Vaisala Oyj

Hello, and welcome to Vaisala's fourth quarter and full year 2025 audio cast and results call. I am Niina Alaluopa from Vaisala's Investor Relations, and today in this call with me are President and CEO Kai Öystämä, CFO Heli Lindfors, and Chair of the Board Ville Voipio. We have today published our financial statement release, and Kai will first go through the results, and then we have time for questions.

Thank you, Nina, and welcome for everybody from my side as well. So, as the headline says, strong performance in 2025, and on a highlight in the fourth quarter really being the orders received improving, and If we look at the actual what happened in the year, in the quarter, maybe I'll start with just if we were to teleport ourselves into beginning of 2025, just to remind you what kind of a year we were thinking that we would face and what was the reality. So we had a plan as a company to grow on the renewable energy on the back of many years of good success, building on that, and the outlook, albeit a little bit more muted growth on renewable energy investments, but nevertheless continuing the growth. when US elections have happened, but the speculations on trade wars, import duties, things of that nature, were on the scenarios, but not the most likely ones, still in early January. And then there was really I think not really much of a speculation which is hard to have the speculation on how volatile the currency exchange rates became during the year. And what a rollercoaster ride in 2025. First thing is, what happened was that the renewable energy market for us really plummeted quite a bit, creating a big hole from the get-go in the year, remembering that this had been one of the growth drivers for the company and a very profitable one as well. So that kind of went away from the beginning of the year. We quantified about 20 million, even a little bit over 20 million as a whole that it created from the get-go. Then during the year, with twists and turns, getting to 15% import duties between US and Europe. And then In the second half of the year, actually the Euro appreciating vis-a-vis not only US dollar but many other currencies, Chinese Yuan, Australian dollar, Canadian dollar and so on and so on. So it's clearly a broader event than just the import duties between two continental countries. And in this environment, I think we can be as a company very proud of how we performed. We were able to continue on our growth journey. If I look at our long term, first of all reminding that our strategic goal was growing the net sales by average 7% over long term. and we were clearly above that as we should be measuring that in constant currencies 7.4% year-on-year growth rate during 2025. We were able to mitigate the import duties on industry measurement side that meant increasing prices the day after where the import duties were clear with no visible impact on the demand and on the weather side actually pre-shipping into US avoiding the tariffs and giving us time to negotiate as the business on that side is based on longer term contracts and especially public side so it takes time to negotiate but happy to report that we've been able to actually during that time that we bought for the second half we've been able to actually come to terms and agree with the customers that we are now able to pass also in the weather side the import duties to our customers. And then thirdly, the fluctuation on the currencies, the strong appreciation of euro during the second half of the year obviously then created headwind, which is a lead-in into when we look at the fourth quarter. In this environment where we were kind of during the quarter in 1.118, 1.116 range in terms of a euro-dollar ratio, Comparing to the year before where we were 1.02, that gives you kind of a flavor of what kind of a headwind one would face. And despite that, essentially a flat net sales year on year. That obviously kind of creating challenges on some parts of the businesses even more than other ones. Exweather being very highly dollar based, we are talking about clearly over 60% of the sales in USD, obviously creating even more headwinds than in some other parts of the business. That being said, also when we look at the order intake in the fourth quarter, that's really a positive highlight, I think. In the fourth quarter, the order book increased 10% in terms of constant currencies, really driven by industrial measurements, but also in weather and environment measurements. clearly improving to the level the year before, marking kind of a significant change when we look at sequentially first quarter, second quarter and third quarter, really kind of like changing, kind of significant change in that trend. Then looking forward, the market uncertainties I think that's one thing that is kind of for sure as an expectation for this year. What are exactly the uncertainties, what are exactly the things that we are going to face, nobody knows, but I am actually convinced when we're going to have this year from now, this call year from now, and we do also again the exercise of teleporting ourselves back to this date. we will find ourselves how many changes and what kind of rapid changes in the marketplace have happened. In all this, based on the good strong performance in 2025, the board of directors also yesterday, or today, decided to propose 86 euro cents as the dividend for AGM to decide. Now, before going into specific numbers and more details in the performance itself, maybe good to look at more of a strategy perspective, highlights on the 2025. It really is about technology leadership, it's about climate action. I think we can be very proud of ex weather and subscription sales growing 50% year on year. We can be very proud of actually meeting and exceeding our long term growth target as a company. But on top of that, maybe a couple of other things that you might not be as familiar with. The work that we have been doing very systematically in the company to improve the health and safety to the level that I am super proud of where we are today. The TRIR being 1.15. Some of you might not know what exactly that means. It means that we are kind of the top of the range industrial company in terms of health and safety. We really have been able to create this to be a safe working place where everybody gets home safe, comes safe to work and gets home safe as it should be. And this is something that we as a company, we as employees of a company, we are very very happy and we continue on this journey. Then another recognition on our sustainable growth journey, this time by time. And then we continued on our strategy execution. Continuous improvement and a flow of new products and services in all parts of the business. We continue to invest also into our operations, which is a key part of our success formula. And a clear milestone on this was the completion of the automated logistics center here in Finland and taking it into full use. Now giving us benefits going forward on multiple different levels. Then into the financials and starting with overall as a company. As said, orders received improved in fourth quarter, driven by very good performance in windowsill measurements and a clear improvement on weather side. orders received increased by 