Hexagon AB (publ) (STO:HEXA.B)

CMD 2015

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Dec 4, 2015

Good morning, everyone, and welcome to the Hexagon Capital Markets Day 2015. And I just need to get used to this. Yes, that seems to work. We're going to cut to the case. So we're going to show you the summary of our financial targets in an update in the beginning, and then we're going to talk about the future at the end. So we'll start with sort of a business update, current trading in the Q4. And then we dig directly into the financial plan and the targets and conclusions of the financial plan. And then after I've done that, we're going to hear the divisional updates, and that's going to be super interesting. They're the main stars of today. We're going to see geosystems. We're going to see geospatial, and we're going to see hexagon positioning. And then we move into industrial applications, and we're going to see PPNM. And Hexagon, it's not metrology anymore, it's manufacturing intelligence. And I have to tell you this joke. When they launched their name, Manufacturing Intelligence, the CFO of Hexagon Manufacturing Intelligence came home to his kids. And he told them about the new name and they said, how do you manufacture intelligence? So think about that, but they have a lot of good stories to tell as well. And then we move. And I think the major theme is really moving beyond 2016 and having a sort of 3 to 5 year outlook on this company and see what could we expect after 2016. Business update, the Q4. As you know, and this doesn't come as a surprise, the low CapEx is starting to make an impact on our oil and gas business. Nothing alarming, but we definitely see our customers, the EPCs and others, cutting back on expanding and CapEx projects. China is another major cause for concern in the global economy. It's not getting worse. As a matter of fact, we see a fairly stable outlook in China. But one thing to remember as we enter into the Q4 is that we have really tough comps in the Q4 in China. We grew by 16% organic growth in the Q4 of last year. So all in all, for the group, we expect a recorded growth of 6% to 9% in 2015 Q4. So if you do your modeling, we did SEK 7 43,000,000 in the Q4 of last year. So if you add 6% to 9%, you get a €20,000,000 deviation between the minimum and the maximum in the quarter. And that's the best forecast we can give you standing here in December. One thing to remember with Hexagon is that we do roughly 40% of our business in the 2 last weeks in the final month of the quarter. So this is why we still have a range for Q4. Margin improvement trend is expected to continue in the 4th quarter. We still have a very positive outlook on being able to over time, but also quarter on quarter, move margins upwards. And then we come to the financial plan. And the 3 parameters I want to update you on today is organic growth, M and A activity and EBIT margin progression. So if we start with the organic growth, you've seen all the bad news hitting the global economy. We've seen oil price plunge. We've seen South America basically having negative growth for 12 consecutive months. And there's been a lot of negative press. But there is a lot of positive things happening in the global economy as well. Do you know that in 2 years' time, 50% of the global population will have smartphones? So 3,500,000,000 people will be connected to the Internet. That's amazing. Another thing that we see is 34,000,000,000 devices will be connected to the Internet by 2020. And that's up from roughly 10,000,000,000 devices today. And take these 34,000,000,000 with a pinch of salt because this is an ever expanding business. We call it Internet of Things, but it's definitely going to come. Another thing is global cloud storage. I don't know if you saw, they benchmark Walmart against Amazon during Black Friday. And I mean, Walmart is in a negative spiral. It's just going down. Amazon and buying online is an ever growing business. And of course, the storage is a reflection of that. So we're currently spending US18.9 billion dollars on buying storage. And that's going to I mean, it's going to be an exponential growth in the next few years. We need more and more storage because more and more of our businesses and transactions are going online. So one final, which is a bit of a negative trend, you could say, is 1 in 3 jobs is going to be converted to software, robots or smart machines in the next 10 years. So what are we going to do? What are you going to do? What if they automate analysts? No. How do I get out of this? Well, then we couldn't have Capital Markets Day because it would be bloody boring talking to a bunch of computers. So let's hope that doesn't happen. What I'm trying to paint is a 2 speed world. We all know that since the financial crisis, things aren't the same. We can't use the same parameters when we run our businesses and industries and when we look forward. And our simple judgment on the state of the nation is we're shifting. And we as a generation are seeing something phenomenal. Old industries are gradually dying, becoming less important, less competitive, but new industries are growing. And it's very important as a global enterprise today to be on the blue line and not the red line. And you're following red line companies, and hopefully you're following blue line companies. And our mission here today is to prove to you that Hexagon is on the blue line and not the red line. This is, of course, a challenge because we got red line customers and red line businesses. So it's quite tough at the moment to predict the outlook and things are changing so rapidly. But I'm pretty sure that we're going to see tremendous global growth in the 10 years to come simply by riding the blue wave rather than the red wave. Now if you look at Hexagon and get a glimpse on what we've done and how we performed, You clearly see this if you plot it like this. So you've got pre financial crisis and post financial crisis. And the scale is tough, but you can see the world GDP growing at roughly 4%, 4.5%, even 5% pre the financial crisis. And then we can see it leveling out. And we can see the hexagon growth way above 10% organic growth pre the financial crisis. And then we had a spike up in 2011, which now is down to well, we've been hovering around 5% since then. And this is what I'm talking about. This is really this impact that we got a lot of customers that are still playing in this area and haven't been able to catch the train and start growing again. But why is Hexagon outperforming GDP in general? Because there is a rule of thumb, you could say we grow twice the rate of global GDP. But why is that? Well, if we look at the blue trends. This is the first time ever when more people on this planet live in cities than on the countryside. So construction, infrastructure and so on is, of course, one of the global trends. Now there are no viable alternatives to our technologies. How are you going to go about building a car without metrology? That's impossible today. So the market is also underserved. Even old accounts that we've held for 20 years, we see them buying more and more of our technology. So the penetration is not done yet in traditional markets and new markets. And I think the most important factor is we sell productivity and quality. We don't sell capacity. So when you see automotive's volumes going down and so on, it doesn't really have an impact on Hexagon's business. Brand loyalty and switching costs are quite high in our industry, and that's good and it's bad because that means that market share, buying market share is quite difficult for us and our competition. And then every 18 months, we come with something that will improve the productivity and quality so much for our customer base that it's actually worthwhile for them to buy new rather than sticking to the old technology. So this is our current business. If we look at what we plan for the future, the beauty about our technology is it's new, it's not ripe. So we have several hundreds of new applications that we can start looking at, starting developing technologies and products for. And this is something we're going to talk more about today, the green area, which is the new. But if we look at the past 4 years and what we've done, we can see that we started off with strong organic growth and blue represent existing applications and green are new markets, new applications. But over time, we've seen primarily the blue box shrinking on the back of a shrinking global GDP growth. So we've had to push ourselves and develop new products, new applications where we can continue to grow even though the global economic growth is muted. And going forward, I think it's fair to believe that this sort of sluggish GDP development that we've seen for the past few years is going to remain for the foreseeable future. So no company can plan on growth, just planning on the current customers buying your current products at an increasing rate. That's not going to happen. So what we need to do is to further penetrate these accounts with new developments of existing applications, but we also need to launch new applications, new ideas. We need this ever increasing flow of new ideas into our business to grow. Now if we move to M and A, in the past 3 years, we've acquired some 30 plus companies. But what we try to do, and I'm going to explain this after lunch, is we've focused on broadening our sensor portfolio. We've focused on increasing our presence going direct in countries and markets where we're not going direct presently. And we've added a lot of software competence to our product offering. And I'm going to show you this afternoon how this all comes together to create the next generation technologies for Hexagon. In the beginning of this plan, we were very close to our financial covenants just when we closed the deal acquiring Intergraph for $2,100,000,000 But we amortized our net debt. And by 2014, we were below our internal target of 2.5x net debt to EBITDA. Then we had a small spike in 2014 when we acquired Verepos, Vero and Nintech. But now we're down again, and we're fairly close to 2x when we close this year. So we got plenty of firepower to continue to do acquisitions in the next coming 12 months. Another way of looking at it is that our cash flow, free cash flow is also increasing. And the way you should look at cash flow is you should expect us to convert roughly 85% of our profit or EBIT into cash flow. The remaining 15% will get stuck in working capital and investments. We also have a more diversified financing if you look at our balance sheet. So if we go back 3 years in time, we were relying heavily on our banks to fund Hexagon. But what we've done recently is to launch a commercial paper program, which is quite successful. And this program is running way below the 1% average borrowing cost that the group has at the moment. So this is a much more flexible situation to be in. And then we have a revolving credit facility as a backup. So we are in much better shape today. And another lesson we've learned is we got 97% of our loans in euros, so no more Swiss francs. What can you expect from us going forward into M and A? We believe that the M and A activity will remain at fairly high levels for Hexagon. It takes these guys some time to figure out what to do next, but I think they're ready to do some more moves. And as I've said, balance sheet is in good shape. Cash conversion is improving. The focus though will be on strengthening the software portfolio. We got some fairly strategic holes that we need to fill going forward, and we're going to discuss that in the afternoon. We see an ever increasing need for new sensor capabilities, and we're going to discuss that as well. And then we expect to pay around historical levels. What's historical levels? Well, we've typically paid 8 to 10 times EBIT for the companies we've acquired. We will then move to the EBIT margin. We've seen an improvement of 3 percentage points since 2011. So in the past 4 years, we've improved our EBIT margin by 3 percentage points. The bit of a negative news was really as we entered into 2015 when the Swiss franc peg to the euro was dropped. And that cost us 100 basis points. So we would have ended the year at 24% if that hadn't happened. And that's important to remember. Now we need to mitigate that, and we need to find ways to circumnavigate a fairly high cost base in Switzerland. But this is the silver lining, and that is we can see a clear trend that the new products that we're launching have better gross margins than the products they replace. So our incremental margin was roughly 27% in the Q2 of 2011. And as you know, that means that $1 well, dollars 0.27 will trickle down to the bottom line. And if we compare that to where we're at today, we're roughly at 35%, 40% incremental margin. So to achieve a margin lift, this is quite important that we've been able to bring the group up along this line. So summary and conclusions of our financial targets. The market expects us to deliver €3,000,000,000 €50,000,000,000 in top line this year. Things that we don't have in these numbers, we've done acquisitions which are not consolidated for the 12 months of 2015, they will generate an additional €50,000,000 So pro form a, we will end the year 2015 at €3,100,000,000 The target is €3,500,000,000 So there is a 13% difference that we need to fill going into 2016. And when we look at the outlook for the next coming 12 months, we've painted a high scenario and a low scenario. And as you know, life always ends up somewhere in between. It's very difficult to say at the moment. We see existing applications, which talks for the high scenario is really the construction industry and the infrastructure investments, which would benefit Geosystems. The low scenario is, of course, we see a lot of uncertainty out there. We don't know how the oil markets will react next year. America is at the peak in its cycle. Can it grow? I'm not saying it's going to come down, but is it going to grow at the rate we've seen in the past few years? And then when it comes to new applications, that's even harder to predict. Are we going to be successful? We have several projects out there, and then we could reach 3% of total sales. But if we fail in certain tenders and so on, it could be 1%. M and A is another factor which is hard to conclude. If we're really successful and we close all the deals we want to close, we could actually add 7% top line growth next year. But it could go wrong and we close fewer deals than we might wish to do. And then we could end up at 3%. So really you have a range of between 7% 15% growth recorded growth as a forecast for next year. The EBIT margin target, 25 percent, we're similar calculation. We're going to end the year at 22.8 sorry, the €50,000,000 sales that we consolidate pro form a is from software companies that have significantly higher EBIT margin than the Hexagon Group. And they're actually going to add 0.2% to the EBIT margin. And that would then mean that we end the year at 23% margin. The target is 25%, and there is a gap to fill of 2%. And in a similar discussion, you can see that these building blocks that I discussed on the top line have different contributions to the EBIT. So M and A, the average margin on the companies we're looking at acquiring is 30%. So we actually have a huge contribution from acquisitions at the moment. The incremental margin on new products is 50%, and that could generate between 0.5% 1%. The incremental margin, as stated previously, on our current core business is 35%, and that could then generate between 0.3% and 0.5%. So if we summarize these two things, we started and we set off this plan at €2,100,000,000 in sales, 20 percent EBIT. The target, 3.5%, 25 percent EBIT. Now the low would mean that we reached €3,300,000,000 at 24 percent EBIT. And you could say, oh, that's a miss, but it's 95% achieved over a 5 year period. €3,600,000,000 We would then reach 25 percent EBIT, and then we would do more than the calculated profit that we had in the plan. So I think in summary, this is the best guidance we can give you standing here in December looking into next year. So it's a fairly detailed forecast, if you so wish, for the next coming 12 months. Beyond the plan, I think it's important to point out a few things that has happened over the past 4 years for Hexagon. If we look at pre the Intergraph acquisition and the new projects that we've started to develop, we had an already high gross margin compared to typical engineering companies. Our EBITDA margin was around 20%. Our EBIT margin was 15%. But what we've managed to do is to change our cost structure, and this is important going forward. We're going to increase continue to increase our gross margin, And we're going to see the EBITA margin continue to increase as well. It's a 9% growth in EBITA margin over this period of 6 years. And as you can see, as a consequence, the EBIT margin continues to grow as well. And this is because we deliberately hired 1,000 engineers early in 2010. And we started about developing the next generation products. Had Hexagon not hired these engineers and acquired Intergraph, we would have been in a very poor position today. And we would have been one of those companies that you might follow that is reporting negative organic growth today. Because we saw low cost competition entering into our market and we need to move this company, its footprint into new markets where we could continue to grow. And that meant that we need to be less hardware centric, more solution centric. And this is the consequence of moving a company from the typical hardware manufacturer into something which is more solution centric. What could we reach? I mean, there is no question that this is going to continue to grow. And as a consequence, of course, the EBIT margin is going to continue to grow. Another important trait as you move into becoming sort of a future proof company is you need to follow your recurring revenue. Most book selling companies don't have recurring revenue. You have a little service business, but that's it. But more and more, we're building into our product offering recurring revenue. We want a subscription rather than to sell it one off and then get probably more cash upfront. We'd rather see a model where the customer pays maybe 60% to 70% upfront, and then we have a fee over a 5 to 7 year period. So for the group today, we're approaching 40% recurring revenue, 55% of sales is now in software and services. So these are 2 huge changes, fundamental changes to the company over the past 4 years. And with that, we've given you our best update we can do on the forecast for next year and how to achieve the financial plan. We're now going to talk about technologies that's going to change and shape the future. We're going to hear Jurgen Doel talking about digitizing the world. If we want to change the world, if you think of global warming, you want to protect coastal regions and so on, first you need to digitize it. But what you also need is you need a very accurate map. And that's what Laudan is going to talk about. He's going to talk about and introduce a new product that we launched in Hong Kong last week, the map of the future. And then we're going to move to positioning intelligence and talking about preparing for an autonomous future. You saw the statistics, the outlook that one out of 3 jobs is going to be replaced with software, robots and so on. But what's the technology behind that? What kind of technologies do we need to create an autonomous future? And that's really geospatial. And then we're going to move on. I think we're going to have a break between, aren't we? Yes, they're nodding. Good for you. Then we're going to move into industrial applications. And PPNM is going to talk about their future where it's not all about oil and gas. We're going to discuss the current oil price, what it does for the business, but we're also going to look at where PPNM is going for the future. And then Manufacturing Intelligence is going to discuss the factory of the future, how quality drives productivity. And on that note, I'll leave the stage and handle this over to Juergen. Thank you, Ola. Am I here? Good morning. I would like to start with one picture where it all began. And I would like to ask you, who knows what GPS does for you? Who knows that? Nobody? GPS, global positioning system in your car, so it tells you where you are. That's because we have some satellites cruising the planet, but surveyors could do this 19 years ago because they had such an instrument, they could look at the stars. And when they were in the middle of Africa, they knew where they are. And over these 200 years of history which we