VAIAFVAIAFOTC
Loading
Niina Ala-Luopa: Hello, and welcome to Vaisala's Fourth Quarter and Full Year 2025 Audiocast and Results Call. I am Niina Ala-Luopa from Vaisala's Investor Relations. And today in this call with me are President and CEO, Kai Oistamo; 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.
Kai Öistämö: Thank you, Niina, 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 kind of just if we were to teleport ourselves into beginning of 2025, just to remind you what kind of a year we were kind of 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 kind 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. Then U.S. elections have happened, but the speculations on trade wars, import duties, things of that nature 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 roller coaster ride in 2025. First thing is what happened was the renewable energy market for us really plummeted quite a bit, creating a big hole from a 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've quantified about EUR 20 million or even a little bit over EUR 20 million as a hole that it created from a get-go. Then in, during the year, the -- with twists and turns getting to 15% import duties between U.S. and Europe. And then in the second half of the year, U.S. -- actually, the euro appreciating vis-a-vis not only U.S. 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 kind of 2 continents or 2 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 in kind of our long term -- first reminding that our strategic goal was growing the net sales by average 7% over long term. And we were clearly above that if we -- 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 Industrial 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 U.S., 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 -- like 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 going to be -- are now able to pass also in Weather side, the import duties to our customers. And then thirdly, the fluctuation on the currencies, the strong appreciation of dollar during -- of euro during the second half of the year, obviously, then created headwind, which is a lead into when we look at the fourth quarter in this environment where we were kind of during the quarter in $1.18, $1.16 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. And that obviously kind of creating challenges on some parts of the businesses even more than other ones. Xweather 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 the -- then when we look at the order intake in 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, clearly improving to the level the year before, marking kind of a significant change when we go look at sequentially first quarter, second quarter and third quarter, really kind of like changing, kind of significant change in that trend. When looking forward, the market uncertainties continue. 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 a year from now, and we do also -- again, the kind of 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 EUR 0.86 as the dividend for AGM to decide. Now before going into like specific numbers and more details in the performance itself, maybe good to look at kind of more of a kind 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 Xweather 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 on 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 the 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 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 clear milestone on this was the completion of the automated logistics center here in Finland and taking 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 Industrial 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 EUR 185.8 million. That puts us below what the level was at the beginning of last year or end of December 31 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 a 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. And this you have to remember again, the 2024 being exceptionally strong fourth quarter. So the comparable was quite strong on what we compare ourselves to. Gross margin, slight decline. And here, I would kind of pick up 2 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 gross margin, there's about 1 percentage point, a little bit over 1 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 compare to previous year, that was kind of a clear creative business in terms of our profitability for the company turning into a more of a -- 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 and net sales in 2025, I think, is 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% at we really can be proud about it and it feels very good. And this growth was driven by Americas despite all the talk about the trade wars and everything else, continued our success in the U.S., especially. And net sales increasing by 1% in terms of reported currencies, but 7% in constant currencies, which I think really reflects our real underlying performance. And there, obviously, the headwinds caused by the depreciation of not only U.S. dollar, but also Chinese yuan and other -- 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, a slight decline. And this was really driven by on the OpEx 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, 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. And 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 of things, 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 actually also for Weather and Environment. If we compare the order book that we start this year with actually is on a good level compared to what we ended in 2023 or 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, the exchange rate impacts and then the impact also from the U.S. tariffs as discussed previously. Despite all that, EBITDA -- the headwinds and the challenges that we faced in the year, the EBITDA level stay 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 EUR 10 million compared to the previous year and mainly really as a good work on improving the net working capital by the company, yielding the 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. And 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 on constant currencies, the organic growth well in double digit. On gross margin, a slight decline due to several headwinds exchange rates impacts, the proportional impacts of the U.S. 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 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 when we were preparing these slides, we should for the next quarter, maybe count how many quarters we have 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-light business model that we have as a company, strong cash flow generation that we have as a company. And now with the automated logistics center completed, that obviously kind of takes -- kind of gives us another leverage going forward as well. Moving on to the market and business outlook. The market outlook for -- as we see it for 2026. We see growth in industrial, in life science, in power markets -- power and the markets for Xweather 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, 1.5 years 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 EUR 600 million to EUR 630 million and our operating result in terms of an EBITDA will be in the range of between EUR 95 million to EUR 110 million. With that, I'll conclude the prepared remarks and happy to answer any questions that you may have.
Operator: [Operator Instructions] The next question comes from Nikko Ruokangas from SEB.
Nikko Ruokangas: This is Nikko Ruokangas from SEB. 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 3 questions, and I'll start with order intake for the Industrial Measurements. So you showed very strong 21% FX adjusted order intake growth in Industrial Measurements, and you, for example, mentioned there 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?
Kai Öistämö: 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. 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 in -- especially in China. They became almost absent in 2022, 2023 when there was a -- 2023, 2024 when there was more of an uncertainty in the market driven by uncertainty in economic development in China. So I think it is a 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 in release 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, just mentioning a few.
Nikko Ruokangas: Okay. I understand. So that you would have had also significant FX adjusted growth even without those orders?
Kai Öistämö: Correct.
Nikko Ruokangas: Good. 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 does it 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?
Kai Öistämö: Yes. So a couple of things on that. So 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 this 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, 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 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 then needs to be for good governance, a backstop on when they kind of expire. And when they expire, then obviously, then you would have to kind of restart the kind of building the financing package if that kind of a case were to happen. So that's what the wording is reflecting. The customer from -- kind of 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 -- reflects back to my comment on the timing itself. So again, the predictability is hard.
Nikko Ruokangas: Yes, totally understand. My last question on U.S.A. and the public client side. So have you now seen kind of a stabilization there in demand? And did you have any impact from the U.S. government shutdown in Q4?
