Harvia Oyj

Hello, everyone, and welcome to Harvia's first quarter 2025 earnings webcast. My name is Mattias Järenfelt. I'm the CEO of Harvia. And with me, I have Ari Vesterinen, our chief financial officer. Hello. As usual, we have this flow for the session today. I will start by covering the highlights of the quarter one in terms of business results and also key activities. I will also shed light on the recent developments and progress in terms of strategy implementation. After that, Ari will cover the financial performance more in detail. After that, we're again welcoming questions that you can submit via the chat box in this webcast. So let's summarize the quarter one first, starting with the top line. Revenue was 52 million euros, and that's up 22.7% from last year. Organic growth was at 14%. We were pleased to see that all of the regions contributed positively to the growth, but clearly North America had a dominant role in driving growth for Harvia Group. With these strong topline results, we also saw broad-based growth across product groups, except spare parts and services, but all the main product categories contributed very nicely to this growth. Steam products is a real standout there with strong triple digit growth, and that's because of the boost from our Thermosol acquisition that we completed in the summer of 24. Then let's move to profitability and cash flow. Adjusted operating profit was 11.9 million euros, and that's 22.9% of our revenue. And this was a result of strong operational performance across regions and functions such as supply chain operations, manufacturing, logistics, and very much also related to our pricing management. In particular in North America, which continued to grow very strongly, we had a smaller share of campaign driven sales during quarter one this year versus the end of last year. And that did contribute positively to our gross margin and overall profitability of the group. Also, we saw very positive development in driving thermosol integration and driving growth and profitability with that acquisition, and that was also contributing positively to our performance. Gas conversion was solid at 73.7%. Of course, we all know that the beginning of the year has been marked by quite a lot of volatility and uncertainty in the global market conditions, such as trade policies and changes in, for example, consumer confidence in certain key countries. However, we are very glad to report that that didn't have a real impact in the global sauna market and our performance during the beginning of this year. Of course, it's true that in an environment that changes fast and is quite volatile, that might pose occasional challenges. But on the other hand, Harvia, we feel that we are very well positioned to handle essentially anything that is thrown at us. And we have a good ability to react to changes, for example, in the tariff environment. All in all, long-term sauna market outlook remains very strong. It's supported by strong long-term trends, and we are well-placed to drive growth, both organic and inorganic, in the coming years. Here are the quarter one 25 key figures. So revenue 52 million euros. That's up almost 10 million euros compared to our figures from last year and essentially 22.7% growth. Organic revenue growth 14% as mentioned and growth at comparable exchange rate was 21%. Adjusted operating profit grew to nearly 12 million euros, and that was 22.9% of our revenue. And adjusted operating profit growth compared to quarter one last year was 18%. Very solid operating free cash flow at 10 million euros, and that's cash conversion of 74%. When we look at the geographical split where the revenue growth came from, this, of course, picture is very pleasing in a sense that there is positive contributions from each of the regions. But it's also very clear that during the quarter one, the clear standout was North America, which grew by nearly 60%. And if you look at the growth euros that we can see in this figure, 80% of the growth euros came from North America. Northern Europe, continental Europe saw modest growth. APEC and Middle Eastern Africa saw double-digit growth, but still on a bit more modest level than we saw generally during last year. And I will be commenting that in a moment. So Northern Europe first. Slight growth achieved despite subdued market conditions. 23% share of Harvia's global revenues and a revenue increase of 1.6% to around 12 million euros. The market conditions and our performance was a bit mixed across countries. The largest country for us is Finland, and in particular in Finland, the market continued to remain challenging, essentially due to weakness in the construction and property market. On the other hand, we saw positive development in Scandinavia and Baltic countries, and we launched here a cylindrical wood-burning heater, which we can see here in this picture, and actually saw particularly good figures in our wood-burning heater product category in North Europe. Continental Europe continued to deliver a gradual positive development. When we look at the chart on the left hand side, we can see that the growth momentum since the kind of market change, since the end of the pandemic and start of the war in Ukraine and steep decline in 23, we are now in our second year of growth. The growth obviously is rather modest, but still this recovery progresses. On the other hand, we can see that if we look at the kind of long-term figures and trends in continental Europe, that we are clearly below the market potential and essentially from our point of view, both North Europe and continental Europe are regions that provide growth opportunities for us in the coming years. North America clearly stands out, as mentioned. It has already experienced very strong growth for many, many years, actually since 2014. Every year we have been delivering very strong double-edged scrolls. And again, we did it this time at around 60% level. And now North America represents 42% of our global revenues, and it's clearly the biggest market region for us. A bit of a change in the dynamics for us from quarter four to this quarter. We had a very strong growth also end of last year, but there we had quite significant impact from campaigns during the Black Friday and Cyber Mondays. This quarter, it was really driven majority of basic, basically normal day to day sales. We also executed certain pricing changes to reflect changes in the material cost and cost of doing business in the US. And that also impacted positively our margin here. Thermosol integration progressed really well, as mentioned earlier. And then Asia-Pacific and Middle Eastern Africa continue to grow. We grow on average last year around 50 percent. The beginning of the year now has been a bit more modest at around 14 percent. But it's also the smallest geographical region for us, which is also prone to large project deliveries. For example, when we look at the Middle