have building this type of instruments, we were exposed to many disruptions in industry. And we had to learn to have blue line products, as Ola said, and red line products, which like this one, nobody would buy anymore to find out where his car is. But in everyday technology change or disruption, there's an opportunity. And we believe there is an opportunity because of smartphones change the role of phones, because of autonomous cars change the role of cars. I mean, the major purpose of a smartphone is not anymore calling. It's not a phone call. It is mobility of data. It's having everything digital available everywhere. With a car, autonomous cars, which we believe in the next 10 years, we will see more and more on our roads, it's also changing. It's changing the way a car navigates to a city. The car needs to see 3 d worlds. He needs to navigate through it and he needs digital worlds. In both cases, we in the geospatial industry, we know that will create exciting opportunities for us. So let's go back to cell phones. When mobile phones came out, there were a lot of jobs created by us mapping cities to figure out the best places of a cell phone tower so that you have connectivity everywhere where you go out. And then there were jobs placing out the cell phone towers with survey instruments in these right places. So think that so that's existing. So this modern model exists. So think about autonomous cars. Connectivity has to be increased everywhere. So we need to find cell phone towers and connectivity towers everywhere. But also when you think about autonomous cars driving through the roads, we need to ensure that we have signals everywhere so that they give priority to the autonomous cars, who has the priority at the cross section. Think about electric cars. Why is an electric car out? What is the best way to drive for an electric car? Is it the shortest way or the way without the least height difference because of the battery consumption. So now you need to get height differences in a city, so height models. So what it is creating digital worlds by geospatial professionals will create exciting opportunities. What we need to understand is there is a difference between the virtual reality and the true reality. And the virtual reality is fine for entertainment. Think about Avatar, you create your dream world, you want to be in because it's so nice, colorful, not because of the challenges, but maybe because of the beauty of that scenery. But if you think for marketing, everyone has on his phone kind of a navigation finds the next restaurant. But for that, you don't need centimeter accuracy. Your brain, your eyes can correct the last meter as long as you see the restaurant, you go in, right? And so the virtual world, which even is maybe not perfectly updated, so good for another 2 years or so, it's good enough. But when you steer professionals in their decisions, you need digital realities. And a digital reality, I mean, is that you mirror the reality into the digital world. It's not approximately and it's not 10 years old, it's not 3 years old. You need to mirror the reality into a digital world as fast as possible, as efficient as possible. And we have different applications where we are driving new blue line products, as you would call it, into new applications. And it is all about kind of managing the assets in a city, whether it is the signs or on above the road, where it's the signs on the road, or it's the inspection of bridges for pedestrians or it's the subways or it's pipes. And I would like to go a bit into detail of those solutions. So we built up over the last years a mobile reality capture portfolio in one way. It's when you could think it's Google cars. You have seen those, but there's differences between this. This is kind of a high precision LIDAR system with imaging technology, which get all the details on the road with high accuracy. What we have created for this is software suite that helps experts to extract informations out of these data with high precision. And when we started this process, it's basically started here on this side with 3 d what's the point with 3 d panoramic images you see it's complete there. But when you go for clearance analysis for like oversized trucks to tell them whether you can go under the bridge, you don't need to guess. You need to know it on a very high accuracy that it fits below that. Cross section analysis is which we done. And then we figure out first driven in the U. S. By road line extractions because in the U. S. They use sometimes these signs as a shooting range, right? And there are some liabilities behind that that all these signs are still there and not a big hole in the sign. So it's managing these assets and figuring out is it complete, is it there, is those signs at this cross section. What we then figure what we then basically see as a development is that the accuracy of our system helps us for engineering, for construction purposes to understand crack indexes of roads so that they don't need to guess is this road ready for next maintenance cycles. They know it's formed. It's now needed a maintenance cycle. Pavement deformation. And one application which is brand new, which we introduced into the city to for the pipes to lay a new pipe or to maintain a pipe and you don't know where there is because they were not mapped at the beginning. Then you would like with augmented reality go to this road and see where it is. But therefore you need to know where it is. And we can now with technologies, radar technology, map basically the underground utilities. So we can detect the pipes. How does that work? And I show you in this next video. So what you see is a mobile mapping system on the top with LiDAR imaging technology. And down here, you see a radar technology, which looks into the ground. What happens then with the software, it builds automatically up the road in 3 d. And here, you see depth maps of the car, which looks basically down. And then you see already in the depth maps, you see kind of where the pipes are. And then with software, you can basically extract those locations and map it in 3 d so that you can give guidance where pipe intersections are buried in the road or where you have free space for new pipes going in. So what we help with this is we help the construction industry not to guess. It's not searching. I mean, what they do right now is they dig the hole big enough that they find the pipe. But by giving them centimeter accuracy to understand where it is, they can make small holes to come to this perfect place or to dig new holes for new pipes in this place's wear space. What the next part is what we detected when we went in this mobile reality capture is there's a lot of applications where you cannot drive to. It's too narrow, narrow streets in the city or it's an inside the building or subways. And we took our technology, our scanning and positioning technology into a wearable device. And since we're from Switzerland, we like to hike, we put it in a backpack. And how that looks like, I can show you in this next video. The main demand for this technology was created in the BIM industry where you need to get models inside houses. But by pushing this technology in the market, we find new applications and we just sold 2 systems into India, where the goal was that you wanted to move a slum in Mumbai from one place to another place, but you didn't know how many people were there and you had nothing to negotiate. You said I give you a new place. So with this technology, you can walk in these narrow areas. You see exactly how big these different spaces are. In the digital world, you can walk through those people who live there. It's like you have 2 rooms here, you get 2 rooms on Wells. It's not you had 100 rooms here 2 rooms here and you get 100 rooms on Wells. So it gives a tool to negotiate with those people to basically move over to new places. And the results is basically kind of visual 3 d, you can walk through it. So we experience here kind of a new product line where we see kind of in the construction industry significant demand, but also experience all other type of applications where we create new markets. And if you cannot basically drive it and if you cannot fly it, then we went into the robotic inspections with UAVs. So what we see right now is let's a big customer base of us is the surveyors. And they're getting also pressure from their customers to say, can you not inspect me such a bridge or kind of a larger area in a shorter period of time, you see all these UAVs driving around. So what we do is we create sensor technology that fly. So creating flying sensors to help in the inspection world to do things more efficient. So what we do here can be summarized in this picture. So we have a huge customer base, which is traditional surveyors. And we innovate their technology to incrementally improve their process, but also we bridge with technology then the path to create these digital worlds, whether it is mobile mapping on the car, whether it's on a backpack to get subways, it's UAVs and other technologies which we're moving forward. So reality capture, why would you use it? I wanted I brought you an application out of the construction industry. BIM is building information modeling is one of those big areas where a lot of demand is created. To start off, it's clear every plan is only as good as its assumptions. What I mean with this, think about an architect to sit in front of his computer and needs to build kind of a new building in an existing environment. He better doesn't guess what stands what is around And a 2 d cadastre will not help him. He needs 3 d cities to simulate what he creates in this new environment. And one of example was the remodeling of a shopping center in Australia. It's a Castle Tower shopping mall in Sydney. It's a project roughly 650,000,000 dollars project and it was a remodeling of 400,000 square meters. And the goal was, is that before this design started that we create dimensional intelligence from digital realities into this building information modeling, so that they basically the engineers can start from a real model. How that looks like? I can walk you now through this error with our point cloud technology. If the movie runs. If not, I just have to take talk longer. So what you will see is a point cloud, which was created with our reality capture solutions. Yes. Could be some music with it. So what you see is basically the reality capture, which we have. It's the outside area. And you see these high density point clouds there, which are centimeter cured. So this is the view of the parking areas which were there, but then there is another view if it comes where you basically, since this is a 3 d model in a computer system, can be overlaid with the design packages. You can basically walk into this area and see the dimensional information of the different floors where the architects can grab these informations from the different shops. So what it is used for is that these digital realities is taken to overlay over the CAD model for the architects so that the architects use these dimensional these digital realities to basically understand in what boundaries they can change the building inside and create new shops. For the plumbers and the electricians, they can use those information to better estimate then also kind of what material they use and how much material they use. And it's all about that by creating the assumptions correct that the execution is closer to the expectation because when then the owner of the building is giving his final okay for the plan, he can basically virtually walk through the new design and it's all correct place, all in the right dimension. He sees the reality of the future ahead of the time. Okay. But then that's only a plan. And then the plan is only as good as execution. So what we do there is that many, many years, we are helping to execute. And what we do is that we help to put the the last 200 years, this was sensor fusion those times. It's a camera with a field light at that time. And the sensor fusion today looks a bit more sophisticated because what we have released just 2 years ago is an instrument that basically combines field light, which is a measurement device with an imaging device, with a scanning device, with computer technology to make the communication between the design and the reality much more faster and reliable. The next video shows you kind of what this technology looks like and how it's used. You see it consists of a lot of optics and mechanics. Quite an engineering work to get the electronics in these miniaturized versions. While in the past, you had 2 operators now, it's all automatic. It follows the operator while he stakes out points. And if there are areas which you want to inspect which you cannot reach, then this scanning technology, which you have miniaturized to kind of a cigarette box and put it into a zeolite device is now taking remote measurements without touching the object. And you can imagine, so we have released this product 2 years ago. It's unique in this space. None of our competitors in the market was able to come close to that. And it shows how we bring these technology steps ahead of the competition. But when you put point cloud scanning into such a device, you can also imagine that the computer power and the software power in these kind of hardware sensors need to be extremely pushed up to perform to a new level. And this is what we released just this year is where we take the software onboard to bring the digital plants to the fields. What it means, I would like to show you in this video. So we have on board of these total stations, we have software that can digest CAD files, that can take the design files from the architects. And you can see this on the field without losing any information. It's not handwriting. It's kind of going right streaming into this instrument. You can select the points where, example, want to drill a hole. And then basically, this information is sent to the instrument and guides the operator exactly to the point. And it gives you here a distance. It's now 13 meters away, 12 meters, 11, 9, 8, 7, 6, 5, 4. And as close as you get, it gives you a different view to basically guide you with centimeter precision on the right point where you drill the hole. And then you fix your pillars and whatever you need to do in the site. And then you can take this scanning technology, which is integrated, and basically scan the environment and overlay these scanned points, which represent the true reality outside with the design of the architect and can see whether the things fit together, whether you exactly executed the plan as it was basically required. So as you see, this is rigorous sensor fusion which we do. And we take it one step further there because we see also the apps are getting more interested for many people. So we create apps that solve specific tasks like checking the flatness of a surface like the ground floor. And within seconds it gives you the answer of the entire floor whether it is flat or not. So the amount of efficiency which we create by connecting this real world with the digital world and giving apps on these instruments on-site drives efficiency on-site in this construction environment. Good. So this is in this construction area where I try to show you how we drive forward with new technologies to innovate what people do today with new methods, also creating new applications. Another area where we are active since 90 years is the airborne mapping business to map cities, utilities, countries and biomass. And this is how we started 90 years ago. Those times we needed operators, which were not only strong but also fearless, to hang with a camera out of the airplane. Today, we need more IT people out there. And we have optimized these workflows over 90 years that now when you look on China and you see all these provinces which are a bit bluish, these are all mapped with Leica sensors out there. And as darker blue they are, as more finished are they with the first mapping, as lighter blue they are, the project has started. But you see we're all over in China to map the entire country, give them country maps, aerial images for all sorts of infrastructure plannings. We also take this technology to next level that we just through an acquisition, a Swedish company AHAP, we acquired technology that has a lidar technology that creates height maps, but not only height maps from cities and from countries, it's also going into the water up to 60 meters. So we can map coastal lines. So it's very important for understanding the marine ecosystems or for flood metting to get understanding how the river if a flood would be there, how the river would flow out there. So there's a lot of applications and interest in this area. The airborne mapping is challenged by other demands right now. Think about Shanghai. Shanghai has 24,000,000 people living there. They live on 6,300 square kilometers. So if you do the math, then you figure out that there's 3,000 the one square kilometer house is 3,800 people. So that's the reason why Shanghai is number 4 in the world with high scrapers. And what they want with the dimension of the change they have is that the urban planners want to understand the change in the you flew it in one day and then a year later you had a city map. A lot of people you flew it one day and then a year later you had a city map. Lots of manual work. And I'm very excited that with our China team, we took the challenge to say we want to automate that. We want to give Shanghai monthly updates. So we're completely changing the way you do it from the sensor technology to the workflow to make it fully automated to create these city models. And the result of a city model looks like this. Now you would say, I have seen this on Google, on a Microsoft platform. It's true. You can see this in others as well. But you see the difference only if you go into this digital model and click on points and can measurements that are accurate down so that professionals can use this for planning purposes. And that's the goal. We have professional cameras there. We have high sophisticated workflow to automate it to create products that look like consumer products that are products, but basically are the professional products where professionals can take dimensions for any sorts of applications. What we have seen since we're 90 years in this airborne mapping business, we know how many customers are out there to buy airborne sensors. And what we did what we see is that there is a demand for higher availability of these data sets. So that was these airborne data sets. And created by these mobile devices, by height models for autonomous cars and so forth. There's more data requested for countries and cities. And 2 years ago, we basically announced the Hexagon Imagery program. And the Hexagon Imagery program is a program where we formed a very unique partnership and created an ecosystems there. And this ecosystem creates basically images from air, from the sky and we move them into the cloud environment. And what we do there is that we do this including our partners which are buying our airborne sensors and make multiple use of these data. So we fly it once but make it through the cloud available to multiple end users. And it is very successful right now. We have we're proud that we were able to secure one consumer customer who is taking these data for his purposes. We are also expanding this data to professional marketplaces like on with Esri, they plug it into ArcGIS Online, but also internally with Milan's group, Hexagon Geospatial, to take it as a layer for data and creating added value information for the end users. When we see where we are right now, since only 2 years in the program, you see basically that in the U. S, it's 1 year more. We have the coverage of the entire country, but also start already re flying certain data. So it's not only very accurate data, it's also refreshed data. This is very unique and very consistent data. And you see also in Europe that we are very active around Europe to basically cover data. These data are used in multiple cases. And what the driver here is that the affordable availability of this data that creates basically drives the utilization. So these are all institutions that are using this data from agriculture, even a park service, but the park service would never pay for flying it. But since the data are there as a service, we create these new services which everyone can add to it. We see interest in Europe that European countries are asking for this data set so that they don't need to fly them themselves so can license this. And then certainly our strategic consumer partner is consuming