Vaisala Oyj

Hello and welcome to Vaisalas third quarter results call. I'm Niina Alaluopa from Vaisalas Investor Relations and today with me in this call are President and CEO Kai Östämä and CFO Heli Lindfors. And like always, first Kai will present the results and then we have time for questions.

Hello and welcome everybody from my side as well. Vaisala had a good third quarter, strong sales and profitability as the headline says. So let's dive a little bit deeper. Where did it come from and what are the details behind? So first notion, the net sales growth was strong, 13% in reported currency, which can be characterized really as strong sales in a quarter. The orders received simultaneously declined by 21% and leading into a decline in the order book. Whilst when going back to the financial performance, we maintain a very solid profitability, 18.2% EBITDA margin. And if I exclude extraordinary items due to the restructuring and so on, actually the EBITDA margin was 20%, which I think is all time high for us in terms of an EBITDA margin, if I recall right. Really happy on industrial measurements on the demand picture and now clearly also broader than earlier and on demand and on the other hand, weather environment side. more challenging market environment. And I'll talk about both in detail in the coming slides. And really happy on the subscription sales growth continued to be very strong, 57% year on year, and also the underlying organic growth on a very healthy level. And as I said in the release already, it was great to see also subscription sales now contributing positively also to the profitability of the company. The market environment continued to be challenging. If you think about the entire third quarter, inside of the third quarter, it started with the tariff changes and fixing the tariffs between Europe and U.S. And then at the same time, during the year, continued in the third quarter, the depreciation of euro vis-a-vis USD and Chinese yuan increased So the environment has many moving parts and the depreciation of dollar and renminbi really are things that don't often get talked about as much as the tariffs. But actually, if you think about it, the magnitude of the depreciation of those currencies vis-a-vis euro, the impact actually is equal, if not greater than what the tariff impacts actually are. So it's good to remember that as well. And as I will conclude at the end of my presentation, the business outlook for the year 2025 remained unchanged. But before going into the numbers and performance of the company in more detail, Good to look at a couple of words on strategy execution inside of the company and this time in terms of a couple of interesting launches that are reflecting also the strategy and strategy execution of the company. The first one, Vaisala Circular, it's a service product and the emphasis really is on the word product where the industrial measurements probes are recalibrated and provide a reuse service where the customers maintain dedicated probe pools at our service centers. Essentially, what it means is that we have productized the calibration service in such a way that now we are selling an always accurate uptime and continuous operations in our customers operations, instead of talking about calibration or other technical terms. This is obviously kind of crucial in terms of selling services. How do you productize it? Crucial for the customers to understand what's the value. And crucial for our sales to actually then be able to communicate what the value is and what the customer should be paying for. So kind of a great example of the things that we are doing to drive our service sales, both in industrial measurements where the Weissler Circular is an example of, but we are doing similar things also in the weather and environment side. Then on X-weather, the hail forecasts. Hail actually is one of the more difficult weather phenomena to actually forecast. And it's been really one of the things that has been really a challenge for meteorologists for a long, long time. Super happy to report that now we have a next weather hail forecast. And hail is really important in terms of the damage it causes for various kinds of property or infrastructure. For us in Finland, the hail sometimes get to be kind of pea-sized and even that can kind of cause some damage. But in a more Southern countries where more extreme weather and extreme thunderstorms typically are, when hails get to be baseball sized, they really can kind of create quite a bit of damage. And it really is like billions of dollars losses in various kinds of places. The example we are showing here, where we can apply the capability to the forecast and create alerts for hail is solar parks. And if you think about solar parks, there's a whole host of glass facing upwards. And in case of a hail, that's really prone for damages. And if you think about solar parks, one of the features is also that in many cases, they actually track sun, i.e. they are turnable. So in case of hail forecast, you can actually turn them sideways so you can avoid the damages. And there's a kind of a big market and unsolved problem that we are solving for here with a hail forecast as an example. And then WinCube, the next generation. Here, this is really, again, a good example of how we push the boundaries of the technology with our own R&D. With this evolution on LiDAR technology, we can actually increase the distance out of which we can read the wind and the wind fields, increase data availability, and much, much more robust performance in clean air and complex terrain environments. So significant step up in terms of our performance, which I believe both demonstrates our capabilities and is important for that business and puts us squarely in the lead also from from technology and solution and performance perspective in that business. Then moving on to the financials. So starting with the group level, strong growth, as I said, in both business areas. Orders received decreased, as talked about, and I'll still kind of talk about that a little bit later when I go into the business areas, because there's differences in those, in performance side. Order book, consequently, kind of down from same time last year. And then net sales wise, very strong quarter, 13% up year on year. And if you take the constant currency side, perspective, it would have been 16% up from year on year, same time, so third quarter last year. Gross margin a bit down, and I'll give you, it's easier to explain when I go through the different business areas, nothing dramatic about that there. And then on the profitability side, as I said, if you exclude the restructuring side, actually the EBITDA margin being all-time high, at least in my recollection, and cash conversion, no news there, remained on strong level. Now, going into industrial measurements, yet another strong quarter, and really happy to note that now the positive results are coming from all market segments on all geographies, and super happy to see that now Asia performing really well compared to the same time last year, almost equally so Europe, and at the same time, the US growth continuing. Obviously, in the US and in China, for example, where the local currencies have devalued vis-a-vis Euro, that has a negative impact. If I take, for example, US, in a constant currency, year-on-year growth was 9% in industrial measurements in America's region. And I promised to talk about the gross margin in the business area side. And if I take industrial measurement side first. So first of all, what I forgot to say is the orders received actually increased on the industrial measurement