Hexagon’s Q2 revenue up 9%, with PPM up 14%, MSC up 8% cc

Jul 31, 2018 | Hot Topics

Hexagon is another serial acquirer, constantly adding companies into its roster –and that’s an important part of its strategy– so today’s news that Q2 revenue was up 9% cc on an organic basis is truly good news. Hexagon doesn’t give details on al of its businesses so it’s a bit difficult to parse, but revenue from the PPM division was up 14% in constant currencies and on an organic basis — that’s the first double-digit growth in years.

The details:

  • Total revenue was up 7% to €937 million and up 9% in constant currencies (cc), on an organic basis. For those keeping track, MSC Software was acquired in Q1 2017, so is now part of “organic”
  • By segment: Geospatial Enterprise Solutions (GES) revenue was €455 million, up 9% organic cc, while Industrial Enterprise Solutions (IES) revenue was €482 million, also up 9% organic cc
  • IES is the part of Hexagon’s business most closely aligned with our PLMish universe, so let’s dive into that in a bit more detail. Hexagon said that IES revenue, in total, was (all organic, cc) up 13% in the Americas, up 9% in Asia and up 6% in EMEA. In the Americas IES saw strong demand from the automotive and aerospace verticals, as well as order wins in the power and energy segment. In Asia, demand in China was “robust across all businesses in the segment” but South Korea remained weak. In EMEA, Western Europe saw mid-single digit growth
  • Within IES, Manufacturing Intelligence (MI) recorded 8% organic cc growth, on strong demand from the automotive and aerospace industries and continued strength in electronics. CEO Ola Rollén said that the PLMish “software offering was growing fast in the quarter”, with MSC up 8%
  • PPM finally returned to growth in Q2, reporting revenue up 14% cc organic, due to “several new large perpetual license orders” in North America and China. During the Q&A, Mr. Rollén said that the overall growth was mostly due to the rebound in downstream oil and gas, and that this was augmented by new business, such as launching Ecosys in new regions. Mr. Rollén said that there’s nothing unusual in the perpetual license part of the company’s statement: it’s just how these customers chose to buy
  • The AutonomouStuff acquisition is still expected to close in Q3, after receiving regulatory approvals.

During the investor Q&A, Mr. Rollén, always open to acquisitions, said that he sees opportunities to expand into more areas of automated digitalization (his “autonomous connected ecosystem” catchphrase), such as autonomous vehicles, smart cities and similar opportunities in other verticals.

Hexagon doesn’t offer guidance but the overall vibe was optimistic for the rest of 2018. It’s important to keep in mind that 9% overall (and 14% in PPM) organic growth is terrific — but. The comparables get harder from here, as the second half of 2017 saw stronger growth across many parts of the business. Mr. Rollén did say that Q3 might be light, with the lion’s share of new product releases turning into revenue in Q4.