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.

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