Vaisala Oyj

Hello and welcome to Vaisala's first quarter 2025 results call. I'm Niina Alaluopa from Vaisala's Investor Relations and today with me in this call are President and CEO Kai Östömö and CFO Heli Lindfors. So Kai Östömö will now present the first quarter results and after the presentation we have time for questions.

So hello everybody and thanks for joining. As the headline says, We had a strong start of the year. And at the same time, obviously, when we kind of living through the first quarter, it was an increasing market uncertainty. There was almost like a no day without either a rumor or a change or a tweet in terms of what would be the anticipated import duties and so on, which then in the end were not implemented between our relevant geographies during the first quarter. Actually, the actual implementation dates only happened in April. So despite all the uncertainty and everything else, direct impact from tariffs were not visible during the first quarter. Obviously then the uncertainty, I'm sure, impacted our customers and investment decisions somewhat. Despite all that, we had, like I said, on all accounts, a strong start of the year. Net sales-wise and profitability-wise, clear improvement. Year-on-year-wise, net sales growth 21 percent year-on-year. EBITDA almost doubled year-on-year. EBITDA percentage almost doubled year-on-year. Kind of great improvements, obviously, both. Industrial measurements, excellent performance. I'll go into more details into the business areas in a short while. And on weather environment, a strong order book that we had opening order book obviously gave us a good understanding start and we continue to deliver against that strong order book. And then on subscription sales, kind of an extraordinary growth on a back of both. Good organic growth of 12%, and then obviously the acquisitions that we closed now on the fourth quarter, Speedwell Climate and Weatherdesk, boosted the subscription sales to 63% year-on-year. Fantastic number. Before going into the actual numbers and everything else, it's just good to kind of pause for a while on our strategy, which gives us a great backbone and great foundation to make the decisions, especially, I would say, in turbulent times. The mission, taking every measure for the planet, being on the right side with climate change, I think gives us good foundation to do good, solid business decisions, both short-term and long-term. Good examples on execution of the strategy when we talk about climate and societal resilience, kind of taking examples from different sides of our businesses. Data centers obviously has been a... growth segment or growth business for a long while driven by AI and a rapid increase demand on compute power and During first quarter, we continued to, this has been also a growth segment in our industrial measurements for many years in a row, and that continued during the first quarter, continuing to drive growth and winning larger projects, which typically the new data centers would be. Then on when we take the XWeather side, great to note that we were able to integrate both WeatherDesk and and speedwell climate on our numbers already late fourth quarter, and now being included for the entire quarter. Actually happy to report also that the entire integration of weather desk is completely done, and we were actually, we did that in kind of several months earlier than what we anticipated it to take, and able to stop the SLAs early also from the previous owner. And this gives us a great strength on further development on our offering on XWeather. And as I said a minute ago, it helped us to boost the subscription sales growth when we compare to year-on-year numbers. And on a more traditional side of the business, we continued the success on winning large orders, this time a weather radar and lightning detection network in Greece in terms of our absolute number, somewhat smaller, obviously, than the extraordinary things that we've been doing now during last year and end of the previous year in both Kuwait and Greece. Spain, but here, great to see another sizeable deal, giving more longevity in the strong order book that we have on this. And it's a great testament on our technology, great testament on our competitiveness, our products, and the leadership that we have been showing on weather monitoring infrastructure, and in this case, especially on the weather radar side. Now, when we look at the financials, as said, strong start of the year. Orders received wise, roughly on the same level as year before. Order book. similar level as what we closed the previous year with. And net sales, as I said earlier, grew very well at 21% year on year. If I now take the acquisitions of Speedwell Climate, Weatherdesk, and Nevis that we closed during the fourth quarter, and remove that from the growth numbers, the organic growth was very strong as well, kind of being 17%. The growth came from both business areas, as I will shortly show, and very, very good performance in the Americas region. And this is good to see. This is now fourth quarter in a row where Americas continued to improve as a region. The performance was strong in other regions as well, but especially satisfying to see the continued improvement in Americas. Gross margin improved a little bit over three percentage points. And as usual with our business, the cash conversion continued to be strong. Diving deeper into the business areas, industrial measurements, I would say, as the headline