Vaisala Oyj

Hello, and welcome to Vaisala's first quarter audio cast and conference call. I'm Nina Alaluopa from Vaisala's Investor Relations, and today here with me are President and CEO Kai Östämö and CFO Heli Lindfors. First, Kai and Heli will present Vaisala's first quarter key highlights and financials, and then we will continue with the Q&A.

So let's start. Kai. Thank you, Nina, and welcome everybody from my side. This is Kai Östämö. So when we look at the first quarter for Vaisala, I would characterize it this way. It was a very good, strong start of the year, especially driven by industrial measurements driving the results. So if we start from net sales, in constant currency, the net sales growth for the company was 7%. in reported currency that converts to 1%. And orders received similarly, if we take the constant currency first, it's 10% growth year on year, and in reported currency, 5%. When you interpret the results, this time actually the difference, as you can notice, between the reported currency and the constant currency, are particularly big remembering that a year ago first quarter euro and dollar and remedy but if i take the dollar as an example was in parity whereas when we look at today or during the first quarter the euro rate euro dollar rate was 1.17 1.18 so a significant difference between the two we expect this to obviously uh difference start to uh get smaller now during the the second quarter as the big change really happened during the end of first quarter in second quarter last year in in the current exchange rates back to the the numbers so so order as i said orders received on a very good level, and that led in the order book, ending order book actually being on a higher level at the ending order book that we had at the end of last year, so three months ago. This also converted into a good level of profitability, whether we look at on gross margin or EBITDA level. Another maybe a highlight on the year, was ex-weather, which continued on the double-digit growth in constant currencies, the growth rate being 12% year-on-year. Now, before I go into kind of more detail into the numbers and dive into the quarter itself, a couple of highlights on the new products launches for growing areas supporting the strategy of the company. Lots of good stuff is happening in the company, a lot of exciting things, and I've just picked a few here to highlight the type of things and type of innovations that we are doing. The Origo family on the left side on the screen, what it is is a modular platform and transmitters for very precise indoor monitoring, and this is – super critical in a couple of things. The modularity makes it obviously kind of flexible and quick to adapt to different applications. But furthermore, and maybe even more importantly, it also allows cost-effective solutions, which may be important in kind of big volume places like data centers. The DMT-153 in the middle, this is a measurement probe for ultra-dry processes. And examples here are the lithium-ion battery manufacturing and even more so the coming solid-state battery manufacturing. This is really further advancing our technological advantage over our competitors. and gives us a good basis, and it's a good example of our strategy driving the technology and creating the world's leading, most accurate, most reliable measurement equipment. And very importantly, somewhat differently on the right, is Vaisala Care, which is a renewed service offering for a weather side. You may recall we launched the Vaisala Circular for our probes in industrial measurements some months ago. This is a similar kind of an effort to really productize clearly the service offering that we are driving, which makes it much, much easier for our salespeople to communicate the value to our customers and even more importantly, for our customers to understand the value proposition and value for their operations. And this is an example of very important milestones and steps. How do we drive one of our strategic initiatives, which is driving the services business and its share in our overall business portfolio? Then, just a reminder that we now report financial information in three businesses. We now report this as of January 1st, 2026, industrial measurements, ex-weather, and weather, energy, and environment. So, we've split what we used to call weather and environment business area into two parts. This is on a back of strong growth on ex-weather over the past four or so years, now representing roughly 10% of the revenues of the company, and our intent here is to give you and our investors and our shareholders much better insight and much more granular information on something which starts to be a meaningful part of our business mix, being XWeather. Then I'll hand over to Heli to go through the financials.

