Earnings call transcript: Vaisala sees strong Q1 2025 growth, stock rises 2.81%

Vaisala Oyj A reported robust financial results for the first quarter of 2025, with net sales increasing by 21% year-over-year and earnings per share (EPS) showing significant growth. The company’s stock reacted positively, rising 2.81% to $45.80 in pre-market trading, reflecting investor confidence in its strong performance and future outlook. According to InvestingPro analysis, Vaisala currently appears slightly overvalued against its Fair Value, though it maintains a "GOOD" overall financial health score, supported by strong profitability metrics and moderate debt levels.

Key Takeaways

• Vaisala’s net sales grew by 21% year-over-year, driven by strong performance in key segments.
• The company’s EPS increased significantly, contributing to a positive stock market reaction.
• Vaisala completed the integration of WeatherDesk and Speedwell Climate acquisitions, boosting its market position.
• The company maintained strong cash conversion and improved its gross margin by over 3 percentage points.
• Despite challenges in the renewable energy sector, Vaisala remains optimistic about growth in industrial and life sciences markets.

Company Performance

Vaisala demonstrated robust performance in Q1 2025, with a notable increase in net sales and EBITDA. The company’s organic net sales growth of 17% highlights its ability to expand operations and capture market share. The integration of recent acquisitions and investments in digital sales channels have further strengthened its competitive position, particularly in the data center segment.

Financial Highlights

• Revenue: Grew by 21% year-over-year.
• Earnings per share: Increased significantly.
• Gross margin: Improved by over 3 percentage points.
• EBITDA: Almost doubled year-over-year.

Market Reaction

Following the earnings announcement, Vaisala’s stock rose by 2.81% to $45.80. This upward movement reflects positive investor sentiment towards the company’s strong financial performance and strategic initiatives. The stock has delivered a robust 30.5% return over the past year and currently trades at a PEG ratio of 0.85, suggesting attractive valuation relative to its growth rate. For deeper insights into Vaisala’s valuation metrics and growth potential, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 top stocks with expert analysis and actionable intelligence.

Outlook & Guidance

For 2025, Vaisala expects net sales between €590 million and €620 million, with an EBITDA forecast of €90 million to €105 million. The company anticipates growth in the industrial and life sciences sectors, while the renewable energy market may face short-term declines. Vaisala remains focused on maintaining production flexibility and responding swiftly to market changes.

Executive Commentary

CEO Kai Oistema emphasized the company’s commitment to climate change initiatives, stating, "Taking every measure for the planet, being on the right side with climate change." He also highlighted Vaisala’s agility in responding to market opportunities: "It’s a question of being agile and quick to respond to opportunities in the marketplace."

Risks and Challenges

• Potential tariff scenarios could impact cost structures, although Vaisala has strategies to mitigate these effects.
• Economic uncertainty and U.S. policy changes may affect renewable energy investments.
• Budget cuts in the U.S. National Weather Service could pose challenges for Vaisala’s weather monitoring segment.
• The renewable energy market is experiencing a temporary decline, affecting short-term growth prospects.
• Market uncertainty necessitates a cautious outlook for future quarters.

Vaisala’s strong Q1 2025 performance underscores its strategic advancements and resilience in a challenging economic landscape. The company’s impressive track record includes maintaining dividend payments for 33 consecutive years, with an 18% dividend growth in the last twelve months. Despite potential headwinds, the company’s solid financial health, evidenced by its moderate debt-to-equity ratio of 0.42 and strong return on equity of 22%, positions it well for future growth. For comprehensive analysis of Vaisala’s financial metrics, growth prospects, and peer comparisons, explore the full suite of tools available on InvestingPro.

Full transcript - Vaisala Oyj A (VAIAS) Q1 2025:

Nina Alalopa, Investor Relations, Vaisala: Hello, and welcome to Vaesala’s First Quarter twenty twenty five Results Call. I’m Nina Alalopa from Vaesala’s Investor Relations. And today, with me in this call are President and CEO, Kai Oistema and CFO, Heli Lindfors. So Kai Ostomer will now present the first quarter results. And after the presentation, we have time for questions.

