Vaisala Oyj

Hello and welcome to Vaisala's second quarter and January-June 2026 results call. I'm Niina Ala-Luopa from Investor Relations and today with me in this call are President and CEO Kai Oistamo and CFO Heli Lindfors. Like always, first Kai and Heli present the results and then we proceed to Q&A. Kai, you may start now.

So, sorry about this. So I heard... There have been some audio problems, so maybe I'll restart so that everybody can hear what I say and hopefully the technical challenges are overcome. So, as I was saying, very strong orders received in the quarter. We continued to perform across the company very well, and really the order intake was really driven by extraordinary demand in terms of industrial measurements, and that drove The company's order intake to increase 11% compared to the year before. XWeather continued on a good track, on double-digit growth, 15% year-on-year growth in constant currency. A key event in the quarter for Exweather and for the company itself was the acquisition of the AI weather company, Atmo Inc., as we announced in the second quarter. I'll talk about that in a little while. In terms of weather, energy and environment, The quarter was more muted as we expected going into the quarter. But even in this environment, I think the team performed really well and delivered strong profitability results. Are we still having the problems now? Okay, we are reconfirming the business outlook as I'll conclude in the end. But before going into the numbers themselves, I'll talk about the two key events during the quarter. I'll start with the product launch, which I rarely do, but I think this Presicab products that we launched in the second quarter I think merits very much of taking it as a key highlight in the quarter. So the state-of-the-art way of measuring rain is what we would know ourselves if you have your own rain bucket somewhere in your summer place, at your house, at your place. So it's a bucket which then catches all the drops and then you just read how much water is in the cup. But if you own one, you also know that in the fall it's full of leaves. It will have insects. The accuracies are whatever they are. It requires maintenance. And it's kind of remote operation really is not possible at all without maintenance on site. And this has been the state-of-the-art way of operating rain measurement since almost the past 100 years. We took on a challenge that with the modern technologies, this probably is not the best way of doing things, given all the challenges related to the rain buckets. So what we did is take a miniaturized version of a radar, turn it pointing upwards, so that we can actually measure with it, with Presicap sensor now, every single droplet that it sees. So not only can we measure all the rain, but we can actually see the size of the droplets, We can distinguish the different sizes of what kind of a rain or hail it may be. And we can actually see even the direction that the rain comes, i.e. we can see the wind impact on the rain as well. And, oh by the way, it is also more accurate. It requires no maintenance to speak of, so it's very easy to to save on the maintenance cost and use especially on the remote sides. It's a great example of taking something which everybody works on and nobody thinks about it, even the challenges that it has, that can be reimagined with right kind of insight, right kind of a team, right kind of capabilities, and it really is what defines really an innovation, and I think it's really good us to to the capabilities that the company and the team involved really has had. It also highlights how well we understand the phenomena in order to do these kind of reinventions, such as in this case RAIN. This very much actually combines to the AI topic that I'll talk next. In terms of an AI world, There are two things that are super important. It is about all about the data. What kind of a data, who owns the data, who understands the data that feeds AI. I think that Presicap is a fantastic example of how we as a company, we actually understand and can measure data, can measure weather-related data better than anybody else. That in combination with what we have been building in XWeather in terms of capabilities on forecasting and capabilities in machine learning and AI, building the entire asset on machine learning and AI. And now, together with Atmo, which we find really the world's leading by far in terms of a company and asset and a team in terms of weather-related AI capabilities. Weather forecasting is going to change based on AI. That's already happening. So lots of attempts by different companies, different teams around the world. What sets Atmo apart is that that they really have a unique scalable model where you can take, based on local data, that can be the weather data that I was talking about, it can be customer data as well, and you can create a local AI-based weather forecasting model, very scalable, in a very scalable way. You can do very local, just imagine we could do on our site here at our headquarters. Or it could be regional, it could be global. Anything where Atmos model is not based on a single AI model, but it actually takes as an input, it can utilize anything that anybody else may innovate, and it can ingest those into its own world's leading model. It's also run by a team, which we find really a best AI-capable team that we've seen within our industry and proven by a very, very interesting customer set who are paying for the service already today. A couple of examples of this would be from the civilian side, MET agencies, Bilippi's meteorological agency has been relying on an atmosphere model for more than a year, weather forecasting. and other great examples is on the defense side. There's multiple branches of U.S. military, but most notably U.S. Air Force, who is also relying some of their operations in Atmos AI-based model. So what we together now with what we know in a traditional side of the weather, what we've been building on in XWeather, and now in combination with Atmo, I think we have world's leading assets, teams, capabilities in all parts, what whether business will look like in the future from providing and understanding the data to building that into a modern platform, customer focused offering based on AI. So very, very exciting, exciting news. Now, with that, I'll hand over to Heli to talk about the financials in more in-depth.