side, corresponding to the net sales growth, actually a little bit more, increased 9% year on year when the net sales grew 6% in reported currencies. But back to the gross margin. So gross margin decreased a little bit. And this really is due to exchange rate impact. But clearly, a big part of the impact was the proportional impact on the US tariffs. And here may be worthwhile just pausing and explaining the math. that we've said that we have been fully mitigating the tariff impacts in our business. And that means that we've raised the prices correspondingly to whatever the tariff costs have been. And if you think about how that math works, it means actually that even if it's fully mitigated in absolute terms, since the divider and the divide above the line and below the line, kind of when you do the division, are added the same amount the relative number actually goes somewhat down. So that's really like, if you have time, just play with the math and you'll see what I mean. And so that's a big part of the explanation. So I am not worried. It's within the normal boundaries in terms of what the gross margin is. changes have been, and it's worthwhile saying also that, well, we are in the industrial measurement side. It's obviously easier to kind of mitigate by price changes, extraordinary events like import duties and such, changes in import duty regimes, compared to fluctuations in currencies. Since we price, and any global company would do the same, price in local currency, you cannot go every time currency exchange rates go back and forth, go change the local pricings. Obviously, long-term, there are pricing means to compensate this, but short-term, you cannot react to all of this, and it would not be constructively taken either from a customer perspective. Then weather environment. In net sales, actually a great quarter. And subscription sales-wise, equally so. At the same time, the orders decreased in weather environment, driven by a couple of things. There's a strong decline in renewable energy market, as we have been saying since the first quarter of this year. Nothing has really changed on that. And there was a kind of a significant change in the market in the beginning of the year. And it continues to be on a low level. And we do not expect that to change in any time. soon and I'll come back to that in the outlook. And then likewise now in aviation and meteorology markets, there was a very strong comparison period and kind of big orders taken in the comparison period last year. But also this part of the market, when you take aviation and meteorology, there is a fluctuation between, a kind of natural fluctuation in those markets, as well as this year where there have been a couple of headwinds that we talked about before, one being that China investments due to the pandemic to a large extent, I would argue, to the fact of the cycle in terms of the five-year plan this year being the last year of the five-year plan and very often being the least investment, at least in this sector. So we have seen that in declining order intake and then then simultaneously the administration or the administration changes and DOGE and so on impacts on delaying the order intake in this year in the US, which obviously is another contributor to this. And then there are kind of gives and takes on the rest of the market, which is within that kind of, I would argue, in the normal boundaries. And good to remember in the comparison period in the aviation and meteorology side, on the back of really a kind of a very strong, now two years in terms of an order intake, really driven by the European Stimulus Fund on the radar networks in Southern Europe. Most notably in our case was the big order that we got from Spain, but there were multiple other ones that we benefited from as well during the past year, year and a half, are still in our order book and are being executed. Now, on the gross margin side, decrease of three percentage points, sales mix, a stronger portion of the... project revenues being recognized. So that's in plain English what the sales mix means. And then same things as what I talked about in industry measurement side on exchange rate and the US tariff impacts, albeit somewhat less pronounced in case of weather environment as the sales mix is more in it's not as heavily weighted in dollars or the US business is a little bit less than what in the same measurement it is. And then EBITDA percentage being on a very healthy level of 14.6%. I mentioned the cash flow continued on a good level. Here you see on the bridge on puts and takes on the cash flow and cash conversion being at excellent level of one and free cash flow around 40 million during the period. Now, if I look at the year to date, both net sales and profitability clearly improved during the first nine months compared to the same time last year. And orders received did decrease by 13% year on year, while net sales grew by 9% year on year. And subscription sales, if I take the first nine months of the year, almost incredible 58% up, obviously boosted by the acquisitions of a weather desk and speed with the climate, but also a great performance on the underlying organic growth. And then gross margin, slightly negative. Again, same explanations that I went through. And then on EBITDA percentage and EBIT percentage up from comparable time, same time last year. And then worthwhile saying on the operating expenses, the restructuring costs, as said, also in regards of this past quarter have been not insignificant, as we have been adjusting our renewable energy business to the new market reality. And that's now behind us, that restructuring. and then acquired businesses and so on, other explanations when you look at the year-on-year comparison on operating expenses. Financial position continued on a very good level, low leverage on the balance sheet, and we continue to have asset-like business model, no changes seen or foreseen in that. On this page, I think it's good to note that the automated logistics center is now in a phase where we are loading it. So it's actually fully in schedule and we are putting material into that and starting to use it as scheduled in the fourth quarter of this year. And then also notable thing during the quarter was the acquisition of Quantira Systems. Think about it this way, that it's kind of an interesting team and technologies on monitoring CO2 fluxes, which means question whether individual Geographic area, field, or piece of land is a carbon sink or carbon emitter, which is a very interesting piece of technology. Potential long-term, kind of quite a bit of potential on that, and that was announced in September. Market and business outlook. We continue to see growth in industrial instruments, life sciences and power. We continue to see roads as a stable marketplace and then renewable energy, meteorology and aviation decline. And this is outlook for the rest of the year. And obviously, the renewable energy being kind of a clear change in the marketplace since beginning of the year, whereas the meteorology and aviation now suffering, suffering a slightly different market conditions, as I explained before, in terms of the government subsidies and government incentives, kind of a, on a lower level than, when we compare to last year. And then on a business outlook, no changes to this. We continue to see net sales to be between 590 and 605 million euros and operating result being between 90 and 100 million euros. With that, I want to conclude my prepared remarks and I'll open up for any questions you may have.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Niko Ruokingas from SEB. Please go ahead.

