Hexagon (B) Stock

Good day, and thank you for standing by. Welcome to the Hexagon Q3 Report 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Anders Svensson, President and CEO of Hexagon. Please go ahead.

Thank you, operator, and good morning, everyone, on the line. And also thank you for joining us for this Hexagon Third Quarter 2026 results. My name is Anders Svensson. I'm the President and CEO of Hexagon. And I'm pleased to have with me here in the room, Enrique Patrickson, our CFO.

And with that, we turn into the cautionary statements. And then after this, we go into the agenda for today. So I will begin with the Hexagon's performance in the third quarter. Enrique will then present the business review and financials in more details. And I will then conclude the presentation, and we will open for question and answers. So next slide.

So let me begin with an overview of our performance in the third quarter, and we can now turn into the highlights slide. We delivered another excellent quarter. Organic growth accelerated to 13%, and it is our highest level in the last 5 years. And we achieved that against a tougher comparable while also generating even stronger order intake and adding to our order book in the quarter.

Gross margin held stable at around 62%, and our EBITAC margin, excluding robotics, rose to 25.3%. And that is up 450 basis points on a like-to-like, and quarter-on-quarter, that's up 100 basis points. Cash conversion was 82% in the quarter, and that's reflecting the normal seasonality that we have in the second quarter -- in the third quarter versus the second quarter.

Operationally, we continued building our business for long-term profitable growth. The acquisition of Waygate Technologies is expected to complete during this quarter, the fourth quarter. And we also announced the bolt-on acquisitions of Guidance Marine, ZG Technology and Rocscience during the quarter. And we continue to embed the Hexagon Way, and that was also done during the -- our leadership forum where we collected 200 leaders across the group, where we improved alignment, accountability and collaboration.

We also launched new company-wide values, which are trust, curiosity and courage. AEON humanoid continues to make great progress. We gained 2 new customers during the quarter, and 2 of our existing customers have now started training AEON independently for different use cases. It is an industry first and possible thanks to our simulations and world models. And this is a great step forward to full production deployment at our customers. So as the Hexagon Way takes hold across our business, we are well positioned to capture the significant opportunities for profitable growth lying ahead of us.

So let me now take you through the quarter in more details, and I will start with the organic growth slide, the next slide. So organic growth accelerated to 13% during the quarter, and every one of our business areas group. Autonomous Solution was again leading the way with 23% growth. Manufacturing Intelligence delivered a strong 16% growth, and Infrastructure & Geospatial grew 4% in quite tough environments. All categories grew, but sensor sales led the way with 20% growth. But strong hardware sales today is enabling future sales of software and service solutions, which are normally at the higher margin. Adoption of our newer products continue to progress very well and represents an increasing part of sales for us. It is an important support for our growth of both the top line and gross margin development going forward.

On the next slide, I will now show how the organic growth was spread across our regions and industries. So looking at the regional industry picture, growth was the strongest in EMEA with 17% growth, followed by China at 15% and the rest of Asia at 14%. The Americas grew 6% with tough comparables. Construction, which is our largest industry at 27% of sales remained mixed. Growth was strong in China, but however, from a low base, as you are aware, and helped by large monitoring projects and monitoring projects of infrastructure, of course.

Western Europe returned to growth on machine control and reality capture. In North America, construction services and software were strong, but machine control was weaker, and South America declined for us. In general manufacturing, we were strong basically across the board with the Americas particularly strong due to reshoring trends. Aerospace & Defense continued to see strong demand across both Manufacturing Intelligence and Autonomous Solutions. Mining also grew well in the Americas, including a record quarter in LatAm, and return to growth in EMEA and the rest of Asia, and that was driven also by mining radar.

Sentiment remains cautious given the high fuel cost within mining, and also the iron ore inventories and iron ore growth rate that we see. Automotive was a more mixed picture. The Americas is improving in both shipments and in orders, while EMEA was flat and China was clearly weak, a trend that we have seen now for some time and also see with all our competitors.

Electronics was a bright spot in Asia with strong orders and shipments of bridge machines and also vision systems, both within China and within Southeast Asia. Finally, Agriculture, which has only represented 2% of sales, remains weak with farm income continuing to be under hard pressure, both from, again, fuel cost, diesel and -- but also from fertilizer costs due to the Middle East conflict.

I'm now turning to the next slide, which is the gross margin. And we kept the gross margin around 62%, so that's the same as last year. And this is despite the growth of sensor sales of 20%, like I mentioned previously, which is a reminder of the strong gross margin profile across our portfolio from sensors to software and services, but also that we managed to keep pricing in a good way year-on-year. And we should remember that increasing the installed base with a large sensor sales is enabling future high-margin recurring and solution sales.

Then we move into the next slide. So we generated EUR 265 million of EBITAC, excluding robotics, and that's giving us an increase in our margins to 25.3% in the quarter, and that's up from 23.1% in the previous year. And last year's margin here was flattered by 230 basis points from a large, very profitable one-off order in -- within Autonomous Solutions for defense application. And this is an order that we spoke about 1 year ago as well. And we also have some smaller one-offs included in that flat margin increase. So if we remove those one-offs, the margin improved by 450 basis points year-on-year. And if we break this down, roughly 130 basis points was from favorable FX or currency and 170 basis points came from the full contribution of the cost saving program that now reached the EUR 18.5 million in the third quarter. And then the rest, the 150 basis points were the drop-through from our organic growth.

We benefited in the quarter from some tariff refunds but these were more than offset by the increase in costs related to the Iran war and costs from semiconductor shortages and memory costs. We aim to mitigate this impact also going forward, of course, but some of these effects will wait until the Q1 2027 to get full effect. Sequentially, the margin increased 100 basis points compared to the second quarter, even though that the third quarter is seasonally weaker than the second quarter. So this was another proof of very strong third quarter. Including Robotics, EBITAC margin was 24% compared to 22.5% a year ago, and the difference reflects then the investment of EUR 13 million during the quarter versus EUR 6 million in 2025.

I then move into the next slide. And now we turn to robotics. And this quarter has been a breakthrough quarter for AEON. We have hit several customer milestones towards production deployment, and our customers can now individually train our humanoid themselves, and that's a big step to scale up use cases with customers. Two of our existing pilots, that's BMW and Schaeffler, are already doing the self-training. In August, AEON became the first humanoid to be trained in Schaeffler's humanoid gym in Germany. The humanoid recreates real factory workstations and environments, so AEON can learn, validate and refine new task before it goes into the production line. This is the next step in Schaeffler's planned rollout of at least 1,000 AEON over the next 5 to 6 years.

What makes self-training possible is a combination of several physical AI efforts. This is an industry first and only possible because of the AI models and simulation capabilities that we have built. And in the market, this was also recognized. ARC Advisory named AEON and Hexagon as a major player in its humanoid reports. And during the quarter, we also added 2 new customers to the robotics business.

Now I'll turn to the next slide, which is acquisitions. And we continue to be active in M&As where the 3 acquisitions announced and 1 of those closed already in the quarter. First, Autonomous Solutions will acquire Guidance Marine, and Guidance Marine makes the sensors that position vessels next to other marine assets or quays. It generated revenues of around EUR 22 million in 2025. The second acquisition is within I&G, and that's to acquire Rocscience and Rocscience makes geotechnical engineering software for mining and infrastructure projects. Rocscience has revenues around $50 million, and we expect both Rocscience and Guidance Marine to be completed during the fourth quarter.

In Manufacturing Intelligence, we acquired the remaining 49% of ZG Technology. We bought the first 51% in 2021, but now with full ownership, it strengthens our portable metrology portfolio and also enables us to run a globalization strategy of the offering from ZG.

On the next slide, we will move into the Waygate acquisition. So before I hand over to Enrique, we have this update on Waygate, which we also expect to close during the fourth quarter. And as a reminder, Waygate is Manufacturing Intelligence's entry point into the nondestructive testing with high product and customer synergies with our existing business. Waygate adds around $631 million of revenue at around 10% EBIT. And that's our 2025 numbers.

We will have 4 businesses being added, and we have allocated different strategic mandates to those 4 businesses. Remote visual inspection has a growth mandate in the beginning. Radiography has a profitability mandate, and this is the CT business. And then we have imaging solutions and ultrasonic testing, which are in stability mandates from the start. On margins, Waygate is, of course, dilutive at first. And if we apply the numbers from 2025 that I mentioned, it will dilute the group EBITAC margin by roughly 150 basis points and the MI margin by roughly 300 basis points. We have plans in place already to bring Waygate's EBITAC margin into the MI's target range of 21% to 24% EBITAC. So this is a real possibility for a value creation journey in the next coming years. Of course, we will update regular on our progress with this as Andreas Renulf and his team work to unlock this value.

So I will now hand you over to Enrique to talk to the financials and the business review. So please, Enrique, go ahead.

Thank you, Anders. Before I begin, let me add my own perspective on this quarter. It is fantastic to see the business executing so well on the market opportunities we are seeing. I'm also very pleased to see the Hexagon Way embedding further into the organization and that is reflected in the underlying profitability performance that we show.

So now turning to the revenue and profitability bridge. This slide shows -- bridges the performance year-on-year. So starting with the net sales at the top. We added some EUR 73 million to our top line to reach EUR 1.05 billion. Structure, mainly the divestment of the D&E business to account EUR 68 million and currency added EUR 20 million. So organically, we grew by about EUR 121 million, and that's a 13% organic growth that Anders mentioned. And what you will see when I comment on the business areas is that our growth is really broad-based and structural. More importantly then, EBITAC grew organically by about EUR 37 million or around 16% faster than sales. And as you heard from Anders, once we account for the large one-off defense order last year, the organic EBITAC growth would have been around 28%.

Currency also helped adding EUR 18 million, this is broken down to EUR 8 million in the quarter translation and EUR 6 million of transaction and then the balance of EUR 4 million is the negative impact from prior period.

So now let's turn to the business areas. And starting with Manufacturing Intelligence, which grew an outstanding 16% organically and delivered a strong improvement in margins. Growth was driven mainly by the stationary and portable metrology divisions with general manufacturing, aerospace and defense and electronics all growing well. Automotive improved in Americas, but remained weak in China. Overall, though, China grew very strongly, and our export strategy is increasingly contributing. Importantly, order intake was strong again for them.

On profitability, if you exclude the divested China engineering business, EBITAC margin improved by 310 basis points to 25.2%, which is a very, very good progress. This was driven by the strong organic growth, the benefits of the restructuring program and some currency benefits. And as Anders mentioned, the Waygate acquisition remains on track to complete in this quarter.

Moving to Infrastructure & Geospatial on the next page. That one grew by 4% organically, up from 1% a year ago despite the mixed markets that they see. By division, growth was strongest in Construction Software and Services, in Geomatics and Radar and Monitoring. China continued to grow after destocking, and there was good growth in North America and Western Europe. Our new TS20 total station continued to sell very well, and that supported the growth in Geomatics. EBITAC margin rose 120 basis points to 23.7% reflecting the higher volumes, a more favorable product mix and some help from currencies.

And then moving on to the last one, last but not least, Autonomous Solutions, which once again delivered a fantastic growth and margin performance with 23% organic growth. This is the strongest quarter ever for Autonomous Solutions. Aerospace and defense continued to drive a very strong performance across our positioning divisions particularly in Septentrio. Mining also grew, while agriculture remained weak.

EMEA drove growth, in particular, Ukraine-related spend. North America declined on a headline basis due to tough comparatives from the one-off order last year, but continued to grow excluding that. Product growth was led by our anti-jamming solutions, our high-precision GNSS and our correction services. Backlog also continued to grow. EBITAC margin expanded by 250 basis points to 31.5% margin on the back of these strong volumes. This is despite the large one-off defense deal from last year. Currency also helped during the quarter.

Now moving on to the income statement, and I'll focus on a couple of items below the EBITAC line. EBIT1 grew by 5% against 11% for EBITAC. The difference is the capitalization and amortization gap, which narrowed by 80 basis points or 120 points if we exclude the D&E and Robotics business. Adjusted EPS was EUR 0.082, up 19% from EUR 0.069 a year ago. That is lower than the reported EPS because the reported earnings include a fair value gain on investment. And as you might have noted, this refers to Unitree. Effective tax rate for the quarter was 18.7%, slightly below the lower end of our range -- guiding range of 19% to 21%.

Now turning to cash flow and net debt. Starting with the cash flow waterfall. EBITAC, including Robotics costs was EUR 252 million. Adding back depreciation and capitalized R&D takes us to adjusted EBITDA of EUR 370 million. After CapEx and noncash items and working capital outflow of EUR 63 million operating cash flow pretax was EUR 208 million, and that is the number that we compare against the EBITAC number here, and that takes our cash conversion to 82%.

After taxes, interest and nonrecurring items, operating cash flow was EUR 119 million. And on the net debt bridge, you see the EUR 119 million here as a positive reducing our net debt. And that operating cash flow more than covered out the investments of EUR 35 million, mainly related to acquisitions and then the outflow for leases and share program. As a result, net debt fell from EUR 532 million to EUR 489 million during the quarter.

And then on the next page, to give you a sense of the combined businesses, this slide shows roughly how last 12 months would have looked if Waygate, Rocscience and Guidance Marine had been part of Hexagon for the full period. Revenue would have been EUR 4.7 billion, up from EUR 4.0 billion and EBITAC of around EUR 1 billion, up from the EUR 0.9 billion that we have currently. And on that basis, net debt-to-EBITDA goes from 0.3x today to 1.4, and this is well below the 2.5x threshold that we have set for ourselves. So even after these 3 acquisitions, we keep a strong financial firepower for further acquisitions. It should be noted that when we look at net debt here, this is financial net debt, excluding leases.

Finally, on next page, sustainability where, as a reminder, our 2030 target is to reduce our Scope 1 and 2 emissions by 70% against our 2022 baseline. By 2025, we had already reduced them by 33%, and we are on a good trajectory for further reduction in 2026. 5 months after we launched our new sustainability targets at the Capital Markets Day, the Science-Based Targets Initiative has validated both our near term and our net zero targets. We're now building sustainability into every part of the business, from product design to how customers use our products and how we refurbish them.

In the quarter, all our sustainability program commitments progress as planned and all our targets remain on track. Several programs gained traction. We are using more renewable energy. We are replacing combustion engine vehicles with hybrid and electric cars, and our production is more energy efficient. This progress in emissions reduction is helping us to win business also. Increasingly, customers include sustainability criteria in their tenders. So being a leader in this area places us at a distinct advantage versus competitors. In short, our targets are now externally validated. Our emissions keep falling, and we remain on track for 2030.

I'll now hand you back to Anders for concluding remarks.

Thank you, Enrique. So let me now bring this together with a short summary of the quarter. And -- but before we do that, let's move into the save the dates slide. So on February 25 next year, we will host a site visit at Septentrio in Leuven, Belgium, where you will be able to see GNSS receivers being developed and also production. The second date that we ask you to hold is 26th of October. And also next year, we will open our doors at our Manufacturing Intelligence facility in Rhode Island where we will demonstrate our production, talk more about manufacturing intelligence and, of course, the North America marketplace and situation.

Investor Relations, Tom and Anton, will be sending invitations with the full details in due course, and we hope to see many of you there.

Now if we move into the conclusion slide. So to summarize, the third quarter has built towards value creation levers both in the near and in the longer term. So we delivered an excellent quarter with 13% organic growth and further improvement in margins. At the same time, we delivered an even stronger order intake while further embedding the Hexagon Way and the benefits that it's increasingly delivering for us. This allows us to enter Q4 with strong momentum, and we are also investing in longer-term value creation initiatives. We have at least 3 acquisitions that are expected to close during the fourth quarter, all representing great value creation opportunities. Waygate, as we know well, is the largest one and brings an opportunity to generate a material step up in profitability over time.

As you've heard, AEON is continuing to take broad steps forward in commercialization giving us access to a sizable humanoid robotics market in the future. So a lot of execution at Hexagon currently and much to be positive about.

And with that, we would be happy to take your questions. So operator, please.

[Operator Instructions] We are now going to take our first question. And this question comes from Simon Granath from ABG.

Yes. So quite encouraging demand trends here, especially in MI. I know you don't report orders, but you have some -- for some quarters now, given a comment about them. So I'm keen to understand if the book-to-bill in MI is directionally up, down or flat versus Q2? And then I'm curious to understand how you would describe your visibility into 2027. Is there anything that suggests the recent trends could reverse or cool off as we move into that year?

Thanks, Simon. If you look at MI, that is basically flattish in terms of developing sales versus order intake. So equally strong, I would say. Autonomous Solutions is considerably stronger on the order intake side than on the sales side. And we also have positive book-to-bill in geosystems or infrastructure geospatial.

If you look at 2027, currently, we don't see any dramatic changes in demand. If we look at our strong areas like aerospace and space also, defense, electronics, general manufacturing, they all seem very stable for us and not sort of weakening in any way. If you look at the weaker sectors like agriculture, automotive and also the construction side, which are the weak markets, we don't see a specific uptake in those markets either going forward in the short term. And of course, these markets are quite large, so they are not changing in 1 quarter or 2 quarters from being weak to be strong.

That is crystal clear. And then I'd like to double click on the latest acquisition of Rocscience. It's a quite sizable deal with a multiple, at least, above yours. And directionally, you have moved a bit away from software more recently. So I'd like to get some more color on this -- on the rationale for this one, also with aspects to pricing as we know that at least public software multiples have been hammered over the past year or so.

Yes. Thanks. No, Rocscience is a very, very good acquisition for us. So if you put it simply, Rocscience is a leading software company specialization in geotechnical analysis. So Hexagon and Rocscience technologies complement each other perfectly. So as you know, we have the sensors that primarily is radars, monitoring sort of slopes and monitoring infrastructure, bridges and tunnels, et cetera where we continuously record data on how these structures are moving. Then Rocscience adds a simulation on top of that. So they actually simulate how these will move in the future.

And then on the mining side, we actually have how the mines need to plan. We have the mining planning tool as well. So that's how you change your planning then to run the mine in the best way and to do the necessary fixes. So it's extremely complementary to what we are doing currently. So hence, we know that we are able to grow this company significantly going forward. And it feels like a perfect fit for us.

And then the second part of the question was related to what? Can you please repeat, Simon?

Yes, it was regarding multiples and how you reason when acquiring these companies, partly in light of the fact that public software multiples have been coming down.

Yes, exactly. So if you look at Rocscience, if you look at the multiple, it's actually very similar to the multiple that Hexagon has. So it's basically not contributing in multiple and it's not eroding in multiples. So we think from that point of view, it's a good fit. Then if you look at the performance of the company, it has a much stronger growth trajectory than the Hexagon Group. And the recurring revenue is 80%, so very stable revenues. And the EBITAC margin is north of 40%. So I think the multiple that we paid for this company is high. But if you look comparing to what we get and what we can do with it, it's definitely a value creation opportunity going forward.

And just a final short follow-up. Can you share anything on how Waygate has developed in terms of growth or margin since the acquisition was announced also given recent market trends?

So as we don't have included Waygate yet, and we are in this period where it's a bit hands-off, so we are not giving basically any comments on Waygate's performance or similar. More that we are planning for receiving Waygate and the employees into our organization. We are looking already now on what we can do without having full insights in the company on how to start with running from day 1 basically, to make sure that we do the improvement journey that we have been discussing to bring them up into MI's average performance. So lots of planning ongoing, Simon, but we look forward to receiving the team.

Congrats on the strong numbers.

We are now going to take our next question. And this question comes from Phil Buller from JPMorgan.

I've got 2, please. I'll perhaps ask them one at a time because they're quite different. The first one is on the growth by geographic region. It's a very different picture than recent quarters with EMEA, Asia, China, the drivers of growth well above the U.S. now. Obviously, that's a good thing to have a broadening out. But obviously, how should we think about the evolution of the geographic exposures into Q4? Are you seeing any change in tone or customer behavior in any different regions of the world that you'd call out as we should think ahead to Q4, please?

Thanks, Phil. If we look at -- if I start with the other markets, so start with EMEA. We had a growth of 17% in the quarter. I think that's really encouraging to see that we are back to good growth in EMEA. China, also back to strong growth with 15%, a very important market for us, especially when it comes to MI. Rest of Asia, strong when it comes to electronics, et cetera, and we grew 14%, so in line with China, basically, very happy to see that development as well. Then, of course, when you look at the Americas, like you say, it dropped to 6% growth. However, if you then take in the one-off order that I discussed in my presentation that we had within Autonomous Solution in the comparison period last year, it shoots out as a standoff -- one standoff. And if you would remove that, the growth numbers are much stronger. We will, of course, not go in and discuss specifics of that order or customer, but the underlying growth is much more positive than the numbers you see there.

And if you would remove that number, you would also see that the group would have a growth of 16% instead of 13%, if you would remove that one-off order, and that would bring up America significantly from the 6%. We don't see that Americas has slowed down for us or so. We see a continued strong demand in North America, and we expect that to continue in the next coming quarters as well.

I guess part of the question was there's no one-offs in EMEA or Asia or China, that's kind of like an underlying-ish. Is that correct?

That's correct, right.

Then secondly, on AEON, obviously, good to see 2 new customers come in during the quarter. I know you won't disclose who they are. Are they Europe-based companies? And when it comes to the investment profile into 2027, given you're now moving into production and you're gaining new customers, how should we think about the increase in investment 2027 over 2026 in approximate terms, please?

Yes. Thanks. Yes, focus for our early deployments are in Europe partly because of proximity, of course, from the home base and the R&D team. So these customers are also based out of Europe, even though they, of course, have global operations. So if we are successful, which we believe we are, that will be rolled out on a more global scale.

On to your second question, how you should think about the investment profile. So AEON will -- or humanoid will continue to require investments going forward. Last year was EUR 25 million from our side. And this year, we end up somewhere in between EUR 45 million and EUR 50 million, as we guided for also previously. Next year will be an increase from that. I would say that we will be in the range of EUR 70 million to EUR 80 million maybe, but that's not confirmed yet, but in those kind of levels is likely. And we will start having revenues also next year within our humanoid or Robotics division. Some of the robots will be sold. Some will be Robot-as-a-Service most likely. So there will be different business models that we operate with customers within this area.

So it will still require investments in the next coming years, I would say, after '31 or so, this project is probably breaking even. And then the humanoid sales is targeting to take off '32 or so, if you look what the people who understand this better than me are saying. And then the market is exponentially growing very quickly. And we are currently in a good position, and we can see that from the feedback we get from customers. We can see that from the feedback we get in media and recommendations, et cetera. So we are in a strong position, and we intend to hold that. So we will invest what's required to make sure that we keep our position.

We are now going to take our next question, and this will come from Daniel Djurberg from Handelsbanken.

I have a couple of questions as well. Congrats on a strong report, I would like to say as well. I was a bit surprised by the strong automotive segment, roughly 10% of revenues seeing good growth in Americas and positive in EMEA, Rest of Asia and only negative in China. So can you comment a bit if this is the beginning of a more positive trend or more of a temporary effect?

Yes. Thanks, Daniel. I'll start from the other direction. I'll start from China. And so as we all are aware, the automotive business in China is currently on a decline. From the manufacturing side, we have quite large inventories of battery vehicles also in Europe, I think is the highest inventory ever of electric cars around the world as the Chinese are offloading more globally since the domestic market is weakening.

Where we see positive effect is rest of Asia and EMEA, and I would say those are not huge positive effects, but there is a positive atmosphere, and we can see increased order intake and increased sales, as you can see, but it's still in the single-digit area for us. So it's not double digit yet.

When we look at North America in specific, very strong. And I think this is related also to tariffs announced of 50% tariffs on imported cars from the 1st of January. I think that drives investments in local manufacturing of cars, et cetera. And there's a general feeling of home shoring in the U.S. at the moment. So I think that drives investments. And I think that's probably here to stay. I believe also that we are recovering in Europe. And of course, the Chinese market will probably remain weaker for some time, but I believe that will also turn in the not-too-distant future.

Perfect. May I also ask you -- and thank you for the pro forma on Waygate. You highlighted plans, obviously, to improve the margins towards the MI level 21% to 24%. Can you -- have you got some ballpark plan time of this? Or is it too early to tell?

We have a plan, but it's too early to go externally with that. We first want to include the company and get to know the company, understand our people and do this plan together with them because they are the people that should execute on this plan. So it won't be me and it won't be Andreas Renulf that execute on the plan. So they need to be on board, of course, and own what we are going to do to make the improvements. So when we have done that, we will talk externally about this.

Super. That's fair. And my final question would be on AEON. Congrats on 2 more customers and so on. But you also talked about finding cooperating partners. And I was also a little bit curious on how you work on versioning, if it will be upgrades by the air or if it will come with the new AEON 2.0 or something at some point just, to understand how you work with that.

Yes. So you are correct. We are looking for partners. We are not looking primarily for someone to invest money because we can fund this ourselves. So we're looking for partners that actually can add value, which we ourselves have difficulties to add. And that could be a range of different things. That could be sort of technologies. That could be manufacturing capabilities, and that could be being a supply chain partner, et cetera. So we're looking for someone who adds value rather than only capital. So we are proceeding with this. But of course, finding the right partners for this, we are not in a hurry with.

And as we go into commercialization in the beginning of next year, of course, then we have a lot of more proof points. And that also, I think, creates a more secure valuation of the AEON's value, both now and going forward. So I'm not in a hurry. But I think finding the right partners will add value going forward and will also put us in a stronger position competitiveness.

Then your question on AEON going forward, if it's going to be AEON 2.0, I would think it will not be. I think it might even be with a different name. But of course, there will be, for lack of a better word, Robot 1 instead of Prototype 7. So there will be a change, both design-wise but also the components inside and how we have optimized it more for production than for proof points.

We are now going to take our next question. And this one comes from Meihan Yang from Goldman Sachs.

I have 2 questions. The first one is, is there anything that you can give us a bit more color on the acceleration of the Autonomous Solutions' organic sales growth despite your tough comparables in the second half '25? And should we expect this to continue in the fourth quarter as well? And the second question I have is on your tariff refund impact. Is it possible to give us a bit more color on the magnitude of one-off benefit you had this quarter? And how is it split across your divisions so that we can understand a bit more on the underlying margin?

Thank you. So I think the main reason for the AS growth was the high demand of anti-jamming antennas, primarily in Europe. And we see this with countries reequipping and modernizing the defense against the backdrop of the war on the Eastern border of Europe, but it's also relating to the anti-jamming solutions for airplanes, marine and other applications. So it's not only related to defense applications. Being a Swedish company, of course, puts us in a very strong position to get increased orders and customer loyalty within the European Union. This development is, of course, driven also by political agendas.

So I think this will continue also going forward. The rearming of Europe will take several years. I would say it's just started actually. So there is probably a long positive tailwind for this sector. It's also strong in North America. However, like mentioned, it was -- in the comparable was a fantastic order in the comparable, so that makes this quarter's number look a bit tougher. There is some effect of that order also into the fourth quarter before that goes out of our comparables, but generally, very strong across North America and Europe, I would say, and we see that trend to continue. There is also rebuild of what has been used by U.S. and also supporting Ukraine and the Iran war, et cetera. So there is a tailwind that is not only in the short term. For the tariffs, I probably leave it to Enrique to respond to that one.

Yes. Thanks for the question. So we have a small effect coming into our gross margin and helping there. This is -- but this is largely then, I mean, offset with other headwinds that we have on memory costs, chips, Iran effects and so on, also higher transportation costs. So it's -- so those 2 are a wash. We estimate it to be in the tune of about somewhere between 70 to 90 basis points each. So it's not of a big magnitude on either side.

Got it. And then is this mainly in the Autonomous Solutions impact? Because what's the sort of the net balance between each divisions that were impacted by tariffs more?

It's -- I would say it's across the board, but Autonomous Solutions that you highlight, it's a smaller business area, so they have a smaller share of that. So the bigger impacts are in ING and MI.

Yes. And actually, in Autonomous Solutions, a lot was actually paid by customers directly on those tariffs.

In the interest of time, we are now going to take one last question, and this one comes from Andre Kukhnin from UBS.

Maybe I'll start with the construction one and EMEA. I'm just looking at a very helpful indicator by market, by quarter by region. And looking at EMEA kind of were in growth territory than dipped into a negative. We're now back in the blue dot. I just wondered, do you think there is a beginning of recovery there in construction market for you? Or is it just kind of treading water?

Yes. Thanks, Andre. I think the sound is not perfect here, but I think I got most of your question. So construction in EMEA, we see some sort of bounce back very, I would say, early indications, primarily in U.K. and Germany, we see positive effects. It's not significant still. It's single-digit numbers basically, I would say. But there seems to be more than one quarter effect and driven, I would say, primarily by machine control and new product sales like the TS20.

That's very helpful. I hope the sound is a bit better now. I've changed the headset. I also wanted to ask on the strength in Manufacturing Intelligence that you're seeing, especially in the U.S. We're kind of hearing from some channel checks that this is getting really quite sort of buoyant and heated up. Are you seeing any signs of customers trying to stock up as well?

No, I wouldn't say so. I mean, our products are generally not products you stock up on. So I think it's mainly connected to actual underlying demand. And we can see the reshoring of manufacturing into North America is driving a lot of these investments. So I would say those investments are more long term than some bump from stocking up in that case.

Perfect. And just a very quick one. Your M&A activity clearly stepped up, but you also indicated that your gearing is still well below the limit to where you'd be comfortable with. So it sounds like you're continuing at full pace. So would it make sense to expect that kind of continuation of deal flow that you've delivered in the last 6 months or year-to-date?

Yes, I would say that's probably something you should expect from us going forward. I mean, if you look at us historically, this company has built from being very skilled at doing M&As and create value, and we have the competence internally to do that. So we are expecting and we have a very strong M&A funnel actually across the whole group within all the business areas and divisions. But we are not buying companies to buy companies. We are buying companies that we are sure that we can create value over that we can get those companies a better home than where they are today, where we can generate double-digit sustainable growth going forward that we can have a return on capital, at least at WACC after like 3 years or so. And that we have a cultural fit, and we have also synergies that we can create from our current portfolio when we are adding into the portfolio.

That was our final question for today. I will now hand the call back to Anders Svensson for closing remarks.

Thank you, everyone, for participating and engaging with good questions. Make sure that you lock in the dates that I mentioned previously and be safe and see you soon. Thank you. Bye.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Hexagon Q2 Report 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Anders Svensson, President and CEO of Hexagon. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us here at the second quarter results review. I'm, as said, Anders Svensson, President and CEO of Hexagon. And I'm also pleased to have Enrique Patrickson, our new CFO, with me here today on the call. Some of you might have met Enrique already at the Capital Markets Day or on our road shows, but this is his first quarterly conference call with us. So welcome, Enrique.

Thank you.

So I will move to the next slide to show the standard cautionary statements. And then after that, we move to the next slide to go through the agenda. So I will begin with Hexagon's performance in the second quarter. Enrique will then present the business review and financials in more detail. And I will, at the end, conclude the presentation and then open up for Q&A.

So on next slide. Let me then begin with an overview of our performance in the second quarter, and I will move into the highlights slide of the quarter. The second quarter was an excellent quarter for Hexagon. The momentum we saw at the start of the year continued and even increased in the second quarter, and we achieved our highest organic growth recorded in the last 5 years. And with a strong order intake, we still built backlog within all 3 of our business areas in the quarter.

We delivered 12% organic growth, with growth across all 3 business areas. Our gross margin held stable around the 62% mark despite a currency headwind and very strong hardware sales, so the mix was not positive. And we demonstrated strong operational leverage by improving EBITAC to 24% in the quarter. Cash conversion was also fantastic at 149%.

Alongside this stellar financial performance, we also were very active operationally. The separation of Octave completed our portfolio restructuring or refocusing on precision measurement and positioning technologies. We also launched our new Hexagon with updated strategies and new midterm targets at the Capital Markets Day in April. As a reminder, these targets are for the group, an organic growth of 4% to 6% between 2026 and 2030, EBITAC margins of 24% to 26% and a cash conversion of 90% to 100% of EBITAC. We also committed to reduce our Scope 1 and 2 emissions by 70% to 2030 from the 2022 baseline and also reaching net-zero by 2050.

We also began building our portfolio for long-term profitable growth. And with the acquisition of Waygate Technologies that we announced, we are expanding our offering into nondestructive testing. We completed the bolt-on acquisitions of Inertial Sense and ITRES during the quarter. Our cost restructuring program is now almost complete, and we are here quite a lot ahead of the initial schedule. So that's very positive.

And last but not least, we are proud to be ranked by TIME as one of the world's most sustainable companies. So in summary, both financially strong and operationally active quarter, and let me take you through it now in a bit more details on the coming slides.

So the first one here is the completion of the Octave separation. And I think this is an important milestone of the quarter, of course. Octave was separated from Hexagon effective 22nd of May. And Octave began trading on Nasdaq Stockholm on the 25th May and was then listed on Nasdaq New York on the 28th. With Octave now separate as a listed company, Hexagon is a more simple and more focused business going forward. I want to wish Mattias and the Octave team every success as they begin their journey as an independent company.

And with that, I will move into our organic growth on the next slide. And the organic growth in the quarter was very strong at 12%, with growth in all of our business areas. Autonomous Solutions led the way, growing a fantastic 20% in the quarter. Manufacturing Intelligence, also very strong at 13% growth. And in Infrastructure & Geospatial, we grew 4% in challenged market conditions.

By end market, we saw strong growth in aerospace & defense and in electronics, both in consumer electronics and semiconductors, but also in general manufacturing. And this more than offset the weaker market conditions we could see in automotive, especially in China; in agriculture, in the Americas; and also construction within both China and Europe. And this is a reminder of the benefit of having the diversification we do both in terms of geography, but also industrial verticals.

You will also see some movement in our software and service revenue and also in the recurring revenues, and that relates primarily to the sale of the design and engineering business. But also to a strong hardware sales quarter. A strong hardware sales quarter, of course, takes down the recurring revenue numbers for the quarter, but it enables future sales of software and service solutions, of course.

Positive was that the adoption of our new products like MAESTRO and TS20 is progressing very well. And that is an important support for our future growth, but also our future gross margin development.

On the next slide, I will now move into how the organic growth was spread across our regions and industries. So in -- Americas led the growth with 19% growth with construction, general manufacturing, aerospace & defense and mining, all growing strongly. The only weak spot in Americas is basically agriculture, and it has been cyclically weak for quite some time now.

In EMEA, the growth was 7%, but the markets were more mixed here, with outperformance driven by general manufacturing and aerospace & defense. Construction, which is a key market for us in EMEA and especially for Infrastructure & Geospatial remains challenged.

Markets in China were very healthy with the exception of automotive, which remains tough, just as in the first quarter. Construction grew for the first time in some quarters for us, but this is from a low base, following the destocking program that we had in the last 12 months. And the market outlook for construction in China remains subdued. The rest of Asia grew modestly, with 10% growth in India being offset by some weakness in Southeast Asia and Australia Pacific.

If we now move into the next slide, we will look at the gross margin development. We maintained a strong level of gross margin at 62%. And if you then exclude design and engineering business that we have sold, the gross margin was flat year-on-year at 62.3%. But the underlying movement was even stronger than this because we had a 50 basis point negative currency impact, and as I mentioned, we saw strong hardware sales with sensor sales increasing 17% in the quarter, which, on average, carries a slightly lower margin than, for example, software sales. So the mix was not contributing positively. However, this is, of course, a good platform for us, as I mentioned, to grow our recurring revenue and software share over time as these sensors will then have pull-through opportunities of software and service sales.

Then I turn into the profitability slide. And before I get into the analysis, a reminder of the EBITAC, which is our new profitability metric which we launched at the Capital Markets Day in April. And EBITAC is a conservative measure of profitability that basically expenses all R&D in the period. So it excludes the gap between amortization and capitalization in R&D expenses.

In the second quarter, EBITAC improved materially of 330 basis points to 24.3% compared to 21% in the comparison period. And this excludes the D&E contribution in both periods. Around 100 basis points of that improvement came from currency tailwind but more importantly, around 230 basis points came from operational drop-through from the strong organic growth. And it was also supported by early benefits of the new operating model, the Hexagon Way, and around EUR 14 million in the quarter savings from our cost restructuring program.

And unless otherwise stated, as we defined in the Capital Markets Day, we exclude Robotics from this metric. And the reason for that is, of course, that this market is in a very early stage, and Robotics needs to be able to focus on scaling and growth rather than a quarterly performance. In the quarter, the incurred cost for Robotics was EUR 10 million, and it is fully in line with the guidance we gave at Capital Markets Day of approximately EUR 50 million for the full year.

I now move over to a short update on Robotics on the next slide. And the Robotics business is making great progress within both partnering with other companies and also attracting great interest from customers for humanoid factory trials. In the second quarter, we announced an expansion of the strategic partnership with Schaeffler, which will result in deployment across Schaeffler's factory network in the coming years of at least 1,000 humanoids.

We also announced a new pilot with the company, Fill, where AEON will be working to achieve advanced manufacturing solutions for machine tending, machine inspection and other inspections and material handling. And this brings the total number of public partnerships now to 4, with additional pilots on the way. We continue to expect to reach commercialization by the end of this year. And we are excited about the potential of this business going forward. And as we previously communicated, we are evaluating partner arrangements, et cetera, if we believe that, that would be the best way to realize the opportunity ahead.

And before I hand over to Enrique, I will move to the next slide and give an M&A update for the quarter. So also in the second quarter, we remain very active on M&As. The most significant one was the announcement of Waygate Technologies, which will be acquired by our Manufacturing Intelligence business area, and it takes us into the nondestructive testing markets. And this is a significant acquisition for us which will expand our serviceable market within MI significantly. And I have discussed this acquisition at various market-facing events already. So I won't go into too much details here today, apart from saying that we still anticipate completion within the second half of 2026, and most likely in the fourth quarter.

Alongside this, we also completed 2 bolt-on acquisitions. And the first one is Inertial Sense, which was acquired by Autonomous Solutions, and it strengthens our assured positioning, navigation and timing portfolio with tactical-grade GNSS and Inertial systems technology and hence, expands our resilient positioning capabilities in GPS-challenged environments. And this has been a big growth area for us recently and was also in the second quarter.

The second acquisition that we closed was ITRES. It was acquired by Infrastructure & Geospatial. It adds to our mapping capabilities with high-performance airborne hyperspectral and thermal imaging sensors that operate across a wide spectrum of wavelengths. It is enabling precise material identification and also temperature analysis that the existing visible and near infrared modalities cannot deliver. So we are excited about all these acquisitions, and we want to welcome these teams into the Hexagon team.

And with that overview, let me hand you over to Enrique, who will take you through the business review and the financials in more details.

Thank you, Anders. It's a pleasure to be here today on my first Hexagon result call, and even more so to discuss this very strong set of results.

A couple of reflections here to start. I've spent the past few months going around to some of our major sites and meeting the teams responsible for delivering this impressive second quarter performance. And I've been really impressed by the talent, dedication and expertise throughout Hexagon. And I feel excited about what has been achieved in the quarter, but also what we can do in the future.

So now let's look at the results more in detail. This page titled, revenue and profitability year-over-year bridge, really captures the performance and the story of the quarter really well. Starting with net sales bridge at the top. We added some EUR 40 million to our top line to reach EUR 1.05 billion. However, structure and the divestment of the D&E business accounted for a reduction of about EUR 70 million. So in reality, we grew our top line by about EUR 110 million, including a 1% of FX. So that equates to about 12% organic growth in the quarter.

More importantly, our EBITAC, our new profitability metric, increased organically by almost double the rate of the growth of our organic top line growth. So that's a recurring theme when you look at our results and look at our various business areas. The operational leverage is great, especially when you get this type of growth. In the quarter, we had a bit of help of FX, or rather the negative impact we had last year was not repeated this year.

So now let's turn into the business areas. Starting with Manufacturing Intelligence, which grew at an outstanding 13% and generated a strong improvement in margins. Growth was driven mainly by the stationary and portable metrology divisions, particularly within aerospace & defense, general manufacturing and electronics. Automotive remained structurally weak, particularly in China and EMEA. Growth was across geographies but remained strongest in the Americas, and China grew by high single-digit rates. Importantly, order intake also grew at the high level and growing our backlog. Profitability, if you exclude the design and engineering business, margins improved by about 380 basis points, which is a very good progress. This was driven by the strong organic growth and some currency benefits.

Now moving to Infrastructure & Geospatial, the business area formerly known as Geosystems. This was another good performance with solid growth despite our exposure to EMEA construction markets, which remain challenging. By division, the growth was strongest in construction software and services, geomatics, radar & monitoring and in machine control. The Americas grew strongly and China grew from a low base as restocking came through, while EMEA remained challenging. Our new TS20 total station continued to sell very well, and that supported the growth in geomatics. In terms of margins, the improvement reflects the higher volumes and more favorable product mix, cost control and some help of currencies here as well. So another business area with great operational leverage.

And then last but not least, Autonomous Solutions, which once again delivered a stellar growth and margin performance. This was driven by a significant increase in our positioning divisions, which benefited from continued strong demand in aerospace & defense and more than offset the weaker conditions we see in agriculture & marine. Both the Americas and EMEA delivered strong double-digit growth, with Asia being weaker. In terms of products, growth was led by our anti-jamming solutions, our high-precision GNSS and our correction services. Backlog continued also to grow here. Margins expanded on the back of those strong volumes, though that was partly offset by currency.

Now let me mention a couple of things in our income statement and highlight a few things. EBIT1 moved in line with our EBITAC, but that was somewhat obscured by a reduction in the capitalization amortization gap of about 125 basis points. However, if you exclude the D&E business from last year, the delta is about 170 basis points.

Our adjusted EPS was about EUR 0.078 a share, lower than the EUR 0.092 reported, and this was due to the gain of the Cadence shares that we sold in the quarter, and that was about EUR 71.5 million, which resulted in a positive financial net in the quarter. So you have to remove about EUR 71.5 million to land into our normalized net financial items in the quarter.

Now on the restructuring program, we continue to make excellent progress. We targeted a savings of EUR 74 million as we announced at the Capital Markets Day, and we have now reached a run rate of EUR 73.5 million so we are essentially at the full run rate. In the second quarter alone, the program delivered EUR 14 million of cost savings. We now expect the program to complete by the end of the third quarter, which is ahead of our original schedule. Importantly, we are retaining these savings, as demonstrated by the profitability improvement. This is thanks to the early benefits of our new operating model, the Hexagon Way, which is improving the operational discipline. And that discipline is demonstrated in the results with great leadership in divisions showing hunger to deliver on enhanced shareholder value.

Finally, from me on cash flow and net debt. Cash generation in the quarter was very strong, as Anders mentioned, with cash conversion at around 149%. That's the operating cash flow pretax of EUR 364 million compared to our EBITAC, including robotic costs of about EUR 245 million. As you can see from the waterfall, the driver here, it was a strong contribution from working capital, particularly driven by strong efforts in both accounts payable as well as in collections.

In addition to the strong cash flow, the net debt bridge below here, I have a few highlights I want to draw your attention to. The Q2 impact from the Cadence share sales can be seen in the financial assets. And you can see the Octave transactions coming through on the line referred to as other. Those 2 together contributed with a bit more than EUR 800 million, and then we had dividends of about EUR 381 million in the quarter. The increase in cash generation and the additional proceeds from the Cadence shares helped to drive a material improvement in our net debt, which took our leverage down to 0.3x during the quarter, way below our target level of 2.5x. Even if we add the already announced Waygate acquisition, we retain a substantial firepower going forward.

So in summary, for the quarter, one, fantastic growth; secondly, had true operational leverage on our EBITAC; and thirdly, it converted into cash.

And with that, I will hand over to Anders for some concluding remarks.

Thank you, Enrique. Yes, it must be a very good quarter to start reporting with Hexagon.

Let me now bring this together with a short summary for the quarter before we open up for any questions. So operator, if we move to the Q2 summary slide.

So first, we delivered excellent organic growth of 12%, while still building backlog in all of our business areas. We saw a particularly strong demand in aerospace & defense, electronics and general manufacturing. Secondly, we continue to reshape our portfolio, completing the Octave separation and announcing the acquisition of Waygate Technologies. Third, we improved our operating leverage, translating the fantastic growth into stronger margins, helped also by benefit of the restructuring program and the early benefits of the Hexagon Way operating model. The restructuring program is ahead of the schedule, as mentioned, and we will achieve full run rate at the end of the third quarter.

We entered the third quarter with strong momentum and a high order intake from the second quarter in all our business areas, and also with strong end market trends that we expect to continue also in the third quarter.

And with that, we would be happy to open up for questions.

[Operator Instructions]And your first question today comes from the line of Daniel Djurberg from Handelsbanken.

Congrats to really strong numbers here and strong market trends. A few questions from my side. Starting off, you write in the report about some quarterly help from a U.S. tariff refund. Can you give any more quantification on this, on the margin on EBITAC or something that gives a ballpark underlying?

Yes. So if you look at just tariffs, comparing year-on-year, we have got some refund in tariffs, both in Switzerland and in the U.S., and that amounted to a net positive of EUR 2.4 million if you compare to the previous year. However, that is completely netted with additional costs from Iran, in the Middle East due to increased freight costs, et cetera. So if you take Iran plus tariffs, it's actually at the net 0.

I see. Perfect. And if possible, you had talking about good order intake as well. Is it possible to give more comments on book-to-bill levels in the division's ballpark?

We actually don't go out with that number normally, and it's because a lot of our businesses don't really build a backlog. If you go to Infrastructure & Geospatial, for example, a lot is invoicing and sales at the same time -- or order intake and sales at the same time. So we don't really go out with that number, but we can say that there was good order intake in all businesses since we built the backlog in all areas. But of course, if you look monetary on the order intake, it contributed most from MI because that's the largest that operates mostly with backlog as well.

Yes. Perfect. And finally, from my side, you talked about expanding scope with Schaeffler, minimum 1,000 humanoids. But I believe that was a similar number that we had before as well or -- can you comment a little bit more on this expansion, what it means?

No, that is something we have already communicated during the quarter, but it happened during the second quarter. So it's a part of our summary.

We will now go to the next question. And the question comes from the line of Uma Samlin from Bank of America.

Two for me, please. The first, would you be able to talk about the moving parts in your EBITAC margin trajectory in H2 given your restructuring program is now almost completed, you're getting better operating leverage and maybe also some shifting between the software and hardware mix. How should we think about this trajectory going into the second half of the year, especially with Waygate also potentially starting to contribute towards the end of the year?

Yes. So if you look at EBITAC, so we have reported a improvement of 160 bps. And if you take then out D&E from both periods and you include robotics, so the gain is 330 basis points. Roughly 100 bps is then from currency -- positive currency contribution. If you look at the restructuring program, we say that it contributed with EUR 14 million in the quarter. That's roughly then 130 bps. So if you look at the remaining 100 bps, then that's sort of operational leverage and other improvements in the group.

Okay. That's very clear. My second question is on the Robotics partnerships. I guess 2 part of the question. So first, should we expect to see a significant increase in cost given the commercialization plans by the end of the year? What are the sort of investment you need for the mass commercialization of the Robotics business?

The second one is you talked about the partnership plans in the side. Would you be able to elaborate a bit more on that? What kind of partnership you're looking for? What would be the ideal kind of scenario for your Robotics business going forward?

Yes. So there are basically 2 close partnership announced. One is the Schaeffler deployment of 1,000 units in the next, I think, 5 years up to 2032 across the Schaeffler manufacturing network. Then, of course, we have the BMW Leipzig production deployments that we discussed also previously, and that was with the first milestone in mid-June, a precedent on this. So that was -- those are the 2 big ones.

But of course, we have more pilots ongoing. We have 4 communicated external pilots, and we also have non-communicated pilots with -- also with a pipeline of more potential pilots going forward. But we want to move this now into commercialization. And hence, we have expanded the partnership with Schaeffler, for example, that from the end of this year, we can then deploy like a Robot as a Service or deployed directly and not only go through pilot sales going forward. Then what was your first question?

Yes. Just my -- would we see any significant increase in terms of cost? What are the investments you need for that?

Yes. So this is what we have communicated previously as well that we are looking for potential business partners where we can take a smaller ownership than 100%. We have not come to any conclusion on that. We will come back to you guys when we take that decision. So if we find it most beneficial for the business itself to be successful, then we are open to partnering with others as well.

But this is -- we have, of course, not achieved the highest cost level now with EUR 50 million in this year. As this business goes into sales, that will, of course, push costs up further. Therefore, you start reaping all the benefits of the productization and commercialization and the pickup in the market of humanoids in general. And we also talked about this in the Capital Markets Day that pickup is expected somewhere in '32 roughly. So of course, we have not achieved the highest cost level here yet.

Your next question today comes from the line of Simon Granath from ABG Sundal Collier.

Are you eager to dive further into 13% organic growth for MI in this quarter? Have you seen anything you would assess as one-offs or nondurable tailwinds to growth like due to changes in the order patterns, due to the inflationary pressure we have noted for several input components? And also separately, how do you see the momentum in semis? Is the Q2 growth reflecting early cycle capacity additions? Or have you seen this momentum for a longer period?

Yes. Thank you. We have seen now good growth in MI on the last 3 quarters, right? So we believe that -- and it's actually increasing every quarter so far in the last 3 quarters. So we believe that the momentum that's in the market is strong. We were elaborating that it could be tariff connected, some sort of hold up of investments for some time. That might have some effect still but I wouldn't say that, that is significantly contributing since we see this stable order growth or order intake growth all the time.

I would say the underlying markets within both aerospace, and that's both in aero and space, and also in the defense side. Electronics, basically all over and strong in general manufacturing in many different segments. So we don't see that this is something that is getting weaker for us currently. So -- and we think that those strong markets will remain.

But also you should take into account, not everything is going well. There's many verticals that are performing to a lesser extent. For example, marine business, which is impacted by the Middle East crisis; the agriculture business, which is in a very low level; and also, of course, construction, especially focused then on Europe and China, has weaknesses. To some extent, those are also impacting MI but the main sort of drag for MI currently is automotive and especially in China, which is down significantly on a year-on-year comparison. But we don't see that we are moving into a worse climate going forward. We see that it seems to be very stable for us.

Very clear and encouraging stuff. And I also have a follow-up on some of the comments you made there and that is relating to construction part in EMEA here in Q2 because given recent product launches like the TS20, which is selling really well. Why is it all that you move into negative territory? How would you describe the current landscape? And should we expect the negative trend to continue over the coming quarters?

Yes. Thanks. I wouldn't say that we're moving into negative territory. I would say that we have been, for quite some time in construction, in Europe, in negative territory. I would rather say that it's slightly improving in Europe. And especially then we can see some effects of infrastructure projects in Germany, that is then starting to contribute positively. But we see a strong growth in construction when it comes to North America, which is also important for us within these new products launched. So MA -- if you look at the Middle East, there is some impact of delays of investments due to the crisis that we are having currently in Middle East. But I would say if you look versus the previous quarter, there might be some small improvement in construction in Europe.

I was referring to the [ blue dots ] last quarter, but then I understand it's predominantly a timing effect. So slight improvement quarter-over-quarter.

Yes, slight improvement quarter-on-quarter.

Your next question comes from the line of Mikael Laseen from DNB Carnegie.

Yes. I have a question related to defense end markets. So you commented that both manufacturing intelligence and autonomous solutions benefited on strong aerospace & defense and wondering if you could give us more color on the specific defense programs or customer applications and product categories driving that growth would be helpful.

Yes. Thanks. So what we do, we sell actually positioning solutions for challenged environments. And some of our customers are then using those technologies that we sell for defense applications. But they are also used in a range of nondefense applications. So it's not that we sell a specific product into defense from that perspective. So what we are measuring then is more -- how much we sell those different technologies into different end customer use areas. And they can be marine, they can be defense, they can be agriculture, they can be aerospace, they can be space applications. And they are basically the same product. So it's not a specific product. It's more positioning solutions for challenged environments that we sell.

Yes. Exactly. Got that. But I'm just thinking if you're benefiting from [ the environment ] in Europe, restocking, things like that.

Of course, we are benefiting from the buildup in Europe. We are benefiting from U.S. replenishing their inventories with the Iran situation. We are, of course, also benefiting in this area from the Ukraine situation. So those things are benefiting us. And I would say the whole buildup of European defense is benefiting us. So we are right at that...

Okay. And what type of growth are you seeing in aerospace & defense in MI, for example, on AS, in those 2 segments?

Yes. So if we look at aerospace & defense, because we normally talk about those together. So -- are we taking that number?

No.

No, we're not? We're not going out with that number. But it's a strong growth in aerospace & defense. Defense is now just over 5% of the total group sales.

Okay. Got it. Can I just follow -- ask a question about Waygate. I'm thinking about here how we should model that, when you expect it to be closed and consolidated and how you can take the margins in Waygate towards the MI segment and what time frame you expect that to materialize?

So we -- as I mentioned, we expect to close the acquisition in the second half, probably in the fourth quarter. And then we will, of course, consolidate the numbers as quickly as we can. There are some challenges here. We have a U.S. GAAP reporting for some entities, and it will require quite a lot of work for our teams. But we will be able to do that. And it's -- as previously communicated, USD 630 million for the whole company at roughly 10% EBIT margin. And if you take out the 2 focus groups -- focus businesses within Waygate, which is then the remote visual inspection and radiography divisions, those contribute with about USD 330 million and a margin at 16%.

And then we are evaluating also what to do with the 2 other divisions, which is ultrasonic testing and imaging solutions. We have categorized them as stability, where we can either help them to do a turnaround, improve the business and create value that way. Or if we don't think that we are the right owner, we will find an owner, which is the right owner for those type of businesses long term. So then, of course, it will take time before we achieve the average MI margin for these acquisitions. But we already have plans in place. Of course, those plans needs to be refined when we get further insights when we become the owner of the businesses. But we have quite good plans to achieve significant improvements in all 4 of the divisions.

Your next question comes from the line of Andre Kukhnin from UBS.

Can we just go back to the second half profit margin bridge? Could you talk about whether we should expect any further self-help in the second half? And on FX, that helps in H1, I presume that's sustainable from the change in Swiss franc versus dollar and the rest of the basket rather than a one-off. But could you confirm that? Maybe start with those 2.

Yes. So if I just start quickly on the FX. I would say now it's more normalized for this quarter. It was rather that it was significantly negative in the comparison period. So I would say it's more normalized now. And we, of course, are not forecasting exchange rates, but we believe that this is a more normalized level.

And when it comes to self-help, we have the RIF program, which will then contribute with estimated roughly EUR 18 million in the third quarter, and that will then be at full speed. It did EUR 14 million in the second quarter, so there is a bit of a self-help additional there. And then, of course, we have within the operating model that we have implemented, there are lots of initiatives around the group and the different divisions to drive self-help improvements going forward that we are not talking about externally. It's more a way how you manage your business. So definitely, we expect more self-help going forward, and we also expect a strong leverage on growth.

Great. And just while on the bridge, when we think about the price/cost, you mentioned that the -- I think you said EUR 2.4 million of tariff refunds help in Q2 was offset by high input costs on the back of the Middle East conflict. Are you raising prices to mitigate that -- those kind of high input costs in the second half as I assume the tariff refund was a one-off.

