Good day and thank you for standing by. Welcome to the Hexagon presentation on the acquisition of Waygate Technologies Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Anders Svensson, President and CEO of Hexagon. Please go ahead.
Thank you very much, operator. We are calling for this presentation to announce that we have agreed to acquire Waygate Technologies from Baker Hughes for a $1.45 billion cost. Waygate is a global NDT business specialized in X-ray, Remote Visual Inspection, ultrasonic, et cetera, with an annual revenue of approximately $630 million and 1,500 employees. The target closing day for this transaction is the second half of 2026. If we then go to the first slide. What are we buying? We are buying the leading NDT platform, nondestructive testing platform. Waygate is number one in Remote Visual Inspection and number two in industrial computed tomography. Both are in growing and highly regulated markets, so the entry barrier is quite high.
There's 130+ years of heritage, a lot of patented IP, and deeply embedded customer relationships within Aerospace, Defense, and Advanced Manufacturing. Why are we buying this company? Well, it's a natural next step for Hexagon. It completes the measurement chain from the surface, where we have been always strong with our metrology solutions, to also now the inside of the components or products. It's an adjacency that we have for quite some time discussed with customers, would be interesting for them to get the full solution, sort of our current metrology solutions, combined with computed tomography and combined then with the analysis tool and visual inspection that we are selling to these types of companies today, called Volume Graphics. We will then be an integrated player across the offering.
It also diversifies our revenue into the MRO markets, which are more recurring, utilization-driven demand, and less sort of connected to CapEx cycles. This is primarily then the Remote Visual Inspection part of the acquisition. How do we intend to create value? Well, already the RVI or Remote Visual Inspection is a very profitable business. Here we are focusing on delivering strong growth, utilizing also our knowledge and our relationships with customers within the Aerospace business primarily. Here we will also see some synergies. The focus is then on the Radiography to improve the profitability level. With our China manufacturing localization experience, we believe that we can generate quite good gross margin expansions within Radiography.
We can also then cross-sell with, as I mentioned previously, our metrology solutions, and we believe that there will be quite a good base for delivering revenue synergies across both businesses actually, also our existing business. When we talk about the stability assets, which are the other two, Imaging Solutions and Ultrasonic Testing, these are still very good assets. We will look into these assets to see, do we have a performance issue? Is it a market position issue or is it a strategic fit issue? We will decide if we will do turnarounds, if we will do further bolt-on acquisitions to become the number one or number two in the market, or if there is required to do some other strategic reviews. I believe that this is a really good value creation opportunity for the shareholders of Hexagon.
This is something that I have worked a lot with in my previous capacities. I see a lot of potential upside to this acquisition being integrated with the Hexagon MI businesses. Going into more details, I will leave over to Andreas Renulf, who is the President for the business area MI, to continue the presentation. Andreas, please go ahead.
Thank you very much, Anders. If we go to the next slide. To give you an overview first here, we are talking about the transaction value of $1.45 billion , and we expect to close in late second half of the year. The revenue for Waygate in 2025 was $630 million, and the EBIT margins, EBIT1 margins are 10%. As you know, that is not the level which we are playing today here in MI and in Hexagon, and this is where we see an opportunity for strong value creation, which Anders mentioned here. The transaction scope is that this is a carve-out from Baker Hughes. To give you a little bit of history, these were four different assets that GE acquired about 20 years ago to create GE Inspection Technologies.
This is what then became part of Baker Hughes, and this is what we are now acquiring from Baker Hughes. The customer persona for these solutions are typically head of quality, which is the same persona as we have for our metrology business in production, and also for MRO departments, maintenance, repair, and operations. Revenue by geography, you can see that it's very evenly split globally, with 30% in North America, 28% in Europe, and 34% in Asia, 8% rest of the world. From an industry perspective, it's very tilted towards Aerospace and Defense, 35%. You see Oil and Gas, 15%, which is primarily from the imaging part of the business. Into a number of different businesses here, including electronics and batteries, where there's a need also for CT and so on. Strong on Aerospace here in Defense with 35%.