Kai Öistämö: 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 on the -- regarding the fourth quarter government shutdown, in the end it actually did not affect our sales. We were able to cope with it.
Operator: The next question comes from Waltteri Rossi from Danske Bank.
Waltteri Rossi: It's Waltteri Rossi from Danske Bank. 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 Vaisala products are used in the semiconductor segment?
Kai Öistämö: 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 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 the different types of silicon products. And we are present in all around the world. So it's much broader kind of a coverage when typically when talked about semiconductor.
Waltteri Rossi: All right. Then about the metrology and aviation segments, which you expect to be stable going into '26. Does that mean 0 growth? Or could it be a small positive number still?
Kai Öistämö: When we have said stable and we've said stable for the long term as well, 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 they behave between -- kind of as you saw 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, the Indonesian order is a great example. 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.
Waltteri Rossi: Good addition. Still few questions about Xweather. So first, what is driving the growth in that business? You expect it to grow this year, but any indication here, could it mean double digits or more like 5%?
Kai Öistämö: Our ambition is to continue to grow double digit this -- the business itself. That being said, when I say double digit, I can really talk about in constant currencies in -- given the currency exchange rate, speed of the currency exchange rate changes and the fluctuation that -- 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.
Waltteri Rossi: Yes. Great. And can you say anything about what's driving the growth here? Where are you potentially getting new customers and so on.
Kai Öistämö: Yes, yes. So we are strong on several customer segments. So finance and insurance, renewable energy and transport. And we see kind of 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 go grow both ways that it's kind of more usage, more -- and wider usage for existing customers as well as then kind of getting new customers. And then obviously, we are looking at the adjacencies at the same time, that's kind of a further growth initiative.
Waltteri Rossi: Great. And lastly, on the Xweather profitability, as we know, the profitability should improve once you lower the investments in the growth. So kind of 2 questions. What are you actually investing in right now at the business that is still keeping the profitability down? And what is your kind of ambition level on the profitability during this strategy period for Xweather?
Kai Öistämö: 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. Like think about this as a recurring software subscription business. And there, the investment into -- like it's relatively easy to kind of measure the impact of sales and marketing impact, both to new leads, qualified leads into then conversions from qualified leads into sales. So the, really, the focus is driving growth and therefore, the focus on the investment side is increasing the reach of sales and marketing.
Waltteri Rossi: And about the kind of your target level on the profitability during the kind of...
Kai Öistämö: We have not said any concrete target level on Xweather during the service period. But I'll just repeat what I said earlier that super happy on the development that we had last year.
Operator: The next question comes from Joonas Ilvonen from Evli.
Joonas Ilvonen: It's Joonas from Eli. Your Industrial Measurements product sales were -- grew only 1% year-on-year. So I think that was -- that seemed like relatively low. So was that only like a timing issue?
Kai Öistämö: Less of a timing issue. So you are talking about the fourth quarter, I assume.
Joonas Ilvonen: Yes, yes, yes.
Kai Öistämö: That's more of a -- think about it the kind of significant headwind in terms of the currency exchange rates. So that's kind of the biggest impact on it.
Joonas Ilvonen: So on constant currency terms, how much would have these product sales then grown?
Kai Öistämö: Let me get back. Net sales growth fourth quarter on 7%, on year, that's the year -- annual number and then quarterly number, it's between timing, as you said.
Joonas Ilvonen: But nothing really special happening there.
Kai Öistämö: No, no, no.
Joonas Ilvonen: I guess we can just assume that basically the volumes are growing at around 5% to 7% or so.
Niina Ala-Luopa: And we don't -- we report the constant currencies, the net sales growth, only the total net sales in Industrial Measurements, but not on products or service sales level.
Heli Lindfors: But they are fairly the same. So you can apply the same percentage gap to the kind of the below items roughly.
Niina Ala-Luopa: Correct.
Joonas Ilvonen: All right. That's clear. And then Weather and Environment on the cost side, so you've implemented these cost adjustments, and 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? Or can we expect even more to be visible in 2026?
Kai Öistämö: We 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, in the third quarter, and they are a very large extent already visible there.
Heli Lindfors: Yes, mostly done. as we recorded also the one-off cost already in Q3, so.
Joonas Ilvonen: Okay. That's clear. And then could you remind us of the gross margin outlook for Industrial Measurements and to Weather and Environment for 2026?
Kai Öistämö: I can't remind you because we don't give it.
Joonas Ilvonen: Okay. Okay. But can you like describe some of the drivers that might -- I mean, impacted this year? What might change in that respect?
Kai Öistämö: Sure, sure. Yes. So obviously, if you look at -- from a gross margin side, similar impacts, obviously, on -- as in a typical year. But if I take weather side first, the project sales, like if you look at the 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 kind of completely fix it since it's now inherently on a lower level than it was kind of in 2024. We kind of -- 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 that clearly has a kind of a creative -- like very creative gross margin in the Weather Environment numbers. And then on BIM side, there it's like -- again, if I look at the quarterly side, some fluctuations between quarters based on 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 gross margin side.
Joonas Ilvonen: Okay. And finally, could you remind us of the geographic sales, I mean the big picture. So [ IN ] should grow this year quite a lot, and it's mostly driven by the U.S. and Europe, but like the big picture, are there any -- anything to highlight from a geographic...
Kai Öistämö: U.S., like if I look at overall, actually last year U.S. grew more than any other Americas, as we say, but it really is U.S. grew much more than other regions. And 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 the -- 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 a 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 in the U.S.-China relationships and maybe positive, maybe negative.
Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Niina Ala-Luopa: 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 results sharing on April 24. But now, thank you very much, and have a pleasant week.