this data. So very exciting part. And I hope I was able to show you a bit our mentality because we live what the way Abraham Lincoln said, the best way to predict the future is to create it, not wait that you get changed. We change the market and help our customers. And with that, I think it would be a good hand over to Milan, who tells us what he does out of the data. Thank you very much. Good morning. So continuing where Juergen left off, we've heard a lot about data. We've heard a lot about content. And certainly, for many end users across a host of different industries and vertical markets, there's a need to extract information to support, really better and smarter decision making. Our challenge is to move beyond status quo and really look at this concept associated with mapping and specifically maps and look at and really ask the question, what is the map of the future? And for the next 20 or so minutes, I'll walk you through Hexagon's innovative approach with regards to not only building and defining a platform for providing the map of the future, but give you several examples and instances of how this ultimately makes sense. We've always heard before, you know where you're going. It's always good to know where you've come from. And we've seen some very nice examples from Juergen, particularly the GPS example. Many of you probably still have maps, I know I do, in your cars. Even though GPS is good, I still like looking at a map. But we grew up in a paper map generation. And this, of course, had an associated economy with it, an economy that had us, particularly with Leica, build hardware for collecting data that would ultimately be extracted from that data to produce paper maps. And there was an ecosystem of selling those maps, using those maps for a host of industry markets and verticals. With the advent of computing technology, we've gone from the 1st generation and entered the 2nd generation, which we call the digital map or the digital generation, where we've taken paper maps, we've digitized them, we've extracted information from them, we've put that information in a database, in a relational database, and we're then able to extract even more information to support transportation solutions, IT solutions, defense security planning solutions as well. And if we look at both the 1st generation and the 2nd generation of mapping, there's some commonality there, although there are certain differences. These maps are static, which means they are a reflection of what was. So at the time of collecting that data, the data is already old. You need new data to ultimately get more and more information. So with our innovative approach and looking forward, our job is to really establish a new area, an innovative approach to defining the map of the future in order to support better and smarter decision making for a host of different applications and industry vertical markets. What is the map of the future? And I'll walk you through this. The map of the future, first of all, is not static. And we have to think outside of the box and we have to move beyond our current understanding of what a map is, whether it be a paper map or a digital map. And really, the map of the future has to be much more than where we've come from. And I'll walk you through the map or a digital map. And really, the map of the future has to be much more than where we've come from. And I'll walk you through what that understanding really, really is and could be. But before I get into some of those details, let's look at some of the market conditions which are driving the industry towards really needing the map of the future. As Juergen mentioned, we have a new wave of content sources, whether they're collected from space, from the air, from the ground, from mobile mapping systems to hikers with backpacks and so forth. There's a lot of content, which means these are all fresh sources that can feed workflows to support the production and utilization of new maps. We now live in a generation of I want it now and I want it immediately and I want to be able to take it with me. So access is very important. The ability to be connected and stay connected so that you could continually get information services delivered to you wherever you are is very critical. We're looking at a progression of business models from those business models, which perhaps provided perpetual licenses to mapping software or data licenses to pay as you go or subscription based licensing models, which allow you to pay based on what you use for a given mapping product or content source. And lastly, we're no longer looking at just a map in and of itself. It's really the answers and really the type of information you can pull and extract from these maps that's most critical. So here we get into analytics, which of course we hear a lot about. But in our case, we're talking about pulling information and answers from mapping data in order to drive better decision making and so forth. You heard Juergen talk about data, and we certainly have within Hexagon the big data challenge. And certainly, our customers have the big data challenge. There's a lot of data. As we know, as Ola mentioned, the storage associated with data is going up, as are the associated costs. And certainly, there are performance issues associated with using and ultimately pulling the most valuable information from these content sources. So when we look at the big data challenges, what does hexagon mean and what do we mean? Certainly, you have storage, but you have to be able to pull analytics or particularly specific information from these fused data sources in order to drive better decision making and so forth. And then lastly, you have to be able to present answers that make sense to your audience or your end users. So it has to be context specific, right? We, working together with Vodafone and a large utility company in Germany, RWE, and certainly in collaboration with many of the state mapping agencies within the country of Germany, we're able to take all imagery in Germany and create one image. One image for the entire country of Germany at 20 centimeter resolution. So high definition, high fidelity content. Let's look at storage. And once again, let's talk about big data. If we were to look at what it would cost to store that much amount of data, whether it's internally, whether you buy a bunch of machines, or whether you put that content in Amazon on an S3 bucket, what would it cost? We will start with the original data, 38,000 gigabytes. In order to properly work with that data, you have to optimize it for the Internet. But with some of our patented technology, we're dramatically reducing the storage footprint and the storage costs associated with working with that such high volume of data. We're going from 50,000 gigabytes of content to under 900 gigabytes of content. That's a 60 times reduction in storage capacity. Let's translate that into value or benefit for our end customers. Looking at Amazon S3, we're going from spending $6,200 a month to $82 a month, providing $73,000 in annual savings, okay? So if you look at all the cities in the world, all the counties in the world, all the organizations that are using this data and have a need to deliver this data to their end users, that's a lot of cost savings. And with Hexagon's patented technology, we not only have the ability to compress that footprint, but ultimately deliver in a very performant way high volumes of content as a service, providing answers and information to drive better and smarter decision making. Having looked at some of the challenges and really looking at the 1st generation of mapping and the paper map and the digital generation and the new era, we can safely say that the maps we have today, whether they're paper maps or maps on our mobile devices, they are static reflections of what was. They're not fresh, which means the data that was collected to produce those maps are already old. Communication. They do not communicate. They provide data, but they're limited by the four edges of the box or the four edges of the map sheet. We need to be able to communicate information associated with patterns, with geographic features and behaviors that occur in real time in a city, in an urban environment, in a rural environment out there in the real world. They're not alive. Going back to this notion of dynamically sensing change. We have to be able to dynamically connect to events and reflect those events in the map of the future. That's very critical in order to make informed decisions so that people can do their jobs effectively. Edward Tufte and really thinking about communication because I think in this day and age of social media, communication I think is even more important. We need to be able to communicate insights. Edward Tufte is an information designer. He is if you Google his name, he's written many very well put together books on information design. One of my favorites is called Envisioning Information. But he put together this very nice quote. The commonality between science and art is in trying to see able to show and convey and more importantly communicate what's happening in the real world is really what Hexagon is now doing with our new strategy with regards to defining the map of the future. We need to be able to communicate, not just share data, but communicate information about what's happening in the real world in order to drive better and smarter decision making. Pulling from one of Tuffy's examples, this is an infographic that was put together in 18/69 by a French civil engineer by the name of Charles Menard, okay? He put this infographic together to reflect Napoleon's march from Poland into Russia, and he took 6 variables. The thickness of the line reflects the size of the troop or the army that Poland that Napoleon had leaving Poland going into Russia, looking at the number of troops, their location, the distance traveled, the direction traveled, the weather, which of course is a very important factor to consider, and the given location at a given time and space. Tufte is showing us through Menard's example how we can establish a new form for communicating information such as that reflected with Napoleon's march into Russia in 18/69. If we look at the map of the future and focus and place emphasis on communicating information, we have to be able to synthesize all these sources of content in order to properly provide a platform that allows our partners and customers to not only envision, but more importantly, communicate information about our dynamically changing world. So you hear Hexagon talking a lot about change. And what we're doing within Hexagon Geospatial is providing our customers and partners a platform for envisioning information about geographic change or change that's occurring on the earth's surface. In the spirit of Tufte, in the spirit of information design, in the spirit of analytics, the map of the future fuses all of these ingredients together in order to provide a new era for mapping and a new era for delivering information that makes sense. So the map of the future has to be fresh. These are the criteria. It has to be fresh. It has to provide answers. It has to be portable. I have to be able to access it and it has to come with me. It has to be an experience, really an innovation experience, not a dry experience. And ultimately, it has to make sense. It has to make sense to the end user who's using this map for their particular need, whether they're an urban planner, a forester, a farmer, because what each one of those wants to see is very different, as well as the information that needs to be communicated to them. The map of the future looking forward is not just a map. It's a dynamic information experience, not only of what was, what is, what can be, but more importantly, what should be. And at Hexagon Live in Hong Kong 2 weeks ago, we announced the map of the future, and that is the Hexagon Smart Map, an innovative way for delivering dynamic information services to users who want to make sense about the changing landscape or the changing world around them. Our sessions allow us to be active participants in our experiences. We make sense of our experience by providing order and structure. We're all constantly conveying information. We are form givers, communicators of information. We believe geographic information is more than a map. A map is a reflection of what was. We want to know what is, what can be and what will be. We're form for envisioning, experiencing and communicating geographic information. Use fresh content sources, 360 degree analytics, targeted workflows and meaningful visualizations to build a dynamic information experience that makes sense. It's an app that delivers an information service about a given phenomenon or about a given event regarding change. As things change on the earth's surface, we need to be able to dynamically deliver that information to end users and end customers. What are the key ingredients inside of this app or inside of this information service? Continuing with what Juergen mentioned, digital reality's content. Content is the fuel that powers accurate and intelligent decision making. Without content, and particularly without accurate, high fidelity, fresh content, our ability to derive answers is a problem. Secondly, workflows. You can have all the data in the world, but unless you have a particular business workflow that is applied to that data, it won't make sense. Thirdly, analytics. And when I talk about analytics, we hear a lot about analytics, I'm referring to 2 specific things. I'm referring to the ability to fuse and synthesize these content sources and analyze the data. But more importantly, we then have to look at the ability to communicate the results of that analytical process to the end users, communicating answers. And then lastly, experience. We have many customers around the world that spend many hours a day looking at these maps or using these systems that have mapping data or mapping information. That experience needs to be fun, it needs to be refreshing, and it needs to reflect what's happening around us. So looking at these 4 key ingredients, we've basically put together a platform that allows our partners and customers to build and define the map of the future. Continuing with content partnership, certainly connecting to the hexagon imagery program as a primary source of content to feed and ultimately deliver these information services is very important. But we can also connect to satellite data sources, demographic data, other statistical data as inputs into feeding the flow line for producing valuable information about our changing world. How does it work? Starting with content, we have the ability to connect through our platform being deployed on Amazon Web Services. We have the ability to connect to content sources and ultimately build our business workflows along with the analytics, along with the experience that will ultimately be packaged together as an app and ultimately delivered as an information service, whether it's your mobile device, to your browser, etcetera. So starting with content, we move to the right and ultimately get to an information service that's delivered as an app. The cloud platform consists of a studio, a framework, an online cloud based application framework for connecting to content sources in real time. So as the earth changes, these content sources are refreshed. And with any smart map that's built, because it's connecting and drilling into these content stores, anytime you log on or anytime you connect to that service, you get a fresh experience or fresh information that's delivered directly to your mobile device or to your web app. And the apps can vary from parks, safety, planning, roads, utility applications, construction, building, transportation and etcetera. There are endless possibilities in terms of the types of apps and the types of information services that can be built and ultimately delivered as part of this platform. In terms of the MAP portfolio, we have the ability to host content. So if you have data already, statistical data or information about a given geographic feature or phenomenon, Just like many of you are familiar, most likely with Dropbox or box.com, we've implemented the geospatial version of that called MapChest. So we have the ability to upload content into the cloud and ultimately get that content on demand when needed and accessed anywhere. Secondly, you have the ability to run geospatial production services. So typically, these are done in a desktop environment, but we scaled our technology to operate and leverage the elasticity of a cloud environment such as that provided by Amazon, so we could streamline and ultimately improve the proficiency and the performance of producing data on the cloud. And then lastly, of course, with the development of smart maps, the ability to deliver information services that connect to these content sources and derive answers from those content sources. Let's talk a little bit about the business model. This is, like any cloud offering, a software as a service business model. But if we look at the primary actors and key stakeholders associated with the business model, we start with our customers and our partners. Using our cloud platform, Map Studio, they are the ones that log in, connect and build Smart Maps. So using the technology that's in the cloud, they're connecting dynamically connecting to 3rd party content stores. They can upload their own content here and ultimately build a smart map. Once a smart map is built, it is published. And just like Apple has Itunes, Hexagon now has Map Exchange, which is an online marketing platform for publishing, marketing and ultimately selling your information services online. Okay. So this is the global marketplace or global exchange for our customers and our partners to not only market and publish their Smart Maps, but ultimately to sell them, introducing a new revenue model for our customers and our partners as well. Once published and once delivered, of course, customers log on, they connect to their Smart Maps, they can buy them, they can run them for a trial and ultimately start using them for their day to day jobs. Now that I've talked a little bit about the map of the future and the map portfolio and the key ingredients associated with the smart map, I wanted to just give you several examples and highlight how some customers and partners are already taking advantage of the map portfolio today to build these smart maps and deliver them as dynamic information services. Let's start with safety, public safety. With all the things happening in the world around us today, we can see in the news almost every day, unfortunately, there's a heightened need for greater intelligence when it comes to security, public safety and so forth. We, of course, have a very strong police departments around the world with our public safety solutions. We're now extending that and adding enhanced or even new capabilities that allow these agencies to get more insight into trends and statistics associated with events and crime analysis. And I want to show you one smart map that allows police agencies to better determine where to deploy their resources and when based on statistical and historical trends regarding events as they occur, so they can properly ensure there are officers in the field in the right zone at the right time in order to respond to events. Let's have a look at this demonstration. So this is a smart map. The map, it's an app. Here's the map. It's used more as a point of reference. But what's more important are some of the statistics here, such as the priority of the event, is it severe, which is priority 1, the day of the week that events occur. And right here we have a dashboard that shows the average response time to a given event. Every police department has to shorten that response time, shorten the life cycle associated with an event occurring and ultimately responding to that event as quickly as possible. By looking at some of these trends, we can look at heat maps, and it's clearly obvious that on Saturday, for this part of the United States, on Saturday, at 3 o'clock in the afternoon, there's a disproportionate amount of activity. If we look at the police districts and the zones that a police department deploys officers at, they can then determine, okay, during this in this area, I have to ensure that there is more than one officer present on Saturday afternoons because something is happening at this location at that time during the week. By connecting to these public safety systems with social media feeds coming in, we have the ability to not only visualize events as they happen, we now have the ability