Hello, this is Niko Ruokingas from SEB. Thank you for the presentation. I have three questions and I'll go one by one. Starting with weather and environment and orders, which you already discussed. And you told the reasons why they have now declined for a couple of quarters. But should we soon start to see the trend in orders happening there? Or has the demand continued, sequentially weakening? And then do you think that the US government shut down cold effect here now in Q4. Yeah.

So obviously, when we talk about, we compare to year on year kind of things will obviously, when the comparables change, then that'll change. Your question was on a sequential basis. Sequential basis in especially aviation meteorology. Things kind of come as they come. So even if there would be numbers improvement or decline from one quarter to another, it would be hard to make a conclusion out of it since they are kind of... lumpy business as a starting point. As I tried to explain on meteorology and aviation, this is more of a, it's a bit of a cyclical business where now we have enjoyed a, I would argue, almost like exceptionally high cycle in it for good, almost two years. Now it's more on a normal basis what it looks like. So I would not be overly worried about it. That's where I'm standing today. Then on the U.S. government shutdown, it's a great question. And so two comments on that. We've seen the budget proposal, and I would be actually happy if the – and this is the government's budget proposal, not the – not a minority budget proposal. I would be happy if and when that is approved, so I have no issues with what is proposed. The shutdown itself, obviously, during the shutdown, getting a new order for next year since there's no budget approved, and there are a whole host of people furloughed. It's postponing things. If I look at Bitona history, typically what has happened is that during this kind of U.S. government shutdowns, the orders will just come a little bit later in. But if I take a 12-month average or a little bit longer time series, it will normalize itself post the shutdown. So it's like a little bit plowing snow in front of a snowplow kind of a thing, at least has been in the past.