Thank you, Kai, and good afternoon from my side as well. If we then look at a bit more detail to the financials, as Kai already mentioned, our orders increased 5% year-on-year, 10% in constant currencies, really driven by the industrial measurement, 17% growth in constant currencies. This did boost our order book, being 6% above the level of 2025. And the net sales, on the other hand, they were mainly flat in reported currencies, but of course 7% in constant currencies. And here the positive side is that we could see the growth in our growth areas of industrial measurements and X-weather. The gross margin then returned actually to the same level as it was a year ago. We had three slightly lower quarters in between. And this was really coming from the kind of mixed effect as well as scaling, as well as kind of lower tariffs than for the one and a half. months in the first quarter, so many kind of impacts to it. On the EBITDA side, we maintained strong profitability, 15.1%, same to last year. Our costs were fairly flat at plus 1.7%. Our cash conversion was 100%, so it continues strong as normal. If we look at the industrial measurements then a little bit more in detail, if looking at the kind of orders received increase and net sales increase that were both very strong in constant currencies, really driven by EMEA and APAC as well as kind of the industrial and power markets. Americas was not bad. They were also growing strongly, but not as strong as EMEA and APAC was. The cross-margin, similar to the Vaisala level, this was also on the same level as last year after a few lower quarters. Here, definitely, the scaling, the growth had an impact on this area. On the EBITDA, then, increase in net sales and relatively low operating expenses actually contributed to the unusually high level of EBITDA margin. On the ex-weather side, then... We continue the double-digit growth in constant currencies. Here we must remember that the ex-weather, about 60% of sales comes in USD, and then we have other currencies, and in addition to that 60%, and actually only minority comes in euro, so the impact in this business is most material of our businesses of the kind of strong euro. If you look at it, the growth was really coming from the insurance industry as well as the sales to developer and API customers. Gross margin was at the same level with last year. EBITDA slightly lower. This is mainly due to the fact that the first quarter of last year was exceptionally high, the comparison period. So it was the first. quarter we integrated the new businesses we acquired in Q4, so it had some one-off cases during the first quarter of 2025. Last but not least, the weather, energy and environment side. Orders received, we did see some increase in demand for the meteorology and aviation. The renewable energy continued on a low level. and the sales did decrease slightly. This is also on the back of kind of last year's lower order intake. It's now visible in the kind of slightly lower net sales. The gross margin was still close to previous year's level. The EBITDA did take a slight decrease due to the lower sales. The OPEX did also decrease. That was the kind of result of the cost controls measures we implemented last year. Cash flow continued at a good level. As already mentioned, the cash conversion was 1, and the free cash flow generated in the first quarter was 17 million euros. If we then look at the kind of income statement as such, we have gone through already most of these. If we look at after the operating result, what happened, you can see that the financial income and expenses was – quite much less than last year. The main reasons for that is that we are less levered, as well as the volatility on the currencies have been less, so the FX results have not been burdening the result in the same way as last year. And that then did result to the kind of earnings per share increasing to 38 euro cents. If you look at our strong financial position, this has been the same heading in the slide I at least as long as I have been here, and the positive side on this one, that we are again net-debt-free, so we are in a net cash position of 3.7 million euros. This was the financials. What would you like to say about the market and business outlook?

Yeah, if you mute, actually, apparently the sound gets better. Yeah, so on a business and market outlook, then no changes to what we said a couple of months ago when we gave the annual outlook. So from the end markets perspective, we expect industrial life sciences, power markets, ex-weather subscription sales, markets for ex-weather subscription sales continue to grow for this year. And then meteorology, aviation and renewable energy continue to be stable on the levels that we ended up at the end of last year. And this then results into the business outlook for this year. No changes on this either. So we expect our net sales to be between 600 and 630 million and operating result in terms of EBITDA be between 95 and 110 million euros. With that, I would like to conclude and open for any questions that you may have.

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 Nico Ruakingas from SEB. Please go ahead.

Hello, this is Nick Groners from SCP. Thank you for the presentation. I have three questions, and I'll go one by one. Starting with the industrial measurements, business, and demands, you highlighted there industrial and power segments as demand drivers. In Q1, you have earlier highlighted especially data centers and semiconductors. sectors there, so how did the demand develop in those segments in Q1?

Yeah, good question. Thank you, Nikko. I would say this way, that the demand was actually strong, as Heli said, across all geographies, all market segments, just picking up the absolute strongest. That's what this is, I think. the entire demand was really on a very good level. So whether we talk about data centers or semiconductor or power, you know, on a very good level on the demand side. Okay.

Sounds good. Thank you. Then another one. There have been changes in April in Section 232 tariffs in the U.S., So does this have any material impact on your tariff exposure to the U.S. or any kind of indirect impact to your business?

I would actually say that we continuously monitor and it's an evolving area as such. Currently, we haven't seen any material changes at this moment.

But obviously, we've made the tax rate somewhat lower than what it was a year, on the second half of last year.

Of course, it's 10% overall tariffs, but then these kind of sectoral tariffs are something that the sectors keep on increasing, and the kind of the tariff codes that come to that area of section. They continuously change, actually.

Yeah, so it shouldn't be big change to you at this point. Correct.

At this point, no, but who knows what each sectors are next.

Yeah, I understand, I understand. Then the last one from me, back to industrial measurements and in fact the fixed cost side, as they didn't grow much in Q1 despite the sales growth there. So was there any extra low items in Q1 or is this kind of cost development which is representative also for the coming quarters.