to analyze all this content and ultimately infer and make better smarter decisions regarding where to deploy our resources to ensure that the average response time in order to get to a problem is addressed. Okay, so this is one example of a smart map for the public safety and security market. We hear a lot about smart cities. And certainly the ability with budgets being in question continuously around the world in cities, municipalities, counties and so forth, Cities have to get smarter. They have to get smarter in terms of how they spend taxpayer dollars and how they allocate investments for ensuring cities are in fact smart, effective and run safe and sound. One example that I want to now show you is specifically associated with transportation networks and roads. Working with the Antea Group, which is a global engineering and consultancy firm together with a partner of ours in the Netherlands called Amajem, The Antia Group has a need to basically deliver smart information to municipalities in order to determine where to invest in the improvement and quality of roads. So Jurgen showed a nice example of collecting data that allows us to look at cracks along the road, cavities so that potholes can be minimized, so you can take preventative measures to address and ensure that roads are properly maintained and so forth. But ultimately, budgets have to be allocated in order to maintain and ultimately upkeep these roads. So it's very important that those budgets are allocated to the right portion of the road and the right portion of the city or the town or the municipality in question. When we first engaged with the Antea groups, typically these meetings start with a whiteboard and some ideas. And when we introduced this notion of the map of the future and the smart map, the engineers and the analysts at the NTA Group put together this very nice picture. And they said, Maladin, if you can build this, then I can deliver to the 300 and so municipalities across the Netherlands a smart map information service that allows them to track the budget spend on a given road network along with the quality index associated with that road so I could compare the 2 and compare how they change over time. So if I started addressing quality issues for a given portion of the road, I can move to another municipality or another section of the city and start addressing problems there. So as we start crowdsourcing data from citizens, so as we start engaging citizens in reporting problems, we now have an ability to dynamically pull all these sources of content together and ultimately deliver an information service that allows the politicians and those involved in building these smart city applications for roads to ensure that they're spending their money in the right place. So let's look at an example of after 2 days of this meeting happening, we're able to put a smart map together for delivering an information service that looks at not only the budget spent, but the quality index associated with the road and how this information can be used to ultimately make better investments and decisions for politicians, because they're always being questioned. So here we have a smart map. We have several indexes. We have the quality of the road, we have the type of road, so depending on it being a primary road, a secondary road or a trail, we have the budget and we have other information that ultimately allows us to select a road network inside the map. Once again, the map no longer is the primary area of focus. What we're now looking at are statistics such as the quality index compared to the budget. And what each municipality in Holland wants to do is basically track these changes over time. So as quality indexes get updated into the systems, and these are typically crowdsourced, which means citizens are reporting problems along a road network, As this data comes together, the municipality establishes a quality index. And then when the politicians start comparing the quality index to the budget associated with the road spend, they then have an ability to assess where they have to start fueling and pooling their funds in order to make smarter decisions in terms of investments for roads and so forth. So this smart map ultimately delivers a dynamic service providing road knowledge in municipalities and cities across Netherlands, which can ultimately be scaled to other parts of the world, other cities, other counties, etcetera. Let's switch gears a bit. Let's come back to the UK. And I want to show you a very nice example of Smart Map called Green Space Analyzer, but really focused on conservation. As many of you know, those of you that live in the U. K, in 2007, there were severe floods. I think in June July, there were historic amounts of rain. I think in one day, there was in a period of 24 hours, there was more rain that would typically fall in 1 to 2 months. So there was a huge 100 storm event 100 year storm event that caused a lot of financial damage in the U. K. And I think it was estimated to be about £6,000,000,000 of damage in the U. K. But with that happening, what's the cause? The infrastructure in many cities and counties, and I'll focus on the city of Hull, many of this infrastructure was built many, many years ago, 100 of years ago. And with properties now being in place, many citizens are starting to remove the green space, which is the grass, vegetation and so forth, and paving those areas over in order to put new parking lots, spaces to park your car and so forth. Cities and counties are now passing laws and policies to extend and really grow an urban environment, once again removing green space. That becomes a problem. That becomes a problem not just for the sociological and psychological effects of having green space, but when it rains, you need that green space in order to absorb water. When you have asphalt, that water goes straight into the sewer. And if you have a huge storm event, that sewer cannot maintain all that water. So after 2007, policies were passed that had to ensure that cities and towns had enough green space. In order to determine how much green space you need, it's good to understand where you're coming from in order to go in order to know where you're going. So working with the Catapult Space Application Centre in the UK, together with the City of Milton Keynes and our partner Stirling Geo, we put together this smart map. Here you have, of course, Milton Keynes. And once again, this type of application or this type of app or information service can be applied to any jurisdiction or any area around the world. What's important is the ability to connect to content just like the Hexagon imagery program and then the ability to pull information and analytics from that content. If we look at the city of Milton Keynes, we have ability to select an administrative boundary and then look at trends. 46% loss of green over 6,000 acres over a 26 year period. So as zoning designations change, as permits are issued and provided to building associations and engineering companies to build, we have the ability to pull all this content together and ultimately track in almost near real time change in green space. What's most important is the ability to not only visualize this type of information over time, but we then have the ability to look at very specific metrics, such as the green gray ratio. With any smart map, you actually don't need the map. You can get a text message, a notification service with just these statistics. Or if you want a PDF with just this report for a given time slice, you can get that delivered to you as well. All of these visual cues and all these information services are dynamically connected to the map. So as you get fresh content coming in, you have these connected visual cues and you have the ability to deliver this information service dynamically. So you can look at the ratio of green to gray. Gray, of course, being buildings, residential and urban areas as well. The last example I'll show is in the real estate market. We all know what happened in 2,008, 2009 around the world, in the United States and Canada, also in Europe, working together with the Dutch Pedaster and several partners in Holland, we were looking at building a smart map that allowed agencies and users within Holland to track changes in value transactions associated with the real estate market. This smart map right here delivers information about the 12 provinces in the Netherlands. For every given province, we can look at the average sales price of a home or a dwelling. We can also drill into more detail within each province, we can look at the respective municipalities. There are over 300 municipalities around the world. With the smart map, we could then break the data down into even more detail. We can look at information associated with what type of house is it? Is it a single dwelling? Is it a dwelling with multiple floors, such as perhaps an apartment building? Is it just a 1 storey apartment and so forth? Is it a semi detached house? Is it a detached house? All that detail can be provided. We can look at the age group of the buyer, okay. So we can do comparables against the type of house, the age group, along with the average transaction associated with a given property over a monthly period. And then most importantly, we can look at the change statistics associated with any one of these given variables. And once again, it's the answer that's the most important. The end game is no longer about the map. The end game is about the app that delivers a dynamic information experience about a feature or a phenomenon or a pattern that's changing on the earth's surface. And that's really, in summary, what the map of the future is. It's a dynamic information experience that allows us to make better sense of change that's occurring around us. And that's what we launched at Hexagon Live in Hong Kong. And you'll certainly see more of this in the coming months, in the coming quarters, in the coming years from Hexagon. At this point, I'd like to hand it over to my colleague, Michael Ritter, who will focus on talking about positioning intelligence and here you go, Michael. Thank you. As it's between me and the break, I promise you I will be brief. Hexagon Positioning Intelligence is something you haven't heard enough a lot about in previous Capital Market Days. So I will talk a little bit about the business first. We are the geeks and behind a lot of the geospatial positioning that happens in the world. We provide global positioning solutions and services in a high accuracy fashion. So not the global positioning in your car that gets you somewhere in the right part of the block, but we provide very high accuracy centimeter level, millimeter level positioning. And we do that through 4 brands that we sell with Veripos, Novotel, TerraStar and Ancom. That's the brands we use. And in our space on the OEM high position positioning business, we have more than 50% of the market share. So it's not a small business from that point of view. We follow something that's of an OEM strategy. So you normally don't see our products on the shelf somewhere or sometimes if you're Finnish, if you saw a late press releases what the business of mapping business from Microsoft being sold to Uber, you saw pictures of the vehicles, you actually saw a logo from us, but normally that doesn't happen. We do OEM strategy. So normally we provide a position in engine for example to somebody that manufactures an autopilot system, their name goes on the box that goes into a UAV. In the agricultural business, very similar. We provide smart antenna and a service, correction service goes to a manufacturer of ag guidance systems or tractors goes in the tractor, all the thing the pharmacies is a logo of the tractor manufacturer. And in the offshore business very similar, we provide a set of equipment and services goes to a company that builds bridges for boats or dynamic positioning systems. And then the offshore vessel operator just thinks it's his Rolls Royce system, for example, that does the magic. So our name doesn't show up. That's why once in a while we have to tell you about what we're doing. So if you talk a little bit more about GNSS or GPS, until recently it was enough to be good at being high accuracy. It was great that the whole market was about, wow, you can do this, you can get a centimeter out of that GPS system, my one only does 15 meters. That was good enough. These days, we got used to that. So now we want to have it work all the time. So now availability is a big issue. So you need to have it working not just somewhere out in the open, you have to work it in downtown London, in urban canyons, you have to work everywhere with GPS because you're used to it. Now you get mad if your cell phone doesn't give you the right position. Now imagine in the professional world, if you see a ground penetrating radar system like Jurgen showed and that suddenly wouldn't have a position only because you're somewhere in downtown London. So you have to work not just with the GPS system, you have to work with all the systems, the positioning systems in the world, GPS, the Russian glowness, the European Galileo when it ever really works and the Chinese BeiDou system, you need to combine signals from all of them into one solution to make sure you can always get one. And you have to fuse against sensors. In this case, you fuse with inertial systems, you fuse with camera information and you fuse with other information from vehicles, for example, to make sure that you get always a position and always not just a position, but the orientation of a vehicle or platform. So all of that in very high accuracy, that's kind of the magic that us geeks are doing. But now when you have all of this, what's the future there? The future is you not only want it all the time, you want to make sure that you can rely on it. If you run an autonomous vehicle in the air or land or in water, you can't ever have the fact that the stuff isn't working or that the stuff isn't telling you that's not working right. So the focus there is, A, on safety of life and functional safety and B, on making sure that if somebody messes with the system that you don't fall victim to it. So that's kind of the future demand on GNSS applications. That's where we spend our money. So the products that we normally ship to customers are not very sexy. Yes, they are GPS receivers and antennas. These days, you might say that's all hardware we're doing. I say these kind of boards, they're very expensive dongles because 95% of the engineering that goes into this software and then you will create a kind of an expensive dongle that makes sure the software doesn't get copied. The other business that we're doing is subscription service business. In the case of GNS positioning, we run a worldwide subscription service that gives you with your GPS receiver or GNSS receiver an accuracy of up to 4 centimeters worldwide with just one receiver regardless where you are. And you basically subscribe to our services there. And depending on what your intentions are, if you, for example, have an offshore drill platform that needs to be positioned at every second at very accurate accuracy and can never fail, you pay us a 6 figure sum per year for that one receiver system. And of course, if you are a farmer that goes and runs a tractor with this, you pay us significantly less. But that's part of the Hexagon recurring software strategy is the service business here where we provide subscription service. And then why would you go to Hexagon? Why would you go to somewhere else for this? We from our experience and our work with military systems, we very, very good at the Sensia fusion I mentioned. We can prevent people from jamming or messing with your GNSS. And we are working now on something that we call authentication. That is if somebody hacks, for example, the system and tries to spoof it, tries to tell you you are where you not really are on that autonomous vehicle is not where it really supposed to be. Or in the case you're all financial analysts, I hope you all know that GNSS is actually used to time your transactions. So what happens if somebody spoofs the antennas on top of the London Stock Exchange for example and messes with the timing cycle. In the case of London, that's okay. There's one of these boxes on there. But in general, you can mess with GNSS. That wasn't a big thing until recently because GNSS was not in everybody's mind. But the more precision GNSS becomes mainstream, the more you have to assure that what you get is actually what you should get and not something somebody messes with. And that is authentication services that we're currently working on. Those exist on the military area, but on the commercial area that's something that is desperately needed for the future. People want to rely on GNSS only. The markets we are in at the moment is a snapshot of 2015. A big portion of our market is in the offshore world, where autonomous or semi autonomous use of vehicles has been a little bit on the forefront. In the survey and mapping world where it has moved from traditional surveying, you saw in Jorgen's presentation the previous kind of traditional survey equipment more to a mobile mapping environment. And you see in addition to our internal customer, you see customers here that 5 years ago you would have not associated with the term survey and mapping. And then agriculture, mostly for autonomous agricultural vehicles, agriculture, defense And of course, while we were in the Gulf War, this defense bucket was a lot bigger than it is at the moment. And then our roots, aerospace and scientific are still there, but they are more smaller and smaller portion of our market segmentation. Those brands here are just the brands that allow us to use them. There are a lot of names that we supply that still claim that they do these things themselves and they don't want me mentioning that we will actually making the equipment for them. If you look at our history, 2,008 is when Hexagon acquired the first company in this business, Canadian company Novotel. At that time, the entire business was basically survey and mapping. There were 2 little lines of aerospace and actually this line other today is the line of defense, which was unmanned airborne vehicles in the military business. So today, if you look at this, we have spread our wings to create a kind of almost recession proof spread across offshore survey and mapping, agriculture, defense and still aerospace and scientific. Say almost recession proof, of course, if you have nothing going on in defense and your agricultural business is down, it's still not fully recession proof, but be pretty safe there. And then we expect in the next 3 years to grow significantly, mostly in the agricultural world and the defense world. But basically, if you look at this, of course, there is a 7 year span and a 3 year span where we pretty much expect the same steep curve of growth in that business as what we do is very unique. So now talking a little bit about autonomous applications. There are actually autonomous applications around that you might not know about that there's actually autonomous vehicles that actually don't move if you look at it from the outside. Take a deep sea drilling platform for example. The problem is this drilling platform drills in deep sea and that means it's not connected to the ground. So in reality, even so it looks stationary, this is a vehicle that's permanently moving with thrusters to compensate for waves, wind, current to stay on the same spot. If the GNSS system that handles this would fail only for 5 seconds, that company that runs that rig will be on the news for the next big oil spill. So this is a vehicle that moves to be stationary. So that's like one of the original autonomous applications. And now you can imagine why somebody for just the service of correcting the GNSS on board while somebody will pay us a 6 figure sum, because if they wouldn't pay us that 6 figure sum, the risk is very high. So but in the offshore business and of course as well having these kind of offshore supply vehicles have those operating near big platforms, most of the time the operation of these vessels. But that's kind of the most of the time the operation of these vessels. So that's kind of the beginning of autonomous operation. Precision Agriculture, you have heard a lot about, I guess cover more one or the other either electronics or chemical company and you hear a lot about precision agriculture. So we're more and more getting into the space of precision agriculture because the demand for the GNS solution becomes higher. It's no longer good enough to guide somebody. You want to guide something autonomously, so you