Vaisala Oyj (VAIAS) Earnings Call Transcript & Summary

Good afternoon, everybody, and welcome to Vaisala's Capital Markets Day 2024. My name is Paula Liimatta, and I'm Head of Investor Relations. Today, we will hear 4 presentations. We have reserved time for your questions after each presentation. After the 2 first presentations, we will have a coffee break. And after the break, we will have 2 more presentations. With that, we are ready to start. Kai, it's your turn.

Thank you, Paula, and welcome from my side as well to Vaisala's Capital Markets Day 2024. My voice may sound like I had a great weekend, but unfortunately, it wasn't a great weekend. It's a bit of a flu so bear with me while I speak. So I'll go briefly through a bit of a recap on where we are, how kind of a scorecard, how we've done over the past few years and then the strategy going forward and the metrics as well. So great, well a place to start is who are we? Like what kind of business are we at Vaisala? It starts with a very, very strong purpose and reason for being taking every measure for the planet. We've actually looked at why we are here and realized with the climate change that we are actually part of the solution, not part of the problem and that leads into the very, very strong purpose, taking every measure for the planet. We equip our customers with devices, data sort of products, solutions and so on to really drive the energy transition, be more sustainable and also take care of the safety and well-being of the people in societies worldwide. 150 countries, 1,400 shipments, 300 product families, very broad customer base globally with many, many different sectors from developers and tech giants to governmental organization, publicly funded organizations. 300 -- more than 300 product families means also a wide product range with their technology leadership from devices to data to software and systems. At the heart of our company is our people. We truly have a very, very talented and diverse workforce. Our people are from many different backgrounds, many different cultures and in 17 different countries worldwide. I talked about 1,400 shipments. So it goes back to global business, very much of a global business, many different end markets, different kinds of business models. It means that the operations is a kind of a key part of our formula. And I would even say that, that's the secret sauce that we have. We -- what we do would not be possible with the Vaisala production system and our excellent supply chain. It really is the secret sauce in our business formula and a great example of that was during the past few years when everybody felt shortage of components, shortage of technologies. And as simultaneous very strongly growing business, we never missed a single shipment. So the excellence in operations, excellence in supply chain really is a secret sauce for us. Now back to the purpose of who we are and what we do. It starts with the climate change. And climate change is really at an alarming status as we speak. And when we look at our business portfolio -- we looked at our business portfolio, we actually are part of a solution. We provide our customers with capabilities that make their business more sustainable. We are part of the solution for climate change. We feel that it's -- we want to be at the right side of the history on this. And therefore, it actually is our responsibility to grow our business and make the impact as big as possible through the technologies enabling our customers for a more sustainable business. Now little bit of a look back on our track record. We have executed our strategy very consistently, I feel. Industrial Measurement has a long track record of growth, and Sampsa will go into much more details in his presentation. In Weather and Environment, we've actually undergone quite a bit of a transformation over the past 3 years. In the traditional weather systems for the publicly-funded entities, whether we talk about Met agencies or airports, we've significantly been able to increase the profitability. Simultaneously, we've actually built a sizable business on renewable energy. And on Xweather, we launched the Xweather, and we've been able to build a solid foundation on subscription business. And Jarkko will talk more in detail on how we've done and how the future looks like on that. We are actively managing our R&D and the way we look at it is, it is a key investment for us for ensuring not only the short-term growth, but especially the longer-term growth. And I'll talk about -- give you a little bit of an update on how we actually have been faring over the past years on this and how we've shifted the focus as well. We consistently develop our operations. I talked about the secret sauce. We are investing in multiple different things on a daily basis. We are looking at automation, whether we talk about automation in the factory, whether we talk about the automation in the warehouse or whether we talk about the automation in the data, how we run our operation. And we consistently build the resilience of our supply chain, which is really, really key in this turbulent unpredictable times that we are living in. And it's all based on a continued development of our very strong culture. The new purpose that we launched really, really strongly resonates with our people. We have a very strong engagement from our employee base. And it also is a great competitive advantage when we look at the future talent and hiring the best possible people out in the marketplace. We've also built over the past 3 years, much more diverse and international talent base. Now let's look at our strategy. As I said, at the core, it is the climate change. It's a fight against climate change. Climate change is not a trend for us. It actually is mega trend. It's way bigger than that. It actually is the big problem that we are trying to solve. Hence, what we did is actually we redefined our category, the category that we feel that we are working in as instruments and intelligence for climate action. We redefined our purpose taking every measure for the planet. I think it's very well describes what our -- really our purpose as a company is. While climate change for us is way bigger than mega trend, we do -- we have identified 3 key mega trends that impact our business at the same time. And if I start with energy transition and decarbonization, if we think about now climate change, obviously, the energy transition has to happen. The decarbonization has to happen. If you think about our offering in this space is multifaceted. Not only it is the kind of all the activities that we do for renewable energy to be it wind or solar side, it's also the offering that we do for enabling power grids -- an efficient and safe operation of power grids, but also energy storage is an important part of future in terms of how to do really the energy transition. And here, we have great offerings on whether we talk about today's power -- the battery operations or tomorrow's battery operations, let alone in the longer term when we think about hydrogen economy. AI and process optimization. If you think about process optimization, the only way of optimizing your processes is to really fully be in control of your processes, that means you have to have the data, you have to understand how your operations work. We are actually the ones who provide that visibility for our customers for process optimization. AI runs on coherent, accurate, reliable data. We are the provider of coherent, accurate, reliable data, again, enabling our customers to apply AI in their own operations. And health and well-being, whether we talk about climate change or shrinking biodiversity or aging population across the world, we have a key role to play in providing the right solutions for health and well-being across the world to our customers, through our customers. We've defined 4 key success drivers. It starts with a deep, deep understanding of our customers and our customers' problems. It's about the application know-how. What is actually the problem, the thing that is -- that can make our customers to be more efficient, operate more -- operate better, be less emitting greenhouse gases. Really having a deep understanding of customers, not only the customers, but really the application itself, that in combination of technology and product leadership, is actually, in a nutshell, our competitive advantage. But it really starts from a customer and then applied into what kind of products and how do we develop our technologies. I talked about the secret sauce in terms of the excellence in supply chain. And this is something that enables really our business globally and across all the different -- various different segments that we operate in. And it's all -- the foundation underneath is the talent. It's the culture. It's a purpose-driven culture that we have in the company and now even stronger than before with the renewed focus and the renewed purpose for the company. Likewise, we've identified 4 different strategic priorities. And Jarkko and Sampsa will go through that in their respective presentation. So I'll let them give you more insight on those. I talked about the shift in how do we manage R&D. And last time we gave you a view like this, how much goes into maintenance and modernization to what goes to new products and what goes into technology and research was 2019. Now if you look at the change in 5 years, it's actually quite drastic. It's a big change. We have actively -- this has not happened by itself, but we have actively managed towards this. While overall, the investment into R&D has increased, but simultaneously, we have shifted clearly the focus into what really matters and makes us more competitive short and long term, i.e., new products and technology and research. How has this been possible? And one of the keys here is that we have been investing into technology platforms across the businesses and across software and hardware. Great example of this is the Indigo architecture that we have inside of where Industrial Measurements, which is actually both hardware and software architecture, which enables a reuse of different components, different capabilities across the entire Industrial Measurement offering. And you can kind of -- it's easy intuitively to understand that obviously gives -- makes the maintenance burden much, much easier. That all being said, our products do have a long life cycles, especially if I take a Weather Environment side, it's not uncommon that our products live over 10 years, sometimes even 20 years. So the maintenance and modernization continues to be playing a big role also today and in the future. But the shift into investing into the future, we've done and we continue to drive towards that. The other tool at our disposal is obviously M&A, and it is a strategic tool at our disposal. We can't use it as a complementing tool to our internal investments. We look at make or buy, what actually -- whether we do it ourselves or whether we can find capabilities, competencies externally, what actually provides the fastest best way to execute our strategy. That's how we look at M&A. We aim, if you look at what kind of an M&A we typically do, it's M&A that opens up new markets, brings new competencies that we might lack and/or new great capabilities. We typically target smaller midsized transactions, buying companies that we think that we can actually grow as a part of us. We are not buying top line. We are buying capabilities. We are buying things that we can actually think that we can grow even faster than what the companies could do themselves. We are not looking at transformative M&A or consolidating the marketplace. Great example of type of acquisitions that we've done over the past year, and which is a good role model for the future as well is, for example, Leosphere, the wind lidar company, which really has been a key in the growth of renewable energy in the company. And if I -- it's been part of us now some 5, 6 years and during that time, we've been growing the top line threefold. It's a great example of what we try to do with M&A. Other good example is a recent acquisition of Speedwell Climate, which is a leader in climate risk transfer. And it's a good example of opening up a new segment, a new way of monetizing our subscription sales. We published our long-term financial sustainability targets last week, and they really reflect our profitable growth and our asset-light business model. So repeating them, average sales growth, 7%. Systematically improving EBITA percentage and then strong cash flow and conversion over time. Heli will go through this and what's behind and what are the drivers? How do we achieve these numbers in her presentation. In addition, we committed to science-based targets for reducing greenhouse gas emissions and then approve that by SBTi organization. Here also our leadership in terms of our responsibility shows. We've been using 100% renewable energy already quite some time. We actually have been leaders not only in our industry, but any industry in this. And hence, our scope -- our focus on reducing the emissions further is actually on the Scope 3, i.e., the lifetime usage of our products and how do we make the footprint as small as possible. Just to conclude, I want to highlight 3 things. We are, I would say, at the heart of, first of all, climate change and heart of other mega trends as well, providing really solutions to our customers and for the planet as well. We equip our customers with instruments intelligence to solve real problems and climate at the same time. We continued strengthening our position as a global technology leader. We continue investing in the technology into new products, developing new products, new solutions based on the deep customer understanding, as I said earlier. This is a key for the long-term success of us. And we continuously develop our own operations to simplify and scale how we work and how do we embrace new capabilities such as AI and digitalization across our operations, across the company so that we are more and more data-driven as a company, adding profitability and simultaneously better customer experience, better quality. With that, I would like to conclude and open up for any questions you may have.

