2023
Annual andsustainability
reportTable of contents
Hexagon in brief

3

Sustainability report

50

Business overview

5Core technologies

6

Financial reports

90

Strategic partnerships

7

91

Hexagon platforms

8

Consolidated and parent
company accounts

Customer highlights

9

Notes

98

Letter from President and CEO

11

Signing of the annual report

125

Financial plan

13

Auditor’s report126

Other targets

14

Board of Directors’ report

15

Corporate governance report

24

Board of Directors

32

Executive Leadership

34

Compliance

37

Managing risks

37

Hexagon commitment to ethics andcompliance

47

Additional information
ESG related notes

130

The share

140

Quarterly income statements

143

10-year summary

144

Financial definitions

145

Business definitions

146

Currency codes

146

Shareholder information

147

About this report

The audited annual accounts and consolidated
accounts can be found on pages 15-23 and 90-125.
The corporate governance report examined by
the auditors can be found on pages 24-31. The
sustainability report reviewed by the company’s
auditors for compliance with the Annual Accounts
Act can be found on pages 50-89. The auditors
have reviewed greenhouse gas emissions within
scope 1 and 2.
Hexagon AB is a Swedish public limited liability
company with corporate registration number
556190-4771. All values are expressed in Euros
unless otherwise stated. The Euro is abbreviated
EUR, thousands of Euro to KEUR, millions of Euroto MEUR, billions of Euro to bn EUR and million US
dollars to MUSD. Figures in parentheses refer to
2022 unless otherwise stated. Data on markets andpeers represent Hexagon’s own assessments unlessotherwise stated. Assessments are based on mostrecent available facts from published sources. While
every care has been taken in the translation of thisannual report, readers are reminded that the originalannual report, signed by the Board of Directors, is in
Swedish.
This report contains forward-looking statements
based on Hexagon management’s current
expectations. Although management considers
expectations expressed in such future-oriented
information as reasonable, no assurance can begiven that these expectations will prove correct.
Consequently, actual future results can differ
considerably from those implied in the forwardlooking statements as a result of factors such aschanged conditions in the economy, market andcompetition, changes in legal requirements andother political measures, fluctuations in exchange
rates and other factors.

Follow us on social media
hexagon.com

In brief Financial plan

Board of Directors’ report

Corporate governance report

Hexagon in brief
At Hexagon, we don’t just see the world as it is; we envision
what it could be. We are committed to integrating precision
data and digital intelligence with human ingenuity to shapea more responsible future. Across more than 27 industries,
we empower our customers, communities, and individuals
to solve the world’s biggest challenges.
To do this, we capture ultra-precise 3D data in thephysical world – from particles to planets – then apply AI,
simulation, and automation to increase efficiency, quality,
safety and sustainability.
From the longest bridge to the smartest car, with Hexagon,companies don’t just adapt to new realities – they
intelligently shape them.

Hexagon empowers
customers to solve theworld’s biggest challenges.

Compliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

3

In brief Financial plan

Board of Directors’ report

Corporate governance report

Hexagon’s impact
on the world

350,000

construction sites

80,000types of mining equipment

Protects over

1B
peopleCompliance

Sustainability report

Additional information

Hexagon Annual and Sustainability Report 2023

Featured partnerships

3.5 million

90%

agriculture vehicles

of all airplanes

Has captured a total of

52Mkm

2

of 2D aerial imagery and

800Kkm2

of 3D mapping of the world

Helped support
the landing of the
Curiosity RoverFinancial reports

95%

of all commercial vehicles

75%

of all smartphones

From microns to kilometers,
we make accurate information
about any physical reality
accessible at scale.

Helped construct
Burj Khalifa
the world’s tallest building

Driving efficiency
in the processing of over 50%
of oil, gas and chemicals

4

In brief Financial plan

Board of Directors’ report

Businessoverview

Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Autonomy &Positioning

Geosystems

Safety,Infrastructure& Geospatial

Hexagon Annual and Sustainability Report 2023

Geospatial Enterprise Solutions
Geospatial Enterprise Solutions (GES) includes aworld-leading portfolio of reality-capture sensors — fromlaser scanners, airborne cameras and unmanned aerial
vehicles (UAV) to monitoring equipment, mobile mapping
technologies and precise positioning. The sensors arecomplemented by software to create 3D maps andmodels, which are used for decision-making in a range ofsoftware applications, covering areas such as surveying,
construction, public safety, mining and agriculture.

Industrial Enterprise Solutions
Industrial Enterprise Solutions (IES) includes a worldleading portfolio of metrology solutions incorporating
the latest sensor and software technologies for fast
and accurate measurements. These solutions include
technologies such as coordinate measurement machines(CMM) and laser trackers and scanners for optimising
design, processes and throughput in manufacturing
facilities. IES also includes a broad software portfolio,
encompassing computer-aided design (CAD), computeraided manufacturing (CAM) and computer-aided
engineering (CAE) platforms. Solutions within thissegment also include software for optimising design,
improving productivity and creating and leveraging
asset management information through the lifecycle ofindustrial plants and processing facilities.

ManufacturingIntelligence

Asset Lifecycle
Intelligence5In brief Financial plan

Board of Directors’ report

Corporate governance reportCoretechnologies

Compliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

What matters most to compete in today’s world? Growth and profitability? Efficiency? Productivity? Quality?
Safety? Digital transformation? What about sustainability?
Thanks to advances in digital reality technologies, achieving these priorities equally is no longer insurmountable.
Hexagon’s innovation strategy is built on its established leadership in each of the core technologies critical torealising the full potential of data.

Reality capture

Positioning

Digital capture of the physicalworld is the basic building blockof a “digital reality” or twin.
This includes documenting andpreserving an exact truth about
what’s happened or happening;it means measuring andrecording with perfect accuracy
and precision; and it’s the ability
to see, monitor, recognise andunderstand both contextuallyand dimensionally in 3D.

The need for accurate position
information is essential for
tracking and controlling the
movement or mobility of assets
and people. Additionally,
achieving full autonomy isn’t
possible without positioning
and other complementary
technologies working together– finely-tuned and seamlessly –to make autonomy a reality.

Autonomous
technologies
Enriching automated systems
with sensors, artificial
intelligence (AI) and analyticalcapabilities enables systems
to function and execute tasks
without human control.

Design and simulation

Location intelligence

Design and simulation
technologies help solve realworld problems safely andefficiently – enabling the digitalcreation and exploration ofwhat could be. The ability tomodel and simulate millions ofreal-world scenarios means wecan predict failure and successbefore they occur.

Complete line of sight todynamic situations – at any
time and from any location– is indispensable to decisionmaking for all mission-criticalapplications. The ability to
instantly gain insight fromcomplex data relationships
leads to big-picture
understanding and proactive
problem-solving.

6In brief Financial plan

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Corporate governance reportCompliance

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Additional information

Strategic
partnerships
Through partnerships, we offer our customers innovative solutions for scaling innovations while strategically expanding
our technologies into new markets.
Central to our partnership approach is the flow and accessibility of data. From software to software, from sensors tosoftware, and from ecosystem to ecosystem, teaming up with leading global brands allows us to leverage Hexagon’s
technologies across expanded markets and user groups.

Microsoft enhances our
AI product offering withlarge language model
productisation anddocument management,
open-platform cloudpartner and technology
partner for the industrial
metaverse.

AWS, continues to bea very important Cloudpartner. In addition, its
Stable Diffusion aidsin training AI assistive
devices and generating
photorealistic scenes
in NVIDIA Omniverse forautonomous projects.

Sony Semiconductor
Solutions contributeswith its advanced Timeof-Flight image sensor andsoftware technologies,
crucial for improving the
speed and accuracy of ourreality capture solutions.

NVIDIA helps us toconnect multiple software
platforms to create aninterconnected industrial
metaverse. The flow ofdata is strengthened by
Hexagon’s open-data
platforms HxDR and Nexus
with NVIDIA’s Omniverse
using OpenUSD

Through strategic partnerships, we integrate our scaling innovation technologies, focusing on facilitating open-format
data flow across AI, reality capture, visual computing, and robotics.

Hexagon Annual and Sustainability Report 2023

7

In brief Financial plan

Board of Directors’ report

Corporate governance report

Hexagonplatforms
OnCallCompliance

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Financial reports

Additional information

By focusing on platforms built from shared modules and microservices, we’re enhancing R&D efficiency andaccelerating the journey from concept to reality. This approach to platform engineering allows us to quickly rollout new functionalities, delivering unparalleled value to our customers.

EAM

Power of One

8

Hexagon is redefining value in the digital age. Our platform strategy is the cornerstone, ensuring data flows
seamlessly across software, sensors and ecosystems to unlock new levels of efficiency and innovation.

Nexus

Maximising asset
longevity and productivity
with industry-leading
management

Next-generation public
safety platform

Hexagon Annual and Sustainability Report 2023

Seamlessly connecting mines

Streamlining
manufacturing
through collaborationand innovation

HxGN SDx

Accelerating asset
digitalisation for optimal
lifecycle performance

HxDR

A cloud native platformto process, fuse, andshare digital reality
data, at scaleIn brief Financial plan

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Hexagon Annual and Sustainability Report 2023

Customerhighlights
Mortenson

Hauk
Customer background

Major developer andengineering services
provider in thecommercial, institutionaland energy sectors.

Customer challenge

One of its customers, the Citizen M hotel
chain, wanted to influence major change
in the hospitality industry by introducing
prefabricated (modular) construction.

How Hexagon is helping

During construction, Mortenson deployed
Hexagon solutions (OxBlue,Multivista andAvvir software) to monitor and document
the project for key stakeholders.

Customer background

European automotive
parts supplier for SKODA.

Customer challenge

Looking to automate processes to improve
inspection speed.

How Hexagon is helping

Expanding upon an existing 25+ year
relationship, HAUK has implemented
Hexagon’s PRESTO automated inspection
cell, Laser trackers, robotics automation
and PC-DMIS to improve their inspection
speed and ease of data transfer to customer
systems.

9

In brief Financial plan

Board of Directors’ report

Corporate governance reportCompliance

Glencore

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

CoRio
Customer background

Customer background

One of the world’s largest
globally diversified natural
resource companies,
headquartered in
Switzerland and operatingin 35+ countries. Glencore
has more than 60 mining, metallurgical and oil
production assets.

Consolidating many different
departments to more effectively control thecity’s daily operations.

Customer challenge

How Hexagon is helping

Seeking to improve safety in their mining
operations with a global strategic partnership
across all mine sites and commodities.

10+ years of Glencore/Hexagon
partnership

Hexagon’s Operator Alertness System
4 continents, 15 mines.
Hexagon’s Collision Avoidance System
3 continents including recent deal for 200 CAS
systems at Lomas Bayas.
Hexagon’s Vehicle Intervention System
3 mine sites, +150 haul trucks.

Rio de Janeiro is the second
largest city in Brazil with over
9 million people.

Customer challenge

Hexagon’s incident and operational
management software platform HxGN OnCall
enables over 30 departments to control andshare information as needed, in response to
emergencies.
This deal includes software, implementationand maintenance over five years.

10In brief Financial plan

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Hexagon Annual and Sustainability Report 2023

11

Letter from President and CEO

Shaping reality,
responsibly
It is traditional to begin a letter of this kind by reflecting on
the difficulties presented by macroeconomic headwinds; toshow how despite geopolitical and economic challenges, thecompany emerged stronger than the previous year. I want tobegin a little differently.
If we focus only on global pressures, we lose sight of companies
and countries that are innovating every day to overcome
challenges. If I think about labour shortages, difficult market
conditions and uneven global growth, then I also think about anentire workforce passionate about decarbonisation, a growing
appetite for localised technology and expertise, and an urgent
need for expert specialisation in automation and autonomy.
Hexagon emerged from 2023 not in spite of global challenges,
but rather because of them. When I speak to our customers,
partners, and newly merged teams, I see market share leaders,capex drivers and industry champions. I see hundreds andhundreds of innovators.
Innovators who believe in Hexagon’s vision to shape a
responsible future. These are organisations driven by the same
spirit of innovation and progress that motivates us to pushboundaries in autonomous technologies. They see obstacles
as opportunities to create better solutions. They know that byworking together, we can drive meaningful improvements inefficiency, safety, and sustainability.
At the core of our sustainability strategy, we believe inempowering industry through our solutions to acceleratechange, coupled with our commitment to create change
across our operations. Explore more in the sustainability
section our Annual Report.

I am proud to lead a company that is not only a part of a
growing appetite for change but also an enabler of it.

Better together
Pursuing collaborations, partnerships, mergers andacquisitions with companies that make us think differently– better – has always been in Hexagon’s DNA. 2023 was nodifferent.
During HxGN LIVE 2023, we announced important
collaborations with industry leaders NVIDIA and Sony
Semiconductor Solutions.
With NVIDIA, we are connecting our technologies toempower real-time digital factory planning, optimisation, andoperations through unified industrial metaverse workflows.
NVIDIA enriches our capabilities with deep learning expertiseand advances our reality capture and analysis solutions.
Our partnership with Sony delivers a streamlined workflow
from data capture to processing and analysis, reducing thetime from scanning to results. By combining Sony’s Timeof-Flight image sensor and software technologies with
Hexagon’s reality capture capabilities, we are developing
solutions that enable faster in-field feedback and more
complete data capture.
Innovation at Hexagon doesn’t only mean developing
the best technology for today, for one industry. It meansdeveloping the best of the best for tomorrow, for all. In July,
we announced a world-first with Mineral Resources: a fullyautonomous road train system controlled remotely by a

In brief Financial plan

Board of Directors’ report

Corporate governance reportteam of operators in Western Australia. As a step towardautonomous transportation, the delivery of advanced
sensors and automation technologies exemplifies
innovative safety and efficiency practices. Such pioneering
methodologies can serve as models across various
industries.
We grew our portfolio with six acquisitions in 2023. We’repleased with the progress of integration, especially with the
newly merged teams from Qognify, Projectmates, and HARDLINE. Each of the newly acquired companies aligns with our
mission to reshape industries into safer, more efficient, andinsight-driven environments.

Leading the charge
In 2023, we launched over 400 products and filed almost 60
new patent applications. More than 6,800 team members
work in research and development or a related discipline
worldwide, embedded in every division, nestled at the heartof the central innovation hub that serves the group. Thisapproach places us directly in contact with our industries
and helps us speak the language of our customers. The
resulting products and patents are not only beacons ofinnovation but also serve to further the innovative potentialof our customers.
At the beginning of the year we launched Nexus, a futureready digital reality platform purposely built for the discrete
manufacturing ecosystem. Nexus allows our customers, forthe first time, to exchange data in real time and accelerateinnovative ways to make high-quality products more
responsibly. Designed to complement existing systems
rather than replace them, Nexus fosters collaboration
and breaks down silos across departments, even wholeorganisations. With more than 30,000 users already, Nexus
showcases the demand for open-platform computing.

Compliance

Sustainability report

Financial reports

Additional information

At the Wichmann Innovation Awards in October, Hexagon
was recognised in both the hardware and software
categories for products that make reality capture moreaccessible. Reality Cloud Studio, powered by HxDR,
provides an intuitive, automated platform accessible
from any device to visualise and collaborate on digital
twins. The BLK2GO PULSE, a handheld laser scanner bornout of our collaboration with Sony, provides customers
with cutting-edge first-person scanning controlled bya smartphone that delivers full-colour 3D point clouds
instantly in the field.

The path forward
Many statistics can describe a company – revenue,
acquisitions, patents filed, products created – indeed,
I’ve used some of these in this letter. There is one number
which I think ties these metrics together: 150 petabytes.
Hexagon’s devices, in the hands of our customers or our
employees, have created 150 petabytes of data in the lastyear alone. Positioning Hexagon as the world’s largest
creator of 3D intelligence, as a leading force for change insome of the most crucial industries on the planet. Sucha staggering amount of data means opportunity, means
untapped potential for the future.
And yet for Hexagon, our focus extends beyond sensors
and software; it fundamentally revolves around people. It’s
the energy, skills, and aspiration to excel that continues toplay a key role in our progress. Over the past two decades,
we have built a dynamic and constantly evolving businessthrough numerous acquisitions and integrations, driven byambitious growth expectations.
Our path has been shaped and guided by a steadfast
vision. It’s with this in mind we honour Melker Schörling,

Hexagon Annual and Sustainability Report 2023

12

our primary shareholder and long-standing chairman,
whose wisdom and foresight have been instrumental in
the company’s evolution. He leaves behind an indelible
legacy and sturdy foundation. As we strive to advancethe mission that he inspired alongside my predecessor,
Ola Rollén, we remain committed to their entrepreneurial
spirit.
As we forge into 2024, with our dynamic and energisedteam, we step into a future of our making. Our
entrepreneurial spirit – one that is transparent, marketfocused, and continually adapting – is infused throughout
our organisation, across geographies, divisions, roles andfunctions. In nurturing this spirit and harnessing the powerof data, we see a clear path to better serve our customers.
With our presence in field across industries, in core digital
reality solutions, coupled with strong partnerships andskills around artificial intelligence, we are positioned tohelp customers leverage the full value of data to optimise
productivity, efficiency, safety and quality. We envisiona future where data is fully leveraged so that business,
industry and humanity thrive responsibly.
In 2024, we stand on a steep curve of widespread
technology innovation and a growing desire to captureand harness data effectively. But we are not there alone.
We stand alongside our customers and our collaborators– our community. Our mission guides us as we enable ourcustomers to shape reality.

Paolo Guglielmini
President & Chief Executive Officer
HexagonIn brief

Financial plan

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Additional information

Hexagon Annual and Sustainability Report 2023

Financial plan for continued profitable growth
The financial targets are to reach annual average sales
growth of 8–12 per cent between 2022-2026 and an
adjusted operating margin including amortisation surplus
values (EBIT1 incuding PPA) of over 30 per cent by 2026.
The margin target includes amortisation of surplus
values (PPA). The targeted sales growth is driven by a
combination of 5–7 per cent organic growth per year and
3–5 per cent structural growth per year from acquisitions.
The targets will be reached through a continued focus on
innovation and customer-centric solutions to further sales
growth, margins and recurring revenues.

Continued growth

Hexagon’s growth strategy is focused on using technology
and innovative leadership to grow organically and throughacquisitions, with a focus on customer-centric solutions.
Total average annual growth is estimated at 8–12 per cent,with variation expected between the years. Organic growth,which is estimated at 5–7 per cent annually, relates inpart to GDP-driven growth from existing solutions, but isprimarily expected to come from increasing revenues fromnew solutions. An increase in recurring revenue is expected
through more focus on customer-centric solutions and anincrease in revenue coming from software. Acquisitionrelated growth is estimated at approximately 3–5 per centannually.

Proven ability to deliver margin improvements

Hexagon has proven its ability to steadily deliver enhanced
margins. Since 2012, the adjusted operating margin (EBIT1)
has increased by 9 percentage points. The ambitious
adjusted operating margin of more than 30 per cent by
2026 will continue to be strengthened by changes to thesales mix — where software and new product generations
account for a greater share of sales. The target is thatorganic growth will contribute with an incremental marginof 35–40 per cent. At the same time, the cost structure
will continue to change. Investments in R&D will continue
in order to meet the demand of a more solution-centricbusiness. This will trigger investments in sales resources
while reducing administrative costs, which are nonaccretive to profitability.
The target to improve profitability will be achieved
through a higher proportion of sales from new high-margin
applications and software, with a high recurring revenue
percentage. There is also a strong focus on further
generating and utilising synergies. The shift toward a higher
proportion of software- and solution-selling has improved
the operating margin but also resulted in changes to thecost structure. Hexagon now has lower costs for goods sold,but higher R&D and amortisation costs.

Development during 2023

During the second year of the new financial plan, organic
net sales increased by 7 per cent, fuelled by strong demandfor our solutions across regions and industries. Adjusted
operating earnings excluding PPA (EBIT1) increased by 5 percent to 1,596.7 MEUR, corresponding to a margin of 29.4 percent. The EBIT1 including PPA margin was 27.2 per cent.

8–12%

5–7%

Average total
growth per year

Average organic
growth per year

3–5%

>30%

Average growthfrom M&A per year

Adjusted
operating margin

13

In brief

Financial plan

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14

Hexagon Annual and Sustainability Report 2023

Other targets
Sustainability targets

Hexagon targets the efficient use of capital in order to generate a strong cash flow, reacha sound equity ratio and achieve a balanced debt structure while generating value forshareholders.

Hexagon has a goal to reach 95% reduction of scope 1 and 2 emissions by 2030 and netzero by 2050. Hexagon succeeded in the target to conduct sustainability audits on 100 per
cent of its direct suppliers in risk areas by 2023. Hexagon targets to achieve at least 30 per
cent women in leading positions by 2025.

Strong cash flow generation

Cash conversion, %A strong cash flow is necessary to finance investments, settle
interest on debts and pay dividends to shareholders. Hexagon’s
117
cash conversion, i.e., the ratio at which profits are converted into
91
88
cash, has averaged 84 per cent since 2013 and was 80 per cent
72(72) for 2023.

Hexagon’s target is to reach a cash conversion of 80–90 per
cent. Cash flow from operating activities, excluding nonrecurring items, amounted to 1,451.9 MEUR (1,372.7).

19

20

21

22

Sound equity ratio and balanced debt structure80

23

Efficient use of operating capital
Hexagon seeks to minimise working
capital and in recent years, theratio of working capital to sales has
averaged less than 10 per cent. The
ratio of working capital to sales in 2023
amounted to 8 per cent (7).

Return on capital
employed, %
13

12

13

Working capital to sales,%
12

A sound equity ratio and balanced leverage are requirements forfinancing acquisitions by loans. Hexagon targets an equity ratioof at least 25 per cent and has the ambition to have a net debt to
EBITDA ratio of 2.5x or below. The equity ratio amounted to 60 per
cent (60) and the net debt to EBITDA ratio amounted to 1.7x (1.8) at
year-end 2023. Debt capital markets account for 59 per cent (52)of Hexagon’s financing, while bank loans make up the remainder.
Hexagon’s net financial expense amounted to -155.3 MEUR(-38.7) in 2023. The average interest rate on the Group’s shortand long-term loans was 4.3 per cent (2.6) at year-end 2023.

Equity ratio, %
57

56

19

20

62

60

60

21

22

23

12
11

The downward trend of working
capital as a percentage of sales
results from a business model shift
19 20 21 22 23
towards more software- centric
solutions. Hexagon’s overall longterm objective is to increase earnings per share by at least 15
per cent annually and to achieve a return on capital employedexceeding 15 per cent over a business cycle, including goodwill
from acquisitions. Return on average capital employed, excluding
adjustments, was 11.4 per cent (11.5) in 2023.

5

19

20

6

21

7

22

8

23

Dividend policy

Hexagon’s dividend policy is to distribute 25–35 per cent of net
earnings after tax.
The Board of Directors proposes a dividend of 0.13 EUR pershare (0.12) for the fiscal year 2023, corresponding to 41 percent of net earnings after tax.

Cash dividend per share,
EUR
0.11

0.12

0.13 10.09 0.09

19

20

21

22

23

1) According to the Board of
Directors’ proposal

In brief

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Hexagon Annual and Sustainability Report 2023

15

Board of Directors’ report
The Board of Directors and the President of Hexagon AB hereby submit their annual
report for the year of operation 1 January 2023 to 31 December 2023. Hexagon AB is a
public limited liability company with its registered office in Stockholm, Sweden and its
corporate registration number is 556190-4771.
Operating structure

Hexagon’s business activities are conducted throughmore than 300 operating companies in about 50 countries
worldwide. The president and CEO is responsible for daily
management and decision-making together with the othermembers of Hexagon Executive Leadership, including theexecutive vice president, the chief financial officer, the chief
strategy officer, the general counsel, the chief marketing
officer, the chief technology officer and the divisionalpresidents.

Hexagon’s Group functions consist of Finance (groupaccounting, treasury and tax), Business and Technology
Development (Innovation Hub), Legal, Strategy, Marketing,
Sustainability and Investor Relations.
Risks are managed by each relevant function. For more
information about managing risks see page 37.

• Safety, Infrastructure &Geospatial• Autonomy & Positioning

Hexagon acquired Projectmates, provider of SaaS-based
enterprise construction project management software.
Hexagon announced the launch of Nexus, an open, flexible
and future-ready digital reality platform .

Q2

Hexagon announced the launch of Reality Cloud Studio, asoftware as-a-service (SaaS) application built on the HxDR
platform.
Hexagon announced a collaboration with NVIDIA to enableindustrial digital twin solutions.
Hexagon announced a landmark agreement with leading
diversified mining company Mineral Resources (MinRes)
to provide an autonomous haulage solution for a fleet of
120 fully autonomous road trains.

HexagonHexagon’s reporting structure is divided into Geospatial Enterprise Solutions and Industrial Enterprise Solutions as follows, withGroup functions serving both:• Geosystems

Q1

Q3

Hexagon’s reporting structure

Geospatial Enterprise Solutions
The business area comprises
the following divisions:

Important events 2023

Group functions• Finance• Legal• Innovation
Hub• Marketing• Sustainability• Investor
Relations• Strategy

Industrial Enterprise Solutions
The business area comprises
the following divisions:• Manufacturing Intelligence• Asset Lifecycle Intelligence

Hexagon acquired HARD-LINE, global leader in mine
automation, remote-control technology and mine
production optimisation.

Q4

Hexagon hosted its Capital Markets Day where the midterm targets for 2022-2026 were reaffirmed and a target
to achieve a 95% reduction in scope 1 and 2 emissions by2030, progressing towards net-zero emissions by 2050, wasintroduced.

In brief

Financial plan Board of Directors’ report

Corporate governance reportCompliance

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2023 in brief

Key figures1• Operating net sales increased by 5 per cent to 5,440.0
MEUR (5,175.5). Using fixed exchange rates and a comparable group structure (organic growth), net sales increasedby 7 per centOperating net sales
Revenue adjustment3
Net sales
Adjusted operating earnings (EBIT1)
Adjusted operating margin
Earnings before taxes excl.
adjustments
Adjustments (before taxes)4
Earnings before taxes
Net earnings
Earnings per share, euro centOperating cash flow
Return on equity, %Return on capital employed, %Share price, SEK
Net debt
Average number of employees• Adjusted operating earnings (EBIT1) increased by 5 per centto 1 596,7 MEUR (1,517.8)• Earnings before tax, excluding adjustments, amounted to
1,441.4 MEUR (1,479.1)• Net earnings, excluding adjustments, amounted to 1,182.0
MEUR (1,212.9)• Earnings per share, excluding adjustments, decreased by
2 per cent to 43.5 euro cent (44.6)• Operating cash flow decreased by 1 per cent to 772.1 MEUR
(778.1)

Financial reports Additional information

2023

2022

%

5,440.0-4.8
5,435.2
1,596.7
29.4

5,175.5-15.0
5,160.5
1,517.8
29.3

72
n.a.
72
5
0,1

1,441.4-380.71,060.7
871.8
32.0
772.1
8.6
11.4
121.003,593.2
24,5481,479.1-231.1
1,248.0
1,019.1
37.4
778.1
10.5
11.5
109.003,441.7
23,196

-3
n.a.
-15
-14
-15
-1
-22
-5
n.a.
4
6

1) All figures are in MEUR unless otherwise stated
2) Adjusted to fixed exchange rates and a comparable group structure, i.e.,organic growth3) Reduction of acquired deferred revenue (haircut) related to acquisitions4) See more information on page 107

Five-year overview
MEUR

Operating net sales
Revenue adjustment 1
Net sales
Adjusted operating earnings (EBIT1)
Adjusted operating margin, %Earnings before taxes excluding adjustments
Adjustments
Earnings before taxes
Net earnings
Earnings per share, euro cent1) Reduction of acquired deferred revenue (haircut) related to acquisitions

Adjusted
operating margin

2023

2022

2021

2020

2019

5,175.5-15.0
5,160.5
1,517.8
29.3
1,479.1-231.1
1,248.0
1,019.1
37.4

4,347.4-6.3
4,341.1
1,269.6
29.2
1,243.4-259.8
983.6
810.0
30.8

3,770.5-6.1
3,764.4
1,009.5
26.8
982.1-222.5
759.6
624.7
24.0

3,907.7
3,907.7
1 ,023.6
26.2
996.7-131.4
865.3
708.6
27.4

Organic growth

29%

7%

Operating net sales, MEUR
Adjusted operating margin, %Earnings per share, EUR
37.4

5,176 5,440
3,908 3,770
26.2 26.8

19

20

4,347

27.4

32.0

30.8
24.0

29.2 29.3 29,4

21

22

23

19

Sales bridge1
5,175.5

5,440.0-4.8
5,435.2
1,596.7
29.4
1,441.4-380.71,060.7
871.8
32.0

Hexagon Annual and Sustainability Report 2023

20

21

22

23

Organic growth,
5,440.0+7%Structure,+2%
Currency,
–4%

2022

2023

1) Operating net sales from completed acquisitions and divestments
during the year are recognised as “Structure”. Percentages arerounded to the nearest whole per cent16In brief

Financial plan Board of Directors’ report

Corporate governance report

Net sales

Operating net sales amounted to 5,440.0 MEUR (5,175.5).
Using fixed exchange rates and a comparable groupstructure (organic growth), sales increased by 7 per cent.

Market demandCompliance

Sustainability report

Operating net sales, MEUR
2,201

2,537 2,638

Adjusted operating margin, %26.6 27.8

Regionally, organic growth was 5 per cent in Americas, 11 percent in Asia, and 7 per cent in EMEA. Operating net sales in theAmericas amounted to 2,097.5 MEUR (1,995.5), representing
39 per cent (39) of Group sales. North America recorded 5
per cent organic growth, driven by a strong performance inaerospace, mining and positioning solutions, but partially
offset by a slowdown in construction and the exit of somelower margin defence contracts. South America recorded 6
per cent organic growth throughout the year, driven by solid
growth in mining, power and energy.
Operating net sales in Asia amounted to 1,464.1 MEUR
(1,408.5), representing 27 per cent (27) of Group sales.
China recorded 8 per cent organic growth, driven by strong
growth in general manufacturing, power and energy anda stabilisation in certain infrastructure and construction
market, which had been particularly weak last year. The restof Asia recorded 10 per cent organic growth.

Industrial Enterprise Solutions

Geospatial Enterprise Solutions

Geospatial Enterprise Solutions (GES) operating net sales
amounted to 2,638.0 MEUR (2,537.0). Using fixed exchange
rates and a comparable group structure (organic growth),
net sales increased by 5 per cent. Regionally, organic growth
was 4 per cent in the Americas, 4 per cent in EMEA and 10
per cent in Asia. Geosystems recorded 6 per cent organic

Hexagon Annual and Sustainability Report 2023

Geospatial Enterprise Solutions

1,934 1,934

Operating net sales in EMEA amounted to 1,878.4 MEUR
(1,771.5), representing 34 per cent (34) of Group sales.
Western Europe recorded 4 per cent organic growth, driven
good momentum in manufacturing industries and powerand energy, but offset by weakness in infrastructure andconstruction markets. EMEA, excluding Western Europe,
recorded 14 per cent organic growth.

Financial reports Additional information

19

20

21

22

23

Operating net sales, MEUR
2,639
1,974

19

1,837

20

2,802

19

20

31.1

31.0 30.6

21

22

23

Adjusted operating margin, %27.1 26.5

Customer segment, %Surveying, 37
Infrastructure & construction, 24
Natural resources, 18
Aerospace & defence, 8Public safety, 8
Other, 5

Customer segment, %Geography, %EMEA, 43
Americas, 39
Asia, 18

Geography, %28.4 28.6 29.1

2,146

21

22

23

19

20

21

22

23

Electronics & manufacturing, 33
Power & energy, 23
Automotive, 16
Aerospace & defence, 10
Other, 18

Americas, 35
Asia, 35
EMEA, 30

17

In brief

Financial plan Board of Directors’ report

Corporate governance report

growth, driven by a strong performance in the mining andreality capture portfolio, but hampered by a challenging
construction market in the latter part of the year. Safety,
Infrastructure & Geospatial recorded -7 per cent organic
growth, due to the exit of a number of low margin defence
contracts. Autonomy & Positioning recorded 22 per centorganic growth, fuelled by strong demand for aerospace,defence and precision agriculture solutions.

Industrial Enterprise Solutions

Industrial Enterprise Solutions (IES) operating net sales
amounted to 2,802.0 MEUR (2,638.5). Using fixed exchange
rates and a comparable group structure (organic growth),
net sales increased by 9 per cent. Regionally, organic
growth was 6 per cent in the Americas, 10 per cent in
EMEA and 12 per cent in Asia. Manufacturing Intelligencerecorded 9 per cent organic growth, driven by strong
demand in key industries as well as the software portfolio.
The Asset Lifecycle Intelligence division recorded 11 percent organic growth, with strong growth in the entire
product portfolio and good momentum in both perpetualand recurring software.

Adjusted operating earnings

Adjusted operating earnings (EBITDA) increased by 8
per cent to 2,026.6 MEUR (1,877.1), corresponding to an
adjusted EBITDA margin of 37.3 per cent (36.3). Adjusted
operating earnings (EBIT1), increased by 5 per cent to1,596.7 MEUR (1,517.8), corresponding to an adjusted
operating margin (EBIT1 margin) of 29.4 per cent (29.3).
Adjusted operating earnings (EBIT1) for Geospatial
Enterprise Solutions increased to 807.5 MEUR (786.5),
corresponding to an adjusted operating margin of 30.6 percent (31.0). Adjusted operating earnings (EBIT1) for Industrial
Enterprise Solutions increased to 814.3 MEUR (755.1),
corresponding to an adjusted operating margin of 29.1 percent (28.6).

Compliance

Sustainability report

Financial reports Additional information

Segments
Operatingnet sales
MEUR

2023

2022

Adjusted operating
earnings (EBIT1)
2023

2022

Geospatial Enterprise Solutions 2,638.0 2,537.0 807.5 786.5
Industrial Enterprise Solutions 2,802.0 2,638.5
814.3
755.1
Group cost
-25.1
-23.8
Total
5,440.0 5,175.5 1,596.7 1,517.8

Adjusted gross earnings

Adjusted gross earnings amounted to 3,593.4 MEUR
(3,384.7). The adjusted gross margin was 66.1 per cent(65.4).

Financial income and expenses

The financial net amounted to -155.3 MEUR (-38.7) in 2023.

Adjustments

During 2023 adjustments amounted to -380.7 MEUR(-231.1). Adjustments consist of share-based programme
expenses (LTIP), amortisation of surplus values (PPA),
acquired deferred revenue, transaction costs and theimplementation of a rationalisation programme. In 2022, theadjustments also consisted of costs related to the decision
to freeze business operations in Russia.

Earnings before tax

Earnings before tax, excluding adjustments, amounted
to 1,441.4 MEUR (1,479.1). Including adjustments, earnings
before tax were 1,060.7 MEUR (1,248.0).

Effective tax rate

Hexagon’s tax expense for the year totalled -188.9 MEUR(-228.9), corresponding to an effective tax rate of 17.8 percent (18.3). The tax rate, excluding adjustments, was 18.0
per cent (18.0) for 2023.

Non-controlling interest

The non-controlling interest’s share of net earnings was
12.9 MEUR (11.5).

Hexagon Annual and Sustainability Report 2023

18

Net earnings

Net earnings, excluding adjustments, amounted to 1,182.0
MEUR (1,212.9) or 43.5 euro cent per share (44.6).
Net earnings, including adjustments, amounted to 871.8
MEUR (1,019.1) or 32.0 euro cent per share (37.4).

Cash flow

Cash flow from operations before changes in working
capital and non-recurring items amounted to 1,530.1 MEUR
(1,546.5), corresponding to 56.9 euro cent per share (57.4).
Including changes in working capital, but excluding nonrecurring items, cash flow from operations was 1,451.9
MEUR (1,372.7), corresponding to 54.0 euro cent per share(51.0). Cash flow from other investment activities was-432.2 MEUR (-1,244.9). Cash flow after other investments
amounted to 339.9 MEUR (-466.8). The change inborrowings was 133.6 MEUR (868.7). Cash dividends to the
Parent Company shareholders amounted to -322.8 MEUR(-295.8), corresponding to 0.12 EUR per share (0.11).

Profitability

Capital employed, defined as total assets less noninterest-bearing liabilities, increased to 14,186.4 MEUR
(13,792.6). Return on average capital employed, excluding
adjustments, for the last 12 months was 11.4 per cent (11.5).
Return on average shareholders’ equity for the last 12
months was 8.6 per cent (10.5). The capital turnover rate
was 0.4 times (0.4).

Financing and financial position

Shareholders’ equity, including non-controlling interest,
increased to 10,046.1 MEUR (9,864.6). The equity ratio was
59.5 per cent (59.9).
Following a refinancing in 2021, Hexagon’s main sources offinancing consist of:
1. A multicurrency revolving credit facility (RCF)
established in 2021. The RCF amounts to 1,500 MEUR
with a tenor of 5+1+1 years.

In brief

Financial plan Board of Directors’ report

Corporate governance report

2. A Swedish Medium-Term Note Programme (MTN)
established during 2014. The MTN programme amounts
to 20,000 MSEK with tenor up to 6 years. On 31
December 2023, Hexagon had issued bonds for a total
amount of 11,650 MSEK (10,150).
3. A Swedish Commercial Paper Programme (CP)established in 2012. The CP programme amounts
to 15,000 MSEK with tenor up to 12 months. On 31
December 2023, Hexagon had issued commercial paper
for a total amount of 10,827 MSEK (7,464) and 63 MEUR(60).
On 31 December 2023, cash and unutilised credit limits
totalled 1,268.6 MEUR (1,429.7). Hexagon’s net debt was
3,593.2 MEUR (3,441.7). The net indebtedness was 0.33
times (0.33). Interest coverage ratio was 7.4 times (27.3).

Investments

Ordinary investments consist mainly of investments in
production facilities, production equipment and intangible
assets, primarily capitalised development expenses. Of
the ordinary investments of 626.6 MEUR (567.5) during2023, approximately 74 per cent (67) were capitalised
expenses for development work. Development work
is primarily performed in Hexagon’s R&D centres with
its primary units located in Switzerland, China, India
and the USA, that results in products and services thatare sold worldwide. The remaining part of the current
investments, approximately 26 per cent, comprised mostly
of investments in business equipment and machines. All
current investments during the year have been financed
by cash flow from operating activities. Investments
corresponded to 12 per cent (11) of net sales. Hexagon does
not expect any material change to current investment
levels as a percentage of net sales in the near future.
Depreciation, amortisation and impairment during the year
amounted to -563.0 MEUR (-467.0).

Compliance

Sustainability report

Financial reports Additional information

Investments
MEUR

Investments in intangible fixed assets
Investments in tangible fixed assets
Divestments of tangible fixed assets
Total ordinary investments
Investments in subsidiaries
Investments in financial fixed assets
Divestments of financial fixed assets
Total other investments
Total investments

2023

2022

489.9
136.7
-28.3
598.3

413.9
153.6
-14.8
552.7

375.8 1,194.8
63.8
59.2
-7.4
-9.1
432.2 1,244.9
1,030.5 1,797.6

Intangible fixed assets

As of 31 December 2023, Hexagon’s carrying value of
intangible fixed assets was 12,993.7 MEUR (12,805.6).
Amortisation of intangible fixed assets was -339.6 MEUR(-292.4). Impairment tests are made to determine whether thevalue of goodwill and/or similar intangible assets is justifiable
or whether there is any impairment need in full or in part.
Goodwill as of 31 December 2023 amounted to 9,616.6 MEUR
(9,599.5), corresponding to 57 per cent (58) of total assets.
Goodwill
MEUR

Geospatial Enterprise Solutions
Industrial Enterprise Solutions
Total

Research and development

2023

2022

3,225.1
6,391.5
9,616.6

2,927.9
6,671.6
9,599.5

Hexagon places a high priority on investments in R&D. Being
one of the most innovative suppliers in the industry, it isimportant not only to improve and adapt existing products,
but also to identify new applications and thereby increase
the total addressable market for Hexagon’s products andservices. Total expenditure for R&D during 2023 amounted
to 836.3 MEUR (714.3), corresponding to 15 per cent (14) of
net sales. Development expenses are capitalised only ifthey pertain to new products, the cost is significant andthe product is believed to have future economic benefits.

19

Hexagon Annual and Sustainability Report 2023

The current level of R&D costs is in line with other leading
companies in the industry.
R&D cost
MEUR

2023

2022

Capitalised
Expensed (excluding amortisation)
Total

461.5
374.8
836.3

377.8
336.5
714.3

Amortisation

205.3

173.5

Share capital and ownership

On December 31, 2023, Hexagon’s share capital was
85,761,451 EUR, represented by 2,705,477,888 shares. Total
shares was 110,250,000 Class A shares, each carrying ten
votes and 2,579,427,888 Class B shares, each carrying one
vote. On December 31, 2023, Melker Schörling AB, the single
largest shareholder in Hexagon, held a total of 110,250,000
Class A shares and 471,081,440 Class B shares, representing
42.6 per cent of the votes and 21.5 per cent of the capital.
Hexagon AB has acquired 21,100,000 of the company’s own
shares of Class B as of 31 December 2023. The purpose of the
repurchase is to ensure Hexagon’s undertakings in respect
to the long-term incentive programme (other than delivery ofshares to participants in the incentive programme), including
covering social security costs.

Significant agreements

To the best of the Board of Director’s knowledge, there
are no shareholder agreements or similar agreements
between the shareholders of Hexagon with the purposeof exercising joint control of the company. Neither isthe Board aware of any agreements that could lead to achange of control of the company.
As far as the Board knows, there is no shareholder
agreement that could prevent the transfer of shares. Nor
are there agreements between the company, directors or
employees, other than as described in Note 30 on page122, which stipulate the right to compensation if sucha person voluntarily leaves the company, is dismissedIn brief

Financial plan Board of Directors’ report

Corporate governance report

without cause or if such a person’s employment isterminated as a result of a public offer for shares of thecompany.

Management of Hexagon’s capital

Hexagon’s reported shareholders’ equity, including noncontrolling interest, was 10,046.1 MEUR (9,864.6) at yearend. Hexagon’s overall long-term objective is to increase
earnings per share by at least 15 per cent annually andto achieve a return on capital employed of at least 15 percent. Another Group objective is to achieve an equity
ratio of 25 per cent as Hexagon is seeking to minimise
the weighted average cost of capital for the company’s
financing.
Hexagon has undertaken to comply with a requirement
regarding a key financial ratio (covenant) towards lenders.
The key financial ratio is reported to lenders in conjunction
with the quarterly reports. If the requirement is notcomplied with, the terms and conditions are renegotiatedand there is a risk of a temporary increase in borrowing
costs. In addition, lenders have a right to terminate loan
agreements. Hexagon has never breached any covenants,
not in 2023 nor in prior years.
The company’s strategy, as well as its financial positionand other financial objectives, are considered inconnection with the annual decision concerning thedividend.

Corporate governanceIn accordance with the Swedish Annual Accounts Act,
Hexagon has prepared a corporate governance report
separate from the annual report. It can be found in thisdocument on pages 24–31. The Corporate governancereport contains the Board of Directors’ report on internal
control.

Compliance

Sustainability report

Financial reports Additional information

Hexagon Annual and Sustainability Report 2023

20

Acquisitions 2023

Hexagon’s ambition is to generate profitable growth through a combination of organic growth and acquisitions.
Acquisitions are an important part of Hexagon’s long-term growth strategy. During 2023, Hexagon acquired the following
companies:
Geospatial Enterprise Solutions
Company

Division

LocLabGeosystems

Area
A leader in 3D digital twin content creation

Projectmates

Geosystems

A provider of SaaS-based enterprise construction project management
softwareComernal Software

Geosystems

A software development center

HARD-LINE

Geosystems

A global leader in mine automation, remote-control technology and mine
production optimisation

Qognify

Safety, Infrastructure &Geospatial

A leading provider of physical security and enterprise incident management software solutions

Company

Division

Area

Cads Additive

Manufacturing Intelligence

A provider of specialised software for metal additive manufacturing(AM)

Industrial Enterprise Solutions

Read about acquisitions on page 121.→

Statutory sustainability report

Hexagon has prepared a sustainability report in accordancewith the Global Reporting Initiative’s guidelines (GRI
Standards 2021) and in accordance with the requirementsof the Swedish Annual Act. The Board of Director’s are
responsible for the sustainability report that has been
prepared. The Group’s sustainability report can be found on
pages 50-89 in this document.

Dividend

The dividend policy of Hexagon states that, over thelong term, the dividend should comprise 25–35 per centof earnings per share after tax, assuming that Hexagon
satisfies its equity ratio objective.

A dividend of 0.12 EUR per share for the fiscal year 2022
was resolved by the Annual General Meeting (AGM) in May
2023. The record date was 4 May and date of settlement
was 11 May 2023.
The Hexagon Board of Directors proposes a dividend of
0.13 EUR per share for the fiscal year 2023, corresponding
to 41 per cent of net earnings after tax. The proposed
record date will be 2 May and expected date forsettlement is 10 May 2024.

Guidelines for remuneration to senior executives

The Board of Directors of Hexagon AB (publ) proposed that
the AGM 2020 resolved on guidelines for remuneration
to the President and CEO and other senior executives
as follows. Other senior executives are defined as

In brief

Financial plan Board of Directors’ report

Corporate governance report

members of the Executive Leadership. The guidelines
are applicable to remuneration agreed, and amendments
to remuneration already agreed, after adoption of theguidelines by the AGM 2020. These guidelines do not apply
to any remuneration decided or approved by the general
meeting.
A prerequisite for the successful implementation of thecompany’s business strategy and safeguarding of its
long-term interests, including its sustainability, is thatthe company is able to attract and retain qualified senior
executives. To this end, it is necessary that the company
offers competitive remuneration on market terms. These
guidelines enable the company to offer the executive
management a competitive total remuneration.
Variable cash remuneration covered by these guidelines
shall aim at promoting the company’s business strategy
and long-term interests, including its sustainability.
The remuneration shall be on market terms and consist of
fixed cash salary, variable remuneration, other benefits
and pension. Additionally, the general meeting may –irrespective of these guidelines – resolve on, among otherthings, share-related or share price-related incentive
programmes. The satisfaction of criteria for awarding
variable cash remuneration shall be measured over a
period of one year. The variable cash remuneration iscapped and shall be maximised at up to 150 per cent of the
fixed annual cash salary.
For senior executives, pension benefits shall be paid
not earlier than from the age of 60 years. As a general
guideline, pension benefits for the CEO, including healthinsurance, shall be fee based. Variable cash remuneration
shall not qualify for pension benefits. The pension
premiums for premium defined pension shall amountto not more than 20 per cent of the fixed annual cash
salary. As a general guideline, pension benefits for otherexecutives, including health insurance, shall be fee based.
Deviations from this general guideline may be made whenCompliance

Sustainability report

Financial reports Additional information

appointing new senior executives whose employment
agreements already comprise benefit-based pension
plans or if the executive is covered by benefit pensionsin accordance with mandatory collective agreement
provisions. Variable cash remuneration shall qualify forpension benefits only to the extent required by mandatory
collective agreement provisions applicable to the
executive. The pension premiums for premium defined
pension shall amount to not more than 25 per cent of the
fixed annual cash salary. Other benefits may include, forexample, life insurance, medical insurance and company
cars. Premiums and other costs relating to such benefits
may amount to not more than two per cent of the fixedannual cash salary.
For employments governed by rules other than Swedish,adjustments may be made for compliance with mandatory
rules or established local practice, taking into account,to the extent possible, the overall purpose of theseguidelines. The notice period for the President and CEO is
six months. Upon termination by the company or in caseof change of principal ownership the President and CEO isentitled to severance pay equal to 18 months of salary. The
period of notice for senior executives is a maximum of 24months. During the notice period, basic salary is the only
severance pay.
The variable cash remuneration shall be linked toindividualised predetermined and measurable criteria.
The criteria shall be designed so as to contribute to thecompany’s business strategy and long-term interests,
including its sustainability, by for example being clearly
linked to the business strategy or promote the executive’slong-term development. The variable cash remuneration
is based on results . The design of the criteria for variable
cash remuneration contributes to the company’s businessstrategy, long-term interests and sustainability.
To which extent the criteria for awarding variable cash
remuneration has been satisfied shall be determined

Hexagon Annual and Sustainability Report 2023

21

when the measurement period has ended. The
remuneration committee is responsible for the evaluation
so far as it concerns variable cash remuneration to the
President and CEO. For variable cash remuneration toother executives, the President and CEO is responsible
for the evaluation. For financial objectives, the evaluation
shall be based on the latest financial information madepublic by the company. In the preparation of the Board of
Directors’ proposal for these remuneration guidelines,
salary and employment conditions for employees of
the company have been taken into account by including
information on the employees’ total income, thecomponents of the remuneration and increase and growthrate over time, in the remuneration committee’s and theBoard of Directors’ basis of decision when evaluating
whether the guidelines and the limitations set out herein
are reasonable.
The Board of Directors has established a remunerationcommittee. Remuneration to the President and CEO
and other senior executives shall be prepared by the
remuneration committee and resolved by the Board of
Directors based on the proposal of the remunerationcommittee. The committee’s tasks include preparing
the Board of Directors’ decision to propose guidelines
for executive remuneration. The Board of Directors shallprepare a proposal for new guidelines at least every fourthyear and submit it to the general meeting. The guidelines
shall be in force until new guidelines are adopted by thegeneral meeting. The remuneration committee shallalso monitor and evaluate programmes for variable
remuneration for the executive management, theapplication of the guidelines for executive remuneration
as well as the current remuneration structures andcompensation levels in the company. The members of
the remuneration committee are independent in relation
to the company and the company management. The
President and CEO and other members of the executive
management do not participate in the Board of Directors’In brief

Financial plan Board of Directors’ report

Corporate governance report

processing of and resolutions regarding remunerationrelated matters in so far as they are affected by suchmatters.
The Board of Directors may temporarily resolve toderogate from the guidelines, in whole or in part, if in a
specific case there is special cause for the derogation anda derogation is necessary to serve the company’s longterm interests, including its sustainability, or to ensure
the company’s financial viability. As set out above, theremuneration committee’s tasks include preparing theBoard of Directors’ resolutions in remuneration-related
matters. This includes any resolutions to derogate fromthe guidelines.
The proposed guidelines for remuneration to senior
executives that were proposed and adopted by theAGM 2020 are applicable until further notice. However,since the general meeting shall adopt guidelines forremuneration to senior executives at least every fourthyear, the Board will present a proposal for new guidelines
for remuneration to senior executives for approval by theAGM 2024 to be applicable until further notice.