East and sub-region, we have quite a lot of project business in that region. On one hand, it contributed to really strong growth, over 90% growth in quarter four end of last year, but then again, a little bit slower growth during this quarter. Our efforts continue to build systematic growth platforms in a number of key countries in this region, including Japan, China and Australia. Then let's look at the products. And as you know, Harvea is the global leader in providing products and solutions for the sauna market, including all product and sauna categories, traditional sauna, infrared and steam. And in terms of product categories, still heating equipment continues to be the largest product group representing a bit over half of our global revenues. Steam products grew significantly from low levels of 2% prior to thermosol acquisition to nearly 10%. And the other figures you can see here on the chart. We delivered growth very broadly across the portfolio, heating equipment growing by around 16%, saunas and Scandinavian hot tubs growing also at around 16%, steam products clear standout due to a thermosol acquisition at over 300% growth compared to year before, accessories and heater stoves growing at 17% and slight decline in the the smaller spare parts and services category. But all in all, a very, very solid picture that we are extremely pleased with. Now let's talk a bit about our strategy. Harvey is operating in a really interesting market that is supported by strong long-term growth trends like health and wellness, increasing awareness and people wanting to spend money on a good life. And we have a great opportunity to drive our leadership strategy where we shape the market and continue to lead the market. We do that by our four strategic focus areas that answer to questions what, where, to whom and how. So what reflects to our portfolio, where reflects geographical focus, where we place our biggest bets and focus, to whom reflects to our challenge strategy and marketing and how to our operational capability and people. We did execute our strategy systematically also during this quarter in terms of portfolio, strong performance in our traditional stronghold of Nordic and traditional saunas across equipment and also the solution side of the business, and that means sauna cabins and sauna kits. STEAM, very, very strong performance with our Thermosol acquisition, also strong performance in the premium price points in the US supported with Thermosol and also strong performance by our high end brand in Europe called EOS. We also have been working now already some time on strengthening our innovation pipeline, and I will be talking about our new product launches in the next slide, but they are already delivering positive impact to our top line, and that's very good to see. In terms of our geographical progress, North America obviously is a pivotal market for us. And we are very pleased to see that our systematic efforts to build the business there across price points, across product categories, across sales channels is paying off. And we saw really strong performance there, as you can see from the figures. APEC and Middle Eastern Africa, they're also very systematic working in the biggest markets that can have the biggest opportunities for the long term. China, Japan, Australia, the work progress is very well there as well. In Europe, we're working to change the trends. Now, a couple of years, the market has been quite subdued. We consider that Europe is turning more into an opportunity for us over time. And we want to make sure that when that happens, we are best positioned to capture the growth opportunities as they emerge. In terms of leading in the key channels and branding, again, strong steps forward there. When we look at our channel split, we can see, again, nice broad-based progress in our main channels in the main countries. We have been working with our new Thermosol team on the product side and also branding side. And Thermosol has now recently launched a new brand identity with visual side of the brand also. refreshed and the response from the market and our key customers is really solid there. We also have been working to update a very important part of our channel portfolio, which is our own direct-to-consumer channels in the United States. So we have recently updated the almostheaven.com website, which is the main channel for us to sell our entry-level sauna kits under the Almost Heaven sauna brand. In terms of supporting our excellence in operations and competence development, we've been also taking the company forward. There's been a number of investment across our production units, including layout improvements, new machinery, et cetera. We are also working to simplify and modernize our group IT and to allow for new business models for us in the future and as well to support our continued growth globally. Thermosol integration has also been one of the key topics on our operations side, and integration has progressed really well, and in fact even somewhat ahead of our plans. And I'm very pleased to say that our Harvia US Northern American team and Thermosol team are really working very well together. It's almost like a seamless one team already now, less than one year after the acquisition. I said that I would be briefly covering some of the novelties and here are a selection of them. On the left hand side, you can see a wood burning version of the Cylindro heater. This has been a very important launch from a short term business perspective for us because Cylindro is one of our top selling heater product lines, but it was never available in a wood burning version. And for the first time it is now available and the response in the market has been really good and that has been contributing already now very nicely to our performance. The next example is the world's first solar power electric sauna. So this is a really nice example of market leader rethinking and driving sustainability forward. It's essentially a sauna with very intelligent structure that is very lightweight, absorbs only very little heat when the sauna is being heated up. It's well insulated. And because of that, you can run it very well with a more low powered sauna heater, which can then be driven by solar power. And that's really exciting novelty that we've introduced. Now, in our mid-range of control panels, we have introduced Harvia Phoenix to succeed Harvia Xenio line. Phoenix is not yet available in the market. The sales start will be a bit later this year, but again, a really, really strong response from our key channel partners. And also in the US, which is a very important part of our business, we've been continuing to develop our portfolio with the launch of Blackwater Cube sauna, a little bit new form factor for almost seven saunas, and that also has been received really well. Now with that, I would hand over to Ari, who can comment a bit more detail the financials.