Kai Oistema, President and CEO, Vaisala: So hello, everybody, and thanks for joining. As the headline says, we had a strong start of the year. And at the same time, obviously, when we kind of living through the first quarter, it was an increasing market uncertainty. There was not almost like no day without either a rumor or a change or a tweet in terms of what would be the anticipated import duties and so on, which then in the end were not implemented between kind of our relevant geographies during the first quarter. Actually, the actual implementation dates only happened in April.

So despite the all the uncertainty and everything else, direct impact from tariffs were not visible during the first quarter. Obviously then the uncertainty, I’m sure, impacted our customers and invested investment decisions somewhat. Despite all that, we had a, like I said, on all accounts, a strong start of the year. Net sales wise and profitability wise, clear improvement. Year on year wise, net sales growth 21% year on year.

EBITDA almost doubled year on year or EBITDA percentage almost doubled year on year, kind of great improvements, obviously, both. Industrial Measurements, excellent performance. I’ll go into more details into the business areas in a short while. And on weather environment, a strong order book that we had opening. Order book obviously gave us a good start, and we continue to deliver against that strong order book.

And then on subscription sales, kind of an extraordinary growth on back of both, a good organic growth of 12% and then obviously the acquisitions that we closed now on the fourth quarter, Speedwell Climate and WeatherDesk, boosted the subscription sales to 63% year on year, fantastic number. Before going into the actual numbers and everything else, it’s just good to kind of pause for a while on our strategy, which gives us a great backbone and great foundation to make the decisions even in and especially, I would say, in turbulent times. The mission, taking every measure for the planet, being on the right side with climate change, I think, gives us good foundation to do good, solid business decisions, both short term and long term. Good examples on execution of the strategy when we talk about climate and societal resilience, kind of taking different examples from different sides of our businesses. Data centers, obviously, has been a growth segment or growth business for a long while, driven by AI and rapid increased demand on compute power.

And during first quarter, we continued to this has been also a growth segment in our Industrial Measurements for kind of many years in a row. And that continued during the first quarter, continuing to drive growth and winning larger projects, which typically the new data centers would be. Then on when we take the ex weather side, great to note then on that we were able to integrate both WeatherDesk and Speedwell Climate on our numbers already late fourth quarter and now being included for the entire quarter. Actually happy to report also that the entire integration of WeatherDesk is completely done, and we were actually we did that in kind of several months earlier than what we anticipated it to take and are able to stop the SLAs early also from the previous owner. And this gives us a great background back strength on further develop on our offering on ex weather.

And as I said a minute ago, helped us to boost the subscription sales growth when we compare to year on year numbers. And on a more traditional side of the business, we continued the success on winning large orders. This time, a weather radar and lightning detection network in Greece in terms of our absolute number, somewhat smaller, obviously, than the extraordinary things that we’ve been doing now during last year and end of the previous year in both Kuwait and Spain. But here, great to see another sizable deal, giving more longevity in the strong order book that we have on this. And it’s a great testament on our technology, great testament on our competitiveness of our products and the leadership that we have been showing on weather monitoring infrastructure and in this case, especially on the weather radar side.

Now when we look at the financials. As said, strong start of the year. Orders received wise, roughly on the same level as a year before. Order book, similar level as what we closed the previous year with. And net sales, as I said earlier, grew very well at 21% year on year.

If I now take the acquisitions of Speedwell Climate, WeatherDesk and Nevis that we closed during the fourth quarter and remove that from the growth numbers, the organic growth was very strong as well, kind of being 17%. The growth came from both business areas, as I will shortly show, and very good performance in the Americas region. And this is good to see. This is now fourth quarter in a row where Americas continued to improve as a region. The performance was strong in other regions as well, especially satisfying to see the continued improvement in Americas.

Gross margin improved a little bit over three percentage points. And as usual, with our business, cash conversion continued to be strong. Diving deeper into the business areas. Industrial measurements, I would say, as the headline says, very positive development across all regions, all segments, shown by the numbers. The orders received increased by 17% year on year, and net sales increased by 24% year on year.

