Hexagon (HEXA) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered record gross margin of 67.3% and operating margin of 29.5%, with recurring revenues up 8% to EUR 560 million, despite flat organic sales and persistent weakness in construction and automotive sectors.

• Cash conversion was robust at 85%, supported by operational efficiencies and the rationalization program, which delivered EUR 38 million in quarterly savings and is 70% complete.

• Margin improvements were driven by pricing, software sales, and divestment of low-margin activities.

• Acquisitions included Itus Digital, Xwatch, and Voyansi, while divestments in MI and SIG contributed to margin gains.

• Early indicators suggest continued market challenges in Q3, but management remains confident in long-term growth targets.

Financial highlights

• Q2 2024 sales were EUR 1,353.4 million, down 1% year-over-year, with zero organic growth; adjusted EBIT1 increased 1% to EUR 399.5 million, and adjusted EBITDA rose 4% to EUR 507.9 million.

• EPS for the quarter was EUR 0.108 (excluding adjustments: 10.8 Euro cent); operating cash flow before non-recurring items grew 17% to EUR 248.5 million.

• Gross margin reached an all-time high of 67.3%, up 60 basis points year-over-year.

• Cash conversion was 85%, and net working capital ratio was 7.3% of rolling 12-month sales.

• Return on capital employed (12-month average): 11.3%; net indebtedness: 0.33x; equity ratio: 60.2%.

Outlook and guidance

• Q3 demand is expected to remain challenged, especially in construction and automotive, but operational improvements and recurring revenue momentum are set to continue.

• New product introductions and continued focus on innovation and efficiency are planned to support future growth.

• Management reaffirms 2022-2026 targets: 5-7% organic growth, 3-5% M&A growth, >30% EBIT1 margin by 2026, and 80-90% cash conversion.