Okay, thank you. So here we can see the development of two years of the quarters, the net sales and the relative profitability in terms of adjusted EBIT. And frankly speaking, Q1 2025 was all time highest sales quarter for us. And we are also happy to see that the relative profitability improved tremendously compared to Q4 based on certain actions we have taken. Here we can see for the first quarter the main financials compared. The adjusted operating profit went down a little compared to last year in terms of percentage, but money-wise it improved and the percentage is going down a little in this quarter because of the growth investments we have had. On the other hand, we were able to improve our material marching, marching after material and service costs quite much, and that improved then the relative profitability of the quarter. The basic earnings per share, they went 12% up and the operating free cash flow was also rather strong in money, a little lower than a year ago, but there are certain reasons. We have been investing about 2 million. Last year we had a total year of 6 million. I think that the investments will get a little higher in coming quarters too. And the net debt, we had end of Q4, 57 million, and we've been able to go down to 51 million in three months. It's still quite much higher than a year ago, end of Q1, and that's because of the thermosol acquisition and increase in networking capital. The leverage is 1.1. Our long-term target is to stay below 2.5, so we are still really clearly below that target. There is a lot of, let's say, headroom to take, for instance, more financing for interesting acquisitions or whatever. The net working capital is actually one third higher than a year ago and also a couple of millions higher than end of last year. The main reasons for the increase of the net working capital are the fact that we have actually one new company in Texas, Thermasol, which we didn't have end of Q1 year ago, and we have also increased our inventories in certain spots in Asia and in Finland, and the trade receivables due to the higher sales have increased also somewhat. The equity ratio is very healthy, 48%, and we have got also a lot of new colleagues in the group. Now, end of the period, we had almost 730 people. A year ago, we had 625. 40, actually exactly 36% of the growth comes now from Thermasol and the rest from the organic growth of the staff. We are growing, we have been also investing in white-collar product development, business development people and in the production facilities. Yeah, we have the strong cash conversion and that's typical for Harvia. We generate a lot of cash and the operations themselves, they don't need a lot of investments. So there is always internal cash source for dividends or acquisitions or other development needs. The net debt is also going down due to the good cash conversion and cash flow. And yeah, we'll see how low it will go. But it creates also the possibility to make further moves in future. The net finance items in our IFRS P&L, they have certain calculatory items, always interest to swap valuation, now also some internal currency rate, exchange rate things for internal loans and so forth. But in terms of cash outflow for financing costs, we are actually going now slightly down. Here we see the growth of the investments. We invested in production facilities, some IT systems, and we will also invest in future, especially in North America, for the future growth. The Harvia's long-term financial targets, just to repeat, growth, two-digit growth, profitability adjusted, operating profit margin over 20% and leverage under 2.5% clearly. We pay regularly increasing dividends with b-annual payout and actually the first payout for this year 25 occurred already in April and the next one will happen at the end of October 25. And just to remark that Harvia has long tradition. The company is already turning to 75 years and we have certain parties and special activities, events also for our customers and partners during the year. So now it's time for questions. I have actually got already plenty of questions here in the chat, and I start from the oldest, and we will answer as long as we have questions here. The first one, and what was the organic sales growth in North America? I can probably answer that. We don't disclose separately the areas or the numbers of newly acquired companies. Of course, we can comment them But I have to say that about half of the growth in value what we had in Q1 came from Thermasol and the half from our old operations. By the way, if you compare the Q1 growth in North America with Q4 growth, actually in value, the Q1 growth was even stronger than Q4 growth. The percentage went a little bit smaller, but since the base is already higher, the growth continues very strongly in value. A couple of other questions concerning Thermasol. Probably you could take them. How has Thermasol's performance been in Q1 compared to Q24 in terms of sales and margin compared to the 23 Thermasol numbers you gave at the time of the acquisition announced?