Proposal guidelines for remuneration to senior
executives from 2024

The Board of Directors of Hexagon AB (publ) intends
to propose that the AGM 2024 resolves on updated
guidelines for remuneration to the President and CEO
and other senior executives as follows. The changes
in the Board of Directors’ proposal compared with thecurrent guidelines are that the guidelines have beenaligned with the company’s updated financial targets.
In addition, the guidelines have been supplemented
with information on the notice period for other senior
executives upon termination by the senior executive, as
well as a clarification in relation to the maximum noticesalary, other employment benefits and severance paythat may in total be paid upon termination. Other senior
executives are defined as members of the Executive

Compliance

Sustainability report

Financial reports Additional information

Leadership. The guidelines are applicable to remunerationagreed, and amendments to remuneration already agreed,
after adoption of the guidelines by the AGM 2024. These
guidelines do not apply to any remuneration decided orapproved by the general meeting.
A prerequisite for the successful implementation of
the company’s business and safeguarding of its longterm interests, including its sustainability, is that thecompany is able to attract and retain qualified senior
executives. To this end, it is necessary that the company
offers competitive remuneration on market terms. These
guidelines enable the company to offer the executive
management a competitive total remuneration.
Variable cash remuneration covered by these guidelines
shall aim to promote the company’s business strategy andlong-term interests, including its sustainability.
The remuneration shall be on market terms and consistof fixed salary, variable remuneration, other benefits
and pension. Additionally, the general meeting may –irrespective of these guidelines – resolve on, among otherthings, share-related or share-price related incentive
programmes. The satisfaction of criteria for awarding
variable cash remuneration shall be measured over a
period of one year. The variable cash remuneration iscapped and shall be maximised at up to 150 per cent of the
fixed annual cash salary.
For senior executives, pension benefits shall be paid
not earlier than from the age of 60 years. As a general
guideline, pension benefits for the CEO, including healthinsurance, shall be fee based. Variable cash remuneration
shall not qualify for pension benefits. The pension
premiums for premium defined pension shall amountto not more than 20 per cent of the fixed annual cash
salary. As a general guideline, pension benefits for otherexecutives, including health insurance, shall be fee based.
Deviations from this general guideline may be made when
appointing new senior executives whose employment

Hexagon Annual and Sustainability Report 2023

22

agreements already comprise benefit-based pension
plans or if the executive is covered by benefit pensionsin accordance with mandatory collective agreement
provisions. Variable cash remuneration shall qualify forpension benefits only to the extent required by mandatory
collective agreement provisions applicable to the
executive. The pension premiums for premium defined
pension shall amount to not more than 25 per cent of the
fixed annual cash salary. Other benefits may include, forexample, life insurance, medical insurance and company
cars. Premiums and other costs relating to such benefits
may amount to not more than two per cent of the fixedannual cash salary.
For employments governed by rules other than Swedish,adjustments may be made for compliance with mandatory
rules or established local practice, taking into account,to the extent possible, the overall purpose of theseguidelines.
The notice period for the President and CEO is six months.
Upon termination by the company or in case of a changeof principal ownership the President and CEO is entitled
to severance pay equal to 18 months of salary. The periodof notice for other senior executives is a maximum of 24months upon termination by the company, and a maximumof six months upon termination by the senior executive.
Basic salary and other employment benefits during thenotice period may together with severance pay not exceed
an amount equivalent to the basic cash salary for 24months. When the employment is terminated by the senior
executive, no severance pay shall be paid.
The variable cash remuneration shall be linked toindividualised predetermined and measurable criteria.
The criteria shall be designed so as to contribute to thecompany’s business strategy and long-term interests,
including its sustainability, by for example being clearly
linked to the business strategy or promote the executive’slong-term development. The variable cash remuneration

In brief

Financial plan Board of Directors’ report

Corporate governance reportis based on results and other financial targets, such asorganic growth and the cash conversion target rate. The
design of the criteria for variable cash remuneration
contributes to the company’s business strategy, long-term
interests and sustainability.
To which extent the criteria for awarding variable cash
remuneration has been satisfied shall be determinedwhen the measurement period has ended. The
remuneration committee is responsible for the evaluation
so far as it concerns variable cash remuneration to the
President and CEO. For variable cash remuneration toother executives, the President and CEO is responsible
for the evaluation. For financial objectives, the evaluation
shall be based on the latest financial information madepublic by the company. In the preparation of the Board of
Directors’ proposal for these remuneration guidelines,
salary and employment conditions for employees of
the company have been taken into account by including
information on the employees’ total income, thecomponents of the remuneration and increase and growthrate over time, in the remuneration committee’s and theBoard of Directors’ basis of decision when evaluating
whether the guidelines and the limitations set out herein
are reasonable.
The Board of Directors has established a remunerationcommittee. Remuneration to the President and CEO
and other senior executives shall be prepared by the
remuneration committee and resolved by the Board of
Directors based on the proposal of the remunerationcommittee. The committee’s tasks include preparing
the Board of Directors’ decision to propose guidelines
for executive remuneration. The Board of Directors shallprepare a proposal for new guidelines at least every fourthCompliance

Sustainability report

Financial reports Additional information

year and submit it to the general meeting. The guidelines
shall be in force until new guidelines are adopted by thegeneral meeting. The remuneration committee shallalso monitor and evaluate programmes for variable
remuneration for the executive management, theapplication of the guidelines for executive remuneration
as well as the current remuneration structures andcompensation levels in the company. The members of
the remuneration committee are independent in relation
to the company and the company management. The
President and CEO and other members of the executive
management do not participate in the Board of Directors’
processing of and resolutions regarding remunerationrelated matters in so far as they are affected by suchmatters.
The Board of Directors may temporarily resolve toderogate from the guidelines, in whole or in part, if in a
specific case there is special cause for the derogation anda derogation is necessary to serve the company’s longterm interests, including its sustainability, or to ensure
the company’s financial viability. As set out above, theremuneration committee’s tasks include preparing theBoard of Directors’ resolutions in remuneration-related
matters. This includes any resolutions to derogate fromthe guidelines. The proposed guidelines for remuneration
to senior executives that are proposed to be adopted by
the AGM 2024 are proposed to be applicable until the AGM
2028, provided that no changes are proposed before then.
For a description of remuneration to senior executives see
Note 30 on page 122.

Incentive programmes

The Board of Directors proposed that the Annual General
Meeting resolved on implementation of a performance

Hexagon Annual and Sustainability Report 2023

23

based long-term share programme for 2023 (Share
Programme 2023/2026), for more information on the share
programme see Note 30 on page 122 and page 140.

Parent company

The Parent Company’s earnings before tax were 1,658.8
MEUR (-1,228.2). The equity was 6,333.3 MEUR (5,040.6).
The equity ratio of the Parent Company was 38 per cent(34). Liquid funds including unutilised credit limits were734.2 MEUR (930.7).
Hexagon’s activities are financed via equity and externalborrowings in the Parent Company. Substantial currency
effects arise due to Intra-Group and external lending andborrowing transactions in multiple currencies.

Proposed appropriation of earnings
The following earnings in the Parent Company are at
the disposal of the annual general meeting (KEUR):
Premium reserve
Retained earnings
Net earnings
Total

2,903,123
1,360,563
1,662,520
5,926,206

The Board of Directors proposes that thesefunds are allocated as follows:
Cash dividend to shareholders of 0.13 EUR per share
Balance remaining in the premium reserve
Balance remaining in retained earnings
Total

Significant events after the fiscal year

348,969
2,903,123
2,674,114
5,926,206

No significant events effecting the financial reporting haveoccurred during the period between quarter-end and dateof issuance of this report.

In brief

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Additional information

Hexagon Annual and Sustainability Report 2023

24

Corporate governance report
Hexagon AB is a public company listed on Nasdaq
Stockholm. The corporate governance of Hexagon isbased on Swedish legislation, primarily the Swedish
Companies Act, Hexagon’s Articles of Association, theBoard of Directors’ internal rules, Nasdaq Stockholm’s
rules and regulations, the Swedish Corporate Governance
Code (the “Code”) and regulations and recommendations
issued by relevant organisations.
Hexagon applies the Code, which is based on the principle“comply or explain”. Hexagon did not note any deviations
from the Code for the 2023 financial year.
This corporate governance report has been prepared inaccordance with the provisions of the Annual Accounts
Act and the Code and has, by virtue of Section 6,
paragraph 8 of the Annual Accounts Act, been issued as a
document separate from the annual report.

Ownership structure and share information

At 31 December 2023, Hexagon’s share capital was EUR
85,761,451 represented by 2,705,477,888 shares, ofwhich 110,250,000 are of Class A with ten votes each and2,595,227,888 are of Class B with one vote each. As of 31
December 2023, Hexagon AB holds in total 21,100,000of the company’s own shares of Class B acquired on
Nasdaq Stockholm. Repurchase of 5,300,000 shares
was made during 2023 pursuant to the authorisation
granted by the Annual General Meeting on 2 May 2023.
The authorisation comprises acquisitions on Nasdaq
Stockholm, on one or more occasions for the period up
until the Annual General Meeting 2024, of maximum somany Series B shares that the company’s holding does
not exceed 10 per cent of all shares in the company at thattime. According to the authorisation any acquisitions ofshares on Nasdaq Stockholm may only occur at a pricewithin the share price interval registered at that time,
where share price interval means the difference between
the highest buying price and the lowest selling price. The
Board of Directors was further authorised, for the period
up until the Annual General Meeting 2024 on one or more
occasions, to resolve on transfer of the company’s own
Series B shares. According to the authorisation, transfer
of Series B shares may be made at a maximum of 10 per
cent of the total number of shares in the company fromtime to time. A transfer may be made with deviationfrom the shareholders’ preferential rights on Nasdaq
Stockholm as well as to third parties in connection withacquisition of a company or a business. Compensation
for transferred shares can be paid in cash, through an
issue in kind or a set-off. Transfers of shares on Nasdaq
Stockholm may only occur at a price per share within theshare price interval registered at that time. Transfer inconnection with acquisitions may be made at a market
value assessed by the Board of Directors. The purposeof the authorisations is to give the Board of Directors theopportunity to adjust the company’s capital structure, tofinance potential company acquisitions, and as a hedge
for the company’s share-based incentive programmes.
The purpose of the repurchase during 2023 was to ensure
Hexagon’s undertakings in respect of the long-term
incentive programmes (other than delivery of shares
to participants in the incentive programmes), including
covering social security costs. The Board of Directors did
not exercise the authorisation to resolve on transfer ofown shares during 2023.
The Annual General Meeting held on 2 May 2023 also
authorised the Board of Directors to, with or without

deviation from the shareholders’ preferential rights, andwith or without provisions for contribution in kind, setoff
or other conditions, resolve to issue Series B shares,
convertibles and/or warrants (with rights to subscribe foror convert into Series B shares). The authorisation may
be utilised on one or more occasions during the period
up until the Annual General Meeting 2024. By resolutionsin accordance with the authorisation, the number ofshares may be increased by a number corresponding toa maximum of 10 percent of the number of outstanding
shares in the company at the time when the Board of
Directors first uses the authorisation. The purpose of
the authorisation is to ensure financing of acquisitionsof companies, part of companies or businesses or tostrengthen the company’s capital base and equity/
assets ratio. In case of deviation from the shareholders’preferential rights, issues by virtue of the authorisation
shall be made on market conditions.
Melker Schörling AB, the single largest shareholder in
Hexagon, held a total of 110,250,000 Class A shares and
471,081,440 Class B shares at year-end 2023, representing
42.6 per cent of the votes and 21.5 per cent of thecapital. No other shareholder has any direct or indirect
shareholding representing 10 per cent or more of the total
votes.
To the best of the knowledge of the Board of Directors (the“Board”), there are no shareholder agreements or similar
agreements between the shareholders of Hexagon withthe purpose of exercising joint control of the company.
The Board also is not aware of any agreements that could
lead to a change in control of the company or that could
prevent the transfer of shares of the company.

In brief

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Hexagon Annual and Sustainability Report 2023

25

Annual General Meeting

The General Meeting is Hexagon’s supremedecisionmaking body in which all shareholders are entitledto participate. The Articles of Association of the company
contain no restrictions regarding the number of votes that
may be cast by a shareholder at general meetings. At theAnnual General Meeting (AGM), the Board presents theannual report (including the consolidated accounts) andthe audit report. Hexagon issues the notice convening
the AGM no later than four weeks prior to the meeting.
To attend the AGM, a shareholder must be recorded in
the share register and notify the company of his/her
intention to attend the AGM within the time limit set
forth in the notice convening the AGM. The AGM is held in
Stockholm, Sweden, usually at the end of April or in the
beginning of May. The AGM provides shareholders with anopportunity to address a number of issues, such as the
adoption of the income statement and balance sheet, theappropriation of the company’s profit or loss according
to the adopted balance sheet, the discharge from liability
to the company of the Board members and the President
and CEO, the remuneration of the Board and auditors, theprinciples for remuneration and employment terms for the
President and CEO and other senior executives, approvalof the remuneration report for the previous financial
year, the election of members and the Chair of the Board,
the election of the auditor, and any amendments to the
Articles of Association.

The Nomination Committee shall consist ofrepresentatives for major shareholders of the company
elected by the AGM. In case a shareholder, who a memberof the Nomination Committee represents, is no longer oneof the major shareholders of Hexagon or if a member of
the Nomination Committee is no longer employed by suchshareholder or for any other reason leaves the Committee
before the next AGM, the Committee is entitled to appoint
another representative among the major shareholders to
replace such a member. No fees are paid to the membersof the Nomination Committee.

Nomination Committee

Board of Directors

The AGM has resolved that the Nomination Committee’s
assignment shall comprise the preparation andpresentation of proposals to the shareholders at the AGM
on the election of Board members, Chair of the Board,
Chair of the AGM, and the company’s auditors. In addition,
the Nomination Committee presents proposals regarding
remuneration of the Board of Directors (including forcommittee work) and the auditors.

Shareholders via Annual
General Meeting

Auditor

Audit Committee

Board of Directors

President and CEO

Nomination Committee

Remunerationcommittee

In accordance with the Articles of Association, the Boardof Directors of Hexagon shall consist of no less than
three and not more than ten members, elected annuallyby the AGM for the period until the end of the next AGM.
The Articles of Association of the company contain no
special provisions regarding the election and dischargeof Board members or regarding changes to the Articles
of Association. The AGM 2023 elected seven members.

Operations

Elects/appoints
Informs/reports

The President and CEO, The Chief Financial Officer, theGeneral Counsel and the Chief Strategy Officer participate
in the Board meetings. Other Hexagon employees
participate in the Board meetings to make presentations
on particular matters if requested.
The Nomination Committee’s conclusions regarding theBoard members’ independence in relation to the company,
its management and major shareholders is presented
on page 32. According to the requirements set out in theCode, the majority of the Board members elected by theAGM must be independent in relation to the company andits management and at least two of such Board members
shall also be independent in relation to the company’s
major shareholders. The criteria set forth in the Codeand other relevant factors were considered in making
determinations about independence.
The Board of Directors is responsible for determining
Hexagon’s overall objectives, developing and monitoring
the overall strategy, deciding on major acquisitions,divestments and investments, and ongoing monitoringIn brief

Financial plan

Board of Directors’ report Corporate governance reportof operations. The Board is also responsible for ongoingevaluation of management, as well as systems formonitoring internal controls and the company’s financial
position. The Board ensures that the company’s external
disclosure of information is characterised by openness
and that it is accurate, relevant and clear. Procedural
rules and instructions for the Board and the President and
CEO govern issues requiring Board approval and financial
information and other reporting to be submitted to theBoard.
The Chair directs the Board’s activities to ensure that they
are conducted pursuant to the Swedish Companies Act,the prevailing regulations for listed companies and theBoard’s internal control instruments.
At all scheduled Board meetings, information concerning
Hexagon’s financial position and important eventsaffecting the company’s operations is presented.

Audit Committee

The Audit Committee, which is a preparatory body in
the Board’s contacts with the company’s auditors, isappointed annually by the Board and regularly submits
reports to the Board about its work. The Audit Committee
follows written instructions and is, through its activities,
to meet the requirements stipulated in the Swedish
Companies Act and in the EU’s audit regulation. The
Committee’s tasks include assisting the Nomination
Committee in drawing up proposals for AGM resolutions
on the election of auditors and remuneration to auditors,
monitoring that the auditor’s term of office does notexceed applicable rules, procuring the audit and making
a recommendation in accordance with the EU’s audit
regulation. Furthermore, the Audit Committee shall review
and monitor the auditors’ impartiality and independence,
paying particular attention to whether the auditor
provides the company with other services than theaudit. The Audit Committee shall also issue guidelines
for services in addition to auditing services provided

Compliance

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Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

26

Key data for board members
Committee membership
Board Member1

Ola Rollén
John Brandon
Ulrika Francke4
Henrik Henriksson4
Erik Huggers
Gun Nilsson
Märta Schörling Andreen
Sofia Schörling Högberg
Patrick Söderlund4
Brett Watson

ElectedIndependent

2000
2017
2010
2017
2021
2008
2017
2017
2020
2021

No2
Yes
Yes
Yes
Yes
Yes
No3
No3
Yes
Yes

Audit Committee

Meeting attendanceRemuneration
Committee

Board ofDirectors



15/15
15/15
5/5
3/5
15/15
15/15
15/15
14/15
3/5
15/15











Audit Committee

Remuneration
Committee

2/2
4/4
6/6

1/1

5/6

1/1

1) A complete presentation of the Board Members is included on pages 32–33
2) Ola Rollén is not deemed to be independent of the company and its management
3) Märta Schörling Andreen and Sofia Schörling Högberg are not deemed to be independent of the company’s major shareholders
4) Ulrika Francke, Henrik Henriksson and Patrick Söderlund resigned at the Annual General Meeting 2023

Board and committee meetings
Jan

Board of Directors
Audit Committee
Remuneration Committee





Feb

Mar

Apr

May






by the auditors and in applicable cases approve these
services according to the issued guidelines. The Audit
Committee shall take part in planning auditing services
and related reporting and regularly meet with the external
auditors to stay informed on the orientation and scopeof the audit. The Audit Committee shall also review andmonitor the Group’s financial reporting, the activities ofthe external auditors, the company’s internal controls,
the current risk situation and the company’s financial
information to the market. The Audit Committee’s tasks
also include submitting recommendations and proposals
to ensure the reliability of financial reporting and otherissues that the Board assigns the Committee to consider.

Jun

Jul

Aug

 





Sep

Oct




Nov

Dec




The Committee has not, other than pursuant to written
instructions approved by the Board specifically for the
Audit Committee, been authorised to make any decisions
on behalf of the Board.

Remuneration Committee

The Remuneration Committee is appointed by the Board
annually and its task is, on behalf of the Board, to consider
issues regarding remuneration of the President andCEO and executives that report directly to the President
and CEO and other similar issues that the Board assigns
the Committee to consider. The Committee shall also
follow and evaluate ongoing programmes or programmes

In brief

Financial plan

Board of Directors’ report Corporate governance reportcompleted during the year for variable remuneration
to Executive Leadership, as well as the application of
the guidelines for remuneration to senior executives
as resolved by the AGM. The Committee has not beenauthorised to make any decisions on behalf of the Board.

External auditors

The AGM appoints the company’s auditors. On behalfof the shareholders, the auditors’ task is to examine thecompany’s Annual Report and accounting records and theadministration by the Board of Directors and the President
and CEO. In addition to the audit, the auditors occasionallyhave other assignments, such as work relating toacquisitions and tax. Hexagon’s auditors normally attend
the first Board meeting each year, at which the auditor
report observations from the examination of Hexagon’sinternal controls and the annual financial statements.
Moreover, the auditors report to and regularly meet with
the Audit Committee. In addition, the auditors participate
in the AGM to present the Auditor’s report, which
describes the audit work and observations made.

Internal control

The esponsibility of the Board for internal control isregulated in the Swedish Companies Act and in theCode. It is the duty of the Board to ascertain that theinternal control and formalised routines of the company
ensure that the principles for internal control andfinancial reporting are adhered to and that the financial
reports comply with the law and other requirements
applicable to listed companies. The Board bears theoverall responsibility for internal control of the financial
reporting. The Board has established written formal rulesof procedure that clarify the Board’s responsibilities andregulate the internal distribution of work between the
Board and its committees.

Compliance

Sustainability report

Financial reports

Additional information

President and CEO and Executive Leadership

The President and CEO is responsible for leading andcontrolling Hexagon’s operations in accordance with theSwedish Companies Act, other legislation and regulations,applicable rules for listed companies, as well as the Code,the Articles of Association and the instructions andstrategies determined by the Board. The President andCEO shall ensure that the Board is provided with objective,
detailed and relevant information required in order for the
Board to make well-informed decisions. Furthermore, thePresident and CEO is responsible for keeping the Board
informed of the company’s development between Board
meetings.
The Executive Leadership, comprising the President
and CEO, divisional presidents, heads of geographicalregions and certain specific Group staff functions, totals
13 persons. Executive Leadership is responsible for theoverall business development and the apportioning offinancial resources between the business areas, as well as
matters involving financing and capital structure. Regularmanagement meetings constitute Hexagon’s forum
for implementing overall controls down to a particularbusiness operation and in turn, down to the individualcompany level

Operations

In financial terms, Hexagon’s business operations
are controlled on the basis of the return on capital
employed. This requires focus on maximising operating
earnings and minimising working capital. Hexagon’sorganisational structure is decentralised with central
oversight and coordination. Targets, guidelines andstrategies are set centrally in collaboration with thebusiness units. Managers assume overall responsibility
for their respective business and pursue the clearly statedobjectives.

Hexagon Annual and Sustainability Report 2023

27

ACTIVITIES DURING THE YEAR
Annual General Meeting 2023

The AGM, held on 2 May 2023 in Stockholm, Sweden, wasattended by shareholders representing 64 per cent of thetotal number of shares and 74 per cent of the total numberof votes. Apart from attending the AGM, the shareholders
had the opportunity to vote by mail before the meeting.
Gun Nilsson was elected Chair of the AGM.

The following main resolutions were passed at theAGM 2023:• Re-election of Directors Ola Rollén, Gun Nilsson, John
Brandon, Märta Schörling Andreen, Sofia Schörling
Högberg, Brett Watson and Erik Huggers• Election of Ola Rollén as Chair of the Board• Election of the accounting firm PricewaterhouseCoopers
AB (PwC) for a one-year period of mandate. PwC has
appointed the authorised public accountant Bo Karlsson
as auditor in charge• Dividend of 0.12 EUR per share for 2022 as per the Board’s
proposal• Resolution on approval of remuneration report for 2022
• Approval of a performance based long term incentive
programme (Share Programme 2023/2026)• Authorisation for the Board of Directors on acquisition
and transfer of Hexagon shares• Authorisation for the Board of Directors to issue shares,
convertibles and/or warrants

Nomination Committee

For the proposal for the AGM 2023, the Nomination
Committee applied rule 4.1 of the Code as the diversity
policy related to the Committee’s nomination work. The
Nomination Committee confirmed that the Board of
Hexagon has an equal gender balance and an appropriatecomposition in general. Additional criteria, such as

In brief

Financial plan

Board of Directors’ report Corporate governance reportbackground, experience, previous leadership roles,
relevant insights into Hexagon’s industries and othercustomary attributes were considered when nominating
the directors.
In respect of the 2024 AGM, the Nomination Committee
comprises:• Mikael Ekdahl, Melker Schörling AB (Chair)• Jan Dworsky, Swedbank Robur fonder• Brett Watson, Infor• Daniel Kristiansson, Alecta
During 2023, the Nomination Committee held six minuted
meetings at which the Chair gave an account of theprocess of evaluation of the Board’s work. The Committee
discussed and decided on proposals to submit to the AGM
2024 concerning the election of Chair of the AGM, theelection of Chair and other Board Members, remuneration
to the Board, including remuneration for committee work,and fees to the auditors. Shareholders wishing to submit
proposals have been able to do so by contacting theNomination Committee via mail or email. Addresses havebeen made available on Hexagon’s website.

Board of Directors’ activities

In 2023, the Board held 15 minuted meetings, including
the statutory Board meeting. At the Board meetings, thePresident and CEO presented the financial and market
position of Hexagon and important events affecting
the company’s operations. On different occasions,
Hexagon senior executives presented their operations
and business strategies to the Board. In addition, items
such as the approval of the interim reports, the annual
report, acquisitions, cyber security and sustainability arepart of the Board’s work plan and the company’s auditorspresented a report on their audit work during the year.

Compliance

Sustainability report

Financial reports

Additional information

Evaluation of the Board’s work

The Board continuously evaluates its work and the format
of its activities. This evaluation considers factors suchas how the Board’s work can be improved, whether thecharacter of meetings stimulates open discussion andwhether each Board member participates actively andcontributes to discussions. The evaluation is coordinatedby the Chair of the Board. In 2023, the Chair conducteda written survey with all the Board members. The resultof the evaluation has been reported to and discussed by
the Board and the Nomination Committee. The Board isalso evaluated within the framework of the Nomination
Committee’s activities.

Audit Committee

During 2023, the Audit Committee comprised:• Gun Nilsson (Chair)• Sofia Schörling Högberg• Erik Huggers
In 2023, the Committee held six minuted meetings
where the financial reporting and risks of Hexagon weremonitored and discussed. The Committee dealt with
relevant accounting issues, audit work and reviews, newfinancing, and testing for impairment of goodwill.

Remuneration Committee

During 2023, the Remuneration Committee comprised:• Ola Rollén (Chair)• Sofia Schörling Högberg
In 2023, the Committee held one minuted meeting
where remuneration and other employment terms
and conditions for the President and CEO and other
Executive Leadership were discussed. The Remuneration
Committee also monitored and evaluated the ongoingprogrammes for variable remuneration to senior
executives as well as the application of the guidelines for

Hexagon Annual and Sustainability Report 2023

28

remuneration to senior managers and the structure andlevels of remuneration in the company.

External auditors

The AGM 2023 re-elected the accounting firm
PricewaterhouseCoopers AB (PwC) as auditor for a oneyear period of mandate. PwC has appointed authorised
public accountant Bo Karlsson as auditor in charge. In
addition to the assignment for Hexagon, he performs audit
assignments for VNV Global AB (publ) and VEF AB (publ).
Other recent assignments include audit assignments forcompanies such as ASSA ABLOY AB (publ), SKF AB (publ)and Investment AB Latour (publ).
Hexagon’s auditors attended the first Board meeting of
the year, at which they reported observations from their
examination of Hexagon’s internal controls and the annual
financial statements. The auditors met with the Audit
Committee on six occasions during 2023. The addressof the auditors is PricewaterhouseCoopers AB, 113 97
Stockholm, Sweden.

Remuneration principles

The following principles for remuneration to senior
executives in Hexagon were adopted by the AGM 2020.
Remuneration shall consist of a basic salary, variable
remuneration, pension and other benefits and all
remuneration shall be competitive and in accordancewith market practice. The variable remuneration shallbe maximised at up to 150 per cent in relation to thebasic remuneration, related to the earnings trend which
the relevant individual may influence and based on theoutcome in relation to individual targets.
The Board annually considers whether a share or sharebased incentive programme shall be proposed to the AGM.
The notice period shall normally be six months when
notice of termination of employment is delivered by theemployee. In case of notice of termination of employment

In brief

Financial plan

Board of Directors’ report Corporate governance reportdelivered by the company, the notice period and theperiod during which severance payment is paid shall, allin all, not exceed 24 months. Pension benefits shall, asa main rule, be defined contribution. Deviation from thismain rule may be permitted when appointing new senior
executives whose previous employment agreement
included a defined benefit pension plan. The pension age
for senior executives is individually determined, although
not less than 60 years of age. The complete guidelines arepresented on pages 20–23.
Since the general meeting shall adopt guidelines forremuneration to senior executives at least every fourthyear, the Board will present a proposal for new guidelines
for remuneration to senior executives for approval by
the AGM 2024 to be applicable until further notice. The
proposed guidelines are presented on page 22-23.

Remuneration of Executive Leadership

Remuneration of the President and CEO and other senior
executives is presented in Note 30 on page 122. The Board
has prepared a remuneration report for approval by theAGM 2024.
There are no agreements between the company and its
directors or employees, other than as described in Note30, which stipulate the right to compensation if such
person voluntarily leaves the company, such person is
dismissed with cause or if such person’s employment isterminated as a result of a public offer for shares in thecompany.

Compliance

Sustainability report

Financial reports

Additional information

Incentive programmes

Details of the Share Programme 2020/2023, the Share
Programme 2021/2024, the Share Programme 2022/2025
and the Share Programme 2023/2026 are presented on
page 140 (The Share section) and in Note 30 on page 122.

Remuneration of Board of Directors

Remuneration of the Board of Directors is resolved by
the AGM upon proposal from the Nomination Committee.
During 2023, the Chair of the Board and other Board
Members received remuneration totaling 636.8 KEUR
(774.1). Remuneration of the Board of Directors ispresented in Note 30 on page 122.

Remuneration of external auditors

Remuneration for services in addition to auditing services
primarily refers to work related to acquisitions and tax.
Remuneration of the external auditors is presented in
Note 31 on page 124.

For more details about principles practised →• The Swedish Companies Act, regeringen.se• The Swedish Code of Corporate Governance,
corporategovernanceboard.se
More information is available at hexagon.com →• Articles of Association• Information from earlier General Meetings• Information about the members of the Board of Directors, thePresident and CEO and the auditor• Information about the Nomination Committee, including thecompany’s instructions for the Nomination Committee• Information ahead of the Annual General Meeting 2024

Hexagon Annual and Sustainability Report 2023

29

In brief

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Board of Directors’ report Corporate governance reportCompliance

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Hexagon Annual and Sustainability Report 2023

30

Internal control pertaining to financial reporting
The Annual Accounts Act and the Code stipulate thatthe Board of Directors must submit a report on the key
aspects of the company’s systems for internal controls
and risk management regarding financial reports.
Internal control pertaining to financial reporting is aprocess that involves the Board, company management
and other personnel. The process has been designed
so that it provides assurance of the reliability of theexternal reporting. According to a generally acceptedframework that has been established for this purpose,internal control is usually described from five different
perspectives:

Board’s monitoring of the company’s assessment of its
internal control includes contacts with the company’s
auditor. Hexagon has no internal audit function, since
the functions described above satisfy this need. All
of Hexagon’s subsidiaries report complete financial
statements on a monthly basis. This reporting provides thebasis for Hexagon’s consolidated financial reporting. Eachlegal entity has a controller responsible for the financial
control and for ensuring that the financial reports arecorrect, complete and delivered in time for consolidated
financial reporting.

1. Control environment

The significant risks affecting the internal control offinancial reporting are identified and managed at group,business area, subsidiary and unit level. Within the Board,
the Audit Committee is responsible for ensuring thatsignificant financial risks and the risk of error in financial
reporting is identified and managed in a manner that
ensures correct financial reporting. Special priority has
been assigned to identifying processes that, to someextent, give rise to a higher risk of significant error due tothe complexity of the process or of the contexts in which
major values are involved.

Hexagon’s organisation is designed to facilitate rapid
decision making. Accordingly, operational decisions
are taken at the business area or subsidiary level, while
decisions concerning strategies, acquisitions and companywide financial matters are taken by the company’s
Board and Executive Leadership. The organisation ischaracterised by well-defined allocation of responsibility
and well-functioning and well-established governanceand control systems, which apply to all Hexagon units.
The basis for the internal control pertaining to financial
reporting is comprised of an overall control environment
in which the organisation, decision-making routes,
authorities and responsibilities have been documented
and communicated in control documents, such as
Hexagon’s finance policy and reporting instructions
and in accordance with the authorisation arrangements
established by the President and CEO.
Hexagon’s functions for financial control are integrated
by means of a group-wide reporting system. Hexagon’s
financial control unit engages in close and well-functioning
cooperation with the subsidiaries’ controllers in terms of
the financial statements and the reporting process. The

2. Risk assessment

3. Control activities

The risks identified with respect to the financial reporting
process are managed via the company’s control activities.
The control activities are designed to prevent, uncover andcorrect errors and non-conformities. Their management
is conducted by means of manual controls in the form of,for example, reconciliations, automatic controls using IT
systems and general controls conducted in the underlying
IT environment. Detailed analyses of financial results andevaluation in relation to budget and forecasts supplement

the business-specific controls and provide generalconfirmation of the quality of the financial reporting.

4. Information and communication

To ensure the completeness and correctness of financial
reporting, Hexagon has formulated information andcommunication guidelines designed to ensure that
relevant and significant information is exchanged within
the business, within the particular unit and to and frommanagement and the Board. Guidelines, handbooks andjob descriptions pertaining to the financial process arecommunicated between management and personnel andare accessible electronically and/or in a printed format.
The Board receives regular feedback in respect of theinternal control process from the Audit Committee. To
ensure that the external communication of informationis correct and complete, Hexagon complies with a Board
approved information policy that stipulates what may be
communicated, by whom and in what manner.

5. Monitoring activities

The efficiency of the process for risk assessment andthe implementation of control activities are reviewed
continuously. The follow-up pertains to both formal andinformal procedures used by the officers responsibleat each level. The procedures incorporate the review offinancial results in relation to budget and plans, analyses
and key figures. The Board obtains current and regular
reports on Hexagon’s financial position and performance.
At each Board meeting, the company’s financial position isaddressed and, on a monthly basis, management analyses
the company’s financial reporting at a detailed level.
The Audit Committee follows up the financial reportingat its meetings and receives reports from the auditors
describing their observations.

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Auditor’s report on the corporate
governance statement
To the general meeting of the shareholders of Hexagon AB(publ), corporate identity number 556190-4771

Engagement and responsibility

It is the board of directors who is responsible for the
corporate governance statement for the year 2023 on
pages 24–30 and that it has been prepared in accordancewith the Annual Accounts Act.

Opinions

A corporate governance statement has been prepared.
Disclosures in accordance with chapter 6 section 6 thesecond paragraph points 2-6 the Annual Accounts Act
and chapter 7 section 31 the second paragraph the samelaw are consistent with the annual accounts and theconsolidated accounts and are in accordance with theAnnual Accounts Act.

The scope of the audit

Our examination has been conducted in accordance with
FAR’s auditing standard RevR 16 The auditor’s examinationof the corporate governance statement. This means that
our examination of the corporate governance statement
is different and substantially less in scope than an audit
conducted in accordance with International Standards
on Auditing and generally accepted auditing standards in
Sweden. We believe that the examination has provided us
with sufficient basis for our opinions.

Stockholm 26 March 2024
PricewaterhouseCoopers AB
Bo Karlsson

Helena Kaiser de Carolis

Authorised Public Accountant
Partner in charge

Authorised Public Accountant

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Board of Directors

Ola Rollén
Born in 1965
Member of the Board since 2000,
Chair of the Board since 2023,
Chair of the Remuneration Committee
Education: B.Sc. (Economics)
Work experience: President and Chief Executive
Officer of Hexagon 2000 - 2022, President of Sandvik Materials Technology and Kanthal, Executive
Vice President of Avesta-Sheffield
Other assignments: Chair of the Board at Greenbridge Holdings Sàrl., Board Member at Divergent
Technologies Inc., Neo4j Inc. and Nstech S.A.
Previous assignments in the past five years: –Shareholding1: 502,075 shares of series B and
518,195 awards through share programmes
Independent of major shareholders

1) Shareholding is based on information per 25 March2024 and also include related-party holdings. Holding
through share programmes are the total number ofawards in all active share programmes and before tax
deductions

Märta Schörling Andreen
Born in 1984
Member of the Board since 2017
Education: B.Sc. (Economics)
Work experience: Brand and innovation consultant
at Pond Innovation & Design
Other assignments: Board Member of Melker
Schörling AB, Hexpol AB, AAK AB and Absolent
Group
Previous assignments in the past five years: –Shareholding1: 110,250,000 shares of series A and
471,081,440 shares of series B through Melker
Schörling AB
Independent of the company and its management

John Brandon
Born in 1956
Member of the Board since 2017
Education: B.A. (History)
Work experience: Advisor at Conductive Ventures,
Vice President International of Apple Inc., CEO Academic Systems Inc., Vice President and General
Manager at North America of Adobe Systems Inc.
Other assignments: Board Member ofSecuritas AB
Previous assignments in the past five years: –Shareholding1: 21,000 shares of series B
Independent of the company, its management andmajor shareholders

Sofia Schörling Högberg
Born in 1978
Member of the Board since 2017
Member of the Audit Committee and the Remuneration Committee
Education: B.Sc. (Economics)
Work experience: Trademark consultant at Essen
International
Other assignments: Vice Chair of Melker Schörling
AB, Board Member of Securitas AB and Assa Abloy
AB
Previous assignments in the past five years: –Shareholding1: 110,250,000 shares of series A and
471,081,440 shares of series B through Melker
Schörling AB
Independent of the company and its management

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Erik Huggers
Born in 1973
Member of the Board since 2021
Member of the Audit Committee
Education: B.Sc. (Business Economics &Marketing)Work experience: President & CEO VEVO LLC, SVP
Verizon Communications, President Intel Media
Inc., Executive Director British Broadcasting Corporation, Senior Director Microsoft Corporation
Other assignments: Chair of the Board at Freepik
Company SL, GotPhoto and EveryoneTV Ltd.
Member of the Board at Wetransfer B.V. Senioradvisor to EQT Group.
Previous assignments in the past five years: Supervisory Board Member at ProSibenSat.1 Meida SE
Shareholding1: –Independent of the company, its management andmajor shareholders

1) Shareholding is based on information per 25 March2024 and also include related-party holdings

Gun Nilsson
Born in 1955
Member of the Board since 2008
Chair of the Audit Committee
Education: B.Sc. (Economics)
Work experience: President of Melker Schörling
AB, CFO of IP-Only Group, Sanitec Group and Nobia
Group, CEO of Gambro Holding AB, Deputy CEO
and CFO of Duni AB
Other assignments: Board Member of Konecranes Plc, Bonnier Group AB and Einar Mattsson
AB, Member of Listing Committee at NASDAQ
Stockholm
Previous assignments in the past five years:
Board Member of AAK AB, Absolent Air Care GroupAB, Hexpol AB and Loomis AB
Shareholding1: 88,662 shares of series B
Independent of the company, its management andmajor shareholders

Brett Watson
Born in 1980
Member of the Board since 2021
Education: B.Sc., MBA (Finance)
Work experience: President of Koch Equity Development (KED), Senior Managing Director KED’s
Principal Investment Team, various positions ininvestment banking, principal investment andprivate equity
Other assignments: Board Member at Infor,
Getty Images, Transaction Network Services and
MITER Brands Globus Group, MITER Brands andthe Flint Group
Previous assignments in the past five years: Board
Member Globus Group, Flint Group, ADT Inc., andSolera Holdings Inc.
Shareholding1: –Independent of the company, its management andmajor shareholders

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Executive Leadership

Paolo Guglielmini
Born in 1977
President and Chief Executive Officer
Employed since 2010
Education: M.Sc., MBA (Engineering)Work experience: President Manufacturing Intelligence division, Chief
Executive Officer MSC Software, Executive Vice President Global Business
Development at Manufacturing Intelligence, Project Lead CERN, Business
Analyst Accenture
Other assignments: –Previous assignments in the past five
years: –Shareholding1: 1,061,827 shares ofseries B
and 329,862 awards through share
programmes

Burkhard Böckem
Born in 1971
Chief Technology Officer
Employed since 2001
Education: Ph.D. (Technology), M.Sc.
(Geodesy)Work experience: Chief Technology
Officer Geosystems division, various
R&D manager positions within Manufacturing Intelligence division
Other assignments: –Previous assignments in the past five
years: –Shareholding1: 103,590 awards
through share programmes

1) Shareholding is based on information per 25 March2024 and also include related-party holdings. Holding
through share programmes are the total number ofawards in all active share programmes and before tax
deductions

Steven Cost
Born in 1967
President, Safety, Infrastructure &Geospatial division
Employed since 2007
Education: B.Sc., MBA (Accounting)Work experience: President of Safety &Infrastructure division, Chief Accountant Officer/Controller/Treasurer at
Intergraph, and senior management
positions with Adtran, AVEX Electronics and Benchmark Electronics
Other assignments: –Previous assignments in the past five
years: –Shareholding1: 137,542 awards throughshare programmes

Norbert Hanke
Born in 1962
Executive Vice President
Employed since 2001
Education: Diploma of Business
Administration
Work experience: Chief Operating
Officer Hexagon, President Manufacturing Intelligence division, Chief
Financial Officer at Brown & Sharpeand various positions within the
Kloeckner Group
Other assignments: –Previous assignments in the past five
years: –Shareholding1: 158,424 shares of series
B and 181,256 awards through share
programmes

Thomas Harring
Born in 1971
President, Geosystems division
Employed since 2003
Education: Diploma of Technically-oriented Business Administration
Work experience: Chief Operating
Officer and Chief Financial Officer
Geosystems division, various management positions within Geosystems,
Senior Management Consultant at
Baker Tilly
Other assignments: –Previous assignments in the past five
years: –Shareholding1: 49,365 shares of series
B and 148,834 awards through share
programmes

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Executive Leadership contin.

Li Hongquan
Born in 1966
Vice President and President of China
RegionEmployed since 2001.
Education: M.Sc. (Engineering)Work experience: President of Qingdao
Brown & Sharpe and Qianshao Technology Co. Ltd. Various positions in the
Chinese manufacturing industry
Other assignments: –Previous assignments in the past five
years: –Shareholding1: 840,000 shares ofseries B and 212,786 awards throughshare programmes

Ben Maslen
Born in 1972
Chief Strategy Officer
Employed since 2017
Education: B.Sc. (Economics & Politics) and Chartered Accountant
Work experience: Co-head of European capital goods equity research
Morgan Stanley and equity analyst at
BoAML
Other assignments: Member of theBoard of Martlet Capital Limited
Previous assignments in the past five
years: –Shareholding1: 7,000 shares of series
B and 103,483 awards through share
programmes

1) Shareholding is based on information per 25 March2024 and also include related-party holdings. Holding
through share programmes are the total number ofawards in all active share programmes and before tax
deductions

David Mills
Born in 1972
Chief Financial Officer
Employed since 2001
Education: B.Sc. (Economics andaccounting) ACMAWork experience: Chief Financial Officer Manufacturing Intelligence division, various financial positions within
Brown & Sharpe, GEC and Telecoms
industry
Other assignments: –Previous assignments in the past five
years: –Shareholding1: 37,163 shares of series
B and 90,646 awards through share
programmes

Madlen Nicolaus
Born in 1981
Chief Marketing Officer
Employed since 2023
Education: Diploma in Media Management and Marketing
Work experience: VP ENT Marketing
EMEA SAP Concur, Head of EMEA
Cloud Marketing Salesforce, Social
Media Manager EMEAR Kodak
Other assignments: –Previous assignments in the past five
years: –Shareholding1: –Michael Ritter
Born in 1963
President, Autonomous Solutions
division
Employed since 2009
Education: M.Sc. (Engineering)Work experience: President Autonomy & Positioning division, Staff andmanagement
positions at Schlumberger Oilfield
Services and Trimble Inc.
Other assignments: –Previous assignments in the past five
years: –Shareholding1: 138,936 awards
through share programmes

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Mattias Stenberg
Born in 1977
President, Asset Lifecycle Intelligence
division
Employed since 2009
Education: B.Sc. (Economics)
Work experience: Chief Strategy Officer and Vice President of Strategy
and Communications at Hexagon AB,
various Investor Relations positions at
Teleca AB and Autoliv Inc.
Other assignments: –Previous assignments in the past five
years: –Shareholding1: 100,000 shares ofseries B and 156,013 awards throughshare programmes

Josh Weiss
Born in 1986
President, Manufacturing Intelligence
division
Employed since 2015
Education: B.Sc. (Finance), MBA
Work experience: COO/CDO Geosystems division, President Geosystems’
mining and heavy construction
businesses, Senior Manager Deloitte, various leading positions at
ArcelorMittal
Other assignments: –Previous assignments in the past five
years: –Shareholding1: 103,310 awards throughshare programmes

1) Shareholding is based on information per 25 March2024 and also include related-party holdings. Holding
through share programmes are the total number ofawards in all active share programmes and before tax
deductions

Tony Zana
Born in 1979
General Counsel and Chief Compliance Officer
Employed since 2008
Education: D.Jur. (Law), B.Sc. (Management Information Systems)
Work experience: Deputy GeneralCounsel at Hexagon, Vice President,
General Counsel and Corporate
Secretary at Intergraph Corporation,
Attorney at Maynard, Cooper & Gale,
Law Clerk at U.S. District Court
Other assignments: –Previous assignments in the past five
years: –Shareholding1: 5,000 shares of series
B and 86,079 awards through share
programmes

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Managing risks
Hexagon’s risk management activities are designed to identify, control and reduce risks associated with its business. The majority of these
activities are managed within each subsidiary of Hexagon. However, certain legal, strategic, sustainability and financial risks are managed
at the Group level.

Market risk management
Market risks concern risks such as economic trends,
competition and risks related to acquisitions and integration.
Market risks are primarily managed within each subsidiary of
Hexagon.

Risk

Risk management

Acquisitions and integration
An important part of Hexagon’s current andfuture growth strategy is to actively pursue strategic acquisitions of companies and businesses.
It cannot be guaranteed, however, that Hexagon
will be able to find suitable acquisition targets,nor can it be guaranteed that the necessaryfinancing for future acquisition targets can beobtained on terms acceptable to Hexagon, or
at all. A lack of acquisition financing or suitableacquisition targets may lead to a decreasing
growth rate for Hexagon.
Acquisitions entail multiple risk. The acquired
entities’ relations with customers, suppliers andkey personnel may be negatively affected by theacquisition. There is also a risk that integration
processes may prove more costly or more time
consuming than estimated and that anticipatedsynergies in whole or in part fail to materialiseor that positive impacts on earnings may takelonger to realise than expected. An acquisitionof a company that is not conducting its businessin a sustainable way or in compliance with Hexagon’s Code of Business Conduct and Ethics may
have a negative impact on Hexagon’s reputation
and brand, even despite Hexagon’s efforts topromptly remediate such conditions.

Hexagon monitors many companies to find acquisitions that can strengthen the Group’s productportfolio or improve its distribution network.
Potential targets are regularly evaluated basedon financial, technology and commercial grounds.
Every acquisition candidate’s potential place in
the Group is determined based on synergy simulations and implementation strategies. Everyeffort to complete a thorough due diligence ismade in order to evaluate potential risks andthere are well-established procedures andstructures for pricing, acquiring and integrating
acquired companies.
From 2000 to date, Hexagon completed morethan 190 acquisitions. Based on its extensive
experience in acquisitions and integration andclear strategies and goals, Hexagon is well positioned to successfully integrate acquired companies into the Group. In Hexagon’s standard due
diligence process, a number of risk management,compliance and sustainability elements areincluded, such as detailed consideration about
the internal controls of the target company, quality business practices, environmental matters,
employee matters, ISO (International Organisation for Standardisation) or other industry
certifications, and compliance programmes of
the target, including those related to anti-corruption/FCPA (Foreign Corrupt Practices Act) andexport controls.

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Impact of the economy and financial markets
Hexagon engages in worldwide operations thatare dependent on global economic and financial
market conditions, as well as conditions that are
unique to certain countries or regions. General
economic and financial market conditions including the interest rate environment, affect the inclination and the capabilities of Hexagon’s existingand potential customers to invest in various
technologies. Weak macroeconomic conditions
globally or in part of the world may therefore
result in lower market growth that falls below
expectations and may reduce revenues for Hexagon, or it may have other effects, like extending
the sales cycle.
The resurgence of the Covid-19 pandemic or
new variants could have an impact on important
Hexagon customer industries, and an increaseof raw material and intermediate goods costs
could impact Hexagon’s sales potential and cost
structure. While the duration and severity of those
impacts on Hexagon’s business are highly uncertain, they could have an adverse effect on the business, financial condition and results of operations
in many ways, including disruptions in Hexagon’s
supply chains.

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Risk

Risk management

Understanding geopolitical risk, how geography
and economics influence politics and the relations between countries, is important in a worldthat has become more closely intertwined dueto the rise of globalisation – and additionally thetrends of regionalisation that we have observed
more recently in certain jurisdictions.

In order to mitigate risks that may occur due togeopolitics, such as sanctions and/or global perception and reputational risk, Hexagon follows
developments closely while evaluating different
strategies in order to prepare for and handle
possible scenarios that may affect Hexagon’sorganisation and the ability to do business in different parts of the world in the near term and overthe coming years. Among other things, Hexagon
mitigates geopolitical risk through its local operations and localised products, adapted to local
requirements, which mitigates risks associatedwith international tensions.

Geopolitical risks
Hexagon’s business is widely spread geographically, with a broad customer base within
numerous market segments which may make theGroup less sensitive to economic fluctuations inindividual sectors, industries and geographicalregions. Potential negative effects of a downturnin the developed world may, for example, be partially off-set by growth in emerging markets andvice-versa.
While Hexagon has developed and continues
to develop plans intended to help mitigate thenegative impact of economic downturns on thebusiness, a protracted event would likely limit theeffectiveness of those mitigation efforts.

Current geopolitical risks include the current war
in Ukraine and the corresponding global sanctions, the Israeli-Palestinian conflict, other political and economic uncertainties and the potential
for further escalation of the trade issues among
various countries, for example the US and China.
Although it is difficult to assess the evolution
and impact of intensification of war hostilities,
ongoing political tensions and international
economic sanctions could have significant negative impacts on the global economy and theperformance of financial markets, interest rates,
availability of supply and on the markets for raw
materials.
Understanding how geopolitical risks may affectHexagon’s organisation, activities, operating
results and strategies is critical to making accurate projections about Hexagon’s future growthand profitability. However, what impact the wars,
crises, pandemics and/or an escalating trade complexities will have on commercial activities and/or global markets, and the demand for Hexagon’s
products, over the coming years remains uncertain
and will to some extent depend upon resolution of
any crises.

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Competition and price pressure
Parts of Hexagon’s operation are carried out insectors which are subject to price pressure andrapid technological change. Hexagon’s ability tocompete in the market by introducing new andsuccessful products with enhanced functionality
while simultaneously cutting costs on new andexisting products is of the utmost importancein order to retain customers and avoid erosionof market share. Other inherent risks exist withcompetitors, such as consolidation or entry into
Hexagon’s markets by companies with significant
resources. Such competition may result in pricereductions, reduced margins or loss of market
share.
R&D efforts are costly and new product development always entails a risk of unsuccessful
product launches or commercialisation, which
could have material adverse consequences on
Hexagon. Further, technological innovation andchanging trends, such as disruptive technologies,
technical capabilities, supply chains, new market entrants or novel business models, creates
inherent risks that are difficult to foresee.

Hexagon invests significantly in R&D. The objectives for Hexagon’s R&D division are to transformcustomer needs into products and services andto detect and advance market and technology
opportunities as early as practicable. Introducing
new products and technologies require active
intellectual property management to secure
Hexagon’s technological position.

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Operational risk management
Operational risks concern risks related to reception of new products and services, dependence on suppliers and risks related to humancapital. Since the majority of operational risks are attributable to Hexagon’s customer and supplier relations, ongoing risk analyses ofcustomers and suppliers are conducted to assess business risks. Operational risks are primarily managed within each subsidiary of
Hexagon.
Risk

Risk management

Customers
Hexagon’s business activities are conducted in alarge number of markets with multiple customer
categories. In 2023, Surveying was the single
largest customer category and accounted for 18
per cent of net sales. For Hexagon, this customer
category may involve certain risks as a downturn
or weak development in the surveying sector canhave a negative impact on Hexagon’s business.
Surveying is followed by customer categories
Electronics and Manufacturing with 17 per cent,Infrastructure and Construction with 12 per centand Power and Energy with 12 per cent. Changing
demand of Hexagon’s customers is possible astechnology needs and consumption change overtime.
Hexagon may face risks, including reputationalrisks, while global conflicts persist, due to unauthorised use or misuse of the Group’s products.
Further, the resurgence of the Covid-19 pandemic or any other outbreak or pandemic could
result in delays, cancellations, or changes to user
and industry conferences and other marketing
events relating to Hexagon’s solutions, including
its own customer and partner activities, which
may negatively impact the ability to obtain new
and retain existing customers, and effectively
market Hexagon’s solutions.

Risk

Risk management

Hexagon’s hardware products consist of components from several different suppliers. To be in aposition to sell and deliver solutions to customers, Hexagon is dependent upon deliveries fromthird parties in accordance with agreed requirements relating to, for example, quantity, qualityand delivery times. Erroneous or default deliveries by suppliers can cause delay or default in
Hexagon’s deliveries, which can result in reduced
sales. Further, Hexagon uses subcontractors,
distributors, resellers and other representatives.
Hexagon may face risks, including reputationalrisks, if suppliers do not maintain a high level ofbusiness ethics in terms of, for example humanrights working conditions and corruption

Hexagon seeks a favourable risk diversification,and no single supplier is decisive for the Group’s
performance. The largest supplier accounted
for approximately 1 per cent of Hexagon’s total
net sales in 2023. To minimise the risk of supply
shortages or of excessive price variations amongsuppliers, Hexagon works actively to coordinate
sourcing within the Group and to identify alternative suppliers for strategic components. Supplierrisk surveys are performed (including those by
Hexagon’s external partner) in order to identify
and mitigate risks associated with the suppliers’
operations.

Suppliers
Hexagon has a favourable risk diversification in
products and geographical areas, and no single
customer or customer category is decisive for
the Group’s performance. The largest customer
represents approximately 1 per cent of theGroup’s total net sales. Credit risk in customer
receivables accounts for the majority of Hexagon’s counterparty risk.
Hexagon’s compliance programme addresses
all principles contained in the Code of BusinessConduct and Ethics, including export controls,customs, anti-corruption, competition, public contracting and data privacy. Hexagon iscommitted to complying with appropriate legal
requirements, such as those listed above, and
the Group’s compliance efforts aim to safeguard
peace and security by preventing the unlawful
trading of items (i.e. goods, software or technology) or diversion to destinations where they may
be used for illegal purposes.

The resurgence of the Covid-19 pandemic could
temporarily result in an inability to meet in person or otherwise effectively communicate withcurrent or potential vendors, suppliers, and partners, which may negatively affect current andfuture relationships with such vendors, suppliers,and partners and Hexagon’s ability to generatedemand for solutions.
If there were to be unmanaged negative impacts
following a supplier’s noncompliance with Hexagon’s Code of Business Conduct and Ethics and/or Hexagon’s Supplier Code of Conduct,
it may result in reputational risks for Hexagon.

Hexagon also has a sustainability risk assessment and supplier audit process in place, including handling the risk of breaches in human rights.
Hexagon has a compliance programme in place
for suppliers to manage social and ethical risks
and the Group regularly conducts supplier audits
to ensure suppliers are compliant with the Hexagon’s Code of Business Conduct and Ethics andHexagon’s Supplier Code of Conduct.

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Production and distribution units
Hexagon’s production and distribution units are
exposed to risks (fire, explosion, natural hazards,
machinery damages, cyber threats, infrastructure failures, power outages, etc.) that could leadto property damage and business interruption.
This risk may be further accentuated by climatechange, which may impact the frequency andseverity of many of these events.

