Hexagon AB (publ)

Good day and thank you for standing by. Welcome to the Hexagon Q1 Report 2026 webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Anders Svensson, President and CEO of Hexagon. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to Hexagon's first quarter 2026 conference call. First, I will direct you to the standard cautionary statement, and then we turn into the next slide. Before I begin, a reminder that the upcoming potential spin-off of Octave, we are now presenting Octave as discontinued operations. We have provided this first bridge here for you to understand the performance of continuing Hexagon, Octave, and taking them both together, meaning the former Hexagon Group. Looking at the headline numbers for the first quarter, Hexagon Continuing Operations delivered a revenue of €964 million, with an organic growth of 8%. EBIT was 251 million euros, giving us an operating margin of 26%. Octave generated 327 million euros in revenues. Organic growth was 1%, and EBIT won of 83 million euros, delivering an operating margin of 25%. At the former group level, including Octave, revenues were 1.29 billion euros, organic growth of six percent and an operating margin of 26 percent during the quarter we also completed the sale of our design and engineering business on the 23rd of february and the business was deconsolidated as of that date today unless i mention otherwise i will discuss hexagon the continuing operations excluding octave and with dne deconsolidated as of the 23rd of February. Mattias will cover the Octave business separately after Norbert. So turning to the agenda for today on the next slide. So I will start with taking you through Hexagon's performance in the first quarter and then dive into our business area performance. Norbert Hanke, our interim CFO, will then take you through the Hexagon financial performance. He will then hand over to Mattias Denberg, CEO of Octave, who will then cover the Octave performance in the quarter. We will then, of course, have time for your questions at the end of the presentation. So next slide. Starting with the first quarter performance then for Hexagon on the highlights of the quarter slide. The first quarter of 26 was a strong start of the year and also a busy one for us at Hexagon. We delivered 8% organic growth with a gross margin of 63%, an operating margin of 26% and cash conversion at 77%. Alongside this strong financial performance, we continue to take decisive portfolio actions to sharpen Hexagon's focus on the core precision measurement and positioning opportunities. We completed a design and engineering business sale to Cadence for approximately 2.7 billion euros in cash and stock. And here in April, in the second quarter, we announced the agreement to acquire Waygate Technologies from Baker Hughes for approximately $1.45 billion. And this is then expanding manufacturing intelligence into the very attractive area of non-destructive testing. And I will cover this more in detail on the next slide. Mattias and Octave team held Investor Day in New York on March 26, with the spin-off expected to become effective on May the 22nd. We also continue to build the new Hexagon executive team. René Rädler has been announced as the chief people officer on the 1st of April, and Enrique Patriksson, who will join us as chief financial officer the 24th of april meaning tomorrow and i wish enrique welcome to hexagon and both of them welcome to the executive team and i'm happy to have you on board finally a humanoid robot aeon is making excellent progress in the past quarter aeon successfully completed a pilot at bmw and will be deployed in production at the leipzig facility It is a significant milestone in demonstrating the real-world industrial capabilities of Aon. In parallel to this, our pilot at Scheffler has resulted in an agreement to deploy up to 1,000 Aons in the next seven years. This is a big step that we communicated here in April as well. Then we expect commercialization of Aon by the end of 2026. So a very active quarter of delivery. Let me now give you the overview of the Waygate acquisition. So next slide. Buying Waygate is a natural next step for us at Hexagon. As a market leader in the non-destructive testing, they fit very well into our portfolio focus on precision measurement and positioning technologies. They're completing the measurement chain from surface to the interior of components. The computer tomography hardware combined with our volume graphic software creates a unique value position for customers. And the business also brings exposure to maintenance, repair, and operation markets with recurring utilization-driven demand, which boosts our exposure to the growing aerospace market. Vegat has a portfolio of assets with different growth and margin profiles. This brings a meaningful opportunity for us to create value. RBI is already growing very well at good and healthy margins of about 30% EBIT. Radiography is a strong business where we can leverage our manufacturing and sales footprint to really drive synergies across the business and leverage shareholder value. The ultrasonic testing and imaging solutions are also very good assets, but here we will assess the position of those assets. They are either challenge but not by not being market leaders or they have a not a perfect strategic fit for us so we will look at these assets from from different perspectives and we will try to then either through acquisitions make them into market leaders or we will have also the possibility to go through strategic reviews or do turnarounds of these assets Now turning to our organic growth performance in more detail for the quarter on the next slide. So we delivered a strong organic growth of 8% in the first quarter, and that's a significant acceleration from the prior year. This was primarily driven by autonomous solutions, which grew 13%, manufacturing intelligence, which grew 9%. Both businesses benefited from growth in aerospace and defense. EOSystems grew 2% while completing the channel destocking program that I talked to you about in the fourth quarter report. Excluding this impact, the underlying growth would have been 4% for EOSystems, which gives us the confidence in that the momentum is again building within EOSystems. Recurring revenues grew 6%, driven by continued momentum in construction software subscriptions and also GNSS correction services. You can see the rolling trend month figures in the chart on the right. For the full transparency, excluding the impact of our design and engineering business, software