All in all, we are very pleased with Thermosol acquisition. And actually, Thermosol is contributing in many ways to the current, and we believe also in the future, success of Harvia Group in the United States, and over time also, particularly in the steam category, also internationally. Thermasol has helped us to actually build and open new sales channels. Thermasol had some really interesting customers for the high-end home spa solutions, and we have been able to grow the sales of Thermasol's core portfolio, but also actually we're increasingly introducing additional products from Harvia's existing high-end portfolio to Thermasol customers. So that's just kind of one example. And Thermosol is also providing a great digital platform for our high-end solutions. You can go to thermosol.com and see some of the control panels that are really beautiful, large Android-based screens where you can basically control fully the sauna environment with the lights, the audio system, the steam, the water. And actually, for example, if you want, watch Netflix or listen to your favorite tracks on Spotify. Now, in terms of the numbers, Progress is strong both in terms of top line and also in terms of bottom line when we look at the comparison figures from last year.

Do you expect Thermosol to reach the same margin as the overall group or do you see any obstacles for that to happen?

Our goal clearly is that our larger units have always the target to be at 20% or above. So the idea is that the main units need to be contributing positively to our group margin structure. And still today Thermosol is somewhat below that, but as I said, the trajectory is very promising and we believe that it will be above 20% in the future.

When we last summer announced the acquisition, we also told that our estimate of the synergies savings or synergies will be value of 1.7 million until 2027. We think that we are now actually ahead of the schedule, at least realizing these synergies. That's right. Yeah. Can you talk about price increases implemented recently? How big and when in which markets?

Yeah, this probably refers to a few things. One is the quarter four last year gross margin and hence also EBIT margin development, which was somewhat lower than you're used to seeing from Harvia. That was mainly driven not by like a general price reduction, but aggressive campaign pricing and those campaigns turned out to be very, very successful. So in terms of absolute sales volume, there was quite a lot of campaign sales affecting then our quarter four sales. During quarter one, in fact, we have been delivering some of those orders that we took in during those campaigns still, but clear majority of our business in quarter one has been based on kind of normal pricing, i.e. not campaign pricing. Now, of course, we are closely observing various factors affecting the cost of doing business or cost of producing our products. For example, material prices in the key material classes like wood, glass, steel. We are of course also looking at the impact of import duties to our operating environment and from time to time it might also have a bit of an impact on our profitability. So we take that into account. So, you know, it's a broad-based kind of set of considerations we look at. We have increased now also the general pricing level somewhat, given that the cost of doing business also there's drivers to drive that up.

Were heater sales in the US boosted by pre-buying due to tariffs?

It's a good question. I don't think there's a clear answer to it. All in all, we see that the US provides massive opportunities for us also in the coming years. The fundamental dynamics is still there. American consumers are really interested in their well-being, a good life. Sauna penetration is still on a very low level. So we talk about around one million saunas in a country of nearly 350 million people. So in terms of sauna penetration, we are at low levels. So for example, if you would compare that to swimming pools in residential use, there are more than 10 million of them in the United States. If you would get to the same levels as the swimming pools in the United States, you would see basically 10x growth in the number of saunas in the United States. So there's so much opportunities for us and so strong drivers that we feel that the long-term drivers and prospects are very positive. And of course, there's some more volatility in the market that might impact temporarily the figures that we report, but it's overall looking good.

Okay, then one question having a little repetition to the price increases, but anyhow I'll ask it. Your gross matching was very solid at 66.3%, up 170 basis points versus last year. Could you elaborate on the key drivers and detractors? Is there still incremental pricing to be implemented? What's the situation in Germany? Does EOS continue to outperform?

