Hexagon AB (publ)

Good day, and thank you for standing by. Welcome to the HEXAGON Fourth Quarter Report 2024 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star 11 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw a question, please press star 11 again. Please be advised that today's conference has been recorded. I would now like to hand the conference over to our first speaker today, Norbert Hanke. Please go ahead.

Good morning and thank you for joining our fourth quarter and full year 2024 conference call. I am Norbert Hanke, Interim President and CEO of Hexagon, and I am joined by Chief Strategy Officer Ben Muslin and our Chief Financial Officer David Mills. For those of you I have not met, I have been with Hexagon for over 20 years in a number of roles, including being president of the manufacturing intelligence division and most recently as chief operating officer. Therefore, I have a pretty good understanding of Hexagon, about its markets, customers and its potential. And I was happy to step in as interim president and CEO during this period of leadership change. Now turning to our performance this quarter. In Q4, we have delivered a modest organic growth of 1% with strong growth in software and new product launches, offsetting the weakness in key markets, which has been seen throughout 2024. The gross margin maintained to be very strong at 67%, reflecting innovation-driven pricing power and a strong product mix. The operating margins were good at 31%, reflecting good internal cost control and a favorable currency environment. The headline of this quarter is the cash conversion of 116%. This reflects the benefit of the operational improvements in our focus on this, as well as usual seasonality. For the full year 2024, we have delivered flat revenues with 30% operating margin and the cash conversion of 91%. So being with this slightly above our annualized target of 80% to 90%. This represents a strong performance in a very challenging key market environment throughout this year. With this achieved, the board are proposing an 8% increase in the dividend to 14 cents a share. We have made several exciting acquisitions to strengthen our market leadership position. We will revisit these in more details later on. There have also been some important appointments. Björn Rosengren has been proposed by the nomination committee as deputy chair and will be available for election at the AGM in May. It is intended that he will ultimately succeed Ola Rohling when he steps down as chairman in 2026. I'm also pleased to announce that Anders Svensson will be joining as President and CEO of Hexagon from July 20th, 2025. Finally, the investigation into the proposed separation of ALI is still ongoing. Today, we cannot give you any update, but we are committed to communicate this to the market during Q1. So, in summary, a good busy quarter at Hexagon. And we will now explore this quarter in more detail. Please turn to the next slide. A few comments now on geographical trends which we have seen in the quarter. We continue to see broad weakness in the construction market globally. Also, there was a single rebound in China. New products helped us to mitigate some of the weaknesses in the construction market. And they generated around 2% in geosystems organic growth during this quarter. Automotive markets remain tough, particularly within EMEA and in the US. And effecting as a whole return to growth in Asia with growth in China and a very strong performance in India. Software grew well across geographics, in particular the Encore Public Safety product, which drove growth in the US and Asia. I will now hand over to Ben, who will talk about the division's performance.