In the event that all or a portion of Hexagon’s
workforce becomes unable or unwilling towork on-site or travel as a result of event cancellations, facility closures, shelter-in-place,travel and other restrictions and changes inindustry practice due to any causes (including
pandemics), these workforce disruptions could
adversely affect Hexagon’s ability to operate,
including to develop, manufacture, generatesales of, promote, market and deliver hardware
and software products, solutions and services,and provide customer support. Adoption of newlaws or regulations, or changes to existing laws
or regulations, that may be imposed as a result of
the resurgence of the Covid-19 pandemic, or any
other wide-spread public health situation, maycause risks in the company’s ability to hire andretain skilled professionals.

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Risk

Risk management

Hexagon provides sensors, software and data
to its customers. Approximately 60 per cent of
the revenues are from software and services.
Hexagon does not currently operate any business that require carbon credits, but that couldchange in the future. However, stricter regulationof environmental matters can result in increased
costs or further investments for the companies
within Hexagon which are subject to such regulation. Climate change can result in natural
disasters and increase the risk of physical damage on assets and supply shortages. Hexagon is
impacted by such legislation in a manner similar
to other companies operating in these fields.

Hexagon believes that it is in material compliance with all applicable laws and obligations
and obtains relevant approvals where needed.
Hexagon continuously monitors anticipatedand implemented changes in legislation in the
countries in which it operates and potential environmental risks are regulary monitored. Hexagon
routinely assesses the risk of climate change
on its operations as part of its insurance programme. Hexagon has implemented ISO 14001 at
the majority of the largest production sites andhas implemented a sustainability programme to
reduce its carbon impact in its own operations
and in its value chain.

Environment
Risk grading surveys are performed (including by
Hexagon’s external partner) in order to identify
and mitigate risks as well as support local management in their loss prevention work. Surveys
are conducted with each subsidiary in accordance with a long-term plan. Hexagon has implemented ISO 9001 at the majority of the largest
production sites.

Human capital
The resignation of key employees or Hexagon’s
failure to attract skilled and diverse personnel
to all different levels within the organisation may
have an adverse impact on the Group’s operations. Further, maintaining Hexagon’s company
culture is critical to attracting and retaining top
talent.

Financial reports

Since future success is largely dependent on thecapacity to retain, recruit and develop skilled
staff, being an attractive employer to bothpotential and existing employees is an importantsuccess factor for Hexagon. Group and businessarea management jointly handle risks associatedwith human capital. Hexagon works with a structured approach to HR and market-based remuneration to better ensure employee satisfaction.
Hexagon uses employee engagement as theoverall measure in the employee survey.
In order to attract skilled employees, Hexagon
cooperates with multiple universities and colleges around the world, aiming at training, developing and hiring students with industry-readyskills.

Business ethics and corruption
Corruption negatively impacts communities andoverall global economic development and erodes
the trust necessary to build a stable businessenvironment. Additionally, under the anit-corruption laws of many jurisdictions, businesses
such as Hexagon may potentially be held liable
for the corrupt actions taken by employees, strategic or local partners or other representatives.
If Hexagon or its intermediaries fail to comply
with anti-corruption laws, governmental authorities could potentially seek to impose civil and/or criminal fines and penalties which could havean adverse effect on Hexagon’s business andreputation.

For Hexagon, anti-corruption compliance is ofutmost importance for many reasons, and it
helps Hexagon advance its financial interests,
sustainability goals and brand value.
Hexagon has a robust Code of Business Conduct
and Ethics and Anti-Corruption Compliance
Programme in place, covering the entire Group,
including policies, processes and training. The
anti-corruption compliance documents include
policies in such areas as gifts and entertainment(both to and from third parties), hiring candidates
with government connections and engaging inand transacting business with third parties.

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Risk

Compliance

Sustainability report

Risk management

Cyber risks and data protection
Hexagon relies on IT systems in its operations.
Disruptions or faults in critical systems may havea negative impact on Hexagon’s operations,
including impact on production, Hexagon’s tangible and intellectual property and, in some cases,
the intellectual property and operations of external parties. Advances in digital technology andincreases in device connectivity have presented
new security challenges as employees and Hexagon’s partners, customers and service providers
to a greater extent, work remotely from non-corporate managed networks.
Incidents may also lead to data privacy infringements such as unauthorised access, leakage
or loss of data. Data security and integrity are
critical issues for Hexagon. Under the GDPR, andother analogous legislation in various jurisdictions, and ePrivacy regulations, Hexagon has firm
legal requirements to protect against personal
information (PI) data breaches. The regulations
extend to all vendors that Hexagon uses to collect, store and process PI data on its behalf. In
China and several other jurisdictions, there arealso similar laws in place to protect various datatypes, including PI data. It is critical for Hexagon
to protect and secure all data as the costs ofremediating a serious breach are high and canalso be damaging to Hexagon’s reputation.

Cyber security risks are increasing in society ingeneral and Hexagon works continuously to keep
the Group’s IT systems protected. In addition,
Hexagon invests in enhanced disaster recovery
and data storage capabilities, cyber security
expertise and tools, and other appropriate risk
mitigation techniques. Hexagon also mitigates
IT-related risks through contracts with external
parties.
Hexagon has mandated that all divisions must
implement a recognised cybersecurity framework. Hexagon applies the standards of ISO27001
and NIST-800-53. Additionally, SOC1 and SOC2,
and other industry specific certifications, are followed and verified where appropriate.

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Financial risk management
Financial risks are primarely managed at the Group level.
The Group Treasury Policy, which is updated and approved
annually by the Board of Directors, stipulates the rules andlimitations for the management of financial risks throughout
the Group. Hexagon’s internal bank coordinates the
management of financial risks and is also responsible for theGroup’s external borrowing and internal financing. Additional
financial risks include, but are not limited to, the risks ofvarying business results, seasonal variation, and changes toaccounting principles (or application thereof).

Risk

Risk management

Hexagon’s operations are conducted internationally. During 2023, total operating earnings,
excluding adjustments, from operations incurrencies other than EUR amounted to an
equivalent of 1,271.5 MEUR (1,232.7). Of thesecurrencies, CHF, CNY and USD have the biggest
impact on Hexagon’s earnings and net assets.
Currency risk is the risk that currency exchange
rate fluctuations will have an adverse effect on
the income statement, balance sheet and/or
cash flow.

Hexagon’s reporting currency is EUR, which has astabilising effect on certain key ratios that are ofimportance to Hexagon’s cost of capital.

Currency

Sales and purchases of goods and services incurrencies other than the subsidiary’s functional
currency give rise to transaction exposure.
Translation exposure arises when the income
statement and balance sheet are translated into
EUR. The balance sheet translation exposure
might substantially affect other comprehensive
income negatively. Furthermore, the comparability of Hexagon’s earnings between periods isaffected by changes in currency exchange rates.
The income statement translation exposure is
described in the table below for the currencies
having the largest impact on Hexagon’s earnings
and net assets, including the effect on Hexagon’s
operating earnings in 2023.

Movement1

Net ofincomeand cost

Profitimpact

CHF
Strengthened 3% Negative Negative
USD
Weakened -3% Positive Negative
CNY
Weakened -8% Positive Negative
EBIT1, MEUR
-81.8
1) Compared to EUR and 2022

As much as possible, currency transaction
exposure is concentrated in the countries where
the manufacturing entities are located. This isachieved by invoicing the sales entities in theirrespective functional currency by the manufacturing entities. According to the Group’s financial
policy, currency transaction exposure should not
be hedged using external financial instruments.
The rationale for this is that the vast majority oftransactions entail a short period of time fromorder to payment. Moreover, a transaction hedge
only postpones the effect of a change in currency
rates.
The translation exposure can be mitigated bydenominating borrowings in the same currency
as the corresponding net assets. In order tohave the volatility in net debt at an acceptablelevel, the majority of the borrowings is currently
denominated in EUR.

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Risk management

Interest
The interest rate risk is the risk that changes inmarket interest rates will adversely affect theGroup’s net interest expense and/or cash flow.
Interest rate exposure arises primarily from outstanding loans. The impact on the Group’s net
interest expense depends, among other things,
on the average interest rate for borrowings.
Futher, increasing interest rate may have an
impact on Hexagon’s customers, vendors andsuppliers. For example, customers may invest
less in Hexagon solutions, or the sales cycle may
lengthen. Vendors and suppliers may reduceinventory levels of available products to deliver
to Hexagon, which could extend delivery times, or
could fail to fulfil their obligations.

Financial credit risk is the exposure to default of
counterparties with which Hexagon has invested
cash or has entered into forward exchange contracts or other financial instruments.

In accordance with the Group Treasury Policy,
the average interest rate duration of the external debt is to be between 6 months and 3 years.
During the year, interest rate derivatives wereused to manage the interest rate risk.
Customer interest-rate sensitivity is mitigatedby the variety of products and services at various
prices that Hexagon offers. Supplier and vendor
interest-rate sensitivity mitigate through monitoring key vendors and suppliers.

Through a combination of geographical and industry diversification of customers, the risk for significant credit losses is reduced.
To reduce Hexagon’s financial credit risk, surplus
cash is only invested with a limited number ofapproved banks and derivative transactions are
only conducted with counterparties where an
ISDA (International Swaps and Derivatives Association) netting agreement has been established.
As Hexagon is a net borrower, excess liquidity
is primarily used to repay external debt andtherefore the average surplus cash invested withbanks is kept as low as possible.

Liquidity
Liquidity risk is the risk of not being able to meetpayment obligations in full as they become dueor only being able to do so at materially disadvantageous terms due to lack of cash resources.

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Risk

Risk management

Refinancing risk refers to the risk that Hexagon
does not have sufficient financing available whenneeded to refinance maturing debt, because
existing lenders decline to provide additional
credit or difficulties arise in procuring new linesof credit at a given point in time. Hexagon’s ability
to satisfy future capital needs is to a large degree
dependent on successful sales of the Group’s
products and services. There is no guaranteethat Hexagon will be able to generate necessary
capital from sales or from third party financing arrangements. In this regard, the generaldevelopment of the capital and credit markets
is also of major importance. Hexagon, moreover,requires sufficient financing in order to refinancematuring debt. Securing these requirements
demands a strong financial position of the Group,
combined with active measures to ensure accessto credit. There is no guarantee that Hexagon will
be able to raise sufficient funds in order to refinance maturing debt.

In order to ensure that appropriate financing
is in place and to decrease refinancing risk, no
more than 20 per cent of the Group’s gross debt,
including committed credit facilities, is allowed
to mature within the succeeding 12 months
unless replacement facilities have been enteredinto.

Refinancing

CreditCredit risk, i.e., the risk that customers may
be unable to fulfil their payment obligations,accounts for the majority of Hexagon’s counterparty risk.

Financial reports

The Group Treasury Policy states that the totalliquidity reserve shall at all times be at least 10
per cent of forecasted annual net sales. A sufficient liquidity reserve limits the risk of not being
able to meet payment obligations in full when
they become due. At year-end 2023, cash andunutilised credit limits totalled 1,268.6 MEUR
(1,429.7).

Hexagon’s main sources of financing consist of:• A multicurrency revolving credit facility (RCF)
established during 2021. The RCF amounts to
1,500 MEUR with a tenor of 5+1+1 years.
• A Swedish Medium-Term Note Programme(MTN) established during 2014. The MTN programme amounts to 20,000 MSEK
and gives Hexagon the option to issue bonds
with tenors of up
to 6 years.
• A Swedish Commercial Paper Programme (CP)established during 2012. The CP programme
gives Hexagon the option to issue commercial
paper for a total amount of 15,000 MSEK withtenor up to 12 months.

Insurable risk
Hexagon’s operations, assets and staff are to acertain degree exposed to various risks of damages, losses and injuries which could tentatively
threaten the Group’s business continuity, earnings, financial assets and personnel.

To ensure a well-balanced insurance coverageand financial economies of scale, Hexagon’s
insurance programme includes, among otherthings, group-wide property and liability insurance, travel insurance, errors and omissions
insurance and transport insurance, as well
as several other programmes, combined withlocal insurance coverage wherever needed. The
insurance programme is periodically amended
so that owned risk and insured risk are optimallybalanced.

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45

Legal risk management
Legal risks are managed for each subsidiary of Hexagon. The Group legal function supports the subsidiaries and manages certain legal risks
at the Group level.
Risk

Risk management

Legislation and regulation
Hexagon’s main markets are subject to extensive
regulation and applicable laws. Hexagon’s operations may be affected by regulatory changes,
tax changes (including to customs duties) andother trading obstacles, political changes andpricing and currency controls, as well as othergovernment legislation and restrictions in the
countries where Hexagon is active. For example,
more stringent regulations have been passedor are being developed in several jurisdictions
relating to the use of artificial intelligence inproduct development and solutions deployment.
In addition, Hexagon remains subject to dataprotection regulations, which continue to evolve.
These changing requirements and more stringent rules impose a risk of non-compliance withthese regulations, which could potentially resultin substantial legal fees and damage to Hexagon’s reputation. Additional areas of regulatory
uncertainty include laws and regulations related
to export controls and sanctions, foreign-direct investment controls and disclosures, andenvironmental sustainability (including climatechange). New laws and regulations could resultin increased compliance and operating costs.
Further, delivery of products and services thatcomply with contractual requirements may present certain risks at times, particularly in light offrequent regulatory change, natural disasters,
wars and regional conflicts, and pandemics andsimilar force majeure events.

Risk

Risk management

Intellectual property rights
Hexagon closely monitors legislation, regulations
and applicable ordinances in each market andseeks to adapt the business to identified futurechanges in each market. The Group legal function
is staffed with experienced professionals andHexagon also regularly consults with external
subject matter experts to address legal risk management topics.
To manage country- specific risks, Hexagon
observes local legislation and monitors politicaldevelopments in the countries where the Group
conducts operations. To this effect, Hexagon has
adopted a worldwide compliance programme
across the Group to ensure that its subsidiaries
at all times comply with all applicable legislation,
rules and ordinances. Hexagon’s complianceprogramme is reviewed and updated as needed
based on changes in laws and regulations. Further, Hexagon will continue to comply with allapplicable export control restrictions and sanctions laws relevant to our operations and with therules of ethics and international standards.

Intellectual property infringement and plagiarism by third parties are risks to which Hexagon
is exposed. There is no guarantee that Hexagon
will be able to protect obtained patents, trademarks and other intellectual property rights orthat submitted applications for registration will
be granted. Furthermore, there is a risk that newtechnologies and products are developed which
circumvent or replace Hexagon’s intellectual
property rights. Infringement disputes, and legal
disputes in general, can be costly and time consuming and may therefore adversely affect Hexagon’s business. Additionally, third parties may
assert that Hexagon’s products infringe theirintellectual property rights.

Hexagon seeks to protect its technology innovations to safeguard the returns on the resourcesthat Hexagon assigns to R&D. The Group strives
to protect its technical innovations through patents, copyrights, and trade secrets and protects
its intellectual property rights through legal
proceedings when warranted. Such intellectual
property rights can generally only be enforced injurisdictions that have granted such protections
or recognise these rights.

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Risk

Risk management

Hexagon operates through subsidiaries in a number of jurisdictions and all cross-border transactions are normally a tax risk because there are no
global transfer pricing rules. Local tax authorities
follow their own local transfer pricing rules andauthorities interpret transfer pricing guidelines
differently. Risks are also presented by new
accounting rules or interpretations by the applicable governing bodies. Hexagon interacts with local
taxing authorities and frequently has several ongoing tax audits in progress.

Transactions between Group companies are carried out in accordance with Hexagon’s interpretation of prevailing tax laws, tax treaties, OECD’sguidelines and agreements entered into with foreign tax authorities. Hexagon has a tax policy thatis annually reviewed and adopted by its Board of
Directors.

Tax

Hexagon’s interpretation of prevailing tax law,
tax treaties, OECD guidelines and agreements
entered into with foreign tax authorities may
be challenged by tax authorities in some countries. Rules and guidelines may also be subject
to future changes which can have an adverse
effect on the Group’s tax position. Furthermore,a change in the business or part of the businesscan have an impact on agreements entered intowith tax authorities in some tax jurisdictions.
The tax rate may increase if large acquisitions are
made in high tax jurisdictions or if the corporate
tax rates change in countries where Hexagon carries out substantial business.

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Hexagon commitment to ethics and compliance

System design
Risk assessment

Hexagon conducts regular risk assessments to identify
and prioritise legal and compliance risks associated with
our global operations. This proactive approach enables
us to tailor our compliance strategies and effectively
allocate resources, addressing the unique challenges ofour diverse and global business environments. Our risk
management process evolves continually, incorporating
insights from industry trends, regulatory changes,
external professionals and our own experiences to refine
our focus and resource allocation.

System architecture

At the top of our System are our Code of Business Conduct
and Ethics and Supplier Code of Conduct. These pivotal
documents form the bedrock of our ethical culture,providing overarching guidance to navigate business
operations with integrity. These documents are regularly
reviewed and updated to reflect evolving legal andindustry standards. Integral to the interpretation of all

In addition to these core areas, the System is augmented
by further policies and procedures that address otherareas of heightened risk, further fortifying our complianceinfrastructure. Accessibility of our System documentation
is paramount; hence, we ensure it is readily available to all
employees, often in many different languages.
For broader transparency, our Codes, summaries of ourCompliance Programmes, and key policies are publicly
accessible on our website.

Training and communication

Effective training and communication are vital
components of our System, ensuring that our global
workforce is well-informed and aligned with our ethics
and compliance standards. Our multifaceted approach
includes in-person and online training sessions, strategic
management meetings, external training opportunities,

ESG

Ethics & Administration Manual

Data
Protection

The System is intentionally designed with a clear focus
on key areas of heightened risk, shaping our specificCompliance Programmes to cover critical aspects suchas anti-corruption, competition, public contracting,trade (including export and customs compliance), dataprotection, and sustainability (ESG). These Compliance
Programmes are operationalised through comprehensive
manuals, procedures, instructions, guidance, worksheets,
templates, and other tools that enable practicalcompliance implementation.

Code of Business Conduct & Ethics; Supplier CodeCompetition

The Ethics and Compliance Administration Manualsets out the System’s governance and accountability
by assigning the roles and responsibilities to bothmanagement leadership and the Compliance Team.

Trade(Customs &Export)System documents, these Codes ensure that our ethicaldirectives reach every facet of our operations.

PublicContracting

Hexagon is dedicated to upholding the highest standardsof ethics and compliance within all aspects of ouroperations. Our Ethics and Compliance System (“System”)
is designed to detect, prevent, and respond effectively
to legal risks and misconduct, ensuring that our businesspractices not only comply with applicable laws andregulations but also align with recognised best practices,such as the 10 business principles recommended byTransparency International and the UN Global Compact
Standards. This System contributes to Hexagon’s cultureof integrity, transparency, and reliability.

AntiCorruption

Introduction

Risk Management, Governance and Compliance Personnel & Reporting Systeminternal compliance briefings, and ad-hoc guidance
addressing emerging risks. In addition, annually, Hexagon
defines a compliance plan addressing communication,
training, and audit activities. This approach ensuressystematic training on all essential compliance topics forevery employee, aligning with Hexagon’s commitment toan informed and compliant workforce.
We recognise the importance of tailoring training to
specific roles, which is why our training programmes
are customised to address the distinct risks andresponsibilities and needs of different employee groups.
These efforts are enhanced by lessons learned from pastcompliance matters and the influence of internationallyrenown advisors, ensuring that we continually learn andimprove.
Hexagon enables collaborative efforts across various
departments - Legal, Finance, Order Fulfillment, Treasury,and Supply Chain/Procurement – to further integratecompliance processes into our daily operations.

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Implementation and resources
Commitment from the top

Effective compliance starts with leadership. At Hexagon,
our senior management and the board of directors are
deeply committed to fostering a culture of ethics andcompliance. They demonstrate this commitment byconsistently emphasising ethical behavior and compliancein both their communications and actions. This approachensures that ethics and compliance are central to
Hexagon’s business strategies, making ethical conduct
a fundamental part of our decision-making process.
Their proactive efforts to align compliance with businessobjectives and address emerging risks underscore theirstrong commitment to maintaining Hexagon’s ethicalfoundation.
A key practice is the annual Compliance Certification by
Hexagon Management, which confirmes leadership’s
commitment to our System. Periodic communications
throughout the year from various business leaders
supplement our compliance alignment, ensuring ongoing
adherence to our standards of integrity.

GovernanceHexagon’s compliance function, overseen by the Chief
Compliance Officer (CCO), operates independently andmaintains direct access to the Board of Directors andAudit Committee leadership. The CCO routinely reports
to these bodies on compliance matters, training activity,
regulatory developments, and other pertinent activities
of interest. This reporting mechanism ensures thatcompliance considerations are seamlessly integrated into
strategic decision-making processes.
The CCO is supported by a global team of complianceexperts, adequately resourced, both in terms of personnel
and technology, which ensures effective monitoring,auditing and enforcement of compliance activities. The
Group Compliance Officer together with the Division andRegional Compliance Officers and assisted by a large

Compliance

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Additional information

network of selected compliance coordinators manage
and lead the operational implementation of the Ethics andCompliance System within all Hexagon entities.
Further, the Hexagon compliance network provides
guidance, advice, and supports all employees on any issue
related to compliance

Incentives and disciplinary measures

Hexagon looks for ways to enforce its compliancestandards through incentives for ethical behavior anddisciplinary measures for violations. This approachensures accountability and promotes a culture where
integrity and compliance are valued and rewarded.

Effectiveness in practiceContinuous improvement

Hexagon is committed to the ongoing enhancement of
the System, ensuring it remains effective in responding
to evolving challenges. The Strategic ComplianceCabinet, a dedicated international team of experience
compliance and legal professionals, monitors regulatory
developments and changes in the business landscape topropose necessary improvements to the System.
Insights into the strengths and weaknesses of ourcompliance framework are also gained through regularinternal audits, observations of the compliance team andwhistleblower reports. Additionally, Hexagon has defineda set of compliance-related Key Performance Indicators(KPIs) to systematically measure and monitor complianceactivity. These KPIs serve as valuable metrics forevaluating the effectiveness of the System and identifying
areas for improvement. This proactive approach allows us
to refine and improve our System continually, ensuring ourcompliance strategy is both robust and responsive.

Response to misconduct

Our commitment to upholding the highest standards of
ethics and compliance is showed by our well-documented

Hexagon Annual and Sustainability Report 2023

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process for investigating allegations of misconduct.
Our methodology in dealing with misconduct reports
follows a risk-oriented approach and ensures thoroughand impartial investigations, identifying root causes,
implementing effective steps to remediate issues andprevent their recurrence.
Hexagon actively promotes a culture of integrity
and responsibility among its employees, while also
empowering external stakeholders—including suppliers,
customers, freelancers, contractors, and shareholders—
to report any suspected violations of law or Hexagon’sinternal policies and procedures. We provide several
reporting channels to submit such reports.
Since 2021, Hexagon has used an external whistleblower
reporting system to manage whistleblower reports andensure consistent case management and recordkeeping.
Operational 24/7/365, it provides a secure platform forreporting in various languages, either in writing or byphone, and allows for confidential submissions.
In 2022, Hexagon introduced the Procedure for Internal
Reporting and Investigations to establish a uniform
standard for the management of reports and the conductof investigations. This procedure, while informed by the EU
Whistleblower Directive’s approach to managing reports
and conducting investigations, extends its applicability
beyond the EU Directive’s scope, allowing for a wider rangeof violations to be reported.
Hexagon’s response to reports is adapted to the specifics
of each case. Typically, the process includes logging thereport into our case management system, acknowledging
its receipt within five business days, and conducting apreliminary assessment. Based on the findings, we mayproceed with a detailed investigation or take other action
on or decide to close the matter. Responsive actions aretaken as necessary, with updates on the investigation’s
progress provided to the reporter when appropriate.

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A strict no-retaliation policy is enforced to protect
individuals who report concerns in good faith.
The activity of the whistleblower reporting system isreviewed on an anonymous basis by Hexagon’s Board of
Directors and Audit Committee.

System evolution through 2023

In 2023, Hexagon demonstrated a proactive and dynamic
approach to enhancing its compliance framework,
responding to emerging challenges and integrating
valuable insights. Below are key developments and actions
taken to fortify our compliance efforts:• Strategic personnel additions: Hexagon enhanced its
compliance team through key appointments, mostnotably adding a Corporate Compliance Counsel.
• Training: Hexagon’s investigation teams have enhanced
their capabilities through participation in external
investigator training. This initiative underscores
our commitment to maintaining a high standard ofinvestigative proficiency and ensuring our teams areequipped with the latest methodologies and bestpractices. Additionally, many informative training
sessions were provided to employees.
• Employee engagement: Results from our employee
surveys on compliance have provided valuable feedback,Compliance

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informing our strategy and helping us to tailor ourcompliance programmes to better meet the needs andconcerns of our workforce.
• Potential Misconduct reporting: Throughout 2023, wereceived 66 reports. Each report was carefully evaluated,leading appropriate responses, underscoring ourunwavering commitment to addressing and rectifying
potential compliance issues.
• Risk management initiatives: A critical focus has been
the identification and management of potential diversion
risks to Russia. We have developed and implemented adetailed procedure for identifying and addressing theserisks.
• Policy implementation: The introduction of the
ChatGPT Policy and AML/CTF (Anti-Money Laundering/Counter-Terrorist Financing) Policy marks a significant
enhancement to our compliance architecture,addressing evolving risks and ensuring robust controls
are in place.
• Continuous improvement: Reflecting our dedication tocontinuous improvement, the Procedure for Internal
Reporting and Investigations was updated to incorporate
lessons learned from past incidents. Further, detailed
instructions have been communicated to Hexagon

Hexagon Annual and Sustainability Report 2023

49

employees on compliance matters impacting their daily
business activities.
• Conflict of Interest Guidance: The implementation of thisguidance, along with targeted training for employees,
highlights Hexagon’s commitment to identifying andmanaging conflicts of interest. The guidance provides
clear examples of conflicts of interest, mandates theirdisclosure, and explains resolution processes. Following
its implementation, there has been a notable rise in
the disclosure and resolution of conflicts of interest,
demonstrating its effectiveness.
• Guidance for Trade Shows and External Events: This
guidance aims to prevent misconduct that breaches
competition laws at trade shows and external events.
It achieves this by offering clear dos and don’ts,
supplemented with examples and explanations,
guiding employees to maintain compliance and uphold
Hexagon’s ethical standards in these settings.

Conclusion

Hexagon remains steadfast in our commitment tomaintaining the highest standards of ethics andcompliance. Our dynamic approach to compliancemanagement ensures that our System not only meets
current legal requirements but is also poised to address
future challenges.

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Contents
Hexagon's sustainability strategy
Letter from the CSO

51

Key stakeholders and related sustainability issues

53

Double materiality analysis

54

Sustainability reporting standards

56

Hexagon's goals and commitments

57

ESG framework

58

The change we empower
Sustainable core competencies

59

ESG customer highlights

60

Quantifying avoided emissions

62

R-evolution

63

Enabling a change with our stakeholders

65

The change we create
Hexagon's sustainability milestones and roadmap

66

ESG governance69

ESG strategy in acquisitions

71

Data privacy and cyber security

73

A responsible culture

75

Environmentally and socially responsible operations

78

Responsible supply chain management

83

Sustainability Key Performance Indicators

84

EU Taxonomy and Auditor's report85

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Letter from the CSO

Together towards asustainable future
I am proud to conclude 2023 as another very strong year for
Hexagon from a sustainability perspective. Perhaps mostnotably, the internal momentum that has been built overthe past several years resulted in us confidently setting new
ambitious goals related to our carbon footprint.
More specifically, we committed to increasing the ratio ofrenewable energy in our operations to 100% by 2027, to reduce
our Scope 1 and 2 emissions 95% by 2030 and to reduce
our Scope 3 emissions 25% by the same deadline, all using
2022 as the base year. The long-term target to achieve a CO2
reduction across the full supply chain aligned with net-zeroby 2050 remains, of course. Our targets and commitments to
set a net-zero target approved by the Science-Based Targets
initiative (SBTi) have also been recognised as aligned withthe requirements of the UN Global Compact Forward Fasterinitiative, a global platform for ambitious corporate action
guiding companies. We are encouraging more companies to join
us to drive progress across all 17 sustainable development goals(SDGs) towards a sustainable future.

Value chain commitment
As the majority of Hexagon’s carbon footprint can be foundwithin our supply chain, we have also committed to ensure that
our major suppliers have CO2 reduction plans, further expanding
our journey towards a greener future outside of our internal

operations. 2023 was also the year where we successfully
reached the goal of conducting sustainability audits ofour key suppliers in what we define as risk areas, aiming
to ensure that the products and components we source
are produced in accordance with Hexagon's strict
environmental and human rights standards. I am glad topresent our key achievements and improvement areas inmore detail in this sustainability report.
Having sustainability included in the core of Hexagon’s
strategy, environmental, social, and governance (ESG)
topics are also considered during our acquisitions toensure Hexagon’s long-term success. As part of the due
diligence process, target companies are assessed on their
ESG practices, evaluating factors such as compliancewith regulations, environmental impact, labour practices
and corporate governance standards. Sustainability
is also used to identify potential synergies and unlock
value creation opportunities, ultimately contributing toHexagon's overall success and sustainability impact.

Our greatest opportunity
From a holistic perspective, the area where we can havethe greatest sustainability impact remains within theuse of Hexagon technology by our customers. As entireIn brief

Financial plan

Board of Directors’ report Corporate governance reportindustries are reshaping their business models andprocesses into becoming more efficient and productive,
our broad portfolio of software and hardware solutions
is put to the test to generate sustainable value acrossthe world. Hexagon’s core portfolio is dedicated to thisvery purpose, as our design and engineering, production
software and metrology solutions increase efficiency
throughout the lifecycles of manufactured products.
Ultimately we are reducing resource inputs, emissions
and waste for customers in automotive, aerospace,construction, manufacturing, agriculture and mining,among other industries. Another example is Hexagon’s
geospatial technology, which is used to monitor andanalyse changes to our planet, providing real-time dataon deforestation, flooding, wildfires, melting glaciers andother effects of changing climate for authorities, city
planners and research institutes all over the world.
This also means that the increased need for technologythat supports sustainability directly translates to anincreased need for Hexagon's solutions, which is why weconsider sustainability as our greatest growth opportunity.
Strengthening our performance on the sustainability
side will feed directly into a stronger performance on thebusiness side and vice versa, and our success in businessis tightly linked to our contribution to sustainability.
Simply put, Hexagon’s sustainability strategy is toempower and create a positive ESG impact either throughour solutions and partnerships, or through our value chain
and people as visualised in the picture. Our goals andexpectations are deliberately set high, and whether you
are a valued shareholder, customer or employee, we lookforward to sharing our journey and progress with you.
Ben Maslen
Chief Strategy Officer
HexagonCompliance

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Sustainability strategy
Change we empower

Change we create

Enabling sustainability
through our solutions

Improving sustainability
across our value chain• Sustainability criteria inproduct innovation• Division specific net-zero roadmap• Innovations to optimise
efficiency, productivity, quality
and safety at scale• Sustainable procurement
program

Empowering other stakeholders
to accelerate change• Engaging industry-specificplatforms• Distribution Partners Program• Accelerating green-tech with
R-evolution• Resource efficiency improvements

Driving sustainability throughour culture and our people• Inclusive- and performance-driven
culture• Social responsibility througheducation and partnerships

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Hexagon’s key stakeholders andrelated sustainability issues
Managing sustainability opportunities and risks are key elements in all successful business models, irrespectiveof what industry or region a company operates in. Hexagon is committed to understanding the sustainability
issues of its key stakeholders – society, employees, customers, investors and regulators – as they aretransforming the business landscape. Only through a continuous dialogue can Hexagon meet and surpass theirneeds. Hexagon navigates the transformative environment by taking a proactive approach to sustainability,
ensuring it acts in an ethical, socially and environmentally responsible way to all its key stakeholders.

1. Society

Stable, well-functioning and prospering societies are a
critical prerequisite for Hexagon to be able to operateand do business. Only by adopting sustainable processes
and proactively contributing to the health and safetyof present and future generations can it ensure a longterm sustainable business landscape with prospects for
growth. Clean energy supply, access to fresh water and air,strong infrastructure systems and safe constructions are
sustainability issues that Hexagon actively can address
through its solutions and market presence. In order tocontribute to healthy societies in a focused manner,
Hexagon has developed a wide range of sustainable
solutions for cities and nations, aiming to ensure thatgovernments, industry and citizens can work together
to build safe and vibrant communities that support thehighest quality of life and sustainable economic vitality.

2. Employees

Attracting, hiring, developing and retaining the best
employees in the industry is key to Hexagon’s success.
The company employs more than 24,000 people globally,
many of whom are highly skilled engineers and softwaredevelopers. With a focused approach to competencedevelopment, anti-discrimination, diversity, employee
engagement and health and safety, Hexagon can remaincompetitive with its peers long term, regardless of where
it operates.

3. Customers and suppliers

Hexagon's customers and suppliers in all industries
have a growing need for sustainable solutions that lower
emissions, reduce waste and spillage, increase safety
and efficiency, protect data privacy and secure highstandards in their supply chain. By actively incorporating
the customers’ sustainability issues into its productdevelopment and processes, Hexagon can protect andsecure new business opportunities while contributing to amore sustainable business landscape.

4. Investors

In order to confidently evaluate and assess the ESGrelated risks and opportunities in its portfolio, the investor
community expects a high degree of transparency andclarity in all areas related to sustainability from theirportfolio companies. By meeting and surpassing theinvestors’ requirements, Hexagon can ensure long-term
viable funding and prospects for growth.

5. Regulators

Regulators in all countries need to ensure the companies
operating under their legislation follow all applicable laws,with strict requirements on anti-corruption, responsible
supply chain management, accountability, human rights,
labour management and export control. With strong
internal processes and policies for management ofcompliance and business ethics, together with a highdegree of transparency and close collaboration withauthorities in the regions it conducts business, Hexagon
can be a role model in building sustainable businessprocesses and be compliant with all commercial laws andethical guiding principles.

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Double materiality analysis
In 2023, Hexagon initiated its first double materiality
assessment to determine material topics and to becompliant with the Corporate Sustainability Reporting
Directive (CSRD) standards. The double materiality
assessment considers the social and environmental aswell as financial impacts of the material issues, taking
an outside-in and inside-out perspective of relevant
opportunities and risks.

Hexagon‘s issue pool of material topics
Financial impact on Hexagon
26• Defining the key material opportunities and risks for
Hexagon, prioritising efforts based on assessment
outcome and following relevant ESRS standards fortransparent disclosure.

9

11
23

26

10

22
9
22

8

14
4 14

2
16

15

3
21
4

16 24

13
7

19
18 5 17

Opportunity

3
7

8

1

24

25 12 20

The assessment consisted of three stages including:• Survey, workshop and interview assessment ofsustainability impact on the company, people andenvironment, considering both risks and opportunities.
The assessment involved internal and external
stakeholders, including shareholders, employees,
suppliers, customers, subject matter experts, investors
and community groups.

101

Materiality assessment methodology• Due diligence preparation to identify potentially material
topics, utilising the European Sustainability RerportingStandards (ESRS) and topics defined in the CSRD,
also including a review of Sustainability AccountingStandards Board (SASB) sectors and peer disclosures for
a comprehensive analysis.

25
11

20

12

21

2

17

3 Withdrawals, discharges

7 Dependency on ecosystem

4 Loss of biodiversity

8 Inflows, outflows, waste

9 Working conditions

16 Other (e.g. forced labor)

10 Talent attraction

17 Economic/social/culturalrights12 Equal treatment/opportunities 18 Civil and political rights
19 Rights of indigenous peoples

13 Other (e.g. child labor)

18
19

5

Risk

5 Loss of species
6 Ecosystem degradation

11 Future of work

13

6

1 Adaptation, mitigation, energy
2 Air, water, soil, otherSocial23
615

Environmental

14 Occupational safety

20 Information-related impacts

15 Employee opportunities

21 Safety-related impacts

GovernanceImpact on environment and society

Materiality assessment issue pool

The issue pool of potential material topics is mapped in
the matrix, defined under ESG. Each sub-topic is weighedbased on its financial materiality for Hexagon and its
impact on the environment and society.

22 Culture, supplier mgmt., dataprotection

25 Industry 4.0, innovation/
digitalisation

23 Bribery/gifts, lobbying,
whistleblower

26 Cyber- and data-related
topics24 Dual use, export controls

A topic is considered as material if it is likely to affectHexagon’s future cash flow, or if it has a significant impact
on people or the environment.

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Materiality assessment results:

Sustainability
a key business
opportunity

Environmental

SocialGovernance

Climate change (ESRS E1)

Own workforce (ESRS S1)Business conduct (ESRS G1)

Adaption, mitigation, energy

Working conditions

Culture, supplier management, dataprotection

Talent attraction
The key material topics identified through the double
materiality assessment were climate change, own
workforce, workers in the value chain, and businessconduct. Each material topic is also associated withrelated material sub-topics as shown in the table.
The majority of the issues defined as highly material for
Hexagon are primarily considered as opportunities by its
stakeholders. Hexagon provides solutions that address
the main environmental and social challenges thatcompanies and nations face today. Furthermore, Hexagon
recognise that some of the topics that scored lower
and therefore have been deemed non-material, such as
circular economy, biodiversity and land use, are relevant
for Hexagon's future product portfolio. Embracing these
topics as opportunities is necessary to ensure a more
forward-thinking approach to developing future solutions.
The broad portfolio suite aiming to solve customers'
challenges related to productivity, energy efficiency,
data protection, climate change adaption and mitigation,
digitalisation and more, are not positioned as threats orrisks but rather an opening for increased profitability and

Future of work
Equal treatment and opportunities
Workers in the value chain (ESRS S2)

Improper use of goods(ESRS G1)
Dual use, export controls
Business responsiveness (ESRS G1)Industry 4.0, innovation, digitalisation
Cyber security
Cyber and data-related topics

stronger financial performance. By investing in bringing
new tools, solutions and technologies that better meetthe sustainability needs of its customers, Hexagon cancontinue strengthening its position as an enabler of asustainable future.
The key material risk areas for Hexagon are within
the fields of cyber security, export controls, suppliermanagement and data protection, highlighting the needfor continuous improvement and investments in strong
compliance and governance processes.
Hexagon's material topics are clearly linked to the United
Nations’ Sustainability Development Goals (SDGs) and are
the starting point for Hexagon's sustainability strategy.
The description of topics, their impact materiality and thefinancial materiality table can be found in the ESG notes ofthis report.

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Sustainability reporting
standards
Hexagon’s ESG reporting covers its own operations andvalue chain, and its goals are aligned to the company
strategy objectives to generate value and lower risks.
Several reporting standards form the basis of thereporting. The climate targets go above and beyond theParis Agreement goals and are submitted to the Science
Based Targets initiative (SBTi) for verification. The
sustainability report is prepared in accordance with the
Global Reporting Initiative (GRI) Standards and United
Nations' Global Compact, and also take into account the
SASB and CSRD reporting framework.
Hexagon is a signatory of the United Nations Global
Compact (UNGC) which means that the company
supports and actively promotes its ten principles on theenvironment, labour practices, human rights and anticorruption in our operations and in relation to external
stakeholders. This also means that Hexagon seeks to
conduct business in a responsible and ethical manner andsupport the UN Sustainable Development Goals (SDGs).
To further increase transparency, Hexagon has also
publicly submitted its climate impact data to the Carbon
Disclosure Project (CDP). For an overview of the ESGrelated reporting, please see page 84, Sustainability Key
Performance Indicators.

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Hexagon's goals and commitments
Focus areas

Environment
Driving change acrossentire value chain to
generate positiveenvironmental impact

Commitment

Goals• Encouraging the development and diffusion ofenvironmentally friendly technologies.

• Increased share of purchased or produced• Absolute target: Reduce absolute
renewable electricity out of total electricity
Scope 1 and Scope 2 GHG
to 46%, compared to 42% in 2022.
emissions 95% by 2030 from a 2022base year.
• Introduced eco-criteria in product design
process.
• Intensity target: Reduce Scope
3 GHG emissions 25% per unit of• Increased total renewable energy
revenue by 2030 from a 2022 baseproduced by 35% compared to 2022.
year.
• Doubled the share of electric vehicles of• To increase annual sourcing of
total vehicle fleet to 8% compared to 4%
renewable electricity from 34.8% in
in 2022.
2022 to 100% by 2027.

• Monitoring and report regularly on environmental
performance across entire organisation.
• Reducing greenhouse gas emissions in operations
and supply chain, and undertake initiatives topromote greater environmental responsibility.
• Supporting a precautionary approach toenvironmental challenges.
• Increasing energy efficiency, reducing waste andhazardous waste in all facilities and implementing
processes for sustainable resource management.
• Reducing the stress of water and air quality from own
operations and supply chain.

2023 impact• Reach net-zero GHG emissions
across the value chain by 2050.

• Reduce scope 3 GHG emissions
97% per unit of revenue by 2050
• Integrating sustainability considerations into productfrom a 2022 base year.
development, design and production processes.
• Leveraging technology innovation, investment andventure capital to profitably grow and accelerate
green-tech business opportunities .
SocialDriving sustainability
through people andculture• Achieve at least 30% women in• Ensuring health and safety for our employees.
leading positions by 2025.
Upholding the freedom of association and theeffective recognition of the right to collective bargaining.
• Eliminating any form of forced or compulsory labour,child labour, and discirimination.

• Increased the number of women in leading
positions to 24% compared to 23% in 2022.
• Increased Diversity & Inclusion Score from
employee survey to 84% compared to 83%
in 2022.

• Creating a culture of sustainability among employees
through recurring trainings.
• Being an attractive employer and recruiting the mosttalented and professional employees.
Governance
Setting high standardsof labour conditions
and adherence toHexagon’s Code ofBusiness Conduct andEthics• Ensuring strict adherence to Hexagon's Code ofBusiness Conduct and Ethics for employees andsuppliers.
• Working against corruption in all forms, including
extortion and bribery.
• Supporting and respecting the protection ofinternationally proclaimed human rights.

• 50% of Hexagon suppliers by spend • 411 executives certified in Hexagon's Ethics& Compliance System.
covering purchased goods, will havescience-based targets by 2028.
• Achieved the target of auditing 100% of key
suppliers in high risk countries with onsite or• 80% of Hexagon suppliers by spend
self-assessment audit questionnaires.
covering purchased goods, will
have science-based targets by• Engaged more than 15,000 employees
2030.
through ESG trainings.

Supported sustainable
development goals (SDGs)

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ESG framework
Sustainable change

Fit for purpose with our short-, mid- and long-term strategic objectives

Aim forsystemic
ImpactYearlytargets andactions
Enablers

Competitive

Resource efficient
operations

Resilient

Functional
improvements

Innovation &development

Relevant

Supply chain risks
mitigation

Inclusive &engaging culture

All employees: from presidents, product managers and designers to facility, quality and HR managers

At Hexagon, the sustainability program and associated ESG
goals, initiatives and reports are tightly linked to Hexagon's
business strategy. By driving sustainable change across its
operations, supply chain, product innovation and merger
and acquisitions (M&A) activities, Hexagon will increase its
competitiveness and financial performance short-, mid- andlong-term.
To ensure that sustainability activities support and alignwith the strategic objectives, Hexagon has defined an
ESG Framework that guides and drives its agenda. The
overall goal to drive sustainable change is supported byinitiatives that should aim to provide real, systemic impact
through increasing Hexagon’s competitiveness, resilienceand relevance for customers, employees, authorities,
investors and other stakeholders.
All yearly targets and actions should support more resource
efficient operations, drive functional improvements ofspecific tasks or business areas, steer towards stronger
and more innovative development processes, mitigate
supply chain risks or strengthen an inclusive and engaging
culture among the employees.
The enablers of the ESG framework are the employees, andto ensure long-term commitment of the initiatives acrossthe organisation, the activities and actions are implemented
at local level with proper tools and resources for effective
sharing of best practices across divisions and regions.

The enablers of the
ESG Framework are
the employees.

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Sustainable corecompetences

Reality capture

Positioning

Sustainability value proposition:

Sustainability value proposition:– Reality capture enables
enhanced productivity,
accuracy and safety, anddrives more sustainable
practices across multiple
industries. Collecting precise
environmental data supports
resource management,
decision-making processes andconstruction efficiency withless waste and emissions.

– Precise and intelligent
positioning technology enables
safe and secure operations
on land, sea and air as
autonomous vehicles, planes,
tractors, vessels and off-shore
platforms can be operated
with lower risk for incidents,
saving lives and avoiding
environmental disasters.

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Hexagon’s five core technologies solve some of the most urgent challenges of
our lifetime. By unleashing data to do its greatest work – boosting efficiency,
productivity, quality and safety – Hexagon is making smarter use of the earth’s
resources and enabling sustainable development.

Autonomous
technologies
Sustainability value proposition:– Sensors and software utilise
data to enable autonomy anddrive the shift to autonomousvehicles and manufacturing
processes resulting in
better fuel efficiency,
safer operations, smarter
construction and agriculture.

Design and simulation

Location intelligence

Sustainability value proposition:

Sustainability value proposition:– Simulations and computer
aided engineering help
manufacturers and asset
managers to optimise
designs before physicallycreating a product, identifying
opportunities to reduce thequantity of material used,generate less waste and lower
energy consumption.

– Identifying the mostefficient transportationroutes, promoting public
transportation andencouraging the use of electricvehicles is essential in building
sustainable societies, andlocation intelligence solutions
are key for enabling this shift.

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ESG customer
highlights
Ziton
Customer background

Offshore service provider of wind farms,
specialising in major component exchanges
on wind turbines such as blades, gearboxes,
transformers and generators.

Customer challenge

Positioning service platforms in the North
Sea very close to the turbine structures andestablish platform legs on the seabed floor
with submetre accuracy to avoid obstacles
such as power cables or large debris, while
also avoiding collision with the structure.

How Hexagon is helping

Ziton deployed Hexagon's positioning,navigation and timing (PNT) solutions, which
use inputs from several sensors to control the
output of the platform thrusters and maintainthe safety of crews and structures.

Jacto
Customer background

Brazilian-based Jacto manufactures awide range of spraying, fertiliser spreading,planting, harvesting and pruning agriculture
equipment, always with an eye on driving
efficiency through technology.

Customer challenge

Increase accuracy of its autonomous tractors
and trailers to increase output and reduce theuse of spraying products.

How Hexagon is helping

Jacto incorporated advanced GNSS receivers
and antennas from Hexagon, with reliable
2.5cm year-over-year accuracy, and intelligent
obstacle control management systems. The
accuracy allows for autonomous driving,
greater deposit and less drift in spraying
products, delivering a more environmentallysound distribution and product savings,
while taking the driver out of harm’s way.

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Victoria Departmentof Transportation

TRAGSATEC

Customer background

TRAGSATEC is an environmental protection
entity owned by the state and based in Madrid.

Victoria’s Department of Transport andPlanning (DTP) is responsible for planning,building, operating and maintaining thetransport and planning system in Victoria,
Australia.

Customer challenge

To analyse root causes of accidents in thecity by examining contributing factors suchas crash locations, vehicle types, weather
conditions and driver behavior.

How Hexagon is helping

The department implemented a 3D digital
reality solution from Hexagon for integratingcrash data into a map for visual analysis of
accidents, contributing factors and patterns,
resulting in reduced crash analysis time andcosts by limiting manual inspections andprovided data to create safer roadways.

Customer background

Customer challenge

TRAGSATEC had to figure out what the top
contributing factors were to the region’s land
and water decline and propose a plan of action.
It also needed to address the impact of global
warming in Spain, including recurring droughts,
extreme weather and desertification.

How Hexagon is helping

TRAGSATEC decided to use an all-in-one
solution for geospatial data management toautonomously connect, manage and publish thedata needed to map the region. They also used asituational awareness solution to visualise andanalyse the data in a public digital twin. Once thedata was visualised, the team ran simulationsin the digital twin to understand how floods
and other events would impact river dynamics,
terrain and the Menor Sea. As a result, areasof concern could be identified and mitigation
measures implemented to improve the health ofthe local environment and population.

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Quantifying avoided emissions
A key benefit of Hexagon’s core portfolio solutions
is greater efficiency in processes for construction,
manufacturing, product design and more. The efficiency
is achieved through reduced material input, lower
consumption of utilities and increased labour productivity.
A common result of the increased efficiency is lower
carbon emissions, a desired outcome for almost any
company aiming to reduce its environmental impact.
To assess its impact on enhancing customer
sustainability, Hexagon conducted a pilot project in 2023
utilising the BLK360 reality capture solution. The findings
clearly showcased how Hexagon’s solutions enabledcustomers to automate their workflows, consequently
boosting productivity and diminishing both costs andthe environmental footprint. Specifically, in the pilot
customer scenario, the BLK360 enabled the automationof modular gypsum board production, which cut
measuring time around 50% and reduced emissions fromboth the installation process and workforce commuting.
The material waste decreased from 10 to 0 tonnes, while
total material requirement was reduced around 1 tonne,measuring process time was halved from 2.70 to 1.35
minutes, and labour hours required were cut from 18 tojust 4 hours. This resulted in savings of 827 kgCO2-eq for an
area of 1,479 m2 functional unit, as per avoided emissions
guidance from > World Resources Institute. In 2024 andbeyond, Hexagon aims to scale this approach to empower
more customers to adopt sustainable practices and drive
positive environmental impact across more industries.

tCO2e

Reference scenario

Solution scenario

Hexagon aims to expand its pilot projects of visualising two alternative
scenarios for its product use in specific workflows: one reference casefor the status quo, and one scenario with Hexagon's solution applied.
The difference between the scenarios will showcase the avoided carbon emissions in the specific project, helping customers understandthe environmental impact.

Avoidedemissions

Time

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R-evolution: Applying
technology innovationand venture capital toaccelerate green-techbusinesses
One of Hexagon’s most prominent
initiatives to support sustainable change
is R-evolution, a business arm runningprofit-driven investments in green-tech
initiatives. R-evolution accelerates theworld’s sustainable transformation by
applying Hexagon's technologies to business
opportunities that benefit the environmentand society. Its key initiatives include
renewable energy, blue carbon ocean
projects, desalination and biodiversity
conservation. During 2023, R-evolution madea significant business impact through its
sustainability contributions.

Digitalising desalination
A strategic technical partnership with Desolenator, aDutch start-up that provides the world’s first solar thermal
desalination process to produce high-quality desalinatedwater with zero harm to the planet. The solar approach,including modular technology, eliminates the high-energy
reliance issues involved in traditional methods. Unlike
reverse osmosis, Desolenator’s patented solution uses
zero harmful chemicals, zero membranes and zero energy
intermittency.
R-evolution is contributing to the optimisation of
Desolenator’s process by providing the desalination digitaltwin for monitoring and asset performance management,
powered by Hexagon’s Smart Digital Reality solutions.
By 2040, all communities on the planet should haveaffordable, sustainable and reachable access to fresh
water. With a pioneering approach, Desolenator andR-evolution are tackling the fresh-water scarcity challengewith sustainability, efficiency and innovation in mind,
increasing access to water for communities in need today
and in the future.

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Promoting biodiversity
conservation

Solar farm energy
storageR-evolution partnered with La Gamba
Tropenstation, part of the University of
Vienna’s Department for Botanic andBiodiversity studies, to join Green Cubes, theforest initiative to accelerate biodiversity
conservation of rainforests worldwide,
starting from La Gamba, Costa Rica. The
Green Cubes concept is redefining therelationship between technology, science andlocal communities, by ensuring that rainforest
conservation has higher value than alternative
practices. Conservation is realised by
implementing the Green Cubes Methodology
in the rainforest, a technology- and sciencedriven approach that monitors development
over time, identifying volume, measured
with airborne LiDAR earth observation for
detecting significant changes within the forest
complexity with multispectral and in-situ
LiDAR and biodiversity indication provided bysoil DNA analysis, camera traps and passive
acoustic sensors.

The battery technology company Hagal AS
and R-evolution teamed up in a newcollaboration where R-evolution provides
Hagal with access to the 16.44 MWp Archidonasolar park in Spain, showcasing Hagal’s
battery technology in a real-world, operationalsetting. A Hagal battery has been installedat the Archidona solar site which will serve
as a platform for future partnerships andcommercial arrangements. The partnership
capitalises on Hagal’s technology in extending
the lifespan of new and used battery cells,
in tandem with R-evolution’s expertise inharnessing data analytics to maximize theprofitability of solar power and deploying
technological solutions that actively reduce
CO2 emissions. The outcome is an accelerated
transition towards renewable energy and moresustainable battery technology.

As a result, Green Cubes offers committed
enterprises an opportunity to promotebiodiversity conservation through anannual sponsorship model – to meet therequirements for ESG engagement anddifferentiate through proactive contributions
to biodiversity conservation.
Green Cubes is a response to the urgent needto preserve the biodiversity of our planet.

The partnership with Hagal is a key milestone
in the continuous development of therenewable blueprint that digitalises solar
energy production and more.
> For more information on R-evolution
collaborations and partnerships, please visit
r-evolution.com.

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Enabling a change with our stakeholders
As a global company, Hexagon has the ability andresponsibility to give back to society. Hexagon supports
and actively engages with the communities where it
operates through philanthropic activities and charitableorganisations as well as business collaborations to
support technology innovation. Local initiatives range
from donating technologies to non-profits, training andsupporting environmental research, partnering with
universities to develop future talent, and sponsorship ofcommunity events.

