Harvia Oyj

Hello everyone, and welcome to Harvia's quarter four, 25 earnings webcast. My name is Mattias Ehnefeldt. I'm the CEO of the company. And with me, I have Ari Vesterinen, our chief financial officer. Hello. We will run the session today as follows. I will start by going through the highlights of the business and financial performance during the quarter four. I will also give you an update on how we're progressing with implementing our strategy. After that, Ari will be providing more details on our financial performance for the quarter and for the full year, after which we will be happy to answer any of your questions, which, as usual, you can submit through the chat of this webcast. So let's summarize quarter four. In terms of top line, our revenue increased by 5.3% to 53.7 million euros, and we delivered positive growth in all regions. And all of the growth was organic. The currency exchange rates, in particular the US dollar depreciation against euro, had quite significant impact on our reported numbers. At comparable exchange rates, we grew by 10.2%. Growth in North America was impacted by the currencies. In addition to that, North America had a particularly strong comparison period from last year. In quarter four, 24, we grew by over 60%. And around half of it, so around 30%, was organic growth. So that was in the base. We had good sales performance in Europe, with Northern Europe delivering the second consecutive double-digit growth quarter, and was the harvest fastest growing region during this quarter. In Asia-Pacific and Middle East, we posted only a small growth. This was particularly impacted by project deliveries in our Middle East sub-region. In terms of the bottom line, we delivered adjusted operating profit of 10.5 million euros, and that represents 19.5% of our revenue. At comparable exchange rates, adjusted operating profit margin was 21%. We continued to strengthen our production capacity, capacity to grow, innovation pipeline and differentiation, and also modernize our IT system landscape. And that was visible in the investment level and also in indirect cost levels of the reported quarter. I'm happy to say that our gross margin developed positively, which was mainly driven by well-executed campaigns during the fourth quarter. In particular, in North America, Black Friday, Cyber Monday campaign was an excellent one for us with good order intake, growing order intake, with really stronger gross margins than in the comparison period a year ago. Then summarizing the full year 2025. Full-year revenue growth was 13.5%, and our adjusted operating profit margin was 19.6%. Growth at comparable exchange rates was 16%. The operating environment was challenging during the year. There was significant macroeconomic volatility, including currency fluctuations, turbulent tariff policy landscape, and also softer consumer confidence in certain markets, such as the United States. And the numbers that you can see here, I think, are strong testament to the resiliency of the sauna market demand and also Harvia as a quality company and the leader of this business. During this year, in addition to delivering the results and managing the ongoing business and changes in the business environment, we've been also taking significant steps forward in implementing our strategy and making Harvia stronger for the future. And while market conditions most likely will remain volatile also this year, personally I feel that Harvey is very well positioned to drive profitable organic growth and also pursue disciplined inorganic opportunities as they might emerge. Then summarizing quarter four key figures. Revenue 53.7 million euros and that's growth of 5.3% in euros and at comparable exchange rates it's growth of 10.2%. Assets in operating profit at 10.5 million euros and that's growth of 20% compared to the comparison quarter year ago. In terms of the margin, we delivered 19.5% adjusted operating profit margin. Operating cash flow was at good 13.3 million level, which is over 100% cash conversion. The same figures for the full year. Revenue at 198.9 million, so very, very close to 200 million mark in euros, and that represents 13.5% growth. In terms of growth at comparable exchange rates, 16% growth, and organic revenue growth at comparable exchange rates at 14.4%. Adjusted operating profit, 39.1 million euros, and that's 19.6% of our revenue. Operating free cash flow at 26.5 million euros, and that's cash conversion of 57%, which is a solid outcome given that the year has been quite significant in terms of investing and strengthening our capabilities, for example, in R&D, innovation, and digital channels, and also while we've been growing. So then looking at the waterfall of growth from our four reported regions, the leading region this time was Northern Europe at 