Okay, I understand.

We'll see how long this will last. It can stop tomorrow or it can be continuing for some time.

Yeah, I understand. Thanks. Then on the guidance, as it indicates for Q4, clearly kind of on year basis weaker sales and EBITDA development than now in Q3. So is this basically explained by smaller project deliveries expected for Q4?

But a big part of it is also very high comparable. It's if I actually go and I'm usually not doing this, I'll try to go back in my slides to just to illustrate what I'm saying on this slide. And it's not this slide here. So if you look at this slide, it's kind of like highlights the unusual nature of the last year in terms of how how the order intake kind of behaved, and especially net sales behaved that we had a very weak first quarter, very strong second quarter, weak third quarter, and a very strong fourth quarter. If you went back into 23 or earlier years, typically, you know, the second half Both quarters have been stronger. Typically, even the third quarter has been stronger than the second quarter, clearly, on an average year. So there's a bit of, when you compare to year-on-year kind of numbers, the abnormality of last year makes it a bit harder this time around.

Yes, and I think the second topic is actually the FX that Kai was referring to earlier on. So in the beginning of the year, the FX was still more similar level to last year, whereas now in the second half of the year, we see more of an impact of the volatility of the FX. So that will definitely be a factor in Q4 as well, if the kind of rates remain as they are today.

Correct. And it's, again, a good illustration of that. If you go back and look at our second quarter results, we said that there was not really a material impact on FX yet.

Okay, thanks. So this year, more normal seasonality expected than last year. Correct. Then last one from me, at least at this point, on cost side. So you mentioned that 3 million euro restructuring expenses. So if we leave those out, so to me it seems that your operating expenses were down in whether it's by the acquisition or fixed expenses, but then clearly up in industrial size. So... If you exclude those restructuring expenses, were those including something extraordinary or is it kind of describing the trends you are now having?

The extraordinary costs, as I said, they were related to the restructuring, what I talked about in relation to the energy business and renewable energy business. So I think your conclusion was exactly right. And since we've also, like if you look at our numbers and we have now a good trend also on the industrial measurement side, we have been in a little bit longer kind of a time series again over the past two years where we had more modest growth. We were more conservative in spending and spending increases in industrial measurements. And now we see kind of clearly more growth opportunities and a bit more spending, not going wild, but a bit more spending on industrial measurement side.

All right. That's a good explanation. I'll leave the floor to the others. Thank you.

The next question comes from Pauli Lohai from Indiers. Please go ahead.

Hello. It's Pauli from Indiers. I would start with this demand-related question. Have you seen any signs that the increased tariffs could start to dent the good market activity you have seen in the U.S. market or elsewhere compared to what we have seen already this year?

So elsewhere, like I don't see it. Well, there could have always. Now I understand your question. So, OK, no, answer is no, not no. We can't point anything in U.S. or anywhere else which would be at all related to tariffs. It's been more positive than what I would have speculated pre-tariffs.

Well, that's definitely positive. And your scheduled deliveries for the rest of the year in the industrial measurements are a bit lower compared to Q3 last year. So do you think that the current federal market activity could still offset this?

No. Now, Pali, remember what Heli just said in terms of the exchange rate changes, which if you compare to last year, I think we are about 15, 16 points cheaper dollar than it used to be a year ago. And industrial measurements and ex-weather are highly exposed to dollar.

also in dollar and renminbi. And especially for the industrial measurements, the renminbi is also very important. Yes, currency. Currency, so.

So it's not really... Then you can draw your own conclusions. I would not be worried about the demand picture per se.

Okay. Then regarding the cost base, how much savings do you expect from the recent restructuring? on annual level?

We have not communicated that. I'll put it this way that when we said In earlier quarters, similar calls, we've said that we are going to adjust our operating expenses to the level that matches the market picture on the renewable energy business. We've now done it.

All right. Then regarding the new logistics center, do you expect any shorter cost-based increase or operational extra costs from starting to use the new center?

No, no, no, absolutely not.

And do you see that it could provide any material financial benefit next year?

Over time, I think it clearly, I mean, if you think about it now, fully automated material flow, it should yield into kind of a better rotation days, better management of the inventory, multiple benefits in terms of how much capital is tied into an inventory and different tools to also to to optimize that inventory. So obviously we have a business case and over time that this is an investment where we expect a payback as well.

