Vaisala Stock

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.

Thank you, Niina. Welcome, everybody, from my side as well. We had a very good quarter as a second quarter. We continue to perform well on all fronts. Industrial measurements being really the highlight of the day, having an extraordinary quarter with a record high demand and order intake, which then drove also the company's order intake to be -- to increase 11% in quarter 2 compared to the year before. Xweather continued on a very good track, having kind of a good double-digit growth, 15% in constant currency to be exact. And of course, a key event that I'll talk about a bit in the quarter.

It seems that there is some voice that is circulating. I have got a message from the online.

Okay. So sorry about this. So I heard that there have been some audio problems. So maybe I'll restart and so that everybody can hear what I say. And hopefully, the technical challenges are overcome in a second. So as I was saying, a 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, a 15% year-on-year growth in constant currency. A key event in the quarter for Xweather and for the company itself was the acquisition of the AI Weather Company, Atmo Inc. that 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. And we -- so are we still having the problem, no.

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 2 key events during the quarter. I'll start with the product launch, which I rarely do, but I think this PRECICAP product 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, in your -- at your house, at your place.

So it's a bucket where -- 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 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 upside -- turning -- pointing upwards so that we can actually measure with it with PRECICAP 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 save on the maintenance cost and use especially on the remote sites. 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 an insight, right kind of a team, right kind of capabilities. And it really is what I would like defines really an innovation. And I think it really kudos 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 2 things that are super important. It is all about the data, what kind of a data, who owns the data, who understands the data that feeds AI. I think the PRECICAP is a fantastic example of how we, as a company, we actually understand and can measure data and measure weather-related data better than anybody else. That in combination on 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, an asset and a team in terms of weather-related AI capabilities. Weather forecasting is going to change based on AI. That's already happening. And so lots of attempts by different companies, different teams around the world. What sets Atmo apart is 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 in -- at our headquarters or it could be regional, it could be global, anything where -- Atmo's 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 kind of 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 in -- 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 a civilian side, MET agencies, Philippines, meteorological agency has been relying on an Atmo's model now for more than a year in the weather forecasting and other great example is on the defense side, multiple branches of the U.S. military, but most notably U.S. Air Force, who is also relying some of their operations in Atmo's AI-based model.

So what we together now with what we know in the 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 weather 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 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. Kai 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. These orders increased growth also boosted the order book close to EUR 200 million, 7% above the level at the end of the 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 Xweather 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 U.S. and EU trade agreement comes to force, it may be again 15%, but we will, of course, see then what it will be later on now in Q3. The gross margin improvement and the increase in sales also improved the EBITA to 14.6 percentage points. Of course, here, we do see that we also increased 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 Xweather.

Also, the return on capital employed improved from last year to 18.2 percentage points, driven by the higher EBITA as well as the strong cash flow and releasing our capital employed. If we then move on to the Industrial Measurements and a record high quarter in all means. The orders received, as I said, 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 order book. We are delivering EUR 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 APAC region. The gross margin improved then following the net sales increase and also the positive impact on the tariff side. This also boosted our EBITA 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 other -- 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 depreciated 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 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 DaaS side of business. The increase in net sales also boosted our gross margin, the same as in other businesses, and this also boosted our EBITA percentage. And of course, if you see the kind of EBITA improvement, it is material, but as the Xweather figures are still fairly small, this is, of course, only EUR 800,000 difference to last year.

Then moving on to the Weather, Energy & 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, where 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 gross margin and also the EBITA 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 EUR 48.9 million. 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 project receivables. The cash conversion was strong, 1.3 in January-June. Then if we look at the half year results as such. So 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 Xweather side, so in the areas where we grow.

The corporate and nonoperative items, they were EUR 4.5 million, up from EUR 2.7 million last year. These are one-off 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 to be the EUR 0.78. 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 a 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.

Yes. So when we look at the market outlook for the rest of the year, no changes in this. We expect all markets underlying Industrial Measurements as well as Xweather to continue to grow. So industrial, life sciences, power and then the markets for Xweather and subscription sales. And then the markets that the weather, energy and environment is focusing on meteorology, aviation and renewable energy continuing to be stable for the rest of the year.

And this leads to reconfirming the business outlook in terms of net sales, we continue to estimate that our net sales will be in the range between EUR 600 million to EUR 630 million, and our EBITA result will be in the range between EUR 95 million and EUR 110 million. And this brings to the end of the prepared remarks, and we would be happy to answer any questions that you may have.

[Operator Instructions] The next question comes from Nikko Ruokangas from SEB.

This is Nikko Ruokangas from SEB. I have a couple of questions, and I'll go one by one. And first one, you highlighted large orders in Data Center and Power segments in Industrial Measurements. And I guess individual orders have typically been relatively small in the area earlier. So how big were the individual large orders now in Q2? And how much of the order growth in Industrial Measurements was extraordinary as you phrased in your presentation?

The orders -- the larger orders are a few millions of euros, the largest ones. But as Kai actually mentioned, the order intake came from a very wide kind of -- wide range of different industries. So as such, we say that it's extraordinary good, but it was not solely driven by these larger orders.

Or extraordinary orders per se.

Yes, exactly.

Okay. Good. That clarifies. Then on Xweather side, the ARR did not grow Q-on-Q despite the year-on-year growth. You highlight the seasonality there. But how much was this seasonality impact? And can you give a bit more color on that?

I think that if you -- the best proxy for this is the seasonality impact of last year. So if you look at the ARR development within last year, you can see that the -- and it is the winter maintenance as well as the lightning that is there kind of causing this seasonality. So the winter maintenance contracts, they -- some of them still end in the...

Just a moment.

Experiencing some technical challenges again.

So it seems that we are -- you can hear us on the audio cast, but not on the telephone conference side.

Or the other way around.

Okay. So just a moment, please.

We'll get back to your question in just a second. Still working on the problem. So bear with us. Sorry about this. We're going to put everybody on pause for a while, and we're going to restart both the audio and the video conference.

Hello. Unfortunately, we have some technical difficulties with the conference call function. So we need to close the audiocast now, and we will come back on the questions recording a bit later, hopefully. So -- but right now, we will close the audio cast.

For the technical challenges that we're having.

So thank you for your patience, and thank you for joining the call. Thank you very much.

Hello, and welcome to Vaisala's First Quarter Audiocast and Conference Call. I'm Niina Ala-Luopa from Vaisala's Investor Relations. And today here with me are President and CEO, Kai Oistamo; and CFO, Heli Lindfors. First, Kai and Heli will present Vaisala's first quarter key highlights and financials, and then we will continue with Q&A. So let's start, Kai.

Thank you, Niina, and welcome, everybody, from my side. This is Kai Oistamo. So when we look at the first quarter, for Vaisala, I would characterize it this way, that 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 renminbi, if I take the dollar as an example, was in parity, whereas when we look at today or during the first quarter, the euro-dollar rate was $1.17, $1.18, so a significant difference between the 2. We expect this to obviously -- difference start to get smaller now during the second quarter as the big change really happened during the end of first quarter, in second quarter last year in the currency exchange rates.

Back to the numbers. 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 Xweather, which continued on the double-digit growth in constant currencies with the growth rate being 12% year-on-year. Now we -- before I go into kind of more detail into the numbers and dive into the quarter itself, a couple of highlights on the new product launches for growing areas, supporting the strategy of the company.

Lots of good stuff is happening in the company and 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 couple of things that 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 DMT153 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 different on the right is Vaisola Care, which is a renewed service offering for weather side. You may recall, we launched the Vaisala Circular for our probes in industrial measurement some months ago. This is similar kind of efforts 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 a 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 3 businesses. We now report that as of January 1, 2026, Industrial Measurements, Xweather and Weather, Energy and Environment.

So we've split the -- what we used to call Weather and Environment business area into 2 parts. This is on the back of strong growth on Xweather over the past 4 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 Xweather. The gross margin then returned actually to the same level as it was a year ago. We had 3 slightly lower quarters in between. And this was really coming from the kind of mix effect as well as scaling as well as kind of lower tariffs than for the 1.5 months in the first quarter. So many kind of impacts to it.

On the EBITDA side, we maintained strong profitability of 15.1%, same to last year. Our costs were fairly flat at plus 1.7 percentages. Our cash conversion was 100%, so it continued strong as normal. If we look at the Industrial Measurements then a little bit more in detail, 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 gross 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 Xweather side, then we continued the double-digit growth in constant currencies. Here, we must remember that the Xweather, 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 is 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 control 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 EUR 17 million.

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 EUR 0.38.

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 net -- the positive side on this one that we are again net debt free. So we are in a net cash position of EUR 3.7 million. This was the financials. What would you, Kai, like to say about the market and business outlook?

Yes. If you mute, actually -- apparently, the sound gets better. Yes. So on the business and market outlook, then the -- nothing really -- no changes to what we said a couple of months ago when we gave the annual outlook. So from the end market perspective, we expect Industrial, Life Sciences, Power Markets, Xweather subscription sales -- markets for Xweather 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 during -- 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 EUR 600 million and EUR 630 million and operating result in terms of EBITDA between EUR 95 million and EUR 110 million. With that, I would like to conclude and open for any questions that you may have.

[Operator Instructions] The next question comes from Nikko Ruokangas from SEB.

This is Nikko Ruokangas from SEB. I have three questions, and I'll go one by one. Starting with the Industrial Measurements business and demand. You highlighted their industrial and power segments as demand drivers in Q1. You have earlier highlighted especially the data centers and semiconductor sectors there. So how did the demand develop in those segments in Q1?

Yes. 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 on a very good level on the demand side.

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 in 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 made the tax rate somewhat lower than what it was on the second half of last year.

Of course, it's this 10% overall tariff, but then this kind of sectoral tariffs are something that the sectors keep on increasing...

Correct.

And the kind of the tariff codes that come to that area of section, they continuously change actually.

Yes. So this shouldn't be a big change to you at this point?

Correct.

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

Yes. 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 OpEx side. But the kind of -- this is not 1 quarter of growth in the sales. So the cost, they don't always necessarily go kind of hand-in-hand with the sales if you look at the quarters as such. So I would say that it is not representative. So we may very well have investments also going ahead.

The next question comes from Waltteri Rossi from Danske Bank.

This is Waltteri Rossi from Danske Bank. 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?

Yes, 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 the companies that you are referring to and the kind of starting a new wind park that part of the business, we don't -- we haven't seen any changes to the better during the quarter.

All right. Fair enough. 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 kind of pick up anytime soon. Now obviously, if the oil prices, the Hormuz situation continues, maybe there are kind of positives and negatives to it, the negative being that if interest rates go up, that makes any -- making the 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.

Then last one, this should be an easy one. So how much is data centers of the Industrial Measurement sales at the moment?

Yes. Thank you for the question. So I'll answer it exactly the same way as I answered before that Life Sciences is about 30%. Another 1/3 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.

The next question comes from Joonas Ilvonen from Evli.

This is Joonas 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 your reported revenue for Xweather 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 yes, can you talk about a little bit about the 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 DaaS separately. So what you can see there is the subscription sales, and that includes both the SaaS and DaaS because we have customers that buy the DaaS 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 DaaS. So actually, they were both growing.

The next question comes from Joni Grönqvist from Inderes.

It's very nice to be back here asking questions. I think it's 5 years ago, I covered you, and it seems like I'm covering the [indiscernible] sector currently. Nice to be [indiscernible] now here and looking at some really good figures. I have one topic that you mentioned here was a little bit -- you discussed it a little bit already, but you -- 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 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?

Yes. Thank you. First of all, welcome back. And good question. So if I give you 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 so that which we are talking about very small numbers in terms of -- remember that like 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 -- relatively small part. So -- that kind of naturally protects us from variations of this. We also have a model where we do kind of -- we are moving into a structure where we are charging the transportation costs anyway from the customers. So it naturally kind of protects us as well from the 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.

The next question comes from Matti Riikonen from DNB Carnegie Investment Bank.

It's Matti Riikonen. 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?

Yes. 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 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 keep -- we are not changing -- the tariffs have not impacted our pricing decisions any which way for the time being, giving us a little bit of then freedom also in case there might be some sectoral tariffs that would be impacting us in the short term.

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 are some technical differences in the last year's numbers and therefore, profitability in the cost base, I mean? And is there something unusual in the cost base of Q1 this year? And how should we model that going forward? Is it kind of a 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 last year as such was a fairly volatile year. So if you -- like you said, there were changes between the quarters quite a lot, and they were impacted FX rates have a material impact on the quarter. So also part of our cost is in USD in Xweather. 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 costs 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 flat 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 Xweather are fairly small. So even a marketing event can make a difference if it is a few hundred thousand, it already changes the figures. It is still a very small business. So I think we also need to remember that.

That helps because as you said, the numbers are very, very tiny and that kind of gives you some kind of -- maybe you think that you would like to extrapolate something, 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 Vaisala Care that has been increasing the top line there? Or are there other drivers as well?

Vaisala 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 Weather and Environment side and so on.

O

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 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's 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 kind of 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 key -- 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 would -- it should be beneficial for you. Is that right?

That is correct. That is correct.

[Operator Instructions] 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 21 when we publish the half year financial report. Now thank you all for joining the call, and have a very nice weekend.

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.

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 Instructions] The next question comes from Nikko Ruokangas from SEB.

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?

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.

Okay. I understand. So that you would have had also significant FX adjusted growth even without those orders?

Correct.

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?

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.

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?

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.

The next question comes from Waltteri Rossi from Danske Bank.

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?

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.

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?

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.

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%?

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.

Yes. Great. And can you say anything about what's driving the growth here? Where are you potentially getting new customers and so on.

