Hello, and welcome to the Vaisala Q4 results call. Throughout the call, all participants will be in listen-only mode, so there's no need to mute your own individual lines. Afterwards, there'll be a question and answer session. I'll now hand the floor to President and CEO, Kai Öistämö. Please begin your meeting. This is Kai Öistämö. I'm the President and CEO of Vaisala, and I'm joined here with our Chairperson, Ville Voipio, our CFO, Kaarina Muurinen, and our Head of IR, Paula Liimatta. I also wanna welcome you all for our fourth quarter earnings call. The fourth quarter 2021 completed a year of growth and excellent performance. We had a strong net sales growth in both business areas. The orders increased by 6%, but varying performance in the two business areas. In Industrial Measurements, the orders were very strong again in all market segments. Whereas in weather environment, the orders decreased compared to fourth quarter 2020, partly due to the strong comparison period, partly due to missing the large project orders in fourth quarter 2021, whereas in fourth quarter 2020, we did have quite a bit of them there. The operating result was at comparison period level despite the additional material costs related to component spot purchases. We did make a very conscious choice to respond to the very strong demand that we experienced during the second half, especially the second half of the year, and took therefore actions to ensure the materials availability, component availability to match that demand. With this approach, we were able to meet the strong demand. We won market share, with that, taking the market share, we created even stronger foundation for the years to come. The cost of this was a three percentage point negative impact on the fourth quarter gross margin. The good results also were followed by higher incentive costs when compared to the previous year, which is also visible in the higher operating expenses in 2022. If I look at the highlights for the Q4 2021, first notion is the strong growth in both business areas. Net sales grew mostly in industrial instruments like life science, renewable energy on the Industrial Measurement side. It's good to note that it actually grew very much in all the other segments as well. The ones I mentioned were especially strong. In weather environment side, renewable energy and meteorology market segments grew as well. We continued to invest as our strategy is into our offering portfolio, and we proceeded very well during the fourth quarter on renewing our continuing renewal of our portfolio with multiple launches, both hardware products, software products, and system products. It's also worth noting, even if it's the close, it actually happened in January 2022. We acquired AerisWeather, which is a subscription-based software company providing Weather and Environmental information. This acquisition supports very much our weather environment business area's strategy to drive growth in data as a service and software as a service. When we combine AerisWeather's industry-leading data services and developer tools, we believe that we can offer the best insights and forecasts for very important weather environmental data parameters with easy to use, industry-leading, developer-centric approach. This acquisition was announced and closed in end of January 2022. Now, taking a deeper look into what happened in fourth quarter, as said, the orders received increased by 6% when compared to year-on-year on Vaisala level. When we look into the two business areas, in Industrial Measurements, we grew actually 42% when compared to year-on-year, whereas in Weather and Environment, the decline was 14%. As said, there's a kind of a seasonality and no large orders during this quarter. We did not see any market change. It really was more of a seasonality and lack of the big project orders happening to close in fourth quarter. When we look at the order book in fourth quarter, the order book increased by 16% when compared to year-on-year. The increase was in all market segments in Industrial Measurements. In Weather and Environment, in ground transportation and meteorology market segments. When we look at the ending order book, or the other way of saying is the starting order book for this year, it actually increased 25% compared to the previous year, with a very healthy level. Looking at the net sales, strong growth, 17% year-on-year. The strong growth happened in both business areas. It was growth in all market segments, again, in Industrial Measurements side. In Weather and Environment, the net sales grew in renewable energy and meteorology segments. When we look at the aviation and ground transportation, they were on the same level as the previous year. Now, looking deeper into the Industrial Measurements, I have the same headline as I had in the last quarterly results when talking about Industrial Measurements, excellent performance continued. I think that very well described how Industrial Measurements fared in fourth quarter. The orders received increased strongly in all market segments, as I said. The order book, when we compare to the year before, increased by 83%. The order book actually stood at the end of the year at EUR 33 million. It's very important to note also that when we look at this, orders received, it was not only that the underlying markets were growing, but we did clearly take market share, and customers from our competitors' accounts that we have been trying to get for sometimes even years. Here very much our excellent products, our capability to deliver and strong marketing actions clearly contributed to the success. When we look at