We are now ready to take your questions. So please wait for microphone and state your name before asking your question.

Thank you for the presentation. I'm Pauli Lohi from Inderes. And I would like to ask about the new financial targets. You don't have an explicit target for profitability in your new targets. Does it imply that you want to have more room to invest for growth in your new strategy period?

I don't -- I would not say that way. I think it partly reflects also the uncertain times that we have. I mean it's very clearly what we are saying, systematically improving the EBITA percentage. So we are kind of systematically looking at improving it. But at the same time, it is -- we are living in uncertain times. And I think that reflects that as well.

Then regarding the profitability target, you tied it to EBITA margin, which works well when you sometimes make acquisitions. Do you believe that you have lots of opportunities to conduct M&A in the -- compared to the last period, you had only 2 quite small ones?

Yes. So we are looking at many M&A at all the time. And if I look at the even past 3 years, it's -- we have the same kind of a funnel as many other companies that you start 20 projects and 1 may kind of conclude. In many cases, you are not in control of the timing and so on. So there's kind of a lot of activity, and we have been improving our capability to do M&A over the past 3 years. That's being said, I don't think that's actually the driver much on the EBITA -- choice of EBITA percentage, and Heli will go through this in more detail. But I'll just say that it's easier to be comparable. The attempt is to make you having an easier comparison base and kind of a cleaner comparison base between the years.

It's Matti Riikonen, Carnegie. You have made recently 3 very small acquisitions. Is that the coincidence so that they just happened to land during this short period of time? Or is it something that, overall, you think that -- you see that there's a lot of small companies that are now becoming kind of fruitful for acquisition and taking the next step with your resources?

I think it's more of a coincidence than anything else. As I said, in many cases, as you all know, in M&A, things -- you may have a funnel, you know what you want to target with, but you are not in control of the timing. And so sometimes it's like a project business. Sometimes there's more projects and sometimes less projects that actually kind of go through. So I would more put it in just coincidence. That being said, we have -- like I said, we have strengthened our capability to kind of professionally build a good funnel and think about what kind of companies we want to go after. Maybe it's a combination of the 2.

All right. And then secondly, on the EBITA margin target, could you just state maybe the 3 biggest positive drivers that help you in achieving those targets and which are then the negatives? You already mentioned the cycle and the current challenges, but just what the kind of -- what are the factors that are moving there and what makes you still think that you can improve?

Let me paint the bigger picture, and I'll let -- I'm not going to preempt what Heli is going to go through in her presentation. But just a bigger picture. I think we have -- we very strongly and I very strongly believe that we have a key role to play in many, many different kind of challenges that our customers face, whether we talk about the energy transition, whether we talk about climate change or health and well-being and so on. So I think there's a continuous demand on even better products than what we have today. I'll give you an example of this. Battery -- I mentioned battery manufacturing. And if I take the lithium-ion battery manufacturing and the requirement that the environment needs to be really, really dry to be safe, it's business-critical measurement in battery manufacturing, has been a big kind of a very good business for us. Now if you look at the next generation of the batteries, which are solid-state batteries, actually, it looks like that the requirement water dryness -- relative dryness is actually 50% higher than needs to be 50% higher than what it is today, which is a great example. It requires new capabilities, new accuracies, highly accurate, highly reliable. That's what it is and who we are. And I think it's a good example. Even if it's a single example, it's a good example of the environment that we are in. We have not found the limitations on what the requirements and opportunities, what kind of things we can bring and enable our customers to do.

This is [ Nikolai from Wind ], shareholder. Just a question on R&D. So as you said, there's been a shift from the Weather and Environment business to the Industrial Measurements business. But how -- I mean it's going quite slowly in a sense, right? So how do you see that going forward. And I know there's kind of a growth part of Weather and Environment and a stable part, but still, if you could.

Again, I -- so if you bear with me, Jarkko actually will go through that, the shifts that have happened within Weather and Environment. He actually will give the details on that. But the chart that I showed you actually reflects how much we've been able to actually kind of move the investments to things that actually matter on the competitiveness side over the past 5 years. And if you really think about it, the length of our product cycles that we have, actually, the shift is really, really meaningful in terms of what we've been able to do. The slowness comes from the fact that some of our products live 10 years, sometimes 20 years, and it makes no sense in killing them until there's a natural death.

Okay. And with the risk of asking about something that will be talked about later, could you talk about -- you said that in the Weather and Environment business, you've improved the profitability a lot. Could you say, is that because you've grown and managed costs? Is it because you've cut costs? Where has that profitability improvement come from?

Again, it will be coming in the future presentations. But I'll say this that it's actually a combination of pretty much what you mentioned, partly it's a shift of less profit -- less relatively profitable businesses into more profitable businesses. It is scaling and it's very good cost management and shifting the investments into right places. It's all of the above. And Jarkko and Heli will go actually in a little bit more detail on what -- exactly where it came from.

This is Atte Jortikka from Evli Research. I tried to stay on this presentation. So you have this strategic priority on simplifying and scaling. Are there currently any larger kind of initiatives here? Or do you see any kind of low-hanging fruits, larger low-hanging fruits there?

I don't think there's a -- kind of a -- this comes from multiple smaller things. It starts from kind of a culture and attitude that you actually continuously hone and challenge yourselves that whatever made you great in the past might not be the way what makes you great in the future. It is about that we have right portfolio of products, but it's equally important, how do we make decisions, what kind of processes we have in-house. How do we actually utilize? I was talking about digitalization and AI. How do we actually utilize that in such a way that we can actually minimize, say, hand work in different parts of the processes and so on. How do we actually can make a complex environment like ours to scale. So while at the same time, continuously challenge ourselves that how can we actually -- can we simplify the way we work.

And before we move on, we have 1 online question here. How do you see the impact of the outcome of the recent U.S. elections on your sales funnel?

On our sales funnel, obviously, it's kind of too early to say anything, obviously, it's a relatively new news and everything else. I don't think actually -- on a sales funnel side, I don't think it has material impact. Our products, as I was saying earlier, are actually critical pieces for many, many different industries. We are kind of present in all geographies and many different industries. And the demand for our products. They are not a commodity. People are buying them for a very much of a reason. And that reason is not changing because of elections in U.S. or somewhere else. And then whether like there's a change in the macro economy and everything else that's way too early to see even to speculate. Up or down. Up or down.

Okay. Thank you. We still have time for your questions after all presentations, so no worries. We will continue now. Thank you, Kai. Let's move on to Industrial Measurements. It's Sampsa's turn.