Yes. The tariff refund is actually not a complete one-off. We expect some benefit of that due to administration delays also during here in the second half of the year. So that will be -- but those are still one-offs. So you're right from that point of view. But we are always considering pricing and freight surcharges, et cetera, when we get these additional costs. And we have become quite quick at implementing these. If you remember, maybe from the first quarter, I said we had some issues with gross margin in one of our businesses in MI because we've been a little bit late with price increases to compensate. That was completely done. And that margin -- gross margin for that business rose significantly in the second quarter, back to the same level as where we should be. So we are quite efficient on implementing measures to make sure that we compensate for tariffs or other events that can happen around the world.

Great. And if I may, just last one on -- back to the MI 13% organic growth, I think you were very clear to tell us that you don't see anything of kind of a one-off nature in there. But I also wanted to actually explore it the other way because we have seen some of your lateral peers that participate maybe in similar end markets also reporting pretty high book-to-bills in the recent quarter, especially with kind of anything with semiconductor manufacturing related. So I just wondered, how high do you see the scope of that number actually accelerating of that already fast pace, 13%? And what's your assessment on the sort of risk of us running into another sort of 2022 type scenario where we start thinking about chip and other kind of semiconductor shortages driving maybe less rational customer behavior?

Yes. So we are not giving a forecast on order intake. Rather, we are saying that -- how we see the market trends. And we don't see any of the market trends weakening, as I explained earlier. And rather, we see stability of strong end markets. And we also expect that some of the weaker end markets also will turn somehow. And this is the strength we have. We're being -- with such a diverse geography and industrial vertical end market situation. We don't get all the benefits when one market goes up, but we're also very stable when one market goes down. So I think we have a good situation, that's where we can create solid growth going forward.

Where we have a bit of a stronger or more difficult comparables will be within Autonomous Solutions in the second half of the year, not so much in MI, where we had a very strong order intake of -- in the defense area that was delivered almost EUR 50 million in the second half, more of a one-off type of order character. So there, we have a bit of a stronger comparable in the second half of the year than we had in the first half of the year. But otherwise, I see that we can continue our strong performance in our businesses.

Currently, we don't see any significant risks of running into supply chain constraints, but it's already now quite widely known that industrial chips and memory solutions are already constrained to some extent. And we are, of course, monitoring that situation closely and working on contingency plans if something would happen that we can then use other type of solutions.

And the final question comes from the line of Magnus Kruber from Nordea.

Magnus here from Nordea. A couple of questions from me. First of all, the scope of the agreement you have with Schaeffler is around 1,000 units over 5-year period. If you look at the other potential customers you have in the pipeline, you talked about a handful, that's not announced. Is 1,000 units kind of a normal level, would you say? Or can you help us scope a little bit what the opportunity is from the other players out there?

So with other players, we are having pilot trials in applications that are not communicated. There are no agreements such of any volume with anyone else that we haven't communicated. So that's I want to be clear about. But of course, we are discussing. And if you talk to some customers, it could be a smaller number, of course, if they are single plant operators or smaller manufacturing sites, but we have also talked to others -- other potential customers that would have a much larger number of units as well. So it's difficult to say what's a normal discussion level.

Perfect. And my second question also, it looks like underlying costs ex Robotics on the group holding cost was slightly higher than in prior year. Could you help us a little bit to guide us what the group cost holding costs would be on a run rate basis on an EBITAC level or an EBIT1 level or however you want to frame it for the rest of the year, what's normal there?

Yes, maybe I can -- Yes, there is a little bit of increased cost for provisions that we took in the quarter. And so it's on the kind of elevated side. So it's -- you should not use that one as -- to extrapolate that. Where we kind of published what the number -- I mean, there are a number of things that happened at the group level. So probably in the area -- I mean, it's definitely less than EUR 10 million. That is -- so maybe around the EUR 5 million mark, that one could adjust out from that.

That concludes the Q&A for today. I will now hand back to Anders for any final remarks.

Thank you, operator. And thank you, everyone, for participating today and engaging with questions. So we at Hexagon would like to wish you all a nice summer break. And be safe and see you back soon for the third quarter report. Bye-bye.

Thank you. This concludes today's conference call. Thanks for participating. You may now disconnect.

Hi. Good morning, everyone. Welcome to Hexagon's Capital Markets Day. Very happy to have you all here with us today. Thank you for coming along on this sunny day just before a bank holiday for some people, so we very much appreciate that. I'm Tom Hull, Head of Investor Relations.

Before we get into the main sessions, I'm just going to take you through some key points we have today very briefly. First off, the cautionary statement. This is unchanged from the ones you've seen previously on any of our reports. I'd also like to highlight there are no planned fire alarms or drills today. So if you do hear an alarm, please proceed to the nearest exit and good luck.

Now to the day itself. We grouped the day into 3 main parts. In session 1, you'll hear from Anders, our CEO; and our new CFO, Enrique. We're then going to have some time for a short Q&A for around 15 minutes, so more about submitting a question in a moment. And then you'll have a break for around 15 minutes as well. Post the break, you're going to hear from our business area President, Andreas Renulf, the President of MI; and then Henning Sanford, the President of Geosystems. We're then going to have a further short Q&A for any questions you might have on those presentations, followed by another short break.

Then in the final session of the day, you'll hear from Gordon Dale, our President of Autonomous Solutions, and you'll hear from Arnaud Robert, President of the Robotics division. Anders is then going to come up to wrap the day up with one short slide, and then we'll have a final Q&A on any area you would like to cover for about 20 minutes, half an hour. We will aim to close no later than 4:30 p.m. To ask a question today, you're going to have options. In the room, you can just raise your hand and we'll bring you a mic.

From the webcast, we'll [indiscernible] every couple of questions and make sure we cover any questions that are coming in through there. There is a chat box on the web box where you can submit your questions. We'll then read those out in the room. We're going to aim to address as many of your questions as possible today.

Before I hand over to Anders, I just want to take a moment to talk about the key metrics you're going to hear about today and highlight the new profitability metric you'll have no doubt all read about EBITDAC. The organic growth metric is completely unchanged. EBITAC, as I said, is a new metric. It takes our adjusted profitability metric, EBIT1, and subtracts capitalized R&D and adds back amortized R&D. This has the effect of charging all of the R&D in the year it's incurred, allowing us to focus more on R&D return on investment, and it is a metric closer to how we run the business today.

Enrique is going to cover this new metric in more detail later. And you will have already noted, we published reconciliations between EBIT1 and EBITAC in the press release issued earlier today. The cash conversion metric remains operating cash flow before interest, tax and nonrecurring cash flow, but it is now divided by EBITAC as it's our main measure of profitability. And the definition of Scope 1 and 2 emissions is unchanged from the previous definitions.

One other important thing when you're listening today is that all of the numbers quoted today, including historical, unless otherwise stated, exclude Octave and the D&E business, which we sold in February this year.

With that, I'm going to pass you to Anders, who will start the main session of the day.

Great. So very nice to be here. Good afternoon. Happy to see all of you here, both live in London, but also online. I know it's close to holiday season here for parts of the attendees. So really appreciate you traveling here to London to participate with us. My name is Anders Svensson. I'm the President and CEO of Hexagon. And this is a great day for us here today. We have the ability and opportunity to explain who we are as the new Hexagon created now since we are spinning off Octave and we have sold off some of our businesses.

So it's a great opportunity to explain to us who we are and where we are headed going forward. And also, of course, our strong conviction to generate superior sustainable value creation for our investors going forward. This is what this whole day is basically about.

So let me set the scene for today a bit. What we want you to bring with you and clearly understand when you leave here is, first, who we are, a focused leader within precision measurement and positioning technologies. And then secondly, that we benefit from really strong fundamentals. We are active in structurally attractive and fast-growing markets. And in those markets, we have a leadership position. And to have a leadership position gives you opportunity to invest in R&D, innovation to keep that leadership position, it also gives you the opportunity to be price setter, so you can charge a premium for your products.

Thirdly, we want you to bring with you that we have a proven operating model on how we steer and govern this company going forward. And combine that with very strong business strategies that our business area presidents will review with you today. Those are actually done on divisional level, but summarized here on business area level for convenience. Otherwise, we would be here a very long time because we have 17 divisions. And this will then help us to unlock superior value going forward.

The fourth thing is that we have clear and ambitious financial targets that are built on this foundation. So that's basically what we want you guys to bring with you when you leave here today. So moving forward then, to understand where we are going, we need to understand where we are first. So if you look back at Hexagon the last 12 months or so, you can see a quite big difference. We had what we call Hexagon now, we have Octave and we have the D&E or design and engineering business that we have sold.

So we have taken decisive actions to sort of clean our portfolio, not clean, but streamline our portfolio towards precision measurement and precision technologies. Because if you look at Octave, it's a completely different business. It's a great business. It's a software business, but it works with completely different cycles with customers. So it's long-term enterprise procurement cycles where they work within and the personas at the customer is completely different from the personas which Hexagon works with. So there's no sort of benefits of being together. And it only makes that look not focused as a group.

The second one is our D&E business. And if you follow this, you know that the electrical design automation software systems are combining with the physical ones, which our business D&E is the computer-aided engineering companies. And this has happened everywhere. So we basically had 2 options, either we exit, while this is a very profitable and valuable company or we need to invest heavily to step into that direction instead buying one of those large companies, which would have been an opportunity, but not where we wanted to go. So this is why we then exited this business and are now since decision in AGM last week, where it was taken by the shareholders to actually spin Octave for real. So what remains is then Hexagon Core.

And if you look on the right-hand side of the slide, you can see that we are $3.7 billion and an EBITAC margin of 22%. And if you convert that back to EBIT1 margin, which you might be more used to, that would then be 26% for '25. If you look at the total amount of employees at 17,000 now instead of 250 plus when we had the other 2 businesses with us as well. But we are not exiting software. Sometimes you hear that now you're exiting software now. Not at all. Software is critical for us. If you look at software and services, it's 44% of our revenue. Recurring revenues are 28%. So we are definitely not exiting software.

And if you look at our development engineers, 75% of them are software engineers. So we are wanting to be a company within hardware, software and services that support each other. That's what we are targeting. We are not targeting to become a software company or a hardware company. We are targeting to become a supplier to our customers of full solutions, hardware, software and services.

But let's dive a bit deeper into our business portfolio. And we consist of 3 business areas. Manufacturing Intelligence is the largest one. Andreas will tell you more later, EUR 1.6 billion in size, global leader in portable and stationary metrology, but also CAM software. With Waygate being added into the organization, hopefully, later in this year, we will then also be within nondestructive testing.

Geosystems is the second biggest one, EUR 1.4 billion in leading in precision surveying and monitoring also within machine control, construction software and services, et cetera. And then we have the smallest business area, but the fastest-growing one, Autonomous Solutions, and Gordon will talk about that. EUR 0.7 billion and leads in precision positioning, of course, and operational intelligence and autonomous solutions like our road train, which is quite famous, I think.

So in every one of these areas, we have a market position of 1 to 3 because within each of these, you have divisions. And those divisions are either best, second best or third best within their field. And that is giving us a strength, like I mentioned in the beginning, also being price leader, price setter of solutions and also to invest the most in innovation and R&D to make sure that we keep that position also going forward. And I want to mention also separate here, which is ventures and robotics.

And those are in this, what we call ventures, it's like an incubator or a greenhouse, mainly internally developed innovation ideas that we then put in this greenhouse, allow them to grow and see if they can grow up to become a new division or even business area sometime maybe. And the most known one is probably AEON, the humanoid robotics, which you can see also here. But we have other strong businesses here like Aura. Francesco is here as well somewhere with his team to also displaying this product over there. So you can have a look at that later if you want. But it's generally technologies we think can be disruptive somehow, and we give them a chance to grow in here.

If I then move forward to now when we are a more focused portfolio, we also have a clear purpose and value proposition. And it's basically that we measure what matters for our customers. And our customers are in all the key strategic verticals in the world basically. So we focus on providing industrial customers solutions to understand the physical environment to convert that or digitize it into a digital reality and then to work and operate within that digital reality and also in the physical reality with physical AI.

So all our products and solutions work to address 1 of the 3 main areas you can see here. It's either precision measurement and positioning or it's digital twins and 3D environments, and that's replicating then the physical world into the digital environment or it's within spatial and operational intelligence using the precision measurements and positioning together with real-time digital twins and then allow those -- and then through that allow assets to be able to operate safely also within the physical environment. And example for that is, of course, AEON is the road train. To some extent, you have the TS20 total station, et cetera.

So this is the way we see our businesses. And we provide customers with the foundation to enable true autonomy in their products. And this is why we are at the core of how our customers develop going forward, and we are not at the edge and edge supplier somehow. We have edge technology, of course, but we are not at the edge, we are at the core.

Then if I move forward to elaborate a bit on the different solutions we have today and how we enable autonomy. So if you look at our offerings, you can see them a little bit like this. It starts with manual solutions. Here, we have an MI Arm measurement, RA8. You have an operator who takes this arm and make precision measurements in reality. Then you move over to the automated solutions. Here, you have the Maestro coordinate measurement machine platform, which we released last year. So it's fully automatic measurement system with fused and connected sensors.

Then you move into the semiautonomous solutions. And here, you have, like I mentioned, TS20 within Leica or Geosystems. You have the ATS800 within Manufacturing intelligence. And of course, you have the anti-ollion system within mining. And those use digital twins, edge AI and perception technologies to be semi-autonomous. And then, of course, you have the further step is then how do we enable true autonomy.

And this is physical AI with real-time spatial and operational intelligence. And the key point here is that we have products, technologies and solutions that support our customers on the journey from being manual to being truly autonomous. And we didn't put in here, but also within adding Waygate into MI, we will not only have like we have here, surface measurement -- precision measurement equipment, we will even be able then to measure the inside geometry of different products and components.

So before turning into our strategy and markets, I want to talk about how we operate. We call it the Hexagon way, and it's a critical enabler to deliver on our targets. And this was introduced basically quite early after I joined in the end of the third quarter, and we started to implement already in some businesses in the fourth quarter, but it's fully implemented from the 1st of January this year. So the Hexagon way starts with purpose as the core. And then around that, you have an operating model. You have people and culture, you have the governance system and you have how we treat our brand.

So if I focus then on the operating model, which is how we do business basically, and this is how we operate with 17 fully accountable decentralized divisions that are customer-facing. They have their own sales force. Each of them run their own strategy, they run their own resources, they run their own decision-making completely. They are basically empowered to take decisions as if this was a self-standing entity. But they are also accountable for the outcome of those decisions and their financial performance. So the business areas then is the next layer and business areas are more there to govern and to help steer the divisions and help with M&As. And if they get off track, they will support the division to get back on track. And we combine this decentralized organization with a strong, transparent performance management system. And this is fundamental for a decentralized organization to be successful.

If you don't have a strong performance management system with a clear governance, you get chaos when you decentralize. So this has to go hand in hand. And it's something that we implemented and that is working very well. And we have a lot of people actually in our organization that has worked with the similar systems before. So it has been fairly simple to implement, I must say. If I then jump into just mentioning a bit about our recent financial performance, and I will summarize then from the last Capital Markets Day primarily. We can see that we basically have the same top line. It's been around EUR 3.7 billion for the past 3 years. We had minus 2.4% growth in '24, and we have plus 2.6% growth in '25. So it's been fairly standstill from that point of view.

Of course, we have had macro environment against us. And we have, due to COVID also had a fairly slow product generation cycle of new products if you compare to how we used to operate. So this has also delayed some of the launches and of course, then didn't help us with our top line development. If you look at what we did deliver since the last Capital Markets Day is basically a growth in recurring revenues of 4 percentage points and also software and services. So actually, the quality of revenues went up. But where we have seen most of the challenges we have had has been within our profitability. We have managed to keep the gross margin at a good level. It's basically 62% straight over the period. But we have not been able to control the cost as we should have done due to that we didn't have any top line development.

So we have invested in SG&A costs, et cetera, which we should not have done. And you can clearly see that in the development of the adjusted EBITAC margin, which has gone down. It's gone down from the top year, which was in '21 at 26%. And this was basically the recovery year after COVID. So we had 16% organic growth. Nobody traveled and we had less people than we normally have. So this was a peak year, right, from a profitability point of view. But then it's gone down to 22% EBITAC. And you can see the gap between amortization and capitalization has been between 3 percentage points up to 5% and then back to 4% now. So in average, it's something like 4 percentage points difference between EBIT1 and EBITAC.

But you can see the trend is the same within EBIT1 that is also going down. So clearly, this is something that we understood that we needed to act on. I don't know what's happened here. Stop me. And without this clear operating model and performance management system, it's very difficult to quickly notice where you go off track. We have scorecards, which we follow on a monthly basis where we can see each business and how they are performing and when they go off track. And if you don't have that, you react too late, and that is exactly what happened with us a bit in history. We reacted too late to the cost development versus the flat top line.

But this is something that we now have embedded in a new discipline in how we run and govern our company going forward. So given this kind of weaker development than we historically have had within Hexagon, we are then taking immediate actions to get back on track, and this is something we already did since mid-'25. So we launched this new decentralized operating model with a strong performance management system. I talked about that already.

Secondly, we launched a restructuring program. And if you remember, that was $110 million, including Octave, $36 million, Octave and $74 million for Hexagon. And that we are still executing on. We have a good run rate of about $50 million after the end of the first quarter. So we are well on track to deliver on this.

We also reviewed our R&D spend and especially what we had on the balance sheet. And we unfortunately had to impair $186 million at that point in time. And this was not because we wanted to improve something or that we wanted to change something in history. This is because we had developed things that was on the balance sheet that no longer fit with customer demands and would not be possible to sell. And if you keep that on the balance sheet, then people will continue to invest in that, and that's throwing good money at bad money. So you need to take a decision where you're in that situation.

And now with the new set that we have, we will not get back into that situation because we are reviewing this on a quarterly basis going through all these initiatives with our businesses. What you can see is that given that we have installed this, of course, we have a positive development of organic growth. Now we have also done a lot of good things in the past that also have a positive impact. So we have turned the table when it comes to the organic growth development. And you can also see it on the EBITAC margin that it dropped down and the low point was basically middle of last year. And since then, we have seen an uptick in our performance. And that gives us confidence in the targets that we're also communicating to the market today.

So if we look ahead, our ambition is simple: to create superior value and to do this sustainably over time. And we have a strong conviction that we can deliver on this ambition. We have, like I mentioned before, compelling fundamentals, leading position in very attractive markets. We have a proven approach to value creation with our account-driven operating model, with our Hexagon sort of DNA, very strong innovation focus and also a clear portfolio strategy. together with a business strategy in all of our businesses.

And portfolio strategy, I mean, buying, selling companies to clean our portfolio to make it right for us. And last but not least, we have a strong and experienced leadership team. And actually, at breakfast, someone said that there is actually no one speaking today that spoke at the CMD of 2023. And I haven't thought about that until this morning, but that's actually true. So there has been a lot of changes and people have gone to Octave and people have gone to the Hexagon side, but also a lot of new people coming in. So that's a quite interesting observation.

But let me take you through this a bit in more detail. So if we move into a megatrend, so we help our customers solve problems. And we have 3 megatrends that are structural, global and durable. And while they represent challenges for our customers, this is, of course, representing also opportunities for us as a company. Labor shortage is one, which is critical going forward. And 2030, it's expected to have a labor shortage of 85 million people. That's roughly the population of Germany globally. And of course, if you go to skilled labor, that is even worse situation. So our customers can't solve this by hiring more people because there is no competence to hire. So we need to go through that automation journey and automate things. And to do that, you need precision measurement. Otherwise, you can't do that.

And the second one is the sustainability pressure. The cost of failure in construction and industrial processes are huge, right? And only if you look at in construction, they spend more on correcting errors and rework and throwing away concrete, which was done by mistake, et cetera, then 7x the profit in the whole industry is going to rework and waste basically. That's massive. And the opportunity is here to minimize waste, to minimize rework and to increase safety and efficiency in construction is massive. And we have the equipment to support customers in that journey.

And then, of course, there's a third megatrend, and this defines where our industry is heading, and that's AI. And AI needs precision data. And to be able to deliver spatial and operational intelligence, the need for really specific high-precision data is massive going forward. So this is a massive opportunity for us. And if you take the step, which I talked about before, going from manual to fully autonomous, it requires an accurate increase of 3,000x to be able to do that. And every time in history, when we have gone through more automation, the data requirements have increased, and it's the same in this journey.

So the requirements of precision data is increasing, and that's exactly what we help our customers doing. And this is also why we see ourselves not threatened by AI, but rather as a demand driver for us going forward. So those megatrends drive growth within our serviceable addressable market, let's call it SAM. And you can see it's increasing from EUR 27 billion to EUR 38 billion in 2030, and that's an increase of EUR 11 billion in just 5 years. It's a broad-based growth. And you can see the slowest growing segment we deem is MI with 4% to 6% growth; [indiscernible] Systems, 5% to 7% and then Autonomous Solutions with 8% to 10%. And we are, like I said previously, positioned as 1 to 2 within those industries. So we have a very good opportunity to take advantage of that underlying market growth.

Of course, you cannot directly translate, let's say, this number into how much we should grow because we might be stronger in geomatics, which is a more mature business and not growing as quick. We might be stronger in Western markets like North America and Europe that might not be growing as quick as development markets. But it's a good indication about how the whole SAM is growing for us. And we consider this to be very good fundamentals going forward, and we are very confident with that we can utilize that. And also, if you look at how diversified we are within the industries, we are basically in all the critical verticals in all areas.

If you look at sales per geography, we're also very well diverse across the globe. And this gives us, of course, strength and resilience if there is problem in any region or any industries. So how do we execute on these great market opportunities and take advantage of our strong market position. From a Hexagon Group perspective, we have 4 main cross Hexagon enablers that are working together in helping to unlock profitable growth. So these are the 4 which are across Hexagon Group.

It's the operating model with accountability, strong innovation and AI focus. It's the portfolio management and also including our DNA of very strong M&A generation, over 200 M&As in the last sort of 25 years. And many of them have built Hexagon as it is today, right? Brown & Sharp, Lyca Air Systems, Novatel, there's massive of M&As where we have really leveraged those companies and made them to something they were not even close to be before. So this DNA will carry with us.

And then, of course, people and culture. We can't do anything about this if we don't have the right people with competence and capabilities and motivation. So this enables us to go across all the businesses. And I will now try to cover these in the next couple of slides, but these are nothing if you don't combine it with these. And this is the core of the presentation when it comes to the business areas presentations. It's the business strategies.

So I start with then the first enabler, which was the operating model. And as I mentioned before, we have structured this in 17 decentralized fully accountable customer-facing divisions. And divisions control all the costs, all their resources, all the decision-making, and they are then accountable for the financial performance, both when it comes to the operational balance sheet and the profit and loss. They are reporting to the 3 business areas, which role was, as I said, mainly to govern and steer those divisions and make sure that we are on track with strategy execution.

So we do this through a very transparent performance management system. And a key part of that is the scorecards. And the scorecard is the last 3 years performance monthly for a range of financial KPIs, but also nonfinancial KPIs to ensure that we quickly can spot trends of deviation against our plans. And given the speed of the markets that we are in and the innovation where we are, this is critical. So being a company that takes decisions with speed is a competitive advantage. And our operating model is enabling us to do just that because it doesn't need to go up to me to take decisions. It's done very much closer to customers and course correction is done also very much closer to customers.

I will then move into the next enabler, and that was the innovation. So our story about innovation is a bit like a recovery and acceleration story. So we used to be very strong at innovation in terms of speed and new generation of products. When COVID came, it actually slowed down quite a bit for us. We didn't get the same innovation cycles as we had previously. So product launches were delayed and we got slower. We then invested more in R&D, and you can see that. This is the total investment. You can see that we invested more, but we didn't get the benefit of the revenue because we didn't get the products out to customers. So that changed now in 2025.

We -- actually from the end maybe of 2024, we started to get new products out to the market. 2025 was a fantastic year of product releases. 2026 is a similar one. So lots of new products coming out to the market, and we will see the benefit of those investments, of course, going forward. That will be a good tailwind for us when it comes to growth going forward. But I think this tells a good story or maybe not a good story that we used in 2021, 10% of our revenue was actually from products being released in the last 3 years. If you look where it was '25, it was 6%. So you can really see that, that sort of boost of releasing new products and getting that boost on your organic growth has not been there in the last 3 years. And we now see and believe that, that is coming back.

And this is not -- this is also important to know just because we released a new total station in Geosystems in October last year. It doesn't mean that from November, we get the full revenue from that one. It takes time to ramp these up. We ramp them up in different geographies, and then we make sure that we have an update of the systems. There are software updates to make sure that the product is as efficient as possible, et cetera. So it's a process which takes normally 18 to 24 months before it's fully ramped up. So that's how it works.

I just -- I don't want to dwell on this slide, and I'm probably already very late. So I just want to mention some of the key releases that we have had in the last sort of 18 months. Started with Icon Trades within Geosystems. Then we have [indiscernible] product, which I spoke about already before, Maestro, the new CMM platform, ATS800, the new laser tracker and then the robotic Total station within Geosystems. So great new products. Several of these, we have not seen platform updates in over a decade within like the CMM and the Total station. So these are huge development projects that we have released. And there will be new products coming on those platforms also going forward.

I will jump into the second part of that enabler, which was artificial intelligence. And I already mentioned that we see AI as a megatrend that works in our favor going forward. But we also deploy AI across 4 dimensions in our products and solutions. Spatial intelligence, improving how our customers interact and get insights and actually manipulate 3D models. Physical AI, this we already talked about. One example is the TF20 robotic Ta station. Other example is our AEON robots. And then we have data enhancement and it's leveraging AI to derive more insights from the precision measurements that we provide and sensor data.

Then we have Agentic AI, and that's building customer workflows on top of our data and software solutions. So these are when it comes to the products, but we also work, of course, with driving speed and operational excellence within our own operations. It could be software development, it could be hardware development. It's, of course, in how we work within legal, with Thomas, we could cut down resources and at least cost and money on external resources to be much more efficient using these kind of solutions. And Madlen is doing the same within marketing. And we do this in all of the different support functions basically to be more efficient.

And we work, of course, with the best partners that we know, and you see those on the bottom of the slide there, AWS, Microsoft, NVIDIA and Anthropic. So -- and we believe that building solutions together with these, both when it comes to how we operate internally, but also in our products and solutions is the way to go. And we have very close relationships and partnerships with several of these.

Then I move into our portfolio management. And this is how we manage our existing businesses. So every division within Hexagon, and we have 17, as I said, will get a mandate, a strategic mandate. And that mind that is either stability, profitability or growth. So if you get the mandate of growth, it means that you have a stable business you have peer-leading profitability within your industry. So your focus should be create organic growth as much as you can and then add on bolt-on acquisitions or M&As to grow even quicker. And you can see 11 out of our 17 divisions are in growth mandates, which means that, that's 75% of Hexagon's revenue that already is with a growth mandate.

But we have the businesses which are with a profitability mandate. And that means you have a good business, you are not running it at peer-leading profitability. So your job is to do that, fix that first. Before you focus on investing in growth or investing in M&As, you should fix your business and have peer-leading profitability. And then we have some businesses which are in stability phase. And that means we have a business that, for some reason, is not performing. It could be that it doesn't fit within our structure or organization.

So we need to evaluate strategic mandates, but strategic long-term position for that business. It could be that it requires a turnaround of that business. It could be that, that business needs to exit part of what it's doing and then go into profitability and then go into growth. So this is how we drive our businesses. And the management teams of those divisions are having the exact same target and focus in their incentives. So if you are here, you don't have a growth incentive. But if you're here, you have a large percentage of your incentives on growth. So this is how we want to drive our businesses going forward.

Then, of course, focused M&A to accelerate value creation. And as I mentioned, we will focus more than we have done before on our core, which is precision measurement and positioning technologies. And we are looking for acquisitions either to strengthen our current position, market position, it could be geography or some technology, et cetera, or enter into some attractive adjacency to those businesses. And that's the case when it comes to Waygate that Andreas will talk about more later. That's an attractive adjacency. But the main focus will be on those bolt-on acquisitions.

So our financial criterias are very straightforward when we look at these type of investments. It can be a bit of a headset here. It's okay, I think. The market needs to be attractive, and we need to be the best owner for the business. And then that business needs to be able to generate sustainable double-digit earnings growth going forward. So those are the 3 main criterias we look at. And we remain very disciplined when it comes to valuations and when it comes to return on capital. And as I mentioned previously, we also dynamically manage our own portfolio. And we look at the different businesses, and we decide if we should exit or not.

D&E is one of those examples. It's a very good business, but we were not the right owner. So then we have decided to exit that business. So those 3. Market needs to be attractive. We need to be the right owner, double-digit earnings growth sustainably. Those we look at. Then the people and culture enabler, and this is the last one of the enablers. So everything I described will not work. The operating model, the innovation, the M&A will not work if we don't have the people who feel accountable, who have the competence and capabilities to be able to do the job and who are motivated to do the job. Those are key.

So we build our culture on the foundational principles of our Hexagon way, and those are accountability, transparency in everything we do and speed in actions. And this is how we make decisions, how we manage performance and how we incentivize leadership.

On talent, we are investing in succession management. We really want to recruit primarily internally. We have created a new internal job market, which we did not have before. All jobs need to go through the job market, and we always want to see internal candidates, but we also want to see them being challenged by candidates from outside to make sure that we have the best capabilities for each of the roles that we are putting in place. And as I mentioned previously, our leadership incentives are based on what the assignment is for the business, but it's always regarding organic growth, EBITAC, cash conversion and ESG in -- but different weight depending on what's your strategic mandate.

So if you remember the slide, I had the 4 enablers and then I had the business strategies. So this is a summary of the business strategies. I will not go through it. We will be touching on that quite a lot going forward with our team here. So what I want to mention here is Ventures, which is our incubator. And like I mentioned, it's organically developed innovations primarily, and we play to win within these as well. These are included in our financial targets and in how we report. AEON is the exception to this. That's our humanoid robotics.

So AEON started as a venture but has grown into a great possibility to be the human robotics that is one of the winners going forward. So here, we cannot sort of contain AEON with our financial metrics and our financial targets that we use for our normal businesses. Here, we need to be more forward leaning and don't expect a short return because the ticket to play is there, but the return is quite far away. So it's a different cycle. This is the reason why we have excluded AEON from the financial targets that we are reporting. We will, of course, be extremely transparent on reporting externally how much we're investing, what's the result, et cetera, et cetera, but not included in the group targets.

This is just a summary slide. I won't put too much time on this one, but it's to explain how we work. So we work within our SAM and then we have a total addressable market, which is including adjacencies. In SAM, we work with organic developments in our divisions primarily, and we work with bolt-on acquisitions. Then on the business area level and on the group level, we work with our organic development into humanoid robotics, Aura, et cetera, which are organic, but it's outside our SAM today. And then we have the acquisitions, which is outside our SAM as well, building on our SAM into our TAM. So that's how we work on the different levels with growth going forward.

Then I will move into my last slide, which represents the confidence, I think, in value creation that we have. So we have communicated organic growth targets of 4% to 6%, '26 to '30. The achievement you know in '25 was 2.6% and the year before was minus 2.4%.

So we believe that this is a good first level to move to in terms of creating stability and getting back into a growth mode within the company. EBITAC margin last year was 22%, and we communicated 24% to 26%. And this is not to be confused, of course, with EBIT1 margins because as we discussed previously, in average, 4 percentage points difference. So this would be 28% to 30% then if you want to related to EBIT1 targets. And we will, of course, continue to report on a quarterly basis EBIT1 as well.

But this is how we steer and govern our business going forward. I don't want anyone to capitalize R&D to get the better EBIT result because I can't take that lever away. Now we have the full R&D cost within the result. So we're not [indiscernible] the wrong things to try to get some short-term incentives or so. I'm not saying we have done that in history, but of course, that could be tempting for smart people.

Cash conversion of EBITDA [indiscernible]. We are targeting 90% to 100%. And last year, we did 109. I think it represents a strong cash generation, but also that we keep on investing in our businesses. When it comes to ESG targets, we have a scope 12 reduction of 70% by 2030 and then a net 0 in the whole value chain by 2050. And if you know us since before, this is considerably lower target than we previously had, but this is basically only taking out Octave and design and engineering that basically don't have anything because they are software businesses.

So this is just basically taking that out. So we're not trying to have easier targets on ESG going forward. And there are many targets on ESG, of course. But good to see that we have progress of 33% since the base year of 2022. So as I said previously, these targets are then excluding the robotics divisions, but including everything else. So Enrica, then I think I'm done for now and I will come back to do the Q&A together with you, but I leave over to you to go through in a bit more detail.

Thank you so much, Anders. You can -- thank you, Anders. Good afternoon, everyone. Great to see you all. So I'm Enrique, very proud to be here representing Hexagon and also grateful for the opportunity in humble as well for the opportunity. And I think many of you will say, well, isn't it a bit premature to do a Capital Markets Day on working day 5, but -- and that's a valid question, but I think the reality is that I'm actually working on this and working with the management team for quite some time now. And I'm also very glad for the on-boarding that so many have provided. So I will actually be focusing now this -- during my session here, focusing on providing you a bit more of the financial substance behind the targets that Anders just outlined. And I've divided this into 4 key questions. And these 4 key questions are actually the very same that I've been using when discussing actually the strategy of the business with Anders and other leadership team members.

So those are where does the growth come from? How do we sustain our margins going forward? How do you convert that into cash? And how do we remain disciplined on capital allocation. So let's work through each of those targets. The -- or each of these questions, the conviction that we are expressing today is rooted in a straightforward logic. Yes, we have strong assets, market leadership an innovation engine and deep domain expertise that has been built over decades. We're adding value by focusing the portfolio on precision measurement positioning, making customers front and center to the decision-making by empowering the divisional leadership and also applying a very disciplined performance management approach here. And the output that we get out of this is sustainable and superior value creation, consistent revenue growth, industry-leading profitability and capital allocation focused on value realization and creation.

Then I want to draw your attention to these 3 boxes here to the left. Because when we now kick off actually with the finance leadership team, the finance leaders that are the closest to the business, actually the ones that really uncover where are we leading money on the table. Really, I mean, that's the operating model, transparency -- accountability, transparency, [indiscernible]. And that means having a deep understanding of unit economics of the business, the R&D, ROI, how do we convert to cash and so on and driving that flywheel faster. And that's the plan. So everything I'd say now in the coming 20 minutes or so is really the evidence behind that. So let's look at the path to enhance profitability through the lens and where we have been.

Looking at our 2019 to 2024 historic average, organic growth averaged up about 3.8%. In the IC margin, 24% and cash conversion of 98%. The what we achieved in '25 was 2.6% in growth. That's below the historical rate, but with a clear recovery as you saw from Anders in the second half of the year. And if you recall from that chart, '24 was actually negative growth. [indiscernible] margin, 22% and cash conversion of [ 109 ], and that was helped a lot from working capital. Our 2026 to '30 targets takes each of these in the right direction from where we have been. So getting to 4% to 6% growth and expanding the margins of [ 24 to 26 ] and cash conversion of [ 90 to 100 ]. And on emissions, as you saw from Anders, we have had a reduction of 33% versus our base year of 2022, and we're then targeting 70% by 2030.

The good thing here is that we are very much on track. Everything we do financially, if you look at this circle here is organized around 4 interconnected priorities: protecting the industry-leading margins, generating the strong cash and then allocating that cash into growth avenues that protect those margins and so on. And if you midpoint of what you're kind of guiding to, you're going to see that, that adds up to about EUR 5 billion. And we commit here now to deploy that in a very disciplined way with a lot of rigor behind that, also with a clear value creation framework. And that's on how we -- it's not only kind of when you look at the total value creation or total capital allocation framework, but also within how do we deploy R&D dollars, how do they deploy M&A spend, marketing spend and so on and creating transparency on leading indicators showing that we are on the right path, it's 1 ingredient behind that.

Another one is actually the incentive structures that we create as leadership behind the financial objectives as well as the emission objectives. And one key aspect here is measuring performance and what else can you expect from an advanced measurement company. So measuring and managing performance. And we get a bit technical now. But I want to also be very clear here in terms of how we are looking at the business and also so that the way that you are looking at is in the same way that we are looking at it internally. EBITAc is EBIT1 adding back the R&D capitalization and subtracting the R&D amortization. So it is adjusted EBIT with a full expensing of the -- all of the R&D costs in the period. I hope that was clear. And the reason for moving to this metric is straightforward. So historically, Hexagon has capitalized a significant portion of the R&D spend. We also typically spends more than peers on industry-leading and disruptive innovation.

In 2025, that amount was EUR 340 million. You see it on that table. We'll come back to that one in a moment. And -- but that capitalization and that's a sequence amortization that creates a timing gap and [indiscernible] it removes that distortion. It expenses all R&D in the same period is incurred. And the result then is a much more conservative measure of profitability. Typically 4 percentage points, as you saw from Anders versus the EBIT1 margin. So in 2025, our EBIT1 margin was 26% while EBITA was 22%.

And there are 2 simple reasons for why we do this. One is that we will drive much more rigor behind our R&D spend. The other one is that EBITDAc is much closer to cash, and that is -- and that's a key driver as well behind accountability. I hope this profitability bridge that we put up all the way to your right is clear. But by taking the 2025 numbers here as a case study, it starts with our reported EBITDA of [ 5 75 ]. We add in the in-year adjustment of 372. We'll add on an EBIT1 of 947, we then substracted add back the R&D compensation amortization, and that takes us an EBITAc of 802.

However, that includes the spend that we had in robotics. And removing that charge takes us to 826, and that's an important note because that's the [indiscernible] that we are guiding for today in our objectives. So we will be excluding the robotics in numbers in our EBITac guidance. And I'll come back shortly for why that is the case. EBIT1 will still be reported while [indiscernible] will be our focus. And here on this chart, you can actually then see the [indiscernible] and EBIT1 on a look-back basis back to 2020 and also highlighting the point that Anders made that 2021, we had a fantastic growth of about 16% organic growth, and we achieved top EBITDAC margin of 26%. But that was also an exceptional period with that growth and also appeared with temporarily lower cost saves.

So that point is actually a demanding point and it's intentionally so. but it also reflects the conviction that we are having in these strategies that we are presenting today. On robotics, you heard from Anders presenting on robotics today, you'll hear much more from Arnaud and I hope that you took a look at the product out there. We're very excited about the the opportunity, and there is a real opportunity to build a market leader here in robotics. The pilots that we have underway are actually moving very nicely forward. But it's also a venture that is kind of at the start of an S-curve.

And decisions here in terms of capital allocation needs also to be framed in terms of long-term value creation as opposed to more kind of short-term margin contribution when we look at our normal business. And so that's the main reason for why we're excluding it from group targets, including it would distort as well how the picture in terms of how we're looking at our core business performance. Here also, the incentive mechanisms are also different. Investments in robotic will double roughly in 2026 versus 2025. So from going from EUR 24 million to about EUR 50 million, and we will be transparent about this in our quarterly reports. We will also have a partner arrangements if we see that that's a better way to realize this opportunity.

Now I'm as well as Anders -- a very strong believer in decentralization. If you do it right, you really drive empowerment, agility and speed. And as a CFO, I need to operating mechanisms to really drive this. One is strong performance management and the other 1 is strong internal controls. And this, in fact, actually derisks the outcomes. And that's very important when we think about this. So core cost is 1 way of grinding this.

We ensure that divisional management has more pixels, more gaiting looking at the results lay out, actually capital allocation decisions in a much better way. unit economics become more clearly understood and we shortened the reaction time. Divisions are accountable for their assets, execution as well as the results. So accountability, transparency speed here as key words that help us to shape a counter into real operational outcomes. When our division is underperforming, we know quickly and we act quickly. This serves also as a base for the mandates that Anders was talking about with the [indiscernible] with all the bubbles.

So in summary, it's about derisking the outcomes. And that is as well why we then have the conviction that we have behind our target. Our businesses, they have clear specific plans to accelerate organic growth profitably. And you will hear more from the -- each of the divisional presidents -- business area presidents talk about that. But before that, I want to address these fourth questions and I'll come back to that because I think these are actually the right question to ask my business that has been kind of struggling a bit on growth and has had margin pressure for quite some time and now setting fairly more ambitious targets. Where does growth come from? [ It is ] 4% to 6%, just a restatement of the historical trend that we've had or is it a too easy target. How do margins expand sustainably. Why should investors believe in our 24%, 26% margin? Or is that really do we need actually peak performance to achieve that?

Looking at the cash conversion, removing offtake and DNE, how does that change the cash profile of the business? And lastly, how will we keep discipline in our capital allocation. particularly as well when we restart the M&A program, we doubled investments in robotics and so on. So let's get into it. Our group target here is of 4% to 6% organically, and that is underpinned by differentiated contributions from each business area. Manufacturing Intelligence, ending Geosystems, 3 to 5 and Autonomous Solutions, 10 to 12. And that's obviously reflecting the faster growth trajectory of the markets that Gordon has and the early stage of some of those revenue streams.

If you look at this chart here, that chart shows a sensor for 2019, 2025, we've been growing at about 4% per year. And that's a period where we had quite some turbulence, we had also a pandemic period as well here. We see now 2026 to 2030 as an acceleration. And that's achievable because of the initiatives that we are seeing in these business areas around product launches, the operating model and the market tailwinds that under described. So what are some of those drivers that we have behind this. So we have been actually in some different forms actually, it's products, it's innovations, it's geographies, it's go-to-market, customer focus experiences and so on. In Manufacturing Intelligence, Maestro, the first new CMM platform, in a decade, APS800. I hope that you saw it out there with [indiscernible] hardware revenues. While China's role is an underexploited commercial opportunity that we have there to manufacture for more markets than outside of China. [indiscernible] here also is also a very interesting opportunity for the nondestructive testing market.

In Geosystems, the [ T820 ], the air power total station as well as [ Icon train ] are also very interesting products that allow us to achieve growth. The need ratio expansion and go-to-market optimization will also expand the reach into new segments where we have also been under indexing in the past. In Autonomous Solutions, the [indiscernible], that's the smallest GNSS receiver to date, you have it out there as well as the gadget products also show continued technical leadership. And the growth strategy here is really to continue to penetrate new and existing markets as well as to scale up that operational intelligence autonomy solutions where the market growth rates are the highest.

The second question was around our growth and how do we get from 22% to that range of 24% to 26%. The answer is straightforward. And based on, I would say, realistic assumptions, organic growth is the primary leader. When revenues grew also over our fixed cost base, obviously, then we -- that creates an operational leverage for us. The gross margins, as you saw, have been consistently around the 62% level and that provides a strong platform. Manufacturing Intelligence is aiming at 21% to 24%, gear systems 25% to 27% Autonomous Solutions, 27% to 30%. And together, they blend into the 24% to 26% target.

On top of that, we have 2 specific cost tailwinds. One is the restructuring program that we announced in the $74 million run rate that we are looking to achieve now for at the end of '26. And the other 1 is the more normalization of our R&D spend that has been a bit elevated coming out of the pandemic investment cycle.

Our gross margins here have been actually extremely resilient, consistently around 62% since 2022. And these are market-leading gross margins that we're showing here. New products is really the key here. New product launches allow us to come in at high gross margins versus the products that they replace. And as the new launches that we have now in market that all built in here, that revenue contribution as well help us to protect and create a tailwind for that gross margin trajectory. And that's consistent across all 3 business areas.

And here, the other element here is obviously pricing. And here, I've been positively impressed with the speed and agility at Hexagon. Nevertheless, when you have a period of turbulent times, there's always more that you can do in terms of addressing that muscle. So that's another lever that we will be looking at much more. On operating costs, and I want to give you a bit of a framework in terms of how we're thinking about that. First, if we start with the R&D spend, that should be in the range of 12% to 15% of sales. And as I mentioned before, we have been on the kind of high end. And as the post-pandemic period kind of like complete, we will be kind of coming down a bit as a percent of sales. The direction is -- that's clear then. So it will be 15% and gradually come down somewhat, but we see it as well as very important to protect because that is really key to fueling our growth. For sales, marketing and admin, additional investments will amount to no more than 50% versus compared to the organic growth that we generate. And that's an important lens for how we're looking at this. So we will invest in go to market, but we will be very disciplined. And these are very important things because I mean when we now break this down into scorecards, it's important that all divisional leadership to really understand operational leverage and they follow that very closely.

On the restructuring program, I think that particular attention. The original scope was EUR 110 million. But following the separation of Octane, we're now looking at EUR 74 million for the continuing Hexagon business. And that's the annualized cost reduction of EUR 74 million, and that's real money, real headcount, real estate operational efficiency and so on. And the program started in Q4 last year and runs to Q4 of this year. That run rate is building up. And that will be a very meaningful contribution to the EBITDA growth that we're seeing for this year. And the decisions have been made, the programs are in place and are in the execution mode.

Another thing on looking at our profitability and margins and cost structure here, that -- and that's important to understand as well as also for the quality of our earnings going forward is items affecting comparability. This has been a source of noise in our P&L in the past. In 2025, they were close to EUR 400 million which is abnormally high. And a big part of that is the R&D impairment that Anders mentioned. Going forward, we are committing to use adjusting items in very specific narrow circumstances where there is a market shock, a pandemic or similar or large M&A or portfolio changes. We will continue with the PPA and LTIP adjustments in line with standard per practice. But the direction is clear. Adjusted items affecting comparability will decrease significantly, and that improves the quality of our earnings and also the comparability.

The third question was around cash. And how does that remain strong now when we're looking ahead here. Our target is 90% to 100% as a comparison to EBITAc to be very clear. In 2025, that was 109%. So very strong achievement. But historically, our average has been 98%. The key mechanism here to really ensure that we are delivering on this is ensuring that our divisional management than in the ones that are accountable for this have a clear understanding of their working capital and their CapEx decisions. And that's truly embedded in our score con model and improving also the -- and as well when we're now using EBITDAC that is much more closer linked to cash that as well enhances that kind of perspective in terms of looking at cash becomes a much, much more of a reality from when we look at our performance. I want to flag 1 important point here as well, and that is investments in new facilities that will partially offset the positive trajectory that we have had, especially in '25. So we are investing in operational infrastructure in key markets. This is planned and targeted and means that the cash conversion may be at the lower end of that target range in the first couple of years of '26 and '27.

And as you can imagine, cash forecasting is the most difficult of all the kind of parameters that we are dealing with here. In terms of our sustainability targets. And here, we only show actually a small portion of the amazing work that we do in ESG, but focusing on the initial targets that we are setting today. We're targeting a 70% reduction in Scope 1 and 2 from our 2022 baseline and all the way to 2030. And in 2025, we achieved already 33%. And by next year, we will have achieved 50%. And by 2050, we will be fully net zero. And we get to these targets by aggressively moving our energy consumption to be fully renewable and by working with our supply chain to ensure that they are compliant and also SBI, they also have SBTI targets as well.

Critically here as well with the products that we sell, Hexagon is already avoiding 49 million tons of CO2 annually. Our products are part of that sustainability solution. And on that topic as well. I need to mention that I've been impressed with the Hexagon initiatives to drive planet resilience. Some of our venture investments like the ones in our evolution using our own technologies and could result in meaningful business opportunities. So sustainability is not only part of our reporting at or compliance of Hexagon is really having a very meaningful business opportunity. Capital allocation then, and that's the fourth question and the discipline that we are putting on this.

Let me start with the financial guide [indiscernible] that we're putting here. First, starting with how we're looking at structural growth coming from M&A. On average, this has been about 2%. And typically, from bolt-ons, but periodically, we will as well consider larger acquisitions like Waygate, but the norm will be that we will be adding more bolt-ons rather than the type of way gas. And whenever we can exploit adjacencies and synergies. Return on capital employed, we are aiming for -- we should be generating 15%, and that anchors key investment decisions that we are making in the business. Net debt to EBITDA, we will stay below 2.5x. We will be at 0.8 post the [indiscernible] spin as well as the dividend that we are just about to pay out actually. Adding Waygate to that would take us about 1.4, 1.5 on a pro forma basis. So you can do the math to understand how much that we do have quite some substantial firepower still and also considering the EUR 5 billion of operating cash flow that we have in the plan.

Dividend, the plan is to maintain 25% to 35% of net earnings and consistent with our existing policy. Before going into more details in terms of our capital allocation, just a couple of things around our currency and tax profile also considering the Octave separation. On revenues, the U.S. dollar is our largest currency with 38% of sales, the euro 22% and Renminbi 14%. The remaining 26% is really spread out between British pounds, Japanese yen or [indiscernible] dollars. That's a diversified currency base, so no single currency that dominate. But looking at this in terms of EBITAc, the picture is quite similar. One thing to note here is that the Swiss franc is more of a cost currency for us and that's a natural consequence of the -- of our Swiss heritage, but also that we have a number of our head office functions located in Switzerland.

A practical consequence of this mix as well as the EU Pillar 2 directive is that our anticipated tax rate moves up a notch from 18% in 2025 to 19% to 21% going forward. And as I mentioned earlier, we do have quite a strong balance sheet, well capitalized following the separation of Octave. We have as well sufficient lines to draw from and we target to stay within 0.5 -- sorry, 2.5x of net debt to EBITDA.

So let's talk more about the capital allocation. And let me divide this into 2 parts: operational investments and corporate actions. So if you think of our P&L, at the EBITDA level and adding back all the R&D, then we're talking of about EUR 1.5 billion in profit. How do we intend to use that? So about half of that goes -- this has here -- goes into reinvesting into the business. So these are primarily investments in R&D. And with the use in EBITDac, you will see that fully expensed. This part includes as well robotics and ventures where we take bolder growth initiatives. And then when looking at the left-hand side, and I think 1 important thing to note here compared to other businesses you may compare with is that investments in tangible sort of CapEx in property, plant and equipment is just a small portion of our investment. Majority goes into R&D similar to tech businesses.

Looking at our -- on the left-hand side here, on the pie, about 20% on average, of course, because this might vary by year. goes into bolt-on M&As. And of course, we will handle that in a discipline -- in a disciplined manner in terms of how we're looking at [indiscernible], the M&A framework that Anders lined out. And in addition, we do have substantial firepower. The remaining piece here, and I would say the most important problem here is that -- and this corresponds to 25% to 35% of EPS and that's about 30% of the total pie. The key message here is that we have a number of opportunities at hand, but we will remain very disciplined in terms of how we are thinking about this and just the fact that we do have a strong balance sheet does not mean a relaxed approach.

So let me bring this together. So each business area has a clear specific target. Manufacturing Intelligence, 4% to 6% organic growth with 21% to 24% margin, Geosystems 3 to 5 top line, 25, 27. And then autonomous solutions with 10 to 12 organic growth and stellar EBITDAc in orders of 27% to 30% margin. Each of them have targeted plans leveraging new products, clear R&D bets, entering new segments, optimizing go-to-market and so on. And each of them have as well pricing, cost and cash in control is embedded in the setup of the divisional structure. So this is all operating under strong governance and with a clear performance management framework. So it means also that these targets are not only aspiration but also quite managed in the way that we are operating.

So now taking this to a closing. And we have clear plans to deliver on growth. And I'm very excited to be part of these plans. One, we have a clear plan for how we deliver on growth. Product launches are in market. The operating model and the accountability is live, market tailwinds are structural. Two, the organic growth and cost controls will sustainably expand our margins. The mass is straightforward.

Cash. Cash generation will remain strong. We achieved 109% last year, and we're looking to be at 90% to 100% going forward. And lastly, we are enabling value creation through strong capital allocation, the EUR 5 billion of cumulative cash flow deployed with discipline against a clear framework. So under this leadership, Hexagon is focused, accountable and growing, and we're very confident in terms of where we're headed. Thank you so much. I'll now hand over to you, Tom, to handle the Q&A session.

Great.

I'll just wait for the seating to get put out, and then we'll kick off with the first question. Okay.

Magnus here with Nordea. Just going to the ROCE target of 15%. To what degree does that reflect the historical goodwill you have on the balance sheet? And what rates do you expect to invest inorganically going forward?

So I take it?

I didn't really get the question, so please.

Yes. So essentially, the question is on the goodwill historically yes, sorry, the ROS -- so return on capital employed historically and the goodwill that we have on balance sheet. I would say the 50% that we're expected to say is more of the framework when we're looking at the investments that we're looking ahead of us. we have some work to do around when we are resetting the EBITDAC versus EBIT1 in terms of how we are because we're changing that part of the equation.

I think now we have assurance factor to achieve the targets which we have had basically always, right, we have a ROCE target of 15% also previously, but we were always around [indiscernible] historically. Now we actually have a chance to achieve that and hopefully build on that going forward, I can grow our targets even further beyond 15%. But that's where we start.

Super, thank you very much for presentation. I would like to close out the growth targets, firstly, at 4% to 6% organic in [indiscernible] like if compared or coming from the 2019, 2024 more sort of red where you grow just some. But I guess the [indiscernible] per busy during the circumstances. So if you could elaborate a bit how much to get to the 4% to 6% is a market improving areas from the 2019, 2024 circumstances and then you also [indiscernible]. If you could just discuss.

Yes. So there have been some really good years in that 19 to 25, right? We had the bounce back from COVID, which was everyone grew whatever you did, like -- so supply chain was a problem. But if you look after that bounce back, it's been very fast, is market has been tough, and we have also had problems to get our innovation cycles to converge into new products in the market. which means competition gets close to you, right, if you are the leader. So what we see now is that the market doesn't look very much better. It looks quite stable going forward. or maybe I say no, but at the same level.

Within securities of war, et cetera, and also difficulty within construction, agriculture, it doesn't seem to turn very quickly as examples. However, we see that we have new products coming to market, which I elaborated based on. There will also be new products going forward within this year. We are very disciplined now fully accountable divisions that will invest in initiatives that will create growth and not invest in group initiatives that might yield something later. So much more focused investments and focus from the divisions, much more focused on customer-facing initiatives, meaning go-to-market models, [indiscernible] will talk about that, for example, within Geosystems and how we optimize our SG&A investments to pay off the best in terms of sales also going forward.

So if the market is as it is now, we should generate the 4% to 6% growth. So we are not expecting a big tailwind to achieve.

Great. We'll go to [ Andre ] down, and then we'll do one from online.

I have a question -- a couple of questions on the bubble chart, please. I can't avoid that. There was a couple there on the right-hand side, and I just wondered if any of these things fixed just with the cost program that you're already implementing? And then this was a bigger 1 in Geosystems right into stability actually area. So I wonder if you could comment on how that's been moving over time? Has that been moving to the left or already to the right? And what would that need to do to get itself into a profitability mode.

Yes. So we are not discussing in principle, the name of the bubbles. But we, of course, want them all to move to the right where you are in a growth phase. But what we're doing in different management teams is to put targets and also incentive targets that push us towards fixing the problems you have. So like I said, it's not that if you are in stability, you are not getting a growth target. You are getting a target to do a turnaround or to do a divestment of part of your business, which doesn't work, et cetera. So that's how we drive the progress in those different strategic mandates backed by management incentives so that everyone is incentivized on what we actually want them to do and not some general group incentive. So I think this kind of thing is supporting.

And our ambition is, of course, to drive everything up towards the right-hand side, but we also intend to make acquisitions like with Waygate, where we will get new businesses, which are also across the mandate of stability, profitability growth. And this is actually how we generate value for shareholders point. If we bought everything up in the top right corner, we have nothing to fix. So we need to pay a lot of money, and it would be very difficult to generate a lot of value from that. So we want to buy businesses that are in attractive markets, that we are the right owner for that can generate double-digit earnings on an annual basis going forward.