the net sales growth, 26%, the operating result was EUR 9.8 million compared to EUR 8.3 million previous year. That means 19.6% of the net sales. When we look at the costs from the spot purchases inside of Industrial Measurements, they actually had a 4 percentage point negative impact on the gross margin. Also, we continued to invest according to our strategy of strong investments into R&D, for example, 11.9% of net sales. When we go into Weather and Environment, as I said, the orders received decreased by 14% when compared to same time previous year. When we look into different market segments, in ground transportation, the orders actually increased, and in aviation and renewable energy were at the same level as the comparison period year before. The decline in the order intake was more, as I said, more or less due to the seasonality, and we do not see any significant changes in the market situation, per se. It's also worth noting that when we look at the—despite the decline in orders received compared to the year before, actually the order book, starting order book for this year or the ending order book for last year was on a very healthy level, also in Weather and Environment. The operating results in Weather and Environment were burdened by both the additional material costs caused by the spot purchases as well as exceptional costs caused by the related to acquisitions in previous year. The operating result actually included EUR 0.9 million exceptional costs related to that. The gross margin decreased by a little bit over 2 percentage points. The component spot purchases had about 2 percentage point negative impact on the gross margin. On the Industrial Measurements side, we continued to invest according to our strategy and renew our offerings. Moving on to the full year financials. The first notion to make is that if I look at the full year 2021, the order intake was excellent, 19% increase compared to the previous year. There was a strong demand in the Industrial Measurements business area across all market segments. This has led to the exceptional increase of orders received by 33% compared to previous year. When we look at the Weather and Environment, also strong growth in order intake by 10%. Exceptional increase in renewable energy and positive development also in aviation market segment. In net sales, we grew by 15%, and this came from both business areas. The operating result increased by 12% from previous year, despite the challenging environment, especially due to the component availability and still COVID-19 environment. The operating result when we look at the full year, EUR 6.9 million exceptional costs related to the, as said earlier, acquisitions. This is the last time we are going to see this. They're related to these acquisitions, the exceptional costs, just as a reminder. The gross margin decreased slightly due to the additional material costs related to component purchases, which has had a 1 percentage point negative impact on gross margin. With the confidence on company's financial position and future cash flow generation, the board of directors proposes now to the AGM a dividend of EUR 0.68 per share for 2021. When we look at our dividend policy, this EUR 0.68 is very much aligned to our dividend policy, which is that we aim to pay stable dividend, which will increase in line with net profit development. Our target obviously is to maintain high solvency and take all the future investments into account when deciding on the dividend. On cash flow, a very good year. Operating cash flow doubled compared to 2020 from EUR 41 million- EUR 80 million. It really shows that our asset-light business model, which generates a stable and good cash flow through its operations. I would take two points maybe when talking about the cash flow. It's when we started or when the COVID-19 situation hit and all the difficulties related to this, there was a little bit of a concern on credit loss allowance, and it's very happy to report that the credit loss allowance has not materially changed at all by this. The other point may be worth noting is the aging of receivables has actually improved in 2021 despite the market situation. Overall financial position, I would summarize as strong in all aspects. The CapEx was down, as indicated earlier, due to the fact that we finished the two R&D buildings both here in Vantaa and in Boulder, Colorado, earlier at the end of the previous year. It was still slightly elevated from the normal year as we've indicated due to the fact that we continued during 2021 to furnish and invest into the laboratories in the R&D building itself here in Vantaa. Now, moving on to the market development and then outlook for this year. When we look at the market development overall, it's worth noting that we believe that the component availability will remain weak. Visibility is challenging and the component supply constraints are expected to continue throughout this year. That means also that the additional material costs related to stock purchases are expected to remain on high level during the year of 2022. That being said, we believe that the underlying market, to a large extent, especially on the Industrial Measurement side, is going to be growing and offering us quite a bit of opportunities. The market for high-end industrial instruments, life science, power industry, and liquid measurements is expected to grow. Market for meteorology and ground transportation is expected to be stable. Aviation market, we believe that is continued to recover towards the pre-pandemic levels. I forgot to mention actually renewable energy, which we also believe that as a