5% year-on-year in reported currencies and 10% in constant currencies, bringing the order book to 185.8 million. That puts us below what the level was at the beginning of last year or end of December 31st of 2024. But at the same time, it puts us clearly above what the order book was at the same time in year 2023. And the year 2024, as you know, was not the bad one for Vaisala. And I think this order book level gives us a good comfort, at least on the starting of the year, on both sides of the business. Net sales in fourth quarter slightly decreased, and if you look at constant currencies being flat, then you have to remember again that 2024 being exceptionally strong fourth quarter, so the comparable was quite strong on what we compare ourselves to. Cross-margin, slight decline, and here I would pick up two things. When we say that we compensated fully the import duties, the way the math works on that, that means in terms of a relative profitability, in terms of a gross margin, there's about one percentage point, a little bit over one percentage point headwind caused by that. And then also, as I said, we had an extremely difficult year on the renewable energy side, and when we compared the previous year, that was kind of a clear creative business in terms of profitability for the company turning into much more of a drag to the profitability. And no news is good news in cash conversion, so as we have been showing as a track record for many years now, cash conversion continued to be strong. Looking at the industrial measurement side, I've said multiple times, the record high orders received in net sales in 2025, I think something that we can be super proud of. We look at the year as such, orders received increasing by 13% year on year, and especially in the constant currencies, 21%, you know, We really can be proud about it and it feels very good. And this growth was driven by America. Despite all the talk about the trade wars and everything else, continued our success in the US especially. and net sales increasing by by one percent in terms of reported currencies but seven percent in constant currencies which I think really reflects our real underlying performance and there obviously the headwinds caused by the depreciation of not only US dollar but also Chinese Yuan and several other currencies impact obviously the reported orders received and net sales as discussed already earlier. Gross margin stayed on the same level despite the headwind as I said from mitigating the import duties and then on EBITDA side slight decline and this was really driven by on the OPEC side one-offs and some investments into sales and marketing and commercial excellence and a couple of maybe words on that. So when I say investments in sales and marketing That means in the digital channel and building the digital channel capabilities, which we are going to be benefiting in the coming years. And then also kind of a clear investment into commercial excellence, which we are running as a program in industrial measurement, which we also expect to be improving the performance even further in the coming years. Then on the weather and environment side, highlight of the year, I think, is really how the year developed, and especially in the fourth quarter, the orders received on the previous year level, and really the increased demand coming from meteorology and aviation segments. Maybe some of you have been somewhat worried about the volatility and the changes of the demand in meteorology and aviation segments. I think this is a good reminder how cyclical and It changes between the quarters and between the years, but the market itself, when looking at it as we will talk about it in grand scheme, I think it is a strong, continues to be a good market. order book somewhat below the level clearly below the level of end of the previous year but at the same time as I said for the entire company similar story as actually also for for weather environment if we compare the order book that we start this year with actually is on a good level compared to end what we ended in 2023 or being kind of what we started 2024 with Then, gross margin, headwinds there, clearly lower, and this is back to what I now said multiple times, the significant decline on the high margin renewable energy business, clearly visible on the gross margin. Obviously, there are exchange rate impacts, and then the impacts also from the US tariffs, as discussed previously. Despite all that, the headwinds and the challenges that we faced in the year, the EBITDA level stayed in a good level of close to 15% EBITDA. Looking at the cash flow, I said strong cash flow continued, and we actually increased the cash flow from operating activities over 10 million compared to the previous year, and mainly really as a good work on improving the networking capital by the company, yielding their cash conversion to 1.1. So I understand that there was a break in the Internet connection, and I assume we are back. So just as a summary for 2025, not sure where you dropped off, so I'll start at the top of the slide. So a reminder that net sales grew in line with our long-term targets. We grew over 7% in constant currencies. If I kind of pick a couple of highlights on this slide, the subscription sales were up by 50% boosted by the acquisitions that we did at the very end of the previous year on Weatherdesk and Speedwell Climate now being fully integrated and bringing when you exclude the Weatherdesk and Speedwell Climate there. One constant currency is the organic growth well in double digits. On gross margin, slight decline due to several headwinds. Exchange rates impacts, the proportional impacts of the US tariffs, as I discussed earlier. And then the strong decline in the high margin renewable energy business. EBITDA being roughly on the same level as the year before. And the earnings per share slightly below the year before. The financial position for the company remains strong. Again, no news is good news and we were preparing these slides. we should for the next quarter maybe count how many quarters have we had the same heading, and I am super proud to have the same heading on this slide, it gives us kind of very very solid ground obviously, and it's a testament on low leverage on the balance sheet and the asset-like business model that we have as a company, strong as for generation that we have as a company. And now with the automated logistics center completed, That obviously kind of gives us another leverage going forward as well. Moving on to the market and business outlook. The market outlook as we see it for 2026. We see growth in industrial, in life science, in power and the markets for X weather subscription sales. And then stable market outlook for meteorology and aviation as well as for renewable energy. And on the renewable energy obviously now stable on a clearly lower level where we started a year and a half ago. And what does it look then in terms of business outlook? For this year, we estimate that our full year net sales will be in the range between 600 to 630 million euros. And our operating result in terms of an EBITDA will be in the range of between 95 to 110 million euros. With that, I'll conclude the prepared remarks and happy to answer any questions that you may have.