Okay. Finally, on Exfator, do you think that the current roughly double digit organic growth rate is sustainable going forward? taking into account the new product challenges and potential synergies from the recent acquisitions?

Yeah, so short answer, yes. And here also short term, we have to take into account the currency exchange rates when we look at the euro reported numbers. But typically we do the pricing changes at the kind of around the year end in all of the businesses well at least industrial instruments and next weather so so we need to then then see how how those impact kind of going forward as well depending on how the exchange rates then turn out to be good okay that was all from me thank you thank you

The next question comes from Walteri Rossi from Dansky. Please go ahead.

Hi. Thank you for the presentation. A few questions. First about the industrial measurements orders in America. The report said that they grew slightly. I think the wording was a bit softened from previous. So have you seen any changes in the activity level in America, or is this only related to the effects?

So I think I earlier said that it was a 9% on constant currency level year on year. And if you look at the reported currency, it would have been two. So here you see kind of a direct impact on the currency exchange rate. I would be very happy with a 9%. I'll offer you that.

Okay, perfect. But you don't disclose how much America's is of the industrial measurements orders. Can you give any?

Not on orders and not on a quarterly basis, but it's clearly the biggest market that we have. And it's clearly north of one third of industrial measurement sales.

Okay. Thank you. About the ex-weather business, it said that over past quarters, it's actually been contributing positively on profitability. So does that mean that the segment is making now positive operating profit already? And if so, are we talking about low single digit margin or what?

We are not reporting that business separately, so I'll decline to answer you. We have not quantified, but contributing positively kind of would imply that it actually makes money.

Yeah, sure. But I was just making sure that we're talking about EBIT on an operating profit level.

But remember, on EBIT level, we did the acquisitions last year. And that's obviously the amortizations of those assets raised the hurdle on one hand. But if you look at on an operating profit side, then that's what I'm referring to.

Okay, so we should still expect that you are continuing to invest in the growth of that business and shouldn't expect the profitability to kind of start to improve or scale up from now on?

Yes, well, if software business grows 50% year on year, one should expect that it scales.

But you are still keeping the view that you are shifting focus from growth to clearly start improving the profitability side only later. during this strategy period?

No, there's no shifts on profitability and growth to be foreseen. You know, it's always like when you are scaling a software business, it's always kind of a trade-off a bit that how much do you invest in the growth. And typically in this kind of a software business, it really is investments into sales. and demand generation rather than increasing in R&D when software businesses are scaling. And return and investment should be quite quick. And it's relatively easy to verify as well. from a cost of acquisition side. If you invest into customer acquisition cost, you can actually measure what the return on investment is, and it really should be quite quick.

Okay. Thanks. Lastly, as of now, earlier in the year, the expectations were kind of lowered because of the U.S. tariffs and how they will impact especially the weather and environment public side sales. How would you describe the impacts of the tariffs on the public sales this year, today? Has your view changed?

I would say no impact so far on the weather environment sales in the US from the tariff side. As you may recall, we did kind of a plan for the tariffs, and we mitigated the tariffs by actually shipping into our own warehouse in the US, so that we have a little bit of a time to pass the tariff costs into prices. And I think we are executing against that plan very well.

Okay, thanks a lot.

Thank you.

The next question comes from Jonas Ilvenen from Evli. Please go ahead.

Hi, it's Jonas from Evli. I have a couple of questions about industrial measurements. You already discussed this question of costs, but if I can come back to it. So I think your R&D costs were down to a relatively low level, and of course, I think there's always a bit of a quarterly variation when it comes to that. But then also you say your, I saw your total OPEC still grew quite a bit. It was still at a rather moderate level. But you mentioned like this investment in sales and digital capabilities. So my question is that how do you see these kinds of overall industrial measurements investments continue to grow from now on? Like do you expect it to grow basically at the rate of sales volumes?

If I take a look at that, that will be a good approximation over time. Obviously these things change over like very over quarters and the quarters are not equally strong and so on. So, so it kind of, kind of different quarters are a little bit different, but over time, you know, that's a good proxy.

That's clear. And then you mentioned IAM-APEC growth that was especially strong. So was this mainly due to China or were there any other countries there you would like to highlight and which specific industry groups? You mentioned life science and power in your report.

