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 publicly listed company (NewCo), aiming to create two focused, global leaders with distinct strategies and financial profiles.

• Recurring revenues grew 7% year-over-year, driven by software and services, despite challenging macroeconomic and currency conditions.

• Net sales declined 4% to €1,299.8M, with organic revenue down 2% year-over-year.

• Adjusted operating margin remained strong at 29.0% (29.1% last year), supported by cost savings and innovation.

• 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; recurring revenues grew 7% to €565M.

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

• Adjusted operating earnings (EBIT1) were €376.6M (29.0% margin), down from €393.0M (29.1%) year-over-year.

• Cash conversion reached 70% in Q3, up from 64% in Q3 2023, and 81% for the first three quarters, within the 80–90% guidance range.

• EPS for Q3 was €0.101 (vs €0.106 last year); including adjustments, €0.088.

Outlook and guidance

• Short-term 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.