11.6% growth, Continental Europe second with 5.7% growth, North America in Euro terms 2.8% growth, But I said there was significant baseline from last year, and the U.S. dollar depreciated by over 8% against euro when we look at the comparisons between quarter four, 24, and 25. So the North America in local currencies grew double-digit. APAC growing around 1%. There was significant impact from project deliveries in the baseline from a year ago. We had significant deliveries in the Middle East, and the Middle East sub-region reported minus 60% development due to the baseline effect, while our strategically important markets like China and Japan continued to grow double-digit. So then let's look at each of the region a little bit more in detail. Northern Europe, strong sales performance after already strong growth in quarter three. So the revenue increased by 11.6% to 12.1 million euros. And I'm happy to report that the growth in Northern Europe was broad-based geographically, where Scandinavia, Finland, and the Baltics all performed well. And on a full-year level, Northern Europe returned to growth of 6.4% after two years of decline, and second half was clearly double-digit growth half of a year. Continental Europe growth continued actually across the markets in countries like Germany, France, and in particular strong performance in the United Kingdom. As you can see on the chart, we've been delivering steady growth now already a number of years in the region. Revenue totaled 15.8 million, and that's 5.7% growth. And the growth for the quarter is also very close to the growth for the full year, which was 5.5%. Then here is North America region I know that most of you are very interested in. And I said this report, the growth slowed down to around 3%. But you can also see in the graph that we had significant jump in the comparison period when we grew by 63%. And around half of that was organic growth last year. Last year, 24 significant part of the growth was coming from very aggressively priced campaign products. And I'm happy to say that we grew in dollar terms double digit while we improved significantly gross margin in the region. And that gross margin improvement in North America is also visible in the three percentage point improvement in the gross margin of the whole group, which I'm very pleased about. And in terms of full-year growth, North America region delivered 22% growth in euros, and that's around 26% growth in U.S. dollars. So a solid year. APAC and Middle Eastern Africa, only modest growth this time, but you can also see that we practically grew or nearly doubled the business, so over 90% business in the comparison period in 2024. And as I said, significant impact from deliveries in the baseline in Middle East and China, Japan, key countries for us, both continue to grow, double legit also during quarter four of 2025. On the full-year level, APAC and Middle East and Africa was our fastest-growing region, as it was also the year before. This year, our revenue growth in the region was 25.4%. Then looking at the product categories, we continued to derive most of our business by selling technical equipment for sauna. Heating equipment share increased somewhat to 54%. Saunas and Scandinavian hot tubs is the second largest product category for us, slight decline to 24%. This is mainly driven by the fact that significant part of this sauna cabin business is in United States, and that was impacted by the dollar, and also we had very high baseline in the quarter year ago. Steam products, accessories and heater stones, and spare bathroom services remaining roughly on the same level in relative terms as year before. Then looking at the waterfall for the product categories, heating equipment delivering majority of the growth by adding 13% or growing by 13% and adding 3.4 million to our top line. Saunas and Scandinavian hot tubs declining by around 600,000, as said, mainly due to dollar impact and high baseline. Steam products minus 600,000. And this is very much driven by actually Middle East project that was significant in size in the comparison period. And also another area where we have a sizable steam business is United States, where we had over 8% headwind in the currencies during the quarter. Accessories, heater stoves and spare parts and services reported slight growth. So that's about the numbers. Then a few words about the strategy. Harvey is operating in a very interesting market business that is supported by strong, sustainable, long-term growth drivers. And we are a leader of this business globally, and we intend to remain so. And the strategic role that we see for ourselves is that we want to be an aggressive, offensive market leader that shapes the global sauna market so that more and more people, everyone, has a reason to experience sauna. And