Hexagon on track to hit €3.5B by 2015

For a company that very few people have heard of, Hexagon is doing quite well. Its engineering-related brands include Leica Geosystems, Intergraph, CADWorx and its customers include process plants operators, EPCs, surveyors, NASA, auto makers and aircraft manufacturers. This diversity allows the company to grow, even as its user verticals and geographies show uneven progress. When China’s high speed rail project stalled because of safety concerns, so did Hexagon’s revenue from the project — but other parts of the business picked up the slack. The second quarter, 2012 details:

• Revenue in Q2 was €607 million, up 12% as reported
• Organic, constant currency growth was 6% year/year, with Asia up 10%, the Americas, up 5% and EMEA, up 3%.
• By business line, Metrology and Intergraph PP&M “continue to be the primary engines for growth” while Geosystems and Intergraph SG&I are “recovering”.
• Geosystems revenue was €211 million, up 7% as reported and up 3% in constant currencies. This division had been lackluster because of year/year comparisons to quarters in which it saw significant revenue from China’s build-out of its high speed rail network; this is the first quarter where that comparison is no longer made.
• Metrology reported €180 million, up 16% as reported, and up 8% in constant currencies.
• Technology, which which includes Intergraph, and NovAtel and Sisgraph (an Intergraph distributor in Brazil), reported revenue €200 million, up 14% as reported and up 7% in constant currency. Hexagon does not break out specific brand revenue, but did say that “NovAtel and the Intergraph PP&M division reported strong growth whereas Intergraph SG&I reported slight growth”. Last quarter, Hexagon announced a slight reorganization of SG&I, which is now complete. The company says that SG&I “has seen a turnaround [and] reported growth & improved profitability” in Q2.
• CEO Ola Rollén painted a very mixed geographic picture for Q2, saying that he sees “accelerating growth in Asia and South America but a more normalized growth in North America compared to previous quarters. Europe is still very much of a two-speed region, with growth contributions primarily from the Northern and Eastern regions.”
• By vertical, the company said it saw strong demand in the automotive, aerospace, power and energy markets, but that construction-related and the government sector remained weak, especially in EMEA.

Looking ahead, Mr. Rollén said that emerging market demand in South America and Asia would drive growth for the rest of 2012, helping offset “flat” sales in North America and a “weak” market in Europe: “While we recognize the increased uncertainty ahead of us, particularly in the engineering segments and regionally across parts of Europe, we expect our diversified business model to drive continued growth in the latter part of 2012.” Mr. Rollén is a very colorful speaker, last year laying out a possible “ugly fish” scenario of large acquisitions to boost growth if the economy turned sour and the company’s organic  revenue growth stalled. During this month’s earnings call, he said that the company is still on target to meet its 2015 goals and that there are no billion-dollar acquisitions under consideration. Instead, he said, the company is looking at smaller, software-oriented acquisitions based on cloud technology. Hexagon doesn’t give specific guidance per quarter,  but analyst consensus for Q3 is revenue of $720 million, or €580 million, an increase of 11%.