Hello and welcome to Vaisala Financial Statement Release 2022 conference call. My name is Priscilla, and I will now hand you over to your host, Mr. Kai Öistämö, to begin today's conference. Please note this call is being recorded and I will now hand you over to your host, Mr. Kai Öistämö, to begin today's conference. Please go ahead, sir. Thank you. This is Kai Öistämö, I'm the President and CEO of Vaisala. Welcome everybody, and I'm joined here with our Chairman of the Board, Ville Voipio, our CFO, Kaarina Muurinen, and our Head of IR, Paula Liimatta. Vaisala's fourth quarter, I would characterize it that the strong net sales growth was the characteristic of our fourth quarter as it was for the entire year. We had a solid performance during the quarter, which ended a good year. The growth of orders received continued strong in both business areas, and especially so in Weather and Environment business area. I'll go back. I'll go deeper into the details in the two business areas in a little while. The net sales grew by 13%, and order book ended over EUR 180 million, which gives obviously a very good start for the year 2023. Reflecting the performance in the year, the board of directors is proposing EUR 0.72 of dividend. That's EUR 0.04 increase from last year to the Annual General Meeting later in the spring. Before I go into the numbers, I thought that I would give you a little bit of highlights on 2022 on some of the key areas from Vaisala. In terms of a strategy, product and technology leadership from sensors to digital solutions is extremely important for us. We had several key product launches in both Industrial Measurements and in Weather Environment. On top of that, I would like to highlight the acquisition of AerisWeather, which is a subscription-based software company providing weather and environmental information, which we acquired and closed the acquisition almost exactly a year ago. Now it's fully integrated in our data business, and we are very happy with the acquisition as well as the progress that we've made on the digital business side as well. Speaking of that, the other event, key event during the year obviously was the launch of Vaisala Xweather, which is a family brand for our digital offering. It's a forecast and observation suite of services using a combination of intelligent hardware and software and business models are Software as a service and Data as a Service, very much with the developers in focus. As said, very happy with the progress on during the year. The second key topic, which I've talked about to you in the previous quarterly releases as well, is the sustainability leadership. If I think back the year 2022, I'd raise two kind of events during the year. One thing is the accolades that we got again from Financial Times. We were selected in top f ive, which is top f ive public companies out of, if I recall right, 1,600 public companies in Europe, or in terms of ability to reduce or their track record of reducing greenhouse gases during the past years. Very proud of that. The second highlight on the same sustainability topic is our commitment to set science-based targets, which we will send now for validation to SBTi in 2023. Lastly, you all are probably very aware that reliability and quality are very much the words that are associated to our products and solutions. They are key elements on our offering. As the Mars rover in the picture shows, we have been part of the Mars missions now for quite some time. An interesting story now, it's that we have actually been in Mars providing a weather forecasting or weather observation network in Mars for 10 years. The whole design was supposed to be lasting minimum two years. Now it's been 10 years and still going strong, and I think it speaks highly of the capabilities, technologies, and the commitment that the company has on the reliability and quality of our offering. Moving on to the numbers on fourth quarter. The growth of orders received continued strong in both business areas, and especially in Weather and Environment business area, as I said earlier. The orders received grew 17%. If we look at in constant currencies, that translates to 13% in constant currencies. If we look at the market segments where that growth came from, meteorology, aviation, and industrial instruments would be the ones that I would highlight. They had the strongest demand growth. There were other ones as well, but the strongest ones were these three. If we look at the ending order book for 2022, we ended the order book with EUR 181 and a 500,000. The order book itself grew from the third quarter 2021 by 13%. Obviously, as I said earlier, it gives us a very strong kind of starting point for 2023. On the right, you can see the analysis on how much of that's 80% of the starting order book that we have actually is for the current year, i.e. 2023, and the 20% is for the out years. It's a similar ratio as what we have had already some time in previous year as well. When we look at net sales in fourth quarter, company-level net sales grew by 13%. In constant currencies, the net sales increase was 8%. We had a strong net sales growth in both business areas. When looking