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.

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?

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.

And about the kind of your target level on the profitability during the kind of...

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.

The next question comes from Joonas Ilvonen from Evli.

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?

Less of a timing issue. So you are talking about the fourth quarter, I assume.

Yes, yes, yes.

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.

So on constant currency terms, how much would have these product sales then grown?

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.

But nothing really special happening there.

No, no, no.

I guess we can just assume that basically the volumes are growing at around 5% to 7% or so.

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.

But they are fairly the same. So you can apply the same percentage gap to the kind of the below items roughly.

Correct.

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?

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.

Yes, mostly done. as we recorded also the one-off cost already in Q3, so.

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?

I can't remind you because we don't give it.

Okay. Okay. But can you like describe some of the drivers that might -- I mean, impacted this year? What might change in that respect?

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.

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...

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.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

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.

Good afternoon, and welcome to Vaisala's Virtual Investor Event. I am Niina Ala-Luopa, and I am from Vaisala's Investor Relations. We have 4 speakers and presentations today. First, President and CEO, Kai Oistamo, will give an overview of Vaisala's strategy and how the company is driving growth in a changing market. After that, Jarkko Sairanen will talk about Industrial Measurements business and strategic priorities that we have in that business.

Our third speaker is Samuli Hanninen, who will provide an overview of Vaisala's Xweather subscription business. And fourth speaker today, Anne Jalkala, will give an overview of the Weather, Energy & Environment business.

You can ask questions through the webcast chat function during the presentations, and we try to take as many questions as possible after each presentation. We have also reserved some time for questions at the end of this webcast before the wrap-up.

But now without further ado, let's start and first presentation is by President and CEO, Kai Oistamo.

Thank you, Niina, and welcome from my behalf as well. As you remember, we held our Capital Markets Day about a year ago. A lot has changed still -- changed since that day, the world, the global business environment, geopolitics fundamentally changed. We have almost worked -- almost a full year on our -- with our renewed leadership team. And I wanted to also give you an overview on our business and as we continue to execute our strategy.

I will now first give you an overview on the business environment and our strategy and then give the space for Jarkko, Samuli and Anne to go in-depth into our various different sides of our business.

Let's start with who we are. What is Vaisala? We are a leading technology company, an industrial technology company, where we provide measurement, instruments and data to optimize industrial processes, drive energy transition and decarbonization. And we care for the safety and well-being of people and societies worldwide.

Our success is deeply rooted in product and technology leadership. We are a leading player in a very large EUR 3.7 billion market with the ability to accelerate even further growth. We have increasing attractive business mix with over half of our business now Industrial Measurements and Xweather subscription business operating in growing marketplaces.

We also have a balanced portfolio of complementary businesses creating resilience with different business models and different industry cycles. When we go into deeper into our businesses, even the individual businesses serve multiple different industries, multiple different end customers with -- who also have different cycles, giving even further resilience to industry cycles.

In addition to all of this, we have shown agility and effective work with turbulence and rapid shifts in the marketplace and a geo environment, such as COVID-19 and the component shortage, the geographic tensions and lately the U.S. tariffs. We also have had a very strong track record of growth. If you look at the past decade, we've grown about 7 percentage points during that time, while delivering growing profits and improving our profitability. I mentioned the business landscape fundamentally changing over the past 12 months since we had the last time the CMD.

And maybe a few words are appropriate about that. The trade policy shifts, the economic nationalism, the regionalization are here to stay, offering both challenges and opportunities. At Vaisala, we have built really a resilient to perform and grow constantly in this changing environment.

A few examples of this. In 2020, we, as everybody else, were first faced with COVID-19 and following a big component shortage that impacted really every manufacturing industry worldwide. We had a very much of a clear playbook during that time. With very -- immediately when the shortage -- component shortage period started decided that we are going to go for securing every single shipment to our customers and procuring all the necessary components from the open market. So we did -- and during that time, we never missed a single shipment to our customers. And we managed to actually grow our business, especially on the Industrial Measurement side, significantly taking also market share from our competitors.

Another example is a 2020 when Russia attacked Ukraine, creating havoc for global logistics chains. We manufacture most of our products here in Finland, and all the shipments in practice to Asia are over airfreight. And all of that actually went over Russia, when the airspace was closed very, very rapidly, we were able to reroute all our shipments around Russia, again, never missing any customer commitments during that period of time.

And now if I take the last 12 months, obviously, the big topic has been the U.S. tariffs. We played different scenarios prior to actual decision on the size of the tariffs, prepare our business in such a way -- multiple different ways, actually. In the weather side, we have long-term customer commitments in U.S. as in rest of the world as well. And we shipped prior to actual tariffs, big part of that demand for the rest of the year into our own warehouses in U.S., mitigating the tariff impact and in weather -- in Industrial Measurement side, where we can rapidly change our oil prices, we did so actually in next day after the realization of the tariffs, we -- price is mitigating the tariff impact fully. So having a clarity on what the playbook is, having the right people in kind of playing that playbook and making clear decisions, that's the secret sauce.

Now if I take how does the world look forward from here, the regionalization will continue, and we'll continue to challenge operating models for any company. We continue to monitor, obviously, all the changes in geopolitics and around the world, and we are prepared for different scenarios, we -- to mitigate the possible impacts to our business and to our customers.

With this changing world, we continue to have a very, very robust strategy that we build upon. And our strategy has delivered very strong results if we look at the past years. If I take the past 10 years, our combined growth in the company has been about 7%. And if I take Industrial Measurement over that same time period, we have grown 11% with a breakthrough technologies, market growth and access to new markets as well. Simultaneously, we've been able to transform whether an environment business fundamentally improving profitability in the traditional business side and simultaneously creating a new subscription business, which we now call Xweather, and Samuli will talk about that a little bit later.

And all this with a business model which ties very little capital and returns strongly cash. If you look at our cash conversion, like just beginning of this year -- since beginning of this year, it actually has returned the cash -- the cash return on the first 9 months during this year is 1.

When I look at the business portfolio that the company has, it's fair to say that it's a balanced portfolio of complementary businesses and thus creating this resilience in this turbulent marketplace with different business models, different industry cycles. Simultaneously, we have very, very clear mandates for our businesses to deliver upon our strategy.

If I start from Industrial Measurements, it has returned to growth now after 2 more difficult years post COVID-19 and the rapid growth phase following it, and now continues to be a key player in our growth agenda. We grow industrial measurements by focusing on key industries, deepening customer relationships and accelerating service growth. I mentioned Xweather. Xweather is the anchor on recurring revenue business for Vaisala. We operate in a very large growing marketplace, where we have consistently achieved double-digit growth organically, and we have boosted that growth with the acquisitions. And we continue to grow that business going forward.

In weather, energy and environment, our focus clearly has been on profitability and maintaining our leading place in metrology, aviation and renewable energy market as we build service business as well. Jarkko and Samuli will go a bit deeper in their respective presentations into the 3 businesses that we operate in.

Time to look at our strategy. The slide really summarizes it, and many of you have seen this slide before. But I'll take a couple of points and recap them now. Our strategy focuses on driving sustainable growth with global leader in measurement instruments and intelligence for climate action. Through our products and technologies, we enable business critical decisions and operations at our customers. Our purpose taking every measure for the planet emphasizes our active role enabling data-driven climate action.

At the heart of our strategy are 4 success drivers. It all starts with deep customer understanding and commercial excellence, really understand deeply what our customer -- what are the challenges that our customers are facing, anticipating them going forward as well as really understanding the application where we can help them in their potential challenges. This unbind with product and technology leadership from our sensors to digital solutions really is what describes the key competitive advantage that we have at Vaisala.

Excellent supply -- excellence in supply chain, partly demonstrated when I talked about the rerouting the air freight to Asia, partly kind of described also when I talked about the time when component shortages, this is really kind of one of the secret sauces that the company has. And it's all built on purpose-driven culture and talent.

To complement our success drivers, we have identified 4 key priorities -- strategic priorities. We continue to drive industrial measurement through breakthrough technologies and product leadership. We grow share of our services and software revenues. We drive profitability as the global leader in weather, energy and environment. And while doing all of this, we need to all constantly challenge ourselves how we operate, how do we simplify our ways of working. How do we scale our operations so that we achieve greater impact and greater efficiency.

Let's take a look at a little -- a short look at our capital allocation. We continue our investments in growth, that really is at the core. We are a growth company. And while doing that, we are aiming to improve our shareholder returns. First part of the capital allocation is to invest into ourselves, invest into R&D and, to some extent, also our sales to secure technology and market leadership. If I take only the R&D investment that has been during the past years and on average, 12% of our net sales.

And if you look at the slide on return on capital employed, it actually is on a very good level. Example is from 2024, but even the earlier years, on a similar level. In addition to the organic growth and investments into our own operations, we do programmatic M&A, which is a critical tool to drive growth even further. We are looking to find established synergetic businesses can scale faster as part of Vaisala as what they could do independently. We aim for acquisitions and assets that open up new markets for us, they bring new competencies or capabilities to us.

We target growth through small and midsized acquisitions. We are not looking at transformative M&A or market consolidation. A great example of types of M&A that we have been doing, and we continue to look at going forward are, for example, the WeatherDesk and Speedwell climate that we executed last year. We are also a solid dividend player. We aim to distribute a stable dividend which will increase in line with the increasing net profit development.

Again, if I look at the net dividend earnings ratio for '24, it was 48%, which is we're on a good level. Just confirming our long-term financial targets. We published our financial targets about a year ago at our CMD. And I'm happy to reconfirm these targets. First, starting with average net sales growth being 7% on average, and this really is driving -- driven by 3 things.

We are operating on growth markets on in Industrial Measurements and in Xweather, that drives further growth. We are also simultaneously expanding in new markets and new customer segments. And thirdly, the growth through breakthrough technologies allows us to create even more value to our existing customers and new customers through our own products, services and capabilities.

Then on profitability side, we -- while growing the company, we are aiming to improve EBITDA percentage in a systematic way. Again, 3 drivers for this. We are changing the business mix or the business mix for the more growing parts of the company are more profitable. So that's a change in profitable business mix. We are also benefiting as we are a growth company, the scaling impact from growing the company is another profitability driver.

And thirdly, very importantly, we are very diligent in our capital allocation towards more growth and profitable opportunities. And then all that we are doing with strong cash conversion over time. We are operating a business which ties very little capital in its operations, and it also returns rapidly the cash back. So it is something that we aim to continue also in the future.

So if I try to conclude what I wanted to say 3 things I would like you to remember. The world has changed quite a bit over the past 12 months. But we continue to have a very robust strategy to drive resilient, profitable growth even in this changing marketplace. Secondly, we have increasingly attractive biz mix and very balanced portfolio of businesses, creating resilience with different business models, different industry cycles underneath. And thirdly, we are seeking for growth through breakthrough technologies, while at the same time increasing recurring revenue from both services and software. And this growth is supported also by programmatic M&A.

So I would say we have all the keys for profitable growth and strong cash flow. And very proud to reconfirm our long-term financial targets as such.

So that concludes my my prepared remarks, and I am very, very happy to answer any questions online. So Niina, any questions yet?

Yes, we do have a couple of questions here. First, a question from Nikko Ruokangas. You talked about your ability to adapt to different market situations. What kind of actions have you been doing recently due to U.S. government shutdown? How much did it affect your market?

Yes. So it's first of all, a great question. And part of it I actually went through already. So -- we all know the tariffs were came in force in the middle of this year. And we did the scenario opening for various different tariff levels in advance knowing exactly kind of what to do in the final number and what the tariffs between Europe and U.S. would be.

And then as said, for the contracts or the customers that we have a longer-term contracts where it takes a little bit of time to renegotiate the financial contracts that we have with them, we preshipped in U.S. and bought us time. So we have now used that time on renegotiating and passing the cost on -- with the aim of passing the cost to our customer on the tariffs.

And then on the side of the business where we can -- we have more freedom on changing the prices, we did so immediately. So that was the way we compensated. We also look at -- looked at alternatives, but this is the path we sort most attractive from a financial and operational perspective.

Next question comes from Matti Riikonen. In the short term, for example, in 2026, next year, can you meet your long-term financial target of 7% top line growth?

Great question, Matti. Unfortunately, we are not giving guidance to next year here. We are talking about the longer-term targets and longer-term strategy. And I can only repeat what I said. We are completely committed to delivering average 7% growth target for the long term.

Then next question comes from Waltteri Rossi. What kind of plans do you have to potentially combine the subscription-based business to the hardware business? Is there a potential to combining these 2 offerings?

Yes. So again, very good question. And I'll let Samuli to talk about it a little bit more, but I'll answer that kind of briefly. So first, synergy has to be kind of recognized that the roots of Xweather and the knowledge and deep understanding of the weather actually come from the same place. The fact that we have been building weather solutions, product capabilities over almost 90 years have been creating the foundation for deep understanding what weather and the opportunities are. And then we've built the business that Samuli runs.

Part of that business is allowing when applicable to bring hardware elements and our own kind of measurement capabilities to it as well. And a great example of this is the world's leading lightning detection network, which we run, it includes the hardware and then we monetize through a sale of data and services as well as then we can combine also with the hardware that we might sell to our customers.

We have actually 2 questions related to data centers and perhaps save at least one of them to -- for Jarkko, but perhaps -- so Pauli Lohi has a question. How big importance do you give the data center industry as a source of growth for industrial measurements in the next years? And Mikkel has a similar, how do you see the data center opportunity?

