Hexagon: Hexagon : 2024 Annual and Sustainability Report

Annual and Sustainability Report 2024 Contents Introduction This is Hexagon 3 Letter from the CEO 4 Year in brief 6 Proposed Spin-off 7 Why Hexagon? 8 Strategy 9 Strategic partnerships 10 Market trends driving Hexagon's solutions 11 AI at Hexagon 12 Financial targets 14 Sustainability targets 15 Divisions 16 Manufacturing Intelligence 17 Asset Lifecycle Intelligence 18 Geosystems 19 Autonomous Solutions 20 Safety, Infrastructure & Geospatial 21 Directors' report 22 Directors' report 23 Corporate governance 31 Corporate governance report 32 Auditor's report on the corporate governance statement 39 Board of Directors 40 Executive Leadership 42 Compliance 45 Managing risks 46 Hexagon's commitment to ethics and compliance 56 Sustainability 60 Sustainability strategy 66 Environment 89 Social 103 Governance 109 Sustainability related notes 118 Auditor's report 129 Financial statements 130 Consolidated and parent company accounts 131 Notes 138 Signing of the Annual Report 165 Auditor's report 166 Other information 170 The share 171 10-year summary 175 Definitions 177 Shareholder information 179 About this report: The audited annual accounts and consolidated ac-counts can be found on pages > 22-30, > 46-55 and > 130-165 . The corporate governance report examined by the auditors can be found on pages > 31-44 . The sustainability report reviewed by the company's auditors for compliance with the Annual Accounts Act can be found on pages > 60-129 . The auditors have reviewed greenhouse gas emissions within Scope 1 and 2. Hexagon AB is a Swedish public limited liabili-ty company with corporate registration number 556190-4771. All values are expressed in Euros un-less otherwise stated. The Euro is abbreviated as EUR, thousands of Euro as KEUR, millions of Euro as MEUR, and billions of Euro as bn EUR. Figures in parentheses refer to 2023 unless otherwise stated. Data on markets and peers represent Hexagon's own assessments unless otherwise stated. As-sessments are based on the most recent available facts from published sources. While every care has been taken in the translation of this annual report, readers are reminded that the original annual re-port, signed by the Board of Directors, is in Swedish. This report contains forward-looking statements based on Hexagon management's current expecta-tions. Although management considers the expec-tations expressed in such future-oriented informa-tion to be reasonable, no assurance can be given that these expectations will prove correct. Conse-quently, actual future results may differ considera-bly from those implied in the forward-looking state-ments due to factors such as changed conditions in the economy, market and competition, changes in legal requirements and other political measures, fluctuations in exchange rates, and other factors. This is Hexagon Hexagon is a global technology leader that combines sensor, software, and autonomous technologies to transform the world's most vital industries. By putting data to work, Hexagon enhances efficiency, productivity, quality, and safety across a range of applications, including industrial manufacturing, infrastructure development, public sector management, and mobility solu-tions. With a focus on connecting and automating production and people-centred ecosystems, Hexagon's technologies enable businesses and governments to operate more intelligently and sustainably. Through advanced innovations, Hexagon is driving the transition towards a scalable and sustainable future. Revenue by geography Revenue by division EMEA, 34% Manufacturing Intelligence, 36% Americas, 39% Asset Lifecycle Intelligence, 15% Asia, 27% Geosystems, 29% Autonomous Solutions, 10% Safety, Infrastructure & Geospatial , 9% Year in review Letter from Interim President and CEO First, allow me to introduce myself. I am Norbert Hanke, inter-im President and CEO of Hexagon. I have been with Hexagon for over 20 years and have held several leadership positions during that time, both within Manufacturing Intelligence and at a Group level. This year, I was pleased to step into the interim President and CEO role to support the business through a time of transformation as we look to position Hexagon for the ex-citing opportunities ahead with new leadership and a potential new group structure. The year in review I am proud to say that we made good progress across the board at Hexagon during 2024. We delivered a strong financial per-formance despite challenging construction and automotive markets, recording modest organic growth, good momentum in recurring revenues, improved profitability, and an annual cash conversion that was slightly above our target range. Even with this financial discipline, we maintained our focus on investing for future success, both within our existing end markets and by pushing the boundaries to enter new ones. We launched over 450 products and updates and filed 71 new patent applications during the year. Highlights include