market is going to continue to grow during this year. That leads into our business outlook for year 2022, where we expect that our net sales will be in the range of between EUR 465 million-EUR 495 million. Our operating result, EBIT that is, will be in the range of between EUR 55 million-EUR 70 million. If I just summarize what I said, 2021 was an excellent year for Vaisala, a year of growth and excellent performance ending with a strong net sales growth in fourth quarter. Good net sales growth in both business areas and the order intake, or let's say this way, a strong order book in both business areas as a starting order book for this year is maybe the last point I would like to make. So that concludes my prepared remarks. Now let's open up for any questions you may have. Thank you. If you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. Once your name has been announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial zero two to cancel. Our first question comes from the line of, Pauli Lohi of Inderes. Please go ahead. Your line is open. Hi, this is Pauli Lohi from Inderes. Thank you for the good presentation. I have a couple of questions, mostly on the components shortage. You said you are winning market shares currently, and at the same time, the gross margins are suffering a bit. What's your ability and willingness to raise prices to meet the increased costs or are you happy to grow and let the margins suffer in the short term? I'll make two comments on that. First of all, we have a strong history of increasing prices every year in the Industrial Measurement side. We did increase again the list prices at the start of this year, more than what we have done in the previous years. That being said, when we look at the spot prices, we are not selling our components on a spot market. Pricing our products according to whatever the spot price is for the components in a specific product, we don't believe that will be the right strategy. We believe that being a reliable and long-term oriented supplier will be something which, first of all, our suppliers will appreciate and will, as new evidence would say, help us to increase market share. Okay. Thank you. I would like to ask about the AerisWeather acquisition. Would you explain further the, like, operational synergies between target company's products and maybe your distribution channels, or how should we see the synergies? I think it's highly synergetic to all the assets that we have at Vaisala. As you may know, we have over EUR 20 million turnover on different kinds of SaaS, PaaS, businesses inside of Weather and Environment, various different verticals. What AerisWeather brings to the table is an industry-leading data sales platform and extremely strong developer tools. I think that and those are the two things that we have not had as strong in our own operations. I believe that they are thus what we have as our old assets and now new assets with AerisWeather are highly synergetic and very excited to look at the future with the combined assets now. Okay. Maybe finally, I would like to ask about the magnitude of the component shortage and how do you expect that to evolve in 2022? You get very useful indications about the impact in Q4 into gross margins. Is it going to intensify or are you even better prepared to tackle this challenge going forward? The first thing maybe I would like to note is that when we look at how we have been approaching this component situation, we have been very much anticipating a bit longer term also what our supply is so that we can, whenever there are situation where on components that we cannot secure from the open market, then we can look at the alternatives and do required R&D changes and or offer other products instead in our portfolio. Kind of taking the right kind of an approach, combining R&D investments, kind of use the right mix in our product and then securing the components. Here we are already working kind of clearly ahead of today when we are doing this. The situation keeps changing. You know, it's very, as I tried to say in my prepared remarks, the visibility remains relatively poor. There are vendors who are indicating that, you know, the situation is going to improve maybe a little bit earlier. There are vendors where, you know, the situation may have improved and then suddenly it's kind of decreased again. That's the situation I think that everybody is in. I think we have been extremely successful in this kind of with our efforts to secure the components. I am extremely proud of our team, both in terms of securing the components and then being able to manage the very fast moves in the mix. Okay, thank you. That was all from me. Thank you. As we have one further question in the queue, just as a reminder to participants, if you do wish to ask a question, please dial zero one on your telephone keypads now. The next question comes from the line of Matti Riikonen of Carnegie. Please go ahead. Your line is open. Good afternoon. It's Matti Riikonen, Carnegie. A couple of questions. First of all, during Q4, were you able to deliver all orders in both divisions just with a higher cost, but did you basically meet the volumes? Hey, Matti, great to hear your voice. Yes, we did. We were able to deliver against the demand. Right. You basically just made the decision that delivering the volumes is kind of essential for the long-term good for the brand, and then you just took the cost. That will, at some point, hopefully, and of course, go away. Is that basically what you're thinking? That's right. Maybe just one more elaboration. It's easier maybe to kind of explain in the industrial context