and services accounts for 44% of sales for the remaining hexagon, corresponding to recurring revenues of around 28%. The new product adoption is also progressing very well, especially if you look at our Laser Tracker, ATS 800, and also our new robotics total station, TS 20. And this is, of course, supporting the growth trajectory across our businesses. Turning now to the development by region and industry in the quarter. So on the next slide. Here you have a snapshot of the development. And I start with the geography. The Americas was the strongest region, delivering a 15% organic growth. with a positive performance across all of our business areas. North America was especially strong, while South America was weaker. EMEA recorded 4% organic growth with broad-based contributions across the portfolio. China reported a decline of 4%. Performance in manufacturing intelligence was very solid, but the wider China business was impacted by the weaker year systems business, and also by the completion of the destocking actions taken within year systems in China. Without the destocking initiative of roughly 8 million in the quarter, there was actually also single-digit growth in China as a whole. The rest of Asia delivered 7% organic growth, solid performance, reflected the good momentum in several of our key markets in this region, and especially a strong India. By industry, if we look at it like that, construction remains our largest vertical, and we recorded a strong growth in Americas, but also good growth in Western Europe. General manufacturing, the second largest vertical, showed broad-based strengths across all the regions. Aerospace and defense continued to perform strongly, while mining was more mixed, with uncertainty impacting the demand in South America. We also had some pulling of deliveries from the first quarter into the fourth quarter last year, and that had some negative impact for the first quarter. Automotive remained under pressure, particularly in the EMEA, but we also saw signs of weakness in China. Electronics was very strong in the quarter, and this is primarily done in China and the rest of Asia. That's where a strong majority of our exposure is, and it was very strong growth. Agriculture, while only being 2% of our sales, still remains weak globally. I now turn into profitability on the next slide, and I start with the gross margin. And I want to say first that the design and engineering that normally operates with strong margins had a challenge start to the year. So while it was very strong in the first quarter of 2025, which is the reference period, it performed quite badly during the six, seven weeks that it was within our business before it was sold on the 23rd of February. There's a lot of reasons for that. But if we exclude the impact of design and engineering in both periods, both in the first quarter of 26 and the first quarter of 25, the gross margin was 62%, and in the comparison period, 62.6%. So it's 60 bps down year on year. Gross margin was, however, stronger in this quarter than in the last two quarters, quarter four and quarter three of 2025. And you will also be able to see this in the appendix slide attached to this presentation. The ramp-up of new product sales continued to support cross-margin. But this was offset by a full quarter of tariff impact. And in the comparison period, there was very little tariff impact. And we also had input cost inflation and also on freight. And this is driven then by the Middle East conflict primarily. If you look at the currency for the quarter, that also created a significant headwind. Going forward, we will mitigate these pressures through pricing and also freight surcharges, etc. And actions are already taken at the end of the quarter. But the full impact of this, given our delivery times, should be seen in the third quarter. Turning now to operating earnings. During the first quarter, we delivered an operating margin of 26.1%. versus 25.9% in 2025. Importantly, excluding also here the full impact of design and engineering business in both periods, the operating margin grew 80 basis points versus the previous year. And this, I would say, is a meaningful improvement, driven by the organic growth performance and benefiting from our restructuring program that we communicated in the second quarter reports. some of the contributions also a gain from a sale of a building within the quarter of about eight million euros offsetting a good performance was like as mentioned a weak design and engineering performance and tariffs and cost inflation we also saw the strong currency headwind on ebit and that corresponded to a negative 60 basis point performance Year-on-year reduction in capitalization to amortization gap which we have talked about before had an impact of 70 basis point negative. A key driver for the margin improvement was the cost reduction program. We benefited here about 10 millions during the quarter and the program remains on track for a total saving within Hexagon at 74 million at the end of the year. also had generally good cost control despite the growth and that also of course supported the performance now turning to the business area performance i start with manufacturing intelligence mi delivered a revenue of 433 million euros and an organic growth of nine percent we also had a very strong order intake in the quarter which is positive for the coming two or three quarters If I start with the geography, the Americas was the strongest region, but we also saw growth in EMEA and Asia. By industry, aerospace and defense continued to perform very strong, and the automotive business remained under pressure, particularly in the European markets, but as I mentioned, also in China. Operating margins came in at 23.7%, down from 24.6% in the first quarter of last year, And this reflects the impacts of currency headwinds and tariffs and the weak D&E performance in this year, which more than offset the positive operating leverage from higher volumes. Again, if we eliminate D&E, as we have divested this part from both periods, the operating margin improved from 23.1% to 23.6%, so 50 bps up. Looking ahead, had an agreement to acquire vega technologies and this is a transformative step for manufacturing intelligence and it expands as i mentioned into the adjacent non-destructive testing market and positions us to offer customers a truly end-to-end precision measurement solution from the surface to the interior and through the life cycle of products and as i mentioned earlier we did divest

D&E on the 23rd of February.