Yes. So I'll actually let Jarkko to answer the more detailed question on this, but I'll stay on a bigger picture and just say that the data center has been a sizable market in Industrial Measurements for some time already. While we don't break it out in terms of exactly what the size of it is, we've just said and we continue to say that it's one of the bigger industries that we serve. And obviously, we all know that there's a huge investment that has been happening into the data centers. We have been beneficiaries of it. And I continue to believe that investments into AI and consequently, also the data centers will continue going forward. And it is -- has been lucrative market for us, and I believe it continues to be also in the future. .

I will save those -- these questions also so that Jarkko can talk about the data center business in more detail in -- after his presentation. But there's another question from Nikko Ruokangas. You said that the market has fundamentally changed during the last 12 months following our Capital Markets Day a year ago. Could you describe the process for reviewing the strategy and whether something needs to be changed following these fundamental changes. And what were the key parts you were reviewing?

Yes. So a couple of things. Again, I think it's a very good question. And I'll say 2 things. First of all, while reviewing our strategy and the core basis of our strategy, we feel that our strategy, as we communicated a year ago, it remains very, very valid and it's a very solid ground for us to build further growth. That being said, obviously, the changes, for example, the geopolitics and the tariffs in the U.S. required us to kind of look at how do we tackle this environment? How do we continue to serve our customers, how do we continue to grow and how do we drive our profitability. And here, we looked at the various different scenarios, we looked at the different capabilities that we may or may not build and looked at the various different scenarios as they decided on, as I described, partly early shipments and then negotiating kind of a later price increases or immediate price increases.

At the same time, we need to continue to review this the tariff changes were just one incidence. But I believe it's a good sign of future as well, it is about looking at the supply chains. It's about how do we, again, serve our customers in a best possible way, keep our promises to the customer, whilst then growing and creating even more profitable company.

Thank you very much, Kai. I do have some other questions here, but we have reserved some time at the end of the webcast for those questions. So I will take those into the Q&A session a bit later.

But now, let's move on with our program. I'd like to welcome here on stage Executive Vice President of Industrial Measurements, Jarkko Sairanen, who will provide an overview of the Industrial Measurements business.

Thank you, Niina, and good afternoon for all of you on the webcast. My name is Jarkko Sairanen. Some of you may remember me wearing a different hat in these events earlier, being the weather business environment area. But now since January 1, I have had the pleasure of leading the Industrial Measurements business and it has been a great new business area advise a lot to learn to know and our fundamentals are extremely strong. There has been 0 needs to modify anything in them. We have really the globally leading products. We have a tremendously strong position in the marketplace and the performance of the business has been excellent.

The thing that we have been really focusing on is that during the last 2 years, as you will see also soon and many of you know, our growth has been flat. And therefore, what we have been working with the leadership team is really to identify the key levers. How do we ensure that we continue to drive the growth in the same way as over the last decade we have seen in this business. And therefore, also the name of this 20-minute summary that I will share with you entering the next growth phase. So I will briefly update you what we are really doing, which markets we serve and how do we believe that the growth will realize for us going forward.

Perhaps building still a bridge what Kai was showing here earlier that Vaisala as a company taking every measure for the planet. So how do we think about that in the industrial measurements? So for us, the core is really the edgy transition and decarbonization if we simplify those into 2 words. Energy transition implies that we have to care in a lot of our customers about resource use, which is then also often energy consumption, energy efficiency. And then I would say in the decarbonization, we are really building sort of the future measurement seeds for the next era in the industrialization, which will be around decarbonized industries around CO2 management, around capturing CO2 in different phases and measuring that.

I think there is a couple of other key words that you see in this text. One is this real-time insights into critical processes. And real-time means for us that we are really measuring in line in the customer processes. So we are not making analyzers where somebody is taking a sample and bringing it into a laboratory. Our measurement devices work sort of directly in line and provide the reliable insights into our customers in very demanding and difficult moment environments.

And then the second one is value proposal is really extremely valid, when our customers are working with critical approaches, which were really the optimization phase of. Sustainability is also core for us. Obviously, there's a lot how we develop the instruments, how we think about their footprint going forward, their energy consumption, et cetera, but also how our customers see them because of the accuracy that they bring, the reliability they have, i.e., they are not drifting as some of the other options would do. And also how long they last. So they are really long-lasting decisions our customers take, so they are also contributing to the sustainability of the solutions that we bring to our customers. This is what the business development looks like from the financial side. And I was sort of showing the similar thing at the Vaisala level, I think the achievement, what the team has done over the last 10 years has been really impressive. So you see 11% compounded annual growth rate for revenue as the business has been growing. During this whole period, there has been only one M&A move that has been done, and it's not material enough to impact this compounded annual growth rate number, which you see here.

Also, the EBITDA has been here high. So consistently for the last 10 years or so, about 20%, as you see from the financial performance. So a great story. The challenge that we have had is that we got a strong boost '21, '22 after the pandemic. And obviously, part of that boost was coming from the Life Science, and I will tell you later a couple of examples there. After that the last 2 years have been flat. Many companies who have been serving life science industries in an as focused manner as we have, have actually seen the top line to decline. So therefore, having been able to maintain it flat has not been totally bad achievement. And the good news is that if we look at this year, so the 3 quarters that we have reported out compared to the 3 quarters last year, our growth has been here 13% for this 9-month periods.

Then also there is worthwhile to remember that there has been certain headwinds that we have been facing through the currency exchange rates especially in the third quarter, impacting our revenue on comparable currencies about EUR 3 million. So 1%, 1.5% of revenue, so relatively significant from that perspective, but still delivering these numbers as you see here. Kai was already talking about the resilience navigating the tariff environment successfully. I don't mention more about it than really saying that we have been quite agile and successful in sort of compensating that impact into our performance as such.

Big portion of the recent growth has been coming from these questions that Niina was already alluding to data centers, I will go also a bit deeper into those segments here in brief. These are the core markets and then the drivers behind what we have. And these numbers that you see on the top line are spot on the same one that we used a year ago in the Capital Markets Day.

So let's start with these industrial markets. As you see, there is a number of different segments that we serve. However, a few of those that we have raised to the upper line are really, I would say, the most important ones for us also strategically. All in all, this segment is growing in a healthy space, the digitalization of industrial manufacturing, I think that is pretty understandable to all of us as such. But then also alluding to your question, what is happening with AI, what is happening with data, what is happening with the buildup with the computing capabilities broadly, which is obviously positively impacting our business in the data centers. And then this electrification also decarbonization long term, is a position that we are really building. If I mention here a couple of examples for you and perhaps starting with the data center.

Now I'm talking of a global average. So there is obviously differences in the different geographies, also in the sizes of the data centers. But if we take the today understood average, so a quarter. So 75% of the energy consumption that we have in data centers is actually going into running the processor, the chips, the GPUs from NVIDIA and a quarter, so 25% is going into maintaining the environmental conditions as they should be. Obviously, the processors are leading into a lot of energy generation, the biggest ones that are being built today, several hundreds of megawatts. That is the power or capacity there. Think about your Sona, where you may have 8 kilowatts. What is a temperature that you get there. So I think it's pretty understandable that some cooling will be needed or otherwise, it gets very hot, very fast.

Too hot environment would lead into SLA problems or service level problems with these data centers, the processors want not be running as needed. Cooling too much is a heavy energy cost as we understood when this 25% is going into the edge. So therefore, these data centers have hundreds of measurement points, we are thankful that many of those are delivered by us to actually optimize this energy consumption. There is right now happening also transition to liquid cooling. We are also positioned there. So our measurement devices are today also to measure the temperatures of the liquid coolants, so this is a specific area where I think we are well positioned. We have really the devices that are needed by the highly qualified data center players and also for the future when the technology is evolving.

The second example here, the batteries. Just to give you an indication of what we do there, the battery manufacturing when you are producing the cells. So the battery cells, lithium-ion cells, it implies that your production environment has to be extremely clean. So if we think of the lithium, if we would be in contact with water, i.e., humidity, it's a contaminant that may lead into not only big quality problems, but even to explosions. And therefore, they have to really drive air very specifically in order to meet the production quality that they need to have. And this humidity, I think it's pretty descriptive what they have to do. So imagine yourself being in a meeting room, where you have a meeting room, which can contain, say, 15 to 20 people, so relatively large meeting room.

So if you have a normal humidity of any environment in that room, there is about 1 liter water in the air. So 1 liter water in there, now when we go to the battery manufacturing for lithium ion batteries in that same space, there can be only 1 drop of water. So 1 tiny droplet when you think about it. So this is -- if your viewpoint is minus 70, what we are measuring there continuously from the air flow with a very, very fast reaction speed.

And again, equally important for the quality but then also for the energy consumption, making the air unnecessarily dry will be tremendous energy constraint and about 1/3 of the energy consumption related to the battery manufacturing is related to this dehumidification that you do for the production. So impacts a lot.

Then perhaps of these forward-looking things I want to mention, the latest -- or the last one there in the road is decarbonization, so I think we are very attractively positioned for the years to come. So we are developing the measurement portfolio, for hydrogen economy for decarbonization, already today, the early innovators who are capturing carbon dioxide directly from air it's called DAC direct air capture or using our instruments to measure their process and to optimize it. So a broad spectrum of equipment.

Then the second one is life science. As I said, there was a tremendous boost, obviously, during the year of the pandemic. Now we feel that it's starting to pick up again. Here, we have also very strong mega drivers, obviously, the aging population that needs more sort of pharmaceuticals, life science-related innovations. There is also the regulatory compliance-related requirements. This industry is facing, but also new innovation, especially in the area of biotechnology. So we have cell and gene therapy and you name it, and there is a lot of things happening.

It's the biggest single segment that we serve in Industrial Measurements, about 30% of our revenue. We are very proud to say that 50 of the globally largest pharmaceutical companies, life science companies, so 50 out of 50 logos use us. It doesn't imply that they are only buying from us, but they are also customers to us, obviously, to a lot of our peers and competition, but we have a strong business here.

An example here was March 2020. Kai was referring to the pandemic time at that day, we got orders from Wuhan to supply our CO2 sensors for the incubators. So they were starting and trying to understand what is this virus all about, but obviously starting to develop the vaccines. And that also then triggered the tremendous growth that we saw '21, '22 in our business when the world was fighting to get these vaccines developed.

Third segment power. And here, I want to start from Heathrow Airport. Many of you remember a few months ago, Heathrow Airport was closed for a full day, 24 hours. And the reason was that a transformer got fire, burned, exploded, whatever word you want to use in a substation that was the critical station of powering the airport. And the interesting thing here is that later is what discovered in the investigations that, that transformer there was measured humidity already 2018. So 6, 7 years earlier, but nobody did anything. There is 1 million of such transformers that we have globally. And only a fraction of those are even being measured not to mention that somebody would do something when a measurement device is showing you. So this is a tremendous new market opportunity for companies like us who can actually measure the conditions of the transformer. So basically, we are measuring if there is some gases in the transformer oil. And from these gases we can deduct that is there potentially a fault that is emerging. And we can measure 9 different gases in the transformer ore.

Naturally, the key customers are transmission grid companies, utilities and with the electrification needs are only expanding. We need to invest a lot in new transmission lines as such. But interestingly, we have also new customer segment here, where we are scoring today first businesses, data centers. They have to ensure that their electricity is sort of in good hands, good shape. So they are also installing on transformers steel manufacturing sites, which are also making the transition with electrification are doing the same. So we see the expanding also to industrial sites.

So as you see, really leading-edge products that we bring to these industries where we also see fundamentals of the growth to continue. If I mention a few words about what are these solid foundational elements that I started with, which I think are in excellent shape in the business. So we were talking about the performance, our market leadership position in these segments. We have a excellent global channel. So we have more than 250 partners globally, working with us every day and covering our sort of footprint in 150-plus countries as we do the business.

And then what I was alluding here, what Kai was already mentioning, we are really working. So we have the luxury of working and serving this type of growth industries that we covered. So here, you see the 5 examples listed. And actually, 2/3 of our business is coming today from these segments. And obviously, that gives us a great confidence that the growth will continue. And we are investing for the future. And what you see here at the bottom, this technology leadership, the deep science work that we do to build these leading sort of instruments continues to be a foundation for our business.

So there is the question, what else can we do? And here, you see the priorities that we have now identified some perhaps a bit more short-term operational where we can start to do immediately some more sort of strategic. But really the core is that we want to strengthen our relationship with the end customers. So I was talking about the channel that we have. Now we want to move further and closer to our end customers, understand the needs better, how can we serve them better, what are the difficulties that we face. And actually, the objective is to build these decades, long lasting business relationships with the leading end users in these industries that we are serving. This is also linked into this commercial excellence. So right now, we are very actively putting in sort of next level of account management practices, which obviously is very tightly related into the customer intimacy, we are investigating that could there be new ways how we could bring a bit more dynamic way, how we work with our pricing, so adding intelligence agility in there in order to sort of really get full value from the value which we deliver to our customers.

And then the services, as was also mentioned as a Vaisala priority, it's a potential hidden gem in our portfolio because we have a very large installed base out there. So decades long that we have been working with our customers, the challenge that we have conventionally had is that the products are -- nobody needs to service them. But we have a lot of segments where the customers still due to the criticality of their processes, sometimes even by the regulation, want to and need to calibrate the sensors in order to make sure that the preciseness is really their spot on what it should be.

So here, we are now building offering, making it really productized. We just launched here a few weeks ago, a new offering called Vaisala Circular which is sort of try first innovation. There is more to come, and we are really looking forward to start building this type of recurring revenue as part of the business.