Obviously, last year’s first quarter was a challenging one. But if you look at the graph on the right, you can see that even in a continuous basis, when you look at the second quarter, third quarter, fourth quarter last year, we had a kind of a very strong quarter in Industrial Measurement in all aspects, even if the relative numbers when you compare to year on year numbers are obviously, we got the benefit this time of weak first quarter last year. Great to see also the gross margin improving and the business really scaling nicely when we get higher scale higher sales and also the EBITA percentage increases correspondingly and now back on the levels that we should be with the EBITA percentage starting with the 2%, like being 21.7% at the quarter. Then looking at the weather environment, continued to deliver against the strong order book that we have had and continue to have. Orders received decreased.

This is the one maybe kind of a glass half full on the numbers and the quarter itself. This is really on the back of renewable energy as we on our release that we are seeing the renewable energy market to decline, and this is on the back of multiple things. One thing is that the continued economic uncertainty and lack of investments into kind of energy intensive green investments requiring lots of energy has been sluggish, leading into competitive energy prices, leading into hesitance on building new energy parks. Combined with that, all the policy changes in The U. S, which put basically the renewable energy investments on hold in The U.

S, given all the measures that were taken. So at least for short term, we are seeing a bit of a headwind on the marketplace. That being said, when we look at the long term, we continue to believe that renewable energy, obviously, long term remains a very lucrative opportunity despite the short term headwinds. Moving on to the net sales side on weather environment increased by 18%. Here, if I take the organic piece, so take all the acquisitions out, which happened to all to be within the weather environment, organic growth was great 11% and driven by large orders received during the earlier quarters.

So the order book or opening order book that we had and subscription sales. Speaking of subscription sales, as said, 63 growth on subscription sales year on year and boosted by the two acquisitions I talked about as well as then a strong organic growth of 12%. Gross margin improved mainly following the growth. Again, the business scales. Simultaneously, we had a good sales mix when we compared to kind of earlier quarters and then that later or previous quarter a year before.

And then that led into EBITA percentage being almost 10%. Cash flow continued on a good level. Here, I would say this is roughly like a usual quarter that we have been having. Obviously, the strong cash conversion being one of our strengths and continued to be so also during the first quarter. Operating result margin being 13%.

And when you look at our kind of financial results on this page, It’s kind of almost boring to say, kind of continues to be kind of strong as it has been for many quarters and many calls that you’ve listened to before. Net sales growth, strong organic net sales growth, strong gross margin improving EBITDA improving EBIT improving when we compare to year before. And then operating expenses increasing, it’s good to note, 12 year on year, but that’s mainly on a back on the expenses related to the businesses that we acquired in the weather environment side. And then simultaneously, we are doing investments in digital sales channels, which we expect to yield into more efficient sales in the coming quarters and years, so important build for future on Industrial Measurement side. And EBIT sorry, EPS earnings per share kind of also increasing strongly compared to same time previous year.

Financial position continues to be very kind of be strong. We are not really a very levered company at all as we have a business model that is very much asset light. And maybe on this page, good to note that we have been investing into the automated logistics center here in Vanta next to our factory that is progressing according to the plan. Just as a reminder, the plan is that it should be operational now in towards the end of the year in the fourth quarter of this year. Then to market and business outlook.

The outlook for 2025, we expect industrial side life sciences and power to grow. As usual, meteorology, aviation and roads to be stable. I mean they are by nature that. And then as I spoke earlier, renewable energy to decline given the headwinds that I talked about. Business outlook for this year remains unchanged.

So we estimate our net sales to be between $590,000,000 to €620,000,000 And we expect our operating result in terms of EBITDA be between 90,000,000 and 100 and 5 million euros Good to remember, as usual, these kind of outlooks for the year kind of don’t include any drastic changes in the outlook. And maybe that’s good to remind you, especially in these kind of days when the visibility for the future, given what has been going on over the past quarter and past months, is maybe especially valid to say. With that, I want to close the prepared remarks and open up for any questions you may have. And I noted Nico was the first one well in advance to book the first question.

Moderator: The next question comes from Nico Ruikangas from SEB. Please go ahead.

Nico Ruikangas, Analyst, SEB: Hello. This is Nikronis from SEB. Thank you for the presentation. I have a couple of questions, and I may be go one by one. Starting with the declining orders in Renewable Energy, so could you kind of open a bit your order composition if you compare to last year in terms of how big was the Renewable Energy, maybe just thinking that should we expect kind of a similar order declines in weather and environment in the coming quarters also going forward?