Great. Okay. We'll take a question from online now. And this might be best directed at our CTO, Burkhard, but I'll leave that to you, Anders. So can we give some examples of proof of why AI is a demand driver for Hexagon?

Yes. I think there are -- there are quite a lot of proof to that. But you're right. So where is Burkhard there. So I need the question to Burkhard, if you will.

Absolutely right. What our customers want from the data that they get of our sensors and workflows and software is to get insights in what they have measured -- whether it's on the construction side, you want to measure the progress, what has been done -- is it according to plan? Or is my elevator shaft largely enough in order to even installed with the elevator or basically, whether it's in the manufacturing intelligence environment is this tornado line on the body in white on the car in specifications.

And in order to have this AI working, which we call special AI up to the specifications. Our customers need reliable and precise data for this and where the -- this is normally where they use our sensor. So more resolution, the more precision and the more accuracy and station fidelity we give into the models, the better will be the results of the AI and the more trustworthy it will be. And therefore, you need high-precision sensors. And that's why we see a boost on this. And in order to fully end-to-end the workflow, we also build AI in our software product that these insights can be autonomously generated.

Great. Any other questions in the room? Yes. that's the one here in the middle.

Johan, SB1. Just a question on robotics. I thought you mentioned that you would consider partnerships going forward with that sort of you're investing now like a VC company and then eventually we will look for a potential buyer of parts of it? Or how should we think about the robotic business right now?

So it's a business which we believe a lot in going forward. We also believe that it will not generate lots of revenues very quickly because it's a long transition, we believe. We have a lot of interested companies and Arnaud is here, he will talk later on this. So maybe that question would be better directed to him. But we are considering different strategic alternatives on how to fund this in the period until it actually is generating more revenues and earnings. And because that could be, let's say, 5 years, 7 years, I don't know. But it's not a 3-year plan until this is a business which is generating a lot of revenues and profits. And this is also why we exclude it from the targets that Enrique was discussing.

And how exactly that we'll see, we will come back to how that setup will be. But clearly, we are looking into potential partnerships to also to accelerate our development within this area because there's lots of investments required to keep the momentum that we currently have. And until we have a solution for that, we will invest Hexagon invest to win. So we will not take down investments in this part and lose what we have basically. That's what I can say today.

Great. I think we've got time for one more question. So just in the middle here.

Simon Granath with ABG. Anders, you had -- you previously amplified that you have been lagging in terms of product launches, but they are now entering the market. But how about prices? Is your assessment that you've also been lagging on prices also given your comments about being a price leader and a follow-up on that, how much should we expect in terms of tailwinds from pricing going forward given your current targets?

I would say, in some areas, we have been a bit slow on pricing when it comes to FX and when it comes to tariffs, I also talked about this with the Q1 report. So we have an effect of FX. I think it was 60 bps and tariffs around the 50 bps. And we haven't been acting quick enough to compensate for that in the beginning of the year. At the end of the quarter, we took the initiatives that we had to take to compensate for that. The full effect of that will not be seen in Q2. It will be seen in Q3 because the implementation is 3 months in some of our businesses before you see the full impact. But we consider ourselves as the price leader, and we will continue to use pricing as a means to both generate reported growth, but also to generate strong gross margins going forward. And that's why we will continue to do our innovation because that solidifies our position as a price leader. So if there's anyone that thinks that we are slowing down investments in R&D and innovation to kind of get a better result short term. That is not a strategy, which we would ever accept in any part of our company, then you need to work somewhere else.

Great. Okay. I think that's what we've got time for now. So if you are going to take a 10-minute break, which will bring you to just after 02:00 and then we'll reconvene for MID systems. And obviously, Enrique and Anders will be back at the end of the day for more questions. Thank you.

Thank you.

[Break]

Okay. Thank you. Welcome back, everyone. My name is Andreas Renulf I will be -- I'm the President of the Manufacturing Intelligence business area, and I will take you through the business area here for another 30 minutes or so. I'm in this position since May 2025. So it's roughly 1 year. even though I've only been here for a year in this role, I've spent my whole career in Industrial Technologies. I'm very much at home with our customers and with the business. I wanted to just give you 2 reflections from when I joined in this role a year ago. And the first one is that we were organized for synergy. We called it 1 MI. And it sort of makes sense, at least in theory, because many of the customers were the same. But if you look at the customer persona, they were actually not the same.

So we had quite limited real synergies in that setup. And what I found that was that we were quite centralized, and we took a lot of decisions quite far away from the customer. And we were not fast enough in that model. So what Anders have explained here with the Hexagon way it fits perfect for this business area. The second one is that I have worked with China for the last 20 years, and I've never seen anything coming close to the level of capability and strength that we have in China for MI.

Fantastic local leadership. They have built up an offering which is good, better and best. So we are competing in the complete pyramid of the market there. We have made some acquisitions in the past. But we have only used the localization to China of the technology for the made in China, and that's been good. But we haven't actually tapped on the possibility to export from China with all the capabilities we have there. So you will see that as one of the growth drivers that we'll be presenting.

Before I get into this, just so that you get a feeling for the level of technical precision we talk about. If you pull out a hair and you look at it like this. It has a width of 75 to 85 micros. If you look at the ultra high accuracy, which is the most accurate machine that we deliver, that 1 has 0.3 microns. So 75 to 85 on the width of hair and 0.3 micro. So that's a level of technical differentiation we talk about here.

I will give you an overview of the business area, then look talk about customers and solutions, so you see where we play and how. I was going to the market drivers, and most importantly, the growth strategy, which are the ones that we control ourselves. We made the acquisition of Waygate Technologies on April 13. So you will see that spread out in this presentation as well. So let's start to look at the business area as an overview. And this is now without the D&E numbers, which was divested in February. We have a serviceable addressable market of EUR 11 billion, and that is now including [indiscernible] Technologies. Revenues of EUR 1.6 billion and an EBITDAC of 22%. And if you look at that EBITDAC of 22%, it's quite significantly higher than what our competitors are having here.

I think we have been optimizing margin at the expense of growth to some extent in the past year. Cash conversion 100% last year, and we are at almost 7,000 employees. By industry, general manufacturing, and that is also what we have in machine shops where we sell the compute of aged manufacturing, the CAM software. Automotive, aerospace, roughly the same and then electronics. And it's a totally global business. We have 42% of the business in APAC and the majority of that is actually in China. We are organized in 3 global businesses, and we did this actually from first of November last year.

The first one is patient metrology, where we have a market-leading position. You see a CMM here. This is actually the Maestro that we released last year. And what we mean with stationary is that the metrology measurement solution is stationary, you bring the part to the measurement solution. We're having coordinate measurement machine. We have visual measurement machines for electronics, metrology software and roughly 1/3 is aftermarket services in this business year. Portable metrology, we're also the market leader. And here, instead the measurement solution is portable.

So we bring the measurement solution to the part, which means we can go in line or near the production line. Laser trackers where we are quite famous hand had later scanners, which is an area which is growing fast. We did an acquisition of a company called SEG in China 3 years ago. And we are selling those all over the world right now. portable arms, metrology software, calibration services for the aftermarket and then more and more of automated inspection solutions.

Production software. Here, we are top free. And this is about generating managed and optimizing the C&C to app. So very specifically for CNC machines. And this is what is called computer-aided manufacturing CAM software. We use this for production machining. We also use this for mold and die design and manufacturing. And this is the division which maybe have gotten the least love in the last couple of years. It's the smallest of the and we have a lot of focus onto this business right now. Very sticky, very profitable and nice business. But some things that we are fixing here on the portfolio side during this year, so we can get into growth mode next year.

I will take you through a couple of industries to show what we do in those industries and the needs they have. So let's start with aerospace. There are 16,000 airplanes on the commercial side in the order backlog end of 2025. It's all about production rates. And Here, you see the fan blades of the jet engine behind those, there are 1,500 plates inside of that jet engine. Each and every 1 of them needs to be expected during production. And we expect with CMM on the outside with Waygate with the CT technology, computer tomography, they actually do the same inspection inside of the base. It's all about increasing the inspection rates and we released the Maestro CMM last year, where we are up to 30% faster in doing this inspection. 95% of the plants in the world are touched by Hexagon technology.

So we are very much entrenched into this market. Automotive, here, the trend and the needs are going towards having more measurement points when they are in this stage. So this is what we call body in white. When you form the body together, it's really, really important to make sure that you have the right quality at that point in time, both for the body itself but also for the process. So here, there are more and more measurements coming close to the line and in line. And there, we are offering standardized and modular Presto solutions, which are these type of automation inspection areas. 95% of course, touched by Hexagon today. So we are basically global on this business as well.

The third area is within the general manufacturing, and this is now specifically machine shops. And I just want to draw your attention to the number here, we are transacting with more than 50,000 machine shops per year. These are typically less than 50 employees working in these machine shops. They are machining very, very critical components, but they can be level Tier 4, Tier 3, Tier 2 in the supply chain. One of the biggest amounts and needs here is to simplify the programming of the CLC machines because there is a skill gap. And it's hard to attract good engineers into this market. So we have launched a solution, which we call Hexagon Proplan AI, which helps the program to optimize the path based on the cat rain.

But you, of course, also need to know exactly how is my CRC machine working. So you need a digital twin of the CNC machine, and that is the data and the knowledge that we sit on. If we look at Combining these market growth drivers on the automotive side, it's a shift to electrical vehicle that brings some new inspection requirements for batteries. There's also much more use of alumina, which is a material which is much less forgiving. Automation, near line and in line, that means that we basically increase the density of the sensors that are required.

On the aerospace side, it's very much the inspection rate to work out of that backlog. But it's also the analysis of airplanes and jet engines that are actually in operation, and that is the remote vision inspection part in Waygate, which is coming into that part. In general industry, the demand for high-precision manufacturing is increasing. And on the electronics side, it's very much about faster new product innovation. So you need faster loops and quality checks during pit introductions.

AI is creating a certain demand for very high precision chips and high-performance chips and they need the level of accuracy that we can offer here. I will conclude on this part of the presentation by giving you an example from BYD. So you probably know BYD, the largest electrical vehicle company in the world. They delivered 4.6 million cars last year, headquartered in Sense in China. We've had a partnership with BYD for more than 15 years in China. And BYD, they are a little bit special. They have verticalized on the electronics side. So we are basically offering them the whole pallet of the products that we have in Hexagon.

They are our largest automotive account globally, which is quite rare for an international company like Hexagon to have the largest customer being in China. And when BYD is now expanding globally, they have put up a big plant in Hungary reasons. They bring that equipment from China with them. And that is one of the inputs that got us to the idea here that we have to leverage our strength in China much, much more. With that, we will switch here and talk a little bit about weight. Waygate Technologies, we had the signing and -- or we announced this on the 13th of April, transaction value of USD 1.45 billion. We expect to close in the end of the year or at 630 million in 2025, 10% EBIT margins, this is a carve-out from a company called Bakers.

And the customer persona are two different types. One is the one which is very similar to what we have in metrology, which is the head of quality ultimately. And the other one is the maintenance, repair and operations departments MRO. And that is for non-distracted technologies that go into the asset integrity when the assets are in use as opposed to the manufacturing part. So why did we buy Wage technologies? The simplest reason is because it became available. This asset has not been available for the last 20 years because GE inspection services brought together 4 different companies.

And it's not often that a market leader in a space which is very attractive from a growth perspective is coming into the market. So it gives us access to the MDP marketplace. It completes the measurement chain where we have been on the surface and wait is on the inside of objects. We did an acquisition already in 2019 of a company called Volume Graphics, and that is the de facto standard for software for CT hardware. So it's basically a perfect fit to complete that now. But it's also diversify and give us a new SAM to work in when it comes to the maintenance, repair and operations market, and that's for asset integrity. And that is a recurring growing market, and it has different characteristics there when it comes to the CapEx cycle compared to the manufacturing side, which we're used to. How do we then create value?

Well, we have a clear path here on the margin expansion, and we are looking to extract value from this acquisition over a long period of time. We have the China manufacturing localization and you will see more about the strength we had in China later on. That will drive some margin expansion on the radiography division. We will be able to cross-sell between metrology and the CP business. And this is something where our competitor size has had this combination in the past, and they have been successful with that. now we have it, and we will be able to put that into work. And we will evaluate strategies to improve the performance of the imaging solution and the ultrasonic testing part.

And when we get to the close, which will be later or end of the year here, we will look at different ways to improve the performance here, which could be to make acquisitions to get to a #1 position in certain areas or look for other ways to improve margin. So this is really not 1 NTT company. These are 4 different portfolios, and that's also how we will bring it into our company. If we start with remote visual inspection. This is here. Waygate is the market leader. They have a very good profit here Revenue was EUR 148 million in 2025. It's the market leader in video borescopes.

And a lot of this market is about testing the integrity of the blade in a jet engine. Here is a very clear mandate to grow. This is an anchor for us for the NDT market for MRO. Then we have the radiography where there's a market position of 1 or 2 in the world. Revenue is EUR 25 million of SEK 183 million. This is where you get into what is called the computed tomography, the CT part. And this is primarily used to remanufacturing, which is where we have the natural and this is a very close adjacency to the metrology business that we have.

This integrates directly with our Hexagon volume graphic software. It's a cross-sell of the CMM part and it's also the use of China for the synergy case. The mandate there is profitability to be to execute on the synergies to get the profit up. Then we have imaging solutions, and this is Industrial x-ray. And a large part of this market is about X-ray film that go out into the asset integrity for MRO departments, checking valves in pipelines and things like this. there is a slow but sure shift from analog film to digital. And at the same time, this is a good business. It's a little bit unusual to Hexagon in the way that it's more of the reselling business from again compared to what we're used to, where we technically differentiate more.

But this is one of the businesses that we will have a look at when we get to the close and see how we can improve the performance. Then we have ultrasonic testing, which is a very, very interesting and important technology and it's one that has a good future in the NDT space. Here, we have revenue of 93 million. It's actually two different businesses. One is for testing machines, which is more of like a system integration business and the other one is for handheld ultrasonic testing machines. Here, the profitability is not at a level where we want it to be. So when we get this into the company, we will look at ways to improve that performance.

If we look at the market overall, we have a TAM, total addressable market of 16 billion, a SAM of EUR 11 million as I said before, by including nondestructive technologies into the SAM, we increased that with SEK 3 billion. If we look at the different divisions, stationary metrology, where we have a market position. One is growing slightly slower than the market, and that is because part of that growth is taken by portable metrology customers want to get closer and closer to the production lines. One other part of that growth is actually being taken by computed tomography.

And that's another reason why we acquired Waygate because -- if you, for instance, are into castings, you want to do one measurement and then you want to measure the surface and the inside at the same time. Portable metrology, 46%. We are #1 there. Production software, 5% to 7%. We're top 3, very nice, sticky business and NBP with Weight gate to and a little bit depending, as you saw before on the modalities, we're top 2. Financial performance. So if we look at the graph on the right-hand side, you will see that we were operating at very high organic growth in '23, and we have been since coded.

In 24, we had a drop. And in '24, we actually were minus 1 -- sorry, 0 and in '25, we were plus 1 only. And that is not how you can run this business we really need to have growth. So we are seeing a trend now that we stabilize ourselves on the organic growth side. We had a good first quarter. But we see a stable trend going forward here. We have been able to defend the EBITDAC margins relatively well given 0 growth and some currency headwinds, especially in 2025. And there is also an element in the OpEx here, which there's a variable component.

So it helps us a little bit in tough times, and you don't get the full leverage in good times. Looking at the recurring revenues, we have gone from 21% to 25% software services, same as 48% and gross margin staying at 58%. Coming over to how we win -- these are more foundational pillars for us. We have some technology. What you see here is a picture of an angular encoder. And this is technology that we share with our sister business areas. -is patented, and we use that a lot, especially on the tracker side, in our case.

We also have a 6 degrees of freedom technology, which is another one that we're using frequently within our different business areas. The entrance leadership market leadership being #1 in metrology, it gives you a possibility to get the customer awareness, the pricing power and also the economies of scale for production. So we have production in the U.S. Europe and in China. And complementary software portfolio, everything we do is a combination of software, hardware and services. But we are actually overrepresented on the software side still today.

So we have some businesses, [indiscernible], for instance, spatial analyzer, where we are selling software, which is agnostic to the hardware. But most of what we do is solutions to be able to make sure that we solve the problem that the customer has in his application. And this is an area which is very, very important for the future. This is where if you look at competition coming from China, they tend to be more skilled on the hardware side than to be able to make the software to fit the application of the customer here. Now we get to the most important part.

So how do we drive growth and performance and which are our growth drivers. So I will go through 4 of them: next-generation innovative products increased customer focus through the decentralized operating model. China has a global growth engine and performance improvements in weak. We start with Maestro, which is the product that you see here is the CMM and it's 20 years since there was a new generation of CMMs coming.

This is a platform, and it takes in the area of 2 to 3 years before we have all the sizes for all the objects to go in because these guys -- these can be huge. You can put the whole truck in one of these -- so it takes some time before we have all the sites on the probes and the feature there. But this is something that gives us a good opportunity to grow the market in the future and take some market share as well. And it's all about the 30% higher throughput, which the customers are looking for. ATS 800. So this is another member of the family of the trackers, and we have it on display today. absolutely amazing.

It stands down to level of microns for 40 meters away. So you can have it here and you can scan over on an airplane body, which is 40 meters away. So it increases the productivity for the customers, and we have very limited competition when we get to this level here. So this is 1 which you will see coming into the numbers much faster. Then the operating model, I touched upon this in the first reflection. And we were organized towards 1 MI with design engineering, production software, stationary and portable metrology together.

And I have a lot of background in a decentralized operating model. And I've seen the water focus can do. The issue is when you have global product lines and you have your primary P&L in different regions. It's very difficult to make sure that you actually develop the things that the customers really need there because your drive is coming from different needs in different regions. So slipping out this EUR 1.6 billion into 3 global divisions that are taking the decisions much, much closer is what we have done. And I think already in Q1, we see some effects of this in the organic growth because there is a completely different focus right now. What we do on a quarterly basis is that in each of these divisions, they check every R&D project to make sure that they are fulfilling the needs of the customer for that project.

And we have already started to make some pruning into the portfolio because that comes very naturally with the division presidents owning their business having the transparency to see where the MMI making money, where can I make more money to also get into a little bit of cleaning up in your portfolio, which is happening right now. And then you get the speed. The third area, which to me is very, very -- it's quite amazing the level of strength and capability that we have in China. And -- for us, this is a unique differentiator because our competitors cannot do this. We have a position in China where we believe we have 50% market share.

And as I said before, this has been built up by a fantastic management over the last 20 years plus. And it's always under good, better and best through product portfolio, making sure you cover the whole pyramid there. Many international companies end up only playing in the best category in the market. And that is difficult because that is easy that you get disrupted from the bottom. So they have done this really, really well. We have been successful in the technology localization to China, but we have stopped there. But in the meantime, we have built up the right cost level, the right infrastructure to manufacture and also the right technical skills. Now we plan to address new market segments in what we call the global South, and we start with Southeast Asia. So that's a given.

From there, we go into Europe and North America, and we do that with a good and the better products, not the best products, those who already have local production in those regions. And with this, we will also be able to optimize the manufacturing cost by sourcing more from China, both in components and in products. I know that some of you have been in Qingdao in China and see in our facility there. But for those who have not, I just wanted to take you through a quick fly through. This is from the demo area, which is huge that everything you see here is presented in how our solutions are helping the customer with his or her application.

Here, for instance, you see aerospace with the trackers, but it's all put into the application context of the customer. Here, we are into the manufacturing space, and you see that it's large -- it has a lot of capacity. It's very modern. We have AGVs moving around the CMMs and so on. And it can take a lot more capacity in here without any additional investments. So this is really exciting from my perspective. Another exciting one is are the performance drivers from Waygate. So this is the fourth growth driver for us. It completes the measurement chain, which we discussed we mentioned on the outside, weighted measures on the inside or inspect on the inside customers in aerospace, automotive, battery.

They would prefer to get these measurements from one player, and now we have that solution. From a software integration perspective, we already have volume graphics. It's a very natural connection to combine these two, and there is a good cross-sell opportunity with the metrology business that we're in today. But I think in all honestly, we are the market leaders in the markets we have been now for many years. And we need areas to work in, where we can do more add-on acquisitions as well.

And this is a perfect opportunity for us to enter into the asset integrity to the maintenance, repair and operations market, which is growing in a very, very attractive marketplace. This is driven by utilization, decoupled from the CapEx cycles that you have in manufacturing, and we believe that we will be able to grow in these markets going forward. The value creation opportunities, we have very clear opportunities to improve Waygate performance significantly and primarily on the synergy side within the CT business on the radiography, especially with China as well. That takes us to the targets.

And let's start on the right-hand side, you see the number, 22%, that's the EBITA, excluding D&E for 2025. What we do is that we adjust for the Wave acquisition pro forma. So 2025, including Waygate, would have looked at -- would have been at 19% EBITDA. From there, we have a number of growth initiatives that will take us up to 21% to 24% and be in that area. We plan to grow in line with the market. 4% to 6%. And in some areas, as soon stationary, that means we will actually try to grow that a little bit faster than what the market is doing with some synergies and new products and so on. But we have the volume pricing inflation here. the next-generation offerings, Maestro APL 800.

We have the operating model we have China as a global growth, and we had the performance improvements from Waygate as the last bucket here. So these are our growth drivers and focus for the next couple of years. To summarize, we are pretty confident with the business strength. We're having a great position in the market. It's innovative new products coming to market. We have a good mix of software and hardware, which is really important to make sure we keep that edge on the software side. We have a new operating model, which will drive accountability and speed.

China as this global growth engine where we are quite unique compared to our competitors that do not have such a position there, and we will really try to leverage as much as we can on that. And returning to growth we see that we are on stable grounds right now, and this business, it should naturally grow. That will lead to the margin conversion and cash flow generation; and finally, we at value creation. So the performance improvement opportunities across the Waygate portfolio, that is something that we are pretty clear on how we will execute on that. So -- that's what I wanted to share with you. I thank you very much for your attention, and I will hand over to Kenny, who will take you through business area Geosystems.

So welcome to Geosystems. Every infrastructure decision, whether you lay train tracks or your renovated building or you build a tunnel starts with one thing, which is knowing exactly where you are, knowing context. And we are in the business of bringing certainty, certainty with geospatial intelligence as a foundational layer to all infrastructure work. From young age, I've personally been very fascinated by how the world runs.

And today, I bring 25 years of experience in the industrial technology business within over 10 years in pane. Siemens portfolio management and factory automation. And then since 2018, Brand as a Global CEO of the product business and Building Technologies and leading a quite significant technological and organization transformation. My name is an [ Kenny Santos ] and since early last year, I'm President of the Geosystems business area.

So you might ask now why joining Hexagon Well, because the stronger belief in the opportunity of that business, a business which is highly relevant and one which is architecture fit growth in the years to come. And today, this is what I will elaborate on. Walking you through our business, the value we provide to customers, taking stock of our performance to date and even more importantly, why I'm confident on future value creation and what we'll do to change that. So let's dive into the business of Geosystems.

This business was built by pioneering meters. People who more than 100 years ago, they're not only started company, but they inspired whole industry. And ever since we have built and expanded leading positions when it comes, for instance, to precision serving and reality capture. Leading positions that also build on the core capabilities that we share across Hexagon. So I'll start with a short overview of who we are and what we do. And from there, because we heard that sometimes complicated to understand what is it really that we do in GEO.

I'll walk you through some of our customer examples, where we play, what we solve and why it all matters. And then I'll walk you through our financial performance to date, our midterm targets that we're committing to as part of the group's updated ambition. And I close to the growth strategy, the specific levers we will pull to deliver on those targets. So coming back to why I was excited to join Hexagon. Let's start here with who we are in GEO. As a $14 billion business, we are a large business, market leader in key segments what we say, which is a $10 billion submissible market of technologies that are used to capture, measure, visualize and analyze the physical world.

We're very profitable and maintained a 23% EBITDA despite the headwinds that we experienced in the last 3 years. And we are very well diversified across industries and geographies with focus on surveying buildings and infrastructure as well as a strong footprint in EMEA and the Americas. This is truly a fantastic business. But let me be transparent. I'm clearly not satisfied with the negative organic growth that we experienced recently, which we will change. And I will share in this presentation how my team and I are currently acting on that. As of January this year, we reorganized into 6 vertically integrated divisions, each with full P&L.

And this replaced a metric structure that has become significantly too complex and what's getting in the way of speed, customer focus and effective capital allocation. When I joined last year that need was immediately apparent. And given the breadth of portfolio, I wanted to sharpen our ability to innovate and sell end-to-end along our product lines. This approach is now embedded in how we operate as the Hexagon way. So we ask us questions like, where is demand distinct? Where is ownership blurs today? And those answers shape 6 divisions that own their results, the strategy, portfolio and route to market. The structure is simple and the accountability is real, as you heard also from iconic. And these are our 6 divisions.

Genetics, construction trade solutions, machine control, greater monitoring, scanning and mapping and construction software and services. Before I dive deeper into those, let us first look at the reality of our customers. And our customer base is quite broad. We are serving professionals, construction and engineering companies infrastructure owned as an operator as mining companies and much more. And they experienced many shared challenges, shortage of skilled labor, both in construction craft and Austin technology. We work and productivity loss, still a very high level of stable accidents.

And [indiscernible] things as simple as sharing data on the same project. and all struggle to integrate all the digital tools due to the industry's strong fragmentation. And our technologies are and will become even more relevant to address these challenges. So we deliver highest precision reliably and efficiently to significantly reduce waste and rework. We build advanced features, but still easy to use and easy to deploy. We build our solutions such that data can be connected and then also shared.

And with our broad and world-class service network, we help our customers to take best use of our portfolio throughout the whole life cycle. And most importantly, we help our customers to gain an edge to be more innovative and more productive. Now let me bring this to life with a real example. A rail project but one that basically represents any transact. So saying you want to build a new rail, what do you do? Well, first, it's essential to understand the exact topography of the [indiscernible] corridor.

So our customers can take our highest precision sensors to create an accurate model by measuring it from the air, from the ground and even detect what is underground. And this is then the basis for everything that will follow being designed, planned and built. Second, we can accurately estimate how much dirt to move, how and where in the most cost-efficient way. And then we use our robotic [indiscernible], one that's back in our demo area to accurately install all relevant components from foundations to bridges to tracks. And then we move from plan to action, excavation plans, feed into our machine control systems. And based on that data, automation can then deliver productivity in the field.

Fifth, we have solutions that can then help progress and assess the quality of work in the field. So it's moved structures built and was installed. And then to conclude the construction taste as the operation relies on an accurate aspire documentation. We have those capabilities, including 360 photos and per 3D models which serves them as a definite visual record for any rail operator. And then during operations, our systems are used to monitor the health of rate structures.

Robotic [indiscernible] and radar systems measure live, the movement of structures, reducing the risk of failure and ultimately potential loss of life. [indiscernible] regularly scan the corridor like tunnels, [indiscernible] of tracks and others to as in maintenance work. And we don't do that alone. We work with technology partners globally to complement our solutions. The benefits our customers get from using our solutions are very significant. You see here a number of examples.

Let me highlight two application examples for our total stations. First, reducing the risk of rework. Sensor sales of kilometers of high-speed rail in China have been built using our half second accuracy total stations. And do you know what half second accuracy precision is Basically, it means you can measure the thickness of a coin in 1 kilometer distance. So basically putting it down at our bridge. And that's the device that you see in the bank. Second, extending the lifetime of assets, fundamentally improving return on invest.

Our robotic total stations can affect critical structural movements that need repair and therefore reducing the risk of failure by 40% to 50%. Now with all of this in mind, let me share some more insights into our 6 divisions. Genetics focuses on accurate measurement across a wide range of businesses, complemented by a strong position portfolio, addressing surveying, construction, monitoring and basically across all major industries. Construction trade solutions focused on measuring accurate points at shorter distance and therefore, more prone to interior finishing and layout in the building vertical, supported by a distinctive portfolio of laser distance and leveling solutions. Machine control is focused on earth moving, paving and drilling applications, but features that drastically also improve safety, both for humans as well as other equipment.

Greater monitoring, focused on measuring and monitoring changes in large services at long and short distances, serving 90% of the world's largest open pit mine operators as well as ground-penetrating radars to detect utility infrastructure and pipes. And scanning and lapping canny Mapping is focused on reality capture, terrestrial, handheld and airborne as well as software and mapping and processing services for customers in building infrastructure, serving and also public markets. And then last but not least, construction software and services focused on 3 main areas: estimating construction insights and virtual design services with a strong focus on the North American market. And similarly to MI, it's a hardware software services mix.

These solutions all come with their distinct software layer for data pool, processing and upload as well as rise workflows for productivity in the field. Thus, we offer hardware agnostic solutions and services, which support with data integration, visualization and analytics. Markets like infrastructure are addressed by every division and some of what these things like mining, for instance, in radar monitoring or public customers in [indiscernible] and scanning and mapping. Yes. But don't just take our word for it.

Let's look at three projects that bring on of this to life. And they start with ANC FCC in Morocco. For many applications, standard satellite positioning is simply not accurate enough. You would be asked by meters. And that doesn't work when you want to define property boundaries or plan infrastructure. And this is where reference networks come in, that's continuously correct, satellite signals, enabling centimeter level accuracy in real time.

In Morocco, our technology was used to build Africa's largest single country GNSS reference network, delivering that level of positioning across the entire country. And that this rely land records and consistent planning and such a trusted reference networks becomes a critical infrastructure, a foundational layer of how you measure and manage a country over the long term. Second example, [indiscernible] design is an Italian artisanal metacarbonty business producing very unique designs for complex locations. And as you can imagine, to fulfill these high demands for their clients, they need precise measurement to tailor to this job.

And with our LICA I can trade solution, which is the first to market, also based on technology from our MI sense. They gain more than 80% of efficiency by speeding up average type of the job. And this solution dramatically reduces losses generated by the stakes, which can be detrimental for trade contractors working with very costly materials. So precision is truly not a nice to have. It is our customer. And then BNP in the U.S. How do you know that you build what you planned? Tracking progress and quality on a project with multiple contractors using different tools and data is quite difficult.

And BNP uses our software and services as well as our reality capture tenders on one of the largest U.S. pharma projects. They track progress and check against the design model. Issues are flagged live, not weeks down the line when they cause extra work, extra costs and serious delays. That means better alignment across teams and stronger control of scandal, quality and ultimately project execution.

Now, all our divisions continue to push the boundaries of what's possible with innovation. And if we reflect on our past many of the segments we're leaders in today where the new segments that we traded are scaled. And today, I want to share 3 examples with you of how we maintain market leadership and want to grow market share. First, [indiscernible]. This is our absolute stronghold and will remain so in the years to come.

Last year's launch of the LICA TS 20 was yet another very important milestone for us, but also for the industry. The GS20 is not just an update. It marks a step change built on a completely new technology platform. It delivers significant double-digit productivity in the field. And it brings II into the field that supports operators in the moment where speed and special reliability matters most. Second, structural health monitoring. A recent study by McKinsey highlighted that 43% of votes are in poor condition. And even more concerning bridges are structurally deficient.

Our customers need solutions to safely monitor, maintain and operate these assets. And to open up this market for us, we launched MIMO. The world's first possible noncontact structural health monitoring solution. It can be deployed anywhere by just one operator for life monitoring, of bridges, stamps or other civil infrastructure. And third, with Axiata Vista, we bring AI-driven deviation analysis into construction workflows. We automatically compare millimeter accurate scans to 2D and 3D models.

This allows for fully automated verification instead of manual spot checks. And deviations are identified early because before they turn into expensive rework delays and costs. And especially on large projects, you can imagine that this impact is quite material. Now let's zoom out. So let me share with you some key market trends that will sustain and drive our growth. The industries and customers we serve will continue to grow due to some of these imversible macro trends, ongoing urbanization, digitalization of cities.

Strained and aging infrastructure needs to be maintained and onto it. Shortages of skilled labor required productivity improvement that we can only deliver with technology. And AI has started to reshape our fears. The examples I showed are just the beginning of truly purposeful use and growing energy and critical mineral needs drive construction and mining. But within those macro trends, there are structural growth drivers for the next 3 to 5 years. First, the build world will continue to expand. Growth in infrastructure, energy organization is real and will provide the basic layer of growth. And digitalization construction gains traction and will never get back.

So digitalized assets can drive 20% to 30% and less cost over its life cycle. Second, we see an acceleration in automation to improve productivity, safety and quality. This elevates growth beyond the construction GDP -- and our technology is a critical enabler in that field, so reality capture solutions, for instance, can reduce rework by 5% to 25%. The third day of growth is data-driven outcomes fueled by digitalization and AI. It's not only about creating more trusted data. It is about increasing flow and use of that data. So use case slide automate the progress tracking and structural health monitoring deliver real commercial value.

And this is how our customers today differentiate and compete. After a thorough review of our business, it became clear that there's a lot of opportunity for us to grow by staying focused and actually good with accidents in our core adjacent solutions, such as pad and project management software and now spinning off with [indiscernible]. Therefore, our total addressable market is around EUR 14 billion and the serviceable market is 2/3 to roughly EUR 10 billion. And here is where we have strong leadership positions but also plenty of opportunities to grow.

We believe our core markets will grow ranging from about 4% to 5% in the course of an up to 10% in segments and Construction, Software and Services. In the last 3 years since the last Capital Markets Day, we made meaningful progress. So we increased recurring revenues to 33% and the share of software and services to 41. And we kept our strong gross margin performance at 64%, only negatively impacted by FX headwinds.

But as I said in the beginning, I'm not satisfied with our organic growth. As you can see on the graph, we experienced a decline in growth from '23 through '24. And now in '25, we took a few pretty steps. We cut OpEx and head count to reflect the lower top line and also FX pressures. As you're aware, we took the practice decision to also destock our dealer channels by around EUR 30 million. We reviewed our product portfolio and impaired part of our capitalized R&D as was presented earlier, and we optimized our innovation best focusing on high success initiatives.

Our actions resulted in stopping the negative momentum in stabilizing revenue, returning to growth in quarter 3 for the first time in almost 2 years. And growth continued in quarter 4, if you take out the impact of destocking. And with our new operating model and renewed focus, I'm very confident that will now be the year where the momentum is changing to consistent positive organic growth. In quarter 1, we achieved 2% organic growth, the highest since 10 quarters and still impacted by destocking, which is now concluded.

And this is why we will take it from here. We target an organic growth of 3% to 5% and an increase of EBITDA margins in the range of '25 to '27. And we will deliver on that ambition through market-leading, next-generation products, a deeper share in our core and this is an expansion into some high potential new segments. Our divisions own their targets with clear accountabilities and a direct line between customer insight product development and also capital allocation.

We have clear levers structural productivity gains and pricing discipline to fully offset inflation headwinds. So what makes us confident that we can deliver, especially on sustainably recognizing growth. It's a set of competitive advantages and concrete growth levers that I want to guide you through now. So I personally have spent the last year not only refining how we operate and where we headed. But I had this opportunity to talk to a lot of our global customers, partners and as team members, understanding the market as well as the fabric of Geosystems. First, this organization clearly lives and breathes with a world-class mix passionate experts across all functions.

Our products are the most robust and deliver highest position from the desert to the Arctic. This is not only on our innovation strength, but equally in our superior process engineering, our in-house assembly and testing facilities consistent across our factory network. This asset know-how. It is hard to transfer or replicate. And then during the equipment life cycle, customers can rely on experts in more than 250 service locations worldwide. All trains in our LICA competence center in Switzerland, being an internal staff or from our partners.

Second, we own and advance the foundational technologies and our products, such as high-volume core components like angle encoders or electronic distance measurement ships for multimillion product cost savings or proprietary algorithm libraries for superior image processing, slam or sensor fusion. Thus, we have a strong network of equally innovative partners who support us, which makes it even harder to replicate. And our teams know how to innovate. We created a lot of the words first, especially at the intersection between surveying and reality capture and advanced radar technology or combining imaging and lighter in an airborne sensor.

And third, we are trusted we're trusted for high stakes tests. When it has to be right for us is more than just the marketing tagline. It's who we are and what we do when safety, productivity and economic values are at stake. It's our commitment that creates repeat business and high customer retention.

And now these are the main levers why I'm very confident we will return to growth. In dark blue are the divisions where the lever is most impactful. First and foremost, we're renewing all core portfolios with next-gen products as part of our regular innovation cycles. Example -- examples here include our new TS20, our new radar system, AXA NEO, new airborne sensors such as City Maestro and a lot more to come in the next quarters this year. These releases create growth cycles and drive market share growth. Our radar innovations are ahead of their business plan. And since the release of TS20, which was only a few months ago, our overall sales of high-end robotic total stations grew by more than 20% year-on-year, and it added 10% new customers, which is a strong early indicator for market share growth.

Second, we are strengthening our offering in mid-range segments, enlarging our reach in those segments that typically grow faster than the high end. Our brand promises when it has to be right, but right can mean a lot of different things across customer needs and applications. So what we will do is we will combine off-the-shelf components with differentiating capabilities of Leica technology and service. So for example, we will expand our GNSS portfolio with cost-competitive sensors, intuitive service offer and then midrange robotic total stationing, shifting the battle from just features to productivity and all built on our latest technology platform. Similarly, we'll expand our slope monitoring offering to address more cost-sensitive applications.

Third, we're expanding in construction, which we expect to grow significantly above our business average starting '27. Our priorities are to continue to adapt and strengthen portfolio for those users in construction, for instance, with our ION GNSS and robotic toll stations, integrate workflows relevant for those construction personas, which are different from the core surveying. And we will invest more in the dedicated sales channels aimed at those construction contractors.

Our fourth growth engine is digital offering and services. We believe in the power of connected data between the field and the office and between different office solutions and the cloud. As an example, coming again back to our new TS20 platform, we released an optional feature that allows customers to connect the center to the cloud for data sharing, firmware updates or also some future AI upgrades. And although it's optional, more than 80% of our customers bought it. And this is not only great news commercially, but it's also an early customer validation of our digital services approach.

Last year, I also had the opportunity to visit one of the largest European infrastructure projects. And our customer was struggling to connect the more than 100 digital solutions on this project. To address -- this is just one example of how painful data integration is in our industry. And to address those customer pain points, we continue to connect critical field data as one sort of truth and share consistently between users. As an example, last week, we announced the integration of our 2 major cloud platforms for surveying and for scan data into one platform, which is Hexagon Geo Cloud. In parallel, we also continue to connect to third-party software such as design authoring tools or construction management.

And fifth, and this applies to all divisions, each division has now dedicated sales teams with a clear and aligned focus, delivering market feedback directly back to product management. And in parallel, we streamline our go-to-market processes, elevate how we work with partners and apply best practices much more swiftly across divisions. And this will improve speed and cost productivity in our sales and service.

And finally, inorganic growth. Here, we focus especially on radar monitoring, scanning mapping and construction software and services. We have our eyes on a number of targets, some of which we already have worked with in the past.

And then broadly, there are several themes that will accelerate our growth, to name a few, Geospatial AI as a basis for more data outcomes, autonomous field data capture technologies and more and more digital services. And in parallel, we expect further traction in the infrastructure, health, energy and data center segments.

Now let me close with something that reflects everything that we talked about. Infrastructure is one of the defining themes of our era, USD 106 trillion required globally through 2040. But the nature of infrastructure is changing. It's not longer just steel and concrete, it's data, software and intelligence layered across the entire life cycle of assets. Labor shortages, aging infrastructure and the accelerated digitalization, these forces are shifting value towards more integrated life cycle solutions, services and software. And geospatial intelligence is the connective tissue running through all of that. And we always have been that layer. For over 100 years, we have built technologies that measure, capture and interpret the build world from serving land before the first foundation is laid to monitoring assets in operation.

And today, we're giving that ambition a name that matches that scale. Our business will be known as Hexagon Infrastructure and Geospatial, a name that honors where we come from and defines where we're going.

What we do matters. We help measure, build and maintain the infrastructure that the world depends on. And we are the company that people turn to when stakes are high and when it has to be right. We are expanding on a very profitable core in a large and growing market with structural demand for precision, automation and digitalization of the physical world. And we have a clear path forward with our new operating model to deliver with discipline on a return to consistent growth, continued high margins and strong cash generation. With that, back to you.

Thank you very much. Great. Thank you very much. Do we have any questions in the room for either Henning or Andreas? Yes. Hemal just at the front here. Sorry.

Just a thought on China, which in MI is such an important driver, both for the cross-selling opportunity and all of that. Just how dependent are you on personnel versus how much is in the actual platform, so to say. Just thought you obviously had a very impressive management, but just to understand the dependence on.

Absolutely. I think we've had a great management for 25 years. And what that does is that it basically gives you a fantastic culture in the whole organization. So we have more than 2,000 people in MI China today. It's a fantastic organization that collaborates very well globally as well. So I would say that we are not at all dependent from that perspective on the people. We even do it like this in China that we try to take people straight out of university and reform them. So many of the people that we have, have never worked in another company. So that's one of the recipes why we are so strong compared to competition.

Great. Any other questions in the room? Yes. Simon.

I have a question on Waygate with respect to the margin upside you expect in that business for the next couple of years. Is that margin improvement contingent on all businesses performing better operationally? Or is there any -- if some of them won't perform to align with your expectation, would you consider divesting them?

Yes. So if we split them up into the remote visual inspection to start with, that one is performing at good profit levels. It's growing well. It has the right tailwinds from a market perspective. So that one will create value by just continuing. If you look on the radiography side and the CT side, there we have a lot of different synergies, which I went through before. So there, we see good growth both organically, but also especially on the profit side. When we talk about the other 2 businesses, they are operating at levels today where we see that we should be able to improve that. But I have to say that we have taken mainly into account the profitable growth journey on the first 2 when we have made those assessments.

[indiscernible]

We can hear you, but...

Both of you have made progress when it comes to recurring revenue in recent years, but I don't hear you emphasizing that too much today, perhaps I'm mistaking. But how should we think about the trajectory in terms of recurring revenue going forward? Or do you feel like this is a sufficient level?

Yes, it's a good question. I mean, first of all, for us, our intent is not only to sell a one-off sensor, but to accompany our customers throughout the life cycle with software, with services. And in many ways, you deliver that value with the recurring business. But looking at all the product launches that we have on the sensor side, we don't optimize singularly on just that KPI of recurring revenue. It will be inherent, but looking at the innovation cycles, I would not expect the trajectory to grow as it did in the recent years, but it will continue to be a very instrumental part of how we also differentiate in the marketplace.

Yes. I can just add to that, that I think recurring revenue, I think there was a time in the past when we maybe paid a little bit too much attention to that because I think it's a good KPI to keep track on. But in the type of business where we are, where we offer complete solutions to solve the application issues of the customer, you have to look at the totality. And we are not intending to go down in recurring revenue, but it's maybe not the most important KPI for...

It's Andre from UBS again. I've got the same question for both of you. You both businesses are launching a lot of new products that offer more functionality, customer productivity improvement. How do you monetize that? Is that through a higher ASP of those products? Do you intend to gain share with them? And also, I guess, do they come with higher gross margin than what you report for your individual divisions, thinking about TS20 and Maestro, things like this?

Yes, it's actually both. On the one hand side, we position these products with higher value than predecessor as you can also experience in the demo. So that allows us to also reach a different price point in the market and also at stronger gross profit. On the other hand side, similar to the question that we just answered, there's also opportunities to add digital services throughout the life cycle. For instance, with the cloud connectivity that we provide, which adds revenue streams on top of the pure sensor sale. So yes, it does, and this is also what I have shared in terms of margin progression, the next-generation offerings will drive also margin progression.

Yes. I think you can look at it in a way that when you are the market leader, you have to continue to innovate to stay the market leader. And part of what we are doing in terms of new platform comes to market is that. Of course, when we do that, we should always make sure that we get a lower cost. And the price, to me, it's basically a reflection of the value that this gives to the customer. So clearly, when we are innovating, we are offering a higher value to the customer so the price tag should be higher. Have we always been great at especially keeping the cost at the right level when you can innovate all these new things? Maybe not always. But that is one of the things that we put a little bit more discipline in now to make sure that we get to the right cost improvement, and we make sure that we have the value, which should be seen in pricing.

And maybe to add to that, for Geosystems is also decided that we look more, as I shared into midrange markets, which is not about taking the same product and just price it lower to fight, but it's about addressing a different demand in the market with a different product concept that, again, is competitive in that specific segment because we cannot just elevate the value curve upwards, we also need to acknowledge that there's different dynamics in the market, different sources of growth, which we need to tap into more.

And if I may, just one more on Geosystems specifically. You mentioned acquisitions. How is the pipeline? Are you ready to make deals already this year?

Short answer would be yes, the pipeline is good. We look into targets as we speak. And it follows basically the financial guardrails of what the group has shared earlier. So mostly, it will be bolt-on acquisitions in our core segments with the focus that I also shared.

So we've got time for one more, just at the front from Mikael.

Mikael Laséen for DNB Carnegie. I have a question for MI. And I was curious about the services part of the business. If you can talk a bit more about that, how you operate, how that part is growing and revenue model, the attach rate and so on. So I mean, the visibility you have in that part of the business.

Yes. So if we take it division by division, this could take an hour, but we'll do it in 30 seconds. If you take stationary metrology, that's what we have, roughly 1/3 being on the aftermarket. It's, of course, extremely important that this is used for production and for checking the measurements while you're producing. So this is quite critical for many of our customers. And as the name says, stationary means you cannot actually send it in. So we have to get out there. So we are selling different types of maintenance agreements with different levels. And I would say that the attach rate is very, very high on that. We are getting that up also in Southeast Asia and China now. That has been a little bit of an issue in the past, but we are getting that up now. This is an area where we are growing nicely, especially in the U.S., and we are starting to see a little bit more of growth also in Europe.

If we talk about the portable side, it is portable. So that means you can actually send it into us. So there, we have calibration centers that calibrate the equipment for the customer. So there is much less of us being out at the customer side. And of course, with that, we can optimize that pretty well. And then you have the computer-aided manufacturing, which is more of a software model there. So very quickly, that's -- but it's a quite high attach rate, and it's one of those KPIs we really pay attention to them.

Okay. Fantastic. Now we're going to hand over to Gordon, who's going to talk you through the Autonomous Solutions business area.

Hello. My name is Gordon Dale, and I'm the President of Autonomous Solutions business area. So Autonomous Solutions is the global leader in precise positioning, operational intelligence and autonomy solutions. I'd like to start my presentation with a short reflection on why autonomy is so important to me.

I joined Hexagon in 2008 through the NovAtel division after beginning my career in telecommunications. But my personal autonomy journey started a few years earlier. When I was living in Europe in 2004, my wife and I fell in love with GPS technology. The shift from paper maps to reliable satellite-based navigation was truly astonishing. No longer did one of us have to drive through the new streets of Paris looking for street signs and the other one's in the passenger side with a map on their lap trying to help navigate usually long after we missed our turn. My wife and I joked that, that first GPS system probably saved our marriage.

So why do I work at Hexagon? Autonomous technologies such as GPS positioning are truly making the world a safer place, while improving productivity in vital industries, addressing critical labor shortages while solving the sustainability challenges of our planet. And I find this work incredibly meaningful, and I'm really excited to share with you today the autonomy journey that we are on.

Here's the outline of what I will cover today. First, I'll provide you with an overview of the Autonomous Solutions business area so that you can understand our scope and what mission-critical customer problems we're solving. Next, I'll walk you through our value propositions, what truly differentiates us from the competition, why our technology, our team and our financial model create durable advantages. Then I'll explain our growth strategies and how we will continue our success in each of our divisions. And then I will review our targets.

As you can see on the summary chart, Autonomous Solutions is a high-growth, high-margin business, providing mission-critical autonomy platforms and components across a wide variety of industries. Our addressable markets are significant in size with attractive growth rates. In 2025, we delivered almost EUR 700 million of revenue at 26% EBITAC. Coupled with a 5-year CAGR of more than 26%, we clearly demonstrate the capital-efficient growth profile expected from top-tier technology businesses. Mining, aerospace and defense and agriculture are our largest verticals, and the Americas is our largest region, followed by APAC and then EMEA.

As you can see, we are structured into 6 divisions with clear accountability. We had already organized ourselves this way, so the transition to the Hexagon way was pretty straightforward for my business area. So looking at mining provides OEM-agnostic solutions across workflows of the entire mining value stream. Septentrio provides the industry's best GNSS standard positioning products. NovAtel provides customized positioning for specific customer problems. Agriculture provides centimeter-level positioning of the highest quality and reliability tailored for agricultural applications. Aerospace and defense provides assured, resilient positioning in very difficult environments. And core autonomy is focused on large, transformative autonomous haulage applications.

Now let's look at our historical financial performance. We provide significant value to our customers, and that's why we have progressed significantly since the last Capital Markets Day, delivering double-digit revenue growth while maintaining stable margins. As you can see, the organic growth was exceptionally high in the 2023 time line with 22%. This was driven by large defense program sales as well as strong mining and agriculture sales. All cylinders are firing that year. Organic growth in 2024 declined as it was impacted by the overall ag global recession plus some really tough comparables for mining and defense. 2025 saw strong growth in defense and good performance from mining, giving us a 14% overall organic revenue growth for the year. Recurring revenue and gross margins remained stable over this time period.

As you can see in this diagram, our business is anchored in 3 pillars: positioning and perception; operational intelligence; and vehicle autonomy. Together, they form a resilient, synergistic portfolio that addresses some of the most challenging operational needs in the world. I'm going to use these 3 pillars as guideposts as we go through the presentation. One of the most important parts of my role is engaging directly with customers to understand the real-world problems that they're facing and where our technology provides irreplaceable value.

For example, in mining, our customer, Ma'aden has emphasized the critical need to protect employees working in high-risk environments. Their commitment to fully deploying our safety systems reflects both the severity of the challenges they face plus the trust they place in our technology.

And when I met with a major mining customer in Western Australia, I saw firsthand the operational challenges they face in the Pilbara. Getting truck drivers to these remote locations is extremely difficult, and the average age of a haul truck operator in Australia is approaching 60.

Our Ukrainian customers deploying our precision positioning products describe an incredibly challenging environment, characterized by interference and jamming. In these conditions, resilience isn't a feature, it's a lifeline.

This diagram shows a simplified model for any autonomous system and the key customer problems that we solve. It also provides you with a high-level understanding of the components, products and solutions we provide to solve our customers' toughest challenges.

Positioning is a foundation of all autonomous systems. Positioning answers the customer's question, where am I? And in complex difficult environments, that's not always an easy question to answer. And after you know where you are, you must understand what's around you. That is called perception or spatial intelligence. The vehicle autonomy section has 3 components. Autonomy software is the brain that tells the machine where to go. And since there's no human, the machine control component physically drive the vehicle. Safety is a foundational element of autonomy. Some studies have suggested that an autonomous vehicle needs to be 10x safer than a manually driven vehicle for society to accept it. These 3 elements address the customer problem. How do I operate autonomously and safely. And finally, autonomous systems operate with multiple machines, and there needs to be site orchestration, fleet management systems that optimize the overall operation of the customer's application.

This is an example of operational intelligence. I'm going to step through now how our solutions deliver each element, starting with the core foundation of positioning.

As you might know, much of what we do is GNSS-based positioning. But note that the terms GNSS and GPS are often used interchangeably. But GPS refers to the U.S.-based constellation, whereas GNSS refers to using all 4 global constellations plus various regional systems.

Let me quickly explain at a high level how this works. The satellites orbit above us at 20,000 kilometers going 14,000 kilometers an hour. If you can receive information from 4 satellites, you can calculate where you are anywhere on the planet. And many companies can do basic GNSS positioning now when the conditions are easy and you'll need a few meters of accuracy, but our customers need greater accuracy and face much more challenging conditions. As these GNSS radio signals travel from space to earth, they can be distorted by the ionosphere. Think Northern Lights or solar flares or Aurora Borealis.

To provide centimeter-level positioning, we use a global network of reference stations to provide subscription-based correction services to mitigate these distortions. It's similar to the example that Henning gave on Morocco. It's the same principle there that we're using.

Our technology can also protect against intentional and unintentional jamming. The satellites broadcast these signals with the power of only a light bulb. So you can as you imagine, when they complete their 20,000-kilometer journey, it's pretty faint. So they can easily be impacted by radio interference, and that's also called jamming.

And let's look at the next chart why anti-jamming is such a competitive advantage for us. Hopefully, some of you saw this video at the display at the back of the room. But let's imagine there was a 1-kilowatt jammer like the one shown on the picture on the left that somebody had located at the tower of London. If it was turned on, it would block the operation of all GPS systems operating within a 300-kilometer radius. No navigation, no positioning, no timing possible in that region. If you are using our competitors' products, the GPS-denied region shrinks down to 2,000 meters, which is still much of London. But if you use our anti-jamming technologies, that GPS-denied region shrinks down to an amazingly small region, just the tower of London grounds themselves, 100-meter radius.

I'd like to explain our next positioning-related competitive advantage, sensor fusion. GNSS provides absolute positioning, exactly where you are on the planet. But everyone has experienced if you're in a difficult environment like a city downtown, you can easily get false readings or even no readings at all as the signals are blocked by the buildings. Inertial navigation systems are an alternate positioning technology that provides relative positioning based on accelerometers and gyroscopes. INS systems unfortunately drift over time. So the position accuracy degrades and solutions diverge from the true path.

Combining these 2 technologies is called sensor fusion. You still get the absolute positioning of GPS, but when you have bad GNSS coverage, the INS solution bridges the gap, providing continuous operation. The underlying technology of integrating different positioning sensors into one overall solution is actually very sophisticated, and that's one of our major competitive advantages.

The spectrum of positioning challenges is illustrated on this diagram and provides a clear view of where real value and real differentiation are created. Starting on the left, environment 1 is OpenSky, where GEOSAT's performance is consistent and predictable. This is the part of the market that has largely become commoditized. Environments 2 and 3 require significantly more sophistication. This is where our competitive advantage of sensor fusion becomes essential. Environment 4 introduces another level of complexity, intentional interference, like the jammer we imagined down at the Tower of London. What began as a challenge in the defense sector, jamming has now become increasingly common in civilian markets as well. Environment 5 represents the most challenging environment, situations with no GNSS availability at all, such as an underground mine. In these cases, alternate sensors and proprietary techniques must be used to maintain reliable positioning.

The highest value opportunities sit firmly on the right side of this chart, and that's where we play. We're leading in the hardest part of the market, mission-critical applications where our technology advantage directly converts into market share, recurring revenue and superior margins.

Many of you have probably heard the expression, it's not rocket science. Well, in our business area, it is. Blue Origin successfully landed the first stage booster of its New Glenn rocket for the first time in November 2025. Hexagon GNSS receivers and antennas are a key part of the navigation and autonomy stack on this incredibly demanding environment. There's another example of when it has to be right, it has to be Hexagon. Our products support every critical phase of operation, allowing for safe booster recovery. This allows for 25x reuse, cutting the booster cost by launch by an astonishing 96%.