And then finally, we have here the aspiration that while over the last decade, we have not done any substantial M&A. Now we are really looking for opportunities that could be boost this organic growth most likely tied into this core growth segments that we are serving in order to accelerate the growth even beyond what we are able to do organically.

So in summary, strong customer segments with underlying growth is the focus. There, we also want to work this customer intimacy be closer, try to make sure that these are really now decade-long partnerships that continue to grow with them, working with very exciting road map in our R&D. So there is every year sort of for the foreseeable future, what we can see, new breakthroughs coming, new exciting offering, which is extending our play that we have. And then really now going systematically after the opportunities -- untapped opportunity that we have in services to really also put their next year on and develop there also and support our systematic growth.

So this concludes my overview and happy to take Niina here with me and see if you have any questions on the line.

We have lots of questions.

Okay.

Let's start a question related to life science. So a question from Mikkel with all the pharma investment activity in the U.S. right now, how do you see the life science market outlook? And when do you expect this to start showing up in your orders?

So as was in my graph, which was showing the financials, there was a statement that this year, we have been really enjoying the strong demand from the data centers, but also we have seen that the life science industry started to activate. So you can read that as orders have been visible already this year. We are expecting the -- and this is obviously not only our expecting but generic sort of industry expectation that the growth in the Life Sciences, pharma industry is probably somewhere between 5% to 10%. But then if we look at that biotech and biotech development. So there, we are talking of high double-digit sort of teens or teens growth numbers. And obviously, that's also something where we are focusing in.

So we are pretty optimistic of the future and North America is actually the market where we have our biggest life science business today. So it fits well with those investments that are happening.

Next question is about power market. So Nikko Ruokangas has a question. You estimate your addressable power market to be worth EUR 250 million, which is up to 25% from our estimate from a year ago, which was EUR 200 million. Was the market -- the power market being this strong in in this year? Or have you changed the definition included in the addressable market?

Excellent question. And honestly, if I think about -- and I think the only fair way to say is that this is the market that we have been obviously developing -- offering for some time, but really starting to play quite recently in a significant manner. So this implies that we are learning all the time because right now, we are talking with customers. We are understanding their situations. As I mentioned, we see that there is new segments like these industrial customers emerging. So this is not only for grid companies, there is also anything else.

So I would even say that most likely in the foreseeable future, our view how large this market opportunity actually may even get bigger. So I think we are learning and therefore, understanding that the opportunity is a little even larger, what we thought a year or 2 years ago.

Thank you. Then a question from Joonas Ilvonen related to M&A. What kinds of acquisitions might you do within industrial measurements as it hasn't been that active in this sense as whether an environment, might such acquisitions also help you build further customer intimacy in key industries? And another question, are you also working closely with AI data center, thermal management technology providers like Verti.

Yes. So obviously, what happens with M&A is very difficult to predict because it's not even in our control as we all know that so well. So naturally, we are looking at M&A opportunities that would be synergistic. So that would -- and then in this question that, okay, could it help our business in the core sort of segments which we serve. So certainly an objective. I think what we can say is that we are not looking for huge transformative M&A, but more like small, medium-sized companies. And then obviously, there has to be synergies. And usually, those synergies are either related somehow to technologies or really to this go-to market, which also refers to, I guess that is all I can speculate right now.

Thank you. Then a question from Simon Jonsson. How has sales to the battery and battery end market developed over the past few years, one would think that demand has been soft given the industry headwinds?

Yes. So we are not disclosing the specific euro numbers on the different segments. But I think the question is totally spot on the battery market has been a bit soft sort of globally due to the fact that there was, I would say, overcapacity in the investments, the utilized sales have been weak. However, what the industry is talking that there is no clear increase, again, driven also by EVs only, but really by the energy story systems. And right now, when you look at the industry insights, there is a lot of comments that most likely the demand will be picking up again in the years to come.

The one last question before we move on. Could you repeat which were those specific industries -- industries that account for 2/3 of the measurements?

Yes. Happy to do it. So as we have been saying, so Life Science is about 30% of our business. So that was even mentioned. The rest we don't disclose by size. But the second one, so there was 5 of those listed. So the second one is really the data centers, critical buildings. So we are calling age with critical buildings, obviously, driven by data centers. The third one is then this battery manufacturing, the fourth one is semiconductors and then the fifth one is this power. So these 5, which was also listed there separately. So those are the ones that I was alluding to about 2/3 of the business.

Yes. Thank you very much, Jarkko.

Thank you. My pleasure.

And moving on with our agenda today. Our next presentation is about Xweather subscription business. Please welcome Samuli Hanninen, Executive Vice President of Xweather.

Thank you, Niina, and also, a warm welcome virtually to our session today. So during the next 30 minutes, I will tell you a bit more about us, about Xweather, also in our numbers. And then the plan is also to show some additional demos as well. But let's get going that every company has survived. Kai was talking about that in the beginning of the session about Vaisala mission. Of course, with Xweather are a part of it.

Vaisala is all about intelligence and instruments for climate action. Then what we do with Xweather is that we help other companies with weather. For our customers, weather is super critical. It's not small talk. It can be a huge risk or a giant opportunity. It is about protecting lives and properties or it's about losing them. So it's about making money or losing money. So for our customers, weather is critical.

Then what really ultimately drives the outcome? So what do we do? We make our customers to know first. That is what we do. We help them to understand what is going to happen, not only providing the insights but also the foresights. And that is why 40% Fortune 100s are our customers.

So what one would remember about Xweather that when you use Xweather, you are the first to know. So what do we do? We sell DaaS and SaaS, so data as a service and software/solution as a service, we operate on a growing EUR 2 billion global market. We basically have 2 horizontal offerings, one being our data products where we have the highest quality of global weather and environmental data available. That data is really of the highest quality, i.e., it can be used for insurances, for finances, for trading.

On top of the data layer, we have something what we call Protect, i.e., our customers can protect their people and assets from different kind of weather risks. Then there are 3 areas where we go deeper into the value chain. Those are our 3 verticals. Our 3 verticals are transportation and logistics, where we, for example, serve car manufacturers, winter maintenance organizations and road asset managers. What are we able to do is that we bring together those ones who use the roads with the ones who maintain their roads.

On an energy side, our most important sort of subsegment is renewable energy. As we all know, weather is the fuel of renewable energy. As the amount of renewable energy assets in -- basically in any country's portfolio are rather large as of today, renewable energy matters also to all energy producers, not only to those energy producers who are producing renewable but for all.

The biggest external weather or the biggest external attribute influencing, for example, the pricing of nat gas is wind. That sounds quite funny rented. That the biggest thing impacting the pricing of natural gas is wind. That is because wind is the part in the value chain, which is, of course, volatile as studies generated by better.

In addition to energy, we are also in the finance and insurance market. I was already touching one area of them, which is the commodity trading. In addition to that, we are also serving a lot of commodity traders. For those for first to know is of essential importance naturally. On the right-hand side of the slide, you see some of our customers natural. We feel, at the same time, very proud and humbled on having those kind of customers, which also provide us room to grow.

Altogether, we have roughly 2,000 customers as subscription customers in Xweather. There are a couple of areas where Vaisala Xweather is clearly the leader, road weather for automotive is one of those. We have global automotive OEMs using our data ranging from European and U.S. car makers to all the main global ones. We started the road weather data as an infotainment play, i.e., seeing what is the destination weather or things like that, as ADAS and AD are getting more common. That is, of course, becoming also a safety feature, which is further elevating the -- our position in the value chain.

When it comes to the globe real-time lightning data, we are clearly the leader. We are the only ones having a global lightning detection network, and we are also operating the U.S. national lightning detection network. We detect a lot of lightings. But what I think is even cooler than detecting the lightning is that how fast we can do it.

So it's not only about the accuracy of the network, but it's also about the latency. If the thunderstorm or the lightning strike hits you, and you are more than 5 kilometers or, let's say, between 4 and 5 kilometers away from the location, you actually receive our warning before you hear the thunder. That's how much we have optimized the performance of our lightning detection network. I would love to demo that, but I would really need to have good luck to be able to do it.

I already talked about weather and energy trading. And there's a fourth area, which is really also our stronghold is the better forecast quality in Europe and North America. Those also being the areas where we focus most, so roughly 50% of Xweather business is DaaS, so Data as a Service, the other 50% one software/solution as a Service. A bit more than 60% of our customers come from North America, plus 30% from Europe. The remaining roughly 5% are the Global and different parts of the world from Latin America to Australia.

During the last 3 to 6 months, we have also started to extend our coverage outside of Europe and North America. As mentioned earlier, our growth has been double digit now for a 4 consecutive years. And as you see from the figures, the growth has been strong. As earlier also mentioned by Kai, we've been also utilizing acquisitions as part of our growth strategy. So the 3 biggest ones being there Aris, WeatherDesk and Speedwell Climate. Those all together present roughly 1/3 of the total revenue. So always, when we have been able to acquire a company, we've been able to to make the company grow and to further accelerate our own growth.

Our net revenue retention is plus 100%, and our business is very clean when it comes to ARR. So over 95% of our revenue is recurring. Then I'm sure I will get questions so I will answer it in advance. So yes, we are profitable, EBITDA being our most important KPI and we are not currently reporting further details, except for the subscription net sales.

But let's move on. This is also a slide that we referred a bit already earlier. So how do the software and hardware play to get there. So in addition, of our business being recurring, it also has a network effect, i.e., the more you use it, the better it gets. When we are selling our SaaS solution, being it, I mentioned a product called Protect, when we are selling that product, that product quite often comes with the piece of hardware.

The reason why it comes with the bit of hardware is that, that improves the forecasting accuracy, like no matter whether you'd use deterministic modeling or AI, you cannot invent data from a place where there is no day, i.e., you need a measurement. Those Vaisala ex gas sensors are the devices that we ship together with our solutions.

As now we install that device onto our customer premises, Vaisala also has access to that data. i.e., from that onwards, that device further improves our capabilities to forecast. So that device's data becomes part our data asset. Naturally, that improves the data quality and the forecast quality, so we are able to sell an improved data-as-a-service offering and improved solution as a service offering. The same logic can apply to different kind of measurement attributes. Lighting network behaves in that way, but so does a temperature sensor. So the more we have people using it the better it also gets.

Then moving forward. So what is it that is differentiating us. When we established Xweather roughly 4 years ago, we were big believers on AI and ML. It was already by that time visible in the industry that those things will change the ways how we are doing with the forecasting. So we started applying AI and ML basically everywhere where we can, everywhere where it adds the benefit. So when somebody asked us to case, where do you exactly use AI or ML, the answer more or less is everywhere. But we combine like discussed earlier, that data science and ML knowledge together with the 89 years of Vaisala's history of understanding both meteorology and metrology. And that's the unique combo that we can do, understand both the deterministic and probabilistic side of the things. And that's also where the hardware comes to the picture. So how we differentiate AI and ML and hardware. Those are the 2 things.

Then what is our team like? We are only software people. So we don't really that much build hardware. So we are builders, explainers and translators of weather intelligence. Roughly half of our team is basically in the Helsinki capital area, the other part in U.S., in Boulder, Maryland, where we just opened an office and in Minneapolis. And then the blue dots are where also our sales guys are. We had a really global team with more than 20 nationalities, and we are currently in 10 countries. We are roughly 250 people. And actually, our head count hasn't changed, as our business really scales with cloud and computers, not only with people.

So that's us in a nutshell. And I was thinking that a good way to show our products and explain a bit more about those would be to have some demos. So I was thinking of running us through let's see, 3 or 4 demos. One thing which we are really excited about is MCPs. I'm sure everyone has heard those. So -- so as part of LLMs, what MCPs are, they are like APIs for large language models. So MCPs help the large language models to receive the real-time information. So MCP itself stands for a model context protocol. I will be here showing example. So now you can play the video of us playing around with Claude AI. So this was done a couple of weeks ago. So we are asking the Claude AI that is connected to our weather back end that what is the likely correlation of weather and weather and lap times on the Singapore Grand Prix.

That question is pretty complex one. Like how much does weather impact lap times in Singapore Grand Prix. And we are feeding that question here to our cloud-based LLM that is connected to our back end. And as you can soon see, it's actually able to make a graph. Okay, now it's building the HTML page. So it's able to build the graph without asking any further questions. I have to check the numbers, but it's roughly so that 1 Celsius degree or 2 Celsius degree seem to equal something like half a second.

Now if you think about what this means and why I think this example is super good one is that just think about the role of a meteorologist. In the past, you actually had to have people, explaining the foresights and insights of everything, and you need to have all the domain-specific skills of various industries. Now I can give that intelligence to machine. That machine can tell me what does it mean? That is pretty amazing, and you can do that more or less for any industry. So feeling super excited about that.

Of course, when it comes to trading or insurance, we have also our own meteorologists that are checking and verifying the reports. But we are a better unit of an AI edge. We didn't start by having 100 or 200 meteorologists but we actually did start with the AI and ML.

Then moving on, I was talking about this lightening and telling that how short the latency is. So hearing the thunder or getting a text message before hearing the thunder, so I did this demo this morning. So just showing an example that there we have that lightning with less than 10 seconds of latency. And now I'm also adding there the threat zones. So here, you can see that where we are forecasting the lighting to go. In addition, I took the other layer, which is hail. And this is also pretty unique as we were the first ones in the industry to release hail forecasts. Hail as a phenomena is also something which is almost impossible to measure using traditional means. In practice, you would need to have a radio sound in every cloud. And that's not possible even for -- and we are to have them in every cloud. So how did we come up with this?