Sixth Sense programme – scaling startups

To leverage Hexagon solutions to solve sustainability
challenges in all industries, Hexagon has launched
an open innovation platform called Sixth Sense. The
platform connects tomorrow’s innovators with today’s
industry-leaders, and the programme is helping to scale
the startups that are building transformative solutions tosome of humanity’s biggest challenges.
Once a year, ambitious scaling startups from the worlds
of design, manufacturing and engineering are invited
to apply to Sixth Sense and its intensive, innovate-onthe-job accelerator programme. Through its tailoredcoaching, workshops, and access to Hexagon’s worldclass expertise and network, Sixth Sense helps innovators
to refine their cutting-edge technologies, forge powerfulpartnerships, and take corporate innovation to thenext level. Featuring startups tackling everythingfrom sustainable manufacturing to virtual reality, theprogramme harnesses the power of these emerging
technologies to accelerate progress towards a moreautonomous, efficient, and sustainable future.

Global rainforest conservation

One initiative to support the climate is Hexagon’s
partnership with global rainforest conservation charity
Cool Earth, offering vital funding and support across its
projects. The eco-projects partnership brings together
Hexagon measurement and digital reality technologies
with the expertise of Cool Earth for rainforest
conservation. The partnership aims to raise awarenessabout the importance of taking climate action by funding
projects that improve understanding and address theneeds of people that live in and protect carbon
sink environments. As part of the initiative, Hexagon will
provide vital funding to back people-powered
conservation across the three largest rainforest biomes:
the Amazon, Congo and New Guinea forests.

Partnerships

In 2023, Hexagon partnered with NVIDIA, AWS, Microsoft
and Sony for delivering best-in-class technology

platforms. Among others, the partnerships aim to enableindustrial digital twin solutions that unite reality capture,
manufacturing twins, AI, simulation and visualisation
to deliver real-time comparison to real-world models.
Digital twins are considered as a key solution to optimise
manufacturing processes and decrease associated scrap
and waste, and to help improve productivity, quality,
safety and profitability when used with any simulated
solution. For more information, please see the StrategicPartnerships chapter on page 7 in this annual report.

Group community engagement and volunteering

One example of Hexagon’s social projects is the Hexagon
Cares group volunteer programme which encourages
employees to support local charitable organisations
by providing one day of paid time off per year to cometogether and participate in volunteer activities, supporting
local communities while also strengthening an ethicaland socially engaged culture. Another example is the
Hackathon-event in India in 2023 where Hexagon invited
university students, startups, companies and employees
to solve sustainability-related challenges. A total of 163
teams qualified for the final event displaying innovative
solutions for sustainable energy, manufacturing andgreen tech, laying the foundation for development ofgroundbreaking new products and innovations.

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Hexagon’s sustainability
milestones and roadmap
2023

2024

2025

Employees

19,562
Employees
conducted diversity
training

All employees
trained in cybersecurity andanti-harassment

All employees
trained in inclusive
behaviours

30% women in
leadership positions

Energy35% renewableelectricity~35,000 MWh
renewable energy
produced

50% renewableelectricity

20% reduction in
power consumption

Company vehicles-5.3%
fewer combustion
vehicles in car fleet

Guidance of green
vehicles in our car
fleet

All employees
completed training
on CO2

Products

Suppliers

11 key suppliers inhigh-risk countries
audited66

Sustainability can
only be achieved witha holistic approach.

2022

NatureHexagon Annual and Sustainability Report 2023

2027

2030

100% renewableelectricity

90% Electricvehicles in car fleet

Waste management
programme inmanufacturing sites

Water management
programme for sites
in high-risk areas

Biodiversity action
plan implemented in
major facilities

Eco design trainings
in product innovationand development

Avoided emissions
framework by
product line

Avoided emissions
standard in place forall solutions

Double sale of circular products

100% of key
suppliers in high-riskcountries audited

Key suppliers inhigh-risk areas
audited every 3
years

Human rights due
diligence across ourvalue chain

20% CO2 reduction inlogistics emissions

Zero waste tolandfill ambition> 80% ofprocurement spend
covered by SBTi validated targets

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Hexagon Annual and Sustainability Report 2023

CO2 reduction roadmap yearly milestones
To ensure the journey towards net-zero in the full value
chain by 2050 is on track, Hexagon's sustainability goals
are broken down with milestones for Scope 1, 2, 3 andavoided emissions for years 2025, 2027, 2030 and 2050.
The initiatives include trainings for all employees in CO2

its progress regularly in upcoming sustainability reports
to increase transparency and maintain its momentum inrealising its sustainability strategy.

emissions reduction activities, a programme for expanding
the use of renewable energy at all facilities and offices,
criteria for product development, supplier requirements
and reductions targets for downstream and upstream
logistics-related carbon emissions. Hexagon will present

Scope 1

Scope 2

Direct emissions

Electricity

Scope 3
Upstream

Avoided emissions
Downstream

Customers’ use2025

All employees completed
training on CO2>50% energy fromrenewables

Eco design criteria inproduct innovation anddevelopment

Distribution partners
programme

Avoided emissions;standard in place2027

At least 50% reduction in
Scope 1

100% energy fromrenewables

20% reduction inlogistics emissions

20% reduction inlogistics emissions

CO2 avoidance throughour products > our Scope
1 & 2 emissions

Double sales of circular
products

2030

At least 90% reduction in
Scope 125% reduction in our fullvalue chain

2050

Net–zero in our full value
chain>80% procurement
spend covered by SBTi
validated targets

Credits throughR-evolution

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68

Hexagon's CO2 reduction levers
To reach the goal of reducing its carbon emissions by 25%
across the full value chain by 2030, Hexagon has identified
its key reduction levers that it will focus on in order toreach the goal.
Almost all parts of Hexagon's value chain are consideredin the carbon programme1. In addition to a 95% reductionof its Scope 1 and 2 emissions, the key enablers arepurchased goods, logistics, business travel and employee
commuting where Hexagon will implement activities
and change its processes in order to achieve long-term
carbon reduction. This means that Hexagon’s supplierengagement programme and service providers willbe critical in the progress plan, as well as enable andincentivise employees in new and more environmentallyfriendly ways of commuting and travelling at work. By
2030, the carbon programme is estimated to achieveroughly 100,000 tonnes of annual carbon emission
reductions.

≈ 410,000
tCO2

Almost all parts of
Hexagon's value chain
are considered in the
carbon programme.

25%

absolute
reduction

Baseline

2022

Scope 1

Scope 2

95%

Reduction in
Scope 1 & Scope 2

1) Hexagon calculates its corporate carbon footprint (Scope 1, 2, and 3)
annually in line with the Greenhouse Gas Protocol and obtained a “limited” assurance from an independent third-party verifier on Scope 1 & 2reported Greenhouse Gas (GHG) emissions

Purchased
goods

Logistics

BusinesstravelEmployeecommutingTarget2030

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ESG governance
Environmental, social and governance (ESG andsustainability) topics• The main responsibility for sustainability at Hexagon lies
within the Chief Strategy Officer (CSO) with oversight fromthe Board of Directors and Executive Leadership Teamaccountability.
• The Hexagon Audit Committee is the guidance body forsustainability-related business at Hexagon.
• Relevant ESG topics are reported and reviewed in the
Quarterly Business Review (QBR) for all Hexagon’s
divisions.

ESG accountability and governance encompasses
the entire Hexagon organisation

Hexagon champions compliance with recognised
principles of corporate governance, which are used as thefoundation for sustainability management. Managementof ESG topics is embedded across Hexagon’s businesses,
through the divisional units, operating functions andentities. This means that ESG criteria is included acrossthe group functions to ensure the relevant sustainability
topics are addressed by the teams that are best
positioned to improve each given area.
In 2023, Hexagon significantly strengthened its
sustainability organisation by introducing a clear
organisational structure and responsibilities throughout
the company. Each division has clearly allocatedand mandated the responsibilities of sustainability.

Furthermore, sustainability has also been an integral partof the quarterly Business Reviews for all Divisions. The
governance of sustainability is distributed as follows:
The Board of Directors (BoD) has the ultimate
responsibility for Hexagon’s sustainability strategy
and ESG governance. The BoD is informed on relevant
sustainability topics in all meetings, and it approves majorchanges to Hexagon’s sustainability framework, including
updates to ESG targets.
The Audit committee assesses risks and opportunitiesof strategic importance related to sustainability. It
adopts appropriate measures to ensure company-wide
implementation of the sustainability framework. The Audit
committee also oversees Hexagon’s ESG management
and internal controls.
The ESG Steering Committee is formed by representatives
from each of the divisions and key corporate functions.
Its main purpose is to discuss topics of company-widemateriality. After prioritising needs, the key initiatives andinvestments are proposed to the Executive Leadership
team.
The CSO oversees Hexagon’s sustainability topics. The
CSO is a member of the Hexagon Executive Leadershipteam and is invited to the Audit Committee on all
sustainability meetings. The approval process for major
investments and capital expenditures, acquisitions and/or
divestitures includes sustainability considerations in theassessment. The CSO is also responsible for Hexagon's
Sustainability department.

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The Head of Sustainability leads the Hexagon
Sustainability department. The Head of Sustainability
reports to the CSO on Hexagon’s sustainability topics,
including the ESG strategy. The Head of Sustainability
is part of the QBR and regularly informs the Hexagon
Executive Leadership team on sustainability matters.
The Sustainability department of Hexagon AB is
responsible for defining the group’s sustainability
strategy, including the specific targets. The department
closely monitors any developments concerning
sustainability by engaging with investors and analysts,
customers, nongovernmental organisations and policy
makers. All existing and new ESG programmes aresupported by the Sustainability department of Hexagon
AB. This includes designing the structure and processes,
and developing the tools and trainings needed toaddress overarching sustainability topics for Hexagon’sbusinesses. The implementation of the net-zero roadmap
lies with the Sustainability department, and it also
governs the purchase of credits related to renewables andcarbon reduction.
In coordination with the Divisional Sustainability
Council and the specific business functions, theSustainability department supports the development andimplementation framework of the related ESG initiatives.
Responsibility for sustainability reporting and progress
tracking is a key priority of the Divisional Sustainability
responsible. All Divisional Sustainability Responsibles
have a governance reporting line to their associateddivisional President and a functional dotted reporting line
to the Head of Sustainability. The Divisional Presidents are
essentially responsible for the sustainability topics in their
specific division. They are supported by their respective
Divisional Sustainability Responsible to ensure progressand reach the goals.

Compliance

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Additional information

ESG governance
Board of Directors
Executive
supervision

Audit Committee

Guidance &coordination

Sustainability
Department

ESG Steering
Committee

Divisional Sustainability Councils
Globalimplementation

Hexagon employees

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ESG strategy in acquisitions
Ensuring sustainability as Hexagon grows

Acquisitions play a vital role in Hexagon’s growth strategy.
In this business model, a focus on sustainability is central
to the company’s overall sustainability management
as Hexagon acquires and integrates new companies.
For Hexagon, it is always a make or buy decision whenevaluating the R&D roadmap and potential acquisition
candidates that support Hexagon’s growth strategy.
In addition to filling gaps in the portfolio, Hexagon’s
acquisition strategy is focused on extracting synergies
across its different businesses and positioning thecompany for future growth opportunities. Acquisition
candidates are regularly monitored and evaluated onmarket position, customer reputation as well as growthand profitability potential.

Sustainability in the due diligence process

Hexagon considers many sustainability factors in an
acquisition process as it enables the company to makebetter investment decisions, thereby unlocking thepotential value of sustainability and reducing the harm
resulting from any possible limitations. It also ensuresa valuable foundation after the transaction has been
completed.
In Hexagon’s standard due diligence process, several
sustainability elements are considered. These include
a detailed review of the internal controls of the target
company, quality business practices, human rights,
environmental and employee matters, as well ascompliance with ISO (International Organization forStandardization) standards, LEED (Leadership in Energy
and Environmental Design) guidelines, anti-corruption
regulations (FCPA, Foreign Corrupt Practices Act) andexport controls. Hexagon also evaluates whether target
companies are following a robust code of conduct andwhether their own corporate sustainability programmes
are effective.
The considerations and steps taken by Hexagon in a due
diligence process are often project-specific. For example,
when evaluating a manufacturing company, Hexagon
evaluates whether the company takes measures to ensure
responsible production and a sustainable supply chain.
Overall, Hexagon seeks to obtain an understanding of thecompany’s philosophy, how this has impacted operations
and whether management can address potential issues
in the right framework. This allows Hexagon to better
determine the company’s sustainability profile and its
potential fit.
Hexagon also frequently uses external specialists,
including counsels trained in intellectual property,
employee benefits, anti-corruption, international trade,
antitrust, labour and employment law and real estate.
Having a cross-functional team supplemented by external
experts allows Hexagon to appraise all key features of thetarget company, including its sustainability practices andsuitability for integration into Hexagon as a whole.

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Integrating companies in Hexagon

After the closing of a transaction, where a company
becomes legally owned and controlled by Hexagon,theacquired company is integrated into Hexagon’s processes
and methods. All companies in the Group are required
to adopt and implement the Hexagon Code of BusinessConduct and Ethics, which is based on the UN Global
Compact’s ten principles on human rights, labour,
environment and anti-corruption. The newly acquiredcompany also implements the Hexagon Ethics andCompliance Programmes, covering topics including
antitrust, anti-corruption, business ethics and export
controls.

Compliance

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Additional information

Hexagon also has an on-boarding checklist covering
employment, ethics and compliance, legal issues,
insurance, intellectual property and information
technology. The operational integration often includes
regular in-house visits to the acquired company to assist
with multiple onboarding tasks including compliancetraining and financial accounting reviews.
Employment agreements are established between thetarget company and the acquiring entity, which set out
policies regarding sick leave, equipment usage, travel
policies and recordkeeping. In all cases, employees
entering the Hexagon Group via an acquisition are
informed about Hexagon’s Code of Business Conduct andEthics and are expected to behave consistently according
to the Code.

Hexagon Annual and Sustainability Report 2023

Hexagon’s acquisition strategy isfocused on extracting synergies
across its different businesses
and further increasing the group’s
exposure to software and recurring
revenues.

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Data privacy and cyber security
Data privacy

Data protection is one of the six pillars of Hexagon’scompliance programme and a key risk topic in Hexagon’smateriality analysis. Employees, customers and partners
require assurance that their personal information will
be handled and managed in a safe and responsible way.
Hexagon is committed to ensuring all personal information
will be processed in accordance with global best practices
and this is reflected in its Data Protection Compliance
Programme (DPC Programme). The Group Privacy andInformation Security Officer has responsibility for
managing and overseeing the implementation of the DPC
Programme across Hexagon Divisions. Changes to the DPC
Programme are reported to the Chief Compliance Officer
and Audit Committee on a regular basis.
The DPC Programme is implemented through teams withineach division, with responsibility for delivery managed by
Divisional Privacy Officers. The principles of the European
Union’s General Data Protection Regulations (GDPR) areused as its baseline for the protection of all personaldata, regardless of locality. GDPR is widely considered asthe ‘gold standard’ of privacy law and provides a robust
and reliable means to ensure personal information isprotected appropriately. Additions have been adopted
since 2018 to encompass other jurisdictional laws as thesehave been enacted.
Following the introduction of updated standard
contracual clauses (SCC) by the European Union in 2021,
Hexagon has been working to update all existing contracts
and has revised its contracting procedures to implement

the new SCCs in all new contracts. Under the SCCs, datatransfers from an EU entity to a third country that does notprovide adequate data protection can only be made after
the appropriate risk assessment has been conducted.
Hexagon has implemented a standard process to conduct
a suitable data transfer impact assessment (DTIA) inline with the legislation. Hexagon recognises that theprotection of personal information is not a point-in-timeprocess and requires committed changes to technology,
processes and people.
All Hexagon employees are required to comply with dataprotection principles and receive training appropriate totheir role. Employees with higher levels of responsibility
for the protection of personal data are provided withadvanced training and offered the opportunity to become
certified professionals through programmes provided
by the International Association of Privacy Professionals(IAPP).

Cyber security

Hexagon’s Group Cyber Council was established in 2019to provide oversight and governance over all information
security matters. The Cyber Council is chaired by theGroup Privacy and Information Security Officer andincludes executive members representing all major
areas of the Hexagon business including Operations,
Legal, Finance and Product. The objectives of the Cyber
Council are to ensure protection of Hexagon’s intellectual
property, ensure the cyber resilience of its networks andprotect Hexagon’s customers through its position in the
supply chain. As a global leader in digital reality solutions,

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Hexagon understands the imperative of security within its
products and services. The autonomous revolution relies
on data as fuel, and the protection and integrity of thisdata is central to Hexagon’s Innovation Process.

supports business goals and objectives. Standardisationof technology across the security spectrum ensures thatas the threat landscape develops, Hexagon is optimised todefend and respond effectively and efficiently.

Hexagon continued to build and develop its employee
awareness programme throughout 2023 and included
training on all key topics of security. All new employees
receive a set of baseline training courses and are thenincluded in the ongoing annual programme of events.
Additionally, employees are frequently targeted byphishing simulations using a wide range of phish lures toboth train and test employees on how to identify emailbased threats. Phishing simulations are run in multiple
languages to match real-world threats as closely as
possible. In 2023, 26,736 employees and subcontractors
were trained in cyber security covering multiple relevant
areas to decrease cyber security-related risks.

Hexagon has complemented the replacement of its
technology landscape with a major reorganisation of its
security operation. This has enhanced both the ability torespond to internal requests for service as well as external
threats and incidents. The global security organisation has
been further augmented by the addition of an externallymanaged Security Operations Centre, monitoring all of
Hexagon's corporate networks and resources to provide
full 24/7 visibility of events.

During 2023, Hexagon continued the delivery of its cybersecurity strategy as defined in 2022. The replacementof legacy technology with market-leading solutions
ensures that its ability to detect and respond to threats

Hexagon continues to back up its cyber capabilities with acomprehensive cyber insurance programme, to transfer
some of the residual risk. Hexagon works with leading
cyber insurance brokers and a consortium of underwriters
to ensure an appropriate level of cover is provided toprotect against data losses and business continuity
interruption.

Hexagon Annual and Sustainability Report 2023

In 2023, 26,736 employees
and subcontractors weretrained in cyber security.

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A responsible culture
A diverse workforce imperative for innovation

Hexagon is committed to being a diverse workplace thatmirrors the international nature of the business – with
employees, customers and suppliers working acrossthe world in more than 50 countries. With an approach
focused on competence development, diversity andinclusion, employee engagement and health and safety,
Hexagon is able to increase its innovativeness andremain competitive with its peers, regardless of where it
operates.
As a global organisation, Hexagon celebrates thedifferences of its employees and strives to build a working
environment where different values and perspectives areactively harnessed in order to create the best solutions foran equally diverse customer base. In promoting equity andinclusion, Hexagon also ensures its access to a greater
range of talent.
The Hexagon Code of Business Conduct and Ethics
helps govern issues such as fair employment, diversity,
discrimination, harassment, health and safety. All
businesses in the company are obliged to adopt andimplement the Code to ensure a uniform approach to theissues. All employees and contractors undergo mandatory
training in the Code of Business Conduct and Ethics toensure it is adopted broadly throughout the organisation,
which is repeated regularly to ensure adherence. In 2023,
24,695 employees were trained in the Code of BusinessConduct and Ethics.
During 2023, a global employee survey was conductedto capture the sentiment and evolvement areas among

Employees by gender, %, 2023
Female, 24% (24)Male, 76% (76)Other, 0% (0)Hexagon’s workforce. The engagement level was 73% the same score as for 2022. Hexagon’s 2023 engagementscore was 2% higher than the score of general industry
benchmark, and 6% higher than the score of the hightechnology companies benchmark. However, it was 4%
lower than the high performing companies benchmark,leaving further room for improvement. Using the findingsof the report, Hexagon has implemented action plans for
50% of the employees participating in the survey in aneffort to increase the engagement and retention rate.
Areas representing the rest of the workforce are currently
under assessment to determine the best approachto improve opportunities for engagement and further
growth.
In 2023, the retention rate of Hexagon was 92%, compared
to 89% in 2022. The diversity & inclusion index, covering
14 inclusion-related topics, was 84% which was 1%
better compared to 2022, indicating that the cultureand inclusion- building activities across Hexagon arehaving a positive effect on the overall sentiment. Where
appropriate, Hexagon supports a flexible workplace andHexagon Annual and Sustainability Report 2023

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New hires by gender, %, 2023

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Additional information

Involuntary attrition by gender, %, 2023

Female, 26.3%
Male, 73.2%
Other, 0.5%

the opportunity to work from home, as well as flexible
working schedules to further support inclusion.
To further improve the general awareness of relevant ESG
topics material for Hexagon, sustainability e-learning
sessions were offered in 2023. Through this education
programme, Hexagon successfully managed to engage
15,991 of employees in training sessions.

Diversity and inclusion — from recruitment to senior
management trainings

Building a truly diverse workforce is a long-term
commitment that requires a dedicated approach todiversity through the full employment cycle – fromrecruitment all the way to senior management trainings.
Hexagon aims to ensure equity and inclusive behaviour
through the four stages of a Hexagon career; recruitment,
early career start, career development, senior

Involuntary attrition - Gen Z
Involuntary attrition - Gen Y
Involuntary attrition - Gen X
Involuntary attrition - Boomers

76

Female, 26% (24)Male, 73.8% (76)Other, 0.2% (0)Involuntary attrition by age, %
14.8%
62.5%
19.0%
3.7%

Hexagon Annual and Sustainability Report 2023

Voluntary attrition by gender, %, 2023

Female, 25.9% (23)Male, 73.8% (77)Other, 0.3% (0)New hires by age, %Newly hired - Gen Z
Newly hired - Gen Y
Newly hired - Gen X
Newly hired - Boomers

Compliance

Voluntary attrition by age, %
12.5%
39.1%
31.1%
17.4%

management. For the recruitment phase, Hexagon has
adopted inclusive hiring practices for its job postings andtalent pool pipeline, achieved through inclusive language
and gender-neutral university recruiting activities. For
the early career start phase, all Hexagon employees
undergo the Diversity & Inclusion educational programmethat define the rights, expectations and obligations of
all colleagues. In 2023, the completion rate for the DEI
trainings were 78% for all employees. For the careerdevelopment phase, Hexagon has implemented mentoring
programs, trainings, awareness campaigns, workshops,
women’s leadership forums and networks of underrepresented employees to support and encourage a morediverse and inclusive culture and workforce. One example
is the Hexagon women’s network Femme Like You, a
network designed to promote equity and diversity andcreate events where employees can discuss challenges,

Voluntary attrition - Gen Z
Voluntary attrition - Gen Y
Voluntary attrition - Gen X
Voluntary attrition - Boomers

6.7%
59.5%
23.0%
10.7%

pitch ideas and share best practices for building inclusive
workplaces. Also, all senior management are provided
with a manager toolkit workspace to provide the tools andknowledge necessary to lead by example.
Hexagon strives to be a diverse workplace across alllevels of management. At year-end 2023, the Hexagon
BoD consists of 3 women and 4 men while executive
management consists of 1 woman and 12 men. Gender
distribution in leading positions, including divisional
management and their direct reports, was 24% womenand 76% men in 2023. The goal is to reach 30% female
managers by 2025, and Hexagon is currently implementing
a set of initiatives for recruiting, retaining and developing
female leaders to meet the goal by the deadline.

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In promoting equity andinclusion, Hexagon also
ensures its access to agreater range of talent.

Compliance

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Additional information

Discrimination

Any kind of discrimination is completely unacceptable
at Hexagon, no matter if it is exhibited internally or in
relation to customer and supplier relations. Prohibiting
discrimination is part of the Hexagon Code of BusinessConduct and Ethics and the Unfair Discriminationand Harassment Policy. To ensure that discriminatory
behaviour does not exist within the organisation,
employees are trained on expectations and have several
channels to report any discriminatory behaviour. The first
avenue for reporting is through direct access to the HR
leader within their division. If the issue cannot be handled
at the divisional level, the HR EVP is approached. The
Compliance Officer also offers direct communication
opportunities that are managed by the Corporate LegalGroup, through the anonymous third-party whistleblowing
system. Employees who may be subjected to unfair
discrimination and/or harassment have the right to report
it to Hexagon, and there are processes in place to ensure
the employee may do so without fear of victimisation andintimidation. In 2023, 20,315 employees were trained in theanti-harassment course.

Our people — transparency builds trust

Hexagon is proud of its diverse workforce and strives
to increase transparency in employee data to promoteaccountability and highlight improvement areas related
to representation and equality. This is the first employee
report including representation of both women and men
at different job levels globally, and also of ethnic groups in
the US following local legal guidelines. Hexagon’s ambition
is to further support initiatives that foster an inclusive
culture that increases its competitiveness as an employer,
where all employees have same opportunities to grow andprosper.

Hexagon Annual and Sustainability Report 2023

77

Employee category by age
Job level

Under 24

25-40

41-56

Over 57

0.0%
0.2%
4.2%

7.0%
18.7%
51.1%

71.9%
62.3%
34.4%

21.1%
18.9%
10.4%

Executives
Job level A
Job level B

Employee category by genderJob level

Male

FemaleOther gender

Executives
Job level A
Job level B

77.2%
75.0%
76.2%

22.8%
24.6%
23.6%

0.0%
0.4%
0.2%

US data — ethnicity
2023
Hispanic or Latino
White
Black or African American
Native Hawaiian or Pacific Islander
Asian
American Indian or Alaskan Native
Two or more races
Total

2022

6.9%
6.6%
71.2% 73.0%
5.0%
5.3%
0.5%
0.2%
13.9%
12.4%
0.4%
0.8%
2.2%
1.7%
100.0% 100.0%

US data — ethnicity by gender2023
Hispanic or Latino
White
Black or African American
Native Hawaiian orPacific Islander
Asian
American Indian or
Alaskan Native
Two or more races
Total

2022

Male Female

Male Female

4.7%
52.5%
3.1%

2.1%
18.7%
1.9%

4.8%
54.8%
3.2%

1.8%
18.3%
2.0%

0.3%
10.8%

0.1%
3.1%

0.1%
9.7%

0.0%
2.7%

0.3%
1.7%
73.4%

0.1%
0.5%
26.5%

0.6%
1.3%
74.5%

0.2%
0.4%
25.4%

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Environmentally andsocially responsible operations
Hexagon is an enabler of a sustainable future, providing
solutions that address the main environmental and social
challenges that companies and nations face today. In
order to work towards the UN Sustainable Development
Goals and the 2030 Agenda for Sustainable Development,
Hexagon takes accountability for the environmental
challenges in its internal operations as well as in all stepsof the value chain. Hexagon is a signatory of the United
Nations Global Compact (UNGC), which means that thecompany supports and actively promotes its ten principles

on the environment, labour practices, human rights andanti-corruption in its operations and in relation to external
stakeholders. This also means that Hexagon seeks to
conduct business in a responsible and ethical manner andsupport the UN SDGs.

Annual emissions, %Scope 1 & Scope 2
market-based emissions,
tonnes CO2e

Scope 3 by category, %In 2023, Hexagon stipulated the goal of achieving a 95%
reduction of its Scope 1 and 2 carbon emissions by 2030.
The goal will be primarily achieved by improving its energy
efficiency, switching its electricity consumption to renewableby 2027 and by transitioning to a clean vehicle fleet. In 2023,

36,800

Scope 1, 4%
Scope 2 (market-based), 8%
Scope 3, 88%

Purchased goods and services,
49%
Capital goods, 8%
Upstream and downstream
transportation, 7%
Business travel, 8%
Employee commuting, 7%
Use of sold products, 18%
Other Scope 3 categories, 3%-6%

31,905

Share of renewableelectricity in total energy
consumption, %
42

4pp.

Renewable
electricity produced,
MWh34,83346
25,884

13,726

15,399

22

23

22

23

22

35%

23

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the renewable energy ratio in total energy consumption was
46%, and the target will be reached and secured by investingin solar panels at its sites and to purchase renewable energy
certificates (RECs). The share of electric vehicles in the
car fleet was 8% in 2023, and a company car policy will be
adopted to ensure combustion engine vehicles will be phasedout as the leasing contracts are renewed.

Highlight achievements in 2023 includes:• Increased share of purchased or produced renewableelectricity out of total electricity to 46%, compared to 42%
in 2022.
• Increased purchase of renewable energy certificates by
60% compared to 2022.
• Increased total renewable energy produced by 35%
compared to 2022.

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Additional information

Facility improvement programme

Hexagon facilities have started an improvement
programme seeking to boost their resource efficiency to
reduce their impact on the environment. Many facilities
reduced their power consumption in 2023 compared
to 2022, despite an increase in production. At the sametime, Hexagon increased its total installed capacity of
renewable energy production with photovoltaic energy
and managed to increase the renewable energy produced
to ~34’800 MWh (35% increase compared to 2022).
To ensure reduction of its Scope 2 emissions, Hexagon
entered into a green power purchase agreement (PPA)
for its major facilities. Furthermore, Hexagon covers thedemand for renewable electricity in areas where directaccess to renewable energy sources is not feasible via
the purchase of RECs in order to stimulate investment inrenewable energy projects.

• Doubled the share of electric vehicles in total vehicle fleet.

Hexagon Annual and Sustainability Report 2023

Hexagon has also obtained ISO 14001 certifications
for the majority of its production sites. On these as
well as on other sites, environmental management
is approached systematically and with a focus oncontinuous improvement. More information on Hexagon’s
environmental commitments can be found in the Hexagon
Environmental Policy.
Energy consumption by region, %Europe, 36%
Americas, 32%
China, 23%
Rest of the world, 9%2023 outcome of facility improvement programme
Priorities
2023
impactReduce energy
requirements
Offices reducing up to 20%
energy needs

Increase renewableenergy produced~34,800 MWh of renewableenergy produced

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Lower carbon intensity ofenergy purchased
18% reduction in Scope 2
intensity ratio (tCO2 / MEUR
sales)

Promote further
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Board of Directors’ report Corporate governance report

Sustainability considerations in the design process

When developing new products, a robust design phase iscritical to ensure that sustainability considerations areencompassing all products throughout their life cycles.
New solutions are leveraged through Hexagon’s Innovation
Process (HIP), a process that drives the efficiency
and effectiveness of products (hardware, softwareor services) through continuous development andimprovement. In addition to quality and cost management,
ESG criteria were implemented in the process to increasetransparency and enable product development teams
to consider the environmental impact of the alternatives
while they prototype a new/upgraded solution. The
process includes conducting lifecycle assessments(LCAs) of targeted products, assessment of improvement
potentials and assessment of these alternatives during
product development. The LCAs include assessing thematerials water usage, land usage and effects on climatechange together with logistics, manufacturing, usage andend-of-life scenarios. The ambition is to also include dataon the components from suppliers to understand the full
cradle-to-gate environmental impact of each productto support decision-making and drive sales. To ensurethat the HIP is properly leveraged across Hexagon, thecompany provided training to 42 of its key R&D engineersthat are involved in the early-stage prototyping of
hardware products. A dedicated employee is supporting
the process to find environmental hotspots in hardware
design and iterate improvement alternatives. As part of
the Hexagon Innovation Process, each product groupwithin Geosystems receives a recycling passport, which
reviews materials used while it confirms that each productcomplies with the EU Directives on Waste Electrical andElectronic Equipment (WEEE 2012/19/EU) and Restrictionof the use of certain hazardous substances (2011/65/EU).
The recycling passport gives information on the productCompliance

Sustainability report

Financial reports

Additional informationgroups’ reusability, recyclability, treatment, and waste
disposal.

Ethical development of artificial intelligence (AI)softwareHexagon realises that development of AI-driven
technology that optimises and enriches data to prepareorganisations for machine learning and to empower
autonomous operations is not only associated with
opportunities but also with risks. To ensure the AI-driven
solutions generate value for customers and society atlarge and to avoid unexpected negative effects from thesoftware development, Hexagon has defined four key
principles that encompass its innovation and productionof artificial intelligence software:
1. Technology augments what people do — it does not
replace them.
2. System data is owned by Hexagon's customers, adheres
to local laws and respects citizens’ right to privacy.
3. Algorithms and output are transparent, explainable andinterpretable.
4. Actionable results facilitate fair and inclusive
decision-making.
As Hexagon’s innovation activities for artificial intelligencesoftware adheres to the four principles, the company cancertify that the use of its solutions will provide positive
outcomes for its customers while also avoiding legal orcommercial risks.

Minimising carbon emissions from cloud storage

A significant part of Hexagon’s business is softwarerelated, meaning that a large share of the company’s
total carbon emissions is related to the operations of thecloud computing and storage at its providers and internal

Hexagon Annual and Sustainability Report 2023

80

servers. To reduce its cloud waste, which refers to theunnecessary consumption of cloud resources leading
to higher costs without providing significant benefits orvalue, Hexagon initiated a project with one of its major
cloud providers during 2023. The purpose is to map anddecrease its unnecessary emissions through purchasing
server capacity hosted with green energy and to more
efficiently utilise the available server computing andstorage resources. Preliminary results from 2023 indicate
a decrease of 40.5 metric CO2eq tonnes, of which 38.2
metric CO2eq tonnes was saved due to renewable energy
purchases and 2.3 metric CO2eq tonnes were due tocloud efficiences compared to on-premises equivalent
workloads. Since its implementation, Hexagon tracks its
related cloud emissions on a monthly basis.The final effects
and outcomes of the project will be presented in 2024.

Occupational health and safety

The safety of personnel in the workplace is a top priorityfor Hexagon. Ensuring that employees work in a safe andhealthy environment is the key to any successful business.
Hexagon aims to provide a workplace that is free ofincidents and promotes a culture of hazard identification
and awareness, near-misses and incident reporting andself accountability. Where appropriate, Hexagon supports
a flexible workplace and the opportunity to work fromhome. Hexagon is responsible for maintaining a safe work
environment by implementing all applicable health andsafety rules and practices within each Hexagon entity.
Employees are provided with appropriate training andsafety equipment to perform their jobs securely. Each
employee is personally responsible for working in a safemanner, following all health and safety policies andprocedures, participating in safety training and identifying
and reporting any health and safety issues and hazards
to management or the relevant internal stakeholders. In
2023, the number of work-related injuries was 31.

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Certified Pre-Owned Equipment Center

To extend the lifecycles of products at Hexagon andto minimise unnecessary waste, the company has a
programme in place for its used equipment at the largest
hardware divisions. At the Certified Pre-Owned Equipment
Center (CPEC) at the Geosystems division, all used Total
Stations, GPS, HDS and construction tool equipment ischecked by Hexagon’s technical service team and thenfully serviced to provide the same level of reliability as
a new product. It is then brought back to more than 120
countries through refurbished second hand productsales, significantly extending product life usage andavoids unnecessary sourcing and production of newcomponents.
The core principles at the CPEC is to reduce, reuse andrecycle to drive circularity of products and components.
Its goal is to make sustainable tools readily available
globally, facilitating a wider impact on environmental
conservation. The quality refurbishments are ensured
by Hexagon experts to secure the tools undergo topquality refurbishment and repairs, backed by professional
warranty, saving resources and extending tool utility.
The CPEC commitment to environmental and social
responsibility goes beyond business and strives tofostering a positive environmental and societal impact
through every tool it provides.

Hexagon Annual and Sustainability Report 2023

In 2023 alone, Hexagon
refurbished and sold 8,006
units of used items, including
total stations, GPS receivers,
construction instruments
and laser scanners.

In 2023, the CPEC successfully recycled 8,6 tonnes ofmaterials. It also refurbished and sold 8,006 units ofused items, including total stations, GPS receivers,
construction instruments and laser scanners.
At the Manufacturing Intelligence division, over 100
Hexagon service centres are strategically distributed
throughout the world to guarantee customers fastand efficient repairs for their coordinating measuringmachines, supporting a culture among its customers
where updating and renovating equipment is encouraged
to extend its lifecycle.

81In brief

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Additional informationRole model facilities forsustainable operations
Hongdao, China

Wetzlar, Germany

Hexagon has expanded and improved one of its larger
facilities in Hongdao, China, in order to develop a blueprint
for how to build and manage its production sites acrossthe region. The site, with more than 200 R&D engineersand 35,000m2 manufacturing area, has been certified
as carbon neutral since 2020 and produces renewableenergy through local panels covering 80% of its totalenergy needs. It recovers and resuses rainwater to supply
and improve the biodiversity in its green areas and diverts
zero of its waste into landfill. It recycled more than 65% of
the total waste generated in production in 2023.

Located in Germany and part of Hexagon’s global
manufacturing network, the Wetzlar factory is a flagshipin the company’s commitment to sustainability. The
site, with approximately 465 employees, stands in theforefront of Hexagon’s sustainability initiatives and has
set the ambitious goal of achieving carbon neutrality andself-sufficiency. A centerpiece of Wetzlar’s sustainability
efforts is the construction of a solar park, symbolising
an important stride towards self-sufficiency. With the
installation of photovoltaic panels boasting a capacityof 1.5 MWp and battery storage capabilities of 800 kWh,
Wetzlar now operates as an independent entity for a
substantial portion of the year, achieving a 60-70% annual
carbon reduction. The facility has also implemented aseries of initiatives to enhance energy efficiency andreduce carbon emissions, such as electric vehicle charging
stations, catering to the rising demand for electric mobility,
and transitioned to a 100% renewable energy contract for
both electricity and gas consumption in 2020.

Huntsville, US
The Huntsville site in the US, representing the largest
office for Hexagon's Safety, Infrastructure & Geospatial
and Asset Lifecycle Intelligence divisions, has committed
to several green initiatives to help reduce carbon
footprint. In 2023, it purchased renewable energy credits(RECs) covering 100% of its electricity consumption,transitioned the car fleet and vehicles used by facility andsecurity teams to hybrid and electric vehicles, eliminatedchemical treatments on its turf. It is also working tocomplete the first solar project by the end of 2024 and will
be investigating the feasibility of a larger solar project tobe implemented in the next three to five years.

Looking ahead, the factory remains committed to furthering
its sustainability objectives, with plans to complete theinstallation of photovoltaic cells, battery storage and heatpump systems ,and exploration into Bosch hydrogen fuel cell
technology. The journey of Hexagon’s Wetzlar factory serves
as a testament to the company’s ambitions within innovation,
sustainability and corporate responsibility. Throughpioneering initiatives and dedication, Wetzlar aspires tomeaningful change within the industry and beyond.

Hexagon Annual and Sustainability Report 2023

82

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Hexagon Annual and Sustainability Report 2023

83

Responsible supply chain management
Supplier requirements and audits

Hexagon’s compliance policies regarding supply chain
management are set out in the Supplier Code of Conduct
and in various Compliance Programme manuals andprocedures. Hexagon selects suppliers based on anassessment of the overall competitiveness of the offeringand if they live up to the goals and values expressed in
the United Nations Global Compact’s ten principles in
the areas of human rights, labour rights, environmental
impact and anti-corruption. Compliance with the Supplier
Code of Conduct, or other agreed equivalent standard,
is a mandatory qualifying condition for Hexagon to entera business relationship with a supplier. In addition, thirdparty suppliers and subcontractors in Hexagon’s global
supply chain are contractually required to meet theseobligations. The Hexagon policies related to supply chain
management include requirements for:1. screening Hexagon suppliers against applicablesanctions list
2. conducting additional due diligence on suppliers that may
be developing Hexagon business3. appropriate anticorruption and other complianceprovisions in supplier agreements
4. prohibiting acceptance of items of value or other benefits
while knowing or suspecting that it is offered or provided
with an expectation that a business advantage will be
provided by Hexagon

In 2023, Hexagon successfully reached its target of
conducting sustainability supplier audits on 100% of its
key suppliers in risk areas. The purpose of the supplieraudit target was to ensure that the suppliers live up to the
expectation on environmental stewardship of Hexagon
and to prevent any forced labor, child labour or humantrafficking within the value chain. During the year, Hexagon
performed approximately 116 audits of new and existing
suppliers, of which 45 audits were of suppliers in risk
areas. Risk areas were considered as areas defined by
the United Nations Environment Programme FinanceInitiative (UNEPFI) and Transparency International which
consider both environmental and social risks. The total
number of suppliers in risk areas are 93, and all have been
audited in the past three years. During 2023, 3 major nonconformances were found in the audits, none of which
violated any local or international laws but where corrective
measures are expected by Hexagon. All 3 major nonconformances cases were cases of suppliers who did not
perform supplier due diligence in their own supply chain. All
open non-conformances are expected to be solved in 2024.
When existing suppliers fail to comply with Hexagon’scompliance requirements, Hexagon engages with the
supplier and conducts an impact assessment to understandthe root cause. Appropriate follow-up actions consist of
taking suitable actions to ensure that the issue will not be
repeated. Should infringements be deemed significant
and intentional, Hexagon will terminate the suppliercontract and seek a sourcing alternative. Key suppliersof manufacturing entities are evaluated through internal
formal visits, reviews and evaluations to ensure that they
strictly follow the Hexagon Supplier Code of Conduct. Third
party assessment is used in cases where an issue cannot be

verified directly with the supplier. In 2023, 39 ESG supplieraudits were conducted on-site, 73 were conducted throughself-assessment questionnaires, and 4 were conducted
through third-party auditors.

Conflict minerals compliance

A small part of Hexagon’s activities is affected by theregulation of conflict minerals including the Dodd Frank
Act. Hexagon does not source conflict minerals directly,
but some divisions are indirectly affected by regulations
due to sourcing products and materials from suppliers
and sub-suppliers. In such cases Hexagon works in close
collaboration with the suppliers and apply a rigorous
process to collect all necessary data as proof of compliance.
Hexagon maintains a Conflict Minerals Policy outlining thecommitment and actions taken to avoid conflict minerals in
its value chain. Hexagon’s divisions implement processes
to ensure compliance with this policy as is applicable toeach division’s operations. For example, the Autonomy &Positioning division requests current and new suppliers tocomplete a Conflict Mineral Report Template (CMRT) for allparts. The CMRT has been provided by Responsible Minerals
Initiative (RMI) and has been adopted by the industry. The
CMRT file is constantly being revised by RMI with updated
Smelter information and whenever a supplier responseis received the file automatically identifies suspected
Smelters. Hexagon, to best of its knowledge, represents
and certifies that it does not source or receive any minerals,
materials or products containing cassiterite (tin), coltan(tantalum), wolframite (tungsten) or gold (known as “3TG
minerals”) at all sourced from the Democratic Republic ofCongo or adjoining countries.

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Hexagon Annual and Sustainability Report 2023

84

Sustainability Key Performance Indicators
Unit

FY 2023

FY 20221

YoYchangeTotal energy consumed

MWh111,530 120,694-8%Energy intensity ratio

MWh/ MEUR
sales

Sustainability Key Performance Indicators (KPIs)

Environment

FY 2023

FY 2022

YoYchangeTotal number of employeesNo.

24,581

24,001

2%

Total working hours by all employees

hours

Share of women within the Board of Directors%

Share of women at top management level

%

18.4

17.5

1 pp.

Total share of women employed

%

23.6

23.7

0 pp.

Employees covered in Hexagon Share Programme

No.

1,753

-

-

Number of recordable work related injuries

No.

31

-

-

Lost time injury frequency rate (LTIFR)

No.

0.17

-

-

Employees covered by H&S systemNo.

17,135--

Voluntary employee turnover rate, of total workforce

%

7.8

11.0

-3 pp.

Social

20.5

23.4

-12%

Total GHG emissions (Scope 1)

tCO2

15,39913,726

12%

Total electricity consumption

MWh90,461 102,503-12%Electricity consumption from gridMWh68,542

69,374-1%

Renewable electricity produced and consumed on-site MWh

1,608

1,264

27%

Renewable electricity produced

MWh34,83325,88435%

Green electricity and REC consumed

MWh18,28011,726

56%

46

42

4 pp

Share of renewable electricity out of total consumption %Total Indirect GHG emissions (Scope 2, market-based)

Unit

Sustainability Key Performance Indicators (KPIs)

36,329,666

-

-

42.9

40.0

3 pp.

tCO2

31,90536,800-14%

Total Indirect GHG emissions (Scope 2, location-based) tCO2

33,32338,306-13%

Employees covered by collective bargaining
agreements

%

22.5

-

-

Total Scope 3 emissions

tCO2

362,351 350,816

3%

Share of ISO 14001 certified production sites

%

82.8

75.9

7 pp.

GHG emissions intensity ratio Scope 1

tCO2/ MEUR
sales

2.8

2.7

7%

Share of ISO 45001 certified production sites

%

6.9

6.9

0 pp.

GHG emissions intensity ratio Scope 2 (market-based)

tCO2/ MEUR
sales

5.9

7.1

-18%

GHG emissions intensity ratio Scope 2 (market-based)

tCO2/MWh

0.4

0.4

0%

Executives certified in Ethics & Compliance System

No.

411

230

79%

Share of key suppliers in high-risk countries audited

%

100

20

80 pp.

GHG emissions intensity ratio Scope 3

tCO2/ MEUR
sales

66.7

68.0

-2%

Employees engaged in ESG trainings

No.

15,991

NA-

Total hazardous waste generated

MT

160

265

-40%

Total waste recycled

MT

1,700

1,473

15%

Total recycled input materials used

MT

160

-

-

Water consumption

m3

263,385 221,672

19%

GovernanceFull GRI and SASB reporting table can be found on page 133.

1) The environmental data for 2022 was restated to increase accuracy and year-over-year comparabilityIn brief

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Hexagon Annual and Sustainability Report 2023

85

EU Taxonomy
This is the third EU Taxonomy report by Hexagon. Hexagon deems
its Taxonomy eligible revenue for 2023 to be approximately 6.33 %of its total turnover. While being an enabler of sustainability, thesignificant majority of Hexagon’s business activities are currently
not defined in the EU Taxonomy and therefore will not be eligible
with the screening criteria. Hexagon applied the precautionary
principle to determine applicable eligible activities and excluded
activities not clearly defined in the EU Taxonomy.
Total EU Taxonomy-related eligible revenue, OpEx
and CapEx
2023
MEUR

Total eligible revenue
Total eligible OpEx
Total eligible CapEx

344.02
50.06
36.50

2022
2023
2022
MEUR % of total % of total

57.93
12.26
16.71

6.33%
12.47%
4.45%

1.12%
0.6%
3.0%

Hexagon used the EU delegated acts information to determine its
eligible activities. Of the total 2023 revenue, 6.33% is eligible and0.05% is aligned with the criteria defined in EU Taxonomy. Hexagon
has interpreted its relevance in the EU Taxonomy into the following
sections under Climate change mitigation, Climate change adaptation, Circular Economy, Biodiversity and Water:• Electricity generation using solar photovoltaic technology• Infrastructure enabling road transport and public transport• Data-driven solutions for GHG emissions reductions• Provision of IT/OT data-driven solutions• Emergency Services• Manufacture, installation and associated services for leakage
control technologies enabling leakage reduction and prevention
in water supply systems• Conservation, including restoration, of habitats[1], ecosystems[2]and species• Repair, refurbishment and remanufacturing
The eligible economic activity “Electricity generation using solar
photovaltaic technology” are associated with the Archidona solarpark Hexagon acquired and operated during 2021.
The eligible economic activity “Infrastructure enabling road transport and public transport” are associated with isolated activities
related to Hexagon’s professional surveying and mapping services.

The eligible economic activity “Data-driven solutions for GHG emissions reductions” are associated with isolated activities related to
Hexagon’s applied solutions for eMobility and windfarm enginerings services, as well as the optimiser feature for the MineOperate
solution.
The eligible economic activity “Provision of IT/OT data-driven solutions” are associated with solutions related to Hexagon’s solutions
suite at Intergraph Smart Construction, iConstruct, EAM, SDx, PAS
and Jovix.
The eligible economic activity “Emergency services” are associatedwith isolated features related to Hexagon’s OnCall solutions suite.
The eligible economic activity “Manufacture, installation and associated services for leakage control technologies enabling leakage
reduction and prevention in water supply systems” are associatedwith the HxGN Networks solutions suite.
The eligible economic activity "Conservation, including restoration,of habitats[1], ecosystems[2] and species" are associated with iniatives to protect seagrass and salt marsh habitats.
The eligible economic activity “Repair, refurbishment and remanufacturing of electronic and optical products” are associated with
Hexagon’s Certified Pre-Owned Equipment Center.
Alignment:
The activity 4.1 Electricity generation using solar photovoltaic technology (the Archidona solar park) fulfils the EU Taxonomy criteria
for alignment as it has substantial contribution to climate mitigation, meets the criteria for climate adaptation, biodiversity andcircular economy set forth in Appendix A and D and also meets thecriteria of the Minimum Safeguards set forth in the EU Taxonomy,
as it has established processes and policies for due diligence of
Human Rights, Corruption, Taxation and Fair Competition based on
the EU Guiding Principles.
The remaining eligible activities are not considered aligned asthey do not meet the technical screening criteria set forth in the
Delegated Act (2021) 2800 and (2023)2486. While the activities
support climate change adaptation, mitigation, circular economy,
biodiversity and water and do no significant harm to the otherenvironmental goals, there is currently not enough data available
to fully comply with all technical screening criteria set forth in the
Delegated Act (2021) 2800 and (2023)2486.

Definitions:• The total turnover corresponds to Net sales in the consolidated
income statement in the Hexagon 2023 Annual Report. The turnover KPI represents the proportion of the turnover derived fromproducts or services that are taxonomy-eligible and taxonomy
aligned. The taxonomy-eligible activities were screened for associated turnover. Turnover is derived from sale of products andthe provision of services after deducting sales rebates and value
added tax and other taxes directly linked to turnover. Hexagon
revenue streams stem from the sales of information technology solutions in which hardware and software are integrated aswell as services, licenses and other assignments. Revenue fromagreements with customers is reported in the income statement
as Net sales.
• CapEx is defined as investments in intangible assets excluding
goodwill and tangible assets such as property, machinery andother equipment, together with the IFRS 16 right of use assets.
The total CapEx amount can be found in the Hexagon 2023
Annual Report in notes 14-16. The CapEx KPI represents the
proportion of the capital expenditure of an activity that is taxonomy-eligible and taxonomy-aligned. The taxonomy-eligible activities were screened for associated CapEx using cost types. The
taxonomy-aligned CapEx investments mainly consists of intangible assets. Own measures and purchased output from suppliers'
economic activities have not been screened for eligibility in 2023.
• OpEx is defined as direct expenditures relating to the day-to-day
servicing of assets of the property, plant, and equipment thatare necessary to ensure the continued and effective use of such
assets (e.g., research and development, building renovation
measures, short-term lease, maintenance, and repair). The OpEx
KPI represents the proportion of the operating expenditure ofan activity that is taxonomy-eligible and taxonomy aligned. The
taxonomy-eligible activities were screened for associated OpEx
using cost types. Own measures and purchased output from suppliers' economic activities have not been screened for eligibility
in 2023.
• The allocation of the turnover for eligible activities was preparedby using product accounts. CapEx and OpEx were allocated byusing cost types. All activities were isolated when allocating turnover, CapEx and OpEx to avoid double counting.

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86

TurnoverFinancial year 2023

Economic activities (1)2023
Proportion of
Absolute turnoverCode(s) turnover(4),(2) (3), MEUR%

Climatechangemitigation (5),%Substantial contribution criteria

DNSH criteria (Do No Significant Harm’)

Climate Water andBiodiverchange
marine CircularPol- sity andadapta- resources
econ- lution ecosystion (6),(7), omy (8),(9), tems (10),
%
%
%
%
%

Climate Climate Water and Circular
Biodiverchange change
marineeconPol- sity andmitiga- adapta- resources
omy lution ecosystion (11), tion (12),
(13),
(14),
(15), tems (16),
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N

Minimum
safeguards
(17),
Y/N

Taxonomyaligned
proportionof turnover,year 2023
(18),
%

Y

0.05

TaxonomyCategoryaligned(enabling
proportion
activity/of turnover, transitional
year 2022
activity)
(19),
(20),
%
%

A. ELIGIBLE ACTIVITIES
A.1. Eligible Taxonomy-aligned activities
Electricity generation using solar photovoltaic technology
Turnover of eligible Taxonomyaligned activities (A.1)
Of which Enabling
Of which Transitional

4.1.