Now let's shift to the second pillar, operational intelligence using mining as an example. You can see in the bottom of the chart all the high-level steps in the mining value stream, which all obviously operate in the real world. Hexagon has the most comprehensive set of OEM-agnostic products and solutions in the industry, and we truly understand our customers' workflows. This gives us an end-to-end digital nervous system that provides context and insights that we can use in the digital world to improve our customers' experience. As mining customers move toward integrated data and analytics platforms, our technology stack becomes a major competitive advantage. For example, the safety data will feed the fleet data. Fleet data feeds planning and analytics and analytics powers automation. This creates a powerful data flywheel. More sensors give you more operational insights, which leads to more automation, which increases value. Every additional module a customer deploys increases the value of the next one.

I'd like to highlight an example of how operational intelligence comes to life in our mining safety portfolio. As you can see, we have 3 main product lines: operator alertness; collision avoidance; and vehicle intervention. Our operator alert systems that monitor driver fatigue are widely deployed and industry-leading. For example, our customer, MMG, reported an 81% reduction in severe fatigue events after they deployed the system at their mine in Tasmania. And our collision avoidance are deployed in over 50 countries. We have more than 65,000 systems protecting over 200 mines in the world. The video I'm going to show will demonstrate the value from the world's first integration of the operator alert system with the collision avoidance systems. And it really shows the effect of this data flywheel.

First, you can see a typical haul truck that we provide safety solutions for. Inside the cab, you can see the display for the collision avoidance system, the operator monitoring camera and the front-facing camera. We can see the value of integrating these 2 systems together by showing the front camera synchronized with the cabin camera when there's a fatigue event. The vehicle almost veers off the road when the operator starts falling asleep. Fortunately, our alert systems vibrate the seat and set off alarms so the driver was able to recover and avoid a very dangerous accident. Combining operator alert systems and collision avoidance systems provides more context to collision alarms by recording operator alertness at the time of the alarm.

So these are examples of driver assist functionality. We can move further up the autonomy stack as well by doing vehicle intervention systems that automatically stop the vehicle if there is a risk of a collision. In this case, we're not just warning drivers, we're taking control to save lives.

So I think the global trend is unmistakable. Industries across the world are accelerating towards higher level of autonomy to boost productivity, improve safety and offset chronic labor shortages, especially in remote and hazardous environments. This chart shows autonomous use cases in the various industry verticals that we serve. Examples include ensuring autonomous machines operate safely and efficiently in mining. Leader follower applications in defense, where convoys have one driver and multiple vehicles follow this vehicle autonomously. Agriculture, where fully autonomous tractors are being developed to complete all activities related to planting, spraying and harvesting.

Autonomous Solutions is positioned to lead this shift by building profitable, scalable solutions for autonomous operations. These capabilities extend far beyond any single application. They pave the way for autonomy across multiple industries and machine types.

But autonomy is not a single leap. It's a journey. Importantly, customers don't have to wait for full autonomy to realize value. Every step along the way can be deployed today, retrofitted onto existing fleets and monetize as customers advance at their own pace. The 5-level model -- autonomy model you see here is familiar from the automotive sector, but it's now playing out across mining, agriculture and other industries. Level 1 assistance technologies like lane keeping and automotive are already mainstream. But in complex industrial environments, higher levels of autonomy depend on our first pillar, precision positioning and resilient perception. Moving large heavy machines safely, whether it's a haul truck, a road train or a tractor is impossible without high integrity positioning. In mining, our portfolio spans from geological modeling to fleet optimization to fully autonomous haulage, the widest stack in the sector. In agriculture, customers are progressing from GNSS-based guidance to vision navigation and ultimately towards fully autonomous tractors. And across every major vertical, our core technologies sit at the foundation, enabling each step toward autonomy while strengthening customer adoption.

Autonomous road trains for moving iron ore more than 100 kilometers from pit to port is a marquee example of our unmatched capabilities to bring autonomy to complex and dynamic environments. The positioning challenges are immense. The vehicles pass each other at 80 kilometers per hour with only a couple of meters to spare. Turning the steering wheel 1 inch on these vehicles will swing the third trailer out 1 meter. The trucks have to travel through tunnels and overpasses, losing connection with GNSS. You can see on the diagram, the significant number of on-vehicle autonomy and safety components that must be deployed to manage a vehicle of this size and complex dynamics.

This is our third pillar of focus, vehicle autonomy. Once deployed, the system becomes indispensable, generating sticky and predictable onetime and recurring revenue. We have the unique ability to bring all these pieces together. Very few companies could even attempt this.

I'm summarizing for you our growth strategy on this chart. We are addressing the most challenging problems that customers must solve in their autonomy journey. And this journey is accelerated by our macro forces and megatrends. And we target our investments in the most attractive markets to optimize our overall growth. And our divisions are accountable for maintaining and expanding their core competencies to provide clear competitive differentiation and drive their own growth.

So looking at the megatrends across all the markets we serve, the global pressures are the same: Acute labor shortages, accelerating sustainability demands and increased operational complexity, needing more precision. In mining, 70% of mining leaders report that finding labor is preventing them from hitting their production targets. It's not just finding workers, it's finding skilled workers. Our operator assist and AI-enabled drilling automation solutions help close that skill set gap immediately. And labor shortages are not restricted to mining. Agriculture faces similar constraints. According to the 2024 Voice of the Farmer survey, farmers are unable to hire 21% of the labor that they need.

Sustainability is the second megatrend that is making our customers' problems even harder to solve. Our advanced positioning and guidance technologies in agriculture directly address this challenge through higher productivity, reduced chemical use and improved sustainability. At the same time, operational environments are becoming more complex. For example, I remember back in 2011 when we launched our first GPS anti-jamming product, interference and jamming and spoofing events were actually quite rare. But you fast forward to 2026, and today, pilots -- commercial pilots are reporting over 1,000 jamming and spoofing attempts every single day. It's amazing.

But this is our advantage. We apply our technical know-how and horizontal platforms across multiple industries, generating data that can be used to further improve our solutions. Hexagon's culture of innovation, particularly in autonomy and resilient positioning, ensures we remain ahead of the curve as the world becomes more complex.

Looking at the markets now. Our overall total addressable market is EUR 13 billion and the serviceable addressable market is EUR 6 billion, growing by 8% to 10% over the next 5 years. In positioning, we focus on the high accuracy assured GNSS, which is a EUR 2 billion serviceable market with 10% growth. We're not exposed to commoditized standard GNSS. Our growth driver is the need for resiliency, what we call Assured PNT. Increased defense spending, more requirements for anti-jamming technologies and increasing adoption of UAVs and drones will fuel the growth of the precision positioning segment. The mining serviceable market is EUR 3.5 billion, growing at 8% Hexagon differentiates as the only player offering a full end-to-end digital mining stack across mixed fleets. Mining growth drivers will include safety, analytics and underground. Fully autonomous industrial systems like road trains is a smaller market today, but is expected to grow more quickly.

I'd like to summarize for you now our growth strategies for each division. For positioning, combining Septentrio's optimal GNSS platforms, the best size, weight and power with NovAtel's sensor fusion expertise and market customization expertise will create an incredible competitive moat. We will integrate all this combined expertise into our next-generation positioning platform.

For aerospace and defense, I spoke earlier about our industry-leading anti-jamming products. But we also have a strong footprint in many areas of aerospace as well, as you saw with the Blue Origin case study. Obviously, our defense market is structurally protected from many of our traditional low-cost competitors. We will grow the Aerospace and Defense division by continued investment in our leading anti-jamming products and technologies, including releasing more value-based products to expand from our high-end market dominance, the good, better, best strategy that Andreas talked about. Our last acquisition InertialSense will enable -- our latest acquisition in InertialSense will enable increased growth in the higher volume segments of this market.

Moving to agriculture now. Everyone in this room understands the agriculture industry has been in a global recession. We're also seeing some OEMs verticalizing this positioning technology and increased price pressure from Chinese suppliers. However, our superior quality and performance has enabled us to maintain our large overall footprint. But in response to these industry dynamics, we will leverage our next-generation products to provide optimized solutions to protect our margin. In addition, we will develop camera-based positioning systems for Level 3, 4 autonomous applications in agriculture such as row guidance in vineyards and orchards where GNSS-only positioning is not sufficient.

One major competitive advantage we have in our largest division mining is that we have the most extensive OEM-agnostic suite of solutions across all workflows in the mining value stream. As we saw earlier in the presentation, our industry-leading safety portfolio and the more stringent industry safety regulations that are coming up around the world, plus our large installed base, will enable us to continue growing this portfolio. The data flywheel I described earlier is an extremely exciting growth opportunity. Hexagon is uniquely positioned to leverage all available data in the mine to improve our customers' productivity and NPV Finally, in core autonomy, the value creation curve reflects the transition from investment to scale. Road train milestones in 2026 build continued credibility and unlock follow-on sites.

So as you can see, we are targeting 10% to 12% organic growth per year, supported by a mix of volume expansion, deeper penetration in our core markets and continued growth in the high-margin software and services that help us offset any inflationary pressures. At the same time, we're targeting to improve our EBITAC to the range of 27% to 30%, driven by our portfolio modernization, the scale benefits we receive from our platform strategy, our disciplined cost management and our AI-enabled operations. This combination of divisional accountability, platform leverage and disciplined capital allocation is what will enable us to deliver a durable high-margin growth profile.

I hope that you now more clearly understand the Autonomous Solutions business area scope, what makes us unique and our growth strategies. The value creation plan for Autonomous Solutions can be summarized as follows: First, we choose to operate in large, attractive markets with strong structural tailwinds. Second, we solve our customers' mission-critical problems. We help them overcome the real challenges they face with productivity, access to labor, safety and sustainability. Third, we are a technical leader with mission-critical reliability, deep domain expertise, proven M&A integration capability and the uniquely OEM architecture that customers can trust across mixed fleets and harsh environments. These elements create durable, defensible moats. Finally, our operating governance ensures that each division is accountable and successful and that we allocate our capital in the most optimal fashion to continue our long-term growth profile. This combination, unmatched technical depth and direct alignment with high-value customer pain points, gives us a clear multi-engine growth path to well beyond $1 billion in revenue.

Thank you very much. Now I'll turn it over to my fellow Canadian, Arnaud.

Thank you very much. All right. Moving on to robotics. Thank you for the introduction. Good morning, Andreas. Give me a bit of background on myself. PGN Computer Science did a postdoc in neural networks before it was called AI. It used to be called neural networks. Then I had a chance to work for Microsoft in technology, and then I did some big product launches for NIKE and Disney. Then I built and scaled businesses for Viking and Sanofi. And I have the opportunity for the last 15 months to join Hexagon Robotics, where I can do all 3: technology, product and business.

To start off, and if we really wanted to save time, we could stop at that slide, Tom, if you really wanted to. But what are the key takeaways? First, humanoids is a massive market. And very importantly, the industry segment will be the largest in the next few years, 5 to 7 years.

Two, Hexagon is uniquely positioned to capture its fair market share. Why? Very simple. Access to customers. You've seen all the customers we have across different industries. We understand their pain points. We understand how they're moving from automation to autonomy. Two, I think we have unique expertise in sensors, sensor fusion that Gordon just mentioned, but also spatial intelligence.

And three, which you'll see is the theme of the topic of the day, we have a multipurpose autonomous humanoidsoid. A lot of [ humanoids ] is out there are actually teleoperated, ours is autonomous. And ours is multipurpose and doesn't do just manipulation, it can do many other things that you'll discover in the next few minutes.

So far, so good. On a 4:00, we're good. Energy. Excellent. Agenda, we'll unpack what we just talked about. Context, always good to see the size of the market and how we're looking at it. Two, AEON, our first product that [ Sarah and Nick ] in the back were nice to give demos to. You could go back if you missed it. And then how do we commercialize this product.

We talked about this automation to autonomy all day, but I want to give you the robotics lens of what that means. On the left side, all manual. Then we had fixed task, fixed geography. Then we move to AMRs, unique task, but now we can be mobile. And now we're moving to human, multiple tasks, mobile. And that's going to be very critical. That transition is critical for many different industries, manufacturing, logistics, automotive, aerospace and so on.

Strong history of robotics at Hexagon. And why do we show this slide is that we're not starting from scratch in robotics. And in addition to all the right elements that you just talked about in the last few hours, actually, especially Gordon and the autonomy and the sensor fusion and everything else.

We also know what it means to deploy robots in production at customers. You all have heard that statistics. 50% of those solutions is a robot, and 50% of the solution is integration within workflows, within different systems and so on and so on. We understand that complexity.

I'm still doing this slide, but I'm hoping it's the last time I have to do it. Why human, and not why other types of robots? Well, 3 things. We talked about workforce shortage, but especially for skilled workers, and that is very important when you think about human. Two, all industries are going to last mile automation. A lot of automation in the factory, but still you have people taking one part, and then feeding it into the next factory line as an example.

And then three, we're talking more and more, especially in automotive, a little bit in aerospace, mostly automotive and manufacturing, lights out factories, right? They just operate themselves. But to do that, you need other form of robots. Why is the form factor of the humanoidsoid? First, those factories are built by human for human. And therefore, if you want to introduce a robot that can roam around, the humanoids form factor is the most logical one.

Second one, and that, to me, is the most interesting thing. If you look at physical AI and you look at where the innovation is going, it's really 2 areas: word robotic models. So basically think of ChatGPT in the word of robotics. But the second thing is imitation learning. So just think back of the history of robotics, it start with all programmed. You have to program every single edge case possible.

And now we leapfrog that completely, and we're basically teaching AEON how to do a new task by just showing how to do the task. We can do it by teleoperation. We can do it by videos. We can do it by synthetic data, but literally, there's 0 line of code needed. The robot just learns by doing. If that's the premise, then the student and the teacher need to have the same form factor to optimize effectively, the transition of the knowledge. If you don't have that, then you need to have very complicated systems that move from what we do to what the robot would be doing.

Then the last thing is that if you think of a humanoidsoid as a singular entity, that's great. But if you look at it in the factory of the future, where there's hundreds of them, it's effectively a fleet. And so each one of them can do just one task. If it does that, it's not a very good ROI. It has to do multiple tasks. And again, how do we evolve to be human that we have is because we can actually do many different things with the way we are shaped, if you want? And when you think of a fleet, that's extremely important.

Why now? One, great progress on the actuators. So these are the motors of the humanoidsoid, effectively. Used in the last 2, 3 years, we've probably made more progress than the previous 15. So the motors that actually feeding those human are much more powerful. Two, way more edge computing than we ever had. Think of the NVIDIA [ Thor ] platform. At the edge, for example, it's basically about 1,000x more powerful than what we had 2 or 3 years ago. Just imagine what that means in terms of AI capabilities, in terms of reading, et cetera, et cetera.

And the last one is just physical AI in general, whether it's training, whether it's word models we just talked about or any other manifestation of AI in the physical world. As you've all seen, I'm sure through the press, it's evolving at an incredible speed. So those 3 combined, great case for human.

Now going to what's the TAM of human. So this chart is from an external source. You've seen many different charts. I would encourage you to do a couple of things. One, ignore the numbers a little bit, other than they're big. And every projection we have seen is big numbers. That's comforting for us.

Two very important points. When you look at in-home versus industry, in the next few years, all the money in human is in the industry sector, not in the home. And lastly, you will see that 2030 is kind of this inflection point. So back to Anders' comment this morning of it won't be tomorrow, it's actually also based on market data. That's the inflection point. Some people could argue it's 2029. People can argue it's early 2031. It doesn't matter, that's the inflection point. So when we look at this -- and I had many conversations with Anders and the Board -- we do not want to miss that opportunity. And that's why we're doing Hexagon robotics.

Our target markets, given the slides you've just seen, pretty logical. We're going after the industry, one, because of the [ inheritage ] of Hexagon, of course, but also just because of what the market and where the market is. In Phase 1, which is the current phase, we focus mostly on automotive, aerospace, transportation -- sorry, logistics and manufacturing. That's where the shortage of skilled workers is the highest, and that's where the humanoidsoid can be deployed the easiest way, if you want.

Then we move to construction, energy and semiconductors, where the environments are a bit more complex to deal with. And then eventually, we move to hospitality. We think it's a very, very interesting market actually, but not ready. It's not ready for humanoids yet. And no plans for consumer, which is already a big differentiating factor with a lot of the companies you hear about on the outside.

So the good thing is there's a market. Now the question is, do we have a product? We'd certainly like to believe so. And so AEON that you see in the back, you see the specifications that you've probably seen from others, height and weight of an average human, actually. Degrees of freedom, 34, so a lot of flexibility in terms of movement. Sensors, 16. And that, you will see it come back in the presentation. That's a massive differentiating factor. Most other humanoids, even for the industry, typically have between 5 and 7 sensors. Why is 16 important? Because with 16 sensors, as Gordon mentioned from sensor fusion perspective, not only we have more precision, we have spatial intelligence and awareness. Which means AEON, in real time, knows what is around him or it, I should say, I was told, around it.

Why is that important? When you do a lab demo, that important. When do YouTube video, not really important. When you deploy the production, you need the human to be very conscious of its environment. Somebody is walking by, the machine has moved, this that theater, and so on. So that's very important that we have those sensors.

Speed, we have wheels, as you've probably seen. So we get some quite good speed. If you're wondering what 2.5 meters a second is, most of the average person jogging quite nicely. So it's quite fast. Why is that important? When you move a part from one side of a factory all the way to the other side of the factory, if the distance that you have to cover is 3 or 4, 5 minutes, you're basically not gaining anything from a productivity perspective. If it's 12, 15 seconds, absolutely is.

Batteries, you'll see a video a bit later. So we have 3 hours of battery. But more importantly, we have a battery cell swap. So we taught AEON -- through mutation learning actually, so showing how to do it, we taught it how to change its own battery. We have 2 batteries, so we can do a hot swap. That's why you see the [ Otoswap ] hot swap, which means it's continuous in operations effectively, other than the 23 seconds precisely that it takes to change the battery. [ ARM ] payload at 10 kilograms, pretty standard in the industry, and we have the same.

Our unique selling proposition is 5 dimensions. The first one, as I mentioned, super important and very grateful for the Hexagon connection because we have access to about 40,000 customers. We understand their needs. We understand where they're headed. We understand their pain points. That's a unique thing, that we can always call the right customer at the right level to understand their appetite and need for humanoids.

The second one is multipurpose. We'll dive into that a bit later. But as I mentioned, a lot of the robots are doing pick and place or moving boxes. We think that's interesting. There's clearly a demand for it. But if you can add inspection and reality capture with onboard sensors, meaning no other equipment needed, then the value of the humanoid, the ROI of the humanoid goes up quite significantly for a customer.

The sensor suite, we talked about it quite a bit, spatial intelligence, but autonomy is also due to those sensors. In the production environment, if you don't have those sensors, you cannot be autonomous. You have to be hardwired. So very, very important. And we believe -- well, not a belief, it's a fact -- that there will be some safety certification for humanoids, just like they are for [ ARM ] robots and there are for AMRs.

Sensors become a critical path to that. If you look at AMRs, there's a number of onboard sensors dedicated to safety, pure safety, detection of object, detection of people, et cetera, et cetera. We have that built in already. So when those specification specs come in, we'll turn on the sensors and we'll turn on the software, obviously, but it will be safety ready, if you want.

A few design elements that are quite unique. So the wheels, we mentioned. The battery, we mentioned. The last one I want to spend 2 minutes or maybe 30 seconds on, which is the end effectors. So this is a fancy way to say the hand of the robot. A lot of our competitors are spending quite a bit of R&D dollars finding the perfect hand. They're mostly [ kers ] hands with sensors and so on and so on.

Having talked to, myself, about 50 customers and the team even more than that, the interesting piece is actually for 99% of the use cases, you don't need a hand. You need a clamp, you need a gripper, you need some other form of hand effectors. So we decided very early on, instead of investing a lot in hands, we'll actually have a modular end effector. Whatever the best an effector is for the job is what the one AEON will have.

Also as a side note, which is interesting in that particular context. Best hand in the market, 2 years ago, $20,000 each. So for robots, $40,000 just for 2 hands. You fast forward to today, a hand that is roughly twice better, $2,000. And we're seeing that the project by the end of the year, it will be probably $1,000. So probably a good thing, Anders, we didn't invest too much in the hands, from a CapEx perspective. But it shows you how quickly that thing -- that space is evolving. And so we're making very, very strict decision on what do we build, what do we buy and so on and so on.

And the last thing is data and AI. You've seen it throughout the day. Same for robotics, I would say even more so because the level of data we have is truly multimodal. So we have sounds, we have videos, we have images and so on and so on, and we need to capture all this in one aspect. That's also what we need to train the robot, better data, better training, better robots doing tasks.

We talked about multipurpose, and I want to show you concrete examples. On the left side is what we do with [ Schaeffler ]. You can see the precision, if you want, of movement and manipulation. And the second one is what we do with [ Piletus ]. We're doing actually, onboard inspection of fuselage parts. If you're not that familiar with the aviation industry, they have the highest standards, right, in terms of quality, and we can do it with onboard sensors.

Reality capture. The video was supposed to loop. They didn't, but hopefully, you saw it a little bit. We basically can capture actually with the sensors we have, the entire environment, and we can create a mid-resolution digital twin just from onboard sensors. Super useful in many different cases where you need just the reality capture and the digital twin to be basically fed with updates on a regular basis. You just have AEON roam the factory, and you're done. So quite powerful.

And then what we showed with BMW at the end of February is AEON actually with an AS1 scanner. Thank you. Where we actually do very high-resolution scan of the car. We can do it obviously when it's being built. But the example we showed is what was finished, and we're basically measuring the space between the door and the frame, if you want, the frame of the door and the frame of the car, I would say, with extremely high precision.

Why this is interesting is that now AEON can also, as you remember, the end detectors can be modulars. One of those could be actually super high-resolution scanner. And now suddenly, AEON goes from inspection at a certain resolution to inspection at 50 micron, if I'm not mistaken.

The video of the -- one of my favorite videos, by the way, of AEON. So this was all done through training imitation learning. We showed AEON, this is how you change your battery. We did about 30 times, and then we have a training algorithm, and then AEON can train itself and effectively do the task. So we say 25 seconds. If you put your stopwatch out, it was actually 23, but very, very good, obviously.

And then what we do is we have an intelligent charging station. So the battery swapping is not just to recharge a battery. And as you can imagine, in the production environment, the robot has to be updated. There will be firmware updates, software updates and so on and so on. So we use actually, the battery station as also our inlet towards updating AEON. Again, if you look at a production environment, that's quite important because the WiFi is a bit unstable. And so if we can push it to the base station, then we have a short-range communication.

One of the most interesting charts, I think, of this presentation perhaps is how do we combine robotics, AI and what we call the data flywheel. First, we need a lot of data to train the robot, synthetic data, video data, simulation data and so on and so on. Most people are doing this in the industry. We think we have a very good understanding, in particular, simulation and synthetic data, thanks to our colleagues in Hexagon. But this is the foundation. If you don't have this, you basically don't have a robot.

The second thing is the training. So classical training, reinforcement learning, imitation learning, word models, VLAs, visual language action models, as many acronyms as engineers can invent. So this is a training aspect of the robot. You take the data, you train the robots, quite logical.

We think there, we have actually really good partnerships with NVIDIA and others that help us accelerate our training. Then you go into robotics. So it's nice to train it, but you need to put to robotics. And then you need to have a brain, it has a perception, it has sensors. And also, it has to understand motion. So far, so good. Most other companies do this. We think we do quite better in some areas, but most companies do this.

And then the task. So basically, the robot doing a task, which is all about planning and control. Now what is the data flywheel is that this is linear, but the power is if you can bring data back, of course, when you're doing the task. This is where I like you pay a bit of attention on the color of that line that will change in a second. At the moment, everybody in the industry, what are they feeding back? They're feeding back robotic data, the state of the actuator, the angle, the force, the torque, et cetera, all the physical aspects of the robot. Quite helpful to understand how it did the work.

Well, what happened, no one captures other than our robots. That's where you'll see it move to blue. Because of all the sensors, not only we capture what the robot is doing physically, we capture the environment. So if there was a task and the robot for some reason failed the task, the robotic data only will not tell you why the tasks failed, other than a hardware failure.

But if you had all the perception, all the sensors, maybe the object changed. Maybe the object was not there. Maybe a human passed by, and there was a stoppage. So this is all the data we can feed back. And then, of course, we had the flywheel because better data means better training, better tasking and so on and so on and so on. So this is for us a very important competitive advantage that again, we can capture the data in real time of the human minute doing the task and feed that back to the training, and that's very unique.

So we can see a few examples of AI, how we deploy AI. So the first one is simulation and reinforcement learning. And this one, I always have a good story for this one. So this is training basically AEON to go up the stairs, right? He has wheels, so it was not intuitive. So I said, well, let's teach AEON how to do -- go up the stairs.

You will see it does many different configurations. We have -- if you have to count them, you can trust me, there's 1,024 AEONs at the same time in the simulator through different things. What is very powerful about this methodology. And again, because of the [ inheritage ] of Hexagon, we know what it means to simulate very complicated and complex systems.

It's that all the engineers were actually 100% convinced that the best way to go up the stairs was to log the wheel and effectively just go up the stairs, just like in essence, what a human would be doing. We relaxed some of the rules in the simulation and we said, well, let's not log the wheel and we see what happens. It turns out that for AEON or any wheel-based humanoid, the best way to up the stairs is actually to use the inertia of the movement and have the wheel actually turn. So that when you go up, it's much, much easier actually. Why I'm giving you this example? Simply because in simulation, we learn about solutions that were not intuitive, and that's extremely powerful when you're trying to resolve tasks.

The second one -- the second video is a bit quick -- is what you see actually in the back. It's very similar to what you see in the back. But you will see AEON actually doing inspection. And you will see, if you go pretty quick, there's 2 boxes, the green box and the red box. The green box is when AEON sees what the part is, and the red box is basically transposing that image to the real environment and seeing how does it need to inspect.

Other words, what's happening? AEON sees the object, goes to the object, automatically and in real time, calculates what's the right trajectory to inspect the object. And if you move the object around, it will just adjust in real time. Quite powerful from a perception standpoint.

And the last one is imitation learning, which is what I mentioned in the beginning. What you'll see is the example. Pay attention a little bit that there's a silver piece and a green-ish piece, if you want. And so just through imitation learning, what we did, obviously, is the right hand takes the silver on the right side, the left hand takes the green, goes on the left side. We never told AEON there's a silver and there's a green object and here's what you need to do. We literally just put all the silver in one side and all the green in the side through teleoperation.

And then when it cuts to itself, it actually knows how to recognize the part, see that there's 2 different parts, remembers effectively through training that the silver should go there and the green should go there. Imagine how much programming you would have had to do even 2 years ago to get that to work. It would basically be 2 objects all positioned on the table of those 2 objects, any combination thereof. And that's quite extensive, right? Now basically, we show it 30 times. It takes 2 hours, and it knows how to do it.

We've won quite a few awards. I'm not going to go through them, other than to say that we feel quite good about where we are from a product standpoint, and we're moving forward. So summary so far, there is a market. We have a product. Now how do we bring it to commercial?

First is recognition that there's quite a bit of competition in the space. So this is selected global players, large players, well-funded start-ups, U.S., Europe, China, we're aware of it. Why this list? Because just -- if you take a step back, about 90% of the humanoids out there are actually for the consumer space and not for the industry space. So this is a selection that's relevant to our market, the industry. The goal is not to give you a rundown on every one of them, but just to tell you, we're quite aware that we have competition. And the reason we're going to that market is that we feel that we have a differentiating product. And if we didn't feel that, I think Anders will be the first one to say. But he hasn't so far, which is all good. But we have competition, but we feel again, very strongly where we are, and it goes back to some of the fundamental differences we have: the wheels, the battery swap, the sensor suite, spatial intelligence and so on.

Our road map, just to give you a view of where we are in 2023 and 2024. We're actually experimenting quite a bit with the form factor, still humanoid, but different variants of it. In 2025, we launched the first product, AEON, at [ Exon Live ] in June of 2025. And now we're really moving into commercial, so '26 and beyond. And what you see here is actually AEON working at the BMW factory, picking up the battery swaps. So a very clear road map for us, and 2026 is the year that we pivot from product to commercial.

We have a very different, actually, approach to most of our competitors in that space of what we build versus what we buy versus where we partner. So I wanted to spend just a few seconds on it. We buy actually all the commodity elements. So the raw sensors, the hand effectors, the battery cells, we buy that. It's commodity. It will get better and better and cheaper and cheaper over time. We don't -- and quite a bit of R&D actually to invest in that if you want to be in that business.

We actually build ourselves, everything we feel is fundamentally differentiating. So the training data, the sensor fusion, which Gordon mentioned, the motion control and everything AI because that's really where we see the difference. I should say everything AI, except the word models, we'll get it in a second. And then where do we partner is where we feel that there's a very high R&D investment needed to get to the right level of competencies.

The actuators, for example, we partner with [ Maxon ]. On the simulation and the edge AI, we partner with NVIDIA. On the word action model, we also partner with NVIDIA and others. And with Microsoft, we do most of the compute, as you can imagine, using Azure, but also all the AI training pipeline. They're very, very strong at the pipeline. We know how to reinvent the wheel, we partner with them.

So we have a very interesting vertical integration strategy, if you want, which is not to build it all ourselves, but to find the right partners and the right suppliers and really focus on where we think the differentiating will be in the next year, 2 years, 5 years, 10 years. We definitely are in this business to win. And I think Anders mentioned it also in the morning.

So how do we win? Basically, 3 things. One, best-in-class product. We talked about the multipurpose aspects, and I will re-insist on that point as many times as I can because truly a multifunctional humanoid is very, very different in the market than a human that can do one thing as an example to pick and place objects. When you're multipurpose, you can do, obviously, multiple things. That's obvious, but you can now manage your fleet very differently.

Imagine if you need to do manipulation and inspection and reality capture. You would basically need to buy X of one, Y of the other one and Z of the third one. If you have one human that can do all these things, you need to buy actually, quite a lower volume and you optimize the usage of the humanoid fleet in real time in your factory. That has resonated extremely well with all the customers we've talked to.

We also know that we need production-grade performance and reliability. And so this is, again, I think, where the heritage of Hexagon and the know-how and knowledge of Hexagon plays a massive role, which is how do you deploy those robots in production. Customers need to be confident that the performance and the reliability is there. And it's always the case in R&D, as you know, the first 90% is quite easy to get to. The last 10% is really hard, and that's where we have, I think, just great, great expertise in the company.

Commercial scale, we talked about our customers. But what's really interesting, and we'll talk about it in the next slide or after, is that every pilot we're doing was meant to scale and it can scale in 2 dimensions. Either vertically, we just sell more AEONs to a customer. That's great, but also horizontally, which means we test use cases with customers where we have that multi purchase aspect. So we'll go into a few examples of how we crafted this and why we were actually quite specific with the pilots we did.

We also have quite a bit of experience in driving high margins. This is a hardware/software mixed business, and it's not that easy to get it right. And again, appreciative of the experience of all my colleagues in helping us figure out what's the right balance. And then the ecosystem.

We talked about the technology partners, but what we have not announced yet, but we're working with is manufacturing partners, system integrator partners, machine builder partners. And we really feel that, that ecosystem is going to play a big role. Going at it alone is great. But if you have the right partners in that ecosystem, it's going to be quite powerful. And that has been really proven in all robotics deployment in the last 20 years.

So speaking of the pilots, I'm going to spend a bit of time on that slide because, one, we're quite proud of the partners we have with pilots. So with BMW, we made a big announcement in February. We've been working with them for the last 6 months. And we're doing 2 things with them already. One is machine tending. The other one is a very precise manipulation of a battery swap. You'll see in the video in a second, how precise it has to be.

And we're -- they're quite happy. They've announced -- actually, they've announced publicly that AEON will be in production at the Leipzig factory at BMW by the end of the year. And this is, again, going back to the statement, 2026 is the year of commercialization. We'll be in production in Leipzig by the end of the year with BMW.

[ Schaeffler ] is a great partner of ours as well. We've been working with them for about 8 months now, mostly about very high-precision manipulation, and now we're also moving to inspection with them. Hopefully, you've seen actually last week, we've released a big partnership announcement with [ Schaeffler ], where they will buy at least 1,000 of our robots over the next few years.

Again, another big proof point for us of commercialization in 2026. We'll be in production with them by the end of the year in Germany, and the goal obviously is to expand to their global factory network. But it's -- we feel it's a very strong testament, I think, to the partnerships that they would go out and basically say that they will buy at least 1,000 of our robots.

[ Phil ] is very interesting. We announced it at the beginning of the week as one of our new partners effectively from a pilot perspective. They're a machine builder. So if you don't -- if you're not familiar with them, they basically build stations, if you want, highly technical robotic stations. And when they sell it to a customer, of course, somebody needs to operate it. So once it's sold, they need to train somebody to actually operate the station.

And what we're working with them is to have AEON actually operate the station.

And so there's 2 great use cases for us. One, AEON manipulating robots, which is interesting in itself. But two, obviously, that it could be a very interesting resell partner for us where they sell the -- not only the station, but with AEON as a fully autonomous solution to the customers. Their customer base is 100% overlapping with ours. And so we have great synergies from that perspective as well.

With Microsoft, you see as a tech partner, but they're also actually a pilot. So we have 3 AEONs working in Houston for Microsoft. I would say it's more in a lab environment at the moment, but obviously, what we're doing is we're pushing the envelope of what a humanoid could do and strong partnership with them. And they were actually the first one to buy AEON. So we actually have sold a few AEONs this year, very low volume, of course. But again, all the way back to the theme of 2026, year of commercialization.

[ Pilatus ], for those who don't know, is a high-end aircraft manufacturer. This was the inspection use case that we showed. And so with them, we're working mostly on inspection, inspection of fuselage parts, which is, again, has extremely, extremely stringent requirements on how precise that inspection has to be. But what we've realized with them actually is that with all the sensors that AEON has, if AEON is at the right distance from actually a built-in fuselage, it can actually do inspection of a large part of the plane, which is a really difficult problem currently in the factory lines of airplanes. So quite happy with the partnership there.

And then one which we cannot name yet, we thought we would, but we've been working on with them for the last 4 months, I would say. But it's in the automotive space, a big European automotive manufacturer. And there is the full gamut. So we do manipulation, inspection, and they're also looking at AEON to do reality capture. So we hope to announce them by probably summer when we finish the big first pilots and then we move towards production with them as well.

So we're quite happy actually with where we are. This year was quite pivotal for us. We're moving away from just a product that is nice to look at and having good demos to really, a product where we have a clear line of sight to production, again, with BMW and Schaeffler by the end of this year. With [ Phil ], actually, we're looking early next year and with that as well.

So we feel that we have really good momentum. But again, for us, it's all about a differentiating product and a year of commercialization. I always like to think that although those slides are quite interesting, if you ask me in a completely objective manner, that the best thing to do is to do what does the customer think of AEON.

And so with this, I'll have a video. Hopefully, the sounds will work. I'm crossing my fingers because the music will wake us up quite nicely. But this is what BMW actually shut on their own with AEON. So they had AEON working and they basically...

[Presentation]

So you probably noticed that the hand effectors were quite different across the use cases, just a proof point of that. And so we're very, very happy and proud with the partnership with BMW, but I think it's a good just to summarize all it like, well, it's about in action in production, and that's what it was in one of their factories.

So just to conclude. We think, again, we're really well positioned, really built for the industry, differentiating factors, the wheels, the battery swap, the sensor suite, the spatial intelligence and ready to scale. So now that we're moving to production, it's a big moment, by the way, for the division when you go from the concept to now we have a product, to now we have customers actually rolling out in production. And so we're just in that journey. We're super excited about the next few years.

And that's it for me. And Anders, I think I'm passing it back to you for a wrap-up and opening the Q&A.

Can you hear me again? Yes. Thank you, Arnaud. Fantastic presentation of a very interesting product for us going forward. So I just want to wrap up a bit with going back to the slide that I had in the beginning.

So what did I want or we want with this day? Basically, to get a clear message of who are the new Hexagon going forward? What are we focused on? Precision measurement and positioning technologies. We have strong fundamentals with a strong growing markets, future markets, and we have leadership position wherever we operate, basically. Proven operating model with clear performance management. And as you could hear from our businesses, clear business strategies within all of our divisions going forward to generate profitable growth. And then we have communicated also. Clear financial targets going forward, which we are determined to fulfill.

So with that, I want to thank you all for participating both in London and also online. And sorry for being a bit late. But Tom, I think we will be going to Q&A anyhow. Yes. Give us a minute to set up the stage, I think, and we will be soon back.

Perfect. Yes. So last Q&A of the day. It probably focus on autonomous solutions and robotics, if we can, but any other questions, we'll entertain as well. Okay. Got one just there.

Thank you, and thank you for all presentations. Very insightful. Arnaud, I have a question for you. You described in your presentation, the example with the hands where prices have been driven down 90% and you get double the capacity or something like that. And you also talk about software coding, and AI is driving that cost down. So what makes you feel sure that the price of an AEON will stay up or drive higher? Or is this going to be a volume market and prices are driven down at the same time?

Great question. I think you have to look at it 2 ways. If you had a single-purpose humanoid, then I think it's a bit of a race to the bottom. If you have a multipurpose humanoid, which we are, then actually the ROI is on the total value, right, for the company that's using it.

So for example, you have manipulation, sure, of skilled workers, great. People can make their own assessment on ROI. But when you add inspection, it's actually -- the value is less about doing the inspection when somebody else could be doing it. It's that it's a fundamental bottleneck in many of the factories. The parts go out of the line, and then the inspection is the inspector, for lack of a better term, is not present, sick days, this other, they just pile up, which means there's nothing going to the rest of the line.

So that's where when you look at multipurpose humanoids, the equation cannot be -- the economic equation is actually not the 1:1 of the price versus -- it's really what's the value to the customer. And all the conversations we had so far, that value is quite high, and we will maintain it high by doing more with AEON and making sure that our robot always bring a lot of value, right, of business value to the customer.

Great. Just one at the front here.

Thank you very much for the presentation. I guess it makes total sense for you to exclude robotics from financial targets, right, to really go after this opportunity. But how will you handle the growth opportunity in the coming, call it, 5 years? Because I guess there's a scenario where you can accelerate costs quite a lot, meaning that including the cost, margins would, all else equal, go down for the group. So is it a situation where robotics will in 5 years' time, cover your own cost with revenues? Or is it that you need to find sort of a partner within 2 years, if that makes sense? But just how will you sort of -- what will the strategy be for the coming 5 years?

Yes. Thanks for the question. I tried to elaborate that a bit in my presentation. So we are currently looking into this. And when we have a clear strategy going forward on how we will execute this, we will come back and we'll tell you. But until that point, we will go play to win. And that is fully funded by Hexagon and Arnaud. And I decide on how much that is. And that is increasing quite quickly, as you said.

But the opportunity is tremendous, right? And this is an area where, like Arnaud has talked about, we have an advantage over, I would say, all the other competitors currently, and we intend to keep that. So until then, we are funding it within Hexagon. But we are, like I said, looking also for partners going forward on how to accelerate further. When we come into what Arnaud said, the inflection points and everything, different amounts of money are needed, of course.

A little bit on the same topic. I think we have gone from mid-single-digit euro million cost per year for the robotics business to EUR 25 million to maybe EUR 50 million. Is that sort of the trajectory you should sort of continue to expect? And then we have to make up our own mind what the revenue is going to be, but is that kind of trajectory that we are looking at?

You should expect that, that will increase year-on-year, all the fact.

And then add on to that. The inflection point we're talking about between '29 and 2030, but can you be more explicit about what is the trigger of that inflection? Is it the capability of the robots or the pricing?

I think it's a great question. I think it's a combination of a few things. I think typically for robots, I think for what -- there's a lot of use cases we can do today. And so the inflection point is more about how many of those can you do in a single factory and not a single use case, right?

The second inflection point is really when we start seeing physical AI being able to enable a deployment of a robot in what is called zero-shot learning, which at the moment, whether it's imitation learning or simulation reinforce learning and so on and so on, it takes quite a bit of data, right, to get the robot to do the task with a high reliability. The moment that changes to you show it once a ton, then you can have a very steep inflection point because now anybody like Schaeffler, for example, can take the robot and teach new tasks overnight, right? And so that is a few years out.

And then I think the third big inflection point we see is just honestly just demand and volume, right? And so when you have lower volume, the price is higher, obviously. But when you get to that point in time, you just see that effect that you've seen in many different industries, right, where it just switches, right? So again, is it end of '28, early '29, '30, the market will tell. But physical AI will be one of the drivers, I think, and we're still a few years away from the word model that many companies talk about. We work very closely with all of them, but it's a few years out before you can just have a robust look at a video once and be able to do the task.

A question, an accounting question maybe for Enrique. I was wondering about this new EBIT focus, you have EBITDAC. I like the idea that you focus operationally on the sort of cash [ EBITA ]. But I understand you will still be capitalizing the R&D and have a reported EBIT with the same impact that you've done historically in Hexagon, implying that you will have a different impact on the balance sheet. And if you just focus on the cash [ EBITA ] and that creates a little bit of issues looking at return on capital employed, et cetera.

Is there a reason that you're keeping the capitalization? I mean, I met loads of CEOs saying, I got expense all of my R&D direct. And I think that's the way the investors would prefer to look at things as well. Could it be a tax issue, for example? And coming into the tax issue, you are guiding for a higher tax rate going forward, 19% to 21% versus historically, 18%. And I think you achieved this attractive tax rate when you acquired [ Leica ] and the Swiss asset base in that point of time. Now with Octave, I don't think there's any changes to the Swiss exposure. Is there another reason for this tax hike?

Yes. Maybe I start with the tax question first. So the EU's tax pillar, so that directive, tax pillar 2, also means that no country can do below 15%. And that effectively means that Switzerland has had to move up, and that moves up our average tax rate. And so that's the effect. Essentially, the mix of the countries that we have moves us up a bit from the 18 to the 19 to 21 range that we're -- so it's not so much that Octave moves out. Actually, that has a smaller impact.

In terms of the accounting question, the honest answer is that I don't know technically exactly, how we will handle that. Actually, we need to sit down and look at that. But the fact remains that we will continue for at least for quite some time, at least keep the EBIT1, which means essentially that we will have a timing gap between capitalization and amortization of that R&D in terms of our -- how we -- our actual reporting.

But the key KPIs that we are following will be in [ IC ] that essentially expenses it and as a way for essentially that we look at the total cash expense. And I think I was having a conversation with some in the break. So essentially, we take our full EUR 600 million and essentially say, which ones of those -- what are our top EUR 100 million and how -- what return is that giving versus the bottom EUR 50 million or EUR 100 million. So I think that's much more of an interesting management accounting question than exactly how we capitalize and amortize.

We have time for one more question. So we'll go to the back. Just there, Helena, by [ Madu ].

It's Ben Castillo from BNP Paribas. Two, if I can just squeeze them in here. First one for you, Arnaud. It feels like you alluded to earlier with the cost deflation of some of the components for AEON. Perhaps it's not the hardware that has the moat, perhaps it's maybe the industry domain knowledge, perhaps it's the data layer on top. Today, I guess you're selling hardware. But how do you position yourself to maybe capture that data or software opportunity long term that may have more of a durable moat? And maybe I'll ask the second question afterwards, but start with that, please.

So when we sell AEON, it's actually it's a combination of software and hardware. The software side is that we bring some training elements, right, so that the [ Shelter ] can train the robot itself, for example. So there's a cost to that. And then how you maintain that over time is that we feel that, that portion will be more and more important for customers. They want to train the robot on a particular task. They want to train the robot doing inspection, not just by insulation and so on and so on.

So when we look at how we sell AEON, the CapEx, typical CapEx, if you want, a model, is the least likely, right? In the short term, we think there will be some of that because different budgets from different companies, but it will move quickly to Robot-as-a-Service model. And in that context, you effectively -- frankly, you assign even more worth to the software than you do to the hardware.

And just a follow-up question, this may be for you, Anders or Enrique, to comment on here. But I get that the robotics business is a totally different business to the rest of Hexagon in terms of where it is in its life cycle. But could you help us just -- what are you aiming for? What might you report on the progress here, perhaps either milestones on certain revenues or shipment rates? What should we maybe anticipate from you? And when it does start to generate revenues? Will you be including those, but excluding the costs from your margins? How should we think about that evolution?

Yes. So like I said, we will not include anything with robotics in our targets with the way we roll up. So neither the investments or the revenues. We would be fully transparent externally with revenues, with cost and the result for robotics, but it will not be included. And I would say, hindered in its development by the group financial target framework. So like Arnaud said also, we play to win, and this is needed to be able to play to win within the Hexagon Group.

With that, I think we are concluding, Tom, right?

Yes.

And from us up here, we really thank you, and it's been a pleasure to talk to you today. And there's also an opportunity to have a look on your way out on the booth back there. And looking forward to speaking with all of you soon again. And travel home safe, enjoy the fantastic London weather. It's not very often, but take the opportunity. All right. Thank you. Take care.

Good day, and thank you for standing by. Welcome to the Hexagon Q1 Report 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Anders Svensson, President and CEO of Hexagon. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to Hexagon's First Quarter 2026 Conference Call. First, I will direct you to the standout cautionary statement, and then we turn into the next slide.

Before I begin, a reminder that the upcoming potential spin-off of Octave, we are now presenting Octave as discontinued operations. We have provided this first bridge here for you to understand the performance of continuing Hexagon, Octave and taking them both together, meaning the former Hexagon Group.

Looking at the headline numbers for the first quarter. Hexagon continuing operations delivered a revenue of EUR 964 million, with an organic growth of 8%. EBIT was EUR 251 million, giving us an operating margin of 26%. Octave generated EUR 327 million in revenues, organic growth was 1% and EBIT1 of EUR 83 million, delivering an operating margin of 25%. At the former group level, including Octave, revenues were EUR 1.29 billion, with organic growth of 6% and an operating margin of 26%. During the quarter, we also completed the sale of our Design & Engineering business on the 23rd of February, and the business was deconsolidated as of that date.

Today, unless I mention otherwise, I will discuss Hexagon, the continuing operations, excluding Octave and with D&E deconsolidated as of the 23rd of February. Mattias will cover the Octave business separately after Norbert. So turning to the agenda for today on the next slide. So I will start with taking you through Hexagon's performance in the first quarter, and then dive into our business area performance. Norbert Hanke, our interim CFO, will then take you through the Hexagon financial performance. He will then hand over to Mattias Stenberg, CEO of Octave, who will then cover the Octave performance in the quarter. We will then, of course, have time for your questions at the end of the presentation. So next slide.

Starting with the first quarter performance then for Hexagon on the highlights of the quarter slide. The first quarter of '26 was a strong start of the year and also a busy one for us at Hexagon. We delivered 8% organic growth with a gross margin of 63% and operating margin of 26% and cash conversion at 77%. Alongside this strong financial performance, we continue to take decisive portfolio actions to sharpen Hexagon's focus on the core precision measurement and positioning opportunities. We completed the Design & Engineering business sale to Cadence for approximately EUR 2.7 billion in cash and stock. And here in April in the second quarter, we announced the agreement to acquire Waygate Technologies from Baker Hughes for approximately $1.45 billion. And this is then expanding Manufacturing Intelligence into the very attractive area of nondestructive testing. And I will cover this more in detail on the next slide.

Mattias and Octave team held Investor Day in New York on March 26 with the spin-off expected to become effective on May 22. We also continue to build the new Hexagon executive team. Renée Rädler has been announced as the Chief People Officer on the 1st of April, and Enrique Patrickson, who will join us as Chief Financial Officer on the 24th of April, meaning tomorrow. And I wish Enrique welcome to Hexagon, and both of them welcome to the executive team. And I'm happy to have you on board.

Finally, a humanoid robot, AEON, is making excellent progress in the past quarter. AEON successfully completed a pilot at BMW and will be deployed in production at the Leipzig facility. It is a significant milestone in demonstrating the real-world industrial capabilities of AEON.

In parallel to this, our pilot at Schaeffler has resulted in an agreement to deploy up to 1,000 AEONs in the next 7 years. This is a big step that we communicated here in April as well. Then we expect commercialization of AEON by the end of 2026. So a very active quarter of delivery. Let me now give you the overview of the Waygate acquisition. So next slide.

Acquiring Waygate is a natural next step for us at Hexagon as a market leader in the nondestructive testing, they fit very well into our portfolio focus on precision measurement and positioning technologies. They're completing the measurement chain from surface to the interior of components. The computed tomography hardware combined with our volume graphic software creates a unique value position for customers. And the business also brings exposure to maintenance, repair and operation markets with recurring utilization-driven demand, which boosts our exposure to the growing aerospace markets. Waygate has a portfolio of assets with different growth and margin profiles. This brings a meaningful opportunity for us to create value.

RBI is already growing very well at good and healthy margins of about 30% EBIT. Radiography is a strong business where we can leverage our manufacturing and sales footprint to really drive synergies across the business and leverage shareholder value. The ultrasonic testing and imaging solutions are also very good assets. But here, we will assess the position of those assets. They are either challenged by not being market leaders or they have a -- not a perfect strategic fit for us. So we will look at these assets from different perspectives, and we will try to then either through acquisitions make them into market leaders or we will have also the possibility to go through strategic reviews or do turnarounds of these assets.

Now turning to our organic growth performance in more detail for the quarter on the next slide. So we delivered a strong organic growth of 8% in the first quarter and that's a significant acceleration from the prior year. This was primarily driven by Autonomous Solutions, which grew 13%; Manufacturing Intelligence, which grew 9%. Both businesses benefited from growth in aerospace and defense. Geosystems grew 2%, while completing the channel destocking program that I talked to you about in the fourth quarter report. Excluding this impact, the underlying growth would have been 4% for Geosystems, which gives us the confidence in that the momentum is again building within Geosystems.

Recurring revenues grew 6% driven by continued momentum in construction software subscriptions and also GNSS correction services. You can see the rolling 12-month figures in the chart on the right. For the full transparency, excluding the impact of our Design & Engineering business, software & services account for 44% of sales for the remaining Hexagon corresponding to recurring revenues of around 28%. The new product adoption is also progressing very well, especially if you look at our laser tracker, ATS800, and also our new robotics total station, TS20, and this is, of course, supporting the growth trajectory across our businesses.

Turning now to the development by region and industry in the quarter. So on the next slide. Here, you have a snapshot of the development, and I'll start with the geography. The Americas was the strongest region delivering a 15% organic growth with a positive performance across all of our business areas. North America was especially strong, while South America was weaker. EMEA recorded 4% organic growth with broad-based contributions across the portfolio.

China reported a decline of 4%. Performance in Manufacturing Intelligence was very solid, but the wider China business was impacted by the weaker Geosystems business and also by the completion of the destocking actions taken within Geosystems in China. Without the destocking initiative of roughly EUR 8 million in the quarter, there was actually also single-digit growth in China as a whole.

The rest of Asia delivered 7% organic growth, a solid performance, reflected the good momentum in several of our key markets in this region, and especially a strong India.

By industry, if we look at it like that, construction remains our largest vertical, and we recorded a strong growth in Americas with also good growth in Western Europe. General manufacturing, the second largest vertical showed broad-based strength across all the regions. Aerospace and defense continued to perform strongly, while Mining was more mixed with uncertainty impacting the demand in South America. We also had some pull-in of deliveries from the first quarter into the fourth quarter last year, and that had some negative impact for the first quarter.

Automotive remained under pressure, particularly in the EMEA, but we also saw signs of weakness in China. Electronics was very strong in the quarter, and this is primarily then in China and rest of Asia. That's where a strong majority of our exposure is, and it was very strong growth. Agriculture, while only being 2% of our sales, still remains weak globally.

I now turn into profitability on the next slide, and I'll start with the gross margin. And I want to say first that the Design & Engineering that normally operates with strong margins had a challenged start to the year. So while it was very strong in the first quarter of 2025, which is the reference period, it performed quite badly during the 6, 7 weeks that it was within our business before it was sold on the 23rd of February. There's a lot of reasons for that. But if we exclude the impact of Design & Engineering in both periods, both in the first quarter of '26 and the first quarter of '25, the gross margin was 62%, and in the comparison period, 62.6%. So it's 60 bps down year-on-year.

Gross margin was, however, stronger in this quarter than in the last 2 quarters, quarter 4 and quarter 3 of 2025. And you will also be able to see this in the appendix slide attached to this presentation. The ramp-up of new product sales continue to support cost volumes, but this was offset by a full quarter of tariff impact. And in the comparison period, there was very little tariff impact. And we also had input cost inflation and also on freight, and this is driven then by the Middle East conflict primarily. If you look at the currency for the quarter, that also created a significant headwind.

Going forward, we will mitigate these pressures through pricing and also freight surcharges, et cetera, and actions are already taken at the end of the quarter. But the full impact of this given our delivery times should be seen in the third quarter.

Turning now to operating earnings. During the first quarter, we delivered an operating margin of 26.1% versus 25.9% in 2025. Importantly, excluding also here the full impact of Design & Engineering business in both periods, the operating margin grew 80 basis points versus the previous year. And this, I would say, is a meaningful improvement, driven by the organic growth performance and benefiting from our restructuring program that we communicated in the second quarter report. With some of the contributions also a gain from a sale of a building within the quarter of about EUR 8 million.

Offsetting our good performance was, like as mentioned, a weak Design & Engineering performance and tariffs and cost inflation. We also saw the strong currency headwind on EBIT, and that corresponded to a negative 60 basis point performance. Year-on-year reduction in capitalization to amortization gap, which we have talked about before, had an impact of 70 basis points negative. A key driver for the margin improvement was the cost reduction program. We benefited here about EUR 10 million during the quarter, and the program remains on track for a total savings within Hexagon at EUR 74 million at the end of the year. We also had generally good cost control despite the growth, and that also, of course, supported the performance.

Now turning to the business area performance. I'll start with Manufacturing Intelligence. MI delivered a revenue of EUR 433 million and an organic growth of 9%. We also had a very strong order intake in the quarter, which is positive for the coming 2 or 3 quarters. If I start with the geography, the Americas was the strongest region, but we also saw growth in EMEA and Asia. By industry, Aerospace & defense continue to perform very strong and the automotive business remained under pressure, particularly in the European markets, but as I mentioned, also in China.

Operating margins came in at 23.7%, down from 24.6% in the first quarter of last year. And this reflects the impact of currency headwinds and tariffs and the weak D&E performance in this year, which more than offset the positive operating leverage from higher volumes. Again, if we eliminate D&E as we have divested these parts from both periods, the operating margin improved from 23.1% to 23.6%, so 50 bps up.

Looking ahead, we had an agreement to acquire Waygate Technologies, and this is a transformative step for Manufacturing Intelligence, and it expands, as I mentioned, into the adjacent nondestructive testing market and positions us to offer customers a truly end-to-end precision measurement solution from the surface to the interior and through the life cycle of products. And as I mentioned earlier, we did divest D&E on the 23rd of February.

If I move then into Geosystems slide. Revenue was EUR 349 million with an organic growth of 2%. And even if -- great to see a return to growth here, I should note again that if we disregard the China destocking program, which now has ended, the actual underlying growth of Geosystems was around 4%, which is a more accurate read of the demand environment within the business. By geography, America was the strongest. EMEA was broadly flat. And we saw solid performance in the Western Europe, offsetting the weakness we saw in Middle East. In Asia, China reflected a destocking that I mentioned, but India performed very well.