Thank you, Norbert, and good morning, everyone. If we go to slide five here, you have the overview of divisional performance during the quarter. As you can see, we saw a mixed development in terms of organic growth with ALI and SIG benefiting from good momentum in their underlying markets. Manufacturing intelligence and geosystems still seeing the effects of a cyclical slowdown in their key verticals. As Norbert said, across the group, we could see good momentum in the software product lines and recurring revenues overall, which increased by 7% organically during the quarter. We also saw a good margin performance across the group, despite these mixed end markets, balancing good cost control with investing in future growth opportunities. If we go to slide six, this is the time series of divisional performance. For your reference, you have these numbers already. We can go on to slide seven, which is the overview of manufacturing intelligence. MI reported revenues of €530 million, which were down 2% organically compared to last year. We note that during Q4 we saw a similar development in terms of orders as we did for shipments, so there was no real adjustment in terms of a backlog. The division reported EBIT of €159 million and an increase in the operating margin to 30%, helped by good cost control and recent currency moves, which mitigated the weaker demand backdrop. By product, we saw good growth in the manufacturing software portfolio, which partly compensated for the weakness that we saw in the quarter in the sensor and robotic solutions portfolio. By segment, as Norbert said, we saw good momentum in aerospace globally, a stable development in general manufacturing, a continued weakness in global automotive and related supply chains, especially in Europe, but also to a lesser degree in North America. China and MI was relatively stable during the quarter. We go on to slide eight with asset lifecycle intelligence. They had a strong quarter delivering revenues of 228.8 million euros and 10% organic growth with good momentum in recurring software sales, which grew double digit. and also a strong end to the quarter in perpetual software deals. EBIT increased to 87.4 million euros, and the EBIT margin was 38%, matching last year's very strong level, despite the additional investments we're making in product lines like SDX. The business saw good growth across all geographies and product areas, but especially in design and engineering software and enterprise asset management software, which both grew at double-digit rates. If we go to slide nine, we have Geosystems. They reported revenues of 400 million euros during the quarter. That represented a 2% organic decline compared to the prior year. Despite this decline, EBIT increased to 124.3 million euros and the operating margin reached 31%, reflecting the benefits of last year's efficiency program as well as currency tailwinds. By segment, construction markets continued to remain weak in EMEA and North America. That was offset to a degree by stabilization in the quarter in China and growth we saw in the rest of Asia. Geosystems saw continued growth in software sales and good momentum in recurring revenues. And they also saw a positive contribution in the quarter from new product launches, including the ICON trade suite that Norbert will mention later on. We go to slide 10, an autonomous solutions. They had revenues of 146.5 million euros during the quarter, which was a 2% decline against what was a tough comparative a year ago. EBIT came in at 46 million euros, representing an EBIT margin of 31%. This decline compared to last year reflects both the volume drop, but also a different product mix this year to last year. In the autonomy and positioning business area, we saw ongoing weakness in precision agriculture. This was offset by growth in marine, aerospace, and defense markets. In mining, we saw a slight decline in the quarter, reflecting tough comparatives a year ago, and a customer pause ahead of a product upgrade cycle we expect for 2025, which we think will drive resumed growth. We also booked the first revenues from the Australian Autonomous Road Project that we announced last year. If you go to slide seven, the safety and infrastructure in geospatial, now they had a very good quarter, delivering revenues of 140.8 million euros and organic growth of 11%. Given the good growth, the division delivered EBIT of 41.9 million euros and an EBIT margin of over 30%, both improvements on last year's record result. The growth acceleration was driven by public safety, where the division is now delivering the strong backlog of orders for the Encore platform, which it has won over the last few years, and where the pipeline of new potential projects remains very strong. Growth was good across all geographies, and especially in Asia. We go to slide 12, staying with the divisions. We have a few slides now of the acquisitions that we've announced recently. Firstly, in autonomous solutions, we announced during Q4 the acquisition of Indurad, a leading provider of radar technologies used to measure all flows, position objects, and avoid collisions between vehicles in a dynamic mining environment. Combined with our existing portfolio, this will help support our customers on their journey towards more autonomous mines. The acquisition closed in late November last year. Slide 13, in manufacturing intelligence in December, we announced the acquisition of Geomagic, and that's a suite of software tools that create high-quality 3D models from multiple sources, including laser scanning. These models can be used to help build CAD design models or to accurately measure and inspect finished parts for quality control purposes, which obviously fit well with our existing solutions. And we expect this transaction to close early in the second quarter. Slide 14, we have an exciting acquisition announced in Autonomous Solutions in early January. Septentrio is a leading provider of GNSS, or Advanced Positioning Technologies, especially focused on applications with low size, weight, and power applications. This will give Hexagon the opportunity to expand in newer, fast-growing markets like airborne delivery and security drones and ground-based robots, where very accurate positioning is needed. This acquisition is expected to be completed during the second quarter. And then finally, slide 15, an acquisition within ALI that we announced last week. CAD service is an existing partner for ALI, providing advanced visualization tools to integrate CAD, BIM, and 3D reality capture data into our asset management software platform. As customers move from visualizing their assets in three dimensions as opposed to two dimensions, I think this technology in-house allows us to accelerate the roadmap and integration of those tools. So welcome to all new members of the Hexagon team. And with that, I will hand over to David.