Go to the next slide. As Anders mentioned, we are buying a world-class NDT portfolio, and it is really a portfolio of four different businesses here. If we start with the first one, which is the Remote Visual Inspection, this has a revenue in 2025 of $ 148 million and very good margins. Here we have a mandate, which is growth. This is the market-leading video borescopes for aircraft jet engine blade inspection without having to disassemble the jet engine. I will show you a slide on the stickiness of this application. There's strong patent IP, strong aftermarket services, and very deep relationship with the customers here. This is a safety-critical application with significant barriers to entry. On the Radiography side, you have leading with revenue of $ 183 million in 2025.
This is where you have the natural extension from what we do today in metrology in the production shop floor, to go into also the internal part of an object and not only measure the surface. It's the 2D X-ray, which is primarily for the electronics industry, and then you get into the 3D computed tomography CT systems. It's both for internal inspection of porosities, et cetera, but it's also the dimensional metrology for inside of an object. Waygate has proprietary in-house X-ray tube manufacturing, which is a key competitive advantage, and this integrates directly with our investment from our acquisition from 2018 in a company called Volume Graphics, which is the de facto software standard for CT analysis today. Here we see a lot of different synergies and the mandate here is to increase the profitability on this part of the business.
For the Imaging Solutions, this is the industrial X-ray, $ 207 million in revenue in 2025. Also here, in Remote Visual Inspection, Waygate is number one. For Radiography and the CT, one or two. Also for Imaging Solutions, it's number one or two in the market. This is the provision of high-quality industrial X-ray films, processing chemicals, equipment and scanners and so on. It's also supported by software for image analysis. This is very widely used for detail inspection of welds, castings, and components. You can think of a valve that's sitting inside of a pipeline, for instance, where you need to put the film around the pipeline to be able to put X-ray through and get a picture of the integrity of this weld.
Here we have put the stability on, and that is primarily because this is more of a resale business than what we are used to in Hexagon. That arrangement is done with Agfa film. When we come to Ultrasonic Testing, we have actually not put up a number where we are from market position, and that is because this is a split of two different parts of ultrasonic. It had a revenue in 2025 of $ 93 million. One part of it is used for testing machine solutions, which goes into both production but also into the MRO market, and also handheld solutions, which is primarily for the MRO market here. Also here we have put this as a mandate of stability. That is because we really need to look at the profitability for this part of the business. Go to the next slide.
How does this hang together with where we are today? Well, we are actually all the way to the left-hand side, on the metrology side, which has a clear production focus. We are the leader in surface representation of any part in 3D, and we measure anything from a surface perspective. The natural connection is with the Radiography piece of Waygate. As I said before, we acquired the company Volume Graphics some years ago, so we are already in this business. With the CT part, you can actually do the metrology and the measurement inside of an object instead of just on the surface. That is still very much a production focus primarily.
We get into the ultrasonic part of the business, where you can penetrate up to 30 cm or 300 mm into steel, and you can check the welds and the corrosion and so on. This is both for production, but then it starts to get over more toward the maintenance, repair, and operations part. You have the imaging part, which is primarily for maintenance, repair, and operations, and Remote Visual Inspection, which is more or less only for maintenance, repair, and operations, and very focused on these applications for Aerospace. If we go to the next slide, I will show you the application for Remote Visual Inspection, because you could think that this is just a video camera that is used to look at things which are difficult to reach. This business is all around the application and doing that in a good way.
What you see here on the left-hand side is the schematics of an airplane jet engine. You have probably noticed when you get on a plane that there are those blades that you can see, and those are the fan blades in the front. There are actually 1,500 blades in an Aerospace jet engine, and they are there for to compress air. The inspection of those blades, which are absolutely crucial, that happens on the tarmac when the motor is on the wing, after around 2,000 flight hours, or if there has been a bird strike or something like this. The MRO technician performs this inspection often quite shortly after landing, so engines are hot. You need some requirements to be able to handle that from a product perspective.
The probes are inserted into specific ports that are pre-made into the engines, and the engine slowly rotates to inspect every blade. 1,500 blades, every one of them needs to be inspected. If a defect is spotted, you need to have an accurate defect characterization and measurements to make the decision. Do I continue operation or do I take the engine and then also the plane out of service for repairs, which is the million-dollar decision for an airline to take? There's a very high value for the customers here compared to the cost of this application. It's all about automating this and be prescribed, of course, in the maintenance handbooks from the OEMs that produce these Aerospace engines. If we go into the next slide, from an acquisition rationale, first of all, we complete the measurement chain going from the outside to the inside.