So good afternoon. I will be talking about Industrial Measurement, the strategy, the markets and also where we believe that the growth is coming from in the future. And when we are saying here growth to product leadership, it actually really means that whatever we are doing, we really need to be the best in the world, and I will come back to that probably a few times during this presentation. So Industrial Measurement is driving growth in selected markets, solving customers' problems better than anybody else. What does that mean? It actually means that while we are playing practically always some kind of a critical component in our customers' processes, we are small, but we are playing a very critical part in the systems. So what we need to do is then to give the customers the best possible visibility into their processes so that the customers can then tune the processes to get the best products out of them and save energy, save natural resources and many other things like maintenance cost, et cetera, so that our task is really to be the binoculars for our customer into their processes. And this is actually very much in line with our taking every measure for the planet because if you can save energy and natural resources, everybody understands that this is absolutely key to the well-being of humankind on the planet. And in that sense, I believe strongly that we are doing really, really, really valuable work for all our end users. Here is then our one picture of the strategy of Industrial Measurements. So we say here, growth through product leadership. And as mentioned already earlier, so we need to be the best solution for our customers, and that is exactly what we are doing. That is exactly what we are doing. If we start from the customers' world first, so discovering customer needs, sounds a bit interesting to say discovering because customers probably know what they need. However, in very many cases, when we start talking with the customers, actually what we are coming with -- what is our solution for them is something different than they have been doing earlier. So hence, working with our customers, whether they are new customers or existing customers, it's really, really essential so that we have the discussion with them that here is the issue that you actually have and here is the solution that we have. The markets what we have here, actually, we have tuned this a bit, and now it's maybe easier to explain. And this is like the big markets which are not overlapping what we have here. We have the industrial market. And industrial market is practically everything related to manufacturing. So lithium battery manufacturing was already mentioned. Data warehouses are one part, semiconductor manufacturing is one part. But then on the other side, we are also playing an important part in sawmills, making sure that the wood is dried in the most effective way or then in heating, ventilation and air conditioning in buildings like this. And there are many, many, many different markets where we are playing, once again, a critical -- small but the critical part of that industry. The other one is life science industry, so all the pharmaceutical companies in the world. And here, actually, the reliability of Vaisala's products is absolutely essential. Many times, pharmaceutical companies have very strict regulation. For example, they have to be able to show that their manufacturing process has been monitored properly or their warehouses have been monitored properly, just the temperature or the temperature and humidity, et cetera. Then if there is an audit, they can prove that this is exactly how we have handled everything in the processes. And hence, basically, once again, small but very critical part, whether it is in the warehousing, whether it's in the manufacturing, et cetera. So once again, really important market for us, and we are playing once again very important part there. Power market is another one. So what we are doing in the power market, we are monitoring high-voltage transformers. They might be the size of a container, and we are monitoring the oil in the containers to see that if something has happened and if something is going to happen. And as the electricity consumption in the world is going up, so once again, small but critical part in the grids that we have in the world. So those are the markets where we are now dividing. And these markets are completely now -- they are not connected to our product areas as such. So we can sell many different parts to many -- so for example, in the industrial side, our pulp business with our refractometers, the liquid measurement devices that we have, they are part of the industrial market for us. Then let's go to the next level, which is achieving #1 position in selected markets. #1 position is slightly open statement. But what it means is that we have to once again be so good in understanding the customers' problem that we can solve their problem better than anybody else. And hence, the customers are willing to pay for the value we are bringing. Very many times, we are not the cheapest option in -- that they can choose. But we are the best value for the money over the lifetime of their own system process factory, whatever it is at time. And that obviously has many different parameters, which are helping us then to get to that achieving #1 position. And let's start from the top. And this customer experience process is one of the projects for us. It's one of the times where we are trying to model this in our systems from the point where the customer gets to know that Vaisala exists, contacts us, we give them -- we discuss with them, we give them an offer, we negotiate, they buy from us, then they start using our equipment. They get support what they need. They get calibration services, et cetera, during that. And when basically they have then used it till the end, which might be 10 years or even 20 years sometimes, then they basically continue using Vaisala. And when we can see in every point that what was the impact of somebody not answering the phone, what was the impact of the marketing campaign, then we have a much better possibility of adapting to the situation and to the requirements of that market group or that region, et cetera. So really important part of our way forward as well. Let's go to the bottom first. So then we have this application expertise. Application expertise means that while we have certain technologies that have been created in-house, we have our clean rooms where we are manufacturing the sensors, the chips and basically then make instruments out of them, we have to understand that what is the real usage of it. And while I was describing that industrial segment, there is a lot of different industrial segments. So we potentially need to measure high humidity in high temperature here and then maybe carbon dioxide in an incubator cabinet here. So we need to understand how we are using our technology and create those products that are fulfilling the customers' needs the best possible way. And hence, I believe that, for example, on the humidity side, we are second to none in the world regarding the expertise that we have in the world. Then superior channel. We are still quite a small company in the world and world is a really big place. So we have our presence in certain countries, and then we have a huge network of partners. Our main partners are distributors dedicated to us, hopefully giving the customers then local support, local language, additional services, et cetera, and basically using our equipment then to once again help the customer to improve their processes. And the superior channel can be online store, can be ourselves, can be our partners. But the main point there is that we have to cover the whole world, every single region and every single market as well. So there is quite a lot of work to do. And I think we are pretty -- we have advanced in this pretty well. But still, the main point there is that the customer decides if they want to use a local partner, fine with us. If they want to buy directly from us, fine with us. So that's one of the points which where we are once again adapting to the customers' needs. Then if we go to continuously creating winning products. So winning products for us is instruments, it is systems and it is services required by the customer. And this we are doing for measurement technologies in gas and liquid measurements. And when we were talking about the R&D expenditure that how it has changed, during the last 10 years, we have practically renewed everything that the Industrial Measurement is doing. The whole product range has been renewed. There are certain products still which are still hanging there, but basically, we have renewed everything. Everything is plug and play nowadays with the Indigo system. And in that sense, we have made life easier for the customer. Then let's take a look at the markets what we have here. So industrial markets, the biggest market we have. And I already talked at which kind of markets we can have there. But what is very essential for this market is that industrial investment does not happen if there is no growth in the economy as we have seen. So we were really good after COVID buying all the components and fulfilling our customers' need, and we actually grew really fast during '21 and '22. And then basically, it's evened out. And now basically, what needs to happen for us to start growing again is that the economy gets rolling again. And I believe personally that, that will definitely happen. And we are capable of answering any kind of a request from the market. Then we have life science market. Another market extremely important for us. What are the drivers there, health and well-being, aging population. And as such, this is not just Western world. This is also developing countries where this is really important. And as such, so this market, really essential for us. We have the continuous monitoring system, but we have also the instrumentation for different processes that the life science customers need. And we have been very successful here as well. If we take the 50 largest pharmaceutical companies in the world, including the Chinese companies, 50 of them are Vaisala's customers. Then we have the power market, really important market for us. I already explained that what we are doing on that market. What is the main driver is the electrification. So more and more and more power is basically conveyed via the electric grid and the importance of monitoring that grid is just increasing, especially with the renewable energy. Renewable energy is very harsh on the network itself because the wind can stop anytime or start anytime or you can have a peak of solar, et cetera. And basically, that's very hard for the system. So the requirement of monitoring the system are just getting greater. And hence, I'm very optimistic about the power market as well. We are not the biggest player in the power market right now, and there is a lot of market share we can grasp. Then let's talk about the future that, okay, fine, what we are doing and what is happening. And the Horizon 1, basically things which we are doing right now, what we're developing as a product right now, what we are renewing right now. So we have all the markets there. So industrial instruments, we keep on looking for new applications where we can solve the customers' problems. We keep on improving what we are doing today. Then we have the life science market, the same thing there as well as power market as well, very important markets for us, and this is not a market that is flattening out. This is going to bring majority of the growth of Industrial Measurement, let's say, for the short while as well. Then if we take the Horizon 2, which is just that what is happening right here is the industrial decarbonization. Our task is now to be in those trial installations in the world where people are trying different things out. Will this work? Will methanation work, should this win, et cetera. So we have to be in as many locations as we can as the partner for the parties who are then one day going to make this a massive business. And hence, I think it is really -- we are in a good position here with the industrial decarbonization because we are in very many different places in this. I have one example on the next slide. The other side, what we have here is then the digital services. And this is as we have our instruments spread out the world in different places, it is not so simple to send the instrument back to us and then basically, we are calibrating it and sending it back to the customers. So basically, this is something where we are looking different ways to help customers' life so that how can we be better by putting our services on the network. So how can we help the customer run their businesses better as far as we are concerned. Really important part as well. And then Horizon 3, so hydrogen economy, there is a lot of discussion about hydrogen economy. Once again, there are a lot of small parts, small testing, et cetera, but we believe that hydrogen economy actually will start really make a difference in the 2030s. However, here, I would like to say that we've been already for some time, for example, in the fuel cell laboratories where they are testing fuel cells and testing fuel cell technologies, we have been the major supplier for, once again, humidity or dew point measurements or really, really low humidity in the laboratories where they are testing what might work one day. And when we are there in the beginning, that obviously gives us a really good possibility so that if this and that company are going to be successful, what they are trying, obviously, they know us and we have then the solution what they need. Then we have here a really funny looking building, and that is actually a real building in the suburb of Copenhagen. It is called CopenHill. It has a ski slope that you can -- even on the summer, you can downhill ski there. You can do tracking. There is a climbing wall outside. And the whole facility is waste incinerating facility. So they are burning waste. You would not expect this to be something where you have outdoor activities on the walls of this building. And -- but that's exactly what it is. So basically, when you are burning waste, you have a lot of heat. So you can create heat, you can create electricity, but then you have a massive amount of carbon dioxide into the air. And what is inside that building is then a facility which is actually ripping out the carbon dioxide from the exhaust. And actually, what is coming out is only water vapor. And where we are playing part in this facility is that we are measuring the carbon dioxide that they are collecting so that they know what is the burning process, what is the cleaning process that works the best. Once again, a good example where we are part of a trial. It's called CopenHill, if you want to, one day, take a look what it is. But for me then to conclude. So Industrial Measurements is truly part of taking every measure for the planet. So we have our task to solve our customers' problems better than anybody else. And we are investing in the science, in the research and in product development of our products. And as Kai already mentioned, so we have a very solid history now to continue what we are doing. And I'll stop here. Thank you.

Thank you, Sampsa. Huge amount of information on 5 slides. We are ready to take your questions, please.

