2024-07-26 17:11:02 ET
Hexagon AB (publ) (HXGBF)
Q2 2024 Results Conference Call
July 26, 2024 4:00 AM ET
Company Participants
Paolo Guglielmini - Chief Executive Officer
David Mills - Chief Financial Officer
Benjamin Maslen - Chief Strategy Officer
Conference Call Participants
Andre Kukhnin - UBS
Erik Golrang - SEB
Magnus Kruber - Nordea
Joachim Gunell - DNB Markets
Sven Merkt - Barclays
Daria-Ioana Sipos - JPMorgan
Nay Soe Naing - Berenberg
Mikael Laséen - Carnegie Investment Bank
Presentation
Paolo Guglielmini
Good morning. Thank you all for joining our Q2 2024 earnings call. Despite headwinds in our core markets, we have delivered a solid quarter of incremental operational and strategic improvements. In this Q2, we recorded sales of €1.353 billion, 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 €560 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 the five divisions.
This gain is a 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. Moreover, the Manufacturing Intelligence and SIG divisions benefited from the divestment of nonstrategic business units in prior quarters.
Strong operating margin followed this gross margin expansion, landing at 29.5 percentage points versus prior year at 28.9%, also supported by gains from the rationalization program. Cash management was strong with conversion at 85%, which is in line with the annual guidance and operational cash flow before NRIs has grown by 17 percentage points year-on-year.
Looking into Q3, we expect demand to remain challenged, but we also expect these operational improvements to continue as well as the momentum in recurring revenue. Very importantly, Q3 will also be particularly active for us in terms of new products introduction across divisions to position us strongly to capture market shares as demand improves.
If we move to Slide 4, in terms of geographic trends, we see Americas, Middle East and India as the areas in which we experienced more sustained broad-based commercial momentum. In the U.S., manufacturing, data centers, public safety and defense demand remains strong despite a large comparative deal booked in Q2 2023 skewing our revenue growth this year.
In Western Europe, despite uncertainty in the automotive supply chain in machine shops and the construction sector, we managed to grow by 4 percentage points with particularly strong momentum in the Middle East across industries. Aerospace and process industries remained positive in Europe, driving demand for software and for more automation....
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Hexagon AB (publ) (HXGBF) Q2 2024 Earnings Call Transcript