Well, all in all, pricing, of course, is one of the core competencies and key success factors of any companies. And at Harvia, we think it from a couple of angles. One is that pricing has to support our... growth path. So we want to be a winning business and kind of increase our market share and provide solutions that are worth the money for our customers and consumers. So on one hand, that's one consideration. And on one hand, we clearly understand that we can finance our growth initiatives through maintaining high enough growth margin. So it's really kind of balancing both of these, top line and profitability. And clearly our goal is that we consistently deliver both. So consistently delivering both strong top line development at good healthy margins that allow us to keep developing the business as we see so many opportunities and at the same time then from the opportunity point of view we see also some needs internally where we need to increase our efforts such as product development, channel development, stronger digital offering as part of our portfolio, even stronger digital channels to the market etc. So that profitable high gross margin growth allows us then to make the company also stronger for the coming years. In terms of EOS development, it's a very strong unit in Harvia Group portfolio.

Many consumer discretionary companies indicated that starting mid-February, demand patterns have been choppier. Have you seen any changes during the quarter and has there been a shift in sales channels? To the extent you want comment on this, has April been consistent with Q1 performance? And related to this, have you seen trade down across product categories, whether it be on the residential or professional segment?

Well, I can really comment on the quarter one and the long-term. As you probably know, we don't disclose short-term outlook. But during quarter one, we saw strong broad-based demand across price points and across product categories throughout the quarter. And as I explained, we believe that the long-term growth drivers are very sustainable in the United States. So we believe that Harve will be a much bigger company in the US compared to where we are today.

Many consumer companies have pulled the guidance, including Masco, which owns Sauna360. Harvia does not provide short-term guidance, but your Q1 results show that. To put it simply, Harvia can do whatever it wants to drive strategic long-term growth. Do you plan to increase expense growth to accelerate market share growth, especially in the U.S.? ?

Well, thank you for the comment. We feel that we are well positioned to maneuver the current market environment and also to capture the long-term growth opportunities. So that's for sure. Maybe kind of one additional comment that I could make here also in relation to the previous question on the U.S. And I commented a bit the demand side that we saw. we saw in the United States during the quarter one, which throughout the quarter was very solid. The other comment that I'd like to make is that when we think of the key source of uncertainty, basically it's the import duty environment and Harvia is we consider well positioned to navigate these choppy waters. And the key reason for that is that around 70% of the products we sell in the United States are made in America. So we have two strong production facilities, one in Lewisburg, West Virginia, which we have had since 2018. and the Thermosol production unit that we acquired last year, which is based in Round Rock, close to Austin. And that high share of domestic production inside the United States, we feel that shields us to quite large degree from the changes in the import duty environment.

Can you talk about the organic attack on the IR market, infrared market in the US? How it is progressing? When will we see effect?

Well, Right now, I would say that Harvia's business clearly predominantly comes from products and solutions for the traditional Nordic sauna type. Now, with Thermosol acquisition, we have made clear step change in the steam side of business as well. Still, of course, only at around 10% of our top line. Infrared is smaller than steam at the moment. And in terms of our organic development activities, I don't think you have really seen the seen the kind of outcome of our product development nor the kind of market entry plans yet. So that's something that we feel it's a clear upside to the future.

There is one question about material margins. I think we discussed it and the follow-up. Have you been able to pass higher wood costs in the US? Yes. now quarter four no what one yes yeah can you discuss the upgrades you have made in almost heaven sauna distribution and what are your plans going forward also if you could touch cross-selling synergies between Harvia and Thermosol?

Yes, we acquired Thermosol for actually a number of reasons. One is we wanted to clearly make a step forward in making Harvia a true global sauna solutions provider. We were heavily dependent, as discussed in the previous question, on just one sauna type, which is the Nordic Scandinavian traditional saunas. And we definitely are eyeing on steam, infrared and also cold wellness, which is a temperature related wellness and natural wellness kind of product category. And with Thermosol, we have gotten what we consider critical mass and critical competencies for us to really strike forward with our growth plans for steam. And the plan is that we use steam core technologies from Thermosol to support, on the one hand, continued core business growth of Thermosol, but also introduce steam products across our brands and channels, both in the US and also in the coming years internationally. So that's kind of one aspect. Then the other aspect was that Thermosol and Harvia US prior to the acquisition, the channels were quite different. So the channels are very complementary. And Thermosol is mainly playing in the kind of very high end of the kind of home spa market. So you could consider kind of high end residential homes where you have almost like a real mini spa in your house. And that was the kind of sweet spot where Thermosol was playing, but actually had somewhat limited portfolio. And this is another obvious top line synergy opportunity for us, which is that we are now taking our high end products from different parts of Harvia group or different product categories are increasingly starting to introduce them to Thermosol high end channels and high end customers. During quarter one, this didn't have a material impact. So the growth that we're experiencing in Thermosol is actually based on a favorable development in the core business, which is a very good thing for us. But in the future, we believe that we can actually give a quite nice upside with that cross-selling. The third reason we bought Thermasol was the advanced digital solutions. So as I mentioned earlier, you can go to www.thermasol.com to see the high-end control panels, Android-based, really nice, that we can also utilize across Harvia. And then actually making people-wise our... total organization including Harvia US and Thermosol stronger in the United States. I think we got really good people from Thermosol that are complementing really nicely competence and experience of our really good people that we had on Harvia US prior to acquisition. So I think from people point of view we are also really well placed for the coming years.