Like we were actually able to utilize machine learning algorithms where we use the intra cloud lighting. So the lightning that happens within the cloud as a proxy for hail detection. Now we can roughly say with the 80% likelihood 30 minutes in advance the rig of lightning. On this area where I was showing the demo, it is very important because there are a lot of solar farms. And if a lightning -- sorry, if a hail hits a solar farm, we are not talking about tens of millions in damage. We can talk about hundreds of millions of damage.

And when you have the warnings in place, you can turn the panels upside down, so that then they are not hitting, the hail is not hitting the panel flat. Then moving on, this is another example if we play the video. So showing how our customers use these capabilities in practice, this is from -- I think, from Panama airspace. So you are actually seeing how people can build their own polygons. So this is now a grid line in Central South America. And now our users can customize and build their warnings.

So if lightning is close, spiking me warning. Here is another example, not now with the lightning but actually with the road weather, so this is in upper, somewhere close to now it's tender so close to between border of Western Canada. So no, it was Detroit. So on the Credit Lake. So this is another example that where you can issue those warnings that you get slippery roads, risk of having black eyes, et cetera. So using the same portal, you can configure the alerts for whatever is critical for your business.

Then our last example, if we play the video, this is then about -- a bit more about the energy and the trading part of it. So this is our portal call Xweather Power Up, where we aim to help the industry improve the liquidity. As PPA, so power purchase agreements help with volume risk, they not help with the volatility. So in this tool, you can see both the forecasted wind and the historical values, both the price curves and all the data.

So now having an index and data you can trust helps you, for example, to make a trade or do a swap. I'm showing an example here because this is just like this very interesting that talking about big changes lately as you see from this slide, something really happened in the German energy market in 2022. That was basically natural gas not flowing in anymore. And all of a sudden, you got negative prices especially during the summer months because of solar.

As the only part, which is now flexible is solar and wind, not something that cannot be managed without having highest quality of weather data. But that's all the demos. I think we had some time for Q&A, Niina.

Yes. We have several questions. So let's aim to take as many as possible. First question from Matti Riikonen. You mentioned net revenue retention being over 100%. Has that number changed during the past 2 years?

Yes. As with any of our core KPIs, so our core KPIs being ARR, then, of course, the EBITDA and also the NRR. So as with any business, naturally, we aim to improve. So yes, NRR is one of our key measurements. And yes, it has improved.

Okay. The next question is from Pauli Lohi. Do you see the development of AI-based weather modeling systems driving up the competition in the data service market?

That's a good question. I think there are many things which are changing in the market. Of course, the fact that private enterprises can build their own weather model using AI and ML itself is a change. If we look at the changes in the marketplace or with the actors, yes, there are a lot of start-ups because development is fast, but we haven't really seen like that kind of completely new bigger entrants or new forces. That it's more of this tradition now that you have incumbents and you have newcomers, but we haven't seen any change in balance. Maybe the only thing is that the amount of startups is still quite high. So the industry hasn't, in that sense, consolidated.

Then a question from Waltteri Rossi. To what extent ex whether currently utilized Vaisala's hardware in its offering, is the potential to bundle the offering more in the future?

Yes. So when it comes to those networks that we operate by ourselves, for example, the lightning networks. That is, of course, like Vaisala's own hardware 100%. We also bundle our hardware with our -- like I was showing the product called Protect. This far we have bundled more than 1,000 sensors. And that also mostly in our key markets like North America and Western Europe. So yes, we are doing it, and our intent is to continue doing it.

Thank you. Then a question from Mikkel. How long do you think Xweather can sustain double-digit growth before the comparison base becomes too high?

Yes, that's, of course, a fact always that when numbers get bigger, making the growth numbers same is might be trickier. We were showing the total market size of being EUR 2 billion. And like I said, that North America and Western Europe also have been our focus areas. So we firmly believe that there is -- in this market, there is a lot of room to grow.

Okay. The next one comes from Nikko Ruokangas. You seem to be well positioned in next Xweather market and the drivers are strong. What is the biggest barrier in accelerating the growth even further as the market opportunities peak?

Yes. One of the things that we did in very beginning with Xweather and that was also partially like driving our acquisition strategy was that we wanted to really build the back end would enable us to scale cost efficiently. As a subscription business is a bit different than some of the other businesses, we truly need to automate everything. So we've been -- during the last 3 years, we've been able to build those back ends. We also did the conscious decision of focusing on Europe and North America first, as you cannot be best everywhere at the same time. I feel confident of us having the needed enablers in place to continue to grow and also capture markets from new geographies.

Okay. Thank you. Then a question from Simon Jonsson. Could you elaborate on what makes up Xweather's competitive advantage?

Yes. So -- yes, maybe let's start with that like I tried to explain is that we really started with AI and machine learning. That was how we got started. So we didn't have a legacy of 50 or 100 or 150 meteorologist providing services manually, but we were able to apply machining learning and AI from the beginning. So in that sense, like we don't have history on that side. At the same time, though, we are part of Vaisala. And Vaisala having 89 years of experience on meteorology and metrology, of course, helps us to understand also the [indiscernible] and really the weather business. And I think it's really these 2 things that we put together. AI and ML with the probabilistic thinking with everything what we as a company know about measurements and weather.

Thank you. We still have a couple of minutes for questions, and I do have many here. So next question is from Joonas Ilvonen. Have you redefined the Xweather addressable market to like you did for power that Jarkko mentioned, so that now it's EUR 2 billion instead of EUR 1.2 billion or EUR 1.5 billion. And do you think you can grow your annual revenue per given customer account? Or is it growth mostly driven by new subscription?

Yes. So on the first question that naturally, there are some areas in Xweather that we don't have a product for, like we don't have every possible product in every possible country. So there is sort of both the geographical and vertical thinking. As we come bigger, we feel also more confident on saying that we can address more of the market. So yes, that number we have in the past said that that it's EUR 1.2 million, but we have excluded certain geographies. Now we are not excluding those geographies anymore.

Then when it comes to the growth, I believe, with those kind of customers, what we have, like 40% of the Fortune 100 is that we can still grow the size of the customer. So basically, ARPU can be further further grown. But of course, we can also get and we should get new customers. The way we are thinking of it is that DaaS or Data as a Service and especially our API offering, works as a funnel. So then as we market and have developer customers, we can then nurture those accounts to grow in value over time.

Maybe time for one more question. I have a couple of questions here about acquisitions. Is there still -- this question is from Matti Riikonen. Is there still a possibility to acquire larger companies such as Maxar WeatherDesk? Or do you think acquiring smaller companies is a more realistic scenario? And also have a question from Frank Vicaruso, that please discuss how you plan on addressing acquisition activity. Do you expect your focus to be on revenue, both our science acquisition. So overall, maybe on the M&A side, what can you say about that?

Yes. I think I really love the way that how Jarkko was answering on Industrial Measurement side, I think, in a very similar manner. There can be acquisitions that help us to grow, for example, in the geography where we haven't been strong before or as strong before. There can be also verticals that we are not yet that active. Then often, this come like that you have some assets I think all in all, our asset portfolio is in good shape. But I think one should always seek both like innovation and new things, both internally and externally. So we keep actively looking at and reviewing opportunities as they come. But as my colleague was saying that, that is a really difficult area to forecast compared even to weather.

Thank you very much, Samuli.

Thank you.

Then moving on to our fourth presentation today that focuses on weather, energy and environment. Please welcome Anne Jalkala.

Thank you, Niina. Happy to be here. Good afternoon also from my behalf. My name is Anne Jalkala, and I plan to share with you the key developments in the markets where we operate in the Weather, Energy & Environment business and open up the business models that we have and how do we plan to drive profitability and service business on top of our strong installed base.

Starting a little bit about who we are and what we do as a business. We are truly a global weather instrumentation leader in the markets where we operate. And this is reflected in our market share. We truly are an undisputable player in the markets. We do play also a vital role in helping societies to understand, mitigate and adapt to climate change and extreme weather.

In essence, what we do is we provide weather sensors, systems and services across the globe for meteorological agencies, airports, defense forces road authorities and renewable energy. And this is really the business where the Vaisala journey started from. We have almost 90 years of innovation and expertise and strong installed base of over 1.5 million weather sensors and strong customer relationships. This gives us a very solid foundation for our profitability and services strategy that I will elaborate further.

Here are the key market segments in the Weather, Energy & Environment business. On the left side, you can see the core markets, meteorology, aviation, defense and roads, which consists about 4/5 of the net sales of the business. And this is, as a whole is really a mature and stable EUR 700 million -- about EUR 700 million market, which is characterized by governmental spend with natural fluctuations and variability in the project and system business.

In the metrology and aviation markets, we have had exceptional 2 years driven by the European weather observation, modernization projects, which are now -- which we are now delivering and now coming to end the modernization peak. In the defense market, where we see some growth potential, especially now European countries are increasing their defense spending. However, good to note that defense, while it's a long-time market for Vaisala, it's a relatively small part of our business. We talk about mid-single-digit percentage of the weather environment sales.

Then on the right-hand side, you see about 1/5 of the sales coming from the renewable energy market where we have had significant slowdown this year. We have witnessed a separation in our core geographies in the wind resource assessment market where we are strong. And now we have really sharpened the focus for the serviceable addressable market. And therefore, you see here, the market size EUR 150 million being smaller than what we indicated last year in the Capital Markets Day.

We do continue to see the wind operations as a potential market starting to emerge in the end of the strategy period. And at the moment, we estimate the growth opportunities are there in the -- starting to emerge in 2027 and onwards and 2028 and onwards. Even though the renewable energy market is currently facing slowdown, we do see that the energy transition fundamentals remain solid as the global wind capacity is expected to grow and the weather dependency of electricity generation is growing.

But to summarize, the mature market segments in meteorology and aviation are expected to return to flat levels compared to exceptionally high levels in the previous years, and the market in the renewable energy has declined, and we do not expect growth in the coming few years.

Then moving on to open up a little bit about the business model dynamics in the Weather, Energy and Environment business. Here, you can see the 3 types of business models that we operate, we sell sensors services and projects. And in the bottom of the right-hand side, illustrative image you see our fairly stable base of sensor sales. This is roughly EUR 200 million business and a fairly stable by nature. And then on the top of the picture, you see the project business, which is, to a large extent, driven by modernization projects, and there are natural fluctuations in the projects. This is about a EUR 100 million business depending on a year, EUR 80 million last year. This year, we had a record number of project sales and really a strong delivery of the orders we received last year.

Then on the middle, you see the orange part, the services part. This is about EUR 20 million business today. And here, we really see potential to grow the share of services by increasing the attachment rate and monetizing our large installed base and strong customer relationships. I will elaborate this more a bit later. Overall, in this mature market environment, our priority is to sustain Vaisala's global leadership by focusing on profitability and expanding our service offering.

Moving forward to how we are planning to do this, we are committed to sustain the profitability across the market cycles also in the current downward market. And in practice, this means about double-digit profitability measured as EBITDA percentage even in a low market cycle. And the way we do is through 3 key profitability enablers. First one is really our -- maintaining our competitive product portfolio and also simplifying and optimizing our offering and making very selective and prudent investments in new R&D projects. We do aim for high R&D effectiveness and the research and development expenditure of net sales was 10% in 2022, and it's roughly 8.5% of net sales this year. At the same time, we do aim to do the maintenance and modernization parts of the R&D work as effective as possible.

The second key profitability enabler is the lean organization and operating model. As you may recall, this year, we adjusted the cost base of our renewable energy business to the current market reality and executed the related and needed restructuring.

Third key enabler is to drive continuously the efficiency throughout our processes and ensure that we have high operational efficiency with automation and AI. Lately, we've been increasing the AI adoption, especially in our customer frontline operations, for example, in tech support, enabling in practice faster resolution times and better customer satisfaction. And this is what we now plan to do across our functions and processes.

Then I will tell about the opportunities that we see in the service business side. We have, as said, almost 90 years of expertise in the weather and climate observations and a very large global installed base of more than 1.5 million weather sensors, and we continue to add thousands of devices annually. So we do have very solid opportunity to grow the share of high-margin services through this installed base. And the way we are doing this is twofold.

First is point of sales, services and second is installed base attachment rate. In practice, what this means is that whenever we sell a sensor, we also sell a service contract. And the second point means that those customers who have a large fleet of Vaisala sensors and systems, we also upsell service contracts and offer them better customer value through our high-margin services. This year, I've been meeting many of our customers globally. And what is the most important for them is to have their critical weather observation data available without interruptions, like Samuli mentioned in the critical weather data availability is important. It is also very important for the customers of the Weather, Energy and Environment business for the metrological agencies that we serve for the airports, that we serve road authorities and so forth.

And we do believe that we can address this customer demand of critical interrupted weather data availability with connectivity enabled services and remote monitoring. Our vision is that weather sensors will be connected to Vaisala platform to enable 24/7 remote monitoring diagnostics and to enable this critical weather data uptime for our customers.

Over the past years, we have been improving our service delivery capability, we are clarifying our service offering and ready to expand our footprint in selected areas. We are starting from the aviation and weather radar customers. And in practice, this means services like extended warranties, repairs, calibrations and remote monitoring. So a very exciting opportunity to build an improving share of predictable recurring revenue streams from services.

To summarize the key message from the Weather, Energy and Environment business perspective, first one is to note that Vaisala is a true global leader in weather and climate observations, and we plan to continue as a global leader in this space by driving market leadership and our high societal impact.

For the strategy period, our key focus is to hold the profitability across market cycles, through competitive product portfolio, prioritized R&D, lean organization and process efficiency. And in addition, we do see opportunity in our service business by increasing the attachment rate and monetizing our large installed base to drive recurring revenue.

With that, I conclude my presentation and happy to take questions you may have.