Waltteri Rossi from Danske Bank. You mentioned that the 50 largest pharma companies are your customers, how do you see your market shares right now in life science and also in other segments?

Well actually measuring our market share, it's slightly a bit of a challenge. So we have different markets where we are -- different segments where we are actually pretty well established. I would say, for example, U.S.A., we're actually very well established as far as the continuous monitoring system is concerned. But as a direct figure that this is our market share globally, very difficult to give you.

But do you consider that there's still -- you have previously said that there's room to grow on top of the market growth? Is that the case still? Has the view changed at all?

I would like to -- as my personal opinion, I would like to think that the market is not limiting our growth.

Then still on the growth. Do you think the opportunity is more in growing through new market segments or by increasing the market shares in markets you already are? And if you look to move into new segments, new industries, do you need to acquire new solutions? Or can you do it with the existing ones?

Well, I would like to say that, that both obviously, are important for us. So looking for new areas where we can play as well as today's market. So it's not saying that we have to keep hold of it and basically you can all keep hold of it if you are keeping being better than anybody else. As far as then buying companies, so we've been obviously, let's say, quite cautious with buying the companies. And there is maybe 1 explanation there, our strategy is horizontal. So we are basically masters of the physical measurement universe. And basically, if we are looking then to find something, then we need to find something that we can scale across the globe, et cetera. But we keep on -- we are all the time looking at new companies to buy.

All right. But if you had to say what is the number like the most important growth driver. Is it the current markets and win there or expand to new markets?

In monetary wise, obviously, it's the current market in the short term, but then obviously, at some point of time, the new markets are going to be current markets. So in that sense, I would say that the current markets that we have today are going to bring the biggest growth. And as we have now had this plateau almost 2 years so that it's been very -- well before that, we grew more than 25% 2 years in a row because we could deliver, but also we were prepared to use that opportunity that was given to us.

Matti Riikonen, Carnegie. Two questions. You currently showed 3 segments where you focus most in IM and liquid measurements was not one of them. It has been there for many years. So could you just describe the reasons why it's not there anymore?

Yes. And the problem with that was that when we entered the liquid measurement, we wanted to show that okay, fine, and that this is important for us. It is still important for us, but liquid measurement is like a parameter-based market. So if we have the parameters and then the instruments and then the real markets, so it was limiting a bit our way of describing it. So now basically, liquid where our main market is pulp industry, so it's directly into the box of industrial. So industrial segment and then life science segment and then power segments are not overlapping and also detached from our own structure as the product area, which I think is the best way to describe the world.

Fair enough. secondly, you mentioned that you have a lot of market share to capture in the power segment. Who are you competing against?

A lot of big players there, General Electric, Siemens, Hitachi. So there are a lot of big players and -- but nevertheless, so we have had fantastic success in many markets. And [indiscernible] is a very interesting market for us today because the biggest player there has said that they have tested us for years, and we are the best in the world.

Atte Jortikka, Evli Research. First, a quick one on the life science. How is it your business there currently split between the manufacturing and distribution?

This I didn't quite get. So what do you mean by distribution?

Yes. So basically on revenue terms, how much of your units go to the manufacturing side and how much to the distributors and kind of logistics and...

Pharma manufacturers...

Yes, yes, yes. I don't have that number, but both parts are really important. And our continuous monitoring system started actually from the warehousing and the warehousing happens with the pharma manufacturers as well as then the distribution companies. So in that sense, I don't have that number, but that's where it started. But then our instruments are sold -- also the instruments and continuous monitoring both are sold to the manufacturing side.

Okay. Then the second on the battery side, which we have already touched few times on. How did this kind of lower-than-expected growth on EVs during the last 2 years affect your demand? And secondly, are you on the kind of -- when we think of the whole battery value chain, are you there existing already on the mining and mineral processing side or just on the cell and pack side on that?

So the main side for us is then the battery manufacturing. As Kai was explaining, so what we are doing is measuring the humidity or dew point in the process itself. Our biggest value added is that obviously we are reliable. And what we promise is true. But the biggest value add there comes from the fact that we can last that very corrosive process much, much, much longer than anybody else. So running down the process to change the instruments is completely different price level than the few thousand euros that you pay per our instrument. So in that sense, I think we are really well positioned and I hope there is nobody here in this room who believes that the electrical vehicles are done. It's just now leveling off and then it starts again.

Then add on, on that, do you think there has been kind of under investment into that side because of the slower-than-expected EV adaptation?

Actually, for our business, it was that there was maybe a bit lower investment on that side, and now they are taking a breather but it will happen. And also then the geopolitics have impacted this a bit. So a very big part was in China and now basically we see battery manufacturers going up across the world.

[ Nikolai from Wind ]. On the margins, there is a target for all of Vaisala to increase margins. How is that in Industrial Measurements division? And if there is also a goal to increase there, what's the baseline?

Well, I think the margins, obviously, we have to -- we tend to be the most expensive in the beginning. So basically, our margins are pretty healthy. But I think that there are several ways we can improve the margins for ourselves. For example, now the modularity of the Indigo family, it's easier to manufacture than earlier. So basically, obviously, we need to ramp down the cost of manufacturing, even though the product value goes up, we have to think about the production, easiness of producing the products and productivity. And -- no, it's not the right word, anyway. And -- but then, of course, we -- every time we try to sell the value as much as we can.

So it's still a goal to increase the margin in IM because IM is growing faster, the margins would increase just because you are outgrowing the other division, right? But...

Yes. So I think that immediately when Kai said that I don't need that margin, so then we can slack off.

But you are right, that is one of the elements Heli is going to talk about more.

And maybe just a question to try to understand the business a little bit better. Could you give any idea around how much of your demand is linked to, let's say, CapEx spend from your customers versus OpEx spend? And also within the CapEx, how much is kind of a new factory or a new greenfield project versus an upgrade? I know you won't have precise numbers, but just so that we can get a flavor of what's driving it?

I believe the maturity is CapEx because we are always part of a bigger system. So we are always part of -- it can be EUR 10 million production line, and we are there only a small part. So I would say the CapEx is that. We don't do ourselves any leasing. So you have to buy it from us immediately. There might be some of our distributors doing something for smaller customers, but I would say CapEx.

I would like to kind of add on that, that what we have been talking about is that we are part of the CapEx investments, definitely, but actually, our products are such small and fairly cheap each that they are in -- separately, they are not CapEx decisions from a customer point of view, but rather OpEx cost. But of course, if a customer decides to build a new manufacturing facility and they need our products. It's, of course, part of CapEx investment.

So best value, not cheap.

[indiscernible] from Schroders. You said that your sensors are best, which sounds great and must be so. But could you just describe when you are selling to new clients, how do you actually demonstrate that at the first place? Do you have your own data packs you use? Or is it for the potential client to test that by themselves, which then typically leads fairly long lead times if you're successful?

Well, our business is not very fast, even though we are fantastic in delivering, so we can deliver this week if you order right now. But, obviously, there are references and then our -- a lot of our salespeople have their own back where they have -- they can show in real life how it works, et cetera. But then, of course, if somebody is on OEM and thinks about making a commitment for tens of years, then, of course, they keep on testing. So it's a back of everything. It's a back of everything. But what is really important is that as far as our competitors are concerned, they normally tell that we are accurate here in 23 Celsius. And if we say that we are 1% accurate in the whole measurement range, that is true. And we have measured all our competitors and none of them can match us.

Before we take a break, I have 1 online question here. What will be the key driver for growth for your continuous monitoring solutions?

Well, I think that, first of all, the growth of the life science industry. It's definitely one of those. Then of course, we have to also win market share, replace our competitors. So that is one thing. And then obviously, win also new customers. And of course, that is based on the fact that we keep on bringing new features and functionalities into the system.

[indiscernible]. My question is actually also related to the growth questions. And what about the Horizon 3, actually, this hydrogen technology. When do you think that will deliver turnover?

In the 2030s.

Pauli Lohi From Inderes. Just 1 question regarding the digital services you mentioned in the future pipeline, how you can calibrate sensors remotely? Or what does that mean in practice?

Calibration is the sci-fi dream. So that -- we have to have something physical next to it. But what we can do is that, that help the customers online, helping somebody to commission it, basically finding out what's the problem, what are the settings, et cetera. So there are a lot of ways where we can improve.

And in your slide, it was like in the future, so is that something you will ramp up in the future? Or have you already started?

We are already doing many things, but it was in the Horizon 2 just to say that we are nowhere near of being done.

Thank you for the questions. It's time for coffee break now and we will continue at 3:30 p.m. There is coffee here and in the other room and more snacks in the other room and toilets are behind my back. So let's stretch our legs and continue at 3:30. Thank you. [Break]

Ready to continue now. I hope you had a chance to enjoy some refreshments and stretch your legs. We will have 2 more presentations to go and first of them is about Weather and Environment business area. It's Jarkko's turn, please.