Kai Oistema, President and CEO, Vaisala: Yes. So while we don’t disclose kind of the exact numbers in terms of the sub segments on our business, but maybe giving you a couple of pointers and color on this. So if you look at renewable energy, the size of the business is such that the order intake kind of it’s somewhat volatile between the quarters. It’s not the same. It’s not like by nature, not the same between every single quarter.

And it’s relatively faster from book to bill. So it’s in between Industrial Measurements, which is very quick and then on the other hand, the traditional side of the meteorology, which is kind of slow, as you know. So this is like in between the two. I would not make the conclusion that it’s a similar impact on to second quarter to rest of the year. Our estimation at the same time is that the market itself is there’s a pause on the marketplace at the moment and a bit of a headwind.

Headwind size of that headwind, we’ll see as the year progresses.

Nico Ruikangas, Analyst, SEB: Okay. Thanks. That helps. Then maybe on the hot topic of tariffs. And could you maybe explain a bit how are you mitigating the tariffs?

And have you already seen the impact of tariffs on your business volumes or demand in April? And how have those been taken into account in guidance and then the segment based outlook? And I’m sorry if you mentioned this when discussing about the outlook. My line was breaking.

Kai Oistema, President and CEO, Vaisala: So yes, yes. So first of all, if I start from the outlook, I mean, outlook remains unchanged. And obviously then everything that we know today is taken into account in the outlook. I mean, that’s that. I will refrain from commenting how is the business going in April when we are talking about the first quarter numbers and April is not done yet.

So it’s too early to kind of make any conclusive statements. But the question on how did we how are we mitigating, what are we doing and so on, we were prepared for various different scenarios, 20%, ten % as it ended up being and other scenarios. What we have done and we were very quick on doing is, first of all, on big part of the business, we are able to move the tariffs into prices, and we did it very swiftly. Day after the tariffs were set, the prices changed. And while it’s too early really to say how will the market take and everything else.

But I’ll say this that customers were not surprised and there was not by any means. On the contrary, I would say that the customers were expecting a change due to the fact that the tariffs were raised. How will it impact on the demand and sales? Let’s take the quarter and see. But I think it’s maybe helpful to understand also the dynamic that it’s not a pushback from the customer side on it.

They understand what needed to be done. And then other mitigation parts. Obviously, I think the organization has shown its agility also in terms of when we know some kind of we have blanket orders for certain things, we have long term orders for certain things for the rest of the year in The U. S. We were able to actually kind of ship quite a bit of that into U.

S. Into our warehouse creating our own hedge on whatever the tariffs may end up being.

Nico Ruikangas, Analyst, SEB: Okay. Understand. And then if you have orders from The US which were not delivered to The US before the tariffs were announced, so are you able to transfer the kind of the increased tariff cost to those orders already in your backlog? Or do you have to take the heat drop for those?

Kai Oistema, President and CEO, Vaisala: Yeah. Obviously, depends. I mean, if you have an ongoing delivery on a customer, kind of a government or public based on a public tender, you’re not middle of a delivery, you can’t kind of change prices or it’s kind of a new then it’s a new complete new negotiation. That’s the nature of a public side of the business. Private side, we had a small short grace period and the prices are effective as of today and have been already for quite some time.

Nico Ruikangas, Analyst, SEB: Okay. Thank you. Then I’ll ask one more question and then let others ask. So and, Kotlin, on the U. S, U.

S. Government is targeting savings on U. S. National Weather Services. So is that visible in your business?

And kind of has this been surprised to you?

Kai Oistema, President and CEO, Vaisala: Obviously, like so two comments on that. So yes, so the National Weather Service budget has been cut to some extent. It’s a bit unclear what that ends up being. Or the net impact of it is that some projects that we anticipated to start have not been canceled but have been postponed into the future when kind of clarity comes. The unclarity comes also from the fact that the U.

S. Government used a very blunt instrument in reducing cost in terms of personnel. So basically a random cut of people on kind of irrespective of their seniority or stay in the organization, which obviously, if you can imagine in your own organization, if randomly you would pick every third person who will get fired, Decision making gets to be a little bit slow and unclear, and approval paths and stuff are broken. That’s being like the National Weather Service is kind of people who are remaining working on it. We are supporting them.