2.80

0.05

2.80

0.05

254.86
51.57

4.69
0.95

6.49

0.12

1.86

0.03

6.14
5.23

0.11
0.10

15.08

0.28

A.2 Eligible not Taxonomy-aligned activities
Provision of IT/OT data-driven solutions
4.1.
Infrastructure enabling low-carbon
6.1.5.
road transport and public transport
Data-driven solutions for GHG emis8.2.
sions reductions
Conservation, including restoration, of
1.1.
habitats[1], ecosystems[2] and species
Emergency Services
3.1.
Repair, refurbishment and5.1.
remanufacturing
Manufacture, installation and associ1.1.
ated services for leakage control
Turnover of eligible not Taxonomyaligned activities (A.2)
Total (A.1 + A.2)

341.226.28

344.02

6.33

B. NON-ELIGIBLE ACTIVITIES
Turnover of non-eligible activities (B)Total (A + B)

5,091.18 93.67
5,435.2 100.00

100%

-

-

-

-

-

-

Y

Y

Y

Y

Y

0.06

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Hexagon Annual and Sustainability Report 2023

87

CapEx
Financial year 2023

2023

Economic activities (1)Proportion of
CapEx
(4),
%

Climatechangemitigation (5),
%

0.08

0.01

100%

0.08

0.01

26.29
6.73

3.21
0.82

0.00

0.00

0.82

0.10

0.29
0.00

0.03
0.00

2.31

0.28

Absolute
Code(s) CapEx (3),
(2)
MEUR

Substantial contribution criteria
Climate Water andBiodiverchange
marine CircularPol- sity andadapta- resources
econ- lution ecosystion (6),(7), omy (8),(9), tems (10),
%
%
%
%
%

DNSH criteria (Do No Significant Harm’)Mini- Taxonomy- TaxonomyCategory
mum aligned proaligned(enabling
Climate Climate Water and Circular
Biodiverportion of proportion ofactivity/change change
marineeconPol- sity and safemitiga- adapta- resources
omy lution ecosys- guards CapEx, year CapEx, year transitional(17),2023 (18),2022 (19),
activity)tion (11), tion (12),
(13),
(14),
(15), tems (16),Y/N%%(20), %
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N

A. ELIGIBLE ACTIVITIES
A.1. Eligible Taxonomy-aligned activities
Electricity generation using solar photovoltaic technology
CapEx of eligible Taxonomyaligned activities (A.1)
Of which Enabling
Of which Transitional

4.1.

A.2 Eligible not Taxonomy-aligned activities
Provision of IT/OT data-driven solutions
4.1.
Infrastructure enabling low-carbon
6.1.5.
road transport and public transport
Data-driven solutions for GHG emis8.2.
sions reductions
Conservation, including restoration, of
1.1.
habitats[1], ecosystems[2] and species
Emergency Services
3.1.
5.1.
Repair, refurbishment and remanufacturing of electronic and opticalproducts
Manufacture, installation and associ1.1.
ated services for leakage control
CapEx of eligible not Taxonomyaligned activities (A.2)
Total (A.1 + A.2)

36.43

4.45

36.50

4.45

B. NON-ELIGIBLE ACTIVITIESCapEx of non-eligible activities (B)Total (A + B)

782.90 95.55
819.40 100.00

-

Y

Y

Y

Y

Y

Y

0.01

2.34

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OpEx
Financial year 2023

Economic activities (1)2023

Code(s)(2)

ProporAbsolutetion of
OpEx (3), OpEx (4),MEUR%

Substantial contribution criteria
Climatechangemitigation (5),%Climate Water andBiodiverchange
marine CircularPol- sity andadapta- resources
econ- lution ecosystion (6),(7), omy (8),(9), tems (10),
%
%
%
%
%

DNSH criteria (Do No Significant Harm’)MiniTaxono- TaxonomyCategory
mum my-alignedaligned(enabling
Climate Climate Water and Circular
Biodiveractivity/change change
marineeconPol- sity and safe- proportion proportion
mitiga- adapta- resources
omy lution ecosys- guards of OpEx, year of OpEx, year transitional(17),2023 (18),2022 (19),
activity)tion (11), tion (12),
(13),
(14),
(15), tems (16),Y/N%%(20), %
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N

A. ELIGIBLE ACTIVITIES
A.1. Eligible Taxonomy-aligned activities
Electricity generation using solar photovoltaic technology
OpEx of eligible Taxonomyaligned activities (A.1)
Of which Enabling
Of which Transitional

4.1.

0.27

0.07

0.27

0.07

31.98
8.89

7.97
2.21

3.80

0.95

0.43

0.11

1.56
0.70

0.39
0.17

2.44

0.61

A.2 Eligible not Taxonomy-aligned activities
Provision of IT/OT data-driven solutions
4.1.
Infrastructure enabling low-carbon
6.1.5.
road transport and public transport
Data-driven solutions for GHG emis8.2.
sions reductions
Conservation, including restoration, of
1.1.
habitats[1], ecosystems[2] and species
Emergency Services
3.1.
5.1.
Repair, refurbishment and remanufacturing of electronic and opticalproducts
Manufacture, installation and associ1.1.
ated services for leakage control
OpEx of eligible not Taxonomyaligned activities (A.2)
Total (A.1 + A.2)

49.79

12.41

50.06

12.47

B. NON-ELIGIBLE ACTIVITIESOpEx of non-eligible activities (B)Total (A + B)

351.24 87.53
401.30 100.00

100%

-

Y

Y

Y

Y

Y

Y

0.07

0.003

In brief

Financial plan

Board of Directors’ report Corporate governance report

Nuclear and fossil gas related activities
Row

1.

2.

3.

4.

5.

6.

Nuclear energy related activitiesNO
The undertaking carries out, funds or has exposures to research, development, demonstrationand deployment of innovative electricity generation facilities that produce energy from nuclear
processes with minimal waste from the fuel cycle.
NO
The undertaking carries out, funds or has exposures to construction and safe operation of new
nuclear installations to produce electricity or process heat, including for the purposes of district
heating or industrial processes such as hydrogenproduction, as well as their safety upgrades,
using best available technologies.
NO
The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat,including for the purposes of district heating or
industrial processes such as hydrogen production from nuclear energy, as well as their safety
upgrades.
Fossil gas related activitiesNO
The undertaking carries out, funds or has exposures to construction or operation of electricity
generation facilities that produce electricity using
fossil gaseous fuels.
NO
The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation
facilities using fossil gaseous fuels.
NO
The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce
heat/cool using fossil gaseous fuels.

Compliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

Auditor’s report on the statutory
sustainability report
To the general meeting of the shareholders in Hexagon AB (publ),
corporate identity number 556190-4771
Engagement and responsibility
It is the board of directors who is responsible for the statutory sustainability report for the year 2023 on pages 50-89 and that it has
been prepared in accordance with the Annual Accounts Act.
The scope of the audit
Our examination has been conducted in accordance with FAR’s
auditing standard RevR 12 The auditor’s opinion regarding the statutory sustainability report. This means that our examination of thestatutory sustainability report is substantially different and less inscope than an audit conducted in accordance with International
Standards on Auditing and generally accepted auditing standards
in Sweden. We believe that the examination has provided us with
sufficient basis for our opinion.
OpinionA statutory sustainability report has been prepared.
Stockholm 26 March 2024

PricewaterhouseCoopers AB
Bo Karlsson

Authorised Public Accountant

Helena Kaiser de Carolis

Authorised Public Accountant

This is a literal translation of the Swedish original report

A limited assurance of Hexagon's GHG emissions (scope 1
and scope 2) for the year 2023 has also been performed.
Full Auditors Limited Assurance Report on Hexagon's
Greenhouse Gas Emissions can be found on page 129.

89

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

90

Financial reports
Contents
Consolidated income statement

91

NOTE 13 Government grants

107

Signing of the annual report

125

Consolidated statement of comprehensive income

91

NOTE 14 Intangible fixed assets

108

Auditor’s report

126

Consolidated balance sheet

92

NOTE 15 Tangible fixed assets

109

ESG related notes

130

Consolidated statement of changes in equity

93

NOTE 16 Leasing

111

The share

140

Consolidated statement of cash flows

94

NOTE 17 Financial fixed assets

112

Quarterly income statements

143

Parent company income statement

95

NOTE 18 Receivables

113

10-year summary

144

Parent company statement of comprehensive income

95

NOTE 19 Inventories

113

Financial definitions

145

Parent company balance sheet

96

146

97

114

Business definitions

Parent company statement of changes in equity

NOTE 20 Prepaid expenses and accrued income/accrued expenses and deferred income

146

97

114

Currency codes

Parent company statement of cash flows

NOTE 21 Share capital and number of shares
NOTE 22 Pension provisions

115

Shareholder information

147

NOTE 1 Accounting policies

98

NOTE 23 Other provisions

116

NOTE 24 Financial risk management

117

NOTE 25 Financial instruments

119

NOTE 26 Assets pledged and contingent liabilities

121

NOTE 2 Critical accounting estimates and assumptions 100
NOTE 3 Segment reporting

101

NOTE 4 Parent company intra-group purchases and sales 102
NOTE 5 Revenue from contracts with customers

102

NOTE 6 Operating expenses

103

NOTE 7 Other operating income/expenses

104

NOTE 8 Impairment

104

NOTE 9 Earnings from shares in group companies

105

NOTE 10 Financial income and expenses

105

NOTE 11 Income taxes
NOTE 12 Adjustments

NOTE 27 Net assets in acquired and divested businesses 121
NOTE 28 Average number of employees

122

NOTE 29 Employee benefits

122

NOTE 30 Remuneration to senior executives

122

NOTE 31 Remuneration of the group’s auditors

124

NOTE 32 Related-party disclosures

124

106

NOTE 33 Subsequent events after the financial
year’s end

124

107

NOTE 34 Appropriation of earnings

124

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Consolidated income
statement
MEUR

Net sales
Cost of goods sold
Gross earnings
Sales expenses
Administration expenses
Research and development expenses
Other operating income
Other operating expenses
Operating earnings1
Financial income and expenses
Financial income
Financial expenses
Earnings before tax
Tax on earnings for the year
Net earnings

Earnings include depreciation,amortisation and impairment of– of which amortisation of surplus values
Average number of shares, thousands
Average number of shares after dilution, thousands
Earnings per share, euro centEarnings per share after dilution, euro cent

Additional information

Hexagon Annual and Sustainability Report 2023

91

Consolidated statementof comprehensive income
MEUR

2023

2022

871.8

1,019.1

22

-10.4

20.8

11

1.5

-5.0

-8.9

15.8

-366.1

435.4

11.3

-35.5

-354.8-363.7

399.9
415.7

Total comprehensive income

508.1

1,434.8

Attributable to:Parent company shareholders
Non-controlling interest

497.3
10.8

1,424.1
10.7

Note

2023

2022

3, 5, 246, 125,435.2-1,892.0
3,543.2

5,160.5-1,799.5
3,361.0

Net earnings

6, 12
6, 12
6, 12
7, 12
7, 12
3, 13, 22, 29, 30, 31-1,159.3-481.2-674.5198.1-210.3
1,216.0-1,019.3-416.7-607.1
187.7-218.91,286.7

Items that will not be reclassified to income statement
Remeasurement of pensions
Tax attributable to items that will not be reclassified to income
statement
Total items that will not be reclassified
to income statement, net of tax

10, 24, 25
10, 16, 24, 25
3

13.1-168.4
1,060.7

8.8-47.5
1,248.011-188.9871.8-228.91,019.1

858.9
12.9

1,007.6
11.5-380.7-231.1-563.0-115.9-467.0-107.7

Attributable to:Parent company shareholders
Non-controlling interest
1) Of which adjustments

Financial reports

12

21 2,687,690 2,693,019
21 2,706,141 2,706,294
32.0
31.7

37.4
37.2

Note

Other comprehensive income:Items that may be reclassified subsequently
to income statement
Exchange rate differences
Tax attributable to items that may be reclassified subsequently toincome statement:
Tax attributable to effect of translation differences
Total items that may be reclassified subsequently
to income statement, net of tax
Other comprehensive income, net of tax

11In brief

Financial plan Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

92

Consolidated balance sheet
MEUR

ASSETS
Fixed assets
Intangible fixed assets
Tangible fixed assets
Right-of-use assets
Other long-term securities holdings
Other long-term receivables
Deferred tax assets
Total fixed assets
Current assets
Inventories
Customer receivables
Current tax receivables
Other receivables – interest bearing
Other receivables – non-interest bearing
Prepaid expenses and accrued income
Short-term investments
Cash and bank balances
Total current assets
TOTAL ASSETS

Note

2023-12-31

2022-12-31

MEUR

SHAREHOLDERS’ EQUITY AND LIABILITIESShareholders’ equity
Share capital
Other capital contributions
Revaluation reserve
Translation reserve
Retained earnings
Shareholders’ equity attributable toParent company shareholders

8, 14
15
16
17, 2517, 18, 25
11

12,993.7
600.2
200.4
129.0
29.1
179.3
14,131.7

12,805.6
592.9
198.0
78.1
36.4
122.3
13,833.3

19
5, 18, 251125
18, 2520, 2524, 2524, 25584.7
1,303.1
12.8
1.0
103.4
200.0
133.0
414.1
2,752.1
16,883.8

577.2
1,285.8
13.3
0.1
108.0
173.0
95.4
390.9
2,643.7
16,477.0

Note2023-12-31

2022-12-31

21

85.8
3,378.4-4.8
383.0
6,171.5

85.8
3,378.4-4.8
737.8
5,633.0

10,013.9

9,830.2

32.2
10,046.1

34.4
9,864.6

22
23
11
25
16
25

56.9
8.1
580.0
2,831.7
152.0
124.4
3,753.1

53.9
9.5
581.8
3,032.4
145.5
121.9
3,945.0

25
25
11
25
16
25
12, 2320, 2520, 25

288.5
83.1
6.5
1,040.2
59.5
190.8
159.4
790.4
466.2
3,084.6
16,883.8

309.8
124.3
77.1
633.8
62.4
176.4
59.2
741.2
483.2
2,667.4
16,477.0

Non-controlling interest
Total shareholders’ equity
Long-term liabilities
Provisions for pensions
Other provisions
Deferred tax liabilities
Long-term liabilities – interest bearing
Lease liabilities
Other long-term liabilities – non-interest bearing
Total long-term liabilities
Current liabilities
Accounts payable
Advance payments from customers
Current tax liabilities
Current liabilities – interest bearing
Lease liabilities
Other liabilities – non-interest bearing
Other provisions
Deferred income
Accrued expenses
Total current liabilities
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIESIn brief

Financial plan Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

93

Consolidated statement of changes in equity
MEUR

Opening shareholders’ equity, 2022-01-01
Total comprehensive income
Transactions with non-controlling interest
Repurchase of treasury shares
Dividend
Share-based programme (LTIP)
Closing shareholders’ equity, 2022-12-31
Total comprehensive income
Repurchase of treasury shares
Dividend
Share-based programme (LTIP)
Closing shareholders’ equity, 2023-12-31

Shareholders’ equity
attributable to parent
company shareholders Non-controlling interest

Share capital

Other capital
contributions

Revaluation reserve

Translation reserve

Retained earnings

85.8

3,378.4

-4.8

337.9

4,934.8

8,732.1

32.6

8,764.7

-

-

-

399.9

1,024.2

1,424.1

10.7

1,434.8

85.8

3,378.4

-4.8

737.8

0.3
-71.0
-295.840.5
5,633.00.3-71.0-295.840.5
9,830.2

-0.3
-8.6
34.4

-71.0
-304.440.5
9,864.6----354.8

852.1

497.3

10.8

508.1

85.8

3,378.4

-4.8

383.0

-47.1
-322.856.3
6,171.5-47.1-322.856.3
10,013.9

-13.0
32.2

-47.1
-335.856.3
10,046.1

Share capital is described in detail in Note 21.
Other contributed capital includes, among others, premium reserves and statutory reserves.
The revaluation reserve relates to fair value adjustments related to financial assets measured at fair value through othercomprehensive income
The translation reserve is the net of currency translation differences related to foreign subsidiaries and the effect after
tax of the currency hedging of net assets made in foreign subsidiaries.
Retained earnings include all historical net earnings after tax excluding non-controlling interest less dividends paid,
including remeasurements of pensions posted in other comprehensive income.
Non-controlling interest are the shares of equity that pertain to non-controlling interest (minority) in certain subsidiaries.

Total shareholders’equityIn brief

Financial plan Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

94

Consolidated statement of cash flows
MEUR

Cash flow from operating activities
Operating earnings
Adjustments for items in operating earnings not affecting cash
flow:
Depreciation, amortisation and impairment
Change in provisions
Capital gain/loss on divestments of fixed assets
Share programme expenses
Other
Interest received
Interest paid
Tax paid
Cash flow from operating activities beforechanges in working capital
Cash flow from changes in working capital
Change in inventories
Change in current receivables
Change in current liabilities
Cash flow from changes in working capital
Cash flow from operating activities1
Cash flow from ordinary investing activities
Investments in intangible fixed assets
Investments in tangible fixed assets
Divestments of tangible fixed assets
Cash flow from ordinary investing activities
Operating cash flow

Note

2023

2022

1,216.0

1,286.7

563.0
46.2
-10.2
56.3
13.3
-159.8-276.2

467.0
-8.4
-1.3
40.5
-6.0
8.6
-46.6
-235.91,448.6

1,504.6

-23.2
-57.5
2.5
-78.2
1,370.4-131.5-196.2153.9-173.81,330.8

MEUR

Cash flow from other investing activities
Investments in subsidiaries
Investments in financial fixed assets
Divestments of financial fixed assets
Cash flow from other investing activities
Cash flow from financing activities
Borrowings
Repayment of debt
Repurchase of treasury shares
Dividend to parent company shareholders
Dividend to non-controlling interests in subsidiaries
Cash flow from financing activities
Cash flow for the year

Note

2023

2022

27
17
17

-375.8-63.8
7.4-432.2-1,194.8-59.2
9.1-1,244.9

24, 2524, 2521839.6-706.0-47.1-322.8-13.0-249.390.6

1,586.2-717.5-71.0-295.8
-8.6
493.3
26.5

486.3
-29.8
90.6
547.1

472.1
-12.3
26.5
486.3

-81.5

-41.9

Cash and cash equivalents, beginning of year2
Effect of translation differences on cash and cash equivalents
Cash flow for the year
Cash and cash equivalents, end of year2
1) Of which non-recurring cash flow2) Cash and cash equivalents include short-term investments and cash and bank balances

14
15
15

-489.9-136.728.3-598.3772.1-413.9-153.614.8-552.7778.1

In brief

Financial plan Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Parent company income
statement
MEUR

Net sales
Administration expenses
Operating earnings
Financial income and expense
Earnings from shares in group companies
Financial income
Financial expenses
Earnings before tax and appropriations

Additional information

Hexagon Annual and Sustainability Report 2023

95

Parent company statementof comprehensive income
Note

2023

2022

MEUR

4
4, 6, 29, 30, 31

26.3
-41.4
-15.1

19.9
-45.9
-26.0

Net earnings
Other comprehensive income
Total comprehensive income

9
10
10

1,807.8
161.0-317.1
1,636.6-1,283.3
216.4-118.0-1,210.9

7.5
14.7
1,658.8-2.6-14.7-1,228.2

3.7
1,662.5-12.0-1,240.2

Appropriations
Group contribution, net
Change in profit equalisation reserves
Earnings before tax
Tax on earnings for the year
Net earnings

Financial reports

11

2023

2022

1,662.5
1,662.5-1,240.2-1,240.2

In brief

Financial plan Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

96

Parent company balance sheet
MEUR

ASSETS
Fixed assets
Intangible fixed assets
Tangible fixed assets
Total intangible and tangible assets
Financial fixed assets
Shares in group companies
Receivables from group companies
Other financial fixed assets
Deferred tax assets
Total financial fixed assets
Total fixed assets
Current assets
Current receivables
Receivables from group companies
Tax receivables
Other receivables
Prepaid expenses and accrued income
Total current receivables
Cash and bank balances
Total current assets
TOTAL ASSETS

Note

2023-12-31

2022-12-31

14
15

7.0
0.4
7.4

6.4
0.0
6.4

17
17
17
11

13,541.7
1,365.5
1.3
3.4
14,911.9
14,919.3

13,488.9
424.7
1.2
13,914.8
13,921.2

11
20

1,530.9
0.1
0.5
2.2
1,533.7

974.8
0.2
1.4
976.4

60.2
1,593.9
16,513.2

33.3
1,009.7
14,930.9

MEUR

SHAREHOLDERS’ EQUITY AND LIABILITIESShareholders’ equity
Restricted equity
Share capital
Reserve for capitalised development expenses
Statutory reserve
Total restricted equity

Note2023-12-31

2022-12-31

21

85.8
7.0
314.3
407.1

85.8
6.4
314.3
406.5

2,903.1
3,023.1
5,926.2
6,333.3

2,903.1
1,731.0
4,634.1
5,040.6

-

14.6
14.6

1.3
1.3

1.2
1.2

25

2,831.6
2.7
2,834.3

3,032.3
3,032.3

25

1,032.4
2.1
6,299.4
0.2
10.2
7,344.3
16,513.2466.8
1.5
6,344.7
8.9
0.3
20.0
6,842.2
14,930.9

Non-restricted equity
Premium reserve
Retained earnings
Total non-restricted equity
Total shareholders’ equity
Untaxed reserves
Total untaxed reserves
Provisions
Other provisions
Total provisions
Long-term liabilities
Liabilities to credit institutions
Liabilities to group companies
Total long-term liabilities
Current liabilities
Liabilities to credit institutions
Accounts payable
Liabilities to group companies
Current tax liabilities
Other liabilities
Accrued expenses and deferred income
Total current liabilities
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES

1120

In brief

Financial plan Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Parent company statementof changes in equity

MEUR

Opening balance2022-01-01
Total comprehensive
incomeSharecapitalPaid-in,Reserve for
non-regiscapitalised
tered share development Statutory
capitalexpensesreserve

Hexagon Annual and Sustainability Report 2023

MEUR

Premium Retained
reserve earnings

Total shareholders’equity

85.8

-

3.0

314.3

2,903.1 3,341.4

6,647.6

-

-

-

-

- -1,240.2-1,240.2

-

-

3.4
-

-

-

-3.4
-295.8-295.8

Capitalisation of development expenses
Dividend
Repurchase of treasury shares
Closing balance2022-12-31

-

-

-

-

-

-71.0

-71.0

85.8

-

6.4

314.3

2,903.1

1,731.0

5,040.6

Total comprehensive
income----- 1,662.5

1,662.5

-

-

0.6
-

-

-

-0.6
-322.8-322.8

-

-

-

-

-

-47.1
0.1

-47.1
0.1

85.8

-

7.0

314.3

2,903.1

3,023.1

6,333.3

Capitalisation of development expenses
Dividend
Repurchase of treasury shares
Rounding
Closing balance2023-12-31

Additional information

97

Parent company statementof cash flows

Unrestricted shareholders’ equity

Restricted shareholders’ equity

Financial reports

Note

Cash flow from operating activities
Operating earnings
Adjustment for operating earnings items not affecting cash flow:
Depreciation, amortisation and impairment
Change in provisions
Unrealised exchange rate gains and losses
Dividends received
Financial income received
Financial expense paid
Tax paid
Cash flow from operating activities beforechanges in working capital
Cash flow from changes in working capital
Change in current receivables
Change in current liabilities
Cash flow from changes in working capital
Cash flow from operating activities
Cash flow from investing activities
Investments in intangible fixed assets
Investments in tangible fixed assets
Investments in financial fixed assets
Change in long-term receivables, group companies
Change in long-term payables, group companies
Cash flow from investing activities
Cash flow from financing activities
Borrowings
Repayment of debt
Provisions
Acquisition of treasury shares
Dividend to shareholders
Cash flow from financing activities
Cash flow for the year
Cash and cash equivalents, beginning of year1
Effect of translation differences on cash and bank
Cash flow for the year
Cash and cash equivalents, end of year1
1) Cash and cash equivalents include cash and bank balance

14
15
17

21

2023

2022

-15.1

-26.0

1.1
6.8
766.3
159.7
-304.3
-8.6

0.3
14.8
-73.8
61.7
215.7
-116.2
-0.2

605.9

76.3

-555.9989.9434.0
1,039.9-454.0-280.7-734.7-658.4

-1.7
-0.4
-46.3
-946.22.7-991.9-3.6
0.0-330.9
287.9
-46.6

839.4
-474.7-14.7-47.1-322.8-19.9
28.1

1,577.9-645.3-71.0-295.8565.8-139.2

33.3
-1.2
28.1
60.2

93.0
79.5
-139.233.3

In brief

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Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

98

Notes
NOTE 1 Accounting policies

The consolidated accounts of Hexagon have been prepared inaccordance with the International Financial Reporting Standards(IFRS)issued by the International Accounting Standards Board(IASB) and interpretation statements by the International IFRSInterpretation Committee (IFRIC), which have been approved by theEuropean Commission for application within the EU.
Furthermore, the recommendation RFR 1 Supplementary accounting rules for corporate groups issued by the Swedish Financial
Reporting Board have been applied.
The Parent Company applies the Annual Accounts Act and therecommendation RFR 2 Accounting for legal entities. The recommendation means that the Parent Company applies the sameaccounting policies as the Group, except in those cases when the
Annual Accounts Act or current tax rules limits the opportunities toapply IFRS. Differences between the accounting principles appliedby the Parent Company and the Group are outlined under Accounting Policies in the Parent Company on the next page.

Application of new standards from 2024
New standards, amended standards and interpretations thathave not entered into force, have not been applied in advance inthe financial reports of Hexagon and are not expected to haveany material impact on the financial statements of Hexagon.
Basis of reporting for the Parent Company and the GroupThe functional currency of the Parent Company is EUR as is thepresentation currency for the Parent Company and the Group.
The financial reports are presented in EUR. All amounts, unlessindicated otherwise, are rounded off to the nearest million with
one decimal.
Assets and liabilities are reported at historical cost except for
certain financial instruments which are reported at fair value.
Receivables and liabilities or income and expenses are only offset if required or explicitly permitted by an accounting standard.

date. The Group’s operating cycle is assessed to be less than one
year.
Consolidated financial statements
The consolidated financial statements consolidate the Parent
Company and the other companies in which the Parent Company
has a controlling influence, that is, is exposed or has right tovariable returns from its involvement and has the ability to affectthose returns through its involvement.
Companies or businesses acquired (acquisitions) are accounted
for under the purchase method. The method involves a businesscombination to be regarded as a transaction in which the Group indirectly acquires the assets of the business and assumes its liabilities.
The Group’s acquisition cost is determined through a purchase priceallocation in connection with the acquisition. The acquisition costis the sum of the fair value at the acquisition date of what is paid in
cash, assumed liabilities or issue of own shares.

On 26 March 2024, the Board of Directors and the President andCEO approved this annual report and consolidated accounts for
publication and they will be presented to the Annual General
Meeting on 29 April 2024 for adoption.

Preparing the financial statements in compliance with IFRS
requires that Management make judgements and estimates aswell as make assumptions that affect the application of accounting principles and the amounts recognised as assets, liabilities,
income and expenses. The actual outcome may diverge fromthese estimates and assumptions. Estimates and assumptions
are reviewed continuously. Changes of estimates are recognisedin the period when the change is made if the change only affects
current period or in that period when the change is made andcoming periods if the change affects both current period andcoming periods.

Application of new and amended standards from 2023
New changes in standards and interpretations that enteredinto force from 1 January 2023 are not expected to have had any
material impact on the financial statements of Hexagon.

Judgements made by Management for the application of IFRS
that have a substantial impact on the financial reports and estimates made that may lead to significant adjustments in coming
years’ financial reports are described in more detail in Note 2.

Contingent considerations are often conditional by future goals
on sales or performance. At acquisition date, an estimation of thefulfilment of the goals is made. The contingent consideration ismeasured at fair value and included in the acquisition cost andrecognised as a financial liability in accordance with IFRS. Longterm contingent considerations are discounted to present value.
The measurement to fair value is initially based on the expected
outcome of the acquired company’s sales or performance. Contingent considerations are subsequently measured at fair value andessential effects of remeasurements are recognised in the income
statement in accordance with IFRS. If a revenue is recognised asa consequence of a change in estimation, the surplus values fromthe acquisition will be tested for impairment. If the impairment test
results in an impairment, the expense will meet the revenue fromthe remeasurement of the contingent consideration. Transaction
costs are expensed in the income statement when incurred.

The group has applied the temporary exception issued by the
IASB in May 2023 from the accounting requirements for deferredtaxes in IAS 12. Accordingly, the group neither recognises nor
disclosures information about deferred tax assets and liabilities
related to Pillar Two income taxes.

Classification
Fixed assets and long-term liabilities essentially consist ofamounts expected to be realised or settled after twelve months
from the balance sheet date. Current assets and short-term
liabilities essentially consist only of amounts expected to berealised or settled within twelve months from the balance sheet

Identifiable assets acquired and liabilities assumed are recognised initially at their fair values at the acquisition date. Exceptions are made for acquired tax assets and liabilities, employee
benefits, stock-based compensation and assets held for sale,valued in accordance with the principles described for each itemin in each standard.

The accounting policies and calculation methods applied by theGroup are consistent with those of the previous financial year
except as below.

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Financial plan Board of Directors’ report Corporate governance report

NOT 1 Accounting policies, cont.

Goodwill recorded represents the difference between the acquisition cost of group companies’ shares, the value of non-controlling interest in the acquired business and the fair value ofpreviously owned shares and on the other hand, the purchaseprice allocation of the assets acquired and liabilities assumed.
For goodwill disclosures, see Note 14 Intangible fixed assets.
Non-controlling interests are recognised at the acquisition date,either at its fair value or at its proportionate share of the carrying
value of the acquires identifiable assets and liabilities. Acquisition of non-controlling interest is reported as transactions
between shareholders, i.e. within equity.
Group companies’ financial statements are included in the consolidated accounts as of the date when control occurs (acquisition date) until the control ceases.
When control of the Group company ceases, but the Groupretains shares in the company, remaining shares are initiallyreported at fair value. The gain or loss from remeasurement isrecorded in the income statement.
Translation of financial reports to EUR
Assets and liabilities in operations with a functional currency
other than EUR are translated at the closing day exchange rateand income statements are translated at average exchange
rates for the period. The resulting translation differences arerecognised directly in other comprehensive income. The amountis recognised separately as a translation reserve in equity. In
case of divestment of an operation with a functional currency
other than EUR the accumulated translation differences related
to the divested operation are reclassified from equity to income
statement at the time of recognition of capital gain or loss fromthe divestment.

Compliance

Sustainability report

Financial reports

Additional information

Monetary long-term items towards businesses with a functional
currency other than EUR, for which settlement is not planned orwill probably not occur within the foreseeable future, are partof the company’s net investment. Translation differences onsuch monetary items, which comprise part of the company’s net
investment are recognised in other comprehensive income andaccumulated in the translation reserve in equity.
Transactions, assets and liabilities other currencies than EUR
Transactions in non-EUR currencies are recognised in the functional currency at the exchange rate on the transaction day.
Monetary assets and liabilities are translated to the functional
currency on the closing day at the exchange rate then in effect.
Exchange rate differences that arise through these translations
are recognised in the income statement.
Eliminated transactions
Intra-Group receivables and liabilities, revenue or expenses andgains or losses that arise from transactions between group companies are eliminated in their entirety in the preparation of theconsolidated accounts. Losses are eliminated in the same way as
gains, but only to the extent that there is no impairment loss.
Earnings per share
The calculation of earnings per share is based on net earnings
attributable to the Parent Company shareholders and on theweighted number of shares outstanding during the year. The calculation of earnings per share after dilution takes into accountthe quarterly calculated dilutive effect from any potential common shares.

Hexagon Annual and Sustainability Report 2023

99

Accounting policies in the Parent Company
The Parent Company applies the same accounting principles as
the Group with the following deviations:• In the Parent Company, the exemption in RFR 2 for IFRS 9 Financial Instruments is applied. This means, among other things, that
financial instruments are valued based on acquisition value andthe principles of impairment testing of loss risk provisions in
IFRS 9 are applied to the Parent Company’s short-term receivables and financial fixed assets.
• In the Parent Company, the exemption in RFR 2 for IFRS 16
Leasing Agreements is applied and the costs for all leasing
agreements are reported on a straight-line basis over the leasing
period.
• In the Parent Company participations in group companies arereported at acquisition value less any impairment.
• Acquisition value of shares in subsidiaries includes transaction
costs and contingent consideration.
• Non-monetary assets acquired in a currency other than EUR arereported at historical exchange rates. Other assets and liabilities
in currencies other than EUR are reported at the exchange rateon the balance sheet date.
• The Parent Company applies the alternative rule for group contributions and reports both submitted and received group contributions and appropriations in the income statement.
Dividends
The dividend proposed by the Board of Directors reduces earnings available for distribution and is recognised as a liability whenthe Annual General Meeting has approved the dividend.
Approval of accounts
The Parent Company’s and the consolidated financial statements will be presented to the Annual General Meeting for adoption on 29 April 2024.

In brief

Financial plan Board of Directors’ report Corporate governance report

NOTE 2 Critical accounting estimatesand assumptions

The critical accounting estimates and assumptions that are
addressed in this section are those that Company Management
and the Board of Directors regard as the most important forunderstanding Hexagon’s financial reporting. The information
is limited to areas that are significant considering the degreeof impact and underlying uncertainty. Hexagon’s accounting
estimates and assumptions are based on historical experienceand assumptions that company management and the Board of
Directors regard as reasonable under the current circumstances.
The conclusions based on these accounting estimates constitutethe foundation for the carrying amounts of assets and liabilities,
in the event that they cannot be established through informationfrom other sources. The actual outcome may differ from theseaccounting estimates and assumptions.
Customer contracts
Parts of Hexagon’s sales derive from major and complex customer contracts. The critical estimates of customer contracts
include establishing the amounts that are to be recognised asincome and when the income should be recognised. For example,
company management makes estimates of completed performance in relation to the contractual terms and conditions, theestimated total contractual costs and the proportion of thecontract that has been completed at a certain point in time. The
degree of completion is established by setting incurred cost in
relation to total costs required to complete the contract. The
estimations are also base for any loss provision, if any.
Hexagon also enters into revenue agreements that contain multiple elements, such as hardware, software and/or services. For
these agreements, Hexagon need to assess if revenue shouldbe allocated to each element as different accounting principles
apply for these elements.

Compliance

Sustainability report

Financial reports

Additional information

Intangible assets
Intangible assets within Hexagon concern essentially pertain to
goodwill, trademarks and other assets as a result of acquisition,such as customer relationships and technology. Goodwill andother acquired intangible assets with an indefinite life are notsubject to annual amortisation, while other intangible assets
are amortised. Insofar as the underlying operations develop
negatively, an impairment requirement may arise. Impairment
test is implemented if necessary, but at least once a year. Suchintangible assets are subject to annual impairment testing,which is essentially based on the value in use, making assumptions about the sales trend, the Group’s profit margins, on-goinginvestments, changes in working capital and discount interest
rate. Company management considers the assumptions applied
to be compatible with the data received from external sources of
information or from previous experience. Hexagon’s goodwill on
31 December amounted to 9,616.6 MEUR (9,599.5). Other intangible assets not subject to amortisation amount to 1,073.9MEUR(1,060.4) as of this date. Performed impairment tests demonstrate that reported values are defendable.
Tax assets and liabilities
The Board of Directors and Company Management continuously
assess the carrying amount of both current and deferred tax
assets and liabilities. For deferred tax assets, Hexagon has toassess the probability of whether it will be possible to utilise thedeductible temporary differences that give rise to deferred tax
assets to offset future taxable profits. In addition, in certain situations, the value of the deferred tax assets and liabilities may
be uncertain due to ongoing tax processes, for example. Accordingly, the value of deferred tax assets and liabilities may deviate
from these estimates due to a change in future earning capacity,changed tax regulations or the outcome of examinations byauthorities or tax courts of issued or not yet issued tax returns.
When assessing the value of deferred tax assets and liabilities,
Hexagon has to form an opinion of the tax rate that will apply at
the time of the reversal of the temporary differences. Hexagon

Hexagon Annual and Sustainability Report 2023

100

recognised deferred tax liabilities, net in an amount of 400.7
MEUR (459.5) net, at the end of 2023. At the same date, the Group
had tax-loss carry-forwards with a value of 42.6 MEUR (49.7) thatwere not recognised as assets. These assets could not be capitalised based on assessments of the opportunity to utilise thetax deficits. In comparison with the final outcome, the estimates
made concerning both deferred tax assets and liabilities could
have either a positive or a negative impact on earnings.
Pension obligations
Within Hexagon, there are defined-benefit pension schemes
based on significant assumptions concerning future benefits
pertaining to either the current or prior workforce. Pension obligations amounted to 52.7 MEUR (48.2) at the end of 2023. Whencalculating the pension liability, a number of actuarial assumptions are of major significance to the outcome of the calculation.
The most critical pertain to the discount interest rate on the
obligation, the rate of pay increases, employee turnover and estimated length of life. A reduced discount interest rate increases
the recognised pension liability. The actual outcome could deviate from the recognised amount if the applied assumptions prove
to be wrong.
Business combination
Hexagon acquire companies on a continuous basis. In connection
with the acquisitions, acquired assets and assumed liabilities arevalued to fair value in a purchase price allocation analysis. The
valuation is to a certain extent based on management assessment of the future earnings of the acquired company. Many of
the acquisition deals contain contingent consideration which
is based on the outcome of the acquired company earnings fora predetermined period. The fair value of contingent considerations recognised as a liability is reviewed on a regular basis,
which requires management to assess the future performance of
the acquired company. An inaccurate assessment of this might
result in overstated acquired assets or liabilities for contingent
considerations.

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Financial plan Board of Directors’ report Corporate governance report

NOTE 3 Segment reporting

Hexagon’s Board of Directors is responsible for determining theGroup’s overall objectives, developing and monitoring the overall strategy, decisions on major acquisitions, divestments andinvestments and ongoing monitoring of operations.
The President is responsible for leading and controlling Hexagon’s
operations in accordance with the strategy determined by the
Board. The President is therefore the Group’s chief operating
decision maker (CODM) and is the function that internally within
the Hexagon Group allocates resources and evaluates results. The
Group’s chief operating decision maker assesses the performancein the operating segments based on earnings before financial
items and adjustments. Financial items and taxes are reported for
the Group as a whole.
Hexagon’s operations are organised, governed and reported
based on the two operating segments Geospatial Enterprise
Solutions and Industrial Enterprise solutions. The operating segment Geospatial Enterprise Solutions has sensors for capturing
data from land and air as well as sensors for positioning via satellites. The sensors are complemented by software (GIS) for creation of 3D maps and models, which are used for decision-making
in a range of software applications, covering areas such as surveying, construction, public safety and agriculture. The operating
segment Industrial Enterprise Solutions provides metrology
systems that incorporate the latest in sensor technology for fast
and accurate measurements, as well as CAD (computer aided
design) and CAM (computer aided manufacturing) software. The
solutions within this segment optimise design, processes andthroughput in manufacturing facilities and create and leverageasset management information critical to the planning, construction and operation of plants and process facilities in a number of industries such as automotive, aerospace and oil and gas.
The two segments have separate product offerings and customer
groups and hence differentiated risk composition. There is marginal sales between the two operating segments. Both segments
are applying the same accounting principles as the Group. Hexagon’s internal reporting, representing the base for detailed review
and analysis, is designed in alignment with the described division
into operating segments. Sales within each operating segment are
additionally analysed geographically.
From 2024 Hexagon will change its segments reporting and reportrevenues and adjusted operating earnings (EBIT1) for the operating
divisions Manufacturing Intelligence, Asset Lifecycle Intelligence,
Geosystems, Autonomous Solutions and Safety, Infrastructure &Geospatial.

Compliance

Sustainability report

Financial reports

2023

Additional information

Hexagon Annual and Sustainability Report 2023

Group expenses
Total segments and eliminations

101

IES

GES

Net sales
Operating expenses
Adjusted operating earnings (EBIT1)

2,802.0-1,987.7
814.3

2,638.0-1,830.5807.5

5,440.0-3,818.2
1,621.8

-4.8
-20.3
-25.1

5,435.2-3,838.5
1,596.7

Adjustments
Operating earnings (EBIT)-183.0631.3-132.4675.1-315.4
1,306.4

-65.3
-90.4

-380.7
1,216.0-155.3-245.7-155.3
1,060.7

Financial income and expenses
Earnings before tax
Operating assets
Operating liabilities
Net operating assets

Group

9,788.2-1,179.2
8,609.0

6,445.7-829.85,615.9

16,233.9-2,009.0
14,224.9-248.1
248.4
0.3

15,985.8-1,760.6
14,225.2

Investments in fixed assets

242.9

433.0

675.9

4.3

680.2

Average number of employees
Number of employees at year-end
Depreciation, amortisation and impairment

13,501
13,605-255.7

10,895
10,803-299.824,396
24,408-555.5

152
173
-7.5

24,54824,581-563.0IES

GESGroup expenses
Total segments and eliminations

Group

2,638.5-1,883.4
755.1

2,537.0-1,750.5
786.5

5,175.5-3,633.9
1,541.6

-15.0
-8.8
-23.8

5,160.5-3,642.7
1,517.8-128.8
626.3

-39.6
746.9

-168.4
1,373.2

-62.7
-86.5

-231.1
1,286.7-38.7-125.2-38.7
1,248.02022

Net sales
Operating expenses
Adjusted operating earnings (EBIT1)
Adjustments
Operating earnings (EBIT)
Financial income and expenses
Earnings before tax
Operating assets
Operating liabilities
Net operating assets

10,109.1-1,212.5
8,896.6

5,876.3-826.85,049.5

15,985.4-2,039.3
13,946.1-245.5248.4
2.9

15,739.9-1,790.9
13,949.0

Investments in fixed assets

240.1

374.6

614.7

20.2

634.9

Average number of employees
Number of employees at year-end
Depreciation, amortisation and impairment

12,93913,249-232.3

10,134
10,626-231.923,07323,875-464.2

123
126
-2.8

23,19624,001-467.0In brief

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Financial reports

Additional information

NOTE 3 Segment reporting, cont.

Geographical markets

Operating assets
Net sales by country4

EMEA
Americas2
Asia3
Elimination of intra-group items/
adjustments
Group
1

AssetsLiabilities

Fixed assets

Net

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

1,878.4
2,097.2
1,464.4

1,771.5
1,995.5
1,408.5

5,567.6
10,145.6
1,077.1

5,325.1
10,001.2
1,143.1-819.8-983.9-761.4-827.6-941.3-751.5

4,747.8
9,161.7315.7

4,497.5
9,059.9391.6

4,125.6
9,170.6
498.1

3,961.9
9,110.7523.9-4.8
5,435.2-15.0-804.5-729.5804.5
729.5
5,160.5 15,985.8 15,739.9 -1,760.6 -1,790.9 14,225.2 13,949.0 13,794.3 13,596.5

1) Sweden is included in EMEA with net sales of 70.1 MEUR (76.5) and fixed assets of 42.1 MEUR (38.0)
2) USA is included in Americas with net sales of 1,580.5 MEUR (1,519.1)
3) China is included in Asia with net sales of 732.5 MEUR (722.6)
4) Relates to the country where the customer has its residence. No single customer represented more than 0.9 per cent (0.7) of net sales

NOTE 4 Parent company intra-grouppurchases and sales

Of the Parent Company’s net sales, 100 per cent (100) refers tosales to other group companies. Of the year’s purchases in the
Parent Company, 81 per cent (72) refers to purchases from groupcompanies.

NOTE 5 Revenue from contracts withcustomers

Hexagon sells information technology solutions in which hardware and software are integrated as well as services, licenses
and other assignments. Revenue from agreements with customers is reported in the income statement as net sales.
Sale of goods
Revenue is recognised when control of the good is transferredto the customer, which coincide with the good being delivered tothe customer and Hexagon has objective evidence that the customer will approve the good. The amount of the revenue will equal
the consideration stated in the contract minus rebates. There isno financing component in the contract as the expected credit do
not exceed one year. The Group’s obligation to offer a repayment
for defected goods in accordance with standard warranty terms,
is accounted for as a provision, see Note 23.

Sale of services, licenses and other assignments
Parts of contracts with customers not being sale of goods compose sale of installations, service, training, licenses and software
subscriptions.
Revenue from sale of services such as installations, services
and training are recognised in the period when the services are
performed. Licenses are classified either as a license that gives
right to use the underlying immaterial asset as it is constituted
at the issuing of the license (right-to-use) or as a license thatgives right to access the underlying intangible asset during thelicense period (right-to-access). Revenue from sale of right-touse licenses is recognised when the license is transferred to thecustomer. Revenue from sale of right-to-access licenses is recognised during the license period. Revenue from sale of software
subscriptions is recognised straight-line as the performanceobligation is fulfilled, during the subscription period.
Revenue from contracts where there is no alternative use of
Hexagon’s performance and where Hexagon has right to costcompensation if the customer cancels the contract is recognisedover time. The degree of completion is determined by comparing
the expenditure that has arisen in relation to the total estimatedexpenditure for the assignment. If the degree of completion cannot be reliably determined, only those amounts corresponding
to the expenditure that has arisen are recognised as revenue,
but only to the extent that it is likely that they will be remunerated by the buyer. If it appears likely that all the expenditure foran assignment will exceed total revenue, the probable loss isaccounted immediately and fully, as an expense.

Hexagon Annual and Sustainability Report 2023

102

Some contracts contain several performance obligations. A performance obligation that does not contain an integration service
with the other obligations in the contract, does not lead to a significant modification or adaptation of the other obligations in thecontract and that is not strongly dependent on or integrated withthe other obligations in the contract is distinct and represents a
separate performance obligation. The transaction price of thecontract is allocated to the separate performance obligations
according to their stand-alone selling prices. Revenue fromeach performance obligation is recognised as the obligation
has been fulfilled.
Estimation of revenue, cost and degree of completion is being
revised if conditions change. Changes in estimations is recognised in the income statement in the period when the Executive Leadership has knowledge of the circumstances causing thechange.
In fixed price contracts, the customers pay a fixed priceaccording to an agreed payment plan. If the value of the services
performed by Hexagon exceeds the payments, a contract asset
will be recognised. If the payments exceed the value of theperformed services, a contract liability will be recognised.
If the contract contains a fee per hour, revenue is recognised tothe extent Hexagon has right to invoice the customer. Customers
are invoiced on a monthly basis and right to consideration exists
when the invoice has been generated.
Main part of recognised revenue reflects performance obligations fulfilled during current year. The performance obligations
are usually fulfilled within 12 months, why disclosure about transaction price allocated to the remaining performance obligations
is exempted.
Contract costs
Additional costs to obtain a contract are recognised as an asset if
the Group expects to recover those costs. If time of depreciationof the asset that would have been recognised is below one year,
the additional costs are recognised as cost when they occur.
Financing component
The Group does not expect any material contracts with customers where the period between transferring of goods and services
to the customer and payment from the customer exceeds one
year. As a consequence of this, the Group does not adjust transaction prices for time value of money.

In brief

Financial plan Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

NOTE 5 Revenue from contracts with customers, cont.

Disaggregation of revenue from contracts with customers
No other revenue than revenue from contracts with customers is recognised in Net sales. The Group derives revenue from the transferof goods and services in the following operating and customer segment.

2023

Industrial Enterprise
Solutions (IES)
Geospatial Enterprise Solutions (GES)
Revenue adjustment1
Total

2022

Industrial Enterprise
Solutions (IES)
Geospatial Enterprise Solutions (GES)
Revenue adjustment1
Total

Surveying

Power Infrastructure& energy & construction Automotive

Naturalresources

Other

Group

675.4

29.7

447.1

2.3

946.7

281.4

21.8

389.4 2,802.0

964.5
972.7

0.5
675.9

639.8
669.5

18.6
465.7

207.6
209.9

3.5
950.2

199.1
480.5

482.3
504.1

122.1 2,638.0
-4.8
-4.8
506.7 5,435.2

PublicElectronics &safety manufacturing

Aerospace& defence

Naturalresources

Surveying

Power Infrastructure& energy & construction Automotive

Other

Group

7.5

627.3

46.1

464.3

1.8

860.7

264.8

18.6

347.4 2,638.5

961.0
968.5

0.6
627.9

656.6
702.7

23.4
487.7

171.5
173.3

2.9
863.6

186.0
450.8

401.3
419.9

133.7 2,537.0
-15.0
-15.0
466.1 5,160.5

Contract balances
Customer receivables
Contract assets
Contract liabilities

Aerospace& defence

8.2

1) Reduction of acquired deferred revenue (haircut) related to acquisitions

Group

PublicElectronics &safety manufacturing2023-12-31

2022-12-31

1,303.1
72.9
873.5

1,285.837.5
865.5

For information on impairment of receivables and contract assets,
see Note 18.
Contract assets include accrued income from fulfilling performance obligations over time. Contract liabilities include advancepayments and deferred income. Deferred income relates to revenue from service, installation and training. Main portion of contract liabilities at the beginning of the year has been recognised
as revenue during 2023.

103

Hexagon Annual and Sustainability Report 2023

NOTE 6 Operating expenses
Group

Cost of goods soldCost of goods
Personnel cost
Depreciation andamortisation
Other
Total
Sales expenses
Personnel cost
Depreciation andamortisation
Other
Total
General andadministrative cost
Personnel cost
Depreciation andamortisation
Other
Total
Research anddevelopment cost
Personnel cost
Depreciation andamortisation
Other
Total

Parent company

2023

2022

2023

2022

891.9
565.8

866.1
510.5

-

-

82.0
352.3
1,892.0

74.1
348.8
1,799.5

-

-

801.0

737.1

-

-

52.6
305.7
1,159.3

52.6
229.6
1,019.3

-

-

304.0

281.2

7.3

23.2

74.2
103.0
481.2

58.9
76.6
416.7

1.1
33.0
41.4

0.3
22.4
45.9

318.1

303.7

-

-

299.7
56.7
674.5

270.6
32.8
607.1

-

-

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Financial plan Board of Directors’ report Corporate governance report

NOTE 7 Other operating income/expenses

2023

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

104

NOTE 8 Impairment

Other operating income and operating expenses consist of
exchange rate gains and exchange rate losses of an operating
nature. In addition, items that do not belong to the primary business are reported in this function, such as impairments and fairvalue changes.
Group

ComplianceCash-generating units
Goodwill and other intangible assets with indefinite lives acquired through business combinations has been allocated to
the five (five) cash generating units (CGU) below, which complies with the Group’s organisation: Geosystems, ManufacturingIntelligence, Autonomy & Positioning, Asset Lifecycle Intelligence and Safety, Infrastructure & Geospatial.
Carrying amount of goodwill and other intangible assets allocated to each of the CGUs:
Geosystems

2022

Other operating income
Capital gain on divestment of fixed assets
Exchange rate gains
Government grants
Reversal of unutilised amounts supplementary
payments for acquired companies
Rental income
Other
Total

11.2
119.5
9.9

5.1
149.6
8.2

41.6
0.8
15.1
198.1

16.7
0.9
7.2
187.7

Other operating expenses
Capital loss on divestment of fixed assets
Exchange rate losses
Rental related expenses
Impairment
Acquisition related expenses
Other 1Total

-1.0
-143.4
-54.5
-8.2
-3.2
-210.3-1.3-153.7
-0.5
-13.4
-10.0
-40.0
-218.91) Other in 2022 consists mainly of expenses related to freezing the businessin Russia

2023

Goodwill
Other intangible
assets with indefinite
useful lives1
Intangible assets
subject toamortisation2
Total

1,957.1
470.2
646.5
3,073.8

2022

ManufacturingIntelligence

Autonomy &Positioning

2023

2022

2023

1,757.3 2,583.7

2,682.1

572.4

161.8

14.3

541.8
730.5
751.3
2,751.2 3,473.5 3,595.2

125.6
712.3

452.1

159.3

Asset Lifecycle
Intelligence

2022

Total

2022

2023

2022

583.7 3,807.8 3,989.5

695.6

586.9

9,616.6 9,599.5

339.1

102.6

92.7

1,073.9

98.3
627.5
648.1
696.7 4,762.8 4,976.7

173.1
971.3

106.2 2,303.2 2,145.7
785.8 12,993.7 12,805.6

14.7

2023

Safety, Infrastructure & Geospatial

327.5

2023

2022

1,060.4

1) Comprises brands2) Comprises capitalised development costs, patents, technology and other intangible assets, which are amortised linearly based on estimated useful life

Hexagon performed its annual impairment test for goodwill andother intangible assets with indefinite lives during the fourth
quarter 2023 and tested if the carrying value of the CGU’s exceed
their recoverable value. The recoverable value is the higher ofthe units net realisable value and value in use, which is the discounted present value of future cash flows.

Calculation of recoverable value
The recoverable values of the cash-generating units consist of its
value in use. The utilisation values are calculated using cash flow
forecasts based on budgets approved by the management that
extend over a period of five years. The after-tax discount rates
applied to cash flow forecasts are shown in the table below. The
annual growth rate for extrapolating cash flows beyond the fiveyear period was 2.0 per cent (2.0) for all cash-generating units.
Annual growth is a conservative assessment and is set equal toexpected inflation. The result of a write-down test has resulted
in the management not identifying any write-down need for any
cash-generating unit.