at the market segment, the strongest growth came from industrial instruments, life sciences, power industry, and aviation market segments. Looking at operating result, first, we increased the operating result year-over-year. Very happy to note that the gross margin was at previous year's level, at 53 and a 0.5 percentage points despite the fact that the component spot purchases had a 3 percentage point negative impact on the gross margin, and we were able to compensate that with economies of scale and higher prices. Simultaneously, operating expenses increased. This was driven by the IT system renewal and investments as we have been doing consistently in sales and marketing as well as in R&D, where in all operating expenses grew compared to the previous year. Moving on into the two business areas, starting with Industrial Measurements. Very good performance continued. The orders received grew by 11%. Orders received, as said earlier, really driven by Industrial Measurements, Life Science, and Liquid Measurements market segments. The resulting order book up 27% compared to the same time last year. When we look at the net sales in Industrial Measurements, the net sales growth grew by 20% compared to fourth quarter the previous year. That's a EUR 10 million higher sales in a quarter compared to the same time previous year. When we turn that into constant currencies, if you look at in constant currencies, that's a sales growth by 14%. In terms of our market segments, all market segments in Industrial Measurements had a very strong growth. Strongest ones were Industrial Instruments, Life Sciences, power industry market segments. As said, we experienced strong growth across all market segments in Industrial Measurements. If I move on to Weather and Environment, I think the quarter was really characterized by excellent growth in orders received. The orders received grew from same time last year by 24%. In constant currencies, that would be 19% increase in orders received. The orders received growing in meteorology, aviation, and ground transportation market segments. The order book ended up at almost EUR 140 million. That's up 10% compared to same time previous year. In terms of a net sales, 9% growth in Weather and Environment compared to the same time previous year. The net sales growth driven by aviation and meteorology market segments. Similar story in terms of a gross margin as in Weather and Environment. On previous year's year level, 49% despite again the component spot purchases having a 2 percentage point negative impact. I want to remind you on the Weather and Environment where we have a large part of the business is with long-term contracts and to public entities where the ability to increase prices due to the spur kind of increase in component costs, or is much more limited than in Industrial Measurement side. I think the fact that we were on a previous year level on gross margin is actually an excellent result. In terms of an operating result, slight decrease compared to previous year, driven by the investments that we are making. If we move on to the whole year and look at the whole year financials, the full year operating profit margin improved year on year to 12.2 percentage points of net sales. Year was characterized by a strong net sales growth, 17% compared to previous year, 12% in constant currencies. When we look at the entire, kind of entire year, the gross margin was close to previous year's level, only 0.4 percentage points lower than the year before, despite again the headwinds that we experienced from component spot purchases, which had a 2.7 percentage points negative impact on gross margin. The operating result, as I said, improved to 12.2%. When we turn that into earnings per share, a nice healthy growth on that as well to EUR 1.24. Here's a picture on the dividend development and how does the EUR 0.72 that now is a proposal for AGM relate to a little bit of a history. As we have a dividend policy of increasing the dividend in line with the result, increasing results of the company, I think this reflects nicely also a little bit longer term, how we have been able to turn the kind of growth of the company into the growing dividends and to the shareholders as well. In terms of a cash flow, the cash flow from operating activities decreased, and this is due to the increase in net working capital in two sides. It's trade receivables, which and then on one hand, and then on the other hand, the capital tied in inventories, both really driven by the strong growth that we experienced through the year. When we look at the entire financial position, again, as I've said before in previous quarterly releases, very strong financial position continues. Here maybe the just to highlight that we have actually done what we set out a year ago to do this during 2022 in terms of capital expenditures going back to the level before the investments into the two sites that we had both here in Vantaa as well as in Boulder, Colorado. A few words on market development and the outlook that we are seeing for this year. When we look at the market segments, and the development of the market segments that we anticipate for 