Hello, and welcome to the Q2 report of Hexagon 2019. Throughout the call, all participants will be in a listen-only mode, and afterwards there will be a question and answer session. Today, I am pleased to present Ola Rollén. Please go ahead with your meeting.
Thank you. Welcome everyone to this interim report for the second quarter of 2019. If we start on slide number four, the overview of the second quarter 2019. As previously reported, early in July, we see organic growth of -1% in this quarter. Our recorded net sales growth is 4%, thanks to structure and FX. We saw solid growth in the quarter in most areas, actually. Geosystems, 6% organic growth, PP&M 3% on the back of very tough comps in the Q2 of 2018. Manufacturing Intelligence recorded -7% organic growth, reflecting the weaker demand environment in China, and especially in the electronic segment. Manufacturing Intelligence without China actually grew year-on-year organic growth. The rest of the world was fine for Manufacturing Intelligence. As expected and previously communicated, Safety and Infrastructure began to stabilize, and we saw improvement in that division. Earnings and margins.
Gross margin, excluding non-recurring items. In the report, you have non-recurring items in the gross margin amounting to EUR 9 million. Excluding those non-recurring items, the margin was 63% versus 62% last year, and the EBIT margin was 24.5%. If we now move to slide five, overview continued. China in the second quarter. We saw a decline in the Chinese demand. It's on the back of geopolitical uncertainties on global trade, especially within the electronics or mobile phone segment in China. Electronics accounted for 4% of Hexagon group sales in the second quarter of 2018. It's now declined to below 1% in the second quarter of 2019. China accounted for 17% of sales in the second quarter of 2018. It's now down to 12% of sales in the second quarter of 2019. What's happening in the electronics segment is several factors impacting demand.
We see customers restructuring their supply chain, moving capacity out of China, and we also see some suppliers faced with restricted access to foreign technology, which is hurting their overseas sales. The financial impact from this and savings is that we launched a restructuring program with proactive restructuring actions across the world to ensure that the company remains on track to meet the 2021 financial targets. We are reducing our global workforce by approximately 700 employees. We're charging the second quarter P&L with EUR 44.4 million, and this is expected to result in annualized savings of EUR 51 million, with the full run rate achieved as from 2020. Slide six. Seasonality and profit. In spite of this weak Chinese development, Q2 was, as you can see from this graph, a strong quarter, and Q2 should be a strong quarter. Moving on to slide seven, key figures in the P&L statement.
Sales amounted to EUR 976 million, which is 4% recorded, - 1% organic growth. Operating earnings, EBIT 1 amounted to EUR 239 million, which is 5% better than the corresponding period last year. In spite of this Chinese decline, we managed to improve our EBIT margin slightly in the quarter. I think we skip the six months numbers and go straight to slide nine, cash flow. Cash flow from operations before changes in working capital and excluding taxes and interest grew by some 10%. We see a pretty good cash flow throughout the quarter. We had a cash conversion of 97%. Just to remind you, our target is 80%-90%. We're going to be above our target if the organic growth is negative. Working capital to sales, slide 10.
Working capital to sales was 12.5%. We saw continuous reduction in working capital to sales in the quarter, reflecting the changed business structure of Hexagon. Market development finally. If we move to slide 12, the sales mix is actually pretty dramatic. This is usually a picture where we have very stable relationships. As you can see, China drops from 17% in Q2 of 2018 to 12% of global sales in Q2 of 2019. If we look at contributors to growth, we saw strong growth. I'm on page 13. Strong growth in South America, strong growth in Asia, excluding China. We see a trend where manufacturers are starting to build capacity in countries like Vietnam, Indonesia, and Malaysia, and that is benefiting Asia, excluding China. Eastern Europe, Middle East, and Africa grew well as well. We had pretty decent growth in Western Europe.