By end markets, construction software & services delivered double-digit growth, very good to see, and we are seeing also the contribution of the TS20 total station. Operating margins were 26.9% compared to 27.4% in the prior year. The decline primarily reflects currency headwinds, which were partially offset by strong cost discipline and favorable product mix.

Turning now to our superstar of the quarter, Autonomous Solutions on the next slide. Revenue was EUR 176 million and organic growth of 13%. By industry, aerospace and defense continues to be a major growth driver with very strong demand. Mining was more mixed in the quarter. Customers remain cautious with capital expenditure, which also softened the demand for equipment investment, but our mining and safety business remained resilient during the quarter. Agriculture, as I mentioned, is subdued globally. We are not worried about the mining business in the midterm. There is a lot of activity. But as I said, a bit of hesitation with high oil prices for capital investments.

By geography, both America and EMEA delivered strong double-digit growth, and APAC declined. Within the product portfolio, demand for anti-jamming solutions and GNSS correction services was particularly strong in the quarter, benefiting from the growing need for a secure and reliable positioning in defense, but also in critical infrastructure applications like aerospace.

Operating margins expanded to 34.1%, up from 31.6% in the prior year, 250 basis points improvement is strong, and that's driven primarily by the strong operating leverage on the higher volumes and also a favorable product mix. Of course, also here, partially offset by currency headwinds and tariffs.

That concludes my overview of the business area performance, and I will now hand over to Norbert, who will take you through the Hexagon continuing operations financials. Go ahead, Norbert.

Thanks, Anders. I will take you now through the Q1 performance. Unless stated otherwise, the slides and my comments will relate to continuing operations, so it will exclude Octave. Turning to the next slide, please. Let us begin with the Q1 2026 income statement, taking the sales bridge first. Revenues were EUR 964 million with a reported growth essentially flat year-over-year. Currency had a negative impact of 6%, and there was a 1% negative structural effect from the sale of D&E, resulting in organic growth of 8%. Gross earnings were EUR 606 million with a gross margin of 62.9% compared with 64.4% in Q1 last year. The 150 basis point decline reflects currency headwinds, tariff impacts and cost inflation that Anders discussed earlier. As he also mentioned, excluding the full impact of D&E, the decline would reduce to 60 basis points.

EBIT1 was EUR 251 million with an operating margin of 26.1%, up 20 basis points year-on-year or up 80 basis points, excluding D&E. This improvement was supported by the cost restructuring program and organic growth in the quarter, partially offset by a reduction in the R&D gap of 70 basis points and currency. Earnings before taxes grew 4% to EUR 224 million supported by the operating improvements. Earnings per share were at EUR 0.067, up 3%. Next slide, please.

Now moving to the bridge. As discussed, net sales were essentially flat on a reported basis with organic growth of 8%, offset by currency headwinds and the structural impact from D&E. On operating earnings, EBIT1 increased to EUR 251 million from EUR 249 million last year. The improvement was driven by the cost restructuring program and the net gain of the sale of the facility, supporting organic performance in the quarter. Currency represented a meaningful headwind with a 35% drop through, primarily reflecting the weaker dollar.

On the margin bridge, we expanded 20 basis points to 26.1%, both organic and structural effects were accretive, while currency diluted margins by around 60 basis points. Next slide, please.

Turning now to the restructuring program. We are targeting EUR 74 million of annualized savings with the full run rate expected by the end of 2026. In Q1, we delivered EUR 10 million of incremental savings, bringing the annualized run rate to EUR 51 million. We are therefore well on track and progressing towards our targets.

As shown on the chart, we expect continued ramp-up through 2026, reaching the full EUR 74 million run rate by year-end. This program continues to be a meaningful contributor, and we remain confident in the delivery. Next slide, please.

Turning to cash flow, where we continue to demonstrate strong operational discipline. Adjusted EBITDA was EUR 351 million, up 3% year-on-year, reflecting organic growth and benefits from the restructuring program, partly offset by currency headwinds. Capital expenditure amounted to EUR 76 million, down 38% versus the prior year, partly driven by proceeds from the sale of a building following our footprint rationalization. This resulted in cash flow post investment of EUR 250 million, up 16% year-on-year.

Working capital was an outflow of EUR 56 million, reflecting the normal seasonal pattern in Q1 as we see activity ramping up through the quarters. As a result, operating cash flow before tax and interest was EUR 194 million. This translate into a cash conversion of 77%, a significant improvement from 60% in Q1 last year. After taxes of EUR 46 million and net interest of EUR 24 million, cash flow before nonrecurring items was EUR 124 million, up 84% year-on-year. Next slide, please.

This slide shows working capital to sales on the new Hexagon base, providing a view of the underlying trend. On this base, Q1 performance is in line with normal seasonal patterns. Net working capital was an outflow of EUR 56 million compared to EUR 68 million in the prior year. The rolling 12 months working capital to sales ratio improved to 11.9%, trending down versus last year.

So to conclude, we delivered organic growth of 8% with stable margin despite significant currency headwinds and gross margin pressure on tariffs and input cost inflation. Cash conversion improved to 77% and the restructuring program continues to deliver with EUR 10 million of savings in the quarter and an annualized run rate of EUR 51 million. Looking ahead, currency is expected to remain a headwind, and we remain focused on execution.

I will now hand over to Mattias. Next slide, please.

Thank you very much, Norbert. Let's take a look at the first quarter results for Octave. What you're seeing in the numbers this quarter, it's not just a transition to recurring revenue. It truly reflects the early impact of connecting workflows across the asset life cycle, which is where the real value in this business sits.

Recurring revenue grew 6% organically compared to the prior year, with SaaS revenue continuing to grow at strong double-digit rates. Reported organic total revenue grew 2%, whereas reported revenue is down year-over-year, driven by currency impact and the disposal of the federal services business that we did last year.

If you look at monthly project-driven subscription license revenue, that was roughly flat with the prior year period, while perpetual licenses and professional services revenue declined, reflecting the deliberate shift we are doing towards subscription-based models.

The EBIT for the first quarter reflects the lower perpetual license contribution together with lower levels of R&D capitalization and higher related amortization. Excluding these factors, underlying profitability was in line with the prior year period as disciplined cost savings offset incremental public company costs. Cash conversion was a healthy 118% in the quarter. Next slide, please.

If we look at our workflow environment in Q1, the trends were consistent with our expectations. In Design, perpetual license sales declined, while monthly subscription licenses continued their sequential improvement. Build delivered strong double-digit growth driven by SaaS adoption in construction and project controls. Operate also saw strong revenue growth across quality management, APM and EAM. And in the Protect area, recurring revenue continued to grow offset by lower perpetual licenses and services revenue.

Our advantage, however, is not in a single product. It is in how these workflows connect. Intelligence created in design, build, operate and protect becomes more valuable when it is shared across the life cycle. Next slide, please.

To the left here, you can see the monthly subscription licenses. We saw a step down as earlier discussed in the activity level in early 2025. However, since then, we've seen sequential improvement, and that positive trend continued in Q1, and we do expect year-over-year comparisons to get easier as we move through 2026.

In the middle chart, you can see that excluding this short-term volatility from project-driven licenses, the underlying trend is, in fact, strong. Recurring revenue continues to grow at a high single-digit rate, reflecting healthy underlying momentum across the portfolio. And on the right, you can see that our quarterly perpetual licenses continue to decline in line with expectations as we shift towards recurring revenue models. We do expect this shift from perpetual to continue to pressure total revenue growth for the remainder of this year. Next slide.

If we turn towards some of the information we shared at Octave's first Investor Day in March, and if you haven't watched it yet, you can access the videos and presentations at the Investors page at octave.com. One of the key takeaways that we discussed there was that we expect to accelerate organic recurring revenue growth to 10-plus percent over the medium term. Approximately 2/3 of that ARR growth is expected to come from our existing customer base. What underpins this is that expansion within our installed base is driven by the multi-workflow adoption where we see a clear step-up in ARR as customers move beyond a single workflow. We expect the remaining 1/3 of growth to come from new customers as we invest in growth areas and expand the partner channel to broaden our coverage across geographies as well as customer segments. Next slide, please.

Turning to customer highlights in the quarter. We had a number of important wins, both for new logos as well as expansion. And I think these wins really reinforce several of the strategic themes we outlined at our Investor Day in March. If we start with new logos, we added Visa CashApp Racing Bulls for enterprise asset management to handle their logistics and operations in their F1 business through a multiyear SaaS contract. We signed both BNSF Railroad and Spokane 911 on multiyear SaaS deals for our OnCall Dispatch platform. We also landed a leading U.S.-based LLM developer on a design subscription for their facilities infrastructure. And these wins demonstrate 2 things that we emphasized at our Investor Day: the diversity of our addressable market across mission-critical industries and our ability to land new customers on recurring SaaS-based contracts as we accelerate the shift towards recurring revenue.

On the expansion side, I want to highlight 2 deals that could not have happened a year ago, frankly, from an organizational perspective as these businesses then sat in separate Hexagon divisions. The first, a global motion and control leader and existing design customer expanded into operate through a 4-year strategic agreement, adding both our EAM and ETQ solutions across their global manufacturing operations. The other one was Kimberly-Clark, who signed a deal that consolidates over 700 of their systems onto our platform in a 5-year SaaS conversion spanning design and operate. And I think this is a great illustration of our -- how our opportunity for ARR per customer expansion where customers adopting 3 or more workflows consistently reach 7-figure ARR levels. And while the 86% of our customer base is still on a single workflow, and that is the expansion runway embedded in this business.

We also expanded with a leading European chemical producer displacing a competitor for critical communications across their production plants. This customer now runs on Octave across all 4 workflow environments, design, build, operate and protect, validating both our platform strategy as well as the value customers see in consolidating onto our solutions.

And lastly, we cross-sold our build solutions into a long-standing design customer with a major copper mine operator, extending our relationship to include project controls.

So to me, what these examples really show is that once we land in one workflow, expansion into adjacent workflows is not theoretical. It is happening, and it materially increases our ARR. So in summary, the Q1 customer activity validates our strategy. We're winning new logos on SaaS, expanding within our base across the workflows and displacing competitors where our integrated life cycle approach gives us a clear right to win. And this is what differentiates us. We are not competing as a point solution. We are competing as a life cycle partner for mission-critical assets where failure is not an option. Next slide, please.

So if we turn to our Investor Day outlook, in the nearer term, 2026 is a transition year as we become an independent public company. We're targeting 3% to 4% total revenue growth on the back of 6% to 8% ARR growth with adjusted operating margins stepping down modestly as we absorbed roughly 100 basis points of public company costs and up to 100 basis points from revenue model shift, net of savings. We do expect revenue growth to be second half weighted, reflecting both the recovery in monthly subscriptions and the typical back half seasonality of enterprise software bookings.

For the second quarter on a U.S. GAAP basis, we expect organic recurring revenue growth of 6%, so similar to Q1. And we expect organic total revenue growth to be flattish year-over-year due to the declines in perpetual licenses that we have discussed. On a reported basis, which will reflect, again, then the disposal of the federal services business, we expect second quarter total reported revenue to be down approximately 4% over the prior year. Next slide, please.

Our medium-term ambitions remain as we laid out in March. ARR growth of 10-plus percent and total organic revenue growth of 6% to 8%. Over time, of course, these growth rates will converge as recurring revenue becomes a larger and larger part of total revenue. We also expect free cash flow margins to expand from today's level of roughly 20% to 23% to 24% of the medium term. Next slide.

So I'd like to close by reiterating why we believe Octave is a compelling investment. We operate in a large and growing market. It's $28 billion today, reaching $40 billion by 2029. We have a deeply embedded sticky installed customer base with 97% gross retention and significant room to expand. Our recurring revenue base of $1.1 billion continues to grow as a share of the mix. AI amplifies the value of 3 decades of domain data and context that is very hard for anyone to replicate. We are leaders in our product categories as recognized by basically all the major industry analyst firms. We operate in mission-critical environments where failure is not an option. And as customers connect workflows across the life cycle, value compounds and expansion becomes more predictable. That is the foundation for sustainable growth and profitability as we scale as an independent company.

So final slide, please. So as a reminder, on the key dates for the separation. The Hexagon AGM vote is tomorrow, April 24. And assuming approval, the record date and effective date for the distribution is May 22, with Octave SDRs expected to begin trading on Nasdaq Stockholm on May 26, and the Class B shares on Nasdaq New York on May 28.

So with that, thank you very much. And I'll hand back to you, Anders.

Thank you, Mattias. Let me jump forward directly into the Q1 summary slide. So Hexagon delivered a strong financial performance. Our cost restructuring program is clearly on track and delivering. On the portfolio side, we completed the sale of our Design & Engineering business to Cadence, and we also announced here in April an acquisition of Waygate Technologies. As we have heard, the Octave spin is remaining on track. And all these actions are then sharpening Hexagon's future focus on the core positioning measurement technologies, positioning technology and autonomy opportunities.

Our full executive team is now in place, as I mentioned, with Enrique and Renée. And looking ahead, we have a solid foundation entering into the second quarter. We had a strong order intake within Manufacturing Intelligence. And with the closure of the Geosystems destocking program, we provided a clean base for growth of Geosystems going forward.

We remain, of course, attentive to the macroeconomic situation, particular to the tariffs, currency dynamics and also what's happening in the Middle East situation. We are, however, very confident on the momentum of our different businesses going forward. And as we have just heard from Mattias, Octave generated another very strong quarter of SaaS growth, contributing to recurring revenue growth in the mid-single digits.

Before I move forward, I want to take this opportunity to thank you, Norbert Hanke, who has been an excellent interim CFO, covering from the gap in August 2025 when David Mills was stepping down. And now handing over to Enrique Patrickson. Norbert will remain as an Executive Vice President at Hexagon, leading our ventures operations and also strategic projects. And I'm very much looking forward to continue working with you, Norbert, in that capacity.

Before we move to the Q&A, I would like to draw your attention to an upcoming event on the next slide. We will be hosting our Capital Markets Day in April, at April 30. That's next week, Thursday, in London. And this will include strategy updates from each of our business areas. And also importantly, we will present the new updated financial targets for Hexagon, reflecting the new portfolio composition that I have spoken about today. So of course, I encourage all of you to join us in London or follow the event via the webcast. And details and registration are available on our Investor Relations website.

So with that, we are now happy to open up for questions. And in the room, we have Mattias Stenberg, Norbert Hanke, Ben Maslen, and myself. So please go ahead, operator.

[Operator Instructions] We will now go to your first question, and your first question today comes from the line of Alice Jennings from Barclays.

I've got a couple. So the first one is just on, I guess, the outlook for Q2. So you've expressed some confidence, but then also recognized a bit of uncertainty. So could you perhaps outline where in the business, like which divisions you have the most visibility or also the most uncertainty? So thinking about divisions, but then also the industries.

And then I just have a question on the Waygate acquisition. So I understand that we're expecting to see some revenue synergies from cross-selling. But how long after the deal is closed? Can we expect to start seeing some of these synergies? And how meaningful could these be?

All right. Thanks, Alice. So I can start a bit and Norbert, you can maybe contribute as well. So if we look at the different businesses and the outlook for Q2, of course, we don't give forecasts on the future. But we have a very strong order intake in our Manufacturing Intelligence business, and that will, of course, benefit us in the coming quarters. And as I mentioned within the Geosystems area, we have completed the destocking initiative. So we don't have -- we don't start every quarter with a negative sort of EUR 8 million to EUR 10 million that is already sort of cleaned, and we have now a clear base to move forward from. And as I said, the underlying growth has now turned positive within Geosystems, and we expect that to continue also going forward.

In the Autonomous Solutions, we have a very strong demand in different sectors like aerospace and defense, et cetera. And we don't see any signs of that changing. And we don't see any signs of the weak business of agriculture improving dramatically either. So many of the businesses are expected to remain in a similar level. Mining, perhaps not growing very much in the second quarter because that's related to what I said in the presentation. But more in the midterm, we don't see any risk for our mining business as the activities is still very strong.

If you look at electronics, for example, we expect that to continue to be a strong business for us also going forward. Automotive will be challenged in Europe. I think also we have seen now some negative growth for us in automotive in China, and that might remain. But given also the high oil prices, you might come back to more electric cars and that will also benefit our automotive sales in China. So we have to wait and see what happens within that business. General manufacturing is a strong business across all the different businesses, basically, and we expect that to continue on similar levels. So I think that's a summary of what we can say about the outlook.

If I then should comment on the Waygate acquisition. So of course, there is a process here that we need to go through until we have actually closed this acquisition. And then there is an integration of the acquisition. And we will start seeing benefits, I think, quite quickly of the synergies because we have similar exposure to customers. We will also complement our offering, and we will go to market with the same people across the different geographies. So I think you will see synergies coming quite quickly after the integration of the business into Manufacturing Intelligence.

Your next question comes from the line of Daniel Djurberg from Handelsbanken.

Congrats to a nice growth profile here. I was wondering, Anders, if you could -- you mentioned some pulls from Q1 into Q4, still strong organic growth, 8%. And my question is, did you experience any prebuys for some reason? And how much of the organic growth was a result of this, if so? And also, if so, would it impact you negatively later on?

Thanks, Daniel. The pull-in from Q1 to Q4, which I referenced was primarily within deliveries in mining. And I wouldn't say that, that has a significant impact for -- with the performance in the first half year here in 2026. Of course, the first part of the quarter was a bit weaker within mining, of course, due to that. But not any permanent effects in any way.

Pre-buys, we actually don't see across the different businesses to any extent that we can recognize that this is a typical prebuys. So we don't see that as a future negative impact for us either.

Super. May I ask you another question on Waygate, obviously, early days, but you mentioned that you will do a strategic review of imaging solution and ultrasonic testing. So my question is, can you already start to plan for this right now? Or do you need to await the full consolidation and then see and plan later on? Or more or less, can you do theoretically a divestment or something at the same time as you do the transaction later in 2026? A little bit hypothetical question, perhaps.

Yes, I would agree with you, Daniel. I think we are here, first, making sure that we do the acquisition before we do anything else and close the acquisition. Then I didn't say that we will divest these businesses. I will say that we will evaluate them to see if we can make them into a market-leading position, #1 or #2 within those businesses as well. That could be with complementary acquisitions. We will also evaluate if we can do a turnaround of the business to improve the performance and create shareholder value. And then we don't exclude to do strategic reviews of businesses, which we don't exclude for any of our businesses, actually. We are always evaluating our portfolio.

Your next question for today comes from the line of Johan Eliason from SB1 Markets.

Just two questions from my side, just starting on the cash conversion, obviously, a good improvement, 77% in this quarter and then 60%, I guess, on some sort of comparable basis a year ago. But is -- I think your target has historically been 80% to 90% cash conversion. But considering Octave bringing all the SaaS and subscription prepayments with it. I guess, one should assume that this 80%, 90% target will be more difficult to achieve going forward? Or how do you see it?

Yes, Johan, I will take it here. For the time being, yes. I would agree, 77% was a good performance, as we said as well from our point of view. But say, we will have the CMD next Thursday, and I think you will hear quite a bit from Enrique as well going forward, what will be the target and how to achieve this. And I think I would then say, wait until Thursday. Hopefully, you are there.

Yes, I am. Okay. Just trying. Then another question. On the robotics, you mentioned the Schaeffler, 1,000 robots coming 7 years or so. Are those on commercial terms? So can you sort of indicate what sort of price tags you are targeting for your type of robotics? I remember when you showed us them in September, I think it was -- there was a wide range of assumptions on what price tags robots could fetch from the consumer side to the professional industrial use? So do you have any indications here? And are you sort of satisfied with the returns for your clients, obviously, but with the returns for you as well in the deals you seem to have struck right now?

Yes. Johan, I think we are not going out with any numbers, as you can see from the release. So we are very happy with this deal. I think the key thing for us here, it proves that this solution with AEON is commercially viable and implementable in an industrial application. And we could also see that with the BMW announcements. We are happy with the outcome for our customer here, and we are also happy with the situation for ourselves in the deal. But we don't comment on anything else regarding the deal.

We will now take our final question for today, and the final question comes from the line of Mikael Laséen from DNB Carnegie.

I have a question for Mattias about Octave, and specifically, how we should think about the capitalized software development costs going from 8% to 4% over the medium term? And my question is about the total R&D expenditures. How should you think about stats in '26 and going forward?

Yes. No, thanks, Mikael. I think I'll pass to you, Ben, for the detail. But I mean it is correct that we are stepping down capitalization. But I'll let you take it, Ben.

Yes. Mikael, so as we said at the Analyst Day, there's no plans at the moment to change the gross level of R&D expenditure, which has been about 18% to 19% of revenues the last few years. I think there are areas where as we implement AI, we could get savings, but the priority at the moment is to reinvest in the product and drive growth. That was the message from a few weeks ago.

Obviously, we're moving the product development more and more towards SaaS, where you have continuous development cycles, and it doesn't really make sense under the accounting standards to capitalize. So this will be gradual at first, and we'll go from 8% of capitalized software development costs in 2025. It will come down this year. And then we think by in the medium term, it will come down to about 4%, as we said a few weeks ago.

Okay. So the cash effect from the R&D activities will essentially then develop in line with sales?

Yes. I think that's probably the best guide at this point, yes.

Okay. Can I also follow up with a quick question on the stock-based compensation. That probably is expected to go from 1% to 4%. Will you have a step up now when you have been separated and listed? Or will that be a gradual process? How does it work?

Yes. It will be a gradual process as the new program gets approved and kicks in, and it layers and stacks up kind of year-over-year. So I would say it's fairly linear between the 1% and the 4%.

There are no further questions. I will now hand the call back to Anders for closing remarks.

Thank you very much, and thank you, everyone, for participating and engaging with questions. Looking forward to seeing you all then on next Thursday in London. And we wish you all a great day from here. Bye.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Hexagon presentation on the acquisition of Waygate Technologies Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Anders Svensson, President and CEO of Hexagon. Please go ahead.

Thank you very much, operator. So we are calling for this presentation to announce that we have agreed to acquire Waygate Technologies from Baker Hughes for a USD 1.45 billion cost. So Waygate is a global NDT business specialized in X-ray, Remote Visual Inspection, Ultrasonic, et cetera, with an annual revenue of approximately USD 630 million and 1,500 employees.

And the [ target ] closing day for this transaction is the second half of 2026. So if we then go to the first slide, so what are we buying? So we are buying the leading NDT platform, nondestructive testing platform. Waygate is #1 in remote visual inspection and #2 in industrial computer tomography. Both are in growing and highly regulated markets. So the entry barrier is quite high.

There's 130-plus years of heritage, a lot of patented IP and deeply embedded customer relationships within aerospace, defense and advanced manufacturing.

So why are we buying this company? Well, it's a natural next step for Hexagon. It completes the measurement chain from the surface where we have been always strong with our metrology solutions to also now the inside of the components of products.

So it's an adjacency that we have for quite some time, discussed with customers, would be interesting for them to get a full solution, so sort of our current metrology solutions, combined with computed tomography and combined then with the analysis tool and visual inspection that we are selling to these types of companies today called Volume Graphics. So we will then be an integrated player across the offering.

It also diversifies our revenue into the MRO markets, which are more recurring, utilization-driven demand and less sort of connected to CapEx cycles. And this is primarily then the remote visual inspection part of the acquisition.

So how do we intend to create value? Well, already the RVI, or Remote Visual Inspection, is a very profitable business. And so here, we are focusing on delivering strong growth. utilizing also our knowledge and our relationships with customers within the aerospace business primarily. And here, we will also see some synergies.

The focus is then on the Radiography to improve the profitability level. And with our China manufacturing localization experience, we believe that we can generate quite good gross margin expansions within Radiography. And we can also then cross-sell with, as I mentioned previously, our metrology solutions. And we believe that there will be quite a good base for delivering revenue synergies across both businesses, actually also our existing business.

When we talk about the stability assets, which are the other two, Imaging Solutions and Ultrasonic Testing, these are still very good assets. And we will look into these assets to see, do we have a performance issue? Is it a market position issue? Or is it a strategic fit issue? And then we will decide if we will do turnarounds, if we will do further bolt-on acquisitions to become the #1 or #2 in the market or if there is required to do some other strategic reviews.

And I believe that this is a really good value-creation opportunity for the shareholders of Hexagon. And this is something that I have worked a lot with in my previous capacities. So I see a lot of potential upside to this acquisition being integrated with the Hexagon MI businesses.

Going into more details, I will leave over to Andreas Renulf, who is the President for the business area MI, to continue the presentation. So Andreas, please go ahead.

Thank you very much, Anders. So if we go to the next slide, to give you an overview first, here, we are talking about the transaction value of USD 1.45 billion, and we expect to close in late second half of the year. The revenue for Waygate in 2025 was $630 million and the EBIT margin, EBIT1 margins, at 10%. And as you know, that is not the level which we are playing today here in MI and in Hexagon. And this is where we see an opportunity for strong value creation, which Anders mentioned here.

The transaction scope is that this is a carve-out from Baker Hughes. And to give you a little bit of history, these were 4 different assets that GE acquired about 20 years ago to create GE inspection services. And this is what then became part of Baker Hughes, and this is what we are now acquiring from Baker Hughes.

The customer persona for these solutions are typically ahead of quality, which is the same persona as we have for our metrology business in production and also for MRO departments, maintenance, repair and operations.

Revenue by geography, you can see that it's very evenly split globally with 30% in North America, 28% in Europe and 34% in Asia, 8% rest of the world. And from an industry perspective, it's very tilted towards aerospace and defense, 35%. And then you see oil and gas, 15%, which is primarily from the Imaging part of the business and then into a number of different businesses here, including electronics and batteries, where there's a need also for CT and so on. But strong on aerospace here and defense with 35%.

Go to the next slide. So as Anders mentioned, we are buying a world-class NDT portfolio, and it is really a portfolio of 4 different businesses here. We start with the first one, which is the remote visual inspection. This has a revenue in '25 million of $148 million and very good margins. So here, we have a mandate which is growth.

This is the market-leading video borescopes for aircraft jet engine blade inspection without having to disassemble the jet engine. And I will show you a slide on the stickiness of this application, this strong patent and IP, strong aftermarket services and a very, very deep relationship with the customers here. And this is a safety critical applications with significant barriers to entry.

On the Radiography side, you have leading with revenue of $183 million in 2025. And this is where you have the natural extension from what we do today in [ metrology ] or in the production shop floor to go into also the internal part of an object, not only measuring the surface.

So it's the 2D X-ray, which is primarily for the electronics industry, and then you get into the 3D computer tomography, CT systems. And it's both for internal inspection of porosities, et cetera, but it's also a dimensional metrology or inside of an object.

Waygate has proprietary in-house X-ray tube manufacturing, which is a key competitive advantage. And this integrates directly with our investment from or acquisition from 2018 in a company called [ Boingo Graphics ], which is the effect of software standard for CT analysis today.

And here, we see a lot of different synergies, and the mandate here is to increase the profitability of this part of the business. For the Imaging Solutions, so this is the Industrial X-ray, $207 million in revenue in '25.

And also here, in remote vision inspection, Waygate is #1 for radiography and the CT1 or 2, also for Imaging Solutions, it's #1 or 2 in the market. This is the provide -- provision of high-quality industrial X-ray films, processing chemicals, equipment and scanners and so on. And it's also supported by software for image analysis. And this is very widely used for detailed inspection of well, castings and components.

And you can think of a valid stepping inside of the pipeline, for instance, where we need to push the the film around the pipeline to be able to put X-ray through and get the picture of the integrity of this weld.

Here, we have put the stability on, and that is primarily because this is more of a resell business than what we are used to in Hexagon. And that arrangement is done with Agfa.

When we come to ultrasonic testing, we have actually not put up a number where we are from a market position, and that become -- that is because this is a split of two different parts of Ultrasonic. It had a revenue in '25 of $93 million. And one part of it is used for testing of sort of -- testing machine solutions, which goes into both production but also into the MRO market; and also handheld solutions, which is primarily for the MRO market here.

And also here, we have put this as a mandate of stability. That is because we really need to look at the profitability for this part of the business.

Go to the next slide. So how does this hang together with where we are today? Well, we are actually all the way to the left-hand side on the metrology side, which has a clear production focus. We are the leader in surface representation of any part in 3D, and we measure anything from a service perspective. The natural connection is with the radiography piece of Waygate. And as I said before, we acquired the company Volume Graphics some years ago. So we are already in this business.

And with the CP part, you can actually do the metrology and the measurement inside of an objective set of just on the surface. And that is still very much a production focus primarily, and we get into the Ultrasonic part of the business where you can penetrate up to 30 centimeters or 300 millimeters into steel. And you can check the welds and corrosion and so on. And this is both for production, but then it starts to get over more towards the maintenance repair and operations part.

And then you have the Imaging part, which is primarily for maintenance, repair and operations and remote visual inspection, which is more or less only for maintenance, repair and operations and very, very focused on these applications for aerospace.

If we go to the next slide, I will show you the application for Remote Visual Inspection because you could think that this is just a video camera that is used to look at things which are difficult to reach. But this business is all around the application and doing that in a good way.

What you see here on the left-hand side is the schematics of an airplane jet engine. And you have probably noticed when you get on a plane that there are those blades that you can see, and those are the fan blades in the front. So there are actually 1,500 blades in aerospace jet engine, and they are therefore to compress air.

Inspection of those blades, which are absolutely crucial that happens on the tarmac when the motor is on the wing after around 2,000 flight hours or if there has been a bird strike or something like this. The MRO technician performs this inspection offer quite shortly after landing, So engines are hot, so you need some requirements to be able to handle that from a product perspective.

And the probes are inserted into specific ports that are premade into the engines, and the engine slowly rotate to inspect every blade. So 1,500 blade, every one of the needs to be inspected. And if the effect is positive, you need to have an accurate defect characterization and measurements to make the decision to continue operation, do I continue operation or do I take the engine and then also the plane out of service for repairs, which is the $1 million decision for an airline to take.

So there's a very high value for the customers here compared to the cost of this application. And it's all about automating this the prescribed, of course, in the maintenance hand books from the OEMs that produce this aerospace engines.

To go into the next side, from an acquisition rationale, first of all, we complete the measurement chain going from the outside to the inside. And this is an area where we have, to be honest, struggled a little bit for the last couple of years because we have one large competitive size that has this combination already. And many customers who are buying the CT part, they are using the CT machine, both to do the measurement on the surface and on the inside as well.

So for us, this is important, especially for aerospace, castings, automotive, battery and so on.

When it comes to the software integration opportunity, our software Waygate gate for CT pairs directly in -- with -- so Waygate CT pairs directly into the modern graphic software that we are offering today. And we see large cross-sell opportunities here with metrology solutions as well.

We also get an entry into new markets, and that's the maintenance repair and operations, so nondestructive technology is a very attractive growing marketplace. And here, we are then decoupling ourselves a little bit in MI from the CapEx cycle of the production shop floor.

So this is an area that we have looked to see if we could get in there to the bridge of CP. And then this is the value creation opportunity that we see clear opportunity to significantly improve the Waygate margins here.

Go to the next slide. So for the Remote Visual Inspection, we see there that with that, we can diversify in MI into the lucrative MRO market. So we have the full-scale testing capabilities for asset integrity with the remote vision inspection that's an anchor for us. And from there, we can start to make more add-on acquisitions in that area.

Radiography, it's very much about profitability for us. We have a number of different synergies that we will work out, both obviously on the software side with graphics. We can cross-sell with metrology. And we have a very, very strong China organization where we can localize manufacturing as well.

For Imaging Solutions and Ultrasonic Testing, we will evaluate these investments and look for opportunities to increase the market leadership. But we will also review the assets and their strategic fit with the core MI.

Next slide. From a deal overview perspective, the acquisition price was $1.45 billion and definitive agreement is signed. Then we aim for closing in the second half. Obviously, this is subject to regular closing conditions, and this is a carve-out from Baker Hughes. So we will have some transition service arrangements pre-close.

If we look at the numbers, the revenue for Remote Visual Inspection, $148 million; and Radiography, $183 million, that gives $331 million. And for that part of the business, the EBIT1 margin is 16%. So RVI is higher, and radiography is a little bit lower. But in total, they are 16%. For Imaging Solutions, NOK 207 million in revenue, ultrasonic testing, $93 million. That brings the total of Waygate to $631 million and the Waygate total EBIT margins are then at 10%.

With that, I think we are ready to hand over to the operator for questions and answers for [ Anders ] and myself.

[Operator Instructions] Our first question for today comes from the line of, just one moment, Daniel Djurberg from Handelsbanken.

I have a question coming back to the key figures that you finished off with here. If you can help us a little bit to understand the growth patterns seen in '25 with regards to the four elements that you have here, Remote Visual Inspection, Radiography and Imaging Solutions and Ultrasonic Testing, just to -- and also, how to think on the outlook on the growth patterns?

So do you want me to start, Andreas?

Yes, please.

So the Remote Visual Inspection is a very highly regulated area, of course, with these inspections. So that is a quite quickly growing area. Radiography is also a good growth engine for the company.

But primarily, we think here or we believe that it's the synergies that will create a fast-growing trajectory for us going forward. Given that we have similar customer base, we can now offer the full solution with our existing with our existing metrology solutions, combining those with the CT capabilities of Waygate and then having the analysis and visualization tool of Volume Graphics, which we already own. So that is what, we believe, will create a quite rapid growth going forward.

So if you take those two together, they will grow at MI or slightly above MI rates going forward, is what we say externally. Of course, we have our own targets to make sure that we can grow this quite rapidly.

When it comes to the Ultrasonic, it's, of course, an interesting business, but we are quite niche. So with this with this ownership, it doesn't create us a strong position throughout the Ultrasonic Testing area with customers. So as we mentioned, here is also where we will review strategic options.

Could we then acquire something else so complement acquisition to make our position stronger within ultrasonic? Or do we need to make a turnaround for this business to come up to the right profitability levels and then grow it? Or should we do any other strategic reviews?

When it comes to the imaging, this is not a fast-growing business. It's a business which is very stable in both upturn and downturns. It's primarily, like Andreas said, it's a supply chain business for us more than a manufacturing business for us.

This will continue to be a good business going forward. key customers like oil and gas and these kind of critical installations, power generation, aerospace, et cetera; the customer base is very, very strong and very loyal to these solutions. But it's not a fast-growing business going forward, either, in my opinion.

Andreas, please complement.

I think that gives a good overview. I would say that the U.K., ultrasonic as a market is growing quite nicely. And that is also taking some of the market growth from traditional films and imaging. But it's more about the starting position there that we are the reason why we put it into stability.

And maybe just one comment on imaging is that this is a market which is slowly but surely transitioning from analog with films to digital to basically have a digital way to create these images instead of doing it on the analog films here. But in general, I would say that, that is where we are.

And the digital solution is also something that Waygate offers, right?

Correct.

May I ask you on the Imaging and Ultrasonic? Is it -- together, it seems to have 7% to 8% margin or something in '28 -- '25. Is the big difference between Imaging and Ultrasonic with regards to the margin? Or is it similar or perhaps you show that on some slide I missed?

No, we did not go out with those numbers. So we basically go out with the RBI being at around the 30 mark for EBITDA, and then you can easily calculate the radiography margin from that. And then the other two, we have at the package.

Okay. And may I also ask you on the China opportunity, you mentioned to cross-sell within MI? And will it be mainly within the Remote Visual Inspection or also Radiography that you will try to sell in China on a larger scale?

Yes. So maybe I can take that. The biggest opportunity we have with our China organization is really for the Radiography part. We are actually selling to our own local developments in China CT already today. We started that only a couple of months ago because it's such a good fit with the customers for metrology. And so the biggest impact is going to be on the Radiography business and on the CT business.

For Remote Visual Inspection, there will be some opportunity, but that is more to the MRO market, where we're not so established today. So most of the benefits from localization to China will immediately come from regular

Perfect. And if I may, the last question for me would be on revenue...

Can you [indiscernible], we need to let someone...

Okay. Perfect. I'll get back in queue. Thank you. Bye.

Our next question for today comes from the line of Alice Jennings from Barclays.

My first question is just on -- so clearly, the acquisition expands Hexagon's current market position and what is definitely an adjacent industry. But I guess, what made you decide that now was the right time? Like why is this acquisition or something similar not been done in the past? Was there anything that kind of fundamentally changed to make the acquisition more attractive right now?

And then my second question is just on the customer overlap. Is there any way that you can kind of quantify what -- how much customer overlap there is in terms of the share of MI customers for which these solutions might be relevant?

Yes. Thanks, Alice. So if I start with the first one, I think this is a space we have always been looking at in history also. We see lately more and more customers wanting to have a full solution, like -- Andreas also mentioned like [ Size ], for example, already has a full solution with similar metrology solutions like we have and then combining that with CT analysis.

And more and more customers are also trying to make CT solutions complementary to also supply the outer dimensions of the components you are measuring. So this is, for us, both strategic but also a value-creation acquisition from that point of view.

So -- and the timing exactly is, of course, when assets become available. There are not that many strong answers like this one. This is basically the strongest assets that has been for sale in years within this area. So it's also a bit combining with -- finding the seller and combining that with the market opportunity that we see arising within this area when we talk to our customers.

And maybe you talk about the overlap, Andreas.

Yes. So First of all, the customer overlap is within the [ radiography ] part of the business. And it's hard to just give you a percentage just like that. But you can think of it of the primary customers, which are into battery manufacturing, automotive, within aerospace, into castings. Those are the typical ones.

And from a Hexagon MI perspective, we have quite a lot of sales that goes into both aerospace and automotive. So it's quite a considerable overlap there, but I don't want to give you an exact percentage number.

This concludes today's question-and-answer session. I will now hand the call back to Anders Svensson for closing remarks.

So also, we are very excited about this announcement today. We believe that this is a great opportunity for us to create value going forward. Very interesting businesses, very complementary to us and to the customers. So we are looking forward to welcoming the Waygate team into the Hexagon Group.

And there will, of course, be more opportunities to have questions on this. We have Q1 reporting next week. And the week after that, we have a Capital Markets Day in London. So we invite you with with further questions. And of course, our Investor Relations teams are always available for you to talk to as well.

So with that, I think we close for today. Thank you, everyone, for attending, and have a good week.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Ladies and gentlemen, please welcome the Vice President of Investor Relations, Elizabeth Chwalk.

Good morning, everyone. Thank you for joining us today. My name is Elizabeth Chwalk. I lead our Investor Relations here at Octave, and we are excited to be hosting you for our first Investor Day. We have a great agenda ahead. Mattias Stenberg, our CEO, will kick us off with an introduction to. Jay Allardyce, our Chief Product Officer, will then take you inside the platform and product strategy, including a customer example from Mladen Stojic, and we'll take a short break at 10:15. When we come back at 10:30, Tamie Adams, our Chief Revenue Officer, will walk you through our go-to-market strategy; and Ben Maslin, our CFO, will follow with our business model and financial details. Mattias will then close with a few final remarks before we open it up for Q&A with the full leadership team on stage.

Before we get started, I have a few things to share, so bear with me. First, certain statements we make during this presentation may constitute forward-looking statements that are subject to risks, uncertainties and other factors as discussed further in Octave's filings with the SEC, including the Form 10. Actual results could differ materially from our historical results or our forecast. We assume no responsibility to update these forward-looking statements other than as required by law.

Second, during this call, we will present both GAAP and non-GAAP financial measures as a reconciliation to non-GAAP -- a reconciliation of non-GAAP to GAAP measures are available in Octave's Form 10 filed with the SEC as well as the appendix to today's slide deck.

Third, today's event is being webcast live and recorded. The slide deck, along with a recording of today's presentation will be available on our website after the conclusion of today's event.

So with that, I'm thrilled to introduce and welcome to the stage our CEO, Mattias Stenberg.

Thank you very much, Elizabeth, and welcome to all of you. Good to see so many people here, and welcome to the people online as well. I know there are a lot of people watching online, so I hope you can follow along as well. I'm super excited to be here with my team to introduce you to Octave. I'm sure some of you have maybe followed Hexagon for a long time and may know some about the company and some are probably more new to the story. So I will do my best to introduce you to the company and tell you why I think this is a fantastic opportunity.

Maybe a few words about me and my background to give you some context. I've been with Hexagon for 17 years. I started there in 2009, done a bunch of different jobs there. I ran strategy and M&A for about 7, 8 years. So you could say I was clearly part of building the company that is Octave today. I also ran the ALI division, which was -- is kind of the biggest part of Octave today. It represents roughly 60%, 65% of Octave. I ran that for 8 years. And I want to say it's been great. I'm very proud of the journey we've had at Hexagon. It's a fantastic company. It certainly a very different company when I started. I think it has doubled and doubled again in terms of revenue and profit. So it's been a good journey, but I'm honestly even more excited to be here and to get the chance and the opportunity to lead Octave. So that's the agenda today, lay out the strategy and the plans for Octave.

All right. But before I go into the detail of our strategy and our customers and so on, I thought we could kick off with some basic numbers to give you the context. We generated roughly $1.6 billion of revenue last year. Roughly $1.1 billion of that was ARR or recurring revenue. So if you do the math on that, that's roughly 66%. If you look at our customers, one key thing to understand about the company is that it's some of the biggest companies in the world that are our customers. Roughly 60% of the Global Fortune 500 is on our customer list. So this means that these are mission-critical industries, assets, infrastructure, it's the big companies in the world. They are important for society, for the world, and hence, we are important.

If you -- it said in the video there, I noticed that we have 14,000 customers. That is true. But if you cap it at customers over 10,000 in ARR, the number we focus on is the 4,500 customers. We have a long tail of smaller customers in our [indiscernible] business.

Okay. Another key metric of our business is our retention. It's very high. It's a very sticky business. We have about 97% GRR, if you look at those 4,500 customers. We have about 105% NRR, which is a good number, but it's also a number that we want to drive north, and that is something we will talk more about later today. We have roughly 7,200 employees around the world in about 45 countries. So it's truly a global business, well diversified around the globe. We are also a growing and a profitable business. If you look at our ARR CAGR the last 3 years, it's been 8%, also a number that we want to drive north, but I think it's a good starting point. And like I said, we are a profitable business, right? We generated 31% adjusted operating margin last year, and Ben will dig into more on the details about that later. And it's also a very cash-generative business. We generate roughly around 20% free cash flow margin.

Okay. But let's take a look at our customers, and I'll -- we divide our customers to simplify it into 3 groups. The first group is the people who build the world. So you see some names here like Bechtel, Fluor, Worley, Jacobs, Wood, Skanska, VINCI. I mean, it's -- these are the companies that truly build the world. Nuclear power stations, desalination plants, data centers, pipelines, big complicated infrastructure. In those environments, there is no margin for error. When these systems fail, they don't fail quietly. The shock waves are immediate and global. So to simplify it, you could say these are the companies who cannot afford to be wrong.

The other big customer group is what we call the owner operators. So companies like Shell, Exxon, Kimberly-Clark, [indiscernible], BASF, Pfizer, NVIDIA, Tetra Pak, the list goes on. These are the companies that own and operate these assets for decades. So think refineries, distribution centers, water systems, research facilities, could really be any asset you can think of as long as it's usually big and it's complicated. And again, I mean, why we are key to these customers is because we are truly the backbone of their engineering, the system of record, if you like.

So the key question though that we're going to talk about in this presentation today, do these owner operators get the data, the context, the digital twin handed over to them after the design and the build phase? In most cases, the answer is no. And in that handoff, the context dies, right? And when context dies, that is when risk appears and compounds.

If you look at our third customer group, you have to think about major cities. We -- our software is installed in most of the major cities around the world, Hong Kong, Copenhagen, New York, Boston, Washington, North London. You can also think about national power grid [indiscernible] think about big events like a presidential election or the Olympics. Our software protects the people, the emergency services, critical infrastructure, really provide a situational awareness around the situation, giving live updates, dispatching the right type of personnel and answer to a situation.

So if you look at this on a global scale, we say that our software protects 1 in 8 people in the world, so roughly 1 billion people. And since we're here today in New York, we can say we're protecting all of you in this room and the whole city because the New York Police is one of our big customers.

Okay. So you just saw 3 types of customers in 3 very different worlds, all critical, all complex, right? But they're all connected by one life cycle. The facility is designed in one workflow, it's built in another, operated for decades in a third and protected throughout. But the problem that I'm going to be discussing today is that these industries, they did not evolve as one system. They evolved as 4. We talk about design, build, operate and protect. Each one optimized independently and the intelligence created in one phase rarely carries over to the next. And that is costing these customers in ways most of them, frankly, cannot even measure.

Over the next 4 years, more than $24 trillion will be deployed into industrial systems. Out of that, roughly $1.2 trillion will be spent on software and digital transformation. And yet the results are not there. Studies show that roughly 70% of digital transformation initiatives fail or at least don't give the full value expected. And only 8.5% of capital projects meet their cost and schedule targets and less than 1% of these projects achieve all the promised benefits.

So what's the takeaway from all of those numbers? I mean, to me, it is the world is not short on capital. It's not short on technology, but it is short on results. So why is that? It's kind of like I alluded to, right? This industry or these industries, I should say, was -- has been built in 4 separate workflows, no shared context. Each one improved, each one powerful. Companies have optimized design, they've optimized build, they've optimized operate, but it's disconnected. So as a result, 96% of engineering and construction data goes unused. So the system has no memory, the same mistakes are repeated. The same risks are rediscovered and the same costs are locked in time over time again. So if you want to simplify it, you could say intelligence is created everywhere, but it's connected nowhere.

So what happens when context doesn't carry forward? Well, the cost escalates and the risk escalates and actually, let me give you -- try to give you a real example. Let's say you have a piping specification error in a design of a chemical plant. You're still in the design phase. So you can fix that. Maybe that's an hour of work. But let's say it goes to the -- it goes into construction, right? Now it becomes a procurement error. You have -- you might have to take out the whole line, right, cut it out, replace. Now we're talking hundreds of thousands of dollars.

Let's say it's missed in construction as well, right? And you build this into the facility. Now it's not just a dollar problem, it's a safety problem, right? The worst case, people get injured or die. So one error, same error, right? The only difference in the cost here is the earlier you detect it.

Okay. So how do we fix this, right? This can't be the end game. How do you fix a structural problem, not with better point solutions, right? That's already been tried. That's already been built. Every workflow in this design, build, operate protect today has good software. That's not a problem. What's missing is the connection. Since these assets need to operate as one system, the software that manages them needs to operate as one system as well which is why we believe this market is converging to one system of record, a system where every system decision is informed by what came before and what improves and what comes next. That is what we mean when we say life cycle intelligence. And to my knowledge, at least, Octave is the only company that has such a platform.

Because if we take a look at what competition does, there are many competitors, many point solution providers. Like I said, each of those solutions works. They solve a real problem, but they were never designed to work as one system. So what happens there? A 3D model lives and dies in one department. Construction starts in a separate system. You have to re-key information. Operations begin with no memory and safety tools arrive with no knowledge of the asset. 4 vendors, 4 databases, essentially 4 versions of the truth.

If you compare that to what we do here at Octave, it's very different, right? The design, the digital twin is born. We carry that through the life cycle, constantly updating it. You make a change in one system, it ripples through the others. And I'll describe this a bit more on the next slide.

So if you look at our platform, this is not point solutions or disconnected products. Our customers, they usually start in the design. They simulate hundreds or maybe even thousands different ways of building an asset. They come up with the most optimal design. They decide on that. And then this digital twin, this design gets handed over in work packages to the different EPCs or construction companies, right, and suppliers that are building this facility or asset.

And they keep this constantly updated, right? So if you make a change in the design, it changes your schedule, your cost, suppliers, materials, all of this connected, right? So once they've done building this facility or asset, they hand it over to an owner-operator, they now have a real live digital twin. Why do they want that? Well, they want to do asset performance, right, predictive maintenance, optimization, quality assurance. And it doesn't stop there because once an asset is live, they make tens of thousands of changes to them every year, right? You have to think about these assets, many of them are like mini cities, right? They are huge assets we're talking about.

Okay. And finally, of course, they want to protect them. I don't think I have to mention what we see in the world going on, right? I mean everybody is interested in having a 360 live view of their assets.

Okay. All of this also is supported by a data backbone, a platform, if you like, where we provide an integration layer so that the customer doesn't necessarily need to know which product they are in, right? It's supported by one backbone. And on top of that, we are right now building an agentic layer that we call Octave Aria. This is still in the beta mode in the R&D department. So I won't steal Jay's thunder, our CPO. He will come out later and talk about what we're doing here.

And the final thing I'll say, this -- we are not building a closed system here. We work with all the cloud and hyperscalers. We can connect to any competitor, any peer, any in-house system the customer might have, doesn't matter. We can connect all of this to our system.

Okay. So that's the platform. That's what we do. What about the market? These are some numbers from the kind of big research companies like Gartner, IDC, McKinsey. They estimate that this market is today worth roughly $28 billion. They also estimate that it's going to grow to about $40 billion until 2029. The reason why they believe that is because of these structural growth drivers you see on the slide here.

A couple of the big ones, in my opinion, is the growing need for energy. It's very clear to me with the investments in data centers and things like that. Digital transformation in itself, it is a buzzword. It has been around for a long time, but it's still very early in this journey. Regulation is certainly a driver. And then I would say general modernization of public safety and infrastructure. And of course, AI. I mean, AI does not shrink this market. It expands it. And I'll get back to the AI topic in a minute. But if you do the math theoretically on this market, and let's say, we win 1 percentage point of market share, that would be worth roughly $280 million in ARR. So it's a big opportunity.

Okay. So it's a big market. Who are we in this market? Well, we are, in fact, the recognized gold standard in this market. As you can see from the screen here, we have more than 35 different industry awards from the most respected analyst firms in our space, Gartner, IDC, ARC, Verdantix and so on. And it's not for 1 or 2 products, it is truly for the entire platform, as you can see.

Okay. I said I was going to get back to AI. So I'm going to say 3 things about AI. I get this question in every investor meeting, so I thought I might as well address it. I mean, the first thing I want to say is back to the mission criticality, right? You have seen what our customers do. They build nuclear power plants like protect entire cities. They don't need probabilistic outcomes. They need deterministic outcomes, right? So you cannot tell an operator that it's a 90% chance this valve is safe, right? It's not good enough. So to me, we have a big head start. We already sit on this data, right? We are the backbone of their engineering. So it's our job to put AI on top of that. So I see it as a great opportunity.

The second point I want to make is we sit on decades of this data, right, of context. Everything from engineering data, operational data, live data, like all of this, we sit on. And I think one common misconception is that customers are looking to cut the software cost. I mean, it's not what I see at least. I mean, we are a tiny fraction of the cost of one of these customers, right? Their big cost in the P&L is the project, right? How do they make their project, their asset 1% more efficient. That could save them hundreds of millions, right? It's not about looking at the software spend. So I think we have a great position.

The final thing I'll say, I'm super excited about AI. We're using it internally a lot, and Jay will talk about this a little bit later. We have around 2,500 developers, and it's frankly super exciting to see the productivity that we've started to gain here, I would say, really within the last year, it's dramatically improved. Not to reduce the headcount, that's important to say. We believe we can shift money from, let's say, maintenance, bug fixing, documentation, stuff like that into innovation to really dramatically improve our innovation, improve our competitiveness and ultimately, of course, change our growth trajectory.

Okay. So sounds all good, hopefully, but how does this work in practice, you might ask. So let me show you a few examples of some real customers. The first one I want to talk about is one of the world's largest oil and gas producers located in the Middle East. This is one -- or actually the biggest deal we have ever won. We announced this in the third quarter last year. We say it's in the very high tens of millions.

To give you -- maybe start with why did we win this? Well, this customer wanted to digitalize all of their assets, not one, right, all of them. And to give you an indication of the size, their biggest facility is the size of 50 Disneylands, right? So when you think of a plant, right, it's not -- it's a mini city, right? So big -- yes, big, big customer. And again, why did we win? Well, we were the only ones that could provide a connected system from A to C, which is what they wanted.

Other than the revenue itself, why is this interesting? Well, because when one of these big owner operators standardizes on our technology, that sends ripple effects into the industry because EPCs, construction companies, suppliers, they get, let's say, very incentivized to get on our platform, right, if they want to work with these big owner operators. So it's a great win and a great story.

The second example I'm going to show you is very different. We also work with Formula 1. We're a technology partner to the Visa Cash App Racing Bulls. And you might think, okay, you put a logo on a car, so what? That is not what we're doing. Well, we are doing that, but that's not the point of it. We are truly a technology partner to them. You might think of Formula 1 as a sport. To me, it is 11 technology companies competing, right? Every weekend, they test -- now every 2 weeks, they test the absolute limit of engineering, manufacturing and logistics. They go to 24 different cities. It's basically a lift and shift traveling circus, right? You can imagine the parts, the logistics, something breaks on Friday, it's analyzed, shipped, manufactured back on the track Saturday, right? It's a very impressive operation.

And what do they use from us then? Well, they use our EAM, or asset management system to manage all the different parts and assets, and they use our quality management software in their quality process. So it's not just a sponsorship. It is truly a partnership.

The last example I want to show you is our software on the biggest stage with the biggest crowds, right? At the 2025 presidential inauguration, our technology was deployed across 7 agencies, 11 operation centers around the district of Colombia, local police, federal agencies, military, all sharing real-time information in a single platform. Our customer here was the Washington's Office of Unified Communications. And they actually won something called the APCO Technology Award for this installation, which is, as far as I understand it, kind of the greatest honor you can get in public safety.

And the cool thing about that is that another customer or potential customer, Arlington County, home to the Pentagon and the Reagan National Airport, they saw this installation and got very impressed. And now earlier -- well, say, late last year, they went live on the platform as well. So to me, that's an example of we win one, the neighbor, the region sees it and we expand that way.

So I've shown you the life cycle. I've seen you what happens -- I've shown you what happens when context connects across it. You have seen it working in energy, in Formula 1 and in public safety. So now I want to show you some numbers. That's why you're really here, right? So let's do that. Because the deeper a customer goes into this life cycle, the more valuable, obviously, the data, the contact our platform becomes. And I think that's very clear when I show you the economics as well that this is not really a growth strategy. It's more a structural outcome of how we operate.

So if we start with this one, if you look at this chart, this is our retention split by customer size. So you can see here the larger the customer, the higher the retention. So among our largest customers, the one over $1 million in ARR, we have a gross retention of 99% and that's a pretty impressive number, right? If you think about those kind of large enterprises, they have whole departments, procurement teams, their job is to find alternatives, right? Yet they stay every year. Why is that? Obviously, because we are critical to them.

Even if you look at our smallest tier under 250,000, our retention is 92%, right? So the base is very stable and it is growing. If you look at our average ARR, recurring revenue, it's gone from $214,000 to $250,000 over the last few years. But the most interesting point on this slide is if you look at the difference between a customer who has 1 workflow versus 2 versus 3 or more, right? So if they're only in design or if they're in design and build and so on, you can see if they're in 1 workflow, the average ARR is $150,000. At 2 workflows, it's a little more than $500,000 and at 3 workflows, it's slightly over $2 million. That's a 15x multiplier. So the follow-up question I usually get from that is, okay, how many customers are on 1 versus 2 versus 3, right? And the answer to that is that 14% of our customers are on more than 1 workflow, 14. Those 14% represent almost half our ARR.

So what's the conclusion from that? We have an 86% runway, right? We can get more percent of the customers adopting more workflow. We have a huge growth engine sitting in our installed base. That's the point I want to make.