We know these people from ten, sometimes even twenty years, and we remain very close to the organization itself. And here’s an opportunity to help also the organization to actually do their duty, which is really, really important for the society, really, really important for the society.

Nico Ruikangas, Analyst, SEB: Understand. But despite this, you are expecting or taking this into account, you are expecting the material market as total to be stable?

Kai Oistema, President and CEO, Vaisala: Yes, yes, of course. Of course, it’s taken into account.

Nico Ruikangas, Analyst, SEB: Yes. Okay, great. Thank you. I’ll let others ask now.

Kai Oistema, President and CEO, Vaisala: As I said, maybe one more piece, Nico, as a color on the National Weather Service side. One is this we are taking into account what we know today. That being said, given its importance what that kind of the task for National Weather Service is, I would not be completely surprised if some sense at some point of time would come back and the cuts would not be as deep as they kind of at the first go now have been. Over time. Maybe it’s this year, maybe it’s next year, but at over time.

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

Atjortika, Analyst, Evli Research: This is Atjortika from Evli Research. Thank you for the presentation. Still continuing on the tariff topic, so how much of The Americas region strong performance in Q1 can be attributed to perhaps front loaded demand ahead of the set tariffs?

Kai Oistema, President and CEO, Vaisala: Not materially.

Atjortika, Analyst, Evli Research: Okay. Thank you.

Kai Oistema, President and CEO, Vaisala: Was shortest replay.

Atjortika, Analyst, Evli Research: Yes, definitely. Then have you made any decisions already on some products on production or locations going forward now?

Kai Oistema, President and CEO, Vaisala: Yes. We of course, as I spoke earlier, we have looked into various different scenarios, various different levels of tariffs and so on. We are happy with the production network that we have today. It gives us obviously options. That being said, given our high mix, low volume business model for many, especially the low volume products, splitting those volumes into two locations, the tariffs should be very high before that makes any sense.

Atjortika, Analyst, Evli Research: Yeah. Makes sense. Then, on the kind of, opportunities also from from this situation. So do you think there’s any opportunities on the sourcing side? For example, cheaper components from Asia or things like that now to Europe?

Kai Oistema, President and CEO, Vaisala: So I don’t see I don’t have anything quantified visible yet. But obviously, this is something that we are taking a serious look, same thought occurred to us. And given all the changes in the world and uncertainty, obviously, we are trying to take the benefit as we usually do in terms of the sourcing the components in the best possible kind of place and at the best possible terms and conditions and prices.

Atjortika, Analyst, Evli Research: Yes. Then to other topics. Life Science was a positive on the first quarter. How much was it due to a weaker comparable? And secondly on that, was the development across all of the Life Science customer verticals?

Or were there some that stood out?

Kai Oistema, President and CEO, Vaisala: On the latter one, I actually haven’t really looked at. I would argue like my so I better not comment since I have not looked at numbers on the sub verticals. It was partly. I mean, if you look at Life Sciences, it has been we’ve been talking about stable market for now a little bit over two years. We’ve indicated, I think, in this call that kind of early signs in The U.

S. Towards the end of last year. Now kind of so part of the it is partly comparable, obviously, kind of since the market has not moved for quite some time. But at the same time, it’s great to see that there’s now life in life sciences as well.

Atjortika, Analyst, Evli Research: Yes. Then on defense, has the increased defense spending across Europe already resulted in stronger demand for your products on this defense side? Not

Kai Oistema, President and CEO, Vaisala: anything to speak of. I mean and I’m not surprised. If you think about where the defense spending in Europe is, that it’s mostly ammunition and tanks and missiles and we’re like filling the warehouses with all that. The weather related things probably were not the first ones on the list of military organizations. Can you hear me now?

We had a little bit of a technical glitch. Hello? Can you hear us? Yes.

Atjortika, Analyst, Evli Research: Hello. Did you hear my question?

Kai Oistema, President and CEO, Vaisala: Yes, yes, I did. Yes, I did. Yes, I about the glitch. So no marked, nothing meaningful in terms of a defense spending increasing or defense orders increasing on our side. I’m not surprised on that at all.