need the better accuracy and assurance and the better sense of why our agricultural business is actually growing significantly even so the general position agricultural market might not be doing so well or the machinery market actually is shrinking. But the push to more autonomous operation creates significant growth for us. So that's a market where we will see the short term growth because equipment is now affordable enough to make sense. Those tractors here, this is actually a Fendt brand tractor. They don't look like much, but you know that they are €300,000 apiece these days. So now if you get the pricing for the autonomous portion of it down to €10,000, €200,000 portion, that makes a lot of sense for a farmer because that €300,000 equipment can then run 24 hours a day or at least 16 hours a day instead of the 8 hours the union operators drives this thing. And that makes a big difference for the farmer. That's why it's worse for them today to invest in something like that, that you would think sounds really expensive to a farmer that 5 years ago wanted only to pay a few $1,000 for its guidance green. You eliminate the operator like in this case for example there's only an operator on the combine that harvest but the tractors that actually run the grain cuts, they all don't have operators. You save a lot, not just by not having labor, but by being able to work for way longer hours. So that's basically the background on the farming side. Military unmanned vehicles, that's kind of long tradition for us. 2 main applications, 1 is of course in everybody's mind UAVs and unmanned airborne vehicles. The other one is actually convoys, military convoys that have only 1 or no operator at all, where you have in for example, this case, you have a convoy with a minesweeper in the front and a bunch of trucks. In this convoy, there's actually one driver, but the driver can be anywhere in the convoy. The rest of the vehicles make their own decisions. Any of guys in the room, most of guys are from the U. K, anybody a fan of Top Gear, At least in the old days before the change. So there was an episode of an Oshkosh TerraMax truck versus the new Range Rover. And actually that Oshkosh Teramax truck that ran on our technology. So you have seen us on TV. Because I had serious video envy after I saw all the other presentations yesterday, actually I added a video on my own. And what you see here is a UAV coming and flying and hitting this wire to land. So now I'll explain why you need position to the NSS. Of course, this is a test at White Sands Missile Range in the desert. You could have landed that UAV just on the ground. But if you are in Pandora or if you're somewhere else and you have a lot of mountains, you can start a UAV from the vehicle by hand, but how do you land that thing? So the military developed a solution where you basically have a notch in the wing of the UAV and a little switch there and you fly the UAV into the wire, you hit with your notch, you hit the wire, the wire basically cuts the engine by hitting that little switch and you spiral down the wire. Looks very rough, but it's a completely damage free way of landing that UAV. But if you want to do this, what do you need? You need very precision high precision navigation that works all the time. It cannot be spoofed with, it cannot be jammed, it cannot be messed with and it has to always give you a high accuracy. Otherwise that thing lands in the enemy's hands. So that's why we're selling in the military UAV market. So that gave you an example why high precision is necessary. You don't need 1 or 2 centimeters to go and shoot at something. But if you want to land that thing after you did that shooting, then you really need that 1 or 2 centimeters. So from there, we're getting into commercial unmanned vehicles. And commercial unmanned vehicles today, there's a lot of fat going on, a lot of boom in all kinds of things from pizza delivery to more serious applications. And serious applications, for example, agricultural UAVs that do spraying and do other things. This is actually a Yamaha helicopter and the Yamaha UAV program we supply for quite a while. Here you see what you saw earlier the same contraption from our Geosystems division to do an inspection of an aircraft. Again, why would you need the GNSS work all the time and very reliable in high position? If this thing by accident flies into that thing, that's a very big bill. So you want to make sure that your GNSS works. For a drone that a real estate agent will use to go take pictures, you don't need our kind of GNSS. That's a different business. Other companies supply that market. But with our experience in the military UAV industry, we are involved in a lot of the more serious commercial projects, but we are not in the consumer world of things here. That gets me to the real good thing for the more long term revenue growth on our side, and that's commercial autonomous driving on the ground. And the first vehicles that you see already starting to drive in a bigger volume actually in mines. Same reason as in agriculture, you have these huge trucks that cost 1,000,000 of dollars in that case, you want to operate them as efficiently as possible and as long as possible. So you want to operate them autonomously. And as we all know, other than forestry, the number so the number 2 fatalities in the world are in the mining industry. The less people you have actually driving, the less error you have. Kind of like IT always says, the error is always in front of the computer. In the case of vehicles, we all know the driver, we are the weakest link. And as much as I love driving, I have still to admit I'm the weakest link in that machine. So trucks, passenger vehicles, mining trucks, that's the market that's slowly starting. Again, with our experience, we have been involved very early with a lot of these projects. We provide currently a lot of the more expensive systems like you see on the offshore platforms as true systems in these vehicles. And we're starting to work with these manufacturers to supply down the line mainstream components. So before you now go and place the huge buy orders for Hexagon stock, there's actually a timeline with this. So commercial autonomous driving as much as you like to see videos from certain California car manufacturers, it's actually a long process. There is a legal process and there's a technology process and the process of getting us the driver out of the picture. So vehicles being released in the 2018 2020 timeframe will allow certain functions to be autonomous like some highway driving, some automatic handling of lane changing, stuff like that. But only in the 2020 to 2025 time frame when the legal side is cleared as well, cars will be able by on driver's demand to fully drive automatically. And then the best way, of course, where we're getting to is 10 years from now when you actually be able to have cars driving without any driver involvement on public streets. Driving on a campus of an electronics company or driving on the farm field that will happen in the next 3 years. But driving in volume or having this capability in mainstream vehicles, that's roughly 10 years out. But now is the time actually in the automotive industry where the R and D happens. So that's what we are working on. And we need to get over this hump here where the people like me are still could be in charge of driving that vehicle because we only get to the accident reduced world when the human is out of the picture. So the big volumes they happen 10 years from now. But today, the next year, 2 years is the stage where the solutions get ingrained into the long term plan. But then again, if there are a lot of cars out there that drive autonomously, it will be a lot of fun for the people that could pay HEC Financial Systems to go and jam or spoof the GNSS side of things. And if you look at availability, doesn't help you if your car only drives on M25 because most of the time you drive don't drive there anyway, you stand there, you have to drive it through the streets of London as well. So as we talked about it before, those three threats to GNSS positioning is something that we have already solved on the military side or the more expensive commercial side. So our job is and all of the geeks around me, the job is to make these things very, very affordable and very, very portable because it's very different if you run a deep sea oil rig or you run a very, very small vehicle because face it, 10 years from now, you might even have a self driving smart car, who knows. So that's kind of what I had for you guys today. All right, everyone. What we've done now is we've covered the geospatial area of Hexagon. In the center, we have a common R and D platform, and that's what I want you to remember. And now we're going to focus on the industrial side, and we will start with PP and M. So Gerhard and Patrick, please. Thank you, Ola. Good morning. Still morning, ladies and gentlemen. It's my pleasure to be here, and I hope I can give you some insight about PPM and what we are doing, challenges we are facing, etcetera. After my first 10 or 11 slides, I'll show you I'll ask Patrick Holkomp, who is responsible for our business development and product strategy, to come on stage and give you an insight and overview about what our clients are doing and saying, okay? All right. Who are we? Well, to simplify the thing, we are the market leader to develop and sell software solutions and services to the process industry, which is the chemical, the oil and gas industry, power industry, etcetera, etcetera. And you can see here also the agenda is saying it's not just oil or so. I have to admit, and you see it here, that oil indeed is a significant factor for our business and our industry and clients. And as you know, there is some challenges these days in this market, and I will come to that in more detail later on in the next couple of minutes, okay? If you look at our history from a business perspective over the next the last 12 years or so, you see that with some exceptions, basically, 2,009 was the only exceptional year when our revenue was slightly shrinking by 6% or 7%, which is relatively good given the situation we have been in. All the years, we had a pretty good record of growth, 13% in average each year. And most of that organically, we did a couple of acquisitions, but most of that growth has been organic. And the good thing is that we continue to grow and do well. As I've said, we are the market leader in our space since many, many years. And we are the number one technology wise in most of the areas we are surfing. We have almost 900 developers worldwide, and we did an acquisition recently. I'll come to that in detail in a few minutes, which is adding to that. So we are targeting the 1,000 mark developers worldwide. Basically, almost 90% of all larger company in that space are using some of our products, not the full suite. There's many who do use the full suite, but not all are using the full suite. Some are using just some 2 d solutions, etcetera, or so. You see on this pie chart that approximately onethree or 30% of our customers are the oil and gas and plant owner operators. About 70% is our key market where we come from. We come from the engineering side, basically engineering design and construction side. That's still the lion's share of clients we have, but the owner operators are more and more playing a significant role. And you see here just a few logos from key customers we have, and that is, of course, just a very, very small percentage of customers we have in general, right? So you can basically say that the customer base we have is a who is who in this industry. What is one element of strength we have? I'm not talking about products here very much, right? I'm talking about market trends, etcetera, right? But one element of our strength is our very balanced global business. So as you can see, our revenue worldwide is relatively even split between the 3 world regions we have, which is North and South America with 34% market share or revenue share, better to say. Europe, Middle East, Africa is about 30%. And for the first time ever last year, Asia Pacific, China became the biggest region we have. But overall, you can say the business is very balanced and not only geographically, but also in terms of customer type, let's say. And that's good, and that's not what other companies have who are very much depending on one world region only or so, but not for us. Here you see basically a grouping of the type of solutions. It's very general, right? But the type of products we have and you see the dark blue block, which is the design tools. It's the 2 d and 3 d CAD systems. The engineering companies worldwide are using to design and lay out and construct the plants they build. So it's still the lion's share, and it's growing still as of today. We're winning market share. I'll come to that in a minute. The green thing is basically our information and materials management suite of solutions, which is, to a large extent, what the customer what the owners are using, right? The owners' market share, you have seen about 30% is from owners. This is not completely, but to a large extent, in the screen space. And finally, this relatively small gray, third line is products we recently added from acquisitions, which is analysis tools to stress calculation for pipes, etcetera, etcetera, this type which is not graphical, let's say, this way. Recurring revenue, very important these days. Approximately 70% recurring revenue, very important these days. Approximately 70% of our total revenue is recurring. And this recurring revenue comes basically from different types of revenue. We have for software for our software, we have leasing options. And the engineering companies are preferring this type of using our software as a preference. Our 3 d, 2 d solutions, you can lease them on a monthly base. The advantage for those guys is that they have a high flexibility on increasing the number of seats if they have a good workload and reduce it on a monthly base if they have not. So they can calculate and plan their cost very flexible depending on the number of projects they run. That's lease. The other big recurring type of revenue is software maintenance. The customers who are not leasing software because maintenance is in the lease, but who are purchasing software, they have to pay a monthly fee for the licenses, for the for the services, bug fixing, etcetera, etcetera. It's a very stable, probably the most stable recurring type of revenue we have. The 3rd type of recurring revenue is global agreements. We have approximately 25 of our key customers, typically the very big ones, who close contracts with us for a couple of years, typically 3 years time line, where we define together with them and agree on a fixed price typically, which they pay per quarter. And then they can use the defined type of software as much as they can, eat as much as you can basically, pay a fixed price for that for a limited time. That is very stable too because normally customers are not breaking these type of contracts. The 4th type of revenue we have, recurring revenue, which is growing faster and it becoming more and more important, is cloud based fee. Customers who are using our cloud service, and they come to that as well, pay us a monthly fee per license they are using, which includes the cloud infrastructure as well as specific services we provide or we offer depending on which type of cloud service they want to have, right? Very simple, just using the infrastructure or in the extreme, having the 24, 3 60 days 65 days day and night services around the world where people are sitting there and are ready to answer questions and help users on specific things. So recurring revenue is growing, is stable. Normally, I do not talk about competitors. But in this case, I know that many of you are following this market, not only Hexagon but other players. So I don't have a name put here, but you can probably imagine who that is. It's a U. K.-based company. I'm fighting them 30 years with Intergraph and Hexagon, right? 30 years. And I'm fighting them since day 1, and I'm really proud and happy to see that. So the last 6 months period, this is 6 months comparisons, right, following their structure, they announced their numbers. It's the first time ever in history that our revenue is more than twice as high as theirs. So that is something I'm glad about, okay? And these data are not coming from us, but you can, of course, read the reports, etcetera. Okay. So that's something which is, I guess, worrying you and me a bit because it's showing the oil price curve, right? As you know, approximately at the end of last year, the oil price went down and is now approximately half or less than half of what it has been for a long period of time. And many, many business plans of oil companies are now going to the toilet with an oil price which is less than half, quite obvious. So what? There is less new projects in the oil industry, less new projects because many projects where high cost are needed for getting the oil out of the ground are canceled or delayed. What you need to know about our business and revenue structure, we have seen that about 50%, 49%, whatever, is from oil and gas. So first of all, if you see the logic is you have to distinguish between oil and gas. We all say in a normal speech, we always say oil and gas. But there's a difference because gas is on the rise or at least is stable. Gas projects are going fine, are growing. There's more gas projects coming out these days more than ever. So gas has to be separated. If you look at this 49% or 50% of our oil and gas business, 20% is oil, almost 30% is 29%, whatever, is gas. Gas is stable. So we talk about 20% of our total revenue from oil. If you look at this revenue, this 20% approximately, we have to divide for new CapEx projects, which is basically the engineering companies are doing, right? And OpEx, where oil and gas owners operate their plants, refineries, etcetera, etcetera. And they have to do that despite a lower oil price. You do not shut down the refinery typically because the oil price is low, right? You have to look for maybe things to optimize the operations. And there, we come in the game because we can help them to reduce their cost and optimize operations. So that is approximately 5% or onefour of this 20% oil we have in our total revenue, right? So the critical portion remains is about 15% only, okay? And then you can imagine that not all projects for new oil plants are canceled. Because if you look at the world map, there's regions which are still fine with this lower oil price, still are productive and make money. Middle East is an example. And there is areas, regional areas or type of to produce oil which are very much hit by the price. And this is basically 2 areas. This is the Canadian oil sands, which needs approximately 70 dollars per barrel to be breakeven. And with the price of $40, they lose their socks. So many, many projects are shut down in Canada, oil sands projects, big layoffs at the engineering companies over there, tens of 1,000 laid off engineers. And it's a very bad situation. And the other area which is suffering a lot from this low oil price is deep sea offshore. You can imagine a platform or a floating device basically, which Michael has shown you is this positioning thing, right, which goes down, let's say, 5 kilometers or 3 miles water depth. And in many cases, like in the Brazilian basin, they have to go 5,000 meter water depth to the sea bottom and then another 4, 5 kilometers down through earth. So they drill down 10 kilometers and more from the water surface. And you can imagine that this way to drill and get oil out of the ground is quite costly. These two areas are really, really suffering. Others are going fine. So what I'm saying is from this reminding 15% oil production, which is part of our revenue, maybe half, maybe onethree is really affected. So we talk about the risk, revenue wise risk in our total business of, let's say, 6%, 7%, 8% maybe. That's on risk, okay? We are working hard to minimize that risk and compensate the risk by diversifying and going into other type of business, not industries, but business, which I'll come to in a minute. Is that clear? Okay. Good. Good. So where are we today? I said, long market share leader. We have approximately 50% market share, by the way, in that industry and growing, okay? Others are shrinking. 