All major countries, but for U.K., grew. North America is on the back of very tough comps for PP&M. PP&M had a perpetual software order amounting to EUR 12 million in Canada and United States this quarter last year, and they did not have a similar perpetual order this year. That's why North America is down. The rest of the business is actually performing quite well in North America. Then we have China with - 25% organic growth in the quarter. Moving on to slide 14, this gives you an overview of the situation for various segments and geographic regions. I am not going to spend time on it now, but you can review it and come back with questions later on. Moving to EMEA, slide 15. As previously stated, Western Europe, decent growth, 5% organic growth, primarily driven by France and Germany.
We saw weakness in the construction sector in the U.K. in the second quarter. Double-digit growth in Russia and high single-digit growth in Eastern Europe. Middle East, mid single-digit growth. Americas, slide 16. North America, -1%, this was on the back of this perpetual one-off order of EUR 12 million in Canada and United States for PP&M in the second quarter of last year. Continued solid demand in infrastructure and construction. Geosystems had a good quarter in North America. South America is growing very strongly in the quarter, strong double-digit growth. It is two things that we see in the quarter in South America. We see strong growth for our solutions in the mining-related countries, the Andean countries. We also see a continued recovery in the Brazilian economy. Asia, finally, slide 17.
As previously stated, China recorded - 25% organic growth, is impacted by the increased geopolitical uncertainty on global trade, it was felt most heavily within the electronics mobile phone business within the Manufacturing Intelligence division. Demand in automotive infrastructure and construction positioning solutions also declined somewhat. Power and energy grew. Strong growth reported in China for power and energy. As I commented before, right now it's small, but we do see a positive trend in countries like Vietnam, Malaysia, and Indonesia, where a large handset manufacturer built out its capacity in Vietnam in the quarter. All these countries neighboring or being close to China in the Asia region are benefiting from investments due to this geopolitical uncertainty. Japan and South Korea continue to record double-digit growth. Reporting segments, slide 19, Industrial Enterprise Solutions.
An organic growth of -4%, where MI had -7%, but PP&M recorded +3% on the back of a very strong quarter in 2018. Sales amounted to EUR 479 million, EBIT came in at roughly EUR 120 million. This is an EBIT margin of 24.9% compared to 25.2% this time last year. The negative impact is obviously to do with MI and China. Geospatial Enterprise Solutions, slide 20. Organic growth of 3%. Geosystems, very strong growth, 6% on the back of newly released products and technologies. I think it's worthwhile mentioning the RTC360, our new scanner, which had record sales in the quarter. SI is stabilizing and improving. For SI, we saw -4% organic growth, and we believe it's going to recover further. We are expecting growth in the second half of this year for that business.
Positioning, 0% organic growth, where we saw a weaker demand in the surveying market, primarily in China. Sales amounted to EUR 497 million and EBIT EUR 127 million, which corresponds to an operating margin improvement of 0.5%. Moving on to slide 21, the growth margin, excluding the EUR 9 million charged in MI in the quarter, is now 63% on a 12-month rolling basis. The operating margin came in at 25% on page 22. If we move on to orders and product releases in the quarter, we start on slide 24. AMendate is an acquisition of a German-based provider of simulation software solutions, and it supports the generation and optimization of designs for additive manufacturing and engineering simulation. It's going to be consolidated into the software division of MI. Slide 25.
We're speeding the transition from document-based workflows to digital workflows by signing a partnership with Aspen Technology, a U.S.-based technology company. We align AspenTech's conceptual basic engineering and cost estimations with Hexagon's detailed engineering suite. The result will be a data-centric workflow that supports the flow of digital project information from the conceptual phase into what's called front-end engineering design. Slide 26. In connection to HxGN LIVE, we introduced the second member of the new BLK family from Leica, the Leica BLK2GO. This takes the Leica BLK3D that we launched a couple of years ago and makes it movable so that you can actually walk through an object, a construction site or whatever it is you want to capture in 3D scans. It allows you to have motion but still get really good quality point cloud.