Yeah, as I said, in a prepared remarks, if I start from the kind of the side of the question, It came from all segments in the industrial measurement side. So all market segments grew. And it's both in China and outside of China. China did have a marked change compared to the second quarter. Clearly having more market optimism in the third quarter. Great to see. But it was not only China. It clearly was outside of China as well. And if I pick one very interesting market, which has continued to be strong, it's Japan. And we're obviously lots of industrial activity and we have a great position in Japan in various different segments. But not only those two markets, it's broader than that.

All right, so there weren't basically any kind of weaknesses in terms of geographic regions?

No, not that I can think of.

Okay, that's clear. And maybe one last question. So you already discussed this IM cross-marginality due to exchange rates and tariffs. So it's going to fade at some point, but did you comment on how, when exactly is it going to fade? Does it still continue over Q4 or in the next year? I mean, considering how things look right now.

Yeah, so two things. If you look at CrossMartin, and this was a bit on the net sales side as well, what I tried to say earlier as well, one thing is that they function differently if you think about FX and then the tariffs. The tariffs, what I said, and what we've been saying all along is that we fully mitigated that by raising prices. And that has a kind of by itself negative relative impact on gross margin. And I'll do you the math. Pardon my details here. But if you think about that, let's imagine that the transfer cost out of which the tariffs are counted would be 100 units. and then you put a 15% tariff on it, now that cost would be, instead of 100, that would be 115. And you fully move that into the sales price, and let's do an easy math and call it like it's 200, and you put 15 on top of 200. Now you fully mitigated it, and if you do the relative calculation, there is a negative impact on relative numbers. Sorry about that. I think it's good to understand that. And then on FX, as I said, you can't manage FX-related changes within a quarter or within a half a year. You cannot fluctuate your local prices based on exchange rates. But we do... try to be smart when we do the annual price increases as we do every year in the beginning of the year. So that's a chance of actually taking the currency exchange rate and now costs and everything else into account. Okay, that's clear. That's all for me. Thanks. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Matti Rikkonen from DNB Carnegie Investment Bank. Please go ahead.

Hi, it's Matti Rikkonen. Good afternoon. And sorry if I have to ask some questions again, because I had to jump to another call for 15 minutes during the presentation. So some of the questions might have been asked already. So I start with the math question that Kaiju just explained. So is it in rough terms, we are talking about that the price increase that you made, it covers the kind of cost price, but then the margin that comes on top of that doesn't follow. So you are not getting the compensation for the lost margin compared to the normal situation where you put the kind of markup to the imported price.

Yeah, and even if you put a markup, it you can do the math and different scenarios how much of a markup you need to do in a high gross margin business in order to kind of mitigate the gross margin if you and then there's obviously a limit how much you can pass on the costs if you think about the tariff kind of a drastic change in the middle of the year you know you know it's you know what's acceptable from a customer side So, yes, in a way, what you asked for. And then I'll go back to what I just said. At the beginning of the year, we are going to review our prices anyway, and we are going to look at different kinds of costs and things. Where do we put the prices going forward?

Yeah, but basically... Isn't it always so that when the new year begins, you are trying to kind of achieve the same profitability level or higher what it used to be? So it takes some time for the following price increases to kind of correct the situation into what it was from there.

Yes. That being said, when the book-to-bill cycle is three weeks in industrial measurement side, that's pretty fast.

Yes. Right. Then regarding the weather and environment, when you talked about received orders and how they were kind of suffering different things, you meant that there's also industrial cyclical fluctuations, or I don't remember what the term that you used was. But what does that actually mean in the weather and environment business? So what kind of industries are there? on the customer side that are affected if you're not talking about the renewable business?

No, I was not talking about the renewable business and maybe I'll just explain it a bit more. So it's not really an industrial activity. Think about it this way that it's a relatively small market. in the end, I mean, in the total market, as we are the market leader in terms of an absolute market leader in this. So it's a relatively small market. And then many of the products are having their natural cycles and sometimes they are quite long cycles. If I take the radars that were just sold, I'm not expecting the complete renewal of Spanish network until 15 years from now or something like that. And here, relatively small individual things like the COVID-19 fund to renew, which was used to renew your Southern European radar network, kind of have increased the tide a bit. And now the tide is kind of a lower as we speak, but that has been a phenomenon. If you go on a longer term, a longer term kind of a history in, in meteorology and aviation that, you know, the relatively small, you know, two big airports get to be built at the same year kind of increases the size of the market and the market years are not exactly the same. So this market kind of just has a phenomenon where there's a relatively small, discrete demand changes, change the size of the market somewhat.