In brief

Financial plan Board of Directors’ report Corporate governance report

NOTE 8 Impairment, cont.
Discount rate
after tax

Geosystems
Manufacturing Intelligence
Autonomy & Positioning
Asset Lifecycle Intelligence
Safety, Infrastructure & Geospatial

2023

2022

8.4%
9.9%
9.7%
10.1%
10.1%

7.6%
9.2%
9.3%
10.1%
10.1%

Key assumptions
The calculation of value in use for all CGU is most sensitive to thefollowing assumptions:• Forecasts, including operating margins and sales growth• Discount rates• Growth rates used to extrapolate cash flow beyond theforecast period
Forecasts
Projected cash flows, approved by management, is based on
an analysis of historic performance as well as a best estimation
regarding the future. Hexagon has since 2001 mainly shown rising
operating margins and virtually continuous good organic growth.
The operating margins are based on average values achieved
historically. The margins are increased over the period to reflect
anticipated efficiency improvements. The organic growth isbased on an analysis of how the competition situation is judged
to develop over time.

Compliance

Sustainability report

Financial reports

Additional information

Discount rates
Discount rates represent the current market assessment of therisks specific to respective CGU, taking into consideration thetime value of money as well as individual risks. The discount rate
calculation is based on the specific circumstances of respective
CGU and is derived from its weighted average cost of capital(WACC). The WACC considers both debt and equity. The cost ofequity is derived from the expected return on investment by theGroup investors. The cost of debt is based on the interest bearing
borrowings. Specific risks are incorporated by applying individual beta factors. The beta factors are evaluated annually basedon publicly available market data. Discount rate before tax is
approximately 10–13%.
Growth rates used to extrapolate cash flow
To extrapolate cash flows over the forecast period, growth figures start based on published research of each respective industry. The long-term rate is conservatively estimated as equal tothe expected long-term inflation rate.
Sensitivity to changes in assumptions
A sensitivity analysis including all key assumptions is performed
and management believe that no reasonably possible change inany of the above key assumptions would cause the carrying value
to materially exceed the recoverable value. For all cash generating units except Asset Lifecycle Intelligence there is a significant
headroom before any changes in key assumptions would cause
a valuation adjustment, since the recoverable value totally isnearly double the book value. The performed sensitivity analysis
demonstrates that the value of goodwill and other intangible
assets with indefinite useful life is more than defendable even if
the discount rate is increased with one percentage point or if thegrowth rate after the forecast period is decreased with one percentage point for all cash generating units except Asset Lifecycle
Intelligence. For Asset Lifecycle Intelligence the recoverable
amount would equal the carrying value if the discount rate would
be increased by 0.6 percentage point or the terminal growth ratewould be decreased by 0.5 percentage point. Even forecasts forsales growth and operating margin are included in the sensitivity
analysis and no reasonable changes in these would cause a needof impairment.

105

Hexagon Annual and Sustainability Report 2023

NOTE 9 Earnings from shares in groupcompanies
Group

Earnings from sharesin group companies
Dividend from subsidiaries
Impairment loss of shares ingroup companies
Total

Parent company

2023

2022

2023

2022

-

-

1,807.8

202.5

-

-

- -1,485.8
1,807.8 -1,283.3

NOTE 10 Financial income andexpensesGroup

Financial income
Interest income
Interest income,intercompany receivables
Other financial income
Total
Financial expenses
Interest expenses
Interest expenses,
lease liabilities
Interest expenses, intercompany liabilities
Net interest on pensions
Other financial expenses
Total
1) Mainly bank costs

Parent company

2023

2022

2023

2022

12.4

7.6

2.3

0.4

0.7
13.1

1.2
8.8

82.0
76.7
161.0

37.5
178.5
216.4

-144.5-27.0-138.5

-24.8

-8.3

-7.9

-

-

-1.3
-14.31-168.4-0.7-11.91
-47.5

-84.6
-94.0
-317.1-20.7-72.5-118.0In brief

Financial plan Board of Directors’ report Corporate governance report

NOTE 11 Income taxes
Income taxes comprise of:• Current tax, meaning the tax calculated on taxable earnings forthe period and adjustments regarding prior periods and;• Deferred tax, meaning the tax attributable to taxable temporary
differences to be paid in the future and the tax that represents
a reduction of future tax attributable to deductible temporary differences, deductible loss carry-forwards and other tax
deductions.
The income tax expenses for the year consist of current anddeferred tax. Transactions recognised in other comprehensive
income are including tax effects, i.e. tax related to these transactions are also posted in other comprehensive income. Tax related
to transactions directly recognised in equity, is posted in equity.
GROUP
Tax on earnings for the year
Current tax
Deferred tax
Total tax on earnings for the year

2023

2022

-206.717.8-188.9-255.526.6-228.9Specification of deferred tax
Deferred tax assets (liabilities) comprise:
Fixed assets
Inventories
Receivables
Provisions
Other
Unutilised loss carry-forwards andsimilar deductions
Less items not satisfying criteria for being
recognised as assets
Total
According to the balance sheet:
Deferred tax assets
Deferred tax liabilities
Total, net

2023-12-31

2022-12-31-636.2
56.8
12.3
13.9
116.1

-617.3
51.8
4.0
6.6
95.2

79.0

49.9

-42.6
-400.7-49.7-459.5179.3-580.0-400.7122.3-581.8-459.5Compliance

Sustainability report

Financial reports

Additional information

Unutilised loss carry-forwards and similar deductions notsatisfying criteria for being recognised as assets have not beenrecognised. Deferred tax assets that depend on future taxable
surpluses have been valued on the basis of both historical andforecast future taxable earnings. Hexagon is striving for a corporate structure that enables tax exemption when companies aredivested and favourable taxation of dividends within the Group.
Certain potential tax on dividends and divestments remains
within the Group.
Reconciliation of the year’s change in current and deferred
tax assets/liabilities
Deferred tax

Opening balance, net

2023

2022

-459.5-372.1

Change via income statement
Deferred tax on earnings
Change in reserve for deductions not satisfying
criteria for being recognised as assets
Change in tax rates and tax reforms
Items pertaining to prior years
Total

-13.6

32.3

53.8
-12.4
-10.0
17.8

-36.8
0.4
30.7
26.6

Change via other comprehensive income
Deferred tax on other comprehensive income
Total

12.8
12.8

-40.5
-40.5

Hexagon Annual and Sustainability Report 2023

106

The Group’s unutilised loss carry-forwards and similar
deductions mature as follows:
2023-12-31

2023
2024
2025
2026
2027 and later
Indefinitely
Total

11.4
2.0
0.6
2.5
227.9
174.4
418.8

The difference between nominal Swedish tax rate andeffective tax rate arises as follows:
2023

Earnings before tax
Tax pursuant to Swedish nominal tax rate 20.6%
Difference in tax rates between Swedish andforeign tax rate
Revaluation of loss carry-forwards, etc.
Income not subject for tax
Expenses not tax-deductible
Change in tax rates and tax reforms
Items not included in the booked result
Items pertaining to prior years
Tax, income statement2022

1,060.7 1,248.0-218.5-257.1
-7.8
86.3
43.4
-62.5
-12.4
-2.9
-14.5
-188.9

51.3
-36.8
20.1
-47.7
0.4
-6.3
47.2
-228.9Current tax

2023

2022

Opening balance, net

-63.8

-45.4

Pillar Two
The group is covered by the OECD’s model rules for Pillar Two.
Legislation on Pillar Two has been adopted in Sweden, where
Hexagon AB is based, and will enter into force on 1 January 2024.
As the legislation on Pillar Two had not entered into force on thebalance sheet date, the group has no related current tax exposure. The group applies the exemption for reporting and providing
information on deferred tax assets and tax liabilities related toincome taxes from Pillar Two, as set out in the amendments to IAS
12 issued in May 2023.

Change via income statement
Current tax on earnings
Items pertaining to prior years
Total-218.712.0-206.7-270.715.2-255.5

Under the legislation, the group is required to pay an additionaltax for the difference between the effective tax rate calculated
according to the GloBE rules for each jurisdiction and the minimum
tax rate of 15%.

Change via acquisitions and divestments
Payments, net
Translation difference
Closing balance, net

0.6
276.2
6.3

-0.4
235.9
1.6
-63.8

The group is currently evaluating its exposure to the Pillar Two
legislation when it comes into force. Due to the complexity of theapplication of the legislation and the calculation of GloBE revenues, the quantitative impact of the adopted legislation is not yet
possible to estimate with reasonable certainty. Therefore, even

Change via equity
Change via acquisitions and divestments
Reclassification
Translation difference
Closing balance, net

-23.2
52.4
-1.0
-400.7-58.0-15.5-459.5

In brief

Financial plan Board of Directors’ report Corporate governance report

NOTE 11 Income taxes, cont.

for those subsidiaries with a reported effective tax rate above
15%, there may still be tax consequences regarding Pillar Two. The
group is currently working with tax specialists to help implement
the legislation.
PARENT COMPANYTax on earnings for the year
Current tax
Deferred tax
Total tax on earnings for the year

2023

2022

0.3
3.4
3.7

-9.0
-3.0
-12.0

Reconciliation of the year’s change in current
and deferred tax assets/liabilities
2023

2022

Deferred tax
Opening balance, net
Change via income statement
Deferred tax on earnings
Total

-

3.0

3.4
3.4

-3.0
-

Closing balance, net

3.4-

Current tax
Opening balance, net

-8.9

0.1

Change via income statement
Current tax on earnings
Total

0.3
0.3

-9.0
-9.0

Payments, net
Translation difference
Closing balance, net

8.6
0.0
-

0.2
-0.2
-8.9

The Parent Company has unutilised loss carry-forwards and future
tax deductions of 148.1 MEUR (-).

Compliance

Sustainability report

Financial reports

Additional information

NOTE 12 Adjustments

Adjustments consists of expenses related to the share programme(LTIP), amortisation of surplus values (PPA) and non-recurring
items which refers to income and expenses that are not expected
to appear on a regular basis and impact comparability between
periods. In 2023 adjustments consist of share-based programme
expenses (LTIP), amortisation of surplus values (PPA), acquired
deferred revenue, transactions costs and the implementaton of arationalisation programme.
Group

2023

2022

Acquired deferred revenue
Cost nature
Personnel costs
Transaction costs
Impairments
Reduction offices/facilities
Amortisation of surplus values
Share-based programme
Other
Total cost nature
Total adjustments

-4.8

-15.0

-142.2
-2.5
-17.2
-24.3
-115.9-61.4-12.4-375.9-380.7

-20.2
-16.7
-25.6
-107.7-44.7-1.2-216.1-231.1

Function
Net sales
Cost of goods sold
Sales expenses
Administration expenses
Research and development expenses
Other operating expenses
Total adjustments

-4.8
-45.4
-142.4-63.0-106.5-18.6-380.7

-15.0
-8.6
-51.3
-21.2
-91.4
-43.6
-231.1

Hexagon Annual and Sustainability Report 2023

107

NOTE 13 Government grants

During the year some of the subsidiaries within the Group havereceived government grants in their country. Government grants
have been recognised in accordance with IAS 20. Receivables
and revenues are recognised when there is a reasonable assurance that the terms and conditions will be met, and it is reasonable certain that the grant will be received. The government
grants received was primarily related to education of employees
and R&D funding. The table below shows how the grants are allocated to functions.
Group

2023

2022

Function
Cost of goods sold
Sales expenses
Administration expenses
Research and development expenses
Other operating income
Total

0.1
9.9
10.0

0.2
0.6
0.3
1.2
8.2
10.5

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 14 Intangible fixed assets

Intangible fixed assets could be acquired separately, as partof a business combination or internally generated. The Group’s
intangible fixed assets include mainly capitalised development
expenses, trademarks and goodwill. Trademarks, goodwill, technology and customer relations are often acquired as part of abusiness combination, while capitalised development expenses
are internally generated. Any impairments are reported as otheroperating expenses in the income statement.
The impairment for the year relates to impairment of releasesof earn-out provisions. See Note 8 for further disclosures about
impairment.
Capitalised development expenses
An internally generated intangible asset that are expected togenerate a future economic benefit and whose cost could bedetermined reliably must, according to IAS 38, be recognised
as an asset in the balance sheet. To assess if those criterias are
fulfilled, the generation of the asset is classified into a researchphase and a development phase. The research phase includes
activities such as obtaining new knowledge, new products, systems, methods or materials. At a certain point in time, the activities change and includes design, construction and testing ofchosen alternatives. This point in time differs between different
projects and constitutes the inflection point between researchphase and development phase. Hexagon expenses expenditure
on research in the income statement and expenditures arisingin the development phase must be recognised as an intangible
asset in the balance sheet. If the research phase cannot be distinguished from the development phase, all expenditures will bereported as expenses in the income statement.
Capitalised development expenses are measured at cost lessaccumulated amortisations and impairment. Amortisationis accounted for linearly based on estimated useful life andexpensed as a research and development expense. Useful life
for capitalised development expenses is 2-10 years. The averageamortisation period is less than six years. The assets’ residual
value and useful life are tested on each closing date and are
adjusted if necessary.
Trademarks
Separately acquired trademarks are measured at cost. Trademarks acquired as part of a business combination are measured
at fair value at acquisition date. In cases where the assets havea limited useful life, amortisation is estimated to 5 years. If the
trademark can be used without any time limitations, it is not sub-Compliance

Sustainability report

Financial reports

Additional information

ject to amortisation according to plan. A new assessment is done
yearly. The right to use the name Leica derives from a contractual
useful life under an agreement that expires in 80 years’ time. The
agreement contains clauses stipulating extension opportunities.
Since Hexagon is of the opinion that there is reason to believethat it will be possible to extend the agreement without considerable expenditure, the value of the right to use the name Leica is
not subject to amortisation.
Goodwill
Goodwill comprises the difference between the acquisition
cost and fair value of the Group’s share of acquired business’
identifiable net assets on the date of acquisition. Goodwill is notamortised, but an impairment test is performed annually or more
often if events or changes in circumstances indicate a possible

Hexagon Annual and Sustainability Report 2023

108

need for impairment. Goodwill is recognised at acquisition valueless accumulated impairment losses.
Other intangible assets
Both acquisition-related and separately acquired intangible
assets are reported at acquisition value less accumulated amortisation and impairment losses, if any. Other intangible assets
consist of patents, customer relations and technology identified
upon acquisitions. Amortisation is linear and is calculated on theoriginal acquisition value and based on the asset’s estimateduseful life. For other intangible assets, the estimated usefullife varies between 2 and 20 years. Both the residual value ofthe assets and the useful life are tested each closing date andadjusted if necessary.

Capitalised
development expenses

Trademarks

Goodwill

Other intangible
fixed assets

Total

Acquisition value, opening balance
Investments
Investments/divestments of business
Sales/disposals
Reclassification
Translation differences
Acquisition value, closing balance

2,858.1
461.5
-1.0
-4.3
-7.0
-25.9
3,281.4

1,082.5
0.1
34.0
-20.0
1,096.6

9,608.3
331.2-52.4-261.99,625.2

2,031.9
28.3
96.7
-10.0
0.9
-46.0
2,101.8

15,580.8
489.9
460.9
-14.3
-58.5
-353.8
16,105.0

Amortisation, opening balance
Amortisation for the year
Investments/divestments of business
Sales/disposals
Reclassification
Translation differences
Amortisation, closing balance-1,524.3-205.3
1.0
-37.0
3.7
13.6
-1,748.3---734.3-134.3
-3.0
10.0
2.3
13.9
-845.4-2,258.6-339.6
-2.0
-27.0
6.0
27.5
-2,593.7

Impairments, opening balance
Impairment for the year
Sales/disposals
Translation differences
Impairments, closing balance
Carrying value-414.7
-37.0
41.3
4.2
-406.2
1,126.9

-22.1
-1.0
0.4
-22.7
1,073.9

-8.8
0.2
-8.6
9,616.6

-71.0
-11.4
2.3
-80.1
1,176.3-516.6
-49.4
41.3
7.1
-517.6
12,993.7

Group 2023

In brief

Financial plan Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Capitalised
development expenses

Trademarks

Goodwill

Other intangible
fixed assets

Total

Acquisition value, opening balance
Investments
Investments/divestments of business
Sales/disposals
Reclassification
Translation differences
Acquisition value, closing balance

2,491.3
377.8
-32.8
-2.3
24.1
2,858.1

1,050.5
0.1
0.7
31.2
1,082.5

8,213.9
1,023.0
371.4
9,608.3

1,614.5
36.0
318.4
-7.6
19.9
50.7
2,031.9

13,370.2
413.9
1,342.1
-40.4
17.6
477.4
15,580.8

Amortisation, opening balance
Amortisation for the year
Investments/divestments of business
Sales/disposals
Reclassification
Translation differences
Amortisation, closing balance-1,366.1-173.5
28.1
0.2
-13.0
-1,524.3---595.0-118.9
-0.2
7.5
-17.3
-10.4
-734.3-1,961.1-292.4
-0.2
35.6
-17.1
-23.4
-2,258.6

NOTE 14 Intangible fixed assets, cont.
Group 2022

Impairments, opening balance
Impairment for the year
Sales/disposals
Reclassification
Translation differences
Impairments, closing balance
Carrying value-408.4
-3.9
4.3
-0.1
-6.6
-414.7
919.1

-15.0
-6.2
-0.9
-22.1
1,060.4

-8.3
-0.5
-8.8
9,599.5

-68.0
-3.0
-71.0
1,226.6-499.7
-10.1
4.3
-0.1
-11.0
-516.6
12,805.6

Amortisation of intangible fixed assets allocated by function:

Other intangible fixed assets

Group

Parent company

2023

2022

Acquisition value, opening balance
Investments
Investments/divestments of business
Acquisition value, closing balance
Amortisation, opening balance
Amortisation for the year
Investments/divestments of business
Amortisation, closing balance
Carrying value

8.2
1.7
-1.1
8.8
-1.8
-1.1
1.1
-1.8
7.0

3.5
3.6
1.1
8.2
-0.5
-0.3
-1.0
-1.8
6.4

Cost of goods sold
Sales expenses
Administration expenses
Research and development expenses
Other operating expenses
Total

2023

2022

-8.6
-24.8
-20.9
-285.3-339.6

-5.9
-23.6
-4.7
-258.1-0.1-292.4

Hexagon Annual and Sustainability Report 2023

109

NOTE 15 Tangible fixed assets

Tangible fixed assets are recognised at acquisition value lessaccumulated depreciation and impairment losses. Acquisition
value includes expenditure that is directly attributable to acquisition of the asset.
Gains and losses on the divestment of a tangible fixed asset arerecognised in the income statement as other operating income
or expenses and comprise the difference between the sales revenue and the carrying amount. Amounts that can be depreciatedcomprise acquisition value less estimated residual value. The
assets’ carrying value and useful life are impairment tested on
every balance sheet date and adjusted if necessary.
Depreciation and amortisation
Depreciation and amortisation is calculated on the original acquisition value and based on the asset’s estimated useful life. The
depreciation terms for various asset classes are:• Computers

3–8 years• Machinery and equipment

3–15 years• Office buildings

20–50 years• Industrial buildings

20–50 years• Land improvements

5–25 years

In brief

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Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

110

NOTE 15 Tangible fixed assets, cont.

Buildings

Land and otherreal estate

Machinery andother technicalplantsEquipment,
tools andinstallation

Construction inprogress andadvances to suppliers

Total

Acquisition value, opening balance
Investments
Investments/divestments of business
Sales/disposals
Reclassification
Translation differences
Acquisition value, closing balance

437.7
11.4
0.5
-11.6
3.3
-9.6
431.7

37.4
-1.4
-1.9
-0.9
33.2

414.1
42.0
5.2
-12.8
-5.4
-4.3
438.8

443.9
78.1
9.0
-50.0
2.4
-9.3
474.1

7.1
5.2
-0.6
-0.2
11.5

1,340.2
136.7
14.7
-75.8
-2.2
-24.3
1,389.3

Group

2023

2022

Cost of goods sold
Sales expenses
Administration expenses
Research and development expenses
Other operating expenses
Total

-58.7
-7.8
-19.9
-7.9
-94.3

-54.4
-7.3
-20.6
-7.3
-0.3
-89.9

Depreciation, opening balance
Depreciation for the year
Investments/divestments of business
Sales/disposals
Reclassification
Translation differences
Depreciation, closing balance-163.2
-15.9
-0.3
7.8
-2.0
2.2
-171.4

-2.6
-0.2
0.4
1.2
0.1
-1.1

-297.4
-26.4
-4.7
12.6
2.9
2.8
-310.2-283.6
-49.4
-8.3
36.6
-0.2
6.1
-298.9

-0.1
-2.4
0.1
-2.4

-746.9
-94.3
-13.3
57.4
1.9
11.3
-784.0Parent company

2023

2022

Impairment, opening balance
Impairments of the year
Sales/disposals
Impairments, closing balance
Carrying value

-0.2
-1.0
0.2
-1.0
259.3

-0.1
-0.1
32.0

-0.1
-3.7
-3.8
124.8

-0.4
0.2
-0.2
175.0

9.1

-0.4
-5.1
0.4
-5.1
600.2

Acquisition value, opening balance
Investments
Acquisition value, closing balance
Depreciation, opening balance
Depreciation for the year
Depreciation, closing balance
Carrying value

0.1
0.4
0.5
-0.1
0.0
-0.1
0.4

0.1
0.0
0.1
-0.1
0.0
-0.1
0.0

Machinery andother technicalplantsEquipment,
tools andinstallation

Construction inprogress andadvances to suppliers

TotalGroup 2023

Buildings

Land and otherreal estate

Acquisition value, opening balance
Investments
Investments/divestments of business
Sales/disposals
Reclassification
Translation differences
Acquisition value, closing balance

395.7
42.3
0.7
-3.7
1.8
0.9
437.7

37.0
1.2
-1.0
0.1
0.1
37.4

389.7
42.2
0.4
-10.5
-10.5
2.8
414.1

397.1
77.0
8.9
-32.9
-8.7
2.5
443.9

16.3
-9.1
-0.4
0.3
7.1

1,235.8
153.6
10.0
-48.1
-17.7
6.6
1,340.2

Depreciation, opening balance
Depreciation for the year
Investments/divestments of business
Sales/disposals
Reclassification
Translation differences
Depreciation, closing balance-147.5
-16.2
-0.5
2.5
-0.8
-0.7
-163.2

-2.3
-0.3
-2.6

-288.4
-24.1
-0.1
10.2
7.6
-2.6
-297.4-260.4
-49.3
-4.1
22.4
10.3
-2.5
-283.6-0.1-0.1-698.7
-89.9
-4.7
35.1
17.1
-5.8
-746.9Impairment, opening balance
Impairments, closing balance
Carrying value

-0.2
-0.2
274.3

-0.1
-0.1
34.7

-0.1
-0.1
116.6

160.3

7.0

-0.4
-0.4
592.9

Group 2022

Depreciation of tangible fixed assets allocated by function:

EquipmentIn brief

Financial plan Board of Directors’ report Corporate governance report

NOTE 16 Leasing

Hexagon as lessee
Hexagon has the role of lessee mainly in contracts regarding realestate, vehicles and office equipment. The leases are recognised
as a right-of-use asset and a corresponding liability at the date at
which the leased asset is available for use. Lease payments areallocated to interest payments and repayment of debt. The interest part is presented as paid interest in the cash flow analysis.
The right-of-use asset is depreciated on a linear basis over the
shorter of the asset’s useful life and the lease period.
Assets and liabilities arising from lease contracts are measured
on a present value basis. Lease liabilities include the net present
value of fixed payments, variable payments based on an index
or a rate, amounts expected to be paid under residual value guarantees, exercise price of purchase options that will reasonably
certainly be exercised and payments of penalties for terminating
the lease, if such option will be exercised.
The future payments are discounted using the implicit interest
rate in the contract. If that rate could not be determined, thegroup’s incremental borrowing rate could be used. The discountrate is updated semi-annually.
The right-of-use asset is measured and cost and comprises,
besides the amount of the initial measurement of the lease liability, of payments (less incentives received) made before the date ofcommencement, initial indirect costs and restoration costs.
Payments of lease contracts with a lease period below 12 months
and lease contracts of low value assets are expensed straight-line
in the income statement. Low value assets are mainly IT-equipment, office furniture and other office equipment.

Compliance

Sustainability report

Group 2023

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

111

Real estate

VehiclesMachinery

Office equipment

Total

At the beginning of the year
New contracts
Termination of contracts
Remeasurements
Reclassification
Translation differences
Acquisition value, closing balance

327.6
32.3
-36.4
31.1
-0.5
-6.8
347.3

48.0
20.4
-15.7
1.0
0.3
0.0
54.0

1.6
0.4
-0.3
0.0
0.0
-0.1
1.6

3.5
0.5
-0.7
0.3
0.0
0.1
3.7

380.7
53.6
-53.1
32.4
-0.2
-6.8
406.6

Depreciation, opening balance
Depreciation for the year
Termination of contracts
Remeasurements
Reclassification
Translation differences
Amortisation, closing balance
Carrying value-154.6
-58.3
30.8
-0.9
1.3
3.5
-178.2
169.1

-25.0
-15.0
15.5
0.1
-0.2
-0.1
-24.7
29.3

-1.0
-0.4
0.3
0.0
0.0
-1.1
0.5

-2.0
-0.9
0.8
0.0
0.0
-2.1
1.6

-182.7
-74.6
47.4
-0.8
1.1
3.4
-206.2200.4

Real estate

VehiclesMachinery

Office equipment

Total

At the beginning of the year
New contracts
Termination of contracts
Remeasurements
Reclassification
Translation differences
Acquisition value, closing balance

297.5
52.9
-41.4
15.6
0.6
2.4
327.6

47.8
13.8
-14.2
0.9
-0.3
48.0

1.5
0.2
-0.1
0.0
0.0
1.6

4.2
0.5
-0.6
0.1
-0.7
0.0
3.5

351.0
67.4
-56.3
16.6
-0.1
2.1
380.7

Depreciation, opening balance
Depreciation for the year
Termination of contracts
Remeasurements
Reclassification
Translation differences
Amortisation, closing balance
Carrying value-121.5
-59.5
28.6
-1.0
-0.5
-0.7
-154.6
173.0

-25.3
-13.8
13.9
-0.1
0.0
0.2
-25.0
23.0

-0.8
-0.4
0.2
0.0
-1.0
0.6

-1.7
-0.9
0.6
0.0
0.0
-2.0
1.5

-149.3
-74.6
43.2
-1.1
-0.5
-0.5
-182.7198.0

Group 2022

Depreciation of right-of-use assets allocated by function:
Group

2023

2022

Cost of goods sold
Sales expenses
Administration expenses
Research and development expenses
Other operating expenses
Total

-14.7
-20.0
-33.4
-6.5
-74.6

-13.8
-21.7
-33.6
-5.2
-0.3
-74.6

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 16 Leasing, cont.

At the beginning of the year
AdditionsRemeasurement
Interest
Payments
Translation difference
Closing balance
Of which current liabilities
Of which non-current liabilities

2023

2022

207.9
53.6
26.8
8.3
-80.1
-4.9
211.5
59.5
152.0

212.6
67.4
7.9
-81.5
1.5
207.9
62.4
145.5

The maturity structure of the lease liabilities is presented in
the table Group’s maturity structure of interest bearing financial
liabilities – undiscounted cashflows in Note 24.
The Group had total cash outflows for leasing of -80.1 MEUR(-81.5) in 2023.
Expenses regarding short-term leases and leases of low value areinsignificant in relation to the Group as a whole.
Hexagon as lessor
There are a few contracts in which Hexagon is the lessor andwhich are classified as finance lease contracts. The revenue ofsuch contracts is allocated to sale of hard- and software andservice. Revenue from sale is recognised at the commencement
date. Revenue from service is recognised during the lease term.
Agreements where a group entity is lessor
Group 2023-12-31

Lease payments due in
2024
2025–2028
Total
Group 2022-12-31

Lease payments due in
2023
2024–2027
Total

Sustainability report

Financial reports

Additional information

112

Hexagon Annual and Sustainability Report 2023

NOTE 17 Financial fixed assets

Set out below are the carrying amounts of the leaseliabilities and the movements during the period.
Group

Compliance

Machinery, equipment, etc.

2.4
3.4
5.8
Machinery, equipment, etc.

2.5
5.9
8.4

Other long-term
securities holdings

Other long-term
receivables

Group

2023

2022

2023

2022

Opening balance
Investments
Acquired as subsidiary
Sales
Reclassification
Translation differences
Closing balance

78.1
55.0
0.0
-4.1
129.0

20.9
58.2
-1.0
78.1

36.4
8.8
-9.2
-6.5
-0.4
29.1

48.7
1.0
1.4
-9.1
-7.2
1.6
36.4

Shares in group companies
Parent company

Opening balance
Shareholder’s contribution
Redemption of shares
Investments
Increase/decrease in receivables
Closing balance

Clothing Tech LLC
Divergent Technologies Inc
Eucliedon PTY
CICV Co Ltd
Hangzhou Unitree Technology Co
Huixin Quanzhi Gongye Hulian Keji Co Ltd
Martlet Capital
Paperless Parts Inc
Baukunst LLC
Other
Total

Other financial fixed assets

2022

2023

2022

2023

2022

13,488.9
46.2
6.6
13,541.7

10,527.4
1,228.8-1,485.8
3,218.5
13,488.9

424.7
940.8
1,365.5718.0-293.3
424.7

1.2
0.1
1.3

1.1
0.1
1.2

Other long-term securities holdingsGroup

Receivables from group companies

2023

2023-12-31

2022-12-31

9.5
90.5
1.0
12.7
3.4
1.0
4.6
4.5
1.2
0.6
129.0

7.0
46.9
1.0
13.6
3.8
1.0
4.5
0.2
0.1
78.1

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

NOTE 17 Financial fixed assets, cont.

Subsidiaries of Hexagon AB

Corp ID. No.

Reg. Office/ Country

Clever Together AB
556070-5138
Hexagon Corporate Services Ltd
Hexagon Corporate Solutions Ltd
R-evolution AB
556016-3049
Hexagon Global Services AB
556788-2401
Hexagon Intergraph AB
556370-6828
Hexagon Position Intelligence Ltd
Hexagon Solutions AB
556083-1124
Hexagon Technology Center GmbH1
Intergraph Corporation
Hexagon Smart Solutions AB
556394-3678
Tecla AB556068-1602
Östgötaeken AB
556197-2380
Leica Geosystems AG
Hexagon Capability Center India Pvt Ltd1 Total

Stockholm, Sweden
Hong Kong
England
Stockholm, Sweden
Stockholm, Sweden
Stockholm, Sweden
England
Stockholm, Sweden
Switzerland
USA
Stockholm, Sweden
Stockholm, Sweden
Stockholm, Sweden
Switzerland
India

No. of shares

Portion of share capitaland voting rights, %2,500
10,0001
200,000
1,000
1,000
3
100,000
583
1,000
1,439,200
160,000
2,000
633,546
50,000

100
100
100
100
100
100
100
100
79.8
100
100
100
100
100
12.3475

Carrying amount2023-12-31

2022-12-31

0.0
0.0
21.0
226.5
261.0
1.6
1,859.6
4,047.5
3,888.1
1.6
9.7
3,218.5
6.6
13,541.7

0.0
0.0
21.0
226.5
261.0
1.6
1,859.6
4,047.5
3,841.9
1.6
9.7
3,218.5
13,488.9

Older than
120 days

Total1) The remaining part of share capital and voting rights in the company are owned by wholly owned subsidiaries in the GroupHexagon Annual and Sustainability Report 2023

113

The expected loss rates are based on the payments profiles ofsales and the corresponding historical credit losses. The historical loss rates are adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of
the consumers to settle the receivables.
Trade receivables are written off when there is no reasonable
expectation of recovery. Impairment losses are presented within
operating profit. Any recoveries of amounts previously written off
are credited against the same line item.
The closing loss allowances for trade receivables reconcile to the
opening loss allowances as follows:
Reserve for expected credit loss
Group

Opening balance
Reserve for anticipated losses
Adjustment for actual losses
Reclaimed expected losses
Increase through acquisition
Translation differences
Closing balance2023-12-31

2022-12-31

49.3
12.5
-6.1
-11.3
-1.2
-2.1
41.1

44.7
14.6
-2.0
-8.0
0.6
-0.6
49.3

NOTE 18 Receivables
Due less Due between Due between Due between
than 30 days
30–60 days
61–90 days 91–120 daysGroup

Not due

Aging analysis of receivables,
31 December 2023, net of impairment losses
Other non-current receivables
Accounts receivable
Other current receivables – non-interest bearing
Total

23.2
919.6
92.3
1,035.1

0.2
144.4
3.6
148.2

0.0
74.1
1.1
75.2

43.7
0.3
44.0

0.0
29.3
29.3

5.7
92.0
6.1
103.8

29.1
1,303.1
103.4
1,435.6

Aging analysis of receivables,
31 December 2022, net of impairment losses
Other non-current receivables
Accounts receivable
Other current receivables – non-interest bearing
Total

34.2
942.5
99.3
1,076.0

0.4
136.0
3.4
139.8

0.1
66.8
1.1
68.0

42.7
0.6
43.3

0.0
24.9
0.1
25.0

1.7
72.9
3.5
78.1

36.4
1,285.8108.0
1,430.2

The Group applies the simplified approach to measuring
expected credit losses. The method uses a lifetime expected loss
allowance for all trade receivables.

To measure the expected credit losses, trade receivables have beengrouped based on shared credit risk characteristics and the days
past due. The expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets too,as the contract assets have substantially the same risk characteristics as the trade receivables for the same types of contracts.

NOTE 19 Inventories

Inventories are accounted according to the FIFO (first-in first-out)principle. Raw materials and purchased finished and semifinished goods are recognised at the lower of cost and net realisable value. Manufactured finished and semi-finished goods arerecognised at the lower of manufacturing cost (including a reasonable portion of indirect manufacturing costs) and fair value.
Market terms are applied for intra-group transactions. The necessary provisions and eliminations are made for obsolescenceand intra-group gains respectively.
Group

2023-12-31

2022-12-31

Raw materials and supplies
Work in progress
Finished goods and goods for sale
Total

279.0
42.8
262.9
584.7

285.7
52.3
239.2
577.2

Value adjustment reserve includes
provisions for obsolescence of

-78.1

-75.1

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 20 Prepaid expenses
and accrued income/accrued expenses anddeferred income

Compliance

Sustainability report

29.9
0.6
43.0

17.2
0.8
20.3

-

-

18.1
29.7

16.7
31.2

-

-

40.3
6.6
4.7
27.1
200.0

61.3
5.3
6.0
14.2
173.0

0.1
2.1
2.2

0.1
0.1
1.2
1.4

Quota
value
per
share,
EUR

Opening balance 2022
Acquisition oftreasury shares
Closing balance 2022
Acquisition oftreasury shares
Closing balance 2023

Repurchased

Parent company

2023-12-31 2022-12-31 2023-12-31 2022-12-31

296.1

320.1

3.6

16.9

30.6

26.3

-

-

0.5
6.9
16.8
4.9

0.6
5.6
21.7
4.4

0.1
-

0.1
-

6.0
17.7
790.4
86.7
1,256.6

2.3
22.5
741.2
79.7
1,224.4

5.8
0.7
10.2

2.3
0.7
20.0

Total issued

Total

Share
capital,MEUR

110,250,000 2,595,227,888 2,705,477,888

85.8

0.03
-6,450,000-6,450,000 6,450,000
0.03 110,250,000 2,570,427,888 2,689,677,888 15,800,000 110,250,000 2,595,227,888 2,705,477,888

85.8

0.03
-5,300,000-5,300,000
0.03 110,250,000 2,574,127,888 2,684,377,888

85.8

0.03

Total

Class B

110,250,000 2,585,877,888 2,696,127,888

Class AClass B

9,350,000

Each series A share entitles the holder to ten votes and eachseries B share to one vote. All shares entail the same right toshare of profits in Hexagon. Dividend per share paid in 2023
regarding the financial year of 2022 amounted to 0.12 EUR (0.11).
Average number of shares before and after dilution, thousands

Accrued expenses and deferred income

Accrued personnel-related expenses
Accrued salescommission
Accrued installation andtraining expenses
Accrued R&D expenses
Accrued fees
Accrued royalties
Accrued interest
expenses
Work in progress
Prepaid revenue
Other items
Total

114

Number of shares
Outstanding

Parent company

Group

Hexagon Annual and Sustainability Report 2023

Parent company

2023-12-31 2022-12-31 2023-12-31 2022-12-31

Accrued invoicing
Accrued interest income
Work in progress
Prepaid maintenancecosts
Prepaid license costs
Prepaid products andservices
Prepaid rent
Prepaid insurance
Other items
Total

Additional information

NOTE 21 Share capital and number of shares

Prepaid expenses and accrued income
Group

Financial reports

Average number of shares before
dilution
Estimated average number of potential
shares pertaining to warrants plans
Average number of shares after dilution

2023

2022

2,687,690

2, 693,019

18,451
2,706,141

13,2752,706,294

Class AClass B

5,300,000
21,100,000 110,250,000 2,595,227,888 2,705,477,888

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 22 Pension provisions

Sustainability report

Financial reports

Additional information

For the defined contribution plans, Hexagon pays a fixed amount.
Expenditure for defined contribution plans is expensed as incurred.
Expected expenditure under defined benefit plans are recognised
as a liability calculated in accordance with actuarial models,consisting of an estimate of future benefits that employees haveearned through their employment during the current and priorperiods. This benefit is discounted to its present value. The discount rate is the yield on high-quality corporate bonds or if there
is no deep market for such bonds, government bonds – that havematurity dates approximating the terms of the Group’s obligations.
Changes of the defined benefit obligation related to changed
actuarial assumptions including currency revaluation on defined
benefit obligation in another currency than functional currency
and experience-based adjustment are reported in other comprehensive income. Pension expense for the year consists ofpensions earned in the current period and pensions earned
from prior periods resulting from any changes in the plan. Pension liabilities, -assets net is multiplied with discount rate andaccounted for as a financial expense. Obligations related todefined benefit plans are recognised net in the balance sheet asa provision, meaning after a deduction of the value of any plan
assets.
Defined benefit plans for which the insurer (Alecta) cannot
specify Hexagon’s share of the total plan assets and pension obligations, pending this information becoming available, are recognised as defined contribution plans. This only exist in limited
extent in Sweden.
GROUP
Provisions – defined-benefit plans
2023-12-31

2022-12-31

746.5-779.6
-33.1
85.8
52.7

668.9
-715.5
-46.6
94.8
48.2

Current service cost
Interest expense
Calculated interest income
Change in terms and conditions
Total

2023

2022

31.5
16.8
-17.5
0.1
30.9

32.8
4.2
-3.5
0.1
33.6

Total pension expenses impact on the income statement
2023

Operating expenses– defined benefit plans
Operating expenses– defined contribution plans
Operating earnings impact
Net interest expenses– defined benefit plans
Earnings before tax impact

Switzerland
Other countries
Total (fair/present value)
Unrecognised assets
Pension provisions, net

Switzerland
Other countries
Total (fair/present value)
Unrecognised assets
Pension provisions, net
Of which:
Reported as asset (othernon-current receivables)
Reported as liability

2022-12-31

2021-12-31

779.6-746.5
33.1
-85.8
-52.7

715.5
-668.9
46.6
-94.8
-48.2

741.4
-779.1
-37.7
-31.6
-69.3

2023-12-31

2022-12-31

668.9
0.2
31.5
16.8
-34.9
0.3
0.1

779.1
-4.9
32.8
4.2
-24.1
-0.1
-0.3

24.3

-147.7

-2.6

-0.4

3.8
38.1
746.5

24.5
5.8
668.9

2023-12-31

2022-12-31

715.5
-3.0
17.5
22.3
18.4
-34.5
0.2

741.4
-9.4
3.5
20.2
16.5
-23.3
-

6.1
37.1
779.6

-39.7
6.3
715.5

2023-12-31

2022-12-31

223.5
279.3
276.8
779.6

209.8
256.1
249.6
715.5

Pension obligations

31.5

32.8

63.4
94.9

54.2
87.0

-0.7
94.2

0.7
87.7

Plan assets

Pensionobligations

Net

734.1
45.5
779.6
-85.8
693.8

-667.9-78.6-746.5-746.5

66.2
-33.1
33.1
-85.8
-52.7

Of which:
Reported as asset (othernon-current receivables)
Reported as liability

2022-12-31

115

2023-12-31

Fair value of plan assets
Pension obligations
Net
Unrecognised assets
Recognised value

2022

Defined-benefit obligations
2023-12-31

Hexagon Annual and Sustainability Report 2023

Three-year summary

Pension expenses - defined-benefit plans

Within the Group there are defined contribution plans as well as
defined benefit plans.

Pension obligations
Fair value of plan assets
Pension obligations less plan assets
Unrecognised assets
Pension obligations, net

Compliance

4.2
-56.9

Plan assets

Pensionobligations

Net

664.2
51.3
715.5
-94.8
620.7

-588.3-80.6-668.9-668.9

75.9
-29.3
46.6
-94.8
-48.2

5.7
-53.9

Opening balance
Change in terms and conditions
Current service cost
Interest expense
Benefits paid
Acquired/divested subsidiaries
Settlement of pension obligations
Actuarial gains/losses– Financial assumptions
Actuarial gains/losses– Demographic assumptions
Actuarial gains/losses– Experience adjustments
Currency translation differences
Closing balance
Plan assets
Opening balance
Change in terms and conditions
Calculated interest income
Contributions – employer
Contributions – employee
Benefits paid
Acquired/divested subsidiaries
Return on plan assets excluding calculated interest income as above
Currency translation differences
Closing balance
Fair value of plan assets
Equities and similar financial instruments
Interest bearing securities, etc.
Real estateTotal

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 22 Pension provisions, cont.

Characteristics of the pension obligations
The following applies for the Swiss plans which represent 89 per centof the total pension obligations. The Swiss plans include the following
sub-plans: retirement pension (main plan), disability pension, management plan, early retirement plan and jubilee plan. The main plan, retirement pension, is financed through an individual savings account. The
plan defines a retirement credit in per cent of insured salary depending on the age of the plan member and it guarantees an interest rate,
which is annually determined by the Pension Fund. The minimum legal
rate as fixed by the Swiss government has to be credited to the minimum savings account. The interest is not allowed to negative, even if
the actual return on assets is negative (capital protection). The otherkind of plans in Switzerland are of similar nature.
Shortfall in the schemes in Switzerland must be covered by theemployer, while surpluses can only become due to the beneficiaries. The value of plan assets has been reduced accordingly.
Remaining duration is in average 20 year.
Actuarial assumptions for the defined-benefit pension schemes(weighted average, where applicable)

2023

2022

Discount interest rate, %Inflation, %Future salary increase, %

2.5
0.8
2.2

0.5
0.8
2.3

For 89 per cent of the defined benefit obligation, the SwissBVG 2020 tables have been used for the actuarial assumptions
regarding employee turnover and life expectancy.
Sensitivity analysis
The table below describes the effect on the value of the defined
benefit obligations of an isolated change in assumptions as
described.
Change inassumption, %Effect,
MEUR

Change inassumption, %Effect,
MEUR

-0.3
-0.5
-1.0

-10.9
-1.0
-3.5

+0.3
+0.5
+1.0

6.9
0.2
2.8

Change inassumption, no.
of yearsLife expectancy-1.0

Change in
Effect, assumption, no.
MEURof years

13.1

+1.0

Sustainability report

Financial reports

Additional information

NOTE 23 Other provisions

For 2024, the contributions to defined benefit plans are estimated at 45.2 MEUR, of which employer’s contribution 25.7
MEUR.

Discount rate
Salary increase
Employee turnoverCompliance

Effect,
MEUR

-13.1

A provision is recognised in the balance sheet when the Group
has a legal or constructive obligation as a result of a past event
and it is probable that an outflow of resources will be required tosettle the obligation and a reliable estimate of the amount can be
made.
If the effect is material, the provision is determined by discounting the expected future cash flows at a pre-tax rate that reflects
the current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
Warranties
A provision for warranties is recognised when the underlying
products or services are sold. The provision is based on historical
warranty

116

Hexagon Annual and Sustainability Report 2023

data and a weighing of all possible outcomes with their associated probabilities.
Restructuring
A provision for restructuring is recognised when the Group
has approved a detailed and formal restructuring plan andthe restructuring has either commenced or has been publicly
announced. No provision is posted for future operating losses.
Onerous contracts
A provision for onerous contracts is recognised when the
expected benefits to be derived by the Group are lower than theunavoidable cost of meeting its obligations under the contract.

Group
Restructuring provisions

Warranty provisions

Other provisions

Total

Opening balance 2022-01-01
Provision for the year
Increase through acquisition of businesses
Utilisation
Reversal of unutilised amounts
Reclassification
Translation difference
Closing balance 2022-12-31

39.9
63.4
0.8
-44.0
-3.5
-15.1
1.9
43.4

18.6
22.2
-22.3
-1.2
0.0
17.3

10.2
0.8
3.6
-2.8
-4.1
0.0
0.3
8.0

68.7
86.4
4.4
-69.1
-8.8
-15.1
2.2
68.7

Provision for the year
Utilisation
Reversal of unutilised amounts
Reclassification
Translation difference
Closing balance 2023-12-31

178.0
-82.2
-4.1
5.6
-0.6
140.1

17.9
-17.4
-0.6
-0.5
16.7

4.3
-1.5
0.2
-0.3
10.7

200.2
-101.1
-4.7
5.8
-1.4
167.5

Restructuring provisions
Restructuring provisions primarily relates to a rationalisation
programme that was introduced in the third quarter of 2023 andto transaction costs and cost in connection with the decision
to freeze operations in Russia in the first quarter of 2022. The
remaining part of restructuring provisions are mainly related topersonnel and are expected to become due within 12 months.
Warranty provisions
Warranty provisions are estimated based on previous years
statistical data and are evaluated on a regular basis. Since thewarranty provisions are based on historical statistical data, theprovided amount has a low uncertainty regarding the amount andtiming of outflow. The majority of warranty provisions run over a

period of 1 - 3 years. Estimated costs for product warranties arerecognised when the products are sold.
Other provisions
Other provisions primarily consist of provisions for buildings, tax
and legal disputes and also legally required personnel-related
provisions. The personnel-related provisions are considered as
long-term.

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 24 Financial risk
management

Risk management
Hexagon is a net borrower and has extensive international
operations and is therefore exposed to various financial risks.
The Group Treasury Policy, approved by the Board, stipulates
the rules and limitations for the management of the different
financial risks within the Group. Hexagon’s treasury operations
are centralised to the Group’s internal bank, which is in charge of
coordinating the financial risk management. The internal bank isalso responsible for the Group’s external borrowing and its internal financing. Centralisation entails substantial economies ofscale, lower financing cost and better control and managementof the Group’s financial risks. The internal bank has no mandate
to conduct independent trading in currencies and interest rate
instruments. All relevant exposures are monitored continuously
and are reported to the Executive Leadership and the Board of
Directors on a regular basis.
Currency risk
Currency risk is the risk that exchange rate fluctuations will have an
adverse effect on income statement, balance sheet and cash flow.
Furthermore, the comparability of Hexagon’s earnings between
periods will be affected by changes in currency exchange rates.
Hexagon’s operations are mainly conducted internationally andsales, costs and net assets are therefore denominated in a numberof currencies. As of 1 January 2011 the presentation currency is
EUR for the Group. The change decreases the currency exposurein both the income statement and balance sheet as well as in othercomprehensive income. It also allows the Hexagon Group to better
match debt to net assets. Currency exposure originates both fromtransactions in non-domestic currencies in the individual operating entities, i.e. transaction exposure and from translation of
earnings and net assets into EUR upon consolidation of the Group,translation exposure.
Transaction exposure
Sales and purchase of goods and services in currencies otherthan respective subsidiary’s functional currency give rise totransaction exposure. Transaction exposure is, as far as possible,
concentrated to the countries where manufacturing entities arelocated. This is achieved by invoicing the sales entities in theirrespective functional currency.
In accordance with the Group Treasury Policy the transaction
exposure should not be hedged.

Compliance

Sustainability report

Financial reports

Additional information

Translation exposure – Balance sheet
Translation exposure arises when the net assets are translated
into EUR upon consolidation. Translation differences from net
assets in other currencies than EUR reported in other comprehensive income during 2023 were -366.1 MEUR (435.4).
Net exposure per currency
USD
GBP
CAD
CNY
AUD
BRL
INR
Other
Total

2023-12-31

Hedging rate

8,607.9
513.7
492.0
389.2
308.6
151.0
113.3
384.8
10,960.5

0%
0%
0%
0%
5%
0%
0%

Translation exposure – Income statement
The consolidated operating income and expense is mainly generated in subsidiaries outside the Euro-area. Changes in exchange
rates therefore have a significant impact on the Group’s earnings
when the income statements are translated into EUR. Translation exposure related to actual and forecasted earnings is nothedged.
Net sales per currency
2023

USD
EUR
CNY
GBP
JPY
AUD
Other
Total

2022

2,168.6 2,076.9
1,157.5 1,054.8
666.0
648.4
194.0
214.8
175.1
175.8
135.6
128.4
938.4
861.4
5,435.2 5,160.5

Interest rate risk
The interest rate risk is the risk that changes in interest rates will
adversely affect the Group’s net interest expense and/or cash
flow negatively. Interest rate exposure arises primarily from theexternal interest bearing debt. In accordance with the Group
Treasury Policy the average interest rate duration for the external
debt should be in a range from 6 months to 3 years.
During 2023 interest rate derivatives were used in order to manage the interest rate risk.

117

Hexagon Annual and Sustainability Report 2023

Financial income and expenses
Interest income
Interest expense
Other financial income and expense
Net

2023

2022

12.4
-154.1-13.6-155.3

7.6
-35.6
-10.7
-38.7

Credit risk
Credit risk is the risk that counterparts may be unable to fulfil their
payment obligations. Financial credit risk arises when investing
cash and cash equivalents and when trading in financial instruments. To reduce the Group’s financial credit risk, surplus cash
is only invested with a limited number by the company approvedbanks and derivative transactions are only conducted with counterparts where an ISDA netting agreement has been established.
As the Group is a net borrower, excess liquidity is primarily used
to amortise external debt and therefore the average surplus cash
invested with banks is kept as low as possible.
Credit risk also includes the risk that customers will not pay
receivables that the company has invoiced or intends to invoice.
Through a combination of geographical and business segmental
diversification of the customers the risk for significant customer
credit losses is reduced. An aging analysis of the receivables canbe found in Note 18.
Liquidity risk
Liquidity risk is the risk of not being able to meet the Group’s payment obligations in full as they fall due or can only do so at materially disadvantageous terms due to lack of cash resources. To
minimise the liquidity risk, the Group Treasury Policy states that
total liquidity reserves should at all times be at least 10 per centof the Group’s forecasted annual net sales.
On 31 December 2023, cash and unutilised credit limits totalled
1,268.6 MEUR (1,429.7).

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 24 Financial risk management, cont.

The Group’s maturity structure of interest bearing
financial liabilities - undiscounted cash flows
The table below presents the undiscounted cash flows of the Group’s
interest bearing liabilities related to financial instruments based on
2024

Compliance

Sustainability report

Financial reports

Additional information

the remaining period at the balance sheet to the contractual maturity
date. Floating interest cash flows with future fixing dates are basedon the actual interest rates at year-end. Any cash flow in foreign currency is translated to EUR using the exchange rate at year-end.
2025 – 2026

2027 and later

Total

CapitalInterestCapitalInterestCapitalInterestCapitalInterest

Liabilities to credit institutions
Revolving Credit
Term loan
Lease liability
Bond loans
Commercial paper1
Other lenders
Total liabilities to credit institutions

650.0
59.5
380.5
9.2
1,099.2

59.0
5.5
30.2
47.0
0.5
142.2

950.0
83.9
573.4
0.1
1,607.4

15.3
8.9
44.1
93.5
0.0
161.8

0.0
68.1
315.1
993.1
1,376.3

7.9
33.5
91.2
132.6

0.0
1,600.0
211.5
1,269.0
993.1
9.3
4,082.9

74.3
22.3
107.8
231.7
0.5
436.6

Other interest bearing liabilities
Total interest bearing liabilities

0.5
1,099.7

0.0
142.2

0.0
1,607.4

0.0
161.8

0.0
1,376.3

0.0
132.6

0.5
4,083.42

0.0
436.6

1) The Commercial Paper Programme is supported by the long-term revolving credit facilities as back-up and therefore classified as long-term
2) Interest bearing liabilities in the Parent Company, 3,864.0 MEUR

There were interest rate derivatives pertaining to borrowing on 31
December 2023. The agreement governing the Revolving Credit
Facility include a financial covenant for Net debt/EBITDA to be
fulfilled to avoid additional financing costs.

Following a refinancing in 2021, Hexagon’s main sources offinancing consist of:Currency composition pertaining to interest bearing liabilities

2) A Swedish Medium Term Note Programme (MTN) established during
Q2 2014. The MTN programme enables Hexagon to issue bonds up toa total amount of 20,000 MSEK. On 31 December 2023, Hexagon had
issued bonds of a total amount of 11,650 MSEK (10,150).

