Earnings call transcript: Vaisala Q4 2024 shows strong growth, stock dips

Vaisala Oyj A, a €2 billion market cap company with a "GREAT" Financial Health score according to InvestingPro, reported a solid financial performance for Q4 2024, with net sales increasing by 14% year-over-year. Despite these positive results, the company’s stock fell by 2.39% in pre-market trading, reflecting investor concerns over future guidance and geopolitical uncertainties. The earnings per share (EPS) reached €1.76, marking a significant improvement from the previous year, while the order book expanded by 25%.

Key Takeaways

• Q4 2024 net sales rose by 14% year-over-year.
• Full-year net sales for 2024 increased by 4%.
• Stock declined by 2.39% in pre-market trading.
• 2025 net sales guidance set between €590-620 million.
• Order book grew by 25% compared to the previous year.

Company Performance

Vaisala’s Q4 2024 results underscore its robust financial health, with net sales climbing 14% from the previous year. The full-year net sales also saw a 4% increase, driven by strong growth in industrial instruments and life sciences. With a strong gross profit margin of 55.76% and impressive return on equity of 21%, the company’s operating margin for the year reached 15%, with an EBIT margin of 16.7% in the fourth quarter. These results highlight Vaisala’s ability to maintain profitability while expanding its market presence. InvestingPro subscribers have access to 14 additional key insights about Vaisala’s financial performance and outlook.

Financial Highlights

• Revenue: €[amount] (14% increase YoY for Q4 2024)
• Earnings per share: €1.76 (significant improvement YoY)
• Operating margin: 15% for full year 2024
• EBIT margin: 16.7% for Q4 2024
• Order book: 25% increase YoY

Market Reaction

Despite the positive earnings report, Vaisala’s stock fell by 2.39% in pre-market trading. This decline may be attributed to investor caution regarding the company’s future guidance amidst geopolitical uncertainties. Trading at a P/E ratio of 35x and currently near its 52-week high, InvestingPro’s Fair Value analysis suggests the stock is currently overvalued. The stock’s recent performance contrasts with its 52-week high of €54.9 and low of €32.6, indicating a volatile trading environment.

Outlook & Guidance

For 2025, Vaisala has set its net sales guidance between €590-620 million, up from €565 million in 2024. The company also projects an EBITDA between €90-105 million. While these figures suggest continued growth, the outlook remains cautious due to geopolitical challenges. Vaisala plans to focus on its purpose-driven strategy, "Taking Every Measure for the Planet," emphasizing sustainability and innovation.

Executive Commentary

CEO Kai Osterme highlighted the company’s commitment to sustainability, stating, "Taking Every Measure for the Planet." He also noted the transition from carbohydrates to renewable energies, emphasizing Vaisala’s strategic focus on growth in industrial measurements and renewable energy sectors.

Risks and Challenges

• Geopolitical uncertainties may affect future performance.
• Potential impact of US tariffs on operations.
• Market saturation in meteorology and aviation sectors.
• Supply chain disruptions could hinder growth.
• Variations in seasonality and profitability.

Q&A

During the earnings call, analysts inquired about the potential impact of US tariffs and the accounting for the WeatherDesk acquisition. The company also addressed growth expectations in various market segments and discussed the seasonality and profitability variations, providing insights into its strategic priorities.

This comprehensive overview of Vaisala’s Q4 2024 earnings highlights the company’s strong financial performance, strategic initiatives, and the challenges it faces in navigating a complex global environment.

Full transcript - Vaisala Oyj A (VAIAS) Q4 2024:

Kai Osterme, CEO, Waisala: Welcome to Waisala’s Fourth Quarter and twenty twenty four results call. I am Kai Osterme, CEO, and I’m joined here by Wille Wojpio, who is our Chair and Heli Lindferos, who is our CFO. Welcome to everybody. So the fourth quarter, it was excellent finish on very challenging year as you may recall. We started the year with the ERP planned ERP change and the industrial actions in Finland and a challenging environment overall in the year, challenging first quarter in terms of results, but we have been improving since the first quarter and finished really the year with an excellent fourth quarter.

And excellent, I would say, in all aspects whether we look at the net sales, if you look at that growth in year on year, 14% order book, 25% orders received, almost on par compared to the previous year, remembering that the year before year ago, fourth quarter, we got the Kuwait deal, which was historically the single biggest deal that Baesla has ever gotten, and that was booked in fourth quarter. So the comparison period was kind of extraordinary high. And even with that, we got to almost to the same level. And as a cherry on the cake, the operating result margin, EBIT margin got to be 16.7%. So I would argue that in all aspects, really an excellent finish of the year and an excellent quarter as such.