70% approximately recurring revenue. I think the relationship we have with our customers is excellent. We have a word which I invented when I became President, when was that, 14 years ago, which is saying, we never ever let a customer down regardless of what it takes. And this type of relationship and commitment we make is very well received by the market. And the fact outcome of this is that we basically almost never lose a customer we already got. So we are ramping up on a very stable base where customers most of at least go with us through SICK and THING. And we have a very broad and diversified portfolio of solutions, not only for design, operation, but construction, etcetera. And we are adding additional areas. So how are we growing? Well, cloud technology is not only a good thing for a specific type of customers because we're offloading a lot of work from them, from IT, etcetera, networking, all that stuff, 24 hours paint holding, if they like to chose that. And we are entering new areas or markets. We recently and I come to that, we recently acquired a company from the U. S, which does project control. Very great solution and very important, I talked to that. Then along with Hexagon, in general, the other divisions, we made a decision recently that we enter the building industry or the BIM market because we believe or we are convinced that we really, with the technology we have, along with Leica and other groups, we can offer this market solutions, which were really 5 or 10 years beyond everything other competitors have. You know how many projects in the building market are going south. I'm living in Germany. And probably those of you which are from Europe, you might have heard about Berlin Airport, a disaster, a disaster. 100 and 100 and 100 of 1000000 higher cost at years years and years, and I cannot open. This is unbelievable. I guarantee if they would have used our technology, which did not exist for the building industry at that time, right? But if so, that would not have happened. And additional, as I said, we have hexagons that have relatively deep pockets. And we have an agreement that we are that we can take some of that to increase and strengthen our business further on, all right? And that's it. And now I would like to have Patrick Holcomb on stage. Hey, Patrick. Say amen. Thank you, Gerhard. So what I'll be talking to you a little bit now is given the situation, which is an enviable market situation for us, how will we navigate both the troubles that we see in the oil market, particularly the deepwater? And what other growth opportunities do we see? And I think the best way to start is to look a little bit about how the current portfolio is performing. I think that will add some flavor to the discussion when we talk about growth. The first thing I'd like to talk about is some of our successes that we've had in design tools. 1 of the companies that we work with quite a bit, Samsung Heavy Industries, who is a very big player in the marine space, they've adopted our Smart 3d technology. Smart 3d, for those of you that don't know, was a huge project for us, a huge R and D project. We've invested around $250,000,000 to bring that technology to market. We did that first released it in 2004. It has since eclipsed our prior 3 d modeling technology and been very well accepted in the market. To get this kind of verbal commitment in public from a company as demanding as them has been a huge achievement for us And no doubt in part to Garrett's philosophy, what he calls rule number 1, about never letting a customer down. What you see here, what they were willing to say publicly was about the productivity. Though if many of you have done the overall math on these large projects, design productivity is good, but what really matters is effective execution. And they were able to reduce errors substantially because they have such an effective design system that's so accurate that things fit together as they're supposed to during fabrication. And that saves a lot on cost and schedule. Another example is the Bechtel Corporation. Bechtel, arguably one of the best, if not the best in the world for doing large complex projects, has also adopted our Intergraph Smart 3 d technology. I can assure you that has been a huge battle and they are a very demanding client for us. However, over many years, we've had great success for them. In particular, one of the things that they've been focusing on to improve their construction business, not the design but construction, is they wanted to start doing more modular construction. And Smart 3D has a unique technology capability to facilitate that. You have to do very specialized design, very specialized materials takeoff reporting, very specialized segmentation of the design in order to do effective modular design for modular construction. As a result of that, Bechtel has been able to accelerate some of their projects by doing better design that can actually accelerate it during construction fabrication. Another example, a scrappy company out in Korea called SK. They're relatively new in their implementation compared to many of our clients. And what they've done is they've started to leverage some of our integration technology. So it's not just the Smart 3 d technology, but also all of our 2 d or schematics applications as well, integrating that with our other systems. And they've started to see the benefits of having an enterprise design system for their projects as they're executing globally. Now I say they're not be as quite as big as Bechtel, but they're executing on multibillion dollar projects in the Middle East. And I think that, that kind of a reference shows what we're able to do with our technology today. And then finally, you may have seen a press release from us here in the last week about Hyundai Engineering and Construction. We've recently done a lot of work with them to further automate their systems. They had already adopted Smart 3d. And I guess you have to know a little bit about the industry to appreciate what's behind me here. But in our industry, they quit long ago, they stopped doing things in sequence because it took too long. And so instead is they fire the disciplines off in parallel. And that creates consistency problems later on when final deliverables coming out, making sure that every discipline, all the analysis disciplines, the design disciplines, that they all have the exact same information in the same place. And that it's common in the industry and you can go ask anyone in the industry, there's they all have some manual amount of checking that they do at the end, manual checking across the disciplines to make sure things match so that it will come together in the field effectively. We started working with Hyundai on this and developed a customization opportunity for them. So we go and we can automatically check around 80% of that verification. So we're going to reduce a large amount of their manual checking that we're doing at the end. And that's where that 20% savings comes from. We've just started to offer this automation to customers in the field. This is our more opportunity here to further improve the implementations that already exist in our Smart 3D technology. Now I'll shift gears a little bit and talk to some about our information management and materials management capabilities. What you see here is a picture of a project we're working on for Vale. Vale is a mining operator and the picture behind me is from the S11D or Serra Sul project. This is a massive project, dollars 20,000,000,000 investment, dollars 4,000,000,000 tonnes of iron ore. It's an impressive project by any measure. Unfortunately, all this iron ore is not located in a convenient area. It's also it's located well away from any shipping capability. And so it's turned into a rail project. It's about 700 kilometers. It's going to be a very high-tech facility, so it will be run with truckless shovels and automated trucks. Very impressive technology from that perspective. If you guys I don't know if you keep up on the industry very much, but the independent project analyst group just issued a report and then what it talked about is that metals and mining major projects tend to be the worst as far as performance on schedule and budget as compared to oil and gas mega projects. You can go find that on the web. It came out in the last week. However, in September, Vale issued a press release to the world and I think is an indicator to their competitors that the CerroSul project is ahead of schedule. We are extremely proud of that because they're using smart plant construction to do the planning of the execution on that project. If you can imagine being out in the middle of the jungle literally, they are cutting this rail out through the jungle. If they forgot anything, safety equipment, a tool, a piece of pipe, rail, whatever, if anything was left, they can't just drive down to shop and get it. So this has to be very well executed. The fact that they're bringing that project in on or ahead of schedule, while most mining operators fail in their major projects and they're leveraging our technology to do it, we're very excited about that because now we can really see how our technology is being used effectively to create cheaper, better materials for consumers in the end. And this is again back to precision scheduling and very detailed planning to make sure every person has everything that they need to get the job done with clear expectations upfront. We've had and we've also had very good feedback from Vale themselves saying that this technology and this approach, this kind of detailed planning, packaging the work up like that has been very effective at helping them bring this project in on time. Another example, one from ConocoPhillips. They had a challenge that they were working with. They had 25 different platforms all linked together physically, but the information systems were not linked together. In other words, information was hanging out in many different places. Sometimes it needed to be consistent and it was not. They had really what I would call an information management mess. We were able to help them by deploying SmartPlan Enterprise, our broader collection of design tools and information management tools to streamline that so they can effectively gain control of the information. We made it so that they could integrate some of that information, ensuring consistency in an automated fashion and making sure that all that information was available to people that needed it, for example, for doing maintenance or revamp work. Another example, which is a great example of some of the synergy that has been realized since Hexagon acquired EndoGraph is a project we did for Woodside. We created a technology called Smart Plant Fusion. Fusion is designed for a brownfield situation or for anywhere where there's a large amount of unstructured data to pull all of that data together in one place. In this case, we had to deal with 360,000 different documents. Many of them were simply scans of paper documents. We had multiple redundant copies of many documents with different versions, all without any control whatsoever. That's where we started on this project for Woodside. We were able to automate the gathering of that, organizing it, finding the masters, identifying the differences, putting it into a database system and making it all searchable for Woodside. And we did that in an order of magnitude less cost than they would have had to do if they had done that manually with just some random consultant to clean it up. Then we added further value by using Leica scanning. We created a laser photogrammatic 3 d model. So now Woodside can literally walk through a real almost a real world representation of that plant. They can poke at any asset and find any document related to any piece of equipment in that facility. So now anybody can do it. It's become so simple that it's just like walking through the real plant except there's no safety problems. And obviously with this, it's a relatively long commute to get out there. So the ability for them to have accurate data and people can really orient and walk through is really quite powerful for operating and maintaining these kind of facilities. So that's just a picture of kind of how things are working in our current portfolio today. Now I'd like to talk to you a little bit about some of our major growth initiatives that we have going on. The first one is cloud technology. We launched SmartPlant Cloud a few years ago to start helping clients who want to standardize systems or have better control and transparency. We saw one of our clients, E and I, had done a lot of different acquisitions, and they had a lot of systems that were spread out all over the place. So they were interested in using some sort of a hosted system because they could consolidate their IT systems, kind of reducing the confusion and also making resources more fungible across different projects because now everybody has similar skills on the smart plant technology and they have a more common configuration. So it's not such a there's not so much chaos and relearning if they want to move people from one project to the other. As a result of this, we were able to bring an enterprise deployment to their systems. All sorts of people were able to use it. It wasn't just designer. It was also business partners and subcontractors, really bringing everything together in one place. This is really kind of common story for one of the benefits of cloud technology is because rather than having information trapped at a client server and having all the IT boundaries of trying to share information, once you do not, with cloud technology streamlines that dramatically. You've seen that with simple information like Box and Dropbox. And with SmartPlan Cloud, that's just a much more complex version of the same thing. We got great feedback from E and I as a result of that project and that deployment. It was much faster, much simpler than trying to create an in house IT group to do all of that internally. And at the same time, they started to use more standardized configurations because they're leveraging some of our latest edge content for their systems. SmartPlanet cloud really does offer a lot of benefits. We've done a lot of work so far in bringing this together, pulling together the infrastructure. The client response to it, I think, is fair to say is mixed. There's definitely clients in our industry who today would still, I think, sit with their arms crossed saying no cloud for us. Typically, it's a fear of intellectual property leakage. However, as we remind clients, if all your personal banking information is on the cloud, all your personal e mail is on the cloud, how big of a deal is it really if there's a schematic of a pipe still on the cloud? Is that really that scary? And we're seeing in the industry, our clients are slowly becoming more and more comfortable with that concept that it really it can be secured, it can be done effectively, but it does require attention, it does require new skills around security in particular. I think we were most honored when this came out. The CEO of Royal Dutch Shell made a presentation this year at a Paris conference, and he talked about something they call Project Vantage. This is a strategic project for them in order to streamline delivery of capital projects. In the industry today, particularly with the oil price being as low as it is, there is tremendous pressure, tremendous pressure to make capital projects more efficient and deliver on schedule. And this is Shell's one of Shell's answers to that is this Project Vantage to start standardizing delivery systems, standardizing information systems. Project Vantage is built on Smart Plant Cloud. So we are very proud to be helping Shell with the strategic initiative to make their capital projects more efficient. And I can guarantee you that we'll be working on this for many years to come. It's a huge initiative. A lot of owner operators are watching this very carefully to see how this works with Shell. Shell has been a vanguard in this area at dealing with some of the security issues and really blazing the way so that others can do it even faster and easier. Switching gears for a moment, I'd like to talk a little bit about project controls. Now many of you probably know we've acquired a company called Ecosys, and they make a world class project control system, web based. It's very effective at handling all of the little nitty gritty requirements of project controls. What it does is it provides users a way a means of tracking performance all the way from the initial budgeting process through to estimating, forecast, actual results, deviation reporting and project closeouts. Now you might say, so what? It doesn't sound that complicated, and you'd be right. It isn't all that complicated, though there's certainly lots of room for handoffs. Traditionally in the world today, I'd say probably 60% of project control work is either done with Excel, Access and a host of other in house systems. Ecosys has seen a huge explosion in demand as the oil prices have gone down. And again, this shows this pressure to improve capital efficiency, right? Because when there's less projects, there's more EPCs to compete for less. And that means that being having a lower cost, higher schedule and higher assurance of hitting those promises becomes more important. And to do that, you need more information about your project. You need to know more about committed costs, more about estimating, more about who approved what change. And so as a result, it's somewhat strange, but you might think, but as a result of the market going down somewhat in oil and gas, they're seeing a spike in demand as more EPCs demand more information about exactly how their projects are performing. They've had a tremendous run so far. They've got reference clients, a lot of them in the process, power and marine space, one of the reasons that we were attracted to them. If you looked at this list in detail, you'd see, I think, that it's dominated by North American clients, not all, but dominant in this list. That's one of the values that we bring by doing this acquisition. PPM, as Gerhard mentioned earlier, we're very globally diversified, not just in our products, but our relationships. We know a lot of clients and we talk to them. We've got good relationships. And so when we started hearing this need for better project insight, we found ECOSYS. And we think this is going to be a great marriage between the ECOSYS technology and the PPM channel. The other thing you might notice, some of these clients are not in the process in Power and Marine Space. They're really in the AEC, what we'd call architectural engineering and construction space. So aerospace, transportation, those are big projects. Berlin project probably could have used some ECOSYS. If they had been smart. I think they'd at least have known their problems much earlier than they did. It might have saved someone some embarrassment or a job. We think that this is going to be very key for us as we move into the AEC market space. This kind of project control capability integrated with other systems is going to be really important to give people the ability to assure clients they can deliver a project on time and on schedule and on budget, which brings me to beyond BIM, our AEC construction market opportunity. Now if you look at the AEC market situation, it's really rather curious in many ways. BIM is being mandated by government organizations and many clients out there. For those of you that have done any research, you'll find that the definition of BIM is really very fuzzy. Many technology vendors have kind of figured this out and started stamping BIM on anything that will fit on a CD. They put BIM on it in hopes that, that will help sell. As we've done our research into this market and admittedly coming from a market that in some ways has already crossed some of these boundaries, Some of the observations that we've seen, by and large, I would say a large percentage of the BIM opportunities that we've seen or BIM Technology Solutions are really focused on what we think of as basic 3 d clash optimization. In other words, ensuring that you don't have 2 designers who inadvertently schedule steel to go through the 2 pieces of steel in the same physical space. That's most of it. In fact, the industry in general has a great debate internally about if you should use a 3 d model, which is why you see companies like Autodesk, they're constantly marketing the benefits of using a 3 d model like Revit on these projects. That's where that industry is. In our end in the PPM industry, no project over a few 100,000,000 would even attempt to have to do a project without a 3 d design. Nobody would do it. It's standard in this industry. In the AEC industry, it is 3 d modeling is not standard. So that kind of gives you a picture of the relative maturity of technology leverage