We see a wide range of applications for this new product, like visual effects in media and entertainment, design of industries, or 3D documentation of already existing plants and architecture and so on. This is a little revolution. It doesn't end there. On slide 27, we can present the third member of the new BLK family, and that is BLK247. It's a continuous 3D reality capture, a stationary that eliminates the need for constant human monitoring of screens, because here you're measuring with lasers and not with images, which is typical for example, security cameras. You can allow geofence objects, you can look at objects that appear that wasn't there before.
Combining this technology, this lidar-based technology with artificial intelligence, you can teach the camera to look for certain events or objects that it should react and send alarms to someone that reacts to that alarm. Both these two products will be commercially available, the BLK2GO will be available as from the fourth quarter and BLK247 as from Q1 2020. Slide 28. Leica also launched the Leica DSX ground-penetrating radar solution, and this will enable you to easily detect, map, and visualize underground utilities. You can combine that with your map so that you get a 3D representation, both above ground and below ground. Slide 29, we introduce the next generation public safety software, which will help driving the growth for the SI division.
HxGN OnCall is the name of the new suite of products that helps public safety agencies of all sizes to achieve more agility and resilience through modernized capabilities and a modernized structure. Now, OnCall can be deployed on premise or in the cloud. It's really up to the customer to configure and decide what modules and how large of an application they want. This will enable Hexagon to address not only the really large police forces or rescue forces around the world, but also smaller sized forces. Slide 30. We launched a new advanced positioning system for automated 3D optical measurement on the factory floor. It's called LightRunner, and it's transforming the 3D optical measurement process by speeding up surface data capture while simplifying setup and operation. You don't need object identification tags anymore. You can just shoot and project your optics.
It's a patented solution, and we're launching it in the fourth quarter. Slide 31. Open autonomy pilot in Peoria. This is a new level of research for autonomous vehicles, where we have created a route through downtown Peoria in the U.S. to refine autonomous capabilities for partners and other research organizations in connection to autonomous driving. We're bringing several cross-divisional technologies together in this test site in Peoria. Slide 32. We're launching GAJT-410ML, this is the latest addition to the GAJT portfolio of anti-jam technology. It's a space-constrained module which works very well on military land applications where space is an issue, it protects against both intentional jamming and accidental interference of your communications and positioning systems. Slide 33.
We've merged our technologies from surveying with our mining technologies in the new HxGN GeoMonitoring Hub, which provides an integrated visualization and analysis platform for mining, bringing together the total positioning station sensors, the scanning sensors, with our mining software. We've created one integrated solution for the mining world. Slide 34. We got an order from Deutsche Bahn, the German railway, and they choose Hexagon's data as a service solution to deliver a Germany-wide cadastral map to support planning and operations in connection to their rail operations. Slide 35. Iowa Department of Transportation in the U.S. selected Hexagon's documentation services for full service documentation of 180 existing facilities with some 90+ additional facilities scheduled for 2020. What we're doing here is we're offering services, scanning services, through our distribution channel, Multivista, using the BLK3D to scan.
We're also using our drone capabilities to do aerial mapping of those facilities. We've reached the end of my presentation. In summary, on the final slide, we report 4% recorded growth, 1% negative organic growth. Despite a more uncertain global trade environment impacting parts of the business, we saw solid growth in Geosystems and PP&M on the back of tough comps. Manufacturing Intelligence record a - 7% organic growth, reflecting the weaker demand environment for MI in China. Hexagon also announced a proactive restructuring program to ensure that the company remains on track to meet its 2021 financial targets. In spite of this, we continued our margin expansion and our profit growth. With that, operator, I think we're ready to answer any questions there might be on the call.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw a question, you may do so by pressing zero two to cancel. Our first question is from Adam Wood, from Morgan Stanley. Please go ahead. Your line is open.
