Vaisala Oyj

Hello everyone and welcome to Vaisala's third quarter results webcast. I'm Niina Ala-Luopa from Vaisala's Investor Relations. Vaisala has today published its January-September interim report and during the next hour our CEO Kai Oistamo and CFO Heli Lindfors will present our third quarter and full year year-to-date results. And, like always, after that, we have time for questions. But now, without further ado, I will hand over to Kai.

Thank you, Niina. Welcome, everybody. I'll start with the statement that is on the slide. We had an excellent quarter with a record high profitability and orders received. Really was a very good quarter. And let's look a little bit deeper into what made the quarter. So in terms of numbers and what made it excellent, orders received up 38% compared to a year ago, resulting a significant increase in order book compared to the beginning of the year or in the last year. The net sales grew 6% when we look at the company level. And here you have to remember, especially on the weather, energy and environment side, very high comparable on the third quarter last year where we had the Spanish radar project in a full delivery mode. So the revenues on weather, energy and environment on third quarter last year were on a very high level. And all this kind of success in terms of getting sales in and the mix then resulted in very high profitability as well. So almost 25% EBITDA margin in a quarter. I think that's something to be very proud of. So where did it come from a business side? Industrial measurements once again performed in an exceptional way, driving the group's results. X weather continued to go steadily, 9% year-on-year growth. And then weather, energy and environment achieved strong order intake. I think even on a performance side, yes, some decline compared to last year because of the very, as I said, very high comparable. But if you kind of take that out, I think we can be quite satisfied on the profitability and the performance on weather, energy and environment. And obviously the Indonesia deal kind of was a big event in the quarter. During the quarter also we updated our annual guidance. We updated in October 2012 and we narrowed our net sales guidance to 610 to 630 million euros and then we changed our EBITDA guidance to be now 110 to 120 million euros. Before going any further, I just want to remind everybody on our strategy. So our mission statement is taking every measure for the planet. What we do is instruments and intelligence for climate action. We are situated very, very nicely in between major megatrends in the world. Energy transition, decarbonization on one hand, AI everywhere another one, and resilient societies being third. Resilient societies meaning not only the different kind of geopolitical things, trade wars, even wars, but also resilience to more and more frequent tougher and tougher extreme weather events due to the climate change. or possibly also health challenges and aging populations. Our key strategic drivers remain same as what they have been expanding and accelerating in industrials. It is lead in weather across from instruments and observations to insights, driving recurring revenue and services business, and then transforming with AI. And transforming with AI means obviously a lot of things. It's about having AI at the front and center in many of our products and solutions, transforming how we operate kind of with AI, and improve our ways of working, kind of making us more effective, but also listening to our customers. How does AI change their life and their realities and how can we be part of that and help them taking benefit of what AI brings to their business? If we look at the progress on the strategy now in light of what I just said during the third quarter, I'll pick a couple of events on the quarter itself. First of all, I said growing with industrials, we really had that. I mean, we had a full force during the third quarter, really a broad-based growth in industrial measurements boosted by the AI-driven investments. It was a very kind of a broad growth across all geographies, all our end market segments, but obviously one needs to highlight data centers, one needs to highlight a semiconductor, one needs to highlight power and battery manufacturing as well. And not only that, we continue to strengthen our offering across the board. And here, maybe I'll just highlight one specific example of this, which would be the productized offering for services for data centers, which I'm particularly excited about what the opportunities that bring in the coming months and quarters. On X-Weather side, as I said, we continued to progress steadily on the sales side, but not only that, a couple of interesting points there, kind of proof points during the quarter, one being the announcement with NVIDIA, where we showed together with NVIDIA how much we can, with our data, improve the leading AI weather forecast and weather model that NVIDIA has developed, how much we can improve the accuracy. And it really kind of a point like It's a clear proof point what a moat we have with our proprietary data and access to data and fusion of the data inside of XWeather. The other example here on the slide would be the Chicago Merchandise Exchange, which has launched now a weather derivatives and options scheme based on on on ex weather data and again proving like a position leading position that we have on kind of interesting relevant weather data for for businesses And then part of leading weather across observations and insights was also the observation side. So well progressing on weather, energy and environment. The big Indonesia deal, the 25 million airport weather modernization project. gives us a good basis for the coming years. It's a big deal which we plan now to deliver over the next three years and it, like said, gives us a good kind of a basis for planning and executing come next year and a few years to come. Maybe with this I'll invite Heli to go through the financials.