But we also, of course, want to have new customers. So let's look at that. What does that look like if you look at the front door. We won 400 new customers last year, so pretty decent number. What's also good is if you look at the average size of landing, if we look 2 years ago, that number was 71,000 for a new customer. Last year, it was 85,000. So we managed to sell bigger from the start. The other good news is that if we look at those customers 2 years ago, on average, they are 40% bigger today. So they land and they grow.

So what does this mean to sum this up, this becomes harder and harder for anybody to displace every year, right? Switching costs increase, more workflows deployed and a larger ARR base to expand from.

Okay. So why now you might ask, why is now the time for Octave to stand alone? Well, I would say everything I just showed you more or less was built inside Hexagon in siloed divisions. Now we're going to do this with one team, one P&L, one road map, all R&D focused on this life cycle. To me, the question is not whether the model works. The question is what will it produce when we focus and point everything in the same direction.

So to summarize kind of the investment highlights for you guys, the market is large. It is growing, roughly a 10% CAGR. We have a very solid installed base with low churn. Our recurring revenue keeps expanding. It was roughly 58% 4 years ago. Today, 66% and Ben will talk later about what our target is for the next coming years. But yes, it is definitely higher than 66%, right, Ben? Good.

And AI is not a threat. It's an amplifier. It expands our TAM. It's a good thing. And like I showed you, in our industries, we are the recognized market leader. And finally, like I said, I think the independence gives us focus and lets everybody unite under one mission and one goal.

All right. So with that, I'm going to invite my team here on the stage soon. I'll start with Jay. But what these guys are going to do is basically lay out the proof for the vision and strategy that I've hopefully given you here. Jay is going to show you how this works inside the product, inside the platform. Then Tami will come up after the break and show you the go-to-market engine and more data on the sales. And finally, Ben will come and wrap this up into a financial model.

So with that, thank you very much, and welcome, Jay.

Thank you, Mattias. How is everyone doing? Good. All right. As Mattias mentioned, my name is Jay Allardyce. I have the privilege of being the Chief Product Officer for Octave. I will go into the proof here shortly, but a bit of -- a little bit about myself as I've been now 7 months into Octave. It's been 25 years in technology, started as an SAP basis developer in HP and over the years, eventually became Vice President and Chief Operating Officer of HP Software, which is a $4 billion software portfolio, not so much undislike Octave with innovation and acquisitions and helped to transform that portfolio, which is a large contribution to HP at the time.

Left that and went to GE. It was unrecruited. And it was partly because I got a spark doing some work in HP Labs about real-time energy management within data centers. How do you look at hot oil, cold [indiscernible] and the way things worked. So I said, where can I go learn? And this is all during the carbon credit days and trying to understand sustainability is our market there. And so I went to GE to understand the industrial landscape and helped to build one of the most successful businesses in power and water, specifically as their digital business and then had a short stint as the CMO and CPO of GE Digital before recruited to uptake. That's not on this list. But I say that as they have an intent to be acquired by Bosch. So big congratulations to that team.

I further spent time at Alphabet in the Google Cloud division with a pure focus at either you're building infrastructure for AI, you're building AI native applications or you're helping companies reimagine their applications using AI. And then that leading solution engineering worked deeply with C3 AI and with [indiscernible] to go into vertical markets, very similar to some of the aspects of where Octave is today.

Last but not least, smaller company, but I think it's relevant for this closure for myself is a company called GenAI Works. We realized during AI, this entire hype. It is about technology, but much more, it is about a cultural shift, a mindset shift. It is here to stay. So it's a mission-based company, helping people to discover, learn and grow through all things AI. That is our biggest opportunity.

So you may ask why Octave? It's very simple in my mind, to make Octave a household name. You heard Mattias talk about exactly what we do for our customers, but more broadly for society. Everything you and I touch that we depend on, in many ways, sometimes take for granted, Octave has helped to power. And I think there's the greatest opportunity to bring the next generation of innovators and engineers first principles plus data to come and work in one of the coolest industries for decades to come.

So you heard Mattias talk about this notion that we have a structural failure. Information is not flowing throughout a life cycle. The context is broken. I want to really make this very clear. This inflection point is not a marketing slide. This is a point right now of a market that is being reimagined. And I've seen these patterns, and I'm grateful to be a part of this. But to illustrate it, first up is this productivity evolution. Every company has bought technologies, SaaS solutions, what have you. These point solutions drive specific value, but they lack the context of how a business runs. That has forced every organization to take investment to become an IT organization to rethink how their workflows work. That's a challenge.

Second to that is the demographic. Our parents, our grandparents, friends, colleagues, many who are in this great industry that we support are retiring. That tacit knowledge is walking out the door, that context is leaving us. And at the same time, we don't have as many people coming in. There's over 300,000 unfilled jobs just in construction alone. So how do we encourage this next generation to be data first and really working in an industry we care about?

And last should be no surprise to anybody is AI. This is not a fad. This is not a this will to pass. This is foundational. We are absolutely creating a plateau in the market across all industries that we see that is going to allow companies to reimagine the way they work, not simply plug in yet another technology in their stack.

So I want to paint this picture because we are in the great city of New York. And many of you came here by plane, trains, bus, automobile, maybe took a [indiscernible] scooter. I appreciate you are here listening to us and sharing this passion vision that we have. But I'm sure you passed across a lot of that infrastructure and took it for granted that it's just there, right? And you might think, in many ways, these are just disconnected assets or silos or systems as companies and that as how they work. But Mattias talked about the orchestration of how the city has a heartbeat, how NYPD is supporting us that is managing the safety for all of you and I to go from this event to get back home to our loved ones. So let's just dig a bit deeper to understand context-wise, how we think about this.

First up are our builders. As you are designing these great assets, be it a building, a roadway, transportation, LNG plant, the mere fact, as Mattias said, we're going through a significant amount of design changes, and it's great to be able to do that upfront to avoid that cost variation that goes downstream. There's a tremendous amount of information going into this, and every change is cost. But the cost of getting this wrong, it is catastrophic. We sit here in a building on the second floor, which is 25 floors above us, knowing that it is safe, structural and secure. That's context. It's understanding something with grounding.

As that design is finished, it goes into a much more complex phase. Every builder has to deal with materials, labor, time line, all things that are significant to their schedule, their cost and how they run. All those signals will have variations, but we don't want to have to spend time trying to assemble this project over project, but that complexity and that data continues and compounds.

And third, it's much like taking the keys to a new house or an apartment. You have that digital twin, you have that design. You have all the information of how that was actually built. So from first day commissioning into perpetuity, you can run this with confidence. But their world is very different. It's situational, events happen. So you have to react, you have to manage.

And last, but certainly not least, is how are we protect it. whether that is through surveillance, supported information, incidents, public safety. I can't hear it right now, but as I said, NYPD is using our capabilities to help keep us all safe. It keeps the heartbeat of the city running, and it can be any city globally. So the reality is this inflection point, in my view, is unlocking an entirely new market.

If you think about these data silos in an enterprise, and we all do because we live in companies where it's hard to share information because you're in different departments. Think of the same way as an Octave city of how assets and systems and people and how they operate and how we can be far more efficient to redefine a life cycle of how to work.

So you've seen this before. We're going to dive a lot deeper into this. Our portfolio. And it first starts with applications from the design, build, operate, protect, the continuity, the consistency of being able to take information all the way through this life cycle and enter it at any point and be able to have that consistency. Why this is unique and why Octave has a leading position is when you start with applications, you're embedded in the workflow that your customers care about. You're in the business that they run. Now the opportunity for us is building out the platform that is in support because that drives not only new context for existing customers, as Mattias talked about, but it also allows us to go after new customers. It allows us to rewire or rethink the way the business processes work. And that is the fundamental problem and opportunity we have with AI today. So we'll go into this here in a deeper view.

But before I do, as a product leader, if I and our team from product and R&D are not sitting here thinking about who we serve daily, we should think about that twice. These are our heroes, our builders, our operators, and I'll call them our guardians, our public safety leaders. We have to think day in and day out of how we make their jobs and their lives easier, not how they become IT professionals.

So first up, let's dive into the builders, EPCs. They live in a project life cycle time and time again. They're trying to optimize this. They're optimizing it for margin, project delivery and ensuring that they can manage this time and time again and bring that tacet knowledge for every project they do globally.

I want to illustrate it with Fluor, a very large EPC, one of our customers that has worked globally across multiple programs and being able to manage multiple construction efforts. And how do they think about this in this life cycle from a design basis, construction through to sustaining engineering. But as you can see, they have some challenges. Every project is managed in a margin window, some greater, some less depending on the company. The backlog is important. If you think about this for an average EPC between $10 billion and $50 billion, if you add up every construction company out there, this equates to well over $1 trillion. There's one other great market right now that we all know that is over $1 trillion in backlog, somewhere around $1.4 billion, I believe, and that is AI. So the market is healthy. The backlog is there. Our customers are thriving. But more importantly, we're embedded to support them.

So you bring this all together, I want to dig into a couple of areas you understand just how our solutions drive this impact. And I'll first start with detailed engineering design. This is our heritage. This is the bedrock of Octave. We invented this space. From 2D to 3D drawings, bringing all things that would make the structural integrity of the design of this building to be precise, accurate, standard code and doing it in a way that drives simplicity and more importantly, drives greater productivity and value for the engineers that all work to deliver that.

So what's great through all this, it has a viewpoint of being the basis of the start of that digital twin and knowing how these capabilities and disciplines come together. And every one of our EPCs as we work with them, we're constantly trying to optimize how this can get better and better using AI, both in 3D rendering as well as geospatial analysis that all helps to the support of these capabilities going forward.

Second up is materials management. We talk about this notion of time on tool. We want people to spend more time working on the project versus spending more time finding the material that they have. So 2 great things about this, one of which is the material management where it's right part, right labor, time to schedule, so you can optimize that cost, which is the biggest cost object for an EPC out there. The second is the referenceability. We manage a reference library that every EPC uses to manage their procurement, supplier, vendors, codes, information. It is an industry standard for which as well the industry adopts. So you can think about this as a very large and powerful way for us to manage the most costly input from supply shocks and variations, material densities, all these things that change that ultimately tie back into how a design might change.

So we bring that together in true system of action. Mattias talked about system of records. But really when you think of what companies care about is, can I act upon something? Not that I archive it, but can I act on it and make it valuable for what I do today in support of my customers. That is engineering information management. It's category leadership in a way that brings together the efficacy of that design, the construction material to a true digital twin and constantly maintaining that so that you know what you've built, how you built and how it supports what it is that you've constructed.

So to cement this, today, we manage over 90 billion engineering points, if you will, under management. That is significant just for this alone. But the beauty of this kind of allows us to then go into our next persona, and that's our facility owners or operators. And those operators, they'll take those keys. They'll take that digital twin and they have the clarity from the first start of a new building or a new power plant or a roadway into how they manage in perpetuity. So that information continues to compound and build. And if you thought about it before, you have this break in silos, you have handoffs, that is a tremendous amount of waste. We continue to be in the life cycle of how our builders operate and handing it off to the next great constituent, which are the operators.

But their world is vastly different. They live in a world of constant change, information is flowing. They have to manage maintenance, quality, potentially cybersecurity. So for them, it's all about uptime, reliability, the availability of that asset, making sure they can manage it more efficiently and doing so in a way that supports their overall financial objective, whether they are a facility operator or a manufacturer.

So let's dive into a couple of areas real quick. First up is the preventative maintenance, vitally critical because you know the cost of your asset and that is on the books. How do you manage that, maintain that, extend that life, knowing truly how things perform versus what was slapped on as an OEM spec for that piece of equipment.

EAM is another system of action. And what is powerful here is we have companies across the globe, one of which many of us know, perhaps might know by the name, but what they provide, be that of [indiscernible]. And that's Kimberly-Clark. They've been around for a considerable amount of time driving an impact in the household name, but for them, not only managing their facilities that they grow as they manage, but they're also managing what they produce and also, more importantly, their brand. And we've seen such the biggest impact that as you go from enterprise asset management on through to other parts of the business, it may have a catastrophic impact of what you're delivering. But one thing I want to highlight here is the extent of how large the system of action is. We manage over 550 million work orders annually. So at the heartbeat of every owner-operator in their facility.

But as I mentioned in terms of quality and compliance, this is not a nice afterthought. This is not something you should have. We all know that every sort of defect has a direct impact to the bottom line or as well as top line revenue. And we know for food and bev or regulated industries that anything that hits into the consumer market and has a recall may have a catastrophic impact to your brand. So this is a strategic asset that our facility owners and operators use and how they manage the delivery of their capabilities and goods to services into market.

So last, but certainly not least, our guardians or public safety, so command and control centers. Living as well in a constancy of change. It is about having the right bit of information and the right incident at the right time, so you can identify, remediate and address. And this can be an individual, it could be an incident. It could be a misplaced piece of information, an object, what have you. How do you bring together monitoring and surveillance, crisis management and that coordinated response. The economics are clear, but there is no price for the loss of human life. We have to, as Octave, realize what we carry and what we have to support and the criticality of what we build for our customers has to be top-notch delivered in a way that they can go and support any one of us in the cities across the globe and how we manage our lives and the safety of those environments.

So what I do want to highlight is our third system of action, Octave OnCall. As Mattias mentioned, NYPD is a customer and a user and a great feedback advocate to us for us to continue to make this better and better. But as we continue to roll this out, it's all about dispatchability. And you can think of this not only in a city like that of Rio de Janeiro with over 17 million citizens, but you can also think about cities such as for manufacturing. Very large manufacturers have their own ZIP code. So incident response is fundamental in terms of how they manage a plant, the safety, the material, who's on the yard, what environments that they are in, the applicability of this spans across our customer base.

So this is really intelligence at scale. It is for the physical world. It's where intelligence is modeled, where it materializes, where it compounds and ultimately, where it becomes durable. So throughout this connected life cycle, this workflow, we have the ability to reimagine this. But what I'd like to do, though, is highlight the fact that across the customers I explained, whether it be Fluor, Kimberly-Clark, Rio de Janeiro, the entry points of where they work within any parts of our workflow can expand as they do and continue to grow with them.

But there's one here that I'd like to pass it off on VGF to introduce our Chief Architect, Mladen Stojic to talk a little bit further about that. So Mladen?

Good morning. My name is Mladen Stojic. I've had the pleasure of being with several companies and now, of course, with Octave, working with Jay and the rest of the leadership team focused on taking ideas and ultimately igniting and delivering innovation across many of the solutions and industries that we operate in today.

I'm going to build off the message, but specifically focus on one industry that nicely tells and articulates the story associated with integrating multiple workflows and ultimately delivering solutions in mission-critical environments, and that's rail.

Rail networks are one of the key arteries, if you think of a body that connect society but also connect global economies. Over 1,500 rail networks around the world are responsible for transporting over 5 billion people and are also responsible for the transport of up to $9 trillion of goods annually. And as Octave, we enable agencies to design, operate and ultimately protect the people, the property and the assets that are participating within this life cycle.

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Let's start with design. We have an uncanny ability to ingest multisource content, whether it's from satellites, whether it's from drones and ultimately produce AI-ready data that feeds downstream workflows, particularly those workflows associated with building complex rail networks and rail network models, storing necessary data to facilitate AI workflows downstream. Once we've designed a rail network, now we move to the operation workflow. Having these systems connected allows us to support the asset in the field through field inspection workflows, ultimately improving the performance of that given asset.

Lastly, protection. Given the amount of people and the value of goods that are transported annually through these rail networks, we need surveillance and monitoring capabilities that allow us to detect and quickly respond when something happens, whether it's an incident or a threat along a rail network. And as Octave, we are the only company in the world that can not only connect to these systems, but also deliver one system of action. So think of it. Instead of having to go to three different vendors to get this solution, you go to one vendor and that vendor is Octave.

Let's see it in action, and I'll kind of talk you through what you're looking at here. It starts with change. Agencies spend a lot of money collecting new content to reflect reality. And that content can come from a satellite, it could come through a drone that's flying and scanning that linear network. It could come from different real-time sensors. But ultimately, we have the ability to fuse all that multisource content and produce a real-time digital twin, not only of what has happened, but of what is happening, establishing a system that facilitates downstream workflows.

Beyond that, we start connecting systems. We have an ability to connect the digital twin to the enterprise asset management system, offering a bidirectional information bridge that allows workers across different silos and across different departments to look at an asset and ultimately update that asset whether something has happened in the field. Surveillance and monitoring. We use video and LiDAR sensors to detect incidents or potential threats. Now other companies do that as well. But what makes Octave unique?

Because we're connected to all these systems, we have the ability to not only connect to the digital twin, but also all that asset information stored within our enterprise asset management system. So you're not having to open and knock on different doors and different systems. With Octave, we connect all of this together. And what you're looking at here is our 3D and linear detection capabilities through the use of LiDAR technology. It's a new innovation. When coupled with AI, we have the ability to detect threats and incidents and immediately dispatch a response team, which is what you have here with OnCall.

So with OnCall, we can take that incident, manage it, look at all of the resources close to that area where that incident has occurred and quickly route and dispatch a response team, taking into consideration traffic or any other information that may get in the way of getting to that response as quickly as possible. So once again, as Octave, we're not only building these capabilities, but we're connecting them through this life cycle intelligence for rail. I've just given you one example of rail, but it doesn't really stop there. The same model, the same idea of life cycle intelligence can be established and applied to roads, where city, county and various states have robust road infrastructure that needs to be modernized and maintained. They need design, build, operate and protect systems that work in concert and together. Airports and seaports also support our global economy through the transport of goods and people. These require not only asset management and design capabilities, but severe protection capabilities to protect the assets that are being managed in and out of different seaports.

Moving beyond that to utility networks, whether they're utility electric, telecom or water. The distribution of power and all of these utilities is important to be designed, maintained and protected. These are long linear networks and through the use of new sensing technology, we could transform all that data into a digital twin that can be used in downstream workflows. So you can see a common need and a common thread across all these different markets. What makes Octave unique is the comprehensive life cycle intelligence capabilities that we have that not only design, build, operate and protect these capabilities that provide one system of action, and that's where Octave comes in. Thank you. Jay, I was looking at...

Good job. All right. Thanks, Mladen. So hopefully, that gives you all a bit of perspective of how our solutions come to life and how we support our customers. It's significant. It's impactful. It is supporting the way they work. So it's great to partner with Mladen and the entire product and R&D team.

So I want to switch gears a little bit, okay, is really talking about this notion of scaling with context. This is our opportunity at Octave. So -- but first, there are three traps, if you will, that are kind of limiting why industry is not yet scaling. So let's talk through this. First is the CoPilot trap. I know everybody here probably uses some form of AI. I encourage it, keep doing it because it's muscle memory. You're having to build new skills. You're having to remove biases of how you've worked before because it is simply not a bolt-on. If you're doing work and then going to that and coming back, you're not integrating it into your workflow and how you run yourself day in and day out. And so forth, if you think of this this way, is that many organizations simply think, "Hey, yes, I've got an AI strategy. But if you not have the opportunity to fundamentally rewire or rethink how your business processes work, that is your rate limiter.

The second is data silos. We talked about this. Now technically, there are ways to manage multiple disparate environments in a federated way to allow data to come about, but that context is absolutely essential. Why certain information interacts with other information? It's no different than how all of you might operate as a team of how you know how somebody works in marketing, sales, procurement, what have you. Once you build that institutional knowledge, you can execute. But oftentimes, the data is simply just data trapped in various environments.

The last is essential. And this is the interface trap. Let's just put a parallel to this. We all went from web to mobile, and we saw how powerful that was to go from a much more complex interface to perhaps the 5, 6, 7, 8 capabilities that you need in a mobile phone to do what, the things that you need to. We are at 100x jump by this, an opportunity where you're actually being able to work with information that is a part of you, not something that was in a form or a database or a table that you just simply retrieve, being able to ask a first secondary or tertiary-based question on what it is you're trying to solve. So you fundamentally have to rethink the workflow. You have to rethink the process to apply AI for the effectiveness that it really does have.

So where are we in this evolution as Octave?

As Mattias talked about, our portfolio is extense. Yes, we've gone from bespoke applications to some data sharing. And where we are now is that digital thread, how are we connecting information across those workflows to create that life cycle, to create greater context to unlock new value. But I will submit today in the tomorrow, if you will, we are in this shift, a true context-driven platform for the physical world. So how do we think about that? It comes back to our customers, our builders, our operators, our guardians, our public safety leaders. And I talked to you about three different systems of action. As we look at this, it is really bringing two worlds of data together, precision engineering that has to be right to how something was designed, constructed because it's held to engineering standards, codes, regulatory bodies, all things that are commissioned for what, the safety and the efficacy of how something is constructed.

Second is situational awareness. This is a one-to-end problem. Things happen. How do you manage information when a new bit of information comes in? What do you need? You need context. When you always talk to a team member, you always ask questions about something and say, yes, can you give you more context about that? Sounds familiar. This is what this is all about. But for us, at Octave, we're not starting from scratch. The data gravity is paramount. And I've seen the patterns throughout my career of whether you start with a platform or you start with applications, we are in the best position as Octave to deliver and unlock an entire new market. The data speaks to itself.

So as we bring this together, we are in private preview right now with the Octave platform. So really, how do we scale this Life Cycle Intelligence across the pillars, across those workflows to have context and have value. So I'm going to walk through this a little bit. And first up, is a bit on the data governance and integration. So this is paramount. You can think of bespoke applications and you can go from data integration to an experience, but there's no reason to do that multiple times over. Having a hardened backbone of information that allows you to connect structured, semi-structured, unstructured data or in our world, IT and OT data, but doing that, that is role-based, secure to user needs such that, that data foundation is right. If we're not spending the time building this, fundamentally, it doesn't matter what else you have on top of the stack.

Second is the context engine. This is where the intelligence comes in for us to support how do our graph-based technologies align across those various systems of action and how the life cycle actually works. But in addition to this, because of the Octave portfolio, we have great things that we can contribute. Mladen shared one with respect to geospatial and some of the rendering capabilities. How do these become consumable engines in support of applications that a customer might need, other ones such as scenario planning, modeling, dispatching, supplier reference, all things that are fundamental to what can be used to answer specific questions in a workflow.

The third is really bringing the life cycle intelligence together across that value chain because that is where the work takes place, as we've talked about. But also then introducing Octave ERIDAA, a true multi-agent-based framework that allows for reasoning and knowledge across an entire life cycle. But I want to kind of paint a picture of how this works. As you think of it in a refinery, if an issue happens, do you send a single individual to go fix that issue? No. You send a team, specialist who understand codes, standards, chemicals, safety. That team works to solve a particular problem. No different in a multi-agent framework. That is true digital labor that has intent and understanding that allows for human-a-loop interactivity of how that life cycle might remediate a particular problem. So the power of this is complementary to the domain knowledge that we have within Octave and how we support our customers.

The great thing of this, any cloud, any system, any model. We have to realize the value that we bring has to be in support of the application and the end use that our customers use and have to be able to run on these fabrics as they continue to evolve. And we partner deeply with many of these providers to help us scale and drive reach into the markets that we serve, which you'll hear Tamie talk a little bit about further later. But as I go into this, it is really about scaling AI to an autonomous life cycle intelligence.

So we've been doing a lot of great work with Octave Assist. So over 2 million assist per day, the assistance of how more information that a user can dive into their specific application and interact with data, not in a form and a table, but in much more of a natural language interaction. The second of that is the embedded AI. We've invested heavily in this because in our world, people don't want to spend time switching screens left and right. You want to bring the intelligence, whether it's prescriptive, predictive or some sort of generative output that can support the way they work right there in the application. And doing so means more time to the focus, more time to doing the work you need to and less time managing different systems and different information sets. So we continue to invest deeply, which drives a greater moat and focus for our customers that are with us today an opportunity to differentiate the products that we have leading as well.

So where does that go? The Octave platform, as I've talked about before, it's an opportunity for not only existing customers to continue to leverage what they have today, but extend this into new opportunities as well, which gets us into Octave ERIDAA, as I mentioned, in private preview as we go forward. But the beauty of this is allowing customers to do one fundamental thing, step out from how they operate their business today and ask a first principles question of how I would build this knowing I can attack this market tomorrow. Take an example. For those builders, they manage hours. They have a very large cost structure, how they manage those hours to deliver something into a given market. That cost structure might not work if they want to go down market to enter into something that is far more nimble and has a very different margin profile. This gives them an opportunity to access all that domain knowledge and context that they've had to think about a new market that they might enter. Very powerful. This is a complete game changer in the way that people work and how they interact in support of their business. So more on this as we go forward.

All right. So Mattias talked about AI for our customers, a little bit about what we're doing. This is a very exciting area for myself, for Mladen, our entire product R&D team is how do you take AI and using this to build and ship products faster, but I want to point out two dimensions, right? One is from the concept to idea, how fast can you compress this? How do you get into a sprint-based mode where you can go from months to weeks to have production-ready code. And this constraint, if anything, is forcing everybody to become a builder within software as roles blend, job functions define and evolve. This is allowing us to bring new innovation even faster to the market and being able to work with customers far more quickly to get their feedback and input to say, will they be a consumer of it? The old ways are gone.

Second of this is how do we actually deploy it across our software development life cycle from a build, QA test, production delivery and actually being able to look back at very large code bases that we've had for years and reimagine those AI-first. Extremely powerful for us as an organization. And more importantly, how do we use this innovation to reinvest into what we are building in the portfolio to drive new organic growth. But as you can see, we've been just moving ahead in a great way, shipping almost 4,000 features here in the last 12 months alone. So two other things I want to highlight as we scale with Octave.

One significant input variable, as I talked about, is education. So we've been at the forefront to help our users who are using our software get better and evolve their jobs. And also at the same time, how do they upskill? How are they evolving in this world of AI? We simply can't provide the technology. We need to help them transform as well. And so one of the greatest opportunities for us is, as we said, is how do you encourage the next generation of innovators from high school, vocational, 2-year, 4-year college, anyone who wants an opportunity to get into what we believe is one of the coolest industries for decades to come.

And second to this is Octave Collabs. We talk about people, process technology. We've talked a lot of the technology, but AI is fundamentally about how you reimagine a process and how do you retool your people. And so for us, it's an opportunity to partner with leading customers and helping them to think and rethink their business purely in an outcome-based, because the value of AI is not a tool. The value of AI is how can I apply it to the economics of how a business runs and how I can constantly optimize that in supporting them.

At a great customer meeting this week, very large Canadian EPC, and we just started walking through. They were very advanced in terms of the data foundation. And it's wonderful to see, but you can see where they were stuck. And that is which use cases matter most, what ones will drive the greatest economic value. And then the harder question, how do I make them stick? Because the management of change, the behavioral change, it is the hardest thing that is in front of us, and it really means removing the recency bias that you've had of what you've learned. So it is so much of what you have to learn as it is what you have to unlearn. So we have a number of customers working with us as they're part of the platform in Octave AARIA on this journey, and we're excited to continue to partner with them this year.

So let me bring it to close. Why do customers choose Octave? From really the Apollo launch to industrial AI, it's 3 things: Domain first, you have to understand the business. You have to understand how you operate in a given setting. Two, it's workflow essential, understanding the applications of how it's actually embedded in the way they work versus do you have an IT system that then they have to go configure and figure out how to work in their environment. And last but not least is context-driven. If you do not have this context that goes across an entire life cycle, that compounding effect stops, the breakage is there, the opportunity is missed. So customers have partnered with us for decades. And in so doing, we are grateful for their partnership and the continued partnership going forward as we help to transform one of the greatest market opportunities that I've seen in my career.

So thank you, everyone, and we're going to now go to a break, and we'll come back afterwards, and we'll hear from Tamie, our Chief Revenue Officer; and Ben Maslen our CFO. So I think we have about 10 minutes.

[Break]

Ladies and gentlemen, please welcome Chief Revenue Officer, Tamie Adams.

All right. Good morning, everybody. Welcome back from break. I'm Tamie Adams. I'm Chief Revenue Officer here at Octave. A little bit about me. I started my career in finance and moved into sales leadership positions at Oracle. I've spent the last 20 years in finance and in sales and looking at winning global sales organizations across the enterprise suite of software products at companies like Honeywell, Oracle, managing billion-dollar P&Ls, global sales organizations, which includes services, marketing and channel organizations.

I've been part of 2 exits, specifically to [indiscernible] and most recently with [indiscernible] to Siemens. My focus as CRO has been really to emphasize around turnarounds, partnerships and hypergrowth organizations. I've seen a lot of go-to-market models. And what I found here as a business, they've earned the market position really the hard way, deep customer relationships built over decades. Industries where failure has real consequences to them. This is not something you build over years. This is something you truly build over time and over decades. And when I looked at this opportunity, I saw something that I've never seen before. And I wanted to share with you a little bit this morning and kind of how I look at it.

Let me be really direct on kind of what I saw when I walked in the door. $1.6 billion in revenue, over $1 billion in ARR, 97% gross retention and new customers who land bigger and grow over time. This is not your typical enterprise software story. Most CROs like myself, walk into a situation where it is 100% turnaround, and I have to fix a lot of things. And to be honest with you, this product is differentiated. It's already differentiated in the marketplace. The vision that Mattias has laid out this morning is abundantly clear. The customer relationships really run deep here. And the sales organization that I actually inherited has decades of domain expertise in the industries that we already serve.

My job is really not to reinvent this. My job is really to kind of focus and find the next level of opportunity and growth on top of a model that already exists. And the levers to do this are already in place in the existing business, and we just need to pull those levers a little bit harder. Let me show you who we're building for. We have a strong global reach. We're in over 140 different countries, Americas, EMEA and Asia Pacific. I spent the first couple of months, I've been here a little bit shorter than Jay. I've been here about 5 months now. And I really wanted to get to know our customers, walk on their plant floors, sitting in their control rooms, watching dispatchers route for emergency calls and services in real time and to really understand our sales motions and really what makes sense and really what's meaningful to our customer base.

I came to understand quickly that the biggest opportunity in our business isn't just the geography, it's the depth. And while we are in 140 different countries today, we have -- we've captured only a fraction of what the market cap is offering us. So there's a lot more visibility and a lot more opportunity in this market. What strikes you immediately about our customer base is that the list is extremely deep. These are not software subscriptions where somebody could actually swap this over a weekend. We are inside engineering workflows. We are inside maintenance facilities. We are inside of emergency response infrastructure. In many cases, we have already been there for decades. These are not discretionary buyers. These are organizations for whom downtime revenue isn't a problem. It's really a safety problem. That's the environment our software operates in, and that's our -- why our retention looks the way it does.

And what makes us different from any enterprise software company I've ever worked at to me this is a true opportunity. The best of these relationships that our sellers have, the criticality of what the software touches and the fact that we have barely scratched the surface and what we can sell into this is actually truly amazing. And so when you look at the workflow that Jay actually described and laid the foundation for us this morning, you can see the growth rates clearly. Build is our fastest-growing workflow, up over 20% year-over-year. 3 years ago, it was $67 million business. Today, it's $113 million. The growth is actually coming from construction efficiency, SaaS adoption and new demand alternatives and energy.

Design is our most mature market, still growing, though at a slower pace, it's really being impacted by some macro headwinds that we're seeing with major project slowdown. However, it is still growing.

Operate is our second largest workflow, and it is accelerating over 10% year-over-year growth at $362 million. This is where our most mature SaaS products live and it's where our margin profile actually is the strongest. Build & Operate are mostly reoccurring revenue ARR for us today. And as the mix shifts towards that, we will gain better visibility into the business and insights.

Now as a CRO, I focus on a lot of things. But this is a few key areas that I focus on the day-in and day-out. We want to be able to continue to retain and protect our customer base. We want to be able to up-sell to that customer base. We want to be able to cross-sell. So think about the product and portfolio that we have today, it's extremely rich. And as we acquire new companies through M&A, we'll want to bring them in quickly from a cross-sell motion perspective. And most importantly, we want to be able to land new logos because we want to be able to put them into the cycle to put them back into retain, up-sell and cross-sell.

So let's break it down a little bit. Mattias actually showed you the growth model this morning. My job is going to be to show you how we're doing to accelerate each lever. This model as it sits today, drives about 8% ARR. 97% gross retention means the base does not erode. Our current NRR is at 105% and is the opportunity to get us to 108% through continued pricing discipline and enterprise expansion. 86% of our customers are on a single workflow, which means the cross-sell runway is enormous. And roughly 1/3 of our growth comes from net new, which means we're adding on top of an already solid base. What changes under Octave is the rigor, the commercial discipline, the data-driven account planning and each one of those levers is moving. My job is to make sure that they're all moving in the same direction at the same time, the same discipline. And let me show you how.

We're going to start with up-sell. We are rolling out a global deal desk with greater rigor, removing money that was previously left on the table, creating consistency, making it easier for forecasting abilities, transparent anchors for discounting, discipline at annual price increases and AI insight tools for the sellers so they can identify where we truly can expand. As customers grow, we tend to move from a seat-based pricing model to an enterprise-wide license agreement. The result is 186, $1 million tier customers, up from 142, 3 years ago. That now represents 51% of our total ARR, and that tier is growing double digits last year alone. The customer base is also moving upmarket. Every group is growing, and we should see more as this global deal desk that we've turned to roll out is implemented and start to take hold during 2026.

Now here's what the pricing discipline is actually producing. $296 million in SaaS revenue. That is up 17% year-over-year. Our customers choose SaaS because it delivers faster time to value and better commercial structures in the way they buy. We are also seeing pockets of small customers who have been on perpetual-based licensing for a period of time choosing to move over to SaaS-based models, and it's on their own time line. We acknowledge we are not pushing them, but it's because the SaaS model actually drives more value. Every tier is growing. The largest accounts are growing fast and the $1 million-plus tier grew over 40% in just 1 year alone.

Our business is really focused on large complex customers. The foundation of everything is retention, and ours is exceptional, not by accident. At the $1 million-plus tier, we have 99% logo retention. At the $500,000 tier, we have 98%. These are not numbers you get by having a good product. You get these numbers by being embedded in the actual business unit itself. Let's think about what the customers actually do. They manage thousands of engineering changes. They handled millions of emergency phone calls. They run physical assets where the cost of failure is measured not by revenue and in dollars, but by safety and security. When you're deep in the customer operations and when your data model knows our asset class, our asset history and their workflow exceptions and their regulatory requirements, switching software isn't a decision. It's an operational risk that no operator actually wants to take.

And the relationship with our customers is deepening at every level, including the sales organization. These customers are now asking us to help them build AI applications for a system of record, very similar to kind of what you saw Jay described earlier. That is a new commercial model for [indiscernible] on top of an already sticky base. The $1 million tier is also growing in our share of business from 48% in ARR in 2022 to 51% today. Our most valuable customers are getting more valuable, and that's the foundation that we're actually building on.

So let me show you what this looks like in practice. Customer example. This is a global German chemical company, 160-year plus strong history and has been with us for many years. This customer story is about kind of the adoption of our solutions and how they grew into a multi-pillar workflow. When they first came to us, they were on a single design workflow, but over the years, they've expanded into Build, then Operate and recently added OnCall solution from the product pillar portfolio. That progression from a workflow to 4 is exactly a land-and-expand strategy that we're looking to build at scale. The most recent OnCall win really kind of strengthen our position in the industrial public safety market, expands our footprint in mission-critical areas and infrastructure and demonstrates that Octave is uniquely positioned to deliver next-generation fully integrated CAD and communication solutions. And their ARR reflects it from the initial landing of a small opportunity to over $3 million in ARR annually today.

Now let's talk about cross-sell. And this is where I see the single most largest untapped opportunity in the business. Let me give you the economic architecture because this piece is really important. A customer on one workflow averages $147,000 annually in spend. Move them to two workflows, they're worth 3.4x that. You move them to more than 3 to 4 workflows, it's 15x. And at that depth, retention is exceptional. Now look where we're at. 86% of our customers represent 51% of ARR are on a single workflow, and 60% of our larger customers are already on multiple. That's not a problem. That's an opportunity. That's the road map to revenue. And actually, that's why I'm here at Octave.

Another customer that speaks to our cross-sell strategy within a single workflow pillar because that's an opportunity for expansion as well. This is a brand-new logo that we just secured in the last several weeks. It's a Fortune 500 company, a global leader in motion and control technologies. They were interested in EAM, which is our Enterprise Asset Management solution. And through the solution discovery and value-based messaging, we determined that the cross-selling motion of ETQ, our Quality Management Solution was actually going to be needed to kind of help resolve their business needs. The sales motion was entirely based upon value. The deal grew from $200,000 with one solution to over $1.1 million with the second. They are now live with 120 sites with over 600 users. And here's the commercial system we're building to capture that conversion market.

First, we're going to focus on target account list, data-driven scoring on every account by workflow and readiness. Second, we're looking at value-based sales methodologies. We're not leading with feature functions. We're leading with business outcomes. Just as an example, what does the design error cost when it reaches construction? What is the operational cost of unplanned outages? These are conversations that are door openers. When you show up with a product-only demo, it doesn't win. Third, the platform integration is a commercial accelerant. These are new releases that make workflows more connected. So as Jay and team expand our workflow portfolio, it will continue to be more and more connected, which means the value of a second or third workflow for every year we grow, we'll continue to invest in that platform. We know the economics of this actually work. 15x at 3x the workflow, we're now building this machine to get more customers faster. This is a systematic approach to go-to-market, and it's one we firmly believe in.

Now let's look at the fourth lever, land and expand. About 1/3 of our ARR growth comes from net new customers, and we have significant room in that given that we have a strong landing motion across all 4 workflow pillars. There's three vectors. The first is geographic expansion. As I mentioned, we're in 140 different countries and our presence also but our penetration in the Middle East, Latin America and high-growth APAC areas are relatively small to a given opportunity, and we see tremendous areas of opportunity to expand in those three regions. Channel. We have over 1,500 reseller marketplace presence with AWS and Azure. Our indirect channel is roughly about 10% of our business today. And that honestly is a little underweight for a company and scale of Octave. I see a lot of room to grow in this area. And at a minimum, we should be double in the channel market. We are building infrastructure for a channel business that will scale, Partner Portal, Octave University for enablement and marketplace presence globally. The foundation is being laid now.

Verticals are third. When you look at data centers, defense, pharmaceuticals, nuclear, food and beverage, we have a strong foundation in these verticals. However, there is plenty of room to grow in each one of these as we look at the TAM overall.

The customer example is all around land and expand at scale. This is a global technology infrastructure company, manages highly secure, reliable and scalable cloud systems and infrastructure with over 900 sites worldwide. You can probably guess who it is. They started with our EAM solution with 350 data centers for enterprise asset management for around $1 million with over 10,000 users. They expanded into the Building Information Modeling Systems for a total of $9 million in ARR annually. Land and expand is really critical to our go-to-market strategy overall.

One of the core changes that we're making in how we drive is the commercial engine. Under Octave, we are going to consolidate to one system, one pipeline, one process, deal desk global-wide as well as revenue operations. Value-based pricing is now the standard. Published pricing, standardized volume discounts, enterprise-wide license agreement and discipline around renewal increases as well. No more ad hoc deals with undervalued platform with the platform delivers. Every point of discount that we provide does count towards our growth. Customer success is now our revenue engine, not a support function any longer. Today, they are in over 700 accounts, which is roughly 90% of our ARR.

Customer success is also driving proactive expansion, up-sell opportunities, migration opportunities as well as contributing to our overall pipeline, and channel growth is a vector, not an afterthought. We are laying a strong foundation, as I mentioned previously.

Let me leave you with really kind of four things. First, the customer base is our foundation, large, complex customers with decade-long relationships. We are embedded in how they operate, and that does not erode. Second, the largest customers are getting larger. NRR is at 105% today, and we can get to 108% through continued pricing discipline, enterprise on the enterprise tier expansion opportunities and the cross-sell motions that we are building systematically. SaaS growth today is at 17% and accelerating. Third, 86% of our customers are on a single workflow and is the largest single growth opportunity in this business. The economics are proven. Three workflows mean 15x of the value. The motion is now systematic. This is not a theoretical white space. This is identified, quantified, data-driven opportunity where we're executing against that. And the fourth is 8% ARR growth. That is the floor. That is not the ceiling. We are here to fine-tune it with the commercial discipline and the unified operating model and our go-to-market rigor that will turn 8% into 10% plus. This is really a great business, and we're building the team and the systems to be able to help us get us there.

And with that, I'm going to turn it over to Ben.

Thank you, Tamie. Good morning, everyone. I'm Ben Maslin, CFO of Octave. Prior to this, I've been the Head of Strategy for Hexagon for over 8 years, responsible for strategic projects, M&A and Investor Relations. This means I've been, like Matthias, heavily involved in building the business that we're here today to present to you as well as working on what's been a very long and extensive separation project.

Prior to Hexagon, I was an equity analyst with Morgan Stanley and Bank of America, and I trained as a Chartered Accountant with PwC. So very excited to be here and involved in the next chapter of Octave's development. I'm going to focus on the financial profile of Octave, including how we got here, recent financial performance and our strategy for future value creation.

So some of you will have followed Hexagon for a long time, and you will know the Octave business and assets well. For others, this will all be fairly new. So here, what we have is a brief recap on how the business has changed under Hexagon's ownership and what that means for Octave's financial outlook going forward. So when Hexagon acquired [indiscernible] in 2010, you had the state that is on the left-hand side of this chart. The business was focused primarily on design tools. It had a customer base that was heavily weighted to oil and gas and EPCs with a focus on large project activity, and it generated around 40% of its revenues from services.

Since then, under Matthias' leadership, we've invested to grow and protect this core business and at the same time, develop and strengthen the platform to set it up better for the future. We've increased the focus on owner operators and the entire asset life cycle where the business is more predictable and sticky. We've diversified the end market exposure into new verticals. We've increased the addressable market size, and we've moved the revenue mix away from services towards software, SaaS and recurring revenue. So as we start life as an independent company, Octave has a much stronger financial profile to build upon.

Now Matthias has talked about the rationale for the separation already, but it's worth underlining again how being independent will impact the financial outlook for Octave. Hexagon remains a great success story, and we're very proud to have been part of that journey. But as an independent company, Octave will have the autonomy to focus on its own strategic priorities with greater management attention. More specifically, we'll be able to more tightly integrate Octave's platform and businesses together to drive greater revenue and cost synergies. And Mattias and Tammy have already given some customer examples to show how that is already taking effect.

Being independent will also allow us to accelerate the shift of the business towards subscription and also attract and retain a stronger pool of talent. And finally, Octave will have its own independent capital allocation strategy to reinvest and drive the business forward in a more focused way. And we believe this greater focus will allow us to deliver improved financial performance at Octave going forward in terms of growth, profitability and cash generation.

Having talked a bit about how we got here, we now have a few slides which recap recent financial performance. Here, we can see the consistent strong growth in Subscription revenue that Octave has delivered since 2022 as well as the increasing share of subscription revenues, which reached 2/3 of the total last year. Now we've increased the focus on driving Subscription revenue and ARR harder and in the last year, have changed the incentivization of the sales teams to focus more on SaaS bookings. Now this shift from perpetual to SaaS obviously has a near-term drag on overall growth. You lose the upfront revenue from that initial perpetual license, and it takes a few years for the stack up of Subscription revenue to offset that, and this partly explains the lower growth we've seen over the last year or so in Non-subscription revenues.

We've also seen a decline in overall Service revenues over the last 2 years. And this has been driven by both the disposal of the Federal service business that we did last year, which had around GBP 90 million of revenues overall and the deliberate decision to exit some business lines, which are now part of the Octave perimeter that were previously reported in other Hexagon divisions. And as you can see, this revenue mix shift accelerated in 2025 as we started to actively prepare from the separation for Hexagon to set Octave business up better for the future.

This divergent growth trend can be seen in more detail on a quarterly basis, with the decline in perpetual licenses and services being the main driver of the slowdown in organic growth that we saw over the last few quarters. Against this, we've seen a continuation of the strong and consistent growth in Subscription revenue over the same period. And this positive trend in Subscription revenues has been underpinned by a record level of SaaS bookings in 2025, which also provides a good starting point for us as we go into 2026. Here, we break out the different constituent parts of our Subscription revenue stream, split between SaaS revenues, maintenance and subscription licenses, which we also break out in more detail on the right-hand side of the slide, so you can see the trend.

Subscription licenses are contracts where the customers are able to flex up and down their consumption of our software tools on a monthly basis, depending on the number of large construction projects that they're actively working on. And as you can see from the slide, although overall Subscription growth for the group was strong last year, we did see a slowdown in growth from the Subscription License revenue stream throughout 2025. And this reflected uncertainties in the global economy, which fed into a lower level of customer project activity and software consumption for us. Now this dynamic is expected to remain a slight headwind to growth as we go through the first half of 2026. However, we do see a sequential stabilization in license usage, and we expect renewed growth later in the year as comparatives get easier.

Turning to profitability. One feature of the last few years has been a steady increase in gross margins, which reached 75% in 2025. And there have been a few drivers of this, including the gradual exit of low-margin Service business that I described earlier to focus our business on higher-margin software. This has dragged on growth, as we've seen, but has structurally improved the margin profile of the group going forward. We also show here our non-GAAP adjusted income from operations. And here, you can see we showed good improvement in profitability in both 2023 and 2024, illustrating that the improvement in the gross margin that you see does drop through to the bottom line, and it gives us confidence in the underlying margin trend for Octave going forward. Now this upward trend paused last year, which reflected two things.

Firstly, we had a slowdown in overall revenue growth, which partly reflects that shifting revenue mix that I talked about. This obviously weighs on profitability in the short run, but it sets Octave up better for the future. At the same time, we started adding in the additional costs we needed to, to make Octave an independent company, such as additional legal, tax, marketing, investor relations and listing costs as well as company and product re-branding, like you can see around you in the foyer, which is significant cost to bear in the short run. So this impacted profitability last year. It's also relevant for 2026, as I'll come on to in a moment. But it's important to remember as a takeaway from this slide that the underlying margin trend is a positive one, which we're confident will reassert itself once Octave is set up as an independent company.

We see a similar trend here in terms of free cash flow, which has consistently delivered margins over 20%, supported by solid recurring revenue growth, an asset-light business model and negative working capital. So in this slide, we bridge free cash flow to adjusted income from operations. And in it, you can see the positive impact R&D capitalization has on our non-GAAP profitability. So this obviously creates higher reported profitability levels. So as a management team, we look at the margin development, excluding this benefit of capitalization because we feel it's a better proxy for underlying cash flow. Looking ahead, as we move more of our product suite to SaaS and a pattern of continuous development and release, we expect to steadily decrease our levels of capitalized R&D. This change in development approach will be a drag on adjusted income from operations. But of course, it's going to have no impact on free cash flow margins, which we expect to consistently increase going forward.

So as we begin our journey as an independent company, we feel we have a very strong starting point for future growth. We have growing Subscription revenues, which accounted for 2/3 of the revenue base last year. We have a balanced exposure across our Design, Build, Operate and Protect platform pillars, which as Mattias and Tamie have already described, offer great scope for increased cross-selling. And we have a balanced global footprint, which is not too dependent on the outlook of any one specific region, and it gives us the scope to focus our investments on those geographies that are growing more quickly.

We also have a diversified end market exposure now, clearly shown here by the 2025 breakdown by end customer, which shows a strong presence in almost all asset-intensive industries. This comprehensive footprint brings Octave, three financial benefits. Firstly, we have a focus on mission-critical industries, which are sticky and bring a large installed base for up-sell and cross-sell, which will help drive growth. Secondly, we have a balanced exposure, not overly dependent on any one particular geography or segment, which over time will reduce cyclicality. And thirdly, we have a diversified and strong customer base in terms of type and size, which also brings financial stability. So if you like, that was the retrospective and setting out the starting point for Octave.

Now we move on to our strategy for value creation over the next few years. And as a management team, we see five key pillars to drive value for our stakeholders. Firstly, we need to protect and grow our share of a large, healthy and growing end market. Secondly, to drive the shift to ARR and subscription revenue and accelerate our ARR growth rate from the 8% we've seen historically. Thirdly, once we fully separated from Hexagon, we will balance the investments we need to make with cost discipline to drive a resumption in our upward margin trend. Fourthly, as an independent company, we can take full ownership of and bring greater focus to improve our cash flow generation. And finally, we can bring disciplined capital allocation to make sure we invest that strong cash flow to maximize shareholder value.

So if we start with growth, as Mattias said, we believe we're well positioned in growing markets that have strong secular external tailwinds. An overall SAM of $28 billion, growing at around 10%. And Mattias, Tamie and Jay have been through these individual growth drivers in detail already, so I won't dwell on them. We'd like to note that these medium-term growth rates reflected in the SAM, obviously don't reflect short-term cyclical dynamics or geopolitics, which can drag on growth in 1 year and boost it the year after, and they don't really reflect the impact of transitioning a perpetual software business to subscription. But over time, this is a market growth rate we believe in, and we think we're already progressing towards, especially in terms of our recurring revenue. And we think being an independent company will set us up better to capture this growth going forward.

Mattias and Tammy have talked about how we aim to increase our ARR growth rate from 8%, which we've done over the last 3 years to sustainably over 10% over the medium term. And here, I provide on a slide an overview of that plan. And by medium term, I mean the next 4 to 5 years.

Overall, we still see great opportunity for expansion within our existing customer base, particularly by driving adoption of more products across the design, build, operate and protect pillars. And going forward, we expect that to drive around 2/3 of our ARR growth. Gross retention is already very high, so we aim to maintain that and move more customers to the large customer category that Mattias described, which is where our relationships are even more sticky.

Next, as Tammy laid out, we think a more focused approach on cross-sell and upsell, including [ Jay's ] new AI-driven applications, plus a better execution around pricing that can increase our net retention by a few hundred basis points from the 105% that we've delivered historically. New customer wins remain a big focus, too. And as Tammy has laid out, we see scope to increase our win rate by investing in new growth areas, by expanding the partner channel to increase our overall coverage in terms of both geography and customer segment. And finally, we'll use bolt-on M&A to add new technology and channel capability where appropriate to support our growth objectives. So overall, there's not one big thing that drives us to consistent ARR growth of 10% plus. It's rather a combination of a number of smaller drivers, which will all contribute and will compound over time.

In terms of revenue mix, we expect the transition to subscription revenue to continue over the next few years. And as we show on the slide, over the medium term, we expect this to increase to around 75% of overall revenues. Within the business mix, we expect perpetual license revenue to decline as a percentage of the total by around half, as we transition new and existing customers to SaaS versions of the product. Not all customers will transition. Some geographies and customer groups like nuclear, or emergency services may still prefer to buy perpetual licenses or remain on-premise. So we don't expect this to be a dramatic effect, more of a slight drag on profitability and growth over the next few years as perpetual software revenue becomes a less significant part of our mix.

We also see some opportunity to transition perpetual maintenance revenues to SaaS, but I also expect this to be fairly gradual and an effect that will build up over time as we develop and release new SaaS variants of our products with comparable feature parity. Overall, we expect SaaS revenues to be over 30% of our revenues by the end of the decade. This continued mix shift will help make the business more predictable. We think it will accelerate growth and provide a much stronger base for us to improve profitability and cash generation going forward.

Moving on to 2026. Here, we provide a high level of framework for what we expect this year. We're going to give more detailed financial guidance for 2026 with our second quarter results in August, but this would help probably understand some of the moving parts until that point. In terms of revenue growth, there is obviously more uncertainty than normal in the economic backdrop at present. But we have good visibility on 2/3 of our business, which is recurring. We also have -- we'll continue to incentivize SaaS bookings over perpetual where possible, which, as I've said, will have a slight drag on the overall growth rate. So all this feeds into our current expectation of 3% to 4% organic growth for 2026 as a whole, which I've said earlier will be slightly back-end weighted given our subscription licenses will face more difficult comparatives in the first part of the year.

In terms of profitability, we expect 2026 to be a transitional year. And as we said with the Q4 Hexagon results, we expect to see a similar profitability trend this year to what we saw last year with the revenue mix shift and additional costs needed to set up and launch Optiv as a separate company likely to drag on profitability in the near term. The cost saving program announced by Hexagon in Q3 will offset some of this. But overall, we expect a small net drag on profitability up until the point of separation. However, as I've said, once the spin is completed and the cost base is fully stood up, we expect the upward trend in margins to continue.

And our confidence in, and our commitment to the upward trend in margins, is summarized on this slide, where we break out the different tailwinds and headwinds we see to margins beyond 2026. In terms of gross margins, we still expect a gradual improvement with internal efficiencies offsetting the drag we expect from having lower perpetual software sales going forward. Across sales and marketing and G&A, we expect cost synergies from more tightly integrating the Octave business, and a normalization of some of the launch costs we've had this year to become tailwinds to profitability in 2027 and beyond.

In terms of research and development, as Jay has described, we think greater adoption of AI tools can bring much greater productivity to our development organization. However, giving the market opportunity of combining AI with our software tools to drive a bigger TAM, we're in the near term focused on reinvesting those savings into the product development and into accelerating organic growth. So in terms of overall R&D costs, we expect gross spending as a percentage of revenues to remain at a similar level that we have today at around 19% of revenues. But we will capitalize less going forward, as I've said, as we move more of our products to SaaS and continuous release cycles. And this change will drag on the reported profitability, but have no change to underlying cash flow generation. So overall, for 2027 and beyond, and if we exclude the change to capitalization, we plan to drive the business to deliver 50 to 100 basis points of underlying profitability improvement annually. And we know that this is one of the KPIs that will feed into managed remuneration going forward.

Building on that, I'll now connect those drivers to our framework for 2026. as well as our medium-term objectives using our '25 actual numbers from the Form 10 as the reference point. So looking at 2026, which I discussed previously, we do see this as a transition year to really set the foundation for our future as an independent company. We expect 3% to 4% organic growth overall, driven by ARR growth of 6% to 8%, and a slight decline in adjusted operating margins. Beyond 2026, we expect greater upsell and cross-sell to drive a steady acceleration in our ARR growth, which we aim to consistently reach over 10% in the medium term. This acceleration plus the ongoing shift in the revenue mix, i.e., moving to 75% subscription revenue, will drive an acceleration in Octave's overall organic growth rate.

In terms of profitability, as I said, we expect to consistently improve beyond 2026. This isn't obvious here in our medium-term projection for Octave's adjusted operating margin, which is expected to remain at around 30% level. But you have to remember, this will face the drag of a lower level of R&D capitalization going forward. So if we bridge down to free cash flow, you can see this effect clearly with a lower level of capitalization going forward and ongoing low levels of tangible CapEx, supporting an upward trend in free cash flow margins of between 50 and 100 basis points annually.

I'd also here like to highlight our estimated framework for stock-based compensation. This is still being finalized by the Board, but we expect it to increase over the medium term from the current 1% of revenues within the Hexagon framework to around 4% of revenues in the medium term. And we believe this is a very competitive level compared to other software names that you may look at.

If we move on to the balance sheet. Here, we show the target level of financial leverage we expect Octave to begin life as an independent company. We expect that at the completion of the distribution, Octave and Hexagon will have similar levels of financial leverage of below 1x. And in absolute terms, we expect Octave to start with net debt of around USD 450 million, with an undrawn revolving credit facility on top of that available for an additional $500 million of capacity. And this is subject to the debt raise process that we're going through at the moment, but is on track.