Hi. Good morning. Thanks for taking the question. I've got two if I could. The first one is obviously around the handset business in China. It feels like this was kind of a very one-off geopolitical shock, and that you're suggesting that in the rest of Asia, you're already seeing build-outs and orders coming through that you might think would compensate. What's your view around this being relatively one-off and short-lived, and that the demand you start to see coming back in other regions? The fact that you're restructuring reasonably aggressively suggests that maybe you don't think that or maybe there are other areas of the business that you're nervous about. If you could just give a few thoughts around how quickly things could bounce back, why you're doing the restructuring now rather than waiting to see how things evolve, that would be really useful.
Then maybe just secondly, and again, it kind of comes to performance if things are a little bit tougher. I think in November last year, one of the lunches you spoke in quite a bit of detail around how the portfolio was much more based today around value selling, and it wasn't really volume linked. Again, is there any reason to change that view today? Is there any kind of metrics you can give us around the recurring software revenue percentages just to help us understand how much of that portfolio is tied to value that would be more protected if things were a little bit slower in the macro? Thank you very much.
Well, I need to chop it up in probably two questions. If we start with China, no one really knows how long this is going to take. As you pointed out, we do see a trend where manufacturers are moving out of China, setting up operations in neighboring countries. For China and for electronics, we don't see any sequential worsening because, frankly speaking, it was worse enough as it was in the second quarter. We don't think sequentially it's going to be any worse in the third quarter. Year-on-year, though, you're going to have a similar impact in the third quarter as in the second quarter. That's important to remember. Why we're doing the restructuring, I think what we're doing is we do see a worsening general situation in the global economy on the back of these failing trade talks.
It's China in the second quarter, and no one knows really what's going to happen in the second half of this year. I don't think any single end market is getting any better, if I put it like that, except for maybe public safety. I don't know if that's enough for you on your first question.
Absolutely. That's very helpful. Thank you.
Could you take the second half of your question again?
Sure. It was just, I remember a lunch we had in London last year. You were going through the portfolio and showing how the sales were much more linked to product quality, and basically the value that you deliver to customers and much less focused on the volumes that they're selling, so much less likely to be canceled through a recession. I wonder what's happening at the minute in that business in particular, but more generally, would make you change your view at all on that? If there's any metrics you could give us in terms of percentage of revenues that's more linked to that. I don't know whether giving us recurring software helps. Just things like that to just give us more of a feel.
As things slow, how protected the portfolio is, given it's very different than where you were going into the last cycle, if this is a cycle, and as you say, who knows?
No, we haven't changed our views. It's still linked to new design and new products. Now we were talking a political event where the OEMs are seeing their volumes drop significantly overnight. That, of course, makes them hesitate on product development as well, and they cut all expenses. It's hard to see how this is going to play out, but it was a bit of a hard stop in June.
Perfect. Thank you.
Thanks.
Our next question is from Daniel Djurberg from Handelsbanken. Please go ahead. Your line is open.
Thank you very much letting me on. Coming back to China, you also mentioned this restricted technology access as an obstacle. Can you comment if this is related only to one customer like Huawei, and can this potentially be solved in short notice, you think? We see in delays in foldable handsets, et cetera, from Huawei. A question on your 700 employees cut down here in 2019 to be on the safe side for 2021 financial targets. How should we consider the impact on the net sales from these measures? Thank you.
I don't think it's going to impact net sales. I think the net sales impact is already seen. As I stated before, it's a very fluid situation out there, and no one knows what's going to happen in the second half and how this prolonged stalemate between the two largest economies in the world is going to play out on certain sectors of the global economy. You have to ask someone smarter than me to answer that. Yes, I don't know what I should answer you, really. I can't comment on individual accounts. It's a more complicated situation than just Chinese manufacturers getting access to U.S. technology. It's actually a bit the other way around as well on certain components.
Okay.
Everyone is getting hurt right now, no matter what nationality they have.
Okay. May I just have a follow-up on the Process, Power & Marine? Obviously, very strong underlying growth in the quarter, given the very strong Q2 2018. You mentioned the LNG Canada and the Everett EUR 12 million order in last year. Can you say anything about the pipeline for similar orders? Or is this a huge LNG Canada potential behind us?
