Vaisala Oyj

Welcome to Vaisala's fourth quarter and 2024 results call. I am Kai Justyman, CEO, and I'm joined here by Ville Voipio, who is our chair, and Heli Lindfors, who is our CFO. Welcome to everybody. So the fourth quarter, it was an excellent finish on a very challenging year, as you may recall. We started the year with a planned ERP change and the industrial actions in Finland and a challenging environment overall in the year, challenging first quarter in terms of results, but we have been improving since the first quarter and finished really the year with an excellent fourth quarter. And excellent, I would say, in all aspects, whether we look at the net sales, if you look at that growth in year-on-year, 14%, order book, 25% orders received, almost on par compared to the previous year, remembering that year before, year ago, fourth quarter, we got the Kuwait deal, which was historically the single biggest deal that Vaisala has ever gotten And that was booked in fourth quarter. So the comparison period was kind of extraordinary high. And even with that, we got to almost to the same level. And as a cherry on the cake, the operating result margin EBIT margin got to be 16.7%. So I would argue that in all aspects, really an excellent finish of the year and an excellent quarter as such. Before going into the actual financials more in detail, just a reminder on our strategy and our purpose. Our purpose is taking every measure for the planet. And in strategy, there are four strategy drivers, customer understanding and application know-how. That's where it all starts. Then that together with a product and technology leadership, that's actually the secret source for us. In combination then with excellence in supply chain, how do we actually find scalability in a very high mix, low volume environment as we are in, and all built on purpose-driven culture and talent. With four strategies, growing in industrial measurements with breakthrough technologies. expanding in energy transition and building recurring revenue in data, driving profitability with being global leader in weather systems, and then finding always ways how do you make that scalable and simplifying our ways of working and finding ways how we actually can really scale the complex environment that we are in. I'd like to take a moment and actually reflect on this, on what we actually did as examples on what I just went through. I talked about the purpose that we had, taking every measure for the planet. It's good to remember that we actually did quite a bit of work the year before and crystallized and launched taking every measure for the planet in February last year. And this is something which is not a major event last year, but it's something, a foundation, it's something that will carry us many, many, many years going forward. And we find this to be both extremely powerful in guiding what we do, but it's also very powerful in us differentiating ourselves in multiple different ways, not the least in terms of an employee market. whether it's our own employees or future potential employees, having a real purpose where you can actually talk to your near and dear ones, where your daily work really matters, I think is a huge, huge asset. Then... This is not only us talking about sustainability of our model, our purpose, but it was great to see the recognition by Time magazine as being one of the world's best companies in combining sustainability with growth. And I think, you know, getting these kind of an external objective recognitions, being one of the leading companies in the world and really the leading company in Europe, it really was a great testament on who we are and how we do things. A few other things just to pick up from last year. I talked about the leader in weather systems, the fact that I think on this slide is the big deal that we got on nationwide weather radar network in Spain, 18 weather radars in Spain. with the meteorological agency in Spain, with a possibility on further expansion, if things go in the right way, kind of major deal in scaling our weather radar business to a new level. We did three different acquisitions in terms of driving the growth in weather data and in energy transition. The fact that we also launched many, many new instruments, and I'll pick just one, which is which is the instrument meant for carbon capture usage. And knowing that the carbon capture is a small business today, but our vision and belief is that it will be a big business end of this decade or in the 2030s. And it's really, really important to be part of actually creating that ecosystem, understanding, getting the customer in-depth, customer understanding, in the early trials, in the early implementations. And it shows also the commitment that we have, not only the short-term growth, but the long-term growth of the company. I talked about the operations side being the secret source for us. We started the investment into the new automated logistics center here in Vantaa, Finland. which is now taking shape also in a physical way. The roof is there, the walls are there, and we are starting actually the implementation of the machinery inside. It will be a key way of how do we take even further the capability to find scalability in a high-mix, low-volume environment. and all built on really a high purpose and engaged employee, which is shown by the employee net promoter score. So overall, not just in terms of the numbers and the financial results, I think the, there's a many, many things in, in year 2024, which, uh, w which we at Vaisala can be very, very proud of building the foundation also for the future years and the success in the future years. Now, moving on to the financials. So excellent operating margin, 16.7% EBIT margin, really an excellent result as a result of excellent finish of the year. For those of you who have followed us a longer period of time, There's a certain pattern within the year how our EBIT margin follows the different quarters. In this year, actually, we performed extraordinary well both in the second quarter and especially in the fourth quarter, which then led into the year's kind of a great result on the annual basis, but also it's very visible on the fourth quarter EBIT margin as such. I talked about the orders received on almost on the level of the record quarter that we had a year ago on the back of the Q8 deal. Order book on a high level up 25% compared to the end of the previous year. And then net sales increased by 14% year on year in fourth quarter. Net sales was driven by multiple different things, among which one of the drivers was the large orders received during the earlier quarters and now being implemented and delivered to the customers, but also things like growth in the subscription sales, and also the pickup of the pace in the industrial measurement side, which I'll talk