This is an area where we have, to be honest, struggled a little bit over the last couple of years because we have one large competitor that has this combination already. Many customers who are buying the CT part, they are using the CT machines both to do the measurement on the surface and on the inside as well. For us, this is important, especially for Aerospace, castings, automotive, battery, and so on. When it comes to the software integration opportunity, Waygate CT pairs directly into the Volume Graphics software that we are offering today. We see large cross-sell opportunities here with metrology solutions as well. We also get an entry into new markets, and that's the Maintenance, Repair, and Operations. Nondestructive technology is a very attractive growing marketplace.
Here we are then decoupling ourselves a little bit in MI from the CapEx cycle and on the production shop floor. This is an area that we have looked to see if we could get in there through the bridge of CT. There's the value creation opportunity that we see clear opportunities to significantly improve the Waygate margins here. Go to the next slide. For the Remote Visual Inspection, we see there that with that, we can diversify MI into the lucrative MRO market. We have the full-scale testing capabilities for asset integrity with the Remote Visual Inspection. That's an anchor for us. From there, we can start to make more add-on acquisitions in that area. Radiography is very much about profitability for us.
We have a number of different synergies that we will work out, both obviously on the software side with Volume Graphics. We can cross-sell with metrology, and we have a very strong China organization where we can localize manufacturing as well. For Imaging Solutions and Ultrasonic Testing, we will evaluate these investments and look for opportunities to increase the market leadership. We will also review the assets and their strategic fit with the core MI. Next slide. From a deal overview perspective, the acquisition price was $1.45 billion. Definite and definitive agreement is signed, and we aim for closing in the second half of 2026. Obviously, this is subject to regular closing conditions, and this is a carve-out from Baker Hughes. We will have some transition service arrangements pre-close. If we look at the numbers, the revenue for Remote Visual Inspection, $148, and Radiography, $183, that gives $331.
For that part of the business, the EBIT1 margins is 16%. RVI is higher and Radiography is a little bit lower. In total they are 16%. For Imaging Solutions, $ 207 million in revenue. Ultrasonic Testing, $ 93 million. That brings the total of Waygate to $ 631 million. The Waygate total EBIT1 margins are then at 10%. With that, I think we are ready to hand over to the operator for questions and answers for Anders and myself.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Our first question for today comes from the line of, just one moment, Daniel Djurberg from Handelsbanken. Please go ahead.
Thank you, Operator, and hi, Anders and Andreas. Can you hear me?
Yes. Very well. Morning, Daniel.
Good morning. I have a question coming back to the key figures that you finished off with here. If you can help us a little bit to understand the growth pattern seen in 2025 with regards to the four elements that you have here, Remote Visual Inspection, Radiography and Imaging Solutions, and Ultrasonic Testing, and also how to think on the outlook on the growth patterns?
Do you want me to start, Andreas?
Yeah, please.
Remote Visual Inspection is a very highly regulated area, of course, with these inspections. That is a quite quickly growing area. Radiography is also a good growth engine for the company, but primarily we think here, or we believe, that it's the synergies that will create a fast-growing trajectory for us going forward. Given that we have similar customer base, we can now offer the full solution with our existing metrology solutions, combining those with the CT capabilities of Waygate, and then having the analysis and visualization tool of Volume Graphics, which we already own. That is what we believe will create a quite rapid growth going forward. If you take those two together, they will grow at MI or slightly above MI rates going forward, is what we say externally.
Of course, we have our own targets to make sure that we can grow this quite rapidly. When it comes to the ultrasonic, it's of course an interesting business, but we are quite niche, so with this ownership, it doesn't create us a strong position throughout the Ultrasonic Testing area with customers. As we mentioned, here is also where we will review strategic options. Could we then acquire something else? Complement acquisition to make our position stronger within ultrasonic? Do we need to make a turnaround for this business to come up to the right profitability levels and then grow it, or should we do any other strategic reviews? When it comes to the imaging, this is not a fast-growing business. It's a business which is very stable in both upturn and downturns.