Warmly welcome, everybody, also on my behalf, those who are present here and also everybody in the webcast. I have a pleasure of telling you in a short 20-minute slot what we have been doing over the recent past when transforming and bringing into expansion our global business in Weather and Environment, a little what we have achieved and what are the priorities going forward. I wanted to start with this picture because I think this is the core that has been driving our thinking. First of all, in the left-hand side, you are seeing that what's the impact as we can measure it, that is happening as a result of climate change and severe weather. So this is not the temperature rise, but there you see really the number of severe events recorded annually. And then what has been the cost of those events for the societies, for the businesses in billion dollars. And I think it's pretty easy to see that the trend is alarming and, unfortunately, it will continue. So this is unstoppable for the time being. The right-hand side of the picture is what we should do. And one of the key priorities is to decarbonize the energy generation. So we have to move away from the fossil-based fuels and a key solution here is renewables. And I have chosen here the picture about wind energy. It has been so far the most relevant for us. And there, as you see how the offshore, onshore wind are growing here and developing and, by the way, I noticed here in the picture that the legend is wrong, onshore is the bigger one than the offshore obviously still today, the growth in the offshore being a significant one. If you look at these forecasts that we have for the future in the history, I think we have always been underestimating the growth of the renewables, and we will be most likely at the end of this decade also getting to the situation where the fossil energy production will start to go down. And actually, that is again empowered by the renewables. So these are really the 2 key mega trends that are driving our business. Left-hand side for the weather systems, right-hand side for the renewable energy and then for the data business that we are running, actually both of these are very relevant for them. Additionally, we have also some important technology drivers like everything as a sensor, IoT technologies and AI-based technologies, which we are really deploying today already in our business. So this is not a future hype, but it's core of the differentiation that we have. So let me first go through here the 3 businesses. We like to think today about our business in sort of 3 different businesses, a bit what are these markets like and then go slightly deeper what we have been doing. So the first of these businesses is what we tend to think is our core business where the whole Vaisala journey started some 90 years ago. So this is the meteorology, very similar to what we are doing in aviation, i.e., with airports as well as then the Northern Hemisphere roads, winter maintenance. So when Vaisala started, we had obviously a small portfolio. It was 1 single product. It was the Radiosonde. Today, we have a very, very broad portfolio of instruments in this business. This is really the business where we are doing every year revenue in 150 countries that Kai referred to in the very beginning. We are the undisputable global leader, so our relative market share is probably close to 2% compared to the second biggest customer. And the key driver here is the climate change and severe weather events. It's about EUR 1 billion market as we think about it. It's not a strong growth market. You could think of that, why is it not growing more, given the severity of the impact that it has. One of the reasons is that large amount of the spend is driven by governmental budgets and spending, and they are relatively stable. So therefore, it's a lowest single-digit number, obviously, can vary a bit annually. The good news here is that it's not disappearing anywhere. So this is not like paper in forest industry. This will continue to take for the foreseeable future, and it's about 2/3 of our business today. And this is really where you could say where we started the transformation front. So what have we been building is really next to this one, the renewable energy business. And this was largely initiated by the acquisition that Kai referred to, Leosphere. So this brought us a global position in wind measurements. So really being the leader with more than 50% of the global market share doing in remote measurements and a totally global business where we are today. So really, our position has been starting a global leader in wind lidars. And I will elaborate to you later that how do we plan to grow it from here. We were talking about the driver. It's the energy transition. It is the renewable energy build. We believe that over a longer period of time, this is a high single-digit low double-digit growth market. Naturally, again, it can vary right now. It has been a bit slower due to the inflation, high cost increases, uncertainties for electricity prices, et cetera, business models but there is nothing that would be stopping this megatrend that we have seen here. It's about 1/4 of our business today and really a business that we have been creating here with a relatively short period of time. And really the key in this Leosphere acquisition was that we have been able to grow it significantly. Kai was saying that it's more than 3x the size it was when we acquired it. We have been able to contribute to the technology. We have been able to contribute to the go-to-market and we have been able to also contribute strongly to the operations, i.e., how we run the production and sourcing in that business. So really adding value in many ways. And then the third business is sort of a business that we have had quite some time. It's this subscription business, but the real change is that we have focused during the last years to start to grow it and think about the business model also different. Here, the main driver is that we are not looking to bring forecasts by replacing what the local national MET agencies are doing or to provide it for consumers. Our focus is to help businesses actually to protect their assets or optimize their processes. Our best understanding is that it's about EUR 1 billion to EUR 1.5 billion market in the pockets that are relevant to us, which is basically North America and Europe. If we would think about this as a global business, it would be probably double the size. But we are really now focusing in this, call it, home markets. It's probably growing with a high single-digit number, again, continuously, thanks to all the reasons. It's also a market that is pretty fragmented. So we have also disclosed that our business here is around EUR 40 million. What we do, if you see that this is the market size, you see that there is ample opportunities for us to grow. There is only a couple of larger competition. So it's a fragmented market, there is space for innovation and also underlying market growth. So we believe that we have good opportunities to grow it also going forward. And really, our position is that we are coming here with the new paradigm. It's not the old numerical weather predictions, what the MET agencies have been running in supercomputers, it's actually very efficiently run AI-based modeling where we can assimilate Vaisala sensor originated data on any specific location and do a differentiating product for our customers that helps them to really get savings or protection for their assets better than they could otherwise do and a bit over 10% of our net sales today. So these are the markets and the fundamentals. And if we then go one notch deeper that what are we doing in this business is what we have been doing. So this meteorology, aviation and roads. Here really, the business is that, first of all, we have played a very important role to understand the climate change. So the most of the long-time series that the MET agencies have been measuring and quantifying for the last decades globally is based on Vaisala Measurement instruments. But obviously, core is also to help the adaptation to the new environment that we will be facing in this planet. We have a very, very competitive product portfolio right now. And this is, I would say, the main reason why we have been so successful over the recent past in getting new business. Our order book is all-time record. It's very high. We have very much a situation where we know pretty well what's already happening next year. And given that we have in such a good shape also the product portfolio, we have been able to do prioritization for the R&D. I will show it to you a bit later more about that. But also, what I think is important here is not only the broad portfolio, but there is a lot of industry first. So those of you who are following us actively recognize terms like RS41E, DA10, CL61, FD70, DMU801, SSPA, WR, et cetera. I'm not going to open all this, you don't worry. But they are all industry-first products that Vaisala has brought to the market that are driving the innovation and which our customers love. And this is really creating the position for us that we can really create something for the customers that is important for them. I think the second important point here is these large projects. And there, we have had the pleasure of announcing here recently, 3 of them. I think there are good examples. We have started in the beginning of this year to renew the whole weather observation system for the new Kuwait Airport what they are building, renewing it for 2 runways that they have, extending and building system for the third one. Then we have started a project in Spain to renew their whole weather radar network and the very unfortunate events in Valencia that happened here, I think it's an explanation why you need that type of capabilities. And a third one, we have been saying that most likely in the beginning of next year, we will be signing a contract to improve the aviation safety in Indonesia. And all of these 3 programs are more than EUR 20 million in value. So they are large ones. What's also important here is that there is nobody else who can do this size of system project as a turnkey delivery for our customers. And we have capability to do it globally. So we have been working in the past in Bahamas, in Argentina, in Vietnam, in Ethiopia to do similar ones. So this is really something which is unique to Vaisala. And then we have said the priority here is not fundamentally to drive the growth. We have been actually recently quite successful there, but the long-term growth in the market is relatively stable. So we have been focusing on profitability. And we have been able to bring the profitability now in this business into the mid-teens, high teens, which is more or less threefold what it was when we started working on with this priority. So a very, very significant improvement, which obviously contributes largely into the financials of the Weather and Environment and has given us space to really invest in the subscription business. The second one was the renewable energy, mitigating climate change. And I was talking already about the wind lidars, Leosphere. The focus that we have had has been largely wind resource assessment. So this is the phase where you, as a developer, think that where do I put my wind farm. And if you put it somewhere, you have to understand, will it be a good business case or not. And therefore, you need to understand how much fuel, i.e., wind is there available. So typically, you do then a measurement campaign, and now traditionally, they have been done with physical [ Met pass ], which you have been installing sometimes in difficult locations, only way to get there is with a helicopter. And now that the turbines are getting bigger, the terrains are more complex, you want to do that with very smart devices, and there the wind lidar kicks in. I think today, the penetration of wind lidars is perhaps 20% of the wind resource assessments that are done there. So there's a lot of opportunity to grow it by penetrating more and replacing the old technologies. But additionally, we are looking to bring that technology not only to the resource assessment but also to the operational phase of a wind farm. So basically, we can help then the wind farm operator to optimize how they get all the energy out of the fuel, i.e., the wind that there is. So we can anticipate very short term, what is happening because these lidars can be also forward-looking when our wind costs coming or we can help you to optimize across your whole wind farm by looking at the different wake and turbulence effect that the turbines are causing to the next ones and really start optimizing it. And we believe that these capabilities will be pretty interesting. The recent announcement was the acquisition of Nevis, which we announced here just a few weeks ago, that is intended to strengthen our capabilities on offshore wind. So basically, Nevis has been building software solutions for offshore platforms. Now we want to bring those capabilities to offshore wind, how you operate safely in those conditions. We are also extending to solar as we speak. So we have a relatively new offering there. And finally, we have also launched a new software platform also here in September called Compass. And this is a cloud-based companion to understand weather-related data for a renewable energy operator. Let me give you one example. You would be modeling your wind resource with your lidar, but in a very complex terrain, i.e., hilly terrain, which we are seeing more and more given that the easiest properties have been largely used. It's very difficult to understand how the wind is propagating in that area due to the fact that the terrain is complex. How you do it? You can do it computationally by feeding the lidar information into a geographical model of the area that you are doing. It's very computational heavy. You cannot do it on the device. So we are offering the customers to do it efficiently with our software platform in the cloud. So this type of value-added capabilities we can bring for the fleet management, but also the data and additional analytics that you are able to do. Here, the priority has been to drive profitable growth. We have been growing over the recent years between 15% to 20% in this business, which is obviously the reason why the business has been growing so fast, threefold here in a short period of time. And we believe that this is the opportunity that we have going forward, also through the expansion that I was elaborating to you. Then the final area is this data as a subscription. Here, we actually started already some 20 years ago. And you see here the picture of lightning strikes. So Vaisala has had a proprietary lighting detection network already 20 years ago and furnishing that data. Really, the new thing is that we have been now also building capabilities to deliver a forecast. And that started some 5 years ago when we acquired the assets from a company called Foreca, including their B2B business. And really, the paradigm shift from this old numerical weather prediction models into the AI has played for our favor because we are capable in a very agile way to provide accurate forecast for any business, for any specific location by enhancing the measurement also with our sensor data and enhancing the forecast with the sensor data. So this is really the core differentiation that we have. We have been building here platforms. It's a scalable platform leveraging AI. This is really about the forecasting engine. There is also 2 other dimensions where we have been investing in. One is the back-end platform, i.e., how do you run a subscription business. And as you know, Vaisala has been traditionally doing business with hardware, we have great SAP platforms. We know how you move your hardware, but it's a totally different thing than to run a monthly business with subscriptions that you are invoicing 1,500 customers every month. So we have built capabilities using totally different technologies, [indiscernible] Stripe, et cetera, which those of you who are following that type of business, say something, and this we have now in place. And then the third element of a platform is more the customer-facing front end because in this type of subscription business, you are actually upselling the products into your current customers, and that you are doing digitally. So very important element. We have been fueling the growth by some M&A. A couple of years ago, we acquired a company called AerisWeather, there the key idea was to get assets, how do you distribute this data. So they have been really specialists in providing sort of a platform or distributing and selling the data. And now we made the acquisition into the area of financial services and insurance by the SpeedWell that Kai was also talking earlier about. So they are basically helping a trader or an energy company to find a business with the financial services company, insurance company or a hedge fund to basically transfer a climate-related risk. For example, that my wind farm will not have a lot of wind this coming year. I can buy an insurance for their -- with our data, we are facilitating how that transaction can be priced. Here, the priority has been really the subscription revenue growth, so ARR, annual recurring revenue. There's been a high investment for us which we have been funding, thanks to the revenue that we have been gaining from the meteorology business, from our old business. And here, the growth has been between 15% and 20% per year. So high growth, and this is getting into an attractive scalable business. Kai was mentioning something about the R&D and promised that I tell you a bit more. Okay, I'll tell you a little more, which you see here. There is 2 stories in this picture. One is that in the Weather and Environment, we have been moving money from the left-hand side circle into the right-hand side circle. And that has been contributing in 2 ways positively. First of all, it has been improving the performance of our meteorology, aviation and roads business because we are investing there less, portfolio is very competitive. And we are more looking at how do we keep the long life cycles of that product -- of that business which are typically 20 years plus even. And that is part of the trick that we know how to do that efficiently. And then we have been really putting the ammunition that we have for new product innovation and where we're also seeking new opportunities for technology and research into the right-hand side bar. So renewable energy, it's much broader understanding than only the wind lidars I elaborated to you earlier and then also the data business and the underlying assets. So this has been quite remarkable shift that has been also helping us during this transformation to drive growth. Then a summary, what are the priorities building on what we went through. Meteorology, aviation and roads, we will leverage this highly competitive product portfolio, we are the global leader. We want to stay one also in the future. We have a lot of large project opportunities in the funnel. The only problem with this is that you never know when they close. So some of them are faster, some come slower, but there is a lot of ample opportunities. I'm convinced that we continue to have similar things that we have been announcing now also in the future. And the focus is to continue to deliver the profits. So exactly on the same trajectory where we have been. Renewable energy expansion, as I told you, outside of the wind lidars and also using the wind lidars in a novel way, building value also with new subscription-based cloud product that is totally novel here, where we have a lot of ideas how to innovate it forward and then continue to drive the profitable growth what we have been doing there, riding on this mega trend that there is behind here. And then finally, the subscription business, we have now invested to build the scalable platform. And this is an attractive business because the gross margin is roughly 80%. So every euro, we are growing the top line. We get EUR 0.80 into the bottom line. And we are looking still to fuel this also with M&A especially go deeper into certain verticals, the platform capability we have right now. So there is additional opportunities there. And naturally, the priority here in addition to the growth will be shifting to turning this into profitability. And we are looking at that to happen during this strategic period. So within the 3 years stint that we have now ahead of us. All in all, we have been able to drive growth through this transformation. And actually, the last 4 years, our average annual growth has been 9% in this area, which is telling you about the transformation that we have achieved, and we have been also doing significant profitability investments and I believe that we will see -- be able to see more of those now that the Xweather subscription business is also starting to scale and shift its sort of position from being an investment area actually into generating also profit. So with this, let me close here, and thank you.