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 Ruakangas from SEB. Please go ahead.

Hello, this is from SEB. Thank you for the presentation. Sorry, there was some technical error in the line, so I lost or didn't hear anything for a couple of minutes, so I'm sorry if I am repeating something. But I have three questions, and I'll start with order intake for the industrial measurements. So you showed very strong 21% effects adjusted. order index growth in industrial measurements and you for example mentioned their data center orders and so on. So, were there something extraordinarily strong in this quarter or does that kind of describe or reflect the current strong trends overall in industrial measurements?

So, the only thing I think that is maybe a little bit more pronounced this year than last year and certainly the year before has been the kind of longer term orders from Chinese companies that you may recall if you have followed us a little bit longer that we have had for a long time a year end early in the year orders kind of full year orders blanket orders from our customers especially in China they became almost absent in 2023-2024 when there was more uncertainty in the market, driven by uncertainty in economic development in China. So I think it is very positive news that at least the confidence of our customers seems to be there in a higher level than in the previous years. But that's only a portion of this. And a big part of it is release, as we said in the release as well, that it really is driven by the demand of our products and remembering that we are, as we have been saying, well situated vis-a-vis the megatrends. There's lots of growth industries that we serve that are sizable for us. be it life sciences, be it data centers, as you said, Nikko, be it semiconductor, and the power are good examples, as I just mentioned to you.