I think we even wrote there that it was a relatively low kind of OPEC side, but this is not one quarter of growth in the sales, so the costs, they don't always necessarily go kind of hand in hand with the sales, if you look at the quarters as such. I would say that it is not representative, so we may very well have investments also going forward.

Okay, thank you. That's all for me.

The next question comes from Walter Rossi from Danske Bank. Please go ahead.

Hi, this is Walter Rossi from Danske Bank. Thank you for the presentation. I also have a few questions. I will not ask them at the same time. So first one, related to renewable energies, of which wind is a big part. You say that it reached the bottom end of last year, in your view. And you expect it to be flat this year. But at the same time, we read from some wind OEMs that they are actually reporting record orders in Q1. So what is explaining the dispersion here?

Yeah, it's about, so remember that our exposure to wind is very early stages of a new wind park. So much earlier than if you think about that. the companies that you were referring to, and starting a new wind park, not part of a business. We haven't seen any changes to the better during the quarter.

All right. Fair enough. Thank you. A kind of a follow-up on that. Do you expect renewable energy to grow next year?

Obviously, it's very difficult to give a long-term view on this. What we've said before is that it is on a low level and we do not expect it to pick up any time soon. Now, obviously, if the oil prices, the hormones situation continues, maybe there are kind of a positives and negatives to it. The negative being that if interest rates go up, that makes making new investments more difficult, making the business case. On the other hand, if oil stays up, then making a business case may get a little bit easier. So it's a little bit of a give and take, but very, very hard to comment on the next year yet.

Okay, thank you. Then last one, this should be an easy one. So how much is data centers of the industrial measurement states at the moment?

Yes, thank you for the question. So I'll answer it exactly the same way as I've answered before, that life sciences is about 30%. Another 130 is represented by data centers. semiconductor power and battery manufacturing, and we have not given any kind of more accurate numbers on the specific ones, any of those segments, any more specifically than that.

Thank you. That's all from me.

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

Hi, it's Jonas from Evli. I have one question about the sales mix of XWeather. So it is about 50-50 software as a service and data as a service business and Now, when you reported revenue for X, where there was flat, but grew 12% in constant currency terms. And then when I look at your annual recurring revenue, so basically the SaaS side, and that grew 5% reported. So there was this 12% gap. on the overall side. So does that mean that your SaaS or ARR side actually grew something like 17% in constant currency terms? Is that how I should interpret this? And yeah, can you talk a little bit about these dynamics? So if there was this kind of a gap that SaaS grew faster than data side, is this, was there anything extraordinary going on? Or is this just like normal variation basically?

Well, actually, if you look at the figures that we report, we don't report the SaaS and DAS separately. So what you can see there is a subscription sales. And that includes both the SaaS and DAS because we have customers that buy the DAS as a subscription. So they actually, it does not give that separation between the two. And actually, if you think about, we mentioned that the growth drivers were insurance as well as the kind of developers and API customers. The insurance is more of the SaaS side, whereas the kind of AP and developers is more DAOs. So actually, they were both growing.

That's good. That's all from me. Thanks.

The next question comes from Joni Gronquist from Indiers. Please go ahead.

Hello, and good afternoon. It's very nice to be back here asking questions. I think it's five years ago I covered you, and it seems like I'm covering the bronze sector currently. It's nice to be standing probably now here and looking at some really good figures. I have one topic that you mentioned here. You discussed it a little bit already, but in your report, you say about the geopolitical risks and how you've been able to mitigate them very well so far. Can you maybe elaborate a bit what you've done, and now going into Q2, and if we're think about your distribution network and the cargo maybe difficulties getting a bit bigger. How do you think you can mitigate the risk in short term looking at your distribution network and The second question is about pricing. Do you feel that you can push the possible higher prices to customers and in what extent? Thank you.

Yeah. Thank you. Thanks. First of all, welcome back. And then, good question. So, if I give a little bit of color on the Middle East situation vis-a-vis us, first of all, we did not see any impact on the demand side. Then on the cost side, very little impact, which we are talking about very small numbers. Remember that if I take the industrial measurement equipment, for example, they are very small and they are light with high value. So the freight cost in the total cost structure of it actually is a very small part of it. relatively small part, so that naturally protects us from variations of this. We also have a model where we are moving into a structure where we are charging the transportation costs anyway from the customers, so it kind of naturally protects us as well from the kind of transportation-related potential cost increases as such. So from a cost perspective, our exposure is in a structural way relatively small to all this. And from a demand side, as I said, so far we have not seen any impact on the demand side. And we'll see how things develop and how long this crisis continues to be.