EUR
INR
SEK
CHF
Other
Total

2023-12-31

2022-12-31

100%
0%
0%
0%
0%
100%

100%
0%
0%
0%
0%
100%

Refinancing risk
Refinancing risk refers to the risk that Hexagon does not havesufficient financing available when needed to refinance maturingdebt, due to existing lenders do not extend or Hexagon has difficulties in procuring new lines of credit at a given point in time. Securing these requirements demands a strong financial position in theGroup, combined with active measures to ensure access to credit.
In order to ensure that appropriate financing is in place and to
decrease the refinancing risk, no more than 20 per cent of theGroup’s gross debt, including unutilised credit facilities, is allowed
to mature within the next 12 months without replacing facilities
agreed.

1) A multicurrency revolving credit facility (RCF) established during Q42021. The RCF amounts to 1,500 MEUR with a tenor of 5+1+1 years.

3) A Swedish Commercial Paper Programme (CP) establishedduring 2012. The CP programme enables Hexagon to issue commercial paper up to a total amount of 15,000 MSEK. Commercial
paper with tenor up to 12 months can be issued under the programme. On 31 December 2023, Hexagon had issued commercial
paper of a total amount of 10,827 MSEK (7,464) and 63 MEUR
(60). The 1,500 MEUR multicurrency revolving facility support thecommercial paper programme.
During Q2 2022 Hexagon issued a private placement bond to SEK(Swedish Export Agency) of 2,000 MSEK with a tenor of 7 years.
A term loan of 200 MEUR with a tenor of 2+1+1 years was established during Q3 2021, of which 200 MEUR was utilised as per 31
December 2023.
Three term loans of 250 MEUR each with a tenor of 2+1+1 years
was established during Q1 2022, of which 750 MEUR was utilised
as per 31 December 2023.

Hexagon Annual and Sustainability Report 2023

118

A two-year term loan of 350 MEUR was established during Q1
2022, of which 350 MEUR was utilised as per 31 December 2023.
A term loan of 300 MEUR with a tenor of 1+1 years was establishedduring Q3 2022, of which 300 MEUR was utilised as per 31 December 2023.
Group’s capital structure2023-12-31

2022-12-31

Interest bearing liabilities and provisions
Cash, bank and short-term investments
Net debt

4,140.3-547.1
3,593.2

3,928.0-486.33,441.7

Shareholders’ equity

10,046.1

9,864.6

Sensitivity analysis
The Group’s earnings are affected by changes in certain key factors,
as described below. The calculations proceed from the conditions
prevailing in 2023 and the effects are expressed on an annualised
basis. Earnings in non-EUR subsidiaries are converted into EUR basedon average exchange rates for the period when the earnings arise.
During the year there have been significant changes to the exchange
rates of currencies that have the biggest impact on Hexagon’s
earnings and net assets, CHF, CNY and USD. Compared to last year
the EUR has weakened against CHF and strengthened against CNY
and USD. Since Hexagon has a majority of the operating earnings
denominated in CNY and USD, this had a negative impact on operating earnings. The strengthening of the CHF had a negative impact
since a considerable part of the costs are denominated in CHF. An
isolated strengthening in the exchange rate for EUR by 5 per cent for
all assets and liabilities denominated in non-EUR currencies would
have had an immaterial effect on net income but a negative effecton equity of 547.8 MEUR (535.3) net, and vice versa, after the impactof hedging.
During 2023, total operating earnings, excluding adjustments, fromoperations in other currencies than EUR amounted to an equivalentof 1,271.5 MEUR (1,232.7). An isolated change in the exchange rate
for EUR by 5 per cent against all other currencies would have a net
effect on operating earnings of approximately 63.6 MEUR (61.6).
The average interest fixing period in the Group’s total loan portfolio
as of year-end 2023 was less than one year. A simultaneous 1 percentage point change in interest rates in all of Hexagon’s funding
currencies would entail a pre-tax impact of about 25.0 MEUR (25.5)
in the coming 12 months earnings.

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 25 Financial instruments

Financial instruments mainly comprise customer accounts
receivable, loans, cash and cash equivalents and accounts
payable.
Classification
The Group classifies financial assets in the following categories:• Financial assets measured at fair value (through other comprehensive income or profit or loss)• Financial assets measured at amortised cost
Classification depends on the Group’s business model and on thecontractual cash flows the Group will obtain from the financial
asset.
Gains and losses from assets measured at fair value will be recognised either through comprehensive income or through profit
or loss. For debt instruments, this depends on the Group’s business model. For equity instruments not available for sale, recognition depends on if the Group initially has chosen to measure
the equity instrument at fair value through other comprehensive
income. Reclassification does only occur if the business model ischanged.
Measurement
Financial assets are initially measured at fair value plus, if financial assets not measured at fair value through profit or loss,transaction costs directly attributable to the acquisition of thefinancial assets. Transaction cost for financial assets measured
at fair value through profit or loss is recognised in the income
statement. Purchases and sales of financial assets are recognised on settlement date.

Compliance

Sustainability report

Financial reports

Additional information

Subsequent measurement of debt instruments depends on theGroup’s business model and the cash flows generated by thefinancial asset. Financial instruments are classified in threedifferent measurement categories:

Hexagon Annual and Sustainability Report 2023

119

Derivatives are initially measured at fair value at the day of entering the contract and are subsequently measured at fair value atthe end of every reporting period.

• Amortised cost: assets held for obtaining contractual cash flows
and those cash flows consist of compensation for capital andinterest, are measured at amortised cost. Gains or losses whendebt instruments are derecognised or impaired are recognised
in profit or loss. Interest income is classified as financial income
according to the effective rate method.

Impairment
The Group estimates on a forward-looking basis expected loss
from debt instruments measured at amortised cost and fair value
through other comprehensive income. The applied methodology
for impairment depends on if there is a significant increase in creditrisk.

• Fair value through other comprehensive income: assets held for
obtaining contractual cash flows and for sale and where the contractual cash flows exclusively are compensation for capital andinterest on outstanding capital is measured at fair value throughother comprehensive income. Changes in recognised value isrecognised in other comprehensive income except from impairments, interest income and currency effects recognised in profit
or loss. When the financial asset is derecognised the accumulated
profit or loss is reclassified from other comprehensive income inequity to the income statement. Interest income is recognised as
financial income according to the effective rate method. Currency
effects are recognised as other operating income or other operating cost and any impairment is recognised as other operatingcost.

For customer receivables, the Group applies the simplified methodology according to IFRS 9, which requires an initial provision for
expected losses.

• Fair value through profit or loss: assets that do not meet the criteria
for being measured at amortised cost or fair value through othercomprehensive income is measured at fair value through profit orloss. Assets measured at fair value through profit or loss consist ofother long-term security holdings. Financial liabilities at fair value
through profit or loss include financial liabilities held for trading andfinancial liabilities designated upon initial recognition as at fair value
through profit or loss. Financial instruments held for trading consistof short term and long-term swap contracts. Gain or loss from adebt instrument measured at fair value through profit or loss is recognised in the income statement at net value, together with otherprofits and losses in the period they arise.

Financial instruments - Fair value
AssetsAssets measured atfair value throughprofit or loss
Other long-term
securities holdings
Assets measured atamortised cost
Long-term receivables
Accounts receivable
Other current receivables
Accrued income
Accrued interest
Short-term investments
Cash and cash equivalents
Total

2023-12-31

2022-12-31

Carrying
amount

Fair
value

Carrying
amount

Fair
value

129.0

129.0

78.1

78.1

29.1
29.1
1,303.1 1,303.1
104.4
104.4
37.5
37.5
0.6
0.6
133.0
133.0
414.1
414.1
2,150.8 2,150.8

36.4
36.4
1,285.8 1,285.8
108.1
108.1
37.5
37.5
0.8
0.8
95.4
95.4
390.9
390.9
2,033.0 2,033.0

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 25 Financial instruments, cont.

Liabilities

2023-12-31
Carrying
amountFinancial liabilities
measured at fair value
through profit or loss
Estimated supplementary
payments for acquiredcompanies
Currency forward andswap contracts – shortterm
Currency forward
and swap contracts– long-term

Carrying
amount2023-12-31

Fair
value

175.8

175.8

162.1

162.1

24.7

24.7

16.1

16.1

-13.4

-13.4

78.8

78.8

Financial liabilities
measured atamortised cost
Long-term liabilities– interest bearing1
2,983.7 2,978.8
Other long-term liabilities– non-interest bearing
124.4
124.4
Current liabilities– interest bearing1
1,099.7 1,100.8
Accounts payable
288.5
288.5
Other current non-interest
bearing liabilities
273.9
273.9
Accrued expenses
466.2
466.2
Accrued interest
6.0
6.0
Total
5,429.5 5,425.7

Sustainability report

Financial reports

Additional information– Currency forward and swap
contracts– Estimatedsupplementary
payments
for acquiredcompanies– Other longterm securities
holdings
Total

2022-12-31

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

-

-11.3

-

-

-94.9

-

-

-

175.8

-

-

162.1

-

129.0
117.7

175.8

-

78.1
-16.8

162.1

The Group uses the following hierarchy for determining anddisclosing the fair value of financial instruments by valuation
technique:3,099.1

3,113.5

121.9

121.9

628.6
309.8

629.1
309.8

300.7
480.9
2.3
5,200.3

300.7
480.9
2.3
5,215.2

1) Commercial papers and bonds have with currency forward and swap contract being swapped from SEK to EUR. The fair value of the derivatives is in
the balance sheet included in current and long-term interest bearing liabilities

120

Hexagon Annual and Sustainability Report 2023

Estimated supplementary payments for acquired companies

Financial instruments valued at fair value

2022-12-31
Fair
value

Compliance

Level 1: Quoted (unadjusted) prices in active markets for identicalassets or liabilities
Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either
directly or indirectly.
Level 3: Techniques which use inputs that have a significant effecton the recorded fair value that are not based on observable market
data.

Opening balance
Present value adjustment
Increase through acquisition of businesses
Payment of supplementary acquisition
considerations
Reversal of unutilised amounts
Translation difference
Closing balance

2023

2022

162.1
3.2
88.4

136.2
1.1
60.6

-33.7
-41.6
-2.6
175.8

-18.4
-16.7
0.7
162.1

The fair value of the estimated supplementary payments foracquisitions are evaluated regularly and includes management’s
assessment of future financial performance of the acquiredcompanies. Estimated supplementary payments for acquiredcompanies have been discounted to present value using an interest rate that is judged to be in line with the market rate at the timeof acquisition. Adjustments for changes in market interest rates
are not made on a regular basis, as this effect is considered to beimmaterial.
The valuation method is unchanged compared to the previous
period. In connection with the valuation of contingent considerations the assets acquired and liabilities assumed in thepurchase price allocation are reviewed. Any indication of impairment due to the revaluation of contingent considerations is
considered and adjustments are made to off-set the impact fromrevaluation.

For further information about estimated supplementary payments for acquired companies see below.

Changes in liabilities arising from financing activities

During the reporting period ending 31 December 2023, there wereno transfers between levels.

Opening balance 2022-01-01
Cash flow
Lease liabilities
Acquisitions
Translation differences
Closing balance 2022-12-31

2,937.9
868.7
59.5
5.6
2.4
3,874.1

2,566.2
932.6
0.3
3,499.1

Cash flow
Lease liabilities
Acquisitions
Translation differences
Closing balance 2023-12-31

133.6
79.7
0.6
-4.6
4,083.4364.7
0.2
3,864.0Group Parent company

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 26 Assets pledged andcontingent liabilities
Parent company

2023

2022

2023

2022

Pledged assets
Total

3.2
3.2

2.8
2.8

-

-

Contingent liabilities
Group

Guarantees in favour ofgroup companies
Other contingent liabilities
Total

Financial reports

Additional information

The fair values of assets and liabilities in businesses acquired
and total cash flow from acquisitions is divided as follows:

December 31

December 31

Sustainability report

NOTE 27 Net assets in acquired anddivested businesses

Pledged assets to credit institutions for loans,bank overdrafts and guarantees
Group

Compliance

Parent company

2023

2022

2023

2022

8.1
8.1

7.9
7.9

15.4
0.2
15.6

171.0
0.4
171.4

2023

2022

Intangible fixed assets
Tangible fixed assets
Other fixed assets
Total fixed assets

127.7
1.9
1.5
131.1

304.6
11.1
2.7
318.4

Current receivables,
inventories, etc.
Cash and cash equivalents
Total current assets
Total assets

20.5
3.5
24.0
155.1

18.1
22.1
40.2
358.6

Provisions
Long-term liabilities
Total long-term liabilities

24.7
2.3
27.0

59.2
10.3
69.5

Current liabilities, etc.
Total liabilities

25.3
52.3

59.8
129.3

Identifiable net assets at fair value

102.8

229.3

Goodwill
Total purchase consideration transferred

331.2
434.0

1,023.0
1,252.3

-3.5
-88.4

-22.1
-75.9

33.7

40.5

375.8

1,194.8

Less cash and cash equivalents in acquired groupcompanies
Less unpaid acquisition price
Payment of unpaid portion of acquisition pricefrom prior acquisitions
Cash flow from acquisitions ofgroup companies, net

Hexagon Annual and Sustainability Report 2023

121

During 2023, Hexagon acquired the following companies:• LocLab, a leader in 3D digital twin content creation• Projectmates, provider of SaaS-based enterprise construction
project management software• Comernal Software, a software development center• Qognify, a leading provider of physical security and enterprise incident management software solutions• Cads Additive, a provider of specialised software for metal additive
manufacturing (AM)• HARD-LINE, a global leader in mine automation, remote-control
technology and mine production optimisation
During the year, Hexagon divested the following:• A business within the Safety, Infrastructure and Geospatial
division providing help-desk support and services. Full year 2022
revenues amounted to 12 MEUR.
Further information related to the acquisitions of Qognify is presented below. The other acquisitions are individually assessed as
immaterial from a group perspective which is why only aggregatedinformation is presented. The analysis of the acquired net assets
is preliminary and the fair value might be subject to change.
Contingent considerations are recognised to fair value (level 3
according to definition in IFRS 13) each reporting period and basedon the latest relevant forecast for the acquired company. The valuation method is unchanged compared to the previous period. The
estimated liability for contingent considerations amounted to 175.8
MEUR (162.1) as of 31 December, whereof the fair value adjustment
in 2023 amounted to 41.6 MEUR (16.7). In connection with the valuation of contingent considerations the assets acquired and liabilities
assumed in the purchase price allocation are reviewed. Any indication of impairment due to the revaluation of contingent considerations is considered and adjustments are made to off-set the impact
from revaluation.

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 27 Net assets in acquired and divested businesses, cont.

Acquisitions analysis
Acquisition of Qognify
In April 2023, Hexagon acquired Qognify, a leading provider of physicalsecurity and enterprise incident management software solutions.
Background and reasons for the transaction
Serving more than 4,000 customers worldwide in banking, government, logistics, manufacturing, retail, transportation andmore, Qognify’s solutions link business and operational workflows
with video data to minimise the impact of security, safety andoperational incidents. End markets include everything from large
utility networks and educational campuses to complex industrial
facilities - the same customers that also benefit from Hexagon’s
computer-aided dispatch (CAD) solutions, which play a crucial role inmobilising the people ultimately responsible for incident resolution.
Qognify’s solutions are a natural expansion of our public safety portfolio, adding comprehensive and tightly integrated video capabilities
that can provide dispatchers, responders and investigators withnew levels of intelligence to serve and protect their communities.
From the date of acquisition, Qognify has contributed 36.9 MEUR
of net sales in 2023. If the acquisition had taken place at the beginning of the year, the contribution to net sales would have been 48.2
MEUR. The contribution to the group operating margin has beenslightly dilutive.
Acquisitions analysis 2022
Acquisition of ETQ
in April 2022, Hexagon acquired ETQ, a leading provider of SaaSbased QMS (quality management system), EHS (environment,
health and safety) and compliance management software.
Background and reasons for the transaction
ETQ’s SaaS QMS solution provides the data backbone for automating the collection and delivery of manufacturing quality control
data, non-conformance reports, customer feedback and more.
It provides an enterprise view of quality management across theentire product lifecycle. ETQ’s broad portfolio of best-in-classapplications comes with out-of-the- box functionality and no-code
configurability, enabling customers to tailor the solution to theirunique needs and optimise critical business processes to achieve
their quality, safety and environmental goals. Given the strong fit
across Hexagon’s manufacturing and process industries and thesignificant scope for geographical expansion, the transaction is
expected to generate sales synergies of over 40 MUSD, with verystrong incremental margins, by 2026.
From the date of acquisition, ETQ has contributed 50.6 MEUR of net
sales in 2022. If the acquisition had taken place at the beginning of
the year, the contribution to net sales would have been 65.2 MEUR.
The contribution to the group operating margin has been accretive.

Compliance

Sustainability report

Financial reports

Additional information

NOTE 28 Average number of
employees
2023
Men Women

Parent company
7
1118
Subsidiaries
18,836 5,694 24,530
Total, Group
18,843 5,705 24,548
Average numberof employees
by country
Nordic region
529
150
679
Rest of Europe
6,479 1,792 8,271
Total, Europe
7,008 1,942 8,950
North America
4,679 1,530 6,209
South America
942
247 1,189
Africa136
55
191
Australia and
New Zealand
334
93
427
Asia
5,744 1,838 7,582
Total, Group
18,843 5,705 24,548

Men Women

Total

917,98917,9981019
5,188 23,177
5,198 23,196

532
6,311
6,843
4,471
811
130

150
682
1,708 8,019
1,858 8,701
1,388 5,859
225 1,036
54
184

348
5,395
17,99889437
1,584 6,979
5,198 23,196

NOTE 29 Employee benefits
Salaries and remuneration

Parent company(of which performance related pay and bonus)
Subsidiaries(of which performance related pay and bonus)
Total, Group
Social security expenses

Parent company(of which pension expenses)
Subsidiaries(of which pension expenses)
Total, Group(of which pension expenses)

122

NOTE 30 Remuneration to senior
executives

2022
Total

Hexagon Annual and Sustainability Report 2023

2023

2022

6.1
(1.5)
1,772.2(190.4)
1,778.3

22.5(6.7)
1,678.2(199.1)1,700.7

2023

2022

2.7
(1.0)
338.2
(93.2)
340.9(94.2)

2.8
(1.6)
263.8
(86.1)
266.6(87.7)At year-end, the board of directors in Hexagon AB consistsof seven board members of which four are men and three are
women. The President and Chief Executive Officer and othersenior executives consists of 12 men and one woman.

Pursuant to resolutions by the Annual General Meeting, the Chairof the Board and Board members were paid remuneration totalling
636.8 KEUR (774.1). The Chair of the Board received 191.7 KEUR andother Board members 60.1 KEUR each. The President and Chief
Executive Officer of Hexagon AB did not receive any director fees. In
addition to ordinary director fees, remuneration is paid for work on
committees. The Chair of the Remuneration Committee received 7.4
KEUR and each member received 5.2 KEUR. The Chair of the Audit
Committee received 28.3 KEUR and each member received 21.8
KEUR. No board member received any remuneration in addition to
director fees or remuneration for committee work. Remuneration
to the President and Chief Executive Officer, as well as the Other
senior executives, comprises basic salary, variable remuneration,other benefits and pension. The President and Chief Executive
Officer total remuneration is recognised in Note 29 in Parent
company. Paolo Guglielmini has received remuneration as President of the Parent Company and as Chief Executive Officer of theGroup according to a separate employment contract with a groupcompany.
Other senior executives are Burkhard Böckem, Chief Technology
Officer, Steven Cost, President Safety, Infrastructure & Geospatial
division, Norbert Hanke, Executive Vice President, Thomas Harring, President Geosystems division, Li Hongquan, Vice resident
and President of China Region, Ben Maslen, Chief Strategy Officer,
David Mills, Chief Financial Officer, Madlen Nicolaus, Chief Marketing Officer, Michael Ritter, President Offroad Autonomy Portfolio,
Mattias Stenberg, President Asset Lifecycle Intelligence division,
Josh Weiss, President Manufacturing Intelligence division and Tony
Zana, General Counsel.
Variable remuneration is based on operational performance.
Pensions and other benefits received by the president and othersenior executives are paid as part of their total remuneration.
PensionPension expense comprises defined-contribution pension
schemes and is the expense affecting earnings for the year. The
President’s and CEO’s pension premiums are payable at 20 per
cent of pensionable salary. Pension premiums for the Other
senior executives are not higher than 25 per cent of pensionablesalary. Pensionable salary means basic salary.

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 30 Remuneration to senior executives, cont.

Severance pay
The notice period for the president and CEO is six months. Upon
termination by the Company or in case of change of principal
ownership the President and CEO is entitled to severance pay
equal to 18 months of salary. The period of notice for senior executives is a maximum of 24 months. During the notice period, basic
salary is the only severance pay.

Compliance

Sustainability report

Financial reports

Additional information

Advisory and resolution model
Remuneration and other benefits to the Group’s senior executives is regulated by the Remuneration Committee, which is
appointed by the Board of Directors, comprising the Chair of theBoard and one additional Board member.

Variable remuneration

Other
benefits1

Pensionexpenses

Total

KEUR

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

Ola Rollén, Chair of the Board 2
John Brandon
Ulrika Francke 3
Henrik Henriksson 3
Erik Huggers
Gun Nilsson
Märta Schörling Andreen
Sofia Schörling Högberg
Patrick Söderlund 3
Brett Watson
Paolo Guglielmini, President andChief Executive Officer
Other senior executives (14people)4
Total

199.1
60.1
81.9
88.4
60.1
87.1
60.1

3,920.0
63.0
88.9
63.0
63.0
217.3
63.0
89.9
63.0
63.0

-

4,967.0--

7,840.0
-

-

784.0
-

199.1
60.1
81.9
88.4
60.1
87.1
60.1

17,511.0
63.0
88.9
63.0
63.0
217.3
63.0
89.9
63.0
63.0

2,000.0

-

693.4

-

-

-

400.0

-

3,093.4-

5,088.4 12,931.3
5,781.8 17,898.3

1,701.1
1,701.1

63.3
7,903.3

10,170.8 11,272.1
12,807.7 15,966.2

1,064.4 1,298.4
1,464.4 2,082.4

18,024.6 25,565.1
21,754.9 43,850.2

1) Other benefits comprices company car and insurance (excluding pension insurance). Expenses during 2023 for all share programmes amounts to 0.9
MEUR for the President and CEO and to 6.1 MEUR for Other senior executives (current and former)
2) Comparison number 2022 refers to remuneration as President and CEO
3) Resigned at the Annual General Meeting 2023
4) Including costs for senior executives who acceded and resigned their positions during the year. Former Executive Vice President is included in Other
senior executives, more detailed information on remuneration to the former Executive Vice President can be found in the Remuneration Report 2023

Share Programme
At the Extraordinary General Meeting on 1 December 2020, it
was decided to implement the Share Programme 2020/2023,
at the Annual General Meeting on 29 April 2021 it was decided
to implement the Share Programme 2021/2024, on the Annual
General Meeting on 29 April 2022 it was decided to implement
the Share Programme 2022/2025 and on the Annual General
Meeting on 2 May 2023 it was decided to implement the Share
Programme 2023/2026 for key employees in the company.
Hexagon’s share programme is accounted for according to IFRS
2 and is classified as an equity-settled share-based payment

123

ers with the interest of the employees concerned. The total costof the share-based incentive programmes is estimated at 60
MEUR each and is recognised as a personnel expense in profit
or loss during the vesting period.

Remuneration and other benefits
Basic salary/
Director fees

Hexagon Annual and Sustainability Report 2023

transaction, which means the programme is reported withinequity. Social fees are reported as a liability in the balance
sheet. Participants in the share programmes are offered to be
granted, free of charge, performance awards which may entitle
to shares of Class B if performance conditions are met during
the measurement periods 1 January 2020 to 31 December
2023, 1 January 2021 to 31 December 2024, 1 January 2022 to 31
December 2025 and 1 January 2023 to 31 December 2026. The
purpose of the share programme is to strengthen Hexagon’sability to retain and recruit competent employees, provide competitive renumeration and to align the interest of the sharehold-

The measurement period for the performance-based condition of Share Programme 2020/2023 was 1 January 2020 until
31 December 2023. The performance-based condition for the
Share Programme 2020/2023 related to the development of
Hexagon’s earnings per share compared to a level set by the
Board for target fulfillment during the measurement period,
where the last financial year during the measurement period(2023) is compared with the financial year immediately preceding the measurement period (2019). The Board has confirmed
fulfillment of the performance-based condition, an increase in
the company’s profit per share during the financial year 2023
compared to the financial year 2019, which pursuant to the duly
adopted terms and conditions of Share Programme 2020/2023
entitles eligible participants to receive shares of Class B in thecompany.
Allocated performance awards in Share Programme
2020/20231

President and Chief Executive Officer
Other senior executives (14 people)
Other employees
Total

Number ofawards1

Market value,
EUR

44,345349,818
4,185, 412
4,579,575

483,361
3,813,016
45,620,991
49,917,368

1) Relates to allocated performance awards, restated after share split 7:1,
which may entitle to shares of Class B to be received during year 2024

Allocated performance awards in Share Programme 2021/20241

President and Chief Executive Officer
Other senior executives (14 people)
Other employees
Total

Number ofawards1

Market value,
EUR

40,461305,977
4,005,045
4,351,483

441,025
3,335,149
43,654,991
47,431,165

1) Relates to allocated performance awards which may entitle to shares ofClass B to be received during year 2025 if the performance conditions are met

In brief

Financial plan

Board of Directors’ report Corporate governance report

NOTE 30 Remuneration to senior executives, cont.

Allocated performance awards in Share Programme
2022/20251
Number ofawards1

President and Chief Executive Officer
Other senior executives (14 people)
Other employees
TotalMarket value,
EUR

51,051
556,456
394,431
4,299,298
4,752,156 51,798 ,500
5,197,638 56,654,254

1) Relates to allocated performance awards which may entitle to shares ofClass B to be received during year 2026 if the performance conditions are met

Allocated performance awards in Share Programme
2023/20261
Number ofawards1

President and Chief Executive Officer
Other senior executives (14 people)
Other employees
TotalMarket value,
EUR

194,005
2,114,655
412,2494,493,514
4,657,107 50,762,466
5,263,361 57,370,635

1) Relates to allocated performance awards which may entitle to shares ofClass B to be received during year 2027 if the performance conditions are met

Compliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

124

NOTE 31 Remuneration of the Group’s NOTE 33 Subsequent events after
auditors
the financial year’s end
Group

PwC
Audit
Audit-related fees
Tax assignments1
Other fees
Total, PwC
Audit, others
Total

Parent company

2023

2022

2023

2022

5.1
0.0
0.4
0.1
5.6
0.7
6.3

4.8
0.9
5.7
0.8
6.5

0.6
0.6
0.6

0.9
0.9
0.9

No significant events effecting the financial reporting haveoccurred during the period between year-end and date of issuance of this report.

NOTE 34 Appropriation of earnings
The following earnings in the Parent Company are at
the disposal of the annual general meeting (KEUR):

1) Tax assignments mainly relates to tax return compliance, transfer pricing
and questions relating to tax legislation and compliance

Premium reserve
Retained earnings
Net earnings
Total

NOTE 32 Related-party disclosures

The board of the directors proposes thatthese funds are allocated as follows:

Remuneration of senior executives, meaning both the Board of
Directors and Executive Leadership, is presented in Note 30. The
Group’s holdings in associated companies and receivables fromand liabilities to associated companies are immaterial. There wereno significant transactions between Hexagon and its associatedcompanies. Similarly, there were no significant transactions
between Hexagon Group and Schörling Group.

Cash dividend to shareholders of 0.13 EUR per share
Balance remaining in the premium reserve
Balance remaining in retained earnings
Total

2,903,123
1,360,563
1,662,520
5,926,206

348,969
2,903,123
2,674,114
5,926,206

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Signing of the annual report
The undersigned certify that the consolidated accounts and theannual report have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by theEuropean Union and generally accepted accounting principles,
respectively and give a true and fair view of the financial positionand earnings of the Group and the Company and that the Boardof Directors’ Report for the Group and the Company give a fairreview of the development of the operations, financial positionand earnings of the Group and the Company and describes substantial risks and uncertainties that the Group companies face.

Stockholm, Sweden 26 March 2024

Ola Rollén

Chair of the Board

John Brandon

Gun Nilsson

Member of the Board

Member of the Board

Märta Schörling Andreen

Sofia Schörling Högberg

Member of the Board

Erik Huggers

Member of the Board

Brett Watson

Member of the Board

Member of the Board

Paolo Guglielmini
President and CEO

Our Audit Report was submitted on 26 March 2024
PricewaterhouseCoopers AB

Bo Karlsson

Authorised Public Accountant
Partner in charge

Helena Kaiser de Carolis
Authorised Public Accountant

Hexagon Annual and Sustainability Report 2023

125

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

126

Auditor’s report
To the general meeting of the shareholders of Hexagon AB (publ),
corporate identity number 556190-4771.
Report on the annual accounts and consolidated accounts
Opinions
We have audited the annual accounts and consolidated accounts
of Hexagon AB (publ) for the year 2023. The annual accounts andconsolidated accounts of the company are included on pages
15–23 and 90–125 in this document.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in allmaterial respects, the financial position of parent company andthe group as of 31 December 2023 and its financial performanceand cash flow for the year then ended in accordance with theAnnual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present
fairly, in all material respects, the financial position of the groupas of 31 December 2023 and their financial performance and cash
flow for the year then ended in accordance with International
Financial Reporting Standards (IFRS), as adopted by the EU, and
the Annual Accounts Act. The statutory administration report isconsistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.
Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional
report that has been submitted to the parent company’s audit
committee in accordance with the Audit Regulation (537/2014)
Article 11.
Basis of opinions
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards arefurther described in the Auditor’s Responsibilities section. We
are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden andhave otherwise fulfilled our ethical responsibilities in accordancewith these requirements. This includes that, based on the bestof our knowledge and belief, no prohibited services referred to in

the Audit Regulation (537/2014) Article 5.1 have been provided tothe audited company or, where applicable, its parent company or
its controlled companies within the EU.

could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial
statements.

We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinions.

Based on our professional judgment, we determined certain
quantitative thresholds for materiality, including the overall
group materiality for the consolidated financial statements as awhole. These, together with qualitative considerations, helped
us to determine the scope of our audit and the nature, timing andextent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.

Our audit approach
Audit scope
We designed our audit by determining materiality and assessing
the risks of material misstatement in the consolidated financial
statements. In particular, we considered where management
made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain. As in
all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented arisk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient
work to enable us to provide an opinion on the consolidated
financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, andthe industry in which the group operates.
The Hexagon Group comprises a large number of subsidiaries.
None of these subsidiaries have, individually, been deemed tobe significant for the audit of the Group. For the Group audit, wehave selected the Parent company and a large number of entities allocated across the Group’s five business areas for Group
reporting. The majority of the subsidiaries in the Group are also
subject to statutory audits according to local requirements. For
other reporting units, analytical audit procedures are performed
as a part of the audit of the consolidation. The Group audit teamhas performed audit work in a selected number of legal entities
as well as performed work on the finance and accounting consolidation processes, treasury operations among other.
Materiality
The scope of our audit was influenced by our application ofmateriality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material
misstatement. Misstatements may arise due to fraud or error.
They are considered material if individually or in aggregate, they

Key audit matters
Key audit matters of the audit are those matters that, in our
professional judgment, were of most significance in our audit of
the annual accounts and consolidated accounts of the current
period. These matters were addressed in the context of our auditof, and in forming our opinion thereon, the annual accounts andconsolidated accounts as a whole, but we do not provide a separate opinion on these matters.
Revenue recognition
Key audit matter
Hexagon’s customer offerings contain solutions in which
hardware and software are integrated as well as services andlicenses. The critical management estimates of customer contracts include establishing the amounts that are to be recognised
as income and when the income should be recognised.
For integrated customer contracts management needs to assess
if revenue should be allocated to each revenue type as different
accounting principles apply for these revenue types. Management makes estimates of completed performance in relation to
the contractual terms and conditions as these performance obligations are or can be fulfilled at different points in time.
Part of Hexagons business comes from major long term, complex and fixed-price customer contracts. Management makes
estimates of completed performance in relation to the contractual terms as a base for recognising revenue on every reporting
date, these estimations are also the base for any potential loss
provision.

In brief

Financial plan

Board of Directors’ report Corporate governance report

Due to the degree of management judgment in arrangements
containing multiple performance obligations, these types ofarrangements have been a key audit matter in our audit.
Accounting principles for revenue recognition are included in
Note 5 and key estimates and assumptions used for customer
arrangements are included in Note 2.
How our audit addressed the Key audit matter
Our audit included, amongst others, a combination of testing ofinternal controls over financial reporting including procedures
to test key application configurations, analytical procedures
including analysing complete transactional data sets with software tools to identify large transactions, anomalies, unexpected
trends or variation. We have, in order to validate revenue for existence and accuracy performed detailed tests of new major contracts in the Hexagon subsidiaries. We have also assessed that
disclosures are appropriate.
Business combinations
Key audit matter
Acquisition of new businesses and the consolidation of new
businesses (business combinations) include purchase priceallocations of the fair values of acquired assets and liabilities
including identification of goodwill and other intangible assets.
The valuation is partly based on management assumptions of the
future earnings of the acquired business and valuation of intangible assets at fair value.
The acquisitions contracts includes contingent earn-out payments which are included in the acquisition cost as a contingent
consideration and remeasured at every reporting date and thus
subject to management estimates and assumptions.
Business combinations and contingent earn-out payments havebeen a key audit matter in our audit due to the degree of management judgment in identifying and accounting of various acquired
intangible assets.
Accounting principles for business combinations are included in
Note 1 and key estimates and assumptions used for fair values ofacquired assets and assumed liabilities as well as identificationof intangible assets and contingent consideration are included in
Note 2.
How our audit addressed the Key audit matter
Our audit procedures included, amongst others assessmentof significant purchase agreements, test of the purchase priceallocations including calculation and accounting for contin-

Compliance

Sustainability report

Financial reports

Additional information

gent considerations. We have involved our valuation specialists to challenge the valuation and calculation methods usedby management. We have also assessed that disclosures areappropriate.
Goodwill and other intangible assets with indefinite useful lives
Key audit matter
The carrying value of goodwill, and other intangible assets withindefinite useful lives represent some 65 percent of reported
total assets. IFRS require annual impairment tests or when there
is an indication that values could be impaired.given that the carrying value of these assets are not amortised.
Market data, Hexagon’s business plans and forecasts on future
development forms the expectations on sales, earnings and cash
flows that are central in the model to calculate a recoverable
value to be compared to the booked carrying value.
We have focused on the valuation of goodwill and intangible
assets with indefinite useful lives as these items involve a large
degree of judgment on behalf of management in assessing future
cash flows.
The key assumptions used and management’s sensitivity analysis for how changes in key assumptions would affect the value in
use are presented in Note 8. As stated in Note 2 the impairment
test require management estimates and assumptions such as
projected cash flows, future market conditions and discountrates.
How our audit addressed the Key audit matter
Our audit procedures included amongst others a review of management impairment tests of goodwill and intangible assets
with indefinite lives. We have examined whether Hexagon’s
impairment test is based on the divisions’ (cash generating units)financial forecasts approved by management. We also evaluatedthe sensitivity analysis for changes in significant parameters,
which, individually or on a collective basis, could imply the existence of an impairment requirement. Valuation experts havebeen involved to challenge the assumptions and estimates madeby management. We have also assessed that disclosures areappropriate.
Other information than the annual accounts and consolidated
accounts
This document also contains other information than the annual
accounts and consolidated accounts and is found on pages 1-14,
32–89 and 130–147. The Board of Directors and the Managing
Director are responsible for this other information.

Hexagon Annual and Sustainability Report 2023

127

Our opinion on the annual accounts and consolidated accounts
does not cover this other information and we do not express any
form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information
identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated
accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the
information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information,
conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of the Board of Director’s and the Managing
Director
The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated
accounts and that they give a fair presentation in accordancewith the Annual Accounts Act and, concerning the consolidated
accounts, in accordance with IFRS as adopted by the EU. The
Board of Directors and the Managing Director are also responsible
for such internal control as they determine is necessary to enable
the preparation of annual accounts and consolidated accounts
that are free from material misstatement, whether due to fraud or
error.
In preparing the annual accounts and consolidated accounts, The
Board of Directors and the Managing Director are responsible forthe assessment of the company’s and the group’s ability to continue as a going concern. They disclose, as applicable, mattersrelated to going concern and using the going concern basis ofaccounting. The going concern basis of accounting is however not
applied if the Board of Directors and the Managing Director intend
to liquidate the company, to cease operations, or has no realistic
alternative but to do so.
The Audit Committee shall, without prejudice to the Board of
Director’s responsibilities and tasks in general, among other things
oversee the company’s financial reporting process.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about
whether the annual accounts and consolidated accounts as awhole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opin-In brief

Financial plan

Board of Directors’ report Corporate governance reportions. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs
and generally accepted auditing standards in Sweden will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis ofthese annual accounts and consolidated accounts.
A further description of our responsibility for the audit of theannual accounts and consolidated accounts is available on Revisorsinspektionen’s website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor’s report.
Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the administration of the Boardof Director’s and the Managing Director of Hexagon AB (publ) for
the year 2023 and the proposed appropriations of the company’s
profit or loss.
We recommend to the general meeting of shareholders that the
profit be appropriated in accordance with the proposal in thestatutory administration report and that the members of theBoard of Director’s and the Managing Director be discharged
from liability for the financial year.
Basis for opinions
We cconducted the audit in accordance with generally accepted
auditing standards in Sweden. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities
section. We are independent of the parent company and thegroup in accordance with professional ethics for accountants in
Sweden and have otherwise fulfilled our ethical responsibilities
in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinions.
Responsibilities of the Board of Director’sand the Managing Director
The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss. At the proposal of adividend, this includes an assessment of whether the dividend
is justifiable considering the requirements which the company’s
and the group’s type of operations, size and risks place on thesize of the parent company’s and the group’ equity, consolidation
requirements, liquidity and position in general.

Compliance

Sustainability report

Financial reports

Additional information

The Board of Directors is responsible for the company’s organisation and the administration of the company’s affairs. This
includes among other things continuous assessment of the company’s and the group’s financial situation and ensuring that thecompany’s organisation is designed so that the accounting, management of assets and the company’s financial affairs otherwise
are controlled in a reassuring manner. The Managing Director
shall manage the ongoing administration according to the Boardof Directors’ guidelines and instructions and among other matters take measures that are necessary to fulfill the company’s
accounting in accordance with law and handle the managementof assets in a reassuring manner.
Auditor’s responsibility
Our objective concerning the audit of the administration, andthereby our opinion about discharge from liability, is to obtain
audit evidence to assess with a reasonable degree of assurance
whether any member of the Board of Directors or the Managing
Director in any material respect:• has undertaken any action or been guilty of any omission which
can give rise to liability to the company, or• in any other way has acted in contravention of the Companies
Act, the Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriations of the company’s profit or loss, and thereby our opinion
about this, is to assess with reasonable degree of assurance
whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect
actions or omissions that can give rise to liability to the company,or that the proposed appropriations of the company’s profit orloss are not in accordance with the Companies Act.
A further description of our responsibility for the audit of theadministration is available on Revisorsinspektionen’s website:www.revisorsinspektionen.se/revisornsansvar. This description
is part of the auditor’s report.
The auditor’s examination of the ESEF report
OpinionIn addition to our audit of the annual accounts and consolidated
accounts, we have also examined that the Board of Directors andthe Managing Director have prepared the annual accounts andconsolidated accounts in a format that enables uniform elec-

Hexagon Annual and Sustainability Report 2023

128

tronic reporting (the Esef report) pursuant to Chapter 16, Section
4(a) of the Swedish Securities Market Act (2007:528) for ABC AB(publ) for the financial year 2023.
Our examination and our opinion relate only to the statutory
requirements.
In our opinion, the Esef report has been prepared in a format that,in all material respects, enables uniform electronic reporting.
Basis for Opinions
We have performed the examination in accordance with FAR’s
recommendation RevR 18 Examination of the Esef report. Our
responsibility under this recommendation is described in moredetail in the Auditors’ responsibility section. We are independentof Hexagon AB (publ) in accordance with professional ethics foraccountants in Sweden and have otherwise fulfilled our ethicalresponsibilities in accordance with these requirements.
We believe that the evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Responsibilities of the Board of Director’sand the Managing Director
The Board of Directors and the Managing Director are responsible for ensuring that the Esef report has been prepared in accordance with the Chapter 16, Section 4(a) of the Swedish Securities
Market Act (2007:528), and for such internal control that theBoard of Directors and the Managing Director determine isnecessary to prepare the Esef report without material misstatements, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to form an opinion with reasonable assurance whether the Esef report is in all material respects preparedin a format that meets the requirements of Chapter 16, Section
4(a) of the Swedish Securities Market Act (2007:528), based on
the procedures performed.
RevR 18 requires us to plan and execute procedures to achievereasonable assurance that the Esef report is prepared in a format that meets these requirements.
Reasonable assurance is a high level of assurance, but it is not aguarantee that an engagement carried out according to RevR 18
and generally accepted auditing standards in Sweden will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected toIn brief

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Board of Directors’ report Corporate governance reportinfluence the economic decisions of users taken on the basis of
the Esef report.
The firm applies International Standard on Quality Management
1, which requires the firm to design, implement and operate asystem of quality management including policies or procedures
regarding compliance with ethical requirements, professional
standards and applicable legal and regulatory requirements.
The examination involves obtaining evidence, through various
procedures, that the Esef report has been prepared in a format
that enables uniform electronic reporting of the annual accounts
and consolidated accounts. The procedures selected dependon the auditor’s judgment, including the assessment of the risks
of material misstatement in the report, whether due to fraud or
error. In carrying out this risk assessment, and in order to design
procedures that are appropriate in the circumstances, the auditor considers those elements of internal control that are relevantto the preparation of the Esef report by the Board of Directors
and the Managing Director, but not for the purpose of expressing
an opinion on the effectiveness of those internal controls. The
examination also includes an evaluation of the appropriatenessand reasonableness of assumptions made by the Board of Directors and the Managing Director.
The procedures mainly include a validation that the Esef reporthas been prepared in a valid XHTML format and a reconciliationof the Esef report with the audited annual accounts and consolidated accounts.
Furthermore, the procedures also include an assessment of
whether the consolidated statement of financial performance,
financial position, changes in equity, cash flow and disclosures inthe Esef report has been marked with iXBRL in accordance withwhat follows from the Esef regulation.
PricewaterhouseCoopers AB, was appointed auditor of Hexagon
AB (publ) by the general meeting of the shareholders on the 2 May
2023 and has been the company’s auditor since 2021.
Stockholm 26 March 2024
PricewaterhouseCoopers AB
Bo Karlsson

Authorised Public Accountant
Partner in charge

Helena Kaiser de Carolis

Authorised Public Accountant

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Hexagon Annual and Sustainability Report 2023

129

Auditor’s Limited Assurance Report on
Hexagon AB’s Greenhouse Gas Emissions
To Hexagon AB (publ), corporate identity number 556190-4771
Introduction
We have been engaged by the Board of Directors and GroupManagement to undertake a limited assurance engagement of
Hexagon AB (publ) greenhouse gas (GHG) emissions (scope 1 andscope 2) for the year 2023, as disclosed on page 84 in the Annual
Report 2023, more specifically in the diagram “Sustainability Key
Performance Indicators”.
Responsibilities of the Board and Group Management
The Board of Directors and Group Management are responsible
for the preparation of the GHG emissions data in accordancewith the applicable criteria, as explained on page 130. The criteria
consists of the Greenhouse Gas (GHG) Protocol – A Corporate
Accounting and Reporting Standard, and the accounting andcalculation principles that the company has developed. This
responsibility includes the internal control relevant to the reporting of GHG emissions that is free from material misstatements,
whether due to fraud or error.
Responsibilities of the auditor
Our responsibility is to express a conclusion on the reported GHG
emissions based on the limited assurance procedures we have
performed. Our assignment is limited to the historical information that is presented and thus does not include future-oriented
information.
We conducted our limited assurance procedures in accordancewith ISAE 3410 Assurance Engagements on Greenhouse Gas
Statements issued by IAASB. A limited assurance engagement
consists of making inquiries, primarily of persons responsible forthe preparation of the GHG emission data, and applying analytical and other limited assurance procedures. A limited assurance
engagement has a different focus and a considerably smaller
scope compared to the focus and scope of an audit in accordance with International Standards on Auditing and generally
accepted auditing standards in Sweden.

The audit firm applies ISQC 1 (International Standard on Quality
Control) and accordingly maintains a comprehensive system of
quality control including documented policies and procedures
regarding compliance with ethical requirements, professional
standards and applicable legal and regulatory requirements.
We are independent in relation to Hexagon AB (publ) according
to generally accepted auditing standards in Sweden and havefulfilled our professional ethics responsibility according to theserequirements.
The procedures performed in a limited assurance engagement
do not allow us to obtain such assurance that we would becomeaware of all significant matters that could have been identified
if an audit was performed. The conclusion based on a limited
assurance engagement, therefore, does not provide the samelevel of assurance as a conclusion based on an audit.
Our procedures are based on the criteria defined by the Boardof Directors and the Group Management as described above. We
consider these criteria suitable for the preparation of the GHG
emission data.
We believe that the evidence we have obtained is sufficient andappropriate to provide a basis for our conclusion below.
Conclusion
Based on the limited assurance procedures we have performed,
nothing has come to our attention that causes us to believe that
Hexagon AB (publ)’s GHG emissions data (as specified above) is
not prepared, in all material respects, in accordance with the criteria defined by the Board of Directors and Group Management.
Stockholm 26 March 2024
PricewaterhouseCoopers AB
Bo Karlsson

Authorised Public Accountant

Helena Kaiser de Carolis

Authorised Public Accountant

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Hexagon Annual and Sustainability Report 2023

130

ESG related notes
Reporting period and standards
Hexagon’s sustainability performance content and data presented in this report on page 50-89 covers the scope from January 1, 2023, to December 31, 2023. This report has been preparedin accordance with the GRI Standards of the Global Reporting Initiative (GRI 2021). Furthermore, information from other standards
and guidelines such as the SASB standards for Technology, Communication, Software and IT Services have also been considered
where appropriate.
Organisational Boundaries
Hexagon’s organisational reporting boundaries cover all its divisions and subsidiaries. These are fully consolidated, following thecontrol-based approach.
Operational Boundaries
Hexagon has completed a company-wide Scope 1 & 2 and Scope
3 emissions inventory that covers all its production sites andoffices. To calculate the GHG emissions, Hexagon has followed
the GHG Protocol Corporate Accounting and Reporting Standard– revised edition, the GHG Protocol Scope 2 Guidance and GHG
Protocol Scope Corporate Value Chain (Scope 3). Scope 3 inventory covers the following categories: purchased goods, capital
goods, fuel-and-energy related activities, upstream transportation, waste generated, business travel, employee commuting,downstream transportation, use of sold products and end-of-life
treatment. The Scope 3 categories not mentioned are considered not relevant to the company based on Hexagon’s businessmodel. Hexagon is only emitting CO2 in its Scope 1. All figures
reported are based on CO2e to account for the emissions fromupstream and downstream activities.
Environmental data collection and reporting methodology
The data has been collected via Hexagon’s ESG reporting system,
developed and aligned to the Financial reporting system during2023 for ESG data gathering and calculation purposes.
In 2023, environmental data was collected from all manufacturing sites and all the facilities under our operational control withmore than 35 FTEs. In order to cover the full scope of Hexagon’s
operations, values have been extrapolated for energy consumption, GHG emissions, water and waste. The extrapolation was

performed on employees (FTEs) basis for sites not covered in thereporting system. The 2022 environmental data for energy consumption, GHG emissions, water and waste has been restated toincrease accuracy and year-over-year comparability.
Scope 1 and Scope 2
Scope 1 and Scope 2 emissions from energy consumption arecalculated using energy data in KWh by energy source (naturalgas, diesel, electricity by country etc.). Scope 1 CO2 emissions arecalculated using the emission factor for the corresponding typeof fuel (source Defra 2023). Scope 2 CO2 emissions are calculatedwith the location-based and the market-based methodology
in accordance with the GHG Protocol Scope 2 guidance. Location-based emissions are calculated using average country/
region emission factor (source IEA and eGrid). Market-based
emissions are calculated using residual mix electricity emission
factor for European counties (source AIB) and the USA (source
Green-e) and average country emission factors for all other countries (source IEA). To capture the CO2 emissions from energy consumption for sites not covered (offices with low number of people
in them), we estimated the Scope 1 and 2 by associating CO2 emissions per employee and extrapolating to the number employees
in the sites not covered.
Scope 1 direct CO2 emissions include emissions from stationary
combustion and vehicles of internal combustion engines in thecompany car fleet.
Scope 2 indirect CO2 emissions include emissions from electricity
in all our facilities, purchased district heating and electric vehicles in the company car fleet.
Scope 3
Scope 3 emissions are calculated in line with the GHG Protocol
for calculating Scope 3 emissions. All transport-related emissions from fuel use emissions are reported on a Well-to-wheelbasis. That includes the categories upstream & downstream
transportation, business travel and employee commuting.
Purchased goods
These emissions are calculated for our major purchased products using the average-data method and their associated cradle-

to-gate emission factor. To capture 100% of our emissions in thiscategory we extrapolated to our total spending on purchased
goods.
Capital goods
These emissions are calculated using the average spend-based
method for our total spending on capital goods. The emissions
are reported on a cradle-to-gate basis.
Fuel-and Energy-Related activities notincluded in Scope 1 or Scope 2
These emissions are calculated using energy consumption data
in KWh by energy course (natural gas, diesel, electricity by countyetc.) and the associated upstream emission factor (Well-to-tank).
For electricity the CO2 emissions are calculated using the averagecountry upstream emission factor (source IEA). For the fuels theCO2 emissions are calculated using the emission factor for thecorresponding type of fuel (source Defra). To capture the CO2
emissions for sites not covered, we associated CO2 emissions per
employee and extrapolated to the number employees in the sites
not covered.
Upstream transportation
These emissions are calculated for our major purchased products using the distance-based method. For calculating the CO2
emissions, we applied the appropriate mass-distance emission
factor for the mode of transport used (source Defra). Air, marine
and road transport were the main modes of transport used for
upstream transportation. To capture 100% of our emissions inthis category, we extrapolated to our total spend on purchased
goods.
Waste generated in operations
These emissions are calculated using actual waste data in kg
by type of waste (hazardous, non-hazardous, residual), type oftreatment (landfill, recycle, incinerated) and the corresponding
emission factor (source Defra and Ecoinvent 3.8). To capture theCO2 emissions from waste generated for sites not covered, we
associated CO2 emissions per employee and extrapolated themto the number employees in the sites not covered.

In brief

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Business Travel
Business travel emissions have been provided by the travel
agency. The modes of transport that have been used for businesspurposes are airplanes, trains, buses, and rental cars. No hotel
stays emissions have been included.
Employee commuting
Employee commuting emissions are calculated for our major
company sites (globally represented) that cover one third of ouremployees using the average-data method. To capture the CO2
emissions for sites not covered, we associated CO2 emissions per
employee and extrapolated to the number of employees in thesites not covered.
Downstream transportation
These emissions are calculated for our major products sold using
the distance-based method. For calculating the CO2 emissions,
we applied the appropriate mass-distance emission factor forthe mode of transport used (source Defra). Air and road transport
were the main modes of transport used for downstream trans-

Compliance

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Additional information

portation. To capture 100% of our emissions in this category, we
extrapolated to our total revenues from sold products.
Use of sold products
These emissions are associated with the products sold by Hexagon during the year and aggregated over their lifetime. Theseemissions are related to electricity consumption of products
over their entire life. We calculated these emissions for our major
products using their technical characteristics (electricity consumption in KWh) and the main assumption was a 10-year lifetime(even though more of our products have a lifetime more than 15
years). The emission factors applied was the average country
electricity emission factor, for the main markets that the products sold as defined (source IEA). To capture the CO2 emissions
for the products that are not covered, we extrapolated based on
the total revenues from sold products.
End of life treatment
Most hardware products have a lifetime longer than 15 years, so
we can re-furbish the products and resale them even after 10

Hexagon Annual and Sustainability Report 2023

131

years of use. When the products have come to their end of life, we
seek to recycle major components. The pieces that are not recycled are disposed.
Social data collection
The methodology used for the social data includes the total
headcount at the end of the reporting period (31/12/2023). By
employees, we refer to everyone in an active employment relationship with our company, excluding interns.
As employee turnover we define the ratio of voluntary and involuntary attritions during the year to the total number of employees at the year-end. Group Management category includes theleadership of the company. Executives include all the employees
directly reporting to the leadership. Level A includes all theemployees directly reporting to the Executives. Level B includes
all the other employees of the company.

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132

Description of material topics
Topic

Description

Impact Materiality

Financial Materiality

Climate change(ESRS E1)

Our biggest opportunity lies in the impact we canmake through our products. Hexagon is very well
positioned to enable the shift towards a net-zerocarbon economy in the industries we serve. To
ensure an effective response to this opportunity,
Hexagon is including ESG criteria in its innovation
process.