About after listening to him. Is it all clear? Or do you have any questions?

Pauli Lohi from Inderes. I would like to ask about Xweather because you are still a relatively small player compared to a couple of larger competitors. How you stand out from the competition?

May I ask you what do you refer to large competitors?

Well, there was a couple of bigger American data companies, I don't remember the actual names here, but yes, I mean what are the segments where you go? And maybe hope that they are not there?

I'm sorry for teasing you, but just wanted to check because my point, Pauli, is there are not that many large ones. But you are right, there are some that are bigger than us. Some of those are also pretty focused on consumers and like advertising-based model. This is not for us. Today, the key verticals where we play, first is really roads and transportation. And as you have been knowing not only is the road authorities, winter maintenance, but we have also a lot of business in automotive side. And then we are also doing things with the computer business. So it's pretty holistic large play in that area. The second one is energy where we are having historical data. We are having forecasting data but there, we are also producing now specific forecasting driven optimization opportunities, like, for example, companies doing district heating or one area that we are looking into right now is DLRs or dynamic line ratings also for the grid companies. So there are ample opportunities and now the third one with SpeedWell is coming this financial services insurance markets. I would say those are like 3 verticals where we have a deeper position right now today. So those are driving growth. I think also stickiness. We can talk that what can be the next ones. We are looking at those. And then I think really a differentiator of how we can be better. A lot is driven by your algorithms, how you drive your AI-based forecasting, but then the uniqueness that actually nobody else does it in the same way today is to assimilate the point-specific forecast into your modeling what we are doing with Vaisala sensors. And here, we have also innovated on the business model. So some of these sensors, we are not selling as hardware, but we are baking it into the subscription i.e., we are selling you a database solution, which we are enhancing for from hardware. And this we can actually do financially in a pretty interesting way for us, but also for the customer who doesn't have to worry about the hardware.

One follow-up question. How -- regarding these subscriptions where you combine hardware, how important is that?

It's still -- from the total revenue number, it's a small number. But we are now approaching a number of thousand sensors that we have globally. So it gives you a bit of flavor, it's not nonexisting, and it's quite new, still what we have been doing. So we believe that, that will be growing in the future to come when we move into the different sort of verticals and start playing this also more globally.

Then finally, about the SpeedWell Climate acquisition. Could you summarize what Vaisala can -- how you can contribute to SpeedWell to make it grow better than...

Interesting question. So as I was sort of briefly saying, perhaps still to repeat, so the kind of the 2 main segments where SpeedWell is active. It's basically companies who are trading something that has impact what is happening with the weather. And it can be also some commodities, it can be energy. And these sort of transactions, you need to understand that what's the likelihood that something is happening that is deviating from today. Say, for example, that you would be now establishing a wind farm or you would be a small operator here for a wind farm, and you have been raising funding to finance your investment. And now you obviously calculate that, hey, how much do I have to pay back to the banks or loaners to do it. And then it happens to be a bad year because wind is volatile, you don't get as much returns from your wind farm as such, you may want to take an insurance against that event that there is low wind resource available or if you would be a company offering heating that it happens to be very cold because then you have to use a lot of your own resources. For these companies to be able to do it, they need to understand that what's the likelihood something happens. So you need to have very pure long-term data available. So this is like the key asset and then you can facilitate both the risk sort of seller i.e., who is transferring the climate risk to somebody with the taker who is taking it with the portfolio, and then it's basically like insurance mathematics. Okay, so what can we do here when this is the business? First of all, we have a relevant client deal, especially in the renewable energy industry to whom we can start offering this one. So we can help with the go-to-market as such. We don't have that much to do with the commodity trading, but actually in the energy we can do. Then the second interesting thing is that some of these climate risk transfers are happening with the parametric insurance business model, which implies that you are not claiming for an event of a loss and quantifying and debating with the insurance company that what's the cost that happened to me. You are just claiming that the weather event did occur, i.e., temperature was below 10 degrees or mean wind was below 8 meters per second that year. So there, we can actually be the party who is helping to quantify that what was happening to that weather parameter, which offers us again sort of synergies. And actually, at the end of the day, there is also forecasting element related to that one, which we can also find synergies from. So we have this go-to-market, we have technology, and then we can bundle some Vaisala measurement capabilities into offering. So there are some examples.

