Q2 2024 Hexagon AB Earnings Call Transcript
Key Points
- Hexagon AB (HXGBF) achieved a new all-time high gross margin of 67.3% in Q2 2024, driven by pricing discipline, favorable mix, and operational improvements.
- Recurring revenues grew by 8% to EUR 560 million, supported by strong momentum in subscriptions and SaaS revenue.
- Operating margin improved to 29.5% from 28.9% in the previous year, aided by gains from the rationalization program.
- Cash management was robust with an 85% conversion rate, aligning with annual guidance and a 17% year-on-year growth in operational cash flow before NRIs.
- The company is set to introduce new products across divisions in Q3, positioning itself to capture market share as demand improves.
- Sales were impacted by weakness in the construction sector and slowing investments in the automotive industry, leading to a reported growth of minus 1%.
- Geosystems division recorded a sales decline of 5%, affected by interest rates and low confidence in the construction sector.
- Revenue in China declined by 4%, reflecting a softening order intake after several years of growth.
- The Autonomous Solutions division faced a degradation of confidence in the agriculture sector, impacting demand.
- The company anticipates continued challenges in demand for Q3, with uncertainty in the market affecting the closing time for commercial projects.
Good morning, and thank you all, for joining our Q2 2024 earnings call. Despite the headwinds in our core markets, we have delivered a solid quarter of incremental operational and strategic improvements. In this Q2, we recorded sales of EUR1,353 million, impacted by weakness in the construction sector and slowing investments in automotive affecting sales of our sensing and robotic systems.
Growth in recurring revenues remained strong, nevertheless, up 8 percentage-points to EUR560 million, driven by subscriptions and SaaS revenue momentum. In Q2. We also have hit a new all-time high of 67.3 percentage-points of gross margin, very importantly, making incremental improvements across all of the five divisions.
This gain is the result of investments in innovation to constantly optimize the cost structure of our portfolio came through diligent pricing to counter inflation, favorable mix and operational improvements. More of the manufacturing intelligence and SIG divisions benefited from the divestment of non-strategic
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