I think that we're fairly optimistic about PP&M going forward into the second half. I think the most geopolitical sensitive businesses we got are in manufacturing, where people tend to pull the brakes very early on. Then you have political decisions around infrastructure decisions as well, which later on could have an impact on our surveying construction business. It's still early days, and we don't know. If you look at the PP&M and the SI businesses, I think right now we're probably a bit more comfortable with growth in those areas.
Okay, thank you very much, and good luck to you.
Thanks.
Our next question is from Stacy Pollard from JP Morgan. Please go ahead. Your line is open.
Thank you. I was hoping to dig in a little bit on North America. You talked about weakness in energy and power as well as automotive. Maybe you could talk about which product sets are being hit there. Of course, you talked about the EUR 12 million perpetual order in PP&M, but of course, overall PP&M grew. Yeah, just trying to dig in to understand the -1% for the region. Second question. Maybe I'll follow up after.
Yeah. Thank you. It makes it much easier to answer. No, North America isn't very weak if you back out the EUR 12 million perpetual order that we had this time last year. It's actually growing.
Okay.
I think it's not weakness in the petrochemical segment, it's just that we couldn't beat a very tough comp in that region this year around.
The automotive?
Automotive, I think is a global phenomenon where we do see slower growth rates, both in Europe, North America, and Asia, outside China.
The follow-up was on restructuring again. Sorry, to be the third person asking. Just the 700 employees, how many came from China, and what other divisions were affected?
It was across the board. We're just safeguarding our margins, and I don't know if you should use naval terminology, but if you're out on the ocean and you reef your topsails because you don't know what's going to happen. That's how you should view this restructuring.
Not particularly focused on China, just completely across the board?
No. One third, a bit less than 1/3 came from China, but China is a fairly well-runned organization already as is, with really good EBIT margins. We were restructuring other regions as well.
Okay. Makes sense. Thanks.
Thanks.
Our next question is from Mikael Laséen from Carnegie. Please go ahead. Your line's open.
Hello. Hi. Yeah. I have a question regarding Asia and the geospatial development. It was a decline of 6%, I think. Can you explain this decline? Because Asia seems to be growing. How much was China down for that segment?
It's more or less all linked to China, and we've seen it's not as great as the electronics decline, but we've seen a reduced activity in these large infrastructural projects like the Silk Road, for example, that has impacted our infrastructure and surveying business adversely in the quarter.
How is the exposure there? How much of GES Asia is China, and how much is rest of Asia?
I don't know from top of my head. It's not like MI. The geospatial has a much more diversified exposure where Japan, Korea, Australia are large markets as well. Can we come back on that? I don't know from top of my head how big China is.
Yeah, of course. I was a bit surprised by the weakness in China, because it must be down quite a lot, because it's more broad-based, this 17% of the GES segment.
No, absolutely. It's hard to speculate. I don't know for sure what the Chinese government's balance sheet looked like, but it's a huge commitment, these large infrastructural projects, and maybe they've been cutting back on that. I don't know.
Okay. In total, you mentioned that you expect the same or similar decline in Q3, maybe Q4 in China. Is that the same type of weakness across all end markets? It's not only electronics, it's infrastructure.
No, it's primary electronics. Most of our end markets have weakened in the quarter, not as dramatically as electronics. We do see a broader weakening in China. The best forecast we can do really is that sequentially, we don't expect it to get worse, but year-on-year, we think a similar trend in Q3, then Q4 may be slightly easier comps. The earliest we could return to growth would be the first half of 2020 in China. That's what we're working on.
Yeah. Okay. Do you expect the total group to grow year-on-year in Q3, Q4?
We'll see. I think right now, China is such a big impact on the group. It depends on how the demand develops in the other regions, really.
Of course. Yeah. Okay. Thanks.
Our next question is from Mattias Holmberg from DNB Markets. Please go ahead. Your line is open.