There is again the question about the pre-buying activity among the customers in North America in anticipation of the tariffs. Did we say that it was not so clear? They actually didn't know, we didn't know how the tariff will evolve, so there was no clear pre-buying pattern. Does the inventory build up mean that you anticipate continued strong demand? And have you seen limited impact from tariffs so far? Yeah.

So essentially, there's a few factors affecting that kind of increasing in networking capital or kind of inventory of goods in terms of materials and also finished goods. One is that we have now more companies in the portfolio, as Ari mentioned, so Thermosol inventories are now part of Harvia Group inventory. We also have been building new country capabilities, such as in Harvia Japan, which have led to a need to have the core portfolio to sell and serve those new markets in Asia. In the United States, it's very much driven by overall strong growth trends that we have been experiencing in the United States. And also from the fact that we consider there to be a lot of opportunities for us to play in more broadly in the United States. If you look at the essentially the historical revenue streams that we have had in the United States. You could summarize it into heaters for Nordic style saunas, plus rather low end sauna cabins under the Almost Heaven Sauna brand. And we know that there's a lot more opportunities, for example, in the sauna cabins and kits in the medium to high price points. To introduce those new models to the market and capture even more of the emerging business opportunities in the United States, we are also expanding the portfolio that we have available. And that means also the first we bring them to our inventory and then we start selling. And that, you know, I would say strategic growth in new product categories is somewhat also impacting the networking capital development.

This next question certainly refers to Q1. Were there any impacts on your profitability from lower priced promotional sales, assuming that some deliveries from Q4 were completed and recorded to the sales during Q1?

There was some. Some of the orders that we received during the end of the year campaigns, end of last year, were still delivered and invoiced and recorded in our P&L during quarter one. But predominantly the sales was coming from sales that was not campaign driven. We have also implemented, as mentioned, price changes during the quarter, and some of them will be taking full effect in the quarters to come.

From EBIT margin point of view, is your positive view on operating leverage intact, assuming benefits when volumes in Europe recovers? Can you comment on that? Can you comment about your capacity utilization in Muurame?

Operation leverage, the drivers are fully intact and essentially comes from the fact that we have high gross margin business. And when we scale the business up, that's definitely a positive driver to the overall profitability of the group. Now, you have to also consider a bit the strategic position that Harvia has. And sometimes I'm getting also questions about the increase in the OPEX, for example, in terms of personnel. And you can see that we have roughly 100 people more now than a year ago. And that relates to the fact that we see a lot of opportunities for us across channels, different products, digital, et cetera. And we are building capacities and capabilities for the future. And the kind of way we look at it is that right now, the growth model of Harvey is based on sales growth at high gross margin that gives us then gross margin in absolute euros or dollars that we then use and allocate with kind of the based on the assessment that where we can best drive strategic long-term growth, but at the same time deliver then that plus 20% EBIT. So it's actually a little bit like target-based kind of OPEX planning that we have so that we can deliver actually all top-line growth at healthy growth margins and strong EBIT at the same time as we are making the company stronger for the future. We would anticipate, I think, kind of my thinking is that we have quite a lot of needs to strengthen our capabilities and the teams and portfolio over the next three, four years, and after which there probably is going to be more diverse, you know, diverse paths in terms of top line. Hopefully keeps growing very strong, but maybe we have then at that time then filled most obvious gaps in the capability and portfolio side. and we don't have to then maybe invest in that much there.

How do you see the US market developing during April? Any feedback from your customers regarding possible changes in consumer behavior or demand?