the iCON Trades Solution in Geosystems - a layout and measure-ment tool designed to deliver high-quality outputs with easy, one-person operability; the ATS800 Absolute Tracker in Man-ufacturing Intelligence - a laser scanner capable of measuring small, crucial tolerances at a distance; SDx2 in Asset Lifecycle Intelligence - a SaaS-ready upgrade to our existing SDx solu-tion, which allows contextualisation and visualisation of work processes; and Aura, a 3D imaging system targeted at the Our commitment to innovation and strategic transformation positions Hexagon for continued success in an evolving global landscape. By embracing change while staying true to our core strengths, we are creating sustainable value for our customers, shareholders, and employees. healthcare and facial aesthetics market. We are immensely proud that more than 6,800 team members work in research and development or related disciplines world-wide. They are either embedded in a division, where they remain close to customers and industries, or in the central Innovation Hub that serves the group, allowing them to be at the cutting edge of developments in new sensor technologies, robotics, and artificial intelligence. We also announced a number of important acquisitions dur-ing the year, which continue to complement our R&D efforts, build market share, and develop competitive niches in our key industries. We acquired seven companies in 2024, including Geomagic - a suite of interoperable software packages used to create high-quality 3D models; Septentrio - a market leader and OEM provider of Global Navigation Satellite System (GNSS) technologies; Itus Digital - a provider of asset performance management (APM) software; and Indurad - a provider of ra-dar, real-time location systems, and autonomous haulage tech-nologies. We are excited to welcome all their employees to the group. Finally, I was pleased to see the Science-Based Targets initi-ative approve our long- and short-term carbon emissions re-duction goals in 2024. This significant endorsement reflects our commitment to sustainability and demonstrates our ded-ication to holding ourselves accountable for our environmental impact. We are proud to lead by example in our industry, set-ting ambitious targets that align with global efforts to combat climate change. We will continue to make sustainability part of our priorities going forward. Looking ahead 2024 was a year of change and progress at Hexagon, and we have much to look forward to as we move into 2025 and be-yond. We start the year with a strong pipeline of organic prod-uct innovation across the Group, which we will announce over the coming quarters. I am excited about the new developments that we will bring to market and the strong foundations for fu-ture growth that they will provide us moving forward. The Board of Directors, after a comprehensive assessment, has directed management to prepare for the separation of its Asset Lifecycle Intelligence division and related businesses ("NewCo") by way of a Lex Asea distribution (or "spin-off") to its shareholders, as announced in late 2024. The Board intends to propose the distribution and listing of NewCo's shares at a shareholders' meeting in early 2026, provided that the circum-stances are deemed appropriate at the time. The separation will improve the focus and clarity of both New-Co and the Hexagon AB ("Hexagon Core") divisions, allowing both companies to capitalise on their competitive advantages, execute their increasingly distinct strategies, and leverage their greater agility to accelerate growth. NewCo will be a pure-play software and SaaS company, offering comprehensive asset lifecycle intelligence, safety, infrastruc-ture, and geospatial capabilities for a wide array of industries, supporting customers in planning, operating, and maintaining assets more effectively, enabling clearer insights and better in-cident response. Hexagon Core will be the global leader in measurement tech-nologies, with a comprehensive suite of metrology, reality cap-ture, and positioning solutions that help customers improve the quality, productivity, reliability, and accuracy of both their products and operations. Looking forward, Hexagon's focus on robotic sensors and software, 3D digital environments, and AI-enhanced analytics will continue to help customers steadily move towards more autonomous solutions. The Nomination Committee and the Board also announced in 2024 new members of the leadership team, including Björn Rosengren and Anders Svensson. Björn Rosengren has been nominated to join the Board of Hexagon AB as Deputy Chair-man and will be available for election at the Annual General Meeting (AGM) in May 2025. It is intended that Björn will ulti-mately succeed Ola Rollén as Chairman when he steps down at the 2026 AGM. Anders Svensson will join as President and CEO, starting in July 2025 at the latest. I'm confident and excited about the future because of the tal-ented and hardworking employees at Hexagon. Their cont