2023, our forecast is that we will experience growth in terms of our market in high-ending industrial instruments, in life sciences, in power and energy, in liquid measurements, renewable energy, and roads, as well as automotive segments, and meteorology and aviation remain stable. When we turn this into our business outlook for 2023, we estimate that our full year 2023 net sales will be in the range between EUR 530 million and EUR 570 million, and the operating result will be in the range between EUR 70 million and EUR 85 million. As a summary, strong net sales growth continued through fourth quarter 2022. Orders received and net sales grew strongly, the ending order book give us a good start for the year 2023. With this, I would like to conclude my prepared remarks. Operator, we would be ready for any questions and answers that you may have. Thank you, sir. Ladies and gentlemen, if you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. We'll pause just for a moment to allow everyone an opportunity to signal for questions. We'll take our first question from Matti Riikonen from Carnegie. Please go ahead. Your line is open. Hi, it's Matti Riikonen, Carnegie. Couple of questions. Firstly, could you remind us how long the ERP project is scheduled to be, and what is the level of investment that you are putting into it? Uh, we have- Basically how many quarters that will impact? If I answer that question, Matti. Hi, first of all, and good to hear your voice. We have not set out on the size of the investment. Let me put this in perspective that we kind of our plan here is that we will take the time to make sure that there are no blunders in executing the ERP. We are a complex company. We are re-represented all around the world. We have many different entities around the world. We have huge portfolio of products, as well as then our business portfolio is exceptionally large, I would say. Managing making sure that the entire functionality or the capabilities across all the complexities that we have takes some time. We want to be prudent on this and really, as said, make sure that there will be no hiccups whatsoever through the transition. All right. The second question goes to the gross margin improvement or let's say, gross margin improvement after you get rid of the spot component purchases. I was wondering, to what extent does your guidance imply that the situation regarding components would become normal in the second half of 2023? That is, are you kind of factoring in that the first half is still going to be burdened by higher component prices? What's your view behind the guidance regarding gross margin as spot purchasing? Great question, and maybe that should have been in the prepared remarks as well now to come to think about that. Our outlook in terms of the material availability is that it will now improve during first half of this year and will normalize by end of the first quarter. Already now we are clearly seeing the improvement in the material availability. There are still some completely different level, but some shortages in things like connectors and cables and things of that nature, but much less than what we experienced during last year. There will be little bit of a some effect during first half of this year, but we foresee that the market will normalize by middle midyear. Right. basically, we are looking at the normalization of your cost base coming from, gross margins, let's say in 2024 is the first full year when you don't expect any kind of known- Right impacts on gross margin. Okay. Correct. That's correct. That's correct. Good. Question related to the power market and equipment that you are selling there. It was a quite a long struggle to basically get the right kind of meters and get that to the clients first in testing phase. Now it seems that during several quarters it has started to kind of gain momentum. How is the sales to the power segment going at the moment? Is it coming from a small set of customers who have decided that they will basically re-renew their whole fleet and, or is it more broad-based? Could you describe a bit how? Yeah where the demand is actually coming from at the moment? Yes. very good question. it's the answer is both in a way. We continue to have customers, new customers coming in and as you implied, testing the product and taking a little bit of this and that. It is increasingly, increasing number has been during this year. That has been the trend and the driver behind the increasing sales in the power segment, that increasing part of the customers are now taking and implementing our solution throughout their network. We have been seeing orders, this kind of big orders of full conversions coming in for multiple customers on all geographies. Right. Is there any competitive product out there at the moment? Are you basically still competing against the traditional way of technician going to the device and taking those oil samples and then getting back to laboratory? Is there any other way, more automated way to get it done? Just thinking about your… Yeah competitive advantage period there. Yeah. There are other means, especially the one that you alluded to. We are