Thank you.

The next question comes from Madi Rikkonen from DNB Carnegie Investment Bank. Please go ahead.

Hi, it's Matt Pirikonen. Good afternoon. A couple of questions still remaining. First of all, I think you mentioned something about the prices, but I just wanted to confirm that. Have you made any price increases in industrial measurement from the beginning of the year? And if not, are you planning to do any price increases during this year? And then if the tariff is at least temporarily a bit lower, are you kind of giving that benefit back to the customers because they paid the higher tariff when it was initiated? So is this now kind of reversing that to some extent or is it that there's no change in customer prices even though the tariff is a bit lower?

Yeah, so thank you, Matti, for the question. And we do every year do the revisions of prices at the beginning of the year. So we've done that this year as well. And the revisions are typically upwards. And then to the second part of your question regarding the tariffs. Given the situation is as Heli explained earlier, where, you know, the overall tariff level went down, as you said. That being said, there's constant discussion and changes in the sectoral tariffs as well. We've decided that we are not changing the policy. Tariffs have not impacted our pricing decisions any which way for the time being, giving us a little bit of a then freedom also in case there might be some sectoral tariffs that would be impacting us in a short term.

Okay.

Good. Then could you talk something about the ex-weather growth or the cost trends because now it's when it's a relatively new segment and we just got the comparison numbers from last year's quarters but they are rather volatile so it's a bit difficult to see how what is actually behind the numbers so could you just a little bit describe where there's some technical differences in in the last year's numbers and therefore profitability in the core space, I mean. And is there something unusual in the core space of Q1 this year, and how should we model that going forward? Is it a kind of straight line, or are there some kind of bumps which we should take into account?

Good question, Matti. I would say, first of all, that, you know, last year as such was a fairly volatile year. So, like you said, you know, there were changes between the quarters quite a lot and they were impacted. FX rates have a material impact on the quarters. So, also part of our cost is in USD in ex-weather. So, actually, last year, we have had multiple different reasons for the cost to kind of change. And also, the integration last year, it did take the first few quarters that we made all the integration efforts. So, we did have kind of the cost are maybe not fully in line with then after all that. But now, as we are in constant kind of, the USD has been relatively stable. since last summer. It hasn't really changed. So now the comparison should also be easier between the quarters. And also the integrations have been done, so also that should be. So we are not looking that there should be huge bumps. There are no reasons why there should be huge bumps, but of course there are certain variations. Also we must remember that the figures of X Weather are fairly small, so even a marketing event can make a difference if it is

few hundred thousand it already changes the figures it is still very small business so I think we also need to remember that okay that helps because as you said the numbers are very very tiny and that kind of gives you some some kind of maybe you think that you would like to extrapolate something but But on the other hand, it feels that it's not good to extrapolate anything because the history is so short and there's been quite a lot of volatility, as you said. So that's good advice. Then finally, third question would be that what is actually included in the weather and environment services? Is it the new service concept, like the Vihala Care, that has been increasing the top line there, or are there other drivers as well?

The Vihala Care, it was so recently launched that it has not yet had a very big impact on it yet. But, of course, already last year the service was highlighted as an area. So there it is, maintenance. also certain calibrations are being done in the veteran environment side and so on.

Yeah. Okay. Good. And then finally, very technical question, but when you have introduced the new dew point transmitter, which is used in battery factories, is there any difference technically between lithium ion technology and solid state technology? technology when you look at the kind of demand potential for your equipment or technically is there any difference? You measure humidity in any case and that's dangerous in a lithium environment, that's what we know, but is there anything else that we should kind of pay attention when the kind of shift from an older technology to the newer technology is ongoing?

Great question, Matti. And yes, there is actually a significant difference between the two in terms of the accuracies that are required. Think of like orders of magnitude. Think about it this way, that the lithium solid state environment, lithium solid state battery manufacturing environment would require tenfold accuracy in kind of a form. And it goes the other way, like if we talk about accuracy, tenfold accuracy improvement over what the lithium ion battery manufacturing is requiring, which is already quite a bit. So what we launched actually is, as I was trying to say, really like leading technology and a key enabler. As an example of a technology that is really required to do the solid state battery manufacturing in any kind of a volume.

All right. So basically the more customers will start to manufacture these solid state battery processes, then of course it should be beneficial for you. Is that right?

That is correct.

That is correct. All right. Excellent. That's all from me. Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you for the questions, and thank you, Kai and Heli, for your presentations. Our next quarterly results call will be on July 21st when we publish the healthier financial report. Now, thank you all for joining the call, and have a very nice weekend.