about next. And as a back of the kind of a higher net sales, the gross margin also improved clearly compared to the previous year. And cash conversion, I'll talk about that as well a little bit later, continued to be very strong in the fourth quarter and throughout the year. So back now into industrial measurements, and I'm very happy to report the strong net sales growth in fourth quarter. The orders received increased by 6% year on year, resulting in order book up 5% compared to the same time previous year. It sales up by 12% compared to year on year. This on the back of maybe a couple of things I want to highlight. In these calls, I have said I think two times in a row that very early signs of recovery have been visible in North America. Now I guess it's time to call it early signs of recovery. So recognizing that now we have a third quarter in a row where we are seeing recovery. It's still kind of early on the recovery to the full potential, but we are now having a good kind of a traction on that. And then China was also a bright spot now on the fourth quarter and clearly great to see that being back on kind of a clearly a growth number after multiple challenging quarters in a row in Chinese market. And then as a result of increased net sales and the gross margin improved as well, leading into EBIT margin improving significantly to 21.2%. Then moving on to weather environment, We kind of run out of the objectives now on weather environment. The strong performance continued. I think this is now a fourth quarter, at least fourth quarter in a row, with the same headline. But that's what it is, a strong performance continued. Slight decrease on orders received and the reason really was the extremely strong comparison period of the year before. But order book, if you look at where the order book stands at the end of the year, we are 30% up compared to the same time previous year. Net sales, really, really happy to report net sales increased by 15% when comparing to the same quarter previous year. driven by, again, the large orders in the previous quarters now being delivered, organic growth in subscription sales now being 18%, which is a bit higher than what the average for the year was. And this all resulted in gross margin improving as well, following the growth, and a good mix in sales as well. leading into, what I would say, as long as we have had a weather and environment business area, the highest ever EBIT margin, finishing with 13.8% EBIT margin, which is really fantastic. Moving on to other financial metrics on cash flow, we continued on a good level. The cash conversion from operating items continued to be 1.0. some decrease on cash flow from operating activities, mainly due to the increase in net working capital driven by the higher net sales, or the net sales growth actually. But like I said, a strong cash flow continued on a good level. When we look at the full year operating result, great to see that we finished the year at 15% operating margin. The orders received grew by 7% and net sales grew by 4%. Gross margin improved, EBIT margin improved and leading into EPS of 1.1 euro 76 euro cents which is a significant uptake also from the previous year. I want to take a moment also here just to recognize as well that in 2021, we launched a new strategy and metrics for the new strategy for the strategy period of three years where we said, we would target to grow on average 7%, so 7% on average growth and end up with the operating margin of 15% by the end of the strategy period. And it really, happy to report that we actually met the promises that we made three years ago. This is a fantastic slide to show, continue to show that now over 10 years in a row, increasing dividend, if you take the additional dividend out, but I think it's fair to take out, and this is not something that many, many, many other companies can show. It is something to be really, really proud of as a continuum and shows, shows how the company has been, for a long period of time, performing with a good momentum and improving metrics. So the proposal for the annual shareholder meeting is that the dividend for 2024 would be 85 euro cents, which is 10 euro cents up from the previous year, driven by the higher profitability, as I spoke. We continue to be on a very strong financial position. We have a very low leverage on our balance sheet. The business model that we have is very asset light. We have few investments. We both started investments and did investments during last year. I spoke about the automated logistics center here in Vantaa Finland, which is progressing according to the plan. And just to remind you, we expect that to be operational during the second half of this year. And then we announced and closed the acquisitions of Nevis, Speedwell and Weatherdesk, both for the renewable energy and then for the data sales. Few words on market and business outlook. So when we look at the market outlook for this year, we see growth in industrial instruments, in life science, and in power. In power, this is a continuation of the trend that has been there for some time. And then on stable side, we see meteorology, aviation, roads, and renewable energy. Many of these are actually by nature stable industries with some fluctuations between the years such as the meteorology and aviation and roads. They by nature as a market are stable and we see that continue throughout this year as well. This then leading into business outlook for 2025, and we estimate that our full year 2025 net sales will be in the range of 590 to 620 million euros. The comparison we ended last year was 565 million euros. And then on operating results side, and now we are guiding in terms of EBITDA. And just as a reminder, we estimate that our full year result in EBITDA terms for this year 2025 will be in the range between 90 to 105 million euros. The comparison number here for last year was 90 million euros. So with this, I just want to kind of one more time recognize that the excellent quarter, excellent finish for the year, a lot of hard work throughout the organization and lots of kudos to our colleagues across the company from sales to operations, to logistics, to finance, to actually get the orders, manufacture everything, deliver it to our customer and recognize the revenues, a fantastic finish of the year. With that, I want to finish and open up for questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Nico Ruakangas from SEB. Please go ahead.

Hello. Thank you for the presentation. This is Niko Ronas from SEB. I have a couple of questions, and maybe starting with the order development in Q4. So, as you said already, you had good order growth in weather and environment, excluding that big order from the comparison period. So, was there something bigger also this quarter in Q4, or was this just generally good development?