic simulation company. They develop technologies for safety training of operators in railways. In this instance, we use our content program, our Metro HD program. We fuse all of that information with GoPro images that are captured by trains, and we build more rich environments for operators to train with them. These are great technologies that We're deploying across other industries and will be increasingly available and accessible through HXBR. Still staying within the railway industry, in slide 28, we refer to two commercial successes with Amtrak and one of our largest customers in Czech Republic. Amtrak is a very large passenger operation in the United States, of course. They are planning to build a joint operations center between their train operations and their police department, and they are standardized on Exagram OnCall for dispatch and OnConnect to integrate the digital records across the two divisions. In Czech Republic, this is a more widespread set of applications from our portfolio that support the state-owned company that is managing the national railways infrastructure. We help them not only managing documentation and managing the infrastructure from rail assets to utility assets, but ultimately building a complete digital twin of this infrastructure. Back to the AEC sector in slide 29, an update about OxBlue. joined Hexagon in 2020. They've experienced very strong growth with their portfolio of high-definition photography and live video streaming services to monitor in real time what's happening in a construction site. This is highly valuable for AEC stakeholders. In this case, a sizable contract with Wallbridge that is one of the largest construction companies in the US based out of Detroit. From an innovation perspective in RealityCapture, we have announced in the quarter the release of StreamDP, which is part of our high-end ground penetrating radar portfolio. Here, we capture data about underground utilities, cables, pipes. We enrich our RealityCapture data set in HXDR with this precious information, and this particular solution is unique in the marketplace in terms of ease of automation and depth of measurement. In slide 31, an update about Leica DNC4 release. This is the next generation airborne frame camera, offers increased productivity, optimized flight times, and of course feeds data into the content program and HXDR. And, of course, this data capture innovation helps support contracts like the ones that we have announced in the quarter in slide 32 with the USDA Farm Service Agency's National Agriculture Inventory Program. In this instance, we go and capture eight states at high resolutions, and we support agricultural applications, biomass calculations, farming programs, and the likes. Moving to our manufacturing portfolio, as Ola alluded to, we have seen strong growth across automotive, particularly with our software portfolio. In this case, we increasingly support one of India's largest automotive OEMs, not only through our structural simulation portfolio, but also in the design of their next generation powertrain component in approach to electrification. Staying within India that has seen good growth across the group, in slide 34, an update about our activities with India's largest space research center. In this case, they have adopted a broad portfolio of metrology equipment from high-accuracy printed circuit boards, inspection all the way up to jig measurements and NICA trackers.

Thank you, Paolo. And if we then turn to slide 36 in this pack, we announce some organizational changes on the 7th of October where David Mills, as of the 1st of July 2023, will assume the position as CFO for the Hexagon Group. And I want to take this opportunity to thank Robert Belkic that has been our CFO for 10 years and will leave the group the 30th of June for his services. So thank you, Robert. And with that, I think we've come to what you will wait for, which is the Q&A. And we are now open to take any questions.