Thank you. Sorry to get back to China again, my question was partially answered right now, but could you still, again, please help us understand a bit, because from how I read your report now compared to what was written in the press release with the profit warning, it seems like the slowdown in China is a bit more broad-based, i.e., not just impacting the electronics business. If you could, just help us understand a bit how much of the 25% decline was related to electronics and how much was driven by these other verticals where you saw some softer demand. Also, as a follow-up on that, could you just help us a bit with how big is China of the total MI division?
We said mostly China electronics, mostly for me would be 80%, 90% of the total decline. That is the segment that dramatically has changed. You do see an impact in other regions, and as I pointed out, in infrastructure, we do see a slowdown in spending in connection to large-scale projects.
Do you have an indication of how big China is of MI?
Of MI?
Yeah.
I don't know if we've disclosed that, but it's by far the largest market for MI. Some quarters, it's been up to 40% of sales.
Okay. Thank you very much.
Thanks.
Our next question is from Sven Merkt from Barclays. Please go ahead. Your line is open.
Yeah. Thank you for taking my question. Just one quick follow-up on China. Obviously, some of the manufacturers are now looking to relocate outside China. Are you actively working with these customers?
Yeah.
Could you give us an update on Smart Build? When do you expect the product to come out of beta, and how big could this product be for you in a couple of years? Thank you.
No, we are actively working. It's the same customers that we encounter in China as in Vietnam, for example. We are actively working in their relocation of capacities. We'll see how that will pan out in the quarters to come. Smart Build was planned to be released in the third quarter from its beta mode, but we've now had requests from our beta customer to add things to the scope, which means that we're going to keep it in beta until year-end, and then release it by the end of the fourth quarter. We believe that this could be a really good product, and if you combine it with the development that you're beginning to see in Geosystems with the BLK series, where you will have portable scanners that can report back to this platform software on updates.
We think that ecosystem could be one of the largest products for Hexagon in a few years' time, not being specific on years.
Maybe just a quick follow-up. Who do you see as your closest competitor for Smart Build?
We don't see a competitor because you have software competitors just focusing on BIM or creating a software model, and then you have competitors making sensors, scanners, and layout tools. We haven't really seen anyone combining the two and create a workflow solution.
Okay. Thank you.
Thanks.
Our next question is from Erik Golrang from SEB. Please go ahead. Your line is open.
My question has been answered, actually. Thank you.
The next question is from Alexander Virgo from Bank of America. Please go ahead. Your line is open.
Thanks very much. Good morning. Morning, Ola. Thanks for squeezing me in. I wondered if you could talk a little bit about two things. On the first one, it's a slightly esoteric question, obviously, the scale of the decline in June took you a little bit by surprise, cutting headcount by that much must have been at least in the back of your mind. Would you have done this savings initiative anyway, exclusive of this deterioration in electronics, just as a function of how you see the next 12 months or the prognosis for the next 12- 18 months, and in the context of the 2021 targets?
I guess that's a fair question, and we've seen, and we've personally have been expecting a weakening in the global economy for two years now. I would be lying if I didn't say that we had prepared a cutback already a year ago. This economy has been very strong indeed, as we all know. We've seen 10 years of unprecedented growth in the global economy, and all great things come to an end. The Chinese decline took us by surprise because it was so distinct, and it was one segment where orders that we were expecting simply didn't materialize in June. The cutbacks would probably have happened anyway.
Right. Okay. Well, that's helpful. Thank you. The second one, I know you don't always quantify this explicitly, but new product contribution to organic growth, I guess particularly in GES, or as a mitigant in the context of IES. Normally, it's a much bigger thing for Q3 and even Q4, I suppose, is when you typically see the biggest impact because of when you launch the new product portfolio. RTC360 has obviously been around for a little bit longer than that. I just wonder if you could talk a little bit about the contribution from new products to organic growth in this current quarter and obviously as we look forward over the next couple.
It's a bit more than 2% in the quarter. RTC360 is a really sticky product. You're absolutely right, it's not brand new, but it's gaining traction everywhere. I think it's the first product in a family of products where you can move around, capture data as the product itself navigates in the geospatial space you want to capture. It's a very clever development.