Before going into the actual financials more in detail, just a reminder on our strategy and a purpose. Our purpose is taking every measure for the planet. And the in strategy, there are four strategy drivers, customer understanding and application know how, that’s where it all starts. Then that together with a production and product and technology leadership, that’s actually the secret sauce for us. In combination then with excellence in supply chain, how do we actually find scalability in a very high mix, low volume environment as we are in and all built on purpose driven culture and talent With four strategies, growing in industrial measurements with breakthrough technologies, expanding in energy transition and building recurring revenue in data, driving profitability with global leader being global leader in weather systems and then finding always ways how do you make that scalable and simplifying our ways of working and finding ways how we actually can really scale the complex environment that we are in.

I’d like to kind of take a moment and actually with reflect of this on what we actually did in as an examples on what I just went through. I talked about the purpose that we had, Taking Every Measure for the Planet. It’s good to remember that we actually did quite a bit of work the year before and crystallized and launched Taking Every Measure for the Planet in February. And this is something which is not a major event last year, but it’s something a foundation. It’s something that will carry us many, many, many years going forward.

And we find this to be both extremely powerful and in guiding what we do. But it’s also very powerful in us differentiating ourselves in multiple different ways, not the least in terms of an employee market, whether it’s our own employees or future potential employees. Having a real purpose where you can actually talk to your near and dear ones where your work daily work really matters, I think, is a huge, huge asset. Then this is not only kind of us talking about sustainability of our model, our purpose, but it was great to see the recognition by Time magazine as being one of the world’s best companies in kind of combining sustainability with growth. And I think getting these kind of an external objective recognitions being one of the leading companies in the world and really the leading company in Europe, it really it was great testament on who we are and how we do things.

Few other things just to pick up from last year. I talked about the leader in weather systems. The fact that I think on this slide is the big deal that we got on nationwide weather radar network in Spain, Eighteen weather radars with the meteorological agency in Spain with a possibility on further expansion if things go in the right way, kind of major deal in scaling our weather radar business to a new level. We did multiple different three different acquisitions in terms of driving the growth in weather data and in energy transition. The fact that we also launched many, many new instruments and I’ll pick just one, which is the instrument meant for carbon capture usage.

And knowing that the carbon capture is a small business today, but our vision and belief is that it will be a big business end of this decade or in the 2030s. And it’s really, really important to be part of actually creating that ecosystem, understanding, getting the customer in-depth customer understanding in the early trials, in the early implementations. And it shows also the commitment that we have not only the short term growth, but the long term growth of the company. I talked about the operations side being the secret sauce for us. We started the investment into the new automated logistics center here in Vantaa, Finland, which is now in a kind of taking shape also in a physical physical way, kind of roof is there, the walls are there and then we are starting actually the implementation of the machinery inside.

It will be a key way of how do we take even further the capability to find scalability in a high mix, low volume environment. And all built on really a purpose and engaged employee a high purpose and engaged employee, which is shown by the employee Net Promoter Score. So overall, not just in terms of the numbers and the financial results, I think the there’s many things in year 2024, which we at Waisala can be very, very proud of building the foundation also for the future years and the success in the future years. Now moving on to the financials. So excellent operating margin, 16.8160.7% EBIT margin, kind of a really an excellent result as a result of excellent finish of the year.

For those of you who have followed us a longer period of time, there’s a certain pattern within the year how the our EBIT margin follows the different quarters. In this year, actually, we performed extraordinary well, both in the second quarter and especially in the fourth quarter, which then led into the year’s kind of a great result on the annual basis, but also it’s very visible on the fourth quarter EBIT margin as such. I talked about the orders received on almost on a level of the record quarter that we had a year ago on the back of the Q8 deal. Order book on a high level up 25% compared to the end of the previous year. And then net sales increased by 14% year on year in fourth quarter.

Net sales was driven by multiple different things, among which the large kind of one of the drivers was the large orders received during the earlier quarters and now being implemented and delivered to the customers. But also the kind of things like growth in the subscription sales, but also and also the pickup on of the pace in the Industrial Measurement side, which I’ll talk next. And as a back of the kind of higher net sales, the gross margin also improved clearly compared to the previous year. And cash conversion, I’ll talk about that as well a little bit later, continued to be very strong in the fourth quarter and throughout the year. So back now into Industrial Measurements, and I’m very happy to report the strong net sales growth in the fourth quarter.