Okay, I understand, thanks. So that you would have had also significant effects on justice growth even without those Chinese orders? Then my second one is on the order or potential order from Indonesia. So you mentioned in the report that the Indonesian airport order will be included in orders if the client receives financing in H1. So can you open that situation a bit more so that doesn't mean that if they don't receive the financing so you will lose this order totally and then are you kind of including that order in your guidance assumptions

Yeah, so a couple of things on that. Good question. Thank you, Nikko. So it is not included in our order book or the guidance. So it's as we don't do anything, which are these kind of orders, bigger orders, especially from emerging markets where timings of such orders is extremely difficult to predict even in the year. So that's one. then the the why the wording was as it was the background is that as you know it's been for a while announced publicly where it actually was start like done by our customer who wanted to publish it even before we had the final commercial agreement done and this is the indonesian order is one of these micd projects where it's based on public financing and the public financing rules are when these kind of projects are done the public financing vehicles are guaranteed for a period of time and there needs to be, for good governance, a backstop on when they expire. And when they expire, then obviously you would have to restart the building of the financing package if that kind of a case were to happen. So that's what the wording is reflecting. The customer feedback is that they absolutely want this to happen. Now, sometimes these kind of things have quite a bit of red tape in both timing. It reflects back to my comment on the timing itself. So, again, the predictability is hard.

Yeah, totally understand. Thank you for a good caller. My last question on USA and the public. client side, so have you now seen kind of a stabilization there in demand and if you have any impacts from the US government shutdown in Q4?

Good question, thank you, so very happy to actually give you color on this, so we now have verbal insight on, for example, the budget for National Weather Service, and it seems to be on a good level. The cuts really in the end did not materially occur in the end in National Weather Service, in some other agencies much more so. And the budget is, like I said, on a good level. And regarding the fourth quarter government shutdown, in the end it actually did not affect our sales we were able to able to cope with it all right good that's all from me thank you thank you the next question comes from walt terry rossi from danske bank please go ahead

Hi, it's Valter Rosso from Downs to Bond. Thank you for the presentation. A few questions. Maybe first I'll ask about the semiconductor segment that you say is also driving the growth currently in the industrial measurements. So could you open a bit how Weissler products are used in the semiconductor segment?

So we sell, so first of all let's define what semiconductor, when I say semiconductor, what it means for us. It actually is, we are present from different types of memory processes to commodity silicon products. to really the leading edge compute nodes in terms of fabs, in terms of manufacturing equipment and so on. So we sell to the semiconductor environment via multiple different ways, so our equipment may be sold sometimes directly into the fab itself, sometimes through an OEM that is creating the environment in the fab, sometimes to the equipment that are actually used in the production of of the different types of silicon products. And we are present all around the world, so it's much broader kind of coverage, typically when talked about semiconductor.

All right. Thank you. Then about the metrology and aviation segment, which you expect to be stable going into 26. Does that mean zero growth, or could it be a small positive number still?

When we have said stable, and we've said stable for the long term as well, yes. The stable, if I take a little bit longer term view averaging things out, it's inflation-corrected stable. It's not a market that is declining in real terms. It's actually stable in real terms. Now, then how does that behave between, as usual last year, between different quarters and so on? The nature of that business is somewhat volatile. I'll give you a little bit more color on for example we just talked about with Nikko on the Indonesian order is a great example that it's a sizable order that would even impact the entire market size when it happens but predicting which quarter it comes is super hard.

Good addition, thanks. Still few questions about ex-weather. So first, what is driving the growth in that business? You expected to grow this year, but any indication here, could it mean double digits or more like 5%?

Our ambition is to continue to grow double digits, the business itself. That being said, when I say double digit, I can really talk about inconstant currencies. Given the currency exchange rate, speed of the currency exchange rate changes and the fluctuation, especially in this business where the exposure to non-euro currencies is larger than anywhere else that we have. The impact also is the biggest on Euro reported numbers.

Yeah, great. And can you say anything about what's driving the growth here? Where are you potentially getting new customers?

So we are strong on several customers segments. So finance and insurance, renewable energy and transport. And we see both more usage from existing customers and then clearly a potential in getting more customers. So we see that there's a kind of opportunity to grow both ways, that it's kind of a more usage and wider usage for existing customers, as well as then getting new customers. And then obviously we are looking at the adjacencies at the same time, that's kind of a further growth initiative.

Great. And lastly, on the X weather profitability, as we know, the profitability should improve once you lower the investments in the growth. So kind of two questions. What are you actually investing in right now at the business that is still keeping the profitability down? What is your kind of ambition level on the profitability during this strategy period for Xweather?