That's 2% at the group level or 2% in GES, correct?
2% on group level.
Group. Okay.
Yes.
That's something that you'd expect to carry on through the rest of the year, notwithstanding the underlying market development, of course.
I think that we're going to see continuous traction in the third quarter. Third quarter is going to be a tough quarter for new products because we really don't launch this year's new product until Q4, and RTC360 is not a new product in the third quarter.
Okay. That's helpful. Thanks, Ola. Have a good summer.
Thanks. You too.
Our next question is from Markus Almerud from Kepler Cheuvreux. Please go ahead. Your line is open.
Yeah. Good morning. Markus Almerud from Kepler Cheuvreux. A couple of questions. Just a follow-up on China Electronics. Could you just help us with what is the customer mix here? How much is foreign producers and how much is domestic, roughly? If you could help us with that would be very helpful.
I can't say that. We are very restricted on commenting on these accounts, though. I can only state that it's both foreign and domestic brands that we work with. There isn't a single OEM in the mobile phone market that we don't work with.
Okay. Fair enough. My second question is on the BLK family. First of all, just a little bit of the recap. What kind of response have you got on the new product that you launched at HxGN LIVE? Also, is it possible to say what kind of annual sales you have at the moment for the family as a whole, so for the BLK family? Also, what is the price for BLK2GO?
Did we announce the price? I can't remember. It's slightly more expensive than the BLK360, which is $ 16,000, because it's got a bit more technology in it since you can move around. I don't dare to say a question because I might be wrong, if you want to go out and buy one. We don't disclose how much the sales are annualized for this new family, but it's been a success. The reception on the BLK2GO and also the BLK247 has been fantastic. It's what people have been looking for because you have a lot of setup time with the traditional scanners, which needs to be stationary, and compare that to that you can walk through a plant or a premises that you want to document in a normal walking pace, and you capture all aspects about it.
It's a small revolution, really, and people are really excited. I have to say, though, since this is an earnings call, that don't expect deliveries in Q3. We start delivering in Q4.
Okay. Just one follow-up on the BLK2GO, and also I guess the BLK3D. Who's the typical customer of this product?
BLK2GO will have anything from construction companies, foremen, layout managers, architects. We also have discussions with the media industry, where you have entertainment, gaming, film productions, and so on. The BLK247 is installations, large industrial sites or large offices or even subway stations and things where you want public safety, and you want constant monitoring of what's going on.
Okay. Perfect. Thank you. Finally, if I can just ask on SI, which is now recovering. If you can just shortly say what kind of steps you've taken to get back on SI?
We've worked really hard in the first and the second quarter to erase all complaints in previous installations in the product that we launched last year. Now with the new launch of OnCall, we have a much easier installation process where we can remotely install software at the customer's premises. The cost and the complication of installing a large-scale system is going to go down.
Okay, got it. Thank you very much.
Thank you. I think we have time for one final question, if there is one.
The next question is from Gal Munda from Berenberg. Please go ahead. Your line is open.
Hi, this is Francois on for Gal. We were wondering, is it possible for you to give us a little bit more color on what the driver of the weakness was in the electronics business in China? Was it just a few key customers being restricted, or was it more of a broad-based slowdown among many of your Chinese customers?
Well, if you count the number of handset manufacturers globally, it's of course, a small number of companies. Without disclosing any names, I think that's the best answer I can give you.
Okay. Thank you. Just one follow-up. Could you give us an indication on what your software business is growing at versus hardware? Is it possible to give us a split? Do you find the software is more defensive in terms of growth and not just in terms of total revenues?
No, not really. In the industrial business, our software is obviously growing faster than the hardware, this quarter. Having said that, if you look at the BLK family that we're now launching with Geosystems, it's outgrowing all our other products.
Okay. Thank you.
Thanks. Okay.
Okay. I will now hand over back to the speakers.
Thank you everyone for listening in. We'll do this again next quarter. Bye.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.