we drive the strategy through our four focus areas that answer the questions what, so the products and portfolio we deliver, where, which answers the question that which geographies and countries are in our focus, to whom, which touches our channel landscapes and customers, and how, which is about our operations and capability development. uh executing systematically our strategy throughout the year and that work continued also in the quarter four of this year or 25. as an example what comes to enhancing and making our portfolio even stronger and even more exciting we've introduced innovation such as the harvia phoenix control panel that that you saw in the introduction video before we started the presentation The sales started in third quarter, and it showed really great performance during the quarter four, and I'm very, very happy to see that. We also continue to strengthen our portfolio by launching a really exciting new product, even a totally new category, Harvia Smart Sana Sensor, which I'll be talking a bit about in the next slide. In terms of winning in the strategically imported markets, North America delivered double-digit growth in U.S. dollars also during the quarter four, despite the baseline, and for the full year, around 26% growth in dollars. So that's, I think, a testament that we continue to perform well there. APAC, it was a slower quarter in those reported figures, but there was that impact from Middle East. And for the full year, APAC and Middle East was the fastest growing region where we continue to drive systematic and steady growth in markets like China and Japan. Continental Europe continued to develop positively. It's gradual development, but it's also very systematic and steady, which we are happy about. And Northern Europe, after two years of decline, turned back to strong growth during the second half of the year, where both quarter three and quarter four recorded double-digit growth. We've also been upgrading our direct-to-consumer digital touchpoints, which already are a significant part of our business in the United States, but we've also introduced a new direct-to-consumer web store for the German-speaking continental Europe, in particular focusing on Germany and Austria, and that is now open and operational. We also have been developing our relationships with our global key accounts, such as in the United States, which is also visible in strong performance during the Black Friday, Cyber Monday campaigns with a clearly healthier margin than we had a year ago. Again, something I'm very, very happy to see. And we have conducted our annual customer survey with our B2B customers, and I'm happy to report that the Net Promoter Score is strong and even improving from the good levels we had in the past year. And in terms of building the capacity and capabilities to grow, we have been continuing our systematic investments in increasing capacity to produce more products to meet the demand in the market, make our product portfolio even more exciting and differentiated, and we have upgraded also our group IT system to support continued growth. And I'm also happy to report that in the annual employee survey, which we also conducted during quarter four, in addition to customer satisfaction survey, we saw great results in the employee responses, and that confirms that Harvia is a great place to work. And then, you know, just one of the highlights of the fourth quarter related to innovation and our portfolio is a completely new category never seen in the sauna market before. So this is a smart sauna sensor. It includes three precision sensors, one temperature, second humidity, and also this movement detection. So basically it can sense human presence in sauna. And it's connected via Wi-Fi to Harvia Cloud. And in the Harvia Cloud, there's application programmers interface. So Harvia can innovate, but also external partners can innovate on the sensors data that it can provide. And it can, for example, notify when the sauna is ready. It can provide you heating curves, humidity curves. It can, for example, tell you that now the heating curve of your sauna is deteriorating. So most likely the reason is that you need to replace your sauna stones. And, for example, for commercial customers, it could report that it seems that the door has been left open because the temperature curve is now dropping significantly. So then the commercial operator can go and check that everything is okay with the sauna. And what is really cool about this is that it works in any sauna. So it really turns any sauna into a smart sauna, whether it's a wood-burning sauna without electricity or also saunas where we don't have other Harvia equipment. So really, really cool innovation showcasing our ability to innovate in the digital space. And with that, I hand over to Ari.