Thank you, Kai. Good afternoon from my part as well. As I already mentioned the financials, but if we dig in a little bit deeper, So the growth in orders received, 11%, really driven by the industrial measurements with 28% with constant currencies, while the weather side had a little bit muted and saw a slight decline on the orders received side. This orders increased growth also boosted the order book, close to 200 million, 7% above the level at the end of 2025. and also the ARR similarly rose by 7%. If you then look at the net sales, it increased by 4% or 6% in constant currency. Also here the kind of main driver is coming from the industrial measurements with 10% growth and ex-weather with 13% growth. Also here the net sales had on the weather side a slight decrease. The kind of net sales growth as well as the favorable sales mix improved the gross margin and it also had a positive impact from the kind of lower tariff level of 10% we have seen since February. Going further, we do expect that this has been a temporary level of 10% and once the US and EU trade agreement comes to force, it may be again 15%, but we will of course see then and what it will be later on now in Q3. The cross-margin improvement and the increase in sales also improves the E-data to 14.6 percentage points. Of course, here we do see that we also increase our spend in our OPEX by 8 percentage points, and that is investments in the sales and marketing activities as well as the R&D in our growth areas of industrial measurements and X-weather. Also the return on capital employed improved from last year to 18.2 percentage points driven by the higher EBITDA as well as the strong cash flow and releasing our capital employed. If we then move on to the industrial measurements and record high quarter in all means. The orders you see are set increased by 28% in constant currencies coming from a very wide base. So all market segments and regions were growing, but particularly the Americas, and it was further boosted by the large orders from data center and power customers. This one also boosted the order book to 33% above the level of the end of last year. This is due to the increase in the larger data center and power related orders. So if you consider a year back and before, most of our orders were delivered within weeks, whereas now these larger orders on top of these kind of deliveries within weeks, we have now orders that also span across a few months going further. And this is visible in the We are delivering 44 million out of this order book still within this year, so it is still a fairly short order book overall. Net sales increased by 10%, and here you see that the increase was less than in the orders received due to this change in the mix of orders. This was still 13% in constant currencies, and here the driver was the ABAC region. The cross-margin improved then following the net sales increase and also the positive impact on the tariff side. This also boosted our EBITDA to 24.5%. We also gave you some further granularity on our largest market segments in the industrial measurements side. and this is now, you can see the new split here. So the life science continues to be the 30%, as we have said before, and now the new information is the quantification of data centers and power segments, both being at around 10% of sales. We do have the other key kind of focus industries, as we have been saying, semiconductors and battery manufacturing, and then of course a wide range of other industries as well. If we then look at the Xweather side, the annual recurring revenue increased from the 7% from a year ago. Here we can remember the seasonality we have in our ARR as well as this is then including the FX and now of course, In the beginning of the year we still had a larger FX impact compared to last year whereas now at the end of Q2 we have now seen a full year of the depreciation dollar and related currencies so now the impact starts to be smaller and this you can also see that the net sales increased by 13% and 15% in constant currencies so now the reported currency as well as the and Constant Currency, they are much closer to each other again. Here you can also see that the net sales growth came from many areas, not only one, so insurance industry as well as transportation and logistics, and then also the developers and API customers that buy more of the DAS side of business. The increase in net sales also boosted our cross-margin, the same as in other businesses, and this also boosted our EBITDA percentage. And of course, if you see the kind of EBITDA improvement, it is material, but as the ex-weather figures are still fairly small, this is of course only €800,000 difference to last year. Then moving on to the weather, energy and environment side, it was a slower quarter as expected, and the orders decreased by 5% in the mainly coming from the project orders. The order book as such remains on the same level as it was at the year end. The Indonesian weather project order that we have announced already a while back, it did move ahead and the customers financing arrangements were clarified. We are still missing the last steps of this order before we book it to our order book and that we do expect to happen now within the third quarter. Net sales as such, they were close to previous year's level. We did see an increase in the project and product deliveries on the weather side, whereas the decline in the renewable energy sales continued on that side. The favorable sales mix then also improved the cross-margin and also the EBITDA side. Here you can see that also the operating expenses were maintained following the development on the sales side as well. Then moving on to the cash flow side, the cash flow from operating activities increased to 48.9% per million, not percentages. and it is really boosted by the kind of increased net result as well as timing of tax payments compared to last year as well as lower level of projects receivables. The cash conversion was strong, 1.3 in January-June. Then if we look at the half-year results as such, Net sales increased by 7% in constant currencies as is our strategic target. The operating expenses increased by 4 percentage points and this is investments in the industrial measurements and etc. side, so in the areas where we grow. The corporate and non-operative items, they were 4.5 million up from 2.7 last year. These are one of items among other M&A expenses. As such, the solid profitability continued and improved to 14.8. And then one item to highlight is also the financial income and expenses that is fairly different from last year. So there you can see that the kind of volatility of the currencies have been less. And as we are also less leveraged, the core financial expenses were more than half less than last year. This, of course, then boosted also our earnings per share in total. The strong profitability as well as cash flow does bring us to strong financial position that continued has been strong for us also for a long time. So we continue to be low leverage in our balance sheet. One thing to highlight here is the capex that is on lower level than last year. Last year we were building our Automated Logistics Center, and we don't have that this year, so that is why we are on a lower level of CapEx year-to-date. Then we move on to the market and business outlook.