It's primarily, like Andreas said, it's a supply chain business for us, more than a manufacturing business for us. This will continue to be a good business going forward. Key customers like Oil and Gas, and these kind of critical installations, power generation, Aerospace, et cetera. Customer base is very strong and very loyal to these solutions, but it's not a fast-growing business going forward either, in my opinion. Andreas, please comment.
I think that gives a good overview. I would say that the UT, the ultrasonic as a market, is growing quite nicely. That is also taking some of the market growth from traditional films and imaging. It's more about the starting position there, the reason why we put it into stability and maybe just one comment on imaging is that this is a market which is slowly but surely transitioning from analog with films to digital, to basically have a digital way to create these images instead of doing it on the analog films here. In general, I would say that that is where we are.
The digital solution is also something that Waygate offers, right?
Correct.
May I ask you on the imaging and ultrasonic, together it seems to have 7%-8% margin or something in 2028 or in 2025? Is it a big difference between imaging and ultrasonic with regards to margin, or is it similar? Perhaps you show that on some slide I missed.
No, we did not go out with those numbers. We basically go out with the RVI being at around the 30% mark for EBITDA, and then you can easily calculate the Radiography margin from that, and then the other two we have as a package.
Okay. May I also ask you on the China opportunity? You mentioned to cross-sell within MI, and will it be mainly within the Remote Visual Inspection or also Radiography that you will try to sell in China on a larger scale?
Yeah. Maybe I can take that. The biggest opportunity we have with our China organization is really for the Radiography part. We are actually selling through our own local developments in China, CT already today. We started that only a couple of months ago, because it's such a good fit with the customers for metrology. The biggest impact is going to be on the Radiography business and on the CT business. For Remote Visual Inspection, there will be some opportunity, but that is more to the MRO market where we're not so established today. Most of the benefits from localization to China will immediately come from Radiography.
Perfect. If I may, the last question from me would be on the revenue model.
I think, Daniel, I think maybe we need to let someone else in.
Okay. Perfect. Thanks. I will get back in queue. Thank you. Bye.
Yep. Thanks.
Thank you. Our next question for today comes from the line of Alice Jennings from Barclays. Please go ahead.
Hi. Good morning. Thank you for taking my question. My first question is just on, clearly the acquisition expands Hexagon's current market position in what is definitely an adjacent industry, but I guess what made you decide that now was the right time? Why has this acquisition or something similar not been done in the past? Was there anything that kind of fundamentally changed to make the acquisition more attractive right now? My second question is just on the customer overlap. Is there any way that you can kind of quantify perhaps how much customer overlap there is in terms of the share of MI customers for which these solutions might be relevant? Thanks.
Yeah. Thanks, Alice. If I start with the first one, I think this is a space we have always been looking at, in history also. We see lately more and more customers wanting to have a full solution, like Andreas also mentioned, like Zeiss, for example, already has a full solution with similar metrology solutions like we have, and then combining that with CT analysis. More and more customers are also trying to make CT solutions complementary to also supply the outer dimensions of the components you are measuring. This is for us both a strategic, but also a value creation acquisition from that point of view. The timing exactly is, of course, when assets become available. There are not that many strong assets like this one. This is basically the strongest asset that has been for sale in years within this area.
It's also a bit combining with finding the seller and combining that with the market opportunity that we see arising within this area when we talk to our customers. Maybe you talk about the overlap, Andreas.
Yeah. First of all, the customer overlap is within the Radiography part of the business. It's hard to just give you a percentage just like that. You can think of it of the primary customers which are into battery manufacturing, automotive, within Aerospace, into castings. Those are the typical ones. From an Hexagon MI perspective, we have quite a lot of sales that goes into both Aerospace and automotive. It's quite a considerable overlap there, but I don't want to give you an exact percentage number.
All right. Makes sense. Thank you very much.
Thank you.
Thank you. This concludes today's question and answer session. I will now hand the call back to Anders Svensson for closing remarks.
Also, we are very excited about this announcement today. We believe that this is a great opportunity for us to create value going forward, very interesting businesses, very complementary to us and to the customers. We are looking forward to welcoming the Waygate team into the Hexagon Group. There will, of course, be more opportunities to have questions on this. We have Q1 reporting next week, and the week after that we have Capital Markets Day in London. We invite you with further questions. Of course, our Investor Relations teams are always available for you to talk to as well. With that, I think we close for today. Thank you everyone for attending and have a good week.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.