The increased defense spending in Europe is concentrated, I would argue, much more on kind of a hardware in terms of ammunition and tanks and guns and things of that nature, missiles rather than enabling equipment that what we are producing for the time being anyway.

Moderator: The next question comes from Pauli Lohi from Inderes. Please go ahead.

Pauli Lohi, Analyst, Inderes: Good afternoon. This is Pauli Lohi from Inderes. And thank you for the presentation. I would go back to the question regarding the Americas sales. And guys said that it’s not materially linked to preordering for the tariffs, but kind of do you think that this trend is sustainable?

And how do you know it?

Kai Oistema, President and CEO, Vaisala: That’s a great question. And I don’t like nobody does. I mean, it’s given the uncertainty in the marketplace. Every tweet seems to be moving the market in The U. S.

It’s so unpredictable that it’s very hard to make long term predictions on where the overall industrial activity GDP overall spending goes in The U. S? What is the inflation kind of inflationary impact in U. S? Time will only tell.

I mean it’s a question of being agile and quick to respond the opportunities in the marketplace. I think we are pretty good at that. And the only thing I can kind of comment is that the first quarter, we didn’t see any kind of a there was not really a marked pull in impact in the numbers that we were reporting. And then we’ll have to wait and see a bit on how the performances are going to go in the second quarter and third quarter. Outlook remains, as I said, and this is the best view that we have at the moment.

Pauli Lohi, Analyst, Inderes: Okay. Thank you. Then considering the data business that you acquired in 2024, is there a significant seasonality in sales, for example, similar to your existing data businesses?

Kai Oistema, President and CEO, Vaisala: No. No. It shouldn’t be any More It should be more even, like normal data business. There’s no reason to be cyclical.

Pauli Lohi, Analyst, Inderes: Then my third question is regarding the gross margin. So could you once more elaborate the gross margin? And maybe if you have any comments, do you see the current level in Q1 being fairly close to a normal or normalized level?

Kai Oistema, President and CEO, Vaisala: Yes. So if I look at the gross margin, so the gross margin was good in both sides, whether in environment and Industrial Measurements. As we have seen in the past continues to be the fact that our business scales very nicely. When sales increase, that impacts positively also the gross margin percentage. So that’s one thing just as a nature of our business.

Similarly, if ever the sales would drop, it would impact negatively our gross margin. So it’s the scaling. Scaling impact is just something I want to remind you. And then the second thing is there are changes in like between the quarters, if I look at just the historical numbers between kind of what the mix is, both in Industrial Measurement side, somewhat lesser extent, but some extent in Industrial Measurement side and maybe a little bit more so in weather environment where how much of the project sales in a given quarter is recognized as bit more of an like creates a little bit more variance in the quarters in terms of a mix as such.

Pauli Lohi, Analyst, Inderes: Okay. But you don’t see kind of any big fluctuation in Q1?

Kai Oistema, President and CEO, Vaisala: No. In Q1, as I said earlier, if you look at where the improvement come from in the Industrial Measurement side, improved kind of through the scaling, I. E, higher net sales, improving gross margin and to some extent also favorable mix. And then if you look at the weather environment, it really was same thing in terms of growth in net sales, I. E, scaling and then favorable sales mix, e, a little bit less projects and more products in terms of weather environment.

Pauli Lohi, Analyst, Inderes: Okay. That’s clear. Thank you.

Kai Oistema, President and CEO, Vaisala: Within the normal fluctuation between the quarters, nothing extraordinary per se.

Pauli Lohi, Analyst, Inderes: Okay. Thank you.

Kai Oistema, President and CEO, Vaisala: Thank you.

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

Kai Oistema, President and CEO, Vaisala: So thank you for questions. Thanks for following our call. Just as a kind of recap, it’s great to have a strong first quarter behind us, gives us good start of the year given especially the turbulence and other kind of challenges in terms of reading what the future brings. So it’s good solid ground under our feet and gave us a good position to build the rest of the year as well. So with that, I’ll close the call.

You know where to find us. In case of any further questions, don’t hesitate, give us a call, drop us an e mail, and we’ll jump on another call. Thank you very much.

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