[ Nikolai from Wind ]. Two questions. First one, you said that you had -- I think you said a threefold improvement in the profitability of the core business. Is that correct?

On relative EBIT terms, yes.

Yes. And which time period was that?

During the last few years. During the strategy period.

Is that 3 years, last 3 years?

Yes. Yes.

And is that -- do you think that level in the core business is sustainable going forward?

Yes.

And if we went -- it's a bit difficult to know, right? But if we went back 5 years or 10 years, is it also a threefold improvement?

Well then if you go back to 10 years and you're always threefolding, you have to think that where did we start...

I meant like the level that you had 3 years ago, was that the level that you had 5 years ago?

Yes. Obviously, there has been better years, there's been worse years, there's certain volatility. But at high -- if you look at it that rough sort of roughly basis, yes. So we have been really ramping it up significantly. And I think we were addressing some of those elements. So obviously, there is certain scalability that Vaisala is pretty good at when the business has been going strongly and as we said, we have very good order book. It's all a forward-looking indication. Then there is the element of the R&D focus, competitiveness in the portfolio, therefore, also our pricing power. Sampsa was talking about that we get a premium, same also for us. So that's a business model where it runs, thanks to the products. And then also a lot of attention into the project execution because we are doing also a lot of these turnkey deliveries. And I think we have learned a lot that how do we have to execute, how do we have to run it? What are the capabilities needed to be a good project house as well. So there's like a big number of levers that we have been pulling to bring it to the next level.

And on the Xweather, I understand there's kind of various businesses there, right? But can you give any figures on -- I don't know if you track revenue retention, upsell or churn or anything like that?

Excellent question, and thank you for reminding, because I forgot it. I wanted to say it. But I was saying that the growth has been good. But I think if I would have to pick a second KPI, which is telling about the business, that would be net revenue retention. And this is actually telling that how much you're able to generate revenue with your existing customers, which implies that you cannot have churn because otherwise, they are gone, but then you have to be able to do the upsell, i.e. get more value for them. And that has been for us over 100%, which is a good number. So clearly over 100%. So that I would pick as a second KPI describing the business as such. And then I think I alluded already to the gross margin where we are just a bit shy of 80% what we are doing, which I think has also pretty good healthiness index that how you are able to price it, you know what it costs you to run it and which tells about the scalability then.

Matti Riikonen, Carnegie. About the traditional project business of yours, which has had and probably always will have lower profitability than product business. How big a share actually you have as product revenue in the project business? Or is it so that all project-related revenue is just the non product-related revenue?

What we are sort of showing and then Heli correct me if I'm wrong here, so Heli is observing there. But what we show in our project business is also the products that flow in the projects. But obviously, in that content, we have also a lot of third-party content or not a lot of, but we have sometimes third-party content as products, i.e., not only Vaisala products. And then we are using different subcontractors to help with the deliveries. So for example, now take the weather radar project. So usually, you need a tower where you put the weather radar. So that would be a good example of third-party content that we buy, and we are not raising those up ourselves or somebody else is doing the construction for us. So we have like the subcontractors for the work. We have sort of outsourced content of the kind of, call it, hardware or infrastructure and then our own products, which we are sort of showing in the project revenue. But you are right, the gross margin is obviously significantly lower due to these latter ones, i.e., the subcontracted work and products.

Right. And if we look at the kind of 3 large projects that you described in your presentation in the coming years, what is the rough product share out of those?

It really depends what it is like. So if I just take this quite work, very complex sort of area to work with. There is a lot of bureaucracy, a lot of supervision. Interestingly, we had to build a building for ourselves to be able to execute there. So there is also this type of cost. So there is a Vaisala building right now at the Kuwait Airport to do the project. So there obviously is a bit more context. If you look a project like the weather radar project in Spain, there obviously the key contribution is coming from the radars that we do. Context is then more related to these powers in certain areas that you do. If we think of the Indonesia project, which is related to the aviation safety, there is actually a lot of our own product content as well. So it really depends. So I cannot give you a single answer. So you would have to go project to project.

Well, if you assume that in the Spanish project, the product content is relatively high, is it then 50%? Is it 80% or 30%.

I think good guesses, yes. It's very difficult to disclose it specifically so.

Then another thing related to your cost base, particularly with these big weather projects that you have now for the next couple of years, do you think that you need to increase your fixed cost in delivering those projects. So how much does it affect your cost base?

How we have now built that business and team in the meteorology, aviation and roads. If you can call that type of business scalable, I would say that it's very scalable. So we have a global coverage in our sales. We have a team that is able to deliver and use third parties to run the projects. We have a whole offering in place. So actually nicely also that type of business for us is scaling. And now when we have been able to drive a bit the project revenue up, thanks to these type of exercises, we actually see it in the bottom line of the business. So it's actually pretty immune for needs to increase any fixed OpEx for those. Obviously, cost of goods sold, there you have naturally expansion or growth, but for the fixed cost, not.

Then finally, when you talk about the Xweather business and rise to profitability, I think one of the earlier comments of that were that it is within the line of sight which was a bit ambiguous statement. What would you say if we kind of stick to calendar years and not this other types of expression?

I think today, in the notion of the day, we can see for the strategy period, which is in this context 3 years. So line of sight is within 3 years and then you can calculate 3 plus 2024.

We can take 1 more question from Atte.

Atte Jortikka from Evli Research. Just a quick one on the lidar market. So obviously, the penetration is up, but do you see new competitors coming in as an inflow into that kind of larger market?

Yes, that's a great question. So we have one very strong European-based competitor, who is a good competitor, and you need good competition. The second sort of pool of competition is actually pretty much Chinese, and they are very active in China. But so far, they have faced tremendous difficulties to move outside of China. And therefore, there is price pressure when there is competition from those dynamics. But I don't think short term, the main fundamentals of the competitive logic will be changing. It's also a relatively difficult technology to master all in all. So therefore, the entry barriers are somewhat high.

Okay. Thanks for the very good questions. Thank you. Jarkko, we have one more presentation. Now that we have heard Kai to tell about the strategy and the financial targets and Sampsa and Jarkko tell about the businesses, it's time to take a deep dive in figures. So Heli, your turn.

