Hexagon (HEXA) Q3 2024 earnings summary

Executive summary

• Management is evaluating a potential separation of the Asset Lifecycle Intelligence Division (ALI) and related businesses into a new standalone company (NewCo), aiming to create two focused public companies with distinct strategies and financial profiles.

• NewCo would include ALI, ETQ, Bricsys, and Utilities & Infrastructure, targeting digital project and asset management with strong recurring revenues and blue-chip customers.

• The separation process is expected to take 12–18 months, with shareholder approval required and listing options being considered in the U.S. and Sweden.

• Q3 2024 saw strong recurring revenue growth and solid margins despite challenging market conditions and currency headwinds.

• Innovation execution remains robust, with important product launches expected to drive growth into 2025.

Financial highlights

• Q3 2024 sales were €1,299.8M, down 2% organically and 4% reported year-over-year, with recurring revenues up 7% to €565M.

• Gross margin improved to 67.1% (from 65.5%), supported by innovation, favorable mix, and operational improvements.

• Adjusted operating margin was 29.0%, supported by gross margin gains and cost savings.

• Cash conversion for Q3 was 70%, and year-to-date stands at 81%, within the 80–90% guidance range.

• Adjusted EBITDA margin was 26.9%, diluted by amortization.

Outlook and guidance

• Demand is expected to remain challenged in Q4, but management is confident in positioning for growth in 2025 as market conditions improve.

• Full-year cash conversion target remains 80–90%.

• Conviction in 2022–2026 targets: 5–7% organic growth, 3–5% M&A growth, >30% EBIT1 margin by 2026.