The orders received increased by 6% year on year, resulting in order book up 5% compared to the same time previous year. Net sales up by 12% compared to year on year. This on the back of maybe couple of things I want to highlight. In these calls, I have said, I think, two times in a row that very early signs of recovery have been visible in the North America. Now I guess it’s time to call it early signs of recovery.

So recognizing that we have a third quarter in a row where we are seeing recovery. It’s still kind of early on the recovery to the full potential, but we are now having like a good kind of a traction on that. And then China was also a bright spot now on the fourth quarter and clearly great to see that being back on kind of a clearly a growth number after multiple challenging quarters in a row in Chinese market. And then as a result of increased net sales and the gross margin improved as well, leading into EBIT margin improving significantly to 21.2%. Then moving on to weather environment, the strong we kind of run out of the objectives now on weather environment.

The strong performance continued. I think this is now a fourth quarter in at least fourth quarter in a row with the same headline, but that’s what it is, strong performance continued. Slight decrease on orders received and the reason really was that we have the extremely strong comparison period of the year before. But order book, if you look at where the order book stands, at the end of the year, we are 30% up compared to the same time previous year. Net sales, really, really happy to report net sales increased by 15% when comparing to the same quarter previous year, driven by, again, the large orders in the previous quarters now being delivered and organic growth in subscription sales now being 18%, which is a bit higher than what the average for the year was.

And this all resulted in gross margin improving as well following the growth and a good mix in sales as well. Leading into what I would say, as long as we have had a weather and environment business area, the highest ever EBIT margin or finishing with 13.8% EBIT margin, which is really fantastic. Then moving on to other financial metrics on cash flow. We continued on a good level. The cash conversion from operating items, it was continued to be 1%.

And some decrease on cash flow from operating activities, mainly due to the increase in net working capital driven by the higher net sales or the net sales growth actually. But like I said, a strong cash flow continued on a good level. When we look at the full year operating result, great to see that we finished the year at 15% operating margin. The orders received grew by 7% and net sales grew by 4%. Gross margin improved, EBIT margin improved and leading into EPS of EUR 1.76, which is a significant uptake also from the previous year.

I want to take a moment also here to just to recognize as well that in 2021, we launched new strategy and a metrics for the new strategy for the strategy period of three years, where we said we would target to grow on average 7%. So 7% on average growth and end up with the operating margin of 15% by the end of the strategy period. And it really happy to report that we actually met the promises that we made three years ago. This is a fantastic slide to show continue to show that now over ten years in a row, increasing dividend if you take the additional dividend out. So kind of a but I think it’s fair to take out.

And this is not something that many, many other companies can show something to be really, really proud of as a continuum of and then shows how the company has been kind of a for a long period of time performing kind of a with a good momentum and improving metrics. So the proposal for the annual shareholder meeting is that the dividend is would be for the 2024, would be which is up from the previous year, driven by the higher profitability as I spoke. We continue to be on a very strong financial position. We are very we have a very low leverage on our balance sheet. The business model that we have is very asset light.

We have few investment. We did it both started investments and deep investments during last year. I spoke about the automatic logistics center here in Wanta Finland, which is progressing according to plan. And just to remind you, we expect that to be operational during the second half of this year. And then we announced and closed the acquisitions of Nevis Speedwell and WeatherDesk, both for the renewable energy and then for the data sales.

Few words on market and business outlook. So when we look at the market outlook for this year, we see growth in industrial instruments, in life science and in power. In power, this is a continuation of the trend that has been there for some time. And then on stable side, we see meteorology, aviation, roads and and renewable energy. Many of these are actually by nature a stable industries with some fluctuations between the years and such as the meteorology and aviation and roads.

They, by nature, as the markets are stable, and we see that to continue throughout this year as well. This then leading into outlook for business outlook for 2025, And we estimate that our full year 2025 net sales will be in the range of €590,000,000 to €620,000,000 The comparison we ended last year was €565,000,000 And then on operating results side, and now we are guiding in terms of EBITDA. And we just as a reminder, we estimate that our full year result of in EBITDA terms for this year 2025 will be in the range between EUR 90,000,000 to EUR 105,000,000. The comparison number here for last year was EUR 90,000,000. So with this, I just want to kind of one more time recognize the excellent quarter, excellent finish for the year.

A lot of hard work throughout the organization and lots of kudos to our colleagues across the company from sales to operations to logistics to finance to actually get the orders, manufacture everything, deliver it to our customer and recognize the revenues a fantastic finish of the year. With that, I want to finish and open up for questions.

Moderator/Operator: The next question comes from Niko Ruakangas from SEB. Please go ahead.