Good afternoon, everybody, from my side as well. As you heard today, you have heard Kai, Sampsa and Jarkko talk about our business, our strategy and our markets. And now we will see how that looks like in figures. But I would like to remind you that this is now long-term strategy, long-term targets. It's not about any guidance for any given 1 year, nor is it any speculation regarding the short-term possible economic changes or geopolitics or so on. So our target, as you have seen them before. Average sales growth, 7%, same growth as we had for the last strategy period. Improving EBITA percentage, last time 15% EBIT. And I will tell you a little bit more why we have chosen EBITA percentage. And then thirdly, we are adding a new target that relates to cash flow, and that is to show our efficient use of capital. Looking deeper at each of the segments, starting with sales, of course. And during the last 10 years, it has been a solid growth of 7% for Vaisala. Very strong track record on that one. For our last strategy period, 2021 to 2024, depending on where we end with our guidance, we will be at 7.2% to 9.2% growth, which means we are reaching that target. Of course, for the last 1.5 years or about, the market economy and the industrial activity has given some headwinds against us, and that is more visible in the Industrial Measurements side. Nevertheless, if you look at the whole 12 years -- 10 years, it has been a solid growth of 12% that we expect to continue. On the Weather and Environment side, it has been a little bit vice versa. As Jarkko was saying, there the dependency is more on the governmental official spend. And there, we have seen that during the last 10 years, the growth has been 4%. That's very much in line with the single-digit growth we expect long term. But actually, the last 3 years have been very strong in that area. In looking at what are the main reasons for that strongness, they are the timing of the projects. As Jarkko was saying, we have received 3 large projects during the last year. They are not yet that visible in sales. But nevertheless, if we take last 3 years, it's also 3 projects. So on average, we get 1 a year. If then looking at other key factors in our sales, you can see here. So our actually sales is very well split evenly across the regions. Our largest segment is Americas with a 37% share of sales. It has been that actually for the last 10 years. What we have had a slight change in is between APAC and EMEA. So APAC has been growing from the 25% to 30% share of sales. At EMEA, we are at around 33%. If moving on to the graph on the right-hand side, you can see that these are now the new segments that Jarkko and Sampsa were talking about. These are also the same segments we will be giving our market outlook for in the future. And as you noticed, we have now industrial that combines the previous industrial instruments and liquid. Then if we are looking at the Weather and Environment side, you do see that the traditional business as such, it's still 1/3 of Vaisala as a total. And what has happened during the strategy period is really that renewable energy and subscription sales have been growing materially. And now they are a material part of Vaisala as well. If we look at the last 1.5 years that we have been reporting the subscription sales, we have been at a double-digit growth continuously. What have we then got with the sales is improvement in profitability. And our operating result has improved materially from the 2014 to 2024. There are 3 main drivers. They have been referred to already today as well. First driver is business mix. So the more profitable businesses have been growing more than the traditional weather side, which gives us a structurally higher profit margin to start the new strategy period with. Second key driver is scalability. We have been able to scale our business with the growth of sales. And third component is the material improvement of the profitability of the weather systems as described by Jarkko. If we look at that, there are actually 3 main components to that. So it is, of course, mix and scale, but it is really the R&D efficiency that we have been talking about or moving the R&D more towards the growth areas as Kai was showing earlier today. And then the profitability is also very much dependent on the diligent follow-up of projects. Project slips is one of the key KPIs we follow in the project area. If we are then looking at -- this is the graph where you see the bridge between the previous EBIT and now that we have as EBITA margin. So the darker bars there that you see that is the EBITA. And then on top of, you see those light bars and the light bars are the ones that vary a bit depending on do we make M&A or not. So that is the amortization and for us, the EBITA is more descriptive of our operational performance, which is why we have selected that as a KPI for us. We have been also very good at turning the cash into -- or the profit into cash. Our cash conversion has been 118% throughout the last 10 years. And the 1 year that you see there is a lower bar, that is actually the global supply chain crisis that we saw. We had the possibility to increase our stock to meet all the customer deliveries and to ensure the deliveries. Other areas there are growth, of course, requires and ties somewhat of net working capital. So we -- but on the other hand, we have been able to increase our return on capital employed. And currently, we are at the level of 20% and have been at that for the last few years. On the CapEx side, we are also fairly CapEx-light company. So we have 2% to 4% of sales goes to CapEx annually. That is to maintain our buildings, make R&D investments or investments for production otherwise. And what do we get from the kind of robust cash flow is actually a very strong balance sheet, as you can see here. We are at a net cash position, and our gearing is negative. This enables us flexibility and agility to answer to any economical cycles or what is happening in the market. But it also gives us possibility to invest organically or inorganically. And we have also built flexibility outside of the balance sheet. We have a EUR 35 million term loan at the moment. We have a credit -- revolving credit facility of EUR 50 million and an uncommitted commercial paper program that we have. When meeting with investors, we often get a question of our capital allocation, and this slide is to answer that one. First of all, our largest investment annually is R&D. We spent about 12% to 13% in the R&D to ensure our competitive edge also now in the short term, but also in the long term. On M&A side, we have made 11 transactions during the last 10 years, on average, 1 a year. Most of them are small. They are a string of pearls. There are some large -- well, not larger ones but medium-sized in those ones as well. They have been to speed up our strategy execution. They have been the competencies or capabilities as has been described earlier today. We are a stable dividend payer. We have paid EUR 250 million in the last 10 years of dividend. Our policy is there that our dividend increase is in line with net profit development. And that is something that's a policy that we have had and continue to keep also for the future. Then let me pause here for a while. So in addition to the dividends we have paid during the last 10 years, we have fourfolded the shareholder returns. As a fairly newcomer in the company, it is -- that's not a very bad result to have as such. And most of it, of course, comes -- it is the dividends, but then also the share price has increased by 320% during the time. The comparison index that we use has, in this time, grown by 105%, so a material improvement compared to that. Then in summarizing what we have heard now and also earlier today. So we are -- we do have the keys for profitable growth and strong cash flow. Average sales growth of 7% can be done with the growth with breakthrough technologies. We are investing in R&D to make that happen. Market growth, we have seen today that our growth markets are to grow between 5% to 10% and expand to new customer segments. Improving EBITA percentage, we have the change in business mix. It has brought us to a structurally higher margin levels that we aim to continue. Then scaling from growth. As we continue to grow, we also scale like we have seen during the last years. And then we continue to deliver profits in weather systems. And strong cash conversion over time, that is how we fund our investments. And we continue with the CapEx-light business model and stable and improving dividends. That concludes my presentation.

Thank you, Heli. Any questions about the targets maybe or how to reach those?

Atte Jortikka from Evli, again. Just a quick one on the cash conversion. You introduced that looking at the historic data, you haven't actually had a problem with that, do you foresee any potential threats there for that as you introduced as a new target?

I wouldn't say any threats, but it's more that it is actually a key enabler for us to continue making investment in growth.

[ Nikolai from Wind ]. The growth target is 7%. Can you break it down? I mean, it's a little bit difficult to know what it means, given some of that will be M&A, some will be organic.

Well, actually, if you look at our history, the M&A we have been making have been fairly small when we buy them. So like Jarkko was saying about threefolding the kind of the purchase of the Leosphere or that kind of basis. So we buy fairly small that we then grow. So the kind of part of the M&A in the growth is small.

Because I think out of the 7% in the past period, there was maybe 1% from M&A. And is that -- what do you think going forward as well?

Shouldn't be at least more than that because otherwise, then we would be growing more if we would make more or larger investments.

And on the margin, I guess one way of seeing it would be that you're a bit worried, right? Because you had this target of 15%, which you haven't reached yet, then you took it away and you said just improving. So how should we read this?

Good catch. And I was actually supposed to say on the profitability slide that for the last 2 quarters, we have been able to reach the 15% level, which means that, yes, we can reach it. We have had the kind of market -- macroeconomics and the industrial activity tailwinds or headwinds against us. But nevertheless, we see that we can make that.

And just on the improving part, so improving versus where you are today? Is there a goal?

Yes.

Systematic improvement.

Matti Riikonen, Carnegie. About your top line growth target, keeping it at the same level where it has been, sounds a bit modest because structurally, you might think that if your Weather business is now a smaller share of the total, and it's the one that has been dragging the percentage down. So IM is bigger now. So with a greater factor on growth. And then inside weather, you have the Xweather business, which is growing quite nicely. And actually, the base has also increased. So the growth kind of means more on the group scale. So why so shy at the top line growth, if I may ask the question, it's a bit provocative, but let's take it like that.

I think that you actually answered part of it already, and you said that as we -- it is now a larger share. So also the -- it's always more to get kind of from a larger share. It's -- you need to have when it's small percentages, you also then need a kind of larger growth. So as such, it's more easy to grow when you are smaller.

But then when you say that the addressable market is, what, EUR 1.3 billion, EUR 1.5 billion, it's also quite large. So are you saying that the growth in Xweather would be slowing down?

No. But Xweather is still below 10% of Vaisala. So it's going to grow. It can still grow for a while above double digit. So it's not very soon that we would see that it would slowdown or have a big effect on Vaisala growth.

Exactly, but that's the whole point of my question.

Maybe in the next 3 years. After 3 years once it has grown again, so maybe then that's the time to ask again that what's our target.

Thank you, Heli, and thanks for the questions. We have now heard all 4 prepared presentations, and it's time to wrap up. Kai has promised to take care of that. Thanks.

So a few words on the wrap up. First of all, I feel very confident with the strategy and the targets that we have. I think we have had a -- when we look at these Capital Market Days as a team, gives us an opportunity to look back as well, and I think the company has had a fantastic ride over the past 10 years, and we can be very, very proud of what the company has done and evenly excited, I look for the next 10 years. And I think there's a lot of possibilities, a lot of trends, and we have the right team to do it as well. But at this juncture, I think it would be right to recognize also the fantastic work in Industrial Measurements over the past 10 years, growing 10% CAGR for 10 years in a row and led by Sampsa Lahtinen who has now decided to retire from Vaisala after 11 years of leading Industrial Measurements. And I think it would be fair to say that it has been a fantastic shareholder value creation, what he and the team have done over the past 10 years. Now you know that -- so that we have also announced the changes following Sampsa's retirement. So Jarkko will take over Industrial Measurements, and we will -- while we'll continue to report Weather and Environment as a single business area, reflecting maybe the kind of more of a majority and expectation from Xweather reaching the profitability, as Jarkko was saying. Anne will take over the weather -- Anne Jalkala here will take over the Weather, Energy and Environment side, and then Samuli Hänninen will continue to drive Xweather, both reporting to myself. The renewal of the management team has been kind of continuous. So Heli has been with us now year -- 1.5 years. Last summer, we had a great addition of Girish Agarwal, who joined us as a CDIO, Chief Digital and Information Officer. And now we have the upcoming changes. We have had a winning team in the past, and I am very, very confident that we have a winning team with these changes in the future as well. So with this, I want to wrap up. Any questions you may have, last call for any questions. If not, then thank you very much for your attention, great questions. You know where to find us for any further questions, and we will be in touch with you in the due course of time. So thank you for today, and have a great evening.

Thank you on my behalf as well. Thank you.