Well, I can comment really on quarter one, which was very strong throughout the quarter and very broad-based demand. Of course, we have also taken note that if we think about the macro environment, there's a few things. One is the import duty environment that is mainly then affecting the costs. but it also clearly impacting the overall consumer confidence in the United States. We have taken a note that the consumer confidence now is on its lowest level in the United States in 12 years. In quarter one, it did not have an impact on us. Time will tell kind of what will happen in the short to medium term. But as I said, long term growth opportunities are quite massive in the United States and we are confident.

What general comments you can do on how the sauna market performed during a recession period, especially in the US? Do you have historical data on that? Could you remind us your market share in the US?

Maybe, Ari, since you have a long history in the sauna business, you can reflect on this recession topic.

Yes, I just checked it for certain analyses and I found really old data before our IPO period. Of course, Harvia's structure and business was a bit different today, but 2008, when the Lehman Brothers happened and the financial crisis came, actually nothing happened to Harvia Sauna and Heater sales, except the growth was flat. And the year after that, the sales declined about 10%, and the second year after that, they bounced back with plus 16%. Of course, the geographical distribution was different and so forth. But this shows, first of all, that this industry is slightly behind the cycle and it's also quite resilient, not reacting as strongly to financial situations as, for instance, construction business, not at all. This is a healthy business and people in this business category or product category, they are not spending their last money for sauna. They can still afford that rather low investment for their health.

And then there was question about market share. Essentially, this is quite interesting market because this is still a specialty market, which we believe is turning into a real volume market, placing Harvia strategically in a really interesting position for the future. But one of the challenges that we have is that there is no foresters or gardeners of the world making market studies and quantification and forecasts for this market. So we're very dependent on our own assessment and what we see in the market and hear from our channel partners. Our understanding is that our market share in the United States at the moment is a little bit below 10%. And that also demonstrates the fact that this market is still quite underdeveloped in the competitive dynamics. So a lot of players rather fragmented and that also provides a lot of opportunity for Harvia. not only to grow organically, but also be a market orchestrator and shape the dynamics through acquisitions.

Are you planning to start manufacturing of traditional heaters in US to avoid possible tariffs?

Well, all in all, we think that we are, as I explained, that we are in pretty good spot to begin with, with that over 70 percent of what we sell in the U.S. being made in America. Now, the notable exception is the heater category. We have heater factories in Finland, Germany and China. And in particular, Finland and China are what we would call volume factories, and then Germany is what we would call high-end value product factory. And you could consider China almost like the mini Finland factory, with very similar capabilities. And that really allows us the possibility to shift production quite flexibly. It's not like every day or every week. In that rhythm, we could so fast change production. But in a few months notice, we can actually change production of one model between China and Finland. So that also already provides us quite a lot of flexibility to navigate kind of these sort of turbulent import duty kind of choppy waters. Now, of course, as we always do, we always look for opportunities to do things even better, more efficiently, faster, more agile, with better kind of efficiencies. And part of that is that we're constantly looking at our manufacturing footprint, which is essentially answering the question, what products we make where? Now, of course, we have taken a note that the US has grown significantly. And we are really looking at what would be the point in time where the volume triggers would justify also kind of opening further manufacturing capabilities in the United States. Of course, it's quite hard to make these kind of decisions based on import duty environment, because basically it's almost like you wake up in the morning and check what's the situation today. And in such a volatile market situation, you don't want to make decisions for many years to come. But then you can do these decisions if you really believe that, yes, the critical mass starts to be there and also the long-term growth outlook remains strong. And we are contemplating those thoughts.

Do you have any possibilities or plans to get revenue from something else than a Polish selling new products, for example, service or some recurring elements?

Absolutely, yes. So what Harvia is about, we are about products and solutions for the global sauna and spa and I would say thermal related wellness market. And we are interested in high margin, global, scalable opportunities. So we are not in the business of building saunas, sending carpenters or engineers across the world to build saunas or manage construction projects. We are an industrial player because industrial activity is scalable. The other obvious opportunity for scalable business is digital services. And as we acquire Thermasol, and you can see the level of technology already there, Android-based control panels, even on Harvia's core portfolio, increasingly our products are Wi-Fi enabled. So they are connected devices out there and the fleet of connected devices continuously increasing. And we do see a future where Harvia has a possibility for not just hardware product-based business models, but also selling software, software upgrades, capability upgrades to the portfolio fleet out there, and also digital services. So, for example, we are contemplating and have been contemplating ideas around, for example, sauna wellness projects. programs that would be customized for individuals' health and wellness needs and goals. So it's actually a pretty interesting field. Harvey is a company with plenty of opportunities.