that if you think about any industrial instrument or industrial buyer, they do not want to change their vendors. They only change their vendors if a new product is significantly better or there's a kind of a bad performance on the existing vendor or that kind of thing. It's not a very fickle decision. It's a kind of a decision that makes me confident when I say that these investments leading into higher market share are much more sustainable than if you take, say, a consumer market. Sure. Yeah. Good. Regarding the pricing, both short-term and long-term, did you try to put the increased component costs to end prices, or is it just very difficult to do that at a short notice? Thinking about the longer end, I think you have earlier said that you find it fairly easy to pass on your higher costs to product prices, and you mentioned that you have been raising your prices in the Industrial Measurement side. How should we think about this kind of lag to eventually put all your increased costs into the prices? It feels like that you are pretty reluctant to do it short-term, but of course, did you even kind of try to improve your margin short-term just by passing on the price, or is it just it has to happen through the longer route and list prices on an annual basis? Yeah. Like with any vendor, you always make a decision, or any company, you make a decision on how do you price and, you know. It's easy to raise prices, but I believe that you have to be mindful on when doing that in a fickle environment. I would actually separate the two things here. You know, there's an increasing inflation going on with us, kind of our vendors and everything, all the market. Passing on that type of a price increase to our customers is straightforward. We have been doing that in the past. Even if we're in a situation where there has not been an inflation, we have been able to pass kind of increase our prices. We typically do that through one increase in a year, but we are not kind of married to only that approach. What we consciously decided is, what I tried to say earlier also is that whenever there's one incident or one given component passing all the costs and thus going ourselves into kind of like a spot pricing, we consciously chose not to do that. Fair enough. Yeah. Of course, that sounds wise and that sounds good for the long term. I think the customers also would appreciate that they are just getting their volumes at a decent price, and any price increases would be gradual. My experience would say, Matti, that all customers have a long memory. If they believe that the price increases are just, that's okay. If they believe that you are extorting things, the short memory will be very, very long. People will get even eventually. Yes. Good. About the kind of basic demand that you're facing, do you think that the customers still have pent-up demand after COVID or after component shortages? That would still continue to support your 2022 top line like it probably did in 2021 when 2020 was a weak year, there were a lot of stoppages, et cetera, and then some of the pent-up demand probably affected positively in 2021. Do you think that you would get the similar benefit or boost in 2022? Two things. If I look at GDP growth, which is like a generic, you know, industrial activities, kind of a highly correlated at least to it. You know, the forecasts for this year are still that the GDP growth in the world is going to still be clearly higher than an average year, even if it's going kind of likely to slow down towards the end of the year. That speaks good in terms of especially industrial instruments or customers for our industrial instruments would expect experience the higher demand and therefore would be investing into new processes, facilities, renewing processes and that kind of things. The second thing is that we have been seeing investments. There's a whole host of bottlenecks still, if you look at any industrial good or many industrial segments, but there seems to be bottlenecks still delivering against the demand, which, you know, one could believe that, you know, that would lead into investments in multiple different industries. Right. Okay. When you mentioned the annual price increases to list prices, how should we think about the gross margin impact going forward? You mentioned in Q4 that you had, on a group level, three percentage points negative impact on gross margin because you had to buy components from the spot market. Now, with the current price increases in place, what do you think? Will it be a similar negative impact to your gross margin short term, of course, but or do you think that the price increases offset already some of the cost increases that you have? Of course, price increases offset some of the cost increases. Now that being all said, I said the visibility for this year is in terms of the component supply, it's relatively weak. As we believe that the shortages are going to continue throughout the year, that will have a negative impact on our gross margin, and thus leading into the outlook that we gave in terms of the net sales and profitability. If I formulate it differently, do you think that the gross margin headwind will be as strong in 2022 as it was in Q4? I think time will tell. Time will tell. Why I'm saying this is that like I said, the visibility into the component market and supply keeps changing. I mean, it's surprisingly unpredictable still after now living in this for, what, three quarters. So. All right. Okay. Fair enough. Final question. The areas where the acquisition, do you think that there would be significant top line synergies kind of immediately or very