Hexagon AB (publ)

Good day and thank you for standing by. Welcome to the Hexagon Q1 Report 2025 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1, 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one, one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Norbert Hanke. Please go ahead.

Good morning, and thank you for joining our first quarter 2025 conference call. I am Norbert Hanke, Interim President and CEO of Hexagon, And I am joined by our Chief Strategy Officer, Ben Muslin, and our Chief Financial Officer, David Mills. In Q1, we delivered 0% organic growth, 67% gross margins, and an operating margin of 26%, and with a cash conversion of 71%. The current revenue grows strongly by 10%. So the quarter began well, but in mid-March, geopolitical uncertainties impacted the volume. March is the largest month in the quarter for revenues, so this had a sizable impact on our growth potential in Q1. The largest impact, however, was on operating margin. Here we saw the combination of negative currency and the late decline on volumes on a cost base positioned for growth. We have seen demand stabilizing now in April. However, we remain very cautious of the uncertain market backdrop and will continue to monitor this and adjust our cost base accordingly. Besides the challenging market, we have made good progress. The preparations to separate the ELI division are on track. And during the quarter, we did announce that the SIG division will be included in the new company. This reflects the shared heritage and synergies between SIG and ELI and will further focus Hexagon Core around precision measurement technologies. We have also announced that NUCO will be listed in the US with the temporary SDRR program. Finally, you will have noted we launched a robotics division during the quarter, which intends to leverage our skills in measurement technologies, AI, and autonomy in the field of humanoid robotics. This will be a key focus of the agenda at Hexagon Live in June 2025, and I encourage you all to attend. Turning to the next slide, please. Before we move into our usual presentation, I want to spend a few moments on the impacts of the geopolitical uncertainty we noted during Q1, which was driven by tariffs. Starting with the indirect impact, which was by far the largest contributor to the drop in volumes and margins. We saw significant declines in Canada, Mexico in March, which were the first countries to be subject to increased U.S. tariffs. We then saw impacts in China and Western Europe later in the month as well. We have seen delays in shipments and orders, deflecting the very uncertain environment. Our cost base was built around an expectation of a return to growth. This expectation was underpinned by a growth in January of 1% and growth in February of 9%. March, which typically accounts for 50% of the revenue in Q1, ended with an overall decline of 6%. The timing of the impacts left us unable to address the cost base proactively, meaning we experienced a significant drop from volumes to operating margins. As noted earlier, we have seen a normalization of demand in April. However, we remain cautious in our near-term outlook. Turning now to the potential direct impacts on tariffs. We expect the direct impacts to be more manageable than the customer uncertainties. In total, based on the current tariffs, we expect the impact on earnings to be up to 15 million in the quarter. with the potential to mitigate some of these with proactive actions. This includes, for example, rerouting of shipping, alternative sourcing of critical materials, strategic inventory management, and price increases. We are also investigating the feasibility of further localization of US manufacturing. In response to the overall uncertain environment created by these tariffs, We will continue to monitor and adjust our cost base as needed.

Turning now to Ben. Thank you, Norbert.