Thank you, Anne. Let's start with the questions here. There is one question from Pauli Lohi about the renewable energy market, which markets have you excluded from the renewable energy addressable market and why?

Good question. As I said, we have sharpened the definition of the addressable market to the serviceable addressable market, meaning the markets that we can serve today. And the EUR 150 million that covers the wind resource assessment as well as our offshore maritime opportunities. So basically sharpening the focus, focusing on the serviceable addressable market.

Then I have 2 questions from Waltteri Rossi. Do you -- first, do you expect any growth in meteorology, aviation and roads in the coming years as the product and investment cycle is getting weaker? And then a follow-up, what are the key elements in driving profitability up in the meteorology, aviation and roads business?

As I indicated, for these core markets, we see a stable, flat, no significant growth in the coming years. And the key is really to now to hold profitability even in a downward market. And as I elaborated, it's all about being very selective in R&D investments having a lean organization and continuous process efficiency improvements.

Then a question from Nikko Ruokangas about the renewable energy market. So your renewable energy market estimate is down about EUR 400 million to EUR 500 million a year ago to now EUR 150 million, there is a big change. Your sales for the segment has not declined more than 50% like our market estimate. Does this indicate that you have not yet seen the worst in renewable energy. Do you think that your group sales growth, well, maybe this is a question for Kai to answer about the group sales growth target and the realistic -- how realistic that is. So maybe I will say that actually for Kai now to think about it.

But let's continue here, Nikko Ruokangas has a question. Do you see needs for new efficiency actions in addition to the actions taken in the renewable energy to reach the profitability target?

Like I said, we did adjust the cost base of our renewable energy business to match the current market reality, and they needed cost adjustment and completed that during this year.

Then next question is from Joonas Ilvonen, whether an environment -- weather energy environment is a relatively mature business and you talk about the prioritization of R&D but might the defense sector will be one area where you could do more product development even if it's a relatively small part of the weather, energy and environment.

It's a good question. Like I said, we do see opportunities in the defense market and this is a long-time customer segment for Vaisala. But at the moment, we see opportunities in our funnel. At the same time, none of our products are classified as defense products or even dual-use products. And what is really critical is that we offer our strong civilian sensor and system offering also to the defense customers.

As said, today, it's a fairly small part of the business. And we do see at the moment that there is an uptick in demand.

Okay. Then a question from Matti Riikonen. The addressable market sizes that you presented are clearly lower than a year ago. So what is the time frame for this market size estimate? Is 3 years a good proxy? What can you say about that?

As said, we have really now in the market a sharpened the focus to the serviceable addressable market or for the coming -- upcoming few years. As said, we do continue to see longer-term market opportunities emerging. For example, in the wind operations market towards the end of the strategy period. So really, the way to think about is to think that for the upcoming few years, we do not see growth in the renewable energy market, and at the same time, we do believe that in the long term, there are more opportunities. We have a very strong portfolio and a very competitive product, both the LiDAR and sensor offerings in the renewable market.

Thank you very much, Anne. Thank you. We have about 15 minutes time, I'm soon about to wrap up, but I still have some questions here that I would like to take into discussions. So maybe I'll now start with the one that I almost asked earlier. So a question from Nikko Ruokangas. So your renewable energy market estimate is down EUR 400 million, EUR 500 million a year ago, now to EUR 150 million, which is a big change. Your sales for this segment has not been declined more than 50%, like your market estimate. Does this indicate that you have not yet seen the worst in the renewable energy? And do you think that your group sales growth target is realistic to reach before the renewable energy returns to growth?

Well, if I start from the end, so if I wouldn't believe that the guidance that we have been given and restating today, of 7% average growth rate. No, I shouldn't be holding my job either. So -- so it really will continue to believe in the long-term growth of the company. And as I said earlier, the attractive mix, there's some mix and underlying robustness that we have so many different drivers under the different businesses that we have. If now we have a little bit of a challenging time in renewable energy, then we have other businesses which are seeing the contrary trend.

Then I will now -- I'll take some questions from the earlier that I -- that we didn't have time to discuss then. So about the tariffs, a question from Matti Riikonen, when you raise prices for products targeted for the U.S. markets, it covered the increased cost due to tariffs, but it lowered your gross margin. Can you raise prices again, say, next year to return to the previous gross margins?

So yes. And mathematically, Matti, you are exactly right. As we discussed earlier in the quarterly call, that's -- so there's a slight dilution. When we say we compensated entirely the tariffs through pricing activities. That means that we be compensated in the bottom line. And if you do the math, there's a slight dilution of gross margin percentage, short term.

Now long term, of course, I mean, there's opportunities to move prices as the market -- depending on how the market allows and market -- our competitiveness allows and we work obviously that in multiple different ways, not only through pricing but also through the attractiveness of the portfolio that we offer to increase the profitability of the company as we scale up also the net sales.

Then a couple of questions about Xweather. This one is from Nikko Ruokangas. Has the renewable energy market turbulence in U.S. recently being visible in your Xweather business?

Not really. Not really. I think, again, it shows the -- as I guess the theory should say that when you have a subscription business that should be much more continuous over cycles than a product or a project business. And that's what we've seen also in Xweather. So we have not really seen kind of any adverse impacts on -- in kind of a short-term cycles in the marketplace.

Then about ex weather growth question from Matti Riikonen. Can you still accelerate organic growth in the next 3 years?

I think Samuli answered that question at -- we have a big market that we are serving. We have been looking at it in a very focused way. There's lots of opportunities, both in terms of upselling to our customers and increasing revenues that we can get from our customers, finding new customers kind of getting into new geographies, as Samuli was explaining, let alone kind of venturing into adjacent markets. So there's plenty of room to grow. And then it's up to us how well do we execute on that opportunity.

Then a question from Pauli Lohi. I think it came during Samuli's presentation, but maybe you could think about Vaisala overall and the M&A. So is there an interesting M&A opportunities left in the hardware field? Or are your aspirations more targeted towards enablers of service growth?

There's always opportunities on...

Sorry, this is I think Jarkko's presentation.

Yes, the opportunities on both sides. And we continue to look at as Jarkko was saying, we continue to look at on the hardware side, and we continue to look at on a service, on subscription or data side as well. And as discussed, predicting on M&A. M&A is nearly impossible, it requires 2 willing parties. And we actively look at the marketplace at the same time, as explained earlier also. We are very focused on what type of an M&A we want to do. It really needs to be creative to us needs to be something that we feel that we are a better home for an asset of our company than what it is as a stand-alone, we can help it to grow faster than it can be as a stand-alone that needs to be the synergies of one kind or another.

But that being said, I think there are opportunities, but kind of timing on executability of any of them kind of is something that as Samuli put it, it's more difficult to forecast that than weather.

Yes. Then Nikko Ruokangas has a couple of questions about data centers and industrial markets overall. So perhaps I will try to ask some -- those things that hasn't been answered just yet. So about the data centers, how competitive is our product offering in the data center?

So our products are for data center, the promise is exactly the same as for any other segments. We promise that our products are the most -- we provide the most accurate and most reliable measurement capabilities, be it on a data, be it on a service or be it in a product. And that's what we holds very much true in the data center side.

As Jarkko went through, it's a 1/4 of the entire spend on energy is coming from a heat dissipation or many of the heat dissipation in a data center. It's a big amount of money, especially when the data centers are getting bigger and bigger. So the accuracy, reliability really, really do matter. And I think I feel very confident on the competitiveness of our offering.

And then continuing, Jarkko talked about Vaisala's current sales exposure today and how the life science batteries, data centers, what's the size is. But then looking at this question is from Mikkel as well, looking 3 years out, how would you rank them by growth potential?

I would hesitate to give you kind of a ranking of what I would say, all of them actually quite lucrative markets. And kind of if you look at even like not our word, but the third party is word on how will data centers grow, how will life sciences, be it pharma or biopharma grow? How much investments will they be on the data grids? We all know semiconductors power, among other things, all the ventures into investments into and so on. So I think the bigger picture here is that it's very interesting to look at the markets that we serve that are actually growth markets and full opportunities for the next-generation technologies that these markets actually require. I could talk about the next generation of batteries, which will require even more accurate and more reliable measurements. Similarly on the data -- on semiconductors, similarly on pharma or biopharma. So there's lots of innovation room not only growth where we can add even more value.

Then a question from Nikko Ruokangas about the weather, energy and environment. So you indicated that the demand is now normalizing in the meteorology and aviation following a bigger modernization wave. Have you seen the demand continuing declining sequentially now in the second half from the high levels of '23, '24? Or do you think your orders in Q2 and Q3 this year already reflect fully the lower cycle bottom?

Well, so again, in -- especially on when we look at the meteorology aviation road side of the business, when comparing kind of a year-on-year or even historical ways, I would argue that even a quarter is a short period of time that this -- the business actually goes in a quite long cycles. And I feel actually kind of show very much the view that Anne was saying that we are prepared, kind of, first of all, profitability even in a low cycle.

But at the same time, if I look at where we are today, if you look at our order book at the end of third quarter, for example, that we had for kind of coming year. We don't have to go that far in the past where we had in -- kind of we were in a similar kind of a size of an order book for sequential year and the sequential year was not all that bad.

So I think -- you can look at this glass half full half empty as well. But I think here, things are moving. We have a good pipeline, and it's not at all kind of the market would be falling off or anything like that. It's a robust market that has its cycles, as Anne was explaining.

Perhaps time for one more question before wrapping up. This is from Waltteri Rossi about weather, energy and environment. So with practically no growth expected in weather, energy and environment in the coming few years, do you expect the business area, excluding Xweather, or weather, energy, environment to still contribute positively on improving the EBITDA percentage of the company.

Yes, we are not giving guidance on individual kind of a business or a business segment level that -- so we'll talk about our guidance, first of all, for next year when that time comes. I feel confident about the kind of the guidance that we are giving in terms of as a company. As a company, we are committing to 7% average growth rates and with improving EBITDA percentage kind of going forward as a long-term guidance. .

Thank you. Thank you very much for attending the questions. If there's anything that was left unanswered or you would like to further discuss about any topic. So please do not hesitate to reach out our Investor Relations, and we will then try to provide some more answers to you.

But now time to wrap up this webcast. So Kai, maybe a few closing words.

Yes. So back to kind of what I would like to -- you to remember out of all of this is that Vaisala has a very, very robust strategy in a changing world. We have an interesting business with on one hand, gives us a robustness on the changes that we kind of -- everybody is facing in this kind of a market environment in the world we are living in. At the same time, when we look at our business mix from a growth perspective, it's actually quite interesting. There is -- over half of our business is actually growing, and the underlying businesses under whether we talk about Xweather or when we talk about it. The industrial measurements are kind of quite interesting and a possible positive dynamic. .

I will just summarize it in such a way that we really have a key for profitable growth with strong profitability going forward. Thank you very much.

Thank you very much, and have a nice week.

Hello, and welcome to Vaisala's Third Quarter Results Call. I'm Niina Ala-Luopa from Vaisala's Investor Relations. And today with me in this call are President and CEO, Kai Öistämö; and CFO, Heli Lindfors. And like always, first, Kai will present the results, and then we have time for questions.

Hello, and welcome, everybody, from my side as well. Vaisala had a good third quarter, strong sales and profitability as the headline says. So, let's dive a little bit deeper where did it come from and what are the details behind.

So, first notion, the net sales growth was strong, 13% in reported currency, which can be characterized really as strong sales in a quarter. The orders received simultaneously declined by 21% and leading into a decline in the order book. Whilst when going back to the financial performance, we maintained a very solid profitability, 18.2% EBITDA margin. And if I exclude extraordinary items due to the restructuring and so on, actually, the EBITDA margin was 20%, which I think is all-time high for us in terms of an EBITDA margin, if I recall right.

Really happy on Industrial Measurements on the demand picture and now clearly also broader than earlier. And on demand and on the other hand, Weather and Environment side, more challenging market environment, and I'll talk about both in detail in the coming slides. And really happy on the subscription sales growth continued to be very strong, 57% year-on-year and also the underlying organic growth on a very healthy level. And as I said in the release already, it was great to see also subscription sales now contributing positively also to the profitability of the company.

The market environment continued to be challenging. If you think about the entire third quarter within -- inside of the third quarter, we kind of we start -- it started with the tariff changes and kind of fixing the tariffs between Europe and U.S. And then at the same time, during the year, continued in the third quarter, the depreciation of euro vis-a-vis USD and Chinese yuan. So, the environment has many moving parts, and the depreciation of euro, dollar and renminbi really are things that don't often get talked about as much as the tariffs.

But actually, if you think about it, like the magnitude of the depreciation of those currencies vis-a-vis euro, the impact actually is equal, if not greater, than what the tariff impacts actually are. So, it's good to remember that as well. And as I will conclude at the end of my presentation, the business outlook for the year 2025 remain unchanged.

But before going into the numbers and performance of the company in more detail, good to look at a couple of words on strategy execution inside of the company and this time in terms of a couple, we picked a couple of kind of interesting launches that are reflecting also the strategy and strategy execution of the company.

The first one, Vaisala Circular, it's a service product and the emphasis really is on the word product, where the industry measurement probes are recalibrated and provide a reuse service where the customers maintain a dedicated pro pools at our service centers. Essentially, what it means is that we have productized the calibration service in such a way that now we are selling always accurate on uptime and continuous operations in our customers' operations instead of talking about calibration or other technical terms.

This is obviously kind of crucial in terms of selling services that how do you productize it, crucial for the customers to understand what's the value and crucial for our sales to actually then be able to communicate what the value is and what the customer should be paying for. So, kind of a great example of the things that we are doing to drive our service sales, both in Industrial Measurements where Vaisala Circular is an example of, but we are doing similar things also in the Weather and Environment side.