So first comment is that the profitability improved significantly last year. And so the direction is... We're super happy with the direction on the profitability. And then... Where are we investing today? It really is about growth. So it's sales and marketing. Think about this as a recurring software subscription business. And there, you know, the investment into, like, it's relatively easy to kind of measure the impact of sales and marketing impacts, both to new leads, qualified leads, into then conversions from qualified leads into sales. So really the focus is driving growth, and therefore the focus on the investment side is growing. is increasing the reach of sales and marketing.

And about kind of your target level on profitability during this period?

We have not set any concrete target level on XWeather during the strategy period. But I just repeat what I said earlier, that super happy on the development that we had last year.

Understood. Thank you for the answers.

Thank you.

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

It's Jonas from Evli. your industrial measurements product sales grew only 1% year-on-year. So I think that seemed like relatively low. So was that only like a timing issue?

Less of a timing issue. So you are talking about the fourth quarter, I assume? Yeah. Think about it as a kind of significant headwind in terms of the... Currently exchange rates, so that's kind of the biggest impact on it.

So if on constant currency terms, how much should these products have then grown?

Let me get back. Net sales growth, fourth quarter on... Seven percent, that's the year, annual number, and then quarterly number. It's a bit in timing, as you said.

Nothing really special happening there. I guess we can just assume that basically the volumes are growing at around five to seven percent or so.

And we report the constant currencies, the net sales growth, only the total net sales in industrial measurements, but not on a product or service sales level.

But they are fairly the same, so you can apply the same percentage gap to the below items, roughly. Correct.

All right, that's clear. And then whether an environment on the cost side, so you've implemented these cost adjustments. I think they were already quite well visible in the Q4 figures. So do the Q4 figures already like fully reflect all these cost adjustments that you have recently made? Can we expect even more to be visible in 2026?

Already announced cost savings that to a very large extent they are visible in the fourth quarter already. So they were done in the third quarter, during the third quarter, and they are to a very large extent already visible there.

Yes, yes, mostly it's been done. As we recorded also the one of cost already in Q3, so...

And then could you remind us of the cross-margin outlook for industrial measurements to weather and environment for 2026?

I can't remind you because we don't give it.

Okay, but can you like describe some of the drivers that might, I mean, in fact this year, what might change in that respect?

Yeah, so... Obviously, if you look at from a gross margin side, similar impacts obviously as in a typical year, that if I take weather side first, the project sales, like if you look at individual quarters, how was the extent of the project sales versus product sales, that has a big impact on gross margin on an individual quarter and sometimes even in a year to some extent at least. And then last year we had a significant headwind from the renewable energy into the gross margin as well in weather environment. And as we are fixing that business, obviously we can't completely fix it, since it's now inherently in a lower level than it was before. in 2024. We are working on that side. And then, of course, the creative thing in gross margin in weather environment is ex-weather, where the bigger that gets to be, and it clearly has a very creative gross margin in the weather environment numbers. And then on VIN side, There it's like if again if I look at the quarterly side some fluctuations between quarters based on you know product mixes that happen to be sold in a quarter that's less so when you look at on an annual level. And then it continues to scale like we have been in the past. As the business continues to grow, that should be bringing leverage not only on the profitability but also on the cross-marching side.

Okay. And finally, I could shoot. Remind us of the geographic sales, I mean the big picture, so iron should grow this year quite a lot and it's mostly driven by the US and Europe, but like the big picture, are there any like anything to highlight from a geographic?

US, like if I look at overall actually last year, US grew more than any other of America's as we say, but it really is US grew much more than other regions. And it kind of reflected also the industrial activity and the growth of industrial activity in the U.S. I think that the overall, when you look at the geographic mix, it reflects often the industrial activity and investments into industrial activity in different geographies. And I would expect that the U.S. continues to be probably ahead of Europe. I think that's a safe bet. And then, you know, positive dynamic in China, short term at least, but we will see. We will see. Important events, for example, like the Trump-Xi meeting now in April, we'll see how that impacts on the U.S.-China relationships, and maybe positive, maybe negative.

Okay, that's clear. That's all from me. Thank you. Thank you.

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

Thank you, everyone, for joining the call. Thank you, Kai, for the presentation. And next in our financial calendar, we have the annual general meeting on March 24, and then the first quarter result sharing on April 24. But now, thank you very much and have a pleasant week.