Thank you. Good afternoon from my part as well. If we take a look at the financials a bit, as Kai mentioned, our Q3 was excellent. Record high order intake, solid net sales growth and very strong profitability. Our orders here received increase by 38% year on year coming from both the industrial measurements as well as weather and environment side. This boosted our order book to 215 million, 16% above the level at the end year of 2025. ARR also increased to 60.9 million, 9% up from Q3 2025. Net sales then increased by 6%, there the driver was industrial measurements by 28% and then ex weather by 9% and the weather and environment side declined 11% on a strong quarter as mentioned by Kai earlier. These net sales growth then improved our cross-margin as well to 61.5 percentage points. Here we have the €4 million impact on the cross-margin. Without the US tariff refunds, the cross-margin would have been at 59 percentage points. So still a very strong cross-margin driven by the industrial measurements growth and cross-margin development. That also boosted the EBITDA to 24.9 percentage points of sale. It would have been 22.5 without the US tariff refunds. If we then look at the return on capital employed, that was 23.3% driven by the result as well as the strong cash flow. On the industrial measurement side, a quarter ago I said that it was a record quarter and a strong quarter in many fronts and it was the same now in Q3. Orders received increased by 24% coming from a wide base from all regions and all market segments. and that also boosted the order book to 54.5 million euros. Similar to Q2, we did receive larger data center and power orders that are shaping the order book to be a bit longer rather than coming from weeks to a few orders then being on month's level as well. The net sales increased by 28% and there the Q2 order intake was visible Q2 growth was only 10%, whereas now we saw the 28% growth. And there the growth was driven by data centers, semiconductors, battery manufacturing and power industries. So the base is very wide. The gross margin improved to 65.8 percentage points coming really from the scaling impact of the net sales as well as the favorable sales mix. This gross margin improvement does not have the tariff refunds. Those are only at group level. The EBITDA then was also record high above 30% with 31.7 percentage points and really coming from the strengthened cross-margin. On the Exwether side, the growth continued steadily at 9 percentage points. It was driven by the insurance industry as well as sales to developers and API customers. The cross margin also improved following the net sales growth and the similar to the EBITDA percentage also improved to 9.4 percentage points from 6.9 percentages. As mentioned, the acquisition of the Atmo Inc. as announced in Q2 is progressing as planned and the transaction is expected to close now during Q4. Then on the weather, energy and environment, the very strong orders received was the highlight of the quarter with the 25 million euro airport project from Indonesia. Even without that, the orders were growing, which is a positive side on the weather and energy side. The net sales decreased by 11% following the strong comparisons of Q3 2025. The decline came from the project sales. As you can see from the reported figures, both the product sales as well as service sales grew in Q3. The cross-margin then improved following the sales mix, more products, less projects, and that also shielded the EBITDA slightly, so the EBITDA declined to 17.3% following the net sales decrease. If you look at the Indonesian order, it's good to note that the 25 million order intake we expect to generate sales in the next three years to come. So it is not a one-off sales, but rather during the three next years. Then if you look at the cash flow side, our cash flow was very strong following the increased net result the tariffs received as well as timing of tax payments. Cash flow from operating activities during January-September amounted to 84.4 million euros compared to 58.9 million euros. If we look at the year-to-date development, net sales have grown by six percentage points in constant currencies. Now in Q3, the FX impact was already fairly minor, whereas in the beginning of the year it was higher, and that is also why we still see the impact in the year-to-date figures. Operating expenses have increased by 5% compared to the previous year and the growth is driven by the investments in industrial measurements as well as ex-weather. The corporate and non-operative items, they were minus 2.2 million compared to minus 7.2 last year. This is from two points, the difference and the positive impact from the US tariff refunds that improved our cross-margin by 4 million euros. And in addition, we had some restructuring cost last year in Q3 that also made the cost higher then. The high profitability EBITDA 18.5 against 15.7 last year is a strong EBITDA for us and as said before it is really coming from the increase in sales, increase in cross-profit as well as the tariff refunds. If you look at then the financial income and expenses, it's only one third of what it was a year ago in the first nine months. And that is coming from the fact that the FX rates have been less volatile this year and we have had less loans. Those are the three key drivers there on that side. Then we have the heading of this slide, strong financial position. It is actually the same heading we have now had for 26 quarters in a row. So this is already a legacy. We cannot change this anymore. And our net debt also kind of following the strong cash flow, our net debt is negative by 20 million. And as such, we have the kind of strong financial position. If we look at the capex, that is lower than last year. Last year we were building the automated logistics center which boosted the capex back then and this year we don't have the same. If we then look at the market outlook for this year, we expect the development on the industrial measurements and ex-weather to continue growing, and then we expect also the meteorology and aviation to continue stable. Of course, here the order intake was strong in the aviation side this quarter, but overall the market is stable in our view. We did change the renewable energy to decline as a market outlook and there we have seen the difficulties continue this year and thus we kind of now put it to decline. This ends, actually there's still Business Outlook, of course. As already mentioned by Kai, we updated our Business Outlook on October 12th. Now it's 610 to 630 million in sales and operating result to be 110 to 120 million in EBITDA. But this now concludes the prepared remarks and I will ask Kai to join us for the questions and I think the lines are now open.