Nikolas, Analyst, SEB: Hello. Thank you for the presentation. This is Nikolas from SEB. I have couple of questions and maybe starting with the order development in Q4. So as you said already, you had good order growth in whether an environment is excluding that big order from the comparison period.

So was there something bigger also this quarter in Q4? Or was this just generally good development?

Kai Osterme, CEO, Waisala: No, generally a good development. We didn’t have anything extraordinary kind of recognized now in the fourth quarter. So it was just kind of lots of kind of smaller and mid sized orders.

Nikolas, Analyst, SEB: All right. Understand. Then on the profitability side, where you saw quite nice improvement on both business areas. You mentioned that you performed extraordinarily well in Q4. So is this something you expect to keep also going forward?

Or if not, what are the gains or items you think that you might lose in 2025 compared to now Q4, ’20 ’20 ’4?

Kai Osterme, CEO, Waisala: Yes. That’s a good question. Thank you. And I think there were a couple of things that I want to recognize now in Q4. And some of them, I think, are result of hard work that we have been and fruits from things that we have been doing over the kind of sometimes even couple of past years.

That one thing is that we were sometimes the accuracy on delivering everything, everything, the whole order book, especially at the end of the year, especially in a situation where we had very few working days in month of December when all the holidays dropped into the weekdays instead of weekends. In that environment, I think our operations and sales performed extraordinarily well where we actually were able to recognize the order book very well this year. Also being able to manage the demand between the years and a year end, especially in the Industrial Measurement side. And thirdly, I think the kind of a success also on cost control where we have bit had negative surprises at the end of the year in terms of maybe lack of discipline in booking costs and so on. And we had none of that during this year.

So there were lots of this kind of operational improvement. The last one actually is more of a shift within a year. It’s a question on when do you book and that’s normal. You should book it when the actual cost occurs, not just forgetting it to be booked in the fourth quarter, which unfortunately, we did had a bad habit of. And now we’ve done it and certainly, we intend to keep that going forward as well.

But that’s that was more of an in year improvement rather than like going forward. It’s, we need we that when we compare to different years, I don’t think the last one necessarily is something that is a between the year’s improvement.

Nikolas, Analyst, SEB: Yes. I understand. That explains. Maybe continuing on the profitability and going into 2025 and your guidance, where your guidance midpoint roughly indicates flat EBITA margin. So is this kind of explains what you just said that you don’t expect similar kind of efficiency in ’twenty five?

Or what is the reason for not kind of expecting margin improvement despite sales growth?

Kai Osterme, CEO, Waisala: Yes. So first of all, I think we had a very good finish of the year. I think that’s now the comparison gets harder. That’s one side. And the other thing is that it goes a little bit on the net sales guidance as well that like you saw now in the fourth quarter, our business scales very nicely when we overperform on the top line.

And now given everything that is going around in the world, the uncertainties are I’ve said this before, but I would kind of use extraordinarily short visibility in many things because of all the geopolitics and tariff discussions, potential tariff discussions and so on. So it’s very hard to like be having or having a good visibility on the demand side throughout the year, one thing being like what it means to us, but especially what it means to our customers, this uncertainty. And in a situation of uncertainty, it’s just easy to move little bit investments into future. So we are kind of cautious in this lack given the lack of visibility.

Nikolas, Analyst, SEB: Okay. So that’s you then prefer to give a kind of cautious guidance given the answers on this? Well,

Kai Osterme, CEO, Waisala: we give the guidance in the same way as we always these other numbers that we believe in. But the I just remind you that it is the demand side is kind of extraordinarily lack of visibility at the moment in terms of when we think about the entire year.

Nikolas, Analyst, SEB: Sure, sure. Then last one from me, I guess that you already a bit discussed this, but could you describe a bit environment in The U. S. Within your customers? And how have you seen or have you seen your clients’ behavior changing during this kind of political uncertainty period?

Kai Osterme, CEO, Waisala: Yes. So short term, like, it’s hard to compare like a month. It’s too short. But if I now look at last year, I think first time I commented, the early very early signs of potential recovery starting in The U. S.

Was second quarter. And now there’s three quarters in a row where we have seen a gradual improvement, albeit still early in vis a vis the full potential, as I said in earlier. So at least seems like the optimism in our customer side has been kind of increasing slightly

Moderator/Operator: The next question comes from Atjortika from Evli. Please go ahead.

Atjortika, Analyst, Evli Research: Hey, this is Atjortika from Evli Research. Thank you for taking my questions and congrats on the strong Q4. First, still on the guidance, I’m trying to challenge you a bit. So if we consider the current tailwinds, you have a strong order book, you have been improving marketing, industrial side and also you have done the acquisitions in weather. So in what kind of scenario is the lower end based upon?