Okay. Thank you. First, a technical note. These full-year figures, what we have now collected and reporting, they have been already audited. So our financial statements for 2025 have been audited, and they will be published together with the annual report at the end of the week 11. That's the second week of March with a couple of administrative changes. reports too. So the full year figures are final and then the KPIs and different other measures, they have been collected by the management, financial management. Okay, here you see the development of the different quarters during 24 and 25. I'm really glad to announce that the quarter 4, 25 was the strongest sales quarter really in the history of the company. And the profitability, relative profitability improved compared to last year's Q4 substantially and We have been doing their good things to improve the profitability. Unfortunately, we didn't quite reach the final so targeted 20% adjusted EBIT level, but there are different explanations of that, for instance, the currency rates and then additional investments also in development projects and so forth. which will bring growth and improvement of the business in future. Okay, here we see the... Here we see once more the comparison of the key figures for the full year and for the quarter. And here we see that actually the adjusted EBIT, for instance, was improving clearly during Q4. It reached almost an average level of 25, and the Investments, they have been now quite heavy for this year and this is not necessarily the normal level compared to the net sales of Harvia for the years to come, but we will have also quite high investments in the next, let's say, 12 months or so, since we want to really... improve the scalability of the business and improve the capacity of production places. And we have also a few markable ESG-related investments, which we have done. But this was a good year. and also good improving quarter, even if somebody was probably expecting something better, but we are rather satisfied with this quarter. Here we see also how typically the Harvia cash flow, free cash flow, evolves over the year. Typically we have the lowest cash flow in Q3, when we build goods in the stock, especially in Finland in the heater manufacturing, but also in sauna manufacturing in US. And then we sell them out typically during the Q4 campaigns, and that was really the case also in 2025. This time we had just a bit higher investments and certain projects which were expensive, so that reduced the profitability and the cash flow a little during Q4 compared to last year. The leverage remains still on a very low level, 1.2, and we have set the long-term target to 2.5. So we have actually quite much space there, for instance, to take more action. financing if we happen to make acquisition or so. And this 2.5 is also just the level for long term. Temporarily we could be also over that if we make interesting acquisitions. Harvia has a very strong cash position. End of last year we had cash or gas equivalents 45 million on our accounts. The financing costs, okay, they were quite much based on different valuation of the swap agreements and also the currency rates, but here we see the dotted yellow, sorry, blue dotted line. It really shows the outflow of the finance costs. It has been quite on a steady level. We mentioned already the investments. We have been really improving our IT landscape, making the group more scalable, better for the future growth in that area. Then in product developments, we have very nice, interesting projects in pipeline, and we have been improving the production capacity, especially in Germany, but also expanding the factory in U.S. And this U.S. expansion still will continue beginning of this year for a while. But, yeah, these investments secure the future growth. The Harvia's long-term financial targets, they are still the same. Growth at least 10% on average on annual level. Profitability over 20% adjusted operating profit margin and leverage as set under 2.5 on a long term. So, and the dividend policy has been to pay the dividends, regularly increasing dividends in two installments. during the year. And this will be the Harvijas Board of Directors' proposal for the annual general meeting on the 15th of April to pay 77 euro cents dividends for the result of 2025. Last year we paid 75. So, now it's time for questions and I have here quite many interesting questions already, and let's start. Well, first kind of financial question. Harvey has never bought protection against currency changes. Should you do so in the future, given the drastic effect of USD weakening? Well, we have been following our treasury policy, and we have been protecting us actively against the interest rate fluctuations. But in the field of currency, we haven't been so much protecting. We have to really consider that in future. Currently, for instance, U.S. dollar is already quite... on a low level and we have to think that level also over and the protection typically gives protection only about 6 to 12 months on decent terms, so it's also a cost factor. But we adapt, as you see, our pricing also in terms of dollars. We have now been able to improve the dollar-based profitability in US through price. increases. So this topic is on the desk all the time and we will review it once more. Can you clarify why you say that no growth in segment other in the segment other, was related to the timing effects. Will these deliveries take place in Q1 26? I think it's related to APEC, Emea.

I assume it's a geographical segment of APEC and Middle East. It's basically due to timing for the reason that we had a year ago, fourth quarter 24, significant project-related deliveries in Middle East, which were not repeated in the fourth quarter this year. And I mentioned during my presentation, in fact, in the sub-region Middle East, we reported actually internally a 60% decline year on year. So that is the reason why I refer to timing of deliveries as a key reason for the slow growth that you see for the APEC region as a whole. At the same time, I did also mention that the strategic countries, the big countries that we are developing for sustainable long-term growth, China and Japan, both grew by a healthy double-digit rate also during the fourth quarter of 2025. Okay.