not alone in the marketplace. The level of, maybe the automation that we can bring through our solution, I think it is a competitive advantage, but we are not acting alone. Nobody else has similar technical solutions what we have. Okay. about the overall level of demand that you have seen in 2021 and 2022. Mm-hmm. I can't remember many years when your demand in both divisions has been this good despite all the, all the kind of negative changes in the market related to COVID and component shortage, whatever. Do you think that this level of growth is sustainable, or do you expect that there would be some kind of slowing down at some point? Yeah, that's an open question. First of all, I agree with you that, when we look at a bit of a history, it has been a excellent year in terms of a demand, now, during past year and a bit longer as well since the recovery from COVID kind of started. I think that there are two things. There are the macro trends that we have been talking about, things that drive really the, in terms of the macro side, the solutions from us. Things like we're gonna focus on this, focus on sustainability, focus on climate change, kind of fighting climate change, energy efficiency, recycling or searching the word on, kind of a closed circular economy. It was the word I was looking for. There are macro trends with that will continue to drive the demand. There are market segments like pharma, especially biopharma, where you look at any market studies and they would indicate that there's a long-term market growth expected from those despite the uncertainties in the world. Of course, part of the strong growth that we have been experiencing has been coming from kind of a recovery from COVID and kind of like the stoppage of everything for a while in 2020. That effect will slowly... I'm expecting that will fade away. It's a bit of a both, and I think kind of continuing on the extremely strong, like, kind of a demand levels that we have been expecting, they probably will little bit normalize. That being said, I think there are strong market trends that are driving the demand for our products and solutions. Finally, question related to 2022 and your guidance upgrade in October. You guided at that time a higher top-line growth range, and you basically delivered in that range. You also guided a higher EBIT range, and the outcome for the full year ended up in the fairly low end of that guidance range. I'm just trying to figure out what made the margin come out to the low end of the, of the guidance range. What did you have in mind when you set the EBIT guidance or when you raised it in October? What were the things that then basically pushed- Yeah. the margin to the low end? Yeah. Part of it is really kind of a timing of the cost of some of our investments came out maybe a little bit differently than we were foreseeing. At the same time, you know, the demand came out maybe a little bit even stronger than what we anticipated. Okay. Basically, there was no kind of estimate on spot purchasing that would have brought you more cost than you had anticipated. That will always be. Well, there always is a little bit of that, the spot purchases where, especially during last year and, to some extent, still remain a hard to forecast kind of a thing. You know, I'll give you an example, and this is not really just, even if, as I said, the market is clearly kind of working towards normalization. If you take now end of last year, there were kind of small things happening due to the COVID-19 in China where even if the market started or was normalized, there were kind of some factory lines stopped in China. Immediately you have a line stops for a month in some supplier somewhere, you know, has a little bit of a, this kind of a ripple effect through the supply as supply is so tight, even if a starting point would not be a shortage. Okay. All right. That's all from me. Thank you. Thank you. Thank you. Once again, ladies and gentlemen, if you have any questions, kindly press star one. We'll move on to our next participant, Arttu Heikura from Evli, please go ahead. Your line is open. Good afternoon. It's Arttu Heikura, Evli. Good afternoon. Do you hear me? Yes, we can hear you. Okay. could you, Kai, also confirm that you hear me? Yes, I can hear you, but not wise enough people. Okay. Just give me a moment, yeah? Just hold on a moment. I will reconnect you. Just give me a moment, about few minutes, I will get back to you. You dial into star one again. Okay. The speaker seems to be disconnected. Hold on. Hi there, Arttu. Hello. Yes. Hey. You can go ahead with your question. Can you hear me? Sorry for the. Yeah. Sorry Yeah. Sorry about... Technical difficulty. Yeah. Yeah, sorry about that. Our fancy conference phone does decided to boot itself in the middle of a call, so. Okay. Okay. There you go. Okay. That's okay. Matti covered quite a lot of questions. I have only a few. Your orders received declined this in renewable energy in Q4. Could you open up the drivers behind the decline? Is it just a, you know, seasonality or something else? It's a seasonality more than anything else. We had a very, very strong orders received in the year