2 on a Wednesday: Earnings from Hexagon and Nemetschek

Nov 2, 2022 | Hot Topics

Hexagon and Nemetschek reported results late last week, and I just couldn’t get to them — so here are quick recaps.

Hexagon reported total net sales in Q3 of €1,317 million, up 22% as reported and up 7% on an organic, constant currency (occ). Within that €1.3 billion total,

Industrial Enterprise Solutions (IES) reported revenue of €678 million, up 9% occ in Q3. Within IES, 

  • Manufacturing Intelligence reported 8% growth, driven by solid broad-based strength across geographies, industries, and the software portfolio.
  • The Asset Lifecycle Intelligence division recorded 12% growth, on growth in both design and asset information management software and the volume of small orders.
  • By geo, IES revenue was up 10% in EMEA, up 9% in Asia with China up 8%, and up 8% in the Americas, all occ.
  • COO and incoming CEO Paolo Guglielmini spoke about the acquisition of iConstruct, maker of tools that combine different BIM models into a single source. He sees iConstruct bringing data management, project planning, and better communication to customers in the Asset Lifecycle Intelligence (plan/design/operate) and Geosystems (construct) divisions. 
  • Mr. Guglielmini also quickly covered the AVVIR acquisition. AVVIR is used on construction sites to analyze reality models (photos, laser scans) for completions, schedule tracking, accuracy, materials on hand, and other factors. He told investors that he sees AVVIR being sold to both BricsCAD and HxGN Smart Build customers.
  • There was also a CAE shoutout during the presentation: an unnamed Indian automotive OEM has standardized on Hexagon NVH (noise, vibration, and harshness), durability, and design optimization for their next-generation electrical powertrain.

Geospatial Enterprise Solutions (GES) reported revenue of €642 million, up 16% (up 5% occ). That occ growth is actually a slowdown — it was 10% in Q2, and 7% in Q3 — that Hexagon says is due to Geosystems, which was affected by supply chain shortages and a tough comparable a year ago (when revenue was up 15%). The company expects the supply chain issues to be resolved by year-end. The highlights: 

  • By business areas, Geosystems revenue was up 4% occ, on solid demand for surveying and mining solutions but hampered by the tough comparison to a year ago. 
  • The Safety, Infrastructure & Geospatial division reported 5% occ growth, driven by defense.
  • The Autonomy & Positioning division reported 9% occ growth on solid demand for defense and autonomous driving solutions.
  • By geo, on an occ basis, GES revenue was up 8% in the Americas and up 7% in Asia, even as China declined 5%. Revenue from EMEA was flat, on solid demand for surveying and positioning solutions but adversely impacted by weakness in public safety and construction and the freezing of business in Russia.  

(You can read much more detail here.)

The Q&A always provides intriguing factoids. Mr. Rollén shared that roughly 60% of overall revenue is software or services, 35% is pure software, and 20% is subscriptions. He said that all new products (in-house or acquired) would be SaaS-based. When asked about the revenue challenges this poses, Mr. Rollén noted that the subscription transition had taken roughly 1/2% off growth in past quarters.

Hexagon is a massively complex business nowadays — many end-markets, many types of technologies, all geos. Is residential construction struggling? Infrastructure projects are coming online. Is the auto industry not up to expectations in a geo? Defense to the rescue. Shutdowns in China? Make sure people are in regional offices so they can travel within prescribed boundaries. 

Over his 23 years as CEO, Mr. Rollén built Hexagon into a technology powerhouse that seems well set to withstand whatever happens next. Mr. Guglielmini takes over as CEO in January.

Nemetschek also released results last week. Revenue for the third quarter was €202.8 million, up 20% as reported and up 12% cc. Within that total, 

  • license revenue was €57 million, up 2%as reported but down 6% cc on the planned transition to subs for Bluebeam (reported in Build). Vectorworks (reported in Design) begins a similar change in January.
  • recurring revenue (maintenance and subs) was €138 million, up 29% (up 21% cc)
  • within recurring, subscription and SaaS revenue was €54 million, up 58% (up 47% cc)

By segment, 

  • Design revenue was up 11% (up 6% cc) to €97 million. The company highlighted growth in subscription revenue (up 51% cc in Q3 and up 52% cc in the first nine months of the year) 
  • Build segment revenue was up 31% (up 17% cc) to €71.0 million on demand for Bluebeam, which also began its business transition to subscription and cloud products during Q3
  • Revenue from the Media segment was up 37% (up 28% cc) to €25.8 million in Q3
  • Finally, revenue from the Manage segment was up 3% (also up 3% cc) to €11.3 million.

CEO Yves Padrines commented, “Digitalization and the usage of intelligent software solutions across a building’s life cycle are essential requirements for making construction more efficient, less resource-consuming, and more cost-effective. This success factor for our customers leads to a continued strong demand for our solutions. The successful transition to subscriptions and SaaS, which will lead to a strong increase in recurring revenues and make our business even more resilient.”

One last thing: the Nemetschek Group has been very much Europe-focused, even though it owns several US-based brands. Growing international sales has been a priority, and efforts seem to be paying off. The group reported an “over-proportional increase in revenues abroad (Q3: +25%), with North America, in particular, showing strong growth.”

Hexagon doesn’t offer guidance, but Nemetschek does. Nemetschek restated its target for 2022 revenue growth of 12% to 14% cc.

More details, here.

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