Then on Xweather, the hail forecasts. Hail actually is one of the more difficult weather phenomena to actually forecast. And it's been really one of these places where -- one of the things that really is -- has been really a challenge for meteorologist for a long, long time. Super happy to report that now we have an Xweather hail forecast. And hail is really important in terms of the damage it causes for various kinds of a property or infrastructure.

For us in Finland, the hail sometimes gets to be kind of pea size and even that can kind of cause some damage. But in more southern countries where more extreme weather and extreme thunderstones typically are when hails get to be baseball sized, they really can kind of create quite a bit of damage. And it really is like billions of dollars losses in various kind of places.

The example we are showing here where we can apply the kind of capability to forecast and create alerts for hail is solar parks. And if you think about solar parks, there's a whole host of glass facing upwards. And in case of a hail that's really prone for damages. And if you think about solar parks, one of the features is also that in many cases, they actually track sun, i.e., they are turnable. So, in case of hail forecast, you can actually turn them sideways so you can avoid the damages. And there's a kind of a big market and unsolved problem that we are solving for here with hail forecast as an example.

And then WindCube, the next generation. Here, this is really, again, a good example of how we push the boundaries of the technology with our own R&D. With this evolution on LiDAR technology, we can actually increase the distance out of which we can read the wind and the wind fields, increased data availability and much, much more robust performance in clean air and complex terrain environment. So significant step-up in terms of our performance, which I believe both demonstrates our capabilities and is important for that business and puts us squarely in the lead also from technology and solution and performance perspective in that business.

Then moving on to the financials. So, starting with the group level, strong growth, as I said, with -- in both business areas. Orders received decreased as talked about, and I'll still kind of talk about that a little bit later when I go into the business areas because there's differences in performance side. Order book consequently kind of down from same time last year. And then net sales-wise, a very strong quarter, 13% up year-on-year. And if you take the constant currency side perspective, it would have been 16% up from year-on-year, same time, so third quarter last year.

Gross margin, a bit down, and I'll give you -- it's easier to explain when I go through the different business areas. Nothing dramatic about that there. And then on the profitability side, as I said, if you exclude the restructuring side, actually the EBITDA margin being all-time high, at least in my recollection. And cash conversion, no news there remained on a strong level.

Now going into Industrial Measurements, yet another strong quarter and really happy to note that now the positive results are coming from all market segments and all geographies. And super happy to see that now Asia performing really well compared to the same time last year, equally so -- almost equally so, Europe and at the same time the U.S. growth continuing. Obviously, in the U.S. and in China, for example, where the local currencies have devalued vis-a-vis euro, that has a negative impact. If you -- like if I take, for example, U.S. in a constant currency, year-on-year growth was 9% in Industrial Measurements in Americas region.

And I promised to talk about the gross margin in the business area side. And if I take Industrial Measurement side first. So, first of all, what I forgot to say is the orders received actually increased on the Industrial Measurement side, corresponding to the net sales growth, actually a little bit more increased 9% year-on-year here when the net sales grew 6% in reported currencies.

But back to the gross margin. So gross margin decreased a little bit. And this really is due to exchange rate impact, but clearly, kind of big part of the impact was the proportional impact on the U.S. tariffs. And here, maybe worthwhile kind of just pausing and explaining the math that we've said that we have been fully mitigating the tariff impacts in our business. And that means that we've raised the prices correspondingly to whatever the tariff costs have been.

And if you think about how that math works, it means actually that the -- even if it's fully mitigated in absolute terms, since the divider and the above the line and below the line kind of when you do the division are added the same amount, the relative number actually goes somewhat down. So that's really like if you have time, just play with the math and you'll see what I mean. So that's a big part of the explanation.

So, I am not worried. It's within the normal boundaries in terms of what the gross margin changes have been and it's worthwhile saying also that while we are in the Industrial Measurement side, it's obviously easier to kind of mitigate by price changes, extraordinary events like the import duties and such changes in import duty regimes compared to fluctuations in currencies.

Since we price and any global company would do the same, price in local currency, you cannot go every time currency exchange rates go back and forth, go change the local pricing. Obviously, long-term, there are kind of pricing means to compensate this. But short-term, you cannot kind of react to all of this, and it would not be constructively taken either from a customer perspective.

Then Weather Environment. In net sales, actually a great quarter and subscription sales-wise, equally so. At the same time, the orders received in decreased in Weather Environment, driven by a couple of things. There's a strong decline in renewable energy market, as we have been saying since the first quarter of this year. Nothing has really changed on that. And there was kind of a significant change in the market in the beginning of the year, and it continues to be on a low level, and we do not expect that to change in any time soon. And I'll come back to that in the outlook.

And then likewise now in aviation and meteorology markets, there was a very strong comparison period and kind of big orders taken in the comparison period last year. But also this part of the market, when you take aviation and meteorology, there is a fluctuation between kind of natural fluctuation in those markets as well as this year, where there have been a couple of headwinds that we talked about before, one being the China investments due to a large extent, I would argue, to the fact of the cycle in terms of the 5-year plan this year being the last year of the 5-year plan and very often being the least investment in at least in this sector.

So that we have seen that in declining order intake and then simultaneously, the administration changes and so on impact on delaying the order intake in this year in the U.S., which obviously is another contributor to this. And then there are kind of gives and takes on the rest of the market, which is within the kind of, I would argue, in the normal boundaries.

And good to remember in the comparison period in the aviation and meteorology side on the back of really kind of a very strong now 2 years in terms of an order intake, really driven by the European stimulus fund on the radar networks in Southern Europe, most notably in our case was the big order that we got from Spain, but there were multiple other ones that we benefited from as well during the past year, 1.5 years that are still in our order book, and are being executed.

Now on the gross margin side, a decrease of 3 percentage points. Sales mix, a stronger portion of the project revenues being recognized. So that's in plain English, what the sales mix means. And then same things as what I talked about in Industrial Measurement side on exchange rate and the U.S. tariff impacts, albeit somewhat less pronounced in case of Weather and Environment as the sales mix it's not as heavily weighted in euros and dollars or the U.S. business is a little bit less than what Industrial Measurement is.

And then EBITDA percentage being on a very healthy level of 14.6%. I mentioned the cash flow continued on a good level. Here you see on the bridge on puts and takes on the cash flow and cash conversion being at excellent level of 1 and free cash flow around EUR 40 million during the period.

Now if I look at the year-to-date, both net sales and profitability clearly improved during the first 9 months compared to the same time last year. And orders received did decrease by 13% year-on-year and while net sales grew by 9% year-on-year. And subscription sales, if I take the first 9 months of the year, almost incredible 58% up, obviously boosted by the acquisitions of WeatherDesk and Speedwell Climate, but also a great performance on the underlying organic growth. And then gross margin, slightly negative, again, same explanations that I went through. And then on EBITDA percentage and EBIT percentage up from comparable time or same time last year.

And then worthwhile saying on the operating expenses, the restructuring costs, as I said, also in regards of this past quarter have been not insignificant as we have been adjusting our renewable energy business to the new market reality. And that's now behind us, that restructuring. And then acquired businesses and so on other explanations when you look at the year-on-year comparison on operating expenses.

Financial position continued on a very good level, low leverage on the balance sheet, and we continue to have asset-light business model, no changes seen or foreseen in that. And on this page, I think it's good to note that the automated logistics center is now in a phase where we are loading it. So, it's actually fully in schedule, and we are putting material into that and starting to use it as scheduled in the fourth quarter of this year.

And then also notable thing during the quarter was the acquisition of Quanterra Systems. Think about it this way that it's kind of an interesting team and technologies on monitoring CO2 fluxes, which means question whether individual geographic area, field or piece of land is a carbon zinc or carbon emitter, which a very interesting piece of technology, potential long-term kind of quite a bit of potential on that, and that was announced in September.

Market and business outlook. We continue to see growth in industrial, instruments, life sciences and power, we continue to see roads as a stable marketplace. And then renewable energy, meteorology and aviation decline, and this is outlook for the rest of the year. And obviously, the renewable energy being kind of a clear change in the marketplace since the beginning of the year, whereas the meteorology and aviation now suffering a slightly different market conditions, as I explained before, in terms of the government subsidies and government incentives kind of on a lower level than when we compare to last year.

And then on the business outlook, no changes to this. We continue to see the net sales to be between EUR 590 million and EUR 605 million and operating result being between EUR 90 million and EUR 100 million.

With that, I want to conclude my prepared remarks, and I'll open up for any questions you may have.

[Operator Instructions] The next question comes from Nikko Ruokangas from SEB.

This is Nikko Ruokangas from SEB. I have 3 questions, and I'll go one by one. Starting with Weather and Environment and orders, which you already discussed, and you told the reasons why they have now declined for a couple of quarters. But should we soon start to see the trend in orders happening there? Or has the demand continued sequentially weakening? And then do you think that the U.S. government shutdown could affect you now in Q4?

Yes. So obviously, kind of when we talk about we compare to year-on-year kind of things will obviously, when the comparables change, then that will change. Your question was on a sequential basis especially aviation, meteorology, things kind of come as they come. So even if there would be like numbers improvement or decline from one quarter to another, it would be hard to make a conclusion out of it since it's a lumpy business as a starting point.

As I tried to explain on meteorology and aviation, it is more of a -- it's a bit of a cyclical business where now we have enjoyed, I would argue, almost like exceptionally high cycle in it for good almost 2 years. Now it's more on a normal basis, what it looks like. So, I would not be overly worried about it where I'm standing today.

Then, on the U.S. government shutdown, it's a great question. And so, 2 comments on that. We've seen the budget proposal, and I would be actually happy, and this is the government's budget proposal, not minority budget proposal. I would be happy if and when that is approved. So, I have no issues with what is proposed. The shutdown itself, obviously, during the shutdown and getting a new order for next year since there's no budget approved nor and then there are a whole host of people furloughed. It's postponing things.

If I look at bit on the history, typically, what has happened is that during this kind of U.S. government shutdowns, the orders will just come a little bit later in. But if I take kind of 12 months average or what kind of a little bit longer time series, it will normalize itself post the shutdown. So, it's like a little bit plowing snow in front of a snowplow kind of a thing, at least has been in the past. And we'll see how long it will last, it can stop tomorrow, or it can be continuing for some time.

Yes, I understand. Then on the guidance, as it indicates for Q4, clearly kind of year-on-year basis, weaker sales and EBITA development than now in Q3. So, is this basically explained by smaller project deliveries expected for Q4?

A big part of it is also very high comparable. If I actually go -- and I'm usually not doing this, I'll try to go back in my slides just to illustrate what I'm saying on this slide. And it's not this slide, here. So, if you look at this slide, it's kind of like highlights the unusual nature of the last year in terms of how the order intake kind of behaved and especially net sales behaved that we had a very weak first quarter, very strong second quarter, weak third quarter and a very strong fourth quarter.

And if you went back into '23 or earlier years, typically, the second half, both quarters have been stronger. Typically, even the third quarter has been stronger than like second quarter clearly on an average year. So, there's a bit of when you compare to year-on-year kind of numbers, the anomality of last year makes it a bit harder this time around.

And I think the second topic is actually the FX that Kai was referring to earlier on. So, in the beginning of the year, the FX was still more similar level to last year, whereas now in the second half of the year, we see more of an impact of the volatility of the FX. So that will definitely be a factor in Q4 as well if the kind of rates remain as they are currently.

Correct. And it's again, a good illustration of that. If you go back and look at our second quarter results, we said that there was not really a material impact on FX yet.

Okay. So, this year, more normal seasonality expected than last.

Correct. Correct. Correct.

Then last one from me, at least at this point on cost side. So, you mentioned the EUR 3 million restructuring expenses. So, if we leave those out, so to me, it seems that your operating expenses were down in weather despite the acquisition or fixed expenses, but then clearly up in Industrial side. So, if you exclude those restructuring expenses, were those including something extraordinary? Or is it kind of describing the trends you are now having?

Yes, the extraordinary costs, as I said, was they were related to the restructuring that what I talked about in relation to the energy business and renewable energy business. So, I think your conclusion was exactly right. And like if you look at our numbers, and we have now a good trend also on the Industrial Measurement side, we have been a little bit longer kind of time series again, over the past 2 years where we had more modest growth, we were more conservative in spending and spending increases in Industrial Measurements. And now we see kind of clearly more growth opportunities and a bit more spending, not going wild, but a bit more spending on Industrial Measurement side.

The next question comes from Pauli Lohi from Inderes.

It's Pauli from Inderes. I would start with this demand-related question. Have you seen any signs that the increased tariffs could start to dent the good market activity you have seen in the U.S. market or elsewhere compared to what we have seen already this year?

So elsewhere, I don’t see it go – it could have – now I understand your question. So okay, no, answer is no. We can't point anything in the U.S. or anywhere else, that would be at all related to tariffs. It's been more positive than what would have speculated pre-tariffs.

Well, that's definitely positive. And your scheduled deliveries for the rest of the year in the Industrial Measurements are a bit lower compared to Q3 last year. So, do you think that the current favorable market activity could still offset this?

No, Pauli, remember what Heli just said in terms of the exchange rate changes, which is, if you compare to last year, I think we are about 15, 16 points cheaper dollar than it used to be a year ago, and Industrial Measurements and Xweather are highly exposed to dollars.

Also, in dollars and renminbi. And especially for the Industrial Measurements, the renminbi is also very important currency.