between those two. We also see a lot of other challenges in this industry. They talk a lot about 4 d and 5 d like what you saw with the Vale project and smart plant construction. However, there's a lot of challenges to actually do that because if you don't have a 3 d model, then detailed execution planning becomes increasingly difficult to do just physically or sometimes even impossible. We also see a lot of silos, which is something that's very familiar to us. We created SmartPlan Enterprises, a concept over a decade ago to address the silo problem. And we see that same silo problem in the AEC space where you've got architects, you've got GCs, subcontractors, lots of different silos. And we think this is a similar problem. Hexagon brings some great assets to this. You saw some examples about the Leica technology. I think there was one where they showed they show people where to drill holes, where to put concrete, where things should be, how to grade a site. The Ecosys technology is very powerful here for project controls, which is absolutely critical. Hexagon also has an investment in BIM objects, which is the world leader in creating content for 3 d models as that industry begins to embrace 3 d modeling as a means of planning construction execution. And then MyVR is another critical acquisition of Hexagon, which enables us to stream 3 d model information or any type of high density graphics information online with very low bandwidth. So it's very efficient. As a result of that, we think we're in great shape to go into this market. The nature of that solution that we are going to bring into the AEC market involves a central information hub, which involves a central source of truth for all information so that people can get access when they're supposed to have it. But it also includes critical project controls. We'll use the ECOSYS technology to do that. Planning and Materials Management, For those of you that are not aware, our materials management business is very mature. We've had tremendous success in our own industry, reducing materials overage. When I started with PPM some 15 years ago, material overages on a process and power project of 3% to 5% was normal. So 3% to 5% materials on a multibillion dollar project. It's not bad, but we've successfully brought all of our clients that use smart plant materials down below 1% materials overage. That's because of the precision by which we can manage all the procurement planning that goes into these multibillion dollar projects. Construction planning is another one that would be critical. Actually being able to hold subcontractors responsible for their performance on a contract is going to be critical. Today, the AEC industry really struggles. Does the when someone shows up late with a concrete truck or anything like that, there's not a lot of financial responsibility that's effectively levered out nor does the motivation system there to really state a plan. And we think that with the right system, we think that we can create a great deal of positive change for that industry as a result. So you see us sitting here today in an MD position as the market leader, high recurring revenue, great relationships with our clients, which gives us great market knowledge and insight as well in a real time way and a very diversified portfolio that we've been successful with. And you see us facing tremendous growth opportunities. You can look at our cloud technology, which I think everybody agrees will eventually happen in many industries is the adoption of cloud technology. Our project controls business is already taking off. Even since the acquisitions closed, we're seeing tremendous growth. I think that's going to be an awesome business for us in the future. Our AEC construction market has tremendous promise. We think we bring a lot of relevant experience to that business. As we begin to hire others that have deep AEC experience and marry that to find the right solution for the AEC market, we think that's going to be another very attractive business for us in the next decade. And then finally, as Gerhard hinted, we intend to do some very smart M and A as well. All right. That's it for PPM. And now I'd like to introduce our colleagues, Norbert Henke and Paulo Gulamini. I apologize for the pronunciation. Perfect. Thanks a lot. Manufacturing Intelligence. Now we are already quite late, so we probably have to speed up here a little bit because you're getting, I assume, hungry. I don't have yet an intelligent way to shorten this down to 30 seconds, but we will try to make it as speedy as possible because one of our tagline is speed and confidence. And I appreciate, Ola, the introduction of Manufacturing Intelligence. And I think the son of David is getting really famous now about that. Maybe I add a little bit more what manufacturing intelligence means. It is about collecting data from different sources to analyze the data and put content to it. That means then you have actionable information and with this we should do something, act on it. In our line, it's sensing, thinking and acting. And we'll talk a little bit about that. Now, I think it's every time good when you stay just started with a new journey, I call it, to see where are we. And I want to talk a little bit about where are we these days. And Manufacturing Intelligence is very regional balanced. When you look at that, for example, in Americas, Europe and in Asia, it's very nicely balanced as Gerhard, you were talking about PPMM. Now for us, Asia has been over the last years already our biggest market from our point of view. And for us, in our business, it is very important that you are very close to your customers. And that means we have position centers, sales and service centers where we can demonstrate as well our solutions. And it was a fantastic event in Hong Kong where we could show the full portfolio. And I have to admit that was the first time myself that I have seen everything that was perfect. So Asia is very important for us. Never mind, the globe is big. We can't be everywhere. So we do work with distributors as well. Over the last years actually, we invested a lot into R and D, but not only say hardware R and D because that's for sure one of our DNA, but it's all about software these days as well. We have heard the whole morning about software. So this has an effect on our business as well. So we invested a lot. And at the moment, as I think the number was as well said, 11% of our sales are related into R and D. So if you then look a little bit to our customer base, where do we come from? A lot from automotive. And this picture actually would have looked differently 10 years ago because automotive would be more the dominant player. In the last years, I would call it, we have heavily, say, gained ground in aerospace and recently the last 2, 3 years the sense. And I think this is going forward the focus for us of investments and acquisitions. Another very important point is that our top 10 key accounts actually only represent 8% of our revenue. So if something happens, it's not nice, I will not deny that, but it's doable. We can say can live with this kind of maybe downside from my point of view as well. So what have we done over the years? We talked about software a lot. Even for us coming as this, let's call it hardware guys, we added software. We did a lot on service, and we acquired a lot of companies in the field of software. So our revenue of software and service is now up to, say, 45% already. Now another very important, say, keystone element of our DNA is the emerging markets. Since 2000, I would call it, we invested a lot into, say, Asia Pac, Eastern Europe and Middle East. And this is representing now 50% of our business already. And just recently, I'll say a year ago, we in particular invested into Vietnam from our point of view. Good. Now Paolo will now talk a little bit about the future. And do you think we have a future, Paolo? That's a good segue to the rest of the presentation. Hello, everyone. Norberto has given you a snapshot of where we are, segments, key accounts, and I think most of you are familiar with our products. What I would like to do is start by describing what's going on in some of these segments in terms of innovation and plans, because probably that's the best way to start when you're planning for your own future, understand what the future looks like for the key accounts that you're working with. And then I would like to describe our strategy going forward and why Manufacturing Intelligence, how do we intend to connect the dots for our key customers going forward. When you look at the future for the key segments that we're working with, obviously, if we start by automotive, electrification and changes in drivetrain is really one of the ones that are mentioned the most. You look at traditional technologies, so if you look at Volkswagen and how they have, for instance, improved some of their powertrain. In Toyota, for instance, over the last 4, 5 years, their 1.4 engine has gained 30% fuel efficiency, okay? So you extract way more power from the same amount of fuel. So traditional drivetrains are still in evolution. And if you're trying to extract the last degree of efficiency from your engines, that's where you have to go and chase for not only dimensional inspection, but surfaces and scratches and irregularities in roughness profiles. And this is where we're putting some of our investments. You're talking about electrification. By 2020, according to IHS, 35% to 40% of vehicles will have some form of electrification in them, okay? Complete electric vehicles probably going forward will remain a minority in absolute terms. But when you look at some form of electrification, you start to talk about a decent amount of the overall yearly production. Now that means that you need fuel efficiency. You need to start working on your components. You need to start changing from traditional technologies. Lightweight components, so aluminum and composites, is really a trend that is going on all the way in transportation from automotive to aerospace. What that means to us is that to inspect a composite surface rather than a traditional steel component, that implies new sensors, that implies a lot of investment that goes in the design and the simulation of that structure before it can be manufactured. So there's a lot of opportunity for us. And as a company that wants to be there from cradle to grave and expand from the inspection to the design and the simulation and the engineering and the manufacturing and the planning all the way to the inspection, that opens up opportunity for us. I would say growth in demand is something that we have to deal with in all of the segments that we're in, okay? It doesn't matter if you're talking about an engine, a mobile device, if you're talking about a watch, there's a demand growth that our key accounts have to deal with, okay? That puts pressure on throughput, on inspection. And metrology, the National Inspection, is still in an adoption phase, okay? We tend to be always surprised when we visit our key customers as well. Metrology is still in an adoption phase, in a penetration phase. And then wearables, we are more and more exposed to electronics. We see wearables growing. We see the handshake between electronics and automotive that is getting closer and closer. That means volumes. But then when you look outside of our segments, there are trends in the world of manufacturing that really changes, I would say, the economics of manufacturing and changes the wealth of opportunities that we are confronted with. Robotization is a classic one. I believe last year there were 200,000 robots that got shipped in 2014. Well, they're going to be 500,000,000 in 2020. So that completely changes the way and robots are one of the new carriers that we utilize on a daily basis and since years actually to deliver inspection for our key customers. Additive manufacturing, again, additive manufacturing is an opportunity to bring manufacture parts, especially in discrete manufacturing, which is really who we are dealing with on a daily basis. And when I'm talking about usability, the real challenge is that the skill set of the users of our technology is changing. So developing technology the way we have done it so far doesn't work anymore. So I would say, especially from a software perspective, the chance of having such a variety of technology, not only within our business unit, but within our group, opens up opportunity to improve these workflows and make technology more accessible. Lastly, I want to focus on information technology. We've mentioned already big data and connectivity, and we all know what this means. When it comes to information automation, again, going back to that blue line, automation of workflow is a phenomenal opportunity that is currently still unexploited in discrete manufacturing. You read the latest report from IHS and we know how much we are still dependent on automotive. This year probably light vehicle production will be flat on last year. Still €160,000,000,000 are spent in CapEx, okay? A third of that is related to the top 2 or 3 manufacturers. And the reality is that, as Ulla was saying, we depend on productivity more than we depend on capacity. Because in automotive this year, there will be almost 300 facelifts, 2 60 new products, 2 60 new vehicles. And each of these is a project that takes 24 to 36 months from design to start up production. Now the companies that are competing at their best and they're gaining market share in automotive are the ones that are shrinking this cycle, that are shrinking their production life cycle, that are shrinking the number of months down to a 24 to 30. Imagine the savings of doing that. And the key driver is information technology, okay? Now this is exactly the direction in which we want to go and we want to help our key customers. Now everything we discussed is about change. So to support change, we need to change and learn new tricks, expand our DNA, if you like. So we are evolving. We have been evolving during the past years already. We're moving from products to systems. We're moving from inspecting quality to inspecting in production to offer that additional flexibility. We're expanding from offering inspection technology to productivity solutions. We're moving along from generating 3 d data to really giving actionable information. Acquiring data by itself is not sufficient anymore. We want to gain for ourselves that additional degree of differentiation and that additional value to our customers, And that's by building actionable information. That is something that you can provide when you understand the workflow and when you combine your technology with the expertise of the workflow. And this is why we are evolving from exegon methodology to exegon manufacturing intelligence. How? Nove was talking about sensing, thinking and acting. Now we want to do it to start off in the workflows that we know best. We want to do it within discrete manufacturing, within the workflow specifically of the core segments that we've been working with. And secondly, we want to do it starting from what we know best, which is dimensional inspection, is really sensing. So we keep investing in sensing technology, understand 3 d data, digitalize surfaces. We're trying to move our technology increasingly from quality to in process. Our customers don't want us in a remote white room. Our users are less and less people wearing white coats. More and more, we're talking to production, heads of production, heads of planning. We're moving inspection technology in process. And that opens up complete new opportunities, and that requires us to make different use of the technology that we have really. From sensing, we want to connect all of this data, make sense of the data and make sure that not only we are capable of acquiring quality data, but also process data. Compare the 2, combine the 2 and make sense of it all. This is the key driver behind the acquisition of Curas that has joined us recently in 2015. Now Curas is a company that is based in Germany and offers really the most recognized package for quality data management within Powertrain. Now what we're working on is really to expand CUDA's offering into other segments, because the type of problems that need to be solved in other segments doesn't differ much. So we're looking into predictive analytics, we're looking into simulation technology, we're looking into quality data management. Once we have gathered 3 d data and collected data, not only from our systems, but also from competitive gauges, also from the process, we want to reconnect it to the process. And over the future, we will develop and we'll acquire manufacturer software solutions that give us the opportunity to impact the flow, the process within these segments. I want to offer to you a few examples now going forward about how do we plan to connect sensing, thinking, acting in these workflows. Just want to point out that when it comes to acting technology, this is the key reason why Vero has joined us in 2014. Vero is the leading independent provider of CADCAM software. So when it comes to discrete manufacturing and large volumes of prismatic parts, really it's all about machining center and gaining that extra efficiency in manufacturing. So if we start looking at our solutions from automotive, okay? So what you have in here is an example of what we have been doing for the last 10 to 15 years. We keep growing our technology, our tactile technology. We offer the most accurate systems that are out there on the market. But the reality is that growth is asking us to go way above and beyond that. So we are transitioning that type technologies to non contact technologies, okay? We have, at the moment, released the most accurate 1D optical probe that is out there on the market that we are slowly rolling out across segments. What we want to do going forward is not only to acquire more data and faster, but to connect this data on quality data management platforms, again, not only from our gauges and our systems, but also from competitive systems. So Curac has joined us 6 to 9 months ago. They keep working with all of our competitors. We want to position ourselves as the ones in the industry that can gather, understand, organize the data so that it becomes supportive to decision making in that process. Curac talks to the ERP and the PLM systems of the all of the automotive powertrain manufacturers. The footprint that they have in the segment is really unparalleled. What we are trying to do now is really to connect process parameters to quality data. Because when you complete this handshake, this is where you can really start predicting non compliances. If we're moving along to automotive sheet metal, so the shapes and applications such as underbody enclosures, body in white assemblies. We have released, I would say, 15 to 18 months ago, 360 SIMS. So the Smart in Line measurement solutions is really a workflow wide quality and process solutions. We've been talking about this in multiple occasions. Now 360 since it's been rolled out, I would say that in the rollout, in the commercial rollout, we are where we expect it to be at this point. I mean, we're talking about a fundamental shift for most of our key accounts. We're talking about a longer sales cycle, but I would say that into most of the OEMs today, either we are in an installation phase or in a pipeline phase or in a technical benchmarking phase really. Now this is what 360 Sims looks like. The value proposition, the key value proposition is really to acquire way more data than anybody can in the flow today. And we do this by making use of white light technology. The WLS sensor is the most reliable source of white light data in the process. It's completely independent from vibrations, from different sources of light. So here we have a unique opportunity when it comes to capturing the data. Now what we are doing is really to go above and beyond that. All of this data become useful to our OEMs if we can marry that with not only statistical analysis, which obviously we can execute us and their capability, but it becomes useful when it's married to the understanding of the workflow. So the way in which we're moving from simply reporting the data to our customers to building additional value is really by making use of some of the technologies that we acquired through Vero. Now Vero as a CAT Chem provider has technology for 5 axis machining, for die and molds from sheet metal components. So the Vyze product of Vero can not only design a piece of sheet metal, not only design the process, but also simulate how these components will change shape, can design a mold, which is what we are seeing