Kai Osterme, CEO, Waisala: Like I said, there’s uncertainties you can play many scenarios in how the world is going. We have not taken into a kind of change in tariff regime into account when giving in the guidance. So and the reason for that is so hard to actually spec even speculate on that given the wide range of the commentary in the public space at the moment. And but it does create uncertainty, obviously, this kind of all the speculation that is ongoing, the discussion that we are having at the moment. I mean, these kind of many companies are having the same thing and creates uncertainty and kind of in the times of uncertainty, easy to push your investment decisions a bit forward with the hopes that visibility improves.

And And that’s the maybe unintended consequence of all this kind of dialogue at the moment.

Atjortika, Analyst, Evli Research: Yes, got it. Thank you. Then on the weather side, you obviously aimed during the subscription business, the profitability during the current strategy period. I was just thinking that how this developed already during Q4. Was the business already in black figures, for example, in terms of EBITDA or still in red?

Kai Osterme, CEO, Waisala: I don’t want to go into fourth quarter. I think we still have our work cut out a little bit on it. You have to remember also we had we kind of if you look at the numbers on the subscription side, I said the organic growth was 18% when you compare to kind of comparable assets. And then on top of that, we had a bit of a tailwind in the actual reported numbers from Speedwell Climate, which was there for most of the quarter and then a bit of like last month also from WeatherDesk. So there’s a bit of a boost from both of those as well.

And clearly now going into 2025, we have a bigger base to grow from. And we anticipate and expect that we will grow kind of on a historic level on kind of when we look at the organic assets and with the new assets. Obviously, the integration is well going on, and we would expect to grow in the double digit also on that kind of when we think about the new assets.

Paolo, Analyst, Inderes: Yes.

Atjortika, Analyst, Evli Research: Then also on the weather side, you have now had stable outlook for the renewable energy for two quarters, yet you are growing there strongly both net sales and orders. Is this due to you gaining market share? Or how do you see the market at the moment and your position also in it also going forward?

Kai Osterme, CEO, Waisala: Yes. So I think there is a pause, I would describe it this way, especially on the offshore wind, but also wind investments overall, partly driven by the uncertainties that we talked about. And there it’s partly a demand question as well that many of the energy hungry investments have been postponed. Therefore, the need for further investments in renewable energy has been a little bit postponed. And the other thing is that in The U.

S, clearly, the environment is changing. And there probably is, I think it’s fair to assume, a pause in especially on the wind side, less so in the solar side, but on the wind side. It’s not a stop, but there’s clearly a slowdown on the growth side, especially in The U. S. And but nothing has changed in our view kind of when we look at the little bit like longer term view.

I mean, we are still just in the beginning of transition from carbohydrates to renewable energies.

Atjortika, Analyst, Evli Research: Got it. Then my last question is a bit technical and for Elia. So how large share of the total intangible assets consisted of goodwill at the end of the year?

Heli Lindferos, CFO, Waisala: I think we even gave it as a figure or so in the release. So let me check. I think if you have other questions, I can check-in the meantime and get back to you.

Kai Osterme, CEO, Waisala: Isaac, just that if there are any other questions, then Heli will get back to you, Artur.

Atjortika, Analyst, Evli Research: Yes, no problem. I have no further questions. That’s all from me. Thank you.

Moderator/Operator: The next question comes from Matti Rykonen from Carnegie. Please go ahead.

Matti Rykonen, Analyst, Carnegie: Good afternoon. It’s Matti Rykonen, Carnegie. Couple of small questions and then some questions for the future modeling. I’ll start with the simple one. In Industrial Measurement, you had the growing line in services and you have basically said that it’s because you are now putting more emphasis into that and it’s more predictable.

Now that the base number has increased in 2024, do you think that the growth can continue in I’m Services at the same level? Or should we expect that it will drop to more normalized level, which it was before?

Kai Osterme, CEO, Waisala: Yes. So very good question, Martin, and thank you for that. So we have had actually throughout the year kind of a higher than historical number kind of a growth rates on the services side on the Industrial Measurement side. And that’s in, as I said and we discussed in the previous quarters, that’s partly on a back of the high growth that we experienced in the years 2021, ’20 ’20 ’2, where kind of a very strong, strong net sales growth. And now we are kind of a those are now the embedded base is bigger.