quickly after the acquisition? Or do you think that you would need to develop the offering slightly longer to basically get the synergy benefits out of it? Now I'm of course talking about top line synergies mainly. Yeah. So there are some short-term opportunities, but obviously what we believe is our case in investing into areas whether it's really about the longer term. You know, the way we can look at it is it's a missing piece that we did not have in our jigsaw puzzle and kind of a complement, clearly, to the capabilities that what we have in-house. You know, getting those kind of real synergies in terms of the top line, some take longer, some shorter time. It may require some new sales capabilities or some new adjustments in the offering, and some cases, just a plug and play. Right. All right. Thanks a lot. That was all from me. Thank you. Thank you. We have one further question coming through. That's from the line of Paul Deseri of Arca Advisors. Please go ahead. Your line is open. Yeah. Good afternoon. Congratulations on an encouraging set of results. Can I just continue firstly from the last question on the AerisWeather acquisition. Has the acquisition opened up a new set of customers, either in new segments or geographical markets? Is there any potential to sell through any products in your division as a result of anything? There's a bit of all of what you mentioned. Let me give you, like, a geographic example. AerisWeather is very much of a US-centric company so far. We have a very strong offering in Europe. Obviously, this is kind of an opportunity to expand, build on kind of a mutual strength in, into, for example, into Europe. It's also additional sales channel to some of our offering. I think what I said in my prepared remarks is really important, that AerisWeather brings really world-class developer tools. And I think that's offers us a kind of real differentiation also in the marketplace, where kind of our excellent data offering combined with their kind of a combined sales channel and the developer tools that come from them. I think that's... There you have the equation kind of. Okay. Thank you. Just you mentioned you managed to increase market share in Q4. Are you able to give any more granularity in what areas and put any figures on market share gains that you made? Unfortunately not in terms of I can give you, like, there's all kinds of anecdotal evidence on customers that we have been chasing for a long period of time, customers that we know that have been our competitors' customers in various different segments. The market share gains have been coming from various different segments. It's not on like one or two. It's kind of across the board. But kind of giving you kind of a number that would be, unfortunately, there is no independent research on the relatively small markets that we are in, and hence, you know, independent market share research and you know, market share moves in terms of quantified numbers that we would not be able to give you that. Okay. When you look at market share, are the market share gains you're getting from existing customers who are, say, moving away from suppliers and switching more of their orders to Vaisala or is it from brand new customers? It's both. It's absolutely both. Okay. Thank you. Your R&D, you spent a significant amount of your sales on R&D. I think it's 11.9%. Mm-hmm. In 2021. Can we sort of assume that that is a stable figure going forward? Actually looking into the divisions, I noticed in Weather and Environment, it's 12.9%. Versus the group's 13.9%. Does that suggest anything in that direction going forward? Yeah. First of all, we continue to look at our investment portfolio. It's not like it's a fixed number for any of the market segments or business areas. We do actively manage the portfolio of investments we have. I actively look at this forward-looking whether we believe that there's a best return on investment within the business areas and across the business areas. Okay, thank you. Just two more questions. Apologies if I missed this in one of your answers, but looking at the component availability issues, are there any particular areas that stand out where you've seen greater difficulties than others, or is it been generally across? I would say any electronic components and, you know, integrated circuits of various different kinds, analog and digital, ICs, you know, you name it and you name a vendor and I doubt that there would be many, if any vendors who would actually meet the demand. It varies in terms of the specific component. You know, you may have individual vendors where a single component or family of components or broader family of components that could easily meet the demand, and then the same vendor with the next family of components might not. Look, to make it kind of more difficult, the situation, you know, this picture keeps changing. How it may have looked like three months ago, the picture, even with the same vendor, and even if I would pick a fixed set of components, might look very different today and will look very different in three months from now. Excellent. Actually, that's all. Thank you very much for answering my questions. All right. Thank you. Thank you. Once again, if there are any further questions, please dial zero one on your telephone keypads now. Okay, there seem to be no further questions coming through at this time, so I'll hand back to our speakers for the closing comments. Thank you for following our calls, and thank you for the excellent questions from all of you. We look forward with interacting and speaking with you soon. Have a great weekend and thanks for joining.