says, very positive development across all regions, all segments. Shown by the numbers, the orders received increased by 17% year-on-year, and net sales increased by 24% year-on-year. Obviously, last year's first quarter was a challenging one, but if you look at the graph on the right, you can see that even in a continuous basis, when you look at the second quarter, third quarter, fourth quarter last year, we had a very strong quarter in industrial measurement in all aspects, even if the relative numbers, when you compare to the year-on-year numbers, obviously, we got the benefit this time of week first, first quarter last year. Great to see also the gross margin improving and the business really scaling nicely when we get the higher sales, then also the EBITDA percentage increases correspondingly and now back on the levels that we should be with the EBITDA percentage starting with a two, being 21.7% at the quarter. Then looking at the weather environment, continued to deliver against the strong order book that we have had and continue to have. Orders received decreased. This is the one, maybe kind of a glass half full on the numbers and the quarter itself. This is really on the back of renewable energy as we flagged on our release that we are seeing the renewable energy market to decline and this is on the back of multiple things. One thing is that the continued economic uncertainty and lack of investments into kind of energy intensive green investments requiring lots of energy has been sluggish leading into competitive energy prices leading into hesitance on building new energy parks, combined with all the policy changes in the US, which put basically the renewable energy investments on hold in the US, given all the measures that were taken. So at least for short term, we are seeing a bit of a headwind on the marketplace. That being said, when we look at the long term, we continue to believe that renewable energy obviously long term remains a very lucrative opportunity despite the short term headwinds. Moving on to the net sales side on weather environment increased by 18% here. If I take the organic piece, so take all the acquisitions out, which happened to all to be within the weather environment, organic growth was great, 11%, and driven by large orders received during the earlier quarters. So the opening order book that we had, and subscription sales. Speaking of subscription sales, I said 63% growth on subscription sales year on year, and boosted by the two acquisitions I talked about, as well as then a strong organic growth of 12%. Gross margin improved mainly following the growth. Again, the business scales and And simultaneously we had a good sales mix when we compared to earlier quarters and then that led into EBITDA percentage being almost 10%. Cash flow continued on a good level. Here I would say this is roughly like a usual quarter that we have been having. Obviously the strong cash conversion being one of our strengths and continued to be so also during the first quarter. Operating result margin being 13%, and when you look at our financial results on this page, It's kind of almost boring to say, kind of continues to be kind of as strong as it has been for many quarters and many calls that you've listened to before. Net sales growth strong, organic net sales growth strong, gross margin improving, EBITDA improving, EBIT improving when we compared to the year before. Then operating expenses increasing, it's good to note, 12% year on year, but that's mainly on the expenses related to the businesses that we acquired in the weather environment side. And then simultaneously we are doing investments in digital sales channels, which we expect to yield into more efficient sales in the coming quarters and years. So important build for future on industrial measurement side. And EBIT, sorry, EPS earnings per share kind of also increasing strongly compared to same time previous year. Financial position continues to be strong. We are not really a very levered company at all. We have a business model that is very much asset light. And maybe on this page, you could note that we have been investing into the automated logistics center here in Vantaa next to our factory that is progressing according to the plan. And just as a reminder, the plan is that it should be operational now towards the end of the year in the fourth quarter of this year. Then the market and business outlook. The outlook for 2025, we expect industrial side life sciences and power to grow. As usual, meteorology, aviation, and roads to be stable. I mean, they are by nature that. And then, as I spoke earlier, renewable energy to decline, given the headwinds that I talked about. Business outlook for this year remains unchanged so we estimate our net sales to be between 590 to 620 million euros and we expect our operating result in terms of EBITDA be between 90 and 105 million euros. Good to remember, as usual, these kind of outlooks for the year kind of don't include any drastic changes in the outlook, and maybe that's good to remind, especially in these kind of days when when the visibility for the future, given what has been going on over the past quarter and past months, is maybe especially valid to say. With that, I want to close the prepared remarks and open up for any questions you may have. And I noted Niko was the first one well in advance to book the first question.

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 Niko Ruokangas from SEB. Please go ahead.