And actually in the big picture, selling heaters on the more mature markets or already grown markets is also a recurring element. About 70 to 80% of our heater sales are actually replacement sales. For instance, in Nordics or in central So we counted already a long time ago that when the sauna cabin lasts, for instance, 20 years in the private use, normally the owner buys one additional heater or replacement heater or even two replacement heaters when the heater generations develop. So we are really in the replacement business also, and that makes a lot of resilience for our business model.

So practically, as we keep growing, we're also building the future installed base for replacement sales and also, for example, digital services and accessories.

How do you see U.S. demand for your products if general consumer confidence and consumption is going down?

It's, of course, a good question, and we don't have a crystal ball. But as I said, ultimately, we think that there's a few things that support our business. One is that it's a big country with actually relatively few saunas still. So around one million saunas in a country of 400 people. 350 million people or so, and that's around one sauna per 350 Americans. If we compare that to the sauna penetration, for example, in Germany, it's one sauna per 34 German people. So that would point out to 10x growth potential in the United States. Another example pointing out to this 10x growth potential is the number of swimming pools in residential use in the US. So basically we have really kind of fundamental growth drivers and the opportunity from this sort of fundamental perspective is very solid. Now it's a big country and there's a lot of millionaires. So I think the number of kind of American citizens that are dollar millionaires in terms of their kind of actually investment ability, even excluding the houses, is above 20 million. And that also points out that if there's more than 20 million dollar millionaires and basically around 1 million saunas, we think there's going to be plenty of people who have the means to buy better life, better health, better well-being also when the economic times are a bit tougher.

The changes in sales operations in North America over the last year, especially post-acquisition of Thermasol, have changed quite a bit in a positive manner. Thank you. Can you speak on the stability of key leadership personnel in Harvia, in Thermasol, especially for long-standing partners who value the relationships that you have been building over the years?

Yeah, I think we have a good mix of change and stability. And as a company, we are growing and as our business is becoming more diversified in terms of geographical footprint, types of products we sell and the type of channels we operate, we do need new capabilities and new also management talent in the organization. And we have been really successful in attracting very high caliber new leaders in the organization. One example, around one year ago, a bit more than one year ago, we recruited Jennifer Thayer with very strong background in kind of durable consumer goods retail, highly commercial person with great values fit to Harvia. And she's doing great. We recruited during last year a new leader for EOS, the high-end brand, global master brand for Harvia, as the previous entrepreneur and owner who had sold the company to Harvia in 2020, left the group. Again, a very strong recruitment. And actually now, right after quarter one, first of April, we had another new person starting, Ivan Sabato, who's coming from Technogym. So again, a very relevant company, a high-quality business with a wellness product that is, you know, price point-wise size-wise and also technology-wise, there's a lot of similarities, you know, with what we sell. And Ivan Sabato started, as I said, 1st of April. So we have new talent, but we have also very solid, long-serving Harvia Group team members in the group management team and also in other key positions. And I'm very pleased with that. So we always try to kind of balance things right. It's about driving sales and profit. It's about having the right new competencies, but also the experience and relationship and stability. That's the way we drive business. What comes to Thermosol, the key people we wanted to stay are all with us today.

And from more or less like from HR perspective, just to remind that a lot of our people are actually Harvia shareholders. And we have also quite wide long-term incentive programs that our key personnel, they have parallel interests with our shareholders to increase the value of the company. And they get their share of that value increase also after minimum three years. Then the last question, if no other questions are arriving. What competition... are you facing in the US in the medium to high-end range sauna market? Who are your key competitors?

There's a really broad sort of broad base of players I would say across price points and across sauna taps and typically they're very different so we don't have like a one single that's the arc competitive hours. It's more like it's still very fragmented market. There's plenty of players and what comes to steam competition or traditional sauna competition in different price points, basically we see different players. So that would be really the situation today. We believe that there is going to be a rather significant consolidation phase going through this industry over the next five years. for actually many simple reasons. One is that as just simply the business keeps growing, importance of brands, importance of being present in the best sales channels becomes more important. When the products get more technical, the smaller players have really hard time in keeping up with what's required to be attractive and competitive. Brands will have a more important role. Also ability in certain customer groups to provide, you know, kind of full solutions or broadly everything that they need for their spas and saunas. So there's quite a lot of reasons why we believe that there's going to be quite significant consolidation. So maybe in the future years, there's going to be more clearly key ARC competitors to us in the U.S., but right now it's rather fragmented market.

I think that was it. Thank you for following. Thank you for great questions and see you. Thank you very much and have a good day. Bye.