This strong balance sheet will give Octave the capacity to make the investments we need to drive growth forward, both organically and in terms of M&A. And it will also give flexibility for Octave's Board of Directors to evaluate returning capital to shareholders, including introducing a potential share buyback program after separation to offset the dilution from stock-based comp. And this is something the Board will review and come back on in due course.

In terms of potential M&A, as you know, Octave has a strong history of accretive bolt-on acquisitions. And we show on the left-hand side of this slide some of the businesses that we've acquired over the last few years, which have both enhanced our technology leadership and provided opportunities for cross-sell into our customer base. So for example, [indiscernible] was a recent bolt-on we did to allow our [ European Protect ] customers to more easily integrate mobile, social media, video data, and lots of other things into their control rooms to have better situational awareness. [indiscernible] is a provider of APM software, which is very easy for us to integrate and cross-sell into our enterprise asset management software customer base. And [ J5 ] was a provider of digital operation management tools, which helps automate shift handovers, incident management and safety procedures in very large industrial facilities. Again, very easy for us to integrate and sell down our channel.

Going forward, we'll be disciplined. We will assess potential acquisitions against alternatives, including developing a product ourselves and other potential uses of cash, including share buybacks, and we'll naturally focus on the most synergistic opportunities we see across the group.

So to conclude, we feel Octave as an independent company has a very exciting future from a financial perspective. We have a large and growing end market and customers that value our partnership, and that will help underpin our growth trajectory going forward. We have multiple levers to pull internally to drive our ARR growth from a historical 8% annual to over 10% sustainably. We have margin tailwinds that will reassert themselves after we separate and feed into improving medium-term profitability and cash flow generation. And we'll be disciplined in terms of capital allocation to both drive growth and deliver an attractive ROI for our shareholders.

So with that, thank you very much for your attention and your time, and I hand back to Mattias for some closing remarks.

Right. All right. Thank you very much, Ben. Thank you to also to [ Tami ] and [ Jay ] and [ Laden ]. I think you all hopefully agree with me that we have assembled a very strong team. I'm very proud of the management team. Normally, in this kind of investor presentations, you don't talk too much about the team, but I wanted to spend a few minutes here at the end to do that. Then I'll wrap up. I'll promise you've heard a lot of Power Point here.

But like I said, I'm very proud of the team we have assembled. Some of these people, as you've heard today, have come from much larger companies. Some of them have been here 15, 20 years and chose to stay. Some of them have come from Hexagon. So yes, super proud of the team. I think it's quite rare, the team we put together. But frankly, much more important than me and those guys is all the people behind that, right? We have roughly 7,200 people around the world, and it's hard to describe, but they are super, super talented. We have among the lowest attrition in the software industry. At the same time, we have among the highest engagement scores. And I say this every time that is our most important asset is the people.

So I wanted to take 30 seconds here because I know probably a lot of them are watching this online to say thank you to the team. You are the guys who make this possible and deliver it to our customers in this mission-critical industry. So thank you to the team. All right. Thanks.

Four things I've told you today, or we've told you today. We told you that it's a structural flaw in these industries, and it's an opportunity that is enormous. We've described to you how we have the platform to deliver the context that we believe is unique in this market. We've also told you about how we think the independence we will have as Octave on a stand-alone basis will align all the forces behind. And I think we've proven, at least in my opinion, that the economics are already visible. We want to improve them. We're not done, but we do think the ground, say, signals are there.

So you may or may not feel that you've heard 4 presentations here today. I would argue that you've really heard one. I talked about the industry and the structural advantage. Jay showed you the portfolio, the platform, how this all connects. [ Tami ] showed you the proof in terms of the numbers, how we land and expand more and more customers. And finally, Ben gave you an accounting lesson here at the end, right?

So if you think how these things connect, right, the context deepens the platform. The platform enables the go-to-market. The go-to-market generates the financial results, and the financial results allows us to invest some of that money back into the platform and the go-to-market. So this is not a cycle that slows down, it accelerates. That is truly one compounding system.

So this morning, I told you that the industrial world is not short on software. It is short on results. And in order to get results, you need intelligence. You saw the platform how we connect throughout the design, build, operate and protect. I would argue you saw that proven. You saw it in different industries, the world's largest energy facilities in Formula 1, presidential inauguration, in rail with the hyperscalers and many, many more examples. So I would argue that you saw it proven at scale. And that ladies and gentlemen, is what we are all about here at Octave, intelligence at scale.

Our first day of trading here on the NASDAQ in the U.S. will be May 28. We'll start a few days earlier in Sweden on May 25. And I hope that many of you will join us on this journey as shareholders and owners of this super exciting company.

So with that, I'll say thank you very much, and we'll do a Q&A session here in a minute. Thank you.

My name is Matt [ Hedberg ] from RBC. Really exciting presentation and opportunity here. It feels like there's a lot of long-term drivers, especially to drive the business to kind of that 10% growth with expanding margins. I wanted to focus on AI. A lot of us in the audience, that's the question that we get time and time again. And it feels like there's a real compelling value play for you guys to monetize AI. So I guess a 2-part question for [ Tammy ] and Jay.

I guess, from [ Tami ], from your perspective, how do you expect to monetize AI in the future? Is it from selling additional features? Is there a consumption element? Some element of that? And then for Jay, you guys sit on a ton of data I'm wondering, is there a network effect where the community data benefits the entire sales models? Or is it still contained more or less on a company-specific basis where their data is used for their models? Or is there more of like a network effect from an AI perspective?

So do you want to start with the?

You guys go?

Yes. Do you want to start? Okay. Well I'll start with the [indiscernible] pricing. So I think we need to kind of look at and determine really kind of what the data elements are that we can actually monetize, right? So I think that's part of where Jay and I are going to be working together. But we do start with everything from a per seat pricing model today, even at our lower tiers, and we graduated to enterprise license agreements. So assuming it's going to follow the same model in that regard, especially for potentially some super users, and then we'll be potentially looking at maybe more of a consumption-based model based upon the quality of kind of what we are looking to achieve with that data set.

Yes. So building on [ Tammy's ] point, it's really on the pricing side, it starts with the value-based pricing. So if we can be clear on the outcomes that we can deliver for a customer. So if you're improving some sort of KPI by a certain percentage, it's a clear demonstration back to where we think we can charge. So how do we add that to the pricing levers we have today, so kind of a plus one.

To your question on the network effect, so yes, smiled a bit because there's a tremendous opportunity. But first and foremost, customers own their data. And two, there's contention as to do they want to contribute to model development and evolution. But you can think of economies of scale. And if you think of supply chain, it's probably one of the most opportunistic areas where every construction builder is procuring. You have supply shocks, you have impacts because of impending wars and just material availability. So how do you think about pricing as a leverage that can benefit the entire ecosystem here?

So that is just one particular example, but there are many more. And this is where this unlock happens because the life cycle, if you look at it independently, they're solving it for their own context. But if you can step out and say, I can think an entire material movement management across an ecosystem, then you have a very different procurement engine. So I think there's just a complete tap of opportunity here.

But to directly answer the question, customers own and then we have to help them understand where they could be a force multiplier by participating.

It's John [ DiFucci ] from Guggenheim. Mattias, you and your team did a great job here today. It was really informative, everybody did. And I -- and it's a really impressive business with some of your financial characteristics. But one of them -- and I think when -- you mentioned 8% growth, but I think the organic growth is about half that. Ben put a slide up there that showed that.

I guess two questions to that. One is, why is it so much lower than the organic -- or the growth of the market because I think you said that was about 10% today? And then [ Tammy ] gave a lot of the levers to really pull on and push on to get to that 10%. But the guidance for next year is still about 3% to 4%. So when is it that we can expect to get to that about 10%?

And the reason I ask is because there are a lot of investors that are going to look at this and see those characteristics. But once you get to that double-digit growth, it actually opens your eventual stock to a whole other class at an additional investor.

Thank you. I'll hand it over to you, Ben. But you're right. I mean, first of all, but to me, when we talk about 10% plus growth, we talk about the ARR, right? What is hard to predict is the perpetual revenue, how fast that will shift? I mean we're incentivizing it. We're driving it, but it's also a customer behavior and adoption, right? How fast that will go? But we're talking about 5, 6, 7 percentage points of revenue. I mean it's not that dramatic, right? But that will take, let's say, a year or 2, right?

Then you have the shift that's going on from maintenance to SaaS. So roughly 30% of our revenue is maintenance. That will take a lot longer time to shift to SaaS, right? It's dependent by product, you have to almost go one by one, right, or which ones are ready and so on.

And then the third element that you explained, but we maybe didn't go in too much detail. So we have one portion of our subscription revenue that is kind of monthly usage based, right? Roughly, what is that then? 15%, 20% of revenue. And there, we have seen a macro downturn, I would say, the last, call it, 12 months. It's mainly on the design side, kind of the EPC business, the big capital projects. So I'm not going to give you a new forecast other than the one we gave, but those are the 3 elements you kind of have to model.

Keith [ Weiss ] from Morgan Stanley. Maybe starting from a big picture question. The industrial logic about bringing together all these processes makes a ton of sense, right? The integrated life cycle and the -- just the cost slide that you put up of going to [ 100 to 500 ] the cost to correcting errors. But that industrial logic has been around for a while. That's been in the existence for a while. And the industry has been very slow to consolidate. And there's a lot of structural reasons behind that, some of it having to do with the physicality of the industry, some of it just a lack of impetus. What changes that?

Because even within your own organization, only 14% of customers have more than one workflow. What are going to be the catalyst to allowing you guys to get the industry to get on board with this broader vision that is kind of necessitated to get that upsell and get that cross-sell dynamic going?

Yes. No, it's a great question. And I guess if I knew fully, I would have done it faster. But the real answer is when I started in this business 8 years ago, I really thought it would have gone much faster, right? But it's -- I always say it's not a technology problem. It's not a capital problem. It's a people problem, right? People don't like change. It is uncomfortable doing something different tomorrow than what you did yesterday. But it is dramatically different today than 8 years ago. 8 years ago, still arguing with customers about if this was the right strategy. That is not a discussion anymore.

I mean they're all -- if you go talk to one of our customers, you will hear a very similar strategy. They're on board with the strategy. Then it is getting them -- you can chime in here, Jay, right? But it's getting them take that leap and take the next step. And -- so yes, I think we're just at the beginning of it. It will happen. It will take time. But those 14% you mentioned, I mean, they also represent half the ARR. Right, so.

Yes. Maybe, I'll build on that. I think you have to borrow from other industries to see kind of the shifts happening. With the rise of AI, it is very clear now that anyone can build applications or insights or products and monetize that. The harder thing that people have to do now is the distribution. How quickly do you get the consumption flywheel going and the usage of that. And so because of that market happening in, say, a consumer-based world and happening in B2B, it's coming this way from an industrial. And I think back to the [indiscernible] kind of point I said of the systems and the retirement and how fast people can build, many companies are now just -- well, I have to change. I have to think about this in a different way. So for us, we want to be a catalyst in supporting them in that shift. Whereas before, I don't think it was as much of an option. It was an intent to do so. We got to do it, but now I think it's an imperative, so.

And if I could sneak in one technology competition focused question. A lot of what you guys are talking about is bring via the data from these various life cycles, these various processes going into what oftentimes are siloed data sets, older data sets. And as investors in the room, I think the one name that pops into our head is Palantir, right? The name that's been most successful in going into these heavy process industries, or old legacy architectures and pulling together all this data. Is Palantir a competitor for what Octave is trying to do? And if so, how do you compete against a vendor that's been so successful in being able to be that integration, that ontology layer for what seems like your core customer base?

Yes. I mean I'll let you chime in. But I would say, are they a competitor? No, not right now. Could they potentially be? Yes, right? I mean.

Yes, fair point. So we have many customers that will entertain and have interest in them. They have a very different cost structure of how they operate and all kudos to them. I think they've done a tremendous job in shaping a market. And if you think about, though, what there are things that are lacking is the domain understanding of how things work. But there is an opportunity to understand the behavior of things based on data and data signals.

But I would say very much that you have to understand the workflow, the domain, the process and the value outcomes, but ultimately, how that embeds back into the work cycle. You can't just do that alone by data itself and answer a question and say, here's a 10x improvement in a particular area without that change management back into how things operate. So it's a double-edged sword. So we're actually playing from a complete strength -- area of strength. And I think it's great because it's validating a market that we know and we own. When I say own, meaning that we have the right to go position even faster, and it's great. So we applaud it.

Ken [ Wong ] from Oppenheimer. A question for Mattias or maybe [ Tammy ], I think one of the more impressive slides is when you guys showed the compounding effect of the multiple workflows. When you think about the revised, or the refreshed go-to-market you guys are going to have, how much of it is just accelerating the time line for customers to get on multiple workflows versus potentially increasing the number of products that your customers are actually using?

And then just another on just the subscription transition. You mentioned you're not pushing customers at this stage. But as you guys separate from Hexagon proper, I mean, should we assume that we'll see more sticks go along with carts in the near future?

Yes. I wouldn't call it stakes, to be honest, but we are -- I mean, you need to make the case attractive for the customer, right? And the way to do that is by having a new version that is a lot better than the old version, right? Then it's a win-win for them and for us. That's why I'm saying you're going to move this gradually. We don't believe in forcing the customer into some product, or give them massive discounts just to move them into another model, right? We want to do it with a product upgrade.

Your first question, I mean, the honest answer is both, right? I mean we need to increase our -- you chime in here. We need to increase our speed. But yes, we also need to get them on more workflows. And I think that from personal experience, when I sit in customer meetings with the salespeople and so on, we always prepare before we go there, look, what do they have today, right? They have 3 products, 5 products, 8 products. Which ones are the ones that are we can upsell them on and get them bigger value and so on.

Yes, definitely. So that's why I mentioned earlier about using AI technology within our sales methodology, right? It's going to be critical that we understand some of the business needs and kind of what's occurring in their business model today. And those insights help us move faster, right, where we would have to do a lot of research kind of prior methodologies, AI is acting us help us move and accelerate. So we're able to do the research quicker, and it's a value conversation, as I mentioned during my presentation. It's not about just kind of showing up with additional products. So we're able to kind of resolve real business problems and get them to be stickier and move quicker. So that's where we think the acceleration will be to get them to do more cross-sell and upsell within an existing workflow.

This was a great presentation. It's Andrew [ DeGaspri ] from BNP. Just wanted to ask a question on the design portion of your business because I noticed it is one of your biggest and it's growing 4%. Just curious to know if in the long term, do you expect that to improve as it relates to your midterm targets?

And then a second part of the question is, I noticed you have quite exposure to energy chemicals. I think you said the largest deal in the UAE was -- I mean that area is clearly under focus. So just wondering what's your exposure there and what assumptions you built for this year?

Yes. So sorry, the first one was energy UAE was the first part? Yes, design, sorry. Yes. So the design, yes, it is true that it was -- had a mediocre year last year. I mean, like I alluded to earlier, we had definitely a weaker year in terms of the capital projects, right? If you look at number of capital projects started, I mean, I don't think the uncertainty around trade and tariffs and so on helped, right?

If you look at it longer term, I do expect eventually some of that noise will go away, right? And I think the outlook is more positive for this year. But it's also true that I think fundamentally, it will be a slower market than build or operate or so because -- simply because of the fact that we already have such a high market share, right? But I don't think it's a declining market or anything. I mean I still think it's a good market to be in.

On the UAE and the Middle East, I would say, with that particular customer, it is almost business as usual right now. I mean they are back to work. But obviously, the situation is very uncertain, hard to predict. It's definitely not good. I mean, when things like this happen and the uncertainty for our customers. So let's see. I mean if it's a short-term thing, I think we can move on. Obviously, if this drags out for longer, it will be a problem. How big is that business? I would say, roughly [ $50 million, $60 million ]?

Yes, it's about 5% of revenues overall, Middle East.

Something like that.

A lot of room to grow.

This is Peter [ Berkley ] here on behalf of Kirk [indiscernible] with Evercore. I want to touch on the concept of the life cycle intelligence and just sort of how that end-to-end process flows, really when it comes from a buyer perspective or again, sort of that network effect perspective.

So you guys gave a really good example of sort of the EPC comes in, has their whole design, has the project and then the on-call solution on the back end on the public safety side to monitor it and react and whatever that may be. I'm curious just in terms of the network effects there. If I'm an EPC, and I want to have a project in New York, and you guys are already working with [indiscernible] are those buyers talking to each other where it becomes a competitive advantage for one of those EPCs looking to get the project to get into New York if they're using Octave? Or is there a push or a pull from one side of that one customer segment to another? Just anything on the dynamics of how that all comes together would be super helpful.

Yes. Generally, the answer is yes, then maybe not that specific example because an EPC wouldn't have much contact with the protect side of it, right? But if you would change the example to an owner operator, it's very much that's the case, right? I usually say we have to work this market from 2 angles, right? Like I said in my example, the owner-operator is very influential, right? If you -- they standardize on your technology, it sends ripples in the EPC industry. At the same time, the EPCs are very influential as well, the big ones, right? They get asked by owner operators, what is your advice? What is the best way to build this, to design this?

So you really have to work both angles. And we -- I would say that we work a bit as the glue in between, right? We hold industry forums. We do workshops with executives. Like I mean, we try to bring the industry together to solve the problem together.

[indiscernible] Brown from Rothschild & Co. Redburn. Just with Octave being a system of record, could you dive into the unique data that it houses on behalf of customers? And you mentioned that it's an open platform. So would it be fair to assume this will be the same for [ MCP ] Access? And if so, how do you weigh up supporting customers and your ecosystem versus protecting that system of record mode?

Yes. Do you want to take that one, Jay?

Sure. Absolutely. So yes, let's give some context to how things are structured. So one, when we talk about an open ecosystem, we have to work with third-party applications that our customers have also consumed, right? The opportunity for us to go to a CIO and be able to explain how they've integrated in our tools is just paramount to support how it's kind of a build to their efforts. With respect to data, it varies across different parts of the life cycle. So P&ID information, work order information, maintenance records, what have you, right, owned by the customer and how that is actually manifested. So the opportunity there is how are these creating symbolic alignment across how behaviors work.

So what I mean by that is a P&ID, a life of that as it goes through that design, or that construction phase into operations, how is it sustained? How it's used and effort? So it's not in terms of now this is exposed. We use MCP, secure MCP interfaces to interact with our systems, but we don't expose that openly, freely to our customers. You think of it just more as you would as you rate limit an API. If someone wants to use an interface, they can. If they want to use an API, then we'll charge for that.

So opportunities as this market is evolving right now is how do we collaborate in a way that can be more open, can be more supportive of standards? But it goes back to the earlier point that Mattias was mentioning to the previous question, it is this push pull where we have to be thought leaders in the market and what should be open standards. So the many that the owner operators have done together to try to make data sharing easier, we just need to contribute to that and help the industry evolve.

Tom [indiscernible] in BofA. As you think about the 86% of customers that are in a single workflow and the opportunity to expand that, are you -- actually, let me maybe ask you in reverse. In the 14%, what is the adoption rate in terms of going from maybe design to build, build to operate, operate to protect? Are you seeing them buy one and then the other one at a time? Or are you seeing more opportunity to maybe cross-sell several of these at once?

Good question. I don't know if we have any data on that [indiscernible] prepared, to be honest. No. I think we have to pass on that one and come back to you, to be honest, because, yes, I don't know the exact number.

I know we have the data.

We have the data, but I think it's better we take that afterwards, and we can come back to you.

Got it. Maybe as one more follow-up. You mentioned -- you mentioned -- sorry, I lost my train of thought. I'll come back to you later.

We both come back later.

Gabriela Borges from Goldman Sachs. One question for Ben, which is what are the macro indicators that we should be tracking that best predict and inform your business? And then a question for the broader group, which is we can see the vision on what an industrial company operation should look like if they fully commit to the Octave suite and all of the ways that, that improves their operations. Are you hearing or seeing a change from your customers in how they allocate budget to software and digital transformation because they recognize the urgency and the potential of AI? I'm asking in the context of we know that your customers tend to move sometimes a little bit more slowly. And I'm curious if you're seeing an inflection in their willingness to commit to digital transformation with Octave because of how AI is evolving.

Yes. In terms of macro indicators, I mean, I think you have to look at a few different things. Part of the business is driven by EPCs, as Mattias mentioned. So I think you can look at their funnel, their backlogs, how their outlook is. I look at specific segments, if you remember the customer breakdown that are most important to us. So power generation, the build-out for data centers, how that feeds into demand for nuclear, gas turbines and things like that. These obviously have very long lead times and they're long cycles, but that helps us set the expectation for where those segments can grow in the future.

And then yes, as Mattias said, there is a portion of our business that is more macro sensitive. We're only 2/3 recurring at the moment. Anything that affects GDP, or geopolitics is obviously still relevant to that nonrecurring piece. But I think you can look at it segment by segment. Mining -- higher oil prices are obviously good for part of our business. If they're high because people believe they stay high, and it's a good reason to invest. So yes, there are some of the macro things that I look at.

And maybe, Ben, I'll just add on to your second part of your question. So we are seeing a shift. So I probably spent the first 7 months, probably have had over 100 customer conversations, interactions. What's unique is you're creating a space where they can have a conversation about how they would retool the business. So as an example, if they have an existing cost structure to run a large project, it's labor hours, it's cost, and they know how to run that very well. But if they want to attack down market into a cost structure that's very different, you wouldn't simply take the existing process. You'd have to reengineer that.

But they've never had that space because they go from project to project as fast as possible. So the Octave collabs gives that sort of opportunity to rethink a model, how would you redefine a process and do it in a very hyper focus just like how we develop software now. So that impetus for change is absolutely happening right now. And so we're excited to see where it goes.

[indiscernible] on behalf of Josh from Wolfe Research. Kind of a question really on when we're thinking about the 86% that are on one workflow, what's addressable when it comes to of that group, to get to that 3 workflow adoption rate that gets that actual expansion kind of to size that path moving forward given it's such a large base of your customers?

And then just as a follow-up for Ben mainly, when I'm thinking about the medium-term target getting to that 6% to 8% revenue growth, is there a latter when we're thinking of after '26, we should anticipate some small acceleration facing easier comps, getting more of that actual recurring revenue watering through our actual base? Just to understand the timing of that 4- to 5-year midterm outlook.

Yes. Maybe I'll take the first one. I mean I don't have a scientific answer for you. I honestly don't know if there's a way to calculate one how many of the 86% would be addressable. But what I would say from just personal knowledge would be the very large percent, right? I mean it's hard to think of a customer that wouldn't benefit from having another. I'm sure there are some, right, small ones or in specific niches. But in general, I would say a very large percentage.

But I would add that we are creating a methodology around that. So I spoke to you that we are putting them into different tiers based upon the qualification criteria of their business needs, and that's how we're prioritizing them coming into the top part of the market. So we know kind of the calculations based upon the opportunity that we're going after. So we are going through the installed base deeply to determine which ones we would prioritize first to get to move quickly.

And in terms of the growth profile, I mean, the main driver of that overall acceleration is the ARR growth going from 8% to 10% and subscription revenue becoming a bigger piece of the pie, right? So you end up averaging up the overall growth rate for Octave. So I think that's the main driver. And as we've talked about over the day, there's no one big thing driving that. It's a combination of lots of different factors. So I would expect it to be fairly linear. Obviously, '27 could be a good macro year, could be bad. '28 could be better. So in the bit of our business that is nonrecurring, there is going to be a little bit more volatility, and we'll just have to see how it pans out between now and then basically. But the ARR acceleration is the main lever for the overall organic growth rate going to 6% to 8%.

Two questions for [ Tami ], please. It's Ben Castillo from BNP Paribas. Just on the go-to-market. Firstly, 1/3 of your ARR growth to come from new customers. Could you give us some color on where the lower-hanging fruit is there by pillar, perhaps? What are the most dynamic or which of those pillars do you expect to contribute more strongly to the net new revenue generation?

And then the second question is really around the channel mix, so doubling that from roughly 10% towards 20%. Could you just help us understand what does that take from your side to cultivate? What sort of time frame do you envisage that materializing?

Yes, you go.

All right. So kind of on the first piece of it -- or actually, I'll start with the channel side of the [indiscernible] so we are going through an evaluation of all of our channel partners now. As I mentioned, we're looking to kind of baseline everyone. They are global. There are 1,500 across all of our business units. We are exiting some partners now where we don't see that there's a whole lot of revenue value. And then we're also recruiting new partners into countries maybe where we have not a huge population of sales revenue coming from those. And so right now, that's how we're thinking about how we're going to get to double-digit growth.

We're also thinking about creating a marketplace opportunity beyond Azure as well as AWS, that we can take some of the lower-hanging transactions and put them through the marketplace, which would actually reduce our overall [ CAC ]. So we see it as a tremendous opportunity to kind of be running through a true channel model. That will take time to build. That's why I mentioned earlier, it's -- I do see double-digit coming from those areas, but that's going to take us a little bit of time to get that foundation moving.

And I'm sorry, what was the first part of the question?

I think it was which is the kind of biggest opportunity if you look at the call them pillars in terms of new customers?

Yes. We're seeing a lot more energy just because of the nature of what we're seeing actually, obviously, with AI. So when we say energy, we are looking into more like the data centers and the nuclear side of the equation where we hadn't seen a huge uptick in those areas previously. There's a lot of scheduled projects that we're getting visibility into. And a lot of it is around a lot of it is facilities management, but on the nuclear side as well because the energy costs and rates are going to be in high demand. And so there's a lot of projects that we're seeing coming online in those areas. So I would say the energy sector is probably the biggest opportunity for us right now.

And in terms of just to connect to -- I mean, to his question would be a lot of that would be in the operate -- facilities and data centers.

[indiscernible] [ Carnegie ]. I have a question about the -- you position the company as a unified platform, life cycle intelligence. And I was curious sort of where you are today in sort of the integration of all these different software offerings that you have. Where are you today? And what is the vision? And how much do you have to, from a tech perspective or product perspective, improve the integration between the different offerings to improve the upselling and cross-selling opportunities?

Yes, I'll hand over to Jay in a minute. But like -- since I know you followed Hexagon a long time, right? I mean, the history is, as you know, 65% roughly 60%, 65% of Octave consists of the Hexagon ALI division, right? That was one fully integrated company. Another 20%, 25% roughly was the Hexagon SIG division, right? That was also one fully integrated division. Then we have 3 smaller businesses, right, ETQ, Bricsys and [ Project Mates ]. Those 3 are not integrated fully. They're kind of, let's say, halfway there. So that would be kind of from a historical perspective. And then I'll pass to you what the -- I mean, it's kind of a little bit what you talked about with the platform earlier, yes.

Yes, yes. So from a technological perspective, so first off, as you know, ALI quite well. So playing from an area of strength already where the integrations across engineering and construction and then into operations has a pretty strong base thus far. But as Mattias mentioned for some of the other applications, we launched the Octave platform vision back in November or beginning of December, I should say. So it's not been too long back. But every team moving at an accelerated pace of looking at where you can start to drive some of the data integration. So in particular, in the operate space, if you bring together EAM and some of the operational procedures and the safety procedures, pretty easy and fairly quick to do. And then some of the aspects as we're talking on the protect side are now kind of new use cases we're bringing into that.

So I expect through this year that the team is continuing to build those use cases and foundations, and then we'll have some pretty exciting stuff to share coming at the new year.

Andrew Thomas from [ Gates ] Capital. I was hoping you could talk a little bit more about your target leverage range midterm in terms of net debt to EBITDA and maybe the max leverage range you would take on for a deal? And then kind of related to that, how is the M&A pipeline today in terms of deal size and just activity level? And then finally, could you clarify the capital return opportunity here in terms of share repurchases versus dividend?

Yes. I mean in terms of leverage, we're going through that process at the moment. It should be completed in the next few weeks. But I think the maximum leverage headroom we'll have is 3.5x net debt to EBITDA, with a spike to [ 4 ] for a period of time if you do a larger deal. So that's what the capacity will be. Obviously, we're not going to run the company with those kind of leverage. It will be significantly below that. But we haven't given a kind of target as to whether that's 1x, 2x, 2.5x. We'll come back on that. But it will be way less than the capacity that we have.

Yes. And then M&A?

Yes. M&A pipeline, I mean, the pipeline is actually quite big because as you can imagine, running a spin project for 18 months takes a lot of management's time. And doing acquisitions in that period messes with all the numbers you have to submit to the Form 10. So it's deliberately been quieter over the last 1.5 years within Octave. But yes, [ Jon ], the Head of M&A is here. I think he has a busy pipeline, and I think there's a lot of good ideas that we could look at post-spin if we want to. And maybe it didn't come across. I think the areas for M&A is to operate, build and protect where we see the most opportunity. But yes, the pipeline is healthy.

This is Ian Black with Needham & Company on for Scott Berg. For the volume-based side of your business, how much visibility do you guys have into the starting and ramping of large contracts and projects?

Yes. I would say pretty good. I mean we get a live score every month, right, in terms of the usage-based licenses. So it's -- we know fairly well. And it usually, I would say, moves on a, call it, 18-month cycle. So we are pretty good at predicting it, I would say, generally speaking.

Okay. Thank you. That was our last question. We're at time. Thank you all for coming. We have demos outside in food. So we'd love for you all to join us out there.

Thank you, guys. Appreciate it.

Thank you.

Good morning, and thank you for standing by. Welcome to the Hexagon Fourth Quarter Earnings Report Conference Call. [Operator Instructions] I would like also to advise you that today's call is being recorded.

I would now like to hand the conference over to your first speaker today, Anders Svensson. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Hexagon's Fourth Quarter 2025 Conference Call. First, I would like to direct you to the standard cautionary statement. And then we are turning to the next slide with the agenda. We will start with taking you through the Hexagon Group performance in the fourth quarter and then dive into the Hexagon core business areas performance in the same quarter. I will then hand you over to Mattias Stenberg, who is the incoming CEO of our potential spin-off company, Octave, and he will take you through the performance of Octave in the quarter. Mattias will then hand over to Norbert Hanke, our interim CFO, who will cover the financials for Hexagon Group in more details. And we will then, of course, have time to take any questions that you may have.

So moving into the next slide and we can jump directly into the highlights of the quarter. So in the fourth quarter of 2025, we returned to good financial performance. We delivered a 3% organic growth while still taking decisions that improve the long-term performance of both Hexagon and Octave. The operating margin of 29.4% was impacted by significant currency headwinds of 150 basis points. We also began implementation of the restructuring program that we launched during the third quarter to further improve the underlying profitability of the group. The strong delivery of the quarter was the strong cash conversion at 121%.

Alongside this, we delivered operationally too. If we look at M&As first, we launched -- we announced that we will acquire Inertial Sense within the Autonomous Solutions business area to strengthen the breadth of our successful positioning portfolio. We acquired IconPro, expanding the range of proactive maintenance services that we provide to our metrology customers. And the sale of our business, Design & Engineering was sold to Cadence, as you know. And the closing of this is progressing on track for a closing during the first quarter.

The new operating model, which we began to implement across Hexagon core businesses during the third quarter is progressing well. And this model then decentralizes Hexagon into 17 P&Ls within our 3 externally reported business areas, creating clear accountability and transparency and decisions are taken closer to customers, increasing our customer responsiveness, but also speed in decision-making and execution.

Our humanoid robot, AEON, continue to make great progress in its customer pilots and we announced an important partnership with Microsoft, aimed at advancing humanoid robotics further. We also announced a new CFO for Hexagon core, Enrique Patrickson, who I will talk more about in the coming slides. And finally, we continue to progress the potential separation of Octave, which remains on track to be completed during the first half of 2026. Following this set of results, the Board will propose a dividend of EUR 0.14 per share at the Annual General Meeting on April 24.

So we had a busy quarter behind us, and we move into the next slide. And I'm pleased to announce that we have appointed a new CFO, Enrique Patrickson, and he will join us then latest in July of 2026, but most likely already early in the second quarter. He is a veteran CFO with many years of corporate finance and strategic experience. At his most recent role at the European private equity firm, Triton. He has been responsible for advising a number of their investment companies on financial matters and best practices. And his experience has been within companies ranging from EUR 300 million up to EUR 5 billion in revenues in all phases of development. Before that, he was at Viaplay, where he played a central role in the turnaround of the business that was a critical part of Viaplay's history. Previously, he also spent time with the Electrolux and Assa Abloy, where he held strategic finance roles across Europe and Asia. So I'm very excited to welcome Enrique to the team, and we look forward to the next phase that he can contribute also with profitable growth going forward.

Norbert Hanke will remain our interim CFO until Enrique joins. And after that, Norbert will become Executive Vice President at the group level. So I would again like to thank Norbert for stepping into this role, supporting us extremely well while we found a strong permanent candidate.

Turning now to our performance in the quarter. So I was pleased to see that we had good organic growth while allowing some of our businesses to make operational and strategic decisions that will offset growth in the short term, but will ultimately set them up for success in the long term. In Octave, Mattias and the team continue to focus on SaaS deals, generating another quarter of strong double-digit SaaS growth. And in Geosystems, we chose not to restock channels in the market, which has been weak for some time, such as in China. And this had a total top line effect of EUR 10 million in the quarter negative for Geosystems. EUR 8 million out of those EUR 10 million were related to destocking in China. Despite these items, the group grew 3% in the quarter, maintaining the momentum that we already saw in the third quarter. Recurring revenues grew 3%, fully in line with the organic growth and new products contributed with 2%. And we expect that the new products will contribute more going forward as we are ramping up the products that we released during 2025.

Turning now into the development by region and industry during the quarter. Here, you get a snapshot of the development. The overall markets remained broadly stable in the fourth quarter. Some highlights, first, by geography. Americas as a standout region grew 11% for the group with positive performance across all of our business areas. EMEA recorded a 4% organic growth driven by Autonomous Solutions and supported by stable performance in Geosystems and Octave, and this was then partially offset by continued weakness in Manufacturing Intelligence in EMEA. China decline with 5%. Strength was shown within Manufacturing Intelligence, but it was offset by continued weakness in Geosystems. And here, I want to again remind us that we had EUR 8 million related to destocking in the sales channel within China. And rest of Asia also declined, mainly due to tough comparables within Autonomous Solutions.

If we look by industry, so there was strength within the construction segment in Americas, but it remained weak for us overall, primarily due to China. General manufacturing was strong in the U.S. and in China, but remain muted in EMEA. Aerospace and defense, as you can see, was a standout performer in the quarter, recording strong growth across all our key markets here in Americas and EMEA. Mining also globally, very strong in the fourth quarter across basically all important market for us. Automotive remained weak in the key EMEA markets. And as expected, unfortunately, also turned negative in China due to overcapacity in the market. Electronics was very strong in China, but weaker elsewhere. But that is -- China here is the important market for us within electronics, the other markets are quite small insignificant in comparison. And agriculture remained weak with the market still looking weak globally since the COVID, post-COVID with supply to market, which was an oversupply to market, this market has been quite muted in the last periods.

Turning now into profitability. We start with the gross margin, which was a record strong gross margin in the quarter, 67.5%, benefiting from a strong product mix. And I think we can also show that we manage pricing and cost very well. And also then, we got a contribution, which was quite small, but still there of new products going to market with better margins. On a rolling 12 months basis, we were in line with the prior year.

So turning now to operative earnings. So during the first quarter, we delivered an operating margin of 29.4%, with significant negative currency impact of 150 basis points, which is under sort of offsetting the underlying strong performance that we had in the quarter. And as we recently launched several new products that are now in ramp-up phase, we also have a negative impact from reduced gap between capitalization and amortization versus the previous year, and Norbert will talk more about this in his slides later.

As you know, we also launched the restructuring program in the third quarter to remedy the underlying margin performance, and we are targeting here savings of a run rate of EUR 110 million at the end of 2026. And as a reminder, we said EUR 74 million of those will be within Hexagon core and EUR 36 million would be related to Octave. And Norbert will also cover the progress of this program at a later stage here.

So in the first quarter, we will continue to see benefits of the restructuring program. But at current exchange rates, we expect a significant headwind from currency, alongside with the usual seasonality that we have in the first quarter, such as, for example, merit increases across the organization from the 1st of January.

I'll now turn to the performance by business area. So I'm going to start with Hexagon core. And this is, as you know, excluding then Octave. And Hexagon core grew 4% in the fourth quarter with operating margins of 28.4%, with significant negative impact from FX year-on-year. There was a slight moderation in the organic growth from the 5% we had during the third quarter, so again, here, I want to highlight the EUR 10 million of destocking within Geosystems. If you would add that back, we actually hit the 5% mark just as we did in the third quarter. So I'm very pleased with the underlying performance that we have made within Hexagon core.

So turning now to Manufacturing Intelligence. So we reported revenues of EUR 491 million, which represents a 1% organic growth on 2024. The market dynamics were broadly unchanged from the third quarter with strength in China that grew 5%, America was also good. While as I stated previously, EMEA, the market conditions continue to be challenged. But if you look quarter-on-quarter versus the third quarter, it was stable. So it was not worsening from the third quarter.

By industry, demand was particularly good in electronics and aerospace and defense. Automotive remained challenged. And the organic growth moderated from Q3 as we saw delays in customer decision-making, especially early on in the quarter, pushing work into 2026. But if we look at orders here instead, so we had strong order intake growth of 7% versus the previous year. And as a result of this, we exited the quarter with a strong order book to be delivered in 2026. The division or the [indiscernible] reported an EBIT of EUR 139.3 million and an operating margin of 28.4%, impacted by currency effects also here.

I now turn to Geosystems. And here, we reported revenues of EUR 363 million during the quarter, and that represents a minus 1% in terms of organic growth compared to the previous year. As I mentioned earlier, the primary reason for Geosystems to turn into a negative growth was the proactive decision that management took to destock the channels where we have seen softer demand for some time, like in China, where our exposure to heavy infrastructure has, as you know, faced significant headwinds and challenges in that marketplace. So excluding this destocking, if you look at Geosystems underlying growth, it was actually plus 2% year-on-year. This destocking headwind will persist on a similar level also during the first quarter of 2026, as we are rightsizing these delivery channels. So after that, we will have a normalized business going forward. So from Q2 and onwards, you will not see effects of destocking further.

Markets remain similar to the third quarter with good demand in the Americas for construction software, surveying tools. And we also saw stability in EMEA with a modest growth. But the challenging environment in China heavy infrastructure remains significant. So EBIT declined to EUR 103 million with an operating margin of 28.4%, reflecting the combined effects of low volumes in some of the product segments and also a weaker product mix and, of course, negative currency impacts.

Finally, then, turning to the outstanding performer of the quarter, Autonomous Solutions. And within Autonomous Solutions, we delivered revenues of EUR 196.4 million during the quarter, representing a 23% organic growth compared to the prior year. There was a record performance within both aerospace and defense and within mining. This was slightly then offset by the challenging global market situation within agriculture, as I mentioned earlier.

Performance was focused on Americas, but EMEA also grew well. Asia declined due to very tough comparables, and this is also in reference to the MinRes project that we're executing in Australia. There were some timing issues, et cetera. So if you look at the underlying performance, it was actually good in Asia as well. EBIT came in at EUR 67.7 million, representing an increased EBIT margin to 34.5%, driven by strong volumes and a positive product mix, but also here, offset by currency.

I will now hand you over to Mattias, who will cover the Octave performance. So Mattias, please go ahead.

Thank you very much, Anders, and good morning, everyone. Before we dive into the quarterly performance, I want to start by reminding and reinforcing what Octave is, and the role we play for our customers. We are the market-leading provider of enterprise software that helps customers design, build, operate and protect their mission-critical assets. We serve industries where failure has real consequences, whether that's human safety, operational downtime or material financial impact. Across our portfolio, the common thread is accountability. Accountability for outcomes across the full asset life cycle. As technology capabilities expand, the requirements for uptime, safety and compliance only become more rigorous. And Octave truly provides a platform and the technology to manage that complexity at scale.

If we then turn to the next slide. Our market position as you can see, is very strong, and our leadership continues to be validated by leading independent research firms, including names like Gartner and IDC, but also several others. For more than 15 years, we have consistently been recognized across multiple solutions and verticals. In this quarter, however, specifically, we were placed as a leader in Gartner's latest Magic Quadrant for QMS software and as a leader in IDC Marketscape for both Asset Performance Management as well as for EAM. So I think these recognitions underscore our sustained innovation and relevance across the markets we serve.

We move to the next slide, digging into the quarter results. As you can see, we delivered 2% organic growth with our recurring revenue slightly outpacing that at 3%. Our recurring base represents roughly 70% of our total revenue, and we continue to make good progress shifting our mix towards subscription-based models which, as you can see, is reflected in our double-digit SaaS growth as well as by another quarter of record new bookings, just like we had in the previous quarter.

Our EBIT margin landed at 32% compared to 35% in the prior year period. This profitability is primarily a reflection really of a higher mix of perpetual revenue in the prior year period as well as FX headwinds. It also reflects deliberate investments in innovation, product development and the infrastructure required for us to operate as a stand-alone public company. We expect to gradually offset these investments through the cost savings program we earlier announced in Q3 2025. So all in all, we are confident we are positioning Octave for stronger, durable, profitable growth.

Turn to the next slide, please. Here, you can see our business broken down by our four core pillars. As you can see, design is our largest business from the pie chart there. In this pillar, we saw solid platform growth which, however, was offset by a lower contribution from our monthly subscription licenses, which I will describe a bit more on a coming slide. Build, you can see, had a very good quarter, strong SaaS growth in construction software as well as in project performance management software. Likewise, operate saw strong recurring growth especially in our solutions around QMS, APM and EAM. In the protect pillar, the growth we saw in recurring revenue was offset by declines in perpetual licenses mainly due to record activity in the prior year corresponding period.

Next slide, please. So yes, like I talked about, if we try to explain a bit what's going on in the recurring revenue, there are two things you need to understand. If we look at our monthly subscription licenses here, it represents roughly 50% of total revenue and is driven by project activity for certain large customers within our design pillar. While this revenue grows over time, it can fluctuate in the short term with macro conditions and customer project timing.

So after a strong end to 2024, as you can see from the graph there, we saw a reduction in monthly license volumes in kind of early 2025 going into Q2, as you can see there, as broader market uncertainty influence customer behavior. These levels have, however, been sequentially improving in the second half of the year, and we expect year-over-year comparisons to gradually get easier throughout 2026.

So on the right side of this slide, you can see that excluding these project-driven monthly licenses, our underlying recurring revenue is growing in the high single digits, reflecting the solid underlying growth we see in our broader portfolio.

Next slide, please. So looking at some customer wins. We, of course, had many, many customer wins in the quarter. I selected these four, because I think it's a good reflection of showing how many different type of critical industry sectors we serve. It's really a good representation of the breadth of our platform and the diversity of our customer base. I think it also shows the level of trust, performance and scale that we are able to provide across a large complex organizations. Such as in this quarter, a very large, fast-growing e-commerce company in Asia, one of the global leaders in the energy sector, one of the largest pharmaceutical distributors in the world, and the largest U.S. police department.

Next slide, please. Looking ahead, we are really focused on execution. We recently completed our first global sales kickoff as one Octave, reflecting our next phase as a stand-alone company. We are truly operating with a clear set of priorities, and we expect each of these to support stronger durable growth over time. First, we continue our transition, like I talked about, to subscription-based pricing models, supporting more predictable, high-visibility revenue streams. Second, we are deepening our customer engagement by driving cross-sell across the design, build, operate and protect pillars, supported by a shift in R&D toward a unified architecture and outcome-focused AI capabilities. Finally, we are also scaling our partner ecosystem and strengthening our go-to-market execution while at the same time, finalizing the governance and operating infrastructure that is required for us to be a stand-alone public company.

Turn to the next slide, please. So if we look at the process and the update on the spin. It is moving forward as planned. The final spin-off is targeted for the second quarter this year, pending the effectiveness of our public listing steps in the U.S. and Sweden and final approval, of course, from the shareholders and the Board of Directors. We expect our draft registration statement, the so-called Form 10, to be filed publicly in February. We're also very excited that we're going to hold our first Octave Investor Day, be in New York on March 26, '26. We look forward there to share more about the strategic priorities I mentioned as well as our business model and, of course, our growth opportunities. You can expect the invitations and details here in the next couple of weeks. I look forward very much to hopefully seeing many of you there.

So with that, thank you very much, and I'll hand it over to you, Norbert.

Thanks, Mattias. I will take you now through the Q4 performance for the Hexagon Group. Turning now to the next slide, please.

Let us begin with the Q4 income statement, taking the sales bridge first. Revenue were EUR 1.4 billion, generating reported growth of minus 1%. Currency was a negative minus 6% on sales, and there was a positive 1% from structure, resulting in an organic growth of 3%. Gross margins were strong at 67.5% despite the impact of FX. We continue to be confident in driving gross margin expansion as we will have positive impact from new product releases.

Operating earnings decreased by 7% to EUR 420 million, corresponding to a margin of 29.4%. I will explain this further in the profit bridge on the next slide. Interest expense and financial costs decreased from EUR 41 million to EUR 30 million, giving a delta on earnings before taxes of minus 5%. The group's tax rate increased to 26.8% for the quarter, reflecting one-off transactions related to legal entity reorganizations ahead of the potential spin-off of Octave and sale of D&E. The tax rate, excluding adjustments, remained at 18%, bringing us down to an adjusted EPS of EUR 0.118, also declining by minus 5%. Just for reference, the EBIT1, including PPA includes EUR 27 million of amortization, and so it dilutes the EBIT1 margin to 27.5%.

Next slide, please. During Q4, currency continued to be dilutive, reducing EBIT margin by 150 basis points. The major impact came from a weakening dollar and RMB year-over-year, leading to an unfavorable earnings impact. The structural element was accretive with solid contribution from acquired companies such as Septentrio and Geomagic as we will -- as well by the sale of the dilutive assets in Octave.

We saw a quarter-over-quarter improvement in organic EBIT contribution supported by the cost actions implemented in the quarter. Despite this improvement, we ended the quarter with a dilution of 80 bps year-over-year, driven by a few factors. First, tariffs created a headwind of roughly EUR 5 million in the quarter. Secondly, the capitalization amortization gap is narrowing as we normalize our R&D investments. Further, Octave continued to invest in go-to-market capabilities, product development and public company readiness.

Turning now to the next slide, please. Now let's discuss the R&D capitalization dynamics. R&D investments are reducing from their peak levels as we have released multiple new products during the year. As many of these products were major new innovations, we capitalized them according to accounting principles. With the launches, our R&D investments are decreasing and we expect the gap between R&D capitalization and amortization to narrow versus 2024 and '25. This creates a year-on-year margin headwind in the near term until the new products start contributing materially over the next 12 months.

Turn now to the next slide, please. Let's continue with the restructuring program. We began implementing the program at the end of Q3, and this has generating savings of EUR 11 million in the fourth quarter and achieving an annualized run rate of EUR 65 million. The savings will increase throughout 2026, and we will see the full benefits by the end of '26.

Turning now to the next slide. Moving on to the Q4 cash flow, which is a strong performance for the quarter 4. The adjusted EBITDA variance is at minus 5%, demonstrate the continuous stronger cash leverage versus the EBIT1 variance at minus 7% due to keeping D&A flat year-over-year. Capital expenditures declined as a result of less capitalized R&D in line with our previous communication to stabilize our R&D investments. Working capital management remains strong and we presented a release of EUR 121 million in the quarter. As a result of this, we end up with an operating cash flow before tax and interest of EUR 509 million, which led to a very strong cash conversion of 121%. Both interest and tax payments decreased compared to last year. The nonrecurring cash flow of EUR 67 million versus the prior year of EUR 18 million relates to the increased cash outflow of the potential spin-off of Octave and the restructuring program resulting in an operating cash flow of EUR 352 million, decreasing by 13% versus the prior year.

Next slide, please. Moving on to the working capital trend. In Q4, we delivered a net working capital release of EUR 121 million compared to release of EUR 141 million in the prior year. As a result, the rolling 12 months working capital to sales ratio improved to 3.2%, lower than last year and well below our 10% threshold.

To conclude, our business areas delivered solid organic growth alongside a strong gross margin for the group and a very strong cash conversion. Currency headwinds impact negatively the EBIT1 margin. And based on current FX rates, is expected to have a negative impact as well on Q1, combined with normal quarter-on-quarter margin seasonality. We remain focused on addressing the cost base through the announced restructuring program with additional benefits expected to gradually continue throughout the year.

I will now hand back to Anders.

Thank you, Norbert. And then we can move directly into the summary. So to conclude a bit. So I'm very pleased with our progress in the fourth quarter of 2025. We delivered good solid financial performance while also making decisions that support the long-term health of both Hexagon and Octave. Profitability was again impacted by significant currency movements. And we implemented the restructuring program that Norbert covered that we launched during the third quarter, and that will help to strengthen the underlying profitability of the group. And finally, we are able to deliver a fantastic cash conversion quarter with 121%.

So looking at the first quarter of 2026, the market basically looks consistent with the second half of 2025. And we are set up very well with a strong operating model, strong product releases during the previous year and a leadership position within basically all the businesses where we operate. So we are very confident going into the year. However, normal seasonality will, of course, apply in the beginning of the year, as you would expect. And should currencies remain on a similar level as today, we expect also a similar headwind from those currencies.

So turning now to my final slide on the upcoming Capital Markets Day for Hexagon. So this is a reminder, the CMD will take place 30 April of this year in London. And this is, of course, in addition to what Mattias talked about, the Investor Day within Octave. So I look forward to seeing you all there.

And operator, I think that was all from the team here, and let's move into questions from the audience.

[Operator Instructions] And now we're going to take our first question, and it comes from the line of Daniel Djurberg from Handelsbanken.

Anders, I have a question on MI. You comment in your CEO letter that you have positive order intake. And also, you write here in the presentation of a strong order book. And you have new products out, we've seen the ATS800, MAESTRO, et cetera. So can you comment any more color on this book-to-bill ratio or whatever.

Yes. Thanks. So the quarter was quite weak in the beginning in terms of closing customer deals. So not weak, but rather that customer postpone things. And we could see that from the second half of the quarter, it started to take off much better for us. And hence, we build up a strong order intake if you compare to the previous year. And we are then moving into the year with a stronger order book than we may be even expected, and we saw good deliveries also at the end of the quarter. So you still have a positive growth number there. But it was a little bit weak in decision-making from customers in the beginning of the quarter.

We don't go out with exact numbers on order intake. So I cannot give you how book-to-bill changed, only a reference towards the previous year. So strong development, which I believe, puts us in a good position going forward. And there's no reason why we shouldn't continue to perform well in here. Aerospace and defense doing very well in both North America and EMEA. We have electronics doing extremely well in China. General manufacturing is actually doing really well in America and China. The weakness there is basically in EMEA. So I see that we have a strong setup that will continue also to go into this year.

Sounds great. May I have a follow-up, and that would be on the destocking, you mentioned in China Geosystems, obviously being a little bit more of a structural change, I guess. So is it fair to assume that it will not only impact also Q1, but also to some extent, Q2 and Q3, I think it has some 100 basis point impact on the Hexagon core growth in full.

No, it's rather like this. We have done destocking previously in 2025 as well within Geosystems to rightsize the delivery channels. So if you look at the full year impact for Geosystem, it's actually EUR 21 million of destocking, and it's primarily Latin America and Asia, but we see that the biggest part is then with China. And we wanted to raise it now because we did EUR 10 million in 1 quarter here, where EUR 8 million of those EUR 10 million were related to China. So we thought it was important to bring it up to increase the understanding.

And we also see that it will continue then in the first quarter of this year, and that will be mainly in the China channel, and we expect EUR 8 million to EUR 10 million also in the first quarter of this year. Then there is nothing remaining to be done in Q2, Q3 or Q4. So from the end of Q1, all the destocking within Geosystems is completed, and you will see a normalized business going forward.

Now we're going to take our next question and it comes from the line of Andre Kukhnin from UBS.

I wanted to ask a question on the cost savings. I think the pace that you're delivering at now is steeper than what the chart implies for the rest of 2026, if we are already at EUR 65 million run rate for EUR 110 million. I think we should be at the EUR 110 million run rate probably by middle of the year. So I just wondered if there is any reason for that to slow down? Is there a kind of low-hanging fruit has been picked first. And what is the appetite for further savings beyond EUR 110 million? Can we already start talking about that?

Yes, I will answer this. It's Norbert. Yes, we did quite a bit in Q4, as we mentioned, and you can see and you highlighted this earlier, that was, say, in preparation, and we will take this now step by step in the sense. So from our point of view, it will be end of the year where we see the full savings going forward. So I think that will be from our point of view, so going forward. The appetite, I mean, will be constantly to look at the different business and what performance they are, as we have mentioned, and Anders mentioned this, particularly in Q3 as well, but that is an ongoing process from our side.

And that will be more of an organic development. So we will not launch other programs like this one. It's rather that some of the businesses will have a hiring freeze and they need to reprioritize if someone leaves, et cetera. So it will be more of an organic going forward. But of course, we are continuously working on making further efficiencies within the group.

And if I may just follow up on the question on new product launches. Could you quantify for us what percentage of sales do these new products account for in terms of the predecessors that they replace? And is it possible to give us some idea of your kind of measure of vitality ratio, kind of percentage of sales from products that are less than 3 or 5 years old, so that we can also assess how these new products are shifting that ratio?

Yes. It's Norbert here again. So I mean, for us, 2025 was a big year. Fair statement, I mentioned this as well, that sure, the new product does take some time to come to full benefit for us from a contribution point of view. But at the moment, we're running around 3% to 4% overall from our point of view. And yes, we're following this very short -- we're following this up going forward as well.

And this is a product launched in the last 3 years, the definition. So here, you had a bit of a delay during the COVID cycle. And then we are basically seeing the launches of new products now coming in, in 2024 and 2025. So -- and these products that we launched, these big products like MAESTRO and the TS20, those take time to ramp up. It takes 12 to 15 months because before they are fully ramped up. And that's also why Norbert mentioned the shrinking gap between amortization and capitalization because when you launch a product, that's the day where you start getting the amortization of what you have put on the balance sheet in R&D. But of course, in that day, you have 0 sales for the new products. It takes time to ramp that up.

So there is a period where you have that R&D gap headwind before you starting to -- of course, over time, we will have a tailwind with the new products, even though we are paying the R&D gap, right? So that's the whole intention. But there is a time lag in between there.

So you said 3% to 4% in total. My line just broke up. Did I get right? 3% to 4% of group sales?

Yes. That is correct. You heard this correctly. But the line was broken up, yes. I saw that.

And the next question comes from the line of Mikael Laseen from DNB Carnegie.

I have a question on Octave. And on the transition from license to SaaS. If you can elaborate on how much of the 72% subscription revenue today that is true SaaS versus term-based subscription or maintenance? That's the first part.

Yes. Good question. I guess we will lay this out on the Investor Day in detail, Mikael. But I think high level, we have said that out of the 70% roughly recurring revenue, it's about 1/3, right, that is SaaS and about 1/3 that is maintenance and about 1/3 that is monthly subscriptions.

Okay. Yes. So the same as you indicated before, of course. But the real question here is how we should think about maybe at this stage on a high level on the migration trajectory when you will have sort of a steady-state SaaS exposure or split?