We actively work with customers to offer efficiency gains in theprocess they operate. In many cases the gains come from energy-efficient solutions and from reduction of materials acrossthe processes they need to deliver. This efficiency gains in several cases reduce greenhouse gas emissions and support thetransition to a low-carbon economy.

Having a financially stable business that is able to continue to grow positively impacts Hexagon’s long-term success, ensuring Hexagon’s financial resilience as well as its
reputation. This will enable us to further reinvest in operations and take advantage of opportunities. Achieving further growth in adapting and mitigating climate change willfurther build customer confidence, motivate employees
eager to contribute to a positive impact in the planet andensure a resilient growth strategy.

Furthermore, to ensure Hexagon also contributes to mitigating
Climate Change, Hexagon has joined the Business Ambition for
1.5°C. Hexagon has submitted to the SBTi (Science Based Target initiative) near-term and long-term net-zero science-basedtargets for carbon emissions covering our full value chain.

Hexagon is incorporating climate transition risks (such as
emissions trading and other regulatory developments)
into our annual supplier risk management analysis.

Own workforce(ESRS S1)

Another opportunity we see is in ensuring anempowered workforce. To manage this topic,
we have been promoting inclusive workplacethrough DEI (Diversity Equity and Inclusion) Committee and divisional councils to cover all thecountries our employees are located.

Hexagon believes driving the best practices within its workforce
in terms of working conditions and providing an inclusive workforce generate a positive impact in the communities where we
operate. Hexagon delivers a positive impact from good hiring
practices to eliminate any unconscious bias. In 2023, interactive
sessions were held globally with external experts to address
inclusive workplace. Cultural awareness has been also highlighted as an opportunity to thrive for inclusivity.

In Hexagon we understand that employees who feelengaged with their work are more productive, focusedand driven. More importantly, we are a company of innovation and we believe innovation happens when brightideas come from a diverse view points. In this regards,
having the best workforce sets us in the right position to
tackle society’s challenges and ensures we have the bestteam in place to deliver sustainable business impact.

Workers in the value
chain(ESRS S2)This topic refers to Hexagon’s commitment tocomply and promote internationally recognised
standards and regulations that promote fairtreatment of people along our value chain.

By ensuring that workers are treated fairly and by requiring safeand fair working conditions within suppliers, Hexagon promotes
improvements in the quality of life and well being of the workers
from our supply-chain partners. Not respecting human rights
and not providing a safe mechanism to raise concerns canpotentially result in physical and economic harm to people andcommunities.

Respect for universal human rights and labor standards isa prerequisite for suppliers to do business with Hexagon,
as described in Hexagon’s Supplier Code of Conduct. By
advocating high labor standards, Hexagon improves its
reputation as a responsible business partner and foster
enhanced collaboration with suppliers. The impact of this
topic depends on financial impact the specific supplier
could have for Hexagon.

See more in the section ”Operational risk
management”.

See more in the section ”Responsible supply chain
management”.
Business conduct andResponsiveness

These topics includes a wide variety of aspects
such as improper use of goods, anti-corruption,business responsiveness, Industry 4.0 (with innovation and digitalisation), cyber security, data-related topics, and product quality and safety.
See more in the section ”Operational risk
management”.

Through Hexagon’s compliance program, which covers business response in face of corruption and other inappropriate
business behavior, we can prevent negative socioeconomic andenvironmental impacts and raise standards in the industries
we serve. Hexagon has a positive impact on data and cybersecurity by actively managing risks and increasing awareness.
We recognise that there are risks resulting from cyber incidents
which may affect the users. Hexagon aims to minimise risky byraising awareness within our full workforce and by providing
safer digital solutions. Hexagon takes pride in its product quality and safety with customer focus. Together with customers,
Hexagon enables positive impact on the society and tne environment with high quality and safety standards.

Failure to act with integrity and meet our high ethicalstandards, values and code of conduct could lead toadverse reputational impact, fines and litigations. Reputational impacts could significantly hinder our ability tomaintain revenues as we could lose customer base, whilefines and legal proceedings may even hamper our ability
to continue to operate in specific markets.

In brief

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Hexagon Annual and Sustainability Report 2023

GRI and SASB reporting table
Reporting name

General Disclosures
Organisational details
Entities included in the organisation’s sustainability reporting
Reporting period, frequency and contact point
Restatements of information
External assurance
Economic Performance
Direct economic value generated (revenues)
Economic value distributed
Economic value retained
Financial implications and other risks and opportunities due to climate change
Defined benefit plan obligations and other retirement plans
Activities and workers
Activities, value chain and other business relationships
Total number of employees
Breakdown by gender
FemaleMale
Other gender
Breakdown by type of contract and gender
Full-time female
Full-time male
Full-time other gender
Part-time female
Part-time male
Part-time other gender
Total number of contractors
Governance
Governance structure and committees
Diversity and composition of governance body:
Male
FemaleOther gender
Gen Z
Gen Y
Gen X
Boomers
Executive members
Non-executive members
Independence
Independence
Nomination and selection of the highest governance body
Chair of the highest governance bodyUnit

FY 2023

FY 20221

Variance (+/-) Standard

Qualitative
Qualitative
Qualitative
Qualitative
Qualitative

Section: About this report
GRI: 2-1
Section: ESG Reporting Methodology
GRI: 2-2
Section: ESG Reporting Methodology
GRI: 2-3
Section: ESG Reporting Methodology
GRI: 2-4
Section: Auditor’s report on the corporate governance statement GRI: 2-5

Million €Million €Million €5 435,2
5 160,5
4 905,2530,0Section: Operational Risk Management
Section: Financial Report / Pension provisions

Qualitative
No.

Section: Business overview
24,581

%
%
%
%
%
%
%
%
%
No.

24
76
0
22
74
0
2
2
2,689

Qualitative

Section: Corporate Governance Report

No.
No.
No.
No.
No.
No.
No.
No.
No.
Yes
No
Qualitative
Qualitative

4
3
0
0
1
3
3
0
7
3
4
Section: Corporate Governance Report
Section: Corporate Governance Report

1) The 2022 environmental data for energy consumption, GHG emissions, water and waste has been restated to increase accuracy and year-over-year comparability.

5% GRI: 201-1
GRI: 201-2
GRI: 201-3
GRI: 2-6
GRI: 2-7

24,001
24
76
-

0%
0%
- GRI: 2-8
GRI: 2-9

6
4
0
0
1
5
4
0
10
6
4

-33%
-25%
0%
-40%
-25%
-30%
-50%
0%
- GRI: 2-10
- GRI: 2-11

133

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Hexagon Annual and Sustainability Report 2023

Reporting name

Unit

Role of the highest governance body in overseeing the management of impacts
Delegation of responsibility for managing impacts
Role of the highest governance body in sustainability reporting
Conflicts of interest
Communication of critical concerns
Collective knowledge of the highest governance body
Evaluation of the performance of the highest governance body
Remuneration policies
Process to determine remuneration
Strategy, policies and practices
Sustainable development strategy
Policy commitments
Embedding policy commitments
Processes to remediate negative impacts
Mechanisms for seeking advice and raising concerns
Number of significant instances of non- compliance with laws and regulations for which fines wereincurred
Number of significant instances of non- compliance with laws and regulations for which non-monetary
sanctions were incurred
Stakeholder Engagement
Approach to stakeholder engagement
Employees covered by collective bargaining aggreements
Material Topics
Process to determine material topics
List of material topics
Management of material topics

Qualitative
Qualitative
Qualitative
Qualitative
Qualitative
Qualitative
Qualitative
Qualitative
Qualitative

Section: ESG Governance
Section: ESG Governance
Section: ESG Governance
Section: Commitment to Ethics and Compliance
Section: ESG Governance
Section: ESG Governance
Section: Corporate Governance Report
Section: Corporate Governance Report
Section: Corporate Governance Report-

GRI: 2-12
GRI: 2-13
GRI: 2-14
GRI: 2-15
GRI: 2-16
GRI: 2-17
GRI: 2-18
GRI: 2-19
GRI: 2-20

Qualitative
Qualitative
Qualitative
Qualitative
Qualitative
No.

Section: Sustainability strategy
Section: ESG Governance
Section: ESG Governance
Section: Commitment to Ethics and Compliance
Section: Commitment to Ethics and Compliance0--

GRI: 2-22
GRI: 2-23
GRI: 2-24
GRI: 2-25
GRI: 2-26
GRI: 2-27

Environmental Indicators
Number of manufacturing sites
Sites with Environmental Management System
ISO 14001 certified production sites
Share of ISO 14001 certified production sites
Area of manufacturing facilities
Percentage of production from owned facilities
EnergyTotal stationary combustion energy consumption
Natural gas
Crude oil
DieselLPG
Estimated stationary combustion of sites not covered*No.

FY 2023

FY 20221

134

Variance (+/-) Standard

0

-

-

Qualitative%

Section: Materiality analysis
22.5-

GRI: 2-29- GRI: 2-30

Qualitative
Qualitative
Qualitative

Section: Double materiality analysis
Section: Materiality assessment results
Section: Sustainability Roadmap- GRI: 3-1- GRI: 3-2- GRI: 3-3

No.

29

23

26%

No.
%
m2
%

24
83
302,000
24

22
76
-

9%
6 pp.
- SASB: TC-HW-000.B- SASB: TC-HW-000.C

MWh

21,068.9

18,190.9

MWh
MWh
MWh
MWh
MWh

14,488.2
2,301.3
75.2
9.8
4,194.5

13,630.1
483.3
644.8
6.8
3,425.9

16% GRI: 302-1 / SASB:
TC-SI-130a.1
6% GRI: 302-1
376%
-88%
44%
22%

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Hexagon Annual and Sustainability Report 2023

Reporting nameUnit

FY 2023

FY 20221

Electricity Consumption
Total Electricity Consumption

MWh90,460.6

102,503.1

Electricity consumption from gridof which purchased renewable electricity
Renewable electricity produced and consumed on-site
Estimated electricity of sites not covered*Green electricity and REC consumed
Renewable electricity produced
Share of purchased or produced renewable electricity out of total electricity consumption

MWh
MWh
MWh
MWh
MWh
MWh
%

68,541.6
16,672.0
1,607.6
20,311.5
18,279.6
34,833.5
46.2

69,374.1
10,462.1
1,263.8
31,865.2
11,725.9
25,883.8
42.2

tCO2
tCO2
tCO2
tCO2
tCO2
tCO2
tCO2
tCO2

4,335.6
2,892.0
597.3
18.9
2.2
825.1
31,732.3
33,323.2

3,443.5
2,523.7
125.4
163.3
1.6
629.5
36,799.6
38,306.4

26% GRI: 305-1
15%
376%
-88%
44%
31%
-14% GRI: 305-2
-13%

tCO2
tCO2
%
tCO2
tCO2
tCO2
tCO2
tCO2

11,063.1
173.6
8.5
15,398.7
31,905.9
33,496.8
47,304.7
48,895.5

10,282.9
4.6
13,726.4
36,799.6
38,306.4
50,526.0
52,032.8

7%
100%
3 pp.
12%
-13%
-13%
-6%
-6%

tCO2
tCO2
tCO2
tCO2
tCO2
tCO2
tCO2
tCO2
tCO2
tCO2
tCO2
tCO2
tCO2

362,351
284,825
177,546
29,236
9,598
14,533566
29,06424,282
77,526
11,267
66,101
158

350,816
276,910
170,401
36,50312,362
14,257798
22,054
20,53573,907
10,51563,234158

3% GRI: 305-3
3%
4%
-20%
-29%
2%
-29%
32%
18%
5%
7%
5%
0%

Greenhouse gas (GHG)
Direct (Scope 1) GHG emissions
Natural gas
Crude oil
DieselLPG
Estimated Scope 1 GHG emissions of sites not covered*Indirect (Scope 2) GHG emissions from grid electricitiy (market-based)
Indirect (Scope 2) GHG emissions from grid electricitiy (location-based)
Company Cars
GHG emissions from owned vehicles fleet (Scope 1)
GHG emissions from owned electric vehicles (Scope 2)
Electric Vehicles share of company car fleet
Total Direct (Scope 1) GHG emissions
Total Indirect (Scope 2) GHG emissions (market-based)
Total Indirect (Scope 2) GHG emissions (location-based)
Direct and Indirect GHG emissions (Scope 1 + 2, market-based)
Direct and Indirect GHG emissions (Scope 1 + 2, location-based)
Scope 3
Other relevant indirect (Scope 3) GHG emissions
Upstream
Purchased goods and Services
Capital goods
Fuel-and energy-related activities (not included in Scope 1 or Scope 2)
Upstream transportation
Waste generated in operations
Business travel
Employee commuting
Downstream
Downstream transportation
Use of sold products
End-of-life treatment of sold products

Variance (+/-) Standard-12% GRI: 302-1 / SASB:
TC-SI-130a.1-1% GRI: 302-1
59%
27%
-36%
56%
35%
4 pp. GRI: 302-1 / SASB:
TC-SI-130a.1

GRI: 305-1
GRI: 305-2
GRI: 302-1
GRI: 305-1
GRI: 305-2
GRI: 305-1

135

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Reporting name

Intensity Ratio's
Revenues
GHG intensity ratio Scope 1 & Scope 2 (market-based) per million EUR
GHG intensity ratio Scope 1 per million EUR
GHG intensity ratio Scope 2 (market-based) per million EUR
GHG intensity ratio Scope 2 (market-based) per electricity in MWh
GHG intensity ratio Scope 3 per million EUR
Energy intensity ratio per million EUR
Waste
Total waste generated
Hazardous waste generated
Waste recycled
Residual waste, recycled
Hazardous waste, recycled
Non-hazardous waste, recycled
Residual waste, landfill
Residual waste, incinerated
Hazardous waste, landfill
Hazardous waste, incinerated
Non-hazardous waste, landfill
Non-hazardous waste, incinerated
Water
Water consumption
Rainwater & Runoff-water harvesting system available onsite
Water recycling system available onsite
Materials
Weight of non-renewable materials that are used to produce and package our primary products
Weight of renewable materials that are used to produce and package our primary products
Weight of materials that are used to produce and package our primary products
Recycled input materials used
Share of recycled input materials used to manufacture the products
Social Indicators
Employee engagement level
Voluntary turnover, of total workforce
Benefits provided to full- time employees
New employee hires and employee turnover
Newly hired by gender and generation
FemaleMale
Other gender
Gen Z
Gen Y
Gen X
Boomers

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

Unit

FY 2023

FY 20221

MEUR
tCO2 / Mio €tCO2 / Mio €tCO2 / Mio €tCO2 / MWh
tCO2 / Mio €MWh / Mio €5,435.2
8.7
2.8
5.9
0.4
66.7
20.5

5,160.5
9.8
2.7
7.1
0.4
68.0
23.4

MT
MT
MT
MT
MT
MT
MT
MT
MT
MT
MT
MT

2,754.6
159.5
1,699.6
624.5
110.5
964.5
178.0
235.7
46.5
2.6
404.8
187.6

2,505.9264.8
1,472.5
1,356.6
116.0
637.0
247.6
0.8
148.0
-

m3

263,385.1

221,672.0

1
3-

19% GRI: 303-5 /TC-SI-130a.2- GRI: 303-1
-

MT
MT
MT
MT
%

13,111.9
2,215.8
15,327.7
159.6
1.04

-

- GRI: 301-1- GRI: 301-2
-

%
%

73%
8
Section: Employee benefits

73%
11

926
2,582
17
521
2,200
669
129

-

No. of sites
No. of sites

No.
No.
No.
No.
No.
No.
No.

136

Variance (+/-) Standard

5% GRI: 201-1-11% GRI: 305-4
7%
-18%
-2%
-2%
-12% GRI: 302-3
10%
-40%
15%
-54%
-5%
-72%
-5%
5482%
-98%
-

GRI: 306-3
GRI: 306-4
GRI: 306-3, 306-4
GRI: 306-3, 306-5

0 pp. SASB: TC-SI-330a.2-3 pp.
- GRI: 401-2- GRI: 401-1-

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Reporting name

Involuntary attrition breakdown by gender and generation
FemaleMale
Other gender
Gen Z
Gen Y
Gen X
Boomers
Voluntary attrition breakdown by gender and generation
FemaleMale
Other gender
Gen Z
Gen Y
Gen X
Boomers
Turnover rate, of total workforce
Parental Leave
Female employees that were entitled to parental leave
Male employees that were entitled to parental leave
Female employees that took parental leave
Male employees that took parental leave
Occupational health and safety management system
Occupational health and safety management system
Employees who are covered by an occupational health and safety management system
ISO 45001 certified production sites
Share of ISO 45001 certified production sites
For all employees:
Proportion of senior management hired from the local community
Total hours worked by all employees
Fatal accidents
High consequence work-related injuries
Recordable work-related injuries
Fatalities accidents Rate
Rate of high consequence work-related injuries
Rate of recordable work-related injuries
For contractors:
Total hours worked by all contractors
Fatal accidents
High consequence work-related injuries
Recordable work-related injuries
Fatalities accidents Rate
Rate of high consequence work-related injuries
Rate of recordable work-related injuries

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

Unit

FY 2023

FY 20221

No.
No.
No.
No.
No.
No.
No.

297
847
3
143
448
356
199

150
489
-

98%
73%
-

No.
No.
No.
No.
No.
No.
No.
%

470
1,336
4
122
1,077
417
194
13

604
1,914
13

-22%
-30%
0 pp.

No.
No.
No.
No.

2,550
6,871
164
330

-

- GRI: 401-3
-

2
6.9

- GRI: 403-1- GRI: 403-8
0%
0 pp.

Qualitative
No.
No.
%
%

Section: Occupational Health and Safety
17,135
2
6.9
79.9

-

No.
No.
No.
No.
No.
No.
No.

36,329,666
0
0
31
0
0
0.17

-

No.
No.
No.
No.
No.
No.
No.

2 257 827
0
0
1
0
0
0,09

-

Variance (+/-) Standard- GRI: 202-2 / SASB:
TC-SI-330a.1- GRI: 403-9-

137

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

Reporting nameUnit

FY 2023

FY 20221

Diversity of Employees by category
Employees trained in Diversity, Equity & Inclusion
Share of women at top management levelNo.
%

10,791
18

19,562
18

%

24

24

-45%
1 pp. GRI: 405-1 / SASB:
TC-SI-330a.3
0 pp. GRI: 405-1

%
%
%
%
%
%
%

92
8
0
0
8
69
23

92
8
0
0
8
69
23

0 pp.
0 pp.
0 pp.
0 pp.
0 pp.
0 pp.
0 pp.

%
%
%
%
%
%
%

77
23
0
0
7
72
21

80
20
0
-

-3 pp.
2 pp.
0 pp.
-

%
%
%
%
%
%
%

75
25
0
0
19
62
19

75
25
0
-

0 pp.
0 pp.
-

%
%
%
%
%
%
%

76
24
0
4
51
34
10

76
24
0
-

0 pp.
0 pp.
-

No.
No.
No.
No.
No.
No.

0
0
411
66
53
0

230
25
25
0

- GRI: 416-2- GRI: 417-2
79%
164%- GRI: 406-1

Share of women employed in relation to the whole organisation
Group Management
Male
FemaleOther gender
Gen Z
Gen Y
Gen X
Boomers
Executives
Male
FemaleOther gender
Gen Z
Gen Y
Gen X
Boomers
Job level A
Male
FemaleOther gender
Gen Z
Gen Y
Gen X
Boomers
Job level B
Male
FemaleOther gender
Gen Z
Gen Y
Gen X
Boomers
Governance Indicators
Incidents of non-compliance with regulations concerning the health and safety impacts of products
Incidents of non-compliance with regulations concerning product information and labeling
Ethics & Compliance System, executives certified
Whistleblower reports
Solved whistleblower cases
Discrimination incidents

Variance (+/-) Standard138

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

FY 2023

Hexagon Annual and Sustainability Report 2023

Reporting nameUnit

FY 20221

Employees and subcontractors trained in cyber security
Policies and practices relating to targeted advertising and user privacy
Approach to identifying and addressing data security risks
Business continuity risks related to disruptions of operations
Child Labor and Forced or Compulsory Labor
Operations and suppliers at significant risk for incidents of child labor
Operations and suppliers at significant risk for incidents of forced labor
Rights of indigenous peoples
Number of incidents of violations involving the rights of indigenous peoples
Anti-Corruption
Operations assessed for risks related to corruption
Employees that the company's anti-corruption policies and procedures have been communicated to
Employees trained in Code of Business Conduct
Number of confirmed incidents of corruption
Public legal cases regarding corruption brought against the organisation or its employees
Procurement Practices
Key direct procurement suppliers
Key direct procurement suppliers in high risk countries
Key direct procurement suppliers in medium risk countries
Key direct procurement suppliers having approved or signed the Hexagon Supplier Code of Conduct
Suppliers assessed for negative social impacts
Suppliers assessed for negative environmental impacts
Suppliers Audits
ESG audits of key direct procurement suppliers
ESG audits of key direct procurement suppliers in risk countries
ESG audits of key direct procurement suppliers that were conducted on-site
ESG audits of key direct procurement suppliers that were self-assessed (SAQ)
Third-party ESG audits of key direct procurement suppliers
Unannounced ESG audits of key direct procurement suppliers
Number of major non-conformances found in audits of key direct procurement suppliers
Number of solved major non-conformances in audits of key direct procurement suppliers
Conflict minerals
Management of risks associated with the use of critical materials
Suppliers possibly handling conflict minerals (3TG: tin, tantalum, tungsten, gold)
Suppliers handling conflict minerals that have submitted a CMRT
Eventual smelters or refineries reported by suppliers handling conflict minerals (3TG: tin, tantalum,
tungsten, gold)
Eventual smelters reported by suppliers handling conflict minerals that are Conformant
Non-compliant or non-conformant smelters reported by suppliersNo.
Qualitative
Qualitative
Qualitative

26,736
22,560Section: Data privacy and Cyber Security
Section: Operational risk management
Section: Operational risk management

Qualitative
Qualitative

Section: Responsible supply chain management
Section: Responsible supply chain management

No.

0

0

No.
No.
No.
No.
No.

4
22,525
24,6953
023,531
-

No.
No.
No.
No.
No.
No.

1,053
93
5
903
47
27

929
51
5
802
-

No.
No.
No.
No.
No.
No.
No.
No.

116
45
39
64
4
0
3
0

80
11
84
90
7
0
27
26

Qualitative
No.
No.
No.
No.
No.

Section: Responsible supply chain management
257
149
234
177
1 324
823
761
85

760
48

139

Variance (+/-) Standard

19%

SASB: TC-SI-220a.1
SASB: TC-SI-230a.2
SASB: TC-SI-550a.2
GRI: 408-1
GRI: 409-1- GRI: 411-1
100%
100%
5%
100%
-

GRI: 205-1
GRI: 205-2
GRI: 205-2
GRI: 205-3
GRI: 205-3

13%
82%
0%
13%
- GRI: 414-2- GRI: 308-2
45% SASB: TC-HW-430a.1
309%
-54%
-29%
-43%
-89% SASB: TC-HW-430a.2-100% SASB: TC-HW-430a.2
72%
32%
61%
0%
77%

SASB: TC-HW-440a.1

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

The share
Share price development and trading
In 2023, the Hexagon share price increased by 9.6 per cent to120.95 SEK as of 31 December. The share price reached the52-week high of 132.80 SEK on 16 June and the 52-week low on 27
October at 89.16 SEK. Hexagon’s total market capitalisation as of
31 December 2023 was 314,022.6 MSEK.
Ownership structure
At year-end 2023, Hexagon had 66,198 registered shareholders(57,171). Shareholders in the USA accounted for the largest foreign holding, representing 26.1 per cent (30.1) of total shares followed by the UK, representing 4.9 per cent (5.4). The ten largest
owners held 58.3 per cent (54.7) of the share capital and 69.5 percent (66.9) of the votes.
Share capitalAt year-end 2023, Hexagon’s share capital amounted to
85,761,451 EUR, represented by 2,705,477,888 shares, of which
110,250,000 are of Class A with ten votes each and 2,595,227,888
are of Class B with one vote each. Each share has a quota value of0.03 EUR. Hexagon AB has acquired 21,100,000 of the company’s
own shares of Class B as of 31 December 2023. The purpose of
the repurchase is to ensure Hexagon’s undertakings in respectof the long-term incentive programmes (other than delivery ofshares to participants in the incentive programmes), including
covering social security costs.

Incentive programmes
At the Annual General Meeting on 2 May 2023, it was decided
to implement the Share Programme 2023/2026. Participants inthe share programme are offered to be granted, free of charge,
performance awards that may entitle them to receive shares,
provided that the performance conditions are fulfilled. The
performance condition is related to the development of Hexagon’s earnings per share compared with the target level set by
the Board during the measurement period 1 January 2023 to 31
December 2026, where the last financial year during the measurement period is compared with the financial year preceding themeasurement period. The fulfilment of the performance-based
condition will be presented in the annual report for the financial
year 2026.
Shares allotted are acquired by a third party, in its own name,and transferred to the participants in accordance with the Share
Programme 2023/2026. The total costs for the share programme
upon full fulfilment of the performance condition are estimatedto amount to a maximum of approximately 60 MEUR allocatedover the vesting period.

Hexagon Annual and Sustainability Report 2023

10%

Share price increase 2023

ISIN SE0000103699
Nasdaq OMX Stockholm
HEXA B
Reuters HEXAb.ST
Bloomberg HEXAB SS
Sector Technology
Segment Large Cap

Dividend and share split
The dividend policy of Hexagon provides that, over the longterm, dividends should comprise between 25 and 35 per cent of
earnings per share after tax, assuming that Hexagon satisfies its
equity ratio objective. Dividends are resolved upon by the Annual
General Meeting and payment is administered by Euroclear
Sweden.

28,519The Board of Directors proposes a dividend of 0.13 EUR (0.12) per
share for 2023. The proposed dividend amounts to 41 per cent of
the year’s earnings per share after tax.

19

Number of shareholders

Geographic distribution ofshareholdings, %Sweden, 54
USA, 26
UK, 5
Other, 15

Cash dividend per share,EUR

66,19850,034140

57,1710.11

0.12

0.13 10.09 0.09

34,793

20

21

22

23

19

20

21

22

23

1) According to the Board of
Directors’ proposal

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Class of shares

Number of shares

Number of votes% of capital% of votes

A shares
B sharesHolding of treasury B shares
Total

110,250,000
2,574,127,888
21,100,000
2,705,477,888

1,102,500,000
2,574,127,888
3,676,627,888

4.1
95.1
0.8
100.0

29.9
70.1
100.0

A shares

B shares% of capital% of votes

110,250,000

472,081,440
244,415,546
164,253,494
157,283,838
92,570,000
91,613,393
69,768,131
65,587,946
60,418,362
49,033,344
46,269,007
45,000,000
43,597,076
40,196,749
33,021,141
32,106,409
27,262,247
24,222,496
23,244,227
21,675,069
1,802,619,915
771,507,973
2,574,127,888
21,100,000
2,595,227,888

21.52
9.03
6.07
5.81
3.42
3.39
2.58
2.42
2.23
1.81
1.71
1.66
1.61
1.49
1.22
1.19
1.01
0.90
0.86
0.80
70.74
28.45
99.19
0.81
100.00

42.58
6.61
4.44
4.25
2.50
2.48
1.89
1.77
1.63
1.33
1.25
1.22
1.18
1.09
0.89
0.87
0.74
0.66
0.63
0.59
78.59
21.41
100.00100.00

Hexagon Annual and Sustainability Report 2023

Hexagon B
OMX Stockholm_PI141

Total number of shares
traded in thousands

200

200,000

160

160,000

120

120,000

80

80,00040

40,0000

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Nasdaq

Largest shareholders
Owner/manager/deposit bank

Melker Schörling AB
State Street Bank and Trust Co.
JP Morgan Chase Bank NA
Swedbank Robur Fonder
Alecta Tjänstepension Ömsesidigt
JP Morgna Securities LLC
AMF Pension & Fonder
Handelsbanken Fonder
The Bank of New York Mellon
SEB Investment Management
CBNY-Norges Bank
Ramsbury Invest AB
Northern Trust Company, London branch
The Bank of New York Mellon SA/NV
Nordea Investment Funds
FolksamFörsta AP-Fonden
Spiltan Fonder
Länsförsäkringar fondförvaltning AB
Clearstream Banking S.A.
Subtotal, 20 largest shareholders1
Summary, others
Total number of outstanding shares
Holding of treasury B shares
Total number of issued shares

110,250,000
110,250,000
110,250,000

1) The concentration corresponds to the 20 largest shareholders presented in the list
Source: Euroclear Sweden AB as of 29 December 2023

1) According to the Board of Directors’ proposal
2) Share split 7:1 2021, historical data has not been restated
3) Based on the share price on 31 December and calendar year earnings

2023

2022

2021

2020

2019

3.73
32.0
54.0
0.131
41.0
10.90
34

3.65
37.4
51.0
0.12
32.1
9.80
26

3.24
30.8
52.0
0.11
35.7
14.022
46

2.31
24.0
53.4
0.09
38.7
74.72
45

2.36
27.4
43.1
0.09
32.3
50.25
26

Total number of shares
traded in thousands

160

400,000

140

350,000

120

300,000

100

250,000

80

200,000

60

150,000

40

100,000

20

50,0000

Key data per share
Shareholder’s equity, EUR
Net earnings, euro centCash flow, euro centCash dividend, EUR
Pay-out ratio, %Share price, EUR
P/E ratio3

Hexagon B
OMX Stockholm_PI

14

15

16

17

18

19

20

21

22

0
23
Source: Nasdaq

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

The Hexagon share
Year Transaction

2000
2002 Rights issue
2004 New issue, warrants exercised2005 New issue, warrants exercised2005 Bonus issue
2005 Split 3:1
2005 New issue, warrants exercised2005 Issue in kind of consideration shares1
2005 Issue in kind of consideration shares1
2006 Rights issue
2006 New issue, warrants exercised
2006 Compulsory redemption, Leica Geosystems
2006 New issue, warrants exercised2007 New issue, warrants exercised2
2007 Bonus issue
2007 Split 3:1
2008 New issue, warrants exercised2
2008 Repurchase of shares2009 Sale of repurchased shares, warrants exercised2010 Sale of repurchased shares, warrants exercised2010 Rights issue
2011 Rights issue
2011 Change of functional currency to EUR
2012 Sale of repurchased shares, warrants exercised
2013 Sale of repurchased shares, warrants exercised
2013 New issue, warrants exercised2014 New issue, warrants exercised2015 New issue, warrants exercised2016 New issue, warrants exercised2018 New issue, warrants exercised2019 New issue, warrants exercised2020 New issue, warrants exercised2020 Repurchase of treasury shares
2021 Split 7:1
2021 Issue in kind of consideration shares3
2021 Repurchase of shares2022 Repurchase of shares
2023 Repurchase of shares
Total number of outstanding shares

Hexagon Annual and Sustainability Report 2023

142

Ownership structure
Nominalvalue, SEK/EUR

A shares,changeB shares,changeA shares,total

B shares,total

Share capital,
SEK/EUR

10
840,000
10
210,000
3,488,295
1,050,000
10
10,1701,050,000
10
722,635
1,050,000
12
1,050,000
4 2,100,000 36,348,564
3,150,000
4
154,500
3,150,000
4
11,990,765
3,150,000
4
82,0003,150,000
4
787,500
16,687,527
3,937,500
4508,933
3,937,500
4
198,635
3,937,500
4309,119
3,937,500
4
58,1703,937,500
6
3,937,500
2 7,875,000 169,024,990
11,812,500
2169,785
11,812,500
2-1,311,442
11,812,500
2138,825
11,812,500
220,07011,812,500
2 3,937,500 83,845,572 15,750,000
2
339,335 15,750,000
0.22
15,750,000
0.22
185,207 15,750,000
0.22
967,340 15,750,000
0.22
1,354,800 15,750,000
0.22
2,392,236 15,750,000
0.22
2,947,929 15,750,000
0.22
106,000 15,750,000
0.22
2,481,550 15,750,000
0.22
4,614,810 15,750,000
0.22
11,500 15,750,000
0.22-646,000 15,750,000
0.03 94,500,000 2,105,704,812 110,250,000
0.03
132,622,274 110,250,000
0.03-4,828,000 110,250,000
0.03-6,450,000 110,250,000
0.03-5,300,000 110,250,000
0.03
110,250,000

13,953,182
17,441,477
17,451,647
18,174,282
18,174,282
54,522,846
54,677,346
66,668,111
66,750,111
83,437,638
83,946,571
84,145,206
84,454,325
84,512,495
84,512,495
253,537,485
253,707,270
252,395,828
252,534,653
252,554,723
336,400,295
336,739,630
336,739,630
336,924,837
337,892,177
339,246,977
341,639,213
344,587,142
344,693,142
347,174,692
351,789,302
351,800,802
351,154,802
2,456,655,614
2,587,877,888
2,595,227,888
2,579,427,888
2,574,127,888
2,574,127,888

147,931,820
184,914,770
185,016,470
192,242,820
230,691,384
230,691,384
231,309,384
279,272,444
279,600,444
349,500,552
351,536,284
352,330,824
353,567,300
353,625,470
530,699,970
530,699,970
531,039,540
531,039,540
531,039,540
531,039,540
707,284,354
707,284,354
78,471,187
78,471,187
78,471,187
78,771,810
79,302,633
79,956,762
79,980,283
80,530,925
81,554,881
81,557,432
81,557,432
81,557,432
85,761,451
85,761,451
85,761,451
85,761,451
85,761,451

1) Issues in kind in connection with the acquisition of Leica Geosystems whereby shares in Leica Geosystems were contributed in exchange for B sharesin Hexagon
2) Issue in kind in connection with annual block exercise in Leica Geosystems’ warrant programme whereby shares in Leica Geosystems received by
the programme participants based on the exercise of warrants were contributed in exchange for B shares in Hexagon
3) Issue in kind in connection with the acquisition of Infor’s EAM businessHolding per shareholder

Number ofshareholders

1–500
501–1,000
1,001–2,000
2,001–5,000
5,001–10,000
10,001–20,000
20,001–50,000
50,001–100,000
100,001–500,000
500,001–1,000,000
1,000,001–5,000,000
5,000,001–10,000,000
10,000,001Total

No. of
A sharesNo. of
B shares

46 3695,097,953
6,143
4,676,850
4,568
6,749,139
4,387
14,160,115
1,973
14,481,892
1,127
15,800,219
781
23,887,899
312
21,872,484
295
64,259,797
51
35,908,209
117
265,801,911
29
203,976,719
46 110,250,000 1,918,554,701
66,198 110,250,000 2,595,227,888

Source: Euroclear Sweden AB as of 29 December 2023

Analysts following Hexagon AB
OrganisationName

ABG Sundal Collier
Bank of America
Barclays
Berenberg
Bernstein
Carnegie
Citi
Danske Bank
Deutsche Bank
DNB
Goldman Sachs
Handelsbanken
HSBC
JP Morgan
Kepler Cheuvreux
Morgan Stanley
NordeaSEB Equities
UBS Investment Research

Olof Cederholm
Alexander Virgo
Sven Merkt
Nay Soe Naing
Nicholas Green
Mikael Laséen
Pavan Daswani
Viktor Trollsten
Johannes Schaller
Joachim Gunell
Mohammed Moawalla
Daniel Djurberg
Puneet Garg
Toby Ogg
Johan Eliason
Adam Wood
Magnus Kruber
Erik Golrang
Guillermo Peigneux-Lojo

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

143

Quarterly income statements
2023
MEUR

2022

Q1

Q2

Q3

Q4

Year

Q1

Q2

Q3

Q4

Year

Net sales

1,285.1

1,365.0

1,349.8

1,435.3

5,435.2

1,159.7

1,282.3

1,316.6

1,401.9

5,160.5

Gross earnings

853.3

893.7

842.1

954.1

3,543.2

744.3

834.2

856.0

926.5

3,361.0

Sales expenses
Administration expenses
Research and development expenses
Other income and expenses, net
Operating earnings1-259.6-108.1-157.90.7
328.4-276.8-110.5-155.2-1.0
350.2-333.3-153.2-198.1-10.7
146.8-289.6-109.4-163.3-1.2
390.6-1,159.3-481.2-674.5-12.2
1,216.0-226.9-100.7-141.7-39.1
235.9-250.0-99.8-153.03.2
334.6-262.6-107.5-155.411.9
342.4-279.8-108.7-157.0-7.2
373.8-1,019.3-416.7-607.1-31.2
1,286.7

Financial income/expenses net
Earnings before tax

-26.8
301.6

-36.2
314.0

-43.0
103.8

-49.3
341.3

-155.3
1,060.7

-5.8
230.1

-5.6
329.0

-8.9
333.5

-18.4
355.4

-38.7
1,248.0

Tax
Net earnings2

-54.3
247.3

-56.6
257.4

-16.6
87.2

-61.4
279.9

-188.9
871.8

-45.7
184.4

-59.2
269.8

-60.0
273.5

-64.0
291.4

-228.91,019.1

1) of which adjustments2) of which non-controlling interest

-42.8
2.9

-43.9
3.7

-246.2
3.6

-47.8
2.7

-380.7
12.9

-99.2
2.6

-43.9
3.1

-43.8
3.3

-44.2
2.5

-231.1
11.5

Earnings include depreciation/amortisation and impairments of-119.0-124.6-144.7-174.7-563.0-103.6-116.0-114.5-132.9-467.0

9.1
9.0
10.4

9.4
9.4
10.8

3.1
3.1
10.6

10.3
10.2
11.8

32.0
31.7
43.5

6.7
6.7
9.9

9.9
9.9
11.2

10.0
10.0
11.4

10.7
10.7
12.1

37.4
37.4
44.6

2,689,678
2,705,478

2,689,678
2,705,478

2,687,028
2,708,128

2,684,378
2,705,478

2,687,690
2,706,141

2,695,712
2,705,912

2,694,555
2,707,105

2,691,928
2,706,478

2,689,882
2,705,682

2,693,019
2,706,294

Earnings per share, euro centEarnings per share after dilution, euro centEarnings per share excl. adjustments, euro cent
Average number of shares (thousands)
Average number of shares after dilution (thousands)

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

144

10-year summary
MEUR

2014

2015

2016

2017

20172

2018

20193

2020

2021

2022

2023

Income statement
Net sales
Operating earnings (EBITDA)
Adjusted operating earnings (EBIT1)4Operating earnings
Earnings before tax- of which adjustments
Net earnings- of which non-controlling interest

2,622.4
743.5
602.8
542.1
508.5
-60.7
406.2
3.4

3,043.8
912.3
725.0
656.1
629.6
-68.9
505.1
5.2

3,149.2
970.0
771.3
736.1
714.3
-35.2
578.6
5.3

3,448.4
1,109.5
880.2
762.1
739.4
-118.1673.8
7.1

3,448.1
1,107.0
877.7
759.6
736.9
-118.1671.2
7.1

3,760.7
1,197.7
978.0
925.1
902.3
-52.9
738.1
8.1

3,907.7
1,339.1
1,023.6
892.2
865.3-131.4708.6
6.2

3,764.4
1,411.6
1,009.5
787.0
759.6-222.5624.7
6.6

4,341.1
1,654.1
1,269.6
1,009.8
983.6-259.8810.0
8.4

5,160.5
1,877.1
1,517.8
1,286.7
1,248.0-231.1
1,019.1
11.5

5,435.2
2,026.6
1,596.7
1,216.0
1,060.7-380.7
871.8
12.9

Balance sheet
Current assets
Fixed assets
Non-interest bearing liabilities and provisions
Interest bearing liabilities and provisions
Shareholders' equity
Total assets

1,410.7
5,401.3
1,216.5
2,125.3
3,470.2
6,812.0

1,492.7
5,939.4
1,360.7
1,969.1
4,102.3
7,432.1

1,672.4
6,241.7
1,474.5
1,848.8
4,590.8
7,914.1

1,815.4
6,813.8
1,666.8
2,344.3
4,618.1
8,629.2

1,799.8
6,813.8
1,664.7
2,344.6
4,604.4
8,613.4

2,061.6
7,622.5
1,901.0
2,463.9
5,319.2
9,684.1

2,118.4
8,482.2
1,939.7
2,584.0
6,076.9
10,600.6

1,894.1
8,809.5
1,981.1
2,773.3
5,949.2
10,703.6

2,271.7
11,823.3
2,317.4
3,012.9
8,764.7
14,095.0

2,643.7
13,833.3
2,684.4
3,928.0
9,864.6
16,477.0

2,752.1
14,131.7
2,697.4
4,140.3
10,046.1
16,883.8

23
12
13
232.5
51
56
14.3
0.50
619.2
563.4
16.1
16.1

24
12
13
230.3
55
61
20.3
0.38
749.9
722.6
19.9
19.9

24
13
14
257.6
58
64
27.9
0.30
832.1
782.1
22.7
22.7

26
13
15
275.6
54
59
27.1
0.40
882.3
907.2
26.4
26.3

25
13
15
275.6
54
59
27.0
0.40
879.7
907.2
26.3
26.3

26
14
15
389.1
55
60
31.9
0.35
1,004.8
944.1
28.9
28.7

26
13
12
399.1
57
62
26.8
0.31
1,125,5
1,103.6
27.4
27.4

27
12
10
383.3
56
60
23.5
0.37
1,153.2
1,374.5
24.0
24.0

29
13
12
419.4
62
66
32.4
0.27
1,372.8
1,351.4
30.8
30.8

29
12
11
552.7
60
63
27.3
0.33
1,546.5
1,372.7
37.4
37.2

29
11
9
598.3
60
63
7.3
0.34
1,530.1
1,451.9
32.0
31.7

24.9

29.9

33.0

35.0

34.9

39.7

44.0

44.9

52.8

57.4

56.9

22.6
1.38
242
0.05

28.7
1.62
315
0.06

31.0
1.81
326
0.07

36.0
1.83
411
0.08

36.0
1.82
411
0.08

37.4
2.09
408
0.08

43.1
2.36
525
0.09

53.4
2.31
750
0.09

14,865

15,891

17,543

19,24920,250

Key ratios
Adjusted operating margin, %Return on capital employed, %Return on equity, %Investments
Equity ratio, %Share of risk-bearing capital, %Interest coverage ratio (times)
Net debt/equity ratio (times)
Cash flow before changes in working capital and excluding non-recurring items
Cash flow after changes in working capital and excluding non-recurring items
Earnings per share, euro centEarnings per share after dilution, euro centCash flow per share before changes in working capital and excluding non-recurring items,
euro centCash flow per share after changes in working capital and excluding non-recurring items, euro
cent
Equity per share, EUR
Closing share price, SEK
Cash dividend per share, EUR
Average number of shares (thousands)
Average number of shares after dilution (thousands)
Number of shares, closing balance (thousands)
Average number of employees
1) As proposed by the Board of Directors
2) Restated – IFRS 153) IFRS 16 is applied from 2019, comparison numbers have not been restated

2,490,348 2,515,709
2,500,575 2,518,719
2,501,723 2,522,359

2,523,031
2,526,153
2,523,101

16,4602,523,101
2,531,123
2,523,101

17,543

4) From 2021 adjusted operating earnings (EBIT1) is excluded from amortisation of surplus values in the purchase price allocation (PPA), comparison
numbers have been restated

The share-related key financial ratios have been calculated considering all historical share issues and splits.

2,523,101 2,526,594 2,554,286
2,531,123 2,536,107 2,556,694
2,523,101 2,540,475 2,572,773

52.0
51.0
54.0
3.24
3.65
3.73
144
109
121
0.11
0.12
0.131
2,572,780 2,599,293 2,693,019 2,687,690
2,573,914 2,606,291 2,706,294 2,706,141
2,568,335 2,696,128 2,689,678 2,684,378
20,343
21,291
23,19624,548

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

145

Financial definitions
In addition to the financial measures as required by the financial
reporting framework based on IFRS, this report also includes
other measures and indicators that are used to follow-up, analyse and manage the business. These measures also provide
Hexagon stakeholders with useful financial information on theGroup’s position, performance and development in a consistentway. Below is a list of definitions of measures and indicators usedin this report.
Amortisation of surplus values
When a company is acquired, the purchase consideration isallocated to the identified assets and liabilities of the company.
Intangible assets are most often allocated the substantial part ofthe purchase consideration. The amortisation of surplus values
is defined as the difference between the amortisation of such
identified intangible assets and what the amortisation would
have been in the acquired company had the acquisition not takenplace at all.
Adjustments
Adjustments consists of expenses related to the share programme (LTIP), amortisation of surplus values (PPA) and non-recurring items which refers to income and expenses that are notexpected to appear on a regular basis and impact comparability
between periods.
Adjusted operating earnings (EBIT1)
Operating earnings excluding adjustments. Adjustments are
excluded to facilitate the understanding of the Group’s operational development and to give comparable numbers between
periods.
Adjusted operating earnings (EBITDA)
Adjusted operating earnings (EBIT1) excluding amortisation,
depreciation and impairment of fixed assets. The measure is presented to give depiction of the result generated by the operating
activities.

Adjusted EBITDA-margin
Adjusted operating earnings (EBITDA) as a percentage of operating net sales.
Adjusted operating margin
Adjusted operating earnings (EBIT1) as a percentage of net sales
for the year.¨
Capital employed
Total assets less non-interest bearing liabilities.
Capital turnover rate
Net sales for the year divided by average capital employed.
Cash conversion
Operating cash flow excluding interest, tax payments and nonrecurring items divided by operating earnings (EBIT1).
Cash flow
Cash flow from operations before change in working capital andexcluding non-recurring items.
Cash flow per share
Cash flow from operations, after change in working capital,
excluding non-recurring items divided by average number ofshares.
Commercial paper
An unsecured promissory note with a fixed maturity of 1 to365 days.
Earnings per share
Net earnings excluding non-controlling interests divided byaverage number of shares.
Equity ratio
Shareholders’ equity including non-controlling interests as apercentage of total assets.

Gross margin
Gross earnings divided by operating net sales.
Interest coverage ratio
Earnings after financial items plus financial expenses divided byfinancial expenses.
Investments
Purchases less sales of tangible and intangible fixed assets,
excluding those included in acquisitions and divestitures ofsubsidiaries.
Net debt
Interest bearing liabilities including pension liabilities and interest bearing provisions less cash and cash equivalents.
Net indebtedness
Interest bearing liabilities less interest bearing current receivables and liquid assets divided by shareholders’ equity excluding
non-controlling interests.
Operating net sales
Net sales adjusted by the difference between fair value andbook-value of deferred revenue regarding acquired businesses.
Organic growth
Net sales compared to prior period excluding acquisitions anddivestments and adjusted for currency exchange movements.
Pay-out ratio
Dividend per share as a percentage of earnings per share.
P/E ratio
Share price divided by earnings per share.
Profit margin before tax
Earnings after financial items as a percentage of net sales.

In brief

Financial plan

Board of Directors’ report Corporate governance report

Return on capital employed (12-month average)
Twelve months to end of period earnings after financial items,
excluding adjustments, plus financial expenses as a percentageof twelve months to end of period average capital employed. The
twelve months average capital employed is based on averagequarterly capital employed.
Return on shareholders’ equity (12-month average)
Twelve months to end of period net earnings excluding non-controlling interests as a percentage of twelve months to end of
period average shareholders’ equity excluding non-controllinginterests last twelve months. The twelve months average equity
is based on quarterly average equity.

Compliance

Sustainability report

Financial reports

Additional information

Business definitions

Currency codes

AI Artificial Intelligence

AUD

Australian Dollar

AIM Asset Information Management

BRL

Brazilian Real

Americas North America, South America and Central America

CAD

Canadian Dollar

Asia Asia (excluding Middle East), Australia and New Zealand

CHF

Swiss FrancBIM Building Information Modelling

CNY

Chinese Yuan

CAD Computer-Aided Design, software
for creating technical drawings

EUR

Euro

CAE Computer-Aided Engineering, simulation software

GBP

British Pound

INR

Indian Rupee

JPY

Japanese Yen

CAM Computer-Aided Manufacturing, software
for controlling machine tools
CMM Coordinate Measuring Machine

Revolving credit facility
A loan facility where the borrower may increase and reduce the size ofoutstanding debt up to the available limit during the term of the loan.

EAM Enterprise Asset Management

Shareholders’ equity per share
Shareholders’ equity excluding non-controlling interests divided
by the number of shares at year-end.

Emerging markets Eastern Europe, Middle East, South America,
Africa and Asia excluding Australia, New Zealand, Japan and Korea

Share of risk-bearing capital
Shareholders’ equity including non-controlling interests and provision for taxes as a percentage of total assets.

Hexagon Annual and Sustainability Report 2023

EHS Environment, Health and Safety
EMEA Europe, Middle East and Africa

ESG Environmental, Social and Governance
GDPR General Data Protection Regulation
GES Hexagon’s operating segment Geospatial Enterprise
Solutions
IES Hexagon’s operating segment Industrial Enterprise Solutions

Share price
Last settled transaction on Nasdaq OMX Stockholm on the lastbusiness day for the year.

IMU Inertial Measurement Unit

Term loan
A fixed amount loan with a maturity date of more than one year
and with a specified repayment schedule where the borrower is
not entitled to re-borrow any amount which it has repaid.

R&D Research and development

ISDA International Swaps and Derivatives Association
OECD Organisation of Economic Cooperation and Development
QMS Quality Management System
SaaS Software as a service

SEK

Swedish Kronor

USD

US Dollar146

In brief

Financial plan

Board of Directors’ report Corporate governance reportCompliance

Sustainability report

Financial reports

Additional information

Hexagon Annual and Sustainability Report 2023

147

Shareholder information
Annual General Meeting 2024
The Annual General Meeting (AGM) will be held on Monday 29
April 2024 at 17:00 CET at IVA Konferenscenter, Grev Turegatan 16 in
Stockholm, Sweden. Shareholders who wish to attend the AGM in
person, by proxy or by postal voting must• be registered in the share register maintained by Euroclear Sweden AB on Friday 19 April 2024. Shareholders with nominee-registered holdings should temporarily have their shares registeredin their own names through the agency of their nominees so thatthey are recorded in the share register well before 19 April 2024.
• give notice to the Company of their intention to participate nolater than Tuesday 23 April 2024 in accordance with the instructions below.
Participation in person or by proxy
Notification of participation in the AGM can be made via Hexagon’s website hexagon.com, by post to Hexagon AB, “Annual
General Meeting”, c/o Euroclear Sweden AB, P.O. Box 191, SE-101
23 Stockholm, Sweden, or by telephone +46 8 402 92 21 no later
than 23 April 2024.
Upon notification, the shareholder shall state name, personal or
corporate identity number, address, telephone number (daytime)and shareholding. Proxies and representatives of legal entities
must submit relevant authorisation documents before the meeting. Proxy forms are available on the Company’s website and will
be sent by post to shareholders who contact the Company andstate their address.

Participation by postal voting
A special form must be used for postal voting. The form is available on the Company’s website. Notification to the meeting does
not need to be made separately as the postal voting form is also
valid as notification.

Financial information 2024
Hexagon will issue financial information concerning the businessyear 2024 on the following dates:
Q2 Interim Report

26 July 2024

The completed and signed postal voting form can be sent by
post to Hexagon AB, “Annual General Meeting”, c/o Euroclear
Sweden, P.O. Box 191, SE-101 23 Stockholm, Sweden or by e-mailto GeneralMeetingService@euroclear.com. The completed andsigned form must be received by Euroclear Sweden AB no later
than 23 April 2024. Shareholders may also, no later than 23 April
2024, cast a postal vote electronically by verifying with BankID
via Euroclear Sweden AB’s website https://anmalan.vpc.se/
EuroclearProxy. The shareholder may not provide the postal
vote with special instructions or conditions. If so, the entire
postal vote is invalid. Further instructions and conditions can befound in the postal voting form and on https://anmalan.vpc.se/
EuroclearProxy.

Q3 Interim Report

25 October 2024

Year-End Report

31 January 2025

Q1 Interim Report

26 April 2024

Distribution policy
The Hexagon Annual Report is distributed digitally. The annual
report can be downloaded at the website where Hexagon’s
Annual Reports from 1997 and onwards are available. For aprinted copy please contact Hexagon AB.

Dividend
The Board of Directors proposes that a dividend of 0.13 EUR
per share be declared for the financial year 2023. As record day
for right to receive dividend, the Board of Directors proposes
Thursday 2 May 2024. If the AGM resolves in accordance with theproposal, the dividend is expected to be paid through Euroclear
Sweden AB starting on Friday 10 May 2024. Payment is made in
EUR, provided that EUR can be received on the shareholder’syield account; if not, payment will be distributed in SEK, whereby
currency exchange is made in accordance with Euroclear Sweden
AB’s applicable procedures.

Produced by Hexagon in cooperation with
Hallvarsson & Halvarsson. Print: Åtta.45.
Photo: Hexagon, Shutterstock andAdobeStock.

Hexagon AB

P. O. Box 3692
SE-103 59 Stockholm, Sweden
Visiting address
Lilla Bantorget 15, Stockholm
Telephone: +46 8 601 26 20
E-mail:info@hexagon.com
Website: hexagon.com