right now. Now is the connectivity of their spring back capabilities with 360 SIMs that will make it possible for us to start diagnosing problems in the process. The same way in which we are building manufacturing intelligence in automotive, we're doing it in aero engines. So again, we start from the sensing technology that we're going to keep improving. What you see in here is a benchmark between a typical tactile application versus an optical solution. So we are rolling out HPO for turbine blades and compressor blade technology throughout most of our key accounts, okay, through our partners from AVIC to GE to Pratt to Rolls. What we're trying to do now is really to make use of MMS, to make sense of the data connected and offer add on solutions, add on value to our customers. So the metrology management system architecture has been developed in collaboration with Intergraph and has been deployed in IO engines so far in various forms, starting from Pulse. Pulse is really a simple interface that acquires data about the systems, acquires data about the environment, combines the data with the data that is required during the measurement. Now what we are working on is to offer add on capabilities to that. So I really want to point out the capability of change management within MMS. Change management, if you refer, for instance, to Rolls Royce, they will receive 80% of their blade production from their Tier 1 and Tier 2 suppliers, okay? So imagine the complexity of making changes in cab and having the need of synchronizing all of those changes across the supply chain. Now with MMS change management, what we can do is to keep the metrology planning completely aligned and synchronized with the PLM environment of the key accounts. And that gives us a footprint along the supply chain that allows for us the possibility of standardizing metrology processes in the supply chain. If we're moving from the engine to the structures, I think you're very familiar with our portable technology with articulated arms, with trackers, with white light that we are deploying in Irostructures. And again, our sensing technology competes very, very well in the market today, but we want to go the extra mile. We're going to start connecting through MMS the reports of metrology from various layers in the supply chain so that we can start virtually fitting components. And again, we want to start connecting more and more of that information to the process, as we did for Aerotech. Now the video that you see in here comes from Premium Aerotech, which is one of the key suppliers to Airbus. In this application, what we're doing is to work on one of the key elements of the fuselage of an A350 in composites. We have trackers that are positioned at the corners of the application. We have reflectors at the robot level. And basically, we can scan in real time the manufacturing operation as it takes place and reposition these components as they get laid out. In the same way as we impact the process in this specific application on composites, we can do it in the assembly phase of an A380, for instance, today, where we automatically readjust jigs and fixtures based on the real time feedback from our factories. And again, this is the way in which we are planning to connect sensing technology with data management with acting technology straight in the examples, electronics. So, Nava has mentioned that we have had increasingly business from the electronics segment in recent years. What we actually do in the smartphone business is mostly inspecting housings, glasses and displays, thanks to our vision technologies, CMN technologies and portable technologies. You can imagine for an industry that has €1,200,000,000,000 devices that get manufactured each and every single year, you can imagine if you want to measure 100 to 120 features on each and every phone, you can imagine the quantity of quality data that gets produced across this very complex supply chain. And these guys, they want to offer us a new phone each 6 to 9 months. So nobody in the industry today, except for Hexagon, has the possibility of having all of that sensing technology that is connected to a very powerful PLM infrastructures that connects all of this data and offers traceability to the supply of the supply chain to the OEMs. And this is what we're doing today. Another application that I want to mention to you is this central image in here. So in our portfolio for the electronics, we have made quite a lot of inroads with our formerly known as M and H probes. So we do sell machine tool probes that are installed within the machining center. Now we've been working since the acquisition of Vero to connecting machine tool probes feedback to CADCAM technology, so that in real time, we can improve the quality of these machining centers, okay? So I want to leave you with these last examples. Norbert? Thanks, Paolo. Let's do a quick recap. So we started the journey as hexagonal metrology 15 years ago. And you have heard from Paolo as well how we want to connect things. And it's very important our DNA is sensing, so the metrology. You have heard from Paolo as well how we want to connect things. And it's very important our DNA is sensing, so the metrology. And we are trying to connect all the sensors together to create a data. And out of this data, we want to create actionable information and act on it from my point. That I think is very important in the different workflows. And it's not automotive only. It is aerospace, what you have seen, aero engines, aerostructures and electronics in particular. So if you translate this, what have we done, where we go, in the last 5 years, we were able to double our sales. And we are ambitious as well in 2020 to get close to it as well, and we will have organic growth, which we expect, but we will as well do a lot of strategic acquisitions as we have done, say, Vero or Kyudos. And I hope you have seen how things fit together on the field. Now if you then look into the sensing thinking and acting one more time is we most probably will only here and there add technology in the sensing part, in the metrology part here and there, but we'll concentrate more on the thinking and acting side from our point of view because that's, say, the new sandbox, the new playground where we want to play from my point. I stop here now. A square peg in a round hole. It doesn't work. And an attempt to square a circle just falls flat. Pythagoras squared 3 sides of a triangle to help prove what shape the world is. Because flat, well, just didn't add up. As brilliant as that discovery was, it couldn't tell us what shape the world is in. And that kind of shape matters to Hexagon. We want our world all as rare to shine. We want innovation to run circles around inadequate infrastructures. And when our reach spirals down and the earth's surface, we want to draw out those resources with integrity and reliability. We want our farmers to put 3 square meals on every table. We want to create an inner circle of safety for our families. Sing it soundly. We have your back, and we expect industries to corner the markets on precision, make it perfect the first time, the 10,000 time. Every time, we want to charge a course that isn't static, but rich and dynamic. Clouds of data, where each rotation is measurably better than the last, which brings us back to square 1. Shape matters. The shape of change, the shape of progress, shape of things to come. We are shaping the future, All right, everyone. You've just made our marketing corporate marketing manager cry. You were talking throughout this video, and you were supposed to watch it. Anyway, we're going to move beyond 2015 2016, and we're going to talk a bit about the future. If we were to describe Hexagon today, I think the easiest way to describe it is to say what is and what should be. And there is a gap between what is and what should be. And just take a minute to reflect on this statement. Most of the companies you follow, they strive to go somewhere. And we try to transform industries, societies, events and so on into something better. And that is what should be. And we believe that Hexagon is the company that can bridge this change between what is and what should be. Now how do we do that? We call it the feedback loop. You can look at any innovation or any process. You've seen construction projects being presented today, large petrochemical projects, auto plants, aerospace manufacturing and so on, things go wrong indeed. And that is what is. And we need to measure it when it goes wrong. We need to gauge it. We need to see what exactly goes wrong and what's the root cause behind it. And then we need to move that information into a format where we can analyze it. We need to move it to the digital world and scrutinize the how do we better processes, how do we make them more comprehensive. And then we can create a remedy to create a better world or a better car or a better aircraft or whatever it is we want to do. So what is, is our sensors and what should be is our software offerings. And how many of you have heard the expression Internet of Things, IoT? None? Oh, a few. Shy guys. This is what IoT is. So next time you hear someone talk about Internet of Things, ask them, how are you going to connect the real world, whatever they want to do to the model world and back? Because that's what you need to resolve if you want to really be online and work with the Internet of Things. Now we've seen a lot of glimpses of what Hexagon can do today. But primarily, we're working in manufacturing, engineering, geospatial and infrastructure. That's the major industry landscapes that we serve. But let's take a step back and look at exactly what we do for these industries. Take automotive. We produced 89,000,000 cars last year, and 3 out of 4 were being manufactured using Hexagon Technologies. Aerospace, 2,900 Norbit is looking. It said 290 yesterday, but we've added a 0. 2,900 commercial aircrafts are being manufactured every year and they try to ramp it up. And we're involved in 90% of that production. That's a huge footprint. Consumer electronics. I want to ask you how many of you that has a smartphone, but it's a likelihood of 85% that we were involved designing and building your smartphone. And 9 out of 10 oil, gas, power, nuclear, coal plants or petrochemical or chemical plants have delivered their products using our design tools. We're the only provider to lead more than 1 industry segment in this area. And with the number one overall worldwide provider of engineering design tools for plant design. 54% of the earth's geospatial imagery is either collected or processed or presented using our technology. So it's a more than 50% chance when you see the picture of the globe that we are involved. Now that's a huge footprint that you see. I'll just run some infrastructure projects, and I'll see if I get the hand right now. The Gotthab Base Tunnel was a project starting in Italy and Switzerland. And they basically drilled through the Alps, underneath the Alps to be precise, a 57 kilometer long tunnel. Do you know what the deviation was when the Italians and the Swiss met? Anyone? Sandia, you were in Hong Kong. Told this story before. Was ahead. Yeah. Yes, you were in Hong Kong too. Burj Khalifa, some of you might have been to the top of Burj Khalifa. It's 800 and something meters tall. But do you think it's straight? Would you think it looks like the Leaning Tower in Pisa? Come on. Have some confidence in engineering for God's sake. No, it's super straight, and that is thanks to us. And as a matter of fact, we have monitoring systems that is gauging and monitoring this structure because we also know it's not going to stay straight. But that's 100 years from now, so don't worry. The shard, just taking a longer reference. If you look at this structure, it basically consists of pieces of glass. And to shape and form this together to make one uniform structure is a huge undertaking, and that is us as well. So we have a lot to be proud of. And looking at the history, I think we can step back and say, wow, aren't we clever? But that's not us. We want to continue to move forward and we want to be involved in the next generation products and solutions that is going to change and transform our society. So let's talk a bit about what should be, what are we going to introduce for the next 5 years. Well, first of all, we need to look at the technology that we try to design for the future. And you've heard us talking about sensors. You've seen Norbert and Paolo and Jurgen talking about anything from airborne cameras, total stations, CMMs and so on. Now if we compare that to the human body, these are our senses. It's smelling. It's viewing things. It's touching things. You will need sensors for the future to just sense what's going on out there. But if we now connect the sensors to the software platform, and we basically got this software platform with the acquisition of Intergraph. So you ask sometimes how does all these businesses connect? Well, it's fairly simple. When Norbe talks about MMS in industrial applications, it's actually based on Smart Plant. When Jurgen talks about BIM, it's based on Smart Plant. So this is the software platform that we acquired. And I think you should scrutinize companies that you follow because to future enable your business. If you're not a platform business today, the likelihood that you will dominate your industry is fairly small. So we took a big bet 5 years ago to integrate our sensors with this software platform. But now we feel that we're in a very good position to go forward. And what you need on top of a software platform that has feed from sensors is something called integration platform. How do you transmit the signal from a video camera into a piece of software? How do you transmit the measurement devices output into something that is meaningful into a piece of software? And this is what everyone needs to work on if they want to play in the Internet of Things area. But beyond that, we need to act. And this is the area where we need to invest for the future. We're talking about artificial intelligence. Some people talk about virtual reality. Well, we don't live in the virtual world as you heard from presentation. But we're going to work with augmented reality, where we can superimpose digital models on a real world environment. And that's going to be super cool, and it's going to be what our customers need. So this is what you need to have in order to survive in the next 10 years in the technology area. What can you do if you got that? Well, then you can do a lot, a variety of really interesting things. You can start building the smart connected factory where you have sensors sensing if your production output is to your standards, to your CAD model. But you can also correct things that deviate outside of the norm instantly. So it's online. And at the end of the day, what it means is you can start automating, you can start cutting back on scrap rates, for example, and you can cut back on manning. So this is the ultimate target for any manufacturing operation. And we are an essential key ingredient to make this happening. The other area for the future as we've started to introduce to you today is autonomous vehicles. It's not just passenger cars. That's probably the last area that we will see being automated. But here you see a driverless truck. And in the mining industry, we're already making autonomous vehicles or semi autonomous vehicles. In agriculture, we've done it for a couple of years now. But this is going to be a huge area, and it's going to have great repercussions on other industries because we're not going to produce 89,000,000 cars when we have autonomous cars. Maybe global production will shrink to €50,000,000 or something. And then we have construction for the future where we started talking about integrating information. The construction industry is probably the last industry to be digitized. So we need to integrate design, construction, documentation with the actual on the job site works and tasks. And you've seen bits and glimpses of our future technologies appearing already today from total stations that can pinpoint where you should go to drill a hole and so forth. And these are the things that we need to design now to improve the efficiency of the construction industry. The other area which is interesting that you saw us presenting today is the fundamental change of how we use maps. Maps are going to be consumables. You're going to subscribe to content. Maybe you're interested in one specific area. You're going to decide how you create your own work flow and you decide what you want to see on this map. It's not a standard prefabricated map. So you can specify the experience. And once you're done with that experience, you throw it away and you start over again. So maps becomes consumables rather than something you keep. And then we've all seen what's happened in our open societies in recent years. You saw the massacre in Paris a couple of weeks ago. Our open societies are unfortunately under threat, and we need to use technology to mitigate risks because we all want to go to rock concerts, to restaurants and sit in bars and so on. That I think is a privilege of our life as we know it. So what do we need to give in order to continue to lead the lives that we've lived up till now? Unfortunately, I don't think terrorism is going away. And we are working, integrating our drones, robots with maps and sensors just to look at spaces in public life and early detect things like weapons and so on. And this is going to be a necessary evil of the future unfortunately. Breaking down the silos, we've heard over and over and over again that we tend to build silos. And silos are the reason why we can't increase productivity in large projects that we undertake. Could be a geographic restriction. It could be that you have lack of accurate data and you need access to the data as it's being created. So more and more of our future solutions needs to be in the cloud. They can't reside in a desktop environment because we need to share this data. And we've started building our own infrastructure to be able to provide cloud based services. And this is really regardless if it's a manufacturer, large process company, construction site or public safety. We need these solutions wherever we are active. So really, if we summarize and try to make a very short statement on what Hexagon tries to do and what's the commonality across these applications, it is moving from what is to what should be. We need to improve productivity. We need to improve safety, yields and so forth. So when we dream, we've painted this picture. We had 8% EBIT 11 years ago and we were box sellers. 5 years later, we had reached 15% EBIT because we had transformed our product offering. And we were touching upon consultative selling more and more solving our customers' problems. And as you can see today, we believe that we'll end this year at 23% EBIT with 40% recurring revenue. And then you have a good way underway to transform your business. But looking into these new applications, they're going to be sold as services. It's going to be subscription models. It's going to be a very different ecosystem to the one we're leaving behind over here. So using a bit of low ocean thinking, we think the sky is the limit for this company. And we using these new technologies, there is no reason why we shouldn't be able to start reaching 70%, 80% recurring revenue business and reaching maybe 30% EBIT margin. So this is just food for thought what could happen in the future. And summarizing the Capital Markets Day, I think it's important in tough times to say that we don't accept to be a victim of the global markets and the downturn that we see in certain markets. We have all the tools internally to generate growth. And we're financially stronger than ever. And M and A activity is basically about filling these gaps in the technology stack that I introduced to you earlier. High level of recurring revenue increases predictability, cameras. We used to sell 20, 30 airborne cameras per year at €1,000,000 per system. But we're now transforming that into a subscription model where the customers, they buy our imagery and we work with our previous customers to capture that imagery and we become a re center of it. Incremental margin, 35% and continuously rising. And the momentum we built up will take us way beyond 2016. I've been asked several times today what comes after 2016. And with this introduction to the next generation products for Exagon, I want to share with you our vision where we believe this company could go. And on that note, I'm going to finish.

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