So, it's not [indiscernible] then you can draw your own conclusions. I would not be worried about the demand picture per se.

Okay. Then, regarding the cost base, how large savings you expect from the recent restructuring on an annual level?

We have not communicated that. I'll put it this way that when we said in earlier quarters, similar calls, we've said that we are going to adjust our operating expenses to the level that matches the market picture on the renewable energy business. We've now done it.

All right. Then, regarding the new logistics center, do you expect any short-term cost-base increase or operational extra costs from starting to use the new center?

No, no, no. Absolutely not.

And do you see that it could provide any material financial benefits next year?

Over time, I think it clearly -- I mean, if you think about it now, fully automated material flow, it should yield into kind of a better rotation days, better management of the inventory, multiple benefits in terms of how much capital is tied into an inventory, and different tools also to optimize that inventory. So obviously, we have a business case, and over time, this is an investment where we expect a payback as well.

Okay. Finally, on Xweather, do you think that the current roughly double-digit organic growth rate is sustainable going forward? Taking into account the new product launches and maybe potential synergies from the recent acquisitions?

Yes. So, short answer, yes. And here also, short-term, we have to take into account the currency exchange rates when we look at the euro reported numbers. But typically, we do the pricing changes at kind of around the year-end in all of the businesses, well, at least Industrial instruments as well. So, we need to then see how those impact kind of going forward as well, depending on how the exchange rates then turn out to be.

The next question comes from Waltteri Rossi from Danske.

A few questions. First, about the Industrial Measurements orders in America. The report said that they grew slightly. I think the wording was a bit softened from the previous. So, have you seen any changes in the activity level in the Americas? Or is this only related to the FX?

So, I think I earlier said that it was a 9% on a constant currency level year-on-year. And if you look at the reported currency, it would have been 2%. So here, you see kind of direct impact on the currency exchange rate. I would be very happy with the 9%. I'll offer you that.

Okay. Okay. Perfect. But you don't disclose how much the Americas is of the Industrial Measurements orders. Can you give us...

Not on orders and not on a quarterly basis, but it's clearly the biggest market that we have, and it's clearly north of 1/3 of Industrial Measurement sales.

Okay. Okay. Then, about the Xweather business, it said that over the past quarters, it's actually been contributing positively at profitability. So, does that mean that the segment is now making positive operating profit already? And if so, are we talking about a low single-digit margin, or what?

We are not reporting that business separately. So, I will decline to answer you. So, we have not quantified. But contributing positively kind of would imply that it actually makes money.

Yes, yes, sure. But I was just making sure that we're talking about EBIT on an operating profit level. But kind of...

Remember on the EBIT level, we did the acquisitions last year. And that's obviously kind of the amortizations of those assets raised the hurdle on one hand. But if you look at on an operating profit side, then that's what I'm referring to.

Okay. Okay. So, we should still expect that you are continuing to invest in the growth of that business and shouldn't expect the profitability to kind of start to improve or scale up from now on?

Yes. Well, if software business grows 50% year-on-year, one should expect that it scales.

All right. But you are still keeping the view that you are shifting focus from growth to clearly start improving the profitability side only later during this strategy period?

No. There's no shift between profitability and growth to be foreseen. It's always -- like when you are scaling a software business, it's always a kind of a trade-off, of how much you invest in the growth. And typically, in this kind of a software business, it really is investments into sales and demand generation rather than increasing the R&D when software businesses are scaling.

And then the return on investment should be quite quick. And it's relatively easy to verify as well, kind of from a cost of acquisition side. If you kind of invest in customer acquisition cost, you can actually measure what the return on investment is, and it really should be quite quick.

Okay. Okay. Lastly, as of now, earlier in the year, the expectations were kind of lowered because of the U.S. tariffs and how they will impact, especially the Weather and Environment public side sales. How would you describe the impacts of the tariffs on public sales this year today? Like, has your view changed since at all...

I would say no impact so far on the Weather and Environment sales in the U.S. from the tariff side. As you may recall, we did kind of a plan for the tariffs, and we mitigated the tariffs by actually shipping into our own warehouse in the U.S. so kind of that we have a little bit of time to pass the tariff costs into prices. And I think we are executing against that plan very well.

The next question comes from Joonas Ilvonen from Evli.

It's Joonas from Evli. I have a couple of questions about Industrial Measurements. You already discussed this question of cost, but if I can come back to it. So, I think like R&D costs were down this quarter at a relatively low level. And of course, I think there's always a bit of like a quarterly variation when it comes to that.

But then also you say -- and I saw your total OpEx still grew quite a bit, albeit it was still at a rather moderate level. But you mentioned this investment in sales and digital capabilities. So, my question is that how do you see the kind of overall Industrial Measurements investments continues to grow from now on? Like, do you expect it to grow basically at the rate of sales volumes?

If I take all kind of that will be a good approximation over time. Obviously, these things change over, like vary over quarters, and the quarters are not equally strong, and so on. So, kind of different quarters are a little bit different. But over time, that's a good proxy.

Okay. That's clear. And then you mentioned IM APAC growth that was especially strong. So, was this mainly due to China? Or were there any other countries there you would like to highlight, and which specific industry groups, like you mentioned, life science and power in your report?

Yes. As I said in the prepared remarks, if I start from the kind of latter side of the question, it came from all segments in the Industrial Measurement side. So, all market segments, grew. And it's both in China and outside of China. China did have a marked change compared to the second quarter, clearly having more market optimism in the third quarter, great to see. But it was not only in China, it clearly was outside of China as well.

And if I pick one very interesting market, which continued to be strong is Japan, and where obviously, lots of industrial activity, and we have a great position in Japan in various different segments, but not only those 2 markets. It's broader than that.

All right. So, there weren't basically any kind of weaknesses in terms of geographic regions or...

No, no, not that I can think of.

Okay. That's clear. And maybe one last question. So, you already discussed this IM gross margin headwind due to exchange rates and tariffs. So, it's going to fade at some point, but did you comment on when exactly is it going to? Does it still continue over Q4 or into next year? I mean, considering how things look right now?

Yes. So, 2 things on, if you look at gross margin, and this was a bit on the net sales side as well, what I tried to say earlier, one thing is we -- and then they function differently if you think about FX and then the tariffs. The tariffs, what I said and what we've been saying all along, is that we fully mitigated that by raising prices. And that has kind of by itself a negative relative impact on gross margin.

And I'll do you the math, pardon my details here. But if you think about that -- let's imagine that the transfer cost out of which the tariffs are counted would be 100 units. And then you put a 15% tariff on it. Now that cost would be instead of EUR 100 million, that will be EUR 115 million. And you fully move that into the sales price and let's do an easy math and call it like it's EUR 200 million and you put EUR 15 million on top of EUR 200 million. Now you fully mitigated it. And if you do the relative calculation, there is a negative impact on relative number.

All right.

Sorry about that. I think it's good to understand that that's when you -- and then on FX, as I said, you can't manage FX-related changes within a quarter or within a half a year. You cannot like fluctuate your local prices based on exchange rates. But we do try to be smart when we do the annual price increases as we do every year in the beginning of the year. So that's a chance of actually taking the currency exchange rates and our costs and everything else into account.

[Operator Instructions] The next question comes from Matti Riikonen from DNB Carnegie Investment Bank.

It's Matti Riikonen. And sorry if I have to ask some questions again because I had to jump to another call for 15 minutes during the presentation. So, some of the questions might have been asked already.

So, I start with the math question that Kai you just explained. So is it in rough terms, we are talking about that the price increase that you made, it covers the kind of cost price, but then the margin that comes on top of that doesn't follow. So, you are not getting the compensation for the lost margin compared to the normal situation where you put the kind of markup to the imported price.

Yes. And even if you put a markup to it, you can do the math in different scenarios, how much of a markup you need to do in a high gross margin business in order to kind of mitigate the gross margin if you -- and there's obviously a limit how much you can pass on the costs if you think about the tariff a drastic change in the middle of the year, it's what's acceptable from a customer side.

So yes, in a way, what you asked for. And then I'll go back to what I just said that beginning of the year, we are going to review our prices anyway, and we are going to look at different kinds of costs and things that where do we put the prices going forward.

Yes. But basically, isn't it always so that when the new year begins, you are trying to kind of achieve the same profitability level or higher what it used to here. So, it takes some time for the following price increases to kind of correct the situation into what it was from there.

Yes. That being said, when the book-to-bill cycle is 3 weeks in the Industrial Measurement side, that's pretty fast.

Right. Then regarding the Weather and Environment, when you talked about received orders and how they were kind of suffering different things, you meant that there's also industrial cyclical fluctuations or I don't remember what the term that you used was. But what does that actually mean in the Weather and Environment business? So, what kind of industries are there on the customer side that are affected if you're not talking about the renewable business, which I would...

No, I was not talking about the renewables business. And maybe I'll just explain it a bit more. So, it's not really an industrial activity. Think about it this way that this is -- it's a relatively small market in the end, I mean, in the total market as we are the market leader in terms of an absolute market leader in this. So, you kind of -- it's a relatively small market.

And then many of the products are having their natural cycles and sometimes they are quite long cycles. So, if I take the radars that we just sold, I'm not expecting the same kind of a complete renewal of Finnish network until 15 years from now or something like that. And here, relatively small individual things like the COVID-19 fund to renewal, which was used to renew Southern European radar network kind of increased the tide a bit and now the tide is kind of lower as we speak.

But that has been a phenomenon, if you go on a longer-term kind of a history in meteorology and aviation that the relatively small 2 big airports get to be built at the same year, kind of increases the size of the market and the years are not exactly the same. So, this market kind of just has a phenomenon where there's a relatively small discrete demand changes change the size of the market somewhat.

Yes. Okay. And that clarifies because maybe the wording in the Finnish stock exchange release was about the industry and basically, it means the sector where you operate in the crisis.

Correct, correct. That's good. Thank you, Matti, well spotted.

If we then think that these sector changes tend to be quite slow and one year is not necessarily enough to make it go away. Are you afraid that this would continue also in 2026?

I'm not talking about the order backlog, which you already have or the Indonesian order, which might come sometime next year, but basically new weather orders that you were -- or you are expecting every year. Is there a danger that we would see an even slower 2026 when it comes to new business?

And if your order backlog is decreased this year, then, of course, you would have less to kind of deliver in '26 based on old kind of order backlog. Do you think that is a kind of risk that you would like to highlight? Or of course, you have to take a stance on that when you give the guidance for '26. But at least -- I mean, at this point of the year, you probably already know, and you have made some internal plans how it's going to be in the weather business in '26. So, any thoughts on that would be great.

Correct. Yes. So let me answer -- well, it's exactly like you said, we're going to give guidance next year when the time comes. But let's think about it this way that there are the product sales, which are selling to existing projects and existing customers and the fluctuation on that business is very small.

The fluctuation really comes from the kind of new projects and bigger and smaller and so on. So, there's kind of a level that has been at least relatively stable in the past, and I don't see any changes why that assumption should be different going forward.

But then how will individual projects come through and so that obviously will not only impact our sales but actually like if kind of a couple of big orders come -- big projects come in a half a year, that kind of theoretically means also irrespective of who wins that impacts the entire market as well.

All right. So we will wait for your guidance for '26 to see that what is your plan that you promise to deliver.

Correct.

Okay. I'm just saying that it doesn't look so good when this year, of course, the order backlog has been decreasing. And when you have basically negative outlook for all key metrological...

For the rest of the year. Remember the outlook.

What would need to happen that it would kind of recover to a normalized situation in '26. Do you foresee some positive changes to this current trend, which you have now said that will impact '25, but do you see some positive triggers that would change the situation for '26?

Yes. Like I said, so as the market impact -- market size is really individual like bigger orders can swing that different ways. So that's something that is, as you know, historically, it's really, really hard to say when certain things kind of come through. The pipeline remains on a good level on new projects. But kind of a flow through the pipeline continues to be very unpredictable as it has been in the past. So...

All right. Fair enough. Final question, you already touched the topic of Industrial Measurement and some investments in digital capabilities. Just out of curiosity, what kind of digital capabilities are you talking about?

So online as a sales channel, whether we talk about to our distributors or whether we talk about to the end users, especially on the services side. If you think about -- so today, it's mainly -- we don't have much of a sales through the digital channel. We are doing demand generation, but the actual sales transactions we do very little through digital channels and that capability we are building.

And very important, like kind of first it will have an impact on the services delivery side. But longer term, I believe, like in any other business, obviously, kind of -- it will have an impact on our overall sales, I believe, as well.

Does that mean that the existing customers would kind of want or need a different approach to maybe order from you? Or does it mean that you are seeking new business through those channels?

I think in the end, it will be both. And I don't think any businesses will remain as they have always been, and I'll just use the car analogy here that nobody ever believed that a car can be bought online and look where we are today. Try to buy a Tesla offline, then they will throw you online.

The next question comes from Waltteri Rossi from Danske.

So just to still clarify the Xweather profitability question. I was actually -- I think I was talking about EBITDA and operating profit as a synonym previously. But just let's talk about EBITDA. So, is the Xweather currently contributing positively on EBITDA level?

Yes. Subscription sales to be specific. That's what we report today. We don't report separately Xweather.

There are no more questions at this time. So, I hand the conference back to the speakers.

Okay. That was our Q3 call. Thank you all for joining. Thank you for the questions. Thank you, Kai.

And I would like to mention or remind that we will arrange a virtual investor event for analysts and investors on November 24. And there, Kai and our business area leaders will provide an overview of Vaisala's strategy and business areas. And you will find more information on the event on our investor website, vaisala.com/investors. But now thank you all for joining and have a nice rest of the week.