Yes. Again, I don't want to lay out the whole plan here today. We'll do that at the Investor Day. But as you can see, the perpetual revenue is roughly 15%, right, of total sales. And this will gradually shift. It won't be dramatic in a couple of quarters, right? It will take some time. So you should expect a gradual shift there, but it will increase the pace compared to the history, right? Because we are doing this more -- yes, more aggressive than we have done in the past. But again, you will have to come to New York, and we'll talk about it.

And can you also maybe sort of give some indication of the cost situation now, how much of this margin decline is sort of this short-term improvement or readiness costs that you have and how much is in an underlying inflation going into '26 and also '27?

Yes. I think what I can say at this point, again, without giving too much of an outlook would be that I think you can expect a similar trend in Q1, right, where we still will have some headwind of the perpetual shift of the increased investment level and of the FX. And then hopefully, as we gradually start to grow faster, but if you see what I'm saying in the slide on the licenses and recurring revenue, we also expect the margin to start to improve. That's as much as I'll say today.

And the question comes from the line of Simon Granath from ABG.

I also have a question on Octave. Have you seen any impact from the government shutdown then relating to SIG? I think one of your competitors highlighted that a couple of months ago. So I was asking if -- wondering if there are any pent-up demand trends to be materialized in 2026.

Yes, good question. Not material, I would say. I mean as you might remember, we divested two businesses in SIG in the [ Hex fab ] area, right, which had quite a lot of government exposure. So the government exposure we have left in SIG is not that big, right? So some impact maybe, but not really material.

That's very clear. And then I also had a question on AEON. After the Microsoft partnership announcement a couple of weeks ago, should we expect more partnerships ahead of commercialization? Or is the framework now mostly in place? Or -- and how are you essentially tracking versus the general time line here?

Yes, thanks. I think we are tracking exactly on the time line that we have laid out for AEON from the AEON team. And there's constantly new partnerships being formed with new ecosystem partners, right, that we use within the AEON project. And this is not something that we always go out with. But this one was quite significant because this is how we use Azure Cloud for training of AI models for AEON and also for the imitation learning framework for AEON. So this is quite significant and important one. And that's why we wanted to go out with this together with Microsoft, like we have done previously with NVIDIA, et cetera.

So we go out with the big ones when we think it's relevant for the market to understand what we are doing, but we don't go out with all the partnerships that we are creating because there are lots of those.

Very clear. And just a final very brief follow-up, if I may, on the supply chain. Do you see any impact on your operations from the rising memory prices? If so, which segments and what are the bill of material costs here? Or -- and could this be something you can push through to your customers?

Yes. Thanks. No, in general, we compensate for all types of inflation that we have within our businesses. So of course, we don't prefer when there is parts of the supply chain that's increasing cost. But in general, we take this into account, and we compensate with pricing. And I think we have done that successfully in the past. So we will continue to do so also going forward.

When it is challenging for us, it's rather when there is a supply chain constraints like we had a bit previously a couple of years ago, then it becomes more challenging also for others, of course. But for this kind of price hikes on memory or whatever, it's something that we compensate for. It's not significant at all in our total bill of material.

Now we're going to take our next question, and it comes from the line of Sven Merkt from Barclays.

I have first a question for Mattias. There's a lot of debate in the market currently on how software is positioned in respect to AI. Can you comment what are the major AI initiatives you have in place, both on a product and also on the cost side and how you oversee Octave position in regards to AI?

And then a question for Anders or Norbert, on the software growth ex-Octave. Overall, the software revenue decelerated by 2 points despite a 1 point acceleration for Octave. So I'm interested to hear what drove the software growth ex-Octave in the quarter.

Thanks. Yes, I'll start then with the AI question. I mean, how much time do you have, if we're going to go through everything. But I would say -- I mean, first of all, important to say is that we support, like I said in my presentation, customers that do mission-critical things or mission-critical infrastructure and assets. We're not building an app or a website or something. It is truly mission-critical software. So I think it's very sticky, right? And I don't see the threat of being replaced by AI as that high. Then, of course, we are building AI on top of our solutions every day, right? We're launching agents every month. And that will just increase and increase.

If we look at internal efficiency, I think that is a very good point. We are training and adopting AI in our own development at a very fast pace. And the goal, of course, there is to get everybody trained and up to speed. And yes, I see it as a big potential efficiency. It doesn't mean necessarily that we are going to get rid of people, right? I see it more as the people we have can do more important things, right, focus on innovation rather than documentation or bug fixing or things like that, right?

So yes, great question. But yes, I'm very positive on AI in general. But yes, I don't think we are at a first in line to be at risk. That would be my summary.

Yes. And then I'll step in and if I understood the question, it was software growth, excluding Octave, in the quarter?

Correct. Yes, yes. Because I think the overall software growth decelerated while Octave accelerated.

So we -- software growth for us in the quarter was 4% related to -- compared to previous year. And the general software and services total, and this is only software and not services that grow 4%. And if you look at software and services, the revenue, excluding Octave and excluding the D&E, Design & Engineering, that we are selling is in the range of 45% to 50% of revenue, and the recurring part is 30% of revenue approximately. So that's a high level for you.

Now we're going to take our next question and it comes from the line of Balajee Tirupati from Citi.

Two from my side, if I may. First one on cash conversion, which has been quite strong for the group in recent periods, including contribution from working capital and capital expenditure being in check. As we look ahead, should we see the cash conversion profile as structurally better or are there one-off impacts within which you would expect us to keep in mind before extrapolating current trends?

And the second one on margins. as we look for margin evolution in 2026, and I appreciate you already have shared some color for first quarter. But if I look at 2026, there are, of course, a few puts and takes. Could you help us on how should we think of recovery in margin, both on an underlying basis as well as in context of current FX evaluation and growing amortization charges?

Yes, this is Norbert. But I'll take the first one on cash conversion. For sure, in Q4, that's very seasonal, let's call it like that. Therefore, we can expect in Q1, not the same magnitude from our point of view. I think the overall as we highlight as well, what our target is the 80% to 90% conversion side. And that is, I think you can, say, take us going forward as well in that range. There will be every time seasonality, particularly in Q4, that is given in the sense. But overall, we remain to our target.

Yes. And if I move in to try to respond to the question, if I understood it correct, the margin question for 2026. So what we already covered is that we are doing things like the restructuring program that will help both Octave and Hexagon with the underlying margin improvement. We are targeting growth with -- and you can see we have markets like America, we have areas like aerospace and defense and mining that are profitable markets and areas for us that continue to grow very rapidly. We have new products that we have launched to the market and some of those were mentioned with the ATS800, MAESTRO, the TS20 and other very important products that will sort of start ramping up now. And those products will, of course, contribute positively also to the gross margin for us going forward.

We are making sure that we compensate the pricing versus cost inflation in all areas. And you can see that we delivered a gross margin of 67.5%, which is the highest quarter in history for Hexagon. So we are managing cost versus price in a very good way.

Then like you mentioned, there are drags as well that we have mentioned. We have the similar FX drag that could be significant like it was for this quarter. Also going forward, we don't know when that will even out or how the FX will become going forward. So I think your guess is better than mine.

Then as Norbert mentioned, the amortization, capitalization gap, as products ramp up, the effect of that will be smaller since you will get the top line and the profitability of the new products that ramp up that will compensate for that shrinking gap. And of course, we are compensating for tariffs, et cetera. We will have continued investments. Mattias mentioned also that we need to invest for making sure that Octave is ready as a stand-alone company. The Octave team needs to invest in their product portfolio to make sure that they have a strong product portfolio when they stand alone. At the same time, on the Hexagon side, we are investing in AEON, which is pre-revenue basically, which is basically only a cost for us. But long term, that's a strategic right decision to do for the group. So we are taking those investments.

I hope that explains something. I'm, of course, not going to go in and estimate margins for the year. But that's sort of some of the underlying drivers for you.

Understood. On cash conversion, I was -- if I can just follow up on that. I was asking more on a full year basis in the last 2 years, conversion has been ahead of 90% despite a rather softer growth. And working capital is one of the contributor being positive in both these years. So I was just trying to understand that structurally are -- because of growing share of recurring revenue, are we now structurally in a phase where the contribution from growing liabilities would provide a kind of tailwind where the cash conversion profile should be going higher? And this is also a period when it seems like we are going much more measured on CapEx.

From our point of view, yes, we are looking into, say, cash conversion constantly, I can tell you that. I'm looking for an efficient way of doing this. But from our point of view, we remain to the target, as I said earlier. And from our side, we will not further say, give more information out, honestly speaking.

It's not structurally changing. What you will see happening during this year is the spinoff -- the potential spin-off of Octave. Octave is a business, as you referred to here as well, which has a structurally difference, which has higher cash conversion than the sort of Hexagon core business. So I see Hexagon core moving in that direction, but much, much lower than Octave. So I think an 80% to 90% would be considered a very good level for Hexagon core going forward. And of course, the tighter we go out with net working capital in the year, the tougher the year -- the next year would be, right? And we had a 3.2% working capital on sales, which is very low. It's the lowest we've ever had. So I think you should not change your structure on the cash conversion for Hexagon core.

Yes, for the time being because...

Yes for the time being.

I would now like to hand the conference over to your speaker, Anders Svensson for any closing remarks.

Thank you, operator. And thank you, everyone, for participating, listening in, adding valuable questions. And we look forward to speaking to you in a quarter from now, giving you the first quarter of 2026. And then hopefully, very tight after there, only a week after that, to see you in London for the Capital Markets Day. And with that, we say thank you for Hexagon, and wishing you all a nice weekend.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.

Good day, and thank you for standing by. Welcome to the Hexagon Q3 Report 2025 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Anders Svensson, President and CEO of Hexagon. Please go ahead, sir.

Thank you, operator. Good morning, and welcome to our third quarter 2025 earnings presentation. Today, we have an extended session with a bit of a different format. So I will take a moment now in the beginning just to walk you through how it will work. So in a moment, I will start by taking you through the third quarter performance. First, from a group perspective, and then focus on Hexagon core business performance in the third quarter. I will then hand over to Mattias Stenberg, the CEO of our potential spin-off company, Octave, and he will talk about the Octave performance during the quarter. Mattias will then hand over to Norbert Hanke, our interim CFO, who will cover the financials for Hexagon Group in a bit more details.

Following this, I will take an additional roughly 20 minutes or so, to discuss my initial thoughts from my first full quarter at Hexagon, including also immediate priorities, with a focus then on -- also here on Hexagon core. And we will then, of course, open up for questions-and-answers. But starting then with our third quarter performance, and I start directly on the highlights.

So in the third quarter, we made solid progress in our financial metrics and delivered a great deal of operational progress. Organic growth was 4%, with growth driven strongly by a demand in Autonomous Solutions and also across some of the other customer segments, such as aerospace and defense, electronics, machine control, mining and general manufacturing. Operating margin strengthened quarter-on-quarter, despite that Q3 is normally our seasonally weakest quarter, but it remained below our targeted levels. Across Hexagon Group, we have identified a cost efficiency program, which has been in action now and will begin to benefit margins gradually from the coming quarter here, the fourth quarter and will then have full effect by the end of 2026.

Cash conversion in the quarter was good at 77%, considering that Q3 is normally the weakest quarter in the year. And we remained on course to achieve our annualized target of 80% to 90%. We also made some strategic operational moves during the quarter. We have previously announced the sale of our D&E business in Manufacturing Intelligence to Cadence for EUR 2.7 billion. And we made some changes to the executive leadership team ahead of the potential separation of Octave. And this separation is still on track for the first half year of 2026. And I will talk more about these changes in a moment. But first, I will walk you through the announcement where we are addressing our cost issue.

So at my first call during the second quarter report, I committed to review the cost base of Hexagon to address the recent challenge in our operating margins. So across Hexagon Group, we have identified EUR 110 million of potential savings with around EUR 74 million being related to Hexagon core and EUR 36 million being related to Octave. And as I said, we expect to see these benefits gradually starting from the fourth quarter this year and then with full effect at the end of next year.

The cost to achieve these efficiencies will be around EUR 113 million. In Hexagon core, we also conducted a review of our balance sheet, which we identified a charge of EUR 186 million related to primarily innovation in history and also some other items like inventory and also discontinued products. These charges were also taken during the third quarter.

And I'm very confident that these situations will be less likely in the future as I expect our businesses to manage their profit and loss and balance sheet within normal operations, and key steps we are taking here is to give divisions full accountability for financial performance. It will also enable operational and product decisions to be taken closer to customers to ensure a market fit and also that customer needs are met. We're also strengthening our governance for approvals and review systems, and we are implementing a new performance management system to enable swift response.

I'll now turn into recent changes to our executive team. So we have announced that David Mills is stepping down as CFO from Hexagon for personal reasons, and he will be replaced on an interim basis by Norbert Hanke until we find a permanent replacement. We didn't want to see David go, but I understand the reasons and he has my full support. But I'm very happy that David has agreed to remain available for us for the next 6 months as a financial adviser and that we also have a very competent and knowledgeable interim replacement here with Norbert.

We have also announced that on the separation of Octave, Ben Maslen and Tony Zana will transition to the Octave leadership team, where Ben will be the CFO, and Tony will be Chief Legal Officer and Corporate Secretary. Ben and Tony has been key members to the Hexagon executive team for many years and still are. And while I'm sorry to see them go, I'm also delighted to see them progress into these new roles with Octave. And I have no doubt that they will be instrumental in driving value for Octave and embrace the future that this company is going into as an independent listed company.

And I'm pleased to announce that replacing Ben is Andreas Wenzel. Andreas joins us from ABB, where he has held a number of senior roles, including Head of Strategy and M&A. Replacing Tony will be Thomas De Muynck, who joins us from Jones Day where he was the Head of the Brussels practice. Thomas joined us early in this month, and I'm very happy to welcome him on board to the team.

Turning now to the next slide. I will talk briefly on the decision to sell our D&E business. In early September, we announced the sale of our D&E business to Cadence for EUR 2.7 billion. The engineering and simulation market has been consolidating rapidly and electronical design and automation suppliers, EDA suppliers, have been increasingly taking a leading role in this consolidation. And we are then consolidating with physical simulation suppliers like our own D&E business, and we have seen this with other companies like Siemens, Altair and Synopsys, Ansys. And this is a trend which is very difficult for Hexagon to follow. It is therefore better that we dedicate our time and attention to our core, which is precision measurement, positioning and autonomy technologies, where we can use our market leadership position to drive best-in-peer group growth and margin levels.

And just to make it very clear for everyone, this is not an exit from software at Hexagon. Post the potential separation of Octave and the sale of D&E, Hexagon software and services revenue will still account for above 40% of revenues and 25% recurring revenues, and we expect these amounts to continue to grow also in the future. The funds released by the transaction expected to be in the amount of EUR 1.4 billion will help support us to build and develop our businesses while also maintaining a very robust balance sheet. We expect the transaction to close during the first quarter of 2026.

I'm now turning to the next section, and that's the financial performance of Hexagon core in the third quarter. So I'll move directly into that. So Hexagon core, that means excluding Octave business, grew by 5% organic in the third quarter with an adjusted operating margin of 27%. This is a solid financial performance in challenged end market environments.

I will now turn into a focus on Manufacturing Intelligence. So MI reported revenues of EUR 445 million, represent a 3% organic growth versus 2024. There was a strength in general manufacturing and electronics, and it was somewhat offset by continued soft demand within automotive. There was growth across all geographies with good demand in the Americas and growth also in EMEA, where automotive weakness was offset by a strong demand in aerospace. China also grew with 3% in the quarter, strength within electronics and general manufacturing, but signs of weakness is also here within automotive. The division reported EUR 112 million EBIT and an operating margin then of 25.1%, and it was impacted by some negative currency effects. In fixed currency, if you compare the margin year-on-year, it was actually better in 2025 than in 2024.

So turning now to Geosystems, where we reported revenues of EUR 353 million during the quarter. And I'm happy to say that represented a 1% organic growth compared to last year. And it was really good to see a return to growth after 6 quarters of negative growth. Last time we had a positive growth was the fourth quarter of 2023. So good to see that we are back on positive numbers. We saw continued growth in the software portfolio and associated recurring revenues and a good contribution from our new product iCON trades, which continues to grow very well. This was, however, offset by continued weakness in hardware related to construction and heavy infrastructure, where the market remains very weak, especially in China.

The Americas continued to grow, and there was a return to modest growth in EMEA. Asia remained challenged, of course, given the exposure to China heavy manufacturing or heavy infrastructure, particularly in high-speed railway, offsetting the continued good growth that we actually have in India. And here, maybe adding some interesting facts that in average 2022 to 2024, China was building 3,600 kilometers of rail every year. If you compare to the first half year of 2025, they only was building 301 kilometers. So it's almost a drop of 85%. And that is, of course, impacting Geosystems deliveries in China.

EBIT declined to EUR 95 million with an operating margin of 26.9%, reflecting the combined effects of low volume in some product segments, the weaker product mix because the product mix going into this heavy infrastructure is a really positive contributor and also then we had negative currency impacts.

Finally, I turn into Autonomous Solutions. And I'm happy to say here we have the standout performer in the quarter, delivered revenues of EUR 178 million, representing 19% organic growth compared to the prior year. There was a very strong performance in aerospace and defense. Mining was also growing well and end markets in agriculture actually remain challenging. So here's the problem child within this division currently. But it's market related, and the agriculture is currently in a serious downturn, and we are seeing signs of improvement, but still it's very low compared to where it should be.

By geography, growth was strong in the Americas, which represented the majority of the aerospace and defense demand in the quarter. APAC also grew well, supported by demand in the autonomous road trend project within Australia and EMEA declined, but that was on tough comparables. EBIT came in at EUR 65 million, represented an increased EBITDA margin -- EBIT margin to 36.6%, driven by strong volume, positive product mix, but slightly offset by currency. So in summary, a very solid performance within Hexagon core in general.

And I will now hand over to Mattias, who will cover the Octave performance.

Yes. Thank you, Anders, and good morning, everyone. We'll start with, I thought, since this is the first time we report like this publicly for Octave, I thought we'd start with a short description on what the business is and what we do. So we are a market-leading provider of enterprise software that ultimately helps customers design, build, operate and protect mission-critical industrial and infrastructure assets. In terms of numbers, we had about EUR 1.5 billion revenue last year. As you can see also from the slide, we have high recurring revenue and high profitability.

We have roughly 7,400 employees around the world. And we have a very strong, I would say, A+ list of customers. As you can see, roughly 60% of the global Fortune 500 companies are customers of Octave today. And you can see some of the logos there on the slide, but of course, many, many more. So what could we do if we move to the next slide and talk about our core pillars.

I think, first of all, it's important to say what makes us unique is that we connect all of these pillars together into one platform, one natively integrated data platform, right, all the way from design, build, operate and protect. So you will see product names out to the right here on the slide, some of the flagship products, obviously, SmartPlant 3D, EcoSys, EAM, ETQ, et cetera. But the way we go to market is really by selling a platform. We're selling solutions. We're delivering value, not selling individual products.

I think an example of that is that you can also see that products like SDx2, which is our data platform, shows up in several of the different pillars here. Design is our biggest area, as you can see from the revenue contribution pie there. Build would be our smallest one, operate our second largest, and that's also been the fastest growing over the last couple of years.

But moving into the quarter, how did we do on the next slide. I guess the headline number is that we grew organic growth 1%. And one has to remember first that we come from several years of good growth, right? I think that's one important thing to say. The other thing to say is that our recurring revenue grew 6%. So I feel confident that we're building momentum for the future. We're adding customers, adding seats, et cetera. So the base is growing. And you can see that by our SaaS revenue that grew strong double digits. However, our lease revenue was flattish, which obviously had a, what you say, dampening effect on the recurring revenue compared to the SaaS.

To offset this growth, we did have a decline in perpetual licenses. This is a revenue that varies quite a lot by quarter. It depends if you get a big deal in one quarter or the other, the other thing one has to say also is that it is an intentional strategy and has been for quite a while to transition this revenue into subscription revenue. So if you look at the slide there as well, we described that the license revenue is now 13% in this quarter of total revenue. And this is the revenue that we will gradually, over time, transition to SaaS.

If you look at the profitability, we did 26% operating margin, which was lower than last year. And I think it's a combination of things. I mean, one, that the perpetual licenses were down that has a high drop-through. Also that we've had some additional investments partly due to making the company ready for being a stand-alone public company and also to integrate the other business units, SIG, ETQ and Bricsys that we have taken on recently. Important to say, however, that this is a temporary downturn in the margin. We are taking cost effects like Anders talked about. And my expectation is that this will put us back on a growing margin trajectory.

If we move to the next slide, I wanted to highlight one very important strategic win we had in the quarter. We won a multiyear 8-figure deal. And I guess you could say also there was very high 8 figures, and I see this as proof that our strategy of selling a platform and our relatively new product, SDx2 is delivering value in the market and to customers. It really also sets a precedent, I think, for other owner operators that want to digitalize their assets. And it will clearly also influence and incentivize other players in the ecosystem, such as EPCs, suppliers, contractors to adopt our platform as they see big owner operators adopting it. Okay.

On the next slide, I wanted to say a few words about some key initiatives that are going on right now. Like I mentioned, we are transitioning our business to a SaaS model. So you will see more of that going forward. I also mentioned that we are investing in making the company ready to be a stand-alone public company. Also wanted to highlight the strategic disposal that we did earlier this summer of some noncore assets in the HexFed business, which historically sat in the SIG division. It was around EUR 90 million of revenue, and this will strengthen our margin profile and, yes, sharpen focus for us going forward.

Like I also mentioned, we are in the midst of integrating these businesses into one. We are making very good progress on that and we'll, yes, soon complete that. We're also, like Anders mentioned, completing the cost saving program, which will, like I mentioned, put us back on a growing margin path.

Finally, we are also making improvements to our organizational structure. So if you go to the next slide, I wanted to highlight the management team that we have put together here over the last couple of quarters. I'm not going to read every resume here, but if you -- there was this press release in September where you can read more about this if you're interested. But I would say it's a world-class management team that we put together that we think really will help us scale this business. It's a combination of Hexagon executives like Ben and Tony that Anders mentioned. And then we have some executives from the former ALI division as well as 2 new recruits that I wanted to say a few more words about.

So we've hired a Chief Product Officer in Jay Allardyce. He is a recognized leader in the industry across AI and enterprise software. He has had prior leadership roles at HP, GE, Uptake and Google. So I think he will be a great addition to our strategy and product teams. We also have hired Tamara Adams or Tammy, as she goes by, who is a strong CRO with lots of experience in the industry. She has had recent roles at Honeywell, Oracle and most recently as Chief Revenue Officer of a company called Dotmatics, which recently was acquired by Siemens. So in summary, I'm very happy with the team we put together, and I'm sure they will help us scale this going forward.

Finally, on the next slide, I wanted to say a few words about the time line and what you can expect there. So we are obviously well aware of that the U.S. government shutdown, which is impacting the SEC and the review process, but we still feel that we are on track to complete the spin-off in the first half of next year. Also, like we mentioned before, Octave will be listed on a U.S. National Securities Exchange with the Swedish depository receipt expected to run for approximately 2 years. And also like we mentioned in the report, we will -- we are planning to hold an Octave Investor Day sometime in the first quarter next year, and we will come back with an exact date when we have it. So thank you very much. And then I'm handing over to Norbert.

Yes. Thanks, Mattias. In the following financial update, I will take you through the Q3 performance for the Hexagon group. Turning now to the next slide. Let us begin with the Q3 2025 income statement. Taking the sales bridge first. Revenue were EUR 1.3 billion, generating reported growth of 0%. Currency was a negative minus 4% on sales, and there was a positive plus 1% from structure, resulting in organic growth of 4%. Gross margin were stable at 67%, considering the impacts of FX. We continue to be confident in driving gross margin expansion as we will have positive impacts from new product releases.

Operating earnings decreased by 7% to EUR 349 million, corresponding to a margin of 26.8%. I will break this out further in the profit bridge. Interest expenses and financial costs decreased from EUR 44 million to EUR 32 million, given a delta on earnings before tax of minus 5%. Taxes being at 18%, in line with prior years, bringing us down to an EPS of EUR 0.096 also declining by minus 5%. Just for reference, the EBIT1, including PPA includes EUR 27 million of amortization and so dilutes the EBIT1 percentage to 24.7%.

Next slide, please. Moving on to the gross margin development. As I mentioned on the previous slide, we saw stability in the gross margin once adjusting for currency. On a rolling 12-month basis, gross margin of 67% is broadly in line with the prior year. Turning now to the profit bridge, please. So during Q3, currency continued to be dilutive, reducing EBIT margin by 30 basis points. The structural element was accretive with solid contribution from acquired companies such as Septentrio and Geomagic as well as by the sales of the dilutive assets in Octave.

The organic impact was negative, diluting the margin by 240 basis points. This mainly reflects a cost base that is not yet fully aligned with the current level of demand. To address this, we have started a cost program to rightsize the organization and mitigating this impact going forward. We expect the benefits to contribute or to start to contribute gradually from the fourth quarter of 2025 and beyond.

Turning to the next slide, please. Moving on to the Q3 cash flow, which is a strong performance when taking seasonality into account. The adjusted EBITDA variance at minus 2% demonstrates the continued stronger cash leverage versus the EBIT1 variance at minus 7% due to the increase in D&A. The working capital represented a build of EUR 32.4 million in the quarter, an improvement to working capital management last year that results in a 1% increase in the operating cash flow before tax and interest, which leads to a solid cash conversion of 77% versus 70% last year.

Interest payments marginally decreased as expected and cash taxes remained at a similar level to Q3 last year. The nonrecurring items cash outflow of EUR 38.8 million versus the prior year of EUR 22.7 million brings an operating cash flow of EUR 139 million, decreasing by minus 3%.

Next slide, please. Moving on to the working capital trend. The Q3 net working capital being a build of EUR 32.4 million versus the prior year build of EUR 56.2 million decreased the proportion to rolling 12-month sales to 5.3%, lower than the prior year level of 8.3%, which is still below the 10% threshold we aim to achieve.

To conclude, the divisions have continued to mitigate an uncertain environment to deliver growth, solid cash conversion and stable gross margin. Negative currency has been a headwind to EBIT1 margin development, and we are working to address the cost base through the announced cost program.

I will now hand back to Anders.

Thank you, Norbert. And I will then start by summarizing the third quarter. So to conclude, in Q3, we have seen solid development in our financial metrics. Organic growth of 4%, an improvement in margins quarter-on-quarter and a good cash flow considering the usual seasonalities for the third quarter. While improved, our operating margins remain below our expectations and below our targets. And as a result, we then launched an efficiency program aiming to achieve cost savings of EUR 110 million. And this, we expect to have gradual benefits from the fourth quarter this year with full effect the end of 2026.

We do not see the immediate market environment that currently is characterized by delays in customer decisions, as Mattias mentioned and also within the Hexagon core businesses, and we don't expect that to change in the near term. So we see a similar environment in the beginning here of the fourth quarter. But we have also released a lot of products in recent quarters, and we see that as we are set up in a good way when the positive environment returns.

Operationally, we had a successful quarter. The sale of D&E, as I mentioned, as one of the key highlights and the release of those funds will then further fund growth for both Octave and Hexagon core. And finally, then, the potential separation of Octave remains on track for completion in the first half of 2026.

I'll now turn to my first quarter review slides. So in this section, unless I otherwise mentioned or it's otherwise stated in the slides, it would be relating to Hexagon core businesses. And that means then the type of businesses that are left after the potential spin-off of Octave, of course. And this includes then our business areas, Manufacturing Intelligence, Geosystems, Autonomous Solutions and also the Robotics division.

So I will take you through my initial thoughts and observations after now almost exactly 3 months being at Hexagon. And I will then talk about actions we are taking to drive performance further and some more details about our upcoming CMD. So I turn into the first slide here.

So Hexagon has created superior value for many decades now, at least 2-plus decades, and we have the potential setup to continue to generate superior value creation for decades to come. And today, we are at a very exciting inflection point in our company's history because our industrial customer base, they value precision and quality more than ever as they try to meet the increased quality demands of everything getting more tight, more small and with less tolerances and also the increased sustainability challenges. They're also driving towards full autonomy as a response to the shortage of skilled labor in the world.

Our industry-leading technologies regarding sensors, software and AI are allowing us to deliver ever more value-adding products and services to our customers, and we are well placed to seize the opportunity for autonomous operations in many industry verticals going forward. Our new operating model will enable us to take full advantage of our profitable growth opportunities. But first, a little more on the opportunity ahead. So I turn to the next slide.

So Hexagon is ideally positioned to enable autonomy in many industry verticals, and we will do this by combining our capabilities and offerings within various fields. We possess market-leading measurement and positioning technologies, combining multiple types of sensors. We utilize these to deliver sophisticated real-time digital twins, including reality like full 3D environments of buildings and cities. And we leverage advanced analysis on [ AI ] to unlock the value of petabytes of data that we generate. The combination of these capabilities position Hexagon to be a clear leader in the emerging field of Autonomous Solutions. Many of our industrial customers have embarked on a journey towards these autonomous operations as they increasingly struggle to find skilled and qualified labor. And hence, they need to move towards so-called lights-out production.

And here, of course, our new humanoid robot, AEON, is a prime example of enabling industry autonomy. Measurement and positioning new technologies and industrial autonomy are only going to become more important as industrial customers face these significant challenges. So let's see how our products are helping. So turning to the next slide.

Since late 2024, we have launched a number of important product innovations, which combine our most advanced sensor with latest technology on AI and digitalization. All of them also bring significant advances on autonomy. Taking some examples from this page, we have talked previously quite a lot about AEON and iCON trades. And also last quarter, we talked about MAESTRO, our new coordinate measurement machine. So I will focus on the other one here.

So in Manufacturing Intelligence, we have the ATS800, which is the first laser tracker ever to merge scanning and reflector tracking into one system. This portable metrology device is automation-ready and uses AI to pinpoint the true center of each measurement, detect features like holes and edges, et cetera, and this is huge to speeding up the process and removing the need for human intervention. And also now in the beginning of October in Geosystems, we just launched the TS20. And that's the first new total station platform in, I would say, 20 years plus.

And it's a full hardware and software overhaul it's the first total station with on-device AI, which enables it to recognize and lock into any prism without user input. And this drastically reduces errors, setup time and operator dependency. And this is a direct response from Hexagon to the shortage of skilled surveyors. So combining our skills in measurement and positioning technologies, digital twins and advances in AI to deliver solutions for industrial autonomy is key for Hexagon, and we are in the middle of this journey.

So the products you can see here on the page represent profitable growth opportunities ahead. And this potential is, of course, largely not reflected in Q3 financial performance and will also not be very much reflected in Q4. But going forward, these products will play a major role in Hexagon's delivery.

So turning to the next slide. So we know that Hexagon historically demonstrated that we can generate strong organic growth with excellent operating margins. And on this slide, I try to demonstrate a bit the relationship between organic growth and profitability during the last 2 years. And we can see here in this recent history that we have 2 trends. One is that the organic growth has been impacted by the macro backdrop, and we can see it's been negative or at best flattish, while the operating margins have been subject to increasing cost levels internally and hence, a dislocation from our top line alignment and -- a top line development, which has been flat. So you can see we have dropped even more when it comes to profit. The recent quarter shows some signs of reversal of this trend.

And with our increased cost focus going ahead here, combining this with our new operating model, we intend to generate a delivery model within Hexagon core that supports profitable growth generation. So let's have a look at the steps we have taken, moving then to the next slide.

During the third quarter, we have taken 2 really important steps to enable us going forward to perform at our full potential. The first one is our new operating model, which embraces best practices of decentralization, but then applies them to the specific situation of Hexagon. So we have established 17 divisional P&Ls with our externally reported businesses with dedicated management team, and this would improve accountability within these organizations considerably. This would also improve our ability to quickly respond to end market changes and also to customer changes and make us generally faster to take decisions. It also means that product and operational decisions will move closer to customers, ensuring that we take the right decisions related to the different market dynamics and ensuring we don't take decisions centrally where we don't have the input from markets and customers.

The second step that we have taken is to realign our operational performance, and that was to do this restructure program that we communicated of EUR 110 million. And this should be understood that this is in addition and completely unrelated to the operating model. If we would have kept the same model as we already had, we would have launched the same program. So it's not related. We already communicated that we are addressing the cost base challenge to respond to the pressures on these margins. And alongside this, we have taken the decision to review the balance sheet as well and in particular, related to historic R&D spend.

This would help us to baseline performance so we can measure our divisional leaders properly on performance going forward. This baselining will only happen once, and we expect our divisional leaders to manage their P&Ls and balance sheet going forward as a part of normal operations, with adjustments only being taken for exceptional circumstances going forward. It could be such acquisitions with partly overlapping offerings. It could be a new COVID situation when we need to, as a group, react quickly. And it could be large restructure within the group, like the spin-off of Octave for example. All other items need to be handled within the business of day-to-day operations.

Turning now to some more details on R&D, where we have taken the decision to make these impairments. So innovation power is one of Hexagon's greatest skills and assets and is something that we will nurture also going forward. However, in recent years, investments in R&D has spiked, as you can see in the graph there. And that's mainly due to related to somewhat delayed core product developments and cost overruns in some major innovation projects, and we have seen this not only in one division, it's been actually in several divisions where some of our key renewal projects has been fairly late to market.

The positive thing is they're coming to market now. And so that's really positive to see with the TS20, et cetera. But this has meant that we have seen significantly increased R&D spend, while at the same time, the benefits of our organic growth and margins have not yet materialized to be seen. Maybe to be added here as well, there are some elements in this spike that related to software acquisitions that in relation has a generally higher R&D spend than our normal businesses. But with these new product launches across '25 and '26, we expect R&D to stabilize on an absolute basis and then to decrease on a ratio versus sales.

However, as we reviewed our innovation and product portfolio, it also became clear that in some cases, we have invested into innovation that turned not fully to meet customer requirements or the target end market situation has changed or we have decided to exit a specific offering. This means that there are some product lines that are not performing and will not be able to generate a return. So we have, therefore, taken the decision to impair EUR 186 million in Hexagon core.

Most of this then is related to these R&D spends, but there's also some related to inventories. And this will give our businesses the opportunity to reset and move forward from a more comparable basis. So we are also then able to performance manage on actual performance and not on historical effects. As I mentioned earlier, our new operating model will help us to avoid that we face the need to do such impairments again in the future.

I move to the next slide. So this is explaining a bit the new management structure. So we will have 17 profit and loss accountable businesses, which are part of -- these are sort of the main part of our operating model. So I will explain a bit how it will work. So Hexagon has always operated with decentralized structure, which has then entailed a lot of freedom for the divisional presidents to run their businesses, and it has kept the corporate cost levels quite low. However, within the former divisions, the organizational structures became quite overly complex sometimes with slow decision-making and not always focused on end customers.

So our new operating model establish clear and common management blueprint on a more granular level. And also, we have historically called divisions. They will now be called business areas instead, and they will have divisions reporting into them. So the previous divisions, Manufacturing Intelligence, Geosystems, Autonomous Solutions will now be called business areas. And they will then have the dark boxes, the 17 -- or you can say 16 smaller dark boxes reporting into them. But externally, we will still report on the business area level. And then you have the 17 dark blue box, which is robotics, and that will then continue to report into the CEO.

Division leaders and their teams will then have mandate to deliver superior value creation within the businesses. And I move to the next slide to show how those mandates will be set up. So a division can have a mandate of stability, profitability or growth depending on where they are in the current situation. So we refer to these 3 stages as strategic mandates. And that sets the overall direction for the business and how the management and leadership of those divisions should basically think every morning when they wake up.

If you are in stability, it does, of course, not mean that you need to restructure or sell parts of your business. You can also transform it organically. And if you are in growth, it doesn't mean that you need to buy everything, you can also grow organically. But we will allocate capital accordingly. So more capital allocated towards where you are in growth and less when you are in profitability and almost nothing when you are in stability.

Moving then to the next slide. So a decentralized management structure with full accountable divisions can only create value sustainably if it's combined with a strong governance and a clear performance management system. And here, we are taking a major step forward at Hexagon with the introduction of scorecards. At the core of the scorecard system is a set of standardized financials and nonfinancial KPIs, which are closely tracked for all divisions in a fully consistent way. The scorecard system will significantly improve transparency, accountability and also speed of action taking to steer the division in the right direction and to pull the right levers to change direction or create more value.

I then turn into the next slide, and that's the summary. So Hexagon is a strong company with a bright future ahead. Our fundamentals are very good. We are the market leader in precision measurement technologies. We have strong exposure to high-growth end markets and emerging field markets like industrial autonomy. And this places us very well to capture the opportunities presented from several macro trends, including the main one, labor shortages and skill shortages, increasing quality demands and also, of course, sustainability and safety demands.

Our innovation and expertise is second to none, and that's reflected in several of the exciting new products that I showcased in an earlier slide. And as we have a clear plan to achieve superior value creation going forward, we are taking immediate actions to address our cost base.

And in addition, we're implementing best practice decentralized operating model, establishing these 17 divisions with full accountability. Operational decisions will then be taken faster and innovation will be anchored in markets and close to customer needs. And last, we will manage our division portfolio very closely for performance and value creation, applying proven tools like strategic mandates and the scorecard system.

Turning then to the next slide, where we are inviting you all to Hexagon's Capital Markets Day in 2026. And that's on the 30th April. It will be showcased in London. And on this event, we will discuss in much more detail business area strategies, including the divisional mandates that we have identified. And also, we will also discuss then new financial targets for Hexagon core '26 and forward. So we are really looking forward to seeing you all there.

And with that, I think that summarizes the presentation, and we will now move into the Q&A section.

[Operator Instructions] And your first question today comes from the line of Johan Eliason from SB1 Markets.

I was wondering a little bit, I mean, your new setup of the Hexagon core looks excellent to me. One issue that's been high on the agenda over a couple of years has been the way you capitalize R&D and now obviously, you impair a lot of that. Will you change the strategy regarding R&D capitalization going forward?

So thanks, Johan, for the question. We will not basically change the way we run capitalization is IAS 38. We will make sure, of course, that we are not capitalizing too early of any of the projects. We will manage our portfolio more like an insurance company. If we believe that we take a larger risk in one project, we can't afford to take larger risks in all projects. So we can manage all that within the normal operational structure of the company.

So what we are doing is more strengthening around how we do governance when we approve projects to be started, how we review projects during the way to make sure we don't continue to invest in something that we are aware of will be difficult in a go-to-market situation. So the answer to your question is we will not change the methodology of capitalization and by then restating all our history or something like that. So we will keep the current way of operating, but we will operate more carefully and more controlled and with a tighter governance.

Excellent. And then secondly, you will have a very strong balance sheet after the D&E divestment next year. How are you thinking about the balance sheet of the spin-off Octave? Is that a business that should be run on a net cash position? Or how should we think about how to split the balance sheet going forward?

Yes. So this is a decision that the Board will take at the right stage in the process on how we divide the assets, net debts and the firepower within the company generated from the D&E sale. So that's a question we would need to come back to you on.

Okay. I guess that's topics on the Capital Markets Day. Then just finally, a short question also for Mattias here. In Octave, you talked about lease revenue stable. I'm not sure I understand what lease revenues are. You have subscription license and services in your pie charts. How does this corroborate to each other?

Yes. Yes, good question. And first of all, I should say we will break all of this down for you in more detail at the Investor Day, right, since we are in a public filing process, and we're still a division of Hexagon. There's -- we're not going to give all of the details today. But basically, leases are -- it's also subscription revenue, but it's month-to-month leases, right, of seats. So think of it, it fluctuates more than the SaaS revenue, right? So that's why it's, yes, more, I guess, short-term volatile than the SaaS, if that helps you.

And your next question comes from the line of Erik Golrang from SEB.

I have a couple of questions. So we'll start with Geosystems and China, which was weaker. And you talked about the development on the high-speed rail side in China. So given you have some peers in China growing much faster, is that basically an end market split dynamic that means Geosystems is growing so much lower?

Sorry, we had a little bit of a problem here with the sound in the beginning of the question. Would you mind to repeat it?

Sure. So on Geosystems development in China and your commentary there that a lot of the weakness is related to your exposure towards high-speed rail and that development. And so your take is basically that it's an end market split that means that you are growing slower than particularly some of the local peers in China.

Yes, I would say the end market exposure that we have in China is related to where very high precision is required and not in the general sort of market for our competitors. So we are in the top-tier segment within China. And the top-tier segment is not required everywhere, of course. It's required when you have sort of high-speed railway manufacturing and other very large infrastructure projects. So our exposure to that sector within construction is much higher than our competition. So when something happens to that specific part of the market, we get hit very hard. And that's exactly what happened if you compare that to local competitors.

Okay. And then as a follow-up on that, any -- there was never a plan to do with Geosystems similar to with -- as you do with MI now, making China a separate unit within to make it operate a bit more autonomously given developments in China?

The question is good. And -- but that option is actually not available because the reason why we can do that in MI is that we have been very good in history on localizing our products and our innovation also is localized. So within MI, we have a good, better and best offering. Best is basically the offering that we use globally and the good and better offering is the offering we use within China for China. And it's fully manufactured, developed, et cetera, within China.

If you look at Geosystems, basically, very little is localized in terms of supply chains, innovation, et cetera, to China. So it's mainly a global offering that we have. So a lot of the products are imported to China. And this is the reason also, of course, why we are only present in Geosystems in the top-tier segment and not in the general segment in the market. So completely different situations within those 2 businesses. So it wouldn't make any sense to do that within Geosystems.

Okay. Then for Mattias on Octave, just if you can give some more perspective on the low growth rate. I get that you say that growth has been high for a few years, but I guess that depends a bit on the starting point you use and you certainly have some peers that are growing quite a bit faster. So what -- I mean, what kind of growth rate would you like to get out of Octave in the midterm?

Yes. I mean I'm not going to give a forecast today, as you can imagine, since we are doing the Investor Day in Q1. But fair to say is that it needs to be higher the growth, and it needs to be higher the margin. And I feel confident when I see recurring revenue growing a lot faster than the headline number, the reported revenue. So yes, I mean, I think that's -- I'll stop there, I think, and then we'll discuss more in Q1.

Okay. Then just one quick at the end. You mentioned for Hexagon core and the peer-leading profit margins. What peers will you compare with?

We have different peers in the different businesses, of course. So if you look at first, maybe you start with AS, you have peers like Sandvik, Epiroc, Metso, et cetera, right? And if you look at MI, you have ZEISS, Siemens, to some extent, Sandvik as well. You look at Geosystems, you have Trimble, FARO, NavVis, Topcon, do you want to add any?

No, I think that's Renishaw. You mentioned already.

Renishaw, yes.

That's all, good.

And the question comes from Sven Merkt from Barclays.

Maybe first, following the R&D impairment, how should we think about R&D capitalization going forward? It looks like you're on track to capitalize around EUR 500 million this year and amortize EUR 300 million. So this gives you a net benefit of EUR 200 million. Where is that heading going forward?

Yes, it's Norbert here. From our point of view, as we are managing now the cost -- the R&D costs, and you have heard as well going forward on this, that we are very selective, right, in the sense and we will be very focused. It will be going down in the sense that overall, I think from our point of view, it will slowly decrease the gap from our point of view.

Yes. And maybe adding here, so let there be no mistake, we are not doing the write-down of the balance sheet to improve the results. And actually, if you would compare going forward with the new products being released and the impairments we are doing on the balance sheet, it's basically a wash from the performance and the gap within the third quarter this year. So there will be no sort of big benefit in our reported results from this impairment. What this impairment does is to set up the new management of divisions and business areas on a right level so we can actually performance manage them on their operational performance and not performance manage them on historical mistakes that we have on the balance sheet that are not generating a return. So this is the reason why we do this. And that enables us then us and the Board to make sure that we take portfolio decisions that are based on facts and not skewed by historical balance sheet issues. That's the reason.

Okay. Got it. And of the capitalized R&D that you have on the balance sheet at the moment, how much is sitting within Hexagon core versus Octave?

We will not give any, say, further information on that, honestly. We'll do it when we have the spin. You will see it then.

Yes, you will see it clearly when you have this potential spin executed.

Okay. Fair enough. And final question, just on the cost savings. How much of that should we expect to really flow through profit and how much you might reinvest elsewhere?

So what you see on the EUR 110 million of savings that we have communicated, that is what we expect flowing to the bottom line at the end of 2026. So that is net. That is not gross. But you -- I want to add one thing. You should not calculate a big effect in Q4. That is important to understand because this is a process that will take time before you will see the effect. And you will see gradual effect starting in Q4 this year, but then it will ramp up during '26 and give the full benefit at the end of the year.

We will now take our next question. And your next question comes from the line of Johannes Schaller from Deutsche Bank.

Three, if I could. I mean, firstly, on the impairments. You said there are certain kind of areas, products, initiatives that are now discontinued or maybe where you didn't have the success you wanted to see. Could you give us a little bit more detail on what that is and which kind of areas are not part of the strategy and the growth profile of Hexagon anymore? And should we expect that this is it now in terms of impairments, maybe for the next 1 or 2 years? Or is that more an ongoing process where maybe in 6 months' time, you also find other areas? That would be my first question.

The second was just coming back to China. I know you don't guide, but could you give us a bit of a sense kind of when you would expect that region to be back to growth? And then lastly, just on the Cadence stake that you got as part of that sale, what's the strategy here and the plan with that stake?

Okay. I counted at least the 4 questions, but...

Apologies, you're right.

No worries. No worries. So starting with the impairment, I will give you a couple of examples where we mean -- what I mean there. It could be related to market changes. We have, for example, one project that we have developed for autonomous driving mass production. And this, as you know, has been quite delayed coming to market all over the world, basically -- maybe except China, where it has come to market a bit at least. So when the main producer of cars then decides to cancel the platform, we have nowhere to allocate this to get any revenues for this. So this is something we need to write off, right? So that's market change.

Then you have misalignment to customer needs. And this is also related to ourselves, but customer needs can also change over time, right? It could be, for example, we have developed a product and the expectation of operations from customer is 4 hours, and we can operate for 20 minutes. We don't fulfill the sort of sound levels that are required by the customer, et cetera, which means that we basically can't offload this product even if we would discount it 90% because nobody would buy it. So this is something we need to write off. It's useless, won't generate any revenue for us.

And then you have the third area then, and that is when we decide as we now restructure our company given the potential spin-off of Octave, and we are refocusing Hexagon core. We then have areas that we believe are not suitable for us to continue to invest in and continue to take a part of, and they're not contributing positively, either in growth or in profitability. And we have then decided to exit those areas and those products, and then we need to write those off. I will, for competitive reasons, of course, not mention exactly which products these are in this call.

And then if we go into -- will this be an ongoing thing? And I think I answered that question during my presentation, I hope, at least twice, but I'm happy to do it again. So my expectation is that our divisions and business areas need going forward to manage this in their operational normal day-to-day business and the operational profit and loss and balance sheet performance, and they will be monitored closely to make sure that we achieve this. The decisions in those divisions will then be taken closer to customers, so we are sure that we are aligned to market needs, customer needs, market changes all the time. We will have a stronger governance also before we start projects and also during projects to ensure that we stop projects early on when we notice that they are no longer aligned with market or customer expectations.

And we will have a new performance management system to enable swift response when we see that some of the KPIs that we follow are getting off track. So this is not that some will come back on a regular basis. And I hope we won't do this at all going forward, unless we have one of those big things that I mentioned could be a potential spin-off like Octave. That will, of course, make us do some things in terms of realignment structure, et cetera. It could be that we, as a company, need to react very quickly together, like a new sort of COVID situation or something like that.

So those are the kind of situations where we might have to do this again on a higher level on a group level. But otherwise, it could also be that we buy a bigger company and there is product overlap and we need to make some impairments of some of that asset, of course. But those are the only examples. It should not be from normal operations and normal R&D development. That should be managed in the day-to-day business in the day-to-day results.

And then China guidance, we are not guiding forward on China, but there are areas in China that are performing very well. So if you look at Manufacturing Intelligence, we are growing quite well in Manufacturing Intelligence on a constant basis in China. I think in Q2, we grew 10%. In Q3, we grew 3% organically. So we continue to grow. The different markets are strong there. Electronics, general manufacturing, we're doing very well. Then we have this construction and larger infrastructure projects, which is very weak currently.

And when that change into being more positive again, I mean, your guess is as good as mine, right? So we are all hoping that, that will change quickly. But unless that change, we will not see a speed up or an improvement in Geosystems performance. And Geosystems is now, I would say, what is it, 20% negative growth year-on-year or so. So that is affecting, of course, the full number for China for us. But when that turns, that business turns, of course, we will start seeing better numbers from China on the group level.

But underlying, ALI is performing quite well in China. Manufacturing Intelligence is performing well in China. And Autonomous Solutions, which is more bumpy, given mining orders, et cetera, are performing well from time to time in China as well. So our China issue is related to large infrastructure and construction within China currently.

And then Norbert, do you want to take the Cadence?

Sure. So the question was on the Cadence, if I understood this correctly, because it's a while ago that you asked and the question here was related regarding net gain, I assume from...

I think it's the EUR 810 million that we have as Cadence shares, right? Ben, you can maybe...

Yes. I think, obviously, the focus at the moment is to close the deal, Johannes, and that's still on track for the first quarter of next year. It's obviously a very nice stake to have. Cadence is a super strong company with a great outlook. So it's a nice stake to have. But I think we'll have to come back to you on what the plans for it are because it's tied to the capital allocation discussion between Octave and Hexagon, and that's obviously a decision for the Board. So I think we'll come back to you on that.

We will now go to the next question. And the question comes from the line of Mikael Las en from DNB Carnegie.

All right. You stated here, that the division priorities will follow the sequence stability, profitability and growth on Page 37. Could you give a sense of how Hexagon Core is distributed across the 3 categories? And maybe give some examples from the 17 P&L accountable divisions on Page 36.

Yes. Thanks, Mikael. We will give more clarity on how we rank the different businesses in the Capital Markets Day. We have just now launched the new organizational structure. It will be implemented basically from the 1st of January across the group finally. So it's too early to give any input on that externally. But I would also like to say that if you are in stability, it doesn't mean that it's a bad business. Even a good business could be in stability. I would even say that our D&E business was in stability phase. It's a very good business, but we didn't really know what to do with it. It wasn't growing for us. We were not the right owner for it.

So that's why the decision was basically to offload it and reallocate those proceeds into where we are stronger and have a stronger market position. So it doesn't mean that if you are instability that you're a bad business. But in general, of course, we would like to move all our businesses into the growth scenario or strategic mandate. But we have a range of different businesses also within the different divisions. So there's a lot to go through here and to set up with the business areas and the divisions themselves. So we have to come back with that on the Capital Markets Day.

Okay. Fair enough. And just curious here about the book-to-bill ratios for the MI segment, if you can maybe comment on that or other areas where you have bookings leading sales?

At the moment, we don't have -- I don't have the information with me now, but we'll come back to you directly afterwards in a sense.

We will come back to you afterwards and give you the facts.

We will now take the next question. And your question comes from the line of Ben Castillo-Bernaus from BNP Paribas.

I guess a couple for Mattias to start with on the Octave business. Obviously, some headwinds there from the transition from licenses to SaaS. I just wondered what's your assumption on how long you expect that to take? And so you're sort of mostly SaaS business? And then I guess, related to that, the margin headwinds that we're seeing there at the moment. Obviously, there's some one-off costs going through there. I guess if you look out to 2026 and the sort of margin trajectory, what's your working assumption at this point in time?

Yes, good questions. But what you said I had to be boring and answer you will get to know in the Investor Day in Q1, right? I'm not prepared to give outlook at this point. But we will lay that all out in detail at the Investor Day.

Okay. I'll try one maybe that can be answered. Just on Autonomous Solutions, obviously, super strong performance there this quarter. How much of that was kind of anticipated and predicted, if you like? And was there any kind of one-off in there that we should think about just in that performance?

Yes. Thanks. If you look at Autonomous Solutions, I mean, we, of course, know our order intake, right? So this -- our result was quite expected internally. Very strong order intake in aerospace and defense area. Also Mining has been very strong, and you can see that also, I think, in related companies reporting Mining numbers also on very good levels. So in general, the underlying markets in here are doing very well. And we have a good order intake in those markets that will also generate a good performance going forward. So we expect Q4 to also perform well. Q4 has a bit tougher comparable, so it will not be on a similar level, but we expect a continued strong market demand within Autonomous Solutions.

And as I mentioned, the weakness we see in Autonomous Solutions is agriculture, which is in a quite serious downturn globally. And that weakness is also expected to continue during Q4. So we see a relative similar business climate in the fourth quarter.

We will now go to our final question for today. And your final question comes from the line of Magnus Kruber from Nordea.

I just wanted to get back to the delta between impairments and -- or amortization capitalizations in R&D. So is the message that it will be relatively similar in the coming quarters, but gradually over time, it will narrow. And if that's the case, do you expect your new strategy will be able to offset this headwind on the margin side in the coming, say, 2, 3 years?

Yes. Thanks, Magnus. Yes, that's correct. So given that we are releasing lots of new products to the market, like the TS20 now here in October, for example, we see that amortization of those products released will then completely net the gain that we will get from this impairment. So this impairment by itself will not move basically the amortization and capitalization gap. It will be on the same level in Q4 and in Q1 as it was in Q3. So that's correct.

And then going forward, we expect, of course, these new products to generate higher sales numbers. And that is how we will compensate the shrinking gap between amortization and capitalization. And I want to make clear that to capitalize R&D is not dangerous if you capitalize good R&D, then that's the way it should be done, right? And then you take the cost over the life cycle of the product. So that's completely right in how it should be done.

The dangerous thing is to capitalize and then not release the product and try to fix it and further capitalize a product which is not good. And then when you release it, you don't get the sales and you only get the amortization. So that is the danger. And that is what the new management structure will make sure that we avoid going forward.

Fantastic. That's very clear. And with respect to the EUR 110 million savings, could you characterize a little bit on how the sort of we should expect this to be filtering through 2026? Is it more linear or back-end loaded? Or what's the character of the implementation?

I would say it's very linear. So you can model in linear with probably less in Q4 than going forward.

Perfect. And then just a final one, Geosystems China, I think you said down 20% or something, if I read that right. How do you characterize that slowdown? How long it has been going on? And is there any element of that, that's structural compared to cyclical, would you say?

I would say it's generally cyclical connected to the large infrastructure projects like the rail. It's impacting very much for Geosystems. In China, we don't have good sales of our whole offering portfolio. We have good sales of the top tier of our offerings, the most sort of precise measuring equipment. That is what we sell in China. On the mid-tier offering, we have very strong local competition. So we have a very little footprint given that we don't have local manufacturing, local R&D, et cetera, within Geosystems. So that's why we get so heavily impacted when there is an effect on those type of industries. And it's been going on now for what is it, could it be something 12 months?

12 months, round about.

Yes, that we see this effect coming in for Geosystems. And of course, since this is our top offering, that also gives a weaker mix for Geosystems because we have best margins on these top-tier products because we don't have any competition basically. So that impacts Geosystems mix negatively. And you can also see that in the year-on-year drop in Geosystems in financial performance when it comes to operational margin. You can see the effect there as well of the lack of sales of those top-tier products.

I will now hand the call back to Anders Svensson for closing remarks.

Thank you, operator, and thank you, everyone, for attending, listening and putting good questions for us. Our next report will be on January 13th -- 30th, sorry. Thanks. Good correction, January 30th, next year. So hoping to see you all then. And until then, be safe.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.