Yes. Okay. That clarifies because maybe the wording in the Finnish Finnish stock exchange release was about the industry. Basically, it means the sector. Correct.

Thank you, Matti. Well spotted.

If we then think that these sector changes tend to be quite slow and... one year is not necessarily enough to make it go away. Are you afraid that this would continue also in 2026? I'm not talking about the order backlog which you already have or the Indonesian order which might come sometime next year but the basically new weather orders that you were or you are expecting every year. Is there a danger that we would see an even slower 2026 when it comes to new business and if your order backlog is decreased this year then of course you would have less to kind of deliver in 2026 based on old kind of order backlog. Do you think that that is a kind of risk that you you would like to highlight or of course you have to take a stance on that when you give the guidance for 26 but at least I mean at this point of the year you probably already know and you have made some internal plans how it's going to be in the weather business in 26 so any thoughts on that would be good yeah so let me answer well it's exactly like you said we're going to give guidance next year when the time comes

But let's think about it this way, that there are the product sales, which are selling to existing projects and existing customers. And the fluctuation on that business is very small. The fluctuation really comes from the kind of new projects and bigger and smaller and so on. And so there's a kind of a... level that has been at least relatively stable in the past and I don't see any changes, why that assumption should be different going forward but then how will individual projects come through and so on that obviously will not only impact our sales but actually like if kind of couple of big big orders come big big projects come in a in a half a year that kind of theoretically means also irrespective of who wins that impacts the entire market as well all right so we will

wait for your guidance for 26 to see that what is your plan that you promise to deliver. Correct. Yeah, okay. I'm just saying that it doesn't look so good when this year, of course, the order backlog has been decreasing And when you have basically negative outlook for all key meteorological... For the rest of the year.

For the rest of the year.

Remember, the outlook was... What would need to happen that it would kind of recover to a normalized situation in 2026? Do you foresee some positive changes to this current trend, which you have now said that will impact 2025? but do you see some positive triggers that would change the situation for 26?

Yeah, like I said, so as the market impact, market size is really individual, bigger orders can swing that different ways. So that's something that it's, as you know, Historically, it's really hard to say when certain things come through. The pipeline remains on a good level on the projects, but the flow through the pipeline continues to be very unpredictable as it has been in the past.

All right, fair enough. Final question. You already... touched the topic of industrial measurement and some investments in digital capabilities. Just out of curiosity, what kind of digital capabilities are you talking about?

So, online as a sales channel, online as a sales channel, whether we talk about to our distributors or whether we talk about to the end users, especially on the services side, if you think about, so today, it's mainly sales. we don't have much of a sales through the digital channel. We are doing demand generation, but the actual sales transactions, we do very little through digital channels and that capability we are building. And it's very important, like kind of a first, it will have an impact on the services delivery side, but longer term, I believe, like in any other business, you know, obviously a kind of a, it will have an impact on our overall sales, I believe as well.

Does that mean that the existing customers would kind of want or need a different approach to maybe order from you or does it mean that you are seeking new business through those channels?

I think it in the end will be both. And I don't think any business is will remain as they have always been. And I'll just use the car analogy here that nobody ever believed that a car can be bought online. And look where we are today. Try to buy a Tesla offline, then they will throw you online.

All right. Fair enough. That's all from me. Thank you. Thank you.

The next question comes from Walteri Rossi from Dansky. Please go ahead.

Hey, so just to still clarify the ex-weather profitability question, I was actually, I think I was talking about EBITDA and operating profit as a synonym previously, but just let's talk about EBITDA. So is the ex-weather currently contributing positively on EBITDA level?

Yep. Right. That's all. Subscription sales to be specific. That's what we report today. We don't report separately X weather.

There are no more questions at this time, so I hand the conference back to the speakers.

Okay, that was our Q3 call. Thank you all for joining. Thank you for the question. Thank you, Kai. And I would like to mention or remind that we will arrange a virtual investor event for analysts and investors on November 24th. And there, Kai and our business area leaders will provide an overview of Vaisala strategy and business areas. And you will find more information on the event on our investor website. vaisala.com slash investors. But now thank you all for joining and have a nice rest of the week.