before, and it's nothing more than a seasonality. You know, if you look at the annual basis, we had a very good year on renewable energy. Okay. Okay. about the Xweather segment- Mm. -of business, could you comment on the recent development of that segment, you know, in terms of sales and new customers? Yeah. We have not given kind of the exact numbers on, in terms of the segment itself. That being said, I can say, as I said in the prepared remarks, I'm very happy with the progress that we made through 2022. AerisWeather gave us a good boost that we were kind of expecting from it, and it really fully delivered on the expectation and I'm very happy on the progress against the plan on that segment. About China. If I remember, so the business were a year ago that big, but how the business is now, and what do you expect from the China's opening from the COVID restrictions? Yeah. Good, good question. Actually, we had a good year in China, so very much in line with the whole company. China is a significant, very significant market for us. It continues to be and obviously, now the little bit brighter outlook overall in China bodes well, kind of, for us as well as anybody else who does business in China. Okay. Thank you. That's all from me. Thank you. Thank you. We'll move on to our next participant, Matti Riikonen from Carnegie, again. Please go ahead, sir. Your line is open. Hi. I forgot to ask a question about the liquid measurement new product line that you announced a couple of days ago. Is this the first kind of bigger launch since the acquisition of K-Patents? Does this in any way change the addressable market estimate that you have been using at your capital market stage? I'm just figuring what kind of market potential does this. Yes. new product line have? First of all, thank you for asking. Thank you for noting. It is actually a major announcement since that now shows the full integration of what used to be a K-Patents technology and what used to be Vaisala technology. Now it's fully integrated into the Indigo family that we have in Industrial Measurements. It's, as the picture was also in one of my slides, it actually now. For example, the displays are the same. We are using same displays and same display modules as with any other Industrial Measurements products that we have. Allows us also, and use the same kind of product architecture, which means also that now we can start to build on the synergies, potential synergies between the technologies that we provide from Vaisala side and what we obtain from K-Patents side. As a market size overall, I don't think it will be that much increase the market size. It's more of a competitiveness in the marketplace and the breadth of our offering into the market that we are serving. Okay. Since this niche has not been addressed so much, could you describe the competition in the segment? What kind of players do you have and, how is the market structured? Is it a lot of smaller players? Yeah. Are there some dominant players in that segment, like in liquid measurement? Yeah. Liquid measurements is. First of all, when we talk about overall as a liquid measurement, there's multiple different technologies that are typically serving different kinds of problems or applications, solutions, where one is measuring liquids. It may be, you know, somebody may be measuring concentration, somebody may be measuring content of different substances, transparency maybe or something, and so on and so on. There's multiple different types of measurements that are done typically with different technical solutions in liquid measurements. When we have indicated liquid measurements as a market size, we have been talking about what is the addressable market for the refractometers that we kind of the technology that we obtained from K-Patents now. That's not covering the entire market when one talks in general about liquid measurements. There are different companies typically tied in with, like, one type of a technology serving one part of the market, other companies with a different kind of technology serving other parts of the market. Each one of these, there may be bigger companies in some of these, smaller companies in other ones, but it's. Typically, one technical solution dominates a market segment. When we look at the part of the market that we address, it's divided up with the kind of smaller players where we are kind of strongest in that part of the market. Did I answer your question clearly now? Yes. Yes. Thank you. That's all. It's a little bit of a complex answer, but it is a little bit of a complex market as well. All right. Thank you. Thank you. Once again, ladies and gentlemen, if you have any questions, please press star one. It appears there is no further questions at this time. I'd like to turn the conference back to Mr. Kai Öistämö for any additional or closing remarks. Thank you. Thanks. I just wanna thank everybody who participating and bearing through us with our technical problems. We will improve on this for the coming quarters. I wish you a happy end of the week, and we'll be we will be in touch. Thank you. Thank you for joining today's call. You may now disconnect. Happy weekend.