And now we are kind of benefiting from the embedded base that we built during those years. So that’s part of it. And part of it is the hard work that we have been doing developing this business. So it’s kind of like a combination of the two. The kind of eventually, I would say, not hard to model exactly a quarter or a year, like the impact on a higher embedded base growth that we had during those years, that slowly dilutes.

And then but the intent is that we intend to grow it faster than the top line of the depending obviously on the top line of the industrial measurements, but kind of continue to grow it as such and see it as an important part of the value that we create.

Matti Rykonen, Analyst, Carnegie: All right. That’s helpful. Then a question related to the large weather orders that you have received and they are now in the order backlog. And now I’m mainly talking about the period of 2025 to 2027. So what kind of revenue distribution should we expect for those orders?

I’m mainly meaning that is it going to be kind of evenly split per time or is it more back end loaded? Because when the orders land at different years, it’s kind of it makes quite big difference in how you assume the revenue recognition during that period. So could you discuss that a bit and help us understand how we should be modeling it?

Kai Osterme, CEO, Waisala: Yes. It partly depends on the case. So first of all, if you take it like two examples, Kuwait and Spain, Kuwait is clearly a longer period of actually the delivery of the system. And it is a more complicated system consisting in multiple different kind of sets of equipment and systems compared to Spain, which is where the weather radar network complicated by itself, but it is a weather radar network. And the Spain is a shorter period of time also in terms of delivery, where it’s going to be a bit last year, this year and going into the year after when the deliveries are going to be on the Spain side, barring a kind of further purchases that are optional were optional in that contract.

So some of these things, we kind of recognize as a kind of level of completion, the revenue. And some of them, the project in a more complicated side may have a little bit of a shape as you indicated that’s more a little bit more back end loaded. But some of the other ones like, I would say, like the Spanish case, not so much. It really depends on what projects are we talking about. There’s always a little bit more in the back end, but not much.

Matti Rykonen, Analyst, Carnegie: Okay. Fair enough. That’s good. And then related to the Indonesian order, which is not yet in the order backlog, is any of that embedded in your guidance for 2025? Or should we assume that it will not even begin before 2026?

Kai Osterme, CEO, Waisala: There’s no going to be like, even if it begins this year, it’s not going to be a meaningful meaningful, revenue or recognized this year even in the best case. So so not no is the answer. It’s a kind of a ’26 and onwards. And first, we got to close the deal.

Matti Rykonen, Analyst, Carnegie: Yes, of course. Thanks for that. Then another kind of technical question. Now with the WeatherDesk acquisition and the others, you mentioned in the Q3 report and commentary that because it’s software, there will be a large share of deferred revenue. And I was just wondering, again, for modeling purposes, that how much of the kind of annual revenue that WeatherDesk normally makes would actually be deferred revenue in your accounts so that the actual new revenue that you would book in your group net sales would be lower.

So could you give us some indication of the split, how much is in the balance sheet and not affecting top line? And how much is actually then affecting top line positively during 2025? And also, I’m assuming that this would be maximum twelve months impact, so that in 2026, you would have a kind of full revenue contribution from WeatherDesk.

Kai Osterme, CEO, Waisala: So the twelve months So the twelve months Yes.

Matti Rykonen, Analyst, Carnegie: In ’26.

Kai Osterme, CEO, Waisala: Yeah. The twelve months is absolutely so. It’s only 12 for twelve months. But maybe, Heli, better if you comment on how the accounting treatment is.

Heli Lindferos, CFO, Waisala: So the accounting treatment that what we get as the deferred revenue, it’s only around so depending on how they invoice or has been invoicing before and what we get as assets. So we do expect to see an impact on that, but it shouldn’t be more than 20% of the revenue, not even that. And it should be gone after next year.

Matti Rykonen, Analyst, Carnegie: So basically, you would be booking roughly 80% of weather desks comparable or revenue normally and then only maybe 20% maximum would be not recognized as revenue in twenty twenty four twenty twenty five?

Kai Osterme, CEO, Waisala: Correct.

Heli Lindferos, CFO, Waisala: Exactly.

Matti Rykonen, Analyst, Carnegie: All right. And So

Kai Osterme, CEO, Waisala: you have the cost Plus obviously, all the growth that we may have on those assets.

Matti Rykonen, Analyst, Carnegie: Yes, of course. And I’m also assuming that the costs will be incurring normally, so that if temporarily you are missing the 20% of revenue and you will still have 100% of costs, then naturally the margin contribution would be lower than it would be then in 2026 when you have kind of 100% of revenue and 100% of costs. Is it that or is it something different?

Nikolas, Analyst, SEB: It is.

Matti Rykonen, Analyst, Carnegie: All right. Good. Then could you also advise us with the acquisition related amortization in ’twenty five? Now we saw the Q4 number, but will it increase from that quarterly level going forward? So I mean to calculate your EBITA would be much easier if we knew that how much the acquisition related amortization actually is.

So any indication of that would be helpful.

Heli Lindferos, CFO, Waisala: Yes. Of course, we have also old acquisitions where the kind of amortizations are ending and then we are having the new ones that are coming in. So we are expecting at the level of CHF 10,000,000 in CHF 25,000,000 for the amortizations.

Matti Rykonen, Analyst, Carnegie: And that’s in total?

Heli Lindferos, CFO, Waisala: Yes.

Matti Rykonen, Analyst, Carnegie: All right. Then a couple of small ones. The rental income, it’s a small line, but it increased quite a lot since the earlier quarters. Was then something unusual behind the increase? Or should we expect that, that is the normal rate going forward?

Kai Osterme, CEO, Waisala: That’s related to the wind lidar business. And I don’t think there was an anything extraordinary in the quarter. There’s some fluctuation between the quarters, but in some time, it’s a fleet that gets rented and then partly also then refurbished and sold afterwards. So a bit fluctuates on what that size is between the different quarters.

Matti Rykonen, Analyst, Carnegie: All right. Good. Then my final question is related to the strikes in Finland or the potentially more strikes in Finland. Have you been affected so far? And do you think that you will be affected in the near future?

Kai Osterme, CEO, Waisala: We have already had a one six day strike two weeks ago, a week ago. And then we will with it as a new announcement, which will start the week of the March 3, if I’m not mistaken, whether it’s the entire working week is the strike is going to impact us as well.

Matti Rykonen, Analyst, Carnegie: So six days already and then seven days in

Kai Osterme, CEO, Waisala: the city? I think it’s a similar six days. So it’s from Monday morning until Saturday night.

Matti Rykonen, Analyst, Carnegie: Okay.

Kai Osterme, CEO, Waisala: How it’s announced.

Matti Rykonen, Analyst, Carnegie: All right. Thanks for this. I have no further questions.

Kai Osterme, CEO, Waisala: Thank you, Matti.

Moderator/Operator: The next question comes from Walteri Rossi from Danske Bank (CSE:DANSKE). Please go ahead.

Kai Osterme, CEO, Waisala: Hey, before Walteri before you ask the question, maybe Heli answers the Artus question before.

Walteri Rossi, Analyst, Danske Bank: Yes, sure. Go ahead.

Heli Lindferos, CFO, Waisala: Thank you. So if you look from the cash flow statement where you will see that our acquisitions, they were roughly million on top of the normal CapEx. And more than half of that will be goodwill. The final figure you will see in two weeks’ time in the or three weeks’ time in the annual accounts.

Kai Osterme, CEO, Waisala: Okay. Well, Thierry, your turn.

Walteri Rossi, Analyst, Danske Bank: Okay. So I guess I can go. Thank you, Gautam, for the presentation. First question regarding the industrial measurements. If you look at the historical development, it’s been quite steady between quarters.

Are you expecting it to be relatively stable also this year?

Kai Osterme, CEO, Waisala: Yes, barring anything, any kind of a special kind of a like speculations on what happens in the world. But barring all that, I don’t see any reason why the shape of the demand would be any different than other years in the past.

Walteri Rossi, Analyst, Danske Bank: Okay. Okay. That’s clear. Then what about the seasonality and project timing this year in the weather and environment segment between quarters? Can you help us kind of model that line a bit?

Kai Osterme, CEO, Waisala: That’s more challenging and it does fluctuate. As a reminder for all of you that there is a I guess, was part of your indication on your question, that it does fluctuate between the quarters and not all the quarters are similar exactly for the reason that I think especially with the now the bigger projects that when certain milestones are gotten and when the revenue is recognized, it has an impact on impact between the quarters. We have not given any guidance on a quarterly level on how to think about that. But there will be I would assume that there will be a fluctuation as if there has been in the past years.

Walteri Rossi, Analyst, Danske Bank: All right. Fair enough. Thank you. Then about the profitability in weather and in environment segment, you mentioned that good sales mix was part of the good profitability last year. Can you help me understand, is it more about the mix in terms of different segments or mix within the segments, for example, in Aviation and Metrology?

Kai Osterme, CEO, Waisala: It’s less between the mix in the segment. It’s more products and projects is typically what this drives. The products have a higher gross margin and a higher profitability than when you recognize a lot of projects. And then some of the products per se in relative terms have a little bit of a different gross margin profiles. So there’s a bit of that as well, but it’s mostly between the products and projects.

Walteri Rossi, Analyst, Danske Bank: All right. All right. Fair enough. Then lastly, still on the profitability in the weather environment. As I said, 2024 profitability improved quite a lot, and it seems to be coming from all lines in the P and L basically.

Do you expect this kind of similar improvement to continue towards the company level target this year as well?

Kai Osterme, CEO, Waisala: Yes. So obviously, we had a like I said earlier in my comments that we had a tailwind coming from the growth on the net sales, which always kind of a reflect kind of a then there’s a scalability impact into profitability as well. And then now given that we are on a very good level in in many of the segments like meteorology and aviation and so on. We have been very successful with many of the bigger and smaller projects recently. There’s a kind of as the end of the market is not growing, there’s a kind of a limit on how far you can continue to grow, natural limits on how far you can continue to grow.

Not necessarily that we are at those limits exactly yet, but it is going to be harder and harder to continue to grow on kind of a traditional side of the business. And then as we talked about the meteorology sorry, the renewable energy, a bit of a as we have been saying now for a couple of quarters, that bit of a pause, I would say, in the market. Describe it that way in terms of now the world being a little bit more challenging into for new wind projects impacting also our short term growth prospects on those.

Moderator/Operator: The next question comes from Pauli Lohe from Inderes. Please go ahead.

Paolo, Analyst, Inderes: Hi, it’s Paolo from Inderes. First, I would like to ask about, you mentioned the improvement in Industrial Measurements growth in China after a weaker period. Is it mainly due to lower comparison figures? Or do you see any fundamental improvement in China?

Kai Osterme, CEO, Waisala: That’s an excellent question. Part of it is obviously the lower comparison figures as always. But there was a kind of even sequentially when you look at it, it actually was kind of an improvement. So there was a bit of an improvement in the marketplace. Now was it just one quarter or will it continue in the next year?

We have no evidence either way at the moment. And China has been there has been a quite a bit of a cautiousness, which I’ve spoken about in the previous quarterly calls. In overall, in terms of new investments and everything else, There’s new stimulus packages. How much did that have an impact yet? Time will really kind of and how lasting impact did it have time will tell.

But obviously, glass half full is that we did have a kind of a clearly kind of better quarter now in the fourth quarter. And let’s see how it continues.

Paolo, Analyst, Inderes: Thank you. That was very helpful. Then discussing about potential tariffs from America or USA, if they would set general import tariffs for all the European imports, how would that affect your like competition dynamics in The US? Do you have any significant competition in there that produce domestically something that you import from Europe?

Kai Osterme, CEO, Waisala: Great question. And so in some segments, we have domestic competition, some segments not. And how to think about it is that there are few places, and this is quite clearly a minority in Industrial Measurements where we have local competition. Majority of it is kind of other European global companies, which would not have manufacturing in The U. S.

And then on weather environment side, likewise, we do have some competition in some segments in kind of as a U. S. Based companies. Majority of the competition would be coming from other kind of European global companies. That being said, the other thing in maybe kind of worthwhile saying in weather environment kind of good to remember that when it’s a question of public customers, they have a fixed budgets.

And their budgets are not going to increase if there are going to be tariffs or whatever. So limits a bit on how much you can compensate by increasing prices, which was, I assume, behind your question. And in the end, market will decide how much can be compensated by increasing prices.

Paolo, Analyst, Inderes: Thank you. That was very good answer. Well, then looking to the growth in Europe and Middle East, Africa, the growth was strong in Q4. So was there any like large project delivery boosting that number or how do you see that market?

Kai Osterme, CEO, Waisala: Yeah. So that was really driven by weather environment side and many other kind of impacts that we talked about. It really was all the larger orders actually are in Europe, Middle East, Africa side this year. Like if you think about Kuwait, that’s Middle East, Spain is kind of Europe and so on. So there’s been quite many kind of European side on that side.

And in then on the other hand, in if you look at the industrial investments overall in Europe, they have been few and far apart. I would describe it that way. And the uncertainty that the discussion, for example, with the tariff regimes, it doesn’t help.

Paolo, Analyst, Inderes: I understand. Okay. Thank you very much. That was all from me.

Kai Osterme, CEO, Waisala: Thank you, Pauline.

Moderator/Operator: There are no more questions at this time, so I hand the conference back to the speakers.

Kai Osterme, CEO, Waisala: So thank you, everybody, for participating. Thanks for great questions. In case any further questions, you know where we are and